Friday, 26 August 2011

Strikers, Trade Unions and Civilization

Recent events in South Africa should give pause all of those people of good will who supported the transition of South Africa to majority rule.
There can be no doubt that Apartheid was an evil system.  It deprived large numbers of men, women and children of the right to realise their potential in a fair environment.  It treated Black people as inferior, and that can never be excused.
However, recent events in South Africa have demonstrated, to those who care to pay attention, some of the fears that allowed that evil system to gain credibility.  Apartheid was based on the fear that democracy would allow people to rule regardless of their ability and their suitability to do so.  The fact that this fear was based on skin pigmentation was wrong, but many of the logical conclusions of this fear have been shown to have been well founded.  South Africans should be careful to ensure that the realisation of these fears is understood not to have, necessarily, a racial foundation, but rather be based in many other factors, some not unconnected with the very implementation of the system of Apartheid.
One of these factors is the rampant corruption in Government at all levels.  There can be no doubt that a significant portion of the funds intended to improve the plight of the people in general have been diverted to enrich those with some influence on the expenditure, and probably as much has been wasted by incompetence, ego and self-aggrandisement.  A large amount of money has been expended almost entirely for the purpose of enabling those in power to skim off bribes.  Many of these cases are known or strongly suspected, but the likelihood of the guilty parties ever being brought to justice is small.  The spread of the corruption is probably so wide-spread that the people who could do anything to combat this top-level corruption, apart from those who will have no desire, no incentive and, probably, not sufficient personal integrity to act in a manner likely to bring corrective or punitive action are, in all probability, in too tiny a minority to have any effect.
Another of the factors was highlighted by a Deputy Minister in a recent radio interview.  She was waxing lyrical about how she and several other high-level Government persons had visited a small village, a two-hour drive from the nearest town.  They found that the conditions there were appalling.  An example that she quoted was of a ‘child-headed household’, in which the child, a ‘woman’ of sixteen years of age, was alone supporting her five children, born since she was eleven years of age!  The Deputy Minister found that the conditions the family was living under were horrific.  The disturbing part of the report was that neither the Deputy Minister, a woman, nor the interviewer, also a woman, made no comment about the fact that a child of sixteen years should have been producing children at the rate of nearly one per year since the age of eleven!  It is little short of amazing that the underlying cause of the poverty of the family was ignored: the continual production of children in an environment of no hope for the future!  It is horrifying that it should be so normal an event in that population that a child of eleven should have been subjected to a repetition of the rape that is a serious statutory offence in South Africa, and that the Deputy Minister should have ignored that!
This example is highlighted by the continued rapid growth of the squatter camps surrounding every city and large town in the country.  Attention is paid to the squalor of these camps, to the poverty of their inhabitants, and vast sums of money are being pumped into their improvement, to provide at least a decent quality of life to the people living in them.  Politicians love these camps – their inhabitants are typically people who believe the wild promises made by politicians on the extremes, politicians who come to power on the back of the beliefs that the delivery of land will resolve all the problems, that the forced transfer of businesses from Whites to Blacks will automatically enable the beneficiaries of the transfer to enjoy the good lifestyles that the previous owners enjoyed, that the enforced appointment of Blacks to senior management positions will automatically acquire the knowledge and experience that the Whites, who previously or presently hold those positions, acquired over years as they worked themselves up to the positions of seniority, power and wealth.
A further factor is the example of lack of civilization displayed by many Trade Unionists during the recent strikes.  Violence, intimidation, destruction – these are all words that have become synonymous with the excessive demands for wages increases, many of which start at such high levels that they cannot be considered to be realistic.  A more realistic view of these demands is that they are pitched at that level – and believed by the unthinking and unsophisticated membership – in order to lead inevitably to the violence and confrontation of the strikes.  These actions were taken to an extreme in a recent strike, where non-striking women and men were stripped naked and humiliated, as well as beaten, by a jeering crowd of women and men strikers!  This cannot be held out to be the actions of a civilized nation!  However, some thoughts should be held in mind when thinking about these actions.  One of them is that the race that carry out these atrocities is the same as that that practiced the art of ‘necklacing’ during the ‘Freedom Struggle’.  This was the stripping naked of people who were claimed to not to support the ‘Freedom Struggle’, tying their hand and legs with barbed wire, putting a car tyre over them, filled with gasoline, which was then ignited, burning these political enemies to death in the most horrific way!  The perpetrators were Blacks, the victims Blacks!  Another thought that should be born in mind is that an influential member of the alliance that keeps the present Party in power is the Trade Union movement!
The final factor that one cannot ignore is that the massive growth in population in South Africa is a time-bomb that is predestined to explode.  The problem is not unemployment, as most commentators claim.  That is a symptom of the underlying problem.  The real problem is that the population is growing too quickly for any nation to create jobs at a rate sufficient to keep the new hands busy, the new bellies full.  Experience throughout the world has shown that a good rule of thumb for estimating the capital expenditure necessary to create one new job is US$250 000!  West Germany, when it amalgamated with East Germany in 1989, had a highly productive, exceptionally well-educated population of 65 000 000.  East Germany had a population, less productive and less well-educated, of 15 000 000.  Germany pumped billions into the small East German population and territory, and even now, 22 years later, it continues to do so.  The results are starting to become visible, but experts believe that it will take further decades for the East German population to come to the standard that West Germany enjoys.  And that in a country with a negative population growth!  Applying this formula to South Africa, an investment will have to be made for the foreseeable future at a level that will exceed the Gross Domestic Production!  What are the chances that South Africa, with a rapid growth of population, an education system that is near the bottom of the world ranking as a result of years of following failed policies and ideologies, a technical training system that no longer exists in any meaningful way, a political system that permits profiling by wannabee politicians at the expense of the few Whites who are trying to hold the economy together, a tax collection authority that has shown itself to be an ally of corruption, a President who seemingly spends most of his time attending meetings in foreign capitals and practically no time in actually making the decisions that are sorely required to keep the country operating, and a population that seems determined to copulate itself to destruction?
Those people of goodwill, inside South Africa, Black, White, Indian and Coloured, and outside South Africa, all of those who supported the transition from the evil system of Apartheid to a system of unbridled Democracy, which now exhibits very clearly the worst aspects of that system, should ask themselves:  “Is this what we wanted?”

