Fronting is commonly centered on the Ownership element where a company makes use of a black person to act as their shareholder. This implies that the business is majority black owned when in fact the company has none or very little black Ownership.

Fronting can be much more than just Ownership and can be far more damaging to the true cause of transformation.  Fronting is a deliberate avoidance or attempting to avoid the requirements of the B-BBEE Act or Codes of Good Practice.

In effect a company that reduces the size of their business so that they are exempt or falsely claims to be a good level when their true level is much lower is fronting. Fronting is fraud by lying about what the company has done or has in place as part of their BEE scorecard. This can have serious repercussions, which includes lost business and very heavy fines. It can also damage the reputation of that company in many ways that can affect its profitability and growth.

Who should police fronting?
It is the duty of all stakeholders, including customers, government, partners, employees etc to unearth fronting practices in any organization and report to the Department of Trade and Industry (dti). Fronting is fraud, as a result the fraud unit can also be contacted.

Published on Hospitality Forum

Compliance with the new BBBEE Sector Code for the tourism industry is obligatory for all stakeholders in the industry. In fact, the exemption threshold in the Tourism Sector Code has been reduced to R2.5 million annual turnover, as compared to a threshold of R5 million set out in the Generic Codes, to ensure that a significant number of enterprises doing business in the tourism industry are not excluded from compliance with the Sector Code. The Tourism Sector Code has also set a target of 30% ownership to be achieved by tourism-related enterprises over the next 10 years.

At a recent seminar, Keith Levenstein of EconoBEE provided some insights into the implications. “The Toursim Sector Code is a BBBEE scorecard developed specifically for the tourism industry. It is based on the Codes of Good Practice with some differing weighting points, targets and definitions. Nevertheless, it will impact a range of operators in the industry.”

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By SLINDILE KHANYILE

The multinational pharmaceutical industry has denied claims that companies would sometimes use imports as an excuse not to comply with black economic empowerment (BEE) legislation.

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