It is an under appreciated fact that in any society, those members that have managed to produce a privileged socioeconomic position will do anything within their power as a group to maintain that position of ascendancy.
Given all the focus that South Africa has poured into the analysis of interracial relations and bigotry, it seems we have lost our ability to see the wood for the trees. Racism is a proxy for privilege protection. Whiteness has been accurately described as a collection of unearned assets transferred from one generation to the next.
The chief asset that comes free with the privilege of whiteness is trust. If one believes this statement to be true then the corollary statement must also be true too. Blackness puts us in a position where the one major asset, trust, as valued by society, is practically unearnable.
Different historical periods over the course of South Africa’s history have handed socio-economic privilege to different groups. As many apartheid apologists like to hint at, this process predates the European invasion of our beautiful country.
It is true that for some period in our history Bantu tribes dominated Khoi and San tribes. It is also true that the Mfecane further reallocated privilege across Southern Africa between vanquished and victorious tribes. Nguni/Bantu people should undoubtedly admit that this has led to inherent socioeconomic privilege in favour of multiple generations of our people.
Dutch, French Huguenot, English, Italian, Greek, Portuguese and Jewish South Africans have all had their turn to start at the bottom of the economic rung. To elevate themselves as ethnic groups, they endeavored to plunder, rape, farm, subjugate and work their way to a position of socioeconomic privilege.
After 1994, faced with a threat of marginalisation and potential loss of privilege, these groups created a consolidated socioeconomic group now known as “white South Africans”. We all take for granted that all members of this group were always thought of and treated as white. They were not.
Long periods of self-imposed isolation by these groups along ethnic lines has facilitated the creation of what are called ethnic enclaves. These ethnic enclaves have the following features: high trust, strong social enforcement of norms, strong emphasis on sameness and a fear/hatred of difference.
These social tools and norms have unwittingly produced high trust, low transaction cost capacity within organisations run by and for these ethnic groups.
From this base banks were created to cater for these ethnic minorities (FNB, Absa, Investec etc), insurance companies were created along these same ethnic lines (Sanlam, Old Mutual to name a couple). In fact, within almost all South African industries, the residue of ethnic enclave economics can be felt.
The result has been highly beneficial for those trying by all means to preserve privilege. Being a member of an ethnic enclave guaranteed you access to certain schools, universities, internships, travel exposure, all of which allowed one to build a superior CV.
This set members of these ethnic enclaves up for job opportunities and later for the chance to start their own businesses, allowing them to build all-important social networks and attain invaluable experience. This is how privilege in South Africa has been inherited from one generation to the next.
Since 1994, the African National Congress has been charged with dismantling this socioeconomic privilege structure. It has gallantly introduced redistribution policies starting with RDP moving on to black economic empowerment and ending with the relatively new black industrialists policy.
The leadership of the ANC has now recognised that none of these policies on their own have the capacity of countering the natural functioning of privilege preservation. More targeted socioeconomic intervention is needed. The leadership of the national democratic revolution is now faced with the reality that trust is the most instrumental of this largely unearned collection of privileges of whiteness.
The biggest victims of this privilege-preservation machine are those born into poverty. They are overwhelmingly black South Africans. Those not lucky enough to be part of families working in the civil service or the few chosen to be part of corporate South Africa are locked out in what we call the informal sector.
The features of this group of businesspeople are not well understood. They lack not only capital and earning power, but specifically lack the mechanisms for building sufficient trust within relevant quarters of society to generate economic opportunities. They are thus forced to live in a marginalised state of what can only be called subsistence commerce.
The informal sector generates a majority of all new jobs. For example, the informal food sector is a R400 billion market, making up 40% of the food sector. The International Labour Organisation estimates that its average size as a percentage of gross domestic product in sub-Saharan Africa is 41%. This ranges from under 30% in South Africa to 60% in Nigeria, Tanzania and Zimbabwe.
The informal sector is chiefly responsible for any semblance of socioeconomic stability. Yet we don’t think of the entrepreneurs in this sector as “normal businesspeople”. They are. On average, 63.7% of the relatively more advanced business type of general dealers have been in existence for over five years compared to 36% for spazas and 19% for hawkers.
What distinguishes them from the rest of corporate South Africa is their inability to access credit, corporate services (on similar terms), macro market intelligence and the limited nature of their social networks. These deficiencies reflect the key fact that they operate in low-trust socioeconomic environments.
They have to manage trust by trading selectively within very well understood, small segments of communities. Notwithstanding their lack of capital, these factors make it difficult for informal sector businesses to scale.
Scaling existing small and medium-sized enterprises (SMEs) in the informal sector should be one of the key economic interventions of President Cyril Ramaphosa’s new administration. Understanding the barriers to scale and responding to these barriers with the necessary capabilities to inject a combination of social-capital tools and financial tools into the sector en masse is critical.
These social-capital tools include – but are not limited to – creating high-trust transactional platforms, facilitating access to macroeconomic information and thereby lowering transaction costs. The chief financial-capital tool needs to be a focused sovereign institution geared to provide reliable growth capital into these businesses with very short lead times.
More importantly, sophisticated pooled-procurement platforms can be created for these SMEs to give them pooled buying power. This will allow the informal sector a chance to flex its economic muscle.
In my view, the president should not give up on two institutions. The small business development ministry should survive the task team investigating a streamlined government. If it doesn’t, it will get lost in the big-businesscentric economic cluster.
The National Empowerment Fund (NEF) should be reassigned to the custody of the small business ministry. The IDC simply has too much on its plate to make it a priority. Thought has to be given to whether the Small Enterprise Finance Agency should not be merged with a better-governed NEF.
Both of these institutions are challenged by a lack of adequate funding. Oligopoly and monopoly businesses that are the bedrock of ethnic privilege preservation should be induced to pay an annual tax directly to a streamlined, well-managed NEF.
This “social capital tax” should be seen as corporate insurance that will be repaid handsomely in the form of economic growth and socioeconomic stability. The source of this growth and stability will come from formalising informal businesses and by extension their leaders and employees.
This formalisation will change the racial trust equation. The more trusted black entrepreneurs and managers are, the more access to normal economic tools they have, the better the benefits for their employees and the more normalised and thus more competitive our economy can become.
*Biko is a business and investment banker
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