A recent report titled “The costs of B-BBEE compliance” by the Free Market Foundation (FMF) and the Solidarity Research Institute purports to be a serious economic critique. In truth, it is a thinly veiled ideological attack on black economic empowerment, built on flawed data, false assumptions and a partisan agenda. The public deserves to know just how far this so-called research strays from sound research methodology and from the truth.
In their ideological onslaught on BEE the FMF and Solidarity attempt to lay the blame for all South Africa’s complex economic challenges squarely at its feet. It’s a misleading narrative designed to inflame public opinion against the very policy meant to foster inclusive growth. In doing so, the report selectively manipulates statistics, presents opinion for evidence and omits any mention of BEE’s tangible returns to the economy and society.
The report alleges that BEE leads to capital flight and reduced investment. South African corporates are indeed sitting on a staggering R1.4-trillion in cash reserves, which could be invested to stimulate economic growth. That they are not investing has nothing to do with BEE. In ongoing dialogues between government and the private sector, BEE is not cited as an investment deterrent. Rather, businesses are asking for structural adjustments, improved infrastructure, stable governance and regulatory clarity.
The assertion that transformation discourages investment ignores the success stories of companies such as Capitec and Discovery, and successful foreign and local investment in the renewables space through independent power producers (IPPs). The growth of these firms is underpinned by the burgeoning black middle class and the effects of a broadening economic base. BEE, far from being a barrier, has helped create a vx ibrant, growing middle class, an essential foundation for sustained growth.
Second, the report positions economic inclusion as somehow incompatible with economic efficiency. This is an outdated, narrow view. Real economic inefficiency lies in a system where large sections of the population remain excluded from meaningful economic participation.
South Africa's economy, owing to the legacy of apartheid, is still largely controlled by few white males; it cannot grow to its full potential without transforming that reality. Legendary businessman Sam Motsuenyane once remarked that white people are too few to drive national growth and create jobs for all of us. BEE is a mechanism to widen that base — not a hindrance to growth, but a prerequisite for an inclusive and shared growth.
Third, another wild and misleading claim is that BEE has failed to address poverty, inequality and unemployment. But BEE was never designed and portrayed as a silver bullet. It is a targeted microeconomic tool meant to correct structural racial and gender imbalances in ownership structures, management control and access to opportunities resulting from apartheid.
The FMF, once a principled advocate of classical liberalism, now appears to function as a platform for white nationalist economic thought
To hold BEE accountable for every social and economic ill in the country is disingenuous. BEE is but one of many policy levers, not the only one, in addressing these economic ills. Moreover, those opposed to BEE have systematically resisted and frustrated its full implementation. It is therefore dishonest to condemn it for failing to achieve outcomes it was never allowed to fully pursue.
Perhaps the most damning indictment of the FMF/Solidarity report is its methodology. As William E Deming once said: “Without data, you're just another person with an opinion.”
In the report, the authors admit to a lack of available data to conduct the study and, strangely, proceeded to use BEE reports with no underlying financial data to draw conclusions about the financial cost of compliance. This is an anomaly and a fundamental error in this research.
I will endeavour to highlight few key points to demonstrate this flawed methodology:
- Assigning monetary value to scorecard points: Not all scorecard points are tied to financial expenditure. For instance, some are earned through behavioural changes such as paying suppliers on time, not through capital outlay. The failure to acknowledge that the BEE scorecard recognises non-financial contributions alone invalidates their cost model.
- Misuse of skills development metrics: The report attributes all skills development points to a uniform 6% spend on payroll. This fails to recognise that the BEE skills development scorecard is much more complex and nuanced, and not all the points earned can be attributed to the 6% of the labour costs. In other words, the 6% of the R2.5-trillion is ludicrous as a basis for estimating the cost of skills development.
- Counting ordinary business costs as BEE costs: Recruitment, diversity training and general staff development costs are treated as if they are imposed solely by BEE requirements, when in fact they are standard global business practices essential for modern, competitive companies.
- Bizarre compliance assumptions: The report assumes that “non-reporting” companies are partially compliant (30-40%), thus inflating overall compliance costs. This flies in the face of logic. Non-reporting generally signals noncompliance, not hidden success. For instance, BEE is a JSE listing requirement, so why would a company not report if it complies with BEE?
- Ignoring returns on compliance: Crucially, the report views BEE purely as a cost. It fails to account for the market access, government contracts and consumer goodwill that often come with BEE compliance. BEE is an investment with real and measurable returns.
Given the gravity of the flaws and errors in the study, one must question the motivation behind the report. Leon Louw, former executive director and founder of the FMF, resigned in 2022 citing the organisation's ideological shift. In his resignation letter, he wrote: “The FMF’s commitment to independence and political neutrality has been replaced by personal political agendas.”
The FMF, once a principled advocate of classical liberalism, now appears to function as a platform for white nationalist economic thought. Its new ideological posture opposes the very idea of inclusive growth, a stance far removed from liberal values of equal opportunity and individual dignity.
Similarly, the Solidarity Research Institute, tied to AfriForum and the Solidarity movement, has openly worked to preserve white economic privilege and stall economic transformation. Their track record of data manipulation and ideological bias (evident in other controversial reports such as their NHI critique) should caution anyone against accepting their findings at face value.
In an age of misinformation and manufactured outrage, it's more important than ever to interrogate the motives and methods behind public claims. South Africa faces enormous economic challenges. We need serious, evidence-based debate, not ideological propaganda masquerading as research.
• Mpafa is member of national office bearers and head of policy: Black Business Council
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.