47 connected individuals became multi-billionaires through BEE in mining

47 connected individuals became multi-billionaires through black economic empowerment (BEE) deals in South Africa’s mining sector.

This was revealed by William Gumede, an associate professor at the University of Witwatersrand’s School of Governance.

He is also the founder and executive chairperson of Democracy Works Foundation and the founder of the Institute for Social Dialogue.

He served as the independent chairperson of the negotiations to establish a multiparty coalition of opposition parties for the 2024 elections.

He is one of South Africa’s foremost political and economic experts, having won numerous awards in both South Africa and internationally.

Gumede has been following and researching black economic empowerment since its early days in the nineties, making him an expert in the field.

He shared his view on the controversial policy during an interview with The Truth Report founder, Rob Hersov.

He said that despite black empowerment policies failing across Africa and devastating many economies, the ANC government implemented similar policies in South Africa.

These policies failed to empower the black population. Instead, they drove away investments and caused large-scale unemployment.

Black empowerment caused tremendous damage to the economies of countries where it was implemented, including Zimbabwe, Nigeria, and Ghana.

There are many better ways than company ownership, which benefits only a small group, to empower Black people.

The best way is education. Gumede mentioned global examples where companies had to adopt and fund schools to benefit from government contracts or assistance.

There should be a strong focus on STEM (Science, Technology, Engineering, and Mathematics) to ensure the learners gain modern skills.

Another thing is to encourage companies to train and potentially employ young people. This will give them valuable real-world skills to become productive.

Supporting small and medium-sized business development is another component of empowering people and growing the economy.

Enriching only a few politically connected individuals

One of the biggest failings of black economic empowerment in South Africa is that most of the money flows to a small group of connected individuals.

The government asked Gumede to conduct an assessment of black economic empowerment in South Africa.

As part of the research, he calculated the amount of money which has been moved through empowerment in South Africa.

It was very clear that BEE benefits only a tiny group of politically connected individuals linked to the African National Congress and trade unions.

Gumede famously found that, conservatively, R1 trillion has been moved between under 100 people through BEE since 1994.

He explained that the same people have been empowered and re-empowered over and over again.

In his discussion with Hersov, he explained that this should not come as a surprise to people who have closely followed BEE.

He cited an official report by one of South Africa’s business chambers in the mid-2000s, which was not made public.

This report revealed that BEE deals in the mining sector resulted in the creation of 47 multi-billionaires.

Gumede said that this and other reports contain even more damning data about the small number of people becoming extremely wealthy through BEE.

“South Africa’s BEE model has created a model of corruption because people set up companies just to get a contract,” he said.

He added that genuine South African entrepreneurs who are not politically connected do not benefit from Black Economic Empowerment funding.

He advocated for halting black economic empowerment entirely in the public sector, as it has led to service delivery failures.

Gumede said the same individuals get tremendous amounts through public procurement tendering, without delivering great services.

“Just like in the private sector, the same individuals are empowered over and over again in the public sector,” he said.

Gumede said merit has to be introduced in the public sector to resolve the problems with service delivery.