All black economic empowerment (BEE) deals in the private sector should include participation by genuine civil society, community organisations and social enterprises.
Private sector BEE deals largely empower politically connected politicians, trade unionists, civil servants and the ANC, as well as politically connected trusts, businesses and dealmakers of all colours.
BEE must be remodelled to become genuinely broad-based, making civil society, community organisations and social enterprises the core beneficiaries.
The Competition Tribunal and Competition Commission should also, in high-stakes mergers, compel companies to set aside funding specifically for civil society, community organisations and social enterprises.
Companies should also be obliged to channel larger proportions of their corporate social responsibility (CSR) funding to these groups. Many CSR programmes are not impactful, do not reach their stated sustainability targets and are not long-lasting.
Dedicated channelling of the funding to civil society, community organisations and social enterprises would be more developmentally beneficial. The licensing conditions of the
National Lottery oblige organisations to fund NPOs. However, there has been criticism that the funding has not been effectively distributed to deserving civil society, community organisations and social enterprises.
In fact, politically connected individuals have established patronage-based “non-profit” organisations to which the funds were channelled.
There have been many disheartening reports of looting of lottery money meant for poor people. There are also reports that lottery funds meant for community upliftment, social infrastructure and public service delivery have been diverted for personal enrichment or political patronage.
State development finance institutions, such as the Public Investment Corporation, the Development Bank of Southern Africa and the Industrial Development Corporation, provide significant BEE funding. It should be compulsory that development finance institution funds set aside for BEE transactions allocate significant portions to civil society organisations, community organisations and social enterprises.
In addition to the funds government departments, development finance institutions and state-owned entities provide, they also have so-called “transformation” funds.
It must be compulsory for these state transformation funds to allocate large portions of their funding to civil society organisations, community organisations and social enterprises.
The same can be said for many private sector companies that have “transformation” funds.
BEE companies of a certain size must also be compelled to make funding available to civil society organisations, community organisations and social enterprises. Such funding should not be given to politically connected “civil society” organisations or, on the basis of patronage, to organisations linked to politically connected individuals in return for state BEE contracts.
An alternative approach to supporting civil society, community organisations and social enterprises would be to create a Civil Society Support Fund, run by civil society, business and professionals. The private sector, public sector transformation funds, BEE companies, wealthy individuals and foreign governments and agencies could make BEE contributions to the fund.
According to figures from the department of social development, as of February 2023 there were 270 313 NGOs registered with the department. The sector employs more than a million people, more than 80% of them black. The management of the organisations is similarly largely black.
Young people make up the bulk of employment. The sector provides and develops large numbers of democratic, Constitution-based and caring leaders, more so than political parties or business.
Civil society plays a critical role in delivering public services, even more so given the catastrophic failure of public services because of ANC government corruption, incompetence and lack of accountability. The organisations provide humanitarian assistance during emergencies, where the state is often absent.
Civil society organisations also play key roles in fighting official corruption, incompetence and lack of care and in holding elected representatives, public representatives, state-owned entities, democratic institutions and businesses accountable.
Civil society organisations have also been key in strengthening democracy. South Africa’s civil society organisations have heroically defended the Constitution, democratic values and democratic culture, which have been under severe attack from populist and authoritarian political, traditional and cultural leaders, structures and institutions.
Civil society organisations have helped keep a brake on violent shadow groups, such as taxi mafias, gangsters, construction mafias, community “business forums”, crime bosses, informal miners and other powerful shadow networks that operate parallel to democratic and government institutions, influencing decisions, policies and resource allocation.
In the vacuum created by official corruption, incompetence, public service delivery failure and the breakdown of the rule of law, the shadow organisations sidestep bureaucratic procedures to fraudulently capture public resources, policies and debates.
Business funding to civil society, community organisations and social enterprises is minuscule compared with that in peer emerging markets, let alone developed countries.
Most of the funding for civil society, community organisations and social enterprises comes from foreign development aid, mostly from Western developed countries, the US, European Union member states and Japan.
Foreign development assistance declined after the end of apartheid in 1994, when foreign donors moved funding away from the organisations to the new democratic state in the hope of strengthening state capacity.
In addition, the ANC-run state either moved the funds to government projects or to politically connected and ANC-approved “civil society” organisations.
Furthermore, post-1994 foreign development funding to South Africa declined as donors from developed countries argued that the country was a middle-income country with a democratic government and therefore no longer required significant foreign development aid. Business and the state did not step into the funding vacuum that was left.
When the European Union integrated former eastern European countries into the EU, traditional development aid to South Africa, Africa and developing countries was reduced. The EU also shifted its strategy from providing development assistance to developing
countries to promoting trade.
Foreign development aid funding to South Africa plunged further after the 2007-08 global financial crisis, with industrial countries redirecting it to domestic priorities.
The Covid-19-induced global economic crisis forced developed countries to cut development aid to South Africa and other developing countries even further.
After Russia’s war on Ukraine, European countries redirected development aid away from developing countries and South Africa to eastern Europe and domestic priorities.
US President Donald Trump, adopting “America First” policies, reduced development aid to developing countries, Africa and multilateral organisations. The US also slashed or stopped its contributions to global multilateral organisations, such as the UN, which channel funding to humanitarian aid, civil society and peacebuilding in poorer countries.
The Trump administration introduced sweeping global trade tariffs that disrupted economies. Many developed countries, in an effort to rebalance their domestic economies after the high tariffs imposed by the US, also reduced development aid. The US and Israel’s war with Iran further disrupted the global economy. Developed countries are now cutting development aid as they reboot their economies.
China does not provide state development aid or significant philanthropic support to civil society, community organisations and social enterprises in developing countries unless these organisations align with the objectives of the ruling Chinese Communist Party.
Corruption, incompetence because of ANC cadre deployment and patronage-based BEE have caused systemic public service and infrastructure failures — whether power and water outages or rail and port deterioration — as well as policy failures and the breakdown of the rule of law. This has collapsed many companies. Others have moved abroad.
The ANC government has often introduced rigidly ideological, populist and patronage-based domestic and foreign policies that have wreaked havoc on the economy.
Many high-net-worth South Africans have also left the country because of corruption, state incompetence and patronage-based BEE, reducing the philanthropic aid, resources and capacity they would have contributed to civil society, community organisations and social enterprises. This means there is less South African private sector funding for development.
Finally, it is critical that BEE, private sector CSR funds and state transformation funds do not go to politically connected civil society, community organisations and social enterprises. Similarly, money set aside by the Competition Tribunal and Competition Commission from high-stakes private sector mergers should not go to politically connected organisations.
No active or former politician or civil servant should benefit from funding that comes from BEE deals, CSR funding, Competition Tribunal and Competition Commission mergers or lottery money.
Private and public sector funding, local and foreign philanthropy and foreign development aid supporting civil society, community organisations and social enterprises would have a catalytic effect on strengthening democracy, development and employment creation.
Professor William Gumede is the founder of the Little Black Book, the directory of black professionals and entrepreneurs established in 2000 and later sold to Times Media. He is former chairperson of ActionAid.
This is an edited extract from Professor Gumede’s recent farewell speech as ActionAid chairperson at Constitutional Hill in Johannesburg.
The policy must be remodelled to become broad-based, helping make community organisations and social enterprises its core beneficiaries rather than political elites and their connections