BEE: Limited benefits, widespread harm – Anthea Jeffery

Key topics.142 race-based laws remain, but many are unenforceable or outdated.Race-based BEE policies benefit a small elite, worsening inequality.South Africa needs a race-neutral empowerment policy for broader impact..Sign up for your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 at 5:30am 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..By Anthea Jeffery*.The IRR has recently been criticised for developing an Index of Race Law listing 317 racial Acts of Parliament adopted since Union in 1910..Most of these statutes have been repealed, but 142 remain on the Statute Book. Of these, a tiny proportion of pre-1994 laws are unenforceable, while 117 have been enacted since the African National Congress (ANC) took power..These laws implicitly require that South Africans be classified by race and treated differently on the basis of their race..Professor Christi van der Westhuizen, head of the Centre for the Advancement of Non-Racialism and Democracy, says that calling these statutes "race laws" suggests a "reactionary white right agenda" that seeks to "cast aspersions over attempts to correct imbalances inherited from the past"..Professor Pierre de Vos, head of the Department of Public Law at the University of Cape Town, dismisses the list as little more than "a publicity gimmick" as it fails to explain whether a law that "mentions race … does good things or bad things, whether it's justified or not"..Both brush over the fact that there is currently no legislation setting out what physical or other markers (the pencil test, perhaps?) are to be used in classifying South Africans into the apartheid-era categories of black, white, coloured and Indian..Nor do they explain what processes are to be followed in making this determination. Or what criteria the courts should use in deciding appeals against the many thousands of erroneous classification decisions likely to be made each year..History is relevant here. In the first seven years after race classification was made mandatory in the apartheid period, approximately 100,000 classification decisions were identified as "borderline cases" and had to be referred to the Director of Census and Statistics for review and possible revision. Various appeals also had to be put before the Supreme Court for adjudication..At that time, classification criteria and processes were set out in the Population Registration Act of 1950. Since race classification was generally regarded as intrinsically odious, this statute was widely condemned across the country and the world. It was repealed by the National Party in 1991, close on 35 years ago, and has never been replaced by the ANC..Read more: EWC, BEE setting up Godongwana and GNU for failure – IRR.South African law is now silent as to how race classification is to be carried out – or adjusted where its accuracy is contested. Both Van der Westhuizen and De Vos are nevertheless adamant that race-based laws remain essential..Both assert that, because previous discrimination was based on race, redress for that discrimination must also be based on race. According to Van der Westhuizen, since race was earlier used, "we have to use race today … to specifically aim for the correction of imbalances". De Vos notes that economic status is relevant too, but adds that "racism and systemic racism do[n't] stop because you happen not to be poor"..These arguments emanate from the essentially Marxist ideology of "critical race theory" (CRT). This assumes that whites are always "privileged" and that blacks are always their "oppressed" (and helpless) victims. CRT crudely stereotypes both whites and blacks, brushing aside their individual circumstances and disregarding how much wealth and power many black "victims" might in fact have attained. It also claims that the ultimate solution to systemic domination is a revolution in which the oppressed rise up and put an end to the existing order..Both professors further assume that race-based measures are effective in helping the people most in need of redress: the roughly 11 million black South Africans who are unemployed (on a broad definition) and often poorly schooled, under-skilled, and destitute..In practice, however, race-based black economic empowerment (BEE) rules benefit only a small black elite: generally those with the best skills and/or political connections. By contrast, the most disadvantaged black people have little prospect of ever obtaining the management posts, ownership stakes or preferential procurement contracts that the race-based system makes available to the black elite..Worse still, BEE requirements actively harm the black majority by eroding efficiency, deterring investment, reducing growth, and adding to the unemployment crisis. Race-based rules have thus exacerbated inequality, which is now often greater within the black population than it is between whites and blacks. This largely explains why the country's Gini co-efficient has risen from 59 in 1994 to 63 in 2022..Some of the ANC's most senior leaders have acknowledged that BEE helps only