Debunking the Myth of a “Hijacked” BEE

BEE has not been hijacked — it was designed for elite enrichment from the start.

Photo by Cytonn Photography on Unsplash

In a recent tweet posted on X Radio 702 presenter Aubrey Masango argued that Black Economic Empowerment (BEE) has been mischaracterised through its association with corruption. According to him, the policy was conceived as a legitimate tool for economic transformation but has since been distorted by corrupt actors who have “hijacked” it for their own ends. This line of reasoning, which recurs in much of the mainstream commentary on BEE, rests on the erroneous assumption that the policy remains sound in principle and that its failures can be attributed to the actions of a few corrupt individuals, rather than fundamental defects in its design.

Why BEE has not been hijacked

This framing is incorrect. BEE has not been "hijacked" by corrupt actors or deviated from an otherwise sound original purpose. Many people are increasingly realising that the policy was never designed with the broad upliftment of black South Africans in mind.

The elite arrangement behind it

It was and remains, as political economist Moeletsi Mbeki argues in Architects of Poverty: Why African Capitalism Needs Changing, the product of an elite arrangement between segments of the old economic elite and sections of the black political elite that are in the African National Congress (ANC) and its broader patronage network. Here, the term 'old economic elite' refers to the predominantly white-owned corporations that dominated South Africa's economy under Apartheid.

This elite arrangement, which was forged against the backdrop of the country's transition from Apartheid to democracy, brought together these two groups with distinct but ultimately reconcilable interests. Segments of the old economic elite sought to neutralise the immediate threat of a radical policy shift to the left as the ANC prepared to assume power, and to preserve a degree of economic continuity and stability. To that end, they saw strategic value in co-opting certain elements of the black political elite through ownership deals - as an example - in existing corporations such as Sanlam.

Beyond the immediate objective of economic continuity and stability, these economic actors recognised that the early trajectory of black empowerment was laying the foundations for a system of cronyism rather than a market-driven, competitive one. Although BEE had not yet been codified into law, Mbeki notes that its conceptual direction was already evident in early ownership deals such as the one involving Sanlam that prefigured what would later become the policy’s pillars of ownership and management control (respectively). These developments signified that empowerment would, at least in part, centre on the transfer of equity and executive control to a select group within the black political elite.

By the time BEE was formally codified into law in 2003, and all its pillars were unveiled (including ownership and management control), it had become clear that the policy would entrench a system of cronyism that would serve the interests of these economic elites. The foundations of this system, as I've noted, had already been laid during the 1990s, and the final framework merely confirmed it.

Inside the BEE scorecard: How compliance works

At its core, BEE operates through a scorecard system that evaluates corporate compliance against these pillars and assigns corresponding scores. Firms with high BEE scores are considered the most compliant and, as a result, stand to benefit most from the system. Among the various pillars, the enterprise and supplier development component stood out for what it enabled: participation in a public procurement regime premised on the principle of preferential treatment. This meant that when the government awarded tenders and contracts, it would reward corporations with high BEE scores. These economic elites realised this dynamic early on and moved to position themselves accordingly.

To secure such rewards, these corporations understood that they would have to raise their BEE scores significantly. This meant investing heavily in the ownership and management control pillars, which are the two most heavily weighted components of the scorecard that are foundational to achieving an elevated BEE status level. The strategy behind this was clear: to gain access to state contracts by securing high scores, and to secure high scores by placing elements of the black political elite in ownership and executive positions.

The remaining two pillars are skills development and socio-economic development. While these carry less weight in the scorecard system, they still contribute to a corporation’s overall compliance. Upskilling black South Africans is, in theory, a worthy goal. The same applies to investing in under-serviced communities. But for these specific corporations, these requirements were seen as racial box ticking exercises that created minor inconveniences. The benefits of BEE compliance far outweighed any discomfort they felt in adhering to them.

These corporations ultimately complied fully with the scorecard requirements and reaped the rewards that came with high BEE ratings. They continue to benefit from this arrangement to this day, and this fact explains why they have little incentive to support calls for the abolition of BEE.

