The institute, which spoke out against racial discrimination under apartheid, said black empowerment policies had seen unqualified people appointed to positions where their incompetence hit poor and vulnerable communities.
It pointed to the deaths of three babies aged between seven and 13 months in Bloemhof in North West province this week, apparently caused by drinking contaminated tap water. Scores of others were also hospitalised.
"The Bloemhof municipality 'lost its capacity' to maintain the sewer plant," the independent think-tank said in a statement quoting its Chief Executive Frans Cronje that accompanied its paper entitled "Killing Babies".
"There is no doubt that the officials responsible for these deaths were appointed, at least in part, on grounds of race-based affirmative action and that a direct causal link therefore exists between the policy and the deaths."
Cronje said that in all the commentary on the deaths there was no mention of affirmative action, because that would "cross the barrier of political correctness forced on our country by the ideology of race-based empowerment".
The governing African National Congress implemented affirmative action when it came to power 20 years ago to redress the injustices of apartheid, under which the black majority were denied access to political and economic power.
But the IRR said the policy had created a "very small black elite" that used the system to perpetuate its own advantage over "the masses of desperately poor people".
The ideology was "a veil behind which to conceal corruption and incompetence".
South Africa needs to break down the barrier of political correctness that has shielded affirmative action and talk about alternatives, Cronje said.
These could include Economic Empowerment for the Disadvantaged, a policy being developed by the institute.
"This policy seeks to use socio-economic status to prioritise access to the building blocks of economic advancement, such as education, employment and entrepreneurship."
Coupled with rapid rates of economic growth, this would allow poor people to pull themselves out of poverty and into the middle classes, the institute said.