To BEE or not to BEE


What South Africa’s economic empowerment programme can teach us about our own.

NELSON Mandela’s death has impacted many around the world. For example, he was referenced in the closing speech at the recent Umno general assembly, which expressed “sadness and appreciation for the freedom fighter and man of peace of whom it is hard to find an equal, because Umno fights on the same principles” (translated from Bahasa Melayu).

Some may note the irony that this was mentioned at a conference for a party that fights for the rights of one particular race, while Mandela was remembered as a man who fought to bring the races together.

Yet, if we look more closely, we will see similarities between both South Africa and Malaysian economic policies to improve disparities between the rich and poor.

When the African National Congress (ANC) won power in South Africa, Nelson Mandela encouraged blacks to put aside their differences with whites and build a better nation together. But apart from the societal divide, it was recognised that the economic gap between blacks and whites also had to be bridged. In 1993, the average annual income of blacks was 10.9% that of whites.

Initially, large companies, especially from the lucrative mining industries, were mandated to have a certain percentage of black ownership. Almost overnight, ownership of some of the most profitable companies in South Africa changed hands. In 1998, the value of such transactions amounted to ZAR 21 billion South African rand (then worth approximately RM14 billion).

These schemes culminated in a formal programme called the Black Economic Empowerment (BEE) (later fine-tuned and supplanted by the Broad-Based Black Economic Empowerment programme). Under the BEE, companies were given scorecards, measuring everything from how many blacks are hired in a company (and in which positions), to the racial makeup of the companies they procure their supplies from.

(Ironically, the government initiative still carries the legacy of apartheid, because the formal definition of the beneficiaries is based on the former apartheid race classification system that was so villainised under the former regime.)

However, the decade and a half of trying to improve the lot of blacks through these programmes have only made a marginal difference. Despite large increases in average black salary, white households still earn about six times more a year. Given the current trend, it will take until 2061 for white and black households to earn the same average.

In detail, the problem is more acute. The greatest economic disparity now is no longer between whites and blacks, but between rich blacks and poor blacks. Despite the initial objective of helping all blacks, it seems that how much you stand to benefit depends on how educated you are – which correlates to how rich you already were.

Or, if you believe some sources, how connected you are. According to a paper presented at a workshop organised by Yale University and Cape Town University, “major infrastructure investments ... might be still more often secured by golf-course hand-shakes rather than by social and economic cost-benefit calculations” and that “the leading financial and mining conglomerates are increasingly reaching into the state and the upper echelons of the ANC and its Leagues”. With such a degree of interrelationship between politics and business, corruption is seen to be rife.

On top of everything else, these empowerment programmes have created a backlash of resentment from some white South Africans. They claim that they are finding it hard to get jobs because their places are taken by blacks who end up “fronting”: being hired to fulfil quotas but are not actively involved in business operations. As a result, white South Africans talk about leaving their homeland to find work abroad.

The parallels with Malaysia’s situation are obvious. Even more so when you consider that the Malaysian Government’s latest initiative announced in September is called the “Bumiputera Economic Empowerment” or BEE. It may be completely different in implementation when compared to its South African counterpart, but both have a similar objective: To improve the economic disparity between one race and the others.

The disparity in Malaysia is real, despite the many improvements over the last five decades. In his speech at the launch, the Prime Minister noted that although Bumiputera household income has risen 2,500% between the 1970s and now, the current average income by somebody who is Chinese is still 1.43 greater than that of a Bumiputera.

However, of concern to me is that the risks that plagued the South African initiatives may still apply in Malaysia. The rich will get richer at the expense of the poor; politics will interfere with business and vice-versa; and the minority will feel they are being discriminated against.

Even while Mandela was alive, there were pockets of resentment from blacks who believed that he had let the whites keep too much in return for peace. There are fears that this resentment will now spill over without Mandela’s hand to keep the simmering lid on. Already last year, 34 miners at Marikana who were protesting for better pay were shot by the police. Perhaps economic resurrection takes time, and any attempt to speed it up along racial lines is likely to be inefficient.

The ones most likely to take advantage of incentives are those with knowledge and resources, which is why large companies and rich individuals make the most of subsidies and tax breaks. And no matter how transparent governments are when ensconced with business, allegations of corruption will always arise.

Whatever the reality of how effective the programmes are, feelings of discontentment and distress may overshadow any good work done.

There is much to learn and be inspired by Nelson Mandela and his successes. However, I believe there are also valuable lessons from what he didn’t manage to do, and it would do us well to learn from them.

 Logic is the antithesis of emotion but mathematician-turned-scriptwriter Dzof Azmi’s theory is that people need both to make sense of life’s vagaries and contradictions. Speak to him at star2@thestar.com.my

 

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To BEE or not to BEE

   

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