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To BEE or not to BEE

One party political systems, historically, have proven detrimental to the health of democratic government in various ways

The experience of South Africa’s ANC government over the past two decades is that it is confirming this depressing trend. There is a high level of corruption within South Africa’s public service sector (the largest employer in the country) and across all three tiers of its government – national, provincial and local.

The ANC was voted into power in April 1994 with a mandate to transform the economy and redistribute its wealth amongst the majority of the population. One method to enforce transformation and redistribute was the policy of Black Economic Empowerment (BEE). Unfortunately, this policy has given rise to preferential procurement practices and should be called Black Economic Enrichment.

There have been many critics of BEE both from the opposition parties (Democratic Alliance and others) and from within the ANC. The brother of former President Thabo Mbeki, Moeletsi, has comment that: “BEE strikes a fatal blow against black entrepreneurship by creating a small class of unproductive, but wealthy, black crony capitalists made out of ANC politicians”.

In effect, BEE has enabled ANC politicians to participate in deals with local businesses and to acquire a shareholding percentage of these businesses for a nominal fee or by a substantial interest-free and constantly deferred bank loan.

BEE has also created many opportunities for fraud as evidence by the common practices of fronting and tenderpreneurship. Recent figures from an accounting firm study has indicated that between 1998 and 2008, the value of transactions involving BEE deals have been between R 550 billion and R 600 billion. These transactions have benefited a small number of rich politicians and their associates, as well as swelling the ANC coffers.

Corruption is often defined as “the giving or accepting of a benefit in exchange for a misuse of power”. The ANC has benefitted from its BEE policies and the nub of the corruption is clearly illustrated by the following observation: In respect of preferential procurements, whereby the government only buys from a BEE accredited company, having a bottle of water that you can buy in the shop for R 7.00 procured by the government for R 27.00 is a clear means by which both the government and the BEE accredited supplier can make substantial profits.

In conclusion, instead of trying to reform the economy and advance the plight of the poor, BEE has failed to promote economic growth. Although BEE has encourage the redistribution of wealth in South Africa, the principal beneficiaries have been the ANC and those politicians and supporters involved in the BEE deals.

As a foreign company wishing to invest in South Africa, have you considered the implications of this BEE policy? Perhaps, you should check whether South Africa’s BEE policies might violate the anti-corruption protocols of your company, or your country.