Illustrative image: The challenge now is to reimagine BEE in the construction industry in a way that genuinely serves local communities and emerging businesses.
If Danny Masimene, the president of the Black Business Council for the Built Environment (BBCBE), is to be believed, all the community and black business forums that are demanding 30% participation on construction sites are doing so illegally.
“Many are not even aware that the regulation is no longer there,” Masimene said.
Yes, the Public Procurement Act of 2024 introduced a framework for preferential procurement, including a provision that allows subcontracting as a condition of bidding on state contracts. But in May 2022, the Constitutional Court ruled in Minister of Finance v Sakeliga NPC (previously Afribusiness) that the preferential procurement regulations, which had mandated such measures, were invalid.
The court upheld a previous Supreme Court of Appeal judgment that found these regulations to be beyond the scope of the enabling legislation, thereby striking them down. This means that, although the act provides for preferential procurement policies, the government cannot impose rigid requirements such as a fixed 30% black participation threshold in all construction projects. Instead, any such provisions must align with the constitutional principles of fairness, competitiveness and cost-effectiveness.
After legal challenges, the 2022/23 regulations in effect removed the 30% mandate, leaving contractors with no legal obligation to subcontract.
The road to hell...
The story of black economic empowerment (BEE) in South Africa’s construction sector is a cautionary tale of good intentions derailed by systemic manipulation. In Masimene’s own words, the journey began with a genuine vision of transformation.
“I’ve done projects all over South Africa,” he recalled during an interview with Daily Maverick. “When it comes to unskilled labourers, it was never about enforcement… It was that local labourers would come from the community.”
Initially, the process was organic and community-driven. Masimene describes how contractors would establish steering committees to determine local participation, ensuring unskilled labourers came from the immediate community.
“We would bring in unskilled labourers and also create opportunities for skilled workers to be absorbed,” Masimene explained. This approach predated formal regulations and was rooted in a natural commitment to local empowerment that existed long before legislative mandates.
The 30% subcontracting regulation, for which the BBCBE lobbied, was intended to formalise and expand this grassroots approach. The goal was not just to provide unskilled labour opportunities, but to create meaningful pathways for small, emerging contractors.
“We wanted a situation where not only unskilled labourers benefit, but small businesses and entry-level contractors could also participate,” Masimene said.
Political folly
The implementation quickly unravelled, however. “Unfortunately, the state missed the implementation plan,” Masimene said. “Once you miss the implementation plan, you leave it to whoever to interpret it in their own way.”
The result was a regulatory nightmare. Companies began creating subsidiaries to technically “subcontract” to themselves, creating “a string of projects with no clear benefit to locals”.
The situation was further complicated by political opportunism. Masimene said political campaigning that misrepresented the subcontracting rule, creating unrealistic expectations among some business forums, is a critical underlying issue.
“Politicians started using this during local government elections, promising projects and telling communities these projects belonged to them,” he said.
This created unrealistic expectations and a volatile environment in which legal pathways to economic participation were overshadowed by aggressive and often illegal, violent tactics.
Organised syndicates, dubbed the “construction mafia”, started employing extortion, intimidation and violence to secure their perceived entitlements.
Minister of Public Works and Infrastructure Dean Macpherson has been equally critical, stating that the government, though committed to empowerment, cannot “allow criminals to profit under the guise of empowerment”.
The statistics are damning: these syndicates have disrupted more than 180 projects worth R63-billion since 2019. What began as a noble attempt to create economic opportunities has evolved into a complex web of legal ambiguity, political manipulation and criminal exploitation.
The challenge now is to reimagine BEE in a way that genuinely serves local communities and emerging businesses.
Changes afoot
Parliament’s Portfolio Committee on Trade, Industry and Competition has now backed moves to criminalise syndicates’ demands, recognising that the empowerment measure has been systematically exploited.
The recently signed Public Procurement Act of 2024 represents a legislative attempt to restore order, allowing subcontracting only where feasible and providing mechanisms for direct payment to subcontractors.
“It would be best if we could welcome these black business forums under our mandate as affiliates, which would bind them to our code of conduct and leave little room for the opportunism,” Masimene said.
“This simply cannot continue,” McPherson declared at a national construction summit, questioning whether the 30% local procurement rule actually achieves its intended outcomes.
He has explicitly stated that the government will no longer negotiate with what he calls “criminals”, even if it means delaying critical infrastructure projects such as roads, dams, schools and hospitals.
As the dust settles, one thing is clear: the noble intention of BEE has been hijacked by a toxic mix of criminal opportunism and regulatory ambiguity. The challenge is to recalibrate the 30% rule, transforming it from a source of conflict into an instrument of genuine economic inclusion.
The battle for the soul of BEE continues, with the future of the construction sector – and vital infrastructure projects – hanging in the balance. DM
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.
