Trade & industry minister Ebrahim Patel’s contention that Pepsico’s purchase of Pioneer Foods illustrates that empowerment demands are not a hindrance to investment seems rather like doggedly seeing a silver lining where storm clouds are looming large (“PepsiCo deal shows BEE does not faze investors, says Ebrahim Patel”, March 9).
Welcome though it is, this investment needs to be seen in the context of the overall failure of the country to attract and retain anything like the scale of investment SA so desperately needs. The reality is that SA’s shortcomings are illustrated by what the country is failing to attract, and what it is losing. In 2019 SA saw a net sale of R114.2bn in equities and R22.1bn in bonds by foreigners. In 2018 the equivalent outflows were R53bn and 108.6bn respectively.
Empowerment requirements are costly, burdensome and unsettling for investors. A 2018 study of European firms found black economic empowerment (BEE) to be the single largest disincentive to doing business in the country. “Investors are mainly concerned about instability and the political and macro-economic environment. They are concerned about the protection of property rights,” Patel said.
This is correct, although by stunting investment and undermining growth, empowerment policy is contributing to this. As for property rights, these are under threat from multiple policy thrusts. The minister is correct that many companies see Africa as a lucrative frontier. Whether SA will take advantage of this is open to question.
The time for rethinking BEE is long overdue. Until this is done, the storm will threaten. When it breaks, it may overwhelm us all.
Terence Corrigan
Institute of Race Relations
