BBBEE

This is the 18^th in this series of Saturday Blogs. These share ideas aimed at correcting problems and improving life for all in South Africa. The general idea is that these should not require humanity to be at its altruistic, honest best for them to be effective. They should be quick and relatively cheap to institute. The goals are to reduce the opportunity and temptation for corruption, reduce red tape and bureaucracy, increase growth, get services to more people for less money, reduce poverty and increase safety and security.

What?

BBBEE must be phased out

Why?

1)        In the long run we all aspire to a country that is so intrinsically fair and gives such good opportunities to all its citizens that no form of special forced opportunities is required.

2)        These laws and regulations did play a role in redressing the entrenched economic disparity caused by Apartheid but increasingly are benefitting a few insiders rather than the actual poor. In particular, ownership rules tend to benefit politically connected individuals amongst the broader previously disadvantaged racial groups. Similarly, the access to higher education BBBEE advantages largely benefits those previously disadvantaged children who attend the better schools in middle class areas and who have the advantage of coming from middle- or upper-class families – not the truly currently disadvantaged black majority. Why should a black child who matriculated from one of the elite private schools, whose family is extremely wealthy be given easier selection to a university than any other child?

3)        As the laws have become more prescriptive, and quotas more rigid and higher, the rule of thumb that the company should hire fairly and not discriminate against a previously disadvantaged person changed to “you must hire the previously disadvantaged person if they are equally qualified” to “you have an excess of a particular race or gender so may not hire anyone of that race or gender until you get your quotas right, no matter if there is no suitable previously disadvantaged person available”. This forces companies to hire people not qualified or to avoid hiring (and rather mechanising, using AI) altogether. This has led to some ridiculous pressures – such as railway locomotive workshops being forced to achieve a target of 40% female diesel mechanics in the next 6 years and hospitals fighting over black male registered nurses which are in short supply – so having to pay them more than their black female and possibly more skilled colleagues. Whenever a company hires a less capable person, they become less competitive with their foreign competitors.

4)         BEE has failed to flatten our Gini coefficient; it has actually worsened during BBBEE.  The difference between rich and poor has grown. After decades of BBBEE, it is not rational to say that we just need “more/stricter BBBEE” to fix this. It’s a truism that repeating the same and expecting a different result is the definition of insanity. It’s time to acknowledge that we need economic growth to lift the majority out of poverty. To do so, we must be laser focussed on changing everything we can in favour of growth. See my previous blogs #3, #4, #5, #12, #13, #17. In addition to these one of the things we have to do is to allow companies (especially SOE’s) to choose the very best and lowest cost person to do each job – even if this is a person who benefitted because they grew up in a family made wealthy during apartheid.

5)        BBBEE, in addition to limiting companies in who they can hire has created an expensive bureaucratic nightmare for companies and a loophole by which corrupt tenders can be issued.

6)        Tenders requiring certain BBEEE scores have caused massive scale fronting.

7)        The BBEEE laws have morphed into treating previously disadvantaged races differently – with increasing distortion and complexity and unfairness – much as happened in Apartheid. “Coloured” and “Indian” are not treated equally with Black people.

8)        With increasing marriages between people of different races - the racial complexity with time just becomes more and more complex and unsustainable from either a moral or practical standpoint.

9)        We thankfully no longer have separate categories with different identification numbers according to race. How are we actually judging whether a person should benefit from BBBEE? Is it based on whether their surname sounds like a certain race group? Is it because of what they claim to be? Is it because they are “generally accepted to be of a certain race”? Is it because they or their parents were classified as a certain race by the odious apartheid system? Or are we going to go back to the race tests of apartheid?

10)   In conclusion, you cannot achieve non-racialism by concentrating on race any more than you can kill for pacifism. The Freedom Charter specifically states the following: “The preaching and practice of national, race or colour discrimination and contempt shall be a punishable crime”. There is no doubt that BBBEE laws and regulations breach this noble ideal and that clause 9.2 of the constitution contradicts all the other clauses protecting the rights of groups against discrimination.

11)   The moral case for BBBEE is that equality can only be achieved by legislating that end point at the cost of taking opportunities from others. There are now children being born whose parents were born after 1994. Is it ethically correct that they should be disadvantaged because they are white – even if they and their parents and grandparents were and are poor?

12)   BBBEE and increasing its stringency regularly has become a convenient “get out of jail” card when government fails to give poor people a fair chance at a decent education – so that they can get jobs.

