Thirty years into democracy, South Africa’s system for measuring Broad-Based Black Economic Empowerment (B-BBEE) on the Johannesburg Stock Exchange (JSE) is facing a crisis of credibility.
Significant policy design failures and political compromises made during the drafting of the BEE Codes and sector charters have created a widening gap between what companies report on their official BEE certificates and the actual net ownership held by black shareholders.
The central issue lies in how empowerment is calculated. A maze of conflicting statistics and flawed methodologies has polluted public discourse and left investors, policymakers, and the public deeply confused about the true extent of economic transformation in South Africa’s capital markets.
The Problem with Scorecard Accounting
Under current BEE rules, passive indirect ownership—such as shares held via pension funds or institutional mandates like the Public Investment Corporation (PIC)—is allowed to count toward a company’s total score. This recognition of indirect ownership means that listed companies can receive high compliance scores without actively initiating new transformation deals or transferring direct equity to black investors.
By relying on this “back-door route” to compliance, companies are rewarded for doing nothing. Passive indirect ownership betrays the original spirit of true empowerment, which was designed to foster direct ownership by active black shareholders capable of influencing corporate strategy and direction.
