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Understanding Fronting in terms of BEE

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BEE has been put into action to ensure that occupations and the workforce of South Africa are evenly spread out and sure to include individuals who were previously disadvantaged. Compliance with the BEE scorecard and its elements is determined by everything from black ownership to skills development. Make sure you are BEE ready in 2018!

Why is BBBEE Important?

BBBEE is important for the future of South Africa and should be considered a business imperative. It is an important factor in rectifying the imbalances of the past and ensuring diversity in the ownership and management of businesses across South Africa.

What is Fronting?

So what is fronting in terms of BEE? Fronting is the deliberate evasion or sidestepping of compliance with the BEE codes. Committing the offence of BEE fronting involves presenting data which is not truthful or accurate to the facts of a business’s level of compliance.

Window-dressing/Tokenism

Window-dressing is a means of fronting whereby the black individuals are introduced to an enterprise as token (representing something that it does not truthfully embody), but in truth do not participate in the activities at the claimed levels. They are either discouraged or inhibited from truly participating as part of the enterprise.

Benefit Diversion

This is when fronting emerges as a means of excluding black people from the economic benefits of a high level of BBBEE compliance as is specified by the relevant legal documentation.

Opportunistic Intermediaries

Bending the rules of BEE to benefit the enterprise. This may be by refusing to disclose or hiding the identity of suppliers, service providers, clients or customers in favour of your BEE scorecard. This can also rear its ugly head as a non-compliance in the form of lying about the terms and conditions being discussed with the workforce or whether their treatment is fair and reasonable.

What is the Punishment for Fronting?

Fronting is considered a serious offense and has been known to end up in the high court. Before 2013 it was dealt with under common law practice as a form of fraud. After the B-BBEE Amendment Act in 2013 it is known as “fronting practice” and considered a statutory offence.

Fronting is recognised as a criminal offence for which your business may face a fine of up to 10{ee2a2ced2e83a70af3b12a5f5f4bc88f1c095ae1846c54ee750c7ec9c020c045} of its annual revenue or up to ten years in prison for responsible individuals. You may also be prohibited from doing business with government branches and enterprises for ten years.

How to Ensure you are Truly Compliant with BBBEE

It is of the upmost importance to ensure your business is compliant with the elements of BBBEE if you wish to be and remain successful. We at SERR Synergy are dedicated to ensuring your compliance is properly recorded and documented so that your business thrives along with the South African economy.