The Need for Empowerment – Why do we need broad-based black economic empowerment?
In South Africa, about 85% of our citizens are black (black, coloured, Indian and Chinese) and 15% white. The contrary applies to wealth in the country. Approximately 85% of all wealth/assets/salaries are in the hands of white and the remainder in black hands.
A similar percentage applies to the job market. Directors of companies listed on the JSE are overwhelmingly white. Pick ‘n Pay Stores, the subject currently of strike action and accusations of racism, has 14 directors, 2 of whom are black – 14%. Pick ‘n Pay Holdings has 100% white directors.
Jobs at the bottom end of the market – e.g. refuse workers are almost totally black. Poverty – the poorest people are in the main 100% black.
Are the above statistics important? Is it necessarily bad that Pick ‘n Pay’s directors are not representative of the nations’ demographics? As a public company Pick ‘n Pay’s shareholders have a right to elect whomever they please. Should we care that one of the populations groups in a non-racial society is more underrepresented than the normal statistical curve? In any country some people are wealthier than others. This is represented by the income distribution curve. Recent reports, in some cases denied by Minister Trevor Manuel show that the Gini coefficient of South Africa is the worst in the world. The Gini coefficient represents income inequality.
South Africa is a special case in that the Gini coefficient almost exactly mirrors the racial breakdown. If we choose to do something abut income equality, we have to know where to start, and with whom.
We all know exactly why this income/wealth/job disparity exists. No matter how anyone spins it, it is a relic from the apartheid days, where black people were denied various rights. The new South Africa was created to redress this inequality.
However in a macro economic environment, something is wrong if a particular group, that for forty years previously had been legislatively disadvantaged remains so today.
It is completely fair to expect, and to have expected that the new South Africa would redress this inequality. There has been some progress. While we all have equal rights, the people living in squatter camps – the poorest, the least educated, holders of the worst jobs – are all still black. The millionaires remain white. Sure, there are exceptions – Tokyo Sexwale, Cyril Ramphosa, Patrice Matsepe, but they are in the minority. Is it fair to let the free market economy take care of the inequalities in the economy – the theory is that Adam Smith’s invisible hand will take care of the market. This would be true if the market had not been so badly dislocated during the old regime. That whites had not received undue and unearned benefits that they are still using today to gain that competitive advantage. We will never know if Raymond Ackerman would have succeeded as much as he has had he been born black, in a shack, with no education. Based on the man himself as a superhuman, chances are he would have succeeded no matter what obstacle stood in his way. A man like Herman Mashaba succeeded in the pre-1994 days despite the hardships. For all other average humans it would have been very different. As at 1994 the playing fields were not level – whites still had more capital and education to always be able to hold onto their competitive advantage.
Therefore some form of remedial action was needed.
There are many questions: Why has it taken so long for very little to happen? Simple! It has taken so long because B-BBEE is a very new policy – it’s only been two years since the codes came out. B-BBEE is trying to change the old, discredited, mindset of other government empowerment policies that have not really worked.
What should be done to rectify the situation?
The answer is B-BBEE – broad based black economic empowerment – if implemented properly. Briefly, this is a policy that encourages companies to invest in skills development, enterprise development and procurement, corporate social investment (socio-economic development), employment equity, and to consider selling shares.
A forthcoming opinion piece will discuss what B-BBEE really is – compared to the common misconception.