Ismail Joosub
In South Africa, the vision of creating a truly inclusive and equitable society remains a cornerstone of our constitutional framework. The promise of Black Economic Empowerment (BBBEE) was, initially, intended to address the legacy of apartheid and uplift historically disadvantaged South Africans, facilitating the broad-based economic transformation needed to repair deep-seated social and economic injustices.
However, we find that nearly three decades after the policy’s inception, it is clear that BBBEE, as currently implemented, has not achieved its intended goals. Instead, it has led to a concentration of economic benefits within a small political elite, perpetuating inequality rather than alleviating it. From where we now stand as a country, it is crucial for us to look beyond the rigid structure of BBBEE and consider alternative solutions that align more closely with the principles of equality (section 9), economic access (section 22) and efficiency (section 195) outlined in our Constitution.
The central problem with BBBEE lies in its failure to reach the vast majority of disadvantaged South Africans. While the policy is meant to empower the black majority, it has, in many cases, resulted in the enrichment of a few politically connected individuals. High-profile business deals have become emblematic of this trend, with the policy’s good intentions giving way to a “rent-seeking” culture that stifles true economic empowerment.
The Zondo Commission’s revelations of state capture further exposed the vulnerabilities in BBBEE’s implementation, showing exactly how the policy could be manipulated for personal and political gain rather than promoting substantive equality. At its core, BBBEE was meant to serve as a tool for empowerment, but instead, it often fuels a culture of entitlement, corruption and inefficiency.
The problem extends beyond issues of corruption and elitism. BBBEE’s rigid compliance requirements, particularly in areas like ownership transfer and management transformation, have created significant barriers to investment. Multinational companies, which could bring critical foreign expertise and capital into South Africa, have been deterred by the requirement to cede ownership to South African nationals. Moreover, the preferential procurement and employment mandates often conflict with global business practices, leading to a strained investment climate. This has had a direct impact on economic growth and job creation, as businesses face increased regulatory burdens that divert resources away from innovation and productivity.
The constitutional framework, which advocates for substantive equality and non-racialism, requires a nuanced approach to addressing inequality. The Constitutional Court’s ruling in Minister of Finance v Van Heerden clarified that affirmative action must advance substantive equality, not create new forms of inequality. Yet, BBBEE, in its current form, has pitifully failed to fulfil this mandate, often excluding those most in need by focusing too heavily on race-based criteria. Instead of advancing inclusive economic justice, the policy has sometimes entrenched division and exclusion, gravely undermining its constitutional purpose.
This is where the call for alternative models comes into play. The Democratic Alliance’s proposed Economic Justice Policy offers a compelling departure from the current BBBEE model. Rather than relying on rigid racial quotas, it emphasises empowerment through skills, economic disadvantage and inclusivity. By focusing on merit-based procurement and skills development, this model would prioritise competence and performance over racial or demographic factors, ensuring that business opportunities are awarded based on capability and the ability to contribute to poverty alleviation. This would address the root causes of inequality, focusing on the socio-economic needs of individuals and communities rather than enforcing arbitrary racial targets.
Another alternative worth exploring is the Equity Equivalent Program (EEP), which provides businesses with the flexibility to meet BBBEE targets without altering ownership structures. Instead, companies can direct resources into community-focused projects, such as skills development and local infrastructure investments, that provide tangible benefits to disadvantaged communities. This approach would allow businesses to empower individuals and communities directly, fostering long-term economic sustainability without the constraints of ownership restructuring.
A more radical shift, proposed by ActionSA’s Inclusive Economic Empowerment (IEE) Proposal, advocates for the repeal of BBBEE and employment equity policies, replacing them with a focus on equal access to opportunities. The cornerstone of the IEE Proposal is the Opportunity Fund, which would redirect resources into areas such as education, entrepreneurship and infrastructure development. By investing in these critical sectors, the IEE seeks to promote genuine empowerment for all South Africans, based not on race or quotas but on the opportunity to succeed. The IEE also proposes a reduction in the compliance costs that burden businesses, enabling them to invest more in their operations and people.
One of the most innovative suggestions to emerge from this discussion is the concept of Enterprise Zones (EZs) – targeted areas within underdeveloped regions that provide businesses with tax incentives and regulatory exemptions. The success of Enterprise Zones in capitalist economies like the United States and the UK demonstrates the potential for private sector-led growth to address regional inequality. By reducing the operational barriers for businesses in these areas, EZs could stimulate job creation, attract investment and foster entrepreneurship, all without the need for racial quotas or compliance with burdensome regulations. Additionally, businesses operating in these zones would be incentivised to hire locally, further driving the economic inclusion that BBBEE sought to achieve.
Another model that deserves attention is Employee Stock Ownership Plans (ESOPs). By giving employees a stake in the success of their companies, ESOPs align individual incentives with company growth, promoting personal responsibility, productivity and wealth-building from the ground up. This model empowers individuals through ownership, providing a more sustainable form of economic empowerment that does not rely on government intervention or compliance with race-based policies. ESOPs have been successfully implemented in countries like Switzerland and Germany, where they have reduced income inequality and fostered a culture of shared prosperity.
Ultimately, the solutions to South Africa’s economic challenges do not lie in perpetuating the failures of BBBEE, but, instead, in reimagining empowerment through practical, inclusive and sustainable policies. A shift from compliance-based models to ones focused on merit, opportunity and investment in human capital would bring South Africa closer to the ideals of the Constitution – a society that fosters equality, justice and economic freedom for all.
To achieve this, we must pilot these alternative models, prioritise skills development and continuously assess the impact of these reforms. South Africa’s future lies not in the policies of the past, but in innovative solutions that provide true economic opportunities to all its citizens, regardless of race or background.
It is indeed insanity to expect better results if the same thing is done over and over again!
Ismail Joosub on behalf of the FW de Klerk Foundation
BUSINESS REPORT