Should an Egalitarian Support Black Economic Empowerment?

Abstract

The policy of Black Economic Empowerment (BEE) appeals implicitly or explicitly to egalitarian norms, though these are never clearly specified. This paper examines how one part of the policy—that designed to create black business elite, referred to here as ‘narrow’ BEE—measures up against a particular egalitarian yardstick, what the paper calls strong and liberal economic egalitarianism—strong in holding to an ideal of rough substantive material equality, liberal in focusing on interpersonal rather than inter-group equality. The paper argues that narrow BEE fails to produce a ‘direct equity effect’—a direct enhancement to interpersonal equality—that could plausibly appeal to strong liberal economic egalitarians. The paper nevertheless considers a variety of more indirect ways that narrow BEE might appeal, whether by yielding indirect economic-redistributive effects, appealing to economic egalitarians' interest in other, non-economic equalities—in the distribution of self-esteem and feelings of inclusion—or by helping to realise non-egalitarian values that egalitarians might nevertheless support in certain contexts, including social cohesion and diversity. Arguments in defence of narrow BEE grounded in these latter putative effects are found to be plausible, but also uncertain, precarious and in need of empirical and other forms of demonstration that they have not yet received, notwithstanding the centrality of BEE as a policy of the ANC government. The overall tenor is thus one of scepticism about narrow BEE's egalitarian credentials.

Notes

1. Indeed Southall (2005, p. 457) warns against treating BEE as synonymous with the general restructuring of South Africa's economy in favour of blacks. His ‘sociological’ definition limits BEE to policies aimed at ‘the increase of black ownership, control and management of state, parastatal and private economic activity in the formal sector’ (italics in original).

2. For an account of their early progress and reverses, see Hirsch (2005, pp. 213–220). The quoted expression comes from the title of Adam et al. (1997).

3. Hirsch (2005, pp. 210–211). Black business was supported on a limited scale by state financing agencies like the Industrial Development Corporation, the National Empowerment Fund (holding a share of the proceeds of privatisation) and the Public Investment Corporation, and by government procurement policies.

4. Various estimates from 2002 through to 2005 place black ownership of the Johannesburg Stock Exchange at anything between 1 per cent and 15.7 per cent. Everything depends on what is being measured. Direct black ownership is near the low end of that range, but the black share expands in estimates that include indirect ownership through institutional investors, the most important of which is the government-linked Public Investment Corporation. Much black direct ownership is also held against debt, and is not always accompanied by effective black control. Private sector company boards remain overwhelmingly white (77 per cent). On the other hand, blacks now dominate management of the influential state-owned business sector. Racial labelling of capital is complicated by the increasingly foreign ownership of South Africa's corporate sector. See Southall (2005, pp. 460–463); Khuzwayo (2005); Hirsch (2005, pp. 228–230); Southall (2006a, pp. 178, 181–182; 2006c); Temkin (2006).

5. A different case could be made for n-BEE that focuses on equal opportunity or fair procedure rather than egalitarian end-state distributions. Thus a black businessperson or would-be businessperson can argue that they have the same right as any other citizen to business success, where ‘same right’ in a post-apartheid context requires not race-blind procedures but affirmative measures to ensure a level playing field. Given inequality, even a strong egalitarian would prefer fair to unfair procedures in allocating people to unequal places. (Whether an equal-opportunity defence of n-BEE succeeds is another matter.) I'd like to thank the anonymous reviewer for inviting me to make this clarification; and the University of Witwatersrand philosopher, Brian Penrose, for highlighting the potential centrality to n-BEE defenders of the fair procedure argument.

6. Strong economic egalitarians can conceivably actively support affirmative action in, say, job allocation. Though support for it is not mandatory within economic egalitarianism, affirmative action in favour of blacks, women and other historically disadvantaged groups can appeal to egalitarians as a practical second-best means for realising egalitarian objectives.

7. In 2005 there were 427 black directors in the top 200 JSE-listed companies, and of these just 90 were executive directors (Khuzwayo, 2005). To them must be added the black chief executives of state-owned enterprises. Of course the aim of n-BEE is precisely to increase these numbers. But there is a limited number of potential places at the top in capitalist societies, as even BEE's defenders admit. Thus Vilakazi writes: ‘BEE will not be able to achieve mass black wealth. In all likelihood, if successful it will create a handful—relative to the vast majority who are unlikely to gain huge benefits—of financially independent individuals’ (Vilakazi, 2006, pp. 3–4).

8. Certainly the bulk of evidence suggests that inter-racial inequality in South Africa has been reducing, and indeed since before 1994. See Seekings and Nattrass (2006, pp. 304–307). It is not clear what contribution BEE policy has made to this shift, though presumably it can only accelerate it.

