The Costs of B-BBEE Compliance

Broad-Based Black Economic Empowerment (B-BBEE) ostensibly aims to address Apartheid-era economic disparities in South Africa through a scorecard assessing ownership, management control, skills development, enterprise and supplier development (ESD), and socioeconomic development (SED).

Unlike other countries’ redress policies, South Africa’s racially motivated approach is highly intrusive.

Annual compliance costs are estimated at R145-290 billion (2-4% of 2024 GDP), with ownership and ESD costing R40-85 billion each, skills development R40-60 billion, management control R20-50 billion, and SED R5-10 billion, including non-reporting entities.

These costs may reduce GDP growth by 1.5-3% and cost 96,000-192,000 jobs annually, while increasing black ownership but also enabling elite capture, as shown by a 2020 Gini coefficient of 0.62.

The policy’s economic distortions, including reduced investment and 3.8 million lost jobs, raise questions about its efficacy, benefiting a small politically connected elite at the expense of the majority.