As a result of fronting among business owners in all industries, the establishment of a Broad-Based Black Economic Empowerment (B-BBEE) Commission was announced in October 2015 by the Minister of Trade and Industry.
The BEE Commission has a mandate to investigate and deal with fronting, fraud, and other BEE transgressions.
Along with policing, fronting and fraud, the BEE Commission assesses BEE transactions and ensures that these contribute towards the long-term goals of the National Development Plan. A commissioner who is responsible for all functions and administration heads it. The BEE Commission also supervises BEE rules and maintains a record of major BEE transactions.
As it is a criminal act to knowingly engage in BEE fronting practices – business owners found to have engaged in BEE fronting can be prosecuted. Penalties include up to 10 years of imprisonment, a fine of 10 percent of turnover, or both. The company may also be disqualified from doing any business with state organs or public entities for a period of 10 years.
Any person who suspects or is aware of a violation of the BEE Act where, for example, black people are used as fronts to achieve BEE points, may lodge a complaint with the BEE Commission. The BEE Commission may also approach a court of law to restrain any breach or for any appropriate remedial relief, which may include setting aside the transaction or initiative.
The BEE Commission will not discuss the merit or the details of its investigative process, but the findings will be published as required in the BEE Act.
The BEE Commission has initiated investigations against specific entities for possible violation of the BEE Act relating to the BEE ownership structures and non-compliance with the Codes of Good Practice in respect of the verification process.
ABOUT THE AUTHOR
Madelaine Loock is a Senior Legal Advisor at SEESA BEE and has been with SEESA since 2009. She completed her LLB degree as well as an LLM degree in Labour Law and is currently in the process of completing an LLD degree in Labour Law. She was admitted as an advocate of the High Court in April 2015.