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Solutions for all

Business StudiesGrade 12

Learner’s Book

F Aron C ChaplinR Rehbock A Voges

SFA Business Studies Gr12 LB.indb 1 5/24/13 3:00 PM

Solutions for all Business Studies Grade 12 Learner’s Book

© F Aron, C Chaplin, R Rehbock, A Voges, 2013© Illustrations and design Macmillan South Africa (Pty) Ltd, 2013

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ContentsHow to write an essay ...................................................................................................xivTERM 1

Topic 1 Macro environment: Impact of recent legislation on business ................. 11. The impact of recent legislation, developed in response to demands for redress and equality, on small and large business operations .......................... 32. Skills Development Act No. 97 of 1998 ................................................................ 4 2.1 National Skills Development Strategy ....................................................... 6 2.2 Human Resources Development Strategy (SETAs) ................................. 73. Labour Relations Act No. 66 of 1995 .................................................................... 9 3.1 Collective bargaining .................................................................................. 10 3.2 Workplace forums ....................................................................................... 11 3.3 Industrial action........................................................................................... 11 3.4 Disciplinary action, disputes and dismissals .......................................... 124. Employment Equity Act No. 55 of 1998 ............................................................. 13 4.1 The nature of the Act .................................................................................. 13 4.2 The purpose of the Act ............................................................................... 13 4.3 Actions that the Employment Equity Act sees as discriminatory ........ 14 4.4 Advantages and disadvantages of the Act .............................................. 14 4.5 Compliance and penalties if the business does not comply ................. 155. Basic Conditions of Employment Act No. 75 of 1997 ...................................... 166. Compensation for Occupational Injuries and Diseases Act No. 130 of 1993

(COIDA) as amended by the Compensation for Occupational Injuries and Diseases Amendment Act No. 61 of 1997 .................................................. 19

7. Black economic empowerment ........................................................................... 248. Broad-based black economic empowerment .................................................... 25 8.1 Human rights ............................................................................................... 27 8.2 Inclusivity ..................................................................................................... 28 8.3 Environmental issues (protection of the environment and human

health by business) ...................................................................................... 319. National Credit Act No. 34 of 2005 ..................................................................... 3210. Consumer Protection Act No. 68 of 2008 ........................................................... 35Summary .......................................................................................................................... 39

Topic 2 Human resources function ............................................................................ 431. Analysis of human resources activities .............................................................. 45 1.1 Recruitment and selection .......................................................................... 45 1.2 Contracts ....................................................................................................... 46 1.3 Induction ...................................................................................................... 47


1.4 Skills development ...................................................................................... 47 1.5 Salaries and wages ...................................................................................... 48 1.6 Other benefits ............................................................................................... 482. HR procedures related to recruitment ............................................................... 49 2.1 Recruitment .................................................................................................. 49 2.1.1 Job description .................................................................................... 50 2.1.2 Job specification .................................................................................. 50 2.2 Selection ........................................................................................................ 50 2.3 Interviewing ................................................................................................. 503. Human resources legalities .................................................................................. 52 3.1 Labour Relations Act No. 66 of 1995 (LRA) ............................................ 52 3.2 Basic Conditions of Employment Act No. 75 of 1997 (BCEA) .............. 53 3.3 Employment Equity Act No. 55 of 1998 (EEA) ....................................... 55 3.4 Compensation for Occupational Injuries and Diseases Act No. 130 of 1993 (COIDA) as amended by the Compensation

for Occupational Injuries and Diseases Amendment Act No. 61 of 1997 ........................................................................................................... 55

3.5 Employment contracts ................................................................................ 56 3.6 Screening and placement procedures ....................................................... 56 3.7 Interviewing, selection and induction procedures ................................. 56 3.7.1 Interviewing ....................................................................................... 57 3.7.2 Selection ............................................................................................. 57 3.7.3 Induction ............................................................................................ 574. Salary determination ............................................................................................ 58 4.1 Piecemeal rates ............................................................................................ 59 4.2 Time-related rates ........................................................................................ 59 4.3 Personal income tax .................................................................................... 59 4.4 Links to BCEA .............................................................................................. 60 4.5 Employee benefits ....................................................................................... 60 4.5.1 Pensions and retirement annuities (RAs) ......................................... 60 4.5.2 Medical aid ......................................................................................... 60 4.5.3 Other benefits ..................................................................................... 605. Skills Development Act No. 97 of 1998 (SDA) .................................................. 61 5.1 The link with SETAs ................................................................................... 62 5.2 Learnerships ................................................................................................. 63 5.3 Skills programmes ....................................................................................... 63 5.4 Qualifications ............................................................................................... 64 5.5 National Qualifications Framework ......................................................... 64 5.6 South African Qualifications Authority (SAQA) .................................... 64Summary .......................................................................................................................... 68


Topic 3 Ethics and professionalism ............................................................................ 69

1. Good business practice methods ........................................................................ 71 1.1 Ethical vs unethical business practice ...................................................... 72 1.2 Professional vs unprofessional business practice ................................... 73 1.3 The relationship between ethical and professional behaviour ............. 74 1.4 Good business practice ............................................................................... 742. The business environment ................................................................................... 76 2.1 What is the business environment? .......................................................... 76 2.2 Issues challenging ethical behaviour ........................................................ 76 2.2.1 Taxation .............................................................................................. 76 2.2.2 Sexual harassment ............................................................................. 77 2.2.3 Pricing of goods in rural areas ........................................................... 77 2.2.4 Unfair advertising ............................................................................. 78 2.2.5 Unauthorised use of funds ................................................................. 78 2.2.6 Abusing work time ............................................................................. 79 2.2.7 Other issues ....................................................................................... 79 2.3 Strategies to address these issues .............................................................. 79Summary .......................................................................................................................... 81

Topic 4 Creative thinking ............................................................................................. 83

1. Applying creative thinking to deal with challenges in complex business contexts ................................................................................................... 85 1.1 Acquiring advanced problem-solving skills ........................................... 85 1.1.1 The Delphi technique ......................................................................... 85 1.1.2 Force-field analysis............................................................................. 86 1.1.3 Creative thinking: convergent and divergent thinking ..................... 86 1.2 Solving complex business problems......................................................... 89 1.2.1 Step 1: Determine the problem........................................................... 90 1.2.2 Step 2: Use divergent thinking to generate ideas

for solutions ....................................................................................... 91 1.2.3 Step 3: Use critical thinking to evaluate possible solutions ............... 92 1.2.4 Step 4: Use convergent thinking to implement solutions .................. 92Summary .......................................................................................................................... 94

Topic 5 Macro environment: Business strategies ..................................................... 951. Advanced problem-solving skills ....................................................................... 97 1.1 Strategy formulation ................................................................................... 97 1.1.1 Devising business strategies .............................................................. 98 1.1.2 Generating business ideas .................................................................. 99


1.1.3 Resolving conflict ............................................................................. 100 1.1.4 Solving other problems .................................................................... 1002. Developing strategies ......................................................................................... 101 2.1 SWOT .......................................................................................................... 101 2.2 Formulation of strategies ......................................................................... 103 2.3 Implementation of strategies ................................................................... 103 2.4 Evaluation of strategies ............................................................................ 1043. Types of business strategies ............................................................................... 105 3.1 Integration strategies ................................................................................ 105 3.1.1 Forward integration ......................................................................... 106 3.1.2 Backward integration ....................................................................... 106 3.1.3 Horizontal integration ..................................................................... 106 3.2 Intensive strategies .................................................................................... 107 3.2.1 Market penetration .......................................................................... 107 3.2.2 Market development ......................................................................... 108 3.2.3 Product development ....................................................................... 108 3.3 Diversification strategies .......................................................................... 109 3.3.1 Concentric diversification ................................................................ 109 3.3.2 Horizontal diversification ................................................................ 109 3.3.3 Conglomerate diversification ........................................................... 110 3.4 Defensive strategies .................................................................................. 110 3.4.1 Retrenchment ................................................................................... 110 3.4.2 Divestiture ........................................................................................111 3.4.3 Liquidation ........................................................................................111 3.5 Other strategies .......................................................................................... 112 3.5.1 Company repositioning .................................................................... 112 3.5.2 Revising the business mission ......................................................... 113 3.5.3 New or revised objectives ................................................................. 113 3.5.4 Devising new policies ...................................................................... 114 3.5.5 Issuing stock to raise capital ............................................................ 114 3.5.6 Additional salespeople ...................................................................... 115 3.5.7 Reallocating resources ...................................................................... 115 3.5.8 New performance incentives ............................................................ 1154. Strategic evaluation ............................................................................................. 117 4.1 Evaluating strategies ................................................................................. 117 4.2 Recommending improvements ............................................................... 117 4.3 Three activities of strategic evaluation ................................................... 118 4.3.1 Examination ..................................................................................... 118


4.3.2 Comparison ...................................................................................... 119 4.3.3 Correction ........................................................................................ 120Summary ........................................................................................................................ 123Revision Term 1 ............................................................................................................. 125

TERM 2

Topic 1 Social responsibility and corporate citizenship/corporate socialresponsibility (CSR) .................................................................................................... 1271. Defining social responsibility ............................................................................ 1292. Social responsibility ............................................................................................ 1303. Corporate social responsibility .......................................................................... 132 3.1 Definition .................................................................................................... 132 3.2 Nature and process ................................................................................... 132 3.3 Benefits to business and community ...................................................... 132 3.4 Problems/challenges ................................................................................ 134 3.4.1 For businesses .................................................................................. 134 3.4.2 For communities .............................................................................. 135 3.5 Components ............................................................................................... 135 3.5.1 Environment .................................................................................... 135 3.5.2 Ethical corporate social investment ................................................. 136 3.5.3 Health and safety ............................................................................. 1364. Corporate social investment .............................................................................. 137 4.1 Definition .................................................................................................... 137 4.2 Nature ......................................................................................................... 137 4.3 CSI projects ................................................................................................. 137 4.4 Responsible business practices ................................................................ 137 4.5 Challenges to business.............................................................................. 138 4.6 Legislative requirements .......................................................................... 139 4.6.1 Employment Equity Act .................................................................. 139 4.6.2 Skills Development Act ................................................................... 139 4.6.3 BEE and compliance ........................................................................ 140 4.6.4 The National Skills Development Strategy ..................................... 140 4.6.5 Human Resources Development Strategy ....................................... 140Summary ........................................................................................................................ 142

Topic 2 Human rights, inclusivity and environmental issues ............................. 1431. How to assess a business venture ..................................................................... 1442. Human rights ....................................................................................................... 1453. Diversity in the business .................................................................................... 148


4. Environmental protection and human health ................................................. 1505. Equality, respect and dignity ............................................................................. 1516. Other economic, social and cultural rights ...................................................... 152Summary ........................................................................................................................ 154

Topic 3 Team performance assessment, conflict management and problem-solving .......................................................................................................... 1551. Collaborating with others .................................................................................. 156 1.1 Criteria for successful team performance .............................................. 157 1.2 Self-assessment and team performance assessment ............................ 157 1.2.1 Interpersonal attitudes and behaviour ............................................. 158 1.2.2 Shared values ................................................................................... 159 1.2.3 Communication ............................................................................... 160 1.2.4 Other criteria ................................................................................... 161 1.3 Performing effectively .............................................................................. 1622. Problem-solving and problem management ................................................... 162 2.1 Common sources of problems when people work together

in teams ....................................................................................................... 163 2.2 Managing problems that arise when people work together

in teams ....................................................................................................... 1643. Correct grievance procedures ............................................................................ 1654. Dealing with difficult people ............................................................................. 167 4.1 Types of difficult people ........................................................................... 167 4.2 What to do to manage a difficult person ............................................... 168Summary ...................................................................................................................... 171 Topic 4 Business sector and its environment .......................................................... 1721. Micro environment ............................................................................................. 174 1.1 Relation to business environment ........................................................... 174 1.1.1 The primary sector – micro environment ........................................ 175 1.1.2 Secondary sector – micro environment ............................................ 176 1.1.3 Tertiary sector – micro environment................................................ 177 1.2 Extent of business influence and control ............................................... 1772. Market environment ........................................................................................... 179 2.1 Relation to business environment ........................................................... 179 2.1.1 Primary sector – market environment ............................................. 179 2.1.2 Secondary sector – market environment .......................................... 180 2.1.3 Tertiary sector – market environment .............................................. 180 2.2 Extent of business influence and control ............................................... 181


3. Macro environment ............................................................................................. 182 3.1 Relation to business environment ........................................................... 183 3.1.1 Primary sector – macro environment .............................................. 183 3.1.2 Secondary sector – macro environment ........................................... 184 3.1.3 Tertiary sector – macro environment ............................................... 185 3.2 Extent of business influence and control ............................................... 185Summary ...................................................................................................................... 188

