BEE a virtual reality?

South Africa’s President Mbeki told a conference of the ‘World Economic Forum’ (WEF) in Cape Town, “We are no longer debating what kind of development programme is needed for Africa, we are all agreed. What’s needed is the next step ‘ finding the funding.” Niall FitzGerald, chairman of the British news agency Reuters, instructed African representatives at the same summit, to “open their economies to more competition, stimulating business through deregulation, simplifying and reducing corporate taxes and freeing labour markets”. He demanded: “Africa needs to take more risks.” At the same time all conference goers agreed, “Investors’ negative perceptions of Zimbabwe were a major barrier to investment in neighbouring countries”. Condescending ‘carrot and stick psychology’ is indeed the common mindset of international Western politicians and the international capital markets. “Let Africans do the dirty work for foreign interests.” In other words, Africa should open itself up for easier and faster exploitation. And, Zimbabwe’s president Mugabe is perceived to be standing in the way of such cruel greed. Mugabe’s land ownership policy defined by the international community as “land grab” remains the major obstacle. To move on, one needs to define ‘direct black African ownership’, particularly in Africa’s hailed role model for democracy, South Africa. It commands a sophisticated economy, which currently undergoes a boom time. South Africa is perceived to be an economic giant not only in the Southern African Development Community (Sadc), but also throughout Africa. Dr. Azaar Jamine, senior economist and head of the Johannesburg, South Africa based economic institute, Econometrix, explains three categories of ‘black African economic ownership’. (i) Direct black African ownership of listed companies (on the Johannesburg Stock Exchange, JSE and/or other exchanges), who have acquired and paid for their shares in those companies with their own funds. This is a miniscule group below 5% of share capital as there is just no ‘black African capital’, nor do Africans have any access to capital. (ii) The next category has bought its shares with loan capital and makes out about 7% of the share capital. (iii) The following category is by far the largest with 15% of share capital – that is ‘deals arranged on promises only’. When and how will aforementioned translate into real, broad based ownership? Chances are never. According to the South Africa based research company into Black Economic Empowerment (BEE) accomplishments, Empowerdex – “the ten black (African) owned JSE companies account for a paltry 0,4% of the exchange’s market capitalization”. The absolute majority of ‘black African owners’ entered the market on borrowed funds. In the meantime they also have acquired a hugely expensive lifestyle with hardly, if any ‘trickle-down-effect’ to their poor ‘kith and kin’ in the townships. That “wealth” has not even made the smallest contribution to alleviate the countrywide unemployment. It is simply wasted. Economist dr. Azaar Jamine observes, “South Africa’s white owners of the economy delay ‘Black Economic Empowerment’ (BEE) all the time. Actually, it (BEE) is not for real. South Africa’s economic ownership is buying time.” At the same time, captains of South Africa’s largest companies benefit directly from their BEE deals. Remuneration packages are vulgar. Their excessive wealth is based on a combination of cash earnings, options and shares. That creates a potential personal net asset value above ZAR100 million (about US$16 million) and more for every one of those ‘captains’. Meanwhile, labour has to battle for any real pay increases. Will the phenomenon of virtual wealth, which is observed throughout the world, eventually lead to the implosion of the international stock markets, leaving those superrich penniless? And, how imminent is it? Johannesburg’s daily newspaper, The Star, writes: “Executive pay packages continued to soar in South Africa in the past year despite the increased scrutiny, while transformation in terms of race and gender remained a distant dream.” The Star’s ‘Business Report’ notes further, “dual-listed companies, with shares in London, are particularly white and male”. This columnist has long observed South Africa’s economy as “exclusive, imperialist, cartellised and rent-seeking oligopoly, alien in Africa”. Since 1994, huge capital fled South Africa and most multi-nationals moved their head offices to London. British arch-imperialist Cecil John Rhodes’ dream to conquer Africa from Cape Town to Cairo is finally being fulfilled by South Africa’s white owned economy. As in the colonial and apartheid era, whites dictate from an economic power base. To this day they call the shots in ‘Black Economic Empowerment’ structures. In reality, BEE belongs to them. Another elite of ‘political patronage’ was eventually added. Former ANC leaders and retired senior government officials, perceived to be well connected (“networked”), qualify for jobs in the private business sector. Is it working? Well, South Africa’s booming economy is helping to defuse racial tensions that have arisen. The new ‘black African middle class’ acts as a cushion for potential tensions, while white owners have done absolutely nothing whatsoever to create a participatory economy. Zimbabwe suffered from same similar exclusive economic structures for a period of twenty years. From 1980 to 2000 black African Zimbabweans had little access to Zimbabwe’s economy, until president Mugabe had literally no option but to implement a new land ownership policy. So far, hardly anything is done to develop skills within the majority of South Africa’s population to eventually partake in leading this economy. The black African majority, which makes out 90% of the country’s 48 million people, is far removed from capital, skills, skills training and management training. How is the black African majority, the voting power base of the ruling African National Congress (ANC) benefiting? It is argued that the “opportunistic mindset of the BEE elite is doing serious harm to the majority of black African South Africans”. The masses observe how easily the elite achieved their wealth. The broad population sees how the elite is living it up. It is important that the underlying psychology of the poor masses is understood, as such “easy access to wealth” could create a new mindset of “crime and corruption are ok. It gives quick and easy access to wealth.” Public servants and other beneficiaries find themselves employed by government, dr. Azaar Jamine from Econometrix comments. “To be sure of their income packages, they have to support patronage. It would be difficult to blame them for doing so.” This created a civil service, similar to that of the “old colonial-apartheid system”. In the short term, BEE is superficially achieving what it is supposed to do, cushioning potential socio-economic unrests and defusing interracial tensions. South Africa’s ‘veneer economy’ enriches not even one percent of the nation. However, the new middleclass contributes to the ‘consumption boom and high economic growth’ currently experienced. It relies mainly on “imported goods, not creating the number of jobs it should have done” said dr. Jamine. South Africa’s BEE structures seem similar to what the Nationalist Party tried to do during its heydays under Vorster, Botha and De Klerk with the Bantustan policy – creating a middle class that can act as a buffer between the ‘haves’ and the ‘have-nots’, in South Africa’s case, between black and white. So far, BEE, like the national lotto, is sending out wrong messages. The odds are never explained to the poor wannabe-participants. But, it gives people hope to aspire to virtual economic participation and instant wealth. Meanwhile, economic substance has gone. “Networking” seems to be the most serious work done. Economic growth based on enterprise, productivity, education and skills development have made way for greed and terrible exploitation, worse than HIV/Aids and bird flu.

March 2006
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