Trade, Industry and Competition Deputy Minister Nomalungelo Gina has described fronting and the misrepresentation of Broad-Based Black Economic Empowerment (B-BBEE) status by some companies as a demon that shatters the transformation agenda of the country.
The Deputy Minister said this while addressing a webinar hosted by the B-BBEE Commission on Tuesday.
“Misrepresentation and fronting by white companies is a serious problem in this country and 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,” said Gina.
She said the success of the Commission would be measured by the extent to which it succeeds in getting companies to adhere to legislation.
“The B-BBEE Commission must be a bedrock upon which black participants in various sectors of the economy must rely in advancing participation levels in the economy.
“The failure and the success of the B-BBEE Commission would be measured by the extent to which it succeeds to stamp its authority and force companies through the power of the legislation, and the capacity of our investigators, criminal cases which must go to court against transgressors,” Gina said.
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.
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.
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