B-BBEE under fire: The myths and reality

Source: Pexels.

1. “B-BBEE imposes no costs on the economy”

A June 2025 report by the Free Market Foundation (FMF) and Solidarity Research Institute (SRI), titled The Cost of B-BBEE Compliance, conservatively estimates the overall cost of B-BBEE to the South African economy as approximately R290bn per year – a total of R5tn in lost economic activity since the inception of the policy.

B-BBEE is estimated to have reduced South Africa’s GDP by 2–4% per annum, resulting in the loss of some 4 million jobs. The report focused solely on the direct compliance burden of B-BBEE, but the opportunity costs are invisible and are likely far higher.

2. "B-BBEE reduces inequality"

Professor William Gumede of Wits University has estimated that 100 families have benefited directly from B-BBEE schemes to the tune of R1tn. Hardly “broad-based”.

That B-BBEE only enriches the elite is a feature, not a bug of the policy.

South Africa’s Gini coefficient, a measure of equality, scores South Africa at 0.62. Although this score has improved slightly since 1994 (0.67), the composition of inequality has changed. Intra-black inequality has gotten worse: rising from 0.54 in 1994 to 0.62 by 2018.

In any event, economic equality is an impossible goal and can only be achieved through coercive limits on freedom. A far more important goal is reducing poverty – a perfectly achievable objective – which B-BBEE also fails to do.

3. “B-BBEE benefits poor black people”

B-BBEE claims to reduce black poverty and alleviate black unemployment. It doesn’t.

Democratic Alliance (DA) head of Policy, Mat Cuthbert recently noted that black unemployment reached 36% in the last quarter of 2024 compared to white unemployment of 7%. From 2014 to 2024, the black unemployment rate increased by 9 percentage points, while the white unemployment rate went down by 1 percentage point.

Cuthbert also cited data from the 2025 Household Affordability Index, which shows that approximately 64% of black South Africans are living below the upper-bound poverty line of R1,634 per person per month. Nearly 30 million black South Africans are trapped in poverty out of a total population of 52 million, he said.

This data shows that black poverty has worsened during the period where B-BBEE has been at its strongest. GDP per capita has remained stagnant in real terms since 2007. Coincidence?

By contrast, in countries that rank highly on the Economic Freedom of the World Annual Report, the poorest segment of the population is eight times wealthier than their poorest counterparts in economically unfree countries. Freedom works.

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4. “B-BBEE is voluntary”

Oh, really?

Try doing business with the state in any capacity if you are not B-BBEE compliant. Even if you don’t do business directly with the state you must still comply with B-BBEE if you wish to do business with a larger firm that has the government as its client. This soft coercion compels whole supply chains to comply.

Want a mining license? You’ll need an equity partner for that.

Want to practise as a real estate agent? You must be B-BBEE compliant to lawfully operate.

Want to conduct a merger? The Competition Commission will need proof that your new entity will benefit black shareholders.

There is no limiting principle on B-BBEE. Once you have conceded the point that the state can determine whether you can operate based on the colour of your skin then your other basic commercial freedoms can easily be taken away.

5. “B-BBEE is well-intentioned, but flawed in its implementation”

The policy has done exactly what it intended to do: extend the power of the state over all aspects of economic and social relations, enrich a politically connected elite, and racialise the economy.

6. "B-BBEE is a constitutional imperative”

Section 9 of the Constitution states that everyone is equal before the law and has the right to equal protection and benefit of the law. Section 9 does allow the state to take: “legislative and other measures to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination.”

However, this is not an explicit authority for the state to discriminate against people on the basis of their race in general, but a relatively innocuous enabling provision for the state to provide social welfare.

It is only in a few instances in the Constitution where racial representation can apply (the judiciary and public service, for example). This authority exists only inside the state, for the public sector. The Constitution makes no similar grant of power to racially engineer the private sector.

Instead, the founding constitutional principle of non-racialism should be the lodestar of any redress policy. This is especially so given South Africa’s history of racialised social engineering.

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7. “B-BBEE is the law so there’s nothing we can do”

South Africa has a proud track record of defying unjust laws.

During the late stages of apartheid, many international businesses operating in South Africa refused to implement race-based policies through policy stances like the Sullivan Principles, which governed American companies’ conduct in the country.

Many black South Africans simply ignored population control measures by seeking work in urban centres, a point documented by the late John Kane-Berman in his 1990 book, South Africa’s Silent Revolution. These illiberal laws were rightly delegitimised through countless acts of non-compliance.

South Africans in 2025 should do the same with B-BBEE and follow a higher moral and constitutional order.

One place to start is in DA-controlled municipalities, the Western Cape Province, and DA-run national ministries. As I have argued previously in these pages, the DA can scrap B-BBEE on Monday morning.

8. “B-BBEE enjoys international support”

Don’t be fooled: It’s not just the Trump administration that has a problem with South Africa’s racial laws. Despite the big smiles of European leaders at the G20, European firms are just as wary about the South African economy (due to policy) as American ones are – they’re just a lot more diplomatic about it.

Judge investors by their actions, not by their words.

Gross fixed capital formation (a measure of long-term fixed investment) has plummeted from 22% of GDP in 2008 to just 15% in 2024. Why invest in a country where your capital is taxed on arrival, as the editor of this publication frequently points out?

Mainstream foreign media outlets like The Economist and the Financial Times have also reported on the negative costs of B-BBEE and called for it to be reevaluated, as has the World Bank.

9. “There is no alternative to B-BBEE”

B-BBEE is a policy choice like any other and what has been done can be undone.

Disadvantage does not need a proxy like race. We can see and measure disadvantage and develop strategies for how to deal with it.

There are many viable alternatives.

The Institute of Race Relations (IRR) has long proposed a voluntary, non-racial alternative: Economic Empowerment for the Disadvantaged (EED).

The Democratic Alliance recently tabled a private members’ Bill in Parliament: The Economic Inclusion for All Bill.

The FMF’s solution is a simple one: free the market and put liberty first. We have yet to see an example of where comprehensive liberalisation has not worked.

10. “Public opinion supports B-BBEE”

No longer.

The latest polling data from the Social Research Foundation shows that public opinion is favourable towards non-racial alternatives to the current empowerment framework.

In a demographically representative survey of 1,002 registered voters, respondents were asked whether they agreed or disagreed with the DA’s proposal to replace B-BBEE with an empowerment policy that uses poverty rather than race to determine who needs upliftment.

The results might surprise you.

Among all voters, 67% said they agreed with the policy and 25% said they disagreed, meaning a strong majority of South Africans are in favour of reforming B-BBEE. Among ANC supporters, 61% agreed while 28% disagreed with the DA’s proposed BEE reforms.

It’s time to bury the B-BBEE behemoth.