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Black economic empowerment is not black economic empowerment

By Michael Nassen Smith

The BEE drum has been beaten many times before on both the right and the left on South Africa’s political spectrum. A recent piece on PoliticsWeb penned by John Kane-Berman gave what has become a standard liberal right critique of BEE. I think Berman is right to bemoan the influence of BEE on South Africa’s economy. I do the same but for different reasons.

Indeed, from its inception BEE has attracted the ire of both the SACP and the Free Market Foundation alike. This government policy has somehow manufactured a rare agreement between “market fanatics” and “ultra-leftists”. Something must be wrong here.

However, as discourse in South Africa has returned with a bang to the question of race and racism, much clarity has been lost on the BEE question. It is now common place to be accused of anti-black racism if one objects to this holy-grail, regardless of whether you keep Karl Marx and Frantz Fanon or Milton Friedman and Friedrich Hayek in your briefcase. This, of course, plays perfectly into the hands of the benefactors of BEE, whether white or black. It is thus necessary to re-clarify a few things.

The official aim of black economic empowerment is to deracialise the distribution of wealth in South African society. Contrary to the beliefs of those nostalgic for the apartheid days of economic and social segregation, this is an important and necessary project to pursue. However, though the principle undergirding it is uncontroversial, all evidence suggests that BEE has only served to enrich a handful of well-connected black businessman and politicians.

As a recent paper by Alan Hirsch, Haroon Bhorat and Aalia Cassim noted, BEE seems to be the outcome of a pact between a section of the ANC government and previously wholly white-owned firms who, after the transition, were still concerned with preserving their property rights and influence on economic policy. Such an elite pact has had little redistributive impact and has largely excluded low-skilled labour, the unemployed, and those in the informal sector from consideration. Moreover, because the profitability of much BEE business depends on the exploitation and marginalisation of the poor, the flourishing of that elite class depends on the continued exploitation of the black majority.

How did we get here?

During the years of the struggle, the ANC and its allies recognised that the extension of political freedom to all would mean very little without a corresponding extension of economic freedom. This was an obvious point to hold in a country that was then (and is now) plagued with extreme and racially defined inequality. Thus, in 1969, the ANC’s Strategy and Tactics (EFF manifesto anyone?) read:

“To allow the existing economic forces to retain their interests intact is to feed the root of racial supremacy and does not represent even the shadow of liberation.”

Although the ANC embraced a “two-stage” theory of revolution, which saw political democracy as a first step towards socialism, its economic policy documents drawn up in the final years of exile still allocated a central role for the state in redistributing wealth to the black majority. The ANC’s economic ambitions were crystalised in the Reconstruction and Development Programme (RDP), a document prepared by Cosatu, and used as the incumbent ruling party’s “unofficial” election manifesto in 1994. The RDP, like the Freedom Charter, demanded a radical redistribution of economic wealth and saw increasing taxes on business, strict labour law, and significant government spending in health, infrastructure and education, as a means to achieve this. Though not an explicitly socialist economic policy, the RDP was the rallying point of much of the country’s progressive left within the ANC, civil society and trade union movements at the time.

It is clear how this programme, like any programme aimed at redistribution, contradicts the interests of big capital. The capitalist class, by its very nature, cannot stomach increased taxes and regulations and naturally is concerned about being crowded out by the state in the economy – one needn’t be a Marxist to concede this point. Thus, the interests of capital and the aims of the black working class majority were diametrically opposed at the time of the negotiations. Moreover, the covert courtship of the ANC by big business (both foreign and international) in the 1980s, the dismantling of the welfare state in the West, the collapse of the Soviet Union along with the widespread acceptance of the notion that liberal capitalism represented “the end of history,” ensured that the ANC’s ambitious redistributive initiatives gathered little international support. From proclaiming the nationalisation of the mines to be the non-negotiable policy of the ANC upon his release from prison in 1990, Nelson Mandela would call the free-market a “magic elixir” and argue that it presents the only hope for creating a prosperous and just new South Africa.

Thus, somehow, the task of redistributing wealth to the black majority in the new South Africa was to be done on the basis of free market capitalism. To the dismay of many on the left of the ANC, the RDP was abandoned a mere two years after its birth. The Growth, Employment and Redistribution plan (Gear), what some commentators have called the only “home-grown” instance of the IMF’s infamous structural adjustment programme (a set of policies that the IMF has since apologised for recommending) was implemented without consultation within the ANC and across the tripartite alliance in 1996. Gear pushed fiscal austerity, a monetary policy focused solely on inflation control, and the opening up of barriers to trade, as substitutes for a strong and interventionist state – all of which constituted favourable policies for capital. The socialist “second-stage” was now a relic of the past.

