Placards of jobseekers begging for jobs have become an all too familiar occurrence at busy intersections in the cities. Not merely because of a lack of jobs, but as a result of BEE policies placing small businesses in a stranglehold. But there is hope for entrepreneurs and jobseekers alike.
South Africa’s economy has underperformed for two decades, with growth rates far lower than other emerging markets. The effects of this are felt most acutely by small businesses that are supposed to be the engines of job creation and value addition.
Small and medium enterprises (SMEs) are estimated to contribute between 34% and 40% of South Africa’s GDP. But it could (and should) be more. In many emerging economies, like Ghana, small, medium and micro enterprises (SMMEs) account for up to 70% of GDP.
While the number fluctuates, South Africa’s SMEs contribute about 60% of all employment in South Africa that puts food on the table for millions of people, and boosts economic growth.
But South African businesses find themselves having to manage complex regulations and the massive compliance costs that go along with the government’s persistence with Black Economic Empowerment (BEE) policies.
Redress
Since the ANC first introduced its BEE policy — aimed at redress — in 2003, the plight of unemployment for the people it claims to represent has significantly worsened. In 2003, the black unemployment rate in South Africa was 29.2% compared to 36% in the last quarter of 2024, compared with 7% among white South Africans.
In fact, from 2014 to 2024, the black unemployment rate increased by nine percentage points, while the white unemployment rate decreased by one percentage point.
What is abundantly clear is that BEE has benefited a small, politically connected elite while most have endured increasing joblessness and poverty.
There is consensus that the fastest way to create jobs is by encouraging small businesses to start up, and then ensuring they thrive and become competitive.
It has been well established that thriving small businesses contribute more to job creation than larger firms. But small businesses are fragile, and in South Africa they must jump through additional BEE hoops that are costly, consume precious management time and limit their access to markets.
Ask any small business owner, and they will tell you: the compliance web is mind-boggling. Small enterprises must be audited for BEE compliance in ownership, management, employment equity, skills development, procurement, enterprise development and socioeconomic development.
Not only must they comply, but they cannot source their inputs at the best price. Instead, they must source from other firms that are compliant, or be penalised.
Bigger businesses in South Africa sometimes employ sinister tactics that place a disproportionate burden onto smaller firms by using businesses as facades to appear compliant and secure contracts without transferring skills and ownership, as the policy intends.
The pressure from bigger company clients to be compliant with BEE legislation, while meant to promote transformation, can strain the limited resources of smaller firms, which hampers resource allocation that could go into business growth.
The time, money and human resources expertise needed for compliance and verification is a significant burden for a small business to carry.
Similarly, the process of obtaining a BEE certificate is a tiresome exercise as it involves working with an accredited verification agency, of which there are limited numbers.
A future free of this web of compliance, which benefits an elite few at the expense of small and family owned businesses, can finally be envisaged if the Economic Inclusion for All Bill is adopted.
Economic stagnation
The bill seeks to fundamentally change the way the government does business by doing away with the failed BEE approach, which has seen economic stagnation and mountains of bureaucratic compliance for business.
This will put an end to fake empowerment and the burdensome compliance that goes along with it, and replace it with real empowerment — favouring companies with a track record of delivering effectively, creating jobs and improving the lives of South Africans by reducing poverty and creating a new generation of skilled workers.
Under the new law, bid evaluation criteria will be weighed with the ordinary citizen, and not the tendering elites, in mind. Eighty percent of the weight will be decided on value for money — assessing the cost-effectiveness, technical capacity, reliability, innovation, compliance and operational capacity of bidders.
A further 20% will be based on the bidding company’s ability to deliver economic inclusion — poverty alleviation, job creation, education, health and environmental sustainability. Finally, no bidder with a proven record of fraud, corruption or misrepresentation will be permitted to apply for any contract.
The future for small businesses — and for the job creation and growth that small businesses multiply — is bright. But for this bright future to be obtained, some tough decisions need to be made.
It is time to abandon the failed policy of BEE and replace it with policies geared to reduce compliance bureaucracy and ensure that procurement is done fairly and with the best result for delivery in mind. There are no shortcuts to this bright future.
South Africa’s small businesses will finally be free from the shackles of costly state-regulated compliance if the DA’s Economic Inclusion for All Bill, also known as the Public Procurement Amendment Bill, is adopted by Parliament. DM