JOHAN FOURIE: How BEE ends
- BEE NEWS
- Dec 1, 2025
- 7 min read
Johan Fourie | 26 November 2025
For all their differences, BEE and apartheid are subject to the same hard logic of economics and politics.
South Africa’s history has a way of circling back on itself. Four decades ago an oppressive racial order began to crack under the weight of economic pressure. Today, a different policy — BEE — faces scrutiny as its own unintended consequences mount.
It is crucial not to confuse the two. Apartheid was a heinous system designed to entrench racial oppression; BEE was conceived to counteract those injustices by promoting black participation in the economy. One was built to separate and exclude, the other to include and uplift.
Yet for all their differences both are subject to the same hard logic of economics and politics. Systems survive while enough powerful groups still benefit from them. They erode once their costs — economic, political, administrative — begin to outweigh those benefits.
That is the core hypothesis here: the mechanisms that helped push apartheid towards its end can tell us something about the conditions under which BEE will be reformed, replaced, or even abandoned.
A first line of explanation for why apartheid fell is simple: the system became too expensive to sustain. From the late 1940s apartheid constructed an elaborate racial edifice. White farmers received generous subsidies and protection. White workers — especially Afrikaner workers — were granted job reservation and a “civilised labour policy” that kept wages high and competition from black workers at bay.
White business enjoyed access to large pools of cheap, politically constrained black labour. The state built an entire bureaucracy — labour bureaus, influx-control offices, bantustan administrations — to police these arrangements.
For a time this coalition of white interests worked. White workers got security, white capitalists got profits, white politicians got votes. But the policy instruments that secured those gains undermined the growth the system needed to reproduce itself.
Job reservation and restrictions on black education meant that by the 1960s and 1970s South African firms struggled to find enough skilled and semi-skilled workers. Instead of drawing on the obvious reservoir of black talent, apartheid forced companies to respond in two ways: by over-investing in machinery, and by trying to substitute capital for labour.
Manufacturing became far more capital intensive than one would expect in a labour-abundant country. The result, as economist Nicoli Nattrass and others have shown, was falling capital productivity and declining profitability in both manufacturing and mining.
At the same time, the composition of white interests became more fractured. Big business lobbied for a relaxation of job reservation and education restrictions. They needed more skilled workers and more predictable access to global markets. By contrast, white workers and farmers feared that precisely those reforms would erode their protected status.
Attempts at partial reform — allowing black trade unions, moving the colour bar up the occupational ladder, tinkering with influx control — reflected these tensions. But they were piecemeal. No-one could change the system without threatening some core white constituency.
By the 1980s the apartheid economy looked like a high-cost, low-efficiency machine. Unemployment among black South Africans was rising, profitability in key sectors was falling, and the system demanded ever more administrative effort to keep its racial rules in place. It was, in economic terms, eating itself alive.
There is an obvious, if uncomfortable, parallel with BEE. Again, the intentions differ fundamentally. BEE was meant to break down the racial exclusivity of apartheid’s economy. But a growing number of businesses now experience BEE as a kind of overlay of rules that must be complied with even when they conflict with efficiency.
Over the past two decades firms have expended significant resources on ownership restructuring, BEE scorecards, management targets and procurement rules. At modest levels, these instruments can nudge companies to search for talent in places they previously ignored, or to invest in training and enterprise development.
However, at more extreme levels the trade-offs sharpen. Compliance absorbs managerial time. Ownership deals can distort incentives. Procurement rules may force firms to choose higher-cost or less reliable suppliers to secure points.
Some analysts estimate that corporate South Africa spends a few percentage points of turnover on BEE compliance. Others argue that empowerment rules, taken together with localisation requirements and other regulations, have cut materially into growth and job creation, while disproportionately enriching a relatively small group of insiders.
One can debate the numbers, but the pattern is harder to ignore: as compliance expectations become more demanding, both white- and black-owned firms find it harder to invest, to expand, and sometimes simply to survive.
The “economic unsustainability” theory of change would therefore suggest that if BEE in its current form continues to erode growth and job creation, without visibly improving outcomes for the poor, the coalition that sustains it will eventually weaken. Just as apartheid’s economic logic turned against itself, BEE could lose support not because its goals are rejected, but because its instruments are judged to be too costly for too little gain.
A second family of explanations for apartheid’s demise turns to the outside world. In the standard story, international sanctions and boycotts ratcheted up the pressure on Pretoria until it capitulated. The sporting boycotts, disinvestment campaigns and trade sanctions of the 1980s damaged South Africa’s economy and isolated its leaders.
