Scrapping race preferentialism key to value-for-money budget – IRR

22 February 2022

Finance Minister Enoch Godongwana should put cost-effectiveness first and exempt all organs of state from race preferentialism when it conflicts with getting the best bang for every buck.

Minister Godongwana would face a tremendous backlash from the tripartite alliance and the EFF if he structurally reformed public spending, putting merit first, but this brave move would be backed by three major powers.

First, structural reform against race-based crony-capitalism was directly called for in Deputy Chief Justice Raymond Zondo’s State Capture Report. That report draws attention to the “inevitable tension” between the Constitution’s requirement that taxpayer money be spent cost-effectively, as per Section 217(1), and its allowance for group preferentialism, in Section 217(2).

Wrote Zondo: “There are of course many cases, one hopes the vast majority, in which the award of the tender satisfies both objectives of the Constitution but undoubtedly there are other cases some of which may well be high-value tenders in which one or other of these two objectives must be preferred, and it is in such cases that the [current] legislation fails to give guidance.

“In the view of the Commission the failure to identify the primary intention of the Constitution is unhelpful and it has negative repercussions when this delicate and complex choice has to be made, by default, by the procuring official.

“Ultimately in the view of the Commission the primary national interest is best served when the government derives the maximum value-for-money in the procurement process and procurement officials should be so advised.”

No one is in a better position than the Minister of Finance to advise organs of state to stop putting a premium on skin pigment and to derive “the maximum value-for-money in the procurement process” instead. The Minister is bound by oath to protect the fiscus.

The Preferential Procurement Policy Framework Act (PPPFA) empowers Minister Godognwana to “exempt any organ of state from any or all the provisions” of the framing Act’s racial preferencing if “it is in the public interest”.

The Commission on State Capture demonstrates why an exemption is in the public interest by drawing attention to the crony-capitalist alternative that persists so long as conflicting laws fail “to identify the primary intention” of getting maximum value from the non-racial public purse. Hundreds of billions or rands, probably trillions, have been looted.

Not only is putting cost-effectiveness before racial preferencing by exempting organs of state from race-based measures within Minister Godongwana’s legal authority, this would also be good for black entrepreneurs and investors. Stats SA data shows that on the broad racial definition the top 10 percent of black earners out-earned the top white 10 percent three times over in 2015.

Moreover, assuming the 2015 racial earnings ratio remained fixed, since then South African Reserve Bank data indicate the top 10 percent of black earners took home roughly the equivalent of South Africa’s net worth, including all private and public wealth, combined.

Said Gabriel Crouse: “No special preference is needed in the investment class. Brilliant people of all races are now capacitated to thrive in a competitive market. Black investors, like all investors, should be allowed to chase yield in a market geared for rocket-paced competition. Black wealth-makers should be allowed to fly without obtrusive training wheels. It’s time for ‘Yes We Can’.”

But the greatest power behind a value-for-money fiscal shift is the half of South Africa, roughly 28 million people, receiving social grants. Grants recipients cannot afford for public money to be wasted. Grants recipients pinch pennies to afford toilet paper, if possible, while Eskom was found to have inflated its toilet paper procurement nine-fold.

If Minister Godongwana admitted that poor people already know how painfully important “value-for-money” is he would have tens of millions of allies to back him in his push against blatant elite enrichment.

Independent surveys commissioned by the IRR have repeatedly shown that most South Africans agree that merit is to be embraced, not feared.

In its 2020 survey 60% of respondents said jobs should be appointed by merit with extra training for the disadvantaged, while 20% choose merit alone. The combined merit preference was 80%. By contrast not quite 20% endorsed the race-preferencing policy of the tripartite alliance and EFF.

Furthermore, IRR polling suggests that almost 80% of South Africans think that jobs and education, rather than race preferencing, are all that is needed to remove racial discrepancies.

The potent implication is that most people would rather let merit rule the day and are unafraid that this would reproduce apartheid-style outcomes. With the exception of white people, roughly 80% of respondents said a meritocratic voucher-based system would help them more, personally, than BEE. (White respondents preferred BEE at almost double the rate of respondents from other racial groups in the 2020 poll).

It stands to reason that if most people, especially most people who are not white, want jobs on merit and think merit is the way out of apartheid’s shadow then most would then also rather want to save taxpayer money, or spend it directly on the poor, or put it back in the pockets of money-makers, rather redistribute that money to a few political cadres who are already rich from their connexions.

Said Crouse: “If he put maximizing value for the public’s money first, Minister Godongwana would have the backing of the State Capture Report; he would have backing from the power of law, specifically the PPPFA; he has grants to defend from thieving cadres and he could have the public’s ululation for putting merit ahead of cronyism all in one go. But does he have the common sense to do the right thing?”

Issued by Gabriel Crouse, IRR Head of Campaigns, 22 February 2022