Policy Bulletin: FMF submission on B-BBEE bill 2011

Extract from the FMF’s 2011 submission on theBroad-Based Black Economic Empowerment Amendment Bill, 2011

This submission does not constitute a detailed response to all substantive provisions in the Bill. It is primarily a recommendation for what government policy in general should be in order to achieve the objectives of the Bill and the Act it seeks to improve, namely to expedite broad-based black economic empowerment, namely the economic advancement and emancipation for black South Africans in general.

Additionally, we draw attention to serious constitutionality questions that have not been addressed in the search for pro-transformation policies. These are basic objective legal questions and drawing them to the government’s attention carries absolutely no implication that we question the objectives of the Act and the Bill. As a simple objective fact, core aspects appear to be to be unconstitutional. The purpose of this observation is primarily to encourage a sincere attempt to formulate black advancement and other transformational policies in ways that comply unambiguously with the letter and spirit of the Constitution, including mandatory yet generally disregarded constitutional “values”.

Government policy
What characterises the formulation of specific policies and laws dealing with relatively narrow aspects of the bigger picture is that truly effective determinants of desired outcomes are easily overlooked. This is captured in the idea of not “seeing the wood for the trees”. The discourse on racial transformation in South Africa tends to overlook a simple yet profound fact, namely that all widespread advancement, especially broad-based black economic empowerment, is possible only if there is increased aggregate wealth and prosperity.

Applied to South Africa, this means that there cannot be meaningful advancement for 80% of the population (would-be beneficiaries defined in the Bill) unless there is general prosperity. A law of this nature cannot possibly achieve its objective unless accompanied by related policies that result in high rates of economic growth which is (a) sustainable and (b) reaches most citizens.

In other words, this law on its own runs the risk of creating a misleading impression that it can achieve B-BBEE, whereas it is inherently incapable of doing so in the absence of policies not addressed in the Act or the Bill.

The world’s experience shows that high rates of growth, andonlyhigh growth, promote broad-based empowerment and enrichment spontaneously, even without special measures such as this. High growth is naturally egalitarian.

Policies that are likely to result in general prosperity, including B-BBEE, and ones that are unlikely to do so, are not “rocket science”. The empirical evidence worldwide is straightforward and incontestable: general prosperity will result from, and only from, freer market policies (as defined by recognised criteria cited below). Conversely, it is clear that broad-based prosperity and empowerment are extremely unlikely if the economy is relatively unfree.

Notwithstanding rhetoric to the contrary, there are virtually no exceptions. It is mistakenly believed, for instance, that the world’s celebrated winners such as China, Sweden, Singapore, South Korea, Uganda, Botswana and Mauritius are examples of non-market prosperity due to successful government intervention in the economy. The fact is that such are either amongst the freest economies on earth (according to recognised and independent indices), or are transforming rapidly towards free market policies. This is not an ideological statement, it is simply a fact.

On the other hand, countries whose economies are objectively classified as less free, or transforming from more towards less economic freedom, stagnate or contractat the direct expense of broad-based empowerment. That the poor are the primary victims of low economic growth and interventionism explains why they always and everywhere risk and often lose their lives to flee from less to more economic freedom. Cuba’s and Mexico’s poor flee to America, whereas America’s poor (who are amongst the richest people on earth) never flee the other way. No one escaped from West to east Germany, and no one flees from South to North Korea, India to Pakistan, or Botswana to Zimbabwe.

The full submission can be read by clicking on "View Document" below:

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