What is Skills Development and its Role in BBBEE?
With such a long list of technical BBBEE jargon out there, it’s easy to become overwhelmed by BEE terms and phrases. That’s why we’ve developed a comprehensive guide to show you all the ins and outs of Skills Development in South Africa. When done correctly, this process can better the lives of fellow South Africans and create many benefits for your business. You could receive tax breaks and benefits, fill skills gaps within your company and contribute to the growth of the South African economy. But where do you start? Read on to find out more.
What is Skills Development?
Starting with the basics, Skills Development makes up one of the five essential elements of the BBBEE scorecard. These elements work together as part of a transformation strategy that was set up by the South African government post-apartheid. The Skills Development section of the scorecard focuses on how much a company invests in the skills training of its employees or other unemployed or disabled individuals in South Africa.
The main purpose of this training is to give previously disadvantaged groups of people an equal opportunity to education and entry into the workplace. To qualify, these groups need to be of African, Indian or Coloured descent. Additionally, skills training can create many benefits for your business too, you could receive numerous tax breaks and benefits, improve the skills of your workforce and contribute to the growth of South Africa.
What is the Skills Development Act?
All procedures and protocols of skills training stem from the Skills Development Act. Also known as Skills Development 97 of 1998, this is an act that was set up by the government to develop the skills of South Africans and incentivise employers to participate in skills training.
What is the purpose of the Skills Development Act?
Digging deeper, the purpose of the act is to:
- To give a framework for how Skills Development and workplace strategies should be executed nationally
- To improve the lives of South Africans by giving them workplace opportunities
- To make sure skills training strategies are integrated with the National Qualifications Framework (NQF)
- To make sure learnership programmes lead to occupational qualifications
- To establish the financing of skills training with a National Skills Fund (NSF) and a levy-grant scheme
- To increase investment into education and training in the workplace and make sure there is a return on that investment
- To improve the competitiveness and productivity of employers of South African businesses
- To improve the delivery of services
To read the full Act click here.
What is a Skills Development Levy?
When researching further into skills training, you’ve probably heard of a Skills Development Levy. The Skills Development Act states that under certain conditions companies must pay levies for implementing training initiatives. This levy is set up to develop and improve the skills of employees in South Africa. The levy is determined by the employer’s salary bill over a 12-month period and is paid to SARS every month.
When do I need to pay a Skills Development Levy?
This skills training levy is mandatory if your business falls within specific requirements. These include companies that are registered with SARS for PAYE and have an annual payroll in excess of R500 000. This includes total salaries and wages with bonuses, commissions, etc.
Who is exempt from paying the Skills Development Levy?
In certain cases, payment of the levy may not be necessary. These businesses include:
- Public service employers within the national or provincial sector of Government
- Provincial entities that have 80% or more of their expenditure paid directly or indirectly from funds voted by Parliament
- Public Benefit Organisations are exempt from paying Income Taxes as stated in Section 10 of the Income Tax No 58 of 1962. This includes industries in health care, humanitarian, religion, etc.
- Municipalities are exempt if they have a certificate of exemption from the Minister of Labour
- Those that don’t fall within the annual payroll of R500 000 or more
Benefits of paying a Skills Development Levy:
With all of this in mind, this levy may sound like more of a hassle than it’s worth. However, this levy can have major benefits for your business in the long run. If your company complies with certain requirements you can claim up to 70% of your levy back from the relevant Skills Education Training Authorities (SETA). It’s important to note that the annual deadline for this submission is June.
Additionally, there are a number of benefits to paying this levy:
- You can apply for a number of grants
- There are a number of tax rebates you can claim from investing in learnership programmes
- You could get 20% of your levy back in a Mandatory Grant
- 50% of your levy could be claimed back in Discretionary Grants. This is for learnerships, internships, Skills Programmes, Workplace Experience placements and bursaries
To apply for these grants you will need to submit your Workplace Skills Plan (WSP) and Annual Training Report (ATR) to your relevant SETA. These grants are only allocated if they meet the specific requirements of the SETA.
Compliances and Penalties of the Skills Development Act:
Ways in which businesses can comply with the Skills Development Act:
In order to be compliant for all your skills training efforts (and claim those valuable BEE points) you need to have certain procedures in place. These include:
- Complying with the procedures stated in the Skills Development Act
- Registering with a relevant SETA
- Paying your skills training levy if required
- Develop a SETA-approved Workplace Skills Plan and Annual Training Report and provide evidence of its completion
- Implement SETA-accredited learning programmes, such as learnerships, to address skills shortages and needs in your company
Penalties for non-compliance with the Skills Development Act:
In certain cases, penalties are given out if you have committed an offence against the Skills Development Act. The consequences of this offence may include a fine or imprisonment for a period that doesn’t exceed a year.
These cases include attempting to or successfully:
- Obstructing a person that is performing a function in accordance with the Skills Development Act
- Prescribing documentation that is fraudulent, has false pretences, or is forged
- To give out false information while knowing that the information is false
- Conduct a private employment services agency that goes against the Act or any other requirements
What is a SETA?
