DTI to act on fronting

The Department of Trade and Industry (DTI) on Tuesday held a conference to help black-owned businesses to implement the Broad-Based Black Economic Empowerment (B-BBEE) Act correctly and counter B-BBEE fronting practices. Held in Johannesburg under the theme “Do it right and lead from the Front on Empowerment”, the conference also provided the overview of the B-BBEE Act and the recently launched Black Industrialists Programme as interventions by government to drive economic transformation. The DTI said fronting was one of the practices that had become prevalent in South Africa since the Broad-Based Black Economic Empowerment Act of 2003 was enacted, and had significantly derailed economic transformation. The DTI describes fronting as a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes.

The B-BBEE Amendment Act of 2013 was enacted to create the B-BBEE Commission to deal with this scourge by monitoring and investigating these fronting practices among others. Earlier on Tuesday, acting B-BBEE Commissioner Zodwa Ntuli said too many companies were listing black employees as stakeholders, sometimes without their knowledge as a form of fronting to get higher BEE rankings. Ntuli was speaking on SABC's Morning Live where she said such practices undermined the government's transformation agenda. At the conference, deputy minister of Trade and Industry Mzwandile Masina said the time had come for government to curtail fronting once and for all. Minister of Trade and Industry Rob Davies, who presented via a video link, said fronting undermined companies that would easily get work which they deserved, but ended up up not getting it because B-BBEE scorecards favoured companies that were fronting.

B-BBEE compliance is currently measured by means of a points system in which companies earn points based on their performance in five areas: ownership, management control, skills development, enterprise and supplier development (through preferential procurement policies - those which favour BEE-compliant businesses for government tenders and contracts), and socioeconomic development. The National Empowerment Fund estimates the equity holding by black people on the Johannesburg Stock Exchange to be at three percent while the 2015 report of the Commission on Employment Equity shows that white people still represented about 70 percent and 60 percent of top management and senior management, with black people representing only about 13.6 percent and 21 percent respectively. The Jack Hammer Executive Report for 2015 shows a decline from 15 percent in 2012 to 10 percent in the number of black Chief Executive Officers measured on the top 40 JSE listed companies.

Chairperson of the Parliamentary Portfolio Committee on Trade and Industry, Joan Fubbs, said BEE must not only be good on paper, but black people needed to benefit meaningfully from the B-BBEE Act. “Fronting is a sanitised word that means fraud,” she said.