This is a summary of key points from the CSI forums that Trialogue hosted in Johannesburg (18 August) and Cape Town (20 August).
Skills needs and unemployment
The government in South Africa spends 6% of GDP and over 20% of the national budget on education. Additionally, 49% (about R4 billion) of corporate social investment was spent on education in 2014. Despite considerable financial investment, significant challenges persist in the sector, including poor teaching capacity, infrastructure and learner support and retention.
The country’s high rate of unemployment is another major challenge. Despite the creation of 1.1 million jobs in South Africa since the economic crisis of 2008/9, unemployment continues to rise as more people enter the working age group (15-65 years old). Unemployment stood at 26.4% in the first quarter of 2015, the highest level since 2003, when it was at 30%.
This unsustainable socio-economic environment is not only a financial burden, but compromises overall capacity available to businesses. In response, government has further prioritised skills development in the amended Broad-Based Black Economic Empowerment (BBBEE) Codes.
Companies are now required to spend 6% of payroll on skills development in order to obtain the 20 points assigned to this element (there are also 5 bonus points), compared with the previous 3% of payroll needed to obtain 15 points. The new Codes also allow for training and education of unemployed black persons, which many companies currently do through their CSI programmes.
This Trialogue CSI Forum considered how these Codes might lead to a shift in the nature of corporate support and the manner in which contributions are internally categorised.
Examples of current corporate investments in education and skills development
- Deutsche Bank supports Sparrow Schools, an organisation that equips young people with learning disabilities from disadvantaged homes with education and employable skills. The Schools comprise grades 1 to 7, grade 8 and 9 combined, as well as a further education and training college. Corporates can partner with the Schools towards skills development, as well as to earn the requisite B-BBEE points. Deutshe Bank has also partnered with the Tertiary School in Business Administration (TSiBA), to offer a nine month Theory of Change The programme, which runs until February 2016, currently supports 25 non-profit organisations to think about alternative means of income-generation, while also providing students with workplace experience.
- Discovery implements its CSI through three arms, namely the Discovery Foundation, the Discovery Fund and an employee volunteerism programme. While the Foundation supports the training of medical specialists, Discovery also develops skills through various other programmes. In partnership with the Umthombo Youth Development Foundation, Discovery supports youth from rural areas to pursue a qualification in healthcare. Jointly with the City of Johannesburg (CoJ), Discovery is facilitating the implementation of the skills development programme in Orange Farm. This is in support of the CoJ’s Jozi@Work programme, which is expected to create 40 000 new jobs by 2016.
- Sanlam’s Vacation Camp is a short business course offered to about 50 learners from different universities. About 10 of the participating students are employed by Sanlam upon graduation. Sanlam also offers consumer financial education. 30% of spend on this initiative is directed at communities, including unemployed people, and 70% at work sites, which are often identified by Sanlam business. Sanlam also partners with a number of universities to train graduates to become financial advisors. This initiative is funded through SED and is likely to increase.
- Virgin Active’s Future Crew programme, which initially donated gym equipment to schools, now also trains learners and members of under-resourced communities to become accredited coaches through the Exercise Training Academy. Once qualified, they are either employed by schools or absorbed into the business. In terms of enterprise development, community members can train to become fully-qualified dance instructors, and start their own income-generating studio.
- The Imvula Education Empowerment Fund is a vehicle for directing BBBEE expenditure under the revised Codes. In the past 14 years, the Fund has assisted 14 250 unemployed black youth to access tertiary and entrepreneurial training. The Fund facilitates the BEE process for corporates, while using its revenue to empower talented but unemployed youths through access to quality education and skills development. Through its Learn and Earn programme, the Maharishi Institute, supported by the Imvula Fund, prepares students for the workplace while they are studying. Students are only enrolled into the programme when there are guaranteed jobs, and receive both academic and soft skills training.
Key points from discussion
- Skills development should be viewed as a tool to bring meaningful transformation to the economy, by helping to change the skills profile of the country.
- The 6% of payroll requirement in the new Codes means that the top 100 listed companies will need to contribute an estimated R25 billion towards skills development annually.
- Corporates can offer learnerships at low to no cost, as money spent can be claimed back from SETAs. However, there are often challenges in attaining these refunds.
- It is anticipated that a significant part of CSI spend on education will move to skills development.
- Approaches to effective skills development must include ‘soft skills’ development, to better capacitate recipients to cope with programme requirements.
- Instead of chasing the BBBEE Scorecard, some companies are opting to focus on the establishment of effective systems that will ensure systemic change in years to come.
- While some companies are overwhelmed by the amended Codes, others feel that it is an important opportunity that should be embraced, and will give companies a competitive edge, long-term.
- Companies should consider how close to the business their skills development interventions are (see slides 9 and 10). For example, funding of early childhood development centres would be ‘far’ from the business, whereas funding bursaries would be ‘close’.
- There will most likely be further integration between CSI and human resources management, as CSI programmes look to provide a pipeline of people for skills development programmes.
- When CSI budgets are spent by HR, the CSI department often struggles to get back adequate reporting on the funds.
- It is important for all relevant parties, including CSI and HR departments, to have a clear understanding and broad overview of the different parts of the business that are investing in skills development. This will help to eradicate territorial issues, streamline expenditure and contribute towards a holistic master plan.
- It is recommended that companies review all education and skills development spend and that each initiative is assessed to establish whether it should qualify as SED, ED or skills development, and which departments should be responsible for which budgets.
- If a company is over-scoring on SED for example, some of those initiatives (if they qualify according to the Codes) can be re-categorised to secure scoring in another sector, such as skills development.
The latest corporate research for the Trialogue CSI Handbook (out in November 2015) asks how CSI and HR budgets will be allocated and aligned to the amended Codes.