Zuma: BEE fronting unforgivable

2013-10-03 14:10

President Jacob Zuma says black economic empowerment fronting is “unforgivable” because it creates the impression the economy is transformed when it is not.

Addressing the first broad-based black economic empowerment (BBBEE) summit in Midrand, Zuma said fronting had been an obstacle to transformation, which was why the BBBEE Amendment Bill outlaws it.

The bill, which is before the National Council of Provinces, 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.

Sandile Zungu, a member of the presidential BBBEE advisory council, said the mooted office of the BEE commissioner should prioritise fronting culprits when it starts its work.

“We want to see them behind bars,” he told the summit.

On the sidelines of the summit, Zungu told City Press they proposed the amendments to the law because the common law crime of fraud was no longer enough to curb the practice.

Despite the problems, Zuma said there had been a lot of progress in the past 19 years in transforming the economy, and this was reflected in the doubling of the black middle class over the last eight years.

He said the National Treasury had recorded more than R600 billion in BEE transactions since 1995, while accounting firm Ernst & Young noted 1 500 publicly announced transactions worth over R600 billion.

He attributed the changes to the ANC-led government’s policies, saying they could not have happened “by osmosis”.

“Let me hasten to add, however, that while we have made strides with regards to black economic empowerment and the growth of the middle class, we are still faced by unacceptable levels of poverty, inequality and unemployment.

“These result from our country’s history of exclusion and marginalisation of the majority and in particular the challenges with regards to education and skills development,” Zuma said.

He said this was reflected in the difference between the household income of black and white households, with black households earning an average yearly income of R60 613, while their white counterparts earn an average of R365 164 annually.

A piece of research on BEE progress is expected to be tabled during the course of the summit.

Zungu said it showed progress in business ownership and management patterns but that was not satisfactory.

He said the creation of black industrialists was the next big priority for the advisory council.

He lamented the absence of “coherent and cohesive” government policies to promote black manufacturers.

He said there was also “no fiscal certainty of both the interest rates and exchange rates in order to plan long-term investments for long-term capital intensive projects”.

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