May 21, 2019

Triple B Empowerment Commission: has this watchdog got more bark than bite?

You had to admire the members of the Broad-Based Black Economic Empowerment Commission at last week’s hearing of the National Council of Province’s (NCOP’s) Select Committee on Trade and International Relations.

This barely known state entity within the Department of Trade and Industry has a very broad mandate ‑ to monitor, promote and ensure compliance with B-BBEE legislation. When the Act was amended in 2013 it was recognised that what was missing was a monitoring mechanism to track the implementation of B-BEE, which has proved to be an extremely slippery policy to implement.

Commissioner Zodwa Ntuli explained that at the time it was decided that South Africa cannot introduce legislation that “was so critical to the country without anybody monitoring how it was [being] implemented.” The establishment of a B-BBEE Commission took a couple of years, but in August 2015 the Department of Trade and Industry established Codes of Good Conduct. That was the trigger and months later, in April 2016, the entity was duly launched under Ntuli.

The B-BBEE A Commission aims to accelerate productive implementation of the law.

She made the point that this had to indeed be “broadbased” in nature as it covered great swathes of business and labour practice. Above all it requires government implementation, said Ntuli. “Government must implement it thoroughly. They must insist it is compulsory [and] obligatory.” Government must provide a standard for B-BBEE implementation.

She reminded the Committee that in terms of the Commission’s mission the aim was to accelerate implementation, and she emphasised that this must be “productive implementation”. B-BBEE must be applied productively in both private and public sectors. “This requires us to look at the market, see how it is working and assist it to work better.”

One of her main concerns, she said, is the lack of change in business ownership patterns seen so far, and she raised as one of its most important roles the Commission’s duty to investigate non-compliance with the law.

Listening to the Commissioner addressing the Committee you had to marvel at this intrepid band of investigators who single-handedly are expected to take on the scourge of fronting, which remains a country-wide and deeply entrenched practice that South Africa was quick to catch onto when B-BBEE legislation first emerged.

Commissioner Ntuli told the Committee that fronting accounts for 83% of the 334 complaints it has dealt with since its inception. “Although complaints decreased slightly this year, fronting practice remains constant. We find more and more companies’ schemes fronting workers through trusts.” She added that there were also more opportunistic intermediaries and existing entities creating new 51% black-owned entities through which they do business.

Fronting is not the Commission’s only challenge. At the same time it is expected to deal with the challenge of fraudulent B-BBEE compliance certificates including, for example, those supplied by Gupta family-owned companies to Eskom to secure their illicit deals.

The Commission was asked by the DA whether it was investigating the matter, and if so, what the outcomes had been so far. If the combined efforts of the Hawks, SAPS, SARS and the Special Investigating Unit don’t yet have much to show for its efforts to expose the questionable dealings of the Guptas, it is surely unrealistic to expect much more of a this relatively new and under-resourced Commission.

The Chairperson indicated that the Commission was well aware of the challenges that it faced. For example, Ntuli said, the Commission has so far withdrawn 100 fraudulent B-BBEE certificates.

She also acknowledged that President Cyril Ramaphosa’s new impetus for investment in South Africa required that the Commission had to up the ante to ensure that B-BBEE is enforced, adding that what was critical was how those who held the capital in South Africa were contributing to transformation.

Listening to the Committee deliberations it is clear that a lot is expected of this Commission, far more than tracking down dodgy B-BBEE certificates. Despite the in-principle support for black economic empowerment by South African industry, and government, challenges persist in lack of political will, shortages of skill, opportunity and resources, as well as outright fraud and corruption. Implementing and enforcing B-BBEE requires no less than massive socio-economic transformation.

So where does that leave the beleaguered B-BEE Commission, whose official mandate declares it responsible for monitoring, supervising and promoting adherence to the B-BEE Act “in the interests of the public” while receiving complaints, initiating investigations, maintaining a register of B-BBEE transactions – all transaction over R25 million have to be registered ‑ as well as providing annual reports and, for good measure, promoting “advocacy, access to opportunities and educational programmes...good governance and accountability”.

The Commission is available to provide advice on transactions, guidance on whether these comply with the legislation, conduct investigations into complaints and generally keep an eye open to ensure that this legislation is being accurately and regularly applied. When it receives complaints and its investigations expose non-compliance, corrective action, usually in the form of fines, are imposed.

The Commission reported a number of instances of fronting, where it learns of employees – many ignorant of the law and therefore left vulnerable – who are being “placed” in senior and managerial positions without receiving commensurate remuneration and other benefits. In such cases, the Commission ensures that the employees are appropriately compensated.

It’s a lot to ask, especially of a small relatively new Commission which acknowledges it remains underfunded and is still struggling to find adequate office space.

At the Committee hearing, DA members summed up in one word the biggest problem that this team faces. “Corruption,” the DA declared, was the Commission’s first challenge, and that included the possibility of corruption within the Commission itself.

Committee members expressed concern about the staff of the Commission being susceptible to being bribed and asked whether they had been vetted and were subjected to regular lifestyle audits.

The Committee also pointed out that breaches of the B-BBEE Act, such as fronting, were criminal offences and members wanted to know why the Commission referred criminal matters to the National Prosecuting Authority (NPA) instead of adopting a multi-disciplinary approach in which the Commission and the NPA worked together from the outset. It also proposed that the Commission work closely with the Public Protector.

The Commission confirmed that it had concluded Memorandums of Understanding (MOUs) with, key stakeholders, amongst others, the National Gambling Board and the Competition Commission. MOUs with the South African Revenue Service (SARS) and the NPA had been negotiated but were still to be signed.

Ntuli noted that stakeholder relations were a priority for the Commission, especially relations with the NPA and the South African Police Services (SAPS) who were called upon to deal with the criminal offences it had turned up. But she pointed out that when the Commission had referred one matter on fronting to the SAPS they had to explain what fronting was to the SAPS official involved.

Busisiwe Ngwenya, Commission Director of Compliance, outlined what has been accomplished since the Commission’s inception in 2016:

  • Advice has been requested from and provided to about 1,700 clients and the Commission has issued 153 letters regarding invalid certificates. Of the more than 200 compliance reports received, 190 have been assessed;
  • The Investigation and Enforcement programme has handled 334 complaints, 83% of which were about fronting. Altogether 101 investigations were conducted. Findings were issued for 45 cases which included 13 summonses and four cases that had been resolved through Alternative Dispute Resolution (ADR) processes.
  • The Commission undertook annual awareness events. These included a conference on fronting in 2015/16 and a seminar for verification of professionals in 2016/17. It had done 80 outreach programmes in the provinces and intended to roll out a media campaign to local areas using community radio stations. It had also held workshops with government departments where there had been non-compliance.

It’s an impressive start, and every little bit counts. But faced by massive fronting and noncompliance, 100 fraudulent certificates, 13 summonses and four resolved cases suggests that the Commission still has a long way to go.

Moira Levy

Additional information sourced from the Parliamentary Monitoring Group

Additional Info

  • Author: Moira Levy
Last modified on Monday, 23 April 2018 12:52

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