The well-known company that introduced BEE in South Africa

Renowned political economist Moeletsi Mbeki said, contrary to popular belief, the ANC was not behind black economic empowerment (BEE) in South Africa.

Instead, BEE was introduced by the financial service provider, Sanlam, which had close ties with the National Party.

Mbeki explained that BEE was never ANC policy because the organisation was multi-racial during the struggle against Apartheid.

“As a multi-racial organisation, the ANC could not come up with a policy which favoured one race over another,” he said.

Mbeki, who was part of the ANC’s research department while in exile, said they “never had any policy of black economic empowerment”.

He said BEE was a tool devised by Sanlam to create ties with the new leaders of the country.

“Sanlam saw BEE as a way to create an alliance between the business and political elites and align their interests,” he said.

Mbeki said Sanlam used greed, a crass but powerful economic tool, to buy off the leadership of the ANC.

The ANC leaders were given shares in which were, at the time, margin companies in the bigger scheme of things.

For example, Sanlam used Metropolitan Life, a marginal company, to create New Africa Investment Limited (NAIL), a major player in early BEE.

“Sanlam used New Africa Investment Limited to bring in leaders from the ANC and PAC and buy them off,” he said.

“That became the modus operandi of big business. They bought off the new leaders to supress competition and serve their other needs,” he said.

Mbeki said BEE has evolved into an elite enrichment scheme where the ANC leaders, heads of parastatals, and other connected cades benefit.

The first BEE Deal in South Africa

The first prominent BEE scheme in South Africa was the sale of a 10% stake in Metropolitan Life to NAIL in 1993.

This deal provided black investors with a large stake in an established financial institution, signalling the beginning of corporate transformation.

It is noteworthy that Cyril Ramaphosa resigned as secretary general of the ANC in 1996 to become deputy executive chairman of NAIL. This was his entrance into the BEE space, which ultimately made him a billionaire.

It is also significant that this deal happened before the end of Apartheid in 1994 and predated the government’s formal BEE policy.

As Mbeki explained, it was the start of BEE in South Africa and created a template for later empowerment transactions.

Many of the new BEE transaction involved leveraged buyouts, special-purpose vehicles, and consortiums of black investors.

NAIL experienced rapid growth and acquired stakes in numerous prominent companies. It also became a model for BEE vehicles which followed, like Johnnic, Real Africa Investments, and Safika Holdings.

Although many BEE deals were struck in the nineties, the government’s official BEE policy framework only came later.

It was formally articulated in the 1998 BEE Commission report and the Broad-Based Black Economic Empowerment Act of 2003.