Proposed changes to South Africa’s broad-based black-economic empowerment (BBBEE) legislation would result in penalties and blacklisting of parties guilty of fronting, Department of Trade and Industry (DTI) deputy director-general for empowerment and enterprise development Sipho Zikode said on Wednesday.

The “sophisticated practice” could no longer be tolerated in South Africa as it was a significant constraint to “true economic transformation”, he told Engineering News Online.

Fronting practices necessitated the amendment of legislation and the strengthening of enforcement. The DTI would present the amendment, along with other critical and key changes to South Africa’s BBBEE legislation, to Parliament by September.

Another proposed change called for the alignment of BBBEE primary legislation to other key pieces of South African legislation, and the establishment of an empowerment ombudsman.

“The nonalignment of key pieces of legislation and other policy instruments to BBBEE policy led to noncoherence with regard to application across government, such as procurement and the granting of a licence,” Zikode said.

The need for an ombudsman was the result of a lack of an institutionalised environment for the review of empowerment transactions.

“We need the requisite authority and capacity to investigate complaints on transactions comprehensively, and to deal with complaints, advocacy and education,” Zikode explained.

The nonregulation of the black-economic empowerment (BEE) verification industry, which Zikode said led to “opportunistic tendencies” and a lack of accountability, also necessitated extending the mandate of the Independent Regulatory Board for Auditors.

Other proposed changes included all companies, except exempted micro enterprises, complying with all seven elements of the BBBEE scorecard, integration of financial and nonfinancial support services to ensure the success of some of the funding interventions by public and private sectors, the alignment of the BEE employment equity element to the Employment Equity Act and aligning a skills development element to the New Skills Development Strategy.

Another change called for enterprise development and procurement to be elevated with each requiring subminimum and enhanced recognition for enterprise development targeted at key sectors in the Industrial Action Policy Plan and the New Growth Path. Lack of compliance could result in penalties.