ONKGOPOTSE JJ TABANE | BEE under attack from global players after the World Bank’s faux pas

The recent World Bank report on South Africa’s inclusive economic growth has brought the BEE debate under the international spotlight. Coupled with AfriForum’s crusade in the US, it has become a convenient battering ram for those who never wanted Black Economic Empowerment in the first place. While the report does not explicitly suggest the abandonment of BEE, it raises enough questions to open the door for its misuse.

The report focuses particularly on the Broad-Based Black Economic Empowerment (B-BBEE) Act’s impact on foreign direct investment (FDI) and business operations in South Africa.

Key issues it highlighted include challenges such as the BEE Act's requirement of specific black ownership and management thresholds to qualify for government tenders and contracts. This is the very foundation of BEE — ensuring inclusivity. In many jurisdictions around the world, businesses must partner with locals to operate in various countries. In some places, it’s called localisation, in others, indigenisation. Yet the World Bank fails to provide examples where such policies have discouraged investors elsewhere. The unique context of South Africa cannot be ignored as the companies that have amassed wealth for more than four decades, did so on the backs of black South Africans who are now expected to “normalise” trade as if apartheid and colonialism never occurred.

Once businesses accept transformation as a natural part of their operations, compliance costs become negligible, balanced by the goodwill and market trust that comes with real inclusion.

The second challenge raised by the report is managing required scorecards. BEE scorecards place a heavy burden on public administration and foreign companies, discouraging investment by foreign firms due to increased costs of doing business. This argument reveals a sense of entitlement. Every country has rules and regulations for doing business. What makes BEE “burdensome” is not compliance but the shift in mindset it demands. The rules require a business to have a local partner to ensure that companies do not operate in a country that is 90% black without meaningful local participation. There is no shortage of capable black partners in our economy.

A decade ago, Adcorp estimated that 800,000 qualified professionals were unemployed — many of whom could be absorbed as part of the employment equity requirements. Enterprise development and skills development programmes are even state-funded, yet many companies have allowed their enterprise development funds to sit idle for years. Once businesses accept transformation as a natural part of their operations, compliance costs become negligible, balanced by the goodwill and market trust that comes with real inclusion.

The proposed action by the report include:

• Streamlining firm entry and operational prerequisites: the World Bank proposes expanding Equity Equivalence Investment Programs (EEIPs), which allow businesses to bypass BEE requirements in exchange for training black workers and developing local supply chains. This approach has been applied to IT companies such as Microsoft, Amazon Web Services, and JPMorgan. The problem is that they are often treated as a reluctant compliance exercise rather than a meaningful empowerment tool. The suggestion that foreign companies should be exempt from BEE in exchange for training is patronising. Black people need more than training; they need representation at board and executive levels. It’s not a trade-off — it’s a necessity.
• Exempting investment projects in strategic sectors: the report suggests that investment projects in export-processing zones should be exempt from national regulations, in exchange for higher salaries or benefits. However, these are the very sectors where real wealth is generated. The idea that Black South Africans should be paid slightly higher wages instead of meaningful ownership is insulting.
• Clarifying BEE regulations: the report argues that clarifying the BEE rules could attract more FDI and reduce the administrative burden on both public administration and foreign companies. This is a contradiction. Investors understand BEE perfectly well — they just don’t like it. And yet they comply with similar laws elsewhere without complaint.

So given this clear and present danger against economic empowerment, what needs to be done? If anything, the government must focus on all sectors — particularly health and legal — to ensure transformation as they remain white dominated. This cannot continue. Greater support must be given to the BEE commission to hold untransformed corporates accountable. If due to political expediency brought on by GNU compromises BEE falls off the agenda even in the slightest, the economic time bombs will go off one day. The unemployment rate is highly unsustainable, poverty levels are totally unacceptable for a country with so much wealth, and when these go out of control there will be no business to protect, so to ignore the marginalised in the name of making it easy for business to operate is shortsighted even if that sentiment comes from the World Bank, known for destroying whole countries with their bad loan management advice and structural adjustment programmes.

Prof JJ Tabane is an adjunct professor of media studies at the University of Botswana and editor of Black Business Quarterly and Leadership magazines