Public Works Minister Stella Sigcau has vowed to "unmask the wolves in sheep's clothing" who are defrauding the government.
The "wolves" are unscrupulous whites and the "sheep's clothing" are the black faces they use to land government contracts.
Announcing the findings of a probe into "fronting" in the construction industry, the public works minister announced on Tuesday that 15 companies were facing prosecution and blacklisting by the Treasury and the Construction Industry Development Board.
She warned that their multimillion-rand contracts could be cancelled.
| 'The doers and supporters of these misdeeds will face the full might of the law' |
Sigcau said the 15 firms engaged in black economic empowerment (BEE) fronting had cost her department R441-million in the past two years.
"Fronting has negative effects. The cancellation and reissuing of contracts takes up valuable time that could be used to complete much-needed infrastructure projects.
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"When public funds are misused by taxpayers this indicates a growing belief that people can get away with murder."
She said some people had made a career out of defrauding the government and defeating the aims of BEE.
"The doers and supporters of these misdeeds will face the full might of the law," she said.
The companies fingered in the report account for 70 percent of the department's construction spending during the past two years. They had each been given contracts worth more than R10-million.
Sigcau gave two examples. In one, an illiterate middle-aged woman was appointed human resources director of a construction company that had a R10-million contract with the government. But whenever authorities tried to speak to the human resources director, she was sick.
In another example, a man walked into a bank to open an account but was told by the teller that he already had an account for a construction company. He had no idea he owned the company.
Mohsien Hassim, of BEE strategic services at Ernst & Young, said he had come across an incident in which a woman who had a job making tea for a company was appointed the company's director.
"They gave her business cards and put her name on their letterhead, but it was nothing more than racial window dressing.
"A client became suspicious and ordered an investigation, which revealed that this was a front and the client terminated their contract."
According to Hassim, companies will be named and shamed in the coming months as the government embarks on a drive to stamp out fronting.
"Fronting is misrepresentation; it's fraud and there are serious implications for those who front, not least opening the doors for the Scorpions and the Asset Forfeiture Unit. It undermines transformation and companies that engage in it are taking a short-sighted view."
He said there was a lack of understanding of BEE. The government's intention was to see the growth of the economy for all, not just a few.
"BEE creates employment, which means crime comes down."
Check out Business Report for more details.
- This article was originally published on page 1 of The Mercury on August 03, 2005
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