Let’s look at the economic effects of BBBEE: -

13)   FMF & SRI (2025 Report: "The Costs of B-BBEE Compliance") Cumulative GDP loss from 2–4% annual drag. - 4 million jobs lost (96,000–192,000/year). - R1.15 trillion annual tax revenue shortfall (2025 figure).

14)   IRR & Parliamentary Analysis (2025). Lost FDI and growth from equity mandates. - Annual compliance: R150–226 billion (3% of GDP). - Cumulative: ~R3.5 trillion in foregone output.

15)   DTI/Intellidex Review (Updated 2025) Gross costs: ~R2.5 trillion in compliance/deals. - Benefits: $32 billion (~R600 billion) value to black beneficiaries (e.g., mining charters). - Net drag: 1–2% GDP/year, totalling ~R1.5 trillion lost growth.

16)   IMF/World Bank (2025 Fiscal Multiplier Analysis) BEE "premiums" in procurement: R150 billion/year (~R3.45 trillion total). - Negative fiscal multiplier: Spending yields

In Summary, if we had not had BBBEE/BEE our unemployment rate would only be around 17%.

We cannot keep on doing this. Instead, we need to improve the social safety net (see my Blogs about BIG and healthcare), boost the economy rapidly and improve education (see my previous blogs). Spending more money more efficiently (without theft and corruption) on schools in poor areas. Giving advantage to get into university for pupils from schools in poor areas and so forth. Let us help the currently disadvantaged rather than the previously disadvantaged.

How?

The BBEEE laws around ownership are the ones that most benefit the few connected and do nothing for the majority. Fewer than 150 individuals have featured in BEE deals worth over R1 billion each.

They are also a major impediment to foreign fixed direct investment. No company wants to be forced to take on unwanted and unneeded partners – when their capital is welcome in most countries without these restrictions. They should be scrapped immediately. This will increase investment in mining (for example) very rapidly leading to a step increase in employment and a reduction in poverty.

Related to this the limitations for tenders only to certain categories of BBBEE scoring companies (in terms of ownership) must be scrapped to allow the state to buy the best quality at the cheapest price.

Absolute quotas for staff race ratio targets that match the population racial ratios as prescribed by the Employment Equity Amendment Act (EEAA) of 2023 to be achieved by 2030 must be scrapped. These are not feasible and hugely anti - business. Firstly, south Africa is in no way racially homogenous. Certain provinces have more of a certain race than other provinces and secondly, areas within provinces or even cities tend to have more of one race than another. To expect a business in the western cape to have the same ratio of Black to Coloured to Indian people as the Eastern Cape or KZN is nonsensical. Second what will the rules be for companies who have offices in many provinces? Third, some businesses require a high number of able - bodied people (for example engineering firms or mines) – in order to achieve the required percentage of disabled staff, these companies will effectively be barred from hiring any able - bodied clerical staff for example. In terms of gender, certain jobs attract more people of one gender or another preferentially because of their personal choice or social pressures within society. It is ridiculous to say that there MUST be equal numbers of male nurses as female or female soldiers as male or as above female locomotive diesel mechanics. Absolutely, no company can be allowed to be biased in favour of or prejudiced against people of one race or another or who are disabled but can do the job well.

As for the affirmative action to give previously disadvantaged people an advantage when competing for a job in order to balance the disadvantage passed on by Apartheid, these will have been in place 23 years this January. They are hard to monitor and police – which is why they have been reduced to quotas. It is relatively easy to police a case of active discrimination in hiring. It is much harder to say that a company did not give sufficient advantage to a previously disadvantaged person. They need to be phased out over time as serious efforts are made to improve the REAL chances for poor young people to get ahead.    

Why Not?

1)        People of colour have been unfairly discriminated against since 1652 and so a similar time should be allowed to redress the balance. While this has an old - testament ring of “justice” about it. It is not a decent excuse to follow a policy that is demonstrably harming our economy, causing unemployment and thus reducing the opportunities for all out youth (in particular) and causing poverty. We need policies that benefit the many unemployed over the few at the top getting tenders.

2)        Without BBBEE previously disadvantaged people cannot compete fairly with people who benefitted from apartheid. There is no doubt that legacy disadvantage is real. BUT … it doesn’t help a previously disadvantaged person if there are no jobs for them to apply for.

Referendum

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