Right of replyThe great empowerment hoax (and how it saved SA's economy) |
SAIRR's Frans Cronje disagrees with Denis Beckett that the new racism benefits no one.
JOHANNESBURG - Some weeks ago the institute published an online SAIRR Today column making the case that white South Africans may come to be seen as inadvertent beneficiaries of empowerment and affirmative action policy. The case made by the institute was along the lines that cut off from state jobs and tenders, and often discriminated against in the public sector, many whites were forced to become more independent and entrepreneurial to maintain their living standards. This independence we described as a formidable economic asset. We cited substantial data on employment and incomes since 1994 to corroborate our case. Moneyweb columnist Denis Beckett has disagreed saying that ‘new racism, whether defined as AA or BEE or BBBEEE' benefits no one.
Writing for Moneyweb Beckett states:
Let's now go through some aspects of this proposition that Frans and I have - rather uncannily and with nil consultation - presented to you simultaneously. We each say in essence that the new racism, whether defined as AA or BEE or BBBEE or what, boomerangs. It damages the cause it is meant to help. Thereafter I suppose we part a little. Frans argues that the whiteys benefit but I'm cautious about that. Yes, it does mean the whiteys, or non-Africans in general, again becoming artificially favoured in the job queues. But that isn't really "benefit"; it is just another perverse twist in the racism tango, sowing the seeds of the next pile of disillusion and reversal. And while Afrikaners who used to wield rubber stamps are overjoyed to have been pushed into starting their own mini-businesses, they are as un-beneficially affected by the collapsing civil service as anyone else.
Beckett is of course right that the performance of much of the public sector leaves a great deal to be desired. Poor people especially suffer at the hands of an often uncaring and ineffective health, education, service delivery, home affairs, and security bureaucracy. Indeed on that point there is probably unanimous agreement across South Africa's racial and political spectrums. We would, however, argue that through their increased independence and reliance on private sector education, health, and security services many whites have done much to mitigate these effects.
There is, however, a further and arguably much more important result of empowerment and affirmative action policy that is seldom identified. In supporting a policy that saw the rapid emergence of a class of politically connected black business leaders, white corporate South Africa insured its own interests by placing a buffer between itself and the aspirations of many poor black South Africans while at the same time ensuring that policy makers in government and the ANC would pursue sound fiscal and monetary policy.
Remember that coming out of exile the ANC was ideologically still strongly bound by an economic model of African socialism with its origins in the Freedom Charter. The model was 30 years too late and its failure had been demonstrated in Zaire and in Zambia as well as number of other African countries. Its tenets were strictly socialist and included among other things the nationalisation of mines and banks. This is a model that Nelson Mandela subscribed to on his release from prison although to his great credit he was dissuaded from pursuing it at a 1992 World Economic Forum meeting in Davos.
Despite Mandela's change of heart it remained necessary for corporate South Africa to achieve two important things:
1. They had to firstly place a buffer zone of black business interests between themselves and the expectations of South Africa's poor black majority.
2. They had to secondly ensure that those business leaders were politically influential to ensure that policy makers in government would pursue sound fiscal and monetary policy.
With these two criteria met corporate South Africa was as sure as it was every going to be that the new government would pursue sound fiscal and monetary policy.
It was unlikely, considering the quality of the education system inherited by the ANC, not to mention the economic inequalities inherited from apartheid, that a black business class could have emerged on merit within the space of a decade. Nor was it guaranteed that the ANC, coming out of exile, would have the skills or insights necessary to address failures in education. Indeed they made serious policy mistakes in education in their first two terms in Government which probably further compromised the chances of black business leaders emerging exclusively on merit out of the education system. Beckett may argue that these policy failures were in part a result of the equity and empowerment policies we are discussing. This is a point we might concede as long as it is not offered as the sole explanation for the post-1994 failure of black education.
It should also always have been certain, despite Nelson Mandela's change of heart, that policy proposals such as that to nationalise mines and banks would re-emerge from some segment of the tripartite alliance. Poverty, inequality, and unemployment levels have simply remained too great to mitigate the risk of ambitious segments of the alliance exploiting these fissures to sow dissent within the alliance in order to advance their own political ambitions. It made much sense therefore for corporate South Africa to ensure that it invited into its boardrooms first and foremost people who would come to exert some policy influence over Government.
A number of analysts might come to argue that the reward of corporate South Africa's support, and perhaps even engineering, of empowerment and equity policy has become most apparent over the past six months. When calls arose for the nationalisation of private assets it was often black South African business leaders, and leaders within the ANC, who raised questions over the wisdom of such policy. Had white corporate South Africa not pursued the empowerment polices of the past decade they might have been left vulnerable and exposed to reckless and populist political maneuvering such as we have seen in the alliance of late. It is quite unlikely that they would on their own, as a small racial minority, have been able to successfully resist and stave off a genuine leftward shift in economic policy in South Africa. As matters currently stand there is less likelihood of such a shift as many of the people who make policy for South Africa have a vested stake in maintaining macro-economic stability and will act to protect that stake.
Those on the left of the tripartite alliance have come to see new black businessmen as sellouts. In the white community there are people who regard them as parasitic. While there is a measure of truth to these allegations both groups miss the mark. The growth of the new black business class occurred partly as a response to a demand created by government policy which throughout had the support of formerly white corporate South Africa. This was a very close collaboration. So close in fact that it is rare to hear either of the two parties voice even the mildest critique of the policy - even as its negative consequences in the civil service became more obvious.
In part this is because both groups may have come to realise that on a macro-scale the various failures that Beckett and others identify were an unfortunate consequence of a policy that they thought was nonetheless necessary in order to guarantee that the country's new political leadership would, in its early years, adopt pragmatic fiscal and monetary policy. This was critical to ensure that South Africa had at least the chance of emerging from apartheid to one day become a lower middle-income economy. Such pragmatic economic policy has, in the face in considerable social and economic tensions, allowed South Africa to maintain a measure of currency stability, a general lowering of interest rates, and control over inflation.
This tie-in between empowerment and equity policy and sound economic policy may come to be seen as an important but obscure result of empowerment policy. It is a result that may have secured the standards of living of middle class South Africans against what might otherwise have been the damaging consequences of out of control inflation, very high interest rates, and a massively depreciated currency.
It has also been a great public relations coup for corporate South Africa. The policy that they adopted to ensure their interests under a black government has come to be widely supported by that same government and its supporters. Many black South Africans are scornful and indignant at the slightest criticism of empowerment and equity policy. Corporations proudly display their empowerment rankings and scorecards as evidence of their commitment to the new South Africa! Of late it is only Cosatu that has come to see through this charade.
Beckett and many others are right that the state of our civil service is often shambolic. It is an understatement to say that the government has not always been terribly good at meeting its responsibilities to its citizens. In part that may be due to the overzealous application of empowerment and equity policy. At other times that policy may itself have been abused by political leaders who overlooked its proclaimed intentions to make small fortunes for themselves and their political associates. It may in addition have created tenderpreneurs, damaged the government's service delivery efforts, created a damaging sense of entitlement, and entrenched unpalatable racial policy in South Africa.
While we can concede all these points I put it to Beckett that, principles aside, there was no equal alternative policy to ensure that the ANC would adopt the sound fiscal and monetary policy that it still practices. In his reply, which we look forward to publishing, I urge him to consider the ramifications of calls for ‘nationalisation' in an environment where, due to failures in education alone, corporate interests had for more than a decade remained the exclusive preserve of a small number of white people.
*Frans Cronje is deputy CEO of South African Institute of Race Relations
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