Pulling up, not pouring out: A new path beyond BEE

Key topics:

• BEE enriches elites, leaves most South Africans unemployed and poor.

• EED targets disadvantage directly, non-racial, and empowers individuals.

• Growth and opportunity, not racial quotas, drive real transformation.

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By John Endres*

The following is the text of an address I delivered late yesterday at a Liberal Sundowners event in Cape Town.

Ladies and gentlemen, thank you for inviting me to speak with you today. It is a privilege to address people who carry such responsibility for the future of our country.

My topic is “Pulling up instead of trickling down: an alternative to BEE”.

Finding an alternative to BEE is not just an academic question. It is about the lives of millions of South Africans. It is about whether their future will be one of exclusion – or of opportunity.

Let us remind ourselves of where we stand today.

We are now more than three decades into our democracy. The Born Free generation is old enough to have children of its own.

The promise of 1994 was that freedom would bring not only political rights, but also expanding economic opportunity. For a time, that promise seemed within reach.

Between 2004 and 2008, our economy grew at 4.8% a year. As jobs were created, unemployment fell. Incomes rose and a new middle class began to emerge.

But since then, progress has stalled. Over the last decade, growth has been weak. The World Bank puts average growth for the most recent ten-year period at about 0.7%, with 0.8% in 2023 and 0.5% in 2024. That is not enough to move the dial on jobs or living standards. 

Unemployment is the human face of this stagnation. The official unemployment rate is 33.2%, and on the expanded definition it is 42.9%. Those figures describe a job market in a structural crisis, not a cyclical downturn. Half of all the households in the country receive at least one government grant, and for a quarter of households grants are the main source of income.

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This is not the South Africa that was promised. And it is not the South Africa our people deserve.

Flagship response

Government’s flagship response for two decades has been Broad-Based Black Economic Empowerment (BEE). Its stated purpose is to redress the legacies of apartheid by promoting black ownership, black management, and black participation in the economy. Its defenders argue that it is a moral imperative: that without it, inequality will persist, and democracy itself will be at risk.

It is important to acknowledge that BEE was born of good intentions. It sought to open doors that had long been closed, to spread opportunities that had long been denied. It is right to want to address the injustices of the past.

But good intentions are not enough. Policies must be judged not by what they promise, but by what they deliver. And when we look at the record, we must recognise that while BEE has benefited the few, it has not delivered for the many.

So today, in this speech, I want to do three things.

First, I want to explain why, as liberals, we oppose racial classification in principle. That is the philosophical foundation.

Second, I want to review the evidence of what BEE has delivered in practice. Spoiler alert: the record is dismal.

Third, I want to set out an alternative vision: one built on growth, on empowerment of the truly disadvantaged, on real transformation instead of the fake transformation that has been a hallmark of government policy for many years.

The core of that alternative is the IRR’s proposal called Economic Empowerment for the Disadvantaged, or EED.

EED forms a key part of a broader set of policy proposals that we call the Blueprint for Growth series. In these papers, we address the structural reforms South Africa urgently needs to trigger much higher rates of economic growth.

The reality

As you listen, I invite you to think critically. Do not take my word for anything. Ask yourself: does this analysis match the reality you see around you? Do these alternatives sound like something that could win support from ordinary South Africans? Do they reflect the principles you hold as liberals?

Because ultimately, this is not about policy documents or speeches. It is about the future of South Africa.

But first, before we talk about outcomes, we must talk about principles. Principles shape the decisions we make, the policies we design, the kind of people we become. Ultimately they determine the outcomes we produce.

For liberals, one principle stands above all others: the dignity and freedom of the individual. We believe that every person must be treated as a person, not as an interchangeable representative of a group. We believe in non-racialism and that rights attach to individuals, not to collectives.

We believe that no person’s opportunities in life should be determined by the colour of their skin.

This is not a fashionable belief in South Africa today, where politics still speaks the language of race. But it is a belief that lies at the heart of our constitutional democracy. Right at the beginning of our Constitution, in the founding provisions, we read that non-racialism is one of the founding values of the Republic of South Africa.

Commitment to non-racialism

Racial classification, which underpins many South African laws in the present day, is fundamentally at odds with that commitment to non-racialism.

