mobile menu mobile search

Watchdog to police BEE fronting

Watchdog to police BEE fronting

Companies and employers could face criminal prosecution for fronting as black economic empowerment entities if found guilty by a soon to be established watchdog.

BEE law expert at Norton Rose Fulbright Ismail Laher and commercial litigation expert Matthew Clark told Fin24 that amendments to the Broad Based Black Economic Empowerment Act of 2003 makes provision for a watchdog to oversee and carry out investigations into the abuse of BEE rules.

According to Laher there was no process to formally enforce accusations of BEE fronting in a consistent manner and some accusations were based on miscommunication.

The amendments came into effect in January and would see the establishment of a BEE commission to investigate contraventions of the act, Laher said.

With the inclusion of the amendments the Act now states that it is a criminal offence for any person to knowingly engage in a fronting practice.

According to Laher and Clark the penalty for fronting is a fine, up to ten years imprisonment, or both.

“A person convicted of fronting will also be disqualified from contracting or transacting with any organ of state or public entity for a period of ten years,” they said.

The revised codes came into effect on May 1 2015 and the implementation of the Codes was supported by the amended B-BBEE Act 53 of 2003 as amended by the B-BBEE Amendment Act 46 of 2013, which came into effect on October 24 2014.

The definition of ‘fronting practice’ in the BEE Act is broad and includes any transaction, arrangement or other conduct that undermines the achievement of the objectives of the BEE Act.

This definition has not yet been tested by the courts and may be refined over time, said Clark.

According to Laher certain industries have made themselves more vulnerable to BEE fronting like “with government tenders sometimes being open to abuse and opportunism”.

Laher cited incidences where winning bidders sometimes do not do any of the work despite being awarded the bid on the basis of a strong BEE score.

The BEE commission is expected to be established later in August.

Fin24

More on BEE in SA

BEE is affirmative action for entrepreneurs

How many black South Africans benefit from BEE

How government plans to legalise corruption: Helen Zille

BEE benefiting only a few


News24Wire is the news wire service offered by Media24. It covers all the latest happenings in South Africa, and abroad....
TAGS: Active BEE
Join the Conversation
  • Lone Stranger

    Imagine the court case and the jail conversations. “For what are you in for?” ask the cellmate, “Oh, my company weren’t black enough” said the criminal businessman. You see how stupid this sounds (even though, they will say it is fraud).

  • Donoterase TVfan

    The new BEE codes are a joke. The apartheid government ruled for about 30 years, it’s been 23 years – how long does the government want to continue with this form of “correcting the past”? The country is where it is because they are trying to make business about something that it simply cannot be about – business should and can only be about the best person for the job, the best product, the best service – at the best price.

    What has stopped a young black person (which according to the codes include coloured, Chinese and Indian individuals) from starting a company and making a success of it over the last 23 years? And I still don’t understand the obsession the DTI has with black ownership. Let’s ask and answer the hard questions for a change: who created the existing large companies and then handed ownership to the ‘white people’ – no one. The companies came into being because of trail and error and blood and sweat and experience earned over time.
    The government make no real effort to stop the thousands of foreign nationals that are pouring into the country but they make it so that international companies have to give away black ownership or have to pay an insane, for there is no other word for it, percentage to gain a decent level to come an do business here. What most of them are, is not interested and what they take with them is thousands of potential jobs.
    Unemployment is a reality, it is a huge issue but it’s not as simple as creating more jobs because there is simply too many people and with people getting a grant for every child how is that NOT promoting overpopulation?! A grand for one or two children will prevent people from just having more and more children because it’s not just about the present – where are all of those children going to go – where are they going to work?

    I am sick of hearing how Apartheid is the root of all the evil in this country – most of the children who matriculate this year were BORN in 1997 – that’s 3 YEARS after 1994. Why should any of these young South African citizens be advantaged or disadvantaged based only on their skin-color.
    I think that it’s high time to redefine ‘disadvantage’ – there are black people who are driving fancy cars, their kids are in private schools and yet they qualify for BEE points and donations because the only criteria is that you need to be black – it’s absurd. There are white families who have been poor since before 1994 – and yes there were poor white people during apartheid (my mother’s family was one of them). I don’t know of a single white person who was given a house by the apartheid government, or who could pay a flat rate for water and/or electricity just because they are black. That is why eskom was able to function properly back then; they could supply enough electricity because only those who paid, got electricity – white or not.

    We need to get away from just giving things to people. It creates a very unhealthy situation where people want things without having to do anything in return.
    If I really need to point it out; when the country’s economy suffers we all suffer together -white and black, if this ship sinks we are ALL going down with it.
    Strong arming owners to give away ownership to someone who is black (this is the only requirement – again, in a business environment this is ABSURD) is not the way to go.
    And getting youngsters in the habit of blaming apartheid for everything – like the president himself so likes to do, IS NOT HELPING. If you don’t believe me look around; tenders are going to businesses who have the “right” level but not the experience or business ethics so the jobs don’t get done or are of pathetic quality.

    Things need to change, the sooner the focus shifts to better product and service quality at more affordable prices the better, for everyone.

    • Thamsanqa Notywala

      the fact that you saying the apartheid government ruled for 30 years made me to stop reading.Clearly maths is a crisis in this country.

  • MH

    ANC = racist!

Join our newest FREE BusinessTech newsletter today!
×