BEE - an Exercise in Deception

2013-11-10 19:51

It is interesting to observe the ebb and flow of people in the public eye and track their fortunes. The noisy ones seem to change very little despite taking on new roles and occasionally seize the limelight afresh notwithstanding their obvious limitations. Remember Jimmy Manyi? He is a convenient icon of the ruling party’s ideological malaise and its coercive implementation of laws that damage the nation and its economic prospects.

Manyi used to be spokesman for government until, following a number of PR gaffes, he was relieved of the position and now heads up something called the “Progressive Professionals Forum” – which from all appearances promotes BEE in its various shapes and forms.

He seems well suited to it.

The job requires a lot of talking, and he now expansively claims that “BEE is working” and has “affected millions”. In order to convince us of the fact, he provides a laundry list of things that BEE stands for and triumphantly announces that “there has been progress”.  In order to support his contentions he uses sweeping generalizations, makes assertions (see Fin24; 03 11 2013)and ignores the likelihood that free markets would have done an infinitely better job of uplifting people, creating growth and generating jobs.

He fails, in other words, to address the opportunity costs of BEE to ordinary citizens. Where he quotes numbers, comparisons are absent.

But of course quantitative justification is not an issue where BEE is concerned because it is an initiative predicated on handing over what others have created by way of unearned patronage. It seeks to transfer ownership, not cultivate competence and fails to “empower” anyone in any way; only free markets driven by the ingenuity of individuals can do that.

In common with others of his ilk, Manyi seems to believe that saying something assertively, repeating it over and over and memorizing righteous sounding clichés, morphs rhetoric into fact. The veracity of counter arguments is irrelevant. More broadly, that is the basis on which South Africa is governed, how our society is moulded and laws promulgated. The ruling agendas are set on the basis of what the big men of the political “struggle” say and collectively think – though they lack the capacity to do either very well.

Ours is a government that does not count the costs of poor decisions; brooks little argument against its chosen assumptions and ideologies; and once cornered with logic, counter arguments or plain economic horse sense, invariably screams “racism”; “legacy of apartheid”; or something similar. In other words, South African public policy lacks introspection and intelligent processes for self analysis and self examination. And it is getting worse.

All it would take to remedy this state of affairs is to ask two simple questions;

* “what the cost?” and

* "who pays?”

(a glaring example of which is the minimum wages issue, where the increase in cost is arithmetically obvious, but those who pay are the ones who lose their jobs as a result of the wage law).

On a broader scale, if it was possible to answer those questions honestly progress would follow because the issues would define themselves. Let us take an example that has been under our noses for the past two decades and where rudimentary arithmetic and a bit of reasoning could have changed outcomes.

The issue is the alleviation of poverty.

Poverty is a serious problem - and when confronted with a problem, the sensible thing to do is examine  the resources available to address it. Moreover - because poverty is a human issue - it might be smarter still to look at the available human resources – starting with national demographics by race.

The next question then is, how do you put a population profile that is-

Black             +-79%

White            <9%

Coloured     >9%

Asian and other     +-3%

to work in order to maximize national welfare and economic performance?

The answer is clearly to exploit the talents available and – where appropriate - use race as a guideline to identifying talent .

For simplicity let us say that, based on the above breakdown “whites” – the main beneficiaries of recent history – account numerically for one in ten South Africans. Despite their small numbers they had (and still largely do have) ready access to resources and vital human capital – which for the greater part they have accumulated by engaging over generations in value adding activities. Thus their contribution to GDP growth has been vital to society and implies a national asset with which to address ills as diverse as poor education and obscene unemployment.

As is the case everywhere, theirs is a resource (both intellectual and cultural in nature) that requires incentivization, not rules – and calls for an efficient market for goods, services, labour and capital; in other words, smart management. Of course, some will argue that because whites were the “oppressors” they should be sanctioned or dispossessed rather than have their talents fostered and promoted - but they would miss my point entirely. Such arguments are damaging and end up hurting society’s most vulnerable people more than anyone else – the destitute - for the poor and the unemployed find no work and no purpose.

And yet that is precisely what the ANC government has done at every fork in the road. It has ignored almost every opportunity to get things right. In an astonishing display of how to lay society’s accumulated value trove to waste, it excised existing human capital from the education system and put in place laws that penalized business and the economy – neutralising its capacity to grow and employ people.

They thought that by passing laws, they could confiscate without consequences. So slow growth; soaring unemployment; and bad education are here to stay pending a paradigm shift in thinking.

On the other hand, the retention of skills and incentivization of enterprise would have made for a very different society because the value creating capacity of ethnically non-African people (acquired through history beyond the capacity of anyone to change) exceeds that of the population at large. Regardless of the labels put on them – be they“whites”, “colonialists”, “boers”, or whatever - they have much to contribute and constitute a national resource squandered at grave cost to society.

But that is not all.

Contrary to common sense, “BEE” and affirmative action have been enacted to not only deny the nation that resource, but magnify the debilitating effects of their exclusion. Simple arithmetic makes the point yet again. “Affirmative Action” – that dubious and misguided phenomenon coined in 1960’s USA - is generally put in place to safeguard minorities against oppression by a majority.

But the South African version is different and fails minorities - on two scores;

-          it targets minorities rather than safeguards them, and then –

-          attacks the institutions that enable them to contribute to the advancement of society as a whole.

In so doing it assumes that members of the exclusive “enabled” cohort (that 10% minority) can be substituted by those outside its universe with neutral outcomes. But even in that far-fetched and unlikely event, what could be the maximum potential gain from fleecing less than ten percent of the population?

Even worse – no one bothered to ask what the inevitable consequences of such distortions would be on society. The answers lie in routine government scandals; our corruption and crime statistics; plummeting education standards; unemployment; and the economic misery on display on the street corners of all our towns and cities.

Conclusively, we lack a government that thinks things through - and Mr Manyi’s recent utterances prompt me to wonder about something else: beyond the ruling establishment’s primal urge to seize upon what others have created through their own work and ingenuity – all in the name of confiscatory “redress”, of course - can it think at all?

I suggest not.

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