Fronting rife in SA, says B-BBEE Commission
IOL - BUSINESS REPORT - ECONOMY / 21 OCTOBER 2020 - 11.22 / SIPHELELE DLUDLA
JOHANNESBURG - Fronting and the misrepresentation of black economic empowerment (BEE) status by companies in various sectors remains rife in South Africa, according to the B-BBEE Commission.
The commission said yesterday that it was investigating more than 400 cases of fronting.
A man walks past the Johannesburg Stock Exchange building in Sandton December 6, 2012.
The executive manager for investigations and enforcement at the B-BBEE Commission, said the commission had received a total of 822 cases from June 2016 to September this year, with 426 cases still in progress.
Moipone Kgaboesele said 22 matters had been referred to the Companies and Intellectual Property Commission (CIPC) to date, with seven under institution of legal proceedings for remedial relief.
At least 22 other matters were under alternative dispute resolution process, six were in courts under the defending of legal proceedings, while seven were referred to the National Prosecuting Authority.
Kgaboesele said common concerns and trends involved the extension of B-BBEE level to entities that were not compliant under the B-BBEE act.
Non-compliance included “white people, Chinese people and foreign nationals claiming black ownership”, 51 percent ownership schemes and trusts, non-adherence to section 10 of the act by organs of state and public entities, and others. “We are dealing with false or fraudulent B-BBEE certificates,” she said.
“Fronting takes us backward, but misrepresentation is really a serious concern.”
Kgaboesele said one of the main challenges was human resources for investigations, as the commission was understaffed while cases were becoming increasingly complex. She said the fact that there was no dedicated tribunal to hear fronting matters was also delaying any impact the commission was making.
The CIPC’s senior investigator in enforcement, Nkululeko Norman, said the organisation had been able to take only one matter to court in the Western Cape.
Norman said the cases of fronting and misrepresentation had a “dire and direct impact” on the economy of South Africa.
“We have a company in the Western Cape which got tenders of approximately R50 million. They recruited an individual from a historically disadvantaged background which gave them the opportunity to tender for the government contracts,” Norman said.
“She was made to believe she had 90 percent holding in the company, but she only received a stipend of R12 000 every quarter, vis-a-vis R50m revenue.”
Kgaboesele said the commission would enhance co-operation with law enforcement agencies for more effective referrals, increase the issuance of summons and refer for persons failing to comply with summons.
“The recruitment of investigating officials is under way. We will improve the panel independent and enhance the publication of findings,” she said.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER