LETTER FROM JOHANNESBURG
Since the election of Nelson Mandela in 1994, righting the injustices inherited from apartheid has been one of the sacred missions of South Africa’s ruling party, the ANC. So there was reason to be surprised in early November when several South African media outlets announced that the most emblematic of affirmative action policies, “Black economic empowerment,” would not be considered in the awarding of contracts. Devastating news that was immediately denied by the government. But the continuing uncertainty surrounding the succession betrays growing anxiety around these policies, which are accused of fueling corruption and hurting the economy.
The imbroglio is based on complex legislation that allows certain companies to be favored in the context of the awarding of public contracts to favor the South African State. “classes of people historically disadvantaged by unfair discrimination on the basis of race, sex, or disability”. It is based on the concept of the main criterion of positive discrimination “Broad-Based Black Economic Empowerment”, commonly abbreviated BEE. Each company has a ‘BEE score’, which is largely determined by the skin color of its leaders.
Traditionally, the mechanism consists of measuring the price offered by a company in response to a call for tender within the public market with a BEE score. But since 2017, a more radical regulation allows for automatic disqualification of a company without a particularly satisfactory BEE score. Mechanically, it also allows public contracting to be awarded to companies 100% owned by people of color. A decision that was quickly challenged in court by Sakeliga, a lobby that opposes affirmative action policies and government intervention in the economy more generally.
In February, South Africa’s Constitutional Court ruled in Sakeliga’s favor amid criticism of the perverse consequences of these rules. Believing that the finance minister has overstepped his authority, he urges the government to look into his copy. In the process, more than a hundred state institutions are asking to be exempted from the provisions that are considered illegal. Among them is South Africa’s public electricity company Eskom, whose current failures show the system’s limits.
Eskom, on the edge of a precipice, cuts daily electricity in South Africa to prevent the collapse of the power grid, as its coal-fired power stations collapse under the weight of accidents. Most of them are over 40 years old, but the new ones, almost a few years old, have the same problems. Because it is actually a skill that the South African electricity giant lacks.
“If Eskom can’t work, it’s because the people responsible for maintenance are not doing their jobs properly”explains a company insider who ensures that incompetent, corrupt companies or both get maintenance contracts under the guise of what he calls South Africa’s policies. “conversion” economy.
In an explosive interview with the Weekly Sunday TimesIn late October, one of Eskom’s newest board members, highly respected business executive Mteto Nyati, publicly claimed that “Corruption is largely behind affirmative action policies that promote small local businesses”. “We have to have the best people to do the job right now, because they’re the ones who have to fix what needs to be fixed, no matter what it looks like.”he continued and called “review and change as needed” legislation. A few months ago, an unthinkable speech from the mouth of a high-ranking public company official.
Unsurprisingly, Mteto Nyati’s remarks are being fiercely attacked by promoters. “conversion”to the point where Eskom management issued a press release confirming it “Supports all government policies aimed at transforming the South African economy” and ensures that his manager’s words are distorted. President Cyril Ramaphosa, questioned by the Assembly on the subject, took steps to defend himself “transformative politics” South Africans. It is hard to imagine him doing otherwise as he prepares to contest re-election as party leader in December, and the ANC “conversion” is one of his main election arguments.
“Developing a New Vision”
It is in this context that on November 4, the South African government finally published new rules governing the conditions for the award of public contracts aimed at complying with the Supreme Court’s ruling in February. The very sober new version significantly restricts the scope of affirmative action and removes any reference to “Black economic empowerment” policies, prompting several media outlets to confirm that the government has just abandoned this criterion.
For his part, Finance Minister Enoch Godongwana calls a press conference under fire. “clarify” situation. He assures that the new measures are merely to comply with the court order and do not indicate any change in policy. A simple technical modification essentially gives various government agencies the responsibility of determining the rules for preferential awarding of public contracts. What the Minister fails to specify is that the new regulations actually include all the radical measures adopted in 2017, such as the ability to disqualify a company based on its “BEE score”.
The saga is far from over. A new, broader law outlining the rules for awarding public contracts in the coming months should clarify the ANC’s position on the subject. But already President Cyril Ramaphosa, while providing the BEE policy “not threatened”emphasizes that it is necessary “developing a new vision” of this policy to conform to “economic realities”.
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