RIAAN SALIE: BEE most hurts those it was designed to help

Though MPs passed The Employment Equity Amendment Bill last week it still requires the approval of the National Council of Provinces (NCOP) before President Cyril Ramaphosa can sign it into law. The bill grants employment & labour minister Thulas Nxesi the power to set “equity targets” for businesses across sectors, so that government may restructure the economy to achieve more equitable outcomes for South Africans across racial groups.

That’s the theory, at least. Given SA’s apartheid history, the democratic dispensation was supposed to be nonracial and based on equality. In fact, nonracialism is explicitly enshrined in chapter 1 of the constitution, with the intent of forging a prosperous future for all. Despite this vision, the grim economic reality for 7.8-million jobless South Africans reflects a life of constant hardship.

Racial disparities continue to characterise unemployment statistics, which show that black citizens remain the most affected by unemployment. But the hierarchy of wealth within the black community, paints an unacknowledged picture of inequality created by BEE laws themselves.

Research shows that, excluding the top 10% of black income earners from the calculation of the racial income gap, the income inequality ratio increased from 10.5 in the 1990s to 11.5 at the end of 2019. It also shows that black South Africans in the top 10% income bracket increased by 54% over the same period. And while the income of the top 10% of black earners has tripled since the 1990s, that of the bottom 50% declined substantially. In other words, BEE laws disproportionately and seriously disenfranchise the majority of black South Africans and favour only an elite few.

More damaging is the effect BEE has on industries by allowing politicians to institutionalise corruption through patronage networks. This allows cronies to plunge key state-owned enterprises (SOEs) into financial ruin, such as SA Airways, which has incurred a net loss of more than R32bn since 2008. The SA Post Office was driven to technical insolvency with financial losses of R1.76bn and liabilities exceeding R1.49bn. Eskom stands on the brink of total collapse with debt of R402bn.

The consequence, particularly of Eskom’s almost total collapse, has been that the bottom 50% of income earners have been with an electricity tariff increase of 14.59% in 2021. The government’s insatiable desire to save SOEs has meant cuts to much-needed social relief, policing and educational infrastructure budgets. Food prices rocketed 10.2% and fuel costs hit an all-time high with an increase of 30%. All this is the result of horrendous public policy, worsened especially by BEE quotas.

Aside from BEE’s monumental failure to create more equal outcomes for the majority of South Africans, the fundamental nature of these laws is profoundly racial. Race-based laws should never be tolerated in democratic societies, especially ones with divisive, racist histories. We cannot have laws that arbitrarily pick winners and losers based on who the victims were in the previous dispensation. Racial quotas, at all levels, are counterintuitive and unnecessary.

Politicisation of race

Controversy over judicial appointments highlights just how deep the politicisation of race has become in SA. Outrage ensued after the Judicial Service Commission failed to recommend David Unterhalter and Alan Dodson for appointment to the Constitutional Court, seemingly because of their race. This shows the extent to which race-based attitudes have become the norm. If the occurrence of these exclusionary practices is so public one can only imagine how deep it runs behind closed doors.

Justified discrimination does not exist, since human rights are not tradable stocks. Clinging to the principle of nonracialism is the only way to safeguard the present and future from further injustices. The only way forward is to cultivate a society based on meritocracy, presupposed on a competence-based hierarchy that will allow SA to cultivate the best social outcomes, as opposed to manufacturing those outcomes.

Access to electricity, clean water, proper education and reliable transport and infrastructure is what induces the growth that creates job opportunities. Attempting to manufacture outcomes in an already heavily regulated economy only harms the prospects of job creation and drives foreign direct investment out of the country. This is evidenced by the Heritage Foundation’s Index of Economic Freedom, which flags business freedom as being in decline in SA.

If the governing party wants to reduce unemployment, the NCOP must reject the draconian Employment Equity Amendment Bill. Instead, the government should repeal quota requirements across the board to free the business sector and induce growth. If President Cyril Ramaphosa wants to be a “great reformer”, he should respect the constitutional principle of nonracialism — which he helped to draft.

• Salie is a writer for the Free Market Foundation. The views expressed in the article are the author’s and not necessarily shared by the members of the foundation.