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The uneasy logic of black empowerment

Roger Southall

Government strategy has created a tiny black elite! BEE favours rampant crony capitalism! BEE is just corporate trickle down to the black middle class! Black empowerment is no more broad-based than Jacob Zuma's bank balance! Such complaints form the backdrop to much discussion about BEE.

Government strategy has created a tiny black elite! BEE favours rampant crony capitalism! BEE is just corporate trickle down to the black middle class! Black empowerment is no more broad-based than Jacob Zuma’s bank balance!

Such complaints form the backdrop to much discussion about BEE, the left blaming neo-liberal capitalism, the right condemning ANC misrule. Yet such is BEE’s complexity that both political credos are right and wrong simultaneously. Imagine a South Africa in 2007 without black empowerment. No Cyril Ramaphosa at Shanduka, no Tokyo Sexwale heading Mvelaphanda, no Patrice Motsepe at African Rainbow Minerals, and a black public sector confronting an exclusively white private sector.

Such counterfactual imaginings force us to confront fundamental questions. Can South Africa be politically stable without a growing black presence at the apex of the corporate structure? Do we want a black capitalist class or not? Isn’t a systematic programme of BEE necessary to make white corporations more demo­cratically accountable?

The ANC’s theory of the national democratic revolution is often used to glue a fractious tripartite alliance together. Nonetheless, it provides important pointers to what the ANC understands as its “historical project”.

The theory posits that, while capitalism in South Africa led to the most advanced level of industrial development on the continent, this was based upon the brutal exploitation of black labour and the exclusion of blacks from significant ownership of the economy. The small black middle class of clerks, teachers, traders and professionals that nonetheless developed was therefore thrown into political alliance with the black working class.

The apartheid regime sought to disrupt this by creating collaborative strata of black politicians, civil servants and traders in the homelands and, from the 1980s, by devolving power upon black councillors and facilitating black petty capitalism in urban areas. Yet it was all too little, too late, and too flawed to confound the political alliance that lay at the heart of the movement for political liberation.

However, rather than being a revolutionary triumph, the 1994 settlement left much of the work undone. The economy remained overwhelmingly in white hands. In a post-Soviet world where neo-liberalism reigned internationally, nationalisation of white assets and retreat into a protected, state-controlled economy was as impossible as it was unwise. Thus it was that BEE came to constitute an unfolding of the ANC’s understanding of history.

State power gave the ANC control over the parastatals. Responsible for about 15% of GDP, these had been used since 1948 as instruments of Afrikaner empowerment. Not surprisingly, the ANC’s first, informal, phase of BEE saw its appointing party loyalists to senior posts in the state corporations, and using them as training grounds for future capitalists and managers.

But what to do with the white economy, especially when the huge conglomerates, which had been assembled under apartheid, were beginning to unbundle? After all, black capitalism had been stunted historically, and black aspirants were “capitalists without capital”, unable to buy their way into significant shareholding.

One answer was to lean on the corporations, the most aware of which had a worried sense of their political vulnerability. They wanted a deal with the new political elite. Powerful ANC figures such as Ramaphosa and Sexwale were more than prepared to strike their own bargains. Thus it was that those who were to become the BEE moguls were those who struck up early connections with institutions in mining, energy and finance.

Just as the 1956 Freedom Charter had committed the ANC to nationalising the “commanding heights” of the economy, so now the ANC wanted to pursue a private sector version of the same aim.

Even so, corporates were slow to come to the party. Despite some remarkable early deals, by as late as 2000, blacks still owned less than 4% of shares on the JSE. Furthermore, aspirant black capitalists remained heavily indebted to the banks, which had funded their acquisitions. Something needed to be done. The Black Economic Empowerment Commission, chaired by Ramaphosa, recommended the use of state power to push the private sector along.

Private capital sought to preempt state intervention by negotiating industrial sector charters establishing black ownership targets and training strategies by 2014. Tough bargaining followed, but a distrustful government wary of corporate backsliding preferred to lay down strict guidelines to which all individual charters would have to conform.

The formulation of the Broad Based Black Economic Empowerment Code, which followed, also allowed the government to respond to criticisms from within the tripartite alliance that BEE was inherently elitist by setting ambitious targets for black ownership, managerial and middle-level employment, skills training and procurement from black companies. If such targets were to be realised, a considerable blackening of corporate capitalism would follow over the next 10 to 15 years.

But the logic of BEE also has a considerable downside. ANC theory envisaged a growing black capitalist stratum as “patriotic capitalists”, marching unselfishly to the party drum and spreading their wealth around their historically impoverished communities. Yet upwardly mobile capitalist classes don’t act like that, particularly within a consumerist culture which emphasises ostentatious display and the virtues of getting rich quickly.

Many black capitalists have been brought on board the corporate bandwagon because of their political connections, not for their Weber­ian entrepreneurial ethic, so many BEE deals collapse into cronyism and corruption, who-you-know mattering more than what-you-know.

Meanwhile, corporate cynicism knows few bounds. Unbundled fragments are transferred to indebted black satraps, and black capitalist success hovers uneasily between dependence on state contracts and white corporate goodwill. Increasingly, too, large corporates are shifting major interests into private equity.

BEE remains a necessary political project. Leaving white capital to transform itself is like asking the devil to convert to Catholicism. But the challenges are immense: can a well-intentioned but under-capacitated state shape a socially responsible capitalism, or is BEE creating an avaricious class of black capitalists tied to the coattails of international capital?

Roger Southall is distinguished research fellow, Human Sciences Research Council

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