Back to Page
Authors: Adri du Plessis
Keywords: social justice, equality, economic empowerment, corruption
Abstract: The Broad-Based Black Economic Empowerment Act 53 of 2003 (BBBEE Act) came into force in 2003. This Act was a significant policy shift away from narrow-based empowerment – sometimes referred to as the first phase of BEE – to broader-based empowerment with a clear policy objective of engineering broad-based socio-economic empowerment. The new approach, with its emphasis on broader economic empowerment, unfortunately, led to a practice called fronting. Incidences of circumvention, tokenism, fronting and abuse proved problematic, and occurrences increased, without any successful method of curbing the practice. The 2003 BBBEE Act itself did not refer to any penalties for offences such as fronting. The 2007 Codes of Good Practice issued in terms of section 9 of the B-BBEE Act, referred to sanctions for misrepresentations or other measures taken to enhance an entity’s score or to circumvent the Act, but these only resulted in the disqualification of the entire scorecard. No references to fronting or possible criminal liability. Before the 2013 amendment to the BBBEE Act, fronting and related practices of tokenism could only generally be dealt with under the common law crime of fraud. At common law, the offence of fraud is defined as an offence against property and can generally be described as the unlawful and intentional making of a misrepresentation which causes actual prejudice or which is potentially prejudicial to another. As time passed, fronting practices, unfortunately, became more and more sophisticated and challenging to detect and the need for clear legislative and regulatory measures became critical. In response to this, the BBBEE Amendment Act in 2013 introduced a definition of a fronting practice, provides for criminal sanction, and established institutions tasked explicitly with investigating matters. Section 13A of the BBBEE Act provides for the cancellation of any contract concluded or authorisation issued that was the result on knowingly providing false information about the enterprise’s BBBEE status either by or on behalf of the enterprise. In addition to the cancellation of the contract or authorisation, section 13O also states that a person or enterprise guilty of an offence under the Act will be liable for a fine or to face imprisonment for a period not exceeding ten years, or both. Where the offender is an enterprise or another type of juridical person, it is liable to be fined an amount of a maximum of ten per cent of its annual turnover. The objective of this paper is to attempt to analyse the development of fronting practices as a method to circumvent compliance with the BBBEE programme and the preferential procurement framework. It will be done by looking at the history of this practice with reference to relevant legislation, regulation and case law. The latest developments will also be detailed and analysed to evaluate the far-reaching consequences of the sanctions that now apply to the fraudulent practice. I will also attempt to place fronting in the context of general corruption, state capture, and the viability and proportionality of the criminal sanction of fronting practices. The findings regarding the effect of criminalisation and the efficiency of implementing the BBBEE Act will ideally contribute to a more coordinated and standardised treatment of the fronting practice as a form of corruption. This will ultimately contribute to the achievement of social and economic justice for the previously marginalised and historically disadvantaged people.