We’ve spoken a lot about SETAs and their critical role in the training of your staff but you may be wondering what it is exactly. A SETA or otherwise known as the Sector Education and Training Authority is responsible for facilitating the successful implementation of the Skills Development Act. Employers, trade unions, and government departments are all members of a SETA. There are about 23 SETAs available in South Africa and each one is responsible for creating skills training programmes within its jurisdiction. Examples of SETAs include Services SETA and MICT SETA.
What are the functions of SETA?
Now that we know more about what a SETA is, it’s time to unpack what a SETA does. A SETA is responsible for the following functions:
- The development and implementation of a sector Skills plan in accordance with the National Skills Development Strategy
- Creating and administering learnership programmes and making sure training providers and educational institutes are SETA accredited
- Approving skills plans and annual training reports
- Making sure learning programmes are integrated with NQF
- Registering assessors
- Making sure skills training programmes are followed correctly
- Reporting back to the South African Qualifications Authority (SAQA)
- Distributing Skills Development levies that are collected from employers within their sector
What is the National Skills Authority?
Alongside SETAs, The National Skills Authority (NSA) is another entity that plays a crucial role in the implementation of skills training. NSA is responsible for the following functions:
- To advise and give guidelines to the Minister of Higher Education and Training for the implementation of the National Skills Development Policy and the National Skills Development Strategy
- Giving the Minister a strategic framework and criteria for the allocation of funds from the National Skills Fund
- To collaborate with the various SETAs on the development of the National Skills Development Policy, the National Skills Development Strategy and Sector Skills plans
- Report progress made on the implementation of the Skills Development Strategy to the Minister
- Being responsible for conducting research, monitoring progress, and establishing investigations
What is the National Skills Development Strategy?
As mentioned earlier, the NSA is responsible for giving guidelines and advice for the National Skills Development Strategy. This strategy was set up to make sure skills training in South Africa runs smoothly and effectively. It aims to link skills training Programmes to career paths that promote career development and sustainable employment. To do this, the National Skills Development Strategy promotes SETA Skills Development programmes that are relevant to the needs of the South African labour market.
Overall, this strategy acts as a guide for the direction of skills planning and the implementation of SETAs. It sets out to create better links between employers, accredited training providers, and SETAs. Additionally, it becomes a framework for the payment of training levies for the various SETAs and the National Skills Fund (NSF).
Funding for Skills Development in South Africa:
If you are in need of funding, then you can turn to the National Skills Fund (NSF). This Fund was established in 1999 and forms part of the Skills Development Act. It is a public entity responsible for funding training initiatives that fall within a specific criteria. This includes companies that are considered national priorities by the National Skills Development Strategy. It can also include other projects that work towards the purposes of the Act. The Director-General makes the final decision on these matters.
What are Examples of Skills Development Programmes in South Africa?
After learning more about this procedure you may be ready to take the leap to invest in skills training for your business. There are a few BBBEE training solutions that you can choose from to gain valuable points for investing in your staff:
1. Learnerships
A learnership is a SETA accredited learning programme that combines both theoretical and practical elements. It aims to give designated groups of people the skills they need to confidently enter into the workplace. Therefore these programmes involve occupation-based skills with a focus on subjects such as Business Administration, Freight Forwarding and Customs Compliance and Information Technology. These courses typically run over a 12-month period but may be shorter in some cases. The theoretical element takes place in the classrooms of the accredited training provider or the offices of the employer. If either of these don’t work for you, Edge Training has additional online learning options. When it’s time for the practical element of the learnership students will perform practical tasks at the offices of the employer.
2. Skills Programmes
A skills programme on the other hand is a chosen unit standard or combination of unit standards that lead to the development of an employable skill. These programmes address a particular skill that is needed in your company. When completed, students will gain credits toward completing a learnership qualification registered with NQF. The timeframe to complete these programmes isn’t as fixed as learnerships. Completion is based on how long it takes to complete the specific outcomes.
How Edge Training has helped a past client with Skills Development:
Over the past 23 years, we have had the privilege of providing our clients with effective Skills Development Solutions. Previously a client approached us with their skills training needs. They needed to make a BBBEE spend of R210 000 on internal learnerships and training for unemployed learners. The client was concerned that their budget would not allow them to make the BBBEE spend and complete the rest of their staff training. Fortunately, we were able to provide a solution that solved all their BBBEE training and staff training requirements, without the client having to spend more than R210 000. Helping our clients wherever we can is important to us as we pride ourselves on adding value to our clients and changing the lives of our students.
Next Steps:
Now that you know more about Skills Development it might be time to talk to Skills Development Professionals and invest in skills training. At Edge Training, we make sure you’re getting the most out of your BEE training initiatives so BBBEE can work for you and not against you. We offer Accredited learnerships, Skills Programmes, and Soft Skills Training Workshops.
Furthermore, Edge Training has a Level 1 SANAS-accredited BBBEE certificate. This means that you will benefit by 135% if you use us for procurement purposes. In fact, we can help you will other areas of your BEE scorecard. We can assist you in achieving BEE points for Skills Development, Management Control, Enterprise and Supplier Development and Socio-Economic Development. Reach out to one of our representatives today and we’ll show you how we can help you maximise your return on investment.