The legal combatting of B-BBEE fronting practices in South Africa – Past and present

• Author: du Plessis, A.
• DOI: https://doi.org/10.47348/SLR/2022/i3a3
• Published date: 27 October 2022
• Date: 27 October 2022
• Citation: (2022) 33 Stell LR 396
• Pages: 396-418

396

https://doi.org /10.47348/ SLR/2 022/i3 a3

THE LEGAL COMBATTING OF B-BBEE

FRONTING PRACTICES IN SOUTH AFRICA –

PAST AND PRESENT

Adri du Plessis

BProc LLB LLM LLD

Senior Lecturer, Department of Public Law, University of the Free State

Abstract

Broad-Based Black Economic Empowerment is critical in establishing

an inclusive South African economy based on social and economic justice.

However, since its inception in 2003 with the promulgation of the Broad-Based

Black Economic Empowerment Act 53 of 2003, misrepresentations intended to

improve an enterprise’s compliance status – fronting – have been ever-present.

From 2003 to 2013, there was no clear approach to dealing with fronting,

which, at least in part, led to increases in the incidence and complexity of

this practice. In an attempt to deal more decisively with the issue, the 2013

amendment to the Broad-Based Black Economic Empowerment Act introduced

two specic measures to combat this problem. The rst was criminalising

fronting practices, and the second was establishing a monitoring body, the

Broad-Based Black Economic Empowerment Commission. This article briey

sketches the policy and legislative framework for implementing the Broad-

Based Black Economic initiative and past practices of combatting fronting

practices. This is followed by a discussion of the two measures introduced by

the amendment to the Act, with a specic focus on the Commission’s role since

its inception to monitor and combat fronting practices. There will also be a

discussion of the various activities that the Commission reports on concerning

its dealing with fronting. The article concludes with suggestions for changes to

the regulatory environment that could improve the efcacy of the ght against

fronting.

Keyword s: Black Economic Empowerment; Broad-Based Black Economic

Empowerment Act 53 of 2003; fronting; criminal of fe nces; B -BBEE

Commission; economic justice

1 Introduction

Fronting has been one of the detrimental consequences of the Broad-Based

Black Economic Empowerment (“B-BBEE”) programme since its inception.

The Broad-Based Black Economic Empowerment Amendment Act 46 of 2013

introduced specic measures to combat the problem of fronting. What has

been the impact of these new measures on the prevalence of this phenomenon?

This article aims to reect on the historical development of fronting

and to analyse the impact of criminalisation of fronting practices and the

(2022) 33 Stell LR 396

© Juta and Company (Pty) Ltd

https://doi.org /10.47348/ SLR/2 022/i3 a3

establishment of a specic monitoring body, two of the signicant changes

introduced to combat this practice. First, the focus will be on government

policies and legislation that deal with economic empowerment in South Africa.

The discussion will be limited to the more dened B-BBEE policy to increase

opportunities for the majority of South Africans to participate effectively in the

economy.1 The discussion will not deal with all legislative and other measures

designed to realise economic justice for persons or groups previously excluded

as a result of discriminatory practices and legislation. Next, the concept of

fronting will be examined, both before and after the Broad-Based Black

Economic Empowerment Act 53 of 2003 (“B-BBEE Act”) was amended.

Fronting will further be explained by looking at examples of the practice.

When discussing the period after the amendments to the B-BBEE Act, the

focus will be on the analysis and evaluation of the changes made to that Act

that deal explicitly with fronting, namely criminalisation and the establishment

of a monitoring body, and the practical impact this has had on combating

fronting. The article concludes with suggestions for changes to the regulatory

environment that could improve the efcacy of the ght against fronting.

2 Government policies and legislation to address economic

injustice in South Africa

An apposite way to start this article is with a quote by former Chief Justice

Mogoeng Mogoeng in Viking Pony Africa Pumps (Pty) Ltd t/a Tricom Africa

v Hidro-Tech Systems (Pty) Ltd:2

“One of the most vicious and degrading effects of racial discrimination in South Africa was

the economic exclusion and exploitation of black people. Whether the origins of racism are to

be found in the eighteenth and nineteenth century frontier or in the subsequent development

of industrial capitalism, the fact remains that our history excluded black people from access to

productive economic assets. After 1948, this exclusion from economic power was accentuated and

institutionalised on explicitly racially discriminatory grounds, further relegating most black people

to abject poverty.”

This passage aptly describes the dire reality that faced the rst democratic

government in 1994. Even now, 28 years after the advent of the new democratic

dispensation, South Africa still has a long way to go before it can be said that

the economic barriers created by the apartheid regime have been demolished

and economic justice realised.3 In 2014, the World Bank placed South Africa’s

Gini co-efcient at 63.0, the highest among the countries for which data

was available at that time.4 From this data, one could speculate that South

Africa is one of the most unequal countries in the world. Research conducted

1 See t he Preamble to the Broa d-Based Black Econom ic Empowerment Act 53 of 2003 (“B -BBEE Act”)

2 2011 1 SA 327 (CC) para 1

3 Eg, th e first quarter 202 2 unemployment numbers il lustrate a dire pictu re with 34 5% unemployment

Amongst people a ged 15-24, 63 9% are unem ployed, and 42 1% of people aged 25-34 a re unemployed S ee

Stats SA “Qua rterly Labour For ce Survey – Quar ter 1:2022” (31-05-2022) Stats SA

govza /publications/P0211/P02111stQuarter2022 pd f> (accessed 17-08-2022)

4 The l atest countr y-specif ic informat ion for South Afr ica is dated 2014 See T he World Bank “GINI i ndex”

(2018) T he World Bank (accessed 17- 08-2022)

THE LEGAL COMBATTING OF B-BBEE FRONTING

PRACTICES IN SOUTH AFRICA – PAST AND PRESENT 397

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