Gerhard Papenfus: BEE – a South African dilemma

Without a doubt, the ANC’s black economic empowerment initiative is one of the country’s most controversial and contentious issues when it comes to the business and employment sectors. South Africa is still a nation in transformation, and addressing and redressing the haunting issues of the past is an incredibly difficult, seemingly impossible task. In the following opinion piece by Gerhard Papenfus, chief executive of the National Employers’ Association of South Africa (NEASA), the issues of BEE and sound business practice are addressed tactfully, thoughtfully and intelligently. Looking at the situation purely from a business perspective, Papenfus tackles difficult questions surrounding the implementation and success of the BEE initiative. – Tracey Ruff

‘You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity’ – Adrian Rogers

By Gerhard Papenfus

One of the most challenging and controversial issues facing South Africa, if not the most important one, is the issue of transformation. The question now, however, is how to deal with the legacy of injustices of our past and how to take South Africa forward. We cannot deny the past: it happened, it was deplorable; but it is the manner in which we will address this that will determine the outcome.

I don’t think that there is a single person who does not understand that, somehow, we need to do something, which will bring about a more inclusive economy and society. However, if we do it haphazardly, those who were the most prejudiced in the past will be the ones who will be the most prejudiced in the future.

‘If well handled, affirmative action will help bind the nation together and produce benefits for everyone. If badly managed, we will simply redistribute resentment, damage the economy, and destroy social peace’ – ANC, 1994.

However, since this was said in 1994, the ANC’s approach towards transformation has changed dramatically. Their current approach is now taking South Africa to where they, in 1994, did not want us to end up.

In 1994, the ANC also emphasised that they would ensure that the state did not become ‘an instrument of racially based extortion and patronage in which friends were favoured, opponents disadvantaged and bribes accepted’. That’s exactly where we find ourselves now and it is causing a huge amount of resentment and uncertainty, which in turn will reflect negatively on growth and development and consequently, job creation – probably South Africa’s primary challenge.


During the recent Mining Indaba (according to, an investor, Peter Major, said the following regarding potential investment in mining in South Africa, “We have very demanding clients. So we are not here to subsidise things. We’re not here for goodwill or for guilt. We’re here to make money for our investors, and they have very tight criteria”

This sentiment applies to each and every business area. If it does not make business sense, it simply will not attract investment. Being forced into something, without regard for the application of healthy business principles, will eventually lead to the complete destruction of business.


Earlier this month, Anglo American announced that it is withdrawing its supply of coal to Eskom because of government’s requirements that ‘blacks’ (saying it so bluntly sounds so wrong) must own at least 55% of a supplier.

According to Fin24, the CEO of Anglo, in making this announcement, indicated that Anglo will not supply any financing or other support to increase the BEE shareholding: “It will have to happen purely on a commercial basis”.

This approach is not unique to Anglo. This is how business thinks and operates. There’s simply no other way.


According to the ANC, South Africa now finds itself in the ‘second phase in the transition to a national democratic society’ - a transition that is supposed to be ‘seamless’.

Although this may sound like a very noble idea, and although the ANC says that it wants to ‘de-racialise ownership and control of wealth and income’, the effect of this policy is exactly the opposite. The end result, which they envisage, will be the specific racialisation (not de-racialisation) of every element of society: state, civil society, education, media and business. Everything must eventually reflect the composition of the population – a complete and utterly racially structured society.

The current demands will become more and more severe, the goalposts will continuously be shifted until this objective is achieved. In the case of a business (for example), the demand of the National Democratic Revolution (which is ANC policy) will not be satisfied until each and every element of your business – ownership and the race of your staff -reflects the composition of the population.


How can it amount to racism? Business, at least a particular segment of business, is severely concerned about this, simply because this approach to ‘transformation’ will attempt to force businesses into making decisions which are completely irreconcilable with sustainable business principles. It has nothing to do with race; it’s about making decisions in the interest of business, without interference.

Being concerned in this regard is not based on the slightest suggestion that any particular part of our population is less qualified or capable than any other group; because it is simply not the case. South Africa needs all of its people.

Is it wrong to insist on building your business on a common vision (not for the purposes of racial transformation – which can never be the motive of business), shared values (‘a house divided in itself will fall’), a particular work and business culture and the appointment of staff on the basis of unique suitability and merit? Can anyone build a successful enterprise on anything other than this? Does insistence on this amount to racism? Of course not!

Thousands of reasonable and responsible businesses stand ready to make a contribution towards the building of a new and prosperous society. They cannot do that, however, if the organisations they lead are weakened by unwise decisions not based on sound business principles. Being concerned about this does not make a business owner a racist.


How business owners/entrepreneurs approach this issue will determine whether, a few years from now, these businesses will still exist.

Investment in all staff, the development of their skills and talents, regardless of race and gender, must always be a business priority. This is imperative if a business wants to be successful. Uplifting people and communities in which a business operates and in which its staff lives, to the extent that it is possible, is a wise commercial decision and  a fantastic investment. This approach and attitude, however, is a thing of the heart, taking place within the context of the availability of resources – it cannot be enforced through legislation.


The direction business now takes in respect of this very important issue will be a road of no return. Business will have to calculate the cost, understand the consequences and do what is right, because those who make the wrong decisions won’t be around for too long. There are very few BEE success stories – there might even be none. According to JSE stats, black people own 23%, white SA owns 22%, SA (unclassified) owns 16% and foreigners 39%.

If a decision in this regard is based on fear or short-term gain, owners will soon lose motivation for doing business and making sacrifices, and the price for doing business will become too high. Once that happens, business will enter a downward spiral – something very few businesses survive.

When that happens, nobody will be better off: not the owner, not anybody in his/her employ, not the communities in which they or their employees live. If that happens on a large scale, which will be the case if these policies are pursued, South Africa will be worse off and we will be heading for an economic and social disaster, something which is already under way because of our inability to create jobs.


We all do things from a particular cultural, educational and historical perspective – but we need to understand more. None of us knows it all, has it all. We all need ‘new hearts’ – and ALL of us, EACH one of us, with everything we can offer, is needed if we want South Africa to work. Let’s put up our hands and commit fully to a prosperous South Africa.

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