South Africans question future of Black empowerment policies

Sipho Ndimande is one of a new breed of South African entrepreneurs. A chartered accountant, he launched his online sneakers and streetwear store, KickBox, in 2018 and has recently built his first bricks-and-mortar shop in the upmarket Johannesburg neighbourhood of Parkview.

This is not, he said, thanks to Black Economic Empowerment — a foundational policy adopted by Nelson Mandela’s African National Congress after the end of apartheid to give Black South Africans a foothold in a business world from which they had long been excluded.

“It has never felt to me that the policy benefits the man on the street,” said Ndimande. “What I’ve seen are the same sort of people benefiting from those policies, and they’re usually politically connected.”

When the ANC took power in 1994, it inherited a nation starkly divided along economic and racial lines. The BEE policies, which promoted Black ownership and employment, were intended to propel the creation of a Black middle class. But three decades later, South Africa remains one of the world’s most unequal societies, as measured by the Gini coefficient.

Although some Black people have become better off, BEE does not appear to have done much to close the disparity of wealth between races either. Households headed by white South Africans earn, on average, more than four times the income of a Black household, according to Statistics South Africa. An unemployment rate of 37 per cent for Black South Africans falls to 8 per cent for their white peers.

One significant flaw of BEE, say detractors, is how relatively few people have benefited. More than R1tn ($57bn) had been transferred into the hands of just 100 people under the scheme, said William Gumede, a professor at the Wits University School of Governance.

“The policy has worked for politically connected people in the ANC, but for very few others,” he said. “And because the Black middle class is now feeling the squeeze from an economy that hasn’t grown, they are questioning this.”

Some high-profile executives believe however that the policy continues to be vital.

“Given that South Africa remains profoundly unequal, and that race remains a large driver of inequality, Black empowerment and affirmative action remain absolutely necessary to make the South African economy more competitive,” Sim Tshabalala, the chief executive of Africa’s largest bank, Standard Bank, told the Financial Times.

BEE is based on a corporate “scorecard” that ranks compliance in everything from affirmative action in executive recruitment to procurement from Black-owned suppliers. Its most controversial plank has been a target for investors in key sectors to give a portion of their local shares to Black investors. In practice, these opportunities have often been reserved for already wealthy businesspeople with ties to the ANC.

Critics argue that BEE has stifled economic growth — to the detriment of everyone. Solidarity, a trade union rooted in South Africa’s Afrikaner minority, has argued that BEE slashes up to 3 percentage points from GDP growth every year.

BEE’s opponents argue that by favouring certain businesses in the award of government contracts, rather than relying just on market competition, the policy has inflated prices and fuelled corruption. As a consequence, the ANC is facing calls for the policy — still a central tenet of the ANC’s so-called transformation agenda — to be reformed, if not scrapped.

A survey by Ipsos this year, commissioned by News24, found that only 44 per cent of South Africans believed BEE should continue. Even among ANC supporters, more than a third saw the policy as “outdated and divisive”.

The ANC has been at loggerheads over BEE with the Democratic Alliance, its main coalition partner after the party failed to win a majority at the polls in 2024 for the first time since the end of white rule.

Yet the ANC appears to have doubled down on aspects of the policy. President Cyril Ramaphosa this month reiterated his commitment to it, saying it was needed “to ensure we correct the injustices of our past and end the inequality of the present moment”.

Last month, authorities implemented a new set of employment equity rules setting out targets for Black people and women in management and executive posts, varying according to the industry.

The DA in May challenged the rules in court, saying the requirement to meet specific racial quotas would “destroy jobs and undermine the economy”, though a court is yet to rule.

A draft mining law would require even prospectors to have Black ownership to qualify for a licence. The Minerals Council, which represents more than 90 per cent of South Africa’s miners, said these new rules would impose “an unnecessary burden on prospectors who must sink every rand into drilling and data”.

Moeletsi Mbeki, a political analyst and brother of former president Thabo Mbeki, has long opposed BEE. “The challenge was to get Black people to become entrepreneurs. But giving them shares in existing companies not only didn’t do that, it didn’t grow the economy.”

Mbeki said it had only enriched the elite of the ANC, including the policy’s architects. “BEE has not worked for the majority of South Africans, but since ANC leaders have benefited, why would they change it now?”

Ramaphosa, initially a trade union leader, was among those who profited from big-ticket BEE deals with existing companies after he left politics in 1996. This included a stake in Johnnic, a former arm of Anglo-American, and a media joint venture with Pearson, then the owner of the Financial Times. In 2014, Ramaphosa divested those interests to re-enter politics.

South Africa’s wealthiest Black businessman today is Ramaphosa’s brother-in-law, Patrice Motsepe, who founded the diversified mining house African Rainbow Minerals. Forbes last put Motsepe’s wealth at $3.5bn.

Standard Bank’s Tshabalala cited ARM as one of the great modern South African businesses, adding that it was “to a significant extent, the product of Black Economic Empowerment”.

Arguments about BEE are not confined to South Africa. The administration of US President Donald Trump has lashed out against the policy.

The biggest BEE flashpoint in years has been the attempt by South African-born Elon Musk’s Starlink to enter the country. Under existing rules, in order to qualify for a telecommunications licence, Starlink’s local operation would need to have 30 per cent Black ownership, a requirement Musk has attacked as racist.

Starlink is instead proposing to make so-called equity equivalent pledges through which, instead of handing over shares to Black owners, it would invest in social programmes, including funds to promote internet access in schools. Amazon, Samsung, and other multinationals have similar programmes but deals can take years to approve.

At a recent ANC meeting Parks Tau, trade minister, defended BEE but conceded it had given rise to instances of corruption. He said there needed to be a “review” of the “entire transformation programme”.

Last year, consultancy McKinsey paid a $122mn fine to settle a bribery case in which it brought in a politically connected middleman as a “Black empowerment partner” to ensure it won a contract with the state electricity provider Eskom.

Khulekani Mathe, head of the country’s largest business chamber, Business Unity South Africa, which has challenged the government’s employment equity rules in court, said calls to bin BEE were premature. “Clearly, much of it hasn’t worked — but that means we need to refine the policy, not dump it.”

Additional reporting by David Pilling in London