President Jacob Zuma says black economic empowerment fronting is “unforgivable” because it creates the impression the economy is transformed when it is not. The practice is outlawed by the BBBEE Amendment Bill, which is before the National Council of Provinces.
The bill prescribes stiff fines and imprisonment for shareholders and directors of companies found guilty of fronting – which typically involves the misrepresentation of a company’s black empowerment profile to get business.
Technology can help companies remain compliant
SA companies now have to quickly adapt to the stringent new requirements. One way of ensuring they remain compliant is to use software to do so, according to Bruce Rowe of Mpowered.
The new codes require companies to achieve a minimum threshold of at least 40% for black ownership, skills development and supplier and economic development in order to obtain any recognition on these “priority” scorecard elements.
The overall compliance thresholds have also increased significantly, adversely impacting a company’s current B-BBEE compliance levels.
“This means that many companies that fail to quickly understand and adapt to the new requirements will automatically fall at least one rating level, which in many cases could impact their profitability,” explains Rowe.
He advises, “Software is available that simplifies and automates many aspects of the BEE compliance process.
“For companies wishing to uphold their BEE compliance levels they worked hard for and earned over the past six years, using technology can enable them to seamlessly transition their compliance based on the refined codes with little to no detrimental effect to their compliance – or their business.”