An apartheid beneficiary's guide to the budget

Who is an apartheid beneficiary? Anyone who was classified “white” under apartheid benefited from the system. Do we include their children almost two decades after apartheid was officially abolished? The answer must be yes. It is the moral stance.

(German youth were faced with a similar dilemma. It took time. The first generation after World War 2 were in shock and denial, and still living with their deeply implicated parents. Later generations rebelled and became extremely conscious of their nation’s past.)

Has the structural inequality created by apartheid continued to benefit its beneficiaries? No longer exclusively, but mostly, yes, because the ANC largely took over the economic agenda of the apartheid state. As a result, the danger exists that if the ANC continues to conflate party and state it will become the new oppressor, and it will increasingly be forced to resort to the tactics of the former regime to maintain power.

A new elite has installed itself and is partly in charge. Some were created by taking public funds raised from taxes largely paid by apartheid beneficiaries (“I didn’t struggle to be poor”); some raised themselves up by their bootstraps; others have made spectacular amounts by the continued exploitation of the same people that toiled under the apartheid system (the Aurora mine owners et al). Only this time it is done in ‘good conscience’ (“Apartheid has been abolished; it is now okay for me to also exploit black people”).

Since 1994, some apartheid beneficiaries have dropped into poverty; there is even a poor white squatter camp (no different from the 55 tent cities that have sprung up in the USA). The poor white pavement invasion is the result of the removal of apartheid privilege, which has hit the economically most vulnerable apartheid beneficiaries first.

But overall those who benefited under apartheid still benefit (also now apparently in good conscience). This is the price paid for a democratic transition as opposed to a head-chopping revolution. When the Bolsheviks overthrew the Tsar they executed the elite and confiscated their land. When the Communist regimes were in turn overthrown by velvet revolution, the political elite found positions of power and money in the new order. Former KGB now sit as the democratically elected rulers of Russia.

Likewise in South Africa, the fall of apartheid became an enormous boon for those best positioned to take advantage.

Post-1994, the biggest wealth generator for most was the surge in the value of their assets as South Africa re-entered the world, not only stock prices, but a property boom. It should be acknowledged that real estate may have been paid for, but whites were able to do this at artificially low prices because the Group Areas Act (repealed 1991) reserved prime locations for whites only. For example a black person could not buy property in Constantia or Camps Bay, if any sea view along our 2800km coastline.

Property values skyrocketed making most prime property holders millionaires. Meanwhile, because non-white areas suffered criminal neglect, rates and service charges, which had been amongst the lowest in the world, remained that way for many more years.

Those who had benefited under apartheid squirrelled away as much of their gains as they dared. For instance, shortly before the 1994 election, De Beers quietly moved 3½ tonnes of diamonds to London with an exemption of R1-billion in tax. Profits of apartheid left either legally with the blessing of the ANC government (between 1995 and 2002, R100-billion by institutional investors alone) or disappeared illegally (a staggering 9.2% of the country’s GDP between 1994 and 2000).

Nine of our largest corporations (Anglo American, Billiton, SAB etc) were allowed to move to New York and London, out of reach and in a strong position to negotiate with any government with radical ideas. Many of South Africa’s cash rich corporations continue to withhold investment from their home economy.

If this wasn’t enough, apartheid beneficiaries were able to take financial advantage of the inflows of capital that did materialise – about 1% of GDP from 1994 to 2000, through financial management of foreign direct investment, acting as middle men, estate agent commissions etcetera. Billions were realised through new investments in their businesses, through acquisitions and mergers and unbundlings and asset swaps impossible under apartheid. The financial industry mushroomed.

Race-based affirmative action policies also had perverse repercussions. Retrenched “whites” with golden handshakes and sunset clause settlements set up consultancies and invested in second homes. In their new business position they were able to maximise tax advantages denied them as salaried workers. They were largely reemployed by the companies and government that had fired them, but at rates sometimes multiples of their previous earnings to do exactly the same job (accounting for 73% of post-apartheid SMMEs according to one World Bank study in 2000).

The ANC was most accommodating. It even opposed the Khulumani class action law suit in the US Courts against corporations that aided and abetted apartheid. But in 2009, President Zuma reversed government’s seven-year-old stance. The group would still like to go after Daimler AG, General Motors, Ford Motor Company and IBM.

Two things should have been done at the advent of democracy in the interests of restitution. A once-off estate tax on all assets at the end of the 1993/4 financial year. The other mechanism would have been a 100% inheritance tax. The old people would have been secure until death; the young set free; the country’s economy liberated from a host of messy if not ill-conceived restitution and redistributive policies.

Those now clutching their pearls as they read this need not fear. 18 years on, it is too late now. There are too many new rich.

But they may face something worse. Tensions simmer over land and systemic poverty. There wasn’t even a revolutionary catharsis, thanks to the Truth and Reconciliation Commission becoming subsumed in the elite compromise.

The psychology of our national debates remains unhealthy. We now confront such bizarre conundrums as the theft of entitlement. Or in the case of Malema Inc: entitlement to steal.

In this environment, any intransigence becomes amplified and distorted; debate fails for we have entered the realm of the irrational: “You can’t sing that song!”; “You can’t change the name of my street.” Or the violent reactions that drowned out some valid points Pieter Mulder had to make about departmental incompetence in land redistribution due to a risible faux pas about history. (How easy it is to forget in a country of at least 4 million apartheid beneficiaries he only attracts 140 000 voters.)

The problem with the rich is that economies become dependent upon them. New York suffers the perverse logic of needing the taxes on morally repugnant Wall Street bonuses to balance its books. In South Africa, a new corporate salary culture – parastatal, public and private – has taken hold.

When I asked Minister Ebrahim Patel last week if government would consider the Chinese system whereby a CEO can only earn a fixed multiple of the lowest paid worker, he inconveniently ran out of time to answer the question.

The health of the fiscus rests on a tiny tax base and upon its co-operation. The ANC frets about the way it is portrayed in the liberal bourgeois media for no other reason.

Minister Pravin Gordhan’s budget seems to be sluggishly shifting in the right direction: a little relief for the lower middle class, more proxy taxes for the wealthy.

“I like paying taxes, with them I buy civilisation,” US Justice Oliver Wendell Holmes is reputed to have said. A more equal society is a more cohesive one, something everyone’s survival depends upon. Apartheid beneficiaries should be working overtime for a fairer society. Tax is the most benign of redistributive mechanisms. Yet unapologetic arrogance flourishes and self-reflection has withered amongst many of our elite.

In a democracy, elites must be held accountable, as should the government on how efficiently and fairly it redistributes the wealth.

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