Two months ago Safika deputy chairperson Saki Macozoma, quoted in the Financial Mail, offered a feeble defence against charges of enrichment levelled by black people against himself and his fellow black economic empowerment (BEE) oligarchs, for want of a better word, such as Patrice Motsepe, Tokyo Sexwale and Cyril Ramaphosa.
He said: “I think it is a racist concept. Suddenly when there are black people becoming wealthy, there is a problem. The fact that black people also offer this criticism does not mean that they are correct. After all, black people also bought into Bantustans. Just because they are black does not mean that they are strategic thinkers.”
African National Congress secretary general Kgalema Motlanthe never bought into Bantustans. But last week he became the latest black person to warn against the dangers of enrichment. “Another problem in the BEE process has been its narrow base. We see the same names mentioned over and over again in one deal after another,” he said in an address to the Black Management Forum.
Motlanthe’s comments followed similar remarks made by Minister of Finance Trevor Manuel, who had suggested that the dramatic increases in salaries of a small pool of skilled black people (especially chartered accountants) had been the main reason for rising levels of inequality within the black community.
Until now, I have resisted participating in what has been a futile and sterile debate about enrichment versus empowerment. However, the ANC’s attack on its own elite — all four or five of them — should be welcomed. It is merely an acknowledgement of a groundswell of opinion among many ANC members that all is not well with the current trajectory of BEE.
It could force a deeper debate about the true meaning of empowerment and the nature of the economic growth path that has been followed since 1994. From Motlanthe’s perspective, has BEE become a nightmare that has only managed to create a rentier class? “A rentier class is one that gains wealth through dividends, interest and rent rather than through building new businesses,” says Ebrahim Khahil-Hassen, a researcher for the Congress of South African Trade Unions.
Is Mothlanthe frustrated that the ANC has been so naïve that it created rents for a black elite without attaching reciprocal obligations to serve the national interest, as was the case in most East Asian countries? If the black elite is to be a motivating force for change, it should operate within the framework of a coherent development strategy.
According to one author, in Asian countries rent-creation by the state was successful in promoting industrialisation. This, however, is not what Motlanthe had in mind. The contradiction in his argument is that it is absurd to propose, as he did, a “one comrade, one tender” policy and at the same time complain that: “Over the last five years and more, the extent of black ownership of productive property has not changed. The commanding heights of our economy remain in white hands, whether one looks at it from the point of view of management, control or ownership.”
A balanced BEE scorecard of South Africa would reveal the following: direct black ownership of assets on the JSE Securities Exchange is at 1%; black control is at 3%; black participation in top and senior management in the private sector is at about 6%. The real story is not that a few people have been enriched, but that so few have been empowered over a 10-year period. If the second revolution has not yet started, why is Motlanthe trying to stop it?
The other side of the debate is that the so-called BEE oligarchs are not real oligarchs. Their companies are still very small, even by South African standards. Most of the rents that they were supposed to receive have been captured by white businesses, many of which have bought into a false notion of empowerment, hence their focus on a few BEE film stars who are only expected to bring political and PR credibility to the table.
This is another dilemma for the ANC. It yearns for a patriotic black bourgeoisie that will support its developmental agenda, but in most cases its senior members in the private sector do not have real power or critical mass.
Even more absurd is Manuel’s suggestion that a tiny pool of professionals has been responsible for rising levels of inequality in the black community. The real reasons are not hard to find. They include massive tax cuts for high-income earners, rising levels of unemployment and underemployment, and economic policies that prioritised the appeasement of the owners of capital.
If Manuel is so concerned about inequality why does he not take President Thabo Mbeki’s analogy of the “Two Economies” to its logical conclusion and ensure that there are direct transfers of resources from the first to the second economy via the tax system? Logic dictates that the current generation of taxpayers must bear some of the costs of creating a more equal society. The balance, which future generations must pay, must be raised through debt.
More important, South Africa has been stuck in a low-growth equilibrium of about 2,5% since 1996. Between 1994 and 1996, when the economy was inefficient, there was a decent growth rate. When Manuel arrived at the Treasury, it was the start of deflationary policies, which brought the brief post-apartheid boom to an abrupt end. If the policies had not been implemented, the economy would have easily cleared 4% growth over the past decade.
Now that the economy is efficient it cannot generate growth. In the year to June 2004, the economy grew by 2,5%, the worst performance of the world’s top 25 emerging markets monitored by The Economist.
If it is accepted that the primary objective of macro-economic policy is to maximise economic growth and employment, South Africa has been a dismal failure. In the final analysis, the true meaning of BEE is about raising the productive capacity of the economy. With up to 70% of black Africans unemployed or underemployed in the informal sector, the challenge is to increase access to skills, capital, other productive assets and economic opportunities on a big scale.
After more than a decade following the BEE movement, I have come to two conclusions. Firstly, it only makes sense to adopt the broadest possible definition of empowerment. BEE is about everything that has to do with economic development. Secondly, the biggest constraints to BEE are at the macro-economic level. Under the current growth path, there will be no meaningful BEE for the oligarchs-in-the-making or the ordinary person.
The pointless debate about enrichment versus empowerment must give way to a national outrage about the country’s mediocre economic growth performance.