Affirmative action failures: Malaysia’s warning for South Africa

Centre For Risk Analysis analyst, Gerbrandt van Heerden expands on the failures of affirmative action policies in Malaysia, and warns of the possibility of similar consequences in South Africa. Malaysia’s ‘New Economic Policy’ aimed to eradicate poverty and ensure representation of all ethnic groups in every profession, however, it became a tool for the country’s elites to enrich themselves, leaving the poor behind. Similarly, South Africa’s Black Economic Empowerment policy has been abused by the politically connected for self-enrichment, leading to corruption, theft of taxpayer money, and a major skills exodus. Van Heerden suggests replacing race-based policies with measures that directly help the greater part of society, such as better access to education, removing red-tape for small businesses, and strengthening property rights.


SA making the same mistake as Malaysia

By Gerbrandt van Heerden 

Affirmative action in Malaysia has failed to uplift the poor – and South Africa is now experiencing the consequences for the same mistake.

Worse still is that South Africa, far from recognising the error, is strengthening policy that only escalates the costs.  President Cyril Ramaphosa this week gave his assent to the Employment Equity Amendment Bill.

In Malaysia’s case, its affirmative action policy, the ‘New Economic Policy’ or NEP, initially had good intentions. After British colonial rule, wealth was mostly concentrated in the hands of those of Chinese and Indian descent – which represented around 30% of the population. After independence in the 1950s,  the new government sought to address the economic disparity that existed between the Bumiputera (which include the Malays and other indigenous groups) and the non-Bumiputera (Chinese and Indians), through the introduction of the NEP.

Read more: How world sees SA: In desperate need of new beginnings after the hard compromises of peacemaking

Main aim

The NEP’s  main aim was to eradicate poverty regardless of race, and to ensure that all ethnic groups were represented in every profession. However, despite being well intentioned and enjoying initial public support, the NEP became a vehicle of enrichment for the country’s elites while leaving the poor behind.

The governing party at the time, the United Malays National Organization (UMNO) used the NEP to provide more economic opportunities for Malay businessmen through ‘Malay-only’ permits, licences and easy loans. In return, the beneficiaries of this system would generously donate to the party, especially at election time. The result was that the NEP became a tool for those already in an advantaged position, as well as the politically connected, to help one another, rather than being of any benefit to those it was originally intended for – the marginalised Malay majority.

The second major consequence has been that the NEP has often prevented non-Bumiputera from accessing the same economic opportunities as their Malay counterparts. As a result, many Chinese and Indian citizens in Malaysia have felt that the policy unfairly discriminates against them.

The NEP therefore has not only disrupted social cohesion in Malaysia, but has also contributed to a significant brain-drain from the country. According to the World Bank, a high number of Chinese and Indian citizens have migrated from the country due to the NEP. Those who leave Malaysia are usually highly skilled and highly educated, resulting in a major loss in human capital for the country.

Read more: Is BEE holding back South Africa’s growth?

Familiar

This all sounds familiar, of course, because this is exactly what is happening in South Africa. Black Economic Empowerment (BEE) was introduced by the African National Congress (ANC) to reduce the racial disparities caused by Apartheid.

But just like the NEP, however, BEE has been abused by the politically connected as a means of self-enrichment. BEE has encouraged corruption and theft of taxpayer money at state-owned enterprises and public institutions, thus contributing to service delivery failures and the country’s energy crisis.

BEE has also made a tiny elite wealthier, while the majority of black South Africans have barely experienced any benefit.  In addition, the policy has contributed to a major skills exodus, with many skilled South Africans feeling that economic opportunities for them in the country are declining. According to Stats SA, more than 600 000 white South Africans are estimated to be living abroad.

The harmful effects of affirmative action in Malaysia should serve as a warning for South Africa. Such policies lead only to an escalation in corruption and nepotism, while breaking down important institutions and disrupting social cohesion.

If the country is serious about uplifting the poor, it should replace race-based policies that primarily benefit elites, with policies that will directly help the greater part of society. These include better access to quality education facilities, removing red-tape that hurts small businesses the most and stifles entrepreneurship, and strengthening property rights. Only then will South Africa see the rise in economic prosperity that would benefit all.

Read more: SA’s new Employment Equity Bill: unconstitutional and counterproductive – Ivo Vegter

*Gerbrandt van Heerden is an analyst at the Centre For Risk Analysis (CRA), a think tank specialising in political risk, economic policy and scenario planning.

This article was first published by Daily Friend and is republished with permission

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