Disruptive Discovery Bank equity scheme constitutionally spot-on – De Vos

CAPE TOWN — One of the first requirements for any kind of change or disruption of the status quo is that we keep an open mind. South Africa’s history and current dispensation are replete with stark examples where the opposite subtext informs very-often resentful behaviour, as in; “don’t argue with me, I’ve made up my mind.” Where minds have remained open, like Nelson Mandela in breaking ranks with his comrades to engage with the apartheid ruling party, the outcomes have been miraculous, disrupting the commonly accepted antagonistic narrative. Adrian Gore, the founder and group chief executive of Discovery Limited, has never accepted the norm, especially in actuarial science and behavioural modification, building a multi-billion-rand empire by being a disruptor. Now that he’s disrupting the financial sector with a ‘behavioural’ bank, his critics are defaulting to the old South African norm of playing the race card – because Discovery Bank is giving black depositors 10% equity when they join. Constitutional law expert, Professor Pierre de Vos, takes issue with those shouting this down as discrimination. He uses his knowledge of the Constitution to pick apart their argument, piece by piece. Fascinating, if not even required reading. First published on the Daily Maverick. – Chris Bateman

By Pierre de Vos*

I have often wondered why so few people who claim to be “race-blind”; rail against “identity politics”; and oppose race-based redress measures because it “requires racial classification”, do not hold similar views on sexual orientation and (to a lesser extent) gender? Why are there so few people who argue that classifying people as either “men” or “women” is immoral and dangerous, or that heterosexuality and homosexuality does not exist?

Pierre de Vos
Pierre de Vos

After all, not only “race” (but also “gender” and “sexual orientation”) are classifications that have been used in the past and continue to be used (often in tandem with one another) to subjugate and discriminate against individuals because they are black, and/or women, and/or gay and lesbian.

As is the case with “race”, we might know that gender and sexual orientation are constructs and do not say anything essential about who we are as individuals, but we still experience these identities as real because they have tangible consequences for our social and/or economic status in society, and often affect how we are viewed and treated by others. Society is also constructed in ways that privilege some groups based on race, gender and sexual orientation and disadvantage others.

There are complex, intersecting, and ever shifting reasons why socially and economically dominant groups depict different forms of identity classifications as more or less problematic. I would guess power plays a pivotal role in this dynamic – which is why the way in which the category of “women” is viewed in a society can change dramatically as women push back against the patriarchy and men resist the claim for equality.

This is why I view blanket criticism of “identity politics” and “racial classifications” with suspicion – otherwise I would not have taken part over the years in as many gay pride parades as I have. It is for this reason that I reject as simplistic and false, the argument that it is inevitably immoral for oppressed people strategically to invoke identity categories that have been used (and continue to be used) to oppress them, in order to use such categories as tools to resist that oppression.

Tentatively embracing such classifications can either be used to achieve bad or good ends, depending on whether they are used to oppress or to resist oppression – much like a knife can be used to stab somebody to death or save somebody’s life when used in open heart surgery.

This view is endorsed by the South African Constitution and by the Constitutional Court. While section 9(1) of the Constitution guarantees for everyone the right to equality before the law, section 9(2) of the Bill of Rights specifically permits redress measures (also, sometimes called by the American term “affirmative action”). Section 9(2) states that:

“Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken.”

In Minister of Finance and Other v Van Heerden the Constitutional Court held that redress measures are not an exception to the general guarantee of equality, but a requirement for its achievement. Redress measures, said the court:

“.. are not in themselves a deviation from, or invasive of, the right to equality guaranteed by the Constitution. They are not ‘reverse discrimination’ or ‘positive discrimination’… They are integral to the reach of our equality protection. In other words, the provisions of section 9(1) and section 9(2) are complementary; both contribute to the constitutional goal of achieving equality to ensure ‘full and equal enjoyment of all rights’. A disjunctive or oppositional reading of the two subsections would frustrate the foundational equality objective of the Constitution and its broader social justice imperatives.”

Anyone familiar with the Constitutional Court jurisprudence on redress measures will know that a scheme like the one announced by Discovery Bank will pass muster in terms of the Constitution, or, more precisely, in terms of section 14(1) of the Promotion of Equality and Prevention of Unfair Discrimination Act (PEPUDA).

