LETTER | Rethinking BEE premiums could unlock billions for growth - Business Day

A refreshing development over the past year has been a greater public willingness to interrogate the desirability of broad-based BEE policy.

With South Africa trapped in an anaemic growth trajectory and severe pressure on the fiscus, this is timely, particularly insofar as it relates to public expenditure.

Interestingly, the Treasury does not keep records of the premiums paid in terms of empowerment policy. This is an extraordinary lapse given its constitutional mandate to exercise transparent cost controls.

However, based on publicly available information and on interactions with the Treasury, we estimate total empowerment premiums directly cost about R17bn annually, with indirect costs amounting to R133bn for reasons detailed in the Zondo state capture report.

This premium system is, in effect, assigning a shifting price tag to purchases based on demographic characteristics while diverting resources away from the goods and services that South African society, particularly its poorest people, needs.

Our recent report, “Cut VAT & BEE Premiums”, by IRR Legal executive director Gabriel Crouse, proposes discarding the current empowerment model in favour of one prioritising value for money. This would save as much as R100bn in the short term, which could fund a VAT cut of 3.5%, reducing the rate from 15% to 11.5%, leaving billions in the pockets of South Africa’s people, particularly its poorest.

Alternatively, it could be put to productive use: the department of water & sanitation estimates its infrastructural backlog amounts to R400bn. This is an existential crisis for the country and worthy of a priority claim on state resources — more so, at any rate, than the recipients of the premiums now being paid.

Terence Corrigan

https://www.businessday.co.za/opinion/2026-02-19-letter-rethinking-bee-premiums-could-unlock-billions-for-growth/