Pretoria – Fronting is contributing to South Africa’s slow pace of economic transformation, says Trade and Industry Deputy Minister Mzwandile Masina.
“It is sad that fronting occurs in all areas of Broad Based Black Economic Empowerment (B-BBEE) and takes forms that have become even more sophisticated and look legitimate.
“For instance, we see trends in B-BBEE equity deals structures with no economic value flowing to black people, but companies continuing to benefit from government contracts,” said the Deputy Minister.
Deputy Minister Masina was speaking at the Broad–Based Black Economic Empowerment (B-BBEE) conference on fronting practices in Midrand.
Tuesday’s conference provided an overview of the Broad–Based Black Economic Empowerment Act, the challenge of fronting practices and the recently launched Black Industrialists Programme.
Deputy Minister Masina said black shareholders are at times used for bidding purposes and when they raise concerns regarding their treatment after a contract is awarded, they are subjected to lengthy legal processes that exhaust the little finances they have or are forced to dilute shareholding or exit.
He said most were reduced to mere employees with none of the shareholders rights they are entitled to under the Companies Act.
“The use of trusts with the executives of the companies that created such trusts being trustees, and influencing all activities of the trust, has become prevalent as well. Employees are at times being made shareholders merely on paper to get higher B-BBEE rating,” he said.
The B-BBEE Commission has now been established to deal with practices such as fronting.
“… It is set up to monitor that B-BBEE is implemented to achieve the goals it was adopted for,” said Deputy Minister Masina.
The Acting Commissioner of the B-BBEE Commission, Zodwa Ntuli, said their mandate is to ensure that BEE is no longer for a few people in business and it must be a reality to everyone who is economically active.