Long-awaited amendments to the Broad-Based Black Economic Empowerment (BBBEE) Act will for the first time introduce penalties for fronting — 10% of annual turnover for companies and a fine or imprisonment of up to 10 years for individuals.
First a plea to the world - if anyone has a copy please send it to me (anonymity) is assured.
Second - read this article carefully and notice how the word "fronting" is used.
Fronting, which has undermined the government’s attempts to use its large procurement budget to achieve economic transformation, occurs when companies misrepresent their black empowerment levels to win contracts.
This refers to "government" business - hence fronting can only be a problem in a government procurement situation and only if it induces the government to contract with a company (with the preference points being based on BEE scores this could be very relevant). Also note that the ambit of fronting is likely to be extended - in other words you can purport to make SED donations and lie and this would be considered a front. It will spill over into private procurement as a method of terminating a contract, perhaps lawyers should start amending terms and conditions immediately in anticipation.
What is of concern is the penalty clause discussed in this article
The Amendment Bill, which has been released for public comment, attributes a higher weighting to the issues of enterprise development and procurement than has hitherto been the case.
Should the legislation be approved, enhanced recognition will also be given in the scorecard to enterprise development in the sectors identified for priority attention under Ipap and the NGP.
A penalty provision for noncompliance with enterprise development and procurement elements of the BBBEE scorecard is proposed, which could result in a discount from the overall score being applied.
I would also not pay too much attention to the word "Act", it's more likely that the codes are being amended. Do you think jungle jim knows the difference between the two?
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