Investigations have been initiated by the Broad-Based Black Economic Empowerment (BBBEE) Commission against 17 firms for possible fronting practices.

Any of the entities found to be in violation of the BBBEE Act in terms of ownership structures and noncompliance with the Codes of Good Practice in respect of the verification process will be provided 30 days to respond to any adverse findings before the commission makes its findings final.

While the BBBEE Commission has notified the companies of the impending investigations, further details, merits and processes of the investigations will not be made public until the commission publishes its final findings.

The BBBEE Commission pointed out that it was allowed to initiate an investigation on its own initiative and this often happened as a result of a tip-off.

The commission is investigating several different aspects of the companies in terms of their compliance with or violation of the BBBEE Act, including certain BBBEE transactions; schemes; trusts; ownership and management control requirements; BBBEE certificates’ validity; and tenders issued to noncompliant companies.

The companies the commission aimed to probe included MTN Group; Nokia Solutions and Networks South Africa; Netcare; State-owned Eskom; Dust-a-Side, Dust-a-Side Holdings and Dust-a-Side Partnership; Net Value Holdings; WorleyParsons RSA; South African Social Security Agency; Tempest Fire; Forklift Parts World; and Altius Trading 40.

Meanwhile, the commission will explore the activities of some verification agencies, including BEE Matrix and Marissimo BEE Professional Verification and Services, the conduct of which, along with a “professional in question”, will be explored for compliance with the BBBEE Act following numerous letters of advice to the entity.

The commission will also investigate National Empowerment Rating Agency, Empowerlogic, Premier Verification and AQRate Verification Agency to determine whether the black ownership structure of the verification agencies complies with the black ownership requirements and whether their conduct follows the procedures required of a verification agency and verification professionals in line with the BBBEE Act.

“If found to have violated the BBBEE Act, the entities may be referred for prosecution and exposed to a fine of up to 10% of the entity’s yearly turnover and the individuals involved can be fined or imprisoned for up to ten years,” the commission said.

In addition, any firm in violation could be excluded, for up to ten years, from doing business with government, with any current contracts cancelled.

“The BBBEE Commission may also approach a court of law to restrain any breach or for any appropriate remedial relief, which may include setting aside the transaction or initiative,” it said, adding that it could also pursue an alternative dispute resolution, if appropriate.