Yet, as economists Mats Lundahl, Merle Lipton and others have argued, the distribution of costs and benefits under apartheid — and under sanctions — was anything but uniform. Apartheid’s discriminatory rules and its sprawling enforcement apparatus did not serve “whites” as a bloc; they mainly protected those white groups with political clout — organised workers in protected jobs, commercial farmers, parts of the Afrikaner bureaucracy — while constraining more outward-orientated business and many ordinary consumers.
Sanctions layered another set of distortions on top of this: they squeezed export-orientated firms and internationally exposed sectors hardest, while import-competing producers and rent-seekers inside the sheltered, state-centred core of the economy could often adapt or even gain from the new scarcities.
In that sense, sanctions risked slowing the political learning process. Instead of steadily eroding the position of those who benefited most from apartheid’s rules, they often reinforced the coalitions that had most to gain from keeping the system intact, while weakening the constituencies, including parts of business, that might otherwise have pushed harder for reform.
The sad irony is that some of apartheid’s international opponents may inadvertently have helped a politically powerful minority to cling on for longer, even as the wider white population, and certainly black South Africans, bore the economic costs.
There is a lesson here for contemporaries of BEE. International investors and foreign governments are increasingly critical of South Africa’s empowerment framework. Ratings agencies and consultancies flag empowerment and labour regulations as part of the “policy uncertainty” that weighs on investment. Some trade partners may even treat BEE requirements — ownership quotas, local-partner rules — as non-tariff barriers.
Yet blunt external criticism can easily trigger a nationalist reflex. In a country where those classified as black were excluded from economic citizenship for most of the 20th century, foreign lectures about “market-friendly” reforms are unlikely to land well.
They make it easy for defenders of BEE — including those who profit most from its current design — to argue that outsiders (or, indeed, insiders who side with the outsiders) “do not want us to undo apartheid’s legacy” and to double down in response.
Just as sanctions could entrench the interests of a small but powerful minority under apartheid, heavy-handed external pressure today might entrench BEE by giving it a symbolic role it was not originally designed to play: a test of sovereignty and dignity, rather than a set of tools to improve growth and inclusion. If history is any guide, the more BEE becomes a proxy battlefield for foreign and domestic posturing, the harder it becomes to change it from within.
A third parallel lies not in what brought apartheid down, but in what delayed its end: the absence, for many years, of a clear and credible alternative.
By the 1980s, it was widely understood that apartheid had no long-term future. Yet there was no settled vision of what should replace it. Within the ANC there was tension between socialist and more market-orientated strands. Business feared radical redistribution and nationalisation. The result was a long period of ideological contestation.
The fall of the Berlin Wall in 1989, and the subsequent collapse of the Soviet model many in the liberation movement had once looked to, helped to weaken the case for a state-led, command-style economy and opened space for a more mixed, market-based settlement.
In the early 1990s that settlement took institutional form in the Reconstruction and Development Programme (RDP) and, from 1996, in the more orthodox macroeconomic framework of Growth, Employment and Redistribution (Gear), both forged through protracted bargaining between the ANC, business and organised labour.
That uncertainty — the sense that the alternative was unclear, contested, even frightening — helped the old order to linger. We are in a somewhat similar place with BEE. Almost no-one believes the current configuration of empowerment policy is the final word. But there is no agreement on its successor.
Should South Africa move away from race-based criteria altogether and target poverty and exclusion irrespective of identity, in the expectation that most beneficiaries will still be black? Should there be a “BEE 2.0″ that shifts emphasis away from ownership deals and high-level appointments towards schooling, skills and small-firm finance? Should empowerment be narrowed to a few sectors, or broadened even further?
Looking back, apartheid did not end because it was morally indefensible; it had been morally indefensible from the start. It ended when the costs of maintaining it — in forgone growth, in social conflict, in administrative burden — exceeded what its beneficiaries were willing or able to carry.
The 1961 Nobel peace prize recipient Albert Luthuli captured the deeper logic in Let My People Go when he wrote: “Economics will not obey racial blueprints.”
Systems that allocate opportunities by skin colour rather than by ability or effort eventually choke off the very dynamism they need to survive. History suggests they are most likely to give way when their economic coalitions fracture and when a more credible path to both growth and inclusion is on the table.
Fourie is chair of economics, history and policy at Stellenbosch University.
‘Disclaimer - The views and opinions expressed in this article are those of the author(s) and not necessarily those of the BEE CHAMBER’.