Black economic empowerment: Elite enrichment or real transformation?
Frank Meintjies (Part 1)
Black
economic empowerment (BEE) has had mixed results, with very little
being achieved in terms of changing the structures of ownership
and control within the economy. Yet, BEE is a relevant and necessary
process. To take the debate forward, there needs to be greater
clarity regarding what is being referred to as BEE and how government
seeks to promote and support BEE.
Part
1 of this article outlines the key forces in shaping BEE in South
Africa and gives a brief historical background to the notion of
BEE, which has culminated in the Broad Based Black Economic Empowerment
Act of 2003. In Part 2 (which will be published in the next issue
of Isandla Development Communiqué), attention will be given
to the various poles and positions in the debate on BEE. The article
will conclude by summarising a number of key challenges related
to BEE.
Setting
the scene
BEE refers to measures, actions or programmatic steps geared to
enable meaningful participation of black people in the economic
mainstream. It is a response to our particular reality born of
racial capitalism, the fusion of apartheid with the capitalist
system.
A
variety of indicators show that white households are economically
dominant and that the white business environment remains stubbornly
white. Black people occupy only a minority of the positions of
power and influence in the economy - they manage in and own only
a miniscule number of companies. More starkly, the majority of
black people falls within categories below the poverty line or
within what may be termed the strata of economic survival. They
are thus largely victims of decision-making in the economic arena,
whether these be decisions by individuals, institutions or companies.
This reality forms a compelling base upon which arguments in favour
of BEE are made.
Interestingly,
the key forces in BEE are not educated and skilled black South
Africans, nor black entrepreneurs, nor the prominent political
activists who have chosen to further their careers and ideals
in the private sector. Politically connected and prominent individuals
may think otherwise, but the deals they shape take place within
frameworks that are already defined by larger forces. The main
drivers of the shape and form of BEE are, in different ways, government
and white businesses.
Government,
on the one hand, has expressed its concern about the economy in
terms of its thesis of two economies – one globally competitive,
advanced and home to a minority, and the other populated by the
marginalised, the unemployed and unemployable. Government has
acknowledged that the second economy could “fall even further
behind without decisive government intervention”. Government’s
renewed vigour to transform ownership and control in key sectors
of the economy can also be linked to its stated position that
the least gains made in the last 10 years have been in those areas
where it has lacked control. Government is shaping BEE through
its policies, backed up with government resources and certain
financing mechanisms.
On
the other hand, the reasons industrialists and commercial interests
have for pursuing BEE are different, yet complementary, to those
of government. At one level, they are responding to a concern
about the credibility of capitalism, which they realise is linked
to reducing racially defined class differentiation and inequality.
This legitimacy of capitalism in the eyes of black people and
black policymakers is viewed as critically important for sustaining
their long term business interests. At another level, business
interests are responding to government’s policy and procurement
system which favours companies that are empowered or have undertaken
empowerment – i.e. those that have greater black ownership
and contribute to other affirmative measures.
The
private sector’s influence on BEE prefigures particular
deals. They select their partners, they are constrained by their
shareholders’ interests and concerns and they are involved
in arranging the financing structures. In particular, the more
short-term view of top management embarking on BEE – where
they simply want to dispose of their empowerment obligations even
if it means accessing several individuals promoted by the media
– explains much about the definition of BEE.
Redistribution
and change: BEE versus economic empowerment ‘at the base’
In this article, BEE is distinguished from economic empowerment
that takes place through social change, through government’s
interventions in housing, education and other social programmes
– or, if you like, through the social thrusts of the Reconstruction
and Development Programme. Such changes are relevant, however,
to economic empowerment because they can help move black people
from poverty to survival or from mere survival to higher levels
of livelihood prospects. In this sense, effective social delivery
forms a base for enabling greater participation of people in the
economy. We can refer to this approach as focusing on redistribution
of resources at the base.
Here,
I focus much more on BEE in terms of redistribution of resources
at the apex and other upper levels of the economy. To some extent,
BEE is about black people in business and about increased clout
of black business and black businesspersons in the economy. Of
course, the way BEE has been practised and pursued has meant a
focus on the formal economy and on the major enterprises within
economy, while scant attention (within the framework of BEE discourse)
has been paid to emerging, small and micro enterprises. Therefore,
I also do not discuss efforts to support small and medium enterprises
as part of BEE.
