'Fronting', where a person of color or an entity is given a stake but does not get the powers associated with it, remains the biggest challenge to the power of the Broad-Based Black Economic Empowerment (BBBEE) Act to deliver on economic transformation, the BBBEE Commission warns.
Speaking at the launch of the commission’s Investigations and Enforcement webinar session, BBBEE commissioner Zodwa Ntuli said that, of the 822 complaints received since 2016, 687 (83.5%) dealt with fronting.
The mining, transport, construction and engineering sectors account for most of the fronting complaints, the commission revealed in an October 22 statement.
“The commission considers compliance with the BBBEE Act as critical to achieve the envisaged change in the patterns of ownership through the transfer of productive assets of the South African economy to black people. Fronting and misrepresentation sabotage this with these fraudulent schemes and falsification of status,” Ntuli lamented.
After fronting, falsified BBBEE certificates (70) and contractual complaints (42) accounted for the most common complaints received by the BBBEE Commission.
To date, some 386 cases had been finalised, of which 22 had been referred to the Companies and Intellectual Property Commission (CIPC) and seven had been referred to the National Prosecution Authority and the South African Police Service, said Ntuli.
She added that the commission has, in seven cases, instituted proceedings in court to restrain any breach of the BBBEE Act or to obtain appropriate remedial relief.
Six entities have initiated review processes in the High Court against the BBBEE Commission.
“We want the public to know about these cases of fronting and misrepresentation of BBBEE status to raise awareness of these practices that are detrimental to transformation and criminal in nature, with a view to identify and prevent them from occurring in our economy. Our ability to publish findings in cases is restricted by the Act, and this has significantly affected communication to the public,” Ntuli added.
The investigation report notes that a multitude of trends that constitute a criminal offence continue to undermine the objectives of the BBBEE Act. These trends include, besides others, willing black participants to fronting, nonexistent participants in Broad Based Ownership Schemes and trusts, non-adherence to Section 10 of the Act by organs of State and public entities, false or fraudulent BBBEE certificates and unqualifying persons claiming black ownership.
Any person convicted of fronting may be imprisoned for up to ten years and an entity may be fined up to 10% of its yearly turnover in accordance with Section 13O of the BBBEE Act.