BEE has failed in South Africa

Black Economic Empowerment (BEE) policies in their current form have failed to meaningfully improve the lives of many South Africans and make them participants in the formal economy. 

Rather, the policies have benefited a handful of well-connected elite, who leverage BEE to secure investment deals and preferential access to government tenders. 

A stagnant economy and soaring unemployment mean that the millions of South Africans whom the policies intend to benefit are left on the sidelines, unable to generate wealth.

This has prompted calls from political parties, business leaders, and lobby groups to make changes to BEE legislation in South Africa to focus on means-based redistribution. 

Proponents of this say it will result in less cronyism and corruption, while also benefiting a broader cross-section of South Africans. 

Head of the Solidarity Research Institute Connie Mulder explained that current transformation policies have effectively resulted in tax money turning into Maseratis for well-connected individuals, with little benefit for poor South Africans. 

“We have got a problem with unemployment, a problem with unemployment, and a problem with meaningful inequality in South Africa,” Mulder told BizNews. 

“We need to address that as a country. Our perspective has never been to not do anything about this, but it has been about doing something else because this will not work.” 

Mulder explained that BEE has failed to address any of these challenges, with South Africa’s myriad of crises only worsening over the past two decades. 

“Unfortunately, we have been proven right here. The needle has not moved on black unemployment. It has gotten worse. South Africans have only gotten poorer, and inequality has broadened,” Mulder said. 

“This means that these policies have not achieved what they should have. Rather, they have achieved the exact opposite. What they have done is create a small, well-connected elite that is benefiting.” 

South Africa cannot afford these policies that have been proven not to work over the past two decades, with its economy stagnating and unemployment soaring. 

The local economy has grown at an average annual rate of 0.8% for the past decade, with the total number of unemployed individuals rising by around 400,000 per year. 

The cost of BEE for South Africa

Mulder’s criticism of BEE is not the only source of pressure for the ANC government in its defence of the policy and surrounding legislation. 

Criticism of BEE has come from fellow parties within the Government of National Unity (GNU), with the DA proposing its own means-based alternative. 

Business leaders, such as Investec CEO Fani Titi, have questioned the inability of the policy to translate into broad-based empowerment, with many being left behind. 

There has also been some criticism of the policy from within the ANC, with high-ranking officials calling for a review to close loopholes that have been exploited for corruption and cronyism. 

Mulder said the increasing pressure BEE finds itself under is largely a result of the immense cost the policy framework placed on the economy, with little benefit coming as a result. 

“We did a simple report about what BEE costs the economy and, on a very conservative level, it is about 3% of GDP per year. That is a massive cost we are paying for this policy” Mulder said. 

This is not necessarily a problem in itself, with many policies costing South Africa heavily. The issue is that BEE does not come with sufficient benefits to justify this cost, Mulder explained. 

“All public policies come with a cost. Usually, they come with a benefit. For example, we pay for an army, it costs taxpayers and the economy, but we are not going to be invaded,” Mulder said. 

“We need to drop the emotion and honestly evaluate this policy. It has a massive cost to the economy. What are we getting for it? Are we getting what we want? And the answer, unequivocally, is no.” 

Mulder suggested that the primary redistributive policy in South Africa should be changed to a needs-based system to empower people from lower-income brackets.

“If you remove BEE and its surrounding legislation, you will see much faster economic growth because you are removing burdens of compliance from companies and they can then invest in the economy,” Mulder said. 

“If we can get economic growth to 3% or 4%, suddenly most of our problems disappear. The focus should not be on redistributing a shrinking pie. It should be on how we can grow this economy.” 

“What we have seen from the ANC for the past 20 years is no real commitment or serious attention paid to growing the economy, much of that has gone to transformation and redistribution.”