Cognac & Conversation with Nelson Sebati: Understanding The Mandate Of The B-BBEE Commission

Cognac & Conversation with Nelson Sebati: Understanding The Mandate Of The B-BBEE Commission

Chief Empowerment Officer, Nelson Sebati

www.enterprisesupplierdevelopment.co.za recently met up with Chief Empowerment Advisor, Nelson Sebati at his favorite after-work chill-spot for some "cognac and conversation" on the mandate of the B-BBEE Commission. Listed below is some of the information that he shared....

Due to ‘rife fronting’, the establishment of a B-BBEE commission was announced in October 2015 by the Minister of Trade and Industry. The commission, which began its operations in April this year, has a mandate to investigate and deal with fronting, fraud, and other B-BBEE transgressions.

The original BEE codes were implemented as far back as 2007 to reduce inequality, promote the growth of the black middle class, and reduce unemployment. However, in addition to a lack of meaningful transformation, there’s the issue of fronting which, according to the DTI, is ‘a deliberate circumvention or attempted circumvention of the B-BBEE Act and the Codes’. Until recently there was no established institution to monitor, oversee, and regulate the empowerment laws, which resulted in:

• Business owners employing black individuals and misrepresenting them as directors, shareholders, or management; 
• Organizations with B-BBEE ratings falsely claiming to have a high percentage of black ownership;
• Companies appointing black directors and shareholders and preventing them from having signing powers, access to financial records, or active participation in the company 
• Black employees appointed to management roles being paid considerably less than, or not having similar responsibilities, compared to white employees in the same role; 
• BEE-rated companies who won government tenders sub-contracting the work to non-compliant entities; 
• The economic benefits received as a result of an entity’s B-BBEE Status did not flow to black people, as per relevant legal documentation. 

Incidences such as these have slowed the process of transformation and creating a dire need for an independent BEE commission to properly regulate industry.

Along with policing, fronting and fraud, the commission assess B-BBEE transactions and ensures that these contribute towards the long-term goals of the National Development Plan.  Functioning as a state organ within public administration, but outside the public service, it is headed by a commissioner who is responsible for all functions and administration. As per the Broad-Based Black Empowerment Act, the commission works with other organs of state such as the Special Investigating Unit (SIU), the South African Revenue Services (SARS), the Independent Regulatory Board of Auditors (IRBA), the National Prosecuting Authority (NPA), and the South African Police Services (SAPS). The commission also supervises B-BBEE rules and maintains a record of major BEE transactions.

As it is a criminal act to knowingly engage in BEE fronting practices, business owners found to have engaged in BEE fronting can be prosecuted. Penalties are up to ten years imprisonment, and a hefty fine of ten percent of turnover, or both. Another consequence – the company may be disqualified from doing any business with state organs or public entities for a period of ten years. These penalties may seem harsh, but government is serious about resolving transgressions and preventing them from occurring in the future.

For more information visit: https://bbbeecommission.co.za/