Much recent criticism of broad-based BEE is framed through cost (“Costs of BEE outweigh benefits”, June 10). It is said to burden firms, undermine efficiency, reduce output and damage the country’s long-term prospects. Employment equity complicates hiring. Preferential procurement reduces efficiency. Land reform creates uncertainty. Transformation, in this telling, is mainly an economic burden on business.The recent Codera/XA report is useful because it shows that two different objections are being run together. Among firms large enough to comply, 26% identified cost, complexity and frequent policy changes as their main concern. If those costs fell below a tolerable threshold, some might accept the remaining obligations.Among non-compliant firms, however, 60% gave reasons not primarily about administrative cost: race-based policies were illegitimate, racist or destructive of meritocracy (21%); inappropriate or inapplicable (27%); or commercially irrelevant because the firms did not do government business or saw no benefit (12%). For this group, no shorter form, cheaper verifier or compliance cost short of zero is likely to satisfy the objection.The common thread is the counterfactual. Every argument compares broad-based BEE with some alternative state of the world. For some in the 26% group the preferred alternative may be a cheaper, simpler compliance system. For some in the 60% group, it may be an economy without a deliberate attempt to address, through affirmative race-based policy, the legacy of a murderous state that restricted participation in the productive economy, distorted labour markets, misallocated capital and suppressed competition on the basis of race.The direct costs of exclusionNone of these alternatives is costless. Concentrated ownership, unequal access to land and finance, unequal schooling, distorted settlement patterns, weak household balance sheets and unequal access to networks all impose real economic costs.They are borne by the black worker commuting for hours from a distant township; the black household with few assets to transfer across generations; the black young person entering the labour market through weaker schools, networks and access to capital; the black entrepreneur kept distant from supply chains and formal finance; and the black child whose prospects are stunted almost from birth by poor sanitation, weak services and low-quality infrastructure in a municipal ward still carrying the consequences of unequal public investment.Statistics South Africa’s Income & Expenditure Survey 2022/23 illustrates the impact. Households in the lower half of the income distribution collectively operated with an annualised cash deficit of about R180bn. The same number of households in the upper half recorded a combined cash surplus exceeding R1.1-trillion.For households in deficit, exclusion is internalised and immediate, even as they spend more than R700bn on goods and services from firms they do not own. For those in surplus, likely including owners and senior employees within the 60% group, exclusion may appear distant, be moralised away as individual failure, or be treated as irrelevant to their economic position and outside the scope of their responsibility.Fortunately or otherwise, the costs of exclusion do not disappear because they are absent from a firm’s income statement. They return through direct and indirect channels: unreliable staff attendance in service businesses; weaker household balance sheets in credit markets; thin supplier pipelines for logistics businesses serving low-income communities; higher security costs at factories and warehouses; social fragmentation that affects workers’ psychological well-being; and lower morale in the workplace.South Africa’s inequality, identified by the World Bank as the highest in its global database and still anchored in inherited circumstances such as race, geography and parental background, is often treated as someone else’s problem (World Bank, 2022). It nevertheless shows up in the common macroeconomy. Long travel times through an urban transport system shaped by separate development and segregated human settlements reduce productivity today. Weak household balance sheets constrain entrepreneurship. Limited access to capital restricts investment. Spatial fragmentation raises transaction costs. Unequal opportunity reduces the effective pool of productive talent. Private security, gated settlements, risk cover, fiscal pressure and social protection all become part of the shared economic bill.These are no different from the older externalities: the factory that looked efficient because the cost of pollution was borne by someone else’s lungs and the society that looked peaceful because the cost of exclusion was borne by someone else’s poverty and subjugation, both costs now internalised as today’s operating costs through carbon credits on exports and security costs against south-to-north migration and many other burdens imposed on terms not of their choosing.Micro to macroeconomic causalityThe argument above is also partly why firm-level cost evidence cannot simply be converted into economy-wide conclusions. Moving from compliance costs to claims about investment, productivity, growth or national welfare requires a causal bridge that accounts for behavioural responses, distributional effects, gains and losses across groups and alternative policy choices.The empirical literature reflects this difficulty. Matthias Busse, Nina Kupzig, and Tim Vogel (2025), using JSE-listed firms between 2004 and 2019, report a small positive effect of BEE on turnover, no significant effect on profits, and positive but non-robust effects on labour productivity. Daron Acemoglu, Stephen Gelb, and James A Robinson (2007); Anagaw Derseh Mebratie and Arjun S Bedi (2013); and Jan A Dreyer, Suzette Viviers and Nadia Mans-Kemp (2021) are similarly cautious and illustrate how serious researchers do not turn partial evidence into sweeping conclusions.The uncomfortable conclusionWhile much criticism of broad-based BEE is framed as concern about cost, the sharper argument, reflected in parts of the 60%, is that transformation itself is economically harmful, illegitimate or meaningless.The counterfactual to that view requires a different premise: that persisting with exclusion is itself a larger and more harmful economic problem. Put bluntly, a black child is born with no less talent than a white child. Bringing more black children into the productive economy, through affirmative steps that deliberately break down the known man-made barriers to access, should therefore mean a larger and more productive economy, not a costly and unproductive one.Unless, of course, you do not believe that.• Mohapi, founder and director of Common Bond Capital and Impact Tech AI, serves on a ministerial advisory unit within the department of trade, industry & competition.