ARTICLE · 11 AUGUST 2015

Fronting Practices

Dentons

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The Broad-Based Black Economic Empowerment Act 53 of 2003 ("BEE Act") was recently amended to provide for (amongst other things) the criminalisation of fronting practices.

South AfricaGovernment, Public Sector

Shahid Sulaiman

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The Broad-Based Black Economic Empowerment Act 53 of 2003 ("BEE Act") was recently amended to provide for (amongst other things) the criminalisation of fronting practices. The Broad-Based Black Economic Empowerment Commission ("Commission") has also now been established to oversee compliance with the BEE Act and to investigate complaints relating to fronting practices.

In this Alert we provide a brief overview of fronting practices as provided for in the BEE Act.

Background

The BEE Act provides for entities to be rated based on the extent to which they promote Broad-Based Black Economic Empowerment ("BEE"). Failure to promote BEE (and therefore having a poor BEE rating) does not make it unlawful to trade. However, Government and public entities (as well as entities doing business with Government and public entities) take an entity's BEE rating into account when determining (i) who they do business with, (ii) who they issue licences to, and (iii) who they issue

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