The purpose of Black Economic Empower (BEE), said the ANC in 1994, is to remove ‘all the obstacles to the development of black entrepreneurial capacity’ and ‘unleash the full potential of all South Africans to contribute to wealth creation’. In practice, however, BEE has had precisely the opposite effects.

‘Close to R1 trillion has been transferred in BEE share deals’, said Professor William Gumede of Wits University late last year, but these deals have gone to ‘a handful of politically connected politicians, trade unionists, and public servants’.

The favoured few have done little to expand the economy. Instead, adds Professor Gumede, they have ‘crowded out genuine black entrepreneurs and killed the development of a mass entrepreneurial spirit in black society because all you need to secure a BEE deal…is the right political connections’.

BEE preferential procurement in the public sector and state-owned enterprises (SOEs) has also been inordinately damaging. By abrogating normal procurement rules, it helped pave the way for the ‘Zupta’-linked ‘state capture’, estimated to have cost between R500bn and R1.5 trillion.  

But Zupta corruption has at least been exposed and ended. Not so the broader problem of BEE ‘tenderpreneurship’, which continues from one year to the next – bringing with it inflated prices, fraud, and the further enrichment of the few at the expense of the many.

Tenderpreneurship

How big is the tenderpreneurship problem? In August 2018 the Treasury’s acting chief procurement officer, Willie Mathebula, told the Zondo commission of inquiry into state capture that ‘the government’s procurement system is deliberately not followed in at least 50% of all tenders’.

Moreover, once the usual tendering rules have been suspended on some spurious basis (a claimed emergency, for instance), ‘a contract which starts at R4m is soon sitting at R200m’. These abuses have enormous negative impact on service delivery because the government is ‘the biggest procurer of goods and services, spending an estimated R800bn a year’, says Mr Mathebula.

The extent of the price inflation is staggering, as Mr Mathebula notes – and as Gwede Mantashe, for one, has also acknowledged.

Said Mr Mantashe (then ANC secretary general) in 2012: ‘It is unacceptable for contractors to charge taxpayers R20m for a public school when the private sector spends between R5m and R10m on a similar project.’

‘Cash cow’

Mr Mantashe criticised officials for ‘prioritising the enrichment of BEE companies through public contracts at the expense of quality services at affordable prices’. He also urged ‘BEE companies [to] stop using the state as their cash cow by providing poor quality services at inflated prices.’

Why are prices so inflated?  According to one BEE contractor (who understandably preferred to remain anonymous), businessmen seeking state contracts have little choice but to charge inflated prices to ‘recoup the costs of paying mandatory kickbacks’ to corrupt officials and ‘regularly donating huge sums’ to the ANC and its allied organisations.

Who then (apart from the ANC) benefits from BEE? Only about 15% of black South Africans, as IRR opinion polls show. Who suffers from it? The remaining 85% of black people, who have little chance of participating in ownership deals or preferential tenders – but bear the full brunt of reduced investment, economic stagnation, high unemployment, and the filching of tax revenues badly needed for clinics, water, sanitation, and schools.

So great is the gap between the few who gain and the many who suffer that even the SACP has identified BEE as the primary reason for mounting inequality since 1994.

In 2017 the party warned that the ‘intra-African inequality’ which BEE has fostered is ‘the main contributor to South Africa’s extraordinarily high Gini coefficient’ of income inequality.

The 15% who benefit have entrenched interests in its retention and expansion and will strongly resist any change

Added the SACP: ‘Enriching a select BEE few via share deals…or (worse still) looting public property…in the name of broad-based black empowerment is resulting in….increasing poverty for the majority, increasing racial inequality, and persisting mass unemployment.’

Why then is BEE not quietly abandoned? The 15% who benefit have entrenched interests in its retention and expansion and will strongly resist any change.

But there is a deeper reason too. The ANC has long undermined black achievement by claiming that black upward mobility has nothing to do with individual skills, acumen, or hard work, but is solely the product of BEE and would never have happened without it.

Deeply debilitating

This message is deeply debilitating, encouraging even the born-free generation to see itself as BEE-dependent. Yet, even under apartheid restrictions, black entrepreneurship flourished in various spheres – the multi-billion rand minibus taxi industry being one prominent example and the growth of black business under Nafcoc (the National African Federated Chamber of Commerce and Industry, established in 1964) being another.

Tellingly, the white minority has also been too small to meet the needs of the economy for a good 60 years. As the skills shortage worsened in the 1960s, business repeatedly urged the National Party (NP) government to ease restrictions on black employment and advancement.

In 1973 prime minister John Vorster finally yielded to this pressure, saying his government would no longer stand in the way of blacks moving into higher jobs. This resulted in considerable advances for black South Africans and began to narrow racial inequality.

Skills shortage

Spurred on by the skills shortage, from the early 1970s the NP government also started reforming ‘Bantu’ education, expanding black trade union rights, allowing black home ownership in townships, and embarking on other reforms. All these policy shifts reflected the increasing economic interdependence of blacks and whites – and made the political exclusion of blacks all the more impossible to sustain.

