South Africa is a truly remarkable place with a rich history that holds lessons for the rest of the world in the political, economic, and cultural realms. Because of the country’s history with apartheid, and so in this post I will speak to the ways I have encountered the race topic since being in SA – as race touches every aspect of life here.At Endeavor, a high-impact accelerator, my project is to help improve their program that focuses on black entrepreneurs – a good cause. Yet, the implementation of affirmative action in SA through BBBEE (Board Based Black Economic Empowerment) legislation has had some interesting effects. The scheme is highly complex, but I will touch on some of my key learnings so far. First, firms must donate a portion their profit to Enterprise Development (ED), which are programs to help develop black owned businesses. This has led to a boom in the business development services (BDS) field, which Endeavor is in, with more than 200 organizations seeking to support entrepreneurs – and as such get their hands on ED money. Ironically, the byproduct is that there are too many service provides and not enough good entrepreneurs and money gets wasted on people, often with people using BDS as a way to source a job, and often participating in several incubators without ever really starting something. As a result, capital in the jobs starved SA economy is wasted. Second, there are sort of ‘quotas’ for organizations to have black leadership and employees. However, the education system is terrible in SA with not enough talent to meet businesses’ needs. Furthermore, strict labor laws make it hard to fire people. As a result there is a booming labor brokerage industry, which act like temp agencies, that distort the talent in the job market, wages, and keep unemployment high. Over the past few weeks I have spoken to several professionals (black and white), often in the financial services industry, who have given me examples of issues that they faced. A highly educated young black stock broker talked about his boss without a university degree continuing to rise, but him unable to because he is there to fill a black quota, but at the least cost to the firm. Meanwhile, a white commodities broker spoke to me about his year working with a large bank under a temp contract but could not get hired because the bank needed to meet its quotas. It is amazing how openly people discuss race in SA. They have shed the stigma we in the US ache over using the words black, white, and colored to describe people. There are indeed large economic imbalances in society, often along racial lines. BBBEE is an interesting experiment at socialist redistribution, but it just might undermine the economy and shrink the economic pie for all. As the world wrestles with the topic of inequality thrust to the forefront of the global political debate by economist Thomas Pinketty, we should look to South Africa for lessons. Furthermore, too often politicians enact policies that have unintended consequences and then lack the willingness to follow up to improve those policies. This lack of humility reminds me of a question a friend asked me when I was young -- “Would you rather be happy or right?”
Below are a few pictures showing the "two worlds" that exist in SA. From a world class rugby stadium and the ultra modern stock exchange, to the dirt streets of a slum 15 minutes away.