South Africa has in recent years passed legislation instituting the world’s most rigorous form of affirmative action. The Broad-Based Black Economic Empowerment Bill strives for the “effective participation of black people in the economy” in order to achieve the “economic unity of the nation.” Although the professed aims of Black Economic Empowerment (BEE) are noble, the program has achieved little success in eradicating poverty, increasing employment, or fostering overall economic growth. Whether the new legislation is government-sponsored discrimination or rightful redress of apartheid injustice, remains a matter of controversy. What is clear is that the initiative is an inadequate approach to extending prosperity. The unfortunate result is the displacement of one elite in favor of another, as income disparity within the black population widens.

BEE is based on redistribution according to race rather than wealth or income. Businesses are expected to fulfill rigorous race quotas in a quest for a “demographically representative” staff. Redistribution legislation has made it more difficult for skilled white workers to find employment domestically, resulting in an outflow of skill. Between 1994 and 2001, the percentage of enterprises that perceived the emigration of skilled manpower as “significant” rose from 2 percent to 33 percent. This disturbing skills shortage in many sectors of the economy is accompanied by slow economic growth rates that barely keep pace with population growth.

Critics worldwide have addressed another pressing concern with BEE policies, namely the perpetuation of a small black elite by the current system without aiding the masses who are most in need. Although BEE professes to promote the “meaningful participation of black people in the economy,” it actually fosters a political cronyism that benefits only an elite few. For instance, in 2003, 60 percent of empowerment deals amounting to 25.3 billion South African rand went to the companies of only two black businessmen. Accordingly, wealthy blacks are enriched at the expense of millions living in poverty. In the case of government employment, where racial preferences commonly outweigh skill-based qualifications, black employees certainly benefit, but the masses of poor black citizens who rely on basic government services such as health care and water face exorbitant costs. Thus, while racial preference allows black contractors to charge much higher prices without the risk of losing business, the burden of excessive cost results in fewer public services for those who need them most.

Socioeconomic and racial inequities plague South Africa, and strong initiatives must be taken to correct them. Approximately 80 percent of the nation’s wealth lies in the hands of a white minority of less than 10 percent, while the remaining 20 is divided between black, multi-racial, and Indian citizens. Yet the measures currently in place have proved an ineffective means of combating such inequality. BEE’s focus on redistribution has not succeeded as promised in eradicating poverty. According to recent research at the University of KwaZulu-Natal and the University of Stellenbosch, poverty has expanded over the past 10 years in South Africa. Duma Gqubule, an economist who has studied BEE, attests that in the 10 years following BEE’s creation, unemployment doubled to eight million, while GDP per capita dropped to the levels of 30 years earlier.

If disadvantaged groups are to be uplifted, the government must place its primary focus on the quality and accessibility of education. South Africa’s schools are in desperate need of improvement, especially among the black population. Evaluations conducted by the Education Department exposed a striking disparity between black and white educational institutions. Moreover, owing to repressive measures under apartheid, there continues to be an unfortunate lack of commercially viable skills among South Africa’s black population. Whereas race quotas impede the merit-based employment conducive to capable management, market success, and collective economic progress, educational improvement will raise the previously disadvantaged to merit-based positions and help them achieve a larger share of the nation’s prosperity. Furthermore, skill-intensity programs will foster the establishment of new black-owned businesses, thereby expanding the nation’s market activity and collective prosperity.

As Archbishop Desmond Tutu said in 2004, “What is black empowerment when it seems to benefit not the vast majority but a small elite that tends to be recycled?” Redistribution according to race without a simultaneous investment in education and skill advancement cannot lift South Africa’s poor from poverty. This unfortunate reality begs for urgent action.