Big BEE changes on the cards for South Africa

Changes to South Africa’s Black Economic Empowerment (BEE) legislation are likely to be made after a review is conducted to determine how loopholes used for cronyism and corruption can be addressed. 

The ANC-led government remains committed to BEE and other transformation policies as a means to try to redress past discrimination. 

However, the policies have come under increasing scrutiny recently, with political parties, CEOs, and think tanks being increasingly critical of BEE in particular. 

The Democratic Alliance (DA), which is the second-largest party in the Government of National Unity (GNU), has even introduced a bill to scrap BEE and replace it with means-based redress. 

Critics of BEE can also be found within the ANC, but for different reasons. High-ranking officials and government ministers, such as Parks Tau, have called for a review of transformation policies as they have become tainted by cronyism and corruption. 

Investec CEO Fani Titi sharply criticised BEE in saying that it has been misapplied, and the opportunities for economic participation it provides have increasingly been linked to political party membership. 

“I can understand the frustration that there is,” Titi said. “You’ve had employment-equity legislation for 30 years, yet it hasn’t achieved the desired effect.”

Speaking to the National Assembly on 11 November, Deputy President Paul Mashatile said there is no need for alternatives to existing BEE legislation. 

However, he admitted that a review and possible changes to certain policies could be implemented to address the shortcomings of the legislation. 

Mashatile told members of parliament that the Department of Trade and Industry was currently reviewing BEE legislation to find gaps in the legislation and assess ways to make it more inclusive. 

“To the extent that there may be weaknesses, let’s correct that. Let’s make amendments, that is why there is this review. There is no need to ditch the legislation,” Mashatile said. 

This makes a significant change in the government’s approach to criticism of BEE, with previous critiques dismissed out of hand and no reviews put on the table.

The DA’s Baxolile Nodada said in a statement that the party is determined to replace BEE in South Africa, and the admission of the policy being reviewed is a step in the right direction. 

“The DA will not allow this entrenched poverty to go on, enforced by failing BEE that makes insiders rich and leaves everyone else behind,” the statement read. 

“The DA is determined to replace BEE with real economic inclusion for all, that is beyond the reproach of political meddling.”

BEE under review

Mashatile’s admission of BEE being under review is not the first time a high-ranking government official has indicated changes are likely to be made to the legislation. 

Former president Kgalema Motlanthe and Trade Minister Parks Tau both criticised the shortcomings of BEE policy at a B-BBEE dialogue last month. 

They argued that the government’s policy of BEE has been tainted by corruption and cronyism, with its continued implementation in the current form being increasingly challenged from all directions. 

Tau said this requires an overhaul of the policy to address and ensure it empowers a broader cross-section of South Africa and not just a handful of elites. 

It has been estimated by some that around R1 trillion worth of BEE deals have circulated among approximately 100 well-connected individuals and businesses. 

Tau’s proposed review and changes seek to remove loopholes that have been exploited by well-connected individuals to ensure they benefit from BEE deals at the expense of ordinary South Africans. 

“In fact, we have said in the department that a review of the architecture of the entire transformation programme, policies, and instruments is called for,” Tau said. 

The minister particularly singled out the practice of faking bEE compliance by individuals and businesses as one of the main failures of the policy. 

This has resulted in the policy failing to bring about genuine inclusion in the economy and uplift millions of South Africans. 

“Progress has not been enough to equal the post-1994 promise to free the potential of each citizen, as ownership patterns remain skewed and top management representation for black South Africans remains low,” Tau said. 

“Too often, empowerment has been undermined by fronting, tokenism, and financial structures that deny true control.” 

Both Tau and Mashatile, while admitting changes need to be made after the review, said the government remains committed to BEE.

At the end of October, following the presentation of the DA’s proposed alternative to BEE, the government said that BBBEE remains a key policy instrument of the state and will not be replaced. 

The government said the policy remains central to South Africa’s economic transformation and forms part of the country’s long-term strategy to redress historic injustices, broaden economic participation, and build a truly inclusive economy.

In addition, the state said the BBBEE Act is constitutional, as it followed all the prescribed requirements to become law.

“This Act is, therefore, a product of democratic processes. If any person requires a change of policy or law, then the appropriate channels and processes should be followed,” the government said.

The government argued that BBBEE is not prejudiced – “rather, it is a constitutional and moral imperative rooted in South Africa’s commitment to equality, fairness, and redressing the imbalances of the past”.