Seventy out of 109 surveyed broad-based black economic-empowerment (BBBEE) businesses have been found to be fronting and circumventing the BBBEE Codes of Good Practice, Department of Trade and Industry (DTI) head of strategy and advocacy for the Black Industrialists (BI) programme Nompumelelo Maisela said on Wednesday.
Addressing an audience of black industrialists at the Development Bank of Southern Africa’s offices, in Midrand, Gauteng, she noted that these businesses had been referred to the BBBEE Commission for further investigation and that the DTI would hopefully have a report soon stating what the penalties for these businesses should be.
Earlier this month, acting BBBEE commissioner Zodwa Ntuli said fronting was rife among local businesses and that new regulations, which would be gazetted later this year, would provide the newly formed BBBEE Commission with legal recourse against companies found guilty of fronting.
Ntuli pointed out that companies found guilty of fronting could face fines of up to 10% of their annual turnover. Shareholders could also be liable to a fine in their private capacity and could also serve a jail sentence of up to ten years.
Further, companies found guilty of fronting would not be able to conduct business with any government entities for ten years.
Masilela noted that government wanted to create an enabling environment for companies in the manufacturing space and ensure that the companies were given the opportunity to thrive through policy interventions, such as the BI programme and BBBEE policies.
The BBBEE policies intended to shift the demographics of the economy and encourage black entrepreneurs to enter into the manufacturing space, while ensuring sustainability of the economy.
“We want to open markets but also ensure that the private sector is able to replicate the same implementation strategies that we have been able to implement using State-owned entities,” she noted.
She said the quality of the projects were more important than the quantity of people involved in the BI programme and that government wanted to create multiple pathways to support black industrialists.
She added that government wanted to ensure sustainable growth and transformation, eliminating challenges such as fronting and “asset dumping”, which was the driving force behind the decision to establish the BBBEE Commission.