Award-winning financial journalist and author, Phakamisa Ndzamela, is not one to shy away from highly-emotive and controversial economic debates.

He has weighed in on the ongoing debate about the future of broad-based black economic empowerment (B-BBEE) policy, which is stoking strong emotions and splitting South Africans down the middle.

In a recent interview with Next Level, Ndzamela challenged anti-B-BBEE critics who are predicting the policy’s demise, cautioning it is too early for them to write its obituary.

“B-BBEE is not dead. It is very much alive,” declares Ndzamela, an author of three books on the history of black business in South Africa.

He says those who want to see B-BBEE abolished face a mammoth task of clearing three major hurdles before they can even sniff the removal of the policy.

Firstly, there is no political party that holds an outright majority in Parliament, which it can use to scrap the B-BBEE Act, the legislation that gives effect to black empowerment.

Secondly, SA has highly-regulated industries that require companies to comply with B-BBEE legislation to get trading licences. So, failure to comply carries huge capital and profit risks for companies operating in B-BBEE-regulated sectors like mining, energy, and heavy metals.

Caption: Cape Flats to the JSE book cover

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Thirdly, scrapping B-BBEE runs the risk of exacerbating social instability, which is already fermenting due to rising economic inequality and high unemployment. The job market is unable to absorb 60% of job-seekers aged 15-24 years and 40% of those aged 25-34 years.

If abolitionists find that it is taking too long to scrap B-BBEE through Parliament, they can alternatively approach the Constitutional Court to convince it to declare the policy unconstitutional.

But the arduous path to scrapping B-BBEE has not deterred abolitionists, both local and foreign. They are vocal and passionate. They want B-BBEE gone because it allegedly discriminates against white people and has mainly enriched a small politically-connected black elite.

In SA, abolitionists are led by civic organisations Afriforum and Sakeliga, which are proposing that B-BBEE must be replaced with non-racial economic policies. Elon Musk, the world’s richest man, is the face of international opposition to B-BBEE.

Musk, who wants to introduce his low Earth orbit satellite company Starlink to SA, has described B-BBEE as "extremely racist”. However, this is disingenuous from the American given that B-BBEE is meant to address the historical exclusion of black South Africans from participating in their country’s mainstream economy.

Ndzamela, who this year unveiled his new book “Cape Flats to the JSE: Black Excellence and the Story of Brimstone”, points out that B-BBEE is still needed to facilitate the economic empowerment of black people and to maintain SA’s political stability.

“We all need to be thinking about intensifying efforts that economically empower destitute South Africans,” says Ndzamela.

His new book traces Brimstone’s rise from humble beginnings in the Cape Flats to become the longest-listed black-controlled company on the Johannesburg Stock Exchange (JSE).

Although Ndzamela believes B-BBEE is unlikely to be scrapped, new data shows that non-compliance with the policy is on the rise. In June this year, Codera Analytics and XA Global Trade Advisors published a survey that revealed that many companies are non-compliant with their B-BBEE ownership targets.

The findings of the survey are gleaned from a sample of 126 firms covering small, single owner businesses, and large enterprises with revenue exceeding R1 billion. About 67% of the surveyed 126 businesses don’t have black shareholders, with 21% saying they were non-compliant because B-BBEE was “illegitimate, racist or non-meritocratic”. Other participants in the survey said they were unable to comply with the policy because it is too complex and costly to implement.

The survey found that B-BBEE took a big knock between 2018 and 2024 when the value of B-BBEE transactions concluded plummeted by 87% to R23,9 billion in 2024 from R188,7 billion in 2018.

This high level of non-compliance with B-BBEE ownership targets is not surprising considering that in 2018 the Pretoria High Court ruled in favour of the "once empowered, always empowered" principle.

In 2021, the Constitutional Court re-affirmed the principle when it ruled that mining companies that had met black ownership requirements were not required to "top up" ownership continuously after black shareholders exited, unless the applicable legal framework expressly required it.

