BUSA WELCOMES MINISTRY'S STANDPOINT IN COMBATING FRONTING
Business Unity South Africa (BUSA) welcomes the position taken by the Minister of Trade and Industry and the BEE Advisory Council against fronting.
BUSA also welcomes the imminent collaboration between the DTI and the Special Investigations Unit to investigate fronting allegations. Such action together with the potential of criminalizing fronting activities will send a clear and strong signal that this practice is unacceptable in South Africa - and that transgressors will be dealt with decisively.
BUSA is equally perturbed by the high number of complaints received by both the department and our organization, regarding incidents of fronting by some businesses and individuals - to avoid adhering to the Broad-Based Black Economic Empowerment policies.
Fronting takes many forms, including, but not limited to:
- Black persons whom a company claims are shareholders or executives while they are in reality unaware or uncertain of their role in the company;
- Black persons who serve in management positions but are paid significantly less and/or have less decision-making authority than their white counterparts purporting to be on the same level;
- Manipulation and exaggeration of company data such as the racial composition of staff or the extent of procurement from empowered entities;
We also recognise that fronting is not only confined to the misuse of black employees or partners to unfairly improve a white-owned company's BEE credentials. Collusion also occurs, often in the form of a black person or a black owned enterprise entering into a questionable partnership mainly and selfishly for pure financial gain, without any intent make a real contribution to the business at hand.
We have noticed that what is common to all forms of fronting is the intention to circumvent BEE policies, and would like to caution on the detrimental effect this has on the economy.
We should all be aware that transforming the socio-economic imbalances is crucial not only as a social responsibility but also because it is conducive towards the long term political and economic stability.
BEE is therefore in the interests of both business and society. Promoting the effective implementation of BEE is one of BUSA's core objectives.
Fronting, however, debilitates transformation by keeping sustainable black enterprises from participating meaningfully in the mainstream economy. It obstructs the meaningful transfer of skills and economic benefits to black persons, and prevents those with skills from making a substantive contribution to their employer. Ultimately, fronting is holding South Africa back from achieving its transformation, developmental and economic goals.
BUSA calls on all businesses and individuals, both black and white, to exercise a high degree of care to ensure full and ethical compliance with BEE requirements and policies. Although there is currently no specific offence for fronting, the practice remains fraudulent in nature.
In addition, we advise those entering into new business relationships to pay careful attention to the terms of contracts or shareholder agreements to ensure that future rights and responsibilities are accurately captured in the agreement.
Statement issued by Masego Lehihi, PR and Communications Officer BUSA, November 18 2010
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