Tag: finance

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A new iteration of BEE is possible

ANTHONY BUTLER: Consensus about BEE policy needs to emerge

First published in Business Day

12 September 2025


The contentious debate about broad-based BEE (BBBEE) has been a real problem for the country. If coalition government between constitutionalist parties is to survive the next decade, some rudimentary consensus about the policy needs to emerge.

Until recently the polarisation has been deepening. BEE’s defenders insist it has created a black capitalist class, black managers and professionals who would otherwise have remained excluded. It has also brought changes in employment equity, skills development and enterprise support.

President Cyril Ramaphosa has always championed the framework he helped create and from which he benefited so handsomely. He has rebutted claims that BEE hinders growth, framing it as an investment in the economy, not a cost. He has strongly backed the Black Industrialists Programme and a proposed R100bn Transformation Fund to bolster black entrepreneurs. Last year he supported legislation to reinforce compliance through enhanced incentives and possible punitive measures such as fines and public “naming and shaming”.

The president’s only real accommodation of critics has been support for the Equity Equivalent Investment Programme, which allows multinationals to invest in skills, innovation and supplier development rather than transferring equity directly.

BEE has meanwhile faced intensifying criticism from opposition parties, businesses and civil society, who argue that the main beneficiaries have been a politically connected, ANC-linked elite rather than ordinary black citizens. It has been a mechanism for patronage, with state contracts channelled to politically connected business people under the guise of empowerment. BBBEE has also been weaponised to justify corrupt procurement practices.

The DA’s hostility has hardened. The party rejects race-based legislation and proposes instead a nonracial economic empowerment framework with a “social impact” approach to integrate sustainable development goals into procurement and other regulatory frameworks, and an “economic empowerment for the disadvantaged” model to target poverty rather than race. An empowerment index for companies would meanwhile measure their social and economic inclusivity to mobilise shareholder activists.

Civil society actors want to replace elite enrichment with broad-based, skills-driven, employment-generating empowerment, by prioritising employee share ownership schemes, community trusts and co-operatives over elite ownership deals, and linking state support and contracts to demonstrable worker and community benefits.

There has also been renewed interest in ordinary citizen investment in stock markets through their pension or investment policies, in carefully designed retirement schemes that encourage saving, in expanded home ownership, and in reducing the barriers to entry that shut out the small, medium and micro enterprises that are the most immediate mechanisms of economic empowerment for most people.

Some of the dwindling band of ANC intellectuals have been influenced by Malaysia’s recent rethink of indigenous empowerment. Its new road map for economic transformation for the bumiputera (sons of the soil) refocuses on upskilling and mentoring of particular individuals, helping smaller enterprises move up the value chain, and giving empowerment agencies dedicated roles as talent developers or “super-scalers” of businesses — with measurable outcome targets, rather than broad objectives or mere compliance metrics.

The ANC’s recently released discussion documents for December’s national general council (NGC) show a flickering — if not yet a significant uptick — of the liberation movement’s formerly flatlining cognitive functioning charts in this area. The NGC “base document” concedes that BEE has primarily incorporated an elite minority of black people, and a few women, into the existing capitalist structure.

It insists that empowerment policies must be “reoriented to benefit more than an just elite few”, and suggests employee ownership trusts and co-operatives, better support for small, black-owned businesses, a public venture capital fund or credit-guarantee scheme, and BEE incentives linked directly to actual job creation.

What is needed is a bit more academic research and an open mind on all sides about potential change. A broad consensus on the way forward might conceivably yet be forged. But don’t bet on it.

  • Butler teaches public policy at the University of Cape Town.
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The property rates dilemma

ANTHONY BUTLER: DA has to beware of progressive taxes on real estate wealth

Once ratcheted up and disconnected from local services, the tariffs will never come down

First published in BusinessLive

06 June 2025

The flexible intellectual gymnasts of SA’s political elite have adopted a variety of contorted positions on the desirability of “wealth taxes” in recent years.  

The EFF has unequivocally favoured soaking the rich, calling for a direct tax on high-net worth individuals (other than illicit cigarette manufacturers), expropriation of other people’s property without compensation, and levies on luxury goods (other than Breitling and Louis Vuitton).  

The DA, in contrast, has argued that wealth taxes undermine investor confidence and encourage tax base erosion. The ANC leadership has meanwhile steered its habitual “fudge and inaction” middle course, endorsing wealth taxes in principle while arguing for cautious implementation.

Given that many stores of wealth — for example offshore assets, trusts, art collections and herds of breeding Ankole cattle — are hard to detect and value, the SA Revenue Service will need to establish a comprehensive wealth register as a tentative step towards a formal wealth tax. 

While the EFF and the ANC support wealth taxes, and the DA opposes them, wealthy Cape Town residents believe DA mayor Geordin Hill-Lewis is launching a “stealth wealth tax” in the city. 

Revenue is needed to service Cape Town’s growing population (soon to top 5-million), replace shrinking central “equitable share” funding, and invest in long term water, sanitation, transport and electricity infrastructure.

Hill-Lewis’s latest financing proposal, open for comment until June 13, escalates rates on higher value properties and indexes services for water, sanitation and other services to property values. 

