ANTHEA JEFFERY: Gqubule is wrong: BEE fails on deracialisation, redress and growth - Business Day

Anthea Jeffery

Duma Gqubule starts his defence of BEE by claiming that the policy is necessary to “deracialise the economy completely”. Yet BEE has kept SA thoroughly “racialised” via the pervasive race classification, race quotas and race discrimination it demands.

Race discrimination cannot be justified under the equality clause, as the 2004 Constitutional Court ruling in the Van Heerden case shows. This is because BEE helps a black elite rather than the disadvantaged, and increases inequality instead of reducing it.

Contrary to what Gqubule further claims, BEE is bad for the economy. BEE ownership rules deter fixed investment, for there is no business case (especially in a small and faltering economy) for giving away 30% of an enterprise to do business at all. BEE is a big part of the reason fixed investment in SA stands at a paltry 15% of GDP — rather than the 26% global average — while its economic growth rate is less than half that of its peers.

Expecting business to do repeat BEE ownership deals, as Gqubule advocates, is even more damaging. However, it does help explain why BEE deals valued at about R1-trillion have gone to roughly 100 black South Africans, as Prof William Gumede is noted as calculating in Peter Bruce’s article. There is no redress for the poor in escalating elite enrichment of this kind. By contrast, millions of people could have benefited if that money had been invested in the infrastructure, plant and machinery that is vital to increased productivity, growth and jobs.

Gqubule also implies that BEE corruption is an occasional glitch to be dealt with by better policing. Yet when racial identity is allowed to trump price and efficiency in procurement decisions, pervasive corruption is almost certain to follow.

In 2007, Kgalema Motlanthe, then-ANC secretary-general, acknowledged that such corruption was already widespread. BEE was fuelling corruption in all spheres of government, he said, with “almost every project conceived because it offers opportunities for certain people to make money”. 

In 2018, the Treasury’s acting chief procurement officer, Willie Mathebula, told the Zondo state capture commission that “the government’s procurement system was deliberately not followed in at least 50% of all tenders”. Moreover, once the normal rules had been bypassed, “a contract that started at R4m was soon sitting at R200m”. This had enormous ramifications for a government procurement budget then standing at R800bn a year. 

The government’s procurement budget has since risen to about R1.2-trillion. BEE price inflation has increased too — so much so that the Institute of Race Relations (IRR) puts the overall value of authorised and illegal BEE “premiums” on state tenders at R150bn a year.

Authorised BEE premiums are capped at 25% for contracts below R50m and 11.1% for contracts above that. This in itself makes for considerable price inflation. But unlawful premiums are common, too, and often go far higher: R40m for a new school that should have cost R15m (as the late Pravin Gordhan, then finance minister, acknowledged in 2009) and R935,000 for kneepads that should have cost R4,000 (as André de Ruyter, a former Eskom CEO, said in 2023). 

The poor black majority gets no redress from this either. Instead, large amounts of scarce tax revenues are siphoned off each year to a small black elite that uses its insider knowledge and political influence to secure tenders at inflated prices and so enrich itself. 

Not surprisingly, most South Africans realise that BEE does not help them get ahead, as IRR opinion polls have repeatedly confirmed. In 2024, for instance, 49% of respondents identified unemployment as one of the two issues that should be the top priorities for the government. Only 8% saw BEE in the same way. 

Gqubule further assumes that BEE is the only possible antidote to apartheid injustices. However, the IRR has long been developing a nonracial alternative to BEE called economic empowerment for the disadvantaged (EED), which has three core features:

EED is nonracial, as it targets the poor via a means test and avoids using race as a proxy for disadvantage.

It scraps the current BEE scorecard and gives business voluntary EED points for adding to economic growth and upward mobility via investments made, jobs provided, taxes paid and other contributions.

It reaches down to the grassroots by providing poor households with tax-funded vouchers for three core needs: schooling, housing and healthcare. 

Under EED, vouchers would be financed not by increasing the tax burden but by redirecting much of the tax revenue now being wasted on dysfunctional state schools, clinics and housing programmes. The vouchers it proposes are already being used in various countries to counter state inefficiency and corruption by increasing individual choice and promoting competition between public and private providers. 

IRR opinion polls show that most South Africans support the voucher element in EED and prefer it to BEE. In 2024, for instance, 92% of South Africans favoured school vouchers, 83% supported healthcare ones, and 80% endorsed housing vouchers. Asked if vouchers would be more effective than BEE in helping them, 81% answered “yes” against 12% who said “no”.  

Gqubule urges more beneficiaries of BEE to “defend” and “improve” it. But at best BEE provides a fake form of transformation that allows a politically connected black elite to keep using race as a proxy for disadvantage. This, in turn, enables that elite to keep lining its own pockets while making the entire country poorer.

What SA needs instead is true transformation of the EED kind. This would provide an effective leg-up to the poor, even as it promotes the investment, growth, employment and self-reliance vital to prosperity and stability. 

True transformation is evident in graphs showing rising incomes, higher levels of fixed investment, more companies being started and more jobs being created. The race-based fake transformation endorsed by Gqubule is demonstrating none of that. 

Jeffery is head of policy research at the Institute of Race Relations. 

https://www.businesslive.co.za/bd/opinion/2025-09-16-anthea-jeffery-gqubule-is-wrong-bee-fails-on-deracialisation-redress-and-growth/