Affirmative Action

Affirmative action; or, as it is shamefully called in South Africa: “Employment Equity”, was (and is) a total failure. It is an excuse for enriching the vultures circulating around the carcass of an economy in destruction because of the unique model of “redress” applied by those that stole everything they can lay a hand on.

Affirmative action programmes, as it is currently used in South Africa, has the same cause-and-effect implications everywhere it is practiced: A few, a small group closely associated with the governing elite, monopolise the benefits it create to became enormously rich and extremely powerful, while the masses that were supposed to be the main beneficiaries remain poor and destitute.

South Africa’s affirmative action model was largely based on the Malaysian model. The problem is (and was, from the start) that this model was failing in that country. In Malaysia, the beneficiaries of affirmative action are the Malays and other indigenous groups, collective known as the Bumiputras (versus the group consisting of mostly people of Indian and Chinese descent currently dominating the economy).

With “affirmative action” I mean the collective policies and practices aimed at promoting specific ethic groups in the country, the historical deprived [or disadvantaged] at the expense of other. This include employment equity and broad-based black economic empowerment.

Gradually, over the more than twenty years since the implementation of the policy that gave effect to affirmative action, the so-called New Economic Policy, the Bumiputra share of corporate ownership also rose sharply from 1.5 per cent to 18 per cent (though this was still below the target of 30 per cent). The same happened in South Africa; the Black middle-class.

If one collapses the upper and lower middle classes, a total of 29.7% of South Africans and 24.4% of black South Africans identified themselves as belonging to the middle class in 2013.

Of that middle-class group, 61.7% were black (Korhonen, 2018). However, similar to South Africa, the beneficiaries of affirmative action in Malyasia were primarily a small selective few, and the masses supposed to reap the benefits remained poor. Similar to South Africa, patronage and cronyism have become so entrenched in the system that it is now impossible to change it, because of the vested interests that have been established. An expectation of beneficiation has developed and is now assumed as a given (Jayant Menon, 2018).

When affirmative action was initially implemented in South Africa, following the 1994 Constitutional transition, a period of 20 years was mentioned as a requirement to correct past injustices. More than that has since passed, and the requirements of affirmative action are intensifying, rather than relaxation. No pretend consideration is given about a limited period for which it will be enforced anymore; it is blatantly proclaimed as a permanent part of the South African economic policy landscape.

Similar to South Africa, the policy of affirmative action in Malaysia is driving scarce skills required for a country to meet the demands of its citizens and be globally competitive in the knowledge-based economy overseas. Same as in South Africa, affirmative action in Malaysia is promoted as a mechanism for social cohesion and promoting racial harmony, while, in reality, it is achieving exactly the opposite. Policies such as affirmative action is hailed as “positive discrimination’. Discrimination, per definition, cannot be “positive’; the very nature of the word and its meaning implies an unequal beneficiary and an associated victim.

For instance, in the United States affirmative action has increasing attracted resistance since the late 1990s, and several of the country’s states have since voted to discontinue the policy.

On a federal level, it is still on the statue books, focusing specifically on educational institutions and public places such as hospitals and police. Many universities in the country have adopted such policies on own initiative in order to promote diversity on their campuses. Until recently the United State’s Supreme Court has sided with moderate affirmative action programmes in their judgement, agreeing that race is an allowable consideration when a college determines its entry requirements.

However, the balance of power in the US Supreme Court has shifted fundamentally with two consecutive nominations made by President Trump, and there is no doubt that, legally, affirmative action will be up against it as a public policy in future. Already the Trump administration had rolled back Obama-era guidance encouraging schools and colleges to take a student’s race into account to promote diversity in admissions (Guardian, 2018).

Affirmative action in South Africa has destroyed a decade’s worth of institutional memory, contributing substantially to rolling back-outs (“loadshediing”), collapsing municipal infrastructure and incapacitated education – and health sectors. More than 85% of all experienced managers, of all races, recently interviewed will leave the country if the opportunity presents itself. There is chronic immigration of key expertise, such as medical practitioners and engineers. This is not only because of affirmative action, but affirmative action is one of the reasons – and so are the deteriorating economic infrastructure, sluggish economic growth, declining wealth-levels, poorly performing JSE and safety considerations; all partly caused by the implications of affirmative action policies.

