- James Vandrau
Why is Black Economic Empowerment Failing to Reconcile Social Inequality in South Africa?
In 1948, the electoral success of the Herenigde Nasionale Party on a platform endorsing the regulation of non-white labour prompted the establishment of apartheid. This legislation system preserved segregationist policies against indigenous South Africans, confining them to the margins of the mainstream economy. Following the historic 1994 multiracial democratic election win by Mandela’s African National Congress (ANC), the Reconstruction and Development Programme (RDP) was introduced, with Black Economic Empowerment (BEE) as a key component aimed at redressing the economic imbalances caused by apartheid. BEE was designed to empower historically disadvantaged individuals, particularly black citizens, by giving them access to the economy and capsizing various systemically racist policies. Nonetheless, despite some incremental progress, BEE has failed to fully reconcile social inequality in South Africa.
Firstly, the failure of BEE to effectively address social inequality in South Africa is attributable, in part, to resistance from the white business community. This demographic has largely been opposed to the changes instigated by BEE, leading to considerable backlash against the program. In fact, a 2006 survey reported that approximately one-fifth of all South African companies had no plans for black empowerment. Consequently, the Presidential Black Business Working Group expressed concern over the slow pace of BEE implementation. Upon evaluating the setback, the ANC concluded that more stringent measures are necessary to achieve any BEE targets, thereby prompting many black business owners to advocate for swifter de-racialisation of the economy, despite the limited intervention demanded by white businesses.
The capacity for Black Economic Empowerment to rectify social inequality has further been impeded by limited access, primarily due to the definitions outlined in “the codes of good practice” for BEE. Prior to the revised codes for Broad-Based Black Economic Empowerment (B-BBEE), these codes defined a black person as “an African…or Indian South African” who satisfies specific criteria. However, as argued in Visions of Black Economic Empowerment, individuals who were the subject of discrimination during apartheid but do not meet the prescribed criteria for being identified as black in the codes, are not considered eligible for benefits under BEE, despite qualifying under other acts and enactments such as the Preferential Licensing Enactments, the Preferential Procurement Act, and the Employment Equity Act. The effectiveness of the Black Economic Empowerment Act has also been persistently hindered by insufficient implementation. The implementation of BEE policies has been plagued by inadequate monitoring and enforcement of the rules, leading to a lack of transparency and accountability.
The legacy of South Africa’s prior social policies, notably Bantu Education, has hindered the efficacy of BEE to address prevailing social disparities. The implementation of the Bantu Education Act of 1953 enforced the racial-separation of educational institutions, thereby impeding the acquisition of necessary training by many black individuals to assume managerial roles, despite possible intrinsic talents. As a result, a significant portion of black South Africans are without the knowledge and expertise required to participate fully in the economy, which curtails their capacity to maximise the benefits afforded by BEE initiatives.
Finally, and arguably most significantly, the effectiveness of BEE has been undermined by instances of corruption and nepotism, wherein a select cohort of individuals have garnered the lion’s share of BEE benefits at the expense of the broader black populace. Although originally instituted under the auspices of the RDP, the policy’s first initiatives emanated from the private sector. Gelb & Black (2004) identified the transfer of unissued equity from white-owned companies to a select group of “pre-identified black buyers,” commonly known as “tenderpreneuers,” who were often characterized by a high political profile but limited business experience. Consequently, BEE became tantamount to enrichment for a privileged few, rather than empowerment for the wider black population. In Black Economic Empowerment 20 Years Later: The Baby and The Bathwater, Mzwakhe Madi posits that the economic benefits of BEE have remained confined to a politically connected minority, with the majority of black South Africans lacking access to the requisite opportunities.
Furthermore, because of the restricted number of black individuals benefiting from BEE, the amount of black citizens positioned in boardroom or senior management positions is significantly small. According to the Black Business Executive Circle report of October 2005, only five of the top 200 companies on the Johannesburg Securities Exchange (JSE) had black ownership exceeding 51%, while only 27 companies had black ownership greater than 25%. These 32 companies collectively accounted for less than 2% of the JSE’s market capitalisation.
Ultimately, the Black Economic Empowerment policy has failed to effectively mitigate social inequality in South Africa. Despite modest strides forward, considerable obstacles remain, including the rampant cronyism, nepotism and overarching malpolitics that has pervaded the program. In light of these challenges, a renewed approach may be warranted to redress the underlying economic asymmetries. Fortunately, President Cyril Ramaphosa has recently announced a review of South Africa’s BEE strategy and legislation, with particular emphasis on forestalling the exploitation of the policy for corrupt purposes.