Are investors skipping South Africa? The BEE hurdle nobody in government wants to price
South Africa is spending less than half of what the ANC’s own National Development Plan says the country needs on building factories, plants and machinery, and manufacturing was the only sector in the economy to go backwards in the first 3 months of 2026. At the same time, a government investigation has found that the body meant to handle applications from foreign companies looking for an alternative to BEE ownership rules had no written procedure, no standard forms and no central place to even receive them. Proposed new BEE rules would strip vehicle manufacturers of their status for using suppliers that are not 100% black owned, punishing the companies that did what the policy asked. The result is not a headline about an investor walking away. It is a factory that is quietly built somewhere else.
The number the government does not put on a slide
Government measures how much money gets spent in South Africa on building physical things, the factories, plants, machinery and warehouses that give people jobs.
In the first 3 months of 2026, that spending came to 13.1% of the economy. In the 3 months before that it was 13.6%, so the direction of travel is downward.
The ANC’s own National Development Plan sets the target at 30%. Economists put the level needed before unemployment starts coming down at somewhere around 25%.
Statistics South Africa’s national accounts director, Bokang Vumbukani-Lepolesa, said the drop in that spending is worrying. Out of every sector in the economy, manufacturing was the only one that went backwards in that quarter.
Hold those figures against an unemployment rate above 32% and they stop looking like separate problems.
There is no single BEE
Part of what makes this difficult for anyone bringing money into the country is that BEE is not one set of rules. What it asks of a business changes depending on the industry, and in some cases on whether the owners are South African or foreign.
A new mining right requires at least 30% of the shares in that operation to be handed to black owners before the right is issued at all. A foreign owned telecoms company falls under the Electronic Communications Act, which requires it to sell 30% of its local operation.
In most other industries there is no ownership law at all. Instead there is a BEE scorecard, and the score a company gets determines whether government departments and most large South African companies are permitted to buy from it.
On top of that, certain industries have their own separate BEE codes with their own targets. And on 29 January 2026, Trade Minister Parks Tau published proposed changes to the whole system, including a new Transformation Fund that companies would pay 3% of their profit into. The public comment period closed on 30 March 2026 and business is still waiting to be told what the final rules will be.
So the honest answer to an investor asking what BEE will require is that nobody can say yet, and that by the time a plant is running it may well have changed again.
What the investigation found
There is a mechanism intended to make this easier for foreign companies. The Equity Equivalent Investment Programme is open to a large international company that can prove it has a worldwide policy of never selling shares in its branches. Instead of selling shares, it puts money into training people and building small businesses in South Africa, worth either 25% of what its local operation is worth or 4% of what it earns here annually.
An application goes to a BEE sector council, and a minister signs it off. There is no deadline written into that process anywhere.
Communications Minister Solly Malatsi, answering a parliamentary question from DA MP Tsholofelo Bodlani, revealed what a departmental investigation found about the B-BBEE ICT Sector Council, the body handling these applications for the technology industry.
Malatsi said the report found the council was dysfunctional in dealing with these applications, with no clear processes and nothing in place to monitor them. The investigation found the council had no written procedure for handling an application, no standard forms and no central place to receive them, and that different companies were judged by different standards.
One application from a major software company sat with the council for around 6 months. Another company, seeking to add to money it had already invested in South Africa, waited several months. The department eventually had to step in and push the applications through itself.
The financial findings were worse. Malatsi said the council had no approved financial system, that spending had been signed off by a person who was not a member of the council, that former members remained on the bank account after a new council had been appointed, and that financial reporting consisted mostly of bank statements.
The chairperson was removed on 14 August 2026.
This is not confined to one committee. The United States government publishes an annual report on what it is like to do business in South Africa. The 2025 edition records that companies raise concerns about the length of this application process and the uncertainty around the terms of the investment, and that American companies have pushed for the programme to be allowed in sectors that currently accept no alternative to selling shares.
The rules that would punish compliance
Business Leadership South Africa chief executive Busi Mavuso has raised a further problem with the proposed changes published in January.
Mavuso said vehicle manufacturers in South Africa spent years deliberately building black owned businesses into their supplier base, which is what BEE asked them to do. She said the proposed changes now threaten to strip those manufacturers of their BEE status, because many of the suppliers they developed are not 100% black owned.
She said components in a vehicle cannot simply be swapped out when the rules change, because getting a new supplier approved and onto a production line takes years. Those manufacturers would lose their status immediately, along with access to the tax incentives government itself created for the industry.
The consequences run further than the manufacturers. A supplier that suddenly counts against its customer’s score begins losing contracts. Enough lost contracts and that business closes, and its workers join the unemployment figures. When a manufacturer loses a supplier it cannot replace quickly, the production line stops, and that is true across manufacturing, not only in the motor industry.
An investor watching that adds it to the list of reasons not to build here.
Kenya made a different decision
Kenya had a rule very much like South Africa’s. Foreign technology companies were required to hand 30% of their shares to local owners.
On 22 August 2023, Kenya scrapped it. The reason given by the Kenyan Cabinet was to make it easier to do business in the country and to give foreign investors certainty about the rules they would be governed by.
Kenya faced the same choice South Africa faces and decided the investment was worth more to its people than the shares.
The part that undoes the policy
There is an option available to that international business that leaves South Africa with nothing at all.
Most African countries, including South Africa, belong to a free trade agreement that allows goods to move between them with little or no import duty. A company can build its factory in Kenya or Egypt and ship the finished product into South Africa to sell here.
BEE applies to companies operating inside South Africa. It does not apply to goods crossing the border.
That company sells to South Africans and takes the money out of the economy. It creates no jobs here, buys nothing local, and transfers no ownership to anybody in this country. BEE never touches the transaction. All the policy achieved was to move the factory next door while leaving the market open.
The thread from BEE to unemployment
For more than 30 years the response to warnings about this has been that BEE exists to fix what the ANC calls a historic injustice, and that questioning how the policy works amounts to questioning the goal.
The goal is not the issue. After 30 years of running every institution built to deliver it, the delivery has not happened.
Follow it from the start. BEE is not one set of rules, so nobody can tell an investor what it will require or how long it will take. The plant gets built somewhere else and the jobs it would have created never arrive. The rules change again and suppliers who did everything the policy asked lose contracts and close, putting their workers out of work. The manufacturers who relied on them sit with production lines that cannot run. And the next investor watching all of this declines to take the chance.
South Africa is building at 13.1% against the ANC’s own target of 30%, with unemployment above 32%. Those are the government’s own numbers, measuring the government’s own plan, moving in the wrong direction year after year.
