To BEE or not to BEE...

Black Economic Empowerment (BEE) is regarded as either holy or evil by South Africans, depending from which vantage point it's looked at. For non-South Africans who may not be in the know - BEE refers to affirmative action policies, which are driven first and foremost by Government through legislation, as well as through so-called BEE Charters agreed to between Government and Business (mostly by specific industry's, e.g. Tourism).


While race plays a major role in how BEE is perceived in South Africa, it would be a mistake to believe that all whites are against it and all blacks for it. BEE was always going to be a necessary evil at best and at worse reverse* discrimination (*against whites as opposed to previous discrimination against blacks). It can probably be argued that it will always be both... My own preference has been towards labelling it a 'necessary evil'. That is, BEE should be seen against the country's history of colonisation (±300 years) and formal Apartheid (±40 years), which robbed the black majority of opportunities for education and development. To address these past injustices, a degree of discrimination is needed in the present day (affirmative action).

However, about a decade of BEE has caused many to re-evaluate their stance on this thorny issue. To be fair many, myself included, had a lot of caveats regarding support for BEE / affirmative action to begin with. These now strongly come into play, given the history of BEE thus far. In short a smallish group of the (mostly) political well-connected have benefited hugely from BEE. Some black labourers benefit indirectly through union participation in BEE deals, although the empowerment effect thereof at ground roots level is questionable. The vast majority of black South Africans are not really in a stronger position to advance up the economic ladder - some even argue that most are in a worse position today.

There are a few aspects of the current BEE experience that troubles me greatly. These include:

• The small number of people actually (disproportionally) empowered by BEE, as referred to above.
  
  
• It seems that the main focus is on filling top, influential, highly paid positions, with black faces - i.e. following a top-down approach.
  
  
• The previous point suggests that the only way to empower blacks is by getting rid of whites... That is, whites can't be trusted in playing a part in the great empowerment project. It has to be driven by blacks in high positions, by extension by driving out whites currently filling those positions. This is gross generalisation on my part, but it represents at the very least a worrying perception.
  
  
• BEE in South Africa, in my view, is based too much on the redistribution of wealth rather than the creation of wealth. In other words cutting the proverbial economic pie in smaller pieces, so that everyone can get a bite - rather than baking a bigger pie. (Obviously the 'shareholding' in a bigger pie can remain in the same lily white hands, which won't help either.)
  
  
• An experience which is bothering me more and more is listening to black commentators matter-of-factly stating that black South Africans must eventually dominate business, because of the demographics of our population. There is a culture of entitlement in these pronouncements that bugs me. If I as a white person build up a family business from scratch with years of blood and tears, am I required to simply hand over a majority stake to someone else, because of his black skin colour? Why can't a family business remain exactly that, irrespective of the family's race?
  

It would be naïve to expect that after 350 years of discrimination against blacks in this country an ANC Government would not opt for fast track empowerment, as they've done. But one would hope that this will be coupled with a similarly aggressive drive to empower blacks to compete on merit, not to be mere recipients of what virtually amounts to hand-outs? I fear this has generally not been the case.

The main failing of the ANC Government in my view has been the complete failure to deliver, or at least begin to deliver, quality education at (primary and secondary) school level. The fortunate black students that make it into universities (these days a very sizable portion of university populations) are either those who were able to get into historically white schools or the exceptional few who managed to reach the bar despite attending the average black township school (the average black township school being poor to useless).


At present universities attain their high percentage of black students not because of population demographics naturally leading to it. Rather, it is manipulated by setting different standards for different race groups. The bottom line is, if you're white you have to outperform black students by a clear margin in order to make it to university. Worse, if you're black a mediocre school performance will often do. The reason for this is not that black kids are lazy or have a lower intellectual capacity. It is rather that Government fails them - mostly in the poor execution of education policy -; school principals who are either unable to manage or don't care fail them; and ill qualified, poorly motivated and often totally uncommitted teachers fail them.

