South Africa’s policy of Black Economic Empowerment (BEE) has not sufficiently transformed the ownership and distribution of resources in the economy. Editorial Director James Schneider proposes a workers’ funds policy, which would give the black majority more ownership of and control over the economy.
The economic legacy of apartheid is catastrophic. The political apparatus of apartheid was dismantled in 1994, but the racialised economic structures of a profoundly unequal society remain.
The ruling African National Congress (ANC) experimented with a number of policies – social grants, public housing, increased provision of social services and Black Economic Empowerment (BEE) – to address economic inequality. While these policies have alleviated some poverty, they have failed to meaningfully transform the economy in favour of the black majority.
BEE and its successor policy, Broad-Based Black Economic Empowerment (B-BBEE), are amongst the most controversial of these policies. BEE, despite its intention to redress past racial and economic discrimination, is seen to have failed to benefit the black majority. A narrow, often politically connected, elite siphons off much of the benefits. Two abuses have contributed to this failure: BEE “fronting”, where black directors with no real executive power are appointed to gain BEE points, and “tenderpreneurship” where politically connected individuals unfairly win government contracts.
But also, failure is written into the structure of BEE and insufficiently addressed in the improved B-BBEE. There is too much emphasis on black ownership by a few individuals, rather than democratising the economy.
Adapting a system first proposed by Swedish economist Rudolph Meidner in the 1970s could help address this structural flaw and begin to dismantle the structures of inequality effectively. The policy would see government mandate that all companies over a certain size issue new stock each year as a percentage of profits. This new stock would be placed into a fund for
the company’s workers, who would all have equal ownership and manage the fund democratically. A decrease in corporate taxes could accompany the new policy. Each year the company was profitable, the workers’ ownership of the company would increase.
As the workers would manage the funds democratically themselves, the permutations for how they could use the dividends are legion. They could be used to pay employee bonuses or provide pensions. The workers could decide to buy additional shares in their company or engage in staff training and further education. Some funds could get more creative and use some portion of the dividends as a pool of investment capital for new co-operative businesses. New worker-owned businesses familiar with a company’s needs and processes could act as suppliers, contractors, or make improvements in supply chains.
Over time, workers would own more of the country’s bigger companies, own more cooperative businesses themselves, receive higher and more equal remuneration, have greater pension provision and much more democratic control over their workplaces, reducing labour tensions. This latter point cannot be underestimated. South African industrial relations are often toxic and provide a significant strain on workers, businesses and the economy at large. The workers’ fund policy would ease antagonisms within industry, and create more efficiency through aligning incentives while firmly shifting ownership of and control over the economy towards the majority.
The policy won’t produce any new black multi-millionaires, but it could, over the course of a generation, radically improve pay and working conditions for workers without making businesses unprofitable. The result could be real economic empowerment for all.
Editor’s note: This article was published as part of Policy Corner, a new series of short policy proposals. To submit your proposal, please contact firstname.lastname@example.org