Fronting has been around for a long time and, despite sterling efforts to eliminate it, is widely prevalent.
“Essentially the practice involves attempting to score B-BBEE points and secure contracts by listing a black, Indian or coloured South African citizen as a part owner in a business, even though they may have nothing or very little to do with the company. It is not only unethical but can cost a company contracts and bring it into disrepute”, says Israel Noko, CEO of B-BBEE advisory firm, NPI Governance Consulting.
According to Noko there are three common fronting practices that deserve highlighting:
Window dressing involves appointing black people who then play an insignificant role in the company. Benefit diversion is when the economic benefits of a project are diverted away from the very people who, by their names, have been instrumental in acquiring the project. And thirdly, opportunism, which is the practice of boosting B-BBEE status by claiming a joint venture with a black person and then outsourcing the work to a non B-BBEE compliant company or supplier.
“As legislation has tightened, some companies have resorted to increasingly devious methods such as forged certificates bearing the names of reputable verification agencies, using unaccredited verification agencies, and using past or future financial information to indicate turnover below the threshold”, continues Noko.
People misrepresent training costs, fabricate invoices, and make use of B-BBEE shell companies to achieve their B-BBEE scorecards. “The law is hot on the heels of such fraudsters and companies would do well to ensure that they stick to best practice when it comes to their B-BBEE scoring – or face litigation, serious fines and a devastating loss of reputation”, advises Noko.
Noko believes that business owners simply don’t realise that obtaining genuine B-BBEE status is not that complicated, “Businesses can achieve meaningful, strategic transformation and valid B-BBEE points while following the rules – getting the right advice and guidance can point them in the right direction to get the B-BBEE status that puts their business in good competitive standing.”