The baggage of school boycotts in the Apartheid era is also haunting us today. I'm amazed at how (black) school children still feature as cannon fodder in political struggles. Whether it be protests against poor service delivery by municipalities, provincial demarcation disputes or micro issues with particular education representatives the fact is that school children should be in classrooms being equipped for their futures - not out on the streets protesting. Parents and community leaders should ensure that children don't get dragged into these matters.

Yet, businesses are pressed continuously to promote black employees, often in preference of better qualified and experienced white co-workers. How can this be, if black schools are continuously allowed to sink further and further into the gutter? It all smacks of political expediency rather than a true commitment to empowering black South Africans. If you're serious about 'BEE' you need to empower black South Africans, first and foremost through dramatically improved school education, to compete.

The litmus test for BEE lies in abolishing affirmative action and then seeing whether you're doing enough for black school education to enable black children to naturally progress in big numbers into university and careers beyond. Blacks have the ability, as do any other race, to compete. They should be allowed to do so!

I didn't really have the stomach to wander into the above topic, but a talk by Moeletsi Mbeki (the brother of our infamous President...) got me fired up. While I've read about some of M Mbeki's opinions lately, I'm not able to vouch for his general positions, as they are mostly unknown to me. However, on this issue I think he's spot on. We need more (black) commentators who come out and address this important issue. I'm just hoping that enough do so to bring real change in BEE policies before my eldest child, born a decade after 1994 'democratic revolution', matriculates in about 2023... I'm not too hopeful though.

Below follows a report on Moeletsi Mbeki's talk as featured on News24.com:

'BEE no solution to poverty'
Johannesburg - Wealth redistribution is no solution to poverty, political analyst Moeletsi Mbeki told a conference on the world economy in Johannesburg on Tuesday.

"Redistribution can actually accentuate poverty and create social conflict," he said.

"I was one of the first to oppose Black Economic Empowerment (BEE), because if they're going to redistribute wealth, who is going to get what? Where are you going to get that wealth from?"

Broad Based BEE had only benefited top ANC leaders, Mbeki said.

"It benefits the people in power, but what about the poor? BEE is more of a problem than a solution."

He suggested that the government look at wealth creation rather than "fight the ghosts of the past. The ANC expends a lot of energy with BEE in an attempt to correct the past".

The only way to go bridge the gap between rich and poor was to sort out the education system and concentrate more on the development of small and medium businesses.

"BEE stops black from becoming entrepreneurs," Mbeki said.

"Black people are not necessarily against capitalism," he said, adding that it was only the model of capitalism that the apartheid National Party had promoted that blacks did not like.

He was however unsure if the ANC could market capitalism to the electorate.

"The ANC leaders are afraid of the unions - groups like Cosatu and the SACP - they think these groups deliver a huge constituency but they don't."

He said that the ANC had been "very good" at establishing a political system and the Constitution, but had not done well in economics.

"I never expected them to because they have never run a business."

He said that at least he and his brother, President Thabo Mbeki, had worked in the family's spaza shop as children.

"But when my brother gets kicked out as head of government, you won't have anyone there who has actually managed even a spaza shop."

Financial Mail - (ANC's) SOUL FOR SALE

The 19 January edition of the Financial Mail had an excellent feature dealing with the corruptive influence of relations between the African National Congress (ANC) and ANC-aligned business people (see link below). I'm afraid it's just another case of 'power corrupts', in this case it deals with the power to award state / municipal contracts.

I've previously referred to the encouraging rise of a black middle class in South Africa, helped along by Black Economic Empowerment (BEE). A corner stone of the latter is affirmative action. It is a necessary evil, which if managed poorly -as it often is- allows for the appointment of unqualified and inexperienced candidates. The pressure on companies to transform in a hurry, as well as dramatic staff changes (i.t.o. racial composition) in the civil service, have led to many such poor appointments. At its worst the incredible economic upward mobility of many affirmative action candidates has led to a culture of entitlement and crass materialism.

This culture of entitlement and materialism features strongly in the article below, although not necessarily described in those terms. Too many officials at national, provincial and municipal level seem to have adopted an ideology of the maximum-accumulation-of-wealth-at-any-cost. In its eagerness to advance BEE the top brass of both the government (cabinet and parliament) and the ANC seem to be reluctant to implement aggressive counter-corruption measures. In fact, most individuals on the ANC's National Executive Committee (NEC), cabinet ministers and their deputies have substantial business interests (personally or through their spouses), often in companies that deal with the state.

