South Africa’s White Elite – the Dog That Doesn’t Bark

Filed under: Business,Featured |
Stallenbosch South Africa photo

White home in Stellenbosch South Africa

Keeping their heads down and operating behind the scenes, South Africa’s White elite have managed to maintain their economic position and control of the country’s economy.

When the curtain finally came down on South Africa’s apartheid in 1994, it happened in a way that none of the key players had predicted. Both the African National Congress (ANC) and its opponents in the White supremacist National Party were surprised that they could reach an accommodation through dialogue and negotiation rather than armed force.

In the negotiations that had followed the release of Nelson Mandela and unbanning of the ANC, the parties sealed an unspoken deal. This handed political power to the Black majority and left economic power in the hands of Whites. There was to be no seizure of White assets, although there were, of course, plans to gradually achieve a more equitable balance of wealth.

Black economic empowerment?

Indeed, there were already plans afoot to bring the leadership of the ANC into the fold. White business magnates had begun to transfer assets into Black hands in order to incorporate those at the top of the new political order. The new policy was ‘Black Economic Empowerment’ (BEE). As the commentator Moeletsi Mbeki put it: “BEE was, in fact, invented by South Africa’s economic oligarchs, that handful of White businessmen and their families who control the commanding heights of the country’s economy, that is mining and its associated chemical and engineering industries and finance”.

He pointed out that the policy was adopted well before the ANC came to power. In 1992, Sanlam Limited, a cornerstone of Afrikaner capital, helped create the flagship Black empowerment company New African Investments Limited – led by Nthato Motlana, Nelson Mandela’s former doctor. Further deals followed and soon the new BEE elite were well-entrenched.

On the face of it, the policy was a success. A more equitable sharing out of the spoils of economic development came about, creating a new Black bourgeoisie. At the same time the ANC abandoned its more radical economic policies allowing rich Whites to continue enjoying a very pleasant lifestyle. A considerable proportion of South African assets were transferred to the BEE elite, but even at their height, these transfers were smaller than they appeared. As my colleague Paul Holden points out, the total value of BEE deals were around R250 billion ($30 billion), still a drop in the ocean when compared with the total value of private sector resources of R6 trillion ($700 billion).

Worse still, the BEE transfers were loans, not gifts. The companies had to earn profits and from these profits the loans would be repaid. That was at least the theory. In reality, many of the new Black elite had little or no experience of business and a good number of the BEE companies were soon in difficulties.

As the government’s own assessment of the problems of BEE rightly put it, this led to contracts being signed by people who lacked the necessary capital: “This has encouraged debt-driven deals that are likely to work only when the economy is growing rapidly and company profitability is expanding significantly”.

Soon the new elite were scrambling around to find a way out. They hit on a plan to nationalise the mines. This would transfer a sizeable chunk of their problems onto the shoulders of the state, which could buy them out at favourable rates. At this point they hit a stumbling block. The ANC’s left-wing allies, the unions of COSATU and the South African Communist Party opposed this solution.

The Communist Party openly attacked those who called for nationalisation. The party declared that it had warned against the use of state finances to bail out the new rich and came out strongly against “diverting billions of Rands of public funds to serve the interests of a narrow Black (and White) capitalist stratum”.

Nor was it just a question of “bailing-out debt-ridden BEE capital”, according to the party. They reported that mine union officials had been quietly approached by members of the new Black elite, asking for their support. They were told, “Why don’t you support the nationalisation of the mines? If government takes over the mines they will turn to us to run them.” The Communist Party accused the right in the ANC of being seduced by the emerging Black capitalist class.

White business

Jacob Zuma1 photo

Zuma laughs while South Africans starve

While Black business is in a relatively precarious position, their White contemporaries have worked hard to secure their privilege. For a start, they have kept their heads down and operated behind the scenes. Business South Africa, which Whites controlled, merged with the Black Business Council in October 2003 to form Business Unity South Africa. Not all Black businesses appreciated the change, and some broke away from the new body in 2009. Nonetheless, the White business community had found a convenient new home for their interests. From here they could lobby the ANC government.

Some in White business went further, joining the ANC’s Progressive Business Forum. Its stated purpose is to open direct links with the ruling party. Within a year of its formation, the forum was being portrayed in the press as a means of “buying face-time with cabinet ministers and senior government officials”. The ANC responded briskly that there was “nothing untoward about this”.

Today it is clear that the Progressive Business Forum is a potent means of raising money for the party. A seat at President Zuma’s table at a banquet held in Johannesburg in June 2012 was going for no less than R500,000 ($60,000).

This is not the only way Zuma’s ANC has raised money from business. An investigation in 2006 by the Institute of Security Studies revealed the existence of a group of companies controlled by a firm called Chancellor House, which quietly accumulated stakes in minerals, energy, engineering, logistics and information technology.

This has been a major source of funding for the ruling party and has resulted in inevitable conflicts of interest. “More often than not, these business opportunities have been dependent on the government’s discretion – the award of state tenders, mineral rights and the like. The ANC, as ruling party, has been both player and referee”, says the report.

“As it has always been”

Nearly two decades after the ANC came to power, the Black middle class is both powerful – through its influential role in the ANC – but also dependent on the party for its position. It is insufficiently well-resourced to stand on its own feet and reliant on state contracts and BEE legislation for its positions.

The White elite, on the other hand, are better endowed and better resourced. Some have moved to become consultants rather than hold formal positions in companies. Others have moved some or all of their wealth offshore – treading the trail blazed by companies formerly listed in South Africa like Old Mutual and Anglo-American, which are now listed on the London stock exchange. At the same time, White business has learnt to live with the ANC in government, working behind the scenes rather than raising their voices in public.

President Zuma summed up the situation rather astutely when he addressed ANC’s policy conference on June 26, 2012. Much had been achieved since taking power in 1994, he said, but much still had to be done. The president went on to outline the key issues that had to be tackled – among them were economic relations, which, he said, were still largely unchanged.

When the end of apartheid came, he said, “We had to be cautious about restructuring the economy in order to maintain economic stability and confidence at the time. Thus, the economic power relations of the apartheid era have in the main remained intact. The ownership of the economy is still primarily in the hands of White males as it has always been.”

 

By; Martin Plaut