Friday, 29 July 2011

Labour and Unemployment

The release of the Employment Statistics by the Department of Statistics of South Africa raises a number of interesting questions.  Some of these are addressed below.
The rate of unemployment in the economy has declined by 3,1% in the second quarter to 25,7%.  That has occurred at a time when the country is completing a ‘year of economic recovery’!  The population has grown by 1,2% in the quarter, of which the Black population has grown by 1,9%, while the White population has declined by 1,0%.  The proportion of Blacks employed has increased by 1,6%, while the proportion of Whites employed has decreased by 23,4%!  (Each of these values relates to the age group 15 to 64 years, i.e. employable age.)
These values are very instructive.  There can be no doubt that the economic value of an employee increases as he or she gains experience.  This value is directly translated into productive activity, and so into job creation.  The Post-Apartheid policy of the Government has been to replace (experienced) Whites with (inexperienced) Blacks.  The results of this have been very clear – rampant corruption and incompetence at all levels of the economy.  This is not a Black-related situation; it relates entirely to experience and traditions, built up necessarily over many years of work experience and exposure.  By removing this base of experience, the Government has created a situation in which experimentation has taken the place of knowledge and understanding.  The education system is a perfect example, but one cannot ignore Eskom, the SABC, the fight against AIDS, the fight against poverty … the list goes on and on.  One of the clear results is shown in the unemployment statistics.  By replacing experience with inexperience, the Government has thrown away a large reservoir of competence, and a large capacity to develop the economy in the interests of all of its citizens.
Another matter that arises from the statistics is the time bomb that is ticking ever more loudly.  The number of new entrants to the job market in the quarter was 2 036 000, an increase of 137 000 compared with a year ago, while the number of students included in the ‘not economically active’ group was 173 000.  The number of jobs added was only 34 000.  At that rate, the absorption of students into the workforce will take over five quarters.  The problem in this area is destined to grow exponentially.
Another concern is that the rate of unemployment among the Black population is 30,0%, while that among the Whites is 5,0%.  Part of the reason for this disparity is clearly the lack of adequate education and training of the Blacks – we have already alluded to the failure of the education system and the dismantling of the technical training institutions under the Post-Apartheid Government – but there is also a clear indication that many of the qualified Whites have given up on the country and are seeking their future in other economies.  It is an unfortunate fact that the best qualified are those who are most likely to be offered employment and opportunities elsewhere.
A further frightening statistic shows that the number of employed in non-productive activities increased, while those actually producing declined.  Job numbers in agriculture decreased by 5,1%, in mining by 10,5% and in construction by 0,6%, while they increased in community and social services by 4,5%.  These changes are a warning that the country is becoming an internally-serviced service economy, while actual production is becoming less important.  This is in compliance with an ANC stated objective in the 1990s, but is hardly likely to create the thriving export-oriented economy that is necessary to create the jobs required by the growing population.
Perhaps the most frightening aspects of the discussions around employment are highlighted by a speech made on the day of release of the unemployment statistics by an ANC representative, in which he declared, aggressively, that the fact that the Whites remain in control of the means of production in the economy, and that this fact needs to be changed in order to redress the unemployment situation.  Perhaps the ANC needs to understand that Whites built the economy step by step, from a rural and mining economy to become the powerhouse of Africa.  The Whites represent a valuable store of economic capability, and they are more than willing to assist their fellow citizens to elevate themselves to an adequate level of economic capability.  Taking the foundations of this capability away will not add to the ability of the economy to equalise the opportunities available to the unemployed.  Only honest and competent government, good and relevant education, investment of capital and the gaining of experience by the unemployed sectors will achieve that objective.  Political rhetoric and popular posturing will not. 
If the ANC is not capable of jumping over its own shadow, it should step aside and let more competent managers of the economy take the helm.

Wednesday, 27 July 2011

How to help the 'Poorest of the Poor'

There are many examples of foreign aid that went wrong.  These have alienated many who would have supported the donations, and, in many cases, has generated a system that is essentially corrupt.
A glaring example of such misdirected Foreign Aid was the donation of corn by the United States to the starving poor in Zimbabwe.  One shipment alone, of 20 000 tons of corn, was sent via a freight terminal in Durban, South Africa, to Zimbabwe.  The corn was shipped in bulk, and the freight terminal was paid to pack the corn into bags marked “Gift of the people of the United Sates of America.  Not for sale.”  A worthy gesture on the face of it.  What actually happened is that the corn arrived, and a representative of the Zimbabwe Government informed the freight terminal opewrator that the bags would not be acceptable.  The Government supplied its own, unmarked, bags.  The corn was duly packed in the anonymous bags and railed to Zimbabwe, where it was sold by members of the ruling Party to favoured groups.  Those who did not support Robert Mugabe were not permitted to buy the grain.  The effects of this ‘worthy gesture’ were fourfold.  First, the value of the corn flowed directly into the personal coffers of Robert Mugabe and his henchmen, strengthening their oppressive grip on the country.  Second, the flow of corn into the country reduced the value of corn produced by local farmers, reducing their economic stability even at this basic level of near-subsistence farming and increasing their poverty dramatically.  Third, the purchase of the corn by the American Government increased the world market price of the commodity, making it more expensive for Aid Agencies to purchase this basic food commodity, but adding to the perceived support of that section of the American agricultural sector by the ruling Party in the United States – a purely internal political handout.  Fourth, within the economy of the United States, the payment for goods which were withdrawn from the economy had the effect of ‘destroying’ that small part of the economic cycle, leading to an inflationary effect in much the same way as a war would.  The end result?  Everyone lost, except the dictator in Zimbabwe who had brought about the economic plight of his nation by his depredations and his inept operation of the previously-thriving Zimbabwe economy.
The worst of this story is that, when notified, the American Government, directly and via the Embassy in Pretoria, of the destination of the Foreign Aid, they did not even the have courtesy to reply!  One can only assume that the American Government knew of the facts and condoned them.  One can only wonder why!
No doubt there are many instances of Governmental Foreign Aid that have had a similar outcome.
In a separate story, the Government of Robert Mugabe, itself a basket case economy, made the gesture of sending a military ‘peace-keeping force’ to assist the Government of the Democratic Republic of the Congo.  This fine act of ‘international solidarity’ was rewarded by the President of Zimbabwe and his Minister of Defence being given a 50% shareholding in four of the most productive diamond mines in the DRC, which were grabbed from their rightful owners for the purpose!  The effect was that the peacekeepers were given the freedom to rape and pillage in the desperately poor DRC, the then unstable Government of Laurent Kabilla was propped up by undemocratic means, and two vicious politicians became even wealthier than they had been able to manage in their own collapsing country, while the poor people of Zimbabwe became even poorer.

