Big changes to BEE in South Africa proposed

The Democratic Alliance’s (DA) proposed replacement of the Black Economic Empowerment (BEE) framework is heading to Parliament for its first reading on 7 May. 

Dubbed the Economic Inclusion for All Bill, the DA plans to repeal all race-based preferences for procurement and create a new system that offers incentives for tangible development outcomes. 

This is likely to be fiercely opposed by the ANC, the architects of the current BEE framework, who have repeatedly said that BEE is going nowhere. 

Current BEE procurement rules encourage the state and companies to choose suppliers that are Black-owned or have strong Black participation to provide more economic opportunities to people who were marginalised during apartheid. 

This framework has come under increasing criticism in recent years, with it being seen as a guise for a handful of politically connected individuals to enrich themselves. 

BEE has become synonymous with cronyism and corruption, with the framework failing to benefit a broad cross-section of South African society. 

Now, the DA is looking to replace the framework with an outcomes-driven points system that prioritises value for money and economic inclusion. 

“There is no question that redress remains a national imperative. But, after 30 years, BEE has failed to deliver meaningful inclusion,” the DA’s head of policy, Mat Cuthbert, said. 

“Instead, it has enriched a politically connected few, while millions remain locked out of real economic opportunity.” 

The DA’s points-based system aims to reward companies for doing what South Africa needs most – jobs, investment in infrastructure, skills development, and support for small businesses. 

Cuthbert added that the bill also includes provisions to strengthen accountability by introducing tougher consequences for fraud and corruption. 

“Crucially, this approach recognises a simple truth: there is no meaningful empowerment without economic growth,” Cuthbert said. 

“By aligning empowerment with investment and job creation, the bill seeks to drive inclusive growth that expands opportunity, rather than concentrating it in the hands of the few.” 

“The first reading of this Bill marks the beginning of a critical parliamentary process to replace a failing system that works for some with one that works for all.” 

BEE under siege

South Africa’s BEE framework has been strongly criticised by political parties, business leaders, and even by high-ranking members of the ANC. 

While some propose scrapping the policy altogether, most of the changes offered by the ANC aim to strengthen enforcement and close loopholes for abuse. 

Political and economic analyst Moeletsi Mbeki explained that there is a fundamental issue at the heart of BEE in that it does not create new wealth or generate additional economic value in South Africa. 

Rather, the policy merely redistributes a slice of the existing economic pie in South Africa between select individuals. 

This results in the policy framework benefiting a handful of individuals who have access to these deals and financing, while those most impacted by the injustices of the past have not benefited. 

The only people able to benefit from the current BEE regimen are those with existing wealth that enables them to buy into already successful businesses or register companies to supply the state with goods and services. 

Mbeki pointed to people who are stuck in structural poverty in South Africa’s former Bantustans, the Cape Flats, and those who had their lives upended by migrant labour at mines across the country. 

“Who is redressing what is happening to those people? Who is having redress programmes for them? Nobody. There are no redress programmes benefiting them,” Mbeki said. 

In contrast, those who have benefited under the current redress regime are predominantly those who were already successful, well-connected, and highly qualified. 

“Who is benefiting from redress? Cyril Ramaphosa. He is getting the so-called ‘reparations’ from white South Africans,” Mbeki said. 

“They are the ones getting redress. Do they need redress? These are rich guys with many qualifications who are already successful.”

While BEE is highly ineffective at driving increased opportunity in South Africa’s economy, the framework exerts a high cost in the form of compliance and lost activity. 

The Free Market Foundation and Solidarity’s Research Institute estimate that compliance costs alone drain South Africa’s economy of R290 billion. 

This trade-off, between what BEE costs South Africa and its effectiveness in increasing opportunity, has pushed high-ranking members of the ANC to call for an open debate of the framework. 

Finance Minister Enoch Godongwana told Parliament after the 2026 Budget Speech that South Africa needs an honest debate about BEE. 

“We must have an honest debate about BEE. But, first and foremost, it is a constitutional imperative. You cannot dismiss BEE as it is required by the Constitution,” Godongwana said. 

“What we need to ask is whether there are any unintended consequences. You can’t say ‘Do away with BEE.’ Are there any unintended consequences?” 

Godongwana said the debate around BEE must focus on the policy’s efficacy and whether it is actually driving the empowerment of black individuals in South Africa. 

“If the debate starts there, it can start from an objective basis of analysing some of the unintended consequences, and then we can have a constructive discussion,” he said. 

“The discussion at the moment is an ideological attack more than an objective analysis of its efficacy. Let’s move away from the ideological attacks on BEE.” 

“Let’s go into the practicalities of analysing what some of the effects are which were not intended by the framework.”