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Let the Gini out the bottle

Keith Levenstein

BEE has recently taken some flak, but it is still a necessary policy for our post-apartheid society.

In South Africa, about 85% of our citizens are black (black, coloured, Indian and Chinese) and 15% white. The contrary applies to wealth in the country. About 85% of all wealth, assets and salaries are in white hands, the remainder in black ones.

A similar percentage applies to the job market. Directors of companies listed on the JSE are overwhelmingly white. Pick n Pay Stores, the subject of strike action and accusations of racism, has 14 directors, two of whom are black, which works out to 14%. Pick n Pay Holdings has 100% white directors.

Jobs at the bottom end of the market—such as refuse workers—are almost totally black. The poorest people are almost all black.

Are the above statistics important? Is it necessarily bad that Pick n Pay’s directors are not representative of the nations’ demographics? As a public company, Pick n Pay’s shareholders have a right to elect whoever they please.

Should we care that one of the population groups in a non-racial society is more underrepresented than the normal statistical curve?

In any country some people are wealthier than others. This is represented by the income distribution curve. Recent reports, in some cases denied by Trevor Manuel, show that South Africa’s Gini coefficient, which represents income inequality, is the worst in the world.

South Africa is a special case in that the Gini coefficient almost exactly mirrors the racial breakdown. If we choose to do something about income equality, we have to know where to start—and with whom.

We all know exactly why this income, wealth and job disparity exists. No matter how anyone spins it, it is a relic from apartheid, when black people were denied various rights. The new South Africa was created to redress this inequality.

But in a macroeconomic environment, something is wrong if a particular group, which for 40 years had been legislatively disadvantaged, remains so today.

It is completely fair to expect that the new South Africa would have redressed this inequality. There has been some progress. We all have equal rights, but the people living in squatter camps—the poorest, the least educated, holders of the worst jobs—are all still black. The millionaires remain white. Sure, there are exceptions—Tokyo Sexwale, Cyril Ramaphosa, Patrice Motsepe—but they are in the minority.

Is it fair to let the free-market economy take care of inequalities, to allow Adam Smith’s invisible hand to take care of the market? This would be true if the market had not been so badly dislocated during the old regime.

Whites received undue and unearned benefits, which that they are still using today to gain competitive advantage. Would PnP’s Raymond Ackerman have been as successful if he had been born black, in a shack, with no education?

Based on the man himself as a superhuman, chances are he would have succeeded no matter what obstacle stood in his way. Herman Mashaba, founder of Black Like Me cosmetics, succeeded in the pre-1994 days despite the hardships.

For all other average humans it would have been different. In 1994 the playing fields were not level—whites still had more capital and the education to be able to hold on to their competitive advantage. Some form of remedial action was needed.

There are still many questions: Why has it taken so long for very ­little to happen? Simple! BEE is a new policy—it has been only two years since the codes came out. BEE is trying to change the old, discredited mindset of other government empowerment policies that have not really worked.

What should be done to rectify the situation? Broad-based black economic empowerment needs to be implemented properly. It is a policy that encourages companies to invest in skills development, enterprise development and procurement, corporate social investment, employment equity and to consider selling shares.

Keith Levenstein is the chief executive of EconoBEE

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