Is there any B-BBEE scorecard benefit for continued employee remuneration during the COVID-19 lockdown?

Since the introduction of the nationwide lockdown was declared by President Ramaphosa on 23 March 2020, many businesses in South Africa have been under extreme financial pressure and face even more uncertainties in the future.

The initial lockdown was extended to 30 April 2020, bringing the total number of lockdown workdays to 22 days. If your business also usually trades/operates on weekends / public holidays, it is possible that up to 35 income-generating days will be lost. Businesses that are not allowed to operate under Level 4 will see even more income generating days lost.

The President urged businesses to continue paying salaries and wages as far as possible. Whilst this is unfortunately impossible for certain businesses, many have stepped up to the plate and paid their employees full or partial wages and salaries during a time when the business itself was unable to generate an income. It is important to note that in many instances these payments were made in good faith without the company receiving any quid pro quo in the form of work performed by employees.

As a result, the salaries and wages paid to employees who are unable to work are absolutely within the businesses’ discretion and are undoubtedly of a charitable nature.

Many are expecting the Covid-19 pandemic to have long-lasting financial implications and have asked what additional benefits/relief would be offered to them by government.

B-BBEE scorecard elements and relaxing of targets 

The Broad-Based Black Economic Empowerment (B-BBEE) scorecard comprises 5 main elements, of which 3 (Skills Development, Enterprise/Supplier Development and Socio-Economic Development) are mainly monetary targets that need to be achieved. Businesses requiring a B-BBEE scorecard have asked whether their B-BBEE targets would be relaxed for their current financial year or, alternatively, whether certain discretionary benefits offered to employees during these difficult times would count towards their B-BBEE spend targets.

Ordinarily, salaries and wages paid to employees may not be used to the entity’s benefit under any of the B-BBEE spend elements. Salaries and wages paid to employees are normally not discretionary and charitable, which leads to the question whether these charitable remunerations can in some way benefit companies in terms of their B-BBEE scorecards.

This question was posed to the Department of Trade, Industry and Competition (DTIC) and on 16 April 2020, informal responses from the DTIC indicated that, as yet, no special dispensations/relaxations are provided for with regard to the B-BBEE requirements.

Given the above, the only decrease in, for example, the Skills Development targets, may be felt where companies have paid partial/no salaries through their payroll. The Skills Development targets are calculated as a percentage of the annual Skills Development levies. Where partial/no salaries were paid for April, the Skills Development levies for this month will certainly be lower and will have a small effect on the overall Skills Development target.

The fact that no relief is being offered on the B-BBEE scorecard at present will certainly affect an entity’s ability to achieve its B-BBEE targets in future and may result in many B-BBEE-compliant entities not being able to achieve their B-BBEE levels as they had been doing in the past. Similarly, entities that aim to be compliant for the first time may now find it impossible to achieve the desired B-BBEE level. The ripple effect may also mean that your clients, who had in the past been able to rely on your valid B-BBEE certificate, will no longer be able to do so, which in turn will negatively affect their Procurement element and scorecard.

Will there be any relief in respect of the B-BBEE scorecard requirements?

Should the South African government consider offering relief in respect of the B-BBEE scorecard in these extraordinary times, the following could be a reasonable solution:

• That salaries / wages / subsistence allowances paid to employees during this time be viewed as Socio-Economic Development donations, provided that each employee confirms that the benefit received during this time was not in lieu of services rendered or for paid leave deductions.
• That the overall leviable amount (on which the Skills Development target is based) be decreased by the portion of monthly Skills Development levy paid in respect of salaries/wages that were of a charitable nature.

SERR Synergy follows a systematic approach to B-BBEE compliance and our comprehensive B-BBEE consulting services include tailor-made solutions that meet existing BEE challenges by implementing effective and value-adding strategies.

About the author: Denise Coetsee is a Senior Project Manager who joined SERR Synergy in February 2018 in the Pretoria B-BBEE Department. She obtained her BCom Law, LLB and LLM (Corporate Law) degrees from the University of Pretoria and is also a member of the Golden Key International Honour Society. Denise is an admitted Attorney of the High Court with 7 years’ legal experience.