It
is important not to conflate the two levels of redistribution
and change. Although the two levels are linked, redistribution
at the apex raises possibilities of redistribution of power in
the economy in the short term, while redistribution of resources
at the base seeks to lay a foundation for potential longer term
changes in power relations.
Furthermore,
it should be noted that there is much to analyse about the way
in which government, black persons with political power and some
capacity for economic intervention, and the private sector are
approaching redistribution – or attempted deracialisation
of economic power – at these higher levels.
BEE,
which focuses on direct and immediate change in economic control
(ownership and management of major enterprises), may be further
disaggregated to distinguish between narrow and broad-based empowerment.
The former focuses on a few high profile individuals. These individuals
have two things in common – they are politically connected
and become millionaires “overnight”. Broad-based BEE
is a term coined by government, in large part as a reaction to
the kinds of empowerment that has been defined as “enrichment”
of a few individuals. Broad-based empowerment may refer to a process
to encourage more black persons to become owners of shares when
companies change their ownership structure to reflect empowerment
requirements. It also denotes a focus on other areas of performance
in addition to ownership change: employment equity, skills development,
procurement and management control. Broad-based BEE would seek
to ensure significantly progress in all these areas and thereby
speed up the process of improving the position of black people
in the economy.
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Figure
1 |
The
diagrammatic representation in Figure 1 may be useful in clarifying
what it is we are debating when we discuss BEE in the SA context.
Figure 1, which is an adaptation of a “model” produced
by Empowerdex, locates BEE within socio-economic categories. The
term “capability” is based on the work of development
economist Amartya Sen and refers to the capacity of people to
make choices about their lives and lead their own economic and
social development. It is adapted here to refer to a situation
where people have some resources and some choices as well as some
possibility of using these resources to strengthen their economic
position in society. Competence refers to “being able to
look after oneself and one’s family and to contribute to
society”.
While
the Empowerdex used its model to focus on the fact that “to
counter the resistance and ceilings at each level, the government
and the private sector need to implement both economic and socio-economic
drivers to promote the graduation of Previously Disadvantaged
Individuals into the different stages of economic growth and development”,
I use this diagram to indicate that BEE as currently promoted
relates to focused interventions in transforming the A category
above. Such transformation must be undertaken in a way that supports,
enables and facilitates positive economic empowerment of disempowered
citizens in categories B and, to some extent, category C. In other
words, we must plan and strategise for deracialisation in category
A so that it takes place in a manner that simultaneously contributes
to a reduction in (rather than consolidation of) economic polarisation
and inequality in our society.
Theoretical
justifications for BEE
It would be interesting to trace the theoretical roots of black
empowerment, but that will require further research. There are
some links to work on affirmative action, including to the ways
in which affirmative action has been advanced in countries such
as Malaysia and in the United States of America. There may be
links with black consciousness, although an initial scan revealed
very little explicit theorising of BEE and as little consideration
of strategies black persons can adopt to rapidly penetrate the
private sector, let alone how they might operate within that sector
in a way that supports wider transformation.
Regardless
of how BEE may be theorised and justified, COSATU and the Communist
Party reject the idea of BEE. Instead, they prefer concepts such
as transformation and, especially in the case of the SACP, “building
people’s power in the economy” and society as a whole.
Blade Nzimande has suggested that BEE is more relevant to a society
in which black people are the minority (i.e. the USA). COSATU
and the SACP are much more concerned with redistribution of resources
at the base, although from time to time they make specific recommendations
about BEE.
Some
of the exponents of BEE merely see themselves as playing a role
within capitalism. They argue for a distinction between on the
one hand broader socio-economic development of black people -
which they argue is the problem of government and society as a
whole - and on the other hand measures to support black business
development in the economy.
However,
many of the prominent “comrades” who become partakers
in BEE appear to enter the business world motivated by first by
personal need and only theorise after the fact, when pressed to
do so. Such persons appear to take part in BEE because they have
reached a ceiling in their career progression in the public sphere
(rather than out of a burning need to help transform the economic
structure of our society). The business arena is for many a logical
next step – because they can build on the contacts they
made while in government – and for many reasons seems to
be more attractive than a transition to the not-for-profit sector
locally or to international development bodies such as the United
Nations. The most common transition strategy is to enter as quietly
as possible, usually via a big empowerment-related business opportunity,
to remain out of the public eye and to reap business success –
an explanation of their role in the business world comes much
later, and often in response to pressure for an explanation of
one’s role.
