Will the GNU change the future of BEE?

Jul 9, 2024 | News

South Africa recently celebrated its 7th democratic general elections, a milestone highlighting three decades of democratic progress. Over the past 30 years under African National Congress (ANC) rule, South Africa has transitioned from policies favouring the minority to an envisioned all-inclusive legislative framework. In 2024, the Broad-Based Black Economic Empowerment (B-BBEE) policy also marked its 20th year since implementation – a system aimed at creating an equitable platform for black empowerment and generational wealth for citizens classified as Black, Coloured, Indian, and Chinese. However, there is ongoing speculation about the effectiveness of B-BBEE in achieving its objectives of equity and equality and whether it remains appropriate after three decades.

The Broad-Based Black Economic Empowerment (BBBEE) model is a cornerstone of South African history. In the early 1990s, the business sector aimed to uplift South African black businesses, which had been previously disadvantaged by Apartheid, by addressing the inequalities present in political, social, and economic spheres. Initially, Black Economic Empowerment (BEE) was established with a clear mandate to transfer ownership and shareholding in both the public and private sectors.

With the adoption of the Constitution in 1996, BEE was broadened to address the imbalances created by previously implemented racially discriminatory laws and policies. This was achieved through the development and enactment of legislation containing equality clauses, now known as the Employment Equity Act and the BEE Act.

In 2003, the BBBEE strategy was published as a precursor to the BBBEE Act No. 53 of 2003. The main objective of the Act was to advance, transform, and uplift economic participation among black South Africans by achieving substantive equality rather than mere formal equality.

Gazetted by the Department of Trade and Industry in 2007, the Codes of Good Practice provide a framework for measuring BBBEE. This framework includes seven elements: ownership, management control, employment equity, skills development, preferential procurement, enterprise development, and socio-economic development. These elements are weighted on a Balanced Scorecard used to measure BBBEE compliance.

As this policy was adopted by the African National Congress (ANC) as the first ruling party in post-Apartheid South Africa, it is no surprise that the ANC supports retaining this policy well into the future.

The 2024 General Election results marked the ANC’s largest voter loss, with support dropping from 57.5% in 2019 to 40.18% in 2024 – a significant 17.32% decrease. This resulted in the ANC losing 71 seats to opposition parties in the national parliament. For the first time since 1994, the ANC failed to achieve the 50 + 1 majority vote, prompting the ruling party to form a Government of National Unity (GNU) with opposition parties to retain control, albeit shared with the Democratic Alliance (DA), Patriotic Alliance (PA), and Inkatha Freedom Party (IFP). The GNU will undoubtedly lead to many policy reforms, but what does this mean for economic transformation policies such as B-BBEE?

The GNU’s second-largest player, the DA has always maintained (per their election manifesto) that B-BBEE “has proven to be a deeply flawed approach to economic inclusion.” The party further suggests that B-BBEE implementation has fostered corruption – as jobs, tenders, and contracts have often been circulated among political insiders. It also argues that the vast majority of black South Africans do not benefit from B-BBEE in the intended purpose of creating generational wealth for a larger proportion of the population.

The DA and others recommend adopting the United Nations’ 17 Sustainable Development Goals (SDGs) as the foundation for achieving equity and equality sustainably. The SDGs move beyond race as the sole determining factor for economic empowerment and development, incorporating inclusive goals such as eradicating hunger, alleviating poverty, ensuring quality education, securing energy and water, and promoting industry development, among others, as measures of achieving equality. If implemented, this proposed model could lead to the removal of the B-BBEE policy from all legislation, replacing it with a point system aligned with the United Nations’ SDGs.

Another significant GNU member, the IFP, has also outwardly expressed their reservations regarding the B-BBEE Policy in its existing form. Although originally a supporter of the policy, the party has conceded that B-BBEE has failed to economically uplift the previously disadvantaged to the degree it had intended. Former IFP Member of Parliament (MP), Mr. Bhekizizwe Radebe, stated his belief that B-BBEE has been used as a “get-rich-quick scheme”. Although the IFP believes that race should remain a critical factor in the redress and development of historically impoverished South Africans, B-BBEE  in its view, is not the means to obtaining that end. Other political parties that have won seats in Parliament, and that oppose the current B-BBEE legislation, include the EFF, Action SA and FF+ to name a few.

The ANC government has previously acknowledged the challenges with present B-BBEE policy. In fact, former Director-General for the Department of Trade, Industry and Competition, Mr. Lionel October, recently indicated that B-BBEE should enter a new phase, focusing on the following:

  1. Cultivating a supportive culture for entrepreneurship and diversifying value chains in South Africa.
  2. Linking B-BBEE with other government economic development strategies, such as Industrial Policy, the Competitive Supplier Development Programme, and the New Growth Path (the “real economy”).
  3. Promoting a culture of venturing into new territories, operational excellence, and risk-taking through empowerment efforts.
  4. Focusing on businesses and industries that create significant job opportunities and address socio-economic challenges.
  5. Establishing a symbiotic relationship between the public and private sectors, as well as among private sector players and large and small enterprises, to unlock opportunities.

One way of preventing a small, politically connected group from disproportionately benefiting from the B-BBEE policy is to address the current legislation so that it is more clearly articulated and communicated. Additionally, processes could be simplified to effectively reach a broader audience. There should be intensified efforts in training, guidance, and financial assistance for start-ups, with all levels of government collaborating to ensure policy cohesion.

There is a strong possibility that the parties to the new GNU have, as part of their negotiations, already raised the possibility of a focus on redesigning policies related to economic redress. Consequently, the future of the B-BBEE policy in its current form is uncertain, and we watch with interest to see how the GNU will approach economic transformation in the near future.

Article by Nadia Nassiep (Candidate Attorney) & Ali Sonday (Associate)