There are also many Government handouts to the ‘poorest of the poor’, and many Government policies that, while passing themselves off as well-intentioned, are aimed not at uplifting the poor of the nation, are, in fact, no more than payments transferring wealth from the ‘tax-paying elite’ of the nation to those whose votes are influenced by the minimal handouts to ensure that the ruling Party behind the Government is re-elected.  These payments have no sense in economic terms, and, in fact, are positively destructive of the economy.
The effect of a redistribution of wealth from tax-payers to the poor represents a conversion of potential capital to consumption.  The money that could have been used to invest in new manufacturing plant and other capital investments is handed over to people who spend it on current living.  This has a long-term negative effect on the economy.  This negative effect is compounded when one realises that the tax, taken from the productive members of society, produces the effect that the tax-payers are forced to earn more in order to maintain the standard of their existence, whether as a manufacturer (in the form of increased costs) or as a salary earner (in the form of an increased wage demand).  This increases the costs for all, leading to a spiral of increased costs, increased wages, increased subsidies to the poor, and so on.  The only way to get out of this spiral is to break it, and the most obvious point to break it is to freeze or cut the transfers to the poor, with the intention of creating more earning opportunities for them in the medium term.  While apparently hard-hearted, this has to be done.  In economics, there ain’t no such thing as a free lunch!
Let us look at an example.  A project was launched in the Eastern Cape Province of South Africa in the mid-1990s to create at least 350 000 jobs.  During a discussion with the then Premier of the Eastern Cape, the project leader was astounded to hear from the Premier that he was unwilling to divert some of the funds for the building of houses to the establishment of small factories to enable the people to become economically active.  “How would I explain to my 84 year old mother that she would have to wait another year for her house?” he asked in explanation.  The answer to the question now, 17 years later, is that she and the 6 000 000 unemployed in that Province are still waiting, still have no means of earning even a basic minimum income, and still have no hope in life.  There can be little doubt that the creation of many new jobs in that Province would have started a positive spiral of income, job opportunities and increasing wealth for the people that would have had a much more beneficial effect than the construction of a few thousand brick and corrugated steel huts, barely usable as a cowshed, has achieved.