Racial classification is not just a technical policy tool. It is a mindset. It says that your most important characteristic is not your effort, your talent, or your choices, but your membership of a racial group. It tells children that their future will be determined not by what they do, but by who they are assumed to be.

The result is to entrench racial divisions rather than overcome them. Instead of building a society where people see one another as fellow citizens, neighbours, and colleagues, we build a society where every interaction is filtered through the lens of race. That corrodes trust and fuels resentment.

There is also a moral test. If we believe in non-racialism, we must believe in it consistently. Otherwise we fall into the trap of saying: racial discrimination is wrong when it harms my group, but acceptable when it benefits my group.

That is not liberalism. That is clientelism that inevitably morphs into a racial spoils system.

Liberalism demands that we treat people as individuals. It demands that we recognise disadvantage where it exists – but that we respond to disadvantage itself, not to race as a proxy for disadvantage.

A policy based on disadvantage goes directly to the problem. It asks: who is struggling, and how can we help them gain the tools to succeed? That is true empowerment because it gives people the means to control their own destiny, rather than leaving them dependent on the state and the generosity of others.

This form of true empowerment also aligns with triggering rapid economic growth, which is how real transformation happens and indispensable if South Africa is to succeed.

Some argue that we cannot move beyond race until we have achieved equality between races and equal racial proportions in all organisations across the country. They say that non-racialism is a luxury we can only afford once we have solved the legacies of apartheid.

But this argument is unconvincing. If we wait until inequality and unequal racial distributions disappear before we abandon racial classification, we will be classifying people by race forever. Because inequality is not only a lingering holdover from apartheid; it is also the result of individual differences in education, geography, family structure, crime, age, interests and many other factors. Race cannot serve as a permanent stand-in for all of these.

Prism of race

We must decide: do we want to be a society that forever sees people through the prism of race, or do we want to build a non-racial society where individuals are free to rise by their own effort?

This is why the IRR says BEE is wrong in principle. It violates the liberal idea that the individual is what matters most and the non-racial idea that individuals should be treated on their own merits, rather than being judged on their group memberships.

But – and this is a crucial point – even if one sets principle aside, BEE must still be judged on outcomes. And when we judge it on outcomes, it fails there as well. That is what makes the case against BEE so strong. It is not only morally wrong, but also practically disastrous, as the evidence shows.

Let us start by looking at economic growth. A healthy economy in a well-resourced country like South Africa should grow at 4% to 6% per year. It should expand opportunity and create jobs. That was the rate achieved by many comparable countries in Asia, Latin America, and parts of Africa during their take-off periods.

South Africa, by contrast, has been stagnating. The World Bank records that from 2010 to 2019 our economy grew at an average of only 1.7% per year, barely above population growth. Between 2014 and 2019, the average was even lower, at just 1%. And since the COVID pandemic, growth has fallen further. In 2022 it was 1.9%, in 2023 it was 0.8%, and in 2024 it slowed to 0.5%. As race-based laws keep intensifying, the growth rate keeps falling.

At that pace, the economy cannot create opportunities for the millions of South Africans entering the labour market each year. Instead of absorbing them into work, we are producing a growing class of permanently excluded people.

BEE is not the sole cause of this stagnation. But it is an important contributor because it imposes heavy costs on business, raises uncertainty, and discourages investment. When investors, both local and foreign, consider South Africa, they look at BEE requirements and conclude that their capital is better placed elsewhere.

As the economy slows, skilled South Africans of all races seek their fortunes overseas, making it even more difficult for South Africa to accelerate its growth.

The human cost of this stagnation is visible in our unemployment figures. In 1994, South Africa’s official unemployment rate was around 23%. Today it stands at 33.2% on the narrow definition, and 42.9% on the expanded definition. That means around 11 million people are without work, out of a labour force of 25 million.

Long-term unemployed

About three-quarters of the unemployed have been without a job for longer than a year and are considered long-term unemployed. The longer a person is out of the job market, the harder it is for them to find their way back in.

For young people the situation is catastrophic. Among those aged 15-24, unemployment is over 60%. That means that most young South Africans have no realistic prospect of a job. No empowerment law can paper over that reality.

