In the fight about BEE and whether or not to replace it with a raceless programme that directs help to the generic poor rather than to politically connected black elites, the space for compromise is being lost.
We’re scared of ideas here. Any serious assessment of our economy would have to conclude that the ANC’s placement of redress and BEE at the centre of economic and industrial policy has largely failed even though a handful of businesses blessed with BEE money may be making good now. The gap between rich and poor in SA is worse now than it was in 1994.
By the same token, proposing a scheme that ignores race and uses poverty as a measure of need, as now proposed by the DA, is to turn a blind eye to the reality that racial redress is still essential here, if only because successive ANC governments have performed so poorly.
At the heart of complaints about BEE is that the ANC has rewarded its own supporters with funding in the expectation of getting some of the funds back. The funding of left-wing parties the world over is difficult and more often than not corrupt.
Both the ANC and DA policies play to their own supporters, but what if you took control of BEE out of political hands? President Cyril Ramaphosa has just dragged his cabinet around Asia, and for any interested minister, the stop in Malaysia would have been instructive. Malaysia uses its sovereign wealth fund as the centre of its efforts to lift the majority Malay population out of poverty.
Both the ANC and DA policies play to their own supporters, but what if you took control of BEE out of political hands?
Malaysia’s affirmative action policies (designed to narrow the gap between Malays and Chinese and Indians) excited the ANC early on, but even though the growth of Malaysia’s oil industry provided the money, its efforts at sovereign wealth funds have been plagued by corruption and saw a prime minister jailed.
But a sovereign wealth fund in SA makes sense if it is properly done. The people who got it right are the Norwegians. Their sovereign wealth fund, worth about $2-trillion (R34-trillion), is the biggest in the world. It’s run out of the Norwegian Central Bank, and the governor is the chair.
If we had a civilised discussion here, the creation of an SA sovereign wealth fund that provides money to BEE would be reasonable. The Reserve Bank would run the fund as an investment arm with a board above reproach. Legally enforceable fiscal rules would say what percentage of its profit it could give the Treasury and government of the day or reinvest or transfer to its reserves.
The bulk would be reinvested because the fund would have the fortunes of future generations at its heart, and those investments would, in turn, need to follow legally enforceable guidelines about where to invest — half in SA and half abroad. And if it didn’t make a profit, it wouldn’t pay anyone. The fund would have a free carry of 5% in the target of any acquisition from abroad and 2% in any greenfield foreign investment.
Legally ringfenced
BEE funding would be legally ringfenced. Bodies like the Industrial Development Corporation and provincial development agencies would get their money from the state’s allocation and their own profitable investments. The state would be required to remove all barriers to foreign investment into the country and remove all racial staffing quotas imposed on firms operating here.
Centralising the funding (though not the ultimate beneficiaries) of redress to an apolitical institution like the Reserve Bank would take a lot of the poison out of our politics. The state would still be free to allocate its allocation as it pleases, but it would have a built-in incentive to be more careful with the money.
• Bruce is a former editor of Business Day and the Financial Mail.
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