Unlocking the Potential in SMEs and SDL Funds in SA

South Africa’s SME sector holds enormous, yet largely untapped potential when it comes to the country’s Skills Development Levy (SDL) funding. While larger corporations may often dominate headlines, it’s the SMEs – contributing nearly 40% to the country’s GDP – that are the real engine behind job creation and economic growth. Yet, many of these businesses are leaving billions of rands on the table by not fully leveraging the SDL funds that are available to them.

The Problem: Billions in Unclaimed SDL Funding

The Skills Development Levy (SDL) is a tax imposed on businesses to fund employee training and development across various sectors. It’s a powerful tool to ensure that businesses continuously invest in the skills of their workforce. However, it’s said that the reality is only 52% of South Africa’s SMEs are actively claiming back these contributions, leaving an estimated R30 billion in unclaimed funds every year. This unclaimed money could be fuelling training and development initiatives that would enhance productivity, boost competitiveness, and ultimately drive economic growth.

The Solution: Empowering SMEs to Claim SDL Benefits

The potential here is staggering – by educating and guiding SMEs through the SDL process, we can unlock significant value for these businesses. SMEs can start by submitting Workplace Skills Plans (WSPs) and Annual Training Reports (ATRs), enabling them to claim up to 20% of their SDL contributions.

Even more exciting is the opportunity for SMEs to access discretionary grants provided by Sector Education and Training Authorities (SETAs) to fund specific training programmes, such as Learnerships and Apprenticeships. These grants can substantially reduce the financial burden on SMEs while enabling them to upskill their teams, making their businesses more competitive.

Learnerships: The Path to BEE Points and Tax Savings

In addition to SDL funding, learnerships provide SMEs with a strategic advantage when it comes to enhancing their BEE scorecard. Learnerships, which blend theoretical education with practical workplace experience, are crucial to the Skills Development component of BEE, offering SMEs a valuable route to earn up to 20 BEE points.

Moreover, businesses that absorb learners into permanent employment can earn up to 5 additional BEE points. But it doesn’t end there – participating in learnerships also provides tax incentives under Section 12H of the Income Tax Act, helping businesses reduce their overall tax liabilities while contributing to skills development.

Why Are SMEs Missing Out?

Despite these clear benefits, many SMEs are missing out on these opportunities due to a lack of understanding or the perceived complexity of the SDL claims process. As a result, businesses that could be improving their competitiveness and unlocking significant financial support are leaving these opportunities on the table.

This is where education, guidance, and support become crucial. SMEs need streamlined access to information and simplified processes to take full advantage of SDL benefits. By doing so, they can strengthen their teams, improve their financial health, and contribute to South Africa’s overall economic resilience.

The Conclusion: SMEs Hold the Key to South Africa’s Growth

The SME sector is the backbone of employment and growth in South Africa. By unlocking the potential of SDL funds and encouraging greater participation in learnerships, these businesses can reap the rewards of a skilled workforce, improved BEE scores, and substantial tax savings.

With the right support and guidance, SMEs can play an even greater role in solving the youth unemployment crisis and driving sustainable economic development in South Africa. The time to act is now – the potential is too great to be ignored.