The Democratic Alliance’s attack on racial redress undermines inclusive growth

South Africa’s socio-economic structure has been designed around racial capitalism for close to four centuries.

This point is articulated extensively in past and present researched policy literature on the country’s inequality. Both domestic and international evidence concludes that racialised class and gendered disparities impede economic development in several ways. 

The state is mandated constitutionally to address this trend by pursuing socio-economic redress through a range of policy and regulatory measures. Decreasing race-based socio-economic inequality is essential for attaining an inclusive economic development path.

Consequently the government of national unity’s (GNU) Statement of Intent explicitly adopted social justice and redress as foundational principles. 

The Democratic Alliance (DA), which is the second largest party in the unity government, has purposely undermined this principle in public statements and court papers aimed at challenging key economic transformation policy or regulatory reforms.

This perspective draws heavily from the party’s 2024 elections manifesto document, which essentially subverts racial redress and inclusive socio-economic development.

Two fundamental flaws underpin the DA’s approach to tackling racialised socio-economic inequality in post-apartheid South Africa. This shortcoming is evident in two recent policy reform examples: the implementation of the Employment Equity Act (EEA) and the establishment of a transformation fund. 

The first weakness in the DA’s perspective is the emphasis on market-led solutions in resolving systemic racialised socio-economic inequality. Party documents advance a case for minimising state regulation, quotas and enforcement mechanisms in economic transformation policies.

This is premised on a belief that markets can adequately address racial inequalities if the government allows companies to make voluntary contributions and supports the following market fundamentalist principles: privatisation, labour market flexibility, austerity and deregulation. The DA’s public statements opposing the transformation fund exemplify this perspective. 

This view overlooks several trends and structural impediments that sustain race-based socio-economic disparities. South Africa’s racialised capitalist system and the persistent structural inequalities that flow from it was constructed through substantive state interventions. Thus, it is necessary to use state regulatory instruments such as quotas and enforcement mechanisms in alleviating these disparities. 

In addition, researched policy evidence illustrates that market-primacy approaches to racial socio-economic redress have largely failed.

Published literature on broad-based black economic empowerment (broad-based BEE) highlights this point in crucial legislative areas such as enterprise and supplier development (ESD) spending. For example, the 2022 Broad-based BEE Commission report found that in “2021 only 61% of the set spending targets was achieved for ESD, which is a continuing trend over the past five years (2017: 44%; 2018: 60%; 2019: 51%; 2020: 61%”’. 

The above-mentioned constraints are heightened by other structural obstacles for black entrepreneurs, which include concentrated markets across sectors, limited access to finance and inadequate social infrastructure. 

All these obstacles for inclusive growth require strengthened regulatory and policy implementation reforms articulated in the transformation fund proposal.

These cover crucial interventions such as supporting enhanced market access, ring-fencing finance for township and rural area development, picking core economic sector growth drivers as well as mandatory financial contributions from private corporations.

Researched literature has shown that these interventions will fail if policymakers follow the DA’s market primacy socio-economic redress approach. 

The second flaw in the DA’s racial redress approach is the emphasis on flexible and cheap labour. This is expressed in the party’s public statements on labour market policy reforms, with a particular emphasis on the Employment Equity Act implementation and minimum wage.

Party leaders and documents state that Act’s regulations should be repealed entirely because they are based on race-based interventions and do not conform to meritocratic principles. 

Furthermore, the DA is opposed to the minimum wage because it believes the policy deepens South Africa’s unemployment problem.

Labour market policy evidence and regulatory reports refute these claims. South Africa has a structural unemployment problem that cannot be reduced to wage costs across the economy. National minimum wage policy implementation evidence illustrates that this policy has not caused substantial job losses.  

Additionally, significant progress has been made to end discrimination in workplaces, yet racialised class and gendered inequalities still persist in labour markets.

These permeate areas such as wages, skills, nature of employment contracts and occupational categories. The Employment Equity Report 2023-24, Statistics SA data and other credible research from civil society organisations amplify these points.

Government officials correctly proposed measures to ameliorate this problem through a set of legislative amendments that include increasing employment equity inspectors, strengthening punitive measures for non-compliance, setting sector targets and linking procurement with labour market policies.

These measures shall be supported by other industrial, competition, social protection, and skills interventions in the government’s overall economic strategy.

The DA’s emphasis on fundamentalist market-led and exploitative labour racial redress approaches does not support inclusive growth. Any proposition for inclusive growth has to address the underlying causes of racialised socio-economic inequalities in South Africa.

All evidence cited above supports interventions aimed at strengthening socio-economic redress using alternative policy measures articulated in both  Employment Equity Act amendments and transformation fund proposals.

Dr Khwezi Mabasa is the economic and social policy lead at Friedrich Ebert Stiftung South Africa and a part-time sociology lecturer at the University of the Witwatersrand.