Criminals and mafia syndicates use BEE to hijack state procurement

Professor William Gumede said criminal and mafia elements have actively hijacked state procurement budgets by exploiting Black Economic Empowerment (BEE).

Gumede, an associate professor at the School of Governance at WITS, shared this information during an interview with The Common Sense.

He explained that corruption in South Africa, which is a significant crisis, has evolved beyond simple bribery.

It has become a systemic issue where bad actors use the regulatory framework of Black BEE as a legal shield to take control of public funds.

He said that the Madlanga Commission has lifted the veil on the frightening reality about the extent of this crisis.

He cited the Tembisa Hospital scandal, where one individual managed to get over R5 billion in contracts.

The impact of Black Economic Empowerment on South Africa and the economy has been severe, especially on poorer people.

One impact is the extreme disparities between black people, where inequality has increased significantly since 1994.

“You have those who became super-rich through the state and through Black Economic Empowerment. They are totally, incredibly super-rich,” he said.

“These super-rich BEE beneficiaries make the gap between certain black individuals and other black citizens extraordinary.”

He explained that if you are politically connected, you can become part of a deal and become a billionaire virtually overnight.

“A week or a month prior, you were just like anyone else, just like your peers. The only thing you brought to the table was your political connectedness to the ANC,” he said.

“It was not your merit or entrepreneurial skill. Perhaps you brought ‘political entrepreneurship,’ but nothing else.”

Gumede explained that it causes deep resentment within the black community and immediately distorts black society.

“Imagine a neighbour you grew up with. You work hard, work two jobs, try to get your children through school, and look after your family,” he said.

“The only difference between you and your neighbour is that your neighbour is connected to the ANC and becomes part of mining and BEE deals.”

“Even if that neighbour is a lazy person, because they are connected to the ANC, they become an overnight billionaire, move out, and buy properties and luxury cars.”

The right way to do empowerment in South Africa

He said that BEE is the wrong policy tool for transformation because it focuses on creating a tiny elite of political capitalists rather than uplifting the majority.

Instead of manipulating ownership shares and state procurement rules, he outlines several pragmatic alternatives.

• Investing in staff education: Companies should focus heavily on educating, upskilling, and training their internal staff members.

• Providing housing: Allowing companies to earn empowerment credits by directly providing or sponsoring quality housing for their workforce.

• Building public infrastructure: Major corporations should build vital public infrastructure and hand those functional assets back to the state.

• Integrating small businesses into supply chains: True empowerment should incentivise large retailers and corporations to bring small businesses and local manufacturers into their procurement pipelines.

• Sponsoring mass low-cost housing: Large conglomerates could sponsor mass low-cost housing developments.

Gumede said that focusing on job creation, hiring on merit, and transferring technical skills is a far more stable and effective path to transformation.