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In his speech at the opening of the ANC’s Policy Conference last week, President Jacob Zuma said that “the economic power relations of the apartheid era have, in the main, remained intact. The ownership of the economy is still primarily in the hands of white males as it has always been”.
But is this so?
I am not an economist, but have made the following rough estimates of who actually controls the economy.
First, ownership of shares on the JSE is often conflated with ownership and control of the entire economy. In fact, the JSE probably represents only about 20 percent of total economic activity.
According to a study by Trevor Chandler and Associates in October last year, 54 percent of the shares on the JSE are available to SA investors. Of the remainder, 33 percent are foreign-owned, 11 percent are cross-held shares and 2 percent are owned by the government.
Of the 54 percent of shares available to South Africans, 28 percent (3.4 percent of GDP) are owned directly or indirectly by black South Africans and the remaining 72 percent (7.5 percent of GDP) by whites.
It is estimated that Small and Medium Enterprises (SMEs) and the informal sector contribute 35 percent of GDP and include between 1.5 and two million enterprises, almost 80 percent of which are owned by previously disadvantaged individuals in the informal sector.
The informal sector is generally estimated to contribute between 5 percent and 10 percent to the GDP.
Black ownership or part ownership of larger firms has probably increased as a result of broad-based BEE. It would thus not be unreasonable to assume that black ownership of the SME and informal sector at a minimum of 10 percent of GDP.
A sizeable segment of the economy is also owned and controlled by foreign multinational companies – apart from their 33 percent ownership of shares on the JSE (6.6 percent of GDP). If one considers only the 6 percent to 7 percent contribution to GDP of the foreign-owned automobile industry and the contribution of at least 3.5 percent to GDP by foreign-owned oil companies, foreign-owned interests probably own or control at least 17 percent of the economy.
Then there is the contribution of the government to economic activity. According to this year’s budget, government expenditure will account for 29.4 percent of GDP. This includes provision for a deficit of 5.2 percent of our GDP of R3.3 trillion.
This total amount – with the possible exception of about 1 percent of GDP that is transferred to the multiracial government of the Western Cape – is controlled by black South Africans.
To this figure we must add the 8 percent of GDP represented by State Owned Enterprises (SOEs), which are also under black control.
If we then tot up the figures the following picture emerges:
l White South Africans own or control 7.5 percent of GDP through the JSE and another 25 percent through their ownership of SMEs, giving them more or less 32.5 percent ownership of the economy.
l Foreign interests own/control 6.6 percent of economic activity through the JSE and at least another 10 percent through the activities of multinational companies that are not listed on the JSE, giving a total of about 17 percent of GDP.
l Black South Africans control 29.4 percent of economic activity through their control of the government; 8 percent through their control of SOEs; 3.4 percent through the JSE and 10 percent through the informal and SME sectors, giving a total of 50 to 51 percent.
Zuma suggested in his statement that although political power had shifted since 1994, the ownership of the economy was still where it had always been – in the hands of white males.
In fact, prior to 1994, black South Africans would probably have controlled no more than 12 percent of the economy – 10 percent through the informal and SME sectors and possibly 1 percent to 2 percent through indirect investments on the JSE.
At that time, whites probably controlled 65 percent to 70 percent of the economy (32 percent through control of government and SOEs; 25 percent to 35 percent of the SME sector and 8 to 9 percent through the JSE). If my rough estimates are only approximately correct (someone should commission proper research), the president has been very badly misinformed.
Black ownership of the economy has become dominant – while white ownership of the economy has declined significantly.
Quite apart from the portion of the economy that black South Africans own or control, they are – as we are now observing at Gallagher Estate – in sole control of political and economic policy.
Zuma evidently intends to use this control of economic policy “to democratise and de-racialise the ownership and control of the economy by empowering Africans and the working class in particular to play a leading roll”.
He says this will require the government to “take the difficult decisions that we could not take in 1994 with regards to the economy”.
What makes the president think that the actions that the policy conference is contemplating would not have catastrophic consequences for economic stability and confidence if they are taken now?
Everyone agrees with the need to address the triple problems of unemployment, poverty and inequality.
However, the policies the ANC is considering would have just the opposite effect. They would put an end to any hope of meaningful foreign investment; they would chase away our best and brightest entrepreneurs; and they would seriously erode the government’s tax base.
l Dave Steward is the executive director of the FW de Klerk Foundation.