Introduction section one 6

The BBBEE Code and the Charters

The amendments to the BBBEE Act and the Codes fundamentally change the BBBEE framework and is an expression of the Government’s intention to promote and implement BBBEE. Up to now Government policy has been based on the “voluntarist” principle that the manner in which a firm applies BBBEE is to be decided by the individual firm having regard to its own business needs and that the BBBEE framework simply provides a methodology for measuring the BBBEE rating of the firm. Although the BBBEE Act and Codes did not impose legal obligations on firms to comply with BBBEE targets, a firm’s BBBEE status is an important factor affecting its ability to successfully tender for Government and public entity tenders and (in certain sectors like mining and gaming) to obtain licences. Private sector clients also increasingly require their suppliers to have a minimum BBBEE rating in order to boost their own BBBEE ratings. The new BBBEE framework also introduces penalties in certain circumstances. This is an important departure from previous Government policy.

The amendments to the BBBEE Act introduce a number of new measures including to: establish a BBBEE Commission to play an oversight and advocacy role with regard to BBBEE and investigate complaints relating to BBBEE, BBBEE transactions and “fronting practices; introduce various criminal offences for misrepresenting or providing false information regarding a firm’s BBBEE status or engaging in a “fronting practice”; introduce a statutory right for Government and public entities to cancel any contract or “authorisation” awarded due to false information on BBBEE status; impose an absolute obligation on Government and public entities to take the Codes into account in their procurement policies and in issuing licences and authorisations (previously they were only obliged to do so “as far as reasonably possible”); impose an obligation on South African listed entities to provide a report to the BBBEE Commission on their compliance with BBBEE. All Organs of State and Public Entities are measureable. All Measured Entities that undertake any economic activity with any organ of state or public entity are measureable.
The priority elements of the BBBEE code includes:

Ownership

Sub-minimum = 40% of Net Value points = 3.2 points

Skills Development (SD)

Sub-minimum = 40% of total weighting points = 8 points

Enterprise and Supplier Development (ESD)

Sub-minimum = 40% of EACH of categories = 16 points

Generics must comply with all 3 priority elements
Specifically with espect to skills development the code proposes that the skills development included should:

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  Contribute to country’s economic and social development goals by developing skills that enrich decent work and sustainable livelihoods
  
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  Promote development of industrial skills base in critical sectors (production and value adding manufacturing that are labour intensive)
  
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  Support ‘Professional, Vocational, Technical and Academic Learning’ programmes through work integrated learning (apprenticeships, learnerships, internships, professional placements)
  
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  Strengthen skills and human resource base to support employment creation with an emphasis on skills development and career pathing.
  
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  Skills Development Expenditure includes any legitimate expenses incurred for any Learning Programme offered to its employees as evidenced by an appropriate accounting record.
  

The following diagram highlights the points allocated in terms of skills development:

The Charters place significant emphasis on the importance of supporting the development of enterprise initiatives, and in a number of charters the net profit after tax to be invested to drive these interventions is indicated.
The Charters also have a number of requirements for business to undertake skills development: in many cases the Charters stipulate an amount, which is over the prescribed 1% skills levy and also suggest a matrix of programmes that can be supported with this investment. These regulations also specify target groups for this skills development, and in particular state that these programmes should be made available to black employees. Many of them also indicate that young people should be beneficiaries of these programmes.
Most of the charters recognise the need to address the socio-economic imperatives of the communities in which their workplaces are based. For example, the Forestry sector outlines the need to provide services and amenities to the rural poor: this includes the provision of housing for workers and their families, support to health and HIV/AIDS programmes, provision of community education facilities, environmental conservation programmes, community training in fire prevention and conservation, and support with rural road maintenance. Quite specifically the charter states that the industry is also aware of the important role of forests in providing livelihood opportunities for poor rural households and makes a commitment to ensuring regulated access to non-commercial forest products such as firewood, building poles, medicinal plants and edible fruits by local communities.

Other possible sources of funding

Corporate Social Investment

In addition to government funding imperatives, there is also substantive funding made available by companies through corporate social investment. These focus on a range of areas related to youth including, but not limited to: Support to and in schools (whole school development, learner support, teacher development etc); Support for FET Colleges (again this includes support for the college, as well as learners and practitioner development), Provision of bursaries; Supporting bridging programmes and academic and psycho-social support programmes for students in universities; Supporting placement into the workplace for new entrants through to the professions; as well as youth development programmes – including those that develop networks and leadership skills.

It was found that many of these corporate funders mobilise other private sector agents to invest in the expansion of delivery – where programmes are found to be successful – and also share their learnings with relevant parties (including social partners as well as government departments). Interviewees suggest that this enables interventions to increase substantially in scale and scope and offer useful learning for other stakeholders.

Other policy options to

Transport and Job Search Subsidies

Previous apartheid laws have meant that over a decade and a half into democracy, residential areas continue to be defined, in the main, by race in South Africa. One of the arguments often made for the economy’s high unemployment rates, is that spatial apartheid does not allow for optimal search behaviour amongst the unemployed. It is extremely expensive for unemployed young people resident in poor communities at the fringes of metropolitan areas or rural areas to go out and search for jobs, this is part of the reason for so many people falling into the ‘not economically active’ category (Bhorat 2012).
A transport subsidy attempts to bridge the gap between outsiders living further away from the market place, by enabling them access to opportunities and making it more affordable to find employment. This is seen as critical as the unemployed are often in on the fringes of metropolitan areas or in outlying rural areas, far from any employment opportunities, and they lack both the networks and skills to access employment opportunities in urban areas. The unemployed in these areas are often too budget-constrained to go out and search for work hence the cost of looking for work is unaffordable. The incentive to look for work is low given the low probability of finding a job coupled with the high cost of transport.
The National Planning Commission is currently exploring the possibility of a transport subsidy and has instituted a randomised control trial to assist government to understand the impact of such an intervention. In addition the possibility of a job search subsidy is being explored which could include transport as well as costs related to Internet usage and photocopying.