Inside Biz | CIC TO PUT IN MEASURES TO CURB FRONTING IN THE CONSTRUCTION INDUSTRY

Construction Industry Council notes that one of the challenges they face when it comes to fronting is two or more companies with a mutual director competing in the same category of tenders or companies accessing work in categories that they are not registered for. The regulator says one of the measures they will put in place going forward is ensuring that a company is not registered where a director or shareholder has a direct or indirect shareholding or interest in a consultancy practice and vice versa.

Photo Credit: www.cic.co.sz

By Ntokozo Nkambule

The Construction Industry Council (CIC) has come out to state that they acknowledge that the local industry suffers a lot from fronting.

The CIC defines fronting as reliance on data or claims of compliance based on misrepresentations of facts, whether made by the party claiming compliance or by any other person. The council also states that fronting is illegal, and is a form of fraud.

The council revealed this during a stakeholder forum they hosted at Sibane Hotel, yesterday. The Acting Chief Executive Officer (CEO) of CIC, Maqhawe Mnisi said one of the fronting challenges they face in the industry;

Are two or more companies with a mutual director competing in the same category of works or tenders.
Companies accessing work in categories that they are not registered for through submitting other company documents at the tender stage.
Foreign companies illegally accessing work locally by submitting local company documents at the tender stage.
Foreign companies engaging in unfair JV agreements with local companies to access local participation.
Registering companies under the same directorship using different company names doing the same scope of works.
Indirectly owning companies under the directorship of others.
Swazis being major shareholders in partnerships with foreigners (silent shareholders).
Swazis partnering in Joint ventures with foreign nationals.

Mnisi notes that because of these challenges the Council has put certain measures in place to ensure that they curb fronting acts. One of these is in the registration of contractors whereby they have put in requirements aimed at establishing the legal standing of an entity, which aims to participate in the industry.

The regulator also notes that the current grading of contractors is under review in a bid to further curb the fronting challenges which are not addressed in the current contractor registration and grading criteria. Currently, contractor registration rules put in place to curb fronting are;

A company director cannot register two or more companies in the same category of works.
A holding company cannot register in the same category of works as a subsidiary company.
Require Competition Commission authorization in the case of company shareholder changes or merges.

Moreover, Mnisi stated that they have proposed further interventions to ensure that they fight fronting in the construction space. He said in addition to the current registration, they seek to incorporate additional registration rules, which will include;

A construction company shall not be registered where a director or shareholder has a direct or indirect shareholding or interest in a consultancy practice and vice versa. A holding company cannot register in the same category of works as a subsidiary company.
A construction company shall be allowed to register wherein a director has a direct or indirect shareholding or interest in a manufacturing and supply of building material business.
A Director, shareholder, or employee of a company cannot have any shares, interest, or hold directorship in any other company that is in the same class of works.
Business fronting is prohibited and considered illegal; any contravention shall be dealt with in terms of the Act.
For purposes of registering companies held by Trusts, the trustees and beneficiaries of the Trust shall be declared to the Council.
Construction public officers shall not be allowed to hold shares in a construction company either in the country or outside the country wherein the local partner is registered with CIC.

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