Topic 5 Management and leadership ....................................................................... 1901. Leadership vs management ............................................................................... 191 1.1 Management .............................................................................................. 192 1.2 Leadership .................................................................................................. 192 1.3 The differences between leadership and management ....................... 1932. Leadership styles ................................................................................................. 194 2.1 Democratic ................................................................................................. 194 2.2 Autocratic ................................................................................................... 195 2.3 Laissez-faire ................................................................................................ 195 2.4 Bureaucratic ............................................................................................... 195 2.5 Charismatic ................................................................................................ 196 2.6 Servant leadership ..................................................................................... 1963. Management and leadership theories .............................................................. 197 3.1 Leaders and followers .............................................................................. 197 3.2 Situational leadership ............................................................................... 198 3.3 Transactional and transformational leadership .................................... 198 3.4 Behavioural theories ................................................................................. 199 3.5 Functional theory ...................................................................................... 1994. Personal attitude .................................................................................................. 200Summary ...................................................................................................................... 203

Topic 6 Quality of performance ................................................................................. 2051. Quality in business .............................................................................................. 207 1.1 Defining quality ......................................................................................... 207 1.2 Quality control/assurance ....................................................................... 2072. Quality and the various business functions .................................................... 208 2.1 Administration .......................................................................................... 209 2.2 Human resources ...................................................................................... 209 2.3 Purchasing .................................................................................................. 209 2.4 Production function .................................................................................. 209


2.5 Financial function ...................................................................................... 210 2.6 Marketing function ................................................................................... 210 2.7 General management ................................................................................ 210 2.8 Public relations .......................................................................................... 2103. How quality affects business structures .......................................................... 212 3.1 Small enterprises vs large enterprises .................................................... 212 3.2 Total quality management ....................................................................... 212 3.3 Continuous skills development .............................................................. 214 3.4 Total client satisfaction ............................................................................. 215 3.5 Continuous improvement ........................................................................ 215Summary ...................................................................................................................... 218Revision Term 2 .......................................................................................................... 219

TERM 3

Topic 1 Investment: Securities ................................................................................... 2211. Assurance vs insurance ..................................................................................... 224 1.1 Assurance ................................................................................................... 224 1.1.1 Compulsory ...................................................................................... 225 1.1.2 Non-compulsory .............................................................................. 225 1.1.3 Viability ............................................................................................ 226 1.1.4 Relevance ......................................................................................... 226 1.2 Insurance .................................................................................................... 227 1.2.1 Compulsory ...................................................................................... 227 1.2.2 Non-compulsory .............................................................................. 227 1.2.3 Viability ............................................................................................ 228 1.2.4 Relevance ......................................................................................... 2282. Types of investments .......................................................................................... 229 2.1 Business investments ................................................................................ 229 2.2 Johannesburg Stock Exchange ................................................................. 230 2.3 Types of shares ........................................................................................... 231 2.4 Unit trusts ................................................................................................... 232 2.5 Government retail bonds ......................................................................... 2333. Returns .................................................................................................................. 234 3.1 Dividends ................................................................................................... 234 3.2 Interest ........................................................................................................ 2354. Calculations .......................................................................................................... 236 4.1 ROI ............................................................................................................... 236 4.2 Interest ........................................................................................................ 236


5. Compound vs simple interest ........................................................................... 238Summary ........................................................................................................................ 241

Topic 2 Investment: Insurance ..................................................................................2421. Compulsory insurance ......................................................................................244 1.1 Road Accident Fund (RAF) .....................................................................244 1.2 Unemployment Insurance Fund (UIF) ..................................................245 1.3 Compensation for occupational injuries and diseases ........................246 1.4 Compulsory insurance on goods ...........................................................2472. Non-compulsory insurance ..............................................................................2483. Understanding life insurance and retirement annuities ...............................248 3.1 Life insurance ............................................................................................248 3.2 Retirement annuities ................................................................................249 3.3 Non-compulsory insurance of goods ....................................................250 3.4 Calculating under- and over-insurance ................................................251 3.4.1 Under-insurance .............................................................................251 3.4.2 Over-insurance ...............................................................................251Summary ........................................................................................................................ 255

Topic 3 Forms of ownership ......................................................................................2561. Sole traders .........................................................................................................258 1.1 Comparison with other businesses ........................................................259 1.2 Capacity .....................................................................................................259 1.3 Taxation ......................................................................................................259 1.4 Management ..............................................................................................259 1.5 Capital .......................................................................................................260 1.6 Division of profits .....................................................................................260 1.7 Legislation .................................................................................................2602. Partnerships ........................................................................................................260 2.1 Comparison with other businesses ........................................................261 2.2 Capacity .....................................................................................................262 2.3 Taxation ......................................................................................................262 2.4 Management ..............................................................................................262 2.5 Capital .......................................................................................................262 2.6 Division of profits .....................................................................................263 2.7 Legislation .................................................................................................2633. Close corporations ..............................................................................................264 3.1 Comparison with other businesses ........................................................265 3.2 Capacity .....................................................................................................265


3.3 Taxation ......................................................................................................265 3.4 Management ..............................................................................................266 3.5 Capital ........................................................................................................ 266 3.6 Division of profits ...................................................................................... 266 3.7 Legislation .................................................................................................. 2664. Co-operatives ....................................................................................................... 267 4.1 Comparison with other businesses ......................................................... 268 4.2 Capacity ...................................................................................................... 268 4.3 Taxation ....................................................................................................... 268 4.4 Management .............................................................................................. 268 4.5 Capital ........................................................................................................ 268 4.6 Division of profits ...................................................................................... 268 4.7 Legislation .................................................................................................. 2695. Private companies ((Pty) Ltd) ............................................................................ 269 5.1 Comparison with other businesses ......................................................... 270 5.2 Capacity ...................................................................................................... 270 5.3 Taxation ....................................................................................................... 270 5.4 Management .............................................................................................. 271 5.5 Capital ........................................................................................................ 271 5.6 Division of profits ...................................................................................... 271 5.7 Legislation .................................................................................................. 2716. Public companies (Ltd) ....................................................................................... 272 6.1 Comparison with other businesses ......................................................... 273 6.2 Capacity ...................................................................................................... 273 6.3 Taxation ....................................................................................................... 273 6.4 Management .............................................................................................. 273 6.5 Capital ........................................................................................................ 274 6.6 Division of profits ...................................................................................... 274 6.7 Legislation .................................................................................................. 274Summary ........................................................................................................................ 277

Topic 4 Presentation and data response ................................................................... 2781. Business presentations ........................................................................................ 280 1.1 Verbal presentations .................................................................................. 280 1.1.1 Audiovisuals .................................................................................... 280 1.1.2 Handouts ......................................................................................... 280 1.1.3 Transparencies/slides ....................................................................... 281


1.1.4 Posters ............................................................................................. 281 1.1.5 The layout of visual presentations ................................................... 281 1.2 Non-verbal presentations ......................................................................... 281 1.2.1 Tables ............................................................................................... 282 1.2.2 Graphs ............................................................................................. 282 1.2.3 Diagrams ......................................................................................... 283 1.2.4 Illustrations ..................................................................................... 2832. Effective presentation criteria ............................................................................ 284 2.1 Knowing your audience ........................................................................... 285 2.2 Most important information first ............................................................ 285 2.3 Using visual support effectively ............................................................. 2853. Process and style of presentations using visual aids ..................................... 286 3.1 Positioning .................................................................................................. 286 3.2 Displaying and changing transparencies/slides .................................. 287 3.3 Using a pointer .......................................................................................... 2874. Responding in a non-aggressive and professional manner to questions about work and presentations ........................................................................... 289 4.1 Answering all questions ........................................................................... 290 4.2 Taking notes ............................................................................................... 290 4.3 Avoiding arguments ................................................................................. 290 4.4 Apologising for errors .............................................................................. 2905. Feedback ............................................................................................................... 292 5.1 Handling feedback .................................................................................... 292 5.2 Amending plans ........................................................................................ 292 5.3 Integrating into future projects ............................................................... 2926. Identifying areas for improvement ................................................................... 293Summary ........................................................................................................................296Revision Term 3 .............................................................................................................297Trial examination ...........................................................................................................299Revision Term 4 .............................................................................................................306Word list .........................................................................................................................310

Note to the teacher: Please refer to the Teacher’s Guide for possible formal assessment tasks, sample tests and exam papers, as well as their memoranda.


xiv

How to write an essayAll business essays must follow this guideline:

Facts 32 marks Two marks awarded per fact to a max. of 16 facts or 32 marksLASO 8 marks See table belowTotal essay mark 40 marks

LayoutYou must write the words ‘Introduction’, ‘Body’ and ‘Conclusion’ as headings for each section.

LASOIn addition to the facts, your essay or report will be marked according to the following rubric:

LASO The learner has: Marks

Layout written the words ‘Introduction’, ‘Body’ and ‘Conclusion’ in the correct places

2

Analysis covered all the topics asked 2Synthesis approached the topic correctly 2Originality used actual, real-life examples. 2

RecommendationTry to practise writing essays and reports in this format as often as possible. Essays will count for 80 marks in your exams.


1Topic

Macro environment: Impact of recent legislation on business

What you will learn about in this topic

• The impact of recent legislation, developed in response to demands for redress and equity, on small and large business operations

• Skills Development Act No. 97 of 1998 (e.g. skills levies and their implications for small and large businesses)

° National Skills Development Strategy and Human Resources Development Strategy (i.e. sector education and training authorities)

• Labour Relations Act No. 66 of 1995 • Employment Equity Act No. 55 of 1998 • Basic Conditions of Employment Act No. 75 of 1997 • Compensation for Occupational Injuries and Diseases

Act No. 130 of 1993 as amended by the Compensation for Occupational Inuries and Diseases Amendment Act No. 61 of 1997

• Black economic empowerment • Broad-based black economic empowerment ° Human rights as defined in the Constitution (issues

of equality, respect and dignity including other economic, social and cultural rights)

° Inclusivity (diversity in the business such as poverty, inequality, race, gender, language, age, disability and other factors)

° Environmental issues (protection of the environment and human health by the business)

• National Credit Act No. 34 of 2005• Consumer Protection Act No. 68 of 2008.

Let’s talk about this topic

• How does legislation affect the way business managers run their businesses?• Whose responsibility is it to make sure that a business complies with legislation?• What are the implications for businesses if they don’t comply with legislation?

1

Term 1


2 • Topic 1: Macro environment: Impact of recent legislation on business

What you already know

In Grade 11, you learnt about contemporary legislation. You saw that it is a challenge to businesses because it changes all the time and because businesses are legal entities with the same rights and duties as ordinary citizens. You saw that business managers need to scan the Government Gazettes to identify the laws that affect them and do what they need to do to adapt to them. You also learnt about the Labour Relations Act and trade unions.

Check

myself1. What is the nature and purpose of the Labour Relations Act?2. Name three functions of trade unions.3. Why can legislation pose challenges to businesses?

Word bank

Capital flight: Money flows out of a country’s economy very quickly because of a political event.

Collective bargaining: A process by which employers and employees negotiate to agree on working conditions.

Credit bureau: An agency that collects information about how creditworthy people are.

Credit provider: A person or business that provides credit to consumers.

Debt counsellor: A person who mediates between a consumer and a credit provider to reach an agreement about how the consumer is going to repay his or her debt.

Disinvestment: Businesses or countries remove all of their investments from a country to create an economic incentive for that country to change its policies.

Industrial action: Action that workers take when they want to dispute workplace issues, such as conditions of employment with their employers.

Occupational disease: A disease that a worker gets that is directly linked to his or her job, such as diseases caused by exposure to radiation or deafness caused by constant exposure to loud noise.

SETA: Sector education and training authority developed to oversee training in a certain sector of the South African economy.

Workplace forum: Employee body formed to allow employees to have a say in how a business is run.

CBA


Topic 1: Macro environment: Impact of recent legislation on business • 3

Term 1

What you still need to know

1. The impact of recent legislation, developed in response to demands for redress and equality, on small and large business operations

Legislation has always played an important role in business in South Africa.

During the apartheid era, apartheid legislation determined where people were allowed to live and work. It controlled the kinds of positions that people could fill in businesses and was designed to keep economic power in the hands of minority white businesspeople and industrialists. Foreign countries which had invested in South Africa disinvested in protest against apartheid policies and legislation. Disinvestment is when businesses or countries remove all of their investments from a country to create an economic incentive for that country to change its policies.

Disinvestment in South Africa resulted in capital flight. Capital flight happens when money flows out of a country’s economy very quickly because of a political event. The country loses wealth and its currency loses value. This makes investors even more reluctant to invest in the country, which leads to the economy further weakening.

When apartheid started to be dismantled, and especially after South Africa’s first democratic elections in 1994, foreign countries were eager to reinvest in the country and welcome the country back into the world economy. However, the benefits of this reinvestment needed to be shared equally among all South Africans. Everyone now had the same political power, but the minority still had the economic power. To deal with economic imbalances, the government introduced legislation that had far-reaching effects on how businesses operated in democratic South Africa.


