BEE is bankrupting South Africa

Black Economic Empowerment (BEE), as it is currently implemented in South Africa, is resulting in the enrichment of a handful of elites with significant value destruction. 

The policy framework has failed to encourage the creation of additional value to the South African economy through entrepreneurship and the upskilling of large parts of the population. 

Rather, it has seen a small number of well-connected individuals strike deals to gain substantial shareholdings in established companies or to win supply contracts with large businesses and the government. 

As a result, despite its good intentions, BEE policies have not created new wealth for South Africans, grown the economy or increased participation. 

National Employers’ Association of South Africa CEO Gerhard Papenfus said BEE does the exact opposite, by limiting access to economic opportunities to well-connected elites. 

Papenfus told BizNews that his association and many BEE opponents do not detest the economic empowerment of any race, but oppose the idea that economic opportunities should be race-based. 

“No one escapes the eventual outcome of engaging in dishonest activity, and BEE is an inherently fraudulent form of enterprise,” he said.

He said BEE beneficiaries are gifted shares of businesses, not through hard work, but as a result of political coercion.

“It forced companies to give in to blackmail for the privilege to be allowed to participate in the mainstream economy,” he said.

This, Papenfus said, is slowly bleeding South Africa dry, without resulting in sustainable wealth creation or economic growth. 

“What I want is for people to understand what this is doing to our country, that this system needs to be ended in South Africa,” he said. 

“The country cannot afford this. It is bankrupting the country. I don’t know exactly how much BEE has cost South Africa, but the amount is almost unimaginable.” 

The Solidarity Research Foundation estimates that BEE costs South Africa around 3% of its GDP every year in compliance costs and lost economic activity. 

This translates into an absolute cost of around R226 billion a year, using the latest GDP data from the Reserve Bank.

Mulder explained that this is not a problem in itself, with most policies coming with a cost upon implementation. The issue is that South Africa gets very little in return in this case. 

“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 South Africa’s primary redistributive policy should be changed to a needs-based system to empower people from lower-income brackets. 

BEE under fire

BEE has come under increasing pressure in South Africa from business leaders, citizens, and even members of the ANC who believe it has failed to achieve what it was meant to. 

The policy has become associated with a handful of extremely rich individuals who leveraged political connections to win lucrative contracts with the state or gain large shareholdings of private companies. 

Minister of Trade, Industry and Competition Parks Tau previously said BEE has become associated with cronyism and corruption, rather than economic empowerment. 

Tau’s department is currently conducting a two-phase review of BEE to close loopholes that enable cronyism and corruption to flourish. 

The review also seeks to understand how BEE can be changed to increase the participation of a broader cross-section of South Africans in the formal economy. 

As part of the review, Tau’s department is set to create a R100 billion Transformation Fund to fund black-owned businesses. 

Despite this review and promises from government leaders that the BEE framework will be altered, the ANC has reiterated its commitment to the transformation policies. 

This is regardless of mounting international and local pressure on the party and the government for BEE to be scrapped and replaced with alternative means of redress and redistribution. 

While much of this criticism has been attributed to US President Donald Trump, South Africans are also increasingly fed up with the policy framework. 

A survey from the Institute for Justice and Reconstruction (IJR) as part of its Reconstruction Barometer for 2025 showed that a majority of South Africans think BEE has gone too far in the country. 

The IJR pointed out that while a majority of South Africans broadly agree with the principle of a racially representative workforce, many think BEE is not the right way to get there. 

Overall, 82% of South Africans agreed that a racially representative workforce should be a national priority, and this was relatively consistent among people of different races, although slightly lower among white South Africans (77%).

The survey also found low levels of support for BEE and preferential practices currently employed by the government. 

It also found that there is low support for the continued use of race categories for measuring transformation. 

Just over half of all South Africans (54%) strongly agreed or agreed that B-BBEE policies have gone far enough in addressing inequalities and should be phased out. 

Three-quarters (76%) of South Africans also strongly agreed/agreed that hiring and promotions should be strictly merit-based, and two-thirds (67%) strongly agreed/agreed that using racial categories does more harm than good.