Black consciousness leader Steve Biko and Daily Dispatch editor Donald Woods, who was banned by the apartheid government after Biko's death in detention in 1977.
Was the implementation of race-based affirmative action and black economic empowerment necessary after the advent of black majority rule in 1994, when the ANC won the first non-racial elections?
Or did this new form of racial engineering, in a bid to redress the effects of apartheid, have precisely the opposite effect to what was intended, boosting white entrepreneurship and making black people increasingly dependent both on white business and on the state?
John Kane-Berman, for decades chief executive of the SA Institute of Race Relations, in his recently published memoir “Between Two Fires – Holding the Liberal Centre in South African Politics”, makes a persuasive case to show that it did the latter.
He does so just as the debate intensifies around so-called white monopoly capital and the supposed need for “radical economic transformation”.
Seen from the viewpoint of black youth, where unemployment is at record levels, the growing clamour for radical action on the economy is understandable. Any objective observer will note that clearly, in the private sector anyway, white people continue to rule the roost. They are the main owners of businesses that generate jobs, create wealth, contribute tax revenues and drive what little growth there still is in the economy.
But it need not have been like this. Kane-Berman explains what went wrong and why. In a chapter titled “Race and redress”, he writes:
“Apartheid was so pervasive and so destructive, as I myself had described in countless articles and speeches over so many years, that there was powerful appeal in the argument that only interventions by the state on a similar scale in the name of ‘transformation’ could reverse its effects. But even before the change of government and constitution in 1994 I questioned this. The real alternative to apartheid, we said, was not another form of social and racial engineering, but a society which prized economic as well as political freedom and which was founded on equality before the law. This ruled out racial discrimination in the form of affirmative action. Given the Institute’s history and who we were, the decision to oppose affirmative action and other racial legislation was the most important taken while I was running the organisation. Nothing has altered my conviction that this was the right decision.
“That conviction has been strengthened as it has become clear that the racial policies being pursued by the ANC go far beyond the affirmative action contemplated in the Constitution. The National Democratic Revolution described in the previous chapter of this memoir seeks not merely redress for the past, but to impose an entirely new doctrine of demographic proportionality on the country. Cyril Ramaphosa, deputy president of both the country and the ANC, has thus said that ‘race will remain an issue until all echelons of our society are demographically representative”. I commented: ‘Given the country’s human needs and its skills profile, this can only have dire consequences.’ “
Kane-Berman said the Institute “opposed affirmative action legislation in its entirely, including the two most important statutes, the Employment Equity Act of 1998 and the Broad-Based Black Economic Empowerment Act of 2003”.
“The main objective of the first was to require employers to use ‘preferential treatment’ for blacks (as well as women and disabled people) to bring about ‘equitable representation’ at all levels and in all occupations in companies with more than 50 employees or annual turnovers above certain thresholds […] within successive five-year periods. The main purposes of the second were to get companies to hand over 26 per cent of their equity to blacks and procure 70 per cent of their goods and services from firms which had done the same.”
Kane-Berman says the first of these was gazetted as a bill in 1997. “When we denounced it the labour minister, Tito Mboweni, accused us of orchestrating public confusion.” Kane-Berman’s colleague Anthea Jeffery was labelled a racist when she spoke out against it at a labour law conference in Durban. Veteran anti-apartheid activist Helen Suzman, however, said it would “deter foreign investment”. Press reaction was mixed.
“Our opposition to the Employment Equity Act meant that from very early on we were fundamentally at odds with the ANC on a key component of its package of policies. We were also at odds with Cosatu and the SACP, as well as with most business chambers, the media, and civil society. We still are.”
Then he cuts to the chase.
“Right from the start we took the view that racial discrimination, even if now supposedly designed to promote equality rather than maintain white supremacy, was still wrong in principle. It violated the maxim of equality before the law.”
Earlier in his book, Kane-Berman talks about how, in the 1970s and 1980s, “the industrial colour bar had broken down during the ‘silent revolution’ when shortages of white skills forced employers to train and promote blacks despite the apartheid laws designed to prevent this. The way to speed up this process of erosion in the post-apartheid era was to speed up the rate of economic growth. If there were not more blacks in skilled and managerial jobs, this was the result not of a shortage of demand for them but a shortage of supply. This in turn would have to be remedied by repairing the country’s education and training system.”
Remember talk about “black diamonds”? These were, and still are, any black people with a decent tertiary education who are in such demand they can command ludicrously high salaries. Kane-Berman explains how that came about:
“A survey had shown that nearly two thirds of companies experienced ‘poaching’ of black professionals, while salary premiums paid to such professionals were further evidence of both their scarcity and the demand for them. Even before the employment equity legislation was enacted, a firm of human resources consultants had said a third of companies were already paying up to 50 per cent premiums on white salaries to get top black personnel. We said it was absurd to require that Africans should comprise 50 per cent or more of top management when only 3 per cent of Africans had tertiary qualifications and only 25 per cent fell within the 35 to 64 age cohort from which managers were usually drawn.”
He explains how the imposition of these racial quotas aimed at achieving “full demographic representation across all levels” was enforced on pain of fines which started at R500 000 for a first offence, but under amended legislation has risen to fines of up to R2.7-million or 10 per cent of turnover.
This first negative impact had been on service delivery.
