Africa-Press – South-Africa. South Africa’s Black Economic Empowerment (BEE) framework has resulted in the enrichment of a tiny black elite, including President Cyril Ramaphosa, rather than its stated aim at redressing economic imbalances.
The framework has been abused by well-connected individuals to secure access to deals that give them ownership in some of the country’s largest companies.
This does not create new wealth or economic value in South Africa and, more importantly, it does not benefit a broad cross-section of society.
Rather, millions of low-income individuals are trapped in conditions of poverty, with no access to the formal economy and the benefits of the current redress programmes.
Political analyst Moeletsi Mbeki explained how this has played out in South Africa over the past 30 years and how it has resulted in a more fragile economy.
Mbeki said that the people who were the most impacted by the injustices of the past have not benefited from South Africa’s current redress programmes.
He pointed to the people who are stuck in structural poverty in South Africa’s former homelands, the Cape Flats, and those impacted by migrant labour at the country’s mines.
“Who is redressing what is happening to those people? Who is having redress programmes for them? Nobody. There are no redress programmes benefiting them,” Mbeki told the SABC.
In contrast, those who have benefited under the current redress regime are predominantly those who were already successful, well-connected, and highly qualified.
“Who is benefiting from redress? Cyril Ramaphosa. He is getting the so-called ‘reparations’ from white South Africans,” Mbeki said.
“They are the ones getting redress. Do they need redress? These are rich guys with many qualifications who are already successful.”
Mbeki said this leads one to conclude that there is no effective redress policy in South Africa, with those who should benefit from it receiving little.
“The real ones who have to benefit from redress are those I have listed, in the former Bantustans, the Cape Flats, and in townships,” Mbeki said.
“There is no effective redress in South Africa. There is an enrichment of the black elite in South Africa and not much else.”
The cost of BEE in South Africa
Moeletsi Mbeki
Apart from its ineffectiveness, South Africa’s BEE framework also imposes a significant burden on the country’s economy through compliance costs and lost economic activity.
This has led the government to implement reforms to make the BEE framework more effective, ensure its benefits are more widespread, and make it easier for companies to comply.
However, experts are divided on whether this will move the needle on the ease of doing business and ensure the benefits are more widely spread across South Africans.
The Centre for Risk Analysis believes there is a compelling case for removing BEE in its entirety, with such action likely to translate into increased investment and faster economic growth.
It explained that the current BEE framework adds another unnecessary hurdle to investment in South Africa from global and local investors.
Crucially, it noted that the regular changes to BEE codes, regulations, and legislation are a major source of uncertainty for businesses in South Africa.
This has been coupled with uncertainty in other key areas, such as expropriation without compensation and the National Health Insurance scheme.
The uncertainty created by BEE in South Africa is on top of the onerous compliance costs businesses face under the framework.
Research from the Free Market Foundation (FMF) and the Solidarity Research Institute shows that BEE costs South Africa’s economy up to R290 billion in direct costs and lost economic activity.
All policies have a cost. However, the benefits of BEE are increasingly coming under intense scrutiny in South Africa, given its association with cronyism and corruption.
The FMF estimates that BEE translates into 192,000 job opportunities being foregone each year.
“In a country with one of the highest unemployment rates in the world, these are not technical side effects. They are structural barriers to growth, investment and job creation,” the foundation said.
“Empowerment should mean widening opportunity, lowering barriers to entry, and enabling enterprise.”
“Instead, BEE has entrenched insider enrichment while ordinary South Africans remain excluded from meaningful economic participation.”
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