It is hardly surprising that, apart from one moment, Cyril Ramaphosa avoided the topic of Black Economic Empowerment at his Investment Summit this week. He was, after all, trying to give reasons to invest in South Africa, not to avoid it.

The one mention he did make of the policy seems to have been a gaffe. In his introductory speech, Ramaphosa referred not to ‘Broad-Based Black Economic Empowerment’ but to ‘Radical Black Economic Empowerment’. It can only be hoped that this was indeed a slip of the tongue, not an indication of a doubling down on a policy that has failed even on its own terms.

BEE was justified by no one less than Ramaphosa himself in a parliamentary portfolio committee hearing in 2000, on both ‘moral’ and ‘economic’ grounds. Moral arguments have no place at an investment summit other than noting perhaps that when politicians use the term, its true content is often elusive.

The ‘economic’ argument has always been that BEE is a growth strategy. The exclusion of black South Africans from the core of a market economy, except as provider of labour power, was apartheid’s greatest sin. But, more practically, the excluded need to be brought into the economic mainstream if South Africa’s sorely needed higher growth rate is to be achieved. Although BEE has palpably failed to do this, this insight seems to have eluded Ramaphosa. Indeed, in Parliament in July, he argued that the policy needed to be ‘strengthened’.

The problem is of course that BEE subjects a full quarter of the economy, the 25 percent allocated in the sectoral charters, to a non-market allocation of resources and capital. It would be bizarre to pretend surprise at this deterring investment. But the President appears to think the big problem lies elsewhere.

The reason for South Africa’s ‘decade of low growth’, Ramaphosa told the Investment Summit, is state-capture and corruption. Of course, these are investment disincentives, but that BEE, as practised by the government of which he was part, opened the door to these phenomena, appears to be news to him.

None of the luminaries who spoke at the Summit were inclined to set the President right. After all the nature of the gathering was such that it was attended by private sector players who already have a substantial interest in the country and would be fired by their shareholders if they jeopardised that stake, or by representatives of state entities who are in no position to disagree with the boss.

Even CEOs like Anglo American’s Mark Cutifani, who told the Mining Indaba at the beginning of the month that he had ‘misgivings’ about the sector’s Charter, was silent on the BEE issue, choosing to highlight concerns about load-shedding, security of tenure, labour flexibility and community relations. Cutifani is neither mendacious nor lacking in courage – these are fraught and controversial issues. But raising BEE was clearly a step too far.

Something similar happened with other speakers. Some, like recently appointed Naspers CEO Phuthi Mahanyele-Dabengwa and MTN’s Rob Shuter, criticised South Africa’s slow and over-complicated regulatory environment. But neither was referring to BEE regulations even though these are complex, necessitating the additional cost of compliance advisors, and worse, far from stable or predictable. In fact, the opacity of BEE regulation – including the disputed Mining Charter and the uncertain status of broad-based empowerment trusts – contradicts Ramaphosa’s assertion that his government has delivered ‘policy consistency and predictability for our investors’. 

This was the wrong forum to expect anyone to speak truth to power on the subject of BEE. But if it were magically possible for President Ramaphosa to face a gathering of the industrialists and fund managers who had no interest in attending this Summit and who don’t even have South Africa on their radar screens, he may have had to listen to the hard truth that the policy is a negative factor which discourages investment.

Written by David Christianson, who was commissioned to write this article by the Institute of Race Relations, a liberal think tank that promotes political and economic freedom. Go to https://irr.org.za/