For me the public hostility towards prominent wealthy White people in the South African national narrative is highly disturbing; not because I “like” them (in fact, I do not know them) but because it is putting enormous social and economic pressure on them; often resulting in “disinvestment” (they simply do not invest their considerable wealth in the country’s economy anymore, because the risks have become too accurate) and [secondly] they eventually immigrate, taking their assets (desperately needed for wealth creation in this country) with them. That is the price of populism. It is not (not, not, not) possible to simply “replace” that wealth, investment ability or experience at the blink of an eye; it has taken these individuals and families years-and-years (often generations) to build up their wealth (and associated investment capacity). Even if the physical assets confined to the geographical space of the South African legal jurisdiction is to be transferred to beneficiaries of affirmative action, it will not imply retaining the wealth-adding value thereof. Even if these beneficiaries are highly competent to manage these assets, the country still loose skills and capital (at the very least) patiently built-up after decades (and, again, often generations).

Some of the historically big investors in the country’s economy (including the Wessels family, Anglo America and the Opperheimers) have either transferred their major presence overseas, or are not a presence in the SA economy any longer.

The most destructive and value-destroying legislation recently enacted (or in the process of promulgation) in South Africa were (and are) all affirmative action-related, include:

-- Expropriation without Compensation. This manifestation of affirmative action has the potentially to destroy the country’s economy like one enormous wave sweeping over it and taking everything of value along as it plays itself out.

-- Amendments to the Employment Equity Act that will allow the Minister of Labour to set employment equity targets, instead of allowing employers to determine their own targets

-- The Mining Charter (and read with it, the deteriorating output – and value – of the mining sector). Already South Africa’s mining sector is in constant decline.

-- The amended Preferential Procurement Regulations (2017)

-- Amendments to the BBBEE codes in 2017

Consider, for instance, the implications of proposed amendments to the Employment Equity Act. Say the Minister decides that all positions on a certain level of management in a specific industry must consist of at least 50% representation from a specific targeted group. Let’s further assume that the current percentage is 30%, and that the time allowed to reach the 50% target is five years. The unavoidable implication is that a substantial section of employees currently occupying those positions will have to be retrenched, and that these retrenchments must be forced through very quickly. It further implies that, regardless of the implications for profit or organisational efficiency, some positions will simply have to be filled with individuals from a designated group, regardless of their qualifications or suitability for the post[s]. This is a very real scenario, and not a hypothetical one, because the penalties for non-compliance with affirmative action laws and regulations (that is, with the requirements of an unworkable ideology) have become so severe that it is impossible to dare not to comply.

It is useless to argue that affirmative action need to be reconsidered to meet the demands for sustained economic growth. Currently the failures of affirmative action is simply attributed to the unwillingness of “corporate South Africa” and “Whites” to implement it, and the “solution” is deemed to be more (and intensified) affirmative action.

Demographics and “demographic representation” have become the only criteria considered when policies about redress of past injustices are considered. The point that is constantly missed, is that the current model of affirmative action is shrinking the available cake, and will not meet the expectations, because it undermine the country’s capacity to growth its economy, expanding the cake and allow the absorption of exactly those beneficiaries the policy of affirmative action is supposed to bring into the mainstream economy. Having lived affirmative action in South Africa, for me a critical question is: How is the success or failure of affirmative action measured; in terms of the number of previously disadvantaged people employed, promoted or engaged in business ventures, or in terms of the percentage of previously advantaged people put out of a job (or position), de-promoted, fired, or discontinuing business ventures?

For me, there is no logic in the accusation of corporate South Africa resisting compliance with government’s expectations for an affirmed workplace. The penalties are so severe, and the implications of non-compliance so destructive, that no company in the country dares not to pursue aggressive affirmative action. In fact, this reality is so acute that more-and-more companies are willing to scarify the substantial White clientele (and purchasing power) to show solidarity with government’s affirmative action policies (consider, for instance, Discovery Bank’s share option scheme that is limited to Black clients, in spite of large-scale resistance from White interest groups; the Spur Restaurant’s persistence with the banning of a White client in 2017 in an incident where the actual fault that cause a racial incident was debateable, at the very least, Eskom’s share incentive scheme that excludes Whites, and the Presidency’s Youth Employment portal that blatantly excludes White Youth).

