ANC will one day follow the DA's reversal on employment equity - Business Day, 25th November 2013.

John Kane-Berman, the CEO of the IRR, argues that the DA's reversal of support for aspects of the Employment Equity Bill are to its credit. He warns, however, that the ANC should not gloat about this as it will soon have to follow suit.

Democratic Alliance (DA) leader Helen Zille says she will not pander to "formalistic liberals" (Business Day, 15 November) - whatever those might be. She has of course done precisely that in reversing her party's stance on employment equity legislation. In the process all those pundits urging her not to pander to the "formalists" have been left high and dry.

Zille's reversal is to her credit. So is her exposé (Business Day, 20 November) of how Business Unity South Africa kowtowed to the African National Congress (ANC) on the legislation.

But the ANC should not crow too loudly about the DA's reversal of support for aspects of current amendments to employment equity and black economic empowerment (BEE) legislation. This is because the ANC will itself have to follow suit.

The reason is simple: like the previous government's racial laws, those of the ANC are moving further and further from economic rationality.

Firstly, the employment equity quotas ignore the country's age and skill profiles. Africans are thus required to supply 75% of managers even though they account for only 36% of economically active people in the age category (35 to 64) from which managers can reasonably be drawn. Nor is that the only problem: only 4.1% of Africans over 20 years of age have post-school qualifications.

One has only to translate these percentages into actual numbers using official data to recognise that the racial quotas set for business are out of touch with reality. If 75% of managers have to be Africans, that will require a supply of 859 500 Africans. Yet only

992 000 have any post-school education.  If nearly all of these were to be employed as managers to fill the 75% quota, there would be few left to fill the 2 404 000 professional and technical posts in the country. 

The only way in which enough Africans could be supplied to make up 75% of all these posts would be to open them up to people with no post-school qualification.

Secondly, the new demands for black economic empowerment are mind-boggling in their complexity. There are priority elements, plus "sub-minimum" requirements. There is a "flow-through principle" and a "modified flow-through principle". You can be "an empowering supplier". You can get "B-BBEE facilitator status".  There are levels, charters, codes, and scorecards. The whole shebang reads like the National Party's pencil testing methods reborn as mathematics.     

Thirdly, efforts to stamp out so-called "fronting" ignore the economic law that people respond to incentives. If BEE law requires people whose main qualification is that they are black, the market will supply them. The resulting racial entrepreneurship is the only kind the ANC government is promoting. White racial entrepreneurs are being incentivised to set up more verification agencies. Black racial entrepreneurs willing to front are being encouraged to co-operate with whites requiring fronts. Successful co-operation is rewarded by government and other contracts. Blacks who didn't take advantage of fronting opportunities would be losing out on a chance to make easy money.    

Win-win co-operation between willing buyers of black faces and willing sellers thereof - a triumph for market forces - has been working so well that the government now wants to stamp out the very behaviour its policies incentivise. Hence the new penalties - up to a maximum of 10% of turnover and/or 10 years' imprisonment -  for fronting. These smack of desperation. 

We've been here before. So desperate was the previous government to stamp out subversion that it introduced 12-day detention without trial. That didn't work, so it was 90 days. Then 180. Then indefinite detention. Not even that worked, so the relevant legislation joined other apartheid laws on the scrapheap. It's but a matter of time before the ANC's racial laws end up in the same place. The only question is how much damage is done before this happens.

   

* First published in Business Day on 25th November 2013.

 

 

 

 

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