patterns have been exacerbated by the impact of the present global crisis upon the South African economy, which in 2009 resulted in the loss of nearly one million jobs.
Even if these job losses were to be reasonably rapidly reversed, this would be totally inadequate for addressing long-term employment needs. A study by a working group convened from representatives of government, business and labour, orchestrated by Miriam Altman of the Human Sciences Research Council, indicates that even if unemployment were to be halved to 13 per cent, by 2014 (the target set by the government), 35 per cent of the population would continue to live below the poverty line of R2 500 a month unless they were to be rescued by receipt of social grants. This reflects the fact that not only are wages for unskilled workers low, relative to the cost of living, but wage earners in poor households support, on average, six people. Yet even this scenario rests upon attainment of an average 6 per cent growth rate between 2004 and 2014, a goal which is highly unlikely to be achieved. More likely are lower growth scenarios which will see a rise in the proportion of the ‘working poor’ and those living in poverty.
In many African countries, the poor and unemployed can draw support from agriculture. In South Africa, however, African peasant production was long ago destroyed by the appetites of the mines for labour and of settler agriculture for land, and today the former homeland areas are agriculturally devastated, land reform has stalled3 and rural African communities are heavily reliant on financial inputs from urban areas. In practice, this has substantially increased pressure on the post-apartheid state to expand its financial support not merely for the unemployed but for the poor generally through an array of social benefits ranging from old age pensions to disability grants. As a result, while the aspirations of South Africa to become a ‘welfare state’, inclusive of contemporary proposals for a national health system (Reynolds below), are morally commendable, there are numerous questions regarding the extent to which they are affordable over the long-term.4 Critics point out that the growth in numbers of grant recipients (13.9 million in 2010 rising to sixteen million by 2013) is not matched by a similar increase in the number of direct taxpayers (six million) (Business Report, 22 February 2010).
The immediate answer to unemployment, argues Altman, is an expansion of the public service, recording a shift towards the hiring of teachers, nurses, and police as well as, importantly, entry level workers. Increasing the number of publicly funded low-skilled jobs would make the most immediate impact upon the level of unemployment, yet because low-skilled public sector workers earn twice to three times more than they are paid in the private sector, the government cannot afford to hire them at present pay levels, and it is not likely that public sector unions will easily accept the idea of a reduced wage, even for new job entrants. Even more problematic is the fact that, ‘While the size of the public service has been growing in recent years, its capacity to do its job hasn’t’ (Paton 2007:43).
If the crisis of unemployment appears recalcitrant, its social impact is made worse by the extent and nature of social inequality. In 2008, while the richest 10 per cent of the population received 53.1 per cent of income and the richest 20 per cent received 70 per cent of total national incomes, the poorest 10 per cent received just 0.57 per cent and the poorest 20 per cent just 1.6 per cent (RSA 2009: 22). These proportions have not changed significantly since the early 1990s, despite some modest shift of the overall proportion of national income going to blacks,5 demonstrating the deeply structural nature not just of poverty but of the inequality of distribution. Politically, its impact is severely worsened by three features of the contemporary scene; first, the alacrity with which corporate executives in both the private and parastatal sectors have fastened on to global trends in ‘top people’s’ remuneration, claiming massive benefits in terms of share options, retainers, bonuses and restraint of trade agreements on top of huge salaries; second, the apparently insatiable greed of elements of the new black elite, and the entrenchment of a culture of entitlement based upon corrupt access to state tenders; and third, the preference of South African elites for highly conspicuous consumption in terms of extravagant lifestyles, clothing, cars, mansions and ‘bling’ (all of which is stoked by the popular media’s obsession with celebrity).
BLACK EMPOWERMENT: Politically necessary, but economically costly?
BEE has increasingly come to have a bad name, reflecting what Business Report (5 February 2010) records as ‘the country’s deep disenchantment with the empowerment process, which has come to be seen as a means of instant wealth for people with political connections and influence, while ordinary people have largely continued to live in poverty. Generally speaking, BEE is taken as having created a small group of ‘BEE-llionaires’ without having had a significant impact on the white domination of industry. This story is variously presented, but notably as white capital having sought self protection by forging deals with the incoming ANC elite, of the politically connected gaining preferential access to state tenders, and of blacks ‘fronting’ for white companies to obtain contracts from government (Bassett 2008). Meanwhile, despite heavy emphasis on the expansion of a black middle class, there is widespread suspicion voiced by the more assertive BEE protagonists that the empowerment process continues to be undermined by white resistance to black upward mobility throughout much of industry and the professions.
The reality is that the progress (or otherwise) of BEE in industry is highly complicated and multidimensional, its interpretation rendered difficult by a paucity of reliable data. On the one hand, too little is made of some of the achievements of BEE. For a start, for all the limitations of the process, black inroads have been made into ownership and management of industry despite a general lack of black capital and of education and training. There are today a small number of black majority-owned major companies (for instance, Shanduka and Mvelaphanda), more smaller such companies (of which we know rather little), and overall – depending upon broader market conditions – considerable upward momentum in the number of BEE deals. Likewise, although white faces continue to predominate in the boardroom and management, the number of blacks in senior corporate positions is steadily increasing.
According to the Presidency, ‘the total value of BEE transactions as a percentage of total mergers declined between 1996 and 2002 and rose sharply from 5.1 per cent in 2002 to 31.1 per cent in 2004. However, lower growth rates have been achieved since then, averaging 19.5 per cent in 2008. This indicates progress in embracing and responding to the principles of the Broad Based Economic Empowerment Bill No. 53 of 2003’ (RSA 2009a: 17). Similarly, the Presidency reports that the number of black senior and top managers in private industry increased from 18.5 per cent in 2000 to 32.5 per cent in 2008. Notwithstanding that different data sets vary considerably, the broad thrust of these figures is that the demographic profile of the private sector in South Africa has changed considerably since 1994. This was both a political necessity if the transition was to be underpinned by visible ‘transformation’ and a demographic one given the limited supply of white skills and the wastage of black talent under apartheid.
Nonetheless, there are substantial grounds for fearing that many BEE gains are hollow.
For a start, the commitment of business has been questionable, the government having systematically appeased large-scale capital by making major concessions over BEE targets and compliance in pursuit of economic growth (Tangri and Southall 2008). Second, even leaving aside the suspicion that (an unknown) proportion of deals are the product of politically connected ‘tenderpreneurship’ rather than of Weberian-style enterprise and risk taking, BEE deals have overwhelmingly been funded by debt. This, of course, is far from unusual in merger and acquisitions activity but it has consistently meant that BEE firms have been particularly exposed when they have encountered difficult market conditions, as occurred most notoriously in 1997 (when many black investors fell foul of that year’s plunge in share prices) but more pertinently as a result of the current global crisis, with empowerment analysts reporting that black investors in BEE deals have been left with a huge debt burden, and that the deals are having to be restructured by the banks in order to save them from collapse (Business Report, 6 January 2010). Meanwhile, although criticism of established firms doing major deals only with a small number of ‘usual suspects’ has moved them towards more