South Africa must stop expropriation without compensation and BEE

South Africa must put an end to any uncertainty regarding private property rights for investors to have sufficient confidence to invest capital into the country.

This should be coupled with accelerated reform in key sectors of the economy dominated by inefficient state-owned enterprises and a comprehensive review of Black Economic Empowerment (BEE) regulations.  

This is feedback from the Centre for Risk Analysis (CRA) following the opening of the sixth South Africa Investment Conference by President Cyril Ramaphosa. 

Ramaphosa is targeting an ambitious R2 trillion in private-sector investment by 2028, by replicating similar calls for investment since 2018. 

The first target for the country was attracting R1.2 trillion in new projects, with the country attracting pledges in mining, healthcare, and automotive sectors, among others. 

This target was exceeded by the end of the first five-year mobilisation drive, with pledges worth R1.57 trillion received across 300 projects. 

While this sounds like an impressive sum of money that would make a significant difference to South Africa’s economy, no tangible impact has been felt or seen in economic data. 

Much of this has been put down to many investments not getting beyond the pledging stage, with only 161 projects of the 300 pledged being finalised or under construction. 

The CRA explained that the lack of benefit comes from investors having to ask themselves whether the conditions in South Africa justify converting pledges into real, fixed investment. 

“The honest answer remains: not yet. In some, isolated pockets, the question has definitely not been sufficiently answered,” CRA executive director Chris Hattingh said. 

What is particularly troubling to local and international investors is the lack of certainty regarding private property rights in South Africa, with expropriation without compensation being a real threat to ownership. 

“Property rights continue to lack the certainty that long-term investors require. The spectre of expropriation without compensation has not been fully laid to rest, and this lingers in the boardroom,” Hattingh said. 

This is coupled with issues surrounding South Africa’s state-owned enterprises and crime, with load-shedding being replaced by these challenges. 

“While Transnet’s partial recovery is welcome, the CRA has consistently highlighted that optimism here must be tempered by how far the network still falls short of what a competitive export economy demands,” Hattingh said. 

Similarly, crime and a lack of personal safety impose real costs on businesses and skilled individuals, pushing many to leave the country. 

“The conference theme, “Invest. Partner. Prosper.” is aspirational. But aspiration without credible policy follow-through is merely marketing,” Hattingh said. 

“South Africa has not yet done enough to shift its risk perception. That shift requires politically difficult decisions, not conferences.”

BEE’s impact on investment

A major disincentive for investment in South Africa is the country’s onerous (BEE) regulatory framework, which discourages investors from allocating capital they might otherwise deploy into the country without any hesitation. 

And so, positive developments regarding the country’s economic fundamentals, such as a lower inflation target and a stabilisation in the state’s debt burden, are being wasted. 

These developments boosted the country’s financial assets significantly in the second half of 2025, with bond yields plummeting and the JSE All Share surging. 

Efficient Group chief economist Dawie Roodt explained that this, unfortunately, is not the real economy and will not translate into significant growth and employment. 

“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.”

Criticism of BEE has risen significantly over the past year, with business leaders and commentators alike pointing to its chilling effect on investment and economic growth. 

Investec CEO Fani Titi has been one of the most vocal critics, saying that the policy framework has failed to benefit a broad cross-section of South African society. 

“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.” 

Apart from its impact on investment, compliance with BEE regulations is a substantial cost for South African businesses. 

The Free Market Foundation and Solidarity’s Research Institute estimate that BEE compliance costs the economy around R290 billion a year. This is equal to 3% of GDP. 

Despite this criticism of the framework, President Ramaphosa has repeatedly said that BEE is here to stay and will not be undone. 

“We will not abandon the BEE policies we have embarked upon because we see them as transformative,” he said at the ANC Limpopo elective conference on 29 March. 

“We see Affirmative Action as enabling our people to participate meaningfully in the economy of our country.”

“We also want to advance land restitution and reform and ensure that our people have access to land. Our people must build an asset base so that their lives can be better.”