Time for People’s Capitalism

With 16 million people on state grants this year, our welfare net is more extensive than any outside Europe and Canada. We thus pay twice as much to twice as many people than Brazil, a country of greater income inequality. This has certainly helped the poorest. But it’s also seen the rise of dependency on the state and ruling party, undermining entrepreneurship and democracy in the process.

The 2011 census, along with research by Prophet Analytics and others, shows fast rising black household incomes. The SA Institute of Race Relations says that the proportion of people living on a current purchase power of US$2 a day dropped by 83% between 1996 and 2011, while the SA Audience Research Council notes that adults in its lowest Living Standard Measurement (LSM) fell from 11% in 2001 to 1% in 2011; the proportion in the middle LSM 6 almost doubling to 22%.

Even so, from these things, along with successful state provision of housing, electricity, clean water and the like, comes an identification of upliftment with the ruling party to the extent that no matter what that party otherwise does, poor people may regard it as worthy of electoral support in order to secure their state hand-outs.

And not only the poor. The SAIRR’s Dr Anthea Jeffery points to a growing black middle class dependant on jobs in a growing public sector whose pursuit of racial employment quotas has been extreme, and where average salaries now outstrip private sector ones by 40%. Meanwhile, declared BEE ownership deals in the decade from 1998 were up to R600 billion.

She isn’t sure that the piece of the national constitution used to justify employment equity and BEE laws justifies these. The constitutional clause is section 9(2): “To promote the achievement of equality, legislative and other measures designed to…advance persons disadvantaged by past discrimination may be taken”. Jeffery argues that this implies bettering “inputs” in things like education, rather than “outputs” such as employment or ownership race profiles. She points, as example, to only 3% of black Africans having a post-school education as opposed to 21% of whites last year as a real hold on black emancipation.

The Free Market Foundation’s Leon Louw goes further, arguing that section 9(2) is quite possibly unlawful in that it contradicts the constitution’s Chapter 1 “founding provisions”. These proclaim SA as founded on “non-racism and non-sexism…”.

Says Louw, “Since these principles are the basis on which the country is founded, anything inconsistent with them, conceivably even subsequent constitutional clauses, are unconstitutional”. He anyway thinks welfare payments and racial job set-asides too stop-gap to liberate blacks from apartheid’s inheritance.

Instead, he proposes a radical “democracy dividend”. This would have shares in parastatals like Eskom, SAA and Transnet issued to all, weighted to favour the poor. At virtually no cost, this would create a “shareholder capitalism” with people selling, borrowing against, or saving their new-found wealth.

Freehold title to land in townships and former “homelands” would be handed over; the latter areas would become temporary tax-free havens for business and individuals; and government would sell off much of its enormous property portfolio to pay off state debt.

Radical, yes, but in their potential for real empowerment, rather than dependency, surely worth putting front-and-centre of political debate.

– Paul Pereira (first published in The Citizen, 14 May 2013)