Ideologically bankrupt ANC persists with BEE

Ideologically bankrupt ANC persists with BEE

13 March 2026 - William Gumede

South Africa's current model of BEE will compound the looming economic crisis.

Foreign investors, particularly those establishing new industrial sectors not present in South Africa, but critical to the domestic and global economy, must be exempted from black economic empowerment, and given options to provide alternatives to BEE, whether providing jobs for the youth, supporting manufacturing small and medium-sized enterprises or developing mass science, technology, engineering and mathematics (STEM) and technical skills.

South Africa is facing its biggest economic crisis since the end of apartheid, and perhaps bigger than the Covid-induced economic crisis the country experienced, despite glowing reports of economic green sooths, by government and some business leaders.

South Africa, battling US tariffs, the impact of US and industrial country reduction of development aid, the flooding of state-subsidised Chinese manufacturing to our domestic market, on top of a long period of low growth, de-industrialisation, state and infrastructure collapse, fuelled by outdated ideological policies, runaway corruption, ANC cadre-deployment state incompetence and the capture of state BEE procurement.

South Africa's current model of BEE will compound the economic crisis, rather than alleviating it. The current BEE policy largely involves giving shareholding of existing white-owned companies to black political capitalists do not expand the economy, create new industries nor new markets.

It reinforces concentration of economy. It has decimated the productive capacity of the economy as many mainstream businesses, a good example, the mining industry and foreign investors do not want to make new greenfield investment and repatriate capital abroad. This has contributed to the continuing de-industrialisation of the economy.

The ANC and South African President Cyril Ramaphosa have doubled down on BEE, it instead of seeking alternatives. The current model of BEE will be fiercely resisted by those oppose to it, meaning there is absolutely no realistic chance that BEE in its current will ever be successfully implemented. The strong opposition against the policy means it cannot be implemented as it stands.

It is a wrongly argued by those, opposing the current BEE model, but with good intentions, that the BEE policy is correct, and that it is only wrongly implemented. BEE is now being opposed by significant majorities among both white and previously disadvantaged communities. It is also being opposed, not only by the US President Donald Trump's Republican administration, but also by foreign investors, whether from Western countries to China.

The opportunity costs, the massive development benefits lost if more broad-based alternative empower strategies, were used to the ANC's model of black economic empowerment (BEE), which has made a few political connected black individuals, deal-maker law and financial firms and middle-men and women, who connect white firms with connected individuals, super-rich, is simply too high, given high unemployment, poverty and inequalities.

Opportunity cost is the value of alternatives policies to the ones pursued. There are many alternatives that could generate higher returns, bigger development impact, more jobs, and less societal, political and investor opposition.

The current model of BEE is a perfect example of the misallocation of capital - whether shares for ordinary black public, or for ANC connected BEE oligarchs, that could have generated bigger societal development impact, by investing it in public infrastructure, world-class education, technology, SMEs or assets, such as homes for the poor.

The misallocation of capital in African and developing countries occurs when resources are not directed to their most productive uses, either through outdated ideological, populists and captured policies, leading to lower overall productivity and economic growth. It prevents capital from flowing to development projects, firms that could generate higher returns, bigger development impact, and more jobs.

Successful east Asian tiger economics managed to allocate scarce capital better to generate higher development impact, greater industrialisation, growth-generating infrastructure and more employment.

Creating new industries that a country did not have before providing catalytic growth which in turn spurs more broad-based development, more inclusive growth, more sustainable transformation, redress, and new opportunities for historical disadvantage communities, while at the same time making the economy larger, quicker.

The current BEE model is based on the African empowerment programs, which is based on creating political capitalists, turning liberation movement politicians into 'capitalists' by giving them shares in mainstream businesses or farms. These African-style empowerment programs collapse the economies of these countries, leading to failed states, such as Zimbabwe.

The failure of African-like empowerment programs is handing over shares of working companies to politicians who have never run a business or even a spaza shop lives, or have been catapulted into the state, or with only political party experience. A better solution would have been to give scarce resources to entrepreneurs already with proven business experience - backing already proven winners, which reduce risks of wastage of precious resources.

