Dave Steward: How to achieve equality - A response to Daryl Swanepoel

Key topics:How SA’s inequality divide has shifted from race to a class split driven by unemployment and policy failuresThe role of the ANC’s NDR, demographic representivity, and RET in entrenching racial targetsWhy economic growth—not race-based policy—is the real pathway to reducing inequalitySign 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 Dave Steward.Daryl Swanepoel’s article - in response to Flip Buys’s views on equality and freedom – does not consider the changes that were already taking place in South Africa during the 1980s and does not provide an accurate picture of the nature and causes of inequality in South Africa now. Neither does it take into account the racial goals of the ANC’s National Democratic Revolution (NDR). Rapid economic growth during the 1960s and early 1970s was already beginning to erode the foundations of apartheid. The Black (Black, Coloured and Indian) share of personal income increased from 28% in 1970 to 51.5% by 1993. The Black share of social spending increased from 43% in 1970 to 65% in 1987. More significantly, the percentage of black matriculants rose from 35.4% in 1980 to 79% in 1993. By 1994, whites comprised only 41.4% of all university enrollments. These statistics still reflected substantial per capita advantages for white South Africans – but the direction of travel was clear - and it was factors such as these that led inexorably to the end of apartheid. So, it was not the simplistic “black and white” caricature presented by Swanepoel.He also presents a caricature of inequality in South Africa today. Almost 32 years after 1994 he still views white South Africans as the beneficiaries of undeserved privilege inherited from apartheid – and implies that that they are the prime cause of continuing inequality. In fact, virtually all white South Africans’ income is derived from their disproportional contribution to the economy. They now comprise only 7,2% of the population but contribute an estimated 30% of state revenue. They cost the state very little: they now receive only 3% of social benefits compared with 35% in 1987. Their relative advantage is due to generational participation in business and economic activity, higher levels of education, and strong family structures.Swanepoel appears to be unaware that South Africa’s equality profile has changed dramatically since 1994.A 2017 study of the racial distribution of wealth in South Africa by Zizzama et al identified five economic classes: a 4,9% elite group (65,4% white); a 22,4% middle class (20,5% white); a 19,4% vulnerable middle class (0,1% white); an 11% transient class (1,6% white); and a 42% chronic poor class (0% white). (Since 2017 the elite and middle-class percentages will almost certainly have changed to the benefit of black South Africans.) The principal equality cleavage is no longer between black and white South Africans – but between the fortunate 28% in the multiracial middle and elite classes – which is only 28,5% white - and the 42% (approximating closely the broader unemployment level) who are chronically poor and black. The black GINI coefficient (measure of inequality) is now .65 - almost as high as the national GINI coefficient of .68. Chronic poverty can no longer be ascribed only to the legacy of the past. It is closely linked to chronic unemployment. In 1993, broader unemployment was 31%. By the end of 2007 it had dropped to 29%. Since the victory of the Zuma/SACP/Cosatu “coalition of the wounded” at the ANC’s 2007 Polokwane conference it has risen to 42% - primarily because of the launching of the second phase of the NDR and the implementation of Radical Economic Transformation (RET). Since then population growth has exceeded economic growth and per capita income has fallen. Swanepoel does not take into account the explicitly racial agenda of the NDR.The NDR’s main objective is “the attainment of political and economic freedom for the oppressed – Africans in particular and blacks in general...” It also seeks to end what the SACP calls “Colonialism of a Special Type (CST)” in terms of which white wealth arose solely from the repression of black South Africans under colonialism and apartheid. The NDR’s core goal is to redress this grievance by means of Radical Economic Transformation (RET) which is defined as a “fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female ...”The NDR’s final goal is the establishment of a National Democratic Society in which South Africa’s constituent races will be represented at all levels of ownership, control and employment in all sectors of society in proportion to their share of the population. Demographic representivity (DR) is the fountainhead of all the ANC’s racial policies. It is the most frequently cited requirement in the 122 racial laws that have been adopted since 1994 and includes Broad-Based Black Economic Empowerment, Employment Equity Act racial quotas and the proposed expropriation of white-owned property without compensation. In 2014, then Deputy President Cyril Ramaphosa insisted that “race will remain an issue until all echelons of our society are demographically representative.”In terms of DR the economic space in which minorities will be allowed to operate will be progressively restricted to their proportional demographic pens - irrespective of their qualifications, merit and hard work. These pens will progressively diminish as the shares of minorities in the total population decline. In 1994 the white population was 5 244 000 - 11,9% of the total. By 2025 it had declined to 4 497 000 - 7,1% of the total - which means that, in terms of NDR reasoning, whites are now entitled to only 60% of the property, jobs and land that they could have claimed in 1994 – simply because their share of population has shrunk!The prospects for the future are bleak: although whites comprise almost 40% of the population over the age of 80, their share of the population below the age of 5 is only 2,9%. The Indian community faces a similar challenge: They now comprise 2,6% of the population, but only 1,5% of the children below the age of 5. White and Indian demographics could be seriously impacted by increasing levels of emigration. At least 800 000 whites have emigrated since 1994 – taking with them critical skills, potential wealth creation and their substantial contribution to national revenue.To achieve DR “in all echelons of our society” the white share of the top 4,9% elite income group would have to be reduced from 1,8 million to 200 000. Their share of the 22,4% middle class would diminish from 2.59 million to 1 million. More than 100 000 Indians would have to leave the elite class and 240 000 would exit the middle class. These supernumary South Africans and their children would have little option but to emigrate – thus further reducing the demographic shares of their communities. The froggies would have to jump out of the pot - taking with them their skills, experience and enormous contribution to the economy and to national revenue.Is this really the way to promote economic equality?President Ramaphosa insists that it is. He says that BBBEE transformation is essential to promote equality and economic growth. This is clearly wrong. Under President Mandela the economy grew at an average rate of 2,7% - and under President Mbeki’s more orthodox GEAR policies it averaged almost 4% - peaking at 5%+ between 2005 and 2007. Following the introduction of RET – between 2014 and 2024 – it has averaged only .76% - compared to an annual population growth during this period of 1,3%. President Ramaphosa should be well aware of all this because for nearly all this period he was Deputy President or President.Neither is it true that BBBEE has addressed inequality. It has certainly benefited the 19% of blacks in the Elite and Middle-Class groups, but it has done little or nothing for black South Africans in the lower echelons of the economy - and particularly not for the 42% chronic poor. The remedy for inequality is economic growth. Had the ANC maintained the 5%+ growth rates that it achieved between 2005 –07 the economy would by 2025 have been twice as large as it was in 2008. Between 2004 and 2008 unemployment (narrow definition) fell by more than 4% to 21.5%. If this trend had continued between 2009 and 2025 unemployment might by now have dropped to below 10%. This would have had a significant impact on inequality with a much smaller chronic poor class – and much larger elite and middle classes. Economic growth would have started to address the problem of inequality – just as it contributed to the erosion of apartheid. Everyone would have benefited. Instead, the NDR’s race-based policies have become one of the principal obstacles to economic growth, job creation, and the advancement of equality. They have also undermined the constitutional vision of unity in diversity and the foundational values of non-racialism and the advancement of human rights and freedoms. Wittingly – or unwittingly – they pose an existential threat to South Africa’s minorities.

Dave Steward: How to achieve equality - A response to Daryl Swanepoel

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