Heavy fine, jail time for those guilty of fronting
Deputy President Cyril Ramaphosa says companies that are found guilty of fronting can now be fined up to 10% of their annual turnover or individuals can be jailed for up to 10 years.
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He said working together with the Presidential Broad-Based Black Economic Advisory Council, government decided to revise the policy to define and criminalise fronting after it was identified as a significant problem.
“Under the amended Black Economic Empowerment Act, the Broad-Based Black Economic Empowerment (B-BBEE) Commission now has a legislative mandate to not only receive complaints, but to also investigate them and institute proceedings in court to restrain those who seek to breach the Act.
“The Act also introduces penalties for those entities and indeed persons found to be involved in fronting. If you are found to be involved in fronting and you are found guilty, a fine of up to 10% of an entity’s turn-over can be imposed, as well as 10 years in prison,” said the Deputy President.
A person convicted of such an offense would also suffer the restrain of not being able to transact with the state or with any organ of the state or public entity for a period of 10 years.
Since the implementation of one of the most important laws passed after 1994, the practice of fronting by some companies has been identified as a significant problem.
The deputy President said when the policy was initially crafted, it did not initially address fronting because it was envisaged that companies would embrace the spirit and the intent of the BBBEE Act and the need to be transformational at an economic level.
“However, through the monitoring of this policy, we have become aware that there are quite a number of cases of fronting that seek to circumvent the intent of this policy as well as the legislation.
“[The] BBBEE Act is one of the most important measures that the democratic government has put in place to address the economic injustices of the past alongside employment equity, land reform and preferential procurement,” he said.
Black economic empowerment has contributed significantly to ensuring the entry of millions of South Africans into the mainstream of the economy through the length and the breadth of the country.
Fronting, he said, is a “great and gross abuse” of a very important process of economic transformation.
“The practice undermines the very purpose for which BBBEE policies were established,” he said.
“Fronting in the end is not a victimless crime. The perpetrators of fronting practices often targets the vulnerable, the poor, the uninformed in our country. They deprive those most in need of opportunities that should rightly be theirs.”
The BBBEE Commission has begun its advocacy campaigns across the country to educate people about their rights and their obligations.