9. For variants of such arguments, usually applied to questions about the legitimacy of giving redistributive priority to compatriots over human beings in general, see Nelson (1974, pp. 410–430); Walzer (1983, pp. 36–42, 48); Tamir (1993, pp. 95–116, 118, 121); Miller (1995, pp. 70–73, 90–96); and Rawls (1999, pp. 106–120). There are of course many political theorists who disagree with such arguments in whole or part, as does this author.

10. According to its Preamble, the Broad-Based BEE Act is meant to ‘promote a higher growth rate’, in the process boosting employment and income equity and ending a situation where the economy ‘performs below its potential’. See RSA (2004, p. 2).

11. States of this sort have been theorised most notably in Evans (1995). For an examination of BEE in terms of its ability to contribute to an Evans-type developmental state, see Freund (2006).

12. The key point of reference here is the ‘difference principle’ or ‘maximin’ (maximising the minimum) principle of distributive justice articulated in John Rawls (1999, original 1971), A Theory of Justice: Revised Edition (Oxford: Oxford University Press), pp. 52–73, 132–136.

13. Hirsch suggests that they have often lagged behind white and foreign firms in this regard (2005, p. 212); see also Barron (2007).

14. For example, the Public Investment Corporation under CEO Brian Molefe. See Bonorchis (2007).

15. These criticisms of BEE are all drawn from Southall (2006a, pp. 196–197).

16. For a lists of dubious deals suggestive of crony capitalism, see Southall (2005, pp. 473–474; 2006b, pp. 8–12; 2006c, pp. 220–222).

17. For example, Sasol Chief Executive Pieter Cox, quoted in Southall (2005, pp. 455). The government's initially proposed 2002 version of the mining charter wiped R11 billion off the share value of mining companies (Southall, 2006a, p. 467). Local steel and engineering companies fear that the new BEE codes will put them out of business (Njobeni, 2006). Bill Lacey of the South African Chamber of Business frets that BEE places a heavy burden on smaller firms notwithstanding the exemptions they have received (Anonymous, 2006). BEE is rated as a ‘concern’ alongside crime by American businessmen considering investing in South Africa, according to the American Chamber of Commerce (Shezi, 2006). The executive director of the Japanese External trade Organisation in South Africa has cited BEE as an ‘African cost’ and a ‘hurdle’ facing prospective investors (Freund, 2006, p. 16).

18. He is quoted in Radebe (2006) as saying: ‘Everything is a race at the moment … Yes, we must ensure there is BEE and women's empowerment, but none of these can delay the roll-out of these projects. We cannot afford that luxury. It is pointless having a BEE economy that is growing at 1%. We have to hit the growth rate.’

19. On these anxieties, see Radebe (2006). Foreign investors are exempted from ordinary BEE requirements, but are required to provide so-called ‘equity equivalents’ which some regard as a tax.

20. This is the basis of the defence of BEE's economic impact by Sutcliffe (2006).

21. See Freund (2006, pp. 7–10) and Liau y-Sing (2007). Freund suggests that in Malaysia economic growth may have facilitated successful affirmative action rather than vice versa and that Malaysia's success owes more to policies supporting agrarian reform, urbanisation, mass education and foreign investment. State-assisted nurturing of a Malay professional and managerial class, as distinguished from tycoons, may have helped too—thanks perhaps to Malaysia's effective educational system. In fairness to the South African state, it is trying earnestly to promote education, land reform and foreign investment. It remains to be seen whether its affirmative action to promote a black managerial and professional class will have comparably benign effects.

22. Certainly numerous black individuals have moved from politics and government into the private sector and some of these have become fabulously rich. For a survey of the outflow up to 2003, see Southall (2005, pp. 475–476). On the way BEE fits into the ANC's evolving conception of national democratic revolution, see Southall (2004, pp. 313–315, 326–327).

23. For a trenchant critique of the ‘Mbeki instant millionaires’—their heavy presence and influence at various levels of the ANC, failure to offer anything but their ‘blackness and proximity to political power’ and their destructive effect on the ANC's ‘pro-poor outlook’—see Brown (2006).

24. For a critique of the role of affirmative action generally (including narrow BEE) in perpetuating divisive racial identities, see Alexander (2006, pp. 10–12).

25. See note 12.

26. The stability rationale is explicit in the Preamble to the Broad-Based BEE Act (RSA, 2004, p. 2). See also Hirsch, who writes of the need for ‘a strong black middle class to underpin democracy’ (2005, pp. 210–211).

27. See Seekings and Nattrass (2006, pp. 303–304).

Additional information

Notes on contributors

Daryl Glaser

Department of Political Studies, University of Witwatersrand, Private Bag 3, WITS 2050, Johannesburg, South Africa. Email: [email protected]