EmpoweringSA: A race-based BEE system helps keep ANC tenderpreneurship alive - Automotive Business Review

10 August 2020 - The ANC might now regard the high court’s approach as a great victory for the NDR, as it further confirms that the clear words of the Constitution can be circumvented to serve revolutionary goals. But as public outrage over BEE tenderpreneurship mounts, the ANC might yet in time want to avert any risk of electoral defeat by shifting to popular and effective empowerment measures of the kind outlined above.

Anthea Jeffery

‘A culture of nepotism, favouritism, and abuse’

‘If, as public servants and political office-bearers we truly care about the public whose interests we claim to represent,’ wrote President Cyril Ramaphosa in his newsletter this week, ‘we must allow ordinary members of the public who have interest in doing business with government a fair chance to bid for such business opportunities, instead of passing on inside information about opportunities to our families and friends.’

But the ruling party was instead ‘faced with the real problem of families and friends of political office bearers or public servants receiving contracts from the state’. This conduct was not ‘necessarily criminal, but it did contribute to a perception and a culture of nepotism, favouritism and abuse’.

The president penned these words after failing to persuade the national executive committee (NEC) of the African National Congress (ANC) – at an NEC meeting held last weekend – that senior ANC cadres should ‘discourage’ their relatives from doing business with the state.

‘Unfair’ to exclude the relatives of the ANC elite

At the weekend meeting, many NEC members simply brushed aside Mr Ramaphosa’s proposal. Since the government is by far the biggest procurer of goods and services in the country, ‘it was unfair to ask family members of politicians not to do business with it’, one NEC member told News24.com.

It was also unfair to penalise the sons and daughters of ANC luminaries no longer holding public office, said others. Why should the sons of ANC secretary general Ace Magashule – a former but not current provincial premier – be barred from doing business with the state? Since Nomvula Mokonyane was no longer in the cabinet, why should her daughter be excluded from contracting with the Gauteng provincial government?

Mr Ramaphosa’s efforts to change procurement policy to avoid perceptions of conflict were just a ‘silly PR exercise’, another NEC member said.

All that the NEC was currently willing to concede, reported News24.com, was that provincial leaders should make lists of ‘who in their provinces had been implicated in wrongdoing’, so that party officials could then ‘deliberate on what should happen’.

A statement since issued by Mr Magashule is clearly intent on damage control.  The NEC is ‘outraged and deeply embarrassed’, it says, at allegations that some ANC leaders and members may have benefitted unlawfully from BEE tenders for the provision of personal protective equipment (PPE) and other items vital to the fight against Covid-19. ANC ethics codes will be ‘reviewed’ to provide clear guidance on family members doing business with the state, while all alleged cases of Covid-19 corruption will be thoroughly probed.

A long history of corruption in BEE tenders

But corruption in BEE tenders has a long history and commonly involves amounts far in excess of the roughly R2.2bn in Covid-related procurement now under investigation in Gauteng.

The first witness called by the Zondo commission of inquiry into state capture made precisely this point in August 2018. According to the Treasury’s acting chief procurement officer, Willie Mathebula, ‘the government’s procurement system is deliberately not followed in at least 50% of all tenders’.

Moreover, once the usual tendering rules have been suspended on some basis (a claimed emergency, for instance), ‘a contract which starts at R4m is soon sitting at R200m’. These abuses have enormous negative impact on service delivery because the government is ‘the biggest procurer of goods and services, spending an estimated R800bn a year’, said Mr Mathebula. His analysis suggests that, all things being equal, up to R400bn a year in state spending may be tainted by fraud and inflated pricing.

Given this long-established pattern of abuse, it is not surprising that the relaxation of normal tendering rules under the Covid-19 disaster regulations promulgated in March 2020 sparked a further spate of fraudulent tenderpreneurship.

However, it is not simply the Covid-19 regulations which are at fault. Rather, it is the entire system of BEE preferential procurement in the public sector and state-owned enterprises (SOEs) that opens the way to corruption on a massive scale.

Stated and real reasons for BEE procurement

The ANC has long provided laudable reasons for BEE procurement, saying it helps promote ‘black entrepreneurial capacity’ and is aimed at unleashing ‘the full potential of all South Africans to contribute to wealth creation’.

The organisation’s real objectives are different, however. BEE procurement helps advance the socialist-oriented national democratic revolution (NDR), for it weakens big business and the established middle class and erodes the free market economy.

BEE procurement also helps create a vast patronage machine which keeps the ruling party’s deployed cadres strongly on side. It further boosts the ANC’s coffers, giving it a level of (clandestine) election funding no political rival can equal.

