In 1994, the ANC put a shiny but misleading gloss on its proposed BEE, employment equity, and land reform policies.
It said that:
- BEE would help remove ‘all the obstacles to the development of black entrepreneurial capacity’;
- employment equity would ensure a better use of ‘the talents and skills of the whole population’; and
- land reform would rectify ownership and strengthen the property rights of all South Africans.
All these claims have proved false. The only accurate statement made by the ANC was its warning that these policies, if badly handled, would ‘redistribute resentment, damage the economy, and destroy social peace’. This, however, understates the immensity of the harm that has been done.
According to Professor William Gumede, ‘close to R1 trillion has been transferred in BEE deals’, but these have gone to ‘a handful of politically connected politicians, trade unionists, and public servants’ who have done little to expand industry or the economy. Instead, ‘they have crowded out genuine black entrepreneurs and killed the development of a mass entrepreneurial spirit in black society because all you need to secure a BEE deal…is the right political connections’.
BEE procurement has been even more damaging. In 2009 Pravin Gordhan, then finance minister, told Parliament that one of the biggest problems confronting government was that it paid more for everything, from pencils to building materials, than a private business would: ‘R40 million for a school that should have cost R15 million, R26 for a loaf of bread that should have cost R7’. In 2012 ANC secretary general Gwede Mantashe urged BEE companies to ‘stop using the state as their cash cow by providing poor quality goods at inflated prices’.
The cumulative costs have been enormous. In October 2016 Kenneth Brown, then chief of procurement at the National Treasury, warned that between 30% and 40% of the government’s procurement budget (worth R600bn at that time) was tainted by ‘inflated pricing and fraud’.
The problem has since worsened, for in August 2018 the Treasury’s acting chief procurement officer, Willie Mathebula, told the Zondo commission of inquiry into state capture that ‘the government’s procurement system is deliberately not followed in at least 50% of all tenders’.
In addition, once the usual tendering rules have been suspended on some spurious basis (a claimed emergency, for instance), ‘a contract which starts at R4m is soon sitting at R200m’. These abuses have enormous negative impact on service delivery because the government is ‘the biggest procurer of goods and services, spending an estimated R800bn a year’, said Mr Mathebula.
Again, moreover, the benefits of BEE ‘tenderpreneurship’ have gone primarily to a narrow group of connected politicians and public servants. This relative elite has prospered greatly, while the price of their ‘empowerment’ has been paid by millions of poor South Africans.
Employment equity (EE) has also proceeded apace over the past 20 years – and particularly in the public service. The upshot has been a crippling loss of experience and institutional memory, made worse by an EE rule allowing people to be appointed for their ‘potential to acquire…the ability to do the job’.
According to Professor Peter Franks of the School of Public Leadership at the University of Stellenbosch, ‘this [rule] soon became the favoured loophole behind which kin, friends, and comrades were favoured over more competent applicants’. EE, and the cadre deployment it has fostered, have thus generated ‘a perfect storm…of poor management, deficient and partial decision-making, excessive staff turnover, and high levels of…corruption’.
This malaise has severely undermined the quality of public schooling, healthcare, and housing. So much so that 60% of pupils drop out of school or fail their final examinations, the housing backlog is now bigger than it was in 1994, and only 15% of public hospitals and clinics comply with basic healthcare norms on such essentials as infection control and the availability of medicines.
Again, only the relative elite benefits from EE in the public service, while millions of poor South Africans bear the brunt of the state’s persistent mismanagement, wastefulness, and corruption.
Inefficiency, fraud, and elite capture have also stymied land reform – thereby generating a persistent malady which the ANC now claims can be rectified solely via a constitutional amendment allowing expropriation without compensation (EWC).
But EWC will fatally erode the property rights the ANC earlier pledged to strengthen for all. It will also empower the ruling party, rather than poor black people, for the land acquired via EWC will be kept in state ownership and simply leased out for 50 years or more.
Speeding up land transfers via EWC will also destroy most farm production, as a 2016 study by the Financial and Fiscal Commission (FFC) has shown. Having looked at a sample of some 3 200 hectares transferred in KwaZulu-Natal, Mpumalanga and the Eastern Cape, the study found that only 17% of this land had remained productive. In addition, some 84% of jobs on land reform farms in these provinces had been lost. Overall, wrote the FFC, ‘land reform beneficiaries were worse off’ than those who had never ‘benefited’ at all.
Again, moreover, it is the political elite that has gained the most – as illustrated by the story of the Bekendvlei Farm in Limpopo. In 2011 the land department bought the farm for R97m, and then leased it to two ANC insiders with no farming experience. Despite the state’s providing them with another R30m in working capital, the two men soon sold off cattle and machinery, let crops die, and repeatedly failed to pay farm workers. Before long, they had brought about the collapse of a once-thriving enterprise.
For two decades now, elite ‘empowerment’ of this kind has played a massive part in squandering scarce resources and entrenching poverty and inequality. It has also helped to push the country into its current economic crisis, in which:
- GDP contracted by 0.6% in the 3rd quarter of 2019,
- the growth rate for the year is likely to be zero,
- public debt (including that of municipalities and SOEs) stands at 80% of GDP, and
- interest payments over the next three years are expected to total R796bn – and will inevitably rise further as the country sinks deeper into junk status.
Current BEE, EE and land reform policies must urgently be jettisoned. So too must all proposals to tighten them up. The mooted EWC constitutional amendment, in particular, must simply be abandoned before it does still greater damage to investment, growth, employment, and the country’s food security.
Many people with vested interests in present empowerment policies will resist such shifts. Many in the ANC and SACP will be ideologically opposed to them as well. But even Lenin in 1921 acknowledged the need to draw back and embrace a seven-year long ‘new economic policy’ aimed at expanding economic freedom and rebuilding confidence and investment.
No such resurgence can be achieved in South Africa under current and proposed BEE, EE, land reform, and EWC policies. The economy, and a long-suffering electorate, needs a halt to these toxic interventions to quicken growth, stimulate employment, reduce public debt, build up efficient administration and procurement – and ensure that all new empowerment policies reach down to the grassroots and are effective in helping the truly disadvantaged to climb the economic ladder.
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