When President Cyril Ramaphosa announced in his Sona that the government was undertaking a review to “refine, realign and strengthen” the broad-based BEE framework, I was cautiously optimistic. After more than two decades of B-BBEE with its achievements but many flaws and a mounting chorus of opposition, a serious reckoning is overdue.
That optimism was misplaced. It appears “review” involves doubling down.
In November 2025, minister of trade, industry & competition Parks Tau told parliament the initial phase of the review would “focus on refinement and review of subordinate legislation, namely regulations, codes of good practice, guidelines and practice notes” and would be completed by the end of the financial year. He said the Transformation Fund would be part of the process.
If that is the design of the intended review, it has clearly been concluded because draft amendments to the B-BBEE codes of good practice were gazetted in January, with 60 days for comment, and may soon be made law. The public is being invited to comment on conclusions already reached.
What the government has undertaken so far is not a thoroughgoing, independent, publicly debated and evidence-based review. Instead, the department of trade, industry & competition (DTIC) is pushing through one of the most sweeping sets of changes to the B-BBEE framework in years, with insufficient transparency.
The draft amendments centre on two significant interventions.
The first concerns preferential procurement. Under the current codes, businesses earn B-BBEE points for buying from majority black-owned (51% or more) suppliers. The proposed changes would dramatically reduce points for dealing with such suppliers while sharply increasing rewards for those that are 100% black-owned. Gareth Ochse of B-BBEE ratings firm Tusker says the scorecard value of doing business with a 51% black-owned supplier would fall from 11 out of 27 points to just three out of 29.
The practical consequences would be severe. Tusker’s database of nearly 54,000 B-BBEE-certified businesses shows that only around 10,000 are 100% black-owned, and 90% of those are small businesses with turnover below R50m. There are simply not enough wholly black-owned suppliers offering the necessary goods and services for most businesses to meet the new targets. Thousands of majority black-owned firms would be penalised in favour of a tiny pool of suppliers. Many firms would see their B-BBEE ratings fall.
The second intervention is the proposed Transformation Fund. This will be a centralised vehicle into which businesses could contribute 3% of net profit after tax in lieu of existing enterprise and supplier development (ESD) obligations, earning up to 20 scorecard points.
The second intervention is the proposed Transformation Fund. This will be a centralised vehicle into which businesses could contribute 3% of net profit after tax in lieu of existing enterprise and supplier development (ESD) obligations, earning up to 20 scorecard points.
The fund is presented as a solution to the fragmentation of current ESD spending, but its structure, mandate, beneficiary criteria and success metrics have not been disclosed.
The consequence of these changes is that firms now benefiting from preferential procurement and ESD spending by business are likely to lose business, harming all those involved, including black shareholders.
By asking for comments on the draft codes without setting out how the fund will work, the government is asking the public to endorse a fundamental shift without revealing where the money will go, who will control it, or how success will be defined. Given the government’s record of devastating malfeasance with public money, there will be serious concerns that this will be a recipe for inefficiency, waste and worse.
There is a further dimension. The DTIC has reportedly entered into a memorandum of understanding with AfriExIm Bank for up to $3bn (about R50.8bn) in financing linked to the fund. The terms are not public, but it is hard to see how any commitment made to the bank could be legal given that the fund is not legally constituted. Has the finance minister signed off on new foreign debt? Does AfriExIm expect the government to backstop high-risk loans to emerging businesses, creating new contingent liabilities?
We doubt that this could be the case, and if not, this would amount to a serious breach of the Public Finance Management Act, which requires public money to be committed only under lawful authority, borrowing to be properly authorised and contingent liabilities to be disclosed through proper fiscal channels.
South Africa’s approach to BEE needs urgent review.
Preferential procurement in government has been a source of staggering corruption and a key component of failed service delivery. B-BBEE has become synonymous with cronyism and criminality. Tau has spoken candidly about fronting and fraudulent certificates.
These are signs of a framework under serious strain.
What the country needs is a comprehensive, independent review of transformation policies focusing on B-BBEE’s effectiveness and costs. The goal: to build a consensus promoting inclusive growth, accountability and tangible benefits for black, and especially disadvantaged, South Africans.
The current proposals should be shelved until such a review has been conducted and publicly debated. The DTIC’s gung-ho style on an issue of such importance reflects badly on the department and the government.
Transforming South Africa needs GNU leadership — not ANC policy alone.
- Bernstein is head of the Centre for Development and Enterprise (CDE). This article is based on the CDE submission on the proposed changes to the B-BBEE codes
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