Currently virtually all the pressure is on the private sector. There is simply no more room for employment equity in the government sector; not because it is still too White, but because government cannot afford to employ more people - its personnel bill is already at unaffordable (and unsustainable) levels. There are public institutions in this country with a single, or no White employees. Several government departments and agencies have already far surpassed the official employment equity targets, in terms of the racial composition of their staff components, but are still aggressively implementing race-based affirmative action.

As illustrated in the Renate Barnard case, White South Africans may not necessarily be promoted, even if they are the only qualifying candidates for a position, because of affirmative action policies.

The problem is that “the private sector” implies a wide variety and broad scope of economic activity, and not the “body corporate” under direct control of government that is the public sector. It include small-scale farmers, doctors and lawyers meeting the employment equity thresholds in terms of staff component and/or annual turnover, it is small business owners giving jobs to family members, it is contractors not been able to get a job with government because they are “too White”; point is, it is not only the large companies and corporations that have staff components and promotion opportunities to gradually work towards compliance with employment equity and BBBEE targets. Different from government departments that will continue to exist even if they are official bankrupt and highly inefficient and ineffective (increasing through government guarantees, such as Eskom and Transnet), companies in the private sector, large or small, will cease to exist if they cannot retain competitiveness and profitability due to organisational inefficiencies. They need very scarce, highly specialised, experienced skills knowledge resources to exist as a viable going concern. The pool of available resources in this category is extremely small, even in global context, and regardless of race.

Affirmative action actively discouraging individuals finding themselves on the receiving end thereof to establish businesses, and (where it is established) to grow it above the 50-employee and/or prescribed turnover thresholds. Even if these companies (or businesses) are below these thresholds, they still face exclusion on various levels if they don’t comply with the rigid BBBEE requirements. In effect, innovation in the economy from an entire section of the population is actively discouraged; and, to be honest, almost criminalised. I know the immediate counter-argument will be that these stumbling blocks will be removed if ownership of targeted beneficial groups are embraced, and if the right people are hired.

However, let me dare to ask the question: Who starts a business to give it (as, at least part of it) away as soon as it starts growing in a meaningful manner? Then all the emotional, physical and financial energy you must put into the effort simply does not seem that attractive (or worthwhile) any more.

There is a desperate need to absorb millions of poor and destitute Black people into the mainstream economy of South Africa. There is no doubt that their plight can, at least partly, be attributable to the destructive legacies of apartheid. My argument is that the solution is not more affirmative action, but a holistic, integrated approach to economic growth, skills development and targeted corrective measures (of which well-considered affirmative action must be a critical element). The problem in South Africa is that affirmative action does not support any sustainable, long-term and value-adding strategy; it has become the (ideologically charged) end-goal in itself (rather than a means to an end). It did not work over the last twenty-something years and it will not work now. The more intense the application of the policy (and practice) became, the more the economy will retract and the more the opportunities for meaningful redress will diminish. Affirmative action, as it is practiced in South Africa, can only work in “closed space”, where actors in the economy have no choices; where investors do not enjoy the luxury of alternative investment destinations and where people, regardless of their race, cannot immigrate away from affirmative action. That, of course, is not the reality we live in; our reality is poor economic growth, collapsing infrastructure, deteriorating service delivery… and, o-yes, targets-obsessed affirmative action…

Amidst collapsing infrastructure, and an economy that will clearly not produce anywhere near the required growth rate to create the jobs required to reduce unemployment, government insists that ‘Radical Economic Transformation’ stands central to all of its policies (confirmed by Pres Ramaphosa during an interview with Radio 702 on 13 December 2018). Affirmative action in South Africa has an ideology in its own right; it is destroying the country, its economy and its ability to recover from its economic decline. But it is actually meaningless to even say that; it has become in truth in itself.

Bibliography

Guardian. (2018, July 7 Downloaded December 2018). Supreme Court pick could put 40 years of affirmative action precedent at risk. Retrieved from The Guardian online: https://www.theguardian.com/law/2018/jul/07/supreme-court-pick-affirmative-action-precedent

Jayant Menon, A. a. (2018, August 20 Downloaded December 2018). Time to act on Malaysia’s affirmative action. Retrieved from East Asian Forum (on-line): http://www.eastasiaforum.org/2018/08/20/time-to-act-on-malaysias-affirmative-action/

Korhonen, M. (2018, March 15 Downloaded December 2018.). Measuring South Africa’s (black) middle class. Retrieved from Africa Check: https://africacheck.org/factsheets/factsheet-measuring-south-africas-black-middle-class/

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