Affirmative action in the form of black economic empowerment (BEE) needs a reality check, economists have warned.
Racism accusations flared up this week after medical aid giant Discovery launched its banking facility last week, announcing a BEE share scheme amounting to 10% of its equity. While minority rights activists, such as AfriForum’s CEO Ernst Roets, vowed to call the corporation to task, experts differed on whether BEE was a justified policy direction for society and the economy.
Iraj Adebian, chief executive at Pan-African Investment and Research Services, said South Africa’s history necessitated some form of BEE, but stressed it was equally important to scrutinise how it was implemented and whether it encouraged real growth for the economy.
BEE share schemes that took decades to mature and become revenue streams its beneficiaries would not address the immediate needs affirmative action should address.
“The reality is there is a symbolic role BEE is playing,” said Adebian. “And coming from a history where marginalisation was institutional and designed for disempowering the majority, that recognition is very important, and any action that seeks to address the need for the correction of an injustice has its place.
“But that is just the symbolic side of it. With the economy, that depends on how one goes about doing it. You can deal with the symbolic side of things but the reality of economic empowerment is just as important.”
Discovery responded to Twitter criticism of their BEE scheme, stating the company was simply complying with BEE legislation. The Association of Black Securities and Investment Professionals’ Stephen Seaka concurred.
“Discovery Bank’s decision is in line with the financial sector transformation code. This provides that banks should sell 10% of their equity to black people,” he said.
“This is less than other industries, in which the general rule is 25%. Discovery is complying with long-established policy that saw other banks sell their stakes (equity) into black hands.
“The noise from other quarters is disturbing, as the BEE legislation was promulgated to enable transformation in the financial sector services, so that those who were deprived can become part the economy.”
Efficient Group economist Dawie Roodt said BEE had largely benefited a select few black people and had only resulted in further inequality, while fuelling racial tensions.
Trade union Solidarity and AfriForum also protested recently, saying BEE policies were discriminatory against poor white people.
Skills development, focused on the youth – especially girls – was key to a more equal society, suggested Roodt as an alternative to BEE.
“BEE is a sensitive issue, but what we really need to ask is what we can do to uplift the poor? We need to find sustainable answers. Research has shown we need to start with skills development, not education.”
Roodt said the top-down approach to dealing with economic disparities did not address the reasons why they existed in the first place.