For over a decade, much has been said about Black Economic Empowerment (BEE), its implementation, and the so-called ‘red tape’ that supposedly chokes innovation in South Africa’s economy. While there is truth in the idea that regulatory burdens can be heavy, particularly for businesses navigating the government procurement space, the reality is far more nuanced − and far more concerning.
The general business community often argues that the government’s compliance requirements are onerous, time-consuming, and a distraction from growth and innovation. This is especially true for small and medium-sized enterprises (SMEs), which are disproportionately affected because they lack the administrative capacity and networks of larger corporations. For SMEs, ‘compliance’ isn’t just a box-ticking exercise − it’s a potential death knell.
Let me give you an example. Assisting a local car wash owner to apply for a basic funding opportunity recently turned into a multi-day logistical operation: sourcing certified documents, going to the municipality for proof of address, and finding someone with a scanner to help upload documents for the CIPC submission and then drafting a business plan with a five-year cashflow projection. What seems like a one-hour digital task to some of us can mean several days of taxi rides and missed income for a small business owner in Tshiawelo or Butterworth.
And while this example may feel like an edge case, the problem persists − and intensifies − even further
up the value chain.
In the last five years, my team and I have assessed numerous tenders across private companies, government and state-owned entities (SOEs), primarily in professional services. We estimate that in nearly 75% of those tenders, the technical requirements are disproportionately exclusionary to smaller firms. Specifications appear designed not just to ensure capability − which is fair − but also to systematically eliminate newer and more agile players from even qualifying to compete.
Let me be clear: these are not just administrative barriers. They are structural filters that effectively lock out skilled professionals simply because they don’t carry the badges of incumbency − 15 years of experience in a single narrow sector, 10-year company registration histories, five transactions above a specific financial threshold, and so on.
We recently saw a tender requiring references from prior clients − nothing unusual there. However, each reference had to provide a detailed score out of 100 for the work delivered, without any framework or scoring rubric. What does that even mean in practice? Are we now expecting our clients to moonlight as rating agencies?
Another recent requirement specified that firms applying for infrastructure panel work must employ team members with at least 15 years of experience in project finance. No rationale was provided. What if you have a team of 10 people, each with 10 years of high-quality experience across multiple sectors? That doesn’t count. Ironically, the same tender required sector-specific experience in, say, agriculture − punishing teams that have diversified and learned across industries.
Let’s contextualise this absurdity: Elon Musk sold his first tech company for $300 million within four years of graduating from university. Enough said.
One of the most startling requirements I’ve encountered was during a tender briefing session where it was stated that the applicant company must have been registered for at least 10 years − purely for ‘reputational purposes’. Someone rightly pointed out that a shelf company registered a decade ago now qualifies, while a thriving business built from the ground up eight years ago does not.
These are not isolated quirks. They are symptoms of a system that has been quietly rigged. In fact, in a recent discussion with an international colleague, it was revealed that one of their associates was involved in drafting the tender specifications − for a local transmission tender, the result of which is that no local company qualifies for the R400-billion tender. It’s hard not to question the fairness of that playing field.
In theory, BEE is supposed to level the field for historically disadvantaged individuals. In practice, many of the biggest firms already boast Level 1 BEE status, crowding out smaller black-owned businesses who are still climbing the ladder.
This isn’t just a black business issue − it’s a small business issue. But when viewed through the lens of transformation, the challenge becomes even more stark. We are asking black entrepreneurs, many without generational wealth, to start at the bottom, take on the smallest contracts, and slowly build track records over a decade or more. Only once they have ticked all the boxes − 15 years of experience, 10 years of company registration, and sector-specific expertise − will they qualify to bid for the kind of work that isn’t even that substantial in value. Some of these tenders are for less than R1million in fees.
By then, most have either pivoted, sold, or shut down.
To be clear, this is not about lowering the bar or awarding tenders to unqualified players. It’s about designing tender criteria that measure what matters − capacity, capability, and innovation − not just tenure and legacy relationships.
I’ve raised these concerns with senior government officials who often acknowledge the problem. However, they’re quick to point out that the levers of change sit much lower in the system, within procurement teams and committees overwhelmed by competing priorities. When I asked about Sipho Nkosi’s red tape reduction initiative, the response was that while his mandate is noble, it spans all levels of government and may never reach this level of granularity.
In countries like the United States, fresh ideas and bold new thinking are valued more than age or tenure. Young people are empowered to fail, learn, and build again.
That’s how you build an innovative economy.
In South Africa, we’ve built a tendering system that filters out that same energy before it even arrives …
Author
Itani Mafune CA(SA), ACMA, CGMA