• Topic 1: Macro environment: Impact of recent legislation on business 4

In this topic, we look at the effects of the following legislation and policies on businesses in South Africa:

Skills Development Act No. 97 of 1998

Labour Relations Act No. 66 of 1995

Employment Equity Act No. 55 of 1998

Broad-based black economic empowerment

Black economic empowerment

National Credit Act No. 34 of 2005

Consumer Protection Act No. 68 of 2008

Basic Conditions of Employment Act

No. 75 of 1997Compensation for Occupational Injuries and Diseases Act No.130

of 1997 as amended by the Compensation for Occupational

Injuries and Diseases Amendment Act No. 61 of 1997

Legislation that affects businesses in

South Africa

Legislation and policies that affect businesses in South Africa

Classroom activity 1.1 (14 marks)

Do this activity on your own.

1 What is disinvestment? (4)

2 How do you think an oil embargo could affect a country’s economy? (5)

3 Do you think the problem of capital flight has ended since 1994? Explain your answer. (5)

2. Skills Development Act No. 97 of 1998The nature of the ActThe Skills Development Act aims to develop workplace strategies and structures that, along with the National Qualifications Framework, will improve South African workers’ skills. It aims to start the learnership system and to make money available to improve workers’ skills, though the National Skills Fund and a levy-financing scheme.



Term 1

Purposes of the ActThe purposes of the Skills Development Act are the following:• To develop the skills of South Africa’s workforce by improving their quality

of life, making them more mobile and able to work in different places, giving them better work prospects, making them more productive and employers more competitive, encouraging them to start their own businesses and improving social services

• To invest more in education and training for workers• To encourage employers to train their workers and increase their skills and

experience, and to employ people who struggle to get jobs• To encourage workers to participate in learning programmes• To use education and training to overcome inequalities in employment and

remove discrimination• To make sure that learning in the workplace is of good quality• To help people who are looking for work to find it, to help people who have

been retrenched to get back into the labour market and to help employers to find qualified workers.

The Act states that it will achieve these purposes by using bodies such as the National Skills Authority, the National Skills Fund, the Skills Development Levies Act, sector education and training authorities (SETAs) and the Department of Labour’s provincial offices and labour centres.

Advantages and disadvantagesThe advantages of the Skills Development Act are as follows:• It gives businesses clear guidelines about what they need to do to help their

workers to develop their skills.• It sets up structures to help businesses to contribute towards skills

development.• It improves workers’ skills, making them more productive and competitive

and improving South Africa's economic growth and economic competitiveness.

• Improved worker skills contribute to the business.

The disadvantages of the Skills Development Act are as follows:• It adds extra costs to businesses because they need to pay skills development

levies.• Businesses need to know how to comply with the Act or they will face

penalties.

Compliance and penaltiesThe Act refers to a ‘skills development levy-financing scheme as contemplated in the Skills Development Levies Act’. Let’s look at these skills levies and their implications for small and large businesses.

In terms of the Skills Development Levies Act of 1999, all employers are required to pay a skills development levy of 1% of their employees’ pay. They pay this levy to the South African Revenue Service (SARS) by the seventh of every month, and



must register with SARS to do this. If an employer is in the public service, or is a religious or charity organisation, the business does not have to pay the levy. If the business pays its workers less than R500 000 a year, it does not have to pay the levy either. The levy collected by SARS goes to the National Skills Fund.

What do you think the implications of this levy are? As you can imagine, 1% of employee wages per month is an extra financial pressure for a smaller company. For example, if your small business pays its workers R600 000 per year, or R50 000 per month, it will need to find R500 every month to pay to the National Skills Fund. This is R6 000 per year. The sector education and training authorities (SETAs) get 80% of this payment. However, if your business trains its workers, you get back some of the money you paid. Your business also benefits from the increased skills of its workers.

Businesses that don’t pay the levy will be charged interest on late payments. In its document called Frequently Asked Questions on Skills Development Levy, SARS gives the following information about businesses that don’t pay the levy:

Business owners that do not do any of the following could be convicted, fined and imprisoned for up to one year:• register for the levy• make any of the required payments on the due dates• give false information• provide any documents or information that the Act requires• answer, fully, any of the questions that they are required to answer in terms of

the Act• get in the way of anybody carrying out duties that the Act requires.

Source: www.sars.co.za/home.asp?pid=190

2.1 National Skills Development StrategyThe Skills Development Act and the Skills Development Levies Act form part of the National Skills Development Strategy (NSDS). The government formulated this strategy to make sure that South Africa’s workforce develops the skills required for growing the country’s economy sustainably. The strategy aims at improving social development through economic development. The Acts state how businesses and the government have to put the strategy into practice.

The strategy was rolled out in three phases:• NSDS I, 2001 to 2005• NSDS II, 2005 to 2010• NSDS III, released in 2011 and still in effect at the time of writing in 2012.

Let’s look at the goals of each of these phases.

Goals of phase 1 (NSDS I)The goals of the first phase of the NSDS were as follows:• To encourage people to value lifelong learning• To encourage workers in the formal economy to develop their skills


http://www.sars.co.za/home.asp?pid=190


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• To encourage skills development in small businesses• To make sure that workers develop skills that would allow them to earn a

living sustainably• To help people who were new to the workforce.

Goals of phase 2 (NSDS II) The goals of the second phase of the NSDS were as follows: • To prioritise skills for sustainable growth, development and equity • To ensure that everyone in the workforce had access to quality training • To promote sustainable employment and make workers more employable • To help workers in the groups identified in the Skills Development Act to get

the skills they needed to get jobs or to employ themselves • To eradicate poverty and support economic growth • To make sure that skills development was in line with national strategies for

growth and development • To make BBBEE advance more quickly • To carry on from NSDS I by making sure that workers continued to value

lifelong learning.

Goals of phase 3 (NSDS III)The goals of the third phase of the NSDS are as follows:• To develop vocational skills further• To develop the further education and training (FET) college system further• To improve youth literacy and numeracy• To improve skills development in the workplace• To encourage smaller skills development initiatives• To improve skills development and service delivery in the public sector• To provide better career guidance for young people.

2.2 Human Resources Development Strategy (SETAs)

In 2006, the South African government launched the Joint Initiative on Priority Skills Acquisition (JIPSA). The initiative meant that the government, labour and business worked together to address skills shortages in the South African workforce. Skills shortage was one of the problems limiting growth in South Africa that the Accelerated and Shared Growth Initiative for South Africa (ASGISA) identified.

JIPSA aimed to develop workforce skills in two phases – the short term, and the medium to longer term. It worked with the NSDS to accelerate the skills development process over a shorter period than the NSDS was designed to do. JIPSA was only intended to last for three years.

In 2009, when its three years ended, JIPSA was replaced by the Human Resources Development Strategy for South Africa (HRD-SA). HRD-SA aims to continue the work of JIPSA in developing workforce skills. Its purpose is to further South



Africa’s development goals, to promote social development and social justice, and to help put an end to poverty. As Blade Nzimande, the Minister of Higher Education and Training said in a 2010 speech: ‘The development of human potential is a priority for South Africa. The envisaged development and growth path for South Africa requires the participation of all South Africans in economic activity. Our policy levers to achieve faster growth, higher employment and reduced levels of poverty include skills development to support labour intensive industries, infrastructure investment and rural development. Quality education is needed in early childhood education, through the years of schooling and in post-school education and training if we are to achieve all of our goals.’

Source: http://www.polity.org.za/article/sa-nzimande-address-by-the-minister-of-higher-education-and-training-at-the-inaugural-plenary-meeting-of-the-human-resource-development-council-

pretoria-30032010-2010-03-30

SETAs are an important part of HRD-SA. Initially 27 SETAs were created by the Skills Development Act to oversee training in different sectors of the South African economy. As of 2012 there were 21 SETAs. For example, AgriSETA is the SETA that oversees skills development in the agriculture and animal farming fields. Services SETA is the SETA that oversees skills development in the services sector (marketing, estate agency activities, machinery and equipment, employment services, cleaning services, etc.

The SETAs receive money from employers through the Skills Development Levies Act. They use the money for training, for example through learnerships, grants and bursaries. They draw up skills development plans for their specific economic sectors. It is their job to make sure that their sectors are supplying enough people who are skilled enough to meet the sector’s needs in a growing economy. People who are already employed in businesses can also benefit from SETAs, because they can do on-the-job training through learnerships that the SETAs fund.

Businesses can benefit from SETAs and from the skills development levies they pay by forming their own skills development strategy. The businesses employ a skills development facilitator who oversees the strategy. They can then claim back a percentage of the levies they pay in the form of skills development grants. Here’s how:

The skills development levy-financing system:• When the business employs a skills development facilitator, it can claim back

15% of the skills development levies it pays. This payment to the business is called Grant A.

• When the business develops a workplace skills plan that the SETA approves, it can claim back another 10% of the levies it pays. This payment to the business is called Grant B.

• When the business submits training reports every year to the SETA on what the business’s workplace skills plan has achieved, it can claim back another 20% of the levies it pays. This payment to the business is called Grant C.

• When the business establishes additional skills development initiatives, it can claim back another 5% of the levies it pays. This payment to the business is called Grant D.


http://www.polity.org.za/article/sa-nzimande-address-by-the-minister-of-higher-education-and-training-at-the-inaugural-plenary-meeting-of-the-human-resource-development-council-pretoria-30032010-2010-03-30






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So, businesses that contribute towards skills development through the SETAs can claim back up to 50% of the skills development levies they pay to SARS.


Do this activity with a partner.

1 Assess why it is worthwhile for a business to contribute towards its workforce’s skills development. (5)

2 What is HRD-SA? (4)

3 Analyse the role that the SETAs play in HRD-SA. (10)

4 What are the purposes of the Skills Development Act? (5)

5 What are the implications of not paying the skills development levy? (2)

3. Labour Relations Act No. 66 of 1995

The nature of the Labour Relations ActSouth Africa’s Labour Relations Act (LRA) is one of the most thorough pieces of labour legislation in the world. The Act aims to do the following:• To change the law that governs labour relations• To make the labour law in line with Section 27 of the Constitution, which

gives everyone the right to healthcare, food and water• To encourage collective bargaining, regulate strikes and encourage employees

to join workplace forums to participate in decision-making in the workplace• To set up the Commission for Conciliation, Mediation and Arbitration

(CCMA) to resolve workplace disputes• To set up the Labour Court and Labour Appeal Court to deal with labour

matters• To simplify and regulate trade union registration• To align South Africa’s labour law with international labour law• To deal with any matters relating to how workers and employers relate to

each other.

We can map this to Section 23 of the final Constitution (1996), which deals with labour law, by saying that all workers have the right to fair labour practices, to trade union membership and participation, and to strike. It says that all employers have the right to become part of employers’ organisations and to participate in these organisations’ activities. It also says that trade unions and employers’ organisations have the right to set their own programmes, to form federations and to use collective bargaining. The government can put national laws in place to regulate collective bargaining.



The purpose of the Labour Relations ActThe Act aims to encourage economic development, social justice and peaceful and democratic workplaces by doing the following:• Making sure that workers’ constitutional rights are protected• Making sure that South Africa’s labour law is in line with international labour

law, as a member of the International Labour Organisation (ILO)• Creating an environment where workers can bargain collectively and be a

part of formulating industrial policy• Promoting fair and organised collective bargaining, worker participation in

workplace decision-making and effective labour dispute resolution.

The LRA is about how employers and employees relate to each other in the workplace. It affects small and large businesses in South Africa because it determines how labour relations work. It was developed to correct the imbalances of power in the workplace that arose from apartheid. But it does not only protect workers – because it is about how employers and employees relate to each other, it protects the rights of employers as well. For an economy to grow, labour and capital need to work together productively and efficiently. Good labour relations are a characteristic of successful democracies all over the world.

The LRA brings labour legislation in South Africa in line with international labour legislation that the ILO has developed. The ILO is the United Nations agency that works towards social justice for workers around the world. It standardises working conditions to prevent worker exploitation. Issues that the legislation covers include:• collective bargaining• workplace forums• industrial action• disciplinary action, disputes and dismissals.

3.1 Collective bargainingThe LRA recognises that collective bargaining is an effective way for employees and employers to negotiate, and that strikes and lock-outs are an important part of this process. Good labour legislation is important for South Africa because a regulated labour environment makes investing in South Africa attractive.

The LRA states that there are three systems that workers can use for collective bargaining:

LRA systems for collective bargaining in a business:• Collective agreements: simple agreements between an employer and one or

more unions• Bargaining councils: councils that deal with collective agreements and make

policies about a business’s labour relations. They also: ° prevent and resolve labour disputes ° set up schemes for education and training



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° make proposals about policies and laws that affect a specific sector or business area

• Statutory councils: councils that have similar functions to bargaining councils, but that do not have as much power as bargaining councils.

