The amendments to the BBBEE Act and the Employment Equity Act require the long overdue policy discussion avoided when we negotiated the Interim Constitution. I witnessed then how consensus in economic matters was reached on the strength of misunderstandings between the prevailing views of blacks and whites.
For most of the whites, the transition was about transferring political power to a black majority without changing how society and the economy operated. The communist and insurrectional components within the ANC aimed at transforming society by transferring not only political, but also social and economic, power to the black majority within 25 years. Hence they wanted no constitutional provision inhibiting the power of Parliament to achieve this goal and avoided discussing economic matters at that time. In this, they found support from the DP which stuck by the neo-liberal understanding that a constitution should have no provision shaping our economic future, save for a strong property clause, which they did not get. Having little appreciation of these themes, the NP said nothing valuable.
The IFP was alone in wanting to negotiate a full “economic constitution” at the World Trade Centre (WTC) and in tabling issues such as the preferential rate of affirmative action for employment and public tender purposes, and the terms of a really full land reform rather than mere land restitution. The IFP sought an economic settlement through the mandatory expedited privatisation of “parastatal” and other public property for the benefits of blacks only, as a compromise which would give blacks a new assets basis of land and state assets while entrenching white private property. Independent technical commissions modeled after the post-communist Eastern European experiences would have reduced the economic costs of wealth transfers and associated corruption.
These issues were ignored and no settlement was reached about the constitutionally and politically permissible modalities of bringing about economic transfers from whites to blacks.
The legislation before Parliament is based on the policy goal of ensuring that both wealth distribution and employment in South Africa reflect our racial composition, viz. 93% of the country’s wealth, including industries, businesses, land and real estate, must be black owned, and 93% of those employed from management level down must be black. Ownership must be real and effective and not perfunctory, and any scheme departing from this requirement will be criminalised. Employment requirements must be met irrespective of qualifications or suitability, as, in substance, it will be prohibited to hire more suitable or qualified white people above the 7% quota.
This policy goal was not discussed at the WTC and would have not been accepted by white interests. This policy goal is achieved by means of legally mandatory discrimination against whites who in effect, will not be allowed to do business with their own government or with any entity doing or intending to do business with the government. Since our government’s spending controls over one third of our GDP, and most of our economy relies on soft loans, subsidies, tenders and other government benefits available only to non-whites and BBBEE compliant entities, whites will be driven out of independent economic activities. Whites will not find relief in working as employees, as businesses comply with the employment equity and try to maximise their points on the BBBEE scorecard necessary to do business with government and receive its subsidies and other benefits.
I know of no other cases in a democracy in which a large majority made it legally mandatory to discriminate against a small minority, save for Malaysia which prompted the Chinese to leave it to form Singapore. When affirmative action is for the benefit of a minority, its effects can be absorbed without the majority being discriminated against, but with our percentages and with the modalities of our BBBEE, radical discrimination ensues.
This mandatory legal discrimination is meant to apply on a purely racial and not economic basis, leaving no hope for the about 760,000 whites who in the past 19 years have moved from a dignified life into squatter camps and below the poverty line. What policy justification can there be to discriminate against them?
Discrimination also applies to whites born after 1992, who did not benefit from Apartheid and should not be responsible for paying for its crimes. Because our inheritance taxation, related costs and inflation cut more than 50% off wealth transfers between generations, there are no economic bases to indiscriminately penalise children for their fathers’ economic gains, especially when this discrimination applies to affluent children and those who inherited nothing.
As it is morally repugnant, undemocratic and unconstitutional to hold children responsible for their fathers’ alleged or actual crimes, or ascribe collective culpability, what are the policy bases to discriminate again them? What are the policy bases to discriminate against foreigners who came to South Africa after 1992 or white freedom fighters?
If a tax on being white is probably unconstitutional, what about the effective ban from work and economic opportunities? Without a social compact reached at a new economic Convention for a Democratic South Africa (Codesa), it will be difficult to make acceptable legislation adopted by one group, no matter how large, to benefit itself at the expense of the other group.
Setting moral and policy issues aside, in economic terms this plan cannot work and will damage all, including those whom it intends benefitting. BBBEE mandatory requirements increase economic costs as they allocate resources away from Pareto optimality [in a Pareto efficient economic allocation, no one can gain without making at least one individual worse off] with no identifiable added value. Furthermore, they seal our marketplace from international non-BBBEEE competition, thereby creating conditions for ever-rising prices, market inefficiency and reduced productivity. Moreover, by creating a class of economic parasites and “tenderpreneurs” who have not grown through the ranks of building businesses or creating new products, government patronage will deprive our economy of its most important force: real-world business experience. All this will result into a lower rate of economic growth.
The entire policy is based on impossible to calculate facts: What was the “black” assets basis in 1992 and how does it compare with the white? Surely, it was not 0% to 100%, which would require an impossible nationwide universal asset evaluation as per 1992.
At what point the target distribution of 93% Black and 7% White will be deemed to have been achieved through the opportunities offered to blacks and not the actual outcome thereof? Will the same “multiplicator” of up to 48%, which turned opportunities into contribution given by the DTI to foreigners on the arms deal’s trade offset, apply to the opportunities transferred from whites to blacks? Will BBBEE continue until the set goal is actually achieved or also thereafter to sustain it from potential erosion by whites?
These calculations cannot be made with a perfect scale and often the scale is affected by those controlling it.
When the Gauls invaded Rome they negotiated a gold ransom to solve an impasse: they were unable to conquer the Capitol and the Romans unable to repel them from Rome. When found cheating on the weighing of the gold, Gaul general Brennus threw his sword on the scale and famously said “Vae victis” (“woe on the loser”), and usually that is the end of it. In that specific case, at that moment, the retired Roman general, Furius Camillus, showed up with an army of farmers and, sword in hand, screamed “ferro not auro Roma redemptur!” (“with steel, not gold, Rome buys its freedom”). The Gauls were killed or driven back to France where the next saw a Roman two centuries later, when they were conquered Caesar.
As South African whites are no Romans, and have no Furius Camillus, they may just have to bow to the victor’s law or call for an economic Codesa. DM