Michael Morris
Who remembers the statement: “This thing of having a bottle of water that you can get for R7 procured by the government for R27, because you want to create a middle-class person who must have a business, is not on … It must stop”? Or, more to the point, who remembers who said it?
Few could be expected to remember; seven years have passed and it’s been more of the same. Believe it or not, ANC veteran Gwede Mantashe uttered those words. His bracing candour of 2012 — captured in the blunt synopsis of a contemporary headline: “BEE now a rip-off’” — has lost its punch because, far from ditching the costly and ineffective strategy, the government has pursued it with greater enthusiasm.
The direct cost is measurable in rand. Just last week, the latest report from the Institute of Race Relations (IRR), A new empowerment strategy to liberate the poor, cites a 2016 warning by a senior Treasury official that between 30% and 40% of the state’s total annual procurement budget was “tainted by fraud and inflated prices”.
My colleague, author of the report and IRR head of policy research Anthea Jeffery, estimates that “at least” R240bn of an annual budget of R800bn is affected in this way every year. But the deeper cost is paid by households, mainly the poorest.
As Jeffery writes: “Far from helping to ‘unleash the full potential of all South Africans to contribute to wealth creation’ — as the ANC promised BEE would do some 25 years ago — current empowerment policies have added to inequality, promoted crony capitalism and encouraged corruption and an entitlement mentality. They have also become a leg-iron on the economy and a major bar to the investment, growth and jobs the poor need most of all.”
The government has known this for a long time. Jeffery reminds us that as far back as 2010, then finance minister Pravin Gordhan admitted: “BEE policies have not made SA a fairer and more prosperous country. They have led to a small elite group benefiting, and that is not good enough.”
But, in all this time, the government has simply not mustered the will to bite the bullet.
What’s needed is to scrap the failed policy and replace it with one that promotes private sector growth — the only meaningful source of jobs — and focuses directly on disadvantage rather than race through measures designed to “reach down to the grassroots”, as Jeffery argues, “by equipping the poor with the sound schooling, housing, and healthcare they need to help them get ahead”.
This policy alternative is readily available in the economic empowerment for the disadvantaged (EED) model crafted by Jeffery over several years. It would reward firms for contributions to investment, growth, employment, innovation and development. And it would redirect the R620bn budgeted for schooling, healthcare and housing/community development into vouchers for education, housing and health to be given directly to people who qualify, using a means test rather than a race proxy.
Investment-deterring edicts and dependency would make way for economic stimulus and genuine liberation.
South Africans like the idea. An IRR survey last December found that 93% of black respondents (up from 86% in 2016) supported the idea of education vouchers, 91% (up from 83%) supported healthcare vouchers, and 83% (as in 2016), housing vouchers. Overall, 85% of black respondents (up from 74%) said these vouchers would be more effective than BEE in helping them get ahead.
SA would be far better off if Gordhan, Mantashe and their cabinet colleagues would only listen to the people. And the government would not have to wring its hands over paying R27 for a R7 product, or squirm at being reminded how much time has passed since it began fretting about the costly truth — without doing anything about it.
• Morris is IRR head of media.
https://www.businesslive.co.za/bd/opinion/columnists/2019-06-03-michael-morris-our-poor-continue-to-lose-out-in-procurement-
