Twenty-two years since it was first enacted as legislation, broad-based BEE (BBBEE) is due for adjustment to ensure it remains fit for purpose. However, the debate about a policy as fundamental as BBBEE should be undertaken with credibility, to promote progress and avoid possible paralysis that would benefit no-one.
There cannot be a diversion from the fundamental essence of BBBEE as a policy born out of concern for justice and equality in the economy and society, which were denied to black people under apartheid. This would be a betrayal of the constitution, which mandates the creation of a society based on equality, inclusion and social justice.
It cannot be forgotten that black people entered democracy in 1994 burdened by the disadvantage of exclusion during the preceding decades of apartheid. Or that SA’s present socioeconomic ills trace back to past economic exclusion of black people by apartheid, as much as a fair share of accountability lies with the performance by the post-1994 democratic state, and by interests and powers at the economy’s commanding heights, which continue to shape the present.
As a country known for the world’s highest inequality, and with unyielding unemployment at record highs of 31.9% — far higher for the youth — millions of fellow citizens live with the indignity of poverty, from which various social maladies and crime feed. These realities highlight the urgent need to address intergenerational inequalities and enable broader economic participation as a foundation for shared prosperity, using BBBEE as a tool.
However, the policy has been engulfed by criticism, not all valid or in good faith. An example is the recently released report by the Free Market Foundation (FMF) and Solidarity, which suggests that BEE imposes an unreasonable compliance cost on companies. Among its claims is a startling finding: that annual compliance costs amount to R145bn-R290bn, the equivalent of 2%-4% of SA’s GDP, or about R7-trillion. The report therefore portrays BBBEE as a burden to local and multinational companies, alleging it deters investment.
To fabricate the “BEE costs”, the authors ascribe financial values to companies’ implementation of BEE, while not factoring in that many companies voluntarily comply out of goodwill and conscientiousness, which are not measurable in financial terms alone. It appears that the report seeks to fuel hostility about the policy without delving into the economic logic of BBBEE as well as the moral and constitutional imperative of transformation.
The core of BBBEE is a recognition that its objectives will be delivered through economic principles and mechanisms that support growth — for example, from increased participation in the economy by citizens and entrepreneurs, as well as enhanced skills, among other objectives of the BBBEE Codes of Good Practice and scorecard. The intent is to redress the racially skewed patterns of ownership in the economy in which inequality in SA is rooted, which requires promoting ownership of productive assets by black people, and equipping them with skills and entrepreneurial capability.
BBBEE was designed to allow for various pathways to contribute to transformation, whether through ownership, skills development or supporting suppliers. This flexibility allows businesses to play to their strengths while helping to grow a more inclusive economy. It is therefore incorrect to evaluate initiatives undertaken by BBBEE-compliant companies as “costs”, as misleadingly punted by the FMF and Solidarity, ignoring that these are actually investments.
BBBEE policy also encourages investments in which black people acquire assets through transactions. These assets are not the forced release of ownership rights. Shares acquired by black shareholders are paid for, and returns are earned relative to business performance, just like any other investment. This aspect of BEE is about extending ownership to a broader base, opening networks and giving black South Africans the chance to build generational assets and financial resilience long denied under apartheid.
Skills development is another vital mechanism: in a society in which educational outcomes remain shaped by race and geography it enables bursaries, learnerships and training that build a more skilled and diverse workforce, creating a pipeline of talent through which black people can ascend to companies’ top management.
The social justice case for BBBEE does not abandon economic logic, and is not in conflict with economic growth.
Enterprise & supplier development (ESD) of BBBEE is directed at growing the pool of small and medium-sized enterprises (SMEs), a sector recognised globally as the engine for growth and job creation. It incentivises large businesses to include black-owned SMEs in their supply chains, through procurement, mentorship, finance and market access. In a country where capital and networks remain skewed by privilege, ESD ensures competent black entrepreneurs have a fair chance.
Similarly, socioeconomic development links directly to social justice. When companies invest in education, healthcare or infrastructure they restore dignity to underdeveloped communities and lay the foundation for an inclusive economy. These are investments in productivity and social sustainability, which corporate environment and social & governance policies elevate globally, and ultimately in peace.
Moreover, many firms comply because they expect to benefit from opportunities such as qualifying as government suppliers or being awarded commercial licences in regulated sectors such as telecom and mining. Multinational entities also have a special dispensation through the Equity Equivalent Investment Programme, which creates a more flexible and investment-friendly framework under the department of trade, industry & competition.
The social justice case for BBBEE does not abandon economic logic, and is not in conflict with economic growth. Nor is there a trade-off between the two. Global evidence shows that inclusive economies are more stable, innovative and resilient. Concentrated wealth is inefficient, inequality depresses demand, and exclusion undermines social cohesion and solidarity. Properly implemented, BBBEE promotes inclusion, a core part of building a fairer society while strengthening the foundations for long-term economic growth.
The monitoring the BBBEE Commission conducts shows that notable inroads are being made in promoting the inclusion of previously disadvantaged black people in the economy. This suggests that BBBEE is still a work in progress, and there is scope to improve its implementation and impact. The commission finds increasing case studies of SA corporates that implement BBBEE not because they are forced to but because they recognise the value of contributing to a more equitable economy. Some go further, with employee share ownership schemes, ensuring that workers directly share in the success of the companies they help to build. These initiatives embody the spirit of BBBEE and show that transformation can be embraced in good faith.
For example, the BBBEE Commission’s National Status & Trends Report, based on BBBEE certificates and reports of private and public entities, shows black ownership rose from 27% to 33.9% in 2017-22. Since 2021 the spend on ESD is R170bn, and R118bn for skills development, indicating the potential impact if more entities implement BBBEE elements. Also, since 2017 BBBEE transactions registered with the commission amount to R700bn, facilitating ownership transfer to black South Africans.
The commission concedes that implementation of the policy is not optimal and that red tape and “gaming of the system” have crept into its processes, suggesting the legislation needs to be reviewed to simplify and improve compliance.
Advancing transformation requires effort as much as it requires partnerships, because the cost of inequality is far greater than the cost of inaction. There can be no free ride in the pursuit of transformation and a truly inclusive and growing economy.
• Matona is commissioner of the BBBEE Commission.
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