Hermann Pretorius and Duwayne Esau
South Africans must conclude from President Ramaphosa’s remarks this week on BEE that the African National Congress (ANC) government has learnt nothing from the catastrophic failure of race-based empowerment policy, while ignoring better alternatives.
Empowerment remains a critical challenge: South Africa’s high levels of joblessness, poverty and poor education outcomes point to the real needs of millions of citizens whose hopes of a better life have been, at best, poorly addressed by the race-based measures the ANC has stubbornly persisted in applying for more than two decades.
A ready alternative is available. The Economic Empowerment for the Disadvantaged (EED) policy, formulated by the Head of Policy Research at the Institute of Race Relations (IRR), Dr Anthea Jeffery, offers comprehensive solutions to the real, on-the-ground difficulties that really do disempower millions. It does so without having to refer to race, because it identifies intended beneficiaries by their actual socio-economic needs.
Yet, it appears the government is simply not interested in finding genuine solutions.
This much is obvious from Ramaphosa’s reported remarks on Tuesday, when he discussed “the participation of black people in all areas of economic activity” at an event hosted by the ANC-aligned Progressive Business Forum.
The president said: “This is the year that we should be able to do that and move the needle of economic empowerment for women, young people and black people broadly. We need to be able to say in a few years’ time that the empowerment of our people is now becoming a reality.”
No doubt, Ramaphosa’s plans for BEE are embodied in the Employment Equity Amendment Bill that is currently before Parliament, a Bill that aims to speed up “transformation” in South Africa. However, as the IRR has shown before, BEE does not benefit those that need it most but instead enriches a well-connected political elite. There is no risk of this in our alternative EED policy.
Where convoluted BEE measures rely on race as a proxy for disadvantage – by which, absurdly, President Ramaphosa is a disadvantaged billionaire – EED would deal directly and honestly with disadvantage itself. This would finally scrap Apartheid-era racial classification, and end the cronyism that has had the effect of robbing from the poor to give to the powerful.
Furthermore, EED focuses not on outputs in the form of numerical quotas, but rather on providing the inputs necessary to empower poor people. Far from overlooking the key barriers to upward mobility, it seeks to overcome these by focusing on all the right ‘Es’. In essence, it aims at rapid economic growth, excellent education, employment, and the promotion of vibrant and successful entrepreneurship.
Research by the IRR, shows clearly that the real issue of inequality is not race but socio-economic deficits. This is most clearly visible in the inequality among black South Africans. Where inequality among Indian South Africans has declined, inequality among black South Africans has worsened – this over a period that saw an overall reduction in inequality. This is evident in the data below:
• In 2006 41.8% of government expenditure was aimed at black people
• In 2015 this increased to 49.3%
• In 2006 the Gini-coefficient, which measures inequality, was 0.54 for black people
• In 2015 this rose to 0.57, which in fractional terms is a great increase.
• During the same period the Gini-coefficient for Indian people went from 0.52 to 0.45
The data is resoundingly clear; BEE has failed to improve the lives of its intended beneficiaries and South Africans know this.
Dr Jeffery notes in her EED research paper: “Many influential South Africans, both within the government and outside of it, have been critical of the policy of BEE. Moeletsi Mbeki, a political analyst and brother of former president Thabo Mbeki, has pointed to the problems in BEE policies for some time. In 2009, he said that BEE was simply entrenching the divide between rich and poor (the growth in intra-racial inequality among black South Africans backs up this view). He said that it had also entrenched a culture of cronyism and entitlement. Even the governing African National Congress (ANC) and its allies acknowledge that BEE in its current form does not work. As long ago as 2012, one of the ANC’s tripartite alliance partners, the South African Communist Party (SACP), said that BEE had not worked and had simply benefited a small elite.”
The practical implications of the exclusionary nature of BEE are wide-reaching, effectively excluding a great number of people from the economy.
In one example, reported by Rapport this month, the eThekwini metro council in Durban decided that Indian and coloured people may not participate in its auctions of used vehicles. This was after members of the ANC and Inkatha Freedom Party (IFP) voted to approved this decision.
BEE was intended as a tool to help fix the injustices of the past, but from this example it is clear that even those who are members of previously disadvantaged groups are excluded. Furthermore, in examples such as the one above, the government is squandering valuable revenue, since having more bidders would mean that auctioned vehicles would be sold for higher prices.
Of course, President Ramaphosa and his ANC colleagues have done very nicely from the empowerment framework they created – not so much the rest of our people.
The president’s reference to a ‘game changer’ must be seen in the context of a game that the political elites have rigged in their favour. Rather than a game changer, South Africans need the ANC to stop playing games. It should scrap blatant elite enrichment and give real empowerment policy a chance.
Hermann Pretorius is head of Strategic Initiatives, and Duwayne Esau, Strategic Communications Officer, at the Institute of Race Relations, a liberal think tank that promotes political and economic freedom.
