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Examining the effectiveness of Black Economic Empowerment in South Africa
Is Black Economic Empowerment failing? Insights from recent analyses
Image: Leon Muller / Independent Newspapers
The debate surrounding the effectiveness of Black Economic Empowerment (BEE) in South Africa has intensified in recent months, with critics pointing to its shortcomings in achieving its core objectives.
BEE is a government policy enacted in 2003 to increase economic participation by black South Africans. It seeks to transform the economy by promoting black ownership of companies, increasing black representation in management and boardrooms, and fostering entrepreneurship among historically disadvantaged communities.
Although its objectives are widely supported, the policy's success has been scrutinised.
In a detailed analysis published in the St Andrews Law Review on May 24, 2023, James Vandrau argued that BEE has failed to reconcile social inequalities in South Africa.
He pointed out that resistance from the white business community has hampered the policy's effectiveness.
'This demographic has largely opposed the changes instigated by BEE, leading to a considerable backlash against the program,' Vandrau noted.
According to a 2006 survey, approximately one-fifth of South African companies had no plans to implement black empowerment initiatives.
The slow pace of progress prompted the Presidential Black Business Working Group to call for more stringent measures, with the ANC acknowledging that more aggressive interventions were necessary to meet BEE targets.
This frustration has led many black entrepreneurs to advocate for faster economic de-racialisation.
One of the most persistent criticisms of BEE is that it has been undermined by corruption and nepotism.
Critics argue that a privileged few have benefited disproportionately at the expense of the wider black community.
Gelb & Black (2004) highlighted how unissued equity was transferred from white-owned companies to a select group of 'tenderpreneurs'—black businesspeople often with high political profiles but limited business experience—resulting in a form of enrichment rather than broad-based empowerment.
Furthermore, the representation of black individuals in senior management and boardrooms remains disappointingly low.
The Black Business Executive Circle report of October 2005 revealed that only five of the top 200 companies on the Johannesburg Securities Exchange (JSE) had black ownership exceeding 51%. Only 32 companies had black ownership above 25%, collectively accounting for less than 2% of the JSE's market capitalisation.
In an opinion piece published in The Star three months ago, Professor Bheki Mngomezulu, Director of the Centre for the Advancement of Non-Racialism and Democracy at Nelson Mandela University, acknowledged that BEE was a noble idea but emphasised that corruption has derailed its progress.
'The process should start with politicians who have corrupted the system and then move to businesses that have exploited loopholes to serve self-interests,' Mngomezulu wrote.
'Unless these corrupt practices are addressed, BEE will hinder economic growth and exclude those it was meant to benefit.'
Weighing in, Dr. Khwezi Mabasa, a sociology lecturer at the University of Pretoria and an economic policy analyst, emphasised the need for a broader approach.
Speaking to IOL, Mabasa highlighted that current legislation and initiatives, such as the broad-based black economic empowerment codes (B-BBEE), must be complemented by efforts outside the stock exchange, including supporting small and medium enterprises, entrepreneurship, and local economic development.
