SA grapples with black empowerment

It has created a wealthy black elite but has been decried for leaving millions of people behind; advocates say it has helped redress the economic wrongs of apartheid but critics argue it is deeply flawed.

South Africa’s black economic empowerment (BEE) policy was supposed to bring the black majority into the mainstream economy but as opponents grow more vocal, there are signs the government may be ready for a rethink.

Through BEE, the state is pushing companies to meet quotas on black ownership, employment and procurement to increase the majority’s share in the white-dominated economy. Often, however, lucrative deals have gone to a few businessmen with ties to the ruling African National Congress (ANC).

“There is concern that ... masses of black people are not benefiting like the ANC would like to see them benefiting,” said Prince Mashele, a policy researcher at the Institute for Security Studies.

“It is a fundamental question that the ANC broadly is grappling with.”

The ANC long saw opposition to black economic empowerment as an attempt by whites to retain old privileges, but the party now seems to be listening as workers grow more disgruntled over stark income gaps.

A July government study showed there was a dramatic increase last year in strikes by labourers who felt they had been left behind in a booming economy where companies and their directors were enjoying hefty windfalls.

“Top management are earning millions, while the workers struggle to make a decent living,” powerful trade union Cosatu said in a statement in March in support of pay-related strikes.

“While management continue to reap the benefits of workers’ sweat, the standard of living of workers has continued to drop.”

The ANC has yet to even hint at any possible changes to the BEE policy, and analysts say it is difficult to regulate since compliance is voluntary for firms, but there are signs of a sea change in government thinking.

Worshipping wealth

In August, the ANC said it was drafting a code of conduct to address complaints that the system benefited people with links to the ruling party. It has also sought to include more ordinary South Africans in the scheme by putting more emphasis on small businesses and employment and gender quotas.

But 12 years after the first all-race poll marked the end of apartheid, South Africa still has some of the biggest income gaps in the world, largely drawn along racial lines.

Africa’s biggest economy last year grew by 4,9%—the fastest growth in over two decades—driven in large part by the thriving black middle class.

This group, defined in South Africa as people who earn at least R154 000 ($20 630) per annum, has grown by 368% between 1998 and 2004, mainly due to BEE.

Analysts say this is helping to drive overall growth but the numbers benefiting are small and the productive side of the economy lags the demand side.

Economic success—and its visible signs in ostentatious consumption—have deepened the anger of those who feel left behind and has attracted the attention of the political elite.

In July, President Thabo Mbeki rounded on the country’s nouveau riche in a speech which analysts said gave perhaps the strongest indication of ANC concerns about BEE shortcomings.

“We nevertheless share a fundamental objective to defeat the tendency in our society towards the deification of personal wealth as the distinguishing feature of the new citizen of the new South Africa,” Mbeki said.

The speech was widely viewed as a veiled swipe at the new black middle class, and a signal of change.

“It [the speech] is building on previous statements, consolidating momentum for possible changes,” said Susan Booysen, a political scientist at the University of the Witwatersrand in Johannesburg.

Some winners

There are some BEE deals that have won widespread praise.

In 2003, state-owned telecoms firm Telkom sold nearly 140-million shares in an initial public offering (IPO). It sold the shares at a discount to attract low income earners.

“I’ve got a sense of security to know I’ve got shares, when days are dark I can now cash them in,” said one 31-year-old Telkom shareholder.

“I still maintain BEE benefited a few ... I can’t really claim BEE benefited a lot of people,” he added.

But there are also examples of large pay-offs for the few—and these fuel criticism of the government’s economic policies.

A recent report by trade union Solidarity said one CEO last year raked in R111-million ($14,9-million). That compares to a minimum wage of roughly 14 400 a year for millions of South Africa’s 45-million people, or even less for casual labourers like domestic workers and farm workers.

This does not sit well with Mbeki, especially as he nears the end of his final term in 2009. Booysen said he was determined to narrow the chasm.

“He certainly doesn’t want to be a lame duck president who doesn’t come up with new ideas to correct known deficiencies,” she said. - Reuters

 

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