The DA’s Big Shift on BEE
DAILY FRIEND.CO.ZA / 18 MARCH 2020 - 05.00 / JONATHAN KATZENELLENBOGEN
It is weeks since the DA’s Draft “Economic Justice” policy paper was released. Despite the bombshell of the key proposal in the document there has been hardly any debate on the matter.
The draft paper rejects a major tenet of economic policy in post-1994 South Africa: that of race-based redress through Black Economic Empowerment (BEE). It says the answer to South Africa’s poverty problem is not BEE.
Instead, the paper wants government to aim for economic growth and work with business to meet 17 United Nations (UN) Sustainable Development Goals (SDGs.) Special interventions to address key problems which lie behind poverty , including measures to ensure children stay longer in school and ensuring good childhood nutrition are proposed.
Under the proposal, when the government awards a contract, price and quality would always be the winning factor, but where two companies are neck and neck, a high SDG score would be the clincher.
“Corporate contributions to achieving the SDGs will make greater impact on the lives of South Africans than the narrow requirements of the BBBEE scorecard.” says the paper.
Under the ANC, South Africa has endorsed the UN’s Social Development Goals and claims to be pursuing them, but when it comes to contracts and tenders, adherence to BEE regulations is the decisive factor.
According to critics, BEE hugely inflates the cost of almost everything while channelling profits into the pockets of an elite. The DA calls its new policy “a change from trickle-down to bottom-up redress” in the sense that rather than pursuing enrichment of an elite, it would focus on targeting poverty. BEE failings have been written about here and here on the The Daily Friend site.
BEE is not helping the country attract investment. The European Union Chamber of Commerce has said BEE is the foremost legislative challenge for their member companies. The SDGs are an international standard and many investors are at ease with them.
The goals which were endorsed by the UN General Assembly are strongly focused on helping the poor. These include: No Poverty, Zero Hunger, Good Health and Well-being, Quality Education, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth. There are also goals for Industry, Innovation, and Infrastructure, Reducing Inequality, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life Below Water, Life On Land, and Peace, Justice, and Strong Institutions. The aim is for tangible progress to be made in these areas by 2030.
This is not the stuff out of which election campaigns are built, but it does allow the DA to claim they have a better plan than the ANC. An election campaign has to be based on simple and clear offerings such as: ‘the DA runs things better where it is in power, the DA is not corrupt, and the DA will create jobs’.
The policy will be put to a policy conference at the end of the month, and to be secure, it must survive beyond the party’s leadership election at the end of May.
In what turned out to be a massive misjudgement, the DA, in its previous ‘ANC-lite’ guise, stuck by BEE out of fear of an electoral hammering. But it received a hammering anyway in 2019, with a heavy loss of Afrikaner and black support, due to what was perceived to be an overall lack of direction.
The rejection of BEE is nevertheless brave, as it opens the DA to a line of attack. Accusations about the party being “anti-transformation” are a predictable part of the ANC’s campaign repertoire, but a defence of “we have a better plan to target the poor” could make for a successful campaign.
For the document’s supporters, its approval at the Policy Conference will be an important victory in confirming the party’s return to its liberal roots. It is a clear rejection of group rights and an upholding of those of individuals.
Globally, one of the great problems in development policy has been to reach the poorest 20 percent of the population. Sustained economic growth greatly helps, but the promises of subsidies, preferences, and infrastructure usually fall wide of the mark in benefiting the very poorest. Abandonment of BEE and a focus on growth and the SDGs could have a greater appeal.
Arguments against the SDGs might be put into two categories – either too much intervention or too little. Free marketers would argue that SDGs amount to an unwarranted interference in business, and growth alone over a long period would achieve the same goals.
Moreover, the SDG requirement lowers returns and the monitoring and reporting add to overheads, and could be the thin end of the wedge for greater government control over investment decisions. The argument might also be made that the goals should be for governments alone. In addition, the point might be made that they are a form of discrimination against old industries like steel, oil, and mining, which still play a large role in the economy.
And given the multitude of policy agendas, some might argue that other goals should be added or that the goals are too unambitious, or that tighter monitoring is required.
The reality is that an increasing number of the world’s largest companies in the US, Europe, and Japan accept that they have a role in meeting these goals. They want to help create a sustainable environment in which they can do business, and address stakeholder concerns.
There is also growing demand among pension funds and other investors who want to back, for example, companies which favour clean energy and environmental issues. In many cases companies under the SDGs would have to do what they are doing anyway as a result of existing regulation.
The economist Milton Friedman believed that the only responsibility boards had was to their shareholders, but there is now a growing shareholder base that wants these development goals.
According to a Bloomberg Intelligence report released last year, about 60 percent of large EU and Japanese companies discussed them in their public communications last year. And at least 10 investment funds have been created to integrate the SDG goals, due to demands from pension fund managers.
Big business in South Africa has a long involvement in corporate social responsibility, and is increasingly helping small towns after the collapse of municipal and government services. Government should give business massive credit for this.
The DA could have a test bed for its “Economic Justice” policy in the Western Cape. The extent to which it succeeds (even though provincial government economic powers are narrow,) could present a serious challenge to the ANC. And pursuing such a policy would also allow the DA to show in clear terms it is not ‘ANC-lite’. The electorate might just reward it for that.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER