02 Jul 2024

Fronting is the main stumbling block to reservation of some business activities for Batswana.

Principal industrial officer from the Ministry of Trade, Ms Sarah Letsoga complained when briefing the ongoing council session in Letlhakane recently, that there was a lot of fronting taking place in the business space so much that some locals acquired licences for the sole purpose of lending them to foreigners.

Ms Letsoga stated that government had reserved some activities to empower citizens to enable them to contribute to economic growth. Such activities she listed as bread and confectionery, ice making, meat processing, purification and bottling of water, school furniture, school uniform and packaging, among others.

The law states that for large companies, Batswana or citizens should always hold 51 per cent shares or more, rendering them to be the major stakeholders and decision makers.

She observed that types of fronting were instances where the person knew that they were fronting and the type of benefit attached was a nominal fee on scheduled times whether monthly, quarterly or as maybe agreed by parties involved.

Ms Letsoga stated that there were cases where the person’s credentials were used without knowledge and it always happened to employees whose documents were requested under pretext of employees’ records.

In another case, she said the other party may know that they were in business with the foreigners and would not be aware of the type of business they were into, its implications and whether it was reserved or not.

She expressed concern that benefits accrued to foreigners as opposed to the intended beneficiaries and when tax law was not complied with, the repercussions remained with the major stakeholder, which was a Motswana.

Batswana, she said, remained poor, yet their businesses demonstrated that they were flourishing.

Non-compliance with Financial Intelligence Act laws could lead to major shareholders failing to account for the dealings in their business transactions.

She stated that Industrial Development Act versus fronting section 37 subsection (1) states that, ‘any person who fronts for another person, operates a manufacturing enterprise under an industrial license or obtains registration certificate through fronting, commits an offence liable to a fine not exceeding P50 000 for a first offence and to a fine not exceeding P20 000 and imprisonment not exceeding two years or both for a second or subsequent offence.

Ms Letsoga said fronting on reserved activities happened across all sectors of the economy be it construction, trade and tourism, among others.

When commenting, Kgosi Barontshi Kegapetswe said fronting was caused by lack of funding required to invest in the business, adding that foreigners came in as financiers.

Councillor Basiami Sentsho of Xhumo/Mmadikola called for segregation of players in the market by uplifting small-medium enterprises, arguing that big retailers had the capabilities and resources that allowed them to lower prices.

Councillor Sentsho said fronting was also caused by lack of knowledge, adding that unemployment could also perpetuate fronting. He implored the Ministry of Trade to intensify public education on fronting.

Councillor Ntebogang Kgosi of Letlhakane North also reiterated the importance of public education on fronting. ENDS