One of the cruel ironies of BEE is that it was meant to expand opportunity for black South Africans, yet it coincides with and contributes to the highest levels of black unemployment in our history. According to Stats SA, black South Africans faced an unemployment rate of 37.1% in the second quarter of 2025, compared to around 8.2% for whites.

South Africa is also one of the most unequal societies in the world. Our Gini coefficient, a measure of income inequality, stands at 0.67, among the very highest recorded anywhere. What is important to note is that inequality within the black population has increased sharply under BEE and is now the highest of any racial group.

A small elite has been able to benefit from empowerment deals, boardroom appointments, and procurement contracts. But the vast majority of black South Africans remain excluded. This shows that BEE has not been a tool for broad empowerment, but rather for selective enrichment. It has created politically connected billionaires, while leaving millions unemployed and impoverished.

If you ask businesses what holds them back from investing in South Africa, several factors come up repeatedly: electricity, logistics, crime, corruption – and BEE.

Fixed capital formation

The numbers tell the story. Gross fixed capital formation in South Africa – that is, investment in factories, equipment, infrastructure – remains persistently and abnormally low, at around 15% of GDP. For comparison, the world average is 26%. In successful emerging markets it is between 25% and 35%. The National Treasury itself says we need 26% to 30% just to reach normal growth.

This shortfall in investment is directly linked to policy choices. BEE adds complexity, uncertainty, and cost. A multinational company looking at where to build a new plant has many options. Why would it choose South Africa if the rules here require it to cede ownership stakes at the outset or navigate racial quotas, when other countries offer clear and predictable terms?

Beyond discouraging new investment, BEE imposes a constant drag on existing businesses. Compliance costs are high. Companies must hire consultants, maintain documentation, and divert management time away from productive activity to satisfy BEE scorecards. The freedom of business owners and managers to make business decisions on commercial grounds is compromised by the need to account for race. This weakens the South African investment case, limits growth and restricts job creation.

For large firms, compliance costs are a nuisance but survivable. For smaller firms, they are crippling. Many small businesses simply cannot compete for government tenders because they lack the resources to manage BEE compliance or meet BEE demands. Instead of supporting small business, which should be the main engine of job creation, BEE tilts the playing field in favour of large incumbents with political connections.

Defenders of BEE often say that empowerment at the top eventually benefits those at the bottom. A black billionaire creates jobs, sponsors scholarships, or contributes to community projects, and in this way the poor are uplifted.

But the evidence shows that this is a myth. The benefits that trickle down are tiny compared to the resources spent on elite deals. Billions of rand have gone into share transfers and enrichment schemes that do nothing for the unemployed in Soweto, Umlazi, or Khayelitsha.

“Tenderpreneur” class

Even the ANC itself has admitted that BEE has created a narrow “tenderpreneur” class, rather than broad-based empowerment. Former Finance Minister Trevor Manuel once warned that BEE had become a tool for “rent-seeking” and corruption.

Finally, we must recognise that BEE has not only failed in its goals, but has also created opportunities for corruption. The link between empowerment requirements and state capture is well documented.

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BEE has been used to justify inflated tenders, fraudulent procurement, and cronyism. Connected individuals and companies are parachuted into contracts for which they lack the skills or capacity, purely to tick empowerment boxes. The result is poor service delivery, wasted money, and failing infrastructure.

Ordinary South Africans pay the price for this every day when the electricity goes off, when trains don’t run, when schools collapse.

So to recap: BEE was supposed to be a policy of empowerment, but in practice it has delivered stagnation, unemployment, inequality, disinvestment, and corruption. It has enriched a few, while leaving the many behind.

That is why we say BEE is not empowerment at all. It is not only based on the morally questionable foundation of racial classification. It is also a clientelist project that shunts benefits towards connected elites while making life worse for the poor, most of whom are black.

Having examined the principles and the outcomes of BEE, we are left with a question. If racial classification and elite enrichment do not work, is there an alternative? Is it possible to imagine a policy that genuinely empowers people, lifts them out of poverty, and does so without dividing society along racial lines?

Some argue the answer is no. They say that because apartheid was based on race, redress must also be based on race. They argue that without BEE, inequality will remain frozen, and black South Africans will be permanently disadvantaged.

