The system has reportedly failed to address the country’s persistent inequality, which is considered the worst in the world
The director of South Africa’s flagship black economic empowerment program has announced plans to introduce measures, including fines, in order to meet its goals. The policy, which has been in place for decades, aims to tackle the widespread inequalities that the country inherited from the apartheid era.
Tshediso Matona, head of the Black Economic Empowerment Commission (B-BBEE) made the comments in a report that Reuters published on Monday.
The South African government passed the empowerment law in 2003 to encourage companies to hire and promote black people by offering them tax breaks and access to public contracts.
More than two decades later, the unemployment rate of 37.6% among the black population remains higher than the national average and far exceeds the 7.9% reported among white South Africans, according to the national statistics agency’s second quarter (April-June) report. The World Bank says the country continues to have the world’s highest and most persistent levels of inequality.
The situation has provoked widespread demands for the African National Congress (ANC), which had ruled for 30 years until losing its parliamentary majority in recent elections, to improve the lives of black people. Critics have accused the ANC-led government of failing to deliver on its promises to end persistent crime, poverty, and high unemployment, which they claim is part of the reason why the party won only 159 seats in the 400-seat parliament in May, down from 230 in the previous election.
“There’s no society that can be viable with [this] level of inequality,” B-BBEE commission director Matona told Reuters.
Under the voluntary B-BBEE program, which critics cited by Reuters claimed has failed to achieve its goals, companies score points in categories such as black ownership, management control, and skills development.
However, Matona has reportedly claimed that some companies inflate their scores by falsely listing black people as managers, a practice known in South Africa as “fronting,” which is a criminal offense.
He said the commission, which refers cases of infringement to state prosecutors, has received 1,348 complaints of fronting since 2017. However, no one had yet been convicted of the crime, mainly because the justice system was “still figuring out how to work with the B-BBEE regulation,” he added.
Matona stated that he intends to increase company incentives for compliance while “naming and shaming” those who fail to submit their required annual reports. About 400 companies are listed under the program, but only 141 of them are said to have submitted a report in 2022.
President Cyril Ramaphosa, who leads the South African multi-party government formed after his ANC lost its majority, recently announced that he will focus on demonstrating to businesses the benefits of black empowerment. He has threatened to impose penalties if they refuse to comply.
However, the pro-business Democratic Alliance (DA), the second-largest party in the coalition government alongside the ANC, has reportedly stated that it will oppose any attempt to include punitive measures under the B-BBEE.
“Businesses don’t exist for altruistic purposes, we must accept that,” DA labour spokesman Michael Bagraim is quoted as having said.