Picture: 123RF/EDHAR YURALAITS
Picture: 123RF/EDHAR YURALAITS

Fronting remains a major factor contributing to the slow pace of economic transformation in SA, the Broad-Based BEE (B-BBEE) Commission says.

The commission, which monitors the B-BBEE Empowerment Act’s progress and compliance, says a major form of non-compliance is fronting, or the introduction of spurious schemes that purport to introduce black shareholders  — sometimes a domestic worker — without assigning any benefits to them.

This enhances a company’s B-BBEE status and increases its chance of winning contracts.

Addressing delegates at a BEE provincial conference in East London this week, the executive manager for compliance at the commission, Busisiwe Ngwenya, said fronting remains a major problem.  

“We are aware that fronting occurs in various ways, and has become even more sophisticated, and looks genuine,” said Ngwenya.

“When signing contracts, read the fine print or get someone who is able to explain the terms in the simplest form 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.”

According to the department of trade and industry, the conference was convened to educate, create awareness and showcase services from various government entities that are tailor-made to assist businesses, especially small, medium and micro-enterprises (SMMEs), and previously disadvantaged individuals to participate meaningfully in the economy.  

Ngwenya urged delegates to alert the commission if they suspect they are being used for fronting, adding that fronting undermines economic transformation and should therefore be reported for the proper consequences to follow.

phakathib@businesslive.co.za