Time to stamp out fronting

Sidestepping the spirit of the BEE Act halts real transformation efforts. 

According to SANRAL, companies that are found guilty are liable for penalties and fines and can be excluded from participation in future contracts.

The act of ‘fronting’, a form of black economic empowerment (BEE) window dressing which undermines the intentions of South Africa’s BEE legislation, is a common practice used by companies to misrepresent their economic empowerment credentials in order to receive contracts or gain economic advantages.  

Fronting takes a variety of forms, including listing lower-paid black workers as directors, executives or shareholders or excluding black managers from high-level discussions and decision-making.  

These actions enable fronting companies to take advantage of the incentives that come with being BEE-compliant – chief among these being access to government tenders.  

However, this practice does not contribute to the real transformation of the company or benefit black South Africans. 

This is also contrary to SANRAL’s commitment to the transformation of South Africa’s construction and engineering sectors, in line with the objectives, mandate and vision defined in its long-term strategy, Horizon 2030.  

As such, SANRAL is intentionally exploiting the provisions of current economic empowerment legislation to maximise the participation of black contractors, professionals and suppliers in all SANRAL-commissioned projects.  

Furthermore, SANRAL is determined to combat fronting and take decisive actions against companies that misrepresent their empowerment status in order to benefit from SANRAL’s transformation initiatives.  

The new Broad-based Black Economic Empowerment Act now makes it an offence for companies to misrepresent their empowerment status.  

Companies that are found guilty are liable for penalties and fines and can be excluded from participation in future contracts.  

Intentional misrepresentations may constitute fraudulent practices and officials are obliged to report such cases to SANRAL’s procurement manager for further action. 

How to spot fronting 

  1. A company may appoint black people to prestigious positions but prevents them from participating in core activities and decision-making.  
  2. Black people in management positions are paid significantly less and have fewer powers than their white counterparts.  
  3. A company manipulates facts about the racial diversity of its staff.  
  4. A company enters a relationship with a BEE-compliant partner – and then exaggerates or misrepresents the role of the partner in the business.  
  5. Black people are signed up as fictitious shareholders or directors in predominantly white-owned companies.