Four lies and two important truths in Jeremy Cronin’s defence of BEE - News24

Anthea Jeffery 
Jeremy Cronin’s defence of BEE is misleading on almost every point he makes. Though two of his points are true, he also includes four big lies that need to be corrected.

First, Cronin implies that the ANC had little to do with the development of BEE, arguing that it was initially “driven by incumbent capital” – Anglo American, in particular – and was “an early variant of state capture”.

This overlooks an ANC document of April 1994 on “Affirmative Action and the New Constitution”. Here, the ANC said that while it could simply “confiscate the spoils of apartheid and share them out amongst those who had been dispossessed”, thus “correcting historical injustice”, this option could “not realistically be advanced” at that time. It would also lead to “capital flight, the destruction of the economy, and international isolation”.

It was preferable to focus on “affirmative action”, “black economic empowerment” (BEE), and “rapid land reform”, the document added.

The ANC’s decision to adopt these policies clearly had little to do with Anglo American’s prior sale of a controlling stake in African Life to businessman Don Ncube – and the resulting formation of Real Africa Investments (Rail).

After years of economic sanctions and exchange controls corralling its investment funds inside the country, Anglo’s primary motive was to shed non-core assets, increase its competitiveness, and re-enter the global arena. These were legitimate business objectives, not evidence of corruption.

ANC’s role

Second, Cronin implies that the ANC had little or no role in BEE until 2003, when it adopted the Broad-Based Black Economic Empowerment Act as a necessary corrective to a one-sided focus on BEE ownership deals. That, too, is incorrect, for the ANC had been implementing different elements of BEE from early on – adopting a White Paper on Transformation in the Public Service in 1995, which set a 50% target for black representation in management by 1999, and the Employment Equity law in 1998, under which that 50% target was soon increased to 75%.

It is, of course, essential to employ the “talents and skills” of the entire population, as the ANC’s 1994 document had said. But it is profoundly damaging for the state to set binding racial targets that brush aside pervasive skills shortages and curtail the full use of the existing skills pool.

Though black people make up 80% of the economically active population, most black South Africans are too young, inexperienced and poorly skilled for many management jobs.
In these circumstances, insisting on demographic representativity from the top down is a sure-fire recipe for reduced capacity and escalating inefficiency – as public sector dysfunction shows.

The ANC also introduced BEE preferences in public procurement at an early stage, as reflected in the Preferential Public Procurement Framework Act (PPPFA) of 2000.

Legal and illicit BEE premiums on public procurement currently cost the fiscus an estimated R150 billion a year. Diverting scarce revenues to a politically connected black elite reduces the funds available for essential public goods and services and greatly harms the poor black majority.

Third, though Cronin is correct in pointing to ANC successes in rolling out millions of small RDP houses and increasing access to electricity, he omits to mention how much more could have been achieved without the heavy costs of EE and BEE.

With regards to RDP houses, BEE premiums, coupled with fraud and inefficiency, have significantly reduced what might otherwise have been provided. Frank Chikane, a former director-general in the Presidency, put it so in 2010:

“The government wanted to help the poor to get a roof over their heads because these people did not have money… But [some contractors] just used their blackness and political influence to get contracts which they could not execute… The worst cases were houses reported as built and paid for when they did not exist. The [contractors] had just stolen the money.”

As for electricity, a toxic combination of BEE premiums in procurement and EE targets in engineering and other senior posts helped plunge South Africa into escalating blackouts from 2008 to 2024.

Increased access to electricity meant little in practice, with supply often so erratic. Even now, the risk that load shedding may return is always present – while overall electricity supply is too limited to sustain the rapid economic growth needed to counter the unemployment crisis.

Fourth, Cronin implies that there would have been little “expansion of black professional strata” without EE and BEE. Look back to the 1970s, however, and a different picture emerges.

After a decade of rapid economic growth in the 1960s, the white population was clearly too small to meet the needs of the economy. The National Party government yielded to this reality by starting to improve black schooling.

In 1973, moreover, Prime Minister John Vorster responded to persistent pressure from business for this policy change by announcing that the government would no longer stand in the way of blacks moving into higher jobs. This resulted in considerable advances for black people and a significant narrowing of racial income inequality.

After the political transition, the private sector still had more reasons to promote black advancement in the workplace.

In September 1997, shortly before the Employment Equity Bill was published, 90% of the 150 large employers surveyed by a human resource consultancy, FSA-Contact, had voluntary affirmative action programmes in place. The proportion of black people in senior management posts at these firms thus increased from 5% in 1995 to 12% in 1998 and was projected to rise further to 21% in 2001, an overall increase of some 325%.

Poaching

Widespread “poaching” of black managers, coupled with a willingness to pay black people premiums ranging from 10% to 20% above normal salaries, testified to an enormous unmet demand for black managers in the private sector – not a racist refusal to employ them, as the ANC pretends.

Cronin is correct on two points, though. First, as he says, “the past must never be used to excuse present failures”. Race-based BEE is a good example; it has enriched a black elite while excluding – and greatly harming – the poor black majority. Since its failures cannot be excused by past injustices, as Cronin states, it must now be abandoned.

Second, as Cronin adds, “real” empowerment demands “dedicated and determined interventions”. Instead of chasing down the BEE cul-de-sac, the country needs to do an about-turn and embrace a non-racial alternative, such as the IRR’s Economic Empowerment for the Disadvantaged (EED) idea.

An EED system would be “dedicated and determined” to reward companies for growing the economy, creating jobs and giving millions more South Africans the chance to climb the economic ladder out of poverty. It would be similarly “dedicated and determined” to reach down to the grassroots and provide the poor (identified by income, not race) with tax-funded vouchers for the competitive and innovative schooling, housing and healthcare of their choice.

Little could be more effective in truly empowering the great majority or breaking the growing stranglehold of a corrupt and inefficient state on a beleaguered private sector.

Anthea Jeffery is head of policy research at the Institute of Race Relations.

https://www.news24.com/opinions/columnists/opinion-four-lies-and-two-important-truths-in-jeremy-cronins-defence-of-bee-20250625-0656