If you find yourself in a hole, stop digging. But that’s not how SA operates. No, we prefer to import a bigger, shinier, state-funded excavator and keep going until we hit the water table.
Cue trade, industry & competition minister Parks Tau, enthusiastically waving around the R100bn Transformation Fund as if it were a winning Lotto ticket. Except, of course, the only winners will be the well-connected cadres who know exactly where these empowerment schemes are headed. It’s a fantasy playing to the ANC’s rapidly shrinking black middle-class voter base. The rest of us? We’re just here to foot the bill.
Tau is asking businesses to hand over 3% of net profits after tax, on top of existing obligations, to fuel this new “empowerment” scheme. If multinationals refuse to cede equity to black partners, they’ll be taxed a staggering 25% of their SA operations’ value. Mergers & acquisitions? Pony up a transformation fee or kiss your deal goodbye.
Even worse, these funds won’t be channelled through the Treasury, so you can bank on this becoming yet another unregulated slush fund. Finally though, someone in business has discovered a spine to challenge the racial bean-counting madness.
For years, businesses gritted their teeth and played along with BEE, fearing government retribution. But the tide is turning. Norton Rose Fulbright SA has fired the first legal salvo, challenging the Legal Sector Code in court. Its argument? The government did not follow due process (shock!) and, crucially, that BEE is economically irrational.
This is a watershed moment. If the courts agree it could unravel the entire kudzu vine of BEE codes that have strangled business growth for decades. Other industries, long bullied into compliance, may finally find their courage and follow suit.
The numbers don’t lie. Manufacturing, which was once the pride of SA, has collapsed. In the 1980s it made up 25% of GDP; today, it's barely scraping 13%. Jobs? Down from 1.8-million in 2007 to 1.6-million in 2023.
BEE is partly to blame. It turns businesses into bureaucratic compliance machines, more focused on checking racial boxes than innovating or expanding. It’s why our exports are dismal, why job creation is stagnant, and why foreign investors look at us the way you’d eye a dodgy second-hand car salesman.
The cruellest irony of BEE is that it’s driving away the very people who could build a thriving economy. Skilled professionals are leaving in droves, not because they hate SA but because they see no future here. Meanwhile, those who remain find themselves locked out of opportunities, replaced by politically connected figures with little competence and even less incentive to excel.
And now, as if to double down on a failing policy, we have the Employment Equity Amendment Act. From January 1 companies with more than 50 employees were required to meet strict racial, gender and disability quotas. The employment & labour minister now has unchecked power to dictate these targets. Fail to comply? No government contracts for you.
This is state-enforced economic engineering at its worst. Businesses will no longer hire the best people for the job; they will hire to meet a minister’s spreadsheet. In a country already riddled with inefficiency and corruption we know how that ends. More businesses will ensure they fall below the 50-employee threshold.
We need a system that rewards hard work and talent, not a lottery where there are a few politically favoured winners while the rest struggle. Want real transformation? Here’s how:
- Fix education. No quota can replace a solid education system that actually prepares people for the workforce.
- Slash red tape. Make it easier for businesses to operate, grow and hire without drowning in paperwork.
- Encourage investment. Stop punishing companies for wanting to do business here.
- Prioritise merit. Hire and promote based on skill, not skin colour.
- Sort out the basics. Without reliable electricity, functioning transport and stable governance, no policy — BEE or otherwise — will save us.
The R100bn Transformation Fund is nothing more than economic extortion. The fact is the ANC doesn’t give a fig about uplifting black South Africans. If it did it would focus on fixing the fundamentals instead of forcing companies into financial servitude. Driving through Johannesburg at the moment is all the evidence one needs that the only way SA can save itself is with the ANC’s racial bean counters as far away from the levers of state power as possible.
This isn’t about empowerment, it’s about control. The ANC is running out of time, running out of voters and running out of patience with businesses that refuse to play along. But the private sector is finally pushing back. And the sooner we stop this economic lunacy, the better.
If the government of national unity has any sense it will stop meddling, step aside and let businesses do what they do best to create jobs, create wealth and grow the economy. Until then, we’ll keep on digging and digging and digging.
• Avery, a financial journalist and broadcaster, produces BDTV's Business Watch. Contact him at Badger@businesslive.co.za.
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