Since the Broad-Based Black Economic Empowerment Commission, which investigates fronting and other abuses, was established in April 2016, some 96 complaints have been lodged.
However, it is still too early to draw any conclusions from the complaints, said commissioner Zodwa Ntuli.
“We will only be able to give judgment after we have investigated each of the complaints,” she says.
Broad-based BEE shareholders particularly complain that they have no authority, are not involved in the management of the companies and that financial information is withheld from them, says Ntuli.
“Shareholder agreements are reached with employees to reach a higher broad-based BEE rating level, but [the employees] complain that it has no effect on their position within the enterprise and that they are not at all represented on boards,” she says.
“It seems they are pushed to the sidelines the moment a government contract is awarded to the company.”
According to Ntuli, there also seem to be indications that some empowerment verification agencies are not doing their jobs properly and are raising some companies’ broad-based BEE status levels without them meeting the necessary requirements.
“New shareholders, among other things, complain that these agencies never consult them and that misrepresentations are taking place,” she said.
The commission is trying to establish whether there is collusion between companies and verification agencies, or whether these agencies are simply being sloppy in their work.
“Fronting is a very serious issue and is a punishable offence, and action will definitely be taken against perpetrators,” said Ntuli.
“The commission is not conducting a witch-hunt, though. Our focus is on making sure that broad-based BEE is applied correctly. We do, however, employ a tough stance in cases where blatant irregularities are found and when we are met with strong resistance to rectifying the situation,” she says.
According to economist Mike Schüssler from Economists.co.za, the possibility of micro businesses not always complying with all BEE codes is high.
“The reason for this does not necessarily have to do with obtaining government contracts in an unethical manner, but rather because of the hassle of meeting all the elaborate rules and codes,” he said.
This article first appeared in News24.com
