Why BBBEE must shift from ownership deals to productive participation

Escaping South Africa’s low-growth trap will require a sustained effort to increase productive capabilities that drive real structural transformation of the economy and promote labour-absorptive growth. This requires a shift from the current model of continued concentration of economic power and unequal distribution of gains among a small portion of the population.

South Africa’s manufacturing sector is responsible for 14% of national GDP. Yet it has extremely low levels of black participation in ownership, management and control of industrial capital. The deliberate exclusion of Africans at a policy level pre-1994 resulted in Africans remaining labourers or consumers of productive output.

Why are we arguing for widespread inclusion?

Expanding manufacturing is critical, as it not only drives growth but accelerates it through strong spillover and multiplier effects.

Historic exclusion from ownership, capital and production entrenched a racially concentrated industrial class dominated by white industrialists. This legacy persists spatially, with former homelands still marginalised and economic activity concentrated in a few provinces. Three decades into democracy, with limited transformation, a key question remains: has broad-based black economic empowerment (BBBEE) delivered meaningful economic justice and inclusive industrial participation?

The answer is complex. BBBEE has undoubtedly changed aspects of the corporate landscape. It has increased black representation in management, ownership and participation schemes. Yet it has not fundamentally altered broad-based participation, nor produced a sufficient number of black industrialists or resulted in mass employment of youth, black women, and marginalised populations.

If South Africa is serious about inclusive growth, the next phase of empowerment must unlock productive participation, ensuring that all black entrepreneurs and businesses can access capital, markets and opportunities at scale.

For years, debates about empowerment have often been framed through an ideological lens. Some argue that economic inclusion will emerge organically through market-led growth.

South Africa’s economic history suggests otherwise.

Most sectors of our economy are dominated by a few players who control primary supply chains with high barriers to entry. As a result, access to markets, finance and infrastructure continues to favour established firms, leaving SMMEs systemically excluded.

Perhaps the clearest illustration came during the Covid-19 pandemic.

The government introduced a R200-billion loan guarantee scheme to support businesses and stabilise the economy. Yet only R18.39-billion, less than 10%, was ultimately utilised.

Why did such a substantial intervention fail to reach entrepreneurs who required liquidity in the economy, crucial for South Africa’s quicker recovery?

Commercial banks applied traditional, strict credit criteria that resulted in a 56% rejection rate for applicants. The requirement that enterprises be in “good financial standing” before the pandemic effectively disqualified the most vulnerable SMEs, already weakened by load shedding and a stagnant economy. Consequently, lending remained concentrated among larger, more stable entities.

Critical gap

This experience highlighted the challenges of SMEs and emerging entrepreneurs and a critical gap in industrial financing: the state’s reliance on commercial risk models meant that “unbankable” small and mid-tier companies were left behind,

South Africa’s financial ecosystem remains dominated by a small number of institutions. The big five banks control 89.63% of the banking market and 85% to 90% of the clearing and settlement volume of the country’s payment infrastructure.

Such concentration has implications for economic participation.

New lenders face high barriers to entry. Non-bank institutions struggle to access payment systems. Alternative sources of SME finance remain underdeveloped.

The result is a systemic under-provision of credit to small businesses, limiting their ability to enter markets, scale operations and create jobs.

For South Africa to build a new class of industrialists, industrial capacity must be financed through a coherent, integrated framework. This requires a coordinated approach between key institutions, including the National Treasury, the South African Reserve Bank, the Department of Trade, Industry and Competition, the Financial Sector Conduct Authority and the Competition Commission, to ensure policy and regulatory alignment.

First, the financial ecosystem must be reformed to broaden access to payment systems and enable new SME-focused lenders to enter the market.

Second, working capital financing must expand beyond traditional bank lending with flexible models suited to small businesses’ shorter cash cycles.

Third, development finance institutions must play a catalytic role. The National Empowerment Fund, for example, expanded its annual disbursements from approximately R5-million to around R1-billion in 2025, focusing on SMEs in job-rich sectors. But significantly greater capitalisation is needed to scale this impact.

An additional instrument that could significantly strengthen this ecosystem is the Transformation Fund, currently being developed to mobilise both public and private capital in support of black-owned enterprises. If structured effectively, the fund could provide first-loss guarantees, patient capital and blended finance, enabling banks and investors to support higher-risk but high-impact businesses.

Finally, public procurement and pension fund capital must be strategically leveraged to align closely with industrial policy objectives, ensuring that government spending supports SMMEs and black-owned enterprises within domestic supply chains.

Transformation cannot succeed without growth, and growth will remain limited without broader participation. South Africa needs a new economic compact focused on industrialisation, targeted fiscal support for productive sectors, stronger public-private investment, expanded market access for new entrants, and a more capable, coordinated state. The goal is not just redistribution but expanding the economy’s productive capacity to accelerate growth beyond 1.6% and create jobs at scale. DM