Blacks seek fronting roles, MPs told

Blackness has become a commodity in the black economic empowerment market, with black people offering themselves for fronting purposes in return for payment, MPs learnt with shock last week.

The Broad-Based Black Economic Empowerment (B-BBEE) Commission’s Zodwa Ntuli said the growing trend was just as much a subversion of the objectives of the B-BBEE Act as when white business people abused blacks as fronts in order to win government contracts only to marginalise them afterwards. Both forms of fronting were corrupt and would be treated with zero tolerance, commissioner Ntuli told members of Parliament’s trade and industry committee during a briefing.

The commission’s role is to monitor the implementation of the act, which aims to increase the number of black people who own, manage and control enterprises either on an individual or in a broad-based manner.

“Willing frontees are people who are making themselves available … for a quick buck. They know exactly what they are doing and are abusing B-BBEE and making the country to regress. There are a lot of people who are chasing just a bit of equity, even if it is just 5%, so that they can get a dividend. It is the financial benefit that they are pursuing. You can’t expect the commission to treat them differently just because of the colour of their skin,” Ntuli said.

The frontees did not require any voting rights or participation in the running of the company.

Also common, Ntuli said, was foreign blacks being used to fulfil B-BBEE obligations when this was not permitted by the act and for blacks to subcontract their government contracts to noncompliant white subcontractors.

Ntuli also pointed to a trend in which companies hopped from their specific sector code of good practice to the less onerous general code. “People are taking advantage of the uncertainty,” Ntuli said, urging that the process of aligning the sector codes be expedited to provide certainty.

Another cause for concern, Ntuli noted, was that stateowned companies were not complying with the B-BBEE Act when awarding contracts.

Also unacceptable was the inadequate representation of employees on trusts set up to hold shares on behalf of employees in employee share ownership schemes.

Trust deeds often treated employees not as the beneficial owners of shares, but simply as beneficiaries who gained nothing on their departure from the company.

Ntuli highlighted the problems of verification of B-BBEE, which she said was “very compromised. We have reason to believe that a lot of BEE certificates are not legitimate.” The commission was trying to improve the quality of the verification process.

The Department of Trade and Industry is also finalising regulations and standards for verification professionals.