On 31 May 2019, the Skills Development element of the Amended Codes of Good Practice scorecard was amended to make specific provisions for a bursary indicator. In terms of the amendment, large entities (with turnovers higher than R50 million per annum) must contribute 2.5% of their annual payroll towards bursaries for black people to gain maximum points for this specific indicator.
Bursaries are nothing new to Skills Development in terms of B-BBEE. Before 31 May 2019, entities could also claim bursary expenditure as part of their Skills Development expenditure. There was, however, not a separate target for bursaries alone.
It is important to understand when a bursary will qualify for B-BBEE recognition.
According to the Amended Codes of Good Practice, a bursary is a grant made to or for students who are registered at educational institutions established by or registered with the Department of Higher Education and Training.
In terms of the Amended Codes of Good Practice, bursaries will not constitute Skills Development expenditure if any portion of the expenses can be recovered from the student or if the grant of the bursary is conditional. There are, however, two exceptions to this rule. If the right of recovery or the condition involves any of the following obligations on the employee, the expenses are still recognisable:
- The obligation of successful completion of their studies within the period allocated; or
- The obligation of continued employment by the Measured Entity for a period following the successful completion of their studies that is not more than the period of their studies.
If any other conditions are imposed on the bursary grant, it will not be recognised as a bursary expense for B-BBEE purposes.
Example 1: If Company ABC grants a bursary to a black student in the amount of R100 000, but the student fails to complete the degree/diploma in the allocated period for that specific degree/diploma, Company ABC can recover a portion of the bursary from the student, but the initial expense will still be recognised as B-BBEE expenditure.
Example 2: If company XYZ grants a bursary to a black student for a three-year course and company XYZ expects the student to work back the bursary for a period exceeding three years, the bursary will not be recognised for B-BBEE purposes.
The following are examples of legitimate training costs for a bursary:
- Payment of college/university fees (or a portion thereof);
- Funding of textbooks or other learning materials;
- Funding for subsistence or accommodation during the period of study.
The abovementioned legitimate training costs will not be subject to the normal costs CAP in terms of the Amended Codes of Good Practice if it is associated with a bursary.
Please keep in mind that the above discussions concern the Amended Codes of Good Practice only and not the various Sector Codes issued in terms of the B-BBEE Act.
If you grant bursaries intending to score B-BBEE points, it is crucial to ensure that it complies with the necessary requirements as set out in the Codes of Good Practice.
Need more information on this topic? Kindly contact your nearest BEE Legal Advisor. Alternatively, leave your details on our website, and a SEESA representative will contact you.
About The Author:
Bernard du Preez started his career at SEESA as a B-BBEE legal advisor in 2011 and currently holds the position of Provincial BEE Manager at the SEESA Pretoria branch. He is an admitted attorney who completed his B.Com (Law) and LLB degrees at the University of the Free State.
Resources:
- Codes of Good Practice on Broad Based Black Economic Development issued in terms of the B-BBEE Act.