LETTER: Time for alternative BEE policy
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Correct as he is about the growing chorus of condemnation of black economic empowerment (BEE), a more biting critique of the policy than Andile Ntingi’s contribution is hard to imagine (“BEE fattens the elite and leaves crumbs for the poor masses” (../2020-08-30-andile-ntingi-bee-fattens-the-elite-and-leaves-crumbs-for-the-poor-masses/), August 30).
Experience from around the world suggests that policies based on ascriptive group identity invariably produce the outcomes he points to. Where preferences are extended to “groups”, advantages and benefits will accrue to those best placed to seize them, who tend not to be those whose plight is invoked as a justification for such policies in the first place.
Where economies are growing and overall opportunities for prosperity are available, this may be less noticeable. In a country such as SA — with low growth and enormous developmental deficits, compromised governance but a complex regulatory architecture — its impact is quite predictable. Not only does it throw up barriers to business but it has acted as a means for corruption and rent seeking.
More than this, such policies can and do introduce perverse incentives. It is the “connected” who profit, not the entrepreneurial. And international experience shows those profiting may well not even be from the “preferenced” group; it requires only that enterprising business people learn to game the system. And they do. The benefits of a BEE contract will seldom be seen in an informal settlement.
Ntingi is correct that we need something different. The Institute of Race Relations has put forward an alternative — economic empowerment for the disadvantaged. This is founded on the recognition that growth is imperative, and that the appropriate object of the country’s policy preferences should be its millions of poor citizens. BEE will not and cannot deliver the upliftment they are entitled to.
Terence Corrigan
Institute of Race Relations
JOIN THE DISCUSSION: Send us an e-mail with your comments. Letters of more than 300 words will be edited for length. Send your letter by e-mail to letters@businesslive.co.za (mailto:letters@businesslive.co.za). Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Experience from around the world suggests that policies based on ascriptive group identity invariably produce the outcomes he points to. Where preferences are extended to “groups”, advantages and benefits will accrue to those best placed to seize them, who tend not to be those whose plight is invoked as a justification for such policies in the first place.
Where economies are growing and overall opportunities for prosperity are available, this may be less noticeable. In a country such as SA — with low growth and enormous developmental deficits, compromised governance but a complex regulatory architecture — its impact is quite predictable. Not only does it throw up barriers to business but it has acted as a means for corruption and rent seeking.
More than this, such policies can and do introduce perverse incentives. It is the “connected” who profit, not the entrepreneurial. And international experience shows those profiting may well not even be from the “preferenced” group; it requires only that enterprising business people learn to game the system. And they do. The benefits of a BEE contract will seldom be seen in an informal settlement.
Ntingi is correct that we need something different. The Institute of Race Relations has put forward an alternative — economic empowerment for the disadvantaged. This is founded on the recognition that growth is imperative, and that the appropriate object of the country’s policy preferences should be its millions of poor citizens. BEE will not and cannot deliver the upliftment they are entitled to.
Terence Corrigan
Institute of Race Relations
JOIN THE DISCUSSION: Send us an e-mail with your comments. Letters of more than 300 words will be edited for length. Send your letter by e-mail to letters@businesslive.co.za (mailto:letters@businesslive.co.za). Anonymous correspondence will not be published. Writers should include a daytime telephone number.