3.2 Workplace forumsThe LRA allows for employees to form workplace forums. If a business employs more than 100 workers, and if most of those workers are represented by a single trade union, the trade union can apply to the Commission for Conciliation, Mediation and Arbitration (CCMA) to form a workplace forum. The forum then works with management in the business to have a say in how decisions in the business are made. This means that management decisions are not unilateral (one-sided), but bilateral (involving both sides). If employees are not members of a trade union, they can also join a workplace forum.

The LRA states that workplace forums have the right to be consulted about the following workplace issues:

Workplace issues that workplace forums have the right to be consulted about:• Restructuring and new work methods• Partial or total closure of a plant• Mergers and ownership transfers• Retrenchments• Job grading• Criteria for merits and bonuses• Education and training• Product development plans• Export promotions• Health and safety measures.Source: http://www.labour.gov.za/legislation/acts/basic-guides/basic-guide-to-workplace-forums

3.3 Industrial actionThe LRA also states how workers can participate in industrial action. Industrial action is action that workers take when they want to dispute workplace issues, such as conditions of employment, with their employers. There are two kinds of industrial action. Protected industrial action is industrial action that complies with rules set out in the LRA. Unprotected industrial action does not comply with the rules in the LRA and is illegal, so workers who lose their jobs for participating in unprotected industrial action are not likely to get their jobs back.

Industrial action can be protected or unprotected


http://www.labour.gov.za/legislation/acts/basic-guides/basic-guide-to-workplace-forums


3.4 Disciplinary action, disputes and dismissals

The LRA provides clear guidance on how employers and employees should deal with disciplinary action and dismissals. It gives employees the right not to be dismissed unfairly and sets up a process that employers need to follow when they want to dismiss employees. It states that if employers dismiss employees, they have to do so for a fair reason and use a fair procedure. It also specifies what an unfair dismissal is. For example, it is illegal for employers to dismiss employees based on discrimination against ‘race, gender, sex, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, political opinion, culture, language, marital status or family responsibility’.

Under the LRA, the CCMA and the Labour Court were formed to resolve workplace disputes. The CCMA is an independent body that resolves disputes between employees and employers efficiently and legally. The Labour Court is a court that resolves workplace disputes. This court has the same status as a High Court.

Advantages and disadvantages of the LRAThe LRA has major advantages for businesses in South Africa because it shifts some of the power in the employer-employee relationship to employees. This is a positive shift for employers and employees, and protects both parties. Happy workers are better workers. Also, if workers are more involved in the decision-making processes, they are more invested in the business and making it successful.

However, the Act does have some disadvantages. Employers must be aware of what they need to do in order to comply with the LRA. This often involves consulting labour lawyers, which can be costly, especially for small businesses. Employers need to allow the formation of workplace forums and bargaining councils and make time to consult with these bodies. They need to know how to deal with disputes and dismissals legally. This requires the business to have knowledgeable human resources staff and a human resources manager, which may be a financial burden to smaller businesses. If a smaller business does not appoint a human resources manager who knows about labour law, the business owner will need to do this job himself or herself. Small business owners seldom have time or resources to do this themselves.

Compliance and penaltiesThe LRA formed the CCMA, the Labour Court and the Labour Appeal Court, which are responsible for making judgements about labour disputes. If businesses do not comply with labour law, and a bargaining council or the CCMA is not successful in resolving the dispute, employees can take the business to the Labour Court. If any party is not satisfied with the Labour Court’s ruling, it can, under certain circumstances, take the matter further to the Labour Appeal Court.

Chapter VIII of the LRA,

Section 187, deals with

unfair dismissals.



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The CCMA, Labour Court or Labour Appeal Court will decide on penalties to be imposed on businesses that do not comply with the LRA.



1 Name four broad issues that the LRA covers. (4)

2 Which two criteria do employers need to meet if they want to dismiss employees in terms of the LRA? (2)

3 What is a workplace forum? What kinds of workplace issues does it have the right to be consulted about? Name five issues. (7)

4 The LRA protects employers and employees. Justify this statement using the purpose of the LRA. (8)

5 Analyse how the LRA affects businesses in South Africa. (8)

6 What is the ILO? (3)

4. Employment Equity Act No. 55 of 1998

4.1 The nature of the ActThe Employment Equity Act recognises that apartheid’s discriminatory nature created inequalities in the workplace. It also recognises that these inequalities are so significant that simply repealing the laws that created them is not enough to ensure that workplaces become fair and equal. The post-apartheid South African business environment could only become fair if active legislation changed the way in which it operated. The Employment Equity Act aims to make the workplace represent the country’s social diversity and to ensure that the economy grows and develops to benefit all South Africans.

4.2 The purpose of the Act In Chapter I of the Act, we read that the purpose of the Act is to remove unfair discrimination in all workplaces, so that workers have equal opportunities and are treated fairly. The purpose of the Act is also to use affirmative action to make sure that all population groups are represented equally in the South African workplace.



Employment Equity Act• Chapter I: Definitions, purpose, interpretation and application (general

information about why the Act was drawn up and how employers should interpret and apply it)

• Chapter II: Prohibition of unfair discrimination (information about what the Act sees as unfair discrimination)

• Chapter III: Affirmative action (information about what affirmative action is and what businesses need to do to comply with the policy)

• Chapter IV: Commission for Employment Equity (information about what this commission is and what its functions are)

• Chapter V: Monitoring, enforcement and legal proceedings (information about what will happen if businesses do not comply with the Act)

• Chapter VI: General provisions (information such as how the Act applies if it comes into conflict with other laws and Schedules containing information about fines)

4.3 Actions that the Employment Equity Act sees as discriminatory

In Chapter II, the Employment Equity Act lists certain actions as discriminatory.

Discriminatory actions under the Employment Equity Act• Direct or indirect discrimination against an employee on the basis of race,

gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language or birth

• Harassment of an employee• Medical testing of an employee unless it is a requirement for the job• Psychometric testing (testing an employee’s aptitude or personality)• HIV testing

4.4 Advantages and disadvantages of the Act

The Employment Equity Act has many important advantages. For example, the Department of Labour issued a document called the Code of Good Practice on the Integration of Employment Equity into Human Resources Policies and Practices in 2005. This is a guide that businesses can use for help in implementing the Employment Equity Act into their businesses practically. The guide has the advantage of helping businesses to ensure that their workforces are happier and more motivated because the workplace will be more diverse and representative. Also, the Labour Court protects the rights of employers as well as employees, which makes for better working relationships. These are all advantages of the Employment Equity Act.

The Employment Equity Act does not have many disadvantages. However, the effects that it has on businesses may be seen as a disadvantage. As you saw in Section 4.4, businesses must do a lot of work to draw up employment equity plans. They must compile and submit employment equity reports every two



Term 1

years and allow labour inspectors to do visits and make recommendations. This can be labour intensive, especially for small businesses, as businesses now need to employ or train someone who knows a lot about the Act. The fines and penalties for non-compliant businesses are also a disadvantage for the business.

4.5 Compliance and penalties if the business does not comply

The most obvious way in which the Employment Equity Act affects South African businesses is in how businesses hire staff. The Act describes affirmative action measures as ‘measures designed to ensure that suitably qualified people from designated groups have equal employment opportunities and are equitably represented in all occupational categories and levels in the workforce of a designated employer’ (Chapter III, Section 15). The Act defines designated employers as follows in Chapter I: • An employer employing more than 50 people • An employer employing fewer than 50 people but whose turnover exceeds a

specific amount that the Act specifies for the sector in which the business operates (for example, Schedule 4 to the Act specifies that if the turnover of a business in the construction sector exceeds R5 million a year, but that business employs fewer than 50 people, it is a designated employer)

• A municipality• An organ of state excluding bodies such as local government and the National

Defence Force.

The Act defines designated groups as black people (including Indian and coloured people), women and people with disabilities.

Designated employers must take measures that promote diversity, dignity and respect. They must ensure that their businesses do not have any barriers to employment or opportunities for people who belong to designated groups. They must also draw up an employment equity plan that details how they plan to implement affirmative action in their businesses. They must follow this up with reports every two years about how the process is continuing in the business. They must comply with inspections from labour inspectors and make a summary of the Act available for employees to view in the workplace. If they do not comply with the Act, they could be fined between R500 000 and R900 000 and face legal action from the Labour Court.



1 What is the difference between employment equity and affirmative action? (4)

2 Analyse how the Employment Equity Act affects businesses in South Africa. (7)

3 What is a designated employer in terms of the Employment Equity Act? (5)



5. Basic Conditions of Employ-ment Act No. 75 of 1997

The nature of the ActThe nature of the Basic Conditions of Employment Act (BCEA) is to help to ensure that all workers have rights to the fair labour practices in the Constitution by regulating the basic conditions of employment in South Africa so that they comply with the standards of the International Labour Organisation (ILO).

The purpose of the ActThe purpose of the Act is to encourage economic development and social justice by doing the following:• Stating workers’ rights to fair labour practices clearly• Enforcing basic conditions of employment• Regulating how many variations are allowed in the basic conditions of

employment• Aligning South Africa’s labour law with the laws of the ILO.

The BCEA covers the following broad areas: • Chapter One: Definitions, purpose and application of the Act• Chapter Two: Regulation of working time (information about working hours,

overtime, meal breaks, public holidays, and so on)• Chapter Three: Leave (information about annual leave, sick leave, maternity

leave and so on)• Chapter Four: Particulars of employment and remuneration (information

about paying employees’ salaries and wages)• Chapter Five: Termination of employment (information about advising

employees that their employment has ended, payment for retrenchments, and so on)

• Chapter Six: Prohibition of employment of children and forced labour (information about how forced labour and child labour are illegal)

• Chapter Seven: Variation of basic conditions of employment (information about when it is legal to change conditions of employment from the conditions in the BCEA)

• Chapter Eight: Sectoral determination (information about how employment conditions vary depending on what sector a business operates in)

• Chapter Nine: Employment Conditions Commission (information about what this commission does)

• Chapter Ten: Monitoring, enforcement and legal proceedings (information about what will happen if businesses do not comply with the Act)

• Chapter Eleven: General (general information such as codes of good practice).

The BCEA aims to bring South African labour law in line with the ILO’s standards.



Term 1

How the Basic Conditions of Employment Act affects businesses in South AfricaThe BCEA affects how employers manage their staff every day. It governs basic workplace issues such as working hours, lunch breaks and leave. Employers and managers in all departments of a business need to be familiar with these issues so that the business complies with the Act.

The conditions in the BCEA ensure that employers treat their employees with respect and dignity.

Advantages and disadvantages of the ActThe BCEA has many advantages for workers and employers:• It protects workers’ rights to safe and fair working conditions• It protects vulnerable workers, such as children, from exploitative labour

practices, such as child labour and forced labour• It sets up codes of good practice to guide businesses in how to ensure that

their labour practices are fair• It protects employers against unfair worker demands, for example for more

time off than is reasonable or that would make the business unproductive• It gives employers guidance about when it is acceptable to change the basic

conditions of employment• It brings South Africa’s labour law in line with international standards, which

makes South Africa an attractive option for foreign companies• It gives workers and employers clear guidance and support on what to do

and who to report to if there is a dispute about basic conditions of employment

• It sets a minimum wage, which protects workers against exploitation• It protects workers against unfair dismissal.

Some disadvantages of the BCEA include the following:• As with other labour laws, businesses need to stay informed about basic

conditions of employment to ensure that they comply with the law at all times to avoid penalties. This can be difficult for smaller businesses, as it increases the workload and may involve legal costs.

• The strict conditions in the Act may discourage some employers from offering formal employment, because they may not want to risk non-compliance with the Act.

Compliance and penaltiesIf employers do not comply with the Act, their businesses could face fines and legal action from the Labour Court. Employers could also be imprisoned for up to three years for an offence in terms of Sections 43, 44, 46, 48, 90 or 92 of the Act. Sections 43, 44 and 46 deal with child labour, Section 48 deals with forced labour, Section 90 deals with keeping employees’ information confidential and Section 92 deals with obstructing the work of a labour inspector or of anyone carrying out a function in terms of the Act.



The Act divides penalties for non-compliance into two kinds: penalties for contraventions that involve underpaying employees, and penalties for contraventions that don’t involve underpaying employees. The fines for these two kinds of contraventions are different. Schedule two to the Act gives the fines for the two kinds of contraventions as follows:

Table 1 Maximum fine for contravention that does not involve underpaying employees

No previous failure to comply R100 per employee in respect of whom the failure to comply occurs

A previous failure to comply in respect of the same provision

R200 per employee in respect of whom the failure to comply occurs

A previous failure to comply within the previous 12 months or two previous failures to comply in respect of the same provision within three years


Three previous failures to comply in respect of the same provision within three years


Four previous failures to comply in respect of the same provision within three years


Table 2 Maximum fine for contravention that does involve underpaying employees

No previous failure to comply 25% of the amount due, including any interest owing on the amount at the date of the order

A previous failure to comply in respect of the same provision within three years

50% of the amount due, including any interest owing on the amount at the date of the order

A previous failure to comply in respect of the same provision within a year, or two previous failures to comply in respect of the same provision within three years


Three previous failures to comply in respect of the same provision within three years


Four or more previous failures to comply in respect of the same provision within three years




Term 1



1 In your own words, state the purpose of the BCEA. (5)

2 What are the two categories of contraventions of the BCEA for fines that businesses need to pay? (2)

6. Compensation for Occupational Injuries and Diseases Act No. 130 of 1993 (COIDA) as amended by the Compensation for Occupational Injuries and Diseases Amendment Act No. 61 of 1997

The nature of the ActThe Compensation for Occupational Injuries and Diseases Act (COIDA) recognises that some occupations are dangerous and expose workers to health risks. It gives information about how workers should be compensated for diseases they contract and injuries they sustain as a direct result of their jobs.

The purpose of the ActThe Act’s purpose is to set up structures that ensure that workers who are injured or become sick because of the work they do get compensation for their injuries or diseases. It also ensures that if a worker is killed at work, his or her family are compensated.

In terms of the COIDA, if you are injured while doing your job, or if you contract an occupational disease from doing your job, you are entitled to claim for compensation. An occupational disease is a disease that a worker gets that is directly linked to his or her job, such as diseases caused by exposure to radiation,



deafness caused by constant exposure to loud noise, or lung diseases caused by jobs in mining. You can find a list of examples of occupational diseases in Schedule 3 to the COIDA.

The COIDA works as follows:

If the Director-General finds that the employee’s case meets COIDA requirements, the office pays out the compensation from the Compensation Fund. This could take several

months.

It is the Compensation Director-General’s job to assess and investigate the employee’s case, to decide whether to award compensation and to determine how much

compensation should be awarded. This takes place through an inquiry into the accident or disease.

The employer reports the case to the Compensation Commissioner. The Compensation Commissioner is an officer of the Compensation Director-General.

If an employee is injured in a workplace accident, or develops an occupational disease, he or she reports this to the employer in writing.

Employers make contributions to a compensation fund. They have to register with the fund by law.

How the COIDA works

The COIDA compensates workers for temporary and permanent disablement. It also compensates the employee’s spouse and children if the employee dies as a direct result of doing his or her job.

Table 3 shows you how employees’ compensation payments are calculated:



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Table 3 Calculating employee compensation

Nature of disablement

Degree of disablement

Nature of benefits Manner of calculating benefits

1 Temporary Total Periodic payments 75% of monthly earnings to a maximum earning of R15 820 per month, i.e. maximum compensation of R11 865

2 Permanent 30% Lump sum 15 times monthly earnings (minimum of R28 215 and maximum of R132 930 compensation)

3 Permanent Less than 30% Lump sum As calculated for Row 2 in the same proportion as the degree of permanent disablement

4 Permanent 100% Monthly pension 75% of monthly earnings (minimum earnings of R1 881 per month and maximum earnings of R15 820 per month, i.e. compensation between R1 410,75 and R11 865 per month)

5 Permanent More than 30%, less than 100%

Monthly pension As calculated for Row 4 in the same proportion as the degree of permanent disablement

6 Fatal Dependent, no children

Lump sum Twice the employee’s monthly pension payable in Row 4

7 Fatal Dependent and child or children

Monthly pension 40% of monthly pension payable in Row 4 to dependant

8 Fatal Dependent and child or children

Monthly pension 20% of monthly pension payable in Row 4 for first child, decreasing in % for subsequent children. Total to dependant and children not to exceed 100%

9 Fatal Funeral costs Funeral costs A reasonable amount of funeral costs to a maximum of R9 200

Source: Adapted from http://www.treasury.gov.za/publications/other/ssrr/Session%20One%20Papers/Compensation%20Fund%20Project%202nd%20draft.pdf


http://www.treasury.gov.za/publications/other/ssrr/Session%20One%20Papers/Compensation%20Fund%20Project%202nd%20draft.pdf

http://www.treasury.gov.za/publications/other/ssrr/Session%20One%20Papers/Compensation%20Fund%20Project%202nd%20draft.pdf


How the Compensation for Injuries and Diseases Act affects businesses in South AfricaThe Act affects businesses in many ways, some positive and some negative. Let’s look at these advantages and disadvantages of the Act.

Advantages and disadvantages of the ActThe Act has advantages such as the following:• It gives businesses an incentive to make workplaces as safe as possible,

because businesses will want to avoid paying compensation in the event of their workers’ injury, illness or death

• It treats workers with dignity and respect because it shows that the law views them as valuable assets and not just as workers whose lives and health are secondary to the business’s profits

• It makes businesses more socially responsible: businesses cannot just employ workers in dangerous working conditions without acknowledging that they are partly responsible for their workers’ and workers’ dependents’ well-being.

Disadvantages of the Act include the following:• Because compensation payments are based on employees’ salaries, employers

must keep records of payments to employees for at least four years.• The Department of Labour does assessments of businesses, then sends them a

notice of how much they need to pay to the Compensation Fund. Businesses have to pay the amount required within 30 days of receiving the notice. The department cannot specify when businesses will receive their notices to pay, so businesses cannot plan for when they need to make payments.

• Employers need to make sure their work environments are safe. If they have a high accident record, they may be required to pay more to the Compensation Fund.

• Dealing with Compensation Fund contributions and employee accident reports is an administrative burden to businesses, especially to small businesses with few administrative staff.

• Contributions to the Compensation Fund can be a financial burden on businesses, especially small businesses. Even if an employer only employs one employee, the business must still contribute to the fund.



Term 1

Compliance and penaltiesChapter IX of the COIDA lists the following as obligations of employers:

Section 80: Employers must register with the Compensation Commissioner and provide the

Commissioner with any information that the

Commissioner asks for.

Section 83: Employers must be assessed by the Director-General. This assessment determines how much the employer pays in earnings each year and how much the business needs to pay to the Compensation Fund. Late payments to the fund may incur penalty interest and fines.

Section 81: Employers must

keep records of their employees’ earnings

for at least four years.

Section 85: The Director-General can decide to increase employers’ contributions to the

Compensation Fund if the business has a high accident record, or decrease the contribution if

the business has taken special measures to protect the health and safety of its employees.

Section 82: By 31 March each year, employers must submit a return of

employee earnings to the Compensation Commissioner.

Section 87: If an employer does not pay its contribution to the Compensation Fund,

fines and penalties will be charged.

Obligations of employers in terms of the COIDA

Obligations of employers in terms of the COIDA

As you can see from the diagram above, employers will be penalised if they do not comply with the Act. The Act states that if employers do not comply with the Act, the law will regard them as being guilty of an offence.

If employers do not provide the correct information about their workers’ earnings on their returns of earnings, the Director-General of the Department of Labour can fine the business.If employers do not submit their returns of earnings on time, the Director-General can fine the business.

If an employer does not make payments to the compensation fund on time, the Director-General can penalise the business by charging interest on the overdue amount.

If an employer does not pay compensation to a qualifying employee, the Director-General can fine the business. The fine will be equal to the amount of compensation that the employer is required to pay.




Do this activity as a group.

1 What is an occupational disease? (2)

2 How do you think the COIDA contributes to bringing South African labour law in line with ILO standards? Remember that the ILO works for social justice for workers around the world by standardising working conditions to prevent worker exploitation, and that labour law in apartheid South Africa was discriminatory. (10)

3 Why do you think it is important for strong democracies to enforce labour laws such as COIDA? (5)

7. Black economic empowerment

Black South Africans had no socio-economic rights under apartheid. (Remember that black here includes coloured and Indian South Africans.) Black economic empowerment (BEE) is a programme for businesses that aims to bring these people into the economic mainstream. It aims to achieve a balance in the South African economy that reflects the country’s demographics.

BEE legislation takes the form of various codes of good practice that the government has gazetted. The latest of these codes is the Broad-Based Black Economic Empowerment Act No. 53 of 2003, which we will discuss in the next section.

In the document ‘A Strategy for Broad-Based Black Economic Empowerment’ released by the government, we read that:• apartheid was responsible for preventing most South Africans from

participating in the economy• apartheid prevented most South Africans from getting the skills they needed

to participate in the economy• apartheid was structured to make sure that a minority of South Africans

could gather wealth.

The document further states that South Africa’s past still affects its economy today, and that all South Africans need to work together to transform the economy.

Source: http://www.gov.za/

BEE was the starting point for bringing black South Africans into the economic mainstream after apartheid. However, this focus was seen as too narrow, so it was replaced by the strategy of Broad-Based Black Economic Empowerment (BBBEE), formalised in Act No. 53 of 2003. This strategy for economic growth and


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development also focuses on empowering all black South Africans economically, but extends the definition of black South Africans to include women, workers, youth, people with disabilities and people living in rural areas.



1 Define black economic empowerment in South Africa. (5)

2 Analyse how the definition of ‘black South African’ changed from the BEE programme to the BBBEE Act. (8)

3 Use the school’s media centre, the internet, a business directory or visit businesses in your local community to find out about BBBEE in your area. Find one example of a business that has adopted a BBBEE strategy. Write a short paragraph about it, saying when it

became BBBEE-compliant and what this compliance involves. (5)

8. Broad-based black economic empowerment

The nature of the BBBEE ActThe BBBEE Act ties in with the spirit of the Constitution and the Freedom Charter, and links to the Labour Relations Act and Employment Equity Act.

The BBBEE Act sets out the laws for promoting black economic empowerment. It gives the Minister the power to draw up codes of good practice that businesses must use. It also allowed the Minister to form the Black Economic Empowerment Advisory Council.

The preamble to the Act explains that the apartheid government used people’s race to control access to resources and skills. The economy still shows the effects of apartheid, because most South Africans still do not have access to resources and skills. This means that the South African economy is not as strong as it should be, because people who cannot access resources and skills earn low incomes. If more South Africans do not participate in the economy, low economic growth will affect all South Africans negatively in the future. So, the Act needs to ensure that more South Africans access their constitutional right to equality. This involves more participation in the economy by formerly disadvantaged groups, more equal income distribution and a national policy on how to achieve these aims.



The purpose of the BBBEE ActThe purpose is to promote BBBEE by:• changing the racial groups that own and manage new and existing businesses• making sure that more communities and workers own and manage

businesses, which will give them access to more economic activities• increasing the number of black women who own and manage businesses, and

making sure that they get more skills training• giving rural communities better access to land, infrastructure, ownership and

skills• making sure that black economic empowerment is given more finance.

Advantages and disadvantages of the BBBEE ActThe advantages of BBBEE for businesses include the following:• The business becomes part of an important economic transformation and

empowerment process.• The business helps to grow the economy, which is good for all businesses and

citizens in South Africa.• BBBEE focuses on skills development, so the business benefits from workers

who become better at what they do.• The business helps to develop the socio-economic environment of its workers.• The business helps to reduce unemployment, which is good for economic

growth.• The fairer businesses become, the more foreign investors will want to invest

in South Africa.• BBBEE compliance attracts business, as many companies want to do business

with BBBEE-compliant organisations.

The disadvantages of BBBEE include the following:• It is quite a lot of work for businesses to become compliant. This process may

require big changes in the business, and existing workers may be unhappy because they feel that they are no longer valued.

• There is a lot of controversy surrounding BBBEE, with many white employees feeling that their hard work over the years has not been appreciated when they get overlooked for promotion and struggle to find employment.

• If a business’s BBBEE scorecard ranking is low, the business cannot get the tenders that the government or its parastatals award. Other businesses will not want to do business with it either, because doing business with suppliers with low BBBEE rankings will affect their own rankings.

Compliance and penaltiesIn terms of the BBBEE Act, the Minister of Labour must make codes of good practice available that inform businesses how they should implement and measure BBBEE. One of these codes of good practice is Code 000, Framework for Measuring Broad-Based Black Economic Empowerment. This code indicates the BBBEE scorecards that are used to assess whether businesses comply with the BBBEE Act.



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BBBEE scorecards list the different aspects of the business that will be measured to determine compliance. Businesses of different sizes have different compliance requirements based on their annual turnover:

Annual turnover of less than R5 million: the

business is an exempt micro enterprise (EME) and does not need to complete a

BBBEE scorecard.

Annual turnover of between R5 million and R35 million: the business is a qualifying small

enterprise (QSE) and its scorecard is only measured on the best four of the seven scorecard elements.

Annual turnover of more than R35 million: the business is a generic

enterprise (GE) and its scorecard is measured on all

seven scorecard elements.

BBBEE scorecard compliance requirements for businesses of different sizes by annual turnover

BBBEE scorecard compliance requirements

The scorecard elements are as follows:• Ownership (20 points)• Management (10 points)• Employment equity (15 points)• Skills development (15 points)• Procurement (20 points)• Enterprise development (15 points)• Socio-economic development (5 points).