To explain the Multiplier Effect of job creation, we need to understand how an economy works in real life.  If an entrepreneurially-minded person starts doing some economically-productive work, say making shoes from hides produced by a local farmer, a number of economic activities start to move.  The farmer has a buyer for the hides, which he has tanned for him by a local worker.  The farmer now has some money to spend, and so does the worker tanning the leather.  The man making the shoes sells them for a price, and he now has the funds to buy more leather and thread, to send his children to school and to buy food.  Each of these activities generates a flow of money, and so produces economic activity beyond the original entrepreneur.  Each of the beneficiaries has funds to spend or invest, and each of them plays a role in the creation of further flows of money.  This is how the European economies, and others, got off the ground in the first place.  Each activity that has an economic outcome creates further activities, and each of those does the same.  Research in Western Australia, Germany, the Caribbean Islands and other widely disparate places shows the same result. 
Each new job has the effect of creating between eight and twelve additional spin-off jobs!
In several cases, where the jobs have an immediate local effect and the types of activity promoted have been chosen to provide the greatest level of development net effect, it has not been unusual for the Multiplier Effect job creation factor to be as high as eighteen!
Contrast this with the effect of an unemployment subsidy.  The small amount transferred to the poor, usually not sufficient to maintain any life, never mind a reasonable standard of life, does no more than enable the recipient to buy food for the week.  The Multiplier Effect is minimal, as the suppliers of food are already established at a level where the additional business is only marginally beneficial.  The transfer of funds away from the taxpayer, if he or she is an individual, is fairly substantial, often leading to a forsaking of the opportunity to save or invest the funds, or, if it is a company, depriving it of a portion of its capability to invest in bigger and better productive capability.  The net benefit to the economy is, at best, barely positive.  At worst, the transfer of the funds has a substantially negative Multiplier Effect on job creation in the narrow view and on the economy in the wider view.
In summary, it is safe to say, from an economic point of view, the handing of social welfare payments to indigent recipients is, at best, neutral and probably damaging to their economic prospects.  From a sociological point of view, long-term social welfare handouts are demeaning and demotivating, and contribute in a most negative way to the building of an equitable economy.  In this light, the humanitarian aspects of long-term handouts, particularly if not accompanied by an economic development program with components of education, training, funding for business activity and a meaningful job creation activity, are at least questionable. 

