Entitlement distorting transformation

I can predict when South Africa’s “Tunisia Day” will arrive. Tunisia Day is when the masses rise against the powers that be, as happened recently in Tunisia. The year will be 2020, give or take a couple of years.

The year 2020 is when China estimates that its minerals-intensive industrialisation phase will be concluded.

For South Africa, this will mean the ANC government will have to cut back on social grants, which it uses to placate the black poor and to get their votes. China’s industrialisation phase has forced up the prices of South Africa’s minerals, which has enabled the government to finance social welfare programmes.

The ANC inherited a flawed, complex society it barely understood; its tinkerings with it are turning it into an explosive cocktail.

Former British prime minister Margaret Thatcher once commented that whoever thought that the ANC could rule South Africa was living in cloud-cuckoo-land.

Why was she right? In 16 years of ANC rule, all the symptoms of a government out of its depth have grown worse:

Life expectancy has slid from 65 to 53 since the ANC came to power.

In 2007, South Africa became a net food importer for the first time.

The elimination of agricultural subsidies led to a loss of 600 000 farmworkers’ jobs and the eviction from commercial farming of 2.4 million people between 1997 and 2007.

The ANC stopped controlling the borders, leading to a flood of poor people into South Africa.

What should the ANC have done? When they took control of the government in 1994, ANC leaders should have identified South Africa’s strengths and weaknesses and decided how to use the strengths to minimise or rectify the weaknesses.

A wise government would have persuaded the skilled white and Indian population to devote some time – even an hour a week – to train blacks and coloureds.

Instead, when the ANC came to power it identified what its leaders and supporters wanted. It then used South Africa’s strengths to satisfy the short-term consumption demands of its supporters – in essence, black economic empowerment.

BEE promotes extremely negative socio-economic trends. It promotes a class of politicians dependent on big business and therefore promotes big business’s interests in the upper echelons of government.

Second, BEE promotes an antientrepreneurial culture among the black middle class by legitimising an environment of entitlement.

Third, affirmative action, a subset of BEE, promotes incompetence and corruption in the public sector by using ruling party allegiance and connections as the criteria for entry and promotion in the public service.

I first came across the concept of BEE at a company, which no longer exists, called Sankor, the industrial division of Sanlam.

The first purpose of BEE was to create a buffer group among the black political class that would become an ally of big business. This group would use its new power as controllers of the government to protect the assets of big business. The buffer group would also protect the modus operandi of big business and thereby maintain the status quo.

Sanlam established BEE vehicle Nail; Anglo established Real Africa, Johnnic and so forth.

The conglomerates gave their marginal assets to politically influential black people, with the purpose, in my view, not of transforming the economy but of creating a black political class that is in alliance with the conglomerates and so wants to maintain the way our economy operates.

There are many things wrong with how conglomerates operate and how they have structured our economy:

The economy has a built-in dependence on cheap labour.

It has a built-in dependence on the exploitation of primary resources.

It is unfavourable to the development of skills in our general population.

It has a bias towards importing technology and economic solutions.

It promotes inequality by creating a large, marginalised underclass.

Conglomerates are a vehicle not for creating development here but for exploiting natural resources without creating in-depth, inclusive social and economic development, which is what the country needs.

The second problem with the formula of BEE is that it does not create entrepreneurs. You are taking political leaders and politically connected people and giving them assets which, in the first instance, they don’t know how to manage.

So you are not adding value. You face the threat of undermining value by taking assets from people who were managing them and giving them to people who cannot manage them. BEE thus creates a class of idle rich ANC politicos.

My quarrel with BEE is that what the conglomerates are doing is developing a new culture – not one of entrepreneurship, but one of entitlement, whereby black people who want to go into business think that they should acquire assets free, and that somebody is there to make them rich, rather than that they should build enterprises from the ground.

We cannot build black companies if what black entrepreneurs look forward to is the distribution of existing assets from conglomerates in return for becoming lobbyists for the conglomerates.

The third worrying trend is that the ANC-controlled state has internalised the BEE model. We are seeing the state trying to implement the same model that the conglomerates developed.

What is the state distributing? It is distributing jobs to party faithful and social welfare to the poor. This is a recipe for incompetence and corruption.

This explains the service delivery upheavals that are becoming a normal part of our environment.

So what route should South Africa be on? Given the implosion of the former Soviet Union, the creation of a state-owned economy is not an option.

If we want to develop the country instead of merely shuffle existing wealth, we have to create new entrepreneurs, and we need to support entrepreneurs to diversify into new economic sectors.

Mbeki is the author of Architects of Poverty: Why African Capitalism Needs Changing. This article forms part of a series on transformation supplied by the Centre for Development and Enterprise and first appeared in Business Day.