Scrutiny

But this argument does not stand up to scrutiny. As the evidence shows, one of the effects of BEE is to disadvantage black South Africans by limiting economic growth and job creation. During the period of intensifying BEE, inequality has increased, especially in the black population group.

The real question, then, is not whether empowerment is necessary – it is. The real question is whether empowerment must be based on race. And the answer is: no, it does not. There are better ways.

Better policies are not only conceivable, they are urgently necessary. Because without them, we are trapped in a vicious cycle: low growth, high unemployment, rising inequality, growing dependence, declining hope.

The choice before us is not between BEE and nothing. The choice is between continuing with a failed model indefinitely, with predictably bad outcomes, or adopting a new model that works.

That new model must do two things. First, it must put growth at the centre because without growth, empowerment is impossible. Second, it must equip the poor and disadvantaged with the tools they need to succeed in a growing economy: because without the means to participate, growth will leave them behind.

This is where the IRR’s proposals come in. Our policy of Economic Empowerment for the Disadvantaged, or EED, is designed precisely to meet those conditions: to empower the poor directly, without race, and in a way that supports growth. And beyond that, our Blueprint for Growth papers outline the reforms needed to get the economy moving again.

It is misleading to claim that BEE is necessary for empowerment. It is also misleading that BEE can be pursued without compromising growth. But without growth, empowerment is impossible. With growth, empowerment happens naturally as more people find work and improve their lives.

Policy agenda

So if we want to empower the disadvantaged, we must put growth at the very centre of our policy agenda. That means creating conditions for investment, fixing infrastructure, restoring the rule of law, and removing barriers to enterprise. It means recognising that government cannot decree empowerment from above; empowerment must be built from below, through growth and opportunity.

What is needed is not just a policy that does not stand in the way of growth as BEE does, but that is in fact supportive of growth.

The IRR’s answer to this challenge is Economic Empowerment for the Disadvantaged, or EED. This is not just a small adjustment to BEE. It is a fundamentally different way of thinking about empowerment. It moves away from race as the yardstick, and focuses directly on disadvantage and the ability to participate in the economy instead.

It is designed to help those who need help most – the poor and marginalised, regardless of skin colour – while at the same time supporting economic growth.

This is not only fairer. It is also more effective, because it ensures resources go to where they make the biggest difference.

So how would EED work in practice?

Under the current system, companies are required to comply with BEE scorecards. They spend billions every year on ownership transfers, procurement rules, employment quotas, and other compliance measures. A large share of that money goes into elite deals that benefit a few individuals.

EED rewires and replaces that system entirely. It rests on two pillars.

The first pillar is a voluntary EED scorecard. It awards companies points for doing the things that contribute to a flourishing economy. For instance: the fixed investments they make, the export revenues they generate, the jobs they create, the taxes they pay, the training they provide.

Scorecard

There is no obligation on companies to use the scorecard, but if they do – and if they achieve a high score – this elevates their standing in society and in the investment community. This is the only benefit the EED scorecard confers. It does not give companies any advantage in terms of government contracts and public procurement. There, companies must compete on the basis of merit and the value they can offer. This is the essence of the contribution the private sector makes to South Africa’s economy and society.

The second pillar is a means-based system of empowerment for the disadvantaged. Using education as an example, the idea here is to divide up the education department’s budget into school vouchers that are given directly to the parents of school-going children.

This would mean that education remains tax-funded as it is now. But the big difference would be that parents would choose where to spend their school vouchers. They could spend them at any school they like, public or private.

This would force schools to compete for the money that the school vouchers represent. Good schools would attract more funding, while badly run schools would face declining funding. Ultimately they would face the choice of either lifting their performance to attract more custom – or shutting down.

System-wide, this would contribute to lifting the performance of the education system more rapidly than any other intervention could. This would be the miracle of consumer choice and market competition at work.

Tax-funded

Similar concepts could be applied in the areas of healthcare and housing. Again, these vouchers would be tax-funded; but the effectiveness of that spending would improve manyfold. Of course, business would have the opportunity to top up the vouchers of their employees, or contribute to a top-up fund. In both cases this would further enhance their EED scorecards and position them as responsible corporate citizens who are improving South Africa through their actions.

As should be apparent, EED has several clear advantages over BEE.

First, it targets the real problem. Instead of assuming race equals disadvantage, it measures disadvantage directly and responds to it. That means resources go to the poorest, not to the politically connected.