The article mentions instances where business people aligned to certain ANC officials have repeatedly won government contracts, with competing tender bids apparently locked out. Where municipalities have instituted 'independent' tender boards it has proven all too easy for politicians and officials to simply manipulate decisions by using proxies within those bodies.

In order to tackle our very serious crime problem in South Africa we need bold intervention on various levels. To my mind corruption in the civil service must be a top priority. Where financial benefit from political connections is not strictly illegal it should become so or be blocked by policy. However, many decision makers in government and the ANC probably has too much to lose.

One can only hope that the ANC's support base will in time become fed up with corruption and nepotism. In the long term I suspect that election shifts will be the most effective measure against corruption. That is, something similar to the recent US midterm election where voters punished the Republican Party not only for its conduct of the Iraq War, but also for corruption.

I'm not necessarily hoping that the ANC should be voted out of government, just sufficiently challenged for it to realise that it does not have carte blanche. As a government you ultimately have to answer to the citizens of your country - not your business buddies.

(Also see a recent posting by Mhambi: BAE and South African government corruption cuts deep)

Financial Mail - SOUL FOR SALE:

By Carol Paton

The African National Congress has traded ideals for influence as the party is corrupted by its members' lust for financial gain. The FM tracks the rot at the heart of SA's most powerful organisation.

It was a cool spring evening when an ambulance screeched to a halt outside the ANC's provincial office in Dutoitspan Road, Kimberley. Paramedics were rushing to the aid of the city's first citizen, mayor Patrick Lenyibi, who had been hit by flying teacups thrown during a brawl in the ANC offices. The first cup hit him on the head. The handle of a second lodged itself deep behind the ear after being smashed onto his head with greater force by a senior ANC member.

From several accounts, the fight, which took place in late 2005, was over a tender to supply coupons for pre paid electricity meters. The mayor is said to have implied that it would go to a group of ANC women, the member's mother included, who had already arranged to be trained to run the enterprise. But instead the tender was advertised, as it should have been, with conditions that cut his mother out of the running.

The blows were exchanged in the office of provincial secretary Neville Mompati, who strenuously denies that the argument was over a tender. Decisions over tenders should be made by neither the mayor nor the ANC but, according to the Municipal Finance Management Act, by officials in the city's tender committee. However, theory and practice are far apart.

Fights over who should get what contract are happening with growing frequency countrywide. It is a matter of embarrassment to the ANC, a party many members proudly think of in terms of its struggle legacy. That legacy is now being severely undermined, and the party seems paralysed.

The ANC, as the party in government, is centrally involved in dishing out tenders and contracts. The introduction of commercial interests is one factor that is undermining its proud political footing. Another is the "deployment" of ANC comrades to business.

This commercialisation has driven a profound change in the nature of the ANC. Once local ANC meetings were all about policies and strategies - the transformation of SA society according to the ideals the party championed for decades. Now these gatherings are frequently preoccupied with business opportunities and who should have access to them.

It's a transformation that wasn't expected. Rather than "transforming the state", as the party describes its goals in official rhetoric, the economy has transformed the ANC.

How did it begin? Trouble started for the ANC almost as soon as it took power, with squabbles over control of provincial structures. But it was only when politicians moved into the world of business that the competition for commercial opportunities began to dominate ANC dynamics. (For the complete article follow link above...)

Mboweni OK with his Afrikaners

A recent edition of the printed FIN WEEK publication caught my attention. Tito Mboweni, ANC member and Governor of the South African Reserve Bank, graces the front page. The portrait photo of him is in photo-comic-book style. A text cloud emanating from his mouth contains the following words: "I'm OK with my Afrikaners. They stay and do the work, and become experts".

I'm sure the words was spoken in a humoristic fashion, but it remains an incredibly bold and non-PC statement all the same. Tito Mboweni was known for cold factual analysis well before he entered the all important Governor position that he's held for a couple of years now. His statement on Afrikaners is one that is sure to draw criticism from the ANC's left wing.