Up until this point, I've referred broadly to certain economic actors who have strategically positioned themselves to benefit from BEE. While I have mentioned the example of Sanlam, I've deliberately refrained from naming others for reasons that should be obvious. As an exercise, however, I encourage all readers of this piece to research some of the country's most BEE-compliant corporations and examine the nature of their relationship with the state. This alone should clarify the nature of the elite arrangement far better than any list of names can.

The role of elements in the black political elite

I now turn to sections of the black political elite in the ANC and its patronage network. Contrary to what some have argued, they were not coerced into this elite arrangement with segments of the economic elite; they entered it willingly because they knew that accepting co-option would yield massive benefits for themselves.

This is where I part ways with Mbeki, who argues that the ANC could never have invented BEE, and that it was rather conceived by sections of the old economic elite. His reasoning is that the party, being "multi-racial" in its ideological character, could never have created a racially exclusive policy designed specifically for Africans. While he is right in pointing out that BEE is racially exclusive in practice, I disagree with his argument that the ANC had no role in its design.

Elitism has always been baked into the DNA of the ANC, which was founded in 1912 by an African nationalist elite group. In Biko: A Biography, sociologist Xolela Mangcu demonstrates how this group established a top-down leadership culture that has continued to define the party’s politics to this day. While the ANC later broadened its base through alliances with the South African Communist Party (SACP) and trade unions, this elite, hierarchical character has never left it.

And so, within this context, it is not difficult to look at the pillars and see how they were deliberately crafted to create the system of cronyism that I've spoken about that enables rent-seeking and the pillaging of the state through procurement as one example. It is here that we must also remember that one of the biggest beneficiaries of BEE in our country - who currently occupies the highest political office - played a central role in drafting the policy. He was the Chairman of the BEE commission that was established in 1998 and tasked with developing a strategy for black empowerment.

By 1998, he and others had already benefitted from ownership deals, so there is good reason to believe that the crafting of the pillars was deliberate. I’ve touched on the pillars of ownership and management control, which clearly serve their purpose. The enterprise and supplier development pillar, as I’ve noted, feeds into public procurement that is based on the principle of preferential procurement. This principle allowed them to benefit from BEE premiums, which in practice meant overcharging the state for procuring goods. They could also use this system to benefit their patronage network, which consists of tenderpreneurs. The two other pillars, skills development and socio-economic development, were really just window dressing to give the facade of broad-based transformation. But at its core, the policy with these three pillars is very clearly geared towards elite enrichment by design.

Beyond nationalism: The ANC’s dual agenda

I also disagree with Mbeki’s claim that the ANC is simply a nationalist party and not socialist. In Countdown to Socialism: The National Democratic Revolution in South Africa Since 1994, Dr. Anthea Jeffery of the Institute of Race Relations (IRR) reminds us that the ANC is both socialist and nationalist, and it is operating within the framework of its National Democratic Revolution (NDR). Its incremental shift towards socialism is evident in pieces of legislation such as the BELA Act, the National Health Insurance Act, and the Expropriation Act. Far from contradicting the elite arrangement, these developments reveal a dual strategy of seeking rent through cronyism while simultaneously pursuing a broader socialist agenda.

Rethinking empowerment

It is in this context that we must also respond to Masango’s reference to the so-called “Afrikaner delegation” and its supposed anti-transformation agenda. While it is true that BEE has largely failed the majority of black South Africans and has benefitted only a connected few, this does not mean that all opposition to the policy stems from a place of imperial nostalgia or racial resentment.

The real reason why many - including the so-called “Afrikaner delegation” - oppose BEE is not because they are anti-transformation, but because BEE is also racially exclusive in its design and discriminatory in its application. That fact alone makes it difficult to defend on principled, constitutional grounds.

Add to this the reality that the policy has entrenched elite enrichment and enabled systemic corruption, and it becomes clear that BEE has failed not only the poor but the country as a whole. It has deepened racial division in society and delegitimised the very idea of empowerment.

If we are serious about addressing the legacy of economic exclusion, then empowerment in the country must be reimagined. It should not be race-based, and it certainly should not be driven by the state.

The conversation should start there.

Ayanda Sakhile Zulu holds a BSocSci in Political Studies from the University of Pretoria and is an intern at the Free Market Foundation.