B-BBEE Commission welcomes court decision on fronting

© HONGQI ZHANG – 123RF.com

“The Commission welcomes the decision of the Gauteng Division of the High Court to dismiss with costs the urgent application by Risc Technology Integration (Pty) Ltd to interdict the B-BBEE Commission from implementing its decision and recommendations,” said the Commission in a statement on Sunday.

This is after the company was issued with final findings in a case alleging fronting and misrepresentation of B-BBEE status on 5 February 2020.

The Commission received a complaint from Winniefred Ntletleng Mashigo, who alleged that she was employed by Risc Technology Integration (Pty) Ltd from the 11 February 2009 to 7 January 2015 as a receptionist.

Mashigo left the company after discovering in August 2014 that she had been listed as a 33% shareholder in Risc Technology Integration (Pty) Ltd without her knowledge or consent.

In addition, Mashigo did not receive any dividends in respect of her 33% shareholding in the company. The former receptionist was told that she was made shareholder to enhance the B-BBEE status of the company. This would also make it easier for the company to access tenders in government entities.

After assessing this complaint, the Commission believed there was merit to investigate it, as the allegations were pointing to fronting and misrepresentation of B-BBEE status.

Facts, fakes and the consequences of fronting

David Loxton  5 Sep 2019

Response to allegations

Risc Technology Integration was formally notified of the complaint and given enough opportunity to respond to the allegations.

The company was also given another opportunity to respond to findings on 12 December 2019, before the Commission made final findings on 5 February 2020.

In the findings issued, the Commission made specific recommendations.

The company asked the Commission to make a written undertaking that it will not implement its decision/findings and the recommendations made, to which the Commission did not provide such an undertaking.

Seeking court relief

Risc Technology Integration decided to approach the High Court on an urgent basis to interdict the Commission from implementing its decision/findings and recommendations made in its report.

Executive Manager for Investigations and Enforcement at the Commission, Moipone Kgaboesele, said the commission defended this matter primarily because there was no basis for the relief the company was seeking.

In the view of the Commission, it was absurd for Risc Technology Integration to attempt to interfere with the mandate and the powers of the Commission, as provided for in the B-BBEE Act.

Companies still fronting through trusts

18 Apr 2018

“The approach of Risc Technology Integration, in this case is regrettable, especially as the Commission was open and afforded them so much time. The Commission is grateful that the High Court agreed with its views on this matter.

“The Commission will proceed with the necessary actions to bring this case to a logical conclusion,” said Kgaboesele.

She said the Commission takes allegations of fronting in a serious light.

“The Commission takes every fronting allegation seriously and will not stop pursuing such matters because if true, they undermine the policies and the efforts of government to properly empower black people in this country.

“Further, it defrauds the tax payers and government because companies that engage in fronting and misrepresent their B-BBEE status get benefits that they do not deserve under false pretences," she said.

The National Status on Broad-Based Black Economic Empowerment Report (issued by the Commission) has shown that black ownership has regressed from about 32% in 2016 to about 25% in 2018.

The Commission is an agency of the Department of Trade and Industry. Its mandate, among others, is to supervise and encourage adherence to the B-BBEE Act.