Second, it is non-racial. It helps those who are struggling, whoever they are. That builds solidarity instead of resentment.

Third, it empowers individuals, not elites. Vouchers go straight into the hands of families, giving them choice and agency. This avoids the corruption and cronyism that plague elite empowerment deals.

Fourth, it supports growth. By building education, skills, and health, EED strengthens the workforce and expands the consumer base. That makes businesses more competitive and the economy more dynamic.

Lastly, it is transparent and both incentivises and measures the things that actually matter. Did school performance improve? Did health outcomes improve? Did more people gain jobs? Unlike BEE scorecards, which measure compliance, EED measures real empowerment.

A few illustrations

Let me give a few illustrations of how EED vouchers would work in practice.

• A child in rural Limpopo attends a dysfunctional public school. Her parents receive an education voucher. They use it to send her to a local independent school with better teachers. She learns more, passes matric, and goes on to university. That is empowerment.

• A young man in Khayelitsha cannot find work because of poor skills. A construction company sets up a training centre under its EED project. He qualifies as an artisan, finds a job, and starts earning. That is empowerment.

• An elderly couple in the Free State live in a shack without secure tenure. They receive a housing voucher, which they use as a deposit to buy a small RDP house. They gain dignity, stability, and an asset to pass to their children. That is empowerment.

These are not pipe dreams. They are achievable outcomes if we redirect resources toward the people who most need them instead of the politically connected.

It is important to be clear: EED is not a silver bullet. Empowerment cannot succeed without growth, and growth cannot succeed without structural reforms. That is why EED must be seen as part of a broader package, alongside the Blueprints for Growth.

But EED is a crucial element, because it directly answers the question of how we empower the disadvantaged in a way that is fair, effective, and unifying.

Ladies and gentlemen, let me end by returning to the theme of this speech: “Pulling Up, Not Trickling Down.”

Benefits

For more than twenty years, South Africa has been told that empowerment means ownership deals for the few, procurement quotas for the connected, and scorecards for the rest. We have been told that if we pour resources into this system, benefits will eventually trickle down to ordinary people.

But now, the evidence is in. That trickle has never come. Instead, we have mass unemployment, collapsing investment, widening inequality, and growing frustration among the poor. BEE is not empowerment. It is enrichment for a few, and stagnation for the many.

The alternative is not complicated. It is to pull people up, directly, through growth and opportunity. It is to focus resources where they make the greatest difference, by equipping disadvantaged South Africans with education, health, and housing. It is to create the conditions for rapid growth through secure property rights, lower business costs, safe communities, flexible labour markets, and world-class schools.

This is what EED and the Blueprints for Growth offer. Together, they form a vision of empowerment that is both moral and practical. Moral, because they treat people as individuals rather than racial categories, and practical, because they build the foundations of real prosperity.

Some will say this vision is unrealistic. I say the opposite. What is unrealistic is to believe that we can continue with BEE and somehow get different results. What is unrealistic is to expect investment and jobs in an economy weighed down by racial quotas, corruption, and uncertainty. What is unrealistic is to think that a policy of trickle-down enrichment will ever solve the crisis of mass poverty.

The way forward

The IRR does not claim to have all the answers. But we do claim this: the principles of liberalism – individual dignity, non-racialism, and economic freedom – point the way forward. They offer South Africa a chance to turn the page on failure, and to write a new chapter of success.

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That is the contribution I put before you today. It is not the final word, but an invitation to debate, to refine, and to act. Because South Africa cannot afford another lost decade.

The time has come to abandon trickle-down empowerment and to embrace broad-based upliftment. The time has come to build an economy that grows, and a society that includes all the people of South Africa. The time has come to pull millions up.

*John Endres is the CEO of the Institute of Race Relations (IRR). He holds a doctorate in commerce and economics from one of Germany’s leading business schools, the Otto Beisheim School of Management, as well as a Master’s in Translation Studies from the University of the Witwatersrand. John has extensive work experience in the retail and services industries as well as the non-profit sector, having previously worked for the liberal Friedrich Naumann Foundation and as founding CEO of Good Governance Africa, an advocacy organisation.

This article was first published by Daily Friend and is republished with permission