On the 7th of September 2016, while answering oral questions in the National Council of Provinces, Deputy President Ramaphosa also discussed the severe consequences of B-BBEE fronting by individuals and companies.
For the first time since the B-BEE legislation’s first enactment, fronting has been defined. In essence “fronting” means any practices or initiatives in contravention of the Black Economic Empowerment Act No. Act 53 of 2003 (the “Act”) as amended and the B-BBEE Codes of Good Practice.
In addition, fronting has now been criminalised. A further development in the general enforcement of this as well is that the B-BBEE Commission has a legislative mandate to receive complaints on possible fronting from the public, to investigate said complaints and to institute proceedings in court to restrain those who are breaching the Act.
Companies that are found guilty of B-BBEE fronting can be fined up to 10% of their annual turnover and individuals can be jailed for up to 10 years. And 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.
Accordingly, it is of utmost importance to ensure that you and/or your company are not in the practice of fronting, whether knowingly or unknowingly, but that your B-BBEE practices are in line with the Act. Rather consult a B-BBEE specialist at SchoemanLaw Inc. for advice on complying with B-BBEE.