These seven scorecard elements show that BBBEE is concerned with making businesses inclusive at all levels to ensure that previously disadvantaged South Africans are empowered economically. It is important for a business to achieve high scores on its scorecard as many business opportunities, such as government tenders, are only awarded to BBBEE-compliant businesses.

8.1 Human rightsAs defined in the ConstitutionThe BBBEE Act links to the human rights set out in the South African Constitution. Chapter 2 of the Constitution, the Bill of Rights, states that all South Africans are equal before the law:

You will learn more about human rights, inclusivity and environmental issues in Term 2 Topic 2.



(2) Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken.

(3) The state may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth.

Source: http://www.info.gov.za/documents/constitution/1996/a108-96.pdf

EqualityThe main principle of BBBEE is that it is a legislative measure ‘designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination’. BBBEE also ensures that the state does not discriminate against any citizen on the grounds of race. In giving all South Africans access to the economic mainstream, the BBBEE Act also helps to ensure that South Africans have their dignity respected and protected, in line with the Constitution.

Respect and dignityIn its protection of constitutional human rights and equality, BBBEE aims to ensure that all South Africans are treated with respect and dignity. When a political and economic system discriminates against people and denies them access on the basis of race, it undermines those people’s dignity and treats them disrespectfully. By acknowledging that apartheid promoted this discrimination, and by attempting to redress this discrimination, BBBEE strives to restore the respect and dignity of previously disadvantaged South Africans.

Economic, social and cultural rightsYou have already seen how BBBEE aims to give all South Africans access to the economic mainstream. In this way, BBBEE promotes economic rights. In promoting human rights, BBBEE aims to encourage business to promote social and cultural rights. As you saw in the extract from the Constitution above, social and cultural rights are an important component of human rights. BBBEE acknowledges that it is not only the government’s responsibility to redress the imbalances of the past. It is business’s responsibility as well, because white-owned businesses benefited from the apartheid system. These businesses need to be part of the effort to bring all South Africans back into the economic mainstream.

8.2 InclusivityThe BBBEE Act is based on the principle of inclusivity. Inclusivity is about ensuring diversity in a business and not excluding people from working in the business on the basis of their race and gender, for example. Its main focus is to ensure that people are not excluded from the economic mainstream because of


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their race or status as previously disadvantaged South Africans. Businesses may not discriminate against people because of their gender, or age. They also may not exclude people because of the language they speak or because they are disabled. Businesses must include people from different religions, beliefs or cultures. This makes businesses and therefore communities more diverse and representative of the country’s demographics.

Diversity in business: race, gender, age, language, disability and other factorsDiversity in businessDiversity in business involves making sure that not only a dominant group of people, for example, white people, Xhosa-speaking people, able-bodied people or men, are represented in a business. It is about ensuring a mix of people from different religious, ethnic and cultural groups and of different genders, sexual orientations and physical abilities in a business. It involves being aware of the following issues:• poverty and inequality• race• gender and age• language• disability and other factors.

Poverty and inequalityWhen you learnt about the Employment Equity Act, you saw that apartheid laws gave people unequal access to employment. This meant that people from certain groups were barred from entering the economic mainstream. This resulted in poverty for some and accumulation of wealth for others, which made the South African economy a place of inequality.

The BBBEE Act seeks to redress this poverty and inequality by bringing people from previously disadvantaged groups into business ownership and management. This will improve their skills and give them greater access to economic benefits, alleviating poverty and narrowing the inequality gap between low-income and high-income earners.

RaceThe BBBEE Act is based strongly on race, because this was the basis on which the apartheid government discriminated against black South Africans. The Act aims to empower black South Africans economically by rewarding companies that place black South Africans in management and ownership positions and that have an equal spread of black South Africans in all occupational categories in the business. In the context of the BBBEE Act, the term ‘black people’ refers to African, coloured and Indian people.



Gender and ageThe BBBEE Act does not only measure inclusivity and diversity by race. It also aims to empower women and the youth, two groups that remain economically marginalised in South Africa.

Women in South Africa have historically been denied access to the economic mainstream because male-dominated cultures and businesses have regarded them as inferior. Many women of all races have historically been confined to their homes, where their domestic duties do not earn them any money. This keeps them economically dependent on male members of the household. It also means that women have unequal access to education compared to men. Poorly educated workers have difficulty entering the workforce, and if they are able to do so, it is in unskilled jobs that are poorly paid. This also keeps them economically dependent on male household members, who are often better educated and better skilled than they are, which means that they earn better salaries. Another reason for women’s economic marginalisation is the time that women who have children spend outside the workforce. Their childcare duties mean that they cannot build careers in the same ways as men. Economically disadvantaged women also sometimes have less control over their reproductive rights than women who are in the economic mainstream.

The youth is the part of the population of young people aged 14 to 35. South Africa has a large young population. These people are often unemployed or underemployed because of poverty and lack of access to education. Legislation such as the BBBEE Act helps marginalised youth to improve their skills through education and to access fairer, better employment opportunities.

LanguageIn South Africa, racial discrimination and language are closely linked because the dominant group during the apartheid era spoke English and Afrikaans. Disadvantaged groups such as black South Africans spoke languages that were considered unofficial. These languages were not in use in businesses. This made it even more difficult for disadvantaged South Africans to excel in the workplace because they were forced to speak a second language.

The democratic government has made 11 South African languages official, and the Constitution of South Africa makes it illegal to discriminate against anyone on the basis of the language he or she speaks.

Disability and other factorsPeople with disabilities face challenges in the workplace that able-bodied people don’t. They are often unable to do certain types of work, and face challenges such as physical access to business premises. This makes it difficult for them to enter the economic mainstream, despite the fact that they often have valuable skills with which they can contribute to the economy.

The Constitution makes it illegal to discriminate against people on the basis of their physical ability, and acts such as the BBBEE Act encourage businesses to



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employ people with disabilities. An inclusive business is one that makes provision for people with different physical abilities.

Other inclusivity factors include demographic information such as where people live. For example, people who live in rural areas are often economically marginalised because the country’s economic centres are in the cities. Groups of people who are already marginalised, such as women, people with disabilities and the youth, are often less empowered than their urban counterparts because of the economic differences between rural and urban areas. Inclusivity in a business also involves investing in rural areas to bring rural people into the economic mainstream.

The penalties for non-compliance with BBBEE are not as serious as non-compliance with other labour laws. To comply with BBBEE, businesses first need to comply with the Employment Equity Act and Skills Development Act. You already know that there are penalties for non-compliance with these Acts. If businesses don’t comply with these Acts, they will not have a high BBBEE scorecard. As you saw in the list of disadvantages of BBBEE, a low BBBEE scorecard will mean that the business is not considered for some kinds of business opportunities.

8.3 Environmental issues (protection of the environment and human health by business)

Section 24 of our Constitution states that everyone has the right to a safe environment, that does not harm their health, and that is protected for the benefit of generations to come. This protection should take the form of conservation, pollution prevention and environmentally sustainable resource use.

As Section 24 of the Constitution shows, all South Africans have the right to a safe and healthy environment. Business has a role to play in ensuring this.

Protection of the environment by businessThe Department of Environmental Affairs aims to ensure that South Africans live in harmony with their natural environment. South Africa’s natural beauty is a major factor in attracting tourists to the country. In 2009, tourism contributed R189,4 billion to South Africa’s GDP, and the government hopes to increase this to R499 billion by 2020. To achieve this, the government and businesses will need to work together to ensure that South Africa’s environment is protected. Business sectors such as mining cause widespread environmental damage. To ensure continued economic growth and to protect South Africans’ right to live in a safe and healthy environment, the government cannot be solely responsible for protecting the environment. Businesses need to play a role in protecting the environment too.



BBBEE aims to protect South Africans’ socio-economic rights. Without a healthy and safe environment, these rights are not protected. The socio-economic development component of the BBBEE scorecard means that businesses need to play their part in protecting the environment if they are to get a high BBBEE score.

Protection of human health by businessHuman health is closely linked to environmental health. For example, if businesses pollute the environment through air pollution, water pollution or dumping of harmful waste products, people’s health in surrounding communities will suffer. If businesses do not provide safe and healthy working environments for their employees, their employees’ health will suffer.

Part of the socio-economic development component of the BBBEE scorecard is social and economic transformation. This involves business practices that are environmentally sustainable. Environmental sustainability is about protecting the environment and natural resources so that they last for future generations. Without a healthy environment, social transformation cannot occur. So, BBBEE helps to ensure that businesses protect the environment and human health.



1 Summarise the contents of the preamble to the Broad-Based Black Economic Empowerment Act using your own words. (10)

2 Analyse how the BBBEE scorecard links to inclusivity as set out in the Constitution. (8)

9. National Credit Act No. 34 of 2005

The last two Acts we will look at in this topic refer to consumer law rather than to labour law. Let’s start with the National Credit Act, an Act passed to protect consumers in credit transactions and to make credit more accessible to all consumers.

The nature of the NCAThe nature of the National Credit Act (NCA) is to do the following:• To make the marketplace fair and non-discriminatory• To give all consumers access to consumer credit and to regulate this • To encourage black economic empowerment in the credit industry• To prevent unfair credit practices• To give people help when they become over-indebted• To make sure that credit bureaus, credit providers and debt counsellors are

registered so that they cannot exploit consumers• To create national standards for the credit industry



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• To establish the National Credit Regulator and the National Consumer Tribunal• To replace old Acts relating to credit.

The purpose of the NCAThe purpose of the National Credit Act is to do the following:1. Improve South Africans’ social and economic welfare2. Allow all South Africans to access the credit market, and to make sure that the

credit market is fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible

3. Protect consumers.

The Act states that it will fulfil its purpose by doing the following:1. Developing the credit market fairly so that all South Africans can access it,

especially people who were not able to access it in the past2. Making sure that the credit market is responsible by encouraging consumers

to use credit responsibly (i.e. to avoid getting into too much debt)3. Making sure that credit providers do not give credit to people who cannot

pay it back4. Making the credit market equal by ensuring the rights and responsibilities of

consumers and credit providers5. Giving consumers more power in credit transactions6. Educating consumers about credit so that they can make good choices7. Regulating credit bureaus8. Setting up a system that consumers can use to help themselves to get out of

debt and to resolve disputes with credit providers, so that their obligations to credit providers are met.

Source: Adapted from http://www.thenct.org.za/NCTDocs/founding-legislation/ 9a669fbc-ef58-4bd2-8a5e-d12f37d018bf.pdf

The advantages and disadvantages of the NCAThe advantages of the NCA for businesses include the following:• It makes consumers better informed about their credit transactions.

Consumers can no longer say that they didn’t understand the repayment terms of their agreements.

• It makes giving credit to consumers safer for businesses. This is because businesses can no longer give credit that will result in over-indebtedness, which is when consumers cannot pay their debts. It reduces business’s bad debt. Lending money recklessly is bad for consumers and for businesses.

• It makes services such as debt counselling available to consumers who are struggling to repay their debts. This means that consumers get help and are more likely to be able to repay what they owe to businesses with this help.

• It makes credit bureau information available to businesses so that they can see whether consumers are high risk before lending them money that the businesses will never get back.

• It protects the reputation of businesses that give credit. Businesses that are authorised credit providers will attract consumers, who know that they will not be overcharged or exploited.

• It makes the credit industry more transparent.


http://www.thenct.org.za/NCTDocs/founding-legislation/9a669fbc-ef58-4bd2-8a5e-d12f37d018bf.pdf




The disadvantages of the NCA for businesses include the following:• It has increased the administration burden on credit providers.• Businesses need more working capital because they cannot sell as many

goods on credit due to stricter credit application processes.• Fewer customers buy on credit because it is more difficult to get credit. This

means that businesses that offer goods on credit suffer. • Businesses themselves may struggle to get credit, such as bank loans and

overdrafts.• Businesses that don’t comply with the NCA may face legal action.

Compliance and penaltiesTo make sure that businesses comply with the National Credit Act, the Act establishes two important bodies, the National Credit Regulator (NCR) and the National Consumer Tribunal (NCT).

The logos for the National Credit Regulator and the National Consumer Tribunal

As its name suggests, the NCR regulates the credit industry and businesses that are credit providers in South Africa. It enforces the NCA, educates consumers and registers credit providers, credit bureaus and debt counsellors. A credit provider is a person or business that provides credit to consumers. A credit bureau is an agency that collects information about how creditworthy people are. A debt counsellor is a person who mediates between a consumer and a credit provider to reach an agreement about how the consumer is going to repay his or her debt.

The NCT is a consumer court that has the same status as a High Court under South African law. By forming the NCR and NCT, the NCA determines how credit-providing businesses may and may not act. Credit providers may no longer lend money recklessly to consumers, money that consumers will never be able to repay. They must give consumers contracts written in plain language so that consumers know exactly what they are signing. They must also give consumers a fair chance through a reasonable process to pay off their debts if they fall behind with their payments. The NCA has important implications for businesses that provide credit, but it also protects businesses against consumers who do not repay their debt.

