Political parties and the Black Business Council (BBC) have fired a broadside at an engineering company NJM for breaking Broad-Based Black Economic Empowerment (BBBEE) laws.
This after NJM shareholders stated in their answering affidavit in the Joburg High Court that they fraudulently supplied a signed shareholders’ agreement to Eskom for the purpose of misleading and misrepresenting the company’s shareholding to win a tender at the state-owned utility a few years ago.
They submitted the affidavit when a female shareholder, Baleseng Zinyana, who held 26% of the shares, which she paid for in cash, took the other directors to court after they refused to hand her the company’s accounting records to conduct an audit to determine the value of the business.
The company’s former CEO Jack Madzivhandila also reported NJM to the BBBEE commission of the Department of Trade and Industry and said another female shareholder of the company, Vanessa Chungu, was fronting for the entity to enable it to be 51% black women owned.
The allegations drew the ire of UDM leader Bantu Holomisa, who lamented NJM’s apparent caper as an indication that many white companies have been using black people as fronts for years.
“BBBEE policy implementation allowed many white companies to exploit it for their gain. This policy was intended to build a black middle class using state funds.
“Other white-owned companies saw loopholes and exploited black workers to enrich themselves. This is also how they looted PIC funds. Today some of the listed and unlisted companies are failing to service their PIC loans,” said Holomisa.
ActionSA leader Herman Mashaba said it was totally wrong for white-owned companies to use black employees to front for their businesses.
He said companies that are using black people to front were committing a crime. “I am dealing with the matter of 200 people who were fired by a white-owned company when they asked about their shares. The BBBEE Commission is tasked to tackle this matter, but it is doing nothing,” he said.
Xiluva president Bongani Baloyi said established and non-established white-owned companies had been using black people as tokens to pose as company shareholders to be compliant with BBBEE, and questioned the effectiveness of the commission monitoring compliance with empowerment legislation.
“Xiluva is of the view that this body has failed dismally to promote adherence. The idea of BBBEE to increase the economic participation of black people and redress the legacy of apartheid is a correct one, however, the current BBBEE has proved to be a failure,” said Baloyi.
GOOD secretary general Brett Herron said companies, largely white-owned, have not transformed their shareholding or top management out of a commitment to redressing their historical unearned privilege but simply to be BBBEE compliant and to continue to win government tenders.
“The corruption of this system of preferential procurement happens through this fronting and the culprits are those who own the companies. The law needs to introduce harsh penalties for those who have undermined BBBEE, and its proper intention in order to continue to win tenders.,” said Herron.
DA spokesperson for trade, industry and competition Darren Bergman said his party did not believe that BBBEE in its current format had helped emerging black businesses nor existing business.
“BBBEE has often led to exploitation and even more corruption with the net result of money going into the hands of people bucking the system and not people that should be redressed from an historic disadvantage.”
IFP spokesperson Liezl van der Merwe said fronting did not only frustrate the achievement of the objectives envisaged by the BBBEE Act, but it was also a type of fraud.
“The IFP is against any form of fronting, and in full support of the fines and penalties imposed through the BBBEE Act. Any company found to be in contravention of BBBEE regulations must face the full weight of the law.
“The BBBEE Commission is woefully under-resourced, which in turn makes it difficult to identify and deal with issues such as fronting.”
BBC CEO Kganki Matabane said: “Those people should be prosecuted as per the BBBEE Act.
“Any person convicted of an offence in terms of the amendment act, will, for offences provided … be liable to a fine or imprisonment for a period not exceeding 10 years or to both a fine and such imprisonment.”
In letter drafted by its lawyers, Knowles Husain Lindsay Attorners, NJM said it was not correct that its directors have been ordered to hand themsleves to the Hawks. They said compliance with the court order envisage a report being submitted to the Hawks as maybe necessary and did not require them to hand themselves over to the anti-corruption unit. However, Madzivhandila said, in his view, there was no difference.
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