You can still meet B-BBEE compliance targets, even during the Covid-19 pandemic

Covid-19 will most certainly have a significant impact on every aspect of B-BBEE compliance. However, it is critical for each business to re-assess, and if necessary, re-adjust its B-BBEE status. Businesses with discounted B-BBEE recognition levels may breach contractual obligations, incur penalties, or forfeit incentives and grants that may have been due to them.

On 23 March 2020, President Ramaphosa announced the establishment of a South African Solidarity Response Fund in a bid to “flatten the curve”, and assist the country’s economic recovery.  The Fund is a public-private partnership to which government, businesses, organisations, and individuals can contribute; and the funds will be administered by the state to support measures to fight the pandemic.

What does a contribution to the Fund mean for your company’s B-BBEE scorecard?

Though further clarity from the Minister of Trade and Industry will be required, donations towards the Fund may be regarded as contributions towards Enterprise Development or Socio-Economic Development under the Amended Codes of Good Practice.

Enterprise Development

Statement 400 sets a compliance target of 1% of the measured entity’s Net Profit After Tax (NPAT) for the development of black-owned Exempted Micro Enterprises (annual turnover less than R10 million), and Qualifying Small Enterprises (annual turnover R10 – R50 million). The Minister of Small Business Development, Khumbudzo Ntshavheni, has reiterated that government will provide assistance to small businesses in distress, irrespective of the business’ black ownership. However, considering that the distribution of the economic relief will be representative of the country’s demographic, it is safe to assume that a significant portion of the aid will be directed towards black-owned small businesses.

Enterprise Development is a priority sub-element of Enterprise and Supplier Development (ESD). If your business does not meet the sub-minimum requirement of this sub-element, your business will automatically be discounted one B-BBEE recognition level.

Socio-Economic Development

Statement 500 also sets a compliance target of 1% of the measured entity’s NPAT for corporate social investment contributions. They may be monetary or non-monetary contributions, and only contributions where black people constitute more than 75% of all beneficiaries may qualify for 100% of the value of the contribution. In the case of the Solidary Fund, socio-economic contributions may be targeted towards various Covid-19-related relief efforts, inter alia:

  • Food relief programmes for vulnerable communities
  • Support for places of safety (e.g. shelters, orphanages, etc) in vulnerable communities
  • Supplying Covid-19 testing kits and research
  • Medical care for hospitalised Covid-19 patients
  • Provision of Personal Protective Equipment (PPE) to frontline health workers

For companies to claim their B-BBEE points for these contributions (Statement 400 or Statement 500), sufficient evidence must be provided for verification. Therefore, supporting documentation to this regard may be requested by the verification agency