Does South Africa want to create a society where 90% of the rich people are black?

Does South Africa want to create a society where 90% of the rich people are black? Or create a society where 90% of the population meaningfully participates in the economy? Last night the discussion invariably veered off into the pastures of the economy where discussed what we need to do to ensure broad based participation into the South African economy. I think that it is often a common assumption perhaps not among intellectuals but certainly of many people that BBE is going to address the inequality gaps in South Africa or aims to do so. It is my argument that BBE simply deracialises the elite but does not and will not change the systemic nature of the economy. The economy which has been geared and structured so as to serve a small proportion of the population. So I will attempt to answer the question on how we can ensure broad based participation in the economy with a brief critique of B-BBEE. This question requires us to grapple with the issues that have defied all the great brains of government over the past 17 years. Exactly what the youth of our country should be engaging in.

The starting point in attempting to address this question is to ask of course what ‘broad based’ really means. Broad based in a utopian sense (or Finnish sense) would include rich as well as poor, men and women, those from rural and urban areas, the youth as well as older, all workers and people with disabilities working at different levels to participate in a broad range of sectors. In South Africa the definition of broad based is intertwined with race. Many will argue that this is essential to addressing the past injustices as well as for legitimacy reasons. Thus the South African approach thus far (Broad Based Black Economic Empowerment Act) is to treat broad based as ‘Black’, which is taken to include African, Coloureds and Indians. Keeping in mind that Black is still arguably the best proxy for poor. As well as taken to include women, workers, youth, people with disabilities and people living in rural areas in our definition.

We need to establish our long term goals. Is it to

1. create a society where 90% of rich people are black?

2. create a society where 90% of population meaningfully participate in the economy

"Democracy is being blocked by the basics. For people to be able to participate, they need to feel secure, to know where their next meal is coming from, and to have dignity and health. You can't participate in the economy or in politics if you are concerned with survival." Dinokeng Scenario Booklet

I understand real participation to mean where the majority of the population meaningful participation in the economy that is option 2 above. What would this require?

1. Long term sustainable work

2. Increased access to economic activities - Job creation

3. An educated population

4. A skilled population

The DTI’s strategy it seems thus far is a Broad Based Black Economic Empowerment Strategy to overcome the legacy of Apartheid. One of the fundamental principles of Black Economic Empowerment is that it is broad-based. This is then further articulated as accelerating the deracialisation of the South African economy and fast tracking the re-entry of historically marginalised communities into the mainstream of the economy.The big questions is then of course whether our economy is big enough to mean that if our economy is deracialised that there will be broad based real participation? Will such an approach address the systematic exclusion of the majority of South Africans from full participation in the economy, the enforced restricted wealth creation, imposed underdevelopment on black communities to ensure that they were, in the main, suppliers of cheap labour, deliberate denial of access to skills and jobs or the undermining of self-employment and entrepreneurship. In combination these policies restricted and suppressed wealth and skill endowments in black communities, thereby structurally inhibiting their participation in a legislatively race-based economy. I would argue that Broad Based BEE does not ensure broad based real participation.

Broad Based BEE is not working in its present form. Very little has been achieved in changing the structures of ownership and control in the economy, there was only 5% Black ownership listed on the JSE in 2006. South African companies approach the question asking ‘what is the least I can do’ to get a good score card? That is there is no significant buy in from the private sector. It is the politically well connected that benefit from empowerment deals. Inequality has gotten worse (between group inequality) . Broad Based BEE is quite simply an elitist view to change: where an elitist approach to change minimizes change itself. The DTI has put out a tender itself to evaluate the effects of B-BBEE, an indication in itself that it is not working in its present form.

But then what are the biggest challenges we face as a society today?

1. Dual economic structure - a well developed market (termed, First Economy), and - a market that consists of majority of population poverty-trapped (termed Second Economy).

2. Economic growth 5% in 2004- 2007, 2.8% in 2010 Problems for growth; South Africa ranks out of 135 countries

- 88th in labour market flexibility,

- 123rd in flexibility of wage determination and

- 119th in poor labour-employer relations.

- With a university enrolment rate of only 15%, we rate 93rd, placing our innovation potential at risk.

3. Inequality In equality has gotten worse since the start of democracy. The economy’s Gini coefficient increased from 0.64 in 1995 to 0.69 in 2005. Furthermore Haroon Bhorat argues that this inequality growth is not as a result of changes within population groups but rather between population groups. That is the rich have gotten richer.

