BEE Might Be Good For Black Dynasties, But Not For The Country

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President Cyril Ramaphosa announced his ongoing support for South Africa’s race laws in parliament this month. ‘We are not going to scrap B-BBEE,’ he said. Is this news or just more of the same? Really, it is a bit of both.

According to one classical line of reasoning, any laws that exclude or limit opportunities based on race are always wrong, in principle. According to a similar line, these laws might be justified in some purely academic sense in order to effect historical redress, but in practice it always turns out that such laws incentivise rent-seeking behaviour that damages society to create a net negative. Both these globalist lines of argument have been categorically ignored when they are not denounced. Ramaphosa’s speech is nothing new in this regard.

A third fresher line of argument is particular to this country and its history under black economic empowerment (BEE). One might start with Hitachi, an international firm that created a local subsidiary partnership with the ANC’s investment wing, Chancellor House, in order to certify itself ‘BEE compliant’. It thus won tenders to build two massive power plants, Kusile and Medupi, that do not work. Particular historical instances of the ANC making laws to force businesses to make money for the ANC and its members, all while ruining the country, become so stark when the lights turn off that IRR policy fellow Gwen Ngwenya headlined her analysis ‘BEE and Eskom blackout: A total eclipse of the brain’.

Across state-owned enterprises, BEE has been used as a mechanism for the ANC’s officially pronounced ‘cadre deployment’ strategy in which political loyalty, rather than skills or even race, come first, second and third. Across state in-house institutions like the South African Revenue Service, the National Prosecuting Authority and the National Intelligence Agency, black-first narratives were used to effect ‘state capture’ which meant shielding those corrupt rent-seekers (black and white) who used BEE deals, slush-funds and tax dodging to fizz their champagne while flattening the rest of us.

In the private sector, BEE is one of many onerous costs of business that the biggest, well-established firms can bear while their up-and-coming competition is hounded off the grid or else simply bankrupted. This creates a winner-take-all economy while the sum of it all shrinks. The Small Business Project’s (SBP) landmark new analysis finds that contrary to former expectations there are not millions of formal Small and Medium Enterprises (SMEs) but only about 250 000. It also notes that formal SMEs ‘only account for 28% of the jobs’ while, ‘based on international trends, this should be about 60% or 70%’.

The loss is tremendous. At national level more than half of South African youth are unemployed or have given up seeking work; the economy has plunged into the longest negative business cycle since WW2; foreign disinvestment is rife with R60 billion having left the country already this year; domestic wealth that does not flee disappears. Momentum calculates that nearly R0.5 trillion of real SA household wealth was vaporized last year.

This third historical line of argument that BEE has made SA a rent-seeker’s paradise and hell on earth for millions of decent citizens is not just more of the same. Something changed recently, big time.

No decent person thinks the problem with BEE is too many black people in power, but rather the wrong people of all races taking power, which is exactly why we were all so excited when Ramaphosa beat Nkosazana Dlamini-Zuma in 2017. That economic shrinkage is getting worse, just at the time when a personnel change in Luthuli house created the opportunity to reverse the downward trend, has nothing to do with the race of our new leadership and everything to do with its character. That we are hearing more of the same race-based appeals after the big leadership change is a stunningly fresh shock.

BEE has been greatly advantageous to some. Those few, those lucky few, are what make Ramaphosa’s statements so alarming. He told parliament that ‘we are not going to scrap [BEE], because it has brought real material benefits’ to the lucky few, going on to say ‘now is not the time to scrap BEE, but to strengthen it’.

The president seems to think that where and when BEE works it must not only continue but ‘strengthen’”. This is a perfect contrast from former US president Barack Obama. When Obama became president he was asked whether his daughters should benefit from affirmative action. Obama said absolutely not, calling for policy to be crafted that would not treat wealthy heirs as if they were disadvantaged because of melanin. Obama understands affirmative action to be, ideally, a temporary corrective rather than a means to keep the money and power in the family.

Ramaphosa seems to think differently. The Bosasa scandal, perhaps groundless, has generated controversy that obscures the most blatant, outrageous fact about the president’s household. Ramaphosa’s children have every advantage that money can buy and yet Andile Ramaphosa qualifies as ‘disadvantaged’ and so gets a leg up from the law.

Those who are willing to admit that BEE has been detrimental to all but a few, but hope that it can be ‘done better’ going forward, not only have to contend with the corruption of our SOEs, and our executive, legislature and law enforcement agencies. To be sure it is hard to know how BEE can be ‘done better’ in this particularly corrupt country presently dominated by unjailed rent-extractors and those, like Ramaphosa, who campaign with champagne toasts to Zuma and company.

Those who hope BEE can be ‘done better’ also have to contend with the tens of thousands of black dollar millionaires whose children have the advantages of wealth and powerful parents and the advantages of BEE legislation to boot. Even if law and order were restored here by miracle, this second generation is poised to capture the private and public market to the exclusion of poor people of all races, if BEE is ‘strengthened’ as Ramaphosa hopes. This would be nice for a few black dynasties, but not so much for the country.

‘Rich blacks should be treated the same as rich whites – as advantaged.’ This is the view of William Gumede, executive chairman of the Democracy Works Foundation. The IRR’s latest demographic survey indicates that 80% of South Africans think appointments should be based on merit, not race. Perhaps ordinary South Africans feel their children do not stand a chance against the ANC-insider new wealth elite if BEE is not scrapped, Mr Billionaire President.

Gabriel Crouse is the George F D Palmer Financial Journalist Trust Fellow at the Institute of Race Relations (IRR). Stand with the IRR by Stand with the IRR by SMSing your name to 32823 or or clicking here.

 

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