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Introduction

South Africa’s affirmative action and black economic empowerment (BEE) policies are probably the most wide-ranging and ambitious in the world. They can be traced back to the political transition in 1994, which brought the African National Congress (ANC) to power as part of a government of national unity committed to providing redress for more than four decades of racial discrimination under the National Party government.

Racial discrimination in the apartheid era permeated every nook and cranny of society, stunting the lives and betraying the hopes of millions of black people. The system was aptly summarised by John Kane-Berman, then a journalist on the Financial Mail, who wrote in 1974: ‘Discrimination … governs every facet of our lives from the cradle to the grave – and even beyond, since even our cemeteries are racially segregated. It is enforced where we live, where we work, where we play, where we learn, where we go when sick, and on the transport we use. Not only does the government condone it; it systematically pursues it, preaches it, practises it, and enforces it.’1

When negotiations for a ‘new’ South Africa began in 1993, all parties to the talks thus agreed that the country’s constitution must strictly prohibit racial discrimination and rigorously uphold the principle of equality before the law. However, it was also recognised by the National Party government, the ANC, and other parties to the talks that simply to repeal all remaining discriminatory laws would not suffice. Remedial measures would also be required to help overcome the legacy of past discrimination and open up opportunities for black citizens.

As in the United States (US), the analogy of the ‘shackled runner’ made sense to many South Africans. In his 1965 commencement address at Howard University, US President Lyndon B Johnson said:

Freedom is not enough. You do not wipe away the scars of centuries by saying: Now you are free to go where you want, and do as you desire, and choose the leaders you please. You do not take a person who, for years, has been hobbled by chains and liberate him, bring him up to the starting line of a race and then say, ‘you are free to compete with the others’, and still justly believe that you have been completely fair. Thus it is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates … We seek not just freedom but opportunity. We seek not just legal equity but human ability, not just equality as a right and a theory but equality as a fact and equality as a result.2

To help provide such opportunity, Johnson called for ‘an equal chance to learn’, for ‘decent homes in decent surroundings’, for ‘better care for the sick’, and for many more jobs to ‘bring the income which permits a man to provide for his family’. He also identified, as perhaps the ‘most important’ of the complex barriers to upward mobility, ‘the breakdown of the family structure’, which at the time saw ‘less than half’ of all African-Americans growing up ‘with both of their parents’. Added Johnson: ‘The family is the cornerstone of our society. More than any other force, it shapes the attitude, the hopes, the ambitions, and the values of the child. And when the family collapses it is the children that are usually damaged. When it happens on a massive scale, the community itself is crippled. So, unless we work to strengthen the family, to create conditions under which most parents will stay together, all the rest: schools, and playgrounds and public assistance, and private concern, will never be enough to cut completely the circle of despair and deprivation.’3

Though Johnson’s words of some 30 years earlier may not have been expressly cited in the debate on affirmative action in South Africa in the early 1990s, his view that freedom had to be supplemented by opportunity resonated deeply with many people in the country. To buttress this perspective still further, the ANC in 1994 put forward a compelling case for affirmative action in employment, business, and land ownership.

Affirmative action, said the ANC, would ‘mainly’ take the form of correcting past injustice through the application of ‘normal and non-controversial principles of good government’. However, there would also have to be special measures to bar racial discrimination, bring about ‘balance in the armed forces, the police, and the civil service’ and ensure that the workforce as a whole became ‘representative of the talents and skills of the whole population’.4

At the same time, said the ANC, black economic empowerment (BEE) would be needed to help remove ‘all the obstacles to the development of black entrepreneurial capacity’ and unleash ‘the full potential of all South Africans to contribute to wealth creation’. Affirmative action would also be required to rectify land ownership, strengthen the property rights of all, and make land available for housing as well as to those who wished to farm.5

While recommending these interventions, the ANC acknowledged that affirmative action could harm as well as help, depending on the way that it was implemented. Said the organisation: ‘If well handled, affirmative action will help bind the nation together and produce benefits for everyone. If badly managed, we will simply redistribute resentment, damage the economy, and destroy social peace.’6

In an additional passage that is generally overlooked, the ANC signalled that it saw affirmative action as an alternative to simply ‘confiscating the spoils of apartheid and sharing them out amongst … the dispossessed’. This latter option would have ‘the immediate attraction of correcting historical injustice’, the party said, but it ‘could not realistically be advanced’ against the background of the negotiated political transition. In addition, in the current circumstances, it would lead to ‘capital flight, the destruction of the economy, and international isolation’.7

In retrospect, these words provide an insight into the ANC’s ultimate objectives. At the time, however, they attracted little public coverage or comment. Instead, the parties to the constitutional talks pressed on with the immediate need – the drafting of provisions to bar racial discrimination while also authorising measures aimed at creating opportunity for the disadvantaged. Three important clauses, in particular, were drawn up and included in the 1996 Constitution in order to promote these goals.

Relevant constitutional provisions

The first of these clauses is a founding provision of the new order, which explicitly identifies ‘non-racialism’ as a core value of post-apartheid South Africa. So strong is the country’s commitment to this principle that this clause may not be amended except by a 75% parliamentary majority.

