The Final Call

‘South Africa's Black Economic Empowerment has failed'

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In his book “Architects of Poverty—Why Africa's Capitalism Needs Changing,” Mr. Mbeki criticizes the ruling elite by saying that Black Economic Empowerment (BEE) “strikes a fatal blow against the emergence of Black entrepreneurship by creating a small class of unproductive but wealthy Black crony capitalists made up of ANC politicians, some retired and others not.”

He argues that BEE policy, which is aimed at building Black ownership of companies, was not the invention of the ANC but was created by the country's White economic oligarchs to co-opt leaders of the Black resistance movement by buying them off with what looked like a transfer of massive assets at no cost.

This would ensure the oligarchs seats at the high table of the ANC government's economic policy formulation and give the oligarchs and their companies the first bite at government contracts.

The impression was created that all previously disadvantaged individuals would benefit from BEE. However, this is far from the truth as the political elite and their cronies have reaped the most benefits.

Stephanie Nieuwoudt spoke to Mr. Mbeki, who is also deputy chairperson of the South African Institute of International Affairs, an independent think tank at the University of the Witwatersrand.

IPS: Do you think BEE was a well conceptualized system that could have realized the goal of empowering the masses?

Moeletsi Mbeki (MM): It was never a good system. It was never intended to advance the masses. It was intended to buy off or co-opt the leaders of the resistance movement. BEE cannot work for the majority. It is only intended to advance the interests of a few.

The masses are not happy with what is happening and we are beginning to see this in the service revolts (widespread community-level protests currently happening). People are beginning to react against the inequality and are turning on the municipal officials, who are regarded as part of the elite because they are elected by the ANC which is not delivering.

IPS: And yet the ANC won a major victory at the polling booths earlier this year?

MM: The ANC has lost its two-thirds majority. It lost support in all the provinces except KwaZulu Natal (the country's president, Jacob Zuma, hails from this province and he has huge support there). The ANC is buying off the poor with social grants—13 million people in this country are receiving social grants.

Government's planned project (anti-recession rescue plan) to retrain those in the private sector who are at risk of being retrenched are merely attempts by the government to appear as if they are sorting out public service problems. What will these people be retrained as? And where will they be redeployed?

The government realizes the people are angry and they are trying to appease them with unsustainable promises.

The country is dealing with a class conflict between Black people. On the one hand there is the political elites and on the other the masses. South Africa is still a rainbow nation, but the emerging class conflict has the potential to escalate.

IPS: South Africa is regarded by some as an example for other African countries. Is this perception of the country maintaining some kind of moral high ground justified?

MM: The South African private sector is extremely powerful. That is why you find companies like Shoprite, MTN and Standard Bank in many African countries. These corporations offer great service and quality whilst ensuring their brands are protected.

But the South African state is declining—there are high levels of corruption, the health care system is on the verge of collapse and the education system is under-performing.

Between 2000 and 2008 South Africa has been downgraded by 20 places by Transparency International's Corruption Index—from 34th to 54th. Corruption is increasing at an enormous rate and it impacts severely on the poor. Revenue destined for the poor is misappropriated, which means that there is a lack of service delivery.

IPS: Some people allege that skilled White people are leaving the country because of a lack of opportunity due to BEE policies.

MM: Black and White people are affected. There is no incentive to stay in the country if you know the top jobs go to the elite and their cronies. Affirmative action and BEE policies have become the inside track for the elected few.

At the moment there are 500,000 unfilled professional vacancies. Every professional who is employed, can create a job opportunity for others who are less skilled.

South Africa is becoming a de-industrialized country. We depend on imports rather than exports. In 1985, 31 percent of our gross domestic product came from the manufacturing sector. Now it is only 16 percent. Thousands have lost their jobs. Our footwear manufacturing industry has collapsed and those who are skilled in making footwear have disappeared. We are going backwards.

Yes, it is cheaper to import many products than to manufacture them, but it is a self-defeating argument. People are losing their jobs and people without jobs are not in a position to buy those imported goods.

The elite have become consumers who live off systems that were created before 1994. They do not see themselves as producers and they do not start new businesses.

IPS: How does one address these issues?

MM: We need to reform the electoral system. MPs should not be elected on a proportional representation basis, but represent specific constituencies directly. This will improve accountability. At the moment there is no system of accountability.

The education system needs to be overhauled. We need skilled workers. But money that should go into education is used for BEE purposes and given to politicians who build big palaces and buy expensive cars.

The critical issues here are the rise in economic inequality and the rise in import dependence. The combination of these two factors is lethal. It is driving the unemployment trend in South Africa, causing conflict among Black people. And in the process, foreign nationals get caught up in the conflict (as was seen with the xenophobic attacks in the past year).