BEE: Black business' false friend - Politicsweb

13 January 2020 - In his tribute to Richard Maponya, the doyen of black business who died earlier this month, Cyril Ramaphosa said he "was of that rare breed of entrepreneurs who would not be held back or become disheartened by difficult operating conditions".

John Kane-Berman 

In his tribute to Richard Maponya, the doyen of black business who died earlier this month, Cyril Ramaphosa said he "was of that rare breed of entrepreneurs who would not be held back or become disheartened by difficult operating conditions".

Mr Maponya was a rags-to-riches story. He overcame the challenges confronting all would-be entrepreneurs starting from scratch. But he had also to overcome all the obstacles that apartheid policy placed in his way. One of these, as he told me when I interviewed him in 1974 at his home in Soweto for the Financial Mail, was that he could not get a bank overdraft. This was because his house, whose value he put then at R100 000, was on leased land so could not be pledged as security. "Others get the right of land ownership, but South Africa's indigenous people are deprived of it," he said.

It was not until the 1980s that the National Party government agreed to allow black Africans to buy land and houses in the townships. Yet the clock may now be turned back. Mr Ramaphosa's party is planning to amend the Constitution and so pave the way for legislation giving the state powers to confiscate not only all the land in the country, but all the improvements on that land as well. In other words, nationalisation.

The proposed constitutional amendment and likely later nationalisation law have two main objectives. The first is to advance the socialist objectives of the national democratic revolution to which the African National Congress (ANC) has long been committed. The second is to increase the ANC's powers of patronage.     

Moreover, while Mr Ramaphosa hailed Mr Maponya's life "as a testament to resilience, determination, and the power of vision...to see black business grow", the African National Congress (ANC) has steadily made it more and more difficult for all kinds of businesses even to get started, let alone to grow. Testimony to this is South Africa's dramatic decline on the World Bank's ease-of-doing-business index.

In 2006 our position was 28th out of 178 countries. By 2017 we had tumbled down to 74th out of 190. Last year our ranking was 84th out of 190. This means that two years into Mr Ramaphosa's reign we have dropped 10 places.

Long before that slippage, Mr Maponya had said in an article published by the Free Market Foundation (FMF) in 2014 that "the regulatory environment stifles small and medium businesses". That environment had been "formulated by bureaucrats, and multiplies each year." He added: "We must free the economy, not strangle it." At that stage South Africa's ranking on the ease-of-doing-business index was 41st, from where, as we have seen, it has plunged to 84th.      

A striking feature of most of the recent articles on Mr Maponya has been the absence of any reference to his criticism of black economic empowerment (BEE). Not only is Mr Ramaphosa a major personal beneficiary of BEE, he is also in a sense the father of the policy as he chaired the commission on broad-based black economic empowerment set up in 1998.

Mr Maponya could easily have had Mr Ramaphosa in mind when he said in 2012 that empowerment did not really "create anything". "You are allocating some shares in an organisation that has been going. That does not create a single extra job." Back in 2005, he said, "I am not impressed with the exchange and buying of shares that do not create jobs. I would like to see people start up something and create hundreds of jobs. That for me would be real empowerment – enabling large numbers of people to put bread on the table and develop skills".

In an interview in the Sunday Times in 2012 he identified another problem. While BEE was designed to empower black people, it had in a sense done the reverse by taking away the incentive to start their own businesses and fostering a culture of entitlement. He added that this culture had been growing from 1976 (the year of the Soweto revolt): "Our youngsters believed that when the ANC takes over we are going to grab whatever belongs to the white man and give it to the black people." As a result, when 1994 came along, the do-it-yourself attitude that had driven his generation to start businesses was largely absent.

Even those wanting to start businesses were held back by "excessive red tape". Indeed, whereas South Africa ranked 47th out of 181 countries for ease of starting a business in 2008, our current ranking is 134th out of 190.

Given all this, Mr Ramaphosa's tribute to Mr Maponya is almost bizarre in its atmosphere of dreamy unreality and absence from the real world. "We are now free politically. We have a democracy," said Mr Maponya in his FMF article. "But our economic freedom is extremely limited." Mr Ramaphosa hailed Mr Maponya's "towering legacy". By now it is clear that the president's own "towering legacy" will be ever more limitations upon economic freedom.       

John Kane-Berman is a policy fellow at the IRR, a think tank that promotes political and economic freedom. Readers are invited to take a stand with the IRR by clicking here or sending an SMS with your name to 32823. Each SMS costs R1. Ts and Cs apply.  

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