South Africa is taking steps to revamp its flagship Black economic empowerment program, aiming to address the program’s shortcomings and ensure its effectiveness in tackling the country’s stark racial inequality. Tshediso Matona, the head of the Broad-based Black Economic Empowerment Commission (B-BBEE), is proposing new incentives and potential fines to increase corporate participation and curb exploitation of the system.
The B-BBEE program, established in 2003, utilizes a scorecard system to encourage companies to hire and promote Black individuals, offering tax breaks and access to government contracts in return. However, two decades later, the program’s effectiveness is under scrutiny. Unemployment rates for Black South Africans are five times higher than for white South Africans, and the country faces the worst income inequality in the world, according to the World Bank. Critics argue that the B-BBEE program has failed to deliver on its promise of closing the gap.
Matona acknowledges that the program is susceptible to abuse, citing the practice of “fronting,” where companies falsely list Black individuals as managers to inflate their scores. The commission has received over 1,300 complaints of fronting since 2017, but prosecutions have been slow due to challenges within the criminal justice system. The program’s voluntary nature has also led to low compliance, with only 141 out of 400 listed companies submitting their Black empowerment status reports in 2022.
To address these issues, Matona proposes a two-pronged approach: incentivizing companies for compliance and holding non-compliant companies accountable. He envisions increasing recognition for companies investing in skills and enterprise development, while also implementing “naming and shaming” tactics and potentially imposing fines on those who fail to submit reports. President Cyril Ramaphosa, who views racial inequality as an “existential challenge” for South Africa, is also supportive of these measures.
However, Matona’s proposals face potential hurdles. The pro-business Democratic Alliance party, a coalition partner of the ruling African National Congress (ANC), has expressed opposition to punitive measures. Additionally, some critics argue that the B-BBEE program has created a system of “Blackwashing,” where companies exploit loopholes to artificially inflate their Black ownership figures, often enriching a select few political insiders.
Matona counters these criticisms by highlighting the need for greater oversight of independent agencies responsible for issuing Black empowerment scorecards and advocating for a shift in focus from ownership to skills development and training. However, even this approach presents its own challenges. Companies can earn points by paying for training courses for Black individuals without necessarily hiring them. This can lead to a cycle of training without meaningful employment opportunities for Black job seekers.
While Matona’s efforts to revamp the B-BBEE program are welcomed by some, others advocate for its complete repeal. Critics argue that the program creates unnecessary bureaucracy, increases business costs, and deters foreign investment.
The future of the B-BBEE program in South Africa remains uncertain. As the country grapples with its legacy of apartheid and its ongoing struggles with racial inequality, the government is facing pressure to find a more effective and equitable approach to promoting Black empowerment.