Walmart in South Africa

Walmart – MassMart
During a recent radio talk show on SAFM in South Africa, Mr Phillip Jennings, purportedly an international union leader, alleged that Walmart has a very ‘bad reputation’ for banning labour unions, preventing collective bargaining and exploiting workers.  He admitted that Walmart employs 1 500 000 workers in the USA.  These statements beg for a rational evaluation of their content, apart from the hype that Mr Jennings built around them.
At the lowest level, a worker is free to choose his or her employer.  If Walmart is a poor employer, for whatever reason, every potential employee may choose not to become employed by Walmart!  The opposite is not necessarily true – Walmart may be limited in deciding whether or not to employ a particular person, or to discontinue such employment if the person involved is not satisfactory in a general way.  The fact that Walmart employs some 1 500 000 workers in the United States must say something positive about the company, even if it is only that any job is better than no job!
At the next level, employment by Walmart of people at a ‘low level’ of wages and benefits, i.e. at a lower cost to the employer, has the result that Walmart is able to offer goods to customers at a lower price than its competitors.  Analysing this fact, it is immediately clear that high wage and benefits packages increase the cost of operations to the employer, and so the necessary selling price of the goods it sells to the public.  This leads logically to the conclusion that the effect of union wage and benefits demands results in an increase in the prices paid by the public!  This is not a particularly profound deduction, but the effect of it is that the unions play a role akin to the Government in ‘taxing’ employers, with the ‘tax’ being paid over to the employees, and a portion of it landing in the pockets of the union!  If this is such a desirable practice, one that no intelligent consumer would object to, why not set up a system of having prices set at the economic lowest level by the retailers and other sellers, with an optional ‘wage surcharge’ being added to the total.  The proportion of the total of such optional surcharge that is actually paid would show very clearly the support by the public for the demands of the unions.  It is unlikely that more than 5% of customers would voluntarily support such wage demands.  What this points out is that the unions are using their monopoly powers to extort an unfair (in the view of the ultimate customer) price for labour.  By avoiding this extortion, Walmart is able to offer the benefit of lower prices to the very large public.  If Walmart were to employ 100 000 persons in South Africa, those people would, in the argument of the trade unions,presumably, be able to obtain employment at lower than union rates but at a higher level than the very small unemployment benefit.  Against that small number, about 50 000 000 people – five hundred times as many! – would enjoy the benefit of lower costs.  Is that not an example of democracy?  If the majority of the customers did not like the way Walmart paid its workers, they would be free not to buy at Walmart and so express their disapproval!
Mr Jennings stated that companies like Pick n Pay would be forced to retrench large numbers of employees once Walmart becomes established in South Africa and that, in fact, it has already started such retrenchments by laying off 3 000 employees.  What Mr Jennings failed to inform the public is that Pick n Pay was subjected to a very damaging strike in 2010, the settlement of which resulted in considerably higher operating costs, leading directly to the need to retrench less economically-significant employees!  The cost of the strike itself was also, obviously, a significant factor in the reduced profitability of Pick n Pay, leading to a substantial reduction in the listing value of its shares. 
A further argument used by the Unions has been that retailers would reduce purchases of South African products and increase in the importation of foreign products.  The simple fact of this situation is that the cost of South African goods is excessively high in comparison with foreign competitors!  This was shown very clearly when a number of factories in the textile sector in Newcastle were closed, resulting in thousands of jobs being lost.  The owners of the factories declared that it was not possible to operate the factories under the high labour cost and restrictive labour legislation prevailing in South Africa.  They were supported in this contention by the workers, who declared that they would be willing to work at a rate of pay less than the minimum wage for the sector, in preference to being unemployed!  Another side of this argument is that the same low-cost imports are available to other retailers and these companies do, in fact import them.  A glance around any of the major retailers will show very quickly that numerous products are presently imported from China, India, Thailand, even Mauritius.  The activities of Walmart would not change this situation except, perhaps, by competing actively with those companies, forcing them to reduce their high mark-ups.
