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BEE fronters could face 10 years imprisonment

The honeymoon for companies using token black directors as fronts to land the lucrative tenders might soon be over, Transform SA Online gathers on good authority.

According to amendments to the Broad Based Black Economic Empowerment Act of 2003 companies and employers could face criminal prosecution for fronting as black economic empowerment entities if found guilty by a soon to be established watchdog. The watchdog, a BEE commission, will oversee and carry out investigations into the abuse of BEE rules.

All along, it has been difficult to bring culprits to book as there is no process to formally enforce accusations of BEE fronting in a consistent manner and some accusations were based on miscommunication. Now, the entity will investigate contraventions of the act.

The penalty for fronting is a fine, up to ten years imprisonment, or both. A person convicted of fronting will also be disqualified from contracting or transacting with any organ of state or public entity for a period of ten years.

The definition of ‘fronting practice’ in the BEE Act is broad and includes any transaction, arrangement or other conduct that undermines the achievement of the objectives of the BEE Act.

The revised codes came into effect on May 1 2015 and the implementation of the Codes is supported by the amended B-BBEE Act 53 of 2003 as amended by the B-BBEE Amendment Act 46 of 2013, which came into effect on October 24 2014.

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