29 November 2010 | Nick Martindale
Many South African
organisations may have unknowingly distorted procurement’s role in broad-based
black economic empowerment (BBBEE) by purchasing from suppliers who have
engaged in “fronting”.
Minister of trade and
industry Rob Davies admitted the
technique, where organisations nominally promote or appoint black individuals
into senior positions to achieve a better BBBEE rating, was “pretty rife”.
The government has now
announced a probe into the practice. Verification agencies and directors of
companies found to be abusing the system could face criminal charges.
“This practice is
disempowering people who are supposed to be empowered and is also drawing a
benefit from government, parastatals or whoever, which shouldn’t be there,”
Business Unity South Africa
welcomed the crackdown and called on procurement professionals to insist
suppliers agree to meet BBBEE criteria.
A spokesperson said:
“Although there is currently no specific offence for fronting, the practice
remains fraudulent in nature. We advise those entering into business
relationships to pay careful attention to the terms of contracts or shareholder
agreements to ensure that future rights and responsibilities are accurately
captured in the agreement.”
Meanwhile, South African
energy minister Dipuo Peters has announced a study into the level of black
participation in the oil industry to assess whether it is meeting requirements
outlined in the industry charter of 2000.
“The rationale for this
important exercise is to get early warning signals of any potential deviation
that might impede the achievement of the intended policy measures and targets,
and to develop intervention strategies in instances where hurdles have been
encountered,” she said.
A spokesperson for the SouthAfrican Petroleum Industry Associationsaid most of its members were on
course to hit the target of buying 25 per cent of goods and services from
historically disadvantaged South African suppliers, but admitted there was more
of an issue with crude oil companies.