September 14, 2018 Print

The history of apartheid has left South Africa scarred by inequality. However, current attempts to fix these injustices have left out 87 percent of the black South African population. In response, the South African Institute of Race Relations (IRR) put forth its plan for an alternative route to economic empowerment. 

The plan put forward by IRR is called “economic empowerment for the disadvantaged” (EED), and it has gained ground in political circles just ahead of the upcoming 2019 elections. The Democratic Alliance (DA) announced it is considering it as a potential alternative to the existing policy of “black economic empowerment” (BEE).

“A new approach to empowerment is both urgent and necessary to overcome disadvantages that burden the black majority as a consequence of the apartheid legacy and the compounding effect of a race-based empowerment policy of the past nearly quarter of a century which has failed to reach deeply enough into poor communities,” says Garreth Bloor, vice president for transatlantic affairs at the Institute of Race Relations. “It is our contention that millions are being locked out of the economy not because of their race, but because of their unaddressed disadvantages, which race-based measures are only compounding.”

According to IRR’s policy brief, EED will “focus on four ‘Es’ – rapid economic growth, excellent education, more employment, and the promotion of vibrant and successful entrepreneurship.” The new focus will shift away from racially based quotas toward “investments a company makes, the profits it generates, the jobs it sustains or creates, the goods and services it buys from other suppliers, the innovation it helps to foster, and the contributions it makes to tax revenues, export earnings, and foreign currency inflows.” It will additionally include a voucher system so currently excluded populations will have the ability to seek out the best possible school, healthcare, and housing.

The needs for reform are many; while BEE attempted to lift previously disenfranchised groups of people into the formal economy, it resulted in a skewed system that only benefited the few. The intent was that empowering black South Africans at the top of the private sector would eventually empower black South Africans at the bottom. For this reason there was a push for companies to transfer stakes to black investors, which resulted in 111 transfers to black investors— valued at 3.8 billion — in 1998. Since few black South Africans had been able to accumulate large funds during apartheid, the stakes were often sold at below market prices or financed by loans backed by the company itself. For this reason, many companies sought to attract the small portion of the black population that was already well off.

According to an IRR survey from 2016, only 13 percent of black South Africans had benefited from the BEE deal, and the majority of 87 percent was ignored. By 2015 black South Africans were still more likely to be living in poverty than any other racial group, 64 percent of black South Africans lived in poverty, compared to only one percent for white South Africans. In the two decades following 1996, black South African incomes rose at comparable rates — 470 percent — to white South African incomes — 407 percent. However, during the same period there was a nearly 10 percent increase in inequality among black South Africans. IRR argues that this increase in inequality in a result of the BEE benefiting relatively few, but already well off members of the black population. 

IRR seeks to enact a policy that no longer ignores the 87 percent of black people that were left out under BEE. Through EED, IRR aims to reduce the barriers that marginalized populations face so they can lift themselves out of poverty. Instead it advocates for a policy that increases jobs, access to education, healthcare, and housing.