It certainly appears so. This is a strange story because it seems that only Business Day published the story. And as usual they published behind their paywall so you can't see it. I do have a copy though and I will lift a paragraph or two for your benefit.
The Black Economic Empowerment Commission, which was set up in the department of trade & industry in 2017, has written to dozens of companies informing them of the need to rectify their ownership structure and undergo reverification of their BEE status or face investigation for fronting.
The companies that she has written to include (reportedly)
Kagiso Trust, Wiphold Investment Trust, the Sactwu Investment Trust, the Royal Bafokeng Nation Trust, and the Batho Batho Trust, which owns 47,5% of Thebe Investments
This is barely a fraction of the companies that will be affected by this pronouncement. An email sent out by Sanjay Kassen -head of ENSafrica's B-BBEE practice group noted
To simply state that the vast majority of broad-based B-BBEE trusts are not compliant with the law and constitute fronting is not something that corporate South Africa is going accept easily and such a change would also cause significant instability in a market that is already facing challenging economic conditions.
The threat of criminal sanction where there has been no intention to commit fronting will not, in our view, yield the results the Department of Trade and Industry and the B-BBEE Commission seek to achieve. There needs to be a more collaborative approach between government and corporate South Africa so that there can be a clear direction going forward on broad-based Black ownership.
In other words, if you suddenly cancel the trust rule, expect litigation. It's also important to note that the commissioner cannot proclaim that this is fronting. Fronting is in fact a crime - the crime of fraud. I wrote an extensive piece about fronting a while ago. This is the essence of what needs to be proven by the NPA (who are tasked with conducting the case)
Proving fronting
Whilst fronting has been specifically created as a crime by the BEE Act, it is suggested that it is very similar to the common law crime of fraud. There are numerous definitions of the term fraud but this oneappears to be the most comprehensive.
"Fraud is the unlawful, intentional making of misrepresentation which causes actual prejudice to another or holds potential prejudice to another"
Five elements must be proved simultaneously for a conviction under fraud, these are
- prejudice,
- misrepresentation,
- unlawfulness,
- causality and
- criminal intent.
Each must be proven by the state beyond a reasonable doubt.
As to when the awesome commissioner is going to to this is anyone's guess. If you watch the clip below at 4:50, the awesome tells the interviewer that she doesn't have the resources to do this. I would suggest that the resources in question are qualified personnel and money. The personnel issue is a major problem for the commission. Some of the documents that I have read that are so-called findings are ridiculously weak.
A bit more on the process. I am now going to borrow liberally from an opinion written by Bobby Lanham-Love.
Bobby writes the following
we do not consider these reported comments to carry any weight until such time as the Minister formally proposes an amendment to the Act and/or the Codes.
We remind that only Parliament can amend the Act and only the Minister may amend the Codes.
Both these procedures require formal consultation with all stakeholders and are subject to judicial review. We are not currently aware of any formal changes being proposed or tabled.
I agree with him completely. The commissioner has shot her mouth off, probably with an endorsement from some government officials, but she's on her own. The dti have said nothing about this at all, and they have posted media statements in the last few days, none of which refer to the commissioner. Even the commissioner's own website says nothing.
And now what?
There is little doubt that this is what the aNc wants. The commissioner is not doing anything that is not aNc policy. I agree with this editorial
since 2015 we have gone back to a narrower form of BEE, first by introducing punitive scoring for companies that chose not to do equity deals, and now by placing limits on broad-based trusts. It can only be expected that the goal posts will shift again in the future.
It is now up to a vigilant private sector to make sure that they don't shift those goal posts.
In the interim, the commissioner is barking up a shothole bored tree and we can safely ignore her.