Property rates have historically functioned as user charges that pay for local services tied to property ownership. Like capital gains tax and estate duties, such wealth-linked taxes have not been viewed as formal wealth taxes, in this case because they are not applied to total wealth, which includes cash, bonds, equity, artworks and luxury goods. In Cape Town though, the boundary between municipal revenue source and wealth tax has arguably become blurred. 

Metropolitan authorities were designed as “unicities” so that higher-income households and businesses could cross-subsidise low-income households, and established areas could fund the incorporation and flourishing of new neighbourhoods and residents. A progressive rates system ensures the rich contribute more to city revenue, helping fund basic services for poorer communities and redress apartheid-era spatial injustices. 

This approach is the right one, and it is the way great cities are built. However, if cross-subsidies grow too fast, property rates start to resemble wealth taxes. The relationship between services and taxes is severed, and the vital accountability mechanism that this maintains is eroded.

Homeowners whose asset values rise while their incomes do not — pensioners, for example — are forced to sell their homes to benefit the city fiscus, when the national fiscus would benefit eventually through estate duties. 

Cape Town is in a better place than other metros, in part because of its mildly meritorious behaviour but in large measure because other cities have crashed and burnt under the ANC. The current DA incumbents must be careful not to raise property taxes simply because they can. This could set a dangerous precedent: progressive taxes based on real estate wealth will never come down once they have been ratcheted up and disconnected from actual local services. 

Finance minister Enoch Godongwana justified his abortive VAT increases a few months ago on the basis that he needed the money to fund front-line services. The DA pushed back against this lazy recourse to tax rises and insisted that he focus instead on efficiency savings.

Many richer Capetonians believe the same should be true of the mayor of Cape Town. 

• Butler teaches public policy at the University of Cape Town.

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Vulindlela Phase 2

ANTHONY BUTLER: Operation Vulindlela will have to remain lean and mean

First published in Business Day and BusinessLive

09 May 2025

The fanfare that surrounded Wednesday’s launch of the second phase of the hitherto low-key Operation Vulindlela shows how central the project has become to the credibility of President Cyril Ramaphosa’s otherwise faltering reform programme.

Vulindlela was born out of crisis, established in October 2020 as a joint initiative of the presidency and National Treasury to fast-track the delivery of reform in the midst of the Covid-19 pandemic. It had long been recognised that structural change was crucial to addressing the underlying causes of low economic growth, but Covid-19 broke down political and institutional barriers to change. 

Initially focused on a narrow list of priorities with the greatest impact on growth and employment, Vulindlela aimed to “modernise and transform” — in truth to salvage — network industries including electricity, water, transport and digital communications, and to remake the visa regime to attract skills and promote tourism growth.

While departments and state-owned entities would still implement structural reforms, a dedicated unit bridging the presidency and the Treasury was created to monitor progress, provide “technical support” and generate clear recommendations for political principals to endorse. 

The first phase went pretty well, though slowly, with reforms to enable private operators to access the freight network and participate in container terminal operations, a re-engineered water-use licence application system, auctioned high-demand spectrum, streamlined telecommunications infrastructure regulations and an updated visa system. All this resulted in somewhat cheaper data and fewer needlessly excluded skills, and unlocked investment in several sectors. 

The government’s review of the first phase observed last year that there was “still a long way to go” in the performance of ports and the rail system, an assessment that applies across most of Operation Vulindlela’s areas of focus. Vulindlela will have to drive its existing initiatives — and prevent backsliding — as it moves on to fresh problems in a second phase that presents four key challenges.

  • The issues Ramaphosa has now placed on its plate include broad digital transformation, a technical quagmire that has defeated the most capable reformers in other countries.
  • Operation Vulindlela’s success has always hinged on private capital mobilisation. Without credible, predictable delivery frameworks — and faster impact timelines — economic benefits will remain limited. Sceptics believe bureaucratic delays will continue to undermine investor confidence in sectors like rail, ports, energy and digitalisation.
  • Operation Vulindlela can only be a supportive partner, and it will continue to be hampered by the lack of technical and managerial capacity in the wider civil service, conservative state-owned enterprises, water boards and other government agencies.
  • Finally, the politics will only get rougher as Operation Vulindlela’s scope of activities embraces local government and it becomes generally more politically exposed. Reform threatens entrenched interests and so brings pushback from unions, opposition parties and monopolistic entities resisting competition. Vulindlela may not be able to depend on political protection from the incoming president — or from their senior ministers — after December 2027. 

Fiscal constraints, slow growth and a rising debt burden will continue to hamper Operation Vulindlela. Reforms requiring public financing or major contingent liabilities, including infrastructure investments, water system development and a local government reboot, will be delayed or downscaled.

Politics precludes any major shift from consumption to investment spending, but SA desperately needs to invest in the future. As is so often the case, crisis has made reform possible, but it has denied reformers the resources they need to realise their goals. This means Vulindlela will remain lean and mean, and we should salute its foot soldiers as they venture across new political minefields. 

• Butler teaches public policy at the University of Cape Town.