As the FIN Week article, below, points out statements like that uttered by a white South African will very likely be labeled as racist. Hopefully Mboweni will not be the last black intellectual to venture a brave opinion on this matter.

As a white Afrikaans male I very much appreciate his statement, even though it was phrased rather paternalistic. I entered the formal job market in 1994. Within a year or two the first black colleagues was appointed in our then Lilly white department. It was obviously long overdue. What was immediately apparent though, was that a very high turnover was going to be a feature of black appointees. Not only were they appointed at senior salary level, even though most had no relevant experience in the (marketing & PR) field, they did not stay long. I remember my silent astonishment when a black colleague left the department for a three-fold salary increase plus perks such as a luxury Audi. She spent less than a year in our department and had not yet had a chance to make any impact, let alone gain any meaningful experience.

If we did not have 40 years of formal Apartheid and 300 years of colonialism before that things may of course have been different. All the same, affirmative action is a necessary evil at best. It is something that most South African whites grudgingly accepted. But 10 years down the line serious misgivings about the continuation of affirmative action is starting to arise. I attended a seminar earlier in the week where a very dynamic coloured (mixed racial descendancy) speaker said in so many words that BEE (Black Economic Empowerment) is doomed to fail. His argument is not unique. The core thereof is that dividing the economic pie, if the pie stays the same size, will only cause everyone to loose. What you need is to grow the pie.

Of course making sure that an larger pie is fairly distributed will require at least limited government intervention. History has shown clearly that pure capitalism mostly favours the 'have's' and does little for the 'have not's'. The ideal is that this intervention is achieved through taxation, not social engineering. However, the ruling African National Congress (ANC) is under ever increasing pressure to deliver benefits to the poor masses.

One of the real tragedies of affirmative action is that the white population has shrunk by approximately. 800 000. Some sources put the figure at 1 million. That's from a population of approx. 6 million, a massive decrease. This decrease has been primarily driven by the 'brain drain'. Skilled whites who are pessimistic about their professional future in South Africa do as many other skilled individuals from across the world do in a globalised world, they go where they are appreciated. That is where they can obtain a challenging position on merit and receive the financial and other benefits associated with the particular position.

In South Africa the same person will often have to silently accept being passed over for promotion or appointment, in order for a black candidate to move up the ladder. Truth be told, white males over 50 were often already in senior positions at the time Apartheid ended. They may be frustrated at not being able to progress further while affirmative actions propels black candidates to the top. But they could have been stuck at the entry level where many 20-35 year old whites find themselves. Not surprisingly the majority of whites who have emigrated fall in this age bracket.

Another very interesting statistic is that 1 of 4 white males are now self-employed. That's a whopping 25% or a 4% increase in just 5 years. In the Apartheid South Africa in which I grew up only a very small number of whites were self-employed. Afrikaners were often referred to as the staatsdiens nasie ('government service nation'). These days if you attend a trade fair or see a group of business men (still mostly men) huddled around a coffee shop table, chances are fairly good that they're speaking Afrikaans. Compared to just ten years ago that's a truly surrealistic image - but it's very much reality today.

The positive angle of this is that Afrikaners (and English whites) are forced to apply their privileged education obtained under segregated Apartheid to start and build small enterprises. In the process jobs are created. I'm one of those newly converted entrepreneurs. However, the world of self-employment can be scary and shaky. Gone are the government house subsidies, medical aid, study allowances, unemployment insurance, etc... You're on your own boykie. By the way, if you make a success from all your sacrifice and 100 hour weeks the government will reward you by slapping taxing BEE requirements on your business - the irony...

Whichever way you look at it, loosing almost a million mostly highly skilled workers is something South Africa can ill afford. Sooner or later the ruling party will have to face the unpopular fact that making things uncomfortable for your most skilled citizens are going to cost you in the long run.

