Thursday, 4 August 2011

Racial Laws could be enforced by fines.

The ANC government is threatening to impose fines for businesses that don't comply with so-called 'employment equity tests'.

This is apparently to ensure that whites and Indians don't receive "undue benefit from positions and promotions in the work place".

The 'Employment Equity Act' regulates Affirmative Action, which specifies the racial quota's that businesses employing over 50 people should comply with. The quotas are according to the percentage of racial groups making up the population.

The 'Employment Equity Commission' (EEC) chairman has said the current racial percentages of top-level management was evidence of “deep-seated racism in the business community” and resistance to appointing black people.

In response to these accusations, the Cape Chamber of Commerce president stated that businesses were desperately trying to get appropriately skilled black people for these positions but the skills were simply not available.

The EEC chairman agreed that scarcity of skills was true in many cases but then claimed that it was “a blanket excuse” used by employers. 
And argued that fines should be increased for not complying with the racial quotas and would be determined in accordance with the businesses turnover.
The government is also considering making it more difficult to do business with the state if the percentages are not satisfactory.

I really wonder if the people who are making these laws have actually studied economics?
Or at least outside of the old Eastern Bloc or Soviet Union.

All that happens with these types of racial laws is that medium-sized businesses are no longer encouraged to get any bigger.
Why would they want to employ over 50 people if the government is going to tell them who to employ and have the worry of fulfilling racial quota's with the threat of a damaging fine and the negative publicity of government criticism?

Many businesses have also merely divided themselves into smaller companies to avoid having to be assessed by the racial percentage of people they employ.
It is after all their own business, having the government tell them who they can and cannot employ when they are creating jobs, developing the economy and paying tax and VAT is not what a free-market economy is about.

Affirmative Action is a form of artificial social engineering by the state, to have all people employed according to the percentage of their race.
But who's to say these would have been the percentages anyway if there wasn't Apartheid?

Take Brazil as an example, they never had Apartheid but yet the poorest people are non-whites. The same applies to most South American countries.

Affirmative Action, is of course just one part of the problem driving away foreign investment.

There's still 'Black Economic Empowerment' (BEE) where the government stipulates what percentage of various business sectors have to be in the hands of black ownership.
So a company would know that by a certain year they would have to have sold off a certain percentage to a black person or a black owned group. Often this is combined with shares given to black workers.

As a result, companies are selling off their shares at a discount to BEE groups and moving as much of their assets abroad as possible.
The largest one's tend to move their headquarters overseas so they will be exempt from any further racial laws.
While many that do invest try to keep the bulk of their assets and their headquarters overseas as well in order to not have to sell a percentage of their business. But as a result they bring less funds into the country.

Every year foreign investment has been decreasing.
Publicly these companies will agree with these policies so as not to get public government criticism and media attention, while at the same time are taking their money and potential future investments out of the country.
Foreign companies have also cited BEE as an “investment risk”.

The hardest hit has been mining, the biggest contributor to the strength of South Africa's economy and especially it's currency.
Without the investment and money from the mining sector, the Rand would be about 30-40 to the dollar instead of the approximately R7 it now is.

In effect, South Africa's global relevance and relative economic strength as a middle-income country is due to mining.
And the yet the government keeps implementing investor-unfriendly laws which have literally led to BILLIONS of Rand in disinvestment and cancelling of future projects, often selecting other African countries instead to invest in.
Unfortunately, when they have chosen other countries instead, the amount of minerals or potential yield are usually lower than in South Africa.
I think that says a lot.

Foreign investment has decreased by 70 PERCENT this year, due mostly to a combination of these investor-unfriendly policies and the constant government debate of nationalisation.

If someone invests their time and money and all the risks involved into creating a business, it is theirs. They own it.
And they should be able to decide whom to employ, and how they wish to run it. This is the basis of a modern free-market economy.

The corruption in BEE is immense with the vast majority of beneficiary's being a small group of politically well-connected black elites. And often those who have held positions in the ANC and government such as Ministers, or their relatives in order not to be too glaringly obvious.

A lot of wealthy whites have however also benefited from these laws.
If they're in the type of business that relies on government contracts, creating a BEE deal or getting a black partner is like hitting a gold mine.
The black partner is often only symbolic and doesn't even need to know anything about the business.

The percentage they have to give him/her far outweighs the benefits of what they'll be earning with their virtually guaranteed government contracts, and usually they'll be getting bigger contracts than they would have before.
Plus the available pool of BEE approved businesses are smaller, so there is less competition, and if the black partner is politically well-connected it really is like winning a lottery.

And often the corruption in these contracts is simply mind-boggling, quotes have been known to be given at 10 times the value and the government have still approved it

So this system has also created a new class of white elites who have benefited massively from BEE, using the racial laws against their fellow whites to their advantage.

But if the nature of the business is such that it doesn't operate using government tenders, then there are no advantages to having a BEE deal or for complying to the Equity Act.
The result is simply losing a percentage of your business and not being free to employ who you want.

With regards to all these racial laws, I wonder if the ANC and their allies even see the irony?
They claimed to have fought against Apartheid but have merely replaced the old racial laws with a new set and with the added benefit of international support and immunity from sanctions.
While at the same time unemployment has doubled, crime is out of control and the gap between the rich and poor gets even greater.

The government should instead focus on providing funds and support for black people to create their own businesses instead of taking from what there already is.
And to create more businesses and thus more jobs.

How long will they be able to take from that single pie of 'white-owned' businesses? With foreign investment declining, whites leaving the country and preferring smaller businesses, it will not last forever.
Instead of taking from that single pie and carving it up, they should be trying to make it bigger for everyone so that there will be more money going around.

But politics is ultimately about political power and control, as long as the rulers and their elite are profiting and can ensure a constant stream of votes to stay in power, it doesn't matter to them what state the economy is in.

If all these laws had cut-off dates, most could probably accept it. 
But when they say the racial laws will last “forever”, this makes the idea behind it seem like just a get-rich-quick scheme to ensure permanent benefits to a specific racial group.

The really sad thing is, South Africa has so much potential.
To see it get squandered by people motivated by only wanting to keep hold of power and lining their own pockets is not easy to take.

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