BEE
in historical context
Many of the practices of black economic advancement can be traced
back to the period immediately following the June 1976 uprising.
In that period, the apartheid government created a relatively
more conducive environment for some form of black advancement
by promoting the idea of creating a black middle class. Linked
to this were initiatives by US companies, in a bid to justify
continued involvement in South Africa, to follow a programme of
black advancement. This advancement focused not on ownership but
on training and promoting black people for management positions
in multinational firms. At this time the Sullaven Code, which
sets out guidelines for US companies wanting to remain in South
Africa, became popularised and was adopted by many companies.
Actively
dealing with racism and counteracting the impact of instutionalised
racism in South Africa did not seem to be a pressing concern for
the new South African government after 1994. Although the new
Constitution took a clear stand on race (upholding notions of
equality and making provision for affirmative measures), government
in its early years translated this into practice mainly through
the repeal of discriminatory laws. It would take some time before
measures would be put in place to encourage and foster non-racial
or even anti-racist behaviour.
It
was not until 1998 that the Employment Equity Act was passed.
In passing this law, government noted that “disparities
(caused by apartheid) create such pronounced disadvantages for
certain categories of people that they cannot be simply addressed
by repealing discriminatory laws.”
The
Black Management Forum (BMF) argues that it has played a key role
in the formulation of affirmative action measures in South Africa,
including employment equity policy. It is sometimes argued that
while deracialising the upper reaches of the economy was on the
back burner, organisations such as the BMF stood alone in agitating
that this issue be addressed through government policy and programmes.
The idea of a BEE Commission arose directly from a resolution
of the BMF in November 1997 as a quest to ensure that black people
“take charge of a new vision for black economic empowerment”.
In
its 2001 report, the BEE Commission viewed Black Economic Empowerment
first in its broadest sense – as an integrated and coherent
socio-economic process located within the RDP. It said this empowerment
includes job creation, rural development, urban renewal, poverty
alleviation education and so on. It also took a narrower view:
the aim of BEE was to ensure “the equitable transfer of
and to confer ownership and control of the financial and economic
resources” to the majority. However, the commission made
wide ranging recommendations, including a call for measures to
growth the economy, a legislative framework, national targets
and the idea of a structure to oversee BEE. It also called for
measures to combat perceived discrimination by financial institutions
and for government to use its resources in a more deliberate manner
to finance BEE transactions. These recommendations have been instrumental
in shaping the recent Broad Based Black Economic Empowerment Act.
Before
this Act was passed in 2003, the South African government did
implement certain measures to reverse the economic legacies of
the past. Measures in the areas of procurement, licensing and
financing and geared to support the development of black business
have been put in place in order to accelerate the BEE process.
However, in the absence of a comprehensive framework to implement
these measures across all organs of State, the effectiveness of
the measures is hampered. The government has recognised these
limitations and has taken the recommendations of the BEE Commission
into account in drafting a legislative framework as a step towards
a more integrated strategy.
The
Broad Based Black Economic Empowerment Act is an important milestone
in that it provides the legal basis for government to begin directing,
in a more conscious and consistent way, deracialisation of the
economy. Despite its name, it is however not clear what aspects
of the Act make it broad-based, except perhaps through its focus
on more dimensions than just ownership – on for example
management, human resources and skills development, employment
equity, procurement and “investment in enterprises owned
by black people”.
In
other words, it is not clear that because the Act exists it will
be prohibitively difficult to continue forging black empowerment
deals that focus on a “small select, community of the best
placed, best informed and best favoured to hijack” the black
empowerment process. Although the objective of the Act refers
to women, co-operatives, workers, there are no provisions in the
Act targeting such groups; any measures focusing to increase their
involvement in BEE will depend on codes of practice and guidelines
that the Minister of Trade and Industry may issue in terms of
the Act.
Part
2 follows in Isandla Development Communiqué no 10.
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