But mining companies still need to implement other elements of B-BBEE like management control, skills development, enterprise and supplier development (ESD), and socio-economic development (SED). However, the "once empowered, always empowered" principle is not applicable in the fishing industry because the Marine Living Resources Act has no provision for it.

The principle holds that if a company has completed a legitimate BEE ownership transaction it should continue to receive recognition for that transaction even if black shareholders later sell those shares.

Without this principle, companies could lose their BEE ownership recognition whenever black investors exited, forcing them to repeatedly conclude BEE equity deals to maintain their BEE statuses.

From around 2010, many businesses started balking at repeatedly doing replacement transactions after black shareholders sold and left. They argued that BEE deal-making was costly.

Evidence that this principle took the sting out of B-BBEE is collaborated by research conducted by economist Duma Gqubule. In June, Gqubule published a report, which shows that B-BBEE wealth not only slowed, it is also exaggerated.

He found that black ownership linked to B-BBEE equity deals accounted for 1.5% of market capitalisation of JSE’s top 60 companies. In rand terms, the value of this wealth is equivalent to R255 billion.

Interestingly, Gqubule’s findings contradict claims made last year by Wits University professor William Gumede, who said B-BBEE had transferred R1 trillion to about 100 politically-connected by 2008.

His findings also put a big question mark on claims that B-BBEE created 46 black billionaires or multi-millionaires in the mining industry. So, the question is where did most of this wealth vanish into?

It is no wonder that economic pundits like Gqubule and Ndzamela are skeptical about the claimed wealth generated by B-BBEE.

“I doubt we can count the number of black billionaires with two hands, let alone with one hand. If ancient Greek mathematician Archimedes heard about the existence of these 46 black billionaires, he would have politely said the math is not mathing. It’s all mythology,” says Ndzamela.

He suspects the exaggeration of black wealth is intended to create an impression that B-BBEE has worked, and therefore, it is no longer needed.

Black wealth exaggeration is not new in SA. It was used in the 1970s and 1980s by the apartheid regime to make its racist policies palatable to black people.

Ndzamela also does not buy the hype around the proposed Transformation Fund, whose supporters say it could engineer a third wave of BEE.

If established, the fund will be capitalised with enterprise and supplier development (ESD) financial contributions from companies. In return for paying ESD contributions into the government-controlled fund, companies will earn points on their B-BBEE scorecards.

“I am not convinced the fund can replace nuanced benefits of the current ESD policy. For example, a small business linked to a large corporate ESD programme enjoys benefits beyond loan or grant funding. It also benefits from accessing technical skills and procurement opportunities from a corporate ESD programme,” explains Ndzamela.

Nonetheless, he is not ruling out that the fund, if launched, can trigger a third wave of BEE. He believes the next BEE wave will not result in a “massive repetition” of the empowerment deals of the 1990s (first wave) and 2000s (second wave), whereby black-owned investment holding firms bought minority stakes in JSE-listed companies.

Ndzamela predicts that future B-BBEE transactions will be driven by black investors acquiring assets from companies that are de-conglomerating or selling off non-core assets.

“Conglomerates with assets in B-BBEE regulated industries like mining and energy will have to do empowerment deals to retain their licenses,” he predicts.

However, these de-conglomerating companies will sell B-BBEE shares to mainly employees and communities instead of a handful of large black-controlled investment groups. The next opportunity for black people may come from exit sales by retiring older B-BBEE investors, whereby they handover to the younger generation.

Whatever shape or form the next B-BBEE wave takes, Ndzamela believes it needs to be anchored in developing skills and small businesses in black communities. This will require pumping money into supporting small enterprises operating in sectors like engineering, renewable energy, and data science.

The money must also trickle down into artisans and skills tradespeople providing services such as welding, plumbing, electrical work, carpentry, fitting, boiler-making, digital and multimedia story-telling.

“This is not to say ownership, management control and socio-economic development must be neglected, but investment in enterprise and skills development needs to take centre stage,” says Ndzamela.

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