Big lie about BEE in South Africa

Political economist Moeletsi Mbeki says that it is a misconception in South Africa that black economic empowerment (BEE) places the economy in the hands of the majority of black people.

Instead, the political economist, author, and chairman of the South African Institute of International Affairs argues that it benefits a small handful of politically connected elites, and hinders the emergence of entrepreneurs, which in turn stalls the economy.

In a recent interview, he told the Palatable Politics podcast that “in a capitalist system, a small number of people own the means of production in the economy. It is irrelevant whether they are white or black.”

“The English people do not control the economy of England. A few capitalists control the economy of England. The same in France or the Netherlands.”

He said that most people in these countries, regardless of their race, do not own much. They are employees. The same, he says, happens in South Africa.

“You cannot have 80% of the population which becomes capitalists. That is not a capitalist country.”

BEE, established in around 2003, is framed at redressing apartheid-era economic inequalities by promoting Black participation in ownership, management, skills development, enterprise, and socio-economic development.

However, Mbeki explained that instead of empowering black people, BEE is preventing companies from investing in South Africa.

Many companies have the desire and money to invest in the country. However, they are unwilling to give away part of their business for no benefit.

Capitalists can invest anywhere in the world, and taxing capital on arrival, which is what BEE does, makes South Africa an unattractive destination.

Additionally, in a recent interview with BusinessTech, Mbeki said that after gaining power, the ANC focused on developing its core voter constituency, the African middle class, through policies like BEE, preferential procurement, and employment equity.

While these policies were framed as addressing historical injustices, Mbeki believes they primarily serve to enrich “a small political elite within the ANC.”

He said the evidence that such policies are not working for all is evident in the ANC’s electoral decline.

He contends that BEE “does not create new wealth. It does not create new entrepreneurs” but rather incentivises becoming “parasitic on the existing companies and at the same time to become parasitic on the state.”

He emphasises the urgent need to cultivate new entrepreneurs from historically disadvantaged populations, which he believes is discouraged by policies that favor public sector employment and reliance on existing structures.

The origins of BEE and its impact

He said that the ANC, from the 1950s, was a multiracial organisation. It could, therefore, not have a policy that favoured a particular race.

Instead, he alleges that the former National Party “came up with BEE” and used greed to convince certain ANC leaders to accept ‘free money’.

For BEE, Key conseptualisationg and efforts coming from bodies like the Black Management Forum (BMF) and the Black Business Council (BBC) in the late 1990s, culminating in the development of policies and legislation under the post-1994 democratic government.

The BEE Commission, chaired by Cyril Ramaphosa, played a crucial role in developing the strategy and recommendations that led to the Broad-Based Black Economic Empowerment Act of 2003. 

“It is a corrupt system, born from original sin. It thrives on the original sin of corruption and is one of the main drivers of corruption,” Mbeki said,

He argued that the corruption at places like the Tembisa Hospital would not have happened if there were no BEE and open competition.

“As there is no competition because of the so-called black preference, you have an embedded corrupt system,” he said.

Mbeki said that this kills the emergence of real entrepreneurs in South Africa who are needed to modernise the economy and create employment.

“If you get money for being a tenderpreneur, which is only a middleman that does not produce anything, it obstructs the emergence of real entrepreneurs,” he said.

“This is one of the reasons for South Africa’s high unemployment rate. BEE has many negative outcomes.”