The economic impact of fronting

Nomalungelo Gina, deputy trade minister

"It has advanced itself to become too sophisticated to easily detect. Unfaithful entities have learnt how to blend their B-BBEE status to appear as genuinely complying with the codes and therefore escape transformation imperatives as set out by this government.

“But equally, because of desperation, these white companies find some willing black fronting tokens who agree to assist in this camouflaging efforts and be made to sign shareholding equities whilst knowing that they are not," says Trade, Industry and Competition Deputy Minister, Nomalungelo Gina.

She said the success of the B-BBEE Commission would be measured by the extent to which it succeeds in getting companies to adhere to legislation. Violations of the B-BBEE Act include engaging in fronting practice, providing false information to organs of state and misrepresentation of B-BBEE status, among others.

Unacceptable

Head of the B-BBEE Commission, Zodwa Ntuli said 26 years after the attainment of democracy; ownership patterns in South Africa remain unacceptable.

She said fronting sabotages the economy, as government seeks to ensure that black people play a meaningful role in the economy and its growth.

Since 2016, the commission received over 800 cases for investigation.

About 386 were finalised, and having gone through several stages of investigation, seven matters have been referred to the National Prosecuting Authority and the South African Police Service for further processing.

An additional 486 cases are still being investigated.

Penalties for fronting include up to 10 years' imprisonment or a fine of 10% of the annual turnover for a business entity.

Convicted offenders may also be barred from doing business with the organs of the state in terms of section 13P of the B-BBEE Act.

Ntuli lamented staff shortages as hampering the work of the Commission.

She committed the B-BBEE Commission to strengthening efforts to tackle violations of the B-BBEE Act.

“We plan to enhance cooperation with law enforcement agencies because we believe success in dealing with violators will send a strong message to those involved in such activities and to the broader South African society,” said Ntuli.