The NCT is responsible for enforcing the NCA. If businesses contravene the NCA, consumers can take them to the NCT. The NCT hears consumers' cases and enforces decisions made by the NCR. If credit-providing businesses do not comply with an NCT order, those responsible could be imprisoned for up to ten years and the business could be fined.



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Section 160 of the NCA states that you have to comply with an order that the NCT gives in a judgement. If you do not, you could be fined, imprisoned for ten years, or both. If you do not comply with any other section of the NCA, you could be fined, imprisoned for 12 months, or both.


Do this activity as a group.

1 What is the difference between the NCT and the NCR? (4)

2 The NCA shifts the balance of power between consumers and credit providers. Discuss and explain what you think this statement means, writing notes about your discussion. (10)3 Why do you think that historically disadvantaged people need

protection against unethical practices by credit providers? Discuss this with your group and write notes about your discussion. (10)

10. Consumer Protection Act No. 68 of 2008

The preamble to the CPA is an important part of the Act because it explains why consumer protection is so important in South Africa:

PreambleThe people of South Africa recognise:• that apartheid and discriminatory laws of the past have caused

unacceptably high levels of poverty, illiteracy and other forms of social and economic inequality;

• that it is necessary to develop and use innovative means to: ° fulfil the rights of historically disadvantaged persons and to promote

their full participation as consumers; ° protect the interests of all consumers, and ensure access to clear and

efficient ways for consumers to set right if they experience abuse or exploitation in the marketplace; and

° apply internationally recognised customer rights;• that recent and emerging technological changes, trading methods,

patterns and agreements have brought, and will continue to bring, new benefits, opportunities and challenges to the market for consumer goods and services within South Africa; and

• that it is desirable to promote an economic environment that supports and strengthens a culture of consumer rights and responsibilities, new ways of doing things in business and better performance.



For the reasons set out on the previous page, and to comply with international law, there should be a law to:• promote and protect the economic interests of consumers; • improve access to, and the quality of, information that is necessary so that

consumers can make informed choices according to their individual wishes and needs;

• protect consumers from risks to their well-being and safety; • develop effective means of setting things right for consumers in the case of

wrong-doing; • promote and provide for consumer education, including education about the

social and economic effects of consumer choices; • make it possible for consumers to freely associate and form groups to publicly

support and promote their common interests; and • promote consumer participation in decision-making processes about the

marketplace and the interests of consumers.

Source: Adapted from http://www.info.gov.za/view/DownloadFileAction?id=99961

Nature and purpose of the Consumer Protection ActThe nature of the CPA is that it is an Act that regulates consumer and business rights in the marketplace.

The purpose of the CPA is to:• look after the social and economic welfare of South African consumers• allow consumers to access the market for consumer products and services fairly• set up standards that make sure that consumers are protected• educate consumers so that they are not exploited by unfair business practices• encourage consumers to behave responsibly• set up the National Consumer Commission • allow consumers and businesses to resolve disputes fairly• replace all of the old Acts relating to consumer rights in South Africa.

Advantages and disadvantages of the Consumer Protection ActThe advantages and disadvantages of the CPA are as follows:

Advantages of the CPA Disadvantages of the CPA

There is now only one law for protecting consumer rights. This makes it easier to enforce and apply the law. There used to be many laws, so it was difficult to deal with all of them.

Businesses need to ensure that they comply with the Act so that they are not penalised. This means that they need to train staff and consult legal experts, which can be expensive for smaller businesses.

It protects consumers from unfair, exploitative and aggressive business and marketing practices.

There are some areas that the Act does not cover, such as the supply of goods or services to the state.


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It promotes consumer rights. The Act specifies that consumers have the right to receive contracts in simple and understandable language. This means that many business documents need to be redone so that they comply with the Act. Businesses will need to educate themselves about plain language.

It gives all consumers fair access to the market for goods and services.

The Act does not cover services that workers offer according to their employment contracts.

It educates consumers about how to participate in the goods and services market responsibly.

The Act increases businesses’ responsibilities to consumers. This means that businesses need to do more work to make sure that they comply.

It enables consumers and businesses to resolve disputes fairly and in a way that respects the rights of both parties, through the National Consumer Commission.

It sets standards to regulate the quality of products and services in the market. This means that consumers know when they are receiving poor quality goods or services.

It corrects the imbalance of power between consumers and businesses. Businesses have more power than consumers, but the Act gives power to consumers too.

It helps to ensure that South Africa, as part of the global economy, does not receive goods that are of poor quality and that did not meet quality standards in other countries.

Rights of the consumer and businessThe rights of the consumer as specified by the CPA are as follows:

The right to equality in the consumer market (including

protection against discriminatory marketing)

The right to privacy (including protection

against unwanted direct marketing)

The right to fair and

responsible marketing

The right to fair and honest dealing

The right to fair, just and

reasonable terms and conditions

The right to deal with suppliers who are accountable to

consumers

The right to fair value, good quality

and safety

The right to information about products and agreements, in plain

language

The right to choose

Consumer rights in terms of the CPA

Consumer rights in terms of the CPA



It may seem that the CPA protects only consumers, but the Act also gives businesses some rights too. The rights of the business as specified by the CPA are as follows:• Businesses now deal with educated consumers. So, they have the right to be

on equal legal terms with their consumers.• Businesses have the right to resolve consumer disputes through fair and

objective channels, such as an ombudsman or the NCC. This means that consumers cannot exploit businesses. It makes transactions fairer for both sides.

Compliance and penalties if the business does not complyThese consumer rights have implications for businesses that provide products and services to consumers. The CPA establishes the National Consumer Commission (NCC), which is an organ of state that enforces the CPA. If consumers are not satisfied with the way in which businesses have treated them in supplying them with products or services, or if they feel that the business has contravened the CPA, they can lodge a complaint with the NCC. The NCC can then take the matter to the NCT. As you learnt in the previous section, the NCT has the same status as a High Court. So, the consequences for businesses that contravene the CPA could be costly, involving a fine or imprisonment.


Do this activity on your own.1 List the main purposes of the CPA. (8)

2 The CPA protects businesses as well as consumers. Discuss. (5)

3 Read the preamble to the CPA again. Write one or two paragraphs explaining how, in your opinion, the CPA relates to the Constitution of South Africa. (15)

Homework activity (49 marks)


1 Why is contemporary legislation a challenge to businesses? (2)

2 What is the difference between BEE and BBBEE? (5)

3 Name five pieces of labour legislation that affect South African businesses. (5)

4 In terms of the Employment Equity Act, what is a designated employer? (5)

5 What are consumer rights in terms of the CPA? Why do they have implications for businesses? (12)



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6 In terms of the COIDA, what are the obligations of employers? (12)

7 What is industrial action? What are the two kinds of industrial action? (6)

8 What is disinvestment? (2)

Extra practice activity (27 marks)


1 Read the sections on the Employment Equity Act and the Broad-Based Black Economic Empowerment Act again. How do you think that apartheid used race to control access to South Africa’s productive resources and access to skills? Explain what effects you think this

has had on the South African economy, and why removing discriminatory legislation is not enough to ensure fair access to economic empowerment. (20)

2 What is an occupational disease? Give two examples. (4)

3 Define a credit bureau. (3)

Summary

• Apartheid legislation controlled the kinds of positions that people could fill in businesses. It was designed to keep economic power in the hands of minority white businesspeople and industrialists.

• Apartheid resulted in disinvestment and capital flight.• After apartheid, the benefits of reinvestment needed to be shared equally

among all South Africans. • To correct economic imbalances, the government introduced legislation

that had far-reaching effects on how businesses operated in democratic South Africa.

• The Skills Development Act No. 97 of 1998 aims to address the shortage of important skills in the South African workplace.

• In terms of the Skills Development Levies Act of 1999, all employers are required to pay a skills development levy of 1% of their employees’ pay.

• The Skills Development Act and the Skills Development Levies Act form part of the National Skills Development Strategy (NSDS).

• The government formulated this strategy to make sure that South Africa’s workforce develops the skills required for growing the country’s economy sustainably. The strategy aims at improving social development through economic development.

• The NSDS was developed in three phases: NSDS I, NSDS II and NSDS III.



• The Human Resources Development Strategy for South Africa (HRD-SA) aims to further South Africa’s development goals, to promote social development and social justice and to help put an end to poverty.

• Sector education and training authorities (SETAs) are an important part of HRD-SA. Created by the Skills Development Act, the SETAs were developed to oversee training in different sectors of the South African economy.

• The SETAs receive money from employers through the Skills Development Levies Act.

• Businesses can benefit from SETAs and from the skills development levies they pay by forming their own skills development strategy and claiming back their levies through grants.

• South Africa’s Labour Relations Act (LRA) is one of the most thorough pieces of labour legislation in the world.

• The LRA is about how employers and employees relate to each other in the workplace.

• The LRA brings labour legislation in South Africa in line with international labour legislation that the International Labour Organisation has developed.

• The LRA recognises that collective bargaining is an effective way for employees and employers to negotiate, and that strikes and lock-outs are an important part of this process.

• The LRA allows for employees to form workplace forums.

• The LRA also states how workers can participate in industrial action. Industrial action is action that workers take when they want to dispute workplace issues, such as conditions of employment, with their employers.

• The LRA provides clear guidance on how employers and employees should deal with disciplinary action and dismissals. It gives employees the right not to be dismissed unfairly and sets up a process that employers need to follow when they want to dismiss employees. It states that if employers dismiss employees, they have to do so for a fair reason and using a fair procedure.

• The Employment Equity Act aims to make the workplace represent the country’s social diversity and to ensure that the economy grows and develops to benefit all South Africans.

• The most obvious way in which the Employment Equity Act affects South African businesses is in how businesses hire staff. The Act describes affirmative action measures as ‘measures designed to ensure that suitably qualified people from designated groups have equal employment opportunities and are equitably represented in all occupational categories and levels in the workforce of a designated employer’.

• Designated employers must take measures that promote diversity, dignity and respect.



Term 1

• They must ensure that their businesses do not have any barriers to employment or opportunities for people who belong to designated groups.

• They must also draw up an employment equity plan that details how they plan to implement affirmative action in their businesses. They must follow this up with reports every two years about how the process is continuing in the business.

• The Basic Conditions of Employment Act (BCEA) affects how employers manage their staff every day.

• It governs basic workplace issues such as working hours, lunch breaks and leave. Employers and managers in all departments of a business need to be familiar with these issues so that the business complies with the Act.

• The conditions in the BCEA ensure that employers treat their employees with respect and dignity.

• If employers do not comply with the Act, their businesses could face fines and legal action from the Labour Court.

• The Compensation for Occupational Injuries and Diseases Act (COIDA) recognises that some occupations are dangerous and expose workers to health risks. It gives information about how workers should be compensated for diseases they contract and injuries they sustain as a direct result of their jobs.

• In terms of the COIDA, if you are injured while doing your job, or if you contract an occupational disease from doing your job, you are entitled to claim compensation.

• The COIDA compensates workers for temporary and permanent disablement. It also compensates the employee’s spouse and children if the employee dies as a direct result of doing his or her job.

• Black South Africans had no socio-economic rights under apartheid. Black economic empowerment (BEE) is a programme for businesses that aims to bring these people into the economic mainstream. It aims to achieve a balance in the South African economy that reflects the country’s demographics.

• BEE legislation takes the form of various codes of good practice that the government has gazetted. The latest of these codes is the Broad-Based Black Economic Empowerment (BBBEE) Act No. 53 of 2003.

• The BBBEE ties in with the spirit of the Constitution and the Freedom Charter, and links to the Labour Relations Act and Employment Equity Act.

• The main principle of BBBEE is that it is a legislative measure designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination.

• The BBBEE Act is based on the principle of inclusivity. Its main focus is to ensure that people are not excluded from the economic mainstream because of their race or status as previously disadvantaged South Africans.



• BBBEE scorecards list the different aspects of the business that will be measured to determine compliance. Businesses of different sizes have different compliance requirements based on their annual turnover.

• The National Credit Act is an Act passed to protect consumers in credit transactions and to make credit more accessible to all consumers.

• The National Credit Act establishes two important bodies, the National Credit Regulator (NCR) and the National Consumer Tribunal (NCT).

• The NCR regulates the credit industry and businesses that are credit providers in South Africa.

• The NCT is a consumer court that has the same status as a High Court under South African law.

• The Consumer Protection Act (CPA) aims to promote a fair, accessible and sustainable marketplace for consumer products and services.

• The preamble to the CPA is an important part of the Act because it explains why consumer protection is so important in South Africa.

• The CPA sets out consumers’ rights.• These consumer rights have implications for businesses that provide

products and services to consumers. • The CPA establishes the National Consumer Commission (NCC), which

is an organ of state that enforces the CPA. • The NCC can take consumer complaints to the NCT.


