Enterprise development
This is arguably the most exacting of the four policy sectors. Enterprise development entails effective ownership and operational, decision-making and risk-taking roles, more than both employment and wealth holdings which may demand less in terms of investment, resourcefulness, networks and experience. At the small-scale end, particularly in Malaysia and its Bumiputera microfinance schemes, there is room to revert from race-based to need-based preferences, or to target disadvantaged population groups outside the Bumiputera orbit. The principle of need-based assistance can also be applied in the converse direction - instead of assisting the disadvantaged, disqualifying those who do not need assistance from receiving further preferential treatment or graduating recipients out of repeatedly receiving preference.
However, for the most part it is incumbent on enterprise development programmes to effectively and productively execute the goal of developing capability and competitiveness in as broad-based a manner as possible, for the ultimate purpose of graduating and exiting from overt racial preferences. The range of programmes is expansive, but these themes run throughout, from the voluminous public procurement and licensing machinery, to loans and grants, and advisory and training services.
A few considerations specific to Malaysia can be raised here. In the corporate sphere, Malays have secured a substantial presence in management of GLCs and on boards of GLCs and large listed companies. The forthcoming challenges are to transition to the next generation and to make a structural shift toward broader participation across all sectors and beyond the established mobility within GLCs or from senior civil service positions to corporate boards. In promoting Bumiputera entrepreneurs, recent policy discourses in Malaysia have duly emphasized the need to be vigilant and punitive against rent-seeking and subcontracting and also to be open to experimentation, improvisation and support for risk-taking, including second chances for first-time failing Bumiputera entrepreneurs (Malaysia 2018). The importance of policy design and implementation to deliver on these intentions, and to avert past rent-seeking proclivities, must be stressed.
Malaysia’s public procurement, as well as GLC vendor development, remain extensive instruments for enterprise development. A few modifications merit consideration. In rural areas, instead of Malay ownership as the qualifying criterion for small contracts, the existing requirement of local registration - within the district a contract is awarded - can adequately safeguard local interests, while indirectly continuing to provide opportunity to Malay contractors. In urban areas with higher density of operators, the focus within the Malay preferential systemcan shift to more competitive selection, new incentives for the smallest scale G1 contractors to move up, by setting limits on the repetition of contracts preferentially received at the G1 scale, or bonus points for scaling up to G2 or beyond.4 The prospect of slower economic growth foreshadows the need to get more mileage out of public expenditures. Bumiputera preference is associated with efficiency losses, but other factors also weigh in, for instance the pricing system based on the average of bids, which can be manipulated through collusion, including submission of multiple bids at inflated prices. Price handicaps for Bumiputera contractors, as per official policy, therefore must be cither replaced or reinforced with a points system for technological upgrades or quality improvements.
In South Africa, enterprise development remains the primary domain of BBBEE. Its underwhelming track record and problematic execution have continually invited scrutiny and prompted policy shifts to better align its mechanisms with genuine economic empowerment. The recentness of BBBEE Code revamps, with priority placed on management control, skills development and enterprise development, and novel establishment of the BBBEE Commission, with designated roles in data compilation and policy evaluation, renew the agenda with significant productive potential and hence deserve another trial period for achievements to be realized. This compliance-based approach undoubtedly has its limits. Beyond redistribution, BBBEE must resolutely seek to build capabilities and resourcefulness and to be a springboard for new ventures. Likewise, it is imperative to cultivate dynamism and innovation, which demands rigorous selection and strenuous monitoring of the BIP and programmes directly supporting the creation or enhancement of black-owned enterprise.
Wealth and property ownership
This policy sector often captures most attention, due to the vested interests of beneficiaries and the conspicuous, often elite enriching, trait of many transactions. Malaysia’s pro-Bumiputera wealth ownership policies stand out globally and are also uniquely mired in impasse regarding the measurement of progress and justification for policy continuation and the issue of equitable distribution. A fresh approach to the perpetually unresolved matter of the 30% Bumiputera target, with its entrenched adversarial interests, can take the simple form of reverting back to the original NEP articulation of individual and institutional ownership. Acknowledging that the individual targets have been reached directs attention to institutional ownership, where attention can be further channelled constructively, toward facilitating broader and more inclusive participation. An opportunity also opens up for policy targeting based on income or need regardless of race, particularly in savings schemes for low-income households such as ASB and ASN. At the other end of the class spectrum, wealth ownership schemes that continually benefit well-heeled Bumiputeras are among the AA programmes ripe for phasing out. Bumiputera middle classes and elites who are poised to afford property purchases should make the first move in relinquishing discounts, which is justified on grounds that they do no longer need preferential treatment, and reinforced by this opportunity to positively and concretely demonstrate how empowered Bumiputeras can graduate out of receiving privileges and stand on their own feet.
Discussion of South Africa is brief in proportion to South Africa’s wealth ownership policies within the AA rubric, which are considerably less than Malaysia’s in scope and also more in flux due to BBBEE policy shifts. Looking forward mainly involves sketching out principles. Wealth held through institutions, notably public sector pension funds, impacts on economic ownership and security of blacks proportionate to their presence in the public services, but this institution generally operates outside the ambit of affirmative action. Policy implications therefore circle back to BBBEE-facilitated asset transfers, predominantly company shares, in which policies should in principle ensure that active and broad-based ownership takes precedence over passive ownership and upwardly skewed distribution.
