Moving Forward From Economic Apartheid: How it Could Benefit all of South Africa

A New Working Paper by Assistant Professor Matthew Andrews

Even though South Africa’s official policy of apartheid ceased in1992, the economic status of Black South Africans remain underdeveloped. In his new working paper “Is Black Economic Empowerment a Growth Catalyst (Or Could It Be?...)” Harvard Kennedy School Assistant Professor Matthew Andrews assesses the economic and social opportunities presented by the Black Economic Empowerment (BEE) program, a governmental initiative designed to afford economic opportunities for previously disadvantaged individuals (PDIs).

The paper was a component of research conducted by the International Growth Advisory Panel, chaired by Ricardo Hausmann, director of Harvard’s Center for International Development.

Andrews questions whether or not BEE is succeeding in changing “intra and inter-firm regional structures” to the point where it is opening the economy “more broadly as well—to new ideas, entrepreneurs, and labor-absorbing, export-enhancing production activities.”

He concludes that “while firms are actively responding to BEE requirements they are also doing so within a fairly static macro-structural context. Ownership, control and management initiatives reflect a minimal change approach whereby firms are adding PDI partners at the margin, with the PDIs looking very much like old white owners, directors and managers. This limits the number of beneficiaries of BEE. It also exacerbates constraints on the number of people in these groups—especially manifesting in added pressure on skilled groups.”

Andrews suggests ways to improve the effectiveness of the BEE. Among his proposals are increasing incentives for firms to engage with “new entrants”; focusing attention on creating more job opportunities at the lower end of the income scale, and ensuring subsequent career growth opportunities; and focusing BEE policy on the “middle and bottom of the economy” rather than the top. The BEE is an “important social policy,” Andrews argues, that could not only help drive the country’s economy but also close the development gap between Whites and Non-Whites.

Matthew Andrews is assistant professor of public policy at Harvard Kennedy School. His research focuses on public sector reform, particularly budgeting and financial management reform, and participatory governance in developing and transitional governments. Recent articles focus on forging a theoretical understanding of the nontechnical factors influencing success in reform processes. Specific emphasis lies on the informal institutional context of reform, as well as leadership structures within government-wide networks.