JOHN WEBB: Ramaphosa is taken aback. He shouldn’t be

On his recent return from a well-publicised visit to Washington, President Cyril Ramaphosa addressed the National Assembly and was quick to disappoint many of his critics by continuing to defend government’s BEE policies.

“I am rather surprised and taken aback when I hear that policies of black economic empowerment militate against the growth of the economy,” he said.   

Ramaphosa went on to explain that since the adoption of BEE policies the country has seen marked growth in the number of black consumers and that consumer spending, in turn, contributes to economic growth.

Well, yes and no. While he might obsess over the colour of consumers, he forgets that overall consumer demand in the economy is extremely weak. Why wouldn’t it be, with 46% youth unemployment? Weak demand puts a constraint on what producers are willing to produce, and on what investors are willing to invest.

So, is the president taken aback that economic growth has slowed to an average annual rate of 1.5% since 2006, when BEE first began to take effect? Prior to that the country had registered average annual growth of 3.47%. 

Is he taken aback that overall inequality in the SA economy has dramatically worsened since 1994? The Gini Index demonstrates that wealth inequality has increased from a score of 59.3 in 1994 to 63 in 2024, with SA now leading the world as the most unequal society on earth. 

Is he taken aback that unemployment has skyrocketed since 2006, from 22.3% to 33.2% in 2024? While government carefully examines the demographic composition of the employed, is he vaguely aware that the number of unemployed is increasing year on year? 

Is he taken aback that the Employment Equity Commission celebrated near-perfect demographic representation in the public sector in 2023, while that same public sector achieved a 16% municipal governance pass rate by the auditor-general in 2024 because of its rank incompetence?

Is he taken aback that foreign direct investment (FDI) into the country has remained largely static and is wholly inadequate to generate sufficient growth to reverse the ever-expanding ranks of unemployed South Africans? 

In short, is he taken aback that the ANC haemorrhaged support in the 2024 election by the loss of a staggering 17% of the popular vote? 

It is patently wrong to claim that BEE policies have not had a negative effect on growth and investment.

Investors who are required to fund the acquisition of equity stakes through loans and other instruments for their black equity partners are assuming liabilities of up to 30% on their balance sheets before they even start operating.

This plainly elevates investment risk. The risk of default under these instruments is real, as we saw during the financial crisis of 2008.

It is no doubt true that the country’s woeful economic performance is not exclusively attributable to BEE policies. Collapsing critical infrastructure, crime against property, weak human resource development and an appalling increase in public sector corruption have been devastating. But it is inescapable that on top of all these other troubles BEE policy increases commercial risks to investors.

BEE is making matters worse.

It is equally true, of course, that some effort must be made to redress income inequality in the country and that the racial characteristics of that inequality will contribute to serious political instability.

Yet without economic growth there can be no economic empowerment of any sort, not for blacks, whites or anyone else. Without sufficient levels of new capital investment that growth will remain elusive.

In the same parliamentary address the president correctly observed that economic assets are concentrated in too few hands. But BEE doesn’t expand the number of hands, it just changes their colour. A bit. Real expansion is driven by new sources of capital, notably from abroad. Flat, mostly downward FDI numbers must be reversed, and quickly. 

It’s impossible to conclude that an intelligent man like Ramaphosa is so naive that he cannot see that BEE is not only failing, but that it’s actively harming the country’s economic performance.

So, what is his calculus? It might have something to do with the scorn he earned from the EFF on his return from Washington. Julius Malema was quick to brand Ramaphosa a coward. 

Yet the president conducted himself with considerable poise at the televised meeting in the White House. He insisted that white farms were not being expropriated without compensation. True, perhaps, but it almost looked like an admission that expropriation without compensation is a bad idea. To be sure, it is a bad idea, but it’s the ANC’s idea and he seemed to be apologising for it.

He was also eager to point out that his government is urgently looking at limited BEE exemptions to appease Elon Musk. And he tepidly insisted that killing Boers isn’t part of “government policy”. In short, Ramaphosa looked as if he was intimidated. Worse, intimidated by a white man with an artificial tan.

The ANC cannot be all things to all people. It must pick a lane. The left wing of the party was jettisoned with the ousting of Jacob Zuma and the ANC isn’t getting it back. It cannot outflank the EFF and MK on the left. It will have to lurch to the middle. And it dare not waste time doing so.

In electoral politics there are rich pickings in the centre. Voter turnout in 2024 stood at a paltry 40%. If the government of national unity (GNU) can deliver a noticeable uptick in tangible progress it will have a chance at reigniting the support of the great majority of the country, which has become disillusioned with electoral politics altogether. 

Whether its critics like it or not, the country still needs the ANC. The alternative is simply far worse. The DA isn’t going romp to outright victory in 2029. But if things keep falling apart MK might. At best, an MK-EFF-ANC coalition is in the offing.

For its part, the DA could do a little more too. Leaving the woeful, inequitable and warped economic performance of the country up to an unfettered free market won’t win it an election, and it won’t solve the underlying problems.

There is a critical role for the state, and the DA ought to be more creative in exploring, together with its GNU partners, what that role is. If it can’t do that it stands little chance of expanding its base. It may celebrate eking out an additional three seats in 2024, but if that’s not evidence of the DA hitting a ceiling it’s hard to know what is. 

There are some aspects of the BEE programme that have merit. The Skills Development Act was a laudable effort to develop national resources in a way that is responsive to market needs. But it has produced lacklustre results. The GNU would be well served to revisit the programme. Skills development funds operated by sector education & training authorities (Setas) are a magnet for leakage, inefficiency and abuse.

Consider whether individual skills development plans that are rewarded with full tax rebates is a more efficient model, so that Setas can be disbanded and training programmes answerable to the National Qualifications Framework can advance with a minimum of red tape.

The EFF and MK have been emboldened by Ramaphosa’s visit to the White House. This should alarm us all. The EFF says it will persist with the “Kill the Boer” mantra with greater pride than ever.

Indeed, the struggle continues. But it is not a struggle against apartheid these days. And it is certainly not a struggle against the “Boers”. It is a struggle against complete constitutional and economic collapse.

• Webb is a lawyer and author.