Black Empowerment Policy Stirs Criticism, Divisions in S. Africa

A dispute between South African President Thabo Mbeki and Nobel laureate Desmond M. Tutu has opened up divisions over a key government policy meant to redistribute wealth to blacks.

Under the Black Economic Empowerment strategy, aimed at redressing apartheid-era inequities, companies with substantial black ownership and management get preference in government contracts.

But retired Archbishop Tutu and others have criticized the policy for enriching what they call a “recycled” black elite that repeatedly benefits from the big deals while the majority of blacks have become poorer during the last decade. A recent study by the Human Sciences Research Council of South Africa showed that 57% of the population lives below the poverty line.

Many in South Africa express concern about the enrichment of a small elite with connections to the ruling African National Congress, and some fear that an enduring black underclass of such vast numbers could prove fertile ground for a revolution.

In a recent address in Johannesburg, Tutu warned that a decade after the end of apartheid, South Africa was sitting on a powder keg of poverty.

Analysts argue that the empowerment strategy, commonly known as BEE, is also undermining the country’s economic development by rewarding political connections instead of entrepreneurial skill.

Last month, in his weekly letter on the ANC website, Mbeki said the idea that the program benefited an elite connected to the party was false and accused Tutu of being less than honest in his criticisms.

The controversy has widened the rift between the government and its trade union and Communist allies, who are critical of the policy. And Mbeki’s sharp reaction to Tutu’s reproaches has fueled criticism that the ruling party is intolerant of dissent.

Critics of the empowerment policy include ANC Secretary-General Kgalema Motlanthe, who complained in a recent speech that the same names were mentioned over and over in BEE deals, and Moeletsi Mbeki, the deputy chairman of the South African Institute of International Affairs at the University of the Witwatersrand in Johannesburg. Mbeki, the president’s brother, argues that big business has used the program to create a lobby for its interests in the ruling party.

The criticisms focus on numerous controversial deals. One involved the acquisition of a 15.1% stake in Telkom, the phone monopoly, by a group of ex-government officials, including the former director-general of the Department of Communications.

In another deal, Standard Bank agreed to sell a stake to a group led by former ANC chief Cyril Ramaphosa and former ANC lawmaker Saki Macozoma. Another bank, Absa, agreed in April to sell a 10% stake to a company associated with mining magnate Tokyo Sexwale, a onetime ANC leader who, like former President Nelson Mandela, was imprisoned at Robben Island in the apartheid era.

President Mbeki argued that the empowerment program covered business deals between individuals outside the government. But in State of the Nation, an annual publication on South Africa’s progress, analyst Roger Southall said official and unofficial ANC involvement in business deals verged dangerously on crony capitalism.

“The danger remains that the massive opening up of easy opportunities for ... blacks, which is being engineered by BEE, will place a scramble for personal enrichment ahead of a drive for entrepreneurship and productive investment,” wrote Southall of the Human Sciences Research Council, which published the report.

In an interview, Moeletsi Mbeki said that in time the empowerment policy could create an unproductive black elite like the old aristocrats of Europe.

“What will happen in South Africa if this carries on is that you will create a class of wealthy blacks who are not entrepreneurs, so they are not creating jobs, they are not adding value to the economy or to the society,” he said. “So rent-seeking becomes the core culture amongst the black elite and rent-seeking is not a productive process -- it’s a destructive process in the end.”

Rhoda Khadalie, once South Africa’s human rights commissioner, said that being in government was a quick steppingstone to instant wealth. “What we are seeing is nervous white businessmen who are also greedy and who are concerned about the survival of their companies making BEE deals with the new black elite,” said the former ANC activist.

She said President Mbeki did not like criticism of his government and had “surrounded himself with sycophants.”

“A government that stood for accountability, democracy and justice is going off the rails,” she charged. “The problem is, if you are an insider critic of the ANC, then you are labeled a traitor, a sellout, an Uncle Tom. If you are white and you criticize government, you are a racist.”

Sampie Terreblanche, economics professor at the University of Stellenbosch, said the program had helped create a black middle class but had failed to alleviate poverty.

“BEE is not doing what it’s supposed to do to solve the inequality problem and the poverty problem and to deracialize the economy. On the contrary, poverty has increased dramatically in the last 10 years,” he said, arguing that the nation, once deeply divided along race lines, is now divided on class lines.

“The ANC must ask itself what will be the verdict of history on the BEE strategy in 20 to 30 years’ time when all the corruption and all the inside deals and nepotism around the BEE is on the table?”