Fine+line+between+empowerment,+cronyism,+Makgetla+BDay

Business Day, Johannesburg, 20 July 2005
=Fine line between empowerment and cronyism=


 * Neva Makgetla**

IT IS not so easy any more to tell when a business deal is corrupt. After all, through black economic empowerment, the state has argued that it has a duty to ensure some black people become rich. So where does one draw the line between desirable support for empowerment deals and the corrupt enrichment of cronies?

The relationship between business and political power in democratic systems is always vexed. But in SA, it has become more visible as a new political class seeks to establish itself economically. In these circumstances, we need to clarify when and how political leaders can legitimately participate in the economy. And we must reinforce the idea that public service is about serving the people, not about making money.

The problem has arisen largely because big white-owned business still provides very little scope for African involvement or advancement. To this day, three-quarters of senior managers in the private sector are white, and the vast majority are men.

Until recently, government did not have a formal strategy for dealing with this problem. Instead, aspiring black business people turned to powerful individuals to help open doors.

It does not help that empowerment in its narrow sense, where people obtain holdings in existing companies, inherently entails speculation, in the sense of buying and selling shares for profit. That has emphasised financial engineering instead of real investment to increase production and employment.

SA is developing a whole generation of aspiring business people with virtually no connection with the real economy. They live and die by financial markets. Many know everything about intricate schemes to allocate debt and risk, but have never set foot in a factory or mine.

When the aim is just to trade shares, not to set up new production, a backer in the state is especially useful. Now, however, both investors and officials are genuinely unsure about when that backing becomes illegal.

Government leaders can support business in many ways: making a call for a friend, joining an investment consortium, participating in a blind trust, or taking a kickback for pressuring a company to accept a particular empowerment partner.

Under current practice, only the last crosses the line.

Initially, most people from the democratic movement expected the struggle traditions of dedication and sacrifice to guide our leaders. Before 1994, skilled people routinely gave up business opportunities to serve the nation.

Today, many in the new ruling class have rejected that morality. Instead, they prioritise the accumulation of wealth at any cost — which has caused huge divisions.

The enrichment drive has several roots. Most black people in leadership positions have high incomes, but lack the inherited assets of established (white) elites. That makes it harder to maintain an upper-class lifestyle. High unemployment also means many have lots of dependants.

Meanwhile, the democratic movement has not adequately debated consumerism. We lack a shared sense of the appropriate lifestyle for our leaders — so for some, the sky is the limit.

At the same time, guided by the new managerial approach to public administration, there has been a tendency to overrate financial rewards for government leaders, while undervaluing the incentives inherent in professionalism and dedication to service. All over the world, the main reward for professional public servants and elected leaders is the esteem of their peers, dedication and influence, not huge salaries or investments. That is why virtually all earn far less than their counterparts in business.

Finally, many of our most ambitious young professionals were too young to experience much of the struggle. Yet they feel entitled to the fruits of victory, without the social qualms often voiced by the older generation.

In these circumstances, it is not always easy to define corruption unambiguously. But it would help to agree on some key indicators. To start with, it should be strictly illegal to use one’s position in the state to help anyone gain an interest in a particular project, even without payment.

The new codes on empowerment should set transparent criteria and procedures for acquiring shares in business, similar to those laid out for public tenders, to avoid unfair political intervention. And last, we need a broader public discussion to reach consensus on guidelines for investment by political leaders.


 * Makgetla is a Congress of South African Trade Unions economist.


 * From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A71000**