DA's flawed approach to empowerment - Daily Dispatch

Feb 28, 2019
28 February 2019 - Race as a proxy is not necessary for reconciliation and justice, and nor will race as a proxy redress the wrongs of the past. No one will be able to determine when it has been remedied. If race is excluded, a sunset clause will not be necessary.

Sara Gon

The Democratic Alliance has repeatedly complained that the ANC’s Black Economic Empowerment (BEE) policy has only benefited a politically connected few and is not sustainable – yet the official opposition remains wedded to the same race-proxy approach.

South Africa needs an alternative with strong, classically liberal ideals, which it isn’t afraid to punt.

In straying from its core classically liberal principles, there appears to be a drift in DA policy-making.

At present, race is the key element to being eligible for government work. It is obligatory for a company to be 100% BEE compliant if it wants to do business with government. Although compliance is otherwise voluntary, in order to do business even with companies who do business with the government, a company needs to be BEE compliant.

By 2015, about R350 billion worth of BEE deals had been done by the top 100 companies on the JSE. An additional R50 billion had been done by private companies. This indicated that 10 percent of South Africa's GDP had been transferred to 20 percent of the population in the 15 years since 2000.

The Institute of Race Relations’ (IRR) research over the past four years confirms that a person who is well educated, black or white, is considerably more likely to be employed and benefit from the economy. BEE beneficiaries, therefore, are mostly not poor and unemployed.

In order to be BEE compliant at Level 1, a company needs to achieve 100% of five factors: ownership, management control, skills development, enterprise and supplier development; and socio-economic development.

With this model, the ANC is making the levels of ownership ever more difficult. It limits the opportunities of non-compliant businesses to do business with other companies. The ratings are very difficult to achieve for entities such as partnerships, where there is no ownership. Companies with highly specialised skills requirements may not meet BEE compliance; and much as the government frowns on ‘fronting’, it will persist in order for companies to pass the necessary test for doing business.

BEE, which squeezes ownership, is one of the greatest deterrents to foreign investment.

The government has been known on occasions, when it needs a specialised service urgently, to hire a company without BEE compliance and pay up front. A major reason for the collapse of black small business is the failure by government to pay them timeously and they are eventually forced to go out of business. 

In its May 2016 report, ‘Economic Empowerment for the Disadvantaged – A Better Way to Empower South Africa’s Poor’, the IRR used a survey to test the reach of the government’s empowerment policies.

When respondents were asked if BEE and Affirmative Action had helped poor black people, 51% of all respondents said it had (50.6% of African, 54% of coloured, 54% of Indian and 55% of white respondents).

However, only 13% of African respondents said they had personally benefited from a BEE deal, along with 10% of coloureds, 15% of Indians and 5% of whites.

The ANC’s BBBEE policy clearly doesn’t benefit the majority of blacks.

Why, then, is the DA flip-flopping and treating the ANC’s model as if it were a constitutional imperative or a religious dogma?

Since the IRR’s proposal is not based on race, but on circumstances, some of the beneficiaries would be white – but our tables below show that the number of whites who may benefit would be so small as to be inconsequential and would take nothing away from the black poor.

We have looked at the age groups most likely to be affected by affirmative action. The figures are instructive.

Number of people in the 15 – 34 age bracket by population group at 2018*

Population Group        Population group ages 15 - 34        % of population ages 15 - 34
African                          17,394,694                                           84,5%
Coloured                       1,674,327                                              8,1%
Indian                            451,434                                                 2,2%
Sub-Total                      19,971,889                                            94.8%
White                             1,064,690                                              5,1%

Total                               20,585,145
*Socio-Economic Survey of South Africa 2019 from figures provided by Stats SA, mid-year population estimates 2018, Statistical Release p0302, 23 July 2018, Table 6, P10.

The number of people living in poverty by population group of all ages in 2015**

Population group
Number  of people living in               % of people living in                        % of people living in poverty to total 

poverty of total population                poverty to total population          population of the poor

                                                                 (54,956,920)                                  (30,383,788)

African            28,267,530                      51,44%                                           93.03%
Coloured         1,989,304                        3,62%                                             6,55%
Indian/Asian   79,460                              0,14%                                             0,26%
White               47,494                              0,09%                                             0,16

**Determining the number of poor people is very difficult. Poverty is divided into a number of categories, therefore it is difficult to calculate the total number of poor. The most recent figures we could find are for 2015. Source: FACTSHEET: South Africa’s official poverty numbers, Africa Check, Researched by Kate Wilkinson, 15 February 2018

94,8% of people from the ages of 15 - 34 are black and 5,1% are white. BEE as it is practised currently can only be unfair discrimination against young, white people who were born between 1985 and 2004. 

When it comes to improving the life of the poor, the situation is even more absurd.

The percentage of white people in poverty as at 2015 was 0,09% of the total population and 0,16% of the total population of poor. The number of whites who would be beneficiaries of EED is so negligible, that continuing to base BEE on race as a proxy for disadvantage, is in every way, unjust.

So why is the DA hesitant to consider an alternative model?

The IRR’s EED policy doesn’t use race as a proxy for disadvantage, but focuses directly on disadvantage instead, using income and other socio-economic indicators to identify those most in need of help.

We’d like the DA to consider EED as an option, but if the DA doesn’t like it there must be other workable policies.

Despite the debate, however, the DA’s election manifesto confirms that it supports race-based redress ‘because it is an important part of our country’s reconciliation project and vital for justice’. It argues: ‘Redress by definition is a project aimed at redressing a past wrong, and once that wrong has been remedied, the need for said redress will fall away. This means that a programme of redress does need a sunset clause. As a party that believes in liberal values and principles, we would seek to ensure that we move to a non-racial position as soon as a successful redress programme has been implemented.’

This is pie-in-the-sky thinking. Race as a proxy is not necessary for reconciliation and justice, and nor will race as a proxy redress the wrongs of the past. No one will be able to determine when it has been remedied. If race is excluded, a sunset clause will not be necessary.

If the DA believes in “liberal values and principles” it wouldn’t suspend them pending a sunset clause that no one could pronounce upon.

Sara Gon is a Policy Fellow at the Institute of Race Relations (IRR), a think tank that promotes political and economic freedom. Readers are invited to take a stand with the IRR by sending an SMS to 32823 (SMSes cost R1, Ts and Cs apply).


Support the IRR

If you want to see a free, non-racial, and prosperous South Africa, we’re on your side.

If you believe that our country can overcome its challenges with the right policies and decisions, we’re on your side.

Join our growing movement of like-minded, freedom-loving South Africans today and help us make a real difference.

© 2023 South African Institute of Race Relations | CMS Website by Juizi