Stephen Gelb June 24, 2008

To BEE or not to BEE?

The real problem is deficient corporate governance, affirmative action is simply the context for the fight

I thought of writing this week about Kevin Pietersen’s reverse-sweep, but I’d rather discuss the issue for which he first became famous: affirmative action, which we call BEE, black economic empowerment. Last Wednesday Cricket South Africa announced new ‘transformation’ guidelines, ending the practice whereby its president approves the national team’s racial composition.

This follows the furore in March when CSA President Norman Arendse allegedly (he denies it) forced the replacement of Andre Nel by Charl Langeveldt in the team to tour India. The media and popular reaction then was: We won’t be fielding our best side! Race quotas are all very well lower down, but not for the national team! This ignored the facts. Langeveldt had performed better than Nel in the subcontinent, and Nel was no longer in the Test XI anyway. He had been replaced by Morne Morkel, so the argument was actually about the reserve seamer spot.

The new guidelines have provoked a sigh of relief, together with moans over some of the recommendations: Politics has not been fully exorcised from cricket!

Affirmative action invariably provokes illogical arguments and the cricket quota debate is no exception. Racial transformation targets – percentage shares with deadline dates – are now fully accepted by SA business, covering ownership, management, skilled labour force, purchases of goods and services and even customers. By and large, formerly white corporations have recognised the necessity of transforming and even its benefits. But far from being voluntary, it needed pressure and regulation to chivvy corporate foot-draggers. Government contracts depend on meeting BEE targets, big shareholders demand change, and legislated codes are in place.

Cricket boardrooms and executive offices are transformed, as evidenced by Arendse, Ray Mali et al., though there is the odd disgruntled (Ray) White. The national team has included black players on merit for years. So why the recent fuss?

I think it stems from a deep contradiction within national sports bodies. Fans following their sport enjoy what we economists call a ‘pure public good’ – all can be fans together and no aspiring fan can be excluded. Fans without the admission fee maybe can’t watch their sport ‘live’, but can be fans nonetheless. Public goods are best supplied by a single provider, usually government representing ‘the public’. Think of national defence, another public good.

National sports organisations are usually monopolies, but aren’t publicly accountable like government agencies or corporations listed on stock exchanges. They are private in character – non-transparent and self-regulating – if not privately-owned. This helps them enormously to evade the consequences of poor performance, limit players’ freedom of movement, and vigorously protect their monopoly power (I’ll write about IPL vs ICL soon).

But the fans have neither ‘exit’ nor ‘voice’ options to register their disapproval. They cannot switch to a market competitor nor hold ‘their’ sports organisations to account to force a change of behaviour. They carry all the risk: if the team does badly, they suffer, but they can’t change teams.

Back to Arendse, who was at worst ham-fistedly forcing employees (the selectors) to carry out company policy. His goal, if not his method, was that of any manager. The hostile reaction was in response to his own lack of transparent accountability. The real problem is deficient corporate governance, affirmative action is simply the context for the fight. So don’t expect the new guidelines to sort things out.

Can anything be done to improve accountability? Perhaps, though as I said, the problem is at the heart of national sports organisations. But I’m out of space, so I’ll have to come back to it another time.