The Department of Trade and Industry (DTI), in cooperation with the Department of Labour, is currently progressing an amendment to the existing broad-based black economic-empowerment (BBBEE) legislation, which could see the criminalisation of private-sector BBBEE fronting and the possible imprisonment of executive managers found to be complicit.

The amendment, which was currently before Parliament, proposed a maximum penalty of ten years’ imprisonment, and/or a fine for individual private-sector executives found guilty of the misrepresentation of corporate BEE points, or a penalty of 10% of total yearly turnover for companies found guilty of fronting.

A maximum penalty of one year’s imprisonment, or a fine, would be imposed on those who failed to report fronting.

DTI BEE chief director Nomonde Mesatywa said on Thursday that the amendment was aimed at pursuing organisations guilty of misrepresenting their empowerment status or that knowingly participating in other schemes which sought to defeat the objectives of transformation.

“BEE has been demonised in the private sector, which is currently not towing the line when it comes to transformation. Once you start to pierce the corporate veil, very few companies that advertise BEE Level 1 accreditation, practise real transformation,” she commented.

These comments came as the Commission for Employment Equity (CEE) released its yearly report, which reflected on the status of employment equity in the country and the progress made in increasing the representation of designated groups in the workplace.

It stated that the percentage of blacks employed at top management level had increased by a marginal 2.3%, from 10% of the workforce in 2002 to 12.3% in 2012.

While white representation decreased by 8.9% from 81.5% in 2002 to 72.6% in 2012, this racial group retained a more than two-thirds majority in terms of representation at this level.

The report further showed that a higher percentage of blacks were employed in lower management levels.

Mesatywa said the report substantiated government concerns that the private sector had perfected the “box tick” approach to empowerment and had not effected true transformation, which was most evident in the lack of upward migration by black professionals.

“What we need are black shareholders that are not simply silent partners, but who actively participate in the running of companies. If this does not happen, we will never realise broad skills development or the rise of black professionals,” she emphasised.

Labour Minister Mildred Oliphant, who attended the launch of the CEE report and described its findings as “sad”, stated that, while the department did not want to enforce harsh legislation against BEE noncompliance by the private sector, it felt as though it was being forced to do so.

“Certain companies feel as though they are not obliged to comply with BEE legislation, despite it being a legal requirement. While we would rather not implement penalties, we do not want this country to depreciate into a ‘free-for-all,’” she said.

Oliphant further alluded to the possibility that, in future, government might not issue compliance certificates to companies that failed to practise “true” empowerment, which would preclude them from applying for government tenders, or participating in any State-sanctioned work.

Oliphant said the department hoped that the amendment would be approved by Parliament by the end of the year, after which it would be promptly implemented.