South Africa stuck with BEE and expropriation without compensation

South Africa is “welded” to policies such as BEE and expropriation, with businesses seeing no indication that these ideas are mellowing, which have limited the country’s economic growth. 

One of the sectors hardest hit by these policies has been the mining industry, which has historically been the backbone of the South African economy. 

The industry has received extensive attention from the ANC since it came to power, with constant revisions to policies and regulations in the sector. 

These changes have not been made to benefit businesses or improve mine output in South Africa. Rather, they have made regulations increasingly onerous and steadily demanded more from companies regarding transformation. 

Modern Corporate Solutions mining analyst Peter Major explained that, with the ANC as the dominant political force, the likely direction of travel for these policies is further down the path of transformation and expropriation. 

“I am just one guy. I try to be unbiased, but I can’t hear everything at the Mining Indaba. But no, I did not pick up any mellowing out of poor macroeconomic policies,” Major told BizNews. 

“It is unlikely to change because this government has shown us for the past 25 years, since they introduced the Mineral and Petroleum Resources Development Act (MPRDA), that it is only going one way, and that is down in the rut.” 

Major explained that there have been several revisions to the MPRDA since its imposition in 2002, but none have managed to address the underlying concerns of mining companies. 

“Each time they have another version of the MPRDA, it looks more punitive than the previous one,” Major said. 

“What happened to ‘This is only going to be for ten years, and all historical injustices were going to be accounted for. Then, we will get rid of the MPRDA.’ Well, boy, now we know it is welded.” 

“We know it is all welded. Black Economic Empowerment (BEE) is welded. There is no talk of even mellowing out on that. So, no, I did not pick up any indication that things are improving at a fundamental level in South Africa.” 

Major said that, unfortunately, all the attendees he spoke to at the African Mining Indaba had more negative stories about South Africa than positive ones.

Smoke and mirrors

These policies, coupled with increasingly onerous regulations, have created a ceiling on South Africa’s potential economic growth. 

This ceiling affects all economic actors in the economy to some extent, with business growth being capped, career progression stymied, and output flatlining. 

“There is a real ceiling, and it is just policy and regulation. Until they can break through that, I won’t think genuine change is coming,” Major said. 

“I also do not believe it is ideology. People say that we have the wrong ideology. I think that the government’s ideology has become pure smoke and mirrors for nefarious activities.” 

The ANC’s signature policy frameworks, with BEE being the case example, have become synonymous with cronyism and corruption. 

An increasingly small number of individuals are benefiting from these policies, without real benefit going to the broader population. 

“Whether they call it socialism, communism, or democratic socialism. It is all just smoke and mirrors,” Major said. 

“But, policies are real things with real consequences for an economy. Companies cannot break what is on paper. They cannot do that, or they will be taken out. Companies do not willingly want to break any country’s laws.” 

“So, why can’t a country just make laws that suck money in, like China. Like DRC did. Like Zambia did. It can be done at the stroke of a pen.” 

Efficient Group chief economist Dawie Roodt urged the government to shift focus away from these destructive policies and instead implement its current reform agenda more aggressively. 

This reform agenda will result in the private sector playing a significantly larger role in the South African economy and improving service delivery. 

“South Africa’s financial markets reacted very, very quickly and very positively to a few changes in policy, such as a lower inflation target, and a few improvements, such as getting off the greylist and a credit rating upgrade,” Roodt said. 

“That is the financial markets. Unfortunately, that is not the economy. The positive impact on financial markets will spill over into the real economy and will support growth.”

However, this will not be to the same extent that the local stock market has appreciated, for example, nor will it be to the full extent that it should.

“Expect some growth, but, unfortunately, the real change in the economy is not happening yet because of the wrong macroeconomic policies,” Roodt said. 

“The wrong macroeconomic policies are things like expropriation without compensation. Things like BEE and even the NHI scheme.”