Is South Africa’s Black Empowerment Policy Working?

Is South Africa’s Black Empowerment Policy Working?

While South Africa’s black empowerment programs have enriched a few black leaders, significant financial power remains in the hands of white South Africans, who occupy 73 percent of top business management jobs, the Employment Equity Commission said in an April 20 report, according to a report at Bloomberg.com.

By 2007, 56 senior African National Congress officials had positions on listed companies’ boards, according to a study published by economics professors Daron Acemoglu of the Massachusetts Institute of Technology, Stephen Gelb of the University of Johannesburg and James Robinson of Harvard University.

On June 20, South Africa’s National Assembly approved changes to the empowerment laws allowing the government to levy fines of at least 10 percent of sales against companies for deliberately misrepresenting the measures they have undertaken to promote black participation.

The amendments also provide for the establishment of a new commission to oversee compliance with empowerment laws and investigate complaints about violations. No new ownership diversity requirements were proposed, the report said.

While President Jacob Zuma says black empowerment needs to be refined and that “the majority of the black people still suffer as they did many years ago,” he denies the black empowerment policy has failed or is politically tainted.

“I don’t think it is true that black economic empowerment has benefitted ANC people only,” he told lawmakers in Cape Town on March 20, according to the report. “It has benefited a particular percentage of the black people in this country who are not ANC. If there are people who may be ANC, who are black, who qualify for black economic empowerment, why should they be punished, why should they not participate?”

Of the 54 South Africans who own listed shares worth more than 500 million rand ($50 million), a dozen were black or of mixed race, a study published in 2012 by Johannesburg’s Sunday Times newspaper shows. Four of them have held senior posts in the government or ANC, including Cyril Ramaphosa, the party’s deputy president, and Tokyo Sexwale, who was human settlements minister until July 9, Bloomberg.com reports.

“No one in his or her right mind would disagree with the need for structural transformation of our economy,” Mamphela Ramphele, former chairwoman of Gold Fields Ltd. (GFI) said in a May 8 interview in Cape Town. “Yet for the last 10 or 15 years we have seen the same people benefiting from a multiplicity of deals. They are the people who are politically connected.”

African Rainbow Minerals Ltd. (ARI) is part-owned by Patrice Motsepe, the richest black South African. Worth $2.2 billion, he is a beneficiary of the country’s policy to spread the wealth to blacks after the end of apartheid, Bloomberg.com reports.

Villagers near Rainbow’s Modikwa platinum mine say in 2000 they were promised schools, hospitals, homes and roads in the hills of Limpopo province, and they are still waiting.

Modikwa officials say the company spent 110 million rand ($11 million) on community development projects, including a $6.5-million road, and recruits more than three-quarters of the mine’s workforce from the surrounding area.

“You might not necessarily with the naked eye see the improvement in the community, but I’m certain that from where we were 10 years ago to where we are now there has been a lot of development,” said Mokgosi Nkoana, the mine’s general manager. “To really satisfy all of them isn’t a 10-year process, it’s a lifetime process.”

The mine has taken over some grazing space for cattle herds, said Kabelo Madilo, who set up a committee to pressure the mine into managing the community stake more transparently, said. Blasting has cracked some of the brick houses and collapsed some boreholes used to access ground water, he said.

Motsepe “became successful because of his influence on politics,” Madilo said. “Black economic empowerment is working for politicians and their friends only.”

That view isn’t shared by all in the village. Edwin Cheloani is chairman of a committee looking after the villagers’ interests in Modikwa. The mine helped communities set up five companies that supply labor, waste removal, maintenance and gardening services to the mine.

“It’s difficult to keep some individuals happy because they want to benefit personally” and the mine can’t provide for all community members, Cheloani said.

“I’m happy the mine is here, but they don’t give us anything,” said Doris Madingwane, who helps run a kindergarten for 35 preschoolers in the area. She says the mine reneged on a promise to upgrade two classrooms, which let in the rain.

Black empowerment been a success, according to Renfrew Christie, dean of research at the University of the Western Cape in Cape Town.

“South Africa would have had another violent revolution if we had not fixed the lily-white nature of the top of the economy,” he said in an email, according to the  Bloomberg.com report. “We now have a surprisingly large black middle class, given where we started.”

African Rainbow is 10 percent owned by church groups, women’s organizations and trade unions through the company’s Broad-Based Economic Empowerment Trust, which has distributed 74 million rand ($7.4 million) to rural projects, the company says.