BEE fronting becoming more sophisticated, holding back transformation – commission

Fronting is contributing to the slow pace of economic transformation, according to the executive manager for compliance at the Broad-Based Black Economic Empowerment (B-BBEE) Commission, Busisiwe Ngwenya.

According to the Department of Trade and Industry, fronting means “a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes”.

Fronting commonly involves reliance on data or claims of compliance based on misrepresentations of facts. This can be the case whether made by the party claiming compliance or by any other person.

Becoming more sophisticated

“We are aware that fronting occurs in various ways, and has become even more sophisticated and looks genuine,” Ngwenya told 750 delegates at a BEE conference in East London on Wednesday.
 
She advised delegates, when signing contracts, to read the fine print, or consult someone who will be able to explain the terms in their simplest form, so as to eliminate chances of being exploited.

“Many black people sit in executive positions but fail to reap the benefits or take strategic decisions in line with their positions because they are not aware that they are used for fronting,” she said.

Ngwenya urged delegates to report to the commission if they suspect that they were being used for fronting. She added that fronting undermined economic transformation and should, therefore, be reported for proper consequences to follow.

The purpose of the conference was to create awareness and showcase services from various government entities which assist businesses – especially small, medium and micro enterprises (SMMEs), as well as previously disadvantaged individuals – to participate meaningfully in the South African economy.  
 
According to Ngwenya, the conference sought to empower the delegates so that they would know immediately when they were being exploited as fronts and how to prevent this.

The aim was also to identify empowerment opportunities through enterprise, supplier and skills development programmes.