Ramaphosa targets private banks and businesses in BEE push

President Cyril Ramaphosa says that black businesses in South Africa need the R100 billion transformation fund to boost the country’s economy – and private banks and businesses need to come on board.

Writing in his weekly letter to the nation, Ramaphosa said that Black Economic Empowerment (BEE) has successfully increased the wealth of black households in the country.

However, white households are still five times richer, which necessitates further state interventions to ‘close the gulf’, he said.

This can only be done by expanding opportunities through the country’s transformation laws, anchored in the Broad-Based Black Economic Empowerment Act and the Employment Equity Act.

“Transformation is not a favour. It is a necessity. The inequality of our past continues to shape the lives of millions of black South Africans,” he said.

The president also said it was a “false notion” that BEE was a cost to the economy and a choice between transformation and economic growth.

“Economic growth without transformation entrenches exclusion, and transformation without growth is unsustainable,” he said.

“Our task is to ensure that we pursue both growth and transformation in concert, with more vigour and with greater effect.”

Ramaphosa also slammed those who are challenging the country’s BEE and transformation laws in court, saying they are the ones who benefited from the country’s “legacy of exclusion”.

He said the government would pursue ways to further entrench BEE and transformation, including establishing the R100 billion Transformation Fund.

The fund is expected to make R20 billion a year available for black enterprises, funded by other profitable companies in the country.

The government plans for South African businesses to pay 3% of their annual net profit after tax into the fund, with more funding coming through the Competition Commission’s public interest participation.

In addition to contributing to the fund, Ramaphosa said the private sector should also help black businesses more.

He said private banks, in particular, have the resources to “make the greatest impact for black businesses,” adding that these banks need to review their lending practices.

“The private sector should use their supply chains far more deliberately to empower many more black-owned businesses, not just to improve their BBBEE scorecard, but to grow and diversify their supplier base,” the president noted.

“I call on all South Africans, and in particular the private sector, to recommit to economic transformation.”

Who really benefits from BEE

Despite Ramaphosa’s position that BEE serves the majority, the true benefactors of South Africa’s empowerment policies have come into question.

Critics have said that the reason the state defends BEE and transformation policies so militantly is because they are part of the very few who actually benefit from the programmes.

Research conducted by Professor William Gumede of the Wits School of Governance posited that BEE has led to increased poverty, unemployment, and inequality in South Africa, with only a few really benefiting.

Gumede stated that the government had asked him to conduct an assessment of black economic empowerment in South Africa.

He said it was very clear that BEE only benefits a tiny group of politically connected people linked to the African National Congress (ANC) and trade unions.

“Conservatively, R1 trillion has been moved between under 100 people since 1994. The same people have been empowered and re-empowered over and over,” he said.

“South Africa’s BEE model has created a model of corruption because people set up companies just to get a contract.”

Efficient Group chief economist Dawie Roodt has also been highly critical of BEE and Ramaphosa in particular.

He said that Ramaphosa, a rand billionaire, had become incredibly wealthy through BEE, not through building successful businesses.

The president was previously involved in various companies, including the Shanduka Group, and held directorships in prominent firms like Bidvest, MTN, and Mondi.

He exited his business interests when becoming president, and continued to oversee years of economic stagnation, where South Africans at large became poorer.