An alternative to BEE

A proposal that will allow all a fair chance to build something of their own

This is the final piece in a three-part series on the economics of black economic empowerment in South Africa, following The cost of BEE and How BEE ends. If you’d like to read the full series and support this work, please consider a paid subscription.

In the last two posts, I tried to do two unfashionable things. First, to count the costs of BEE not only in moral terms, but in the language of public finance and industrial organisation. Second, to ask how BEE might end, drawing parallels with the way apartheid eventually buckled under its own economic and political weight. Both pieces came to the same conclusion: a framework meant to broaden opportunity has, over time, come to resemble a tax on production and a moat around incumbents. It nudges a few firms and individuals upwards, but does too little for those at the bottom and too much to slow the very growth they depend on.

If that diagnosis is roughly right, then the next question cannot be avoided: what should replace it?

Here the economics is much clearer than the politics. We now know a great deal more than we did when BEE was designed about how societies grow. The common thread is not ownership deals or procurement scorecards. It is entrepreneurship at scale: millions of people able to start firms, move to better jobs, adopt new technologies and experiment with new ways of doing things. That was precisely what apartheid and colonialism denied to most black South Africans – schooling that prepared you to compete, property you could borrow against, licences and finance to open a business, freedom to live near customers and suppliers. If we are serious about redress and growth, those are the margins we should want to move.

In other words, the thing we should be empowering is not a slice of black ownership on the JSE, but the capacity of millions of poorer South Africans to become entrepreneurs in their own lives. That is both the fairest and the fastest route to shared prosperity. Here’s how…