PHOSANE MNGQIBISA | Inclusive growth is impossible without BBBEEsation that expands GDP, sustains jobs

The 2026 State of the Nation address and the Budget speech need to focus on inclusive growth or risk relevance.

South Africa’s BBBEE initiative is often viewed as a political or moral issue, but it is much more than that. It presents a major economic challenge and raises a critical question: can inclusion serve as a growth strategy that increases investment, output and jobs, or are we merely perpetuating empowerment as a compliance requirement that reallocates a static economic pie?

The economic outlook is sobering. South Africa’s GDP is roughly R7–R8-trillion in nominal terms, equivalent to about $380bn–$420bn at current exchange rates, based on figures from the Reserve Bank, Stats SA and the World Bank.

Growth has been disappointingly slow for too long, preventing the absorption of new labour market entrants. Unfortunately, recent data from Stats SA’s quarterly labour force survey show that official unemployment remains around the low 30% range on the narrow definition and above 40% on the broader definition. As a result, “inclusive growth” should not be just a slogan but must be integrated into procurement, payments, finance, regulation, logistics, safety and energy markets.

Hence, President Cyril Ramaphosa should use the Sona to promote a more targeted approach to BBBEE, dubbed “BBBEEsation”. This variation should clearly emphasise job creation and economic growth as its measure.

The main message should be straightforward, emphasising that empowerment should be judged by tangible outcomes rather than bureaucratic processes. Achieving this requires fostering new businesses, expanding existing ones, increasing employment, boosting export capacity, enhancing supplier competitiveness and broadening public ownership, especially among black people and Africans in particular.

The most effective starting point is to examine the economy’s missing middle, a critical, underserved segment of small and medium-sized enterprises that are too large to qualify for finance and too small and risky to access traditional bank loans.

This segment includes the township economy and micro, small and medium enterprises (MSMEs). South Africa has a large number of small businesses, but their survival is fragile. Estimates indicate that MSMEs account for about 95% of enterprises and provide significant employment. However, they contribute less to GDP than their peers because few firms grow. Though figures vary depending on the definition and level of informality, the trend remains clear. In successful emerging markets, scaling MSMEs is a central driver of modern service exports, manufacturing, and retail.

The township economy (about 532 townships), largely informal and valued at about R900bn annually, is driven by over 200,000 spaza shops and small-scale enterprises in retail, services and transport.

It is where reality begins and must be considered by the government. Millions of South Africans live in townships. According to the 2021 South African census, some 24.35% of the country’s population lives in townships. This means these vibrant and innovative communities are home to over 11.6-million people (about 11.6-million to over 21-million), indicating that townships represent billions of rands in spending power and a vast consumer market, but also an under-capitalised production base.

Ramaphosa must firmly guide the current strategy by turning BBBEE into a connector between the township economy and the formal sector.

The “main economy”, comprising formal corporations, large procurement budgets and established supply chains, is valued at roughly R7.71-trillion, making it the 33^rd-largest economy globally and accounting for about 12% of Africa’s total GDP.

In contrast, the township economy is often informal, cash-based and exposed to risks. The disparity between these sectors is driven more by infrastructure, safety, market access and working capital than by talent. When electricity goes out, freight routes become unsafe, permits are arbitrary, and crime and extortion serve as additional taxes, the township entrepreneur is often at a disadvantage, facing significant obstacles.

Estimates of township economic activity vary significantly due to measurement challenges, as 80% of MSMEs are unregistered. Nonetheless, credible public estimates often place the total at hundreds of billions of rand annually, including informal trade and services.

For policy purposes, the precise figure is less important than the underlying implication: if even part of township demand is directed towards competitive production and formal services, such as repairs, construction, food processing, last-mile logistics and digital services, South Africa can generate local jobs, decrease commuting costs and expand the tax base.

Where does BBBEE stand? Currently, one of its main criticisms is that it often relies on large deals and narrow networks. While the total value of BEE transactions since the early 2000s has reached hundreds of billions of rand and can approach or surpass a trillion rand when including broader ownership deals, large deal value does not necessarily mean broader inclusion or productive investment. If empowerment capital mainly funds passive stakes without fostering productive capacity, it benefits a few balance sheets but does not contribute to national growth.

Ramaphosa must firmly guide the current strategy by turning BBBEE into a connector between the township economy and the formal sector. This should prioritise demand over speeches or rhetoric as the key to integration.

The main demand driver the government can use is procurement. With public procurement by government bodies, entities and infrastructure projects reaching hundreds of billions of rand annually, it could grow to around a trillion rand with broader initiatives. Even a minor reallocation, committing a few percentage points to scalable MSMEs and township suppliers, could direct tens of billions of rand each year into labour-intensive businesses. This isn’t just theoretical; it’s basic maths.

To achieve significant, real-term growth, the (department of trade, industry and competition) the DTIC and department of small business development must move beyond merely developing policies and focus on their active implementation. This includes enforcing master plans, boosting localisation efforts and cutting bureaucratic barriers for MSMEs.

Key actions should include securing reliable energy and rail services, combating illegal imports through trade measures and facilitating industrial financing to stimulate the economy, as detailed in the DTIC’s October 30 2020 report.

Success depends on steady cash flow; late payments mainly hurt small firms more than poor ideas. A strong Sona and budget commitment would include enforcing a 7–15-day repayment period for eligible MSME suppliers, with automatic interest, clear public dashboards and penalties for non-compliant accounting officials. One such reform could immediately ease working capital constraints, reduce business failures and directly promote job creation.

Next, re-balance the scorecard to focus more on growth outcomes. Maintain ownership as a corrective measure but incentivise productivity: support verified supplier development that leads to independent firms, net job creation, artisan training completions, localisation aligning with price and quality standards, and export readiness. Essentially, make empowerment points easier to achieve through capability building rather than purchasing structures.

Township inclusion requires a robust security and infrastructure backbone. No serious investor, whether a bank financing a spaza shop expansion or a retailer onboarding township suppliers, can accurately assess risk when extortion is widespread and service delivery is unreliable.

Therefore, a targeted township economic programme should allocate funds and track performance across areas such as safe trading corridors, visible policing in key economic zones, streamlined digital permit processes, a reliable power supply at trading hubs, including embedded generation and storage, and municipal service standards in strategic locations.

Comparing emerging markets highlights this point. For instance, Malaysia’s Bumiputera policies boosted participation and contributed to a growing middle class, though they faced criticism for rent-seeking when preferences lacked strict controls.

India demonstrates the benefits of combining inclusion with market-friendly measures such as ‘digital rails’ and procurement reforms that reduce transaction costs for small businesses.

South Africa’s main lesson is that empowerment works best when it is transparent, performance-driven and incorporated into the country’s purchasing, payment and financing systems, rather than being added later just to meet compliance.

If Ramaphosa sets clear, measurable goals in the Sona, such as targets for procurement share, payment durations, township-node upgrades, along with specific financial objectives, deadlines, anti-extortion measures, and a reweighted BBBEE outcome, it will address the essential needs of both businesses and households: growth that generates jobs.

While South Africa has existing policies, they are ineffective and not properly implemented. What is needed is a comprehensive inclusion strategy that significantly enhances productivity and employment. BBBEEsation could fulfil this role, provided it is designed to stimulate economic growth rather than merely reorganising existing structures.

Phosane Mngqibisa, PhD candidate, economic research and policy analyst