THE Free Market Foundation (FMF) has joined the chorus of critics who deem the Broad-Based Black Economic Empowerment (BEE) a failure, that has instead of empowering the majority of marginalised black people benefited only a few politically connected elites.
Various civil society groups, including the Institute of Race Relations (IRR), have over the past few years warned that the BEE was marred with corruption and favouritism instead of transforming black people's economic status.
In a piece published on the FMF website on Tuesday, FMF director Eustace Davie called for the scrapping of the policy, which then-president Thabo Mbeki signed into law in early 2004, as it had unintended consequences for the economy.
“One of the most harmful outcomes of BEE is the culture of favouritism it has created.
“The policy gives bureaucrats and government officials the power to hand out contracts and tenders based on BEE scores,” wrote Davie.
Davie said the policy had achieved political goals that opened a door to corruption and favouritism.
“BEE has done exactly that, leading to manipulation, political patronage, and massive corruption.
“This has led to the rise of ‘tenderpreneurs’ - individuals who use their BEE status to secure lucrative government contracts, often without the necessary skills, qualifications or experience to carry out the work,” he said.
Davie said well-established businesses were struggling to thrive and contribute to the country’s economy as they had to focus mostly on being BEE compliant.
Davies said the policy had led to the collapse of service delivery as a result of contracts being awarded to unqualified and politically connected individuals.
“This mismanagement has resulted in wasted resources, collapsing infrastructure and unending inefficiency,” said Davies.
“This has resulted in businesses spending more time navigating regulations and seeking political connections than focusing on merit, innovation, and efficiency.
“Businesses are no longer focused on improving their services or expanding their operations; instead, they are driven by the need to meet BEE requirements.
“This diverts attention away from merit and competitiveness, reducing productivity and efficiency in the economy,” said Davies.
Late last week six engineering firm directors accused of BEE-fronting and tender fraud to the tune of R400 million at Eskom and Sasol were arrested.
IRR researcher Chris Patterson said early this month: “Policy must be judged on its outcome, not its intention, and it is crystal clear that the outcomes of BEE policies and legislation have been poor.
“A ten-year analysis of the unemployment statistics shows that the unemployment level of black South Africans has increased from 28,1% in the third quarter of 2013 to 36% in the latest figures, a percentage point increase of 7.9%, said Patterson.
Patterson established through the South African Social Security Agency (SASSA) that nearly 10 million have never been employed and most of them were unlikely to be ever employed.
“This is another clear indication of BEE’s failure,” said Patterson.
Perspectives on how to address the shortcomings vary.
Although the Communist Party of South Africa (SACP) and Cosatu also held the view that the BEE had failed millions of black people, they differ from the IRR and MFM’s call for the policy to be discarded.
“What we need is broad-based empowerment that will uplift and empower the formerly oppressed in economic ownership and management control terms.
“To be broad-based, this must not be elitist, but it must target empowering the masses through the pursuit of large-scale employment towards the realisation of the right of all to work in practice, real worker ownership and management control,” said SACP spokesperson Alex Mashilo.
Mashilo said those who were calling for the scrapping of the BEE were “racially biased think tanks and NGOs, who seek to preserve the advantages their population group inherited from the history of white privilege, which was anchored in capitalist super-exploitation of the formerly oppressed.”
“South Africa is a single country but the legacy of the past racial, class and gender divisions persists.
“The capitalist market is daily reproducing the inequalities handed over by that period,” said Mashilo.
FMF Head of Policy, Martin van Staden said although it was unlikely that the the current parliament would undo the whole BEE framework, there were signs of “a more pragmatic approach developing.”
“BEE is far more open to debate today than it was a decade ago, and its foundations will only continue to crumble in light of its unavoidable failures.
“No country that has widely deregulated and liberalised its economic policy environment is poor – not one. The best replacement for BEE is an open economy with minimal government interference,” said van Staden.
Cosatu spokesperson Zanele Sabela said because of the damage done to South Africa by 350 years of discrimination it was compelling that the legacies of the past should be addressed.
“Yes it (BEE) has been abused at times and hence the government has fine-tuned criteria guiding it.
“We cannot ignore the realities where the key levers of the economy or even senior management positions are still dominated by white males.
“As a trade union federation, we are keen to see more done to roll out employee ownership schemes as a key way of de-racialising our economy and empowering and uplifting workers and unlocking the economy,” said Sabela.