Top South African CEO’s BEE warning

Investec CEO Fani Titi warned that while Broad-Based Black Economic Empowerment (B-BBEE) remains crucial for economic inclusion in South Africa, its potential has been undermined by corruption and inefficiency.

“Thirty years into democracy, South Africa remains a nation of unfulfilled promise, held back by sluggish economic growth and persistent economic exclusion,” Titi said.

“Section 9 of our Constitution enshrines the moral and legal imperative to correct historical disadvantage and promote substantive equality.”

The policy of B-BBEE sought, in response, to create a fairer, more dynamic economy by expanding participation through skills development, enterprise and supplier development, socioeconomic development and ownership.

“The goal was never simple redistribution,” Titi said. “It was rather to harness the ingenuity and enterprise of all South Africans for the benefit of the broader society.”

Despite a comprehensive policy framework intended to include them, he noted that millions continue to languish at the margins of a stagnant economy, without access to commercial opportunities or decent public services.

“There is a growing narrative that B-BBEE is a failed social experiment: a tax on investment that we can ill-afford, and a recipe for rent seeking and the appointment of unqualified cadres to key public positions,” he said.

“Sadly, this view is not entirely without basis. But to regard these failings as reason to abandon the principle of economic inclusion would be a profound mistake. “

Titi said Apartheid’s legacy of institutionalised inequality stands as a painful reminder that growth without inclusion is neither just nor sustainable.

However, at the same time, South Africa’s more recent history has shown that economic inclusion without growth is a non-starter.

“Suffice to say, we have ample evidence that economic inclusion and growth are not mutually exclusive,” Titi added.

South Africa misses out on trillions

Titi explained that the years between 2002 and 2008, following the initial enactment of BEE into South African law, exemplified the fact that inclusion and growth can coexist.

During this era, the country saw a sharp increase in black and female representation in management and control roles.

They also experienced broader access to skills development and expanded opportunities for black- and female-owned businesses.

“It was also a period in which economic growth averaged 4% a year, business confidence was at historical highs, and unemployment fell from about 28% to 21%,” Titi said.

“Had this trajectory continued, today’s South Africa would look markedly different.” According to Investec research, the economy would now be worth roughly R12 trillion instead of R7.5 trillion.

This would have resulted in higher levels of employment and a broader tax base, thereby expanding the state’s spending capacity for investment in education, healthcare, policing, and social security.

“Consider the opportunities that such conditions would present for young professionals or the prospects of startup enterprises,” Titi said.

“Most of those professionals and businesses would be black, and a good proportion female, simply based on South Africa’s demographics.”

He also pointed out that there was a knock-on impact on families and communities, which were enlivened by dignity, self-reliance, and hope for a brighter future.

“This is not merely an indulgent counterfactual. It is a picture of what is possible if we can return to a path of inclusive economic growth,” he said.

Titi said it also demonstrates that economic inclusion, when implemented with integrity and in the broad interests of society, is not merely consistent with, but supportive of, investment, business confidence, and productivity.

“I say this with the personal conviction of one for whom economic inclusion policies afforded a chance to realise my potential and contribute meaningfully to society. And my own example is one of many,” he said.

“Indeed, the progress made over the past thirty years in transforming the management, control and ownership of an economy dominated by an exclusively white and male elite is nothing short of remarkable.”

Today, Titi said many thriving black-owned and -controlled companies are making significant investments in the economy. However, more progress is still needed.

Corruption taints noble goals

Unfortunately, Titi said the noble aim of opening doors once closed to the majority has too often been tainted by greed and systemic corruption in procurement processes, perpetrated under the guise of B-BBEE.

He explained that the Tembisa Hospital’s alleged tender fraud, amounting to R2 billion, is a painful example of this phenomenon.

This money was meant to deliver critical healthcare to society’s most vulnerable. The saga represents theft not only from the state and its citizens, but also from the nation’s moral fabric, Titi said.

“During the COVID-19 pandemic, procurement processes were similarly exploited, diverting emergency funds from those in need into the pockets of the greedy and dishonest.”

“These are symptoms of a malaise that metastasised in the era of state capture, leaving the country on the brink of economic collapse.”

According to Titi, a decade that should have been spent accelerating inclusive growth instead put South Africa’s economy in reverse, undoing prior gains in employment and equality.

“In its wake, the energies of public institutions tasked with addressing injustice have instead been consumed by efforts to restore lost credibility and public trust,” he said.

“It is time to question whether the current transformation policy framework still serves the people of South Africa,” he added.