Standard Industrial Classification Codes: Are you prepared?

Elsabe Klinck (Elsabe Klinck and Associates) provided valuable insights on Standard Industry Classification (SIC) codes in relation to the introduction of Sector Targets and how to apply these to medical technology companies.

The Employment Equity Amendments Bill, Bill 14B of 2020) has proposed clause 15A which give the Minister of Employment and Labour the power to identify national economic sectors for the purpose of employment equity targets and consult with the relevant sectors before publishing sector targets which will have a direct impact on B-BBEE scores.

The Minister may set different numerical targets for different occupational or labour sub-sectors or regions within a sector. The sectors will likely be based on SIC codes and targets will cover percentage requirements for gender and race per job level. The Bill has already been passed at the National Assembly and is being reviewed under the National Council of Provinces. Once it has completed this process it will be signed by the President and then a proclamation will be issued that the amendments are in effect. The likely timeline for this is the middle of 2022.

SIC codes are issued by StatsSA based on a global classification providing for broad economic activities. Interrogating the SIC codes is also not as straightforward as just selecting one code for all of medtech but rather a deep dive into sub-codes must be undertaken by each individual member to determine where their organisation fits in. You should also reference your annual employment equity report in conjunction with your local SETA or CHIETA and can also lodge a query with StatsSA.

Many medical device and pharmaceutical companies put themselves under the health and welfare SETA, however, this is actually the wrong place because this SETA covers the people who render the service (such as hospitals, nursing care facilities and so forth) rather than supply the medical technologies.

When interrogating the sub-codes, you won’t find medical devices instead you will find medical equipment, medical goods, health goods, chemical, and so forth. Your products may fall under textiles (drapes and dressings), gases (which could be basic chemicals), wholesale, or manufacture. It is important not to confuse SIC code wholesale with SAHPRA wholesale licences and manufacture under the SIC codes means that you are making the product locally. For radiation products, you may need to look for testing or measuring apparatus and for consumables, you may find applications under plastics.

You may find that your products have some unusual category companions such as musical instruments, sports goods, toys, jewellery, or coffins. In-vitro diagnostics (IVDs) including pregnancy tests and the manufacture of radioactive in vivo diagnostics could likely fall into the manufacture category.

There are no simple answers and each medtech company would need to read the Standard Industry Classifications document and determine for themselves where they fit in. The medtech sector is also so wide that it is also possible for companies with diverse product portfolios to fall into a number of SIC categories. Multinational members may be able to lean on international SIC codes to assist them and local manufacturers receiving support from the Department of Trade, Industry and Competition (the dtic) may find their support is linked to specific SIC codes.

It is important to know where each member is classified as this will affect the staff compliment. For example, the staff complement of manufacturing facilities will be different to those who might be warehousing goods or those who are fully manufacturing versus those who are just assembling or packaging.

The categories are broad, and targets set on the broad categories will not be feasible for the plethora of businesses within the sub-categories. SAMED members need to understand their SIC codes so that SAMED can assess these and advocate for realistic targets as these will impact medtech B-BBEE scores.

When commenting on the Sector Targets consideration will need to be given to the skills requirements, the available pool of people and the specific targets from top management, senior management, middle junior, semi-skilled and unskilled. Any identified hardships can then be raised with the Minister.