4. South Africa’s missing middle The rich have gotten richer and the bottom percentiles have been propped up by the grant system. This has resulted in very little growth expenditure by the middle. The stagnation in expenditure growth in the middle of the distribution is arguably a key feature of not only this rising Gini coefficient in the democratic era, but also a predictor of how the employed, blue-collar households may have inadvertently been excluded from the growth process.”

5. The PIE is simply too small. Simply deracialising the existing economy is NOT going to lead to broad based real participation. Despite the reduction of unemployment from 31% in 2003 to 24% in 2010, Unemployment is still unacceptably high. This is a systemic issue that stems from lack of skills and education. The unemployment rate among those with university degrees is only 3%, for those with matric it is 28%, but for those without matric it is over 60%.

6. Lack of skills In 2007, there was an estimated shortage of 300,000 skilled workers. The ‘brain drain’ is considered an unintended consequence of Affirmative Action 7. Education South Africa ranks among the lowest in the world on basic literacy and numeracy skills. In terms of the quality of mathematics and science education, South Africa ranks 132nd out of 134 countries surveyed by the World Economic Forum.

- 92% do not have stocked libraries

- 95% do not have stocked laboratories

- 90% do not have stocked computer centres

- 17% do not have sports facilities - 18% do not have electricity

- 20% do have proper access to water

- There are still 395 mud schools in the Eastern Cape

- In 2007 less than 5% of Matrics received a higher grade pass

The World Economic Forum ranks an “inadequately educated workforce” as the most problematic factor for doing business in South Africa.

What is the way forward then?

1.New Growth Plan’: President Jacob Zuma declared 2011 South Africa's "year of job creation". The government's New Growth Path aims to create five million jobs by 2020 and bring unemployment rate down to 15 per cent. At least six key sectors, including infrastructure development, agriculture, mining, the "green" economy, manufacturing and tourism, had been identified as having potential to unlock employment opportunities. Whether this will be successful remains to be seen but what seems apparent is clear political will.

2.Tackling the skills deficit: Supposed to be the Sector Education Training Authorities (SETAs) set up to address the problems of skills shortage by firstly identifying the skills requirements of the sector and then educating and training new entrants into the labour market in response to those identified. They have wholly failed to achieve their goals even though they have generous resources from tax payers in which to do so. Such resources, the resources we have, need to be used effectively. Government also needs to acknowledge the mistakes they made in closing 100 technical colleges including nursing and teaching colleges and reopen these colleges. The same goes for organised business and labour ‘for failing to collectively address the skills shortage.’

3.Education: The crisis in education is the most prominent issue currently being addressed in South Africa. Some ideas that I have and have garnered from various discussions is that 'minimum norms and standards' for basic education are in dire need of being published by the department. The department needs to do this so as to ensure that the (unqualified) Right to Education in schools is immediately realisable. Schools need to have increased managerial capacity and accountability. We need to regain more broadly teacher’s commitment to the profession. A significant proportion of teachers are under-qualified, demoralised and lack professionalism. We have the highest rate of teacher unionism in the world (over 80%). While it is commendable that teachers are well organised, the commitment of the teacher unions to the all important job of ensuring that our children are properly taught is perhaps questionable. The unions often make efforts to improve education impossible. Despite the legal requirement to establish governing bodies, there are few effective mechanisms by which parents can hold teachers accountable, particularly in poor communities with poor literacy rates.

Education has perceived insurmountable challenges given the abhorrent legacy of Bantu Education. We, however, need a sustainable commitment from all stakeholders. There is great urgency in eradicating the Apartheid legacy and the people of this country will not and should not be patient.

Finally I feel that there are a number of additional inputs which are necessary. We need strong leaders who can mobalise society behind clear objectives and goals. We need to improve state capacity. There needs to be political accountability. We have a culture of mediocrity, incompetence, fraud, corruption, nepotism and entitlement and that culture needs to change to one of active and engaged citizenship. Finally and I think most importantly we need a sense of ownership and ‘nationhood’. A major challenge facing South African leaders is the will to build one nation across racial or class divides. "Until South Africans unequivocally forge a single common identity out of our diversity, we will not be able to harness the social capital needed to address our critical challenges."

References:

Dinokeng Scenarios

DTI BBE Strategy

WEF: Global Competitiveness Report, 2008-9; see also World Bank:

Doing Business, Report 2009.

Haroon Bhorat