South Africa: Is BEE Working?

23 March 2007
guest column

If you have ever wondered what a gilded cage looks likes, search no more. South Africa's Black Economic Empowerment is your answer.

Invented by South Africa's white controlled mega mining and finance corporations in the early 1990s, BEE as it is now affectionately called, is a magic wand that can turn previously disadvantaged black politicians into instant millionaires. Whites in South Africa invented Black Economic Empowerment, you ask? The same people that invented apartheid! It may sound unbelievable but it happened.

When Mandela came out of prison in February 1990, in the first public speech that he made, he restated his party, the ANC's, Manifesto, or Freedom Charter, which amongst other things advocated the nationalisation of the mines, the banks and other commanding heights of the South African economy.

This understandably struck fear in the hearts of South Africa's white business oligarchs. So they tried to find a way to placate Mandela and his radical associates. After a time, they came up with Black Economic Empowerment.

BEE looks deceptively like a form of reparation. By putting some ownership of companies into the hands of previously disadvantaged groups, it appears as a way of South Africa's rich whites, atoning for their sins of exploiting cheap black labour to dig for the fabulous diamonds and gold that South Africa is world famous for. The reality however is very different. It is a formula for co-opting - and perhaps even for corrupting - ANC leaders by enriching them as private individuals. In my view the objective was to play on their weakness of many years of depravation in prisons and in exile by dangling in front of them unimaginable riches that would be given to them by the oligarchs, all for free.

One of the first companies to implement the magic formula was Sanlam, the second largest insurance company in South Africa, which had been closely associated with the apartheid regime. It had a subsidiary, MetLife, with assets of several hundred million dollars - small change in Sanlam's world, but unimaginable wealth in the eyes of erstwhile black political activists who had spent much of their lives in jail.

Sanlam helped obtain loans through a state bank to enable a number of key figures in the anti-apartheid movement, and leaders of other black organisations to buy shares in MetLife. Through further financial wizardry the black-owned shares were given a higher vote weighting than conventional shares, thus by owning a tiny portion of shares, the company could be controlled by the black shareholders.

Needless to say once they controlled the company, the black shareholders paid themselves large sums in directors' fees. Several of them built themselves palaces a few kilometers outside of Johannesburg that make Kubla Khan's stately home in Xanadu look like a bungalow.

As they say in the movies, the rest is history.

The ANC has long forgotten about nationalising the commanding heights of the South African economy. And you will be hard pressed to find a current or former ANC minister or senior civil servant who is not in, or working on, a BEE deal.

But what about the black masses? Well, the English have a famous song - sung to the tune of the red flag - which goes: "The working class can kiss my arse; I've got a foreman's job at last".

Moeletsi Mbeki is deputy chairman of the South African Institute of International Affairs, an independent think tank based at the University of the Witwatersrand. This is transcript of a commentary broadcast on February 27, 2007 by the BBC World Service.

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