The Amended Codes of Good Practice list five separate elements in terms of which an entity must score points in order to become compliant. Two of the five elements are Skills Development and Socio Economic Development (SED). These elements are separate and distinct, and therefore it is essential that an Entity properly classifies their initiatives as either Skills Development or SED.
Should a business confuse the two elements a situation may arise where they over-spend on one element while under spending on the other. The result would be wasteful expenditure from a BEE perspective, and the entity would not reach their full points potential.
In some cases deciding whether an initiative falls under Skills Development or SED is straightforward. Where you pay for your employees studies, then we are clearly dealing with skills development. On the other hand where you donate bread to a school you are clearly dealing with SED.
However the distinction is not always so straightforward. When you pay the school fees of a grade 2 learner, would the spend count as Skills Development, or does the spend count as SED?
When faced with such grey areas one must look to the Codes of Good Practice for guidance.
The Codes provide that Skills Development must “[s]trengthen the skills and human resource base by encouraging the support of skills development initiatives with an emphasis on skills development and career pathing for all working people [emphasis added] in order to support employment creation”.
On the other hand the Codes provide that SED “consist[s] of monetary or non-monetary contributions…with the specific objective of facilitating income generating activities [emphasis added] for targeted beneficiaries”.
The distinction above may be slight in certain cases but there is a clear distinction nonetheless. The aim of Skills Development is to encourage companies to spend time and resources on training people who form part of the economically active population. On the other hand SED is aimed towards charitable contributions which are geared towards initiatives which “facilitate income generating activities”. While the both Skills Development and SED seemingly have similar objectives, there is a slight distinction.
Based on the above, the defining difference between Skills Development and SED is that while both may involve a transfer of skills, Skills Development is focused on the transfer of skills to members of the economically active population, while SED is focused on the ancillary activities which promote economic activity, albeit indirectly and on members that are not yet economically active.
An example best illustrates the above distinction.
If one were to pay for the grade two learners school fees, while their school attendance does involve the transfer of skills, the beneficiary does not form part of the economically active populace. Hence the initiative would be classified as SED.
On the other hand if an entity was to pay for the school fees of an underprivileged matriculant the outcome would be different. In this case there is also a transfer of skills through school attendance but the beneficiary in this case is a member of the economically active populace. Hence the initiative would be classified as Skills Development.
In making the distinction in ‘grey area cases’ one must look at the facts of the particular case. The question one should bear in mind in making this distinction is “what is this initiative aimed at achieving? The transfer of skills to a member of the economically active population, or ancillary activities which promote economic participation but which do not fit into the Skills Development category?”.