President Cyril Ramaphosa used his reply to the debate on the State of National Address (SONA) to emphasise the importance of BEE “as an investment in the sustainable growth of our economy”, but said a review of the policy was necessary “to ensure that it supports greater transformation and inclusive growth”.
Ramaphosa said that, as the Constitution “calls on us to redress the injustices of the past, to build a society that is equal and just … (w)e cannot do that without transforming our economy.”
He went on: “It cannot be acceptable to anyone in this House for African people, coloured people and Indian people to be poorer and have fewer opportunities than white people… And yet there are people in this House, in this debate, who tell us to get rid of the measures that we have put in place to correct this gross historical injustice.
“They say we must get rid of broad-based black economic empowerment, falsely claiming that it benefits only a few, falsely claiming that it inhibits economic growth, falsely claiming that it enables corruption.
“And yet the progress we have made since the introduction of these laws is undeniable. We have seen real changes in ownership patterns, including more businesses owned by women. We have seen changes in management control, enterprise development and skills development.”
He argued that it was “no accident that between 2006 and 2023, black African households experienced real income growth of 46 percent, coloured households 29 percent and Indian households 19 percent”, and it was “no accident that the level of poverty in the black African population fell from 67 percent in 2006 to 44 percent in 2023. Nor is it any accident that the level of poverty in the coloured population fell from 43 percent to 25 percent in the same period”.
He continued: “Despite this progress, the average income of white households is still nearly five times higher than that of black African households.
“This is the gulf we must close through deliberate and sustained efforts to expand opportunity. Now is not the time to abandon BEE. Now is the time to make it more effective.”
In a statement after Ramaphosa’s reply to the SONA debate, DA leader John Steenhuisen said his party “remains committed to the government of national unity because it is helping to stabilise South Africa after years of governance failure, and because it serves as a bulwark against instability and extremist policy alternatives”, but that this participation “does not mean passive support. It means driving reform from within, fighting corruption, and holding the executive accountable where urgency is lacking.”
On BEE, he said the policy “must be replaced by an alternative that address poverty, not race, such as the DA’s Economic Inclusion for All Bill, to attract capital and create jobs. These are practical economic reforms, not ideological positions, and they are essential to achieving sustained growth. We have begun to turn a corner, but turning the corner is not the destination.”
Having urged MPs to use the SONA debate to press for a value-for-money approach, and scrapping annual multi-billion-rand BEE premiums in the state’s more than one-trillion-rand-a-year procurement spending, the Institute of Race Relations (IRR) this week turned its attention to the coming week’s Budget speech, on Wednesday.
Again, in the first of two submissions in response to Finance Minister Enoch Gogongwana’s invitation for “budget tips”, the IRR urged the government to make value for money the primary consideration in procurement to improve service delivery and curb corruption.
The IRR argues that “adopting the principle of maximising value for money in procurement, and cutting Black Economic Empowerment premiums out of public procurement expenditure, will enable true transformation and economic growth”.
“In this way, spending of taxpayers’ money would be strictly limited to providing all South Africans with quality basic services, thus delivering development across all communities. This would strengthen business activity and investor confidence by allowing companies to focus on growing their businesses and creating jobs rather than having to plug the many gaps caused by the non-value-for-money spending that is the current reality.”
IRR Legal executive director Gabriel Crouse – author of the latest paper in the Institut’s Blueprint for Growth series, Cut VAT & BEE Premiums – notes that the “current procurement system places what a Treasury official calls a ‘cap’ on BEE ‘preference premiums’ of 25%. However, Treasury has not stated the amount of funds spent on BEE ‘preference premiums’ since the year 2000, although these payments have been made every year since.”
In a webinar to launch the paper thisweek, Crouse explained how making BEE premiums transparent would “resolve an obvious political dysfunction at the heart of South Africa’s no-growth period since 2008”.
“Polling indicates that most South Africans think BEE premiums should be cut to zero, and that taxes on ordinary people should be reduced due to the lack of value for money in government spending. However, no political parties are seriously pushing to reduce BEE premiums or the tax burden.
“That is likely to change if the constitutional requirements of ‘transparency’ and ‘expenditure control’ at Treasury are implemented by making the cost of BEE premiums explicit.”
Crouse also pointed out that the Zondo Report, the Harvard Growth Lab, and other notable authorities had demonstrated that the “confusion caused by non-transparent BEE premiums overburdened procurement offices, which in turn facilitated corruption”.
Crouse added: “President Ramaphosa is right to call procurement corruption a ‘cancer’. Any good doctor will tell you that the first thing you need to do is find the cancer. Then you can take it out. Finding the cancer here means making the procurement system transparent for the first time in nearly three decades by exposing the annual cost of BEE premiums.”
[Image: Siloé Amazzi from Pixabay]