It was a single line at the end of a long press release, announcing that cabinet had approved the codes of good practice for black economic empowerment (BEE). The terse announcement last week betrayed the tension that has dominated cabinet's sessions over the BEE codes: should growth take second place to the job of transforming the economy?
It is easy to be myopic in answering what is a vital question. Obviously the economy has to thrive or else there will be little to redistribute: the goose will be dead. But in reality, what is good for the economy has to be offset against social or political objectives. Economic growth is not everything. We consider labour standards and environmental exploitation, for example, sufficiently important to trump the outright interests of companies in their efforts to maximise profits.
Ultimately, SA's ambition should be to boost socioeconomic welfare; corporate interests are merely a part of that equation. Empowerment must be seen in that light.
But it is equally myopic to claim that empowerment and growth are one and the same, an argument advanced by some in the empowerment bloc. Empowerment will often require economic agents to do things that are inefficient in an economic sense. Compliance with a complex set of empowerment objectives absorbs economic resources that would otherwise be productively deployed. The vast amounts of capital being directed towards financing the transfer of ownership into black hands would otherwise be deployed where it could earn the highest return.
It is only honest to recognise that BEE is not always supportive of economic growth and may even deter some investors, particularly those that weigh up investing in SA against other emerging markets.
Some argue that empowerment has driven the emergence of the black middle class and that in turn has driven the economy. But this is not sound economic reasoning: the emerging classes have stimulated demand for durable goods, financed by increased earnings and debt, often at the expense of savings and investment in productive assets.
Empowerment and growth are therefore not one and the same - but both are vital if SA is to develop and prosper, and government has made this abundantly clear. The Accelerated & Shared Growth Initiative for SA (AsgiSA) is meant to achieve growth. The BEE Act and the codes of good practice are meant to achieve empowerment. The two projects must be balanced. It is the search for this balance that is the subtext to cabinet's ideological divisions.
The exemptions that have been granted to small and medium-sized enterprises (SMEs) - those under R5m in turnover will not have to comply at all; those under R35m only partially - are a significant concession to the growth agenda and must be welcome. AsgiSA has identified the regulatory burden on SMEs as a binding constraint. The AsgiSA lobby, led by finance minister Trevor Manuel, won that argument. It remains to be seen whether he will win another: that compliance should be evidenced by an affidavit to that effect, rather than a third-party rating.
The empowerment camp, led by trade & industry minister Mandisi Mpahlwa, argues that it will give the codes no teeth. On the other hand he has won the key principle that virtually every large company in SA now has to have black co-owners, majority directors, executives and staff.
That in itself will require a huge distribution of existing corporate assets and will drive the empowerment project for years to come.
The outcome of the cabinet debate is a pragmatic policy that should be applauded. Tough arguments make for a fine balance, and it's the only way SA will achieve its long-term ambition to become a prosperous, non racial society.
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