Beyond Fronting and Compliance: Transitioning B-BBEE Barriers through Sustainability Thinking

By Phumlani Nkontwana and Sanele Kweyama, Mindworx Empowerment Advisory consultants.

So much has been said about fronting in the transformation discourse but very little behavioural changes are observable. Some businesses continue to exploit opportunities that come with having a great B-BBEE scorecard by fabricating corporate identities to reflect bogus empowerment when the reality reflects otherwise. Since inception, the BEE Commission has reportedly received over 100 fronting cases – a damning statistic for a country in so much need of transformation than it ever did before. Post 1994’s independence, unemployment has only soared, the gap between the rich and poor widened and poverty deepened. Without boring the reader with too many supporting statistics, it suffices to state that of the global societies in need of transformation, we are right up there! Yet, some companies struggle to see beyond short term gains.

Some horrendous red flags associated with fronting include but are not limited to the following:

  • The person identified by an organisation as a shareholder or director is not fully aware of the scope of their role and clearly does not have the same or similar responsibilities and benefits as his or her peers.
  • There is no significant or active participation by someone identified as top management at strategic decision-making level.
  • The organisation relies on a third party to conduct core functions or cannot operate independently without a third party to meet its contractual obligations.
  • A high-powered B-BBEE appointee clearly lacks technical or operational competence.
  • B-BBEE appointees are never available for meetings or allowed to meet you without the presence of other directors or shareholders.

There is no quick or easy route to transformation. The process is rigorous, tedious and time-consuming. However, sidestepping the requirements of B-BBEE is not the answer; not least because the B-BBEE Commission is increasing its policing of companies and has devised severe punishments for offenders.  Not only can companies be fined up to 10% of their annual turnover but individual perpetrators can be held criminally liable and face a fine or up to 10 years of imprisonment. Firms found guilty of contravening the Act can also be registered as tender defaulters at the Treasury and disallowed to do business with any state organisation for a period of 10 years.

But why then do companies continue to with this practice at the expense of genuine transformation? We cannot just accept the idea that perpetrators do this for mere profits, fear of change and/or lack of knowledge. Companies need to realize the link between transformation and business success in the first place. A genuine investment in transformation over long term can lead to bigger and better profit margins than those offered by the existing paradigm based on the singularity of thought and deliberate exclusion of other contexts. The reason for this is that in the long term, a portfolio of varied ideas from diverse backgrounds has a much more likelihood to win or succeed than the one based on unilateral thinking or mono-economics.

B-BBEE is neither about compliance nor an instrument for sealing deals as some opportunistic businesses have reduced it to be. It is a means to an end and not the end itself. The ultimate goal is to see a diversified representation of our society integrated into mainstream economic activities for national competitiveness. That and of itself is a transformative exercise in a country where the intended beneficiaries of the Act are still excluded from mainstream economics and current players represent a minority group. But more importantly is the need to transform our national economics which has since struggled to recover from the global crises of 2008.

To date, the focus on fronting has focused a lot on barriers to access and moralistic gestures. Whilst this focus is admirable, it makes the arguments against fronting incomprehensive and does so at the risk of distracting stakeholders from other perspectives – such as competitiveness and sustainability.

The call for transforming corporate SA includes but is not limited to the realization that:

  • Transformation is about embracing new ideas
  • New ideas come from a multiplicity of thoughts, backgrounds, experiences and thinking; so that
  • Transformation means sustainable enterprises in the long term.

The conversation thus needs to shift beyond emotive arguments but rather seeing corporations as sustainable entities in which all principles of competitiveness and sustainability are fully and wholeheartedly embraced. These principles among others include the idea that no one system can achieve true or long term sustainability without successfully harnessing interdependencies from others. Thus, there can be no sustainable enterprise without diversity of employees, shareholding, and suppliers to name but just three sources of transformation. One merely needs to acknowledge the socio-political instabilities in this country to appreciate this point.  If we borrow these ideas from literature in systems, innovation, and sustainability sciences, we can then start to question how corporate SA can achieve long-term sustainability without employing fundamental principles of innovation and sustainability.

Thus, viewing transformation from sustainability lenses forces us to question the root – principles and values – rather than symptoms such as fronting. It also aid the shift from compliance arguments toward a demoralized but competitiveness thinking.

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