The widely reported remarks by the chairman of the Richemont Group, Johann Rupert, dismissing the South African government’s agenda for radical economic transformation as “a code word for theft” are regrettable and reckless, but not altogether surprising.
Remarks in a similar vein have been made recently by all manner of self-proclaimed so-called anti-corruption crusaders and groupings who want to conveniently ascribe all the modern ills facing the South African economy to chronic state “mismanagement” and not to stubborn and distorted patterns of economic ownership that they continue to perpetuate.
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It is nevertheless unfortunate that this somewhat pedestrian critique comes from a beneficiary of the largesse of the interventionist apartheid state.
Rupert, among others, can thank what historian Dan O’Meara called ‘Volkskapitalisme’ for the success and expansion of his late father’s and his impressive business enterprise.
By means of volkskapitalisme, the National Party government leveraged state power and state assets such as state-owned banks to buoy up Afrikaner businesses and turn them into corporate giants that exist today.
To now ring alarm bells at signs of state intervention in the economy in post-apartheid South Africa would be ironic to say the least.
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We are being told that “they” are bleeding the economy dry - conveniently failing to mention the excesses of what Lenin referred to as “rogue capitalism” in enforcing the inequalities that persist in our economy today.
Today, only 3% of South Africa’s economy is black-owned, according to the dti. A meagre 23% of all companies on the JSE are black-owned.
Blacks comprise only 21% of the executive teams in South Africa’s top 40 companies, and the number of black chief executives running JSE-listed companies has dropped from 15% in 2014 to only 10% in 2015.
The top portion of income earners in South Africa are still white. Black graduates being three times more likely to be unemployed than their white counterparts, raising questions about business and its commitment to transformation.
The majority of the privately-owned land in South Africa remains in white hands.
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Ironically, we are being told South Africa doesn’t have a white monopoly capital problem, but more of a generic “monopoly capital” problem. This is an airbrushing of history and is both disingenuous and damaging.
More than 23 years into democracy, we still grapple with not only the transformation of our economy to make it more inclusive and reflective of our demography, but also with skewed patterns of land ownership, the composition of management structures in private companies, and perhaps most importantly, with the role of both the state in advancing and accelerating transformation.
As the economics Nobel laureate Joseph Stiglitz pointed out in The Great Divide, it is not simply economic laws that determine the degree of inequality in a country, but politics and policies.
The crux of the matter is that very real limits exist regarding the ability of the state to absorb millions of the poor and marginalised people into the formal economy, create jobs and deliver services.
There is also the role of business and the private sector in doing its part to level the playing field from an economic perspective, and whether it has in fact has “come to the party”.
What is lost in Mr Rupert’s sweeping and dismissive analysis is why the need for economic transformation? Why must it, by necessity, be radical? Why now?
These are critical questions to be asked of anyone with an interest in seeing South Africa’s economy healthy and prosperous.
As to why the need for economic transformation, the answer is simple. The idea of the invisible hand of “market forces” being the key to economic prosperity in society has proven to be a chimera.
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The “trickle down effect” approach to correcting economic inequalities and income disparities has been tried in societies with far lower levels of inequality, and found wanting. To the contrary, the rich have become richer and the poor are poorer, as the saying goes.
South Africa’s Gini coefficient is one of the highest in the world. As the World Bank noted in a 2014 study, we remain “a dual economy with one of the highest inequality rates in the world, perpetuating both inequality and exclusion”.
Clearly, then, what the champions of “market forces” have since 1994 been telling us - that a hands-off approach to managing the economy would lead to higher rates of economic growth and to the creation of more jobs (which would solve the problems of poverty and underdevelopment) has not been borne out by reality.
As to why this economic transformation should be radical, it is clear that the noble idea that redistribution of wealth would be a by-product of the style of capitalism South Africa adopted after 1994, that “a rising tide lifts all boats”, has proven to be otherwise.
Irrespective of more equitable wealth distribution, government policies remain lopsided, positively impacting the privileged, who are in the main, white, and who owe their positions of privilege to their and their forefathers’ preferential status under apartheid.
South African business however hasn’t suffered the fate of the urban and rural poor.
The International Monetary Fund notes the after-tax profits of our companies are amongst the world’s highest, even in the midst of recently reported declines. Corporate taxation is amongst the most favourable amongst developing countries. According to the Financial Intelligence Center (FIC), Illicit financial flows cost South Africa an estimated R60billion in 2015-2016 and the figure is rising. This of course excludes the capital gains enjoyed by local, mainly white shareholders.
So, even with our being one of the most unequal societies in the world, business hasn’t fared too badly - irrespective of its inability to create jobs on a mass scale or raise levels of inequality in society.
The bread price-fixing scandal of 2007 was a stark reminder that the country’s large monopolies have scant regard for the effects of their actions on those who are hardest hit in their relentless pursuit of profit.
When the Competition Commission found in 2014 that the country’s largest construction firms had colluded to fix the prices of tenders for the construction of stadiums for the 2010 Fifa World Cup - resulting in the state (and the South African taxpayer) being overcharged by billions of dollars, there was little hue and cry from the likes of organisations like the Organisation Undoing Tax Abuse (Outa).
It could be that the Fifa World Cup tender collusion scandal was just the tip of the iceberg: with there undoubtedly being other instances of construction firms involved in anti-competitive practices for other mega-projects. The silence of the likes of Rupert was particularly deafening following the outcome of the Competition Commission’s investigation into the collusion of 18 (that we know of) major banks in foreign exchange trading. That some of South Africa’s largest banks “made false sales to drive up demand” or “colluded to agree not to trade for specific periods of time” would be a scandal of immense proportions elsewhere.
And see them called to account for the effects of their actions not just on the economy, but on the “man on the street”.
And yet, somehow, the insidious impact of white collar crime in South Africa, when it is committed by the private sector, fails to bring the crowds and the banners out onto the street in the same way that government corruption scandals do. This evidences a hypocrisy and double standard that is worrying.
It is these and other excesses of laissez faire capitalism that the ANC government seeks to check by introducing policy and regulatory reform as well as radical economic transformation.
In societies such as ours with high levels of historical inequality, any attempts by governments and regulators to loosen the stranglehold of monopoly power will inevitably be met with resistance from those who stand to lose out in this transformation.
It should come as no surprise therefore that those who face the prospect of no longer having unfettered access to government business without any real competition should put up stiff resistance and dismiss radical economic transformation.
Having become fat on government contracts, some of them dubious, inflated and their terms wholly disadvantageous to the state, they now cry foul and talk of “state capture”.
As noted in the ANC’s Economic Transformation discussion document presented to the recently held National Policy Conference, the objective of radical economic transformation is “to reduce racial, gender and class inequalities through ensuring more equity in incomes, ownership of assets and access to economic opportunities”.
Cartelism, predatory lending, price and exchange rate fixing, grossly inflating contracts in the provision of services to the state, dominating and monopolisation of key sectors to exclude new, black entrants and a host of other dishonest practices by businesses and banks haven’t just hurt the economy, but the poorest of the poor.
Capital is not by nature altruistic - this is a reality none of us should be fooled about. Nor can the transformation of the economy be left to “market forces” any longer.
What we need, and have, is a capable and developmental state to intervene to address and resolve these discrepancies.
The ANC government will not be deterred from its programme of radical economic transformation by those with intent on preserving the status quo for their own interest.
We will continue to pursue this path that is in the interests of the majority of our people, and not the select few.
* Molewa is a member of the NEC of the ANC and the chairperson of the cabinet’s international cooperation, trade and security cluster.
** The views expressed here are not necessariliy those of Independent Media.