Why BEE's defenders have it 180 degrees wrong

Thabo Mbeki says that if BEE changes, South Africa faces revolution. The Minister in the Presidency says the policy will never change. The President says apartheid can never be forgotten. All three were responding to Washington's request to exempt American firms. The Common Sense says each of them is 180 degrees wrong. Had the economy grown like top-end emerging markets since 2008, poverty would be half today's level. Growth is the only route to empowerment, yet empowerment policy chokes the investment that growth needs. The fix? Stop taxing capital. Award empowerment points for jobs, investment, tax and exports. The revolution Mbeki fears? It's already here..This article was first published by The Common Sense.From The Common Sense.It has been a furious week for empowerment policy. In a fit of pique Thabo Mbeki warned that if South Africa’s empowerment policies are amended the country will collapse into revolution. The Minister in the Presidency has suggested the same in a briefing, following a recent Cabinet meeting, insisting that South Africa is sovereign and that its empowerment policies will never change. The president is himself going around saying that apartheid can never be forgotten and that for this reason empowerment policy cannot be changed. All this has been occasioned by the Americans asking that South Africa’s government exempts American firms from black economic empowerment and related regulations.Each of the three is precisely 180 degrees wrong.It is to avoid a violent revolution that the policies must be amended. And it is because South Africa is sovereign, and surely wishes to remain so, that it has the power and the interest to amend the policies. And it is further because apartheid will obviously never be forgotten (an absurd notion, which no person has contemplated) that the policy must be amended so that the country’s history can finally be properly addressed.How to do this?Yesterday this newspaper ran a fascinating report in which it estimated that, had the economy grown at the rate of top-end emerging markets since 2008, then levels of poverty in the country would today be half of what they are. Per capita GDP would be almost twice as high. This newspaper has also, separately, previously shown that the unemployment rate would be around half of what it is.Growth therefore is the answer and, as the Beatles song goes, “We know that for sure.” But South Africa is in a fatal bind because while growth is the only route to empowerment, empowerment polices undermine the investment that is required to generate growth.How to fix that?Nothing needs to be abandoned or forgotten. The solution is much simpler and more nuanced. Just stop taxing capital and instead allow firms to win empowerment points for jobs created and maintained, fixed investment contributed to South Africa, tax payments, and their contribution to exports. Beyond that, firms win additional points for investment in schools, bursaries, start-up entrepreneurs, and community support projects.The risk of violent revolution only arises from the failure to raise the investment and growth rates. And in any event that revolution is not some future prospect – it is well in train, as Thabo Mbeki, of all people, should be the first to know, because it has already taken him down, and it will take down Cyril Ramaphosa too, and the African National Congress (ANC) after that (which is currently polling at 35%). And this is not a new warning – it was put to Mbeki in mid-2007 and to the ANC in 2012! The warning has become the reality not because empowerment policy was amended but because it was not. You’ve all got it the wrong way around – this thing is taking you down. The apt thing to say is, “Ask not for whom the revolution bays, gentlemen and lady, it bays for you.”.Read more:.Growth, not redistribution, key to reducing global inequality: Katzenellenbogen.What happens after that is hard to say but most likely South Africa just balkanises and the middle classes hold out well enough in their enclaves through periods of occasional unrest, which is only to say that the status quo of the past 400 years continues. And if it gets too hot many in the middle classes will simply emigrate..This article was first published by The Common Sense and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

Why BEE's defenders have it 180 degrees wrong

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