A Good Life For a Few

Tom Masland, Newsweek, Jan. 24

They are the black princes and princesses of the new South Africa. They wear Armani to the office, drive late-model Mercedes or BMW sedans and buy vacation villas in Tuscany. The children of Johannesburg’s new business elite attend once-segregated private schools in neighborhoods that look like Beverly Hills. Ten years after the system of legal racism known as apartheid fell, jewelry shops now market diamonds to this new carriage trade. And the nation’s world-famous country clubs, where whites once learned enough Zulu to tell a caddy, “Move your shadow,” still thrive. The new black elite loves golf.

Is there something wrong with this picture of prosperity? Rolling back the legacy of apartheid—essentially an affirmative-action program for the white minority—was the African National Congress’s top priority when it took power in 1994. But now the ANC’s own affirmative-action campaign is under siege. So-called Black Economic Empowerment (BEE) laws steer government business to firms that include at least 15 percent black ownership. Yet statistics show that the gap between rich and poor has widened. Between 1995 and 2000, for example, average black household income shrank by 19 percent, while that of whites—and of the new black middle class—rose by 15 percent. The country’s Gini coefficient—a measure of inequality—also worsened.

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But the South African approach to spreading wealth has also proved ripe for abuse. Some white firms bidding on government contracts have simply created black-owned front companies—in effect, renting people’s identities. Ten years on, little capital has changed hands. Individual blacks still own only 1.6 percent of shares traded on the Johannesburg Stock Exchange.

At the same time, a small group of politically connected black magnates has grown wealthy, typically by buying into corporations after privately gaining discounted or loaned shares. These so-called empowerment firms often don’t create new companies, but benefit immediately from stock earnings and from taking part in management. The new black tycoons include Cyril Ramaphosa, a top ANC leader once considered a potential president; Tokyo Sexwale, a former provincial premier; and mining entrepreneur Patrice Motsepe. Deals involving those three accounted for nearly 80 percent of the value of the top 10 empowerment buy-ins recorded during 2003.

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