Should a business owner consider employing foreign nationals for the benefit of their BBBEE rating?
A current problem in the economy is that whenever an employer advertises a new vacancy, they are overwhelmed with applications. These applications usually include quite a high number of foreign nationals. How does employing a foreign national effect your BBBEE rating?
Foreign nationals could have a definite impact on some of the following elements on the scorecard, namely:
- Ownership;
- Management and control;
- Skills development;
- Preferential procurement and;
- Socio-economic development.
These elements are calculated on the race, gender and nationality of the parties involved. Broad-based black economic empowerment is focused specifically on “black people” and is defined as Africans, Coloureds and Indians:
- who are citizens of the Republic of South Africa by birth or descent; or
- who became citizens of the Republic of South Africa by naturalisation:
- before 27 April 1994; or
- on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date;
A foreign national is not a person who received citizenship through naturalisation and is not regarded as a black person for purposes of the definition. It is, therefore, necessary for an employer to understand what the repercussions would be (from a BBBEE perspective) if foreign nationals are appointed as opposed to South Africa citizens with suitable skills and qualifications for the vacancy.
Ownership?
The allocation of points at ownership is dependent on a business vesting a certain portion of its equity in the hands of black people. In light of the fact that a foreign national is not considered a black person, the equity owned by a foreign national will not be considered for ownership.
Management and Control is the representation of black people in management positions within the company and the result is compared to the economically active population in a specific area (in other words the percentage of different races and genders who are active in the community or in short EAP). Foreigners are not included when determining the EAP of a certain area. Any foreign nationals occupying a management position will thus not count towards determining a final score on this element.
Skills development?
Skills development reflects the expenditure made by a company during a financial year in order to develop the skills of black people. If any expenses are made towards the skills development of foreign nationals, the funds spent on such training will be excluded and will have a negative impact on the BBBEE scorecard.
Preferential procurement?
Preferential procurement refers to the “procurement of goods and services from Empowering Suppliers as a percentage of that company’s’ total procurement”. Only South African citizens can qualify as Empowering Suppliers, and therefor procurement from a foreign national will not assist a company in enhancing its score on this element.
Socio-economic development?
These are the contributions made (either in the form of money or something that has a monetary value) to either black individuals or groups with at least 75% black beneficiaries. The beneficiaries of these contributions must also be black people. When contributions are made for the benefit of a foreign individual, that contribution will not be taken into consideration.
SOURCES
BBBEE Codes of Good Practice of 2013
Broad-Based Black Economic Empowerment Act 46 of 2013
Employment Services Act 4 of 2014
About The Author
Nandi Vermeulen started her career at SEESA Klerksdorp in 2017 as a legal advisor, assisting clients with BEE and Labour related matters. She studied at the North-West University in Potchefstroom, where she obtained her LLB and LLM in Environmental Law.