The amended Broad-based Black Economic Empower (B-BBEE) Act of 2013 that came into effect on 1 May 2015 could potentially wipe out more than R20-billion in direct skills development and training investments and cost black South Africans many thousands of job opportunities. In this opinion piece, Hansie Fourie, managing executive of B-BBEE Consultancy Services, explains why.

The abovementioned alarming possibility has been created by the Department of Trade and Industry’s decision to gazette a formula based on an “adjustment” to the official national economically active population (EAP) statistics that must be used to calculate the B-BBEE points to be earned by companies for skills development and management control (including employment equity) in the B-BBEE audit process.

EAP groups are defined at both national and provincial levels as African Male (AM), African Female (AF), Coloured Male (CM), Coloured Female (CF), Indian Male (IM), Indian Female (IF), White Male (WM) and White Female (WF). Foreign Nationals are also included as a group in the QLFS.

In its wisdom, the DTI has chosen to exclude whites and foreign nationals entirely (both male and female) and then adjust the remaining groups on a pro-rata basis to reconstitute an adjusted national EAP percentage breakdown that has been gazetted as follows:

African males – 45,9%;
Coloured males – 6,5%;
Indian males – 2,1%;
African females – 38,6%;
Coloured females – 5,6%; and
Indian females – 1,2%.

Using this demographic representation of African (non-white) people, the DTI’s formula of how these adjusted figures should be used to calculate B-BBEE points is so complex that it takes up all but eight pages to explain.

The complexity of the formula is compounded even further by the DIT’s decision to impose limits or caps per race group and gender according to the adjusted national EAP when calculating points.

The outcome of these two ill-conceived components in the new Act are that, under certain circumstances, companies striving to comply with the skills development and management control elements in the generic B-BBEE scorecard may not be able to qualify for recognition and maximum points through no fault of their own.

The ultimate consequences of the amended Act and the adjusted national EAP statistics that drive the formulas used to calculate skills development and management control (employment equity) is that 20% to 40% of skills development investments could be removed from the economy while 20% to 40% of jobs that may formerly have been created for black South Africans could go to whites or to foreign nationals.

Clearly these consequences were never intended to be the outcome of the amended B-BBEE Act and government is going to need to act decisively and urgently to address this issue in the short to medium term as the new Act takes effect.

Until then Business Beyond Boundaries is strongly positioned to provide clients with expert consultancy and practical, cost-effective solutions to these and other B-BBEE compliance challenges.