It is very clear that any rational person would buy an equal quality good at the lowest cost.  This applies to the end customers as well as to the manufacturer or retailer.  The ‘good’ might be an hour’s labour or a new television set, or a factory.  The choice of seller is open in the widest sense.  A potential employer has the choice of choosing from the range of job-seekers, and will make the choice based on the skills set offered, the attitude to the work and productivity, the cost of the labour, and similar factors.  This choice covers not only the Gauteng region, but also the nation as a whole and, in the wider sense, the world.  If a manufacturer can choose between equal quality labour in Gauteng, in South Africa and in the world, the cost of the labour package will play a significant role.  This package would include the direct cost of labour, the benefits required to be offered, the productivity of the labour and the flexibility of the labour laws, and the likelihood that these costs will change compulsorily.  Other factors, of course, are those related to the security of the investment, of the senior employees, the extent to which the investment and the investor will be subjected to illegitimate demands by, for example, the tax authorities, the protection against the additional cost elements posed by employment equity (which, in effect, demands that employees may be chosen not only on the basis of their ability to add to the economic effort of the employer, but must also comply with racial and gender limitations), and the need to fund the acquisition of a share in the business (i.e. compulsorily donate) by the members of a particular racial group.  In most of these aspects, South Africa falls woefully short.  The sharp reduction in foreign direct investment in South Africa is testament to this.  This broad trend is likely to increase, with existing privately-owned businesses relocating to neighbouring or other more distant countries, and with a reducing level of new investment by foreign companies in manufacturing in South Africa.
One result of the increasingly difficult problem posed by a rampant trade union movement is the conversion of previously labour intensive activities to automated manufacturing.  Labour effectively prices itself at a level where it is more cost-effective to buy new equipment.  This change, once it has occurred, cannot be reversed.
A Management Consultancy company, active internationally, which has a section specialising in the evaluation of possible locations for the establishment of new manufacturing entities by European and American companies, has, over the past year, assisted in the establishment of new factories with an investment value of several hundred million Dollars, employing nearly a thousand workers.  These plants have been set up in several countries, including, remarkably, California and Britain.  These locations were chosen on the basis of a large number of factors, all relevant to the companies making the investment.  They included overall cost of labour, flexibility of labour, Government policies relevant to the protection of free enterprise, peaceful relationships with potential workers, the even-handed application of clear laws by Government bodies, and several other similar factors.  In each case, South Africa dropped out of the running at an early stage.  The country was simply not able to put up a case to match those of the large number of competing locations!  Application of the Multiplier Effect of job creation, a theory that postulates that each new direct job created results in the creation of several additional jobs in supplier and support activities, would have generated, in the evaluation of the Consultancy, of more than twelve thousand new jobs within a year!
Has the Government heard the story of Harold Mac Millan, the Labour Prime Minister of Great Britain, who came to power with the intention of sharing the prosperity of the nation amongst its people?  He found that his policies were unable to do this, so he settled for sharing the poverty of the nation!

