Radical transformation the only way to halt monopoly grip on economy
Push-back against policy is evidence of private sector’s determination to retain status quo for own self-interest
Two weeks ago SA’s richest man, Richemont chairman Johann Rupert, described the government’s agenda for radical economic transformation as “a code word for theft”. It is regrettable that this scathing critique of the black-majority government came from a beneficiary of the largesse of the interventionist apartheid state. Rupert can thank what historian Dan O’Meara called “volkskapitalisme” for the stellar fortunes of his late father’s and his impressive empire.
By means of volkskapitalisme, the racist Nationalist Party government leveraged state power and state assets such as state-owned banks to buoy Afrikaner businesses and turn them into the corporate behemoths of today.
For him to now ring alarm bells at signs of state intervention in the economy in postapartheid SA is ironic.
Rupert’s comments speak to a wider tendency by sectors of SA’s business community to ascribe all the modern ills facing the economy to chronic state “mismanagement”, and not to stubborn and distorted patterns of economic ownership they themselves continue to perpetuate.
Today, only 3% of SA’s economy is black-owned, according to the Department of Trade and Industry, and a meagre 23% of all companies on the JSE are black-owned.
Blacks comprise only 21% of the executive teams in SA’s top 40 companies and the number of black CEOs running JSE-listed companies has dropped from 15% in 2014 to only 10% in 2015.
The top portion of income earners in SA are still white, with black graduates three times more likely to be unemployed than their white counterparts.
The majority of the privately owned land in SA remains in white hands.
The reality is that limits exist regarding the ability of the state to absorb millions of the poor and marginalised people into the formal economy, create jobs and deliver services.
Questions need to be asked about the role of the private sector in levelling the playing field from an economic perspective, and whether it has, in fact, “come to the party”.
For anyone with an interest in seeing SA’s economy healthy and prosperous, there is a pressing need to transform the economy. The question is, why must this by necessity be radical? The answer may be found in the fact that since 1994, the champions of market forces have been telling us that a hands-off approach to managing the economy would lead to a “trickle-down effect” that would solve our problems of poverty and underdevelopment.
This has not been borne out by reality. SA’s Gini coefficient is one of the highest in the world. As the World Bank noted in a 2014 study, we remain “a dual economy with one of the highest inequality rates in the world, perpetuating both inequality and exclusion”.
Yet South African business hasn’t suffered the fate of the urban and rural poor. The IMF notes that the after-tax profits of our companies are among the world’s highest. Corporate taxation policy is among the most favourable of developing countries.
According to the Financial Intelligence Centre, illicit financial flows cost SA about R60bn in 2015-16 and the figure is rising. This, of course, excludes the capital gains enjoyed by local, mainly white shareholders. So, even with our being one of the most unequal societies in the world, business hasn’t fared badly.
The work of the Competition Commission has exposed the ugly face of what Vladimir Lenin called “rogue capitalism”. The bread price-fixing scandal of 2007 was a stark reminder that capital is not by nature altruistic, and that the country’s large monopolies have scant regard for the effects of their actions on those who are hardest hit by their relentless pursuit of profit.
The 2014 Soccer World Cup stadium contracts scandal resulted in the state (and the South African taxpayer) being overcharged by billions of dollars, but the silence from business and the likes of the Organisation Undoing Tax Abuse was deafening, as it was following the commission’s investigation into the collusion of 18 (that we know of) large banks in foreign exchange trading.
That some of SA’s largest banks “made false sales to drive up demand” or “colluded to agree not to trade for specific periods of time” would be a scandal of immense proportions elsewhere. And yet, somehow, the insidious effect of white-collar crime in SA fails to bring the crowds onto the streets in the same way that government corruption scandals do. This illustrates a hypocrisy and double standard that is worrying.
It is these and other excesses of laissez faire capitalism the ANC government seeks to check by introducing policy and regulatory reform as well as radical economic transformation.
Cartelism, monopolies, predatory lending by banks and insurance companies, price- and exchange rate-fixing and contract inflation are some of the excesses the ANC government seeks to check. They haven’t just hurt our economy, but the poorest of the poor.
According to the ANC, the objective of radical economic transformation is “to reduce racial, gender and class inequalities in SA through ensuring more equity with regards to incomes, ownership of assets and access to economic opportunities”.
In line with our commitment to radical economic transformation, we have introduced policies to advance broad-based black economic transformation, formed a black industrialists programme, set ownership and equity targets for key sectors such as mining, updated legislation for the just and equitable expropriation of land, and are working to broaden access to banking services for the poor through the push for a state-owned bank.
In societies such as ours with high levels of historical inequality, attempts by governments and regulators to loosen the stranglehold of monopoly power over the economy have inevitably been met with resistance.
In his famous essay, “Of the one percent, by the one percent, for the one percent”, economist Joseph Stiglitz notes that in societies “where a minuscule fraction of the population – less than 1% – controls the lion’s share of the wealth; where wealth is a main determinant of power … the wealthiest often stand actively in the way of policies that would improve life for people in general”.
What we need, and have, is a capable and developmental state to intervene to tackle and resolve these discrepancies. The ANC government will not be deterred from its programme of radical economic transformation by those intent on preserving the status quo for their own interest.
We will continue to pursue this path that is in the interest of the majority of our people, and not the select few.
Molewa, a member of the ANC’s national executive committee, is environmental affairs minister and chairs the Cabinet’s international co-operation, trade and security cluster.