2Topic

Human resources function

What you will learn about in this topic

The relevant legislation and the following aspects of the human resources function: recruitment and selection; employee contracts; induction and placement; salary administration; employee benefits; skills development• Analysis of human resources activities (recruitment and selection, contracts,

induction, salaries and other benefits)• Procedures related to recruitment, selection and interviewing• Human resources legalities ° Labour Relations Act No. 66 of 1995 (LRA) ° Basic Conditions of Employment Act No. 75 of 1997 (BCEA) ° Employment Equity Act No. 55 of 1998 (EEA) ° Compensation for Occupational Injuries and Diseases Act No. 130 of 1993

(COIDA) as amended by the Compensation for Occupational Injuries and Diseases Amendment Act No. 61 of 1997

° Employment contracts ° Screening and placement ° Interviewing, selection and induction• Salary determination (piecemeal and time-related)• Skills Development Act No. 97 of 1998 (SDA) and the link with SETAs,

learnerships, skills programmes, qualifications, National Qualifications Framework, SAQA, and more.

Let’s talk about this topic

The human resources (HR) function is a very important part of any business because it deals with people and complying with laws. People working in the HR department need to be able to answer many questions such as:• What is the best way to go about hiring new employees?• What is the correct way to pay salaries and wages?• What laws must be complied with?

Term 1

43

Term 1


• Topic 2: Human resources function 44


HR forms part of the four factors of production (human capital/labour). In Grade 11 you were introduced to the various procedures involved in recruiting and selecting new employees.

Check

myself1. Name four laws that affect the employer-employee relationship. 2. What is the impact of the Employment Equity Act?

Word bank

Curriculum vitae: A description of a person’s personal details, education, job experience and interests.

Dispute resolution: A disagreement or conflict between an employer and an employee is settled.

Employment contract: A legal contract between an employer and an employee.

Grievance procedure: A step-by-step process that an employee must follow if he or she lodges a complaint.

Headhunters: People who specialise in finding high-quality personnel.

Induction/orientation: The training given to new workers so that they understand their role and responsibilities.

Job description: Sets out the duties and responsibilities of the person employed to do the job.

Job specification: A list of individual qualities required to perform a job.Learnership: A vocational education and training programme

which combines theory and practice.PAYE: Pay As You Earn income tax.Personal income tax: A tax on the income of individuals.Piecemeal rates: An employee is paid according to the amount

(per unit) of product produced or action performed.Placement: The process of placing new employees in jobs in the

business.Qualification: The formal recognition of the achievement of learning.Recruitment: The process of finding and hiring new staff.Salary: Agreed-upon and regular payment for employment,

usually paid on a monthly basis.Selection: Procedures to identify the most suitable candidates

to fill posts.Shortlist: The list of suitable applicants from all those who

applied for the job.SITE: Standard Income Tax on Employees.Skills development: The training and development that employers

provide for their employees in the workplace.Time-related rates: Used when employees are paid for the amount of

time they spend at work.

CBA


Topic 2: Human resources function • 45

Term 1

UIF: Unemployment Insurance Fund.Wage: An amount usually paid to unskilled workers on an

hourly, daily or weekly basis.

What you still need to know

The human resources function is responsible for all matters regarding people in the workplace. In a larger enterprise a department is responsible for this function, whereas in a small business the owner may be responsible for it.

Human resources deal with the welfare of the employees in the business. The bigger the business, the greater the need for an HR manager and team to protect the interests of the employees. The HR department deals with the recruitment, selection, interviewing, induction, placement, skills development, employee contracts and benefits of employees. Businesses need to understand the labour legislation, their own rights as employers and the rights of their employees.


In Grade 11 you learnt about some of the regulations and legislation that affect all businesses, no matter how big or small. You can refer back to Topic 19 in Grade 11 for revision purposes.

1. Analysis of human resources activities

1.1 Recruitment and selectionRecruitment is the process a business carries out to find and hire the right person for a vacancy. When recruiting, the HR department needs to be aware of factors such as affirmative action and trade union activities, as well as any shortages or imbalances in the labour market. Recruitment is an ongoing process.

LABOUR LAWS COMPLIANCE

RECRUITMENT &

SELECTION

PERFORMANCE APPRAISAL

CAREER

PLANNING

TRAINING & DEVELOPMENT

HEALTH AND SAFETYJOB

CLASSIFICATION

The HR department deals with issues relating to the workforce



A business might need to recruit staff because:• it wants to expand• existing employees leave• it needs employees with new/advanced skills• it may be relocating• employees retire• employees may be dismissed.

Finding the right person for the job is vital for the success of a business. Therefore the employer or HR department must be very clear about the nature of the job and what is required. Recruitment can either be done internally or externally.

• Internal recruitment involves appointing existing staff from within the organisation.

• External recruitment involves hiring staff from outside the organisation.

Each method of recruitment has advantages.

Internal External

• Theapplicantalreadyunderstandstheoperations of the business.

• Theapplicantalreadyknowstherulesand policies of the business.

• Itisencouragingforotheremployeesto see that someone from within the business can be promoted.

• Itdecreasestheemployeeturnoverinthe business.

• Itpromotesapositiveimageofthebusiness.

• Newskillsandideasarebroughtintothe business from new personnel.

• Itpreventspossibleunhappinessifseveral existing workers have applied for the same post.

• Thereisalargerpoolofapplicantstochoose from.

• Recruitmentagenciescanfindcandidates and this saves the business time.

The HR department must make sure that it does not discriminate against anyone on the basis of gender, religion, race, disability or age.

1.2 ContractsOnce the most suitable candidate has been selected, he or she must be offered the position. An employment contract must be signed by both the employer and the employee.

This contract is a legally binding agreement between the employer and employee. By law, an employee must be given a contract within two months of starting a job. This contract may be negotiated later if both parties wish to do so. An employment contract must contain:• the conditions of employment• the salary offered• the code of conduct• other relevant information specific to the business.

A copy is kept by both parties. You will learn more about employment contracts later.



Term 1

1.3 InductionInduction, or orientation, is the process of introducing new employees to the business, other employees, the specific job and the corporate culture of the organisation. You will learn more about this later.

Good induction practices include:• having clear performance standards• allowing for ‘settling-in time’• providing support and a mentor to assist the new employee• ensuring that the new employee feels part of the team• giving initial tasks that produce success.

A business may need to induct staff for the following reasons:• Existing staff are transferred from one position to another in a businessOR• New staff are introduced to their new job.

The length of induction training will vary from job to job. It will also depend on the complexity of the job, the size of the business and the level or position of the job within the business.

1.4 Skills developmentSkills development is the training and development that a business provides for its workers. This comprises training provided by an outside training provider, as well as on-the-job training. The Skills Development Act (SDA) was established to encourage lifelong learning and to ensure that workers could acquire skills while in the workplace. Every business that has more than 50 employees or makes a turnover over a certain amount has to pay 1% of their total salary payroll payment as a Skills Development Levy. The SDA also encourages businesses to provide training for their staff.

The National Qualifications Framework (NQF) was established by the SDA to provide a single national education framework so that everyone can receive further education and training, regardless of age, gender or existing education levels. One of the organisations established by the SDA within the NQF is the Sector Education and Training Authority (SETA). There are about 23 SETAs representing different industries. These SETAs ensure that businesses offer complete training programmes in their relevant sectors. Once the employees have successfully completed a course, the business may claim a refund from their SETA.

A learnership is a work-based learning programme where employees learn how to do a specific job under normal working conditions. A learnership focuses on the outcome or the skill and knowledge acquired rather than the time that the course takes. An employee who successfully completes a learnership will receive a NQF-level qualification. Unemployed people can be offered a short-term employment contract. Once they have completed the training, these people receive a qualification, skills and work experience that makes them more employable. The business can also claim back the cost of training those people who successfully pass their learnership courses.



1.5 Salaries and wages A salary is a regular payment for employment which has been agreed upon and signed by both the employer and the employee. Usually, a salary is paid on a monthly basis. A wage is usually paid on an hourly, daily, weekly or piecemeal basis. Employees can also earn money in the following ways:• Commission: the employee receives a monetary percentage of a transaction as

agreed, for example estate agents earn commission when they sell houses • Profit sharing: the employee shares in the profit of the business as and when

agreed• Performance-based payment: the employee receives a bonus when a set target

is reached.

1.6 Other benefitsOther benefits may also be part of an employment contract with an employee and must be dealt with by the HR department. These are in addition to their salaries and are often called ‘fringe benefits’. Examples of fringe benefits are:• Pension and provident funds: The business pays a portion of the pension or

provident fund on behalf of the employee, for example the employee pays 8% of his/her salary towards a pension fund, and the company pays 6% of the employee’s salary as a company contribution.

• Medical aid: The business pays a portion of the medical aid contribution on behalf of the employee. For example, the employee pays 50% of the calculated medical aid subscription and the company pays 50% of the same subscription as a company contribution.

• Meals: The business provides meals on site for employees in the form of a cafeteria or subsidises meals provided to employees. This has an added benefit in that healthy meals can be provided, thereby contributing to the employees’ well-being, and employees are less likely to take extended lunch hours off site.

• Company cars: The business provides certain employees with the use of a company car, for example senior management, sales representatives and other employees who may have to travel regularly in the course of their business. The value of this benefit is based on the value of the car at book value over time. The car may only be used for company travel and personal use must be declared and paid back to the business.

• Travel allowances: The business, instead of providing company cars, provides a travel allowance to compensate for the cost of employees using their own cars for business matters. This includes wear and tear of their car, petrol and maintenance costs. Travel allowances also include the costs of travelling out of town and could include car rental and air tickets.

• Subsistence allowances: Linked to travel allowances, here the business pays for all costs related to the employee having to travel and do business away from home, for example accommodation, meals, laundry and other related costs. All slips have to be submitted to support any claims for this allowance.

• Discounts on purchases of company products: The business offers employees discount on goods of up to 40%, or sells the goods at cost to employees.

• Loans and bonds at lower rates: If the business is a financial institution (like a bank), it is able to offer loans and bonds at lower rates to its employees.



Term 1

Most fringe benefits are classed as taxable by SARS. This is why the business has to declare the value of each of these benefits on the employee’s pay slip as well as on their tax return sent to SARS at the end of every tax year.


In groups of three, choose a business you are familiar with OR interested in (such as a bank, a restaurant, or something bigger, for example SABC, e.tv or a magazine company).

Create an induction plan to introduce a new employee to the business. Hint: Use page 47 to see what you should put in your plan.Share ideas about how you would take the new employee around. (Remember that the bigger the business, the more departments there will be.) Decide what the new employee will need to be told during the induction process and how long the process will last.Choose one person to write down your plan. Hand in your group work.

Use the following checklist to assess whether you have created your plan correctly:

Criteria Yes NoLength of time of induction decided onDetails for induction recordedIntroduction process recordedPlan is logical and easy to read.

2. HR procedures related to recruitment

The HR procedures for filling a vacancy in a company involve three main steps: recruiting, selecting a group of suitable candidates and then interviewing them to see who best fits the job profile.

2.1 RecruitmentHow does HR attract the right person for a specific job?For example, a company may develop plans to recruit a new IT manager when the current one plans to retire in six months’ time. The company writes a job description and a job specification for the post and then selects someone either internally or externally. This can be done by:• placing advertisements in newspapers or on noticeboards • recruiting at special events, for example during a university’s

open day • vacation work, for example a company decides to recruit a

student who has worked at the company during the holidays A job description states what the job entails.

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• using a computer database, for example all the information of candidates who have previously applied for jobs at the enterprise, but who weren’t successful at the time is stored on computer

• using recruitment agencies.

2.1.1 Job descriptionA job description refers to the content of the job itself and sets out the duties and responsibilities of the person employed to do the job. It will need to set out:• the title of the job• the location of the job • the duties of the job.

2.1.2 Job specificationA job specification indicates the specific qualifications, skills, experience and personal qualities required of the person who will fill the job. It will need to set out:• the qualifications required• the personal qualities needed• the work experience required.

For example, a job specification for a trainee manager’s post in a retail store might include the following: ‘Managers at all levels would be expected to show responsibility. The company is looking for people who have a minimum of one year’s previous experience and a qualification in marketing. They should have a flair for business, know how to sell and be able to work in a team.’

2.2 SelectionSelection means identifying and hiring the most suitable candidate to fill a post. HR usually receives many applications. The process of selecting involves:• advertising, either internally or externally• shortlisting suitable candidates• checking on curriculum vitaes (CVs) and references• interviewing the shortlisted candidates• selecting the right candidate for the job.

At the end of this process, a contract is signed between the employer and employee.

If external sources are used for selecting a suitable candidate, the HR manager will have to decide whether to place their own advertisement in newspapers or to use a recruitment agency or headhunters. Headhunters are people who specialise in finding good-quality employees, who are usually already employed at other businesses.

2.3 InterviewingThe purpose of an interview is to meet the applicant personally and to make sure that he or she will fit into the company and is capable of filling the advertised position.


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