Monday, June 29, 2009

The ABC of BEE

Thanks Vince R for suggesting I post this here.

One of the joys of living in a new country is experiencing new type of business practices. South Africa has something called BEE, or Black Economic Empowerment, which sounds very noble and highminded but in reality has be shown to be something different.

The argument goes, black man downtrodden by racism and oppression, so black man has no money. Therefore, the new regime must right the wrongs of the past by finding ways to empower “previously disadvantaged” person. Make sense so far? Unfortunately, the method of ‘empowering’ people is simply to chip away at what other people have built, not to create something new. And that is not the only problem with the system.

There are no doubt egregious differences based on historical inequalities, and most of these in the New South Africa stem from educational deficits. So, Sipho can’t get a job because he can’t read or write. This is unfortunate and must be rectified. The answer would seem simple, bolster the education system, and help people in Sipho’s position. But the Government is not interested in that, the reasons for which I will not speculate on here. The solution provided is to give Sipho a job in civil service, where he will not improve his skills, but will merely add to other people’s difficulties and handicap the civil service.

This scenario is remarkably common. Instead of adjusting past injustices by launching an all-out war on the education system’s inability to improve the standard of education in South Africa, the government is effectively dumping unskilled people onto the public and private sectors and saying “it’s your problem”. Their solution is to render education unnecessary! What message does that send out to young black people?

BEE is applied in the business world by giving preferential treatment to companies with BEE point. I recently saw one of these BEE tables, and was surprised at what I read. Types of people are graded according to their race and sex. Black women seem to be top of the pile, with Indian and Coloured people next, and white males squarely at the bottom. Depending on how many of these different kinds of people you employ or have on your board of directors, you are awarded points. For example, you get a lot of points if 51% of your directorship is BEE-friendly, if 70% of your employees are, or, and this confounds me, if you give 1% of your income to a “black charity”.

Company shares are sold to people of a certain colour only, contracts are given out only to BEE companies. Individuals have gotten rich, often due to connections within the ruling party (and yes this also happened with the old National Party). But ordinary black people are suffering as a result, with businesses becoming less efficient, less competitive, and profits – and therefore taxes – heading south. Workers are laid off because their companies are in the hands of incompetent managers, and other those few managers have benefitted – but only temporarily, until the company hits the wall.

One of the net results of BEE is white flight. Young white men in particular find it difficult to get jobs, but because they are educated and skilled, other countries snap them up. So the brain-drain is massive, and a vacuum of skills is created. The cost of this to the economy is in the millions of Rand. Another problem with the system is that it is RACIST. No less so than the system it succeeded. Since when have two wrongs made a right?

The idea of making right past wrongs is a fair one, one which most people were willing to accept as the price of reconciliation, but 15 years later, BEE lumbers on like an embarrassing drunken uncle, leaving only disaster in its wake. 15 years is long enough to educate an entire generation of children – why aren’t they achieving through merit? If they aren’t, then perhaps business people and taxpayers should not be being asked to right a perceived wrong they did not cause.

Who can really succeed when that success comes as a result of discrimination? If you know that you got where you are because of your skin colour, how can you ever say you have achieved? There are many talented and intelligent non-whites in South Africa today, and those often have nothing but contempt for BEE. They have worked hard and earned their success, and are no more willing than white South Africans to see another cheat his way to the top.

6 Opinion(s):

Anonymous said...

The cost is not just millions of Rands. There is a massive snowball effect from one person leaving. Local shops have less money spent in them, local doctors, dentists... other people with skills suffer and that has a knock on effect too.

It's just not the person who leaves, it is there irreplaceable knowledge, their buying power, their employing the great unwashed power, their fines, taxes, rates, and levies. It all leaves with them... So does the capital which is now employed in another country.

South Africa does not just lose a white face when a skilled white man leaves with his family. They lose everything that his existence here sustains... the welfare state, the tax base, etc. He is also not only lost but his future generations are lost too. Who will want their children to come back to this shithole after creating a new life for them far away from this place.

BEE is one of the most damaging policies to EVER be implemented, but the munts love it so it is here to stay come hell and starvation.

Anonymous said...

@Anon. Indeed. I had approximately 60 employed before I left. Another of our bloggers probably had an equivalent amount, or more. Coupled to this, we depart with our wealth and our intellectual property. It would be intersting to do a tally of jobs lost, simply through the readers visiting this site and who are now expats.

Anonymous said...

Not to mention that the BEE requirement is effectively (at its minimum) a 25.1% tax. Plus it stifles real entrepreneurship because 25% - 50% ownership of an established business is less risky and more rewarding financially, than starting your own enterprise.

Exzanian said...

BEE creates an intolerable situation for everyone. CEO's, Executives and managers. There is a terrible fatalism about it. Whatever goes wrong, must simply be picked up and fixed by someone else. Poor performance is excused, performance management becomes a joke. Recipients cotton onto this very quickly and the race card is easily employed at every turn and mediocrity sets in. But it soldiers on, like the drunken uncle that we keep feeding and clothing, hoping one day he will be on his own two feet.
The fear that the ANC has, is that if this artificial means is withdrawn, competent whites will quickly re-assert their natural abilities and takeover again. There has to be a "check/ balance" against this, and crude as it is, BEE fits the bill. The effect is not only discrimination against whites, but also against competence.

Scorpion said...

Well said Anon, and great article.

It all seems so blatantly obvious! One thing Africans have a great natural tendency for - from their dictatorial leaders further north to the thick of BEE down south - is their ability to delve out solid ground from under their own feet much more effectively than erotion can ever do.

BEE solidly screws over the white man, but very soon blacks will also feel the negative effect and it will take decades to correct.

Thanx for a great blog.

Tim Johnston said...

@Scorpion
well said. ultimately the black man will suffer far more.
In every civilised country, the majority nurtures and protects the rights of productive minorities - for example the Jews in America and Britain, and those countries have benefitted as a result.
Putting business in the hands of people who don't know how to run a business causes the employees, i.e. the poorest, to suffer, just to make one man rich.
BEE also helps award government tenders to people who have no idea of costing. Ultimately the cost of the job far exceeds the original quote, and legitimate businesses who would have done the job cheaper at a realistic price suffer.
VI says it best, it's a 25% tax on business. Not because the black "front man" is incompetent - he may not be. But BEE teaches him he doesn't need to be competent, he just has to be black.