Dave Steward Responds to Mondli Makhanya's Comments in the Sunday Times Regarding His Article on 'Who Controls the South African Economy'

DAVE STEWARD RESPONDS TO MONDLI MAKHANYA’S COMMENTS IN THE SUNDAY TIMES REGARDING HIS ARTICLE ON 'WHO CONTROLS THE SOUTH AFRICAN ECONOMY'

My article on 'Who Controls the South African Economy' evidently upset Mondli Makhanya of the Sunday Times (ST 8 July 2012), probably because it questioned some of the sacrosanct preconceptions on which he and many other people base their analysis of South African politics.

In my article I questioned the view expressed by President Zuma at the opening of the recent Policy Conference that, “the economic power relations of the apartheid era have in the main remained intact. The ownership of the economy is still primarily in the hands of white males as it always has been.”

It seemed as though President Zuma equated ownership of shares on the Johannesburg Stock Exchange with ownership of the economy. In his closing speech to the Policy Conference he again created this impression: “With regards to the ownership of the economy, after excluding the value of foreign operations, the gross black ownership of South African assets on the JSE is equivalent to 6.8%.” (In fact, even with regard to the JSE, the president was wrong. According to a thorough and conservative study carried out by Trevor Chandler and Associates in October last year direct and indirect black ownership of JSE shares is 17% of the total - and 28% of the shares available to South Africans.)

I pointed out that the economy comprises much more than companies listed on the JSE - which according to two leading economists whom I consulted, probably does not comprise more than 20% of total economic activity. The broader economy includes

the substantial contribution of government at the national, provincial and municipal levels; state-owned enterprises and the informal sector - which are all controlled by black South Africans (with the exception of the multiracial Western Cape and Cape Town);
JSE-listed companies, non-listed companies and the small and medium-size enterprises which are predominantly owned by white South Africans; and
foreign ownership or control of the economy, including 33% of the shares on the JSE; most of the oil industry; virtually all of the car-manufacturing industry and the enormous stake of multi-national companies.

I also observed that black South Africans are entirely in control of economic policy - which clearly is a critically important dimension of “economic power relations”.

All this is mirrored in the fact that the white share of income has declined from 54% in 1993% to less than 40% in 2008.

I concluded - I thought rather politely - by stating that, if my estimates were only approximately correct, “it is clear that the president has been very badly misinformed”. I stand by this view - which Makhanya thought was “nauseatingly patronising”.

The president was demonstrably wrong when he stated that “the economic power relations of the apartheid era have in the main remained intact.” This is of more than passing importance because it is on this error that he and his colleagues have constructed the whole edifice of their proposed “Second Transition” (now called the “Second Phase”) - with its proposals for the radical reorganisation of the South African economy and the racial redistribution of wealth.

I did not deny that white South Africans still control a disproportionate share of national wealth and agree with Mkahanya that “wealth and poverty still wear a complexion” - although, as he points out, this is also changing as a result of the rapid growth of the black middle class. In this regard, it is interesting to note that white portion of the top 20% of income earners dropped from 47% in 1995 to 32% in 2009.

I specifically agreed with the “need to address the triple problems of unemployment, poverty and inequality”. I pointed out, however, that the policies that the ANC was considering would have just the opposite effect. “They would put an end to any hope for meaningful foreign investment; they would chase away our best and brightest entrepreneurs; they would seriously erode the government’s tax base; and they would undo all President Mandela’s excellent work in promoting reconciliation and national unity.”

Makhanya is unkindly dismissive of my modest attempts to analyse the complex question of who owns the South African economy. However, what he refers to as my “back-of-matchbox calculations” are the only analysis of this kind that I have thus far seen - and are in all their imperfection far closer to the mark than those upon which President Zuma wants to reconstruct the economy.

I shall be happy if my informal estimates serve to stimulate proper research on these topics - since they are so central to our national discourse and to the evolution of government policy.

Dave Steward, Executive Director of the FW de Klerk Foundation

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Published in: FW de Klerk Foundation