BEE divides South Africa and fails to empower poor people

The implementation of the government’s Black Economic Empowerment (BEE) framework pits black people against the white population, while failing to empower poor South Africans. 

This is done rather than fostering a spirit of collaboration to drive faster economic growth and get more young people employed. 

It also implies that black individuals are incapable of creating businesses on their own, without the state mandating that they become business owners. 

This is feedback from Montsi Investments founder and CEO Sam Montsi, who explained that while he benefited from BEE, the policy framework has had negative consequences for South Africa more broadly. 

Born in Lesotho, Montsi quickly became known as a business leader and was appointed managing director of the Lesotho National Development Corporation. 

Under his leadership, the state-owned company became entirely self-sufficient, with it no longer requiring government funding to keep its doors open. 

After making the enterprise profitable, Montsi was targeted by Lesotho’s military rulers due to his unwillingness to engage in particular business activities. 

Montsi fled Lesotho to South Africa, where he became the first black general manager at South African Breweries. Here, he oversaw the company’s Western Cape and Namibia divisions. 

After South Africa’s first democratic elections in 1994, the government began outlining its policy to transform the economy and empower the previously disadvantaged.

This opened up significant opportunities for people like Montsi, who had capital to exploit the chance to take ownership stakes in successful South African businesses. 

Montsi chaired Thebe Investments during this period, which was one of the first black-owned investment companies launched in South Africa to facilitate economic transformation. 

In the 1990s, Montsi founded his own company, Montsi Investments, which is a family-owned private equity firm that focuses on investment in businesses in South Africa.

The company is an active investor and looks to create value for the businesses in which it takes investment stakes. 

Focusing on industrial and engineering companies, Montsi Investment has been immensely successful in generating value for the family and its investee businesses. 

BEE has failed in South Africa

Despite benefiting from the policy, Montsi said that the framework, as it is currently implemented, has had unfortunate consequences for South Africa. 

Montsi explained to BizNews that it is a matter of implementation, as the intentions of the framework were good and necessary. 

“I have benefitted from it, but the way that it has been implemented, in my view, has been a little unfortunate for South Africa,” Montsi said. 

The negative impacts of the policy framework have gone beyond economics, with it significantly altering how South Africans of different races view each other.

“One of the consequences has been that it has pitted the black person against the white person, rather than trying to get them to work together,” Montsi said.

“The policy has sown divisions among South Africans, rather than bringing them together to solve challenges.” 

Montsi has also likened the implementation of BEE to apartheid-era policies that were based on exclusion, with its basis for determining exclusion being different. 

“I think it has, in a sense, perpetuated some of the unfortunate policies of the apartheid era, where somebody like me was excluded,” Montsi said. 

“There were certain things that I could not do, purely because I was black. The approach of BEE says that white businesses must have black owners to access opportunities to do business with the state.”

Monsti argued that, in a sense, this implies that black people cannot create these things themselves, but need to latch onto a white-owned business. 

“This implies that they need to come in with a white person to participate in the economy, and it is unfortunate in that sense. It could have been done differently,” Montsi said. 

One alternative would have been to get people to work together rather than force them to operate businesses in certain ways to access opportunities that create resentment. 

Montsi raised the example of Kenya and other post-colonial societies where there was a focus on creating entrepreneurs and business leaders, rather than forcing existing businesses to find new partners. 

In the Kenyan example, the government focused on identifying individuals with experience and aptitude in certain business activities. 

The state then encouraged these individuals to start their own businesses, gave them access to finance, and helped them access markets. 

As a result, new businesses were created, rather than the South African model, where no new business or wealth is created. 

Instead, in South Africa, successful businesses are forced to accept mandatory partnerships and owners who do not contribute to the business.