The second key provision is the equality clause (Section 9), which expressly requires equality before the law; bars discrimination on racial (and other) grounds; and requires those who nevertheless discriminate on racial grounds to prove the fairness of their conduct. As an exception to these general rules, the equality clause incorporates a sub-section authorising the taking of ‘legislative and other measures designed to protect or advance persons … disadvantaged by unfair discrimination’.8

The third key clause (Section 195 of the Constitution) calls for a ‘public administration that is broadly representative of the South African people’. However, it also makes it clear that the pursuit of broad representivity must not be allowed to trump other needs. The clause thus stresses the importance of employment practices ‘based on ability, objectivity, and fairness’. It also requires the public service to ensure the ‘efficient, economic and effective use of resources’.9

Another founding clause – which also needs a 75% majority to change – reinforces the binding force of these provisions by guaranteeing the ‘supremacy of the Constitution’ and adding: ‘The Constitution is the supreme law of the Republic; law or conduct inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.’

By contrast, the Constitution makes no mention of racial targets, or the ANC’s goal of demographic representivity. This last is a shorthand term for the idea that every group should fan out into the workforce, and every other sphere of society, in strict accordance with its share of the national population. But this supposed demographic ‘norm’ does not in fact exist in any heterogeneous society – as research by US expert in affirmative action Professor Thomas Sowell and other international scholars has repeatedly shown. Moreover, as these scholars note, in assessing what degree of representation is appropriate for any group, relevant criteria such as age, education, and experience must be factored in, not overlooked.

The Constitution is thus firm in its endorsement of non-racialism, equality before the law, and the importance of an efficient and effective public service. Where it authorises affirmative action, it does so for the specific purposes of ‘protecting or advancing’ the unfairly disadvantaged, or making the public service more ‘broadly representative’ (provided, in this instance, that this is not at the expense of ability, fairness, effectiveness, and efficiency). The Constitution also makes it clear that these affirmative action provisions are exceptions to its general principles of non-racialism and equality before the law. Hence, like all derogations from general rule, these exceptions must be interpreted narrowly, so as to limit the extent to which they detract from the wider principles in issue.

In addition, in discussions on how affirmative action should in practice be implemented, it was generally agreed by all parties to the talks that the most effective steps would lie in:

 ■ providing excellent education,

 ■ making major improvements to living conditions,

 ■ quickening the pace of economic growth,

 ■ encouraging direct investment, and

 ■ creating conditions conducive to the generation of very many more jobs.

On this basis, millions of black South Africans currently mired in poverty would gain the opportunity to reach and scale the ladder to economic success.

The ANC’s other objectives

Behind the scenes, however, the ANC had other objectives in mind. In particular, it had long been committed to a national democratic revolution (NDR) aimed at eliminating existing property relations and ensuring demographic representivity in every sphere of society. In addition, its allies in the Congress of South African Trade Unions and the South African Communist Party – joint rulers with the ANC in the governing tripartite alliance – had long identified the NDR as providing the shortest and most direct path to a socialist and then communist society.

The ANC also believes that the national democratic revolution exempts it from having to comply in full with either the negotiated settlement or the Constitution thereby adopted. In the ANC’s perspective, ordinary political parties may commit themselves to binding outcomes that cannot be altered save by mutual consent, but a national democratic movement with a historic mission cannot be deflected from its long-term objectives by the tactical concessions it might be compelled to make along the way. Such an organisation may find it expedient at various times to enter into compromise agreements that will help to strengthen its position. However, once the balance of forces has shifted in its favour, it will not hesitate to disregard or circumvent the compromises earlier made.10

Since coming to power in 1994, the ANC has regularly recommitted itself to the national democratic revolution. This has been particularly evident at its five-yearly national conferences in Mafikeng (North West) in 1997, Stellenbosch (Western Cape) in 2002, and Polokwane (Limpopo) in 2007. Its most recent reaffirmation of this commitment was at its national conference at Mangaung (Free State) in December 2012.

However, the media has shown singularly little interest in exploring the national democratic revolution and its significance. This means that most South Africans have little information or understanding about the ANC’s commitment to continuing revolution. This helps explain how a supposedly limited form of affirmative action has quietly morphed into a complex set of employment equity, BEE, and land reform rules that are cumulatively eroding business autonomy, undermining property rights, crippling public service efficiency, choking off direct investment, retarding economic growth, and adding to a crisis of unemployment within the country.

These outcomes fly in the face of what BEE is intended to achieve. Empowerment policies are supposed to be key levers for putting millions of black South Africans on the path to prosperity, but instead their benefits have gone mainly to a relatively small black elite – many of them well paid but often ineffective public servants. Though BEE has thus helped to expand the black middle class, it has also fostered a toxic mix of inefficiency, waste and corruption that frequently causes great harm to 19 million poor South Africans heavily dependent on the state for schools, hospitals, houses, water, and other services.

