Asset 4.png


OPINION: Sovereign fund a solution to inequality and a catalyst for social cohesion


BEE deals ensure that power and wealth remains only in the hands of the elite

Creating an inclusive economy in SA has been undermined for centuries by a few self-serving individuals. Colonialists, broederbonders and now a small number of beneficiaries of the cynically named “broad-based” BEE (BBBEE) codes have continued the tradition of creating a few super-rich, with little or no benefit to the average South African, in general, and the historically disadvantaged sections of the population, in particular.

It is difficult to justify the owners of BEE shares continuing to benefit from their clever schemes of laying their hands on assets they made no contribution to creating, while those who were exploited to create these assets are still living in poverty and going through waves of assault on their dignity with every change of the governing elite.

In a global race to the bottom of having, SA is disastrously leading the way in inequality, with the worst Gini coefficient — the world standard of measuring disparities in wealth.

The ANC’s policies have spectacularly failed to tackle this issue, and the reality of the application of ownership rules of BEE legislation and evermore horrendous revelations of corruption explain why this is so.

In a global race to the bottom of having, SA is disastrously leading the way in inequality, with the worst Gini coefficient — the world standard of measuring disparities in wealth.

Even with the recently renewed hope that the ANC can change, it would be naive to trust it blindly. Like the rest of us, even the leaders of the party’s various factions seem now to fundamentally distrust their own organisation.

Given this situation, it is truly astounding that the political discourse has not advanced in proposing workable solutions to creating a more inclusive economy.

The discussion of socialist solutions fails to acknowledge that most ideas of the left have already been implemented. While some have worked (pensions, social grants), others have failed spectacularly, and overall they have not achieved economic inclusivity.

The application of capitalist solutions to economic redress, such as SA’s BEE codes, have not worked either. They have led exactly to what Thomas Piketty has shown is the natural tendency of capitalism, namely evermore concentrated wealth in the hands of fewer and fewer individuals. SA provides the perfect case study for this both before 1994 and, sadly, even more so after 1994.

We should review the benefits companies get from having black ownership, as it typically serves the ruthless few to the detriment of the people. The current sections of the BEE codes on ownership should be replaced with a scheme of genuine and equal ownership by all the people of SA. That is what economic transformation should be about.

The solution is remarkably simple, but obviously not favoured by the commanding heights of government and the corporate world, who knowingly or unknowingly work towards concentrating as much wealth in their hands as possible.

The solution is to build a structure that creates wealth not for the state or the investor clique, but for the people, such as creating a sovereign wealth fund that is not owned by the state or a group of investors, but equally by all people.

The fund should be governed by a board that is directly voted for by the people, rather than the government. With available communications technology this could be organised in a relatively cost-effective way.

The two big questions, then, are how it should be funded and who should benefit. The short answer to funding is that it should be funded out of what already rightly should be owned by the people. The recent find of gas off the coast of SA would be an ideal event to kick off the fund.

Of course Total, the company that found the oil, needs to be appropriately rewarded for the investment and risk-taking required to make the find. But it would be ridiculous to suggest the oil belongs to anyone other than the people of SA. Of course, the vultures in the public and private sectors are already circling to seize the value of the oil.

Mining rights and the proceeds emanating from those rights should be housed in the sovereign wealth fund. How can the state possibly claim to rightfully own these when it has so shamelessly enriched the few at the expense of the many?

So far, the contracts granted by the state to empowered companies have related mostly to being suppliers to state-owned companies and corporations governed by the BEE legislation. They fail to entice private individuals to make purchasing decisions with a view to empowering people. I would much rather make my weekly food purchases with a retailer that is partly owned by the people than enrich investors who make little or no contribution to the company, me or the broader public.

To be clear, the sovereign wealth fund should not typically own private-sector companies outright, but similar to the Public Investment Corporation (PIC), it should own meaningful stakes in these companies without necessarily getting ultimate control. Despite its current problems, nobody would reasonably argue that the PIC has undermined our free-market economy.

The fundamental principle of a sovereign wealth fund is that all people must benefit equally. Typical contributions the fund makes to people could be a regular payment to pensioners, a payment similar to a basic income grant, or supporting equal access to education for all. These would not be guaranteed payments, but would be made mindful of the prerogative to protect the value of the sovereign wealth fund, in line with the performance of its assets.

A fund like this would contribute to the cohesion of our society and the understanding that we do not just work for ourselves individually, and that by being productive and making purchasing decisions we also contribute and take care of everyone in a society. Having so many still excluded from meaningful participation in the economy is to everybody’s detriment.

• Heil (@DominikHeil) is a partner at Hewers and a sessional lecturer at Wits Business School and Cranfield School of Management.



Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

28 views0 comments