the few while harming the many. In the run-up to the May 2019 general election, the late Pravin Gordhan, then public enterprises minister, said that both he and President Cyril Ramaphosa were agreed on the "urgent" need for "a new model for BEE" that would benefit a broader group of black South Africans..In 2010 Mr Gordhan, then finance minister, admitted that "BEE policies had not made South Africa a fairer and more prosperous country. They had led to small elite group benefiting, and that was not good enough"..In 2012 the National Planning Commission echoed this concern, saying "empowerment [had] to be about more than changing the colour of a narrow elite". In 2016 Mathews Phosa, a former ANC treasurer general, noted that BEE had empowered "a handful of people" at the expense of most South Africans..In 2017 the South African Communist Party (SACP) warned that the "intra-African inequality" that BEE had fostered was "the main contributor to South Africa's extraordinarily high Gini coefficient" of income inequality. Added the party: "Enriching a select BEE few via share deals…or (worse still) looting public property…in the name of broad-based black empowerment is resulting in….increasing poverty for the majority, increasing racial inequality, and persisting mass unemployment.".Others have made much the same point. In 2019 Professor William Gumede of Wits University urged an end to the race-based system, saying "the current BEE model, which enriches a few politically connected political capitalists, should immediately be abolished". He recommended that "rich blacks should be treated the same way as rich whites: as advantaged". BEE interventions should be based on socio-economic disadvantage "rather than colour", as "blacks would automatically be the largest beneficiaries" in any event..The Constitution requires this too, for race-based BEE conflicts with many clauses in the Constitution. The racial targets it imposes cannot be met without the continued use of apartheid-era race classifications and the preferencing of black South Africans over their white, coloured, and Indian counterparts. Yet this is prima facie inconsistent with the Constitution's founding value of "non-racialism", as well as its express prohibition of unfair racial discrimination by both the state and private persons..Many commentators have long assumed that BEE is implicitly authorised by Section 9(2) of the Constitution, which allows the taking of "legislative…measures designed to…advance [those] disadvantaged by unfair discrimination" and "promote the achievement of equality". However, as the Constitutional Court ruled in the Van Heerden case in 2004, race-based remedial measures are valid only if they satisfy three tests: they must (1) target the disadvantaged, (2) help advance them, and (3) promote equality..Read more: Will South Africa ever ditch race-based politics?.The Constitutional Court has never properly applied these tests in adjudicating on BEE requirements. Were it to do so, however, BEE rules would fail on all three grounds. First, BEE does not target the disadvantaged, for it helps only a relative elite (the most advantaged 15% within the black population) and not the great majority of poor black people. Second, BEE has failed to "advance" the black majority, which has instead been greatly harmed by it in all the ways earlier outlined. Third, BEE has failed to "achieve equality", for it has helped to raise the Gini coefficient to levels higher than in the apartheid period..Given the many failures and evident unconstitutionality of BEE, South Africa urgently needs an alternative empowerment policy. What is required is a race-neutral approach that reaches right down to the grassroots and is effective in helping millions of poor South Africans to get ahead..The IRR has for many years been developing an alternative to BEE, which it calls Economic Empowerment for the Disadvantaged or EED. An EED strategy would have three core features: a non-racial focus in keeping with the Constitution; a scorecard that recognises and rewards key business contributions to investment, growth, employment, and upward mobility; and a tax-funded voucher element that directly empowers the poor and helps them meet their core needs for sound education, housing, and healthcare..If the aim is truly to "correct imbalances inherited from the past", as Professor van der Westhuizen says, then race-based BEE must swiftly be jettisoned and non-racial EED embraced in its stead..Read also:.Dave Steward (pt. 2): SA's demographic policies – A threat to minority rights and equal opportunitySA's BEE Policies: Temporary measures turned permanent failures – Daniël EloffANC's betrayal: From liberation to inequality – the soaring wealth gap in South Africa: Andrew Kenny.*Dr Anthea Jeffery holds law degrees from Wits, Cambridge and London universities, and is the Head of Policy Research at the IRR. .This article was first published by DailyFriend and is republished with permission.

BEE: Limited benefits, widespread harm – Anthea Jeffery

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