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The biggest lie in the post-apartheid economy: ‘buy-black’ (black spending power), black diamonds, township economy and black capitalism

By Hadebe Hadebe

Local market, Marabastad. 2017. PIC: Mdu Ndzingi

New ideas for growing the economy and especially those that seek to see an increased participation of the black majority appear to be obsolescent and lacking in depth. In more cases than not there is strong belief that since blacks enjoy numerical advantage they can ‘secede’, in order to build their own economy and institutions, parallel to what already exists. As part of this thinking, there is also a widespread belief that the black community holds substantial buying power. Perhaps, those behind the concept of ‘township economy’ interpret the goings-on in the South African economy from this perspective.

Of course, these perspectives are not necessarily part of the public policy; although in recent years the Gauteng province started talking about the township economy. In the main, however, initiatives like ‘buy black’, are driven by independent groups. On the other hand, the mainstream media perpetuates the idea that there is something tangible that the country can benefit from the debt-laden and asset-less black middle class. These views clearly indicate that no one is seriously scrutinising what could be impactful participation of the black majority in the economy.

The implication of this is that nobody has had an in-depth investigation into black poverty in South Africa, in the post-apartheid era as it has happened for other races in the past. A document called ‘The Poor White Problem in South Africa: Report of the Carnegie Commission’ was released in 1932 which looked into the plight of European South Africans (or the so-called “poor white problem”) and also made recommendations, including apartheid economy. The Theron Commission in 1976, according to Gerhardus J. van Deventer, reported “on coloured poverty and recommended widespread reform to the apartheid system to incorporate coloureds into social and economic life on an equal footing with whites.” Among others, this commission led to the inclusion of the Coloured population group in the tricameral parliamentary system of 1984.

The Tomlinson Commission in the 1950s only studied “the economic viability of the native reserves (later formed into the bantustans)” as a way of reinforcing the policies of separate development. As such, Van Deventer refers to this commission as “one of the cornerstones of grand apartheid.” Other than this commission, the post-apartheid dispensation never really bothered to investigate the poor black problem and its institutionalisation in South Africa. What happened in 1990 is that blacks were given full South African citizenship and nothing more was done to remove poverty in the black community from its base.

The main assumption of ‘South Africanness’ in terms of public policy, laws, regulations and so on, creates a disturbing illusion that citizenship automatically produces equal opportunities; and the same type of people. But the reality is that when it comes to economics, South African citizens are stratified – one part of society in the peoples of European stock, and sometimes Indians, enjoy better opportunities compared to their native compatriots.

This is evident in poverty, education, and other human development indices. The native population scores lowest in all of them and is also burdened with social meltdown and racial discrimination. The “two economies” phenomenon, as introduced by former president Thabo Mbeki, remains a mainstay of the country’s apartheid-based economy.

The purpose of this article is to show that the notions of ‘buy-black’ (black spending power), black diamonds, township economy and black capitalism are, at this moment, the biggest nonsense in today’s South African discourses. They lack theoretical economic underpinnings and seek to distort history. They are a creation of Big Capital to keep the black majority in South Africa at the bottom of the food chain. Blacks are supposed not to fight for their share in the economy since they have been accorded bogus statuses. Unfortunately, public policy has fallen for this trap and does not come forward to openly support meaningful economic development and growth actively and openly in townships and rural areas. This perspective confirms what Steve Biko said: “Black man, you are on your own!”

Black economic participation and the peripheral status of black communities

Closer analysis of the country’s industrial policy and related initiatives aimed at developing businesses throughout South Africa, which include government incentives and private sector schemes, particularly financing and support, shows that there are minuscule resources afforded to the Black majority in real terms. Those who are oblivious to the plight of blacks tend to compare blacks to Asians, Jews, Arabs, Greeks, Italians, lndians, Pakistanis, Nigerians and others who have not been subjected to sustained exclusion and discrimination. For example, some of these groups have always owned small corner stores, restaurants, cleaners, etc. in the areas where blacks were prohibited to live, let alone to set up shop. Consequently, blacks do not enjoy any privilege or advantage in the centres where most of the economic activity and development takes place.

In addition, there has been no deeper probe that would expose that whites and groups of migrants did not actually start at the bottom like the natives in South Africa. In this regard, most European and Asian migrant communities could and continue to secure loans or credit from banks. Nobody has looked into their wealth and business acumen, skills and networks in their home countries that make them successful business owners. A study of Korean small businesses in Atlanta in 1984 found, “the immigrants got an added boost from the Korean government when it permitted them to take up to $100,000 from the country to start new businesses.” Pakistanis, Ethiopians, and Bangladeshi operate a similar scheme which gives them access to rotating credit for loans, subsidies, business training, and investment information.”

