LETTER: State on the wrong track - Business Day, 11 May 2017

May 11, 2017
Your report calls for "harsh penalties". Firms are referred to as "offenders". Calls are made to delist "noncompliant" companies from the stock exchange. Employers that don’t meet racial quotas are referred to as "intransigent".


By Frans Cronje 

Your front page report (Calls for action over failure to transform, May 10) reveals the depth of the madness that has attached itself to the government’s approach to economic empowerment. Almost 200 companies have been "referred for prosecution" for failing to meet racial targets set by the government.

Your report calls for "harsh penalties". Firms are referred to as "offenders". Calls are made to delist "noncompliant" companies from the stock exchange. Employers that don’t meet racial quotas are referred to as "intransigent".

But these "intransigent, noncompliant offenders" are the only hope SA has of pulling out of the economic slump the country finds itself in. Against the odds, and in the face of policy hostility, many of these companies are doing everything they can to make a go of it in a now almost zero-growth economy.

We brief many companies and every week see company boards whose efforts to make a contribution to the country can only be described as heroic. These companies, and the boards that run them, are in our experience often dedicated, patriotic South Africans and foreign investors who are deeply committed to improving social and economic circumstances in the country. But the way SA conceives of empowerment has brought us to a point where the government and many activists treat those same companies and their directors as virtual criminals.

In your report the ANC in effect blames them for "instability" in SA. What is going on here is not the pursuit of empowerment — it is the very antithesis of any definition of the word. Real empowerment requires more jobs, more entrepreneurs and the tax revenues to develop the infrastructure to support economic expansion. Our polling shows time and again that South Africans do not care greatly for racial quotas and targets — the demand is for jobs, rising incomes and better lives.

The madness has reached a point where the government is engaged in an assault on the source of those jobs, yet claims time and again, and with the economy on its knees, that this assault is in pursuit of empowering SA’s people.

The country needs empowerment policies that work — there is no greater policy priority. But that won’t happen without recognition that investment-led economic growth is the basis of all empowerment. Empowerment policy should be geared to reward the fixed investment, job creation, tax payment and export contributions of companies.

My policy colleagues have devised a bold new approach to empowerment policy called economic empowerment for the disadvantaged (EED) that prioritises above all else the inputs necessary to position SA as a competitive, high-growth emerging market. It is a workable alternative for pulling millions of people into the middle classes.

Under current empowerment policy, business, entrepreneurs and the private sector will continue to be hung out as a root cause of poverty, inequality and instability in SA. As the pursuit of "empowerment" drives more investors out of the country, the screws will be tightened on those that remain. Year after year, the rhetoric and hostility will deepen.

However, there are alternative approaches to empowerment policy that could change that and organised business needs to learn to back those alternatives.

*Frans CronjeCEO, Institute of Race Relations, a think-tank that promotes political and economic freedom. 

Read letter on Business Day here

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