“Though we criticised the legislation right from the start, we actually underestimated the harm affirmative action would do to the public as opposed to the private sector. The latter operated under the constraint that poor appointments risked damaging businesses. No such constraints applied to the public sector, where affirmative action has been applied without regard to cost or consequences. Large numbers of skilled whites, including teachers, have been retrenched, posts left vacant rather than filled with whites, and plenty of people promoted or appointed for reasons of race alone. The police, the defence force, provincial education departments, public hospitals, local authorities, sewerage systems, and Eskom are among dozens upon dozens of public entities that fail to work properly. The ANC has eviscerated large parts of the civil service on which it relies to implement its policies. This has done as much damage to the state and to the ANC’s own supporters as to the whites who have lost or been denied jobs.”
But what of the impact on economic growth and black self-esteem and self-reliance?
“Our critique of BEE was essentially twofold. In the first place the funding of BEE deals would come at the cost of funding new investment in plant and equipment, and so be detrimental to growth. The second problem involved a paradox. Instead of promoting black entrepreneurship, BEE required white companies to do things for blacks. What was being measured was not black success but white success. This was a strange form of liberation.
“As long as this approach continued, BEE would fail to capture the critical component of entrepreneurial success. Twelve years later, the ANC itself bewails the absence of black industrialists – but fails to acknowledge that BEE created the wrong incentives.”
Kane-Berman spelt out these likely effects of BEE in a speech to the Johannesburg Rotary Club in 2009, entitled “Empowerment that disempowers”. It is worth quoting at length from this speech, which really captures the lunacy of BEE. He said:
“About 10 years ago the Institute hosted a panel discussion about affirmative action. One of the speakers was Temba Nolutshungu of the Free Market Foundation. He predicted that the main beneficiaries would be whites. Formerly protected white youth who found that the Employment Equity Act limited their job prospects would be forced to turn to the technical trades or become entrepreneurs. Young blacks, on the other hand, would be channelled into ‘low-risk soft-option’ positions. This would reinforce white dominance and blunt the entrepreneurial spirit among young blacks.
“Another factor undermining black entrepreneurship relative to white is that so many blacks have been absorbed into the public service. Whites displaced to make way for them have been forced to set up their own businesses. Professor Lawrence Schlemmer […] observed in April 2007 that the number of small businesses owned by whites had increased very rapidly because of the exodus from the public service.”
Kane-Berman continued, tellingly, in that 2009 speech, which he reproduces in his book: “BEE is more about white than black achievement. White-owned companies are given ratings for doing things for blacks. BEE empowers white firms to get contracts from the black government. Black individuals benefit, but do they have to perform in a competitive marketplace? What are the government’s priorities: making backs independent or whites compliant?
“Brian Molefe, CEO of the Public Investment Corporation, complained in August 2007 that whites were not doing enough to develop black talent. But how much are blacks doing to develop it? Given its record in education, the government is certainly not doing very much. Nor is ‘transformation’ doing much. This is because the focus is on making white companies harness blacks, rather than on creating new black or non-racial institutions.”
Then the crux of the argument, which brings in a struggle hero from the 1970s.
“I wonder what Steve Biko would have thought. Professor Sipho Seepe, at the time president of the Institute, wrote in September 2007: ‘Given Biko’s emphasis on self-reliance, it is reasonable to assume that he would have great discomfort with affirmative action and the current form of BEE. These forms of intervention discourage self-reliance and self-actualisation. They perpetuate the victim mentality and discourage an enterprising spirit. They also encourage a debilitating sense of entitlement.’ “
Note that here Kane-Berman was quoting a prominent black academic. He then addresses another key factor:
“It is sometimes suggested that BEE requirements are not very different from the policies used by Afrikaners to build up their economic power. But there is a difference: in the 1930s the savings of tens of thousands of individual Afrikaners were mobilised to start financial institutions. Why have the savings of the burgeoning black middle class not been similarly mobilised to create black financial institutions?
“Joel Netshitenzhe, until recently a top man in the president’s office, said that apartheid had crushed the entrepreneurial spirit among blacks. But the present government’s policies are doing little to liberate that spirit. Quite the reverse. Vincent Maphai, chairman of BHP Billiton, commented in July 2009: ‘Under apartheid people were most creative and the community flourished. People did not sit back and think what will the state do for me? They were empowered by apartheid but ironically disempowered by liberation.’ ”
Then Kane-Berman tackles the impact on foreign investment:
“BEE requirements have almost certainly deterred foreign direct investment (FDI), in the mining industry in particular. Lower FDI has meant lower rates of economic growth, so BEE has retarded the generation of jobs. So we can reconfigure President Thabo Mbeki’s old ‘two-nations’ divide. Instead of rich-and-white versus poor-and-black, we have a growing divide between whites who have to look after themselves and blacks who are becoming increasingly dependent on the state. This is profoundly disempowering. As Professor Achielle Mbembe of Wits wrote in April 2007, ‘It risks codifying within the law and in the minds of its beneficiaries the very powerlessness it aims to redress.’
“What will all this mean for race relations?” asks Kane-Berman. “In May 2002, Tim Modise wrote: ‘One problem with seeing ourselves as permanent victims is that it makes those who believe they are racially superior feel vindicated.’ In August 2008 Professor Jonathan Jansen, now rector and vice-chancellor of the University of the Free State and also president of the Institute, said that affirmative action ‘perpetuates the myth among white people that black people are inferior’.”
So the next time the likes of Black First Land First, and other racially obsessed groups vent their anger against white journalists currently exposing Gupta-Zuma corruption or “white monopoly capital”, they might want to reflect on the view that it was the ANC’s own policies, implemented over the past two decades, which have, according to the above evidence, disempowered the very people they were meant to empower.
Clearly a major policy shift towards a more liberal, non-racial democracy is long overdue if we are to prevent the already badly holed ship of state from sinking completely.
* “Between Two Fires” by John Kane-Berman is published by Jonathan Ball