Three requirements must be met for a redress scheme to be legally compliant.

First, the overwhelming majority of the beneficiaries of the redress scheme must be shown to be disadvantaged by unfair discrimination. In effect, you must ask whether the beneficiaries belong to a group who had been unfairly discriminated against before: is the targeted group black, and/or women, and/or gay, and/or disabled?

As black people do not stop experiencing racism and discrimination when they become middle class (although the working class and unemployed black people might experience discrimination and racism more intensely), those who wish to challenge the Discovery Bank scheme will not be successful in arguing that black people who join the bank will largely be middle class and are therefore not affected by unfair discrimination.

The confusion comes in because some people wrongly believe that race is being used as a proxy for economic disadvantage, when people suffer discrimination because they are poor and/or because they are black, and/or because they are women, and/or because they are gay or lesbian or transgender, and/or because they are disabled. As long as the redress scheme benefits one of these groups (although a good scheme might benefit different groups who belong to a different combinations of oppressed groups in different ways), the first requirement will be met.

A scheme that targets black members who join the bank will thus meet this first requirement. Although a scheme that allocates a different percentage of shares to black people who join the bank, based on their class, gender, sexuality and disability might be more subtle, this subtlety is not required by the law.

The second requirement is that the measure must be “designed to protect or advance” those disadvantaged by unfair discrimination. You do not have to show that the scheme is necessary to achieve the redress goal, but only that the measure must be reasonably capable of achieving the desired outcome of redress.

You obviously also do not have to show that the redress scheme will solve the structural inequality in society as no redress scheme is capable of doing this. (This reminds us, if we needed reminding, that the law or more specifically the Constitution, cannot solve deeply rooted structural injustice – only government and society, empowered by the Constitution, can do so.) In the light of the above, a scheme that benefits black people who join the bank will obviously meet this second requirement.

The third requirement is that the measure must “promotes the achievement of equality”. As the Constitutional Court stated in the Van Heerden judgment:

It must be accepted that the achievement of this goal may often come at a price for those who were previously advantaged. As Ngcobo J observed in Bato Star: ‘The measures that bring about transformation will inevitably affect some members of the society adversely, particularly those coming from the previously advantaged communities’.”

The court held that in order to achieve this long term vision “a measure should not constitute an abuse of power or impose such substantial and undue harm on those excluded from its benefits that our long-term constitutional goal would be threatened”.

Discovery
Lights illuminate the windows of the Discovery Ltd. headquarters office in the Sandton district of Johannesburg, South Africa. Photographer: Waldo Swiegers/Bloomberg

In the case of the Discovery Bank scheme, this third requirement is clearly also met. This is because the scheme in fact does not impose any harm or burden on white people who are excluded from the benefits of the scheme. While white clients will not benefit from the scheme, nothing is taken away from them.

A similar situation arose in the Van Heerden case where a former National Party member of Parliament complained about a scheme that enhanced the pensions benefits of MPs who joined parliament in 1994, but not of MPs who were members of the apartheid parliament. As Mr Van Heerden had been a beneficiary of the pension scheme when he was an MP in the apartheid parliament, and as his pension benefit was still going to be far more generous than that of any parliamentarian who were only permitted to become an MP in 1994, the court held that there was clearly:

“..no evidence to suggest any indignity. His claim appears to be propelled by a desire to earn more in circumstances where his pensions benefit is well ahead of that of his newer colleagues in Parliament, despite the remedial measures challenged.”

I wrote the above, knowing from experience that many opponents of race-based redress measures will refuse to engage with either the law or the conceptual arguments advanced here, but hoping (as I always do) that rational people who disagree with me, will read what I have written and will only then engage with the substance of my arguments. DM

  • Pierre De Vos teaches Constitutional law at the University of Cape Town Law Faculty, where he serves as deputy dean and as the Claude Leon Foundation Chair in Constitutional Governance. He writes a regular blog, entitled ‘Constitutionally Speaking’, in which he attempts to mix one part righteous anger, one part cold legal reasoning and one part irreverence to help keep South Africans informed about Constitutional and other legal developments related to the democracy.