International pressure against BEE is ramping up

The US Administration has set the exemption of US entities in South Africa from all BEE requirements and race-based legislation as one of its necessary preconditions for the normalisation of bilateral relations between the United States and South Africa.

Sakeliga welcomes this diplomatic development. It marks a significant escalation in international pressure against race-restrictive economic policies in South Africa, with more to come.

From an international trade perspective, the South African government’s race-restrictive policies amount to non-tariff barriers. They severely restrict the licensing, ownership, management, supply chains, employment, and corporate action of international companies and their subsidiaries in South Africa.

The unfolding international escalation in opposition to BEE is therefore not isolated to the US Administration.

It has become clear in Sakeliga’s engagements with foreign companies operating locally, as well as foreign embassies, that the South African government has crossed the threshold of non-tariff and race-restrictive barriers that foreign governments and companies are willing to tolerate. Especially the looming September deadline for international companies to commence implementation of the government’s Employment Equity racial hiring quotas is causing significant alarm.

The international backlash against BEE and other race-restrictive policies of the South African government is set to escalate further in the coming months and years.

BEE exemption now a US precondition

The requirement to exempt US entities from BEE and all race-based legislation is one of four preconditions of the US Administration as conveyed in an official statement by a delegation including the leader of the Freedom Front Plus, Dr Corné Mulder, Saai* CEO, Dr Theo de Jager, and NEASA* CEO, Gerhard Papenfus, after talks in Washington this week.

Among the four conditions, three have been publicly set before: farm attacks, death chants against farmers, and risks of unfair land expropriation were all mentioned in President Trump’s executive order of 7 February 2025 and were discussed at some length in public view in the White House recently between President Ramaphosa and President Trump.

However, race-restrictive economic policies and their effect as non-tariff barriers were not specifically addressed in the executive order or earlier public engagements, relegated to limited commentary about Elon Musk’s Starlink prospects and race laws in general in South Africa.

The explicit inclusion of the fourth precondition regarding BEE is therefore a new public development in the diplomatic relationship and is to be welcomed. BEE and other race-restrictive legislation and regulation have done immense economic and social harm for over two decades.

Possible implications of this BEE precondition

The announcement may have several important implications, including but not limited to the following:

• By explicitly recognising the harm of BEE and race-restrictive legislation to US business interests and identifying that these may constitute unfair non-tariff trade barriers for US firms, the BEE precondition announcement elevates race-restrictive legislation beyond merely domestic affairs to the level of international economic and diplomatic relations.

  In the very short term, this is especially relevant in light of the Trump tariff deadline looming on July 8 and attendant negotiations.

  In the longer term, this may entail a ratcheting up of US-led bilateral or even multilateral pressure opposing race-restrictive legislation in South Africa, utilising various economic and political levers.

• By pressing its interests in respect of BEE, the US Administration is likely to embolden and legitimise rising opposition to BEE and race-restrictive legislation from other states. Moreover, firms from other foreign countries can be expected to express their concern that US firms may be permitted to compete on more favourable terms than they are.

  Domestic businesses will similarly express concern about the competitive advantage enjoyed by US firms. This might likewise embolden demands from domestic firms and business groups to end BEE requirements altogether.

• The possibility of cascading demands for BEE exemption significantly raises the stakes and weight of the US’s BEE precondition. One could expect, therefore, that the demand will be met with considerable resistance by the South African government, reinforcing and perhaps strengthening the trend toward diplomatic escalation.

  Escalation may take familiar forms, such as targeted international sanctions by the US or formal complaints and consequences for what will be considered South Africa’s violation of World Trade Organisation Agreements and more.

  However, the current US Administration has demonstrated a willingness to consider less orthodox methods. Scenarios to be considered should include that the US, confronted by an intransigent South African government, could persist with its planned increase of tariffs on goods from South Africa, but decide to exempt companies not participating in or withdrawing from BEE from those tariff increases.

  Such measures would compensate US firms operating in South Africa for the costly local non-tariff barriers they face, and at the same time, strengthen the most independent parts of the private sector in South Africa. Notably, measures like these would be colourblind, since non-participation in the state’s BEE programme is open to everyone, regardless of race, who prefer doing value-based business.

Businesspeople need to be aware of the trend of escalation in BEE policy and opposition to BEE policy, both domestically and from abroad. Sakeliga will continue to expand its litigation against race-restrictive policy, develop and encourage an alternative ethic of appropriate non-cooperation, and strengthen relations with domestic and foreign business communities who wish to end or greatly restrict BEE.