Virtue without victory: The failure of the ANC’s B-BBEE policy

If economic empowerment is to transcend rhetoric and become a genuine vehicle for national renewal, then courage, candour and intellectual honesty must take precedence over ideological orthodoxy.

ANC Headquarters (Source: Photographed by Babak Fakhamzadeh, Flickr)

Written by: Dr Brian Benfield

More than two decades have elapsed since the African National Congress (ANC) formally instituted Broad-Based Black Economic Empowerment (B-BBEE), a policy framework purporting to rectify the socio-economic injustices of the past. Initially conceived as an instrument of restorative justice and inclusive economic participation, B-BBEE has metamorphosed into a deeply flawed apparatus of racial preference, market distortion and institutional degradation.

A recently published and rigorously argued study, The Costs of B-BBEE, offers an unflinching assessment of the policy’s real economic and social repercussions. Its findings are as sobering as they are urgent. While the theoretical rationale underpinning B-BBEE may still rest on a foundation of apparent moral legitimacy, its practical implementation has proven to be not only ineffectual but profoundly economically injurious and socially corrosive.

The architects of B-BBEE envisioned a transformative mechanism, legislative and regulatory in nature, through which historical disenfranchisement might be redressed. Mandates concerning racial ownership thresholds, preferential procurement criteria and employment equity prescriptions were designed to accelerate the realisation of economic parity. However, the policy’s real-world execution has failed to yield broad-based upliftment. Instead, it has facilitated the ascendancy of a wafer-thin layer of politically connected elite, while the overwhelming majority of South Africans remain structurally marginalised and economically immiserated.

In place of meritocratic principles essential to a well-functioning economy, B-BBEE has entrenched a system of racial metrics and political patronage. Tenders, contracts and appointments are frequently awarded on the basis of compliance scores rather than competence, expertise or value creation. As the report articulates with empirical clarity, the consequence is an economy hampered by inefficiency, drained of investment confidence and riddled with institutional fragility.

Nowhere are the deleterious consequences of this policy more manifest than in the domain of investment. Despite South Africa’s vast endowment of natural resources and its sophisticated financial infrastructure, foreign direct investment has diminished, stifled by regulatory compulsion and policy ambiguity. Although multiple factors contribute to investor reticence, including wide-spread governance failures, deteriorating infrastructure and levels of crime, the report identifies B-BBEE as a principal driver of capital flight. The obligation to cede ownership to “empowerment” partners, frequently devoid of capital input or operational acumen, constitutes a powerful deterrent. In an era where both global and local capital seeks certainty and value, the imposition of racially-defined ownership quotas has served only to erode confidence in the country as a whole.

Multinational firms, acutely attuned to reputational risk and regulatory complexity, increasingly choose to deploy capital in friendlier jurisdictions that offer greater legal coherence and commercial predictability. Meanwhile, domestic enterprises expend significant resources devising convoluted ownership structures that serve bureaucratic appeasement rather than entrepreneurial purpose. The upshot is a stultified economic environment in which innovation is subordinated to box-ticking, and where excessive regulatory overreach suffocates the very dynamism it professes to unlock.

A most grievous impact of B-BBEE has been its role in hollowing out the capacity of the public sector. State-owned enterprises, once emblematic of South Africa’s potential, have descended into outright dysfunction. Eskom and South African Airways for example, now serve as cautionary exemplars of how empowerment imperatives, when pursued without regard for technical proficiency or operational exigency, can result in waste, failure and downright malfeasance. In many instances the pursuit of empowerment targets has trumped the imperative of service delivery, rendering essential organs of the state ineffectual and breeding public cynicism.

What emerges from the report’s analysis is a stark indictment: B-BBEE has failed in its fundamental mission to empower the majority. While a minuscule cohort of politically favoured individuals has amassed inconceivable wealth, the entrenched obstacles that perpetuate inequality, inadequate education, lack of access to capital and systemic unemployment, remain unaddressed. Rather than catalysing economic emancipation, the policy has constructed a mere illusion of empowerment, enriching a select few while leaving the structural edifice of deprivation untouched.

In tethering opportunity to racial identity rather than to socio-economic necessity, B-BBEE has sown discord, deepening both inter-racial suspicion and intra-racial resentment. The report captures this tragedy with poignant precision: South African society is becoming ever more stratified, not solely by class but by distrust, disappointment and disillusionment.

To its credit, the study does not advocate the wholesale abandonment of empowerment initiatives. Rather, it calls for a profound recalibration of the paradigm, one that reorients empowerment away from racial essentialism and toward the twin imperatives of merit and need.

Chief among its recommendations are:

· Replacing ownership quotas with incentive structures that reward genuine contributions to training, mentorship and entrepreneurial development;

· Redirecting public funds from regulatory compliance exercises to education and vocational training;

· Streamlining empowerment codes to significantly lower compliance burdens and promote investor confidence;

· Redefining empowerment in socio-economic terms, thereby extending opportunity to all who are disadvantaged, irrespective of race.

Such a re-formation would not only revitalise South Africa’s economic prospects but would also re-establish faith in the project of national reconciliation and collective advancement.

The path to reform is however, strewn with political obstacles. For the ANC B-BBEE is not merely policy, it is dogma. A symbolic restitution of dispossession and oppression. But as the report astutely observes, symbols do not feed nations. Nor can they substitute for tangible progress.

If economic empowerment is to transcend rhetoric and become a genuine vehicle for national renewal, then courage, candour and intellectual honesty must take precedence over ideological orthodoxy. As the report so aptly concludes: “South Africa cannot continue to mortgage its future in the currency of past injustice. Empowerment must be made to serve the whole of the national good, not a narrow elite, and not the machinery of political incumbency.”

This is a hard truth. But it is necessary to grasp it ingenuously and forthrightly. To ignore it is to imperil the very future B-BBEE was intended to secure for our beloved country, South Africa.

Dr Brian Benfield, retired professor, Department of Economics, University of the Witwatersrand, is a Senior Associate and Board member of the Free Market Foundation.