Since the early 1990s, 46 politically connected individuals secured 60% of all black economic empowerment (BEE) mining deals, becoming billionaires or multimillionaires overnight.
This is according to a 2015 research report for the Chamber of Mines. The report was not publicly released.
BEE has taken many different forms. In the private sector, it involves transferring shares in white-owned private companies to previously disadvantaged individuals. In the public sector, national, provincial and municipal governments as well as state-owned entities, compel white firms contracting with the state to have BEE shareholding. In the immediate post-1994 privatisation of state-owned companies, BEE was also a key requirement for privatisation sales.
The Bureau of Economic Research, using narrow government data, shows there has been a loss of over 300,000 mining jobs since the early 1990s.
The reality is that the former majority ANC government’s BEE strategies have largely benefited a small group of well-connected black and white individuals, whether ANC leaders, ANC-aligned trade union leaders or companies, trusts and entities linked to them. Intermediaries — including law firms, transaction brokers and financiers, structuring BEE deals — have also benefited richly. Some white-owned companies have similarly benefited from striking repeat BEE deals with the same politically connected partners.
Of course, there have been broad-based empowerment transactions in which ordinary employees received shares following BEE deals. However, even in such transactions, particular well-connected individuals often received the bulk of the benefits.
Even when BEE deals are successful in transferring shares to a previously disadvantaged community that is not politically connected, they are rarely financially rewarding. BEE shares are often locked in for years, shareholders frequently receive no dividends and when they do, these are heavily taxed.
The failure of South Africa’s state rail and port entity Transnet cost the economy R353bn — equivalent to 4.9% of GDP in 2023
In 2000 public procurement rules incorporating BEE were introduced. South Africa now spends almost R1-trillion on public procurement annually, accounting for about 12% of GDP.
Testifying at the Zondo commission, the Treasury’s then acting chief procurement officer Willie Mathebula said in the 2017 financial year, for example, the national procurement bill was R800bn. More than 50% of the government’s annual procurement budget was lost due to “intentional abuse of the system”, which included manipulation of BEE rules for personal benefit, he testified. Of course, incompetence, mismanagement and corruption are also responsible for the losses.
State entities, such as the Public Investment Corporation provide significant BEE funding. In its 2023-2026 corporate plan, the PIC envisaged allocating more than 70% of its approved funds to BEE managers. One of its funds, the Isibaya Fund, with more than R170bn in unlisted investments, finances BEE projects such as Daybreak Foods, in which the PIC has invested at least R1.7bn since 2015. Finance minister Enoch Godongwana in 2025 announced a new enquiry into allegations of misconduct involving the PIC’s unlisted funds.
In the 2005 privatisation of Telkom, the Elephant BEE consortium acquired an estimated R9bn stake in the company. Key figures in the consortium — led by politically connected individuals such as former communications director-general Andile Ngcaba and former head of communications in the ANC presidency Smuts Ngonyama — pocketed more than R3bn from the sale of BEE shares in Telkom and Vodacom, as well as another R1.4bn in dividends.
In the public sector, state capture has often occurred through BEE. Evidence presented to the Zondo commission indicated that Gupta-connected companies had secured more than R57bn in state BEE deals.
State-owned infrastructure entities such as Eskom and Transnet were the main sites of state capture, which happened through BEE deals, public procurement and cadre deployment.
In one example, Hitachi Power Africa — in which the ANC’s investment arm Chancellor House owned 25% — secured contracts worth around R38bn to build boilers for the Medupi and Kusile power stations. The ever-rising costs of the two stations increased Eskom’s debt from R40bn in 2007, to more than R400bn in 2024. The fiscus has bailed out Eskom to the tune of close to half a trillion rand between 2008 and 2026.
If BEE has been successful, it has been a success for the few rather than the broad-based success it was intended to achieve
The failure of South Africa’s state rail and port entity Transnet cost the economy R353bn — equivalent to 4.9% of GDP in 2023. Transnet’s operational failures are estimated to cost the economy roughly R1bn a day in lost economic output.
Corruption, mismanagement and the manipulation of BEE contracts are key reasons for South Africa’s water crisis. As a case in point, tenderpreneur Edwin Sodi’s Blackhead Consulting has been implicated in irregular BEE contracts amounting to more than R4bn.
Manipulation of BEE has been a factor in poor service delivery in the health sector. At Tembisa Hospital, BEE tenderpreneurs secured around R4bn in contracts through corrupt practices while delivering very little.
If BEE has been successful, it has been a success for the few rather than the broad-based success it was intended to achieve.
BEE that involves granting shareholding in existing companies to politically connected black capitalists does not expand the economy; it reinforces the concentration of the South African economy.
The current BEE model is a clear example of the misallocation of capital — whether through shares for the ordinary black public, or for politically connected BEE oligarchs. These resources could have had a greater developmental impact if invested in public infrastructure, world-class education, technology, small and medium-sized businesses, or assets such as housing.
• Prof William Gumede is associate professor at the School of Governance at the University of the Witwatersrand and author of ‘South Africa in BRICS’ (Tafelberg). This an edited version of his speech on remodelling black economic empowerment delivered to the Black Management Forum.
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