If any organisation is demonstrably callous towards the marginalised, it is the African National Congress (ANC), which insists on maintaining BEE despite its proven inability to help the truly disadvantaged.
Ever since political liberalisation in 1994, the most difficult challenge confronting South Africa has been how best to liberate those disadvantaged by past racial discrimination and help them get ahead.
The ANC has an ideologically driven BEE ‘solution’ that has clearly failed. The Democratic Alliance (DA) has been struggling with the issue, despite its classically liberal roots and the answers that classical liberalism provides.
The ANC claims that the only solution lies in continued race classification so that those identified as black can be given the benefit of BEE management posts, ownership deals, and preferential tenders, among other things.
ANC policy takes no account of poverty or other socio-economic indicators of disadvantage. Hence, the benefits of BEE management posts, ownership deals and preferential tenders go mostly to the black people who are the most advantaged. Generally, these are the individuals with the best education and skills – and often with the strongest connections to the ANC.
This relatively small group, which makes up about 15% of black South Africans, has done well out of BEE. Some of its members have become millionaires and even billionaires. A significant number have benefited enormously from abusing preferential tendering rules and granting contracts at inflated prices to relatives or business associates.
However, the remaining 85% of black South Africans have gained nothing from BEE. Despite being black, they have no prospect of ever benefiting from the management posts, ownership deals, and preferential tenders that go to the relative elite.
Worse still, the truly disadvantaged are greatly harmed by BEE, with its ever more onerous requirements. These shifting and costly rules have become a major barrier to investment and jobs, making it even harder for some 9.2 million unemployed black people to find work and start earning their own incomes.
At the same time, rigid racial targets in employment have robbed the public service and many SOEs of experience, competence, and institutional memory. This has greatly undermined efficiency and the quality of such essentials as schooling, healthcare, housing, sanitation, water, and electricity supply.
BEE has thus greatly harmed the great majority while helping only the relatively few. It is the primary reason for widening inequality within the country. It has also created the false impression that effective steps are being taken to provide redress for past injustice, when this is not the case.
Despite its manifest failures, BEE is now deeply entrenched. The ANC has a strong vested interest in preserving it. So too do the people who have gained from it, and the many commentators who have sung its praises over two decades.
Many people may also find it difficult to believe that a far better form of transformation can be developed. Yet the key solutions can in fact be found by embracing the core tenets of classical liberalism.
Classical liberalism in South Africa has always recognised the need to help the disadvantaged get ahead. It seeks to do so on the basis of five key principles:
First, classical liberalism clearly acknowledges the role of past racial discrimination in barring upward mobility and entrenching disadvantage. However, it also recognises that there is no need to use race as a proxy for disadvantage in developing remedial policies.
Second, classical liberalism notes that disadvantage can be identified directly via a means test, as the social grants system does. It also sees that very few white South Africans are poor. Hence, a focus on socio-economic disadvantage, rather than race, would result in 99% of remedial interventions going to people who are black. These individuals, however, would benefit not because of their race, but because they are poor and need help to climb the economic ladder.
Third, classical liberalism is adamant that remedial measures must reach down to the grassroots and be effective in liberating the disadvantaged. What the poor need most to get ahead are jobs, skills, good living conditions, and sound healthcare. However, none of these can be achieved without a rapidly growing economy that promotes entrepreneurship, buttresses confidence, rolls back dirigiste regulation, upholds property rights, and stimulates investment.
Fourth, classical liberalism respects the Constitution, which identifies non-racialism as a core founding value and demands equality before the law. The Constitution does, of course, allow remedial measures for the ‘disadvantaged’ – but it wants those measures to be effective in ‘advancing’ the marginalised (which BEE clearly is not). In addition, there is nothing in the Constitution that authorises the use of race as a proxy for disadvantage, or that sanctions racial targets and the racial classification these inevitably require.
Fifth, classical liberalism recognises that race-based policies encourage racial awareness, promote racial tension, and are inherently divisive. It pays close attention to the majority views of ordinary South Africans, and respects their wish for policies that cut across racial lines and encourage everyone to work together for the mutual benefit of all.
Various remedial policies would fit within these core principles of classical liberalism. One idea, which we at the IRR have been developing for some time, is to shift away from BEE to a new system of ‘economic empowerment for the disadvantaged’ or ‘EED’. This would include an alternative ‘EED’ scorecard that incentivises and rewards investment, employment, innovation, the expansion of the tax base, and rapid economic growth.
EED would also reach down to the poor by providing them with tax-funded vouchers they could use to buy the schooling, housing, and healthcare of their choice. Schools and other entities would then have to compete for their custom, which would help to keep costs down and push quality up.
Unlike BEE, these vouchers would truly empower the poor – as ordinary South Africans seem well aware. In December 2018, 93% of black respondents in an IRR field survey (up from 86% in 2016) supported the idea of education vouchers. Black support for healthcare vouchers came in at 91% (up from 83% in 2016), while support for housing vouchers was strong as well, at 83% in both years. In addition, 85% of black respondents (up from 74% in 2016) said these vouchers would be more effective than BEE in helping them to get ahead.
Classical liberalism has much better answers to the challenge of redress than does the statist and ideologically driven ANC. That is why the ANC is so determined to prevent classically liberal ideas from catching on.
This is also why the ruling party is so relentless in stigmatising classical liberalism as ‘neo-liberalism’ and in deriding it as a political philosophy fundamentally indifferent to the poor. Yet nothing could be further from the truth.
If any organisation is demonstrably callous towards the marginalised, it is the ANC with its insistence on maintaining BEE despite its proven inability to help the truly disadvantaged – and the massive harm it has long been doing.
Dr Anthea Jeffery is the Head of Policy Research at the IRR
If you like what you have just read, become a Friend of the IRR if you aren’t already one by SMSing your name to 32823 or clicking here. Each SMS costs R1.’ Terms & Conditions Apply.