Critique of South Africa’s BBBEE policy, arguing it harms growth, increases inequality, and excludes minorities from the economy.
Key topics:
BBBEE blamed for low growth, rising inequality, and job losses.
ANC policies seen as ideological, not economically pragmatic.
BBBEE said to exclude minorities and fail to build inclusivity.
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By Dave Steward
A statement titled “BBBEE Policy is a Critical Policy of Government”, which was recently issued by the Government Communication and Information Service (GCIS), is a stark and bitterly ironic reminder of the degree to which the ANC-led government has lost all contact with reality.
According to the statement “BBBEE is a key policy instrument of the state” to
redress historic imbalances (i.e. to promote equality),
broaden economic participation (i.e. to create jobs), and to
“build an inclusive economy that works for all South Africans”.
The statement resonates with a recent comment by President Ramaphosa that BBBEE is essential to promote economic growth and equality. This is patently untrue. Under President Mandela the economy grew at an average rate of 2,7% – and under President Mbeki it averaged almost 4%. In the period between 2014 and 2025 – when Mr Ramaphosa, as Deputy-President and President has overseen accelerated implementation of BBBEE and related policies – it has averaged only 0.76% – compared to an annual population growth of 1,3%.
Neither is it true that BBBEE has addressed inequality.
A 2017 study of the racial distribution of wealth in South Africa by Zizzama et al identified five economic classes: a 4,9% elite group (65,4% white); a 22,4% middle class (20,5% white); a 19,4% vulnerable middle class (0,1% white); an 11% transient class (1,6% white); and a 42% chronic poor class (0% white). (This profile had changed significantly since 1994 and has inevitably changed even more in favour of black South Africans since 2017).
BBBEE has certainly benefited the 10 million black South Africans in the Elite and Middle-Class groups, but it has had a negative impact on 81% of black South Africans in the lower echelons of the economy – and particularly on the 47% who are languishing in chronic poverty. South Africa – with a GINI coefficient of .68 – is one of the most unequal societies in the world – and is more unequal than it was in 1994. However, the GINI coefficient within the black population is .65 – almost as high as the national figure. ANC policies have not reduced inequality – they have simply redistributed it. The core problem is that unemployment stands at 32.9% and is 46,8% if discouraged work-seekers are included (closely tracking the percentage of the chronic poor) .
The remedy for inequality and unemployment is economic growth. Had the ANC been able to maintain the 5%+ growth rates that it achieved between 2005 – 07 under President Mbeki and Trevor Manuel, the economy would by 2025 have been twice as large as it was in 2008. Between 2004 and 2008 unemployment fell by more than 4% to 21.5%. If this trend had continued, unemployment might by now have dropped to below 10%.
This would have had a significant impact on inequality with a much smaller chronic poor class – and much larger black middle and elite classes. Everyone would have benefited. Instead, National Democratic Revolution (NDR) policies of BBBEE, expropriation without compensation and employment equity race quotas have become the principal obstacles to economic growth; They have severely limited investment and job creation and have opened the floodgates of corruption.
