Statistics submitted to the Broad-Based Black Economic Empowerment (BBBEE) Commission are impressive, showing increase in black ownership in businesses. However, the impact of this trend is not felt on the ground where some of the supposedly black shareholders are not involved in decision-making in organisations, as a result of the ‘deeply embedded’ malpractice of fronting. The Commissioner of BBBEE Commission, Zodwa Ntuli, disclosed this during the Black Business Council’s Summit recently.
The data in the Commission’s forthcoming 2020 Transformation Report will show a slight increase of economic ownership by black people in the country from 29% in 2018/19 to 31%, Ntuli revealed, warning people should not read too much in the statistics. “There are questions on how authentic these numbers are because B-BBEE fronting is ‘so embedded’ in SA’s corporates. This improvement is only based on the information that is submitted to us. This is not the information that we have interrogated to even see if those black people do exist behind that black ownership.”
Lamentably, improvements on paper regarding ownership do not match black people’s voting rights in listed companies, nor their representation in management that controls these companies.
Fronting is often exposed in the service providers ‘compliant’ organisations use, Ntuli pointed out. “Many companies mainly have white-owned vendors, but this changes when they are looking to complete transactions with 51% black-owned service providers. Suddenly, the same providers who are majority white-owned on their databases improve their black ownership without any change in the way they look structurally.”
Bearing in mind that BEE fronting is so endemic that available mechanisms instituted to curb it fall woefully short, the Commission hopes to ask government to introduce harsher punishment to curb it, suggesting where needs be even revoking licences.