In ‘The Continuing Myth of Black Capitalism’ (1993), Earl Ofari Hutchinson argues that even if the Black Americans “don’t enjoy the instant entree to business and government that many immigrants got, black self-help advocates argue that they can still fashion the billions of consumer dollars blacks spend into a formidable power base. But the problem is that black consumer dollars are just that, consumer dollars.” The very same argument applies to blacks in South Africa who also carry consumer rands, and no productive rands.

This problem is compounded further by two related factors First, as per StatsSA data, the average annual earning among black people was about R6,000 in 2006 and R9,000 in 2015, while the figures for the white population were R77,308 in 2006 and R100,205 in 2015. Commenting on this situation, Statistician-general Risenga Maluleke opined that income earning in South Africa was “heavily racialised”. Second, blacks own less than 2% of the nation’s stock holdings, contrary to popular belief. The PIC and UIF funds are not under the control of black individuals and or groups. Third, whoever is classified as a black middle class has to retain a middle-class job to stay in that category.

Blacks exist in the semi – and peripheral areas of the economy as a source of cheaper labour and a home of undeterred consumers. In terms of the latter, there is a growing argument that blacks should utilise their numbers and strength of their supposed buying power to bargain for respect and regard by the other races that dominate the South African economy.

Such things as “buy black” and Facebook groups like Brownsense are based on this illusion, which is characterized by lack of understanding and evidence. This lopsided thinking which places too much emphasis on buying power should be discouraged by all means. What the proponents of this flawed thinking do not appreciate is that blacks do not even have discretionary spending and savings since most of their consumer rands go to basic household goods and services. What is not said is that large white corporations exclusively dominate this market. And this makes one to question the theoretical underpinnings of shallow ideas concerning the ‘township economy’. Large white-owned companies “control production, supply and transport of all basic food and household items.”

This is no coincidence because townships and rural areas were only designed to facilitate consumption of goods and services from white businesses as well as to send cheap labour to the white-urban economy. The economic infrastructure in these areas, historically, was never designed for capital retention or inflow. Townships and rural areas are therefore like satellite outposts for large white corporations. The character of the economy in townships and rural areas still shows the same pattern: spaza shops and taverns/shebeens (carrying merchandise from large corporations), hair salons, taxis, car washes, etc.

The Kota shop in Soweto. PIC: Mdu Ndzingi

Most businesses in townships and rural areas are too small to employ anyone other than the owner and a few family members. They are mostly service based with a short-life and it is this lack of sustainability that makes them susceptible to take over by foreigners. Instead of searching for serious economic interventions, a province like Gauteng wants to protect the ‘township economy’. What exactly is there to protect and against what? The focus should be building a resilient economy and preventing ‘capital flights’.

Although some black businesses have made some strides, the evidence suggests that they are well too small in terms of size and revenue in comparison to the large monopolies that dominate the South African economy. As a result, economic prosperity in black areas is stagnant since “most prospective black entrepreneurs still find the door shut when they seek credit and capital from lending agencies or managerial and technical training from corporations.” This therefore makes black capitalism the biggest myth in the post-apartheid economy.

Earl Ofari Hutchinson says the persistence of white-owned large firms and their products in the black communities/

economy “is akin to a kind of domestic [economic] colonialism.” He adds, “This near permanent “capital flight” from black communities virtually ensures that black business stays at the outer fringes of the corporate economy.” What is clear with the new proposals like ‘buy black’ and ‘township economy’ is that they are not aimed at taking townships and rural areas out of the clutches of control by white businesses. Instead, they seek to strengthen their dominance and also aim to keep black communities in the fringes of the bigger economy.

Real power and influence is in value addition and wealth retention, not spending power

American author of ‘The Myth and Propaganda of Black Buying Power’ (2020), Jared A. Ball proposes that “more attention should be paid to policy targeting better redistribution of the tremendous annual Gross Domestic Product (GDP).” Institutions such as Statistics South Africa and others do not present GDP share according to race, as they do with unemployment and poverty. Such a move would provide a transparent evaluation and assessment of the impact of the industrial, fiscal, and monetary policies on improving the lives of black people overall.

What this piece aims to show is that black empowerment policies are not targeted at community-wide initiatives but tend to focus or benefit blacks as individuals. Furthermore, all post-1994 policy interventions seem to be indifferent to historical realities in a deeper sense. Meaning, the black community’s aggregated capacity to accumulate wealth and assets was grossly undermined throughout history by colonialism and apartheid, which in turn, directly and indirectly, destroyed the assets of millions of people as well as any opportunity to access to skills and to self-employment.