However, one redistributive policy remained namely, black economic empowerment. Because it aimed at de-racialising the composition of the country’s affluent class without fundamentally restructuring the economy, BEE represented an elite resolution to the conflicting needs of redistribution and capital accumulation. The contradictions of policies which in their rhetoric aim to ensure broad participation in the economy by black people but can only accommodate a select few has made contemporary South Africa a particularly volatile political space.

It is now widely accepted, even by its own champions within the ANC, that Gear’s free-market economic prescriptions have been disastrous for black working-class communities across the country. Alan Hirsch, a sponsor of Gear in Nelson Mandela’s cabinet for example, has recently written an opinion piece admitting to this. As a consequence of Gear’s initiatives, much of the economic legacy of apartheid and colonialism remains with us today. Our cities, for example, are still defined by an apartheid-era geography due to the dominance of market logic in determining housing provision (see Zachie Achmat’s recent open letter to Helen Zille).

The imperatives of free market capitalism have also ensured the suppression of wages, outsourcing, the flagging of unions through repression and co-option into the political elite, and the suppression of protest action by the police – see Marikana. Moreover, the privatisation of essential state functions and the commodification of services like water provision have ensured that our marginalised communities, unable to access the market due to a lack of capital, are plagued with service-delivery shortages. The black majority is thus far from being emancipated from conditions of poverty.

In addition to this, black economic empowerment, while formally advertised as a means by which the black majority might gain access to the fruits of the South African economy has only served to divide the interests of the black population. For while it is clearly in the interests for the black poor to challenge the dominant economic thinking of the new South Africa, the benefactors of BEE have an interest in preserving the status quo. For example, extra profits derived from labour casualisation and suppression, and union corporatisation ensures higher dividend payoffs for those who have been handed shares in the country’s large businesses. In addition, the continued privatisation and outsourcing of state services means greater access to government tenders, offering another site for narrow black accumulation. To put it in vulgar terms: black BEE elite flourishing, means black working-class exploitation.

To conclude, unpacking the consequences of BEE in post-apartheid South Africa without slipping into reactionary moralising is essential. Dismissing the notion that BEE serves “black” interests writ large is a necessity. Being attuned to the conditions that have defined post-apartheid South Africa must involve a double rejection of, what those in the student movement have termed, “rainbowism”, which downplays or plasters over the existence of racial and class inequality, and the view that BEE somehow serves the interests of the black poor.

Empowering the black poor would involve the scrapping of BEE and the instituting of meaningful redistributive policies that would engineer the structural transformation of South Africa’s economy. These include land reform, a total revamp of our basic education system, greater infrastructure spending, the scrapping of outsourcing and the decommodification of service delivery (housing, electricity and water), to name but a few. No one should be blackmailed into believing that asserting this is to commit some form of anti-black racism.

Michael Nassen Smith is a researcher at the Institute for African Alternatives, publisher of New Agenda: South African Journal of Social and Economic Policy. He writes in his personal capacity.

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    • Karl-Heinz Sittlinger

      It goes way beyond “a pact between a section of the ANC government and previously wholly white-owned firms who, after the transition, were still concerned with preserving their property rights and influence on economic policy”
      While the statement above is true to a degree, especially ’94, heavy greed and power hunger of the current ruling elite are by now a much bigger factor. BEE deals and tenders primarily now seem to be a reward system for loyalty and patronage of premier league, trickling down the ranks.
      That’s not to say that there aren’t any deals going on with white businesses, but especially in the current climate, it is important to identify all major influences for problems.
      Zumi and his merry band are very consciously exploiting those they should serve, and often race is just the attention grabber from a much darker card trick we should not see.

      And because the way BEE has now become merely an enrichment tool, it is no wonder that it is being misused (fronting) , criticised and dismissed. It needs to be scrapped and recreated, and based on need NOT colour. There is no reason why a billionaire still needs to be helped by BEE.

    • chris

      Someone who lives in Hyde Park, sends their kids to private schools and drives a R1m+ car is no longer unempowered and should not be able to benefit from BEE no matter what the melanin content of their skin. However getting the fatcats currently gorging themselves at the BEE trough to admit the truth is another matter entirely….

    • Pieter Barendse Botha

      Economic freedom is available to all people with initiative and a will to work!! false promises of BEE only creates false hopes for nothing constructive !! Constructive action is a force within an person who wish to go forward !!!Empowerment is from within ..not from the outside inward !!!!!!!!

    • Charlotte

      Karl-Heinz Sittlinger is right:
      Does BEE now mean:
      – Black Economic Enrichment
      – Black Economic Entitlement
      or Black Economic Embezzlement?