BEE

BEE and BEE Fronting

Broad-Based Black Economic Empowerment (B-BBEE) is implemented in South Africa as a means of promoting the economic participation of all South Africans. This is done with the hopes of creating equitable wealth distribution within South Africa.

The five elements of B-BBEE

Businesses are expected to comply with BEE and its five scorecard elements. These include:

  1. Ownership–the black ownership of entities.
  2. Management–the participation of black individuals in management and control sectors.
  3. Skills Development–the amount spent on providing learnerships, training, apprenticeships and internships to black and unemployed South Africans.
  4. Enterprise and Supplier Development–the procurement spent from empowering suppliers.
  5. SocioEconomic Development–contributions to socio-economic development.

A business’s compliance with these elements is checked by a BEE verification agency.

What is Fronting?

Fronting is the undermining of the objectives set by B-BBEE. Legally, this is defined by the Income Tax Act, the Companies Act and the Labour Relations Act as anti-avoidance, circumvention and non-genuine operations. In a nutshell, fronting is claiming to be B-BBEE compliant when you are, in fact, not.

Fronting can manifest as:

  • Lying about the position or job title a black employee truly holds. This may be claiming a garden worker actually holds a senior position in the company.
  • Listing black employees as shareholders without their agreement or even their knowledge.
  • Giving a black employee an executive position but giving unequal pay than that of others.
  • Leaving black managers out of decision-making processes and not allowing them to participate in the capacity their title dictates.

Is fronting illegal?

Fronting is recognised as a criminal offence in South Africa. If found guilty of being dishonest about B-BBEE compliancy, whole businesses can face fines of up to ten per cent of their annual turnover and up to ten years in prison. Businesses may also be prohibited from doing business with the government for up to ten years. The B-BBEE Commission was established in 2016 to investigate fronting practices.

To ensure you are compliant with the codes in place, refer to BEE consultants who can help you become fully compliant.