BEE procurement has brought enormous benefits to the ANC/SACP alliance and its favoured cadres at all tiers of government. That it also erodes delivery and harms the poor majority has been brushed aside.

The harm done to the poor majority

In the memorable (2007) words of journalist Jovial Rantao, the government’s declared BEE aim was to ‘spend billions of rands’ on delivering much needed goods and services while simultaneously empowering black business. But what many suppliers did was to ‘pocket the millions’ they received, buy better houses and ‘the biggest and flashiest 4×4 by far’ – and then use what little was left over to deliver on their contracts with the state.

Black South Africans dependent on the government for core needs such as housing, water, sanitation, education, and health care have borne the brunt of such defective delivery.

Against this background, it is hardly surprising that many in the NEC rejected Mr Ramaphosa’s call for limited reform, saying it would be ‘unfair’ to exclude the sons and daughters of ANC leaders from contracting with the government.

Race-based procurement policy

As this response highlights, one of the most telling of the many defects in the preferential procurement system is its racial basis. It is because BEE procurement is based on race that the ANC elite can repeatedly draw benefit from it. Neither the ANC’s cadres nor their offspring need show that they are poor, but only that they are black.

By contrast, if empowerment policies were reserved for the truly disadvantaged – the millions of people who are jobless and destitute – politicians could not so easily abuse them. Eligibility for empowerment programmes should thus be governed by socio-economic status, rather than racial identity.

Many other reforms are needed too. Open and competitive public tendering is too important to cost-effective delivery and the best use of scarce tax revenues to be compromised by set-asides and preferences. Other means must instead be used to empower the disadvantaged.

Better ways to empower the poor

Poor households should be provided, for example, with tax-funded vouchers for schooling, healthcare and housing. Though eligibility would depend on a means test, some 99% of beneficiaries would be ‘black’ in any event. With households empowered in this way, schools and other suppliers would have to compete for their custom, while the truly disadvantaged would gain the benefits of choice, agency, and self-reliance.

IRR field surveys show strong popular support for the voucher option. In 2018, some 93% of black respondents (up from 86% in 2016) endorsed the idea of school vouchers. Black support for healthcare vouchers stood at 91% (up from 83% in 2016), while support for housing vouchers was strong as well, at 83% in both years. In addition, 85% of black respondents (up from 74% in 2016) said these vouchers would be more effective than BEE in helping them to get ahead.

What the Constitution says

Unlike BEE, this non-racial system of empowering the poor would be fully in line with the Constitution. This identifies ‘non-racialism’ as a core founding value of South Africa’s democracy. It bars racial discrimination by the state and others, regards any discrimination on racial grounds as automatically unfair unless the contrary is shown, and requires affirmative action measures to be directed at those who are ‘disadvantaged’.

Perversely, however, the Pretoria high court seems determined to rewrite the Constitution to justify race-based BEE even in a context where existing law does not allow for this. In June a full bench of this court dismissed the DA’s objections to the use of race in the provision of Covid-19 relief to small business, claiming that the Constitution was not ‘race-neutral’.

Last week, the full bench rejected the DA’s application for leave to appeal against its earlier decision, saying that to ‘approach South Africa in a colour-blind fashion is effectively to run counter to the normative framework of the Constitution’.

That assessment ignores the clear wording of the text, in both its founding provisions and the equality clause. It also assumes that a race-based approach is essential to help those ‘most in need and most in vulnerable conditions, who happen to be black’.

As this last sentence underscores, however, ‘need’ and ‘vulnerability’ are the key criteria in assessing who needs help to get ahead, whereas race is incidental. Why then insist on a race-based approach which will inevitably help not only the ANC elite but also (like similar affirmative action programmes right around the world) the most skilled and advantaged within the black group?

Liberating the poor is what cuts to the heart of the matter. Socio-economic status should thus underpin a new empowerment policy that discourages corruption and reaches right down to the grassroots to help those most in need.

The ANC might now regard the high court’s approach as a great victory for the NDR, as it further confirms that the clear words of the Constitution can be circumvented to serve revolutionary goals. But as public outrage over BEE tenderpreneurship mounts, the ANC might yet in time want to avert any risk of electoral defeat by shifting to popular and effective empowerment measures of the kind outlined above.

How ironic it would be if the courts’ current willingness to rewrite the Constitution to rule out a non-racial approach were then to stymie a policy shift important to the ANC’s continued grasp on power.

Dr Anthea Jeffery is head of policy research at the Institute of Race Relations. 

This article was first published on the IRR's online publication Daily Friend.