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First, it targets the poor black majority for redress, rather than a small connected elite. It does this by tackling the key drivers of inequality of opportunity directly rather than relying on “trickle-down fixes”.
Second, it prioritizes cost and skill in government procurement where BBBEE awards government contracts at inflated tender prices to companies that are often unable to deliver.
Third, it promotes rather than undermines economic growth by attracting rather than deterring investment.
BBBEE failed
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According to the government website, “The fundamental objective of the Broad-Based Black Economic Empowerment Act, No. 53 of 2003, is to enhance the economic participation of black people in the South African economy”.
On Tuesday, the latest quarterly Labor Force Survey revealed that the official general unemployment rate among black South Africans in the first quarter of 2022 was 50%, down from 36% in the first quarter of 2008.
This equates to a doubling of the number of unemployed black South Africans from 5.7 million to 11.3 million over the past 14 years. (2008 is the first year for which StatsSA provides employment data.)
The fact is, after 19 years of so-called “broad-based” BEE, black inequality and poverty are at record highs and there are more black people excluded from the economy than ever before.
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Of course, the black unemployment rate and the black poverty rate are not the only measures of black economic participation. But these are surely the most important.
BBBEE has clearly failed in its fundamental goal of achieving broad economic inclusion for the black majority.
deep damage
Worse still, it deeply harmed this group.
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Nineteen years later, it is now clear that BBBEE has enriched a small number of politically connected individuals – of all races – in costs of the black majority.
It has done this by giving connected individuals/companies preferential access to lucrative government contracts at inflated bidding prices, and not caring enough whether those individuals/companies are able to deliver.
This actively and disproportionately harms the poor black majority who suffer most from the consequences of inefficient and ineffective public spending because they are most dependent on the state.
The DA is committed to making cost and competence a priority in government procurement. Overpriced and unexecuted or poorly delivered contracts hurt the poor black majority because they are the group most dependent on government services.
BBBEE, working in tandem with executive deployment, is the mechanism by which R1.5 trillion has been lost to state capture and R14 billion to covid-related theft of PPE, and whereby R238,000 was paid for a wooden mop, as Eskom reported last year. Inflated bidding prices are not the exception; they are the norm.
Therefore, not only was the economic disadvantage perpetuated for the black majority, but the gap widened. expanded.
BBBEE has also harmed the black majority by deterring investment.
A must for growth?
The only thing that makes an economy grow is investment in productive businesses. The BBBEE is a major obstacle to this, not only because compliance is difficult and costly, but because it has spawned a corrupt, clientelist and incapable state.
In 2016, the EU Chamber of Commerce in South Africa listed the BBBEE legislation as its top legislative barrier and top three challenges to doing business in South Africa.
The DA’s Economic Justice Policy, meanwhile, bases preferential government procurement on the globally recognized Sustainable Development Goals model, choosing competent companies that make a positive socio-economic contribution to the poor black majority.
This model promotes investment, as investors, shareholders and analysts seek companies with strong SDG awareness and commitments. Rather than being deterred by the BBBEE model, investors are attracted to the SDG model.
Large-scale transformation requires growth
As President Ramaphosa rightly pointed out in his Monday newsletter: Economic transformation and economic growth are closely linked. There can’t be one without the other.
Growth is essential for two things:
Large-scale job creation to bring millions of black people into the South African economy; and
Increase access to opportunities (education, health, housing, transportation, electricity, security, communication, subsidies, property titles) for the poor black majority by disproportionately spending growing tax revenues on this group. It is the opportunities that enable people to participate in the economy.
While the BBBEE is anti-growth and exclusive, the DA’s economic justice policy is pro-growth and inclusive.
Conclusion
South Africa desperately needs a radically different approach to reparation and inclusion. We can win the fight against our deeply unequal and unjust past. But the only way to achieve this is to ensure that economic opportunity is accessible to everyone, not just the elite. This is what the DA’s economic justice policy does. Our large-scale transformation approach will succeed where BBBEE failed.
Best wishes,
John Steenhuisen