In other African liberation movement run countries, as is in SA, these liberation movement ideologies see the state as the sole provider of development, see a private sector independent from the liberation movement as a challenge to the liberation movements power, and want to capture the private sector, by deploying their political leaders to become political capitalists.

South Africa must reset BEE programs, by cancelling the current version of BEE, which has only enriched a handful of people politically-connected to the ANC, the so-called 'political capitalists', often politicians who never started a genuine business or managed one, who often set up 'companies' just to secure a state contract or resource licence and secure BEE shareholding in the private sector.

BEE should be cancelled in state departments, state-owned and infrastructure state institutions key to public service delivery, economic growth and infrastructure development. It should be cancelled in catalytic economic growth industries in the private sector also.

Another solution is for companies to instead of BEE, contribute to a development or wealth fund, which should be run by the private sector, and not the government. If a fund is run by the current government it will fail as all the other state-owned entities (SOEs), development finance institutions (DFIs) and other development funds. Such a fund would then invest in merit-based, non-party political and non-ideology-based, growth, industrialisation and infrastructure programs.

Local and foreign companies should be asked as an alternative to BEE, to provide investments in targeted catalytic economic sectors: technology, science, mathematics education; low-income housing; critical public infrastructure; manufacturing small and medium-size enterprises (SMMEs); sport, cultural and music development, and so on.

Creating employment for youth, economy-relevant technical skills and supporting industrially-competitive start-ups and SMEs, should be seen as alternative BEE. South Africa's 60% youth unemployment is one of the biggest risks to the country's economic, political and social stability.

Strengthening non-public democratic institutions, democracy capacity building initiatives including supporting civil society, anti-corruption activities and independent media should be an integral of a new BEE. Currently, very few companies in their BEE deals involve democratic civil society organisations, unless it is civil society trust linked to the ANC.

The South African government must also shelf its BEE policy of focusing on creating 'big' black industrialists. 'Big' black industrialists should be treated as 'white' and should pursue funding like any mainstream company. There has to be a culture change away from seeing political capitalists, deal facilitators, go-betweens and tenderpreneurs as are genuine 'entrepreneurs'.

It must also be compulsory for already empowered BEE companies to also have BEE requirements. After one BEE transaction, BEE individuals and companies should not be allowed to participate in another BEE deal - they should be treated as fully empowered.

It must be compulsory for BEE companies to have BEE tenders, contracts, support skills development and contract SMEs like mainstream companies. BEE companies should provide employees with shares, housing and education. BEE companies must focus on supporting small and medium-sized black business and social enterprises, employ young people, build infrastructure, support new technology.

BEE companies should also operate as good corporate citizens - look after the environment, threat their contractors, employees and stakeholders ethically.

BEE companies should also be compelled to support and strengthen non-public democratic institutions, democracy capacity building initiatives including supporting civil society, anti-corruption activities and independent media.

White companies, particularly legacy companies, who operated during the colonial and apartheid-era, should provide current and past previously disadvantaged employees and their families' shares in companies. Former employees who lost out on benefits during the apartheid-era should be given priority in getting shareholding as BEE beneficiaries.

Legacy resource companies, for example, should give local communities neighbouring mines shares in these companies. Surrounding communities could form social enterprises, cooperatives - in similar ways Afrikaner communities in the early 1900s, where each community member has a shareholding. Such community social and cooperative enterprises will then become the BEE shareholders in these white-owned companies.

Companies must provide industrially relevant vocational and technical training to both current and former employees and their families. Companies must provide housing, funding for education and health insurance to their employees. Companies must bring genuine black small and medium-sized businesses into their supply chains, to provide goods and services, but also support manufacturing SMEs.

Legacy companies must compensate former employees or their surviving families' outstanding employee contributions, not given during apartheid. Many black employees died or suffered disability from illnesses such as tuberculosis, asbestosis and work accidents, but they or their family never got compensated. Companies still affected must compensate their former black employees who were affected by these.

Professor William Gumede is Associate Professor, School of Governance, University of the Witwatersrand and author of South Africa in BRICS (Tafelberg). This is an extract of his recent address on "Remodeling Black Economic Empowerment" to the Black Management Forum.

This article was first published in Business Day.