The racialisation of the South African economy restricted participation of blacks and cushioned other races from competition that could come from the native populations. The outcome of this is gross inequality, poverty, and total exclusion. In short, blacks lack the means to partake in the economy and it is a great fallacy that spending power will catapult them to asset owning classes in the economy. The black majority is landless and without productive assets as well as other necessary tools to partake fully in the modern, globalised economy. What has happened is that the black majority retains the same old position as envisaged by colonial and apartheid policies; it is expected to consume goods produced in the white economy and to supply labour.

Such things as preferential procurement at government level are proving to be a biggest scam ever designed to purportedly transform the South African economy. Again, the conceptualisation of this policy had a wrong premise, hence the practices of fronting, abuse and corruption were always going to make things extremely difficult. At the end of the day, anything and everything that has to do with black economic empowerment has resulted in creating unusable economic enclaves in black-led businesses, that neither produce goods nor have capacity to grow independently from white businesses. This made the idea of creating black industrialists stillborn.

The sooner everyone accepts that the fundamentals that prop the South African economy are colonial and anti-African in their entirety, the better. It is inconceivable that such could be easily overturned using simple notions as “buy black” (buying power) and preferential procurement. The power in any economy is embedded in numerous issues including policy control, ownership of assets and value chains for production and distribution, systems for finance and credit, access to primary sectors such as land, water, and minerals. In truth, blacks are not even near a single percentage point to controlling any of these things.

This begs a question; who exactly will benefit from the assumed buying power of blacks in the South African economy? Without making any untested claims, this article attempts to address this question. In reference to a similar assertion pertaining to the buying power of African Americans in the US, Ball concludes that this thinking is “a concoction of a business and marketing class and propelled by a media force capable of evolving the myth to axiom.”

This propaganda is not necessarily new. After 1994, wool has been pulled over the eyes of the largely segregated and marginalized black professional classes by giving them meaningless tags such as ‘black middle class’, ‘black diamonds’ and ‘LSM somethings’. The common thread in these phrases is consumption and reckless usage of credit to stunt the progress of the black community. South Africa’s credit-driven economy under the custodian of the financial sector understands that without the propaganda of black buying power, its bloodline of consumption spending could fall apart. Blacks are indeed the majority buyers of mostly non-capital assets like, in a true sense, houses, motor vehicles, liquor and other goods.

The point that is often overlooked in this myriad of lies and blasphemy is that black representation in the supply-side (production) of the economy is minuscule. Unlike in other countries, the so-called black middle-class population (or the so-called black diamonds) barely engages in the production of goods and has no say in asset ownership. This situation seems to escape the attention of those who insist on ‘buy black’ or black spending power. New media technology, the advent of the internet and social media expertly complement traditional patterns of propagation, marketing, advertising, and extreme psychological warfare.

Way-forward: GDP must be disaggregated per race like other economic measures

In South Africa GDP is measured by two methods, i.e. production method (total value added of all goods and services produced) and the expenditure method (total spending in the economy). The South African GDP is estimated at R5.077 trillion using the data from Statistics South Africa (2019). The biggest mistake by decision makers since 1994 is assuming that growth in black middle class was sufficient “to create knock-on effects on growing spending power, a better educated and trained workforce, more investment, more job creation, and an increase in savings and entrepreneurship.”

This miscalculation emanates from their failure to properly quantify the concentration of wealth or money in the different stages of ‘building’ the GDP.

In essence, spending power alone is insufficient to measure participation without locating where money and wealth are made throughout the GDP value chain. Another related point is that it is important to know who exactly benefits from this sizable GDP. Adding peripheral economic activities such as informal activities, expanded public works programmes, etc. when calculating the GDP merely distorts the picture. The present GDP calculation also assumes that blacks are active participants in the economy, without necessarily expressing this in real numbers.

Thus, the spending power notion dismally fails to disintegrate the contribution of blacks in the economy and how much they are likely to make when they remotely interact with value chains in the different sectors of the economy. Ball makes a telling observation in that, “Buying power as economic mythology developed within a broader effort to impose [insignificant] black capitalism as an alternative to political or social equality and citizenship.” It is for that reason that most of the private and public resources are concentrated on supporting white firms due to their positioning in the GDP value chain. At most, it is impossible to know how much of government support is dedicated to ramp up production and industrial activity in rural areas and townships or to the black race.

What is worst is that government utilises white, conservative lending institutions as intermediaries to distribute any funds for business development and support. In the absence of basics like assets as collateral, requisite skills, networks and the ‘hand of God’ (direct government support), black entrepreneurs fall short and excellent ideas evaporate into thin air. Not that money is not there, but it is not for blacks to access.

Si ya yi banga le economy!

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