Many mostly black commentators bristle at the above debate. They retort that black South Africans can take up the slack, surely blacks aren't inferior or unable to perform as well as whites? If we haven't lived with colonialism and Apartheid for as long as we have that simplistic argument would have been very legitimate. However, the fact is that the majority of black South Africans, non-withstanding their equal potential, has lamented in pathetic schools and socio-economic conditions. The sad truth is that the majority of black citizens has simply not had the opportunity to develop their potential to the degree that they can make a meaningful contribution in the sphere of highly skilled workers. To disregard this is to bury your head in the sand. Worse, while privileged black kids now enjoy quality education in formerly whites-only schools, the majority of black kids still suffer incredibly poor education. Sooner or later the current government will have to start owing up to that, never mind how huge the challenge Apartheid and colonialism left it.

So what's the solution? I believe it lies in courageous bold leadership. The kind of leadership that will acknowledge that non-withstanding the sins of their fathers, whites who choose to stay in South Africa (very few don't want to) have a very valuable contribution to make to the welfare of the country. Downscale affirmative action, focus more on merit in appointments, BEEF UP EDUCATION and be patient. We need to grow that economic pie, at present it's way to small for 45 million people to share. The pie is only going to grow if nurtured, disregard the laws of intellectual capital and you risk making the future worse. The ANC's motto since the 1994 election has been 'A better life for all', indeed a noble cause. Social engineering could result in 'A worse life for all'...

I concede that it is probably too early to adopt a totally colour blind approach to fighting poverty in South Africa, thanks to our Apartheid past. But wouldn't it be nice if policies addressed poor, middle-class and wealthy South Africans - irrespective of race? Instead we're still stuck in racially based policies that provide or withhold opportunities based purely on race. Sooner or later that has got to change.

FIN24 : Empowering Financial Decisions: "Johannesburg - Any white male - more so if he's an Afrikaner - who says anything about affirmative action is now quickly relegated to being irrelevant, writes Finweek Editor Rikus Delport in this week's edition.

He writes: 'If you're someone who belonged to a previously privileged class your views don't count in the current debate.

'However, it's different if someone like the Governor of the SA Reserve Bank, a former Labour Minister and a respected figure in ANC circles, vents his views,
especially if he says something positive about whites in the workplace and -
believe it or not - about Afrikaners in particular.

'And that's precisely what happened when Governor Tito Mboweni spoke recently at a breakfast session in Johannesburg. When describing the dilemma the Bank is facing - black people who seek greener pastures shortly after being appointed and trained, his words were: 'I get so upset... I'm stopping this recruitment of black people. I'm okay with my Afrikaners. They stay and do the work and become experts.'

Must learn from experts
'However, what Mboweni said - probably in a joking and light-hearted manner - is what every company is experiencing but is afraid to say, and what blacks - with the exception of a few, such as Mboweni - aren't prepared to admit. Especially not in government circles. 'And that's to the detriment of SA's economy and empowerment. Because how can you empower a person if he can't learn from experts? And due to their previously privileged positions, it's the whites who have that expertise.'

Delport concedes that under the current government, SA has experienced unprecedented economic growth. And it's been said repeatedly that the economy has probably never been managed aas well as since 1994. "However, unless it's accepted that if all SA's people aren't set to work properly and don't use their skills correctly, then we won't reach the above-average growth levels government has targeted.
"To achieve that will necessarily mean that there must be equal opportunities for
all, that the unhealthy trend of putting people in positions just because they
belong to the right racial group or political party will have to stop and that skills must count above all else."

Time to drop the race issue
He says it's disturbing to learn that research shows that nearly 1m people, many of them experts, have left SA over the past 10 years - mainly due to affirmative action
and crime. "Especially if you remember that many of them had the potential to make a contribution to our economy and also create jobs." Delport points out that SA's current unemployment figure shows encouraging signs that the battle against that evil is slowly but surely being won.

"But it isn't happening fast enough, and politicians in particular should realise that people are becoming impatient at the slow progress. So why not use the expertise that we have at home to promote government's own aims?

"What Mboweni said is by implication applicable to most whites and not just Afrikaners: they're committed to the success of SA and they're prepared to work hard, even if opportunities for promotion are limited. But hasn't the time come for us to drop the race question?" "