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We will take your profit and throw you in jail for BEE fronting: Government

| Legislation

The BBBEE Commission says fronting remains a big problem in the country, and that the majority of cases reported to them involve the practice.

“Out of the 33 complaints we received, 22 of them were purely on fronting,” acting commissioner Zodwa Ntuli told reporters on Tuesday.

“There is rife fronting that is continuing unabated,” Ntuli said.

“Preliminary assessments indicate that there is merit to these complaints, but because investigations are confidential, until the report is made and findings are issued, we will not be in a position to say who the parties are.”

She addressed the media after a BBBEE advisory council chaired by President Jacob Zuma at the Union Buildings.

President Zuma said that creating a class of black industrialists and entrepreneurs lies at the heart of the transformation of the economy.

“It is however critical that we go about black economic empowerment the right way.

“The practice of fronting does not advance economic transformation; rather, it seeks to subvert it. I am therefore pleased that we are dealing with this matter.  The establishment of the BEE Commission is significant because one of its principal objectives is to eradicate the scourge of fronting,” Zuma said.

Ntuli said a lot of issues regarding business were discussed, with fronting also emerging.

She said the commission would be looking into the matter, in a bid to resolve the problem and stop it from continuing in future.

Trade and Industry Minister Rob Davies said they were given an example of a person named as a director of a multi-million-rand company, but who earned low wages.

“We were given an example where a person is drawing a salary of R3,000 and is just a worker, but is the owner of a company worth BBBEE shares of R378 million. People are claiming levels of empowerment that they are not entitled to,” he said.

Ntuli added that the commission would be taking action against companies found to be fronting.

“If a company is found to be fronting, we have provision for a fine of 10% of the turnover. Again, those individuals in the company could be imprisoned for up to 10 years or both. Another penalty could be that they are penalised from doing business with government for 10 years,” she said.

Davies added that the Black Industrialist Programme was starting to yield results, with businesses already benefiting. He said the fund had received more than 100 applications, which were scrutinised.

“Five approvals have been given and that finance will go in the form of capital support and incentive grants. These have received support to the tune of about R550 billion, and that will support the retention of 300 jobs and the creation of 600 new jobs,” he said.

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