SA ICT firm accused of BEE fronting

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 24 Mar 2020

A local ICT firm, Risc Technology Integration, is accused of black economic empowerment (BEE) fronting and misrepresentation to get lucrative government contracts.

According to the Department of Trade and Industry, fronting means a deliberate circumvention or attempted circumvention of the Broad-Based Black Economic Empowerment (B-BBEE) Act and the codes.

It explains that fronting commonly involves reliance on data or claims of compliance based on misrepresentations of facts, whether made by the party claiming compliance or by any other person.

This practice boosts a company’s B-BBEE status and increases its chance of securing contracts.

Risc is a South African-owned company that provides independent enterprise IT solutions. It specialises in enterprise Unix and Linux servers.

Application dismissed with costs

This week, the B-BBEE Commission, which monitors the B-BBEE Act’s progress and compliance, issued a statement saying it welcomes a court decision to dismiss an application that would see it not performing its functions.

“The commission welcomes the decision of the Gauteng Division of the High Court to dismiss with costs the urgent application by Risc Technology Integration to interdict the B-BBEE Commission from implementing its decision and recommendations,” says the commission in a statement.

This after Risc was issued with final findings in a case alleging fronting and misrepresentation of B-BBEE status on 5 February 2020.

Risc could not be reached for comment at the time of publishing.

The commission has frequently lamented that fronting remains a major factor contributing to the slow pace of economic transformation in SA.

In the latest case, the commission received a complaint from Winniefred Ntletleng Mashigo, who alleged she was employed by Risc from 11 February 2009 to 7 January 2015 as a receptionist.

Mashigo left the company after discovering in August 2014 that she had been listed as a 33% shareholder in Risc without her knowledge or consent.

In addition, Mashigo says she did not receive any dividends in respect of her 33% shareholding in the company.

The former receptionist was allegedly told she was made a shareholder to enhance its B-BBEE status.

This would also make it easier for it to access tenders in government entities, says the commission.

After assessing this complaint, the commission says it believed there was merit to investigate it, as the allegations were pointing to fronting and misrepresentation of B-BBEE status.

According to the commission, Risc was formally notified of the complaint and given enough opportunity to respond to the allegations.

It notes Risc decided to approach the High Court on an urgent basis to interdict the commission from implementing its decision/findings and recommendations made in its report.

Executive manager for investigations and enforcement at the commission, Moipone Kgaboesele, says the commission defended this matter primarily because there was no basis for the relief the company was seeking.

It was also given another opportunity to respond to findings on 12 December 2019, before the commission made final findings on 5 February 2020, the commission says.

In the findings issued, the commission made specific recommendations.

The company asked the commission to make a written undertaking that it will not implement its decision/findings and the recommendations made, to which the commission did not provide such an undertaking.

Absurd interference

In the view of the commission, it was absurd for Risc to attempt to interfere with the mandate and the powers of the commission, as provided for in the B-BBEE Act.

“The approach of Risc Technology Integration in this case is regrettable, especially as the commission was open and afforded them so much time. The commission is grateful that the High Court agreed with its views on this matter,” says Kgaboesele.

“The commission will proceed with the necessary actions to bring this case to a logical conclusion.”

She adds the commission takes allegations of fronting in a serious light.

“The commission takes every fronting allegation seriously and will not stop pursuing such matters because if true, they undermine the policies and the efforts of government to properly empower black people in this country.

“Further, it defrauds the taxpayers and government because companies that engage in fronting and misrepresent their B-BBEE status get benefits they do not deserve under false pretences,” she concludes.