If SA is to reverse the credit rating downgrades to junk status and start restoring business and consumer confidence, it needs urgent structural reforms. In particular, it needs to find effective ways to increase growth and empower the disadvantaged. Black economic empowerment (BEE) was supposed to achieve these goals by unleashing "the full potential of all South Africans to contribute to wealth creation", as the ANC glowingly described it in 1994. Since then, business has put huge sums and enormous efforts into BEE compliance. But BEE has undermined black entrepreneurship, while encouraging corruption and inflated pricing. The relevant rules have become ever more onerous, while the ownership requirement is gradually being nudged up from 25% to 51%. This is putting property rights and business autonomy increasingly at risk. BEE is thus deterring direct investment and promoting capital flight. It is a key part of the reason economic growth has been negative in per capita terms for t...

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