BEE COSTS SOUTH AFRICA R290 BILLION A YEAR
- BEE NEWS
- Mar 9
- 4 min read
Shaun Jacobs | 9 March 2026
Annual Black Economic Empowerment (BEE) compliance costs the South African economy up to R290 billion a year in direct costs, as well as lost economic activity. This equates to around 3% of South Africa’s entire annual GDP.
While this is not necessarily a problem in itself, as every policy comes with a tradeoff of sorts and a cost, BEE is coming under increasing scrutiny as to whether it provides any benefit to South Africans.
The policy framework has become increasingly associated with cronyism and corruption, with a handful of well-connected individuals benefiting instead of a broader cross-section of society.
This has led to calls for the policy framework to be scrapped and replaced with a means-based mechanism for redistribution from the Democratic Alliance and civil society organisations.
The ANC remains committed to the policy framework, with it saying that some changes need to be made to close loopholes that are being exploited by politically connected individuals.
Crucially, Finance Minister Enoch Godongwana, a high-ranking member of the ANC, has said the policy framework is up for honest debate.
This admission is significant as BEE has been treated as beyond question for years, with the ANC refusing to even engage in a debate on the policy framework’s merits.
“Evidence was ignored, critics sidelined, and the policy expanded in reach despite mounting economic strain,” the Free Market Foundation said.
The foundation, alongside Solidarity, has conducted research on the economic impact of BEE in South Africa over the past 20 years.
Their research indicated that the policy framework has had severe negative consequences for the economy –
More than R5 trillion in cumulative economic losses since 2004
A 1.5% to 3% annual reduction in GDP growth
Approximately 192,000 jobs are foregone each year
Up to R290 billion in compliance costs annually
“In a country with one of the highest unemployment rates in the world, these are not technical side effects. They are structural barriers to growth, investment and job creation,” the foundation said.
“Empowerment should mean widening opportunity, lowering barriers to entry, and enabling enterprise. Instead, BEE has entrenched insider enrichment while ordinary South Africans remain excluded from meaningful economic participation.”
Changes coming to BEE
Godongwana’s admission that BEE is up for debate came with an important caveat – that transformation remains a constitutional imperative.
This means that the policy framework is unlikely to be done away with in a wholesale change, but rather alterations are set to be made to existing transformation policies.
“We must have an honest debate about BEE. But, first and foremost, it is a constitutional imperative. You cannot dismiss BEE as it is required by the Constitution,” Godongwana said.
“What we need to ask is whether there are any unintended consequences. You can’t say ‘Do away with BEE.’ Are there any unintended consequences?”
“If the debate starts there, it can start from an objective basis of analysing some of the unintended consequences, and then we can have a constructive discussion.”
Godongwana is not the only high-ranking ANC official to say that changes are likely to be made to the BEE framework in South Africa, with Trade Minister Parks Tau overseeing a two-phased review of transformational policies.
This two-phased review is part of the implementation of the Transformation Fund, which may replace the existing BEE framework entirely.
The second, longer-term review focuses on the effects of BEE policies on the economy and how they can be improved to ensure positive outcomes.
Tau’s proposal and the looming implementation of the Transformation Fund are set to be the most significant change to BEE in South Africa in years.
The draft changes to South Africa’s BEE codes show that the intention is for the fund to be capitalised through businesses’ enterprise and supplier development contributions.
This fund will then use the capital it manages to invest in and finance small- and medium-sized black-controlled businesses.
Under the existing BEE codes, all businesses must make contributions, in cash or in kind, to these types of businesses, with some also being their suppliers.
Tau’s changes are set to allow businesses to instead make contributions to a centralised fund, which will then deploy money to beneficiaries in line with BEE principles.
This would mean that businesses would no longer have to identify their own enterprise and supplier development beneficiaries or go through third-party intermediaries.
Crucially, while the 3% net profit after tax spending target will remain unchanged, businesses could score more points by contributing to the fund than by making individual contributions to black-controlled companies.
“This shows that BEE is probably going to be redefined, and I think this is probably the beginning of the end of BEE as we know it,” Efficient Group chief economist Dawie Roodt said.
Roodt explained that the existing BEE framework is likely to be replaced with the new Transformation Fund, with businesses paying into the fund to secure points for their BEE scorecard.
“This will probably be the end of BEE when this process is followed through to its conclusion,” Roodt said.
‘Disclaimer - The views and opinions expressed in this article are those of the author(s) and not necessarily those of the BEE CHAMBER’.