At the same time the vast majority of these truly disadvantaged individuals have little or no prospect of ever gaining the management posts, ownership deals, preferential contracts, or new small businesses that BEE provides to the privileged few. Most of the poor are unskilled, while more than 8 million of them are also unemployed. Moreover, within the low-growth economic environment that empowerment policies have helped to bring about, few have realistic prospects of finding regular work or otherwise climbing the ladder to success. Hence, far from making it easier for them to get ahead, BEE is harming rather than helping the great majority of black South Africans.

The evolution of BEE

This book sets out to explain the evolution of empowerment policies in all their different aspects. Relevant laws include the Employment Equity Act of 1998, the Preferential Procurement Policy Framework Act of 2000, the Mineral and Petroleum Resources Development Act of 2002, the Broad-Based Black Economic Empowerment Act of 2003 and its generic codes of good practice, and a series of land reform measures already implemented or in the policy pipeline.

This account breaks new ground in pulling all these laws together and describing the relevant legislation in accessible layman’s terms. In doing so, it helps provide a broad overview of what the rules say and how they have been implemented. In this respect, it is a simple but essential ‘everyman’s guide’ to BEE.

However, the book also canvasses the difficult issues that most commentators downplay or avoid. Instead of ignoring the ruling party’s commitment to a national democratic revolution, it shows how BEE in all its aspects is helping the ANC realise its revolutionary goals. It also points to the many negative consequences of these increasingly dirigiste interventions – especially for the 19 million truly disadvantaged South Africans unlikely ever to benefit from racial targets and set-asides.

In addition, the book shows how empowerment goalposts are steadily being changed. This is not happenstance, but what the national democratic revolution requires. For example, most firms subject to the BEE generic codes have put huge efforts into compliance – so much so that their BEE ratings average around 70%. But the BEE generic codes are nevertheless now being ratcheted up to make compliance far more difficult. In addition, executives will soon face jail terms of up to ten years for ‘undermining’ BEE objectives. These changes are likely to provide a further barrier to direct investment and worsen unemployment, thereby adding to ‘revolutionary potential’.

Many other empowerment laws are also being tightened up – particularly those dealing with employment equity in the private sector and BEE in the mining and oil industries. In addition, despite the failure of some 90% of land reform projects, the supposed need to speed up land transfers is being used to justify a comprehensive assault on property rights which, in the end, will by no means be limited to agricultural land.

Even in the education sphere, the stated need for faster ‘transformation’ is being used to serve NDR goals. This justification has already been used to give the minister of higher education (also the general secretary of the South African Communist Party) extraordinary powers to fire university councils and bring the country’s autonomous universities under an unprecedented degree of state control.

In very many spheres, the pattern is the same. The need for remedial measures to help overcome apartheid injustices is being used by the ruling tripartite alliance to implement the national democratic revolution. Yet the media largely persists in turning a blind eye to this process and what it portends. As John Kane-Berman, consultant to the Institute of Race Relations, has recently written, ‘the commentariat is sleeping through the revolution’.

A lack of critical scrutiny

The silence from most commentators points to another problem – a lack of critical scrutiny of BEE in all its aspects. This is partly because of its supposedly remedial aims, which tend to be taken at face value, so limiting proper evaluation. In addition, the fact that BEE is based on racial identity makes the system still more difficult to criticise for fear of being labelled a racist or apartheid apologist.

The playing of the race card to discourage and deflect criticism has been present from the start. It first emerged in 1997 when the Employment Equity Bill was unveiled – and those who spoke up against its likely damaging impact were castigated as racists and ‘sirens of self interest’. Yet these critics included the Institute of Race Relations and its then vice president, Helen Suzman, both renowned around the country and the world for their fight against racial discrimination.

The racial foundation of BEE has had other consequences too. In particular, it has breathed new life into the Population Registration Act of 1950, under which all South Africans were previously officially classified as African, coloured, Indian, or white. The National Party government repealed the statute in 1991 as part of the political transition. But in 2014, almost a quarter of a century later, university students (most of them born after the statute was abolished) are still being asked to classify themselves into the very same apartheid-era categories. So too are public servants, private sector employees, applicants for jobs, and business people seeking procurement contracts from the state or other firms. Without BEE in its present form, racial classification might by now have become a distant memory: something that older generations had been obliged to endure but which ‘born-free’ South Africans could escape. Instead, current BEE rules keep racial tagging alive.

Though racial goodwill has greatly improved since 1994 and remains yet strong, BEE’s emphasis on racial identity reinforces racial stereotypes and fosters polarisation around race. It also undermines the core values of non-racialism and equality before the law, and opens the way to racial scapegoating. South Africa, of all countries, should know the risks here. The ANC is also well aware of them, as it made clear in 1994 when it warned that affirmative action, if poorly implemented, could ‘redistribute resentment … and destroy social peace’.

Overall, BEE in all its diverse aspects has become very different from the limited measures advocated by the ANC back in 1994. Yet critical assessment of this shift in policy and practice has largely been lacking. This book aims to fill that gap. By bringing all the relevant material together, it seeks to make it easier to grasp all the BEE rules, assess the impact they have had, and understand the bigger NDR picture of which they form so vital a part.

Anthea Jeffery

Head of Policy Research and Dick Gawith Fellow, IRR