By: Tebogo Mokwena
The Broad-Based Black Economic Empowerment (B-BBEE) Commission received 114 complaints relating to fronting for the previous financial year, according to Commissioner Tshediso Matona. However, there have been no successful prosecutions, and the commission is working with the NPA and other law enforcement agencies to expedite criminal proceedings against companies found to be committing fronting.
Matona was addressing the Portfolio Committee on Trade and Industry this week when the commission presented its annual performance plan. Since the inception of the commission, a total of 1246 complaints have been received, with 84% of them relating to fronting. These included creating SMMEs owned by black people with no economic benefit or participation, the misrepresentation of B-BEEE credentials, and a misrepresentation of credentials relating to Broad-Based Ownership Schemes and Employee Share Ownership Plans.
Of the 114 complaints received in the 2022/23 financial period, 68 cases were closed through non-investigation and one resulted in an alternative dispute resolution agreement. Matona explained that the commission sometimes found that there were no merits to the complaints. He said fronting was prevalent in the mining, transport, engineering, and construction sectors. As such, the commission conducted 64 awareness sessions across the country. But Matona did admit that more could be done as it was up to every sphere of government to ensure that businesses followed the law.
The commission defines fronting as transactions, arrangements, or other acts or conducts that directly or indirectly undermine or frustrate the objectives of the B-BBEE Act or the implementation of its provision. Matona also said that fronting occurred when black-owned SMMEs were created with no real economic benefit or participation for black people.
When a company is found guilty of fronting, they are excluded from doing business with the state for up to 10 years. Business owners are also fined, imprisoned for up to 10 years, or must pay up to 10% of their annual turnover. “When we do alternative dispute resolution where the company admits guilt and is prepared to do good, we ask them to make a contribution, small as it may be, to NSFAS (National Student Financial Aid Scheme) because we have a partnership with NSFAS which is approaching R100-million to assist students who finished training but owe fees for the purpose of skills development among the youth,” he said. The commission believes that investing in the youth’s education is a key proponent of economic transformation.