BEE ignores all these considerations. Far from helping ‘all’ South Africans to ‘contribute to wealth creation’, as the ANC promised in 1994, it has hobbled the economy and cemented inequality between the relatively few who benefit and the 9.3 million black people who find themselves locked out of jobs, income, and any prospect of a better life.

The Covid-19 lockdown is now likely to throw at least another million people out of work. It will also push the economy into a deep depression, with GDP contracting by 6.1%, as the South African Reserve Bank estimates.

At this time of unprecedented crisis, it is unconscionable for the government even to consider making state support for small businesses dependent on their BEE status. If BEE is supposed to be about the contributions of ‘all’, why count white-owned SMEs largely out? Especially when allowing these small enterprises to collapse will simply make unemployment that much worse.

Even before the Covid-19 pandemic, the economy was in recession – mired in a deep dark hole that BEE had done much to dig. When you’re in a hole of your own making, the remedy is very clear. Stop digging!

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5 COMMENTS

  1. Very interresting. This information should go viral and reach every household in the townships, schools uuniversities etc

  2. BBBEE has a twin brother called “supply chain management “. If one can rid only local government of these two animals we will , conservatively estimated , save 20-25% on total Capex spend annually . Make that sum !!!!

  3. If I were the Capo di tutti Capi of the BEE Mafia, I would institute rigorous lifestyle audits to find out how any particular mobster on a nominal salary of a bar can afford thirty million worth of houses and another ten of cars, etc. etc. I would want to know what had happened to my cut.

  4. Ineffectual BEE Policy created by technically illiterate bureaucrats – A National Disaster.

    Since 1994 the ANC government has shown no interest in using engineers to create the industries and jobs that this country needs. In 1994 Minister Jay Naidoo’s office referred to engineers as elitists with no part to play in SA’s future and he ran away from Star reporter Winnie Graham who wanted to ask him how would SA develop without engineers.

    This concerned a proposal to create industry and farms in squatter camps that in 1985 Ford, GM and Goodyear funded me to prove out just before the all left SA. The CSIR confirmed that the plan worked so did they.

    Since 1994, regarding this plan to bring squatter camps out of poverty through manufacturing and farming business development, the following have supported development but the dti and other government departments rejected all support as incompetent. They are, the National Research Foundation where this plan is registered with their support, the CSIR (4 reports) Ford (3 reports), GM, Goodyear, Siemens, Wits School of Mechanical Engineering, Potch University Agriculture, the PE Technikon, SACOB, Business Unity SA, the Banking Association of SA, the SA Academy of Engineering, NAAMSA, NAACAM to name some of the important ones. Governments claimed that the Sociology of Work Unit at Wits convinced the dti that they were able to show that all of this support did not understand manufacturing development, as sociologists were the expert, and got the Presidency to support this rubbish
    In 2004 the Presidency got the rector of Pretoria University and his NACI team to demonstrate that the Ford Motor Company was incompetent in manufacturing development for supporting this plan, but when asked for a copy of that report I was refused. There is no report as Pistorius ran away from further discussion as how he was able to convince government

    If it was not for these technically illiterate government officials and SWOP at Wits, engineering could have cracked the unemployment and black economic empowerment decades ago where black economic empowerment should take place, in squatter camps.

    The Url below will take you to a plan based upon the one registered at the NRF in 1995/6 and it pro-poses industrializing the seven squatter camps between Diepsloot and Zandspruit, to become a roll out model for most of SA’s +2000 squatter camps. This is where BEE should occur, however, the ANC government has tried everything to bury it.

    Please read it and fault it if you can but after reading you will have a clearer picture why SA cannot create jobs or create industry, it is because technically illiterate sociologists and economists have excluded engineers from industrial development. One only has to look at Nedlac and GEAR policy. Nedlac is where all the people sit who don’t know how to create industry and exclude engineers who do. GEAR developed by sociologists and economists, was so bad that I led a party comprising Ford and Siemens directors to meet Alex Erwin at the dti. A disastrous meeting where Erwin told us he and the ANC knew more about manufacturing than what we did. Implemented GEAR against our concerns, GEAR caused the loss of 500 000 jobs and the closure of nearly 40% of SA’s manufacturing industry. Ramos recently described GEAR as successful!

    https://drive.google.com/drive/folders/1z4NFGxspc-TFUmitL7j1hBY7R9fuC6Mp?usp=sharing

  5. YOU MUST ADMIT THAT IS THE BEST ACHIEVED & BIGGEST TRUIMPH THE ANC HAS ACHIEVED.TO THINK YOU CAN CONVERT A COUNTRY INTO A TYPE OF PONZI SCHEME RULED IN A PROPER PYRAMID SYSTEM. THIS SYSTEM WILL BE RUN LIKE THIS FOREVER UNLESS ENOUGH PEOPLE IS PREPARED TO FIGHT FOR A NEW TYPE OF FREEDOM OR AN ALTERNATIVE CHINESE ENSLAVED TAKE OVER . THE WHITE LIBERALS IN S.A. MUST ALSO BE PROUD OF THEIR CONTRIBUTION TO THE PRESENT SITUATION. GOD BLESS AFRICA.

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