SMES and black economic empowerment in South Africa - Issue 3 - Research analysis

Aug 22, 2026

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Black Economic Empowerment (BEE) is a South African policy designed to reduce racial inequality by incentivising firms to train, hire, promote and transfer ownership to black people. Despite these objectives, compliance remains challenging. This study examines firm-level determinants of BEE certification and compliance among small and medium-sized enterprises (SMEs) using multiple firm and managerial characteristics. Results link BEE compliance significantly to location, age, industry, owner and manager traits, and firm size.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages11

Reading Time28 min

AccessFree to download

Introduction

The BEE Policy

Certification and Compliance Determinants

Implications for SME BEE Adoption

Volume 45, Issue 3 SMES and black economic empowerment in South Africa Nina Kupzig Ruhr-Universität Bochum Abstract Black Economic Empowerment (BEE) is a South African policy that aims to decrease racial inequality and incentivises firms to train, hire, promote and transfer ownership to black people. However, the policy struggles to reach its goals. This article investigates the firm-level determinants of BEE compliance of small and medium-sized enterprises (SMEs) to understand the challenges towards BEE adoption for SMEs. Considering the BEE certification decision and the BEE compliance level, the results show that, e.g. , firm location, age, industry, owner and manager characteristics, and firm size are significantly associated with BEE compliance. Editor`s Note: This paper was originally submitted under a different manuscript number on 08/26/2024 and accepted for publication on 8/24/2025. A system error required us to replace the original submission with a new manuscript witha later manuscript number Citation: Nina Kupzig,(2025) ''SMES and black economic empowerment in South Africa'', Economics Bulletin, Volume 45, Issue 3, pages 1159-1169 [Contact:](Contact: Nina Kupzig-nina.kupzig@rub.de)[ Nina Kupzig-nina.kupzig@rub.de](Contact: Nina Kupzig-nina.kupzig@rub.de). Submitted: October 16, 2025. Published: September 30, 2025. 1. Introduction South Africa experienced institutionalised racial discrimination during Apartheid, leading to persistent racial inequality. Broad-Based Black Economic Empowerment (B-BBEE)– a policy enacted in 2003 and that I refer to as Black Economic Empowerment (BEE) for the sake of brevity – aims to reduce racial inequality by economically empowering black1 people (South African Government, 2003) . The policy incentivises firms to train, hire, promote, and transfer ownership to black people. Participating firms receive annual BEE certificates measuring their empowerment. While participation is voluntary for non-listed firms, participation is tied to benefits in public tenders and licensing processes, as well as advantages in obtaining private contracts. The latter is driven by the policy’s so-called trickle-down effect which incentivises participating firms to choose BEE-certified suppliers.2 Much criticism of the policy exists. For example, the B-BBEE Commission (2022) finds many malpractices (e.g., fraudulent certificates) . Smaller firms complain they need to transfer ownership to get certified – something many family-owned businesses are reluctant to do.3 Moreover, many listed firms obliged to get BEE certificates are not certified (B-BBEE Commission, 2018) . Thus, the policy struggles to transform the South African economy. This paper uses the World Bank Enterprise Survey (WBES) from South Africa from 2020 to investigate firm-level determinants of BEE implementation for small and medium-sized enterprises (SMEs) . To the best of my knowledge, I am the first to use a large, representative dataset on SMEs that includes firm and BEE characteristics, allowing such an analysis. My findings may indicate the most challenging policy areas toward a higher BEE adoption rate for SMEs. As SMEs constitute a significant share of the South African economy (Kongolo, 2010), their adoption of BEE is key to transforming the South African economy. This paper contributes to the literature on BEE implementation, which needs to be distinguished from the much larger literature on the effects of BEE on firms’ success (e.g., Akinsomi et al. , 2016; Busse et al., 2023; Duffett et al. , 2009; van der Merwe and Ferreira, 2014; Vilakazi and Ponte, 2022; Ward and Muller, 2010) . Existing work on BEE implementation often employs qualitative approaches using literature reviews, case studies of single firms, or interviews (e.g., Amoah, 2023; Bracking, 2019; Dlamini, 2014; Fauconnier and Mathur-Helm, 2008; Musabayana andMutambara, 2022; Pike et al., 2018). Seldomly, it uses quantitative approaches althoug

FAQs

What is the goal of Black Economic Empowerment (BEE) in South Africa?

BEE aims to decrease racial inequality by incentivising firms to train, hire, promote, and transfer ownership to black people.

What does the study analyze about SMEs and BEE?

The study investigates firm-level determinants of BEE compliance by considering BEE certification decisions and compliance levels for SMEs.

Which factors are associated with higher or lower BEE compliance in SMEs?

Firm location, age, industry, owner and manager characteristics, and firm size are reported as significantly associated with BEE compliance.

Aug 22, 2026

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