Can South Africa continue to afford the destruction of its economy, the destitution of its people, which is the inevitable result of continued implementation of policies demanded by the Trade Union movement?

Thursday, 9 June 2011

Where to, South Africa?

The political and economic situation in South Africa is showing a disturbing trend to those who care to look.  A comparison with the rise of Nazi Germany reveals some parallels that brings one to ask where we are headed.
The continued dominance of Julius Malema, and those who support him, either explicitly or by their refraining from condemnation of his extremism, bears a remarkable resemblance to the rise of Adolph Hitler.  In both cases, the use of extremist and popularist speeches were tolerated, possibly even tacitly supported, by those whose function was to protect the public.  In both cases a group was singled out as scapegoats, a group that was chosen to ‘bear the faults’ of the nation, regardless of the truth. 
In the case of Hitler, the Jews were singled out as the group that had brought the German nation down, even though any examination of the history of Germany would show that many of the great thinkers, artists and economic developers of the country were Jews.  The Jews were talked about as though they were a separate nation, even though almost all German Jews were Germans first and Jews only by religion.  The Jews were blamed for everything that was bad in Germany, and not given any recognition for what they had contributed to Germany, and were continuing to give to Germany.  The Jews were the subject of continuous and vicious rhetoric, a rhetoric that came to be believed, or at least accepted, by the mass of the undiscriminating public.

In the case of South Africa, the Whites have been chosen as the ‘bad guys’.  Everything that has gone wrong in South Africa has been the fault of the Whites.  The solution to every problem in South Africa is to remove the Whites from the equation, whether the problem is corruption in Government, total incompetence in Government at almost all levels, a jobless growth in the economy which, together with the rapid growth in the population, is leading to a massive growth in unemployment, a lack of competitiveness of South African industry and agriculture.  The list goes on.  And all of this is laid at the feet of the Whites, who have deprived, and continue to deprive the Blacks of the opportunity to make their contribution.  And all of this is used by the populist leaders to heat the emotions of their unthinking followers, to blind them to the real causes of the problems of the country, to induce them to elevate those ‘mini-Hitlers’ to ever higher positions of power.  Many of the trappings of the Hitler Nazi Party dominance are evident, such as the heavily armed bodyguards accompanying Julius Malema to the Court and the blatant lack of observance of the laws by the convoys of official cars, the killings of political opponents.
This is exacerbated by the use of words.  Blacks are no longer ‘Blacks’; they are ‘Africans’, a use of the term that seeks consciously to exclude all who are not Black, particularly Whites, but not excepting those of Indian origin, the Coloureds and other Asians.
What this campaign seeks to achieve is several things.
The first is the clear exclusion of Whites, and particularly White males, from economic power. 
It is a fact that the bulk of the economic growth of South Africa is a result of the economic activity of White males.  They are the ones who managed the economy, who built the railway lines to enable exports, who built the mines to exploit the minerals to develop the economy, who built the factories to manufacture the goods that fed and clothed the nation, who planned and built the roads that united the country.  A myth is being propagated that Apartheid, far from being the brainchild of Hendrick Verwoerd, was in fact instituted as far back as three hundred years ago!  People speak of White exclusion of Blacks from economic activity virtually as long ago as the first settlement of White, specifically Europeans, in South Africa under van Riebeeck, or, possibly, even further back in time.  There is no doubt that Blacks were not in the mainstream of economic decision-making in the last three hundred years.  However, that cannot be ascribed to a conscious exclusion of Blacks by Whites.  Surely it is more reasonable to believe that the reason is simply that Blacks at that time did not have the economic background or the education to play a meaningful part in the economic decision-making.  This is not because Whites did not permit them to become educated.  State education was not a factor at that time.  Education was something that the people did for themselves.  Education was a drain on the precious and limited resources of the community, and was afforded only to those who had a clear ability to contribute to the economic well-being of the community.  The Black tribes at that time were economically undeveloped, and had neither the tradition of economic activity engendered by the European civilizations and the Industrial Revolution in Europe, nor the social structure that permitted the diversion of large portions of the economic wealth to education.  The result was that the Black nations did not prosper to the same level as the Whites.  By their lