South Africa is on the brink of an economic crisis. Some would say the country even faces an existential threat, as rumblings about Western Cape secession – which would have been dismissed a few years ago as a fantasy of the lunatic fringe – are starting to grow louder.
But the government is so trapped in an outdated ideological paradigm that it insists on doubling down on failed policies instead of looking at new ways of doing things. Rather than considering privatizing or rationalizing some state-owned enterprises (SOEs), the government is intent on attempting to bail out failing companies with taxpayers’ money. At the same time, it seems hell-bent on implementing policies which are guaranteed to fail – expropriation without compensation (EWC) and National Health Insurance (NHI) come to mind.
Another policy which has clearly failed but which the government is determined to intensify is that of black economic empowerment (BEE) and its cousin, employment equity (EE).
Inequality trends in South Africa illustrate the failures. Contrary to popular belief, inequality has actually declined in South Africa since the end of apartheid. However, if we look at inequality within race groups, it is only among black South Africans that there has been a significant increase in inequality. For all other race groups, inequality either declined or remained fairly steady. This would seem to indicate that BEE and EE policies have benefited a relative elite of black South Africans, presumably the better-educated and well-connected. And these numbers would also indicate that if white South Africans, and their wealth, disappeared tomorrow, South Africa would actually be a more unequal society.
As Capitec CEO Gerrie Fourie noted in an interview with Radio 702 in November last year: ‘If you look at BEE in totality in South Africa, it hasn’t worked because it should be there to help all South Africans and, unfortunately, it has only helped a couple of people.’
Our unemployment rate is another reflection of this, especially given the differences between black and white unemployment. In 2019, the overall unemployment rate was 29%. Nearly a third of black South Africans were unemployed, compared to nearly a quarter of coloured South Africans, 11% of Indians, and only 7.4% of whites. When looking at the expanded definition (which includes people who have given up looking for work), the overall unemployment rate was nearly 40%. For black South Africans, it was an eye-watering 43%. Some 30% of coloured South Africans were unemployed on the expanded definition, and 15.5% of Indian South Africans. Just under ten percent of white South Africans were unemployed on this measure.
Now some will point to these numbers and argue that they are the result of recalcitrant white-owned companies opposing transformation and refusing to hire South Africans who are not white, black South Africans especially. However, what is far more likely is that the combined impact of the legacy of apartheid and failures of the current government has meant that white South Africans have had access to better education and social networks, and have thus found it easier to find employment. Furthermore, strict labour laws, coupled with issues such as the minimum wage, have further served to lock out – in particular – lower-skilled black South Africans from the labour market.
Also, BEE often does not confer ownership in any real way, as intended beneficiaries who have been granted shares are not able to sell them, as they could if the shares had been purchased on the open market. Dirk de Vos, writing in the Daily Maverick, gives an excellent overview of the problems with share schemes and other elements of broad-based BEE here.
Dr Anthony Turton also provides a view of how BEE has failed here.
Yet, despite the uncertainty about whether BEE and EE have brought any benefits to those they intended to help, the government seems intent on enforcing these policies to an even greater degree. For example, new amendments to BEE laws will allow the minister of labour, on the advice of the Employment Equity Commission, to set racial targets for various sectors.
This type of social engineering should be dismissed with the contempt it deserves –but in South Africa it is likely to be welcomed by many in the chattering classes.
It is clear that BEE and EE have not worked for the majority of South Africans, but, for many, even contemplating an alternative is out of the question. We at the Institute of Race Relations have for some time called for a form of empowerment which is based on actual disadvantage rather than just race. The Democratic Alliance, which until recently suffered from some muddled thinking on this issue, has also found some direction and is also arguing for a form of empowerment based on disadvantage.
Unsurprisingly the DA and the IRR have been attacked for these views, with people seemingly being upset that any poor white people should be helped in any way. However, leaving aside the class bigotry that this probably reveals among many opponents, any form of empowerment policy which focuses on disadvantage will help black people in the main.
Of course, the number of poor white South Africans is miniscule compared to poor black and coloured South Africans, but they do exist. We should focus on lifting all South Africans out of poverty, rather than persisting with failing social engineering schemes that benefit only those who are already fairly advantaged.
If we want true empowerment, we need to make sure our education system is functional, that the government creates an environment where businesses can thrive and jobs can be created, and where government funds are used to improve the lives of all South Africans, rather than propping up failing SOEs.
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