BEE Partner, South Africa Economy Watch

The QSE skills development scorecard only contains one indicator. It is significantly simpler than skills development of non-QSE businesses and easier to obtain a higher score. Unfortunately, because the target is based on terms and calculations used in the Skills Development Levies Act, the SDLA, this is a technical section.

Indicator terminology

Leviable amount

The leviable amount is derived from the SDLA. It the amount that the levy that must be paid to the SETA is calculated on. BEE uses the same calculation and therefore terminology, but sets a target over and above that payable to the SETA. The scorecard sets the target for the indicator as 2% of the leviable amount for QSEs. Essentially, the leviable amount is the annual total net salaries and wages payable by the entity. Read the rest of this entry »

The skills development levy was designed to force entities to invest in skills development by paying money to a SETA. This money is recoverable from that SETA when the company invests in skills development. A large majority interpreted the skills development levy as a pure tax, paid the money to the SETA and never reclaimed it. This approach results in zero return and becomes, as mentioned, a straight tax.

The objective of BEE is to stimulate growth, not to invoke taxes. If the skills development initiative is not going to result in a return for the business then it is likely to result in unsubstantial skills training. If it is unsubstantial, then the trainee is not going to be any closer to participating in the mainstream economy and the exercise lacks substance. Strictly speaking, BEE contributions that lack substance are not measurable.

An investment implies that the employee will return from training with the ability to make more money for the company than prior to the training. Whether that training entails operating a computer programme more efficiently or part-time study for a university degree is particular to each business. But it must result in a return for the company greater than the initial investment. Read the rest of this entry »

Targets

The targets are discussed before indicator terminology in this element because they are necessary for understanding some of the indicator terminology. Enterprise development and socio-economic development use the same methodology for calculating the target. The calculation is not clearly articulated in the Codes and is a technical calculation. Read the rest of this entry »

Targets

As mentioned above, the target is calculated on the same basis as that of enterprise development. The calculation is not clearly articulated in the Codes and is a technical computation. To avoid repetition, the following constitutes a brief summary of what was communicated under enterprise development.

The target for socio-economic development is 1% of net profit after tax (NPAT). NPAT is easily manipulated through accounting entries, so the Codes use an anti-circumvention approach, outlined below. Read the rest of this entry »

Tax law is dynamic. Any tax commentary could be outdated After the final Codes have been approved as law, time will reveal inconsistencies with the application of BEE and the Tax Act.

Private parties will probably make submissions to National Treasury on amending tax law to accommodate BEE. The point is that it is too early to give conclusive advice on BEE and tax. Further, the nature of tax advice varies according to the base of the company, making it a difficult topic to discuss conclusively in this format. Read the rest of this entry »

This stagnation tendency, the growing savings gap, has often been viewedas a problem. But why should one look at it that way? Isn’t the gap really a big resource? Should it not be encouraged? For the bigger the gap, the greater the scope for deficit financing of public spending. Indeed, the graver the stagnationist tendencies of the private sector, the lower the taxes can go, and the greater the scope for public borrowing and a growing debt. Instead of encouraging private spending as a remedy for stagnation, should we not promote private saving to widen the savings gap? For by so doing, we could deficit finance all the more, and enjoy the supply-side benefits of reduced taxation. Read the rest of this entry »

A necessary practical condition is that the government share of GDP be limited, that is — in the case of European welfare states — be cut back. This need not involve any reductions of the volume and quality of services provided by the government sector. If aggregate supply is relatively elastic with respect to the level of taxation, then tax cuts may provide for a great expansion of the private sector. A vigorously growing private sector will tend to reduce the share of the public sector in the economy, a reduction that might render unnecessary any actual cutbacks of the real size of government. Read the rest of this entry »

ADDITIONAL ASPECTS OF PSE

One of the chief limitations of the PSE approach is that PSE subsidies may bemisdirected when used by state or local governments to pay employees already hired, or workers who would have been hired in the absence of the program. This kind of ‘fiscal substitution’ appears inherent in a PSE approach because it functions as a disguised form of revenue sharing.

A study prepared under the auspices of the National Planning Association estimated a fiscal substitution effect of 0.46 after one year. Subsequent studies produced conflicting results, but verified that the fiscal-substitution effect can be substantial (Bergman and Bennett, 1977). The greater the substitution of federal funds for state and local funds, the less effectively PSE will operate as an employment program. Read the rest of this entry »

Proponents of functional finance are committed to the principle that government’s power to tax, spend, borrow and manage its debt can and should be used as an instrument for achieving the goals sanctioned by a democratic voting process for the macroeconomy. The premise of functional finance is quite explicitly that a dynamic capitalistic economy is inherently unstable, so that unemployment and price instabilities periodically impose economic pain on the economy as a whole, which impacts most severely on labor markets. Wages and salaries comprise two-thirds of earned income; both J.M. Keynes, and subsequently Laurence Klein and Richard Kosabud, have shown the ratio of the wage relative to the profit share to be historically constant in national income (Keynes, 1939; Klein and Kosabud, 1961). Read the rest of this entry »