The launch of the government's Youth Employment Service programme seems to have gone largely unnoticed. Picture: ISTOCK
The launch of the government's Youth Employment Service programme seems to have gone largely unnoticed. Picture: ISTOCK

President Cyril Ramaphosa’s tenure as president has been characterised by expectations of turning around SA’s fortunes and announcing a stimulus plan for the economy. This stimulus has to prioritise job creation and address youth unemployment.

In this regard it is a pity that the official implementation of the government’s Youth Employment Service (YES) programme on August 28 did not receive the required public attention, as it is directed at addressing some of the core causes of our present economic predicament.

In March this year, shortly after the inauguration of the president, the YES programme was announced to give impetus to much-anticipated job creation and the employment of youth in SA. YES is a joint initiative by the private sector and the government and it was widely reported that the president had been personally involved in tailoring and contouring the programme.

Five months later, the August 28 government gazette enacting the YES programme is good news, as it creates an ideal opportunity for scorecard entities and multinational enterprises to claw back recognition levels lost as a result of the new, more onerous broad-based BEE (B-BBEE) scorecard requirements introduced in 2015.

The main driver of the YES programme are the incentives participating enterprises will receive in terms of B-BBEE compliance levels. Participating enterprises can be enhanced up to two levels on their B-BBEE scorecards and certificates

The main driver of the YES programme are the incentives participating enterprises will receive in terms of B-BBEE compliance levels. Participating enterprises can be enhanced up to two levels on their B-BBEE scorecards and certificates. The programme was not immediately available for enterprises as the B-BBEE Codes had to be amended to make provision for their incorporation into the B-BBEE Codes of Good Practice.

In March, the draft amendments to the B-BBEE Codes were published for public comment. During the public comment period, the YES programme received very little, if any, media coverage. The negative economic data published during the past few weeks indicates that SA is in a recession, which means that the media ignored the important publication of the government gazette enacting the YES programme as an integral part of the B-BBEE Codes with immediate effect. It was as if the haze of public focus on the depressing economic data obscured the official implementation of the programme.

When the YES programme was initially launched in March this year, it was met with mixed reaction, although the overall sentiment in this regard can be summarised as positive.

Critics

Some critics had argued that the YES programme would merely replace existing accredited training and learnership programmes and would not correct the structural deficiencies in the South African economy.

The final rules for recognising the programme published on August 28, to a large extent, addressed these concerns. Several gaps still exist in respect of certain areas of application, which will hopefully be cleared up once more guidance is provided by the department of trade and industry.

At this point it is clear that businesses will be unable to offset existing B-BBEE initiatives against the YES programme. The safeguards built into the B-BBEE Codes for recognition of and participation in the programme are that enterprises must receive a minimum of 40% on each of the priority elements, or an average of 50% across all priority elements if, for instance, they miss out on a particular priority element. A further safeguard against offsetting initiatives is that an enterprise must maintain or improve its overall B-BBEE status level with the introduction of the programmes, compared to the status level obtained in the preceding year, before YES had been incorporated by the participating enterprise.

For smaller enterprises, categorised as exempted micro-enterprises (EMEs) and qualifying small enterprises (QSEs) with annual turnovers of less than R10m and R50m, respectively, the target for participation and receiving B-BBEE recognition is based on a percentage of staff employed, as per a fixed table listed in the government gazette. For example, an EME or QSE employing 50 employees in total must employ an additional three employees as part of the programme, while those EMEs and QSEs employing 100 employees in total must employ six additional youth employees in terms of the programme, and so forth.

For large or “generic” enterprises with an annual turnover exceeding R50m, the target is more complex and is based on the highest of three possibilities, namely 1.5% of total workforce; 1.5% of net profit after tax converted to a headcount by dividing the 1.5% headcount number by R55,000; or a number according to annual turnover as per a fixed table, for instance eight in the case of R100m turnover and 15 for a turnover of R450m or higher.

The persons employed in terms of the programme must be placed in new positions and may not replace existing positions or incumbents

The YES programme for B-BBEE recognition is only available for employing black youth between the ages of 18 and 35 for at least 12 months on a fixed-term or temporary employment contract.

The persons employed in terms of the programme must be placed in new positions and may not replace existing positions or incumbents. Should an enterprise be unable to create a new position of its own, it may sponsor the salaries of such employees placed with any other EME or QSE.

Minimum wage

Although the B-BBEE Codes do not provide for a minimum salary payable to YES employees, it is suggested that such employees be paid at least the national minimum wage, expected to be introduced later this year, being R3,500 amonth. This amount would allow for a 50% tax incentive in terms of the Employee Tax Incentive (ETI), also known as the “youth subsidy”.

All expenses incurred in training YES employees (non-accredited training) may be recognised as informal training expenditure. Up to 50% of such informal training expenses may be claimed under the skills development scorecard element, excluding the salaries paid to YES employees.

Enterprises that meet the YES targets may progress one recognition level on their B-BBEE scorecards on condition that they absorb or offer permanent employment to 2.5% of the YES employees. Those that exceed the target by 1.5% and permanently employ 5% of the target group will receive a one level recognition enhancement and three bonus scorecard points, while those that double the YES target will be enhanced two levels on their B-BBEE scorecards.

Gerber is an attorney and director of BEE specialist SERR Synergy.