Commission initiates probe into B-BBEE violations

The Broad-Based Black Economic Empowerment (B-BBEE) Commission has initiated investigations against specific entities for possible violation of the B-BBEE Act.

In a statement on Monday, the Commission said the investigation relates to B-BBEE ownership structures and non-compliance with the Codes of Good Practice in respect of the verification process.

All entities were notified, and if there are adverse findings against them, they will be given 30 days to respond to the adverse findings before the B-BBEE Commission makes the findings final, it said of the 17 companies its investigation encompasses.

Among the companies and state owned companies under investigation is Net Value Holdings (Pty) Ltd where the Commission is looking to determine whether the B-BBEE ownership model used by the entity for black ownership through a trust and acquisition of minority stakes in certain entities, as well as the nature of the Net Value Holdings with such entities, comply with the B-BBEE Act.

With regards to MTN Group Limited, the Commission is looking to determine whether the MTN Zakhele and the MTN Zakhele Futhi B-BBEE schemes meet the requirements for black ownership elements and comply with the B-BBEE Act.

Meanwhile, at Eskom SOC Limited the Commission is looking to determine whether the entity complied with the requirements of section 10(1) of the B-BBEE Act in the issuing and awarding of the Duvha Power Station tender to a Chinese company, which is alleged not to be B-BBEE compliant.

At the South African Social Security Agency (SASSA) the Commission is looking to determine whether SASSA complies with section 10 (1) of the B-BBEE Act in issuing and awarding tenders, and whether allegations that the tender for the payment of social grants to Cash Pay Master Services (Pty) Limited (CPS) was awarded to a company (CPS) that is engaging in a fronting practice in violation of the B-BBEE Act.

The B-BBEE Commission, which is an entity of the Department of Trade and Industry (dti) is allowed to initiate an investigation on its own initiative and this often happens as a result of a tip off.

Penalties of violating the B-BBEE Act

If found to have violated the B-BBEE Act, the entities may be referred for prosecution and exposed to a fine of up to 10% of the entity's annual turnover and the individuals involved can be fined or imprisoned for up to 10 years.

The entities can also be excluded from doing business with government for a period of up to 10 years, and the contracts they have with any state owned entity or government department can be cancelled.

The B-BBEE Commission may also approach a court of law to restrain any breach or for any appropriate remedial relief, which may include setting aside the transaction or initiative.

On Monday, the Commission said it would not discuss the merit or the details of its investigative process, but the findings will be published as required in the B-BBEE Act.

The B-BBEE Commission is also allowed in terms of the B-BBEE Act to consider alternative dispute resolution, if appropriate, and where such has been facilitated and agreed upon, the B-BBEE Commission will communicate such outcome. The investigations are reflected in the table below with the entities and the summary of the issues being looked at.

The commission was announced by dti Minister Davies in October 2015. At the time, Minister Davies said the Commission will deal with fronting, fraud and other issues that affect BEE.

The Commission has the ability to address fronting, as well as to introduce mechanisms to prevent it from happening.

The B-BBEE Commission effectively commenced with its operations on 1 April 2016.

Source: South African Government News Agency