Em­pow­er­ment will ben­e­fit us all

Com­pa­nies should view BEE as a pre­req­ui­site for eco­nomic growth, a way to re­duce the in­equal­ity gap and cut poverty

Financial Mail - Investors Monthly - - Tickling A Nerve - THABI LEOKA Thabi Leoka is an in­de­pen­dent economist.

Black Eco­nomic Em­pow­er­ment is sup­posed to be a prag­matic strat­egy that aims to cor­rect the in­jus­tices of the past by in­cor­po­rat­ing black peo­ple into the eco­nomic main­stream. Apartheid sys­tem­at­i­cally re­stricted the ma­jor­ity of South Africans from par­tic­i­pat­ing in the econ­omy and if we are to grow the econ­omy, the full po­ten­tial of the econ­omy needs to be re­alised.

Adopt­ing BEE re­quire­ments should not be a mat­ter of em­ploy­ing black peo­ple in or­der to tick the BEE boxes.

Com­pa­nies should view BEE as a pre­req­ui­site for eco­nomic growth, a way to re­duce the in­equal­ity gap and cut poverty. I’d like to be­lieve that most South Africans sup­port trans­for­ma­tion.

At Ar­gon As­set Man­age­ment’s 10th an­niver­sary din­ner, Fi­nance Min­is­ter Nh­lanhla Nene de­liv­ered a speech in which he said trans­for­ma­tion is at the cen­tre of the South African story; it re­flects our col­lec­tive de­sire to cor­rect the in­jus­tices of the past and en­sure a sus­tain­able fu­ture.

But is trans­for­ma­tion truly at the cen­tre of the South African story? Is cor­po­rate SA do­ing enough to en­sure that ev­ery com­pany re­flects SA’s de­mo­graph­ics? The pres­sure to move up a few BEE lev­els in or­der to win ten­ders or get busi­ness from those cor­po­rates that will only deal with com­pa­nies at a par­tic­u­lar BEE level negates what BEE set out to ad­dress.

Cor­po­rates may want to ful­fil their BEE score level by em­ploy­ing black peo­ple who just tick the BEE boxes, in­stead of hav­ing a holis­tic and long-term ap­proach, which may in­volve stu­dent re­cruit­ment pro­grammes or the fund­ing of univer­sity scholars on con­di­tion that they work for the fun­der for a few years. For in­stance, a com­pany of 10 peo­ple with an an­nual pay­roll of R10m can score 12,6% on BBBEE score­card by sim­ply plac­ing one black fe­male on a dis­abil­ity-fo­cused learn­er­ship.

This en­cour­ages a fo­cus on the BEE score­card and not nec­es­sar­ily on that em­ployee’s tra­jec­tory. This sce­nario raises the ques­tion: Are we truly sin­cere about the trans­for­ma­tion agenda and if we are, why are we lim­it­ing our­selves to BEE re­quire­ments?

Na­tional trea­sury an­nounced the first in­come tax hikes in 20 years in the Fe­bru­ary bud­get. These in­creases are mainly due to slower rev­enue col­lec­tion, which is a re­sult of re­duced eco­nomic growth. The hike in in­come tax was tar­geted mainly at the mid­dle- and up­per-in­come earn­ers, lead­ing many to ar­gue that the very peo­ple who pay taxes are be­ing pun­ished.

If we were more sin­cere about trans­for­ma­tion by hir­ing more pre­vi­ously dis­ad­van­taged peo­ple and mak­ing sure they re­ceive the best train­ing, are sup­ported at the work­place, pro­moted and paid fairly, we will be do­ing a lot more for trans­for­ma­tion and ad­dress­ing in­equal­ity that so sti­fles eco­nomic growth. The de­pen­dency ra­tio of a pre­vi­ously dis­ad­van­taged per­son is high be­cause he sup­ports not only his im­me­di­ate fam­ily, but his ex­tended fam­ily as well.

SA is the only coun­try in the world that has fewer em­ployed work­ers than peo­ple on wel­fare. The quicker trans­for­ma­tion oc­curs here, the sooner fewer peo­ple will de­pend on wel­fare. If less money is al­lo­cated to wel­fare sub­si­dies and more goes to­wards in­fra­struc­ture de­vel­op­ment, we should see long-term sus­tained eco­nomic growth.

The pri­vate sec­tor pro­vides tools that can de­liver trans­for­ma­tion. It is the in­stru­ment to cor­rect broader so­ci­etal im­bal­ances but on the other hand it may also con­trib­ute and, at times, ex­ac­er­bate, those very im­bal­ances.

In­deed, the in­ter­ac­tion is very com­pli­cated be­cause pre­vi­ously dis­ad­van­taged peo­ple within the pri­vate sec­tor are both vic­tims of in­equal­ity and par­tic­i­pate in a sec­tor that deep­ens and en­trenches in­equal­ity.

South Africans have a ten­dency to rely on gov­ern­ment to lead the trans­for­ma­tion agenda.

But the re­spon­si­bil­ity to trans­form the econ­omy and ad­dress our in­equal­ity prob­lem lies with both gov­ern­ment and the pri­vate sec­tor.

SA is the only coun­try in the world that has fewer em­ployed work­ers than peo­ple on wel­fare

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