C. Gopinath

DIAGONAL Street in downtown Johannesburg, South Africa, houses several Indian-owned retail stores.

In the heyday of apartheid, blacks could visit this street for their purchases, but most other areas in that neighbourhood were out of bounds. In local parlance, the term `blacks' includes Africans, Indians and people of mixed white/black parentage, and all three were discriminated against to various degrees.

In one of the worst forms of segregation, these people had to carry passes at all times that specified where they were allowed to go on work. If caught in a non-authorised area, they would be hauled off to prison.

Indians, although discriminated against, were sometimes seen as collaborating with the whites to benefit from economic scraps that were thrown at them. Mahatma Gandhi cut his teeth fighting discrimination in South Africa for almost 20 years before he came to lead the independence movement in India.

Varsha, of Indian descent and owner of a wholesale store on Diagonal Street told me that he and his family are reaping the benefits of all the hard work his grandparents put in. And, so, today, Diagonal Street all abuzz with retail activity, like any other downtown area. It is over ten years since apartheid was abolished, and one of the major challenges of the democratic government in power is how to increase the involvement of the 85 per cent of the non-white population in the economic activities of the nation.

In today's South Africa, only about 12 per cent of mid to senior managers are black. Considering the severe discrimination of non-whites for so long, you would forgive the government if it introduced legislation reserving jobs for different under-privileged groups of people. In India successive governments have continued to follow the route of reservations even 58 years after Independence.

Rather than be chastened by the damage it has done to the public sector and the entitlement mentality it has created in society, the populist politicians today even talk of extending the policies to the private sector. But South Africa has taken the high road. Under the policy of `Black Economic Empowerment', South Africa is both trying to improve the percentage of blacks hired for jobs and also raise the percentage of ownership of corporations to be majority black held.

It does not augur well when a minority community owns or controls most of the productive resources in a country — an issue many East Asian countries face with the emerging dominance of the minority Chinese community. Remember the time when Idi Amin, in Uganda, chased out the Asian community and handed over their assets to the locals? The economic effect of this sudden intervention was disastrous although it had wide political support. Thus, South Africa has chosen to embark on a policy of gradual transformation.

The inspiration for a process of accommodation rather than sudden change through fiat must surely come from the Freedom Charter that was adopted in June 1955.

The Charter was drawn up by diverse sections of the black community working together secretly at a time when apartheid was in force, and when the white regime was even preventing blacks from meeting.

Given that context, the sentiments are truly inspiring. It begins with, "We, the people of South Africa, declare for all our country and the world to know, that South Africa belongs to all who live in it, black and white, and that no government can justly claim authority unless it is based on the will of all the people."

The Employment Equity Act of 1998 required "all enterprises employing more than 50 employees to take affirmative action to bring about a represented spread of designated groups in all occupations and organisational levels...' Thus, the Act aimed to promote compliance, rather than punish non-compliance. Companies must set up a plan and set numerical targets, and submit reports to the department of labour on compliance.

Thus, rather than fix quotas or percentages, the government has provided a vision and asked companies to set their own goals and targets and submit annual employment equity reports on progress towards implementation. The government has set a target of 25 per cent black equity ownership within 10 years. This gradual approach also accommodates the lack of sufficient specialised talent for middle-managers among blacks. It also deals with the fear that in the rush to meet quotas, merit and efficiency would be compromised.

Black Economic Empowerment codes were revised recently and are being debated in the media. A system of points is being set up to rate organisations along various dimensions such as ownership, management control, employment equity, preferential procurement, percentage of blacks among the board, and so on. Some specific industries, such as financial services and mining have their own charters.

Clearly, all is not hunky dory with this approach. Several complain that enough progress is not being made, and others reply that the officers charged with monitoring the policy in the companies have enough powers under the law to act. The challenge before the government is to increase the percentage of black participation in the economy without frightening the local whites or foreign investors. As an example of how forced empowerment can result in quixotic actions, one only needs to glance at neighbouring Zimbabwe. Malaysia, under its `bhumiputra', or native son policy, gives preferences to Malays (but not the minority Indians) in business opportunities and admissions to universities.

The former Prime Minister, Dr Mahathir Mohamad, was reportedly against it but did not change the policy under his regime. In the US, the question of how minorities should be given a helping hand to rectify past discrimination was addressed through an affirmative action policy for some time. This is slowly falling out of favour. Even the US Supreme Court sat on the fence through a recent split ruling in two affirmative action cases — which allowed race to be used in admissions decisions but banned quotas and systems based on points.

A frequent complaint against setting reservations is that quality and efficiency are sacrificed. This is a serious charge since inefficiency has immeasurable costs. If you are on the operating table awaiting surgery, you want the best doctor possible to be looking over you and not be worried about whether he got there because of some reservation policy somewhere.

Of course, it is not necessary that merit is mutually exclusive with reservations, but it often is, at least in the way the policy is implemented. And there are better ways of dealing with past discrimination. Fiscal means such as incentives, scholarships, and subsidies, have less deleterious effects than quotas and reservations.

South Africa's experiment is worthy of close examination by other countries such as India, Malaysia, Brazil and the US who are struggling with similar issues.

(The author is professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is cgopinat@suffolk.edu)

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