South Africa’s destructive BEE policies are here to stay

Despite fierce opposition to South Africa’s destructive black economic empowerment (BEE) policies from within and outside the country, the ANC is doubling down on them.

South Africa’s BEE policies have come under tremendous pressure in recent years as they have hampered investments and only enriched a small politically connected elite.

The issue made headlines in recent months after the United States provided preconditions for the normalisation of bilateral relations with South Africa.

One of these conditions was exempting US entities from all BEE requirements, meaning any race-based legislation constituting a non-tariff trade barrier should not apply to US entities.

Political analyst Frans Cronje said it made perfect sense for the United States to request that BEE policies be removed.

Cronje explained that taxing foreign capital on arrival through BEE and related policies makes South Africa unattractive for international investors.

“Many companies quietly pass South Africa because their policies do not make for a good investment case,” he said.

Political economist Moeletsi Mbeki has also criticised BEE, arguing that it has created a black elite rather than empowering the majority of black South Africans.

“It was not the ANC supporters who wanted BEE policies. It was the ANC leadership because they benefit from it,” he said.

Prof. William Gumede of the Wits School of Governance said BEE has led to increased poverty, unemployment, and inequality in South Africa.

His research revealed that BEE across Africa failed terribly because it focused on benefiting a small group of connected individuals rather than a large group of people.

“R1 trillion has been moved between under 100 people since 1994. The same people have been empowered and re-empowered over and over,” he said.

Mbeki and numerous other economists said the government should do away with BEE to attract investment and stimulate economic growth.

“I don’t think South Africa needs any transformation. We need to develop our country,” Mbeki said.

The ANC doubles down on BEE

Despite growing calls from the business sector, political parties, and economists for the government to abandon BEE, the ANC is doubling down on its empowerment policies.

“As the leader of society, the ANC will continue to evaluate the implementation of all transformation policies to ensure they remain true to their mandate,” it said.

“Where these policies are found not to benefit those who were previously oppressed and marginalised, they will be reviewed and strengthened.”

ANC Secretary General Fikile Mbalula called on people who benefited from BEE to defend the policies against attempts to dismantle laws based on ascribed traits.

“We call on all South Africans who have benefited from these measures, including those appointed to various positions in the private sector, to stand in defence of their own gains,” the ANC said.

“South Africans who have benefited from these measures must reject any political agenda aimed at reversing the progress made.”

The ANC said people must speak out against such attempts, whether they are professionals, business owners, or workers.

“Our commitment remains firm: to advance inclusive economic growth, to deepen equity, and to safeguard the hard-won victories of our struggle for freedom,” the ANC said.

The ANC also took aim at the Democratic Alliance (DA), which proposed reforms which included scrapping BEE and taking action against the Expropriation Act and the Employment Equity Act.

DA leader John Steenhuisen said BEE, the Employment Equity Act and the Expropriation Act are job-killing policies.

The ANC hit back, saying its rival and national coalition partner repeatedly signalled its intention to dismantle transformation policies.

“We have observed a growing public discourse surrounding policies intended to address historical inequalities,” the ANC said.

“These policies aim to create an open and democratic society where the government is based on the will of the people and all citizens have equal protection under the law.”

Why BEE remains despite its negative effects

Despite growing discontent with BEE and race-based policies, and mounting evidence of their adverse effects, it raises the question of why the ANC is doubling down on them.

Nobel-prize-winning economist Milton Friedman explained that when you get a government programme in, it becomes a special privilege of a small group.

“This small group has an enormous interest in maintaining it. You do not have a comparable group with an interest in getting rid of it,” he said.

The book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, by economists Daron Acemoglu and James Robinson, expanded on this issue.

It described systems like BEE as extractive political systems, characterised by concentrated power in the hands of a small elite.

The political institutions in those countries are designed to benefit the elite at the expense of the rest of society.

These political structures create and sustain economic arrangements that funnel wealth to the elite and suppress innovation, competition, and broad-based growth.

Because the elite benefit from the status quo, they have strong incentives to resist reforms, even if those reforms could lead to long-term prosperity for the country as a whole.

Extractive political systems often lead to instability and conflict as different groups compete to control the extractive apparatus rather than dismantle it.

As the political elite has no incentive to stop the extractive system, it is passed from one regime to another rather than being dismantled.