B-BBEE Commission Finds First Garment Rental (Pty) Ltd not to have Violated the B-BBEE Act 

The investigation by the B-BBEE Commission (Commission) which commenced in 2019 against First Garment Rental (Pty) Ltd t/a Montana Laundries (Garment Rental (Pty) Ltd,) a Bidvest subsidiary, has found that the company did not violate the B-BBEE Act. 

The investigation was prompted by a complaint lodged by Mr Ivan Motlogeloa for MMK Laundry (Pty) Ltd, wherein he alleged that MMK Laundry (Pty) Ltd entered into a Joint Venture with First Garment Rental (Pty) Ltd to bid for the provision of laundry services contract for three (3) years at the Nelson Mandela Children’s Hospital, with First Garment Rental (Pty) Ltd using MMK Laundry (Pty) Ltd’s 
B-BBEE credentials and SME status to enhance its bid. 

Mr  Motlogeloa alleged that the said contract had included the development of a black owned entity as part of promoting enterprise development, and that in responding to that requirement, First Garment Rental (Pty) Ltd had approached MMK Laundry (Pty) Ltd as an entity to benefit from the enterprise development aspect of the Nelson Mandela Children’s Hospital laundry services contract.

He further alleged that the Nelson Mandela Children’s Hospital jointly awarded the said contract to MMK Laundry (Pty) Ltd and First Garment Rental (Pty) Ltd; that First Garment Rental (Pty) Ltd performed the contract work without the knowledge and/or consensus and involvement of  MMK Laundry (Pty) Ltd; and that MMK Laundry (Pty) Ltd has not benefited adequately financially from the said contract. MMK Laundry (Pty) Ltd alleged fronting and misrepresentation of B-BBEE status.

Following the lodging of the complaint, the Commission informed by its mandate under the B-BBEE Act investigated the complaint to determine whether the joint venture arrangement between MMK Laundry (Pty) Ltd and First Garment Rental (Pty) Ltd was in place and to find out if there was fronting and misrepresentation as alleged arising from the said arrangement. Further to test the requirements for Enterprise and Supplier Development element of the B-BBEE Act. 

The Commission found that the matter at hand was contractual in nature, and no evidence of fronting or misrepresentation of B-BBEE status could be found on the part of First Garment Rental (Pty) Ltd, and further, that no joint venture partnership had been entered into between the parties.

The outcome of the investigation revealed that First Garment Rental (Pty) Ltd included MMK Laundry (Pty) Ltd as its proposed Enterprise Development beneficiary for the purpose of fulfilling the B-BBEE requirement set by Nelson Mandela Children’s Hospital in the Request for Proposal (RFP) process. However, the Enterprise Development agreement was not entered into upon award of the contract due to low laundry volumes received from the hospital. MMK Laundry (Pty) Ltd was informed of such low volumes and the impracticality of implementing the Enterprise Development arrangement under such economic circumstances. 

Nonetheless, First Garment Rental (Pty) Ltd provided MMK Laundry (Pty) Ltd with an Enterprise Development agreement, with terms different from the one that was included in the proposal submitted for the RFP, in an effort to provide support to MMK Laundry (Pty) Ltd. The latter refused to sign the agreement, however, continued to implement its terms, including invoicing and receiving payments from First Garment Rental (Pty) Ltd based on the said agreement to as recent as December 2019. 

In issuing findings to First Garment Rental (Pty) Ltd for its response within 30 days as required by the B-BBEE Regulations, in case there was anything considered adverse, the same findings were shared with MMK Laundry (Pty) Ltd, for them to respond to the findings, in case there is any crucial evidence that the Commission may have missed. MMK Laundry (Pty) Ltd requested an extension to the 30 days indicating that there was additional evidence that the B-BBEE Commission needed to consider. The extension was granted on 2 March 2020 and a meeting was also held with Mr Motlogeloa. However, up until the publication of the findings, no further evidence was submitted to the Commission.

During this investigation both MMK Laundry (Pty) Ltd and First Garment Rental (Pty) Ltd cooperated fully with the investigation. However, based on the outcome of the investigation and the conclusion that the matter related to a contractual dispute which the Commission does not have a mandate to pronounce on, the Commission did not make any remedial recommendations in respect of this complaint.

The Commission considers compliance with the B-BBEE Act as critical to achieve the envisaged change in the patterns of ownership through the transfer of productive assets of the South African economy to black people and to facilitate the support and growth of black entrepreneurs and Small Medium and Micro Enterprises through preferential procurement and enterprise and supplier development.  

In the interest of addressing issues raised by Small Medium and Micro Enterprises, the Commission may refer the outcome of this investigation to the Department of Small Business Development to consider whether any intervention is feasible to provide a cost effective and independent platform/structure for Small, Medium and Micro Enterprises that have disputes arising from private sector procurement processes to refer them for facilitation given the plight raised by Small Medium and Micro Enterprises, like in this matter, that they often do not have the financial resources to pursue contractual disputes.

The Commission tests both what is written and what happens in practice to determine if the objectives of the B-BBEE Act will be achieved. The summary of the findings and recommendations of the Commission can be found on www.bbbeecommission.co.za. 

Issued for the B-BBEE Commission: 
Sidwell Medupe – Departmental Spokesperson  
Department of Trade and Industry
Telephone: +27 12 394 1650
Mobile: +27 79 492 1774
E-mail: MSMedupe@thedti.gov.za
Follow us on Twitter: @the_dti

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