After more than a decade working in BEE verification, I’ve witnessed both the promise and the pitfalls of transformation policy.
The government’s latest proposal, which would allow companies to pay a voluntary 3% levy on gross revenue in exchange for automatic level 3 BEE status, has sparked wide debate.
On paper, it seeks to simplify compliance and generate funds for black-owned enterprises. By contributing a 3% levy, participants receive a level-3 BEE score, a straightforward 3-for-3 (343) exchange.
But in practice 343 risks institutionalising compliance theatre — something that has long undermined SA’s transformation agenda.
The proposal, aimed at raising about R40bn annually for a central Transformation Fund, is framed as voluntary. Yet its design could make participation a commercial necessity rather than a choice.
Since the levy applies to gross revenue, not profit, it disproportionately burdens low-margin businesses while offering larger, cash-rich firms an easy path to BEE recognition.
More troubling still, it in effect allows companies to purchase compliance rather than earn it through genuine empowerment initiatives such as enterprise supplier development, employment equity and skills transfer.
Moral hazard
From a verification standpoint this introduces a dangerous moral hazard. In my daily work I encounter two types of companies: those that view BEE as a catalyst for inclusive growth and those that see it as a box-ticking exercise. This levy legitimises the latter approach.
A company with annual revenue of R1bn could write a R30m cheque and instantly qualify for level 3 status, without creating jobs, training opportunities or supplier relationships. It replaces transformation with transaction — precisely what the BEE framework was designed to avoid.
One would hate to create a parallel to the carbon credits system, where heavy emitters can buy credits of dubious credibility and avoid their carbon-reduction responsibilities. Equally concerning is how the scheme could erode the verification system that has been built up over decades.
At present verifiers assess whether enterprise and supplier development investments reach black-owned enterprises, whether skills initiatives produce measurable capability gains, and whether employment equity translates into real advancement. This risks regression to a pre-transformation mindset where a financial contribution substitutes for structural change.
Administrative risk
The risks extend beyond verification. Across sectors, from agriculture to mining to financial services, I’ve witnessed transformation programmes that genuinely work. They succeed because they’re rooted in sector-specific knowledge, long-term relationships and measurable outcomes, refined over years.
Diverting funds from these decentralised systems into a single central fund risks dismantling proven, sustainable models in favour of a one-size-fits-all bureaucracy. History warns that such centralisation rarely delivers broad-based empowerment; instead, it amplifies elite capture and administrative inefficiency.
Proponents argue the levy will simplify compliance, close loopholes and accelerate capital flow to black-owned enterprises. There is merit in recognising that the current BEE regime is often administratively heavy and exclusionary for smaller firms. But simplification cannot come at the cost of substance.
Real transformation is difficult, relational and iterative; it cannot be achieved through cheque-book compliance. If implemented as proposed, the levy may create the illusion of progress while entrenching the very inequities it seeks to resolve.
There are also questions of fairness and constitutionality. Any framework must align closely with principles of equality before the law. Granting preferential treatment based solely on financial contribution risks blurring the line between empowerment and unfair discrimination.
Moreover, transparency around fund allocation and oversight is vital; without robust governance, this initiative could become another well-intentioned policy mired in mismanagement.
The mooted central fund is being sold as a streamlined, public-private initiative that will make funding easier for black start-ups. But regulatory compliance is there for a reason. A fund worth R40bn a year can become a target for all kinds of malfeasance. Without robust management, funds will be frittered away.
It’s one thing to make a transformation fund payment to earn a BEE rating, but few organisations will be happy to see their funds vanish into a black hole with few measurable outcomes.
Gauges of progress
A more effective alternative lies in strengthening existing transformation ecosystems rather than replacing them. Outcomes-based measurement, tracking business creation, job generation, skills retention and supplier integration all offer more credible gauges of progress. Government could reinforce sectoral programmes through co-funding, allowing industries to tailor interventions to unique challenges.
A decentralised approach, with rigorous auditing and performance contracts, would maintain accountability while respecting SA’s complex economic landscape.
SA’s transformation challenge is real, and frustration with red tape and compliance fatigue is understandable. But shortcuts risk doing more harm than good. The proposed 3% levy may raise money quickly, but it cannot buy legitimacy, accountability or inclusive growth.
Based on lessons from our recent history, we must speak plainly about what works. Sustainable transformation is born from commitment, not compulsion; from capability-building, not capital transfers. Government should seize the opportunity to refine the proposal, consult deeply with industry and anchor reforms in evidence rather than expedience.
We all believe in real transformation, and most organisations have committed themselves to the policy for the long term. But SA deserves better than another well-meaning, misguided policy experiment.
⋅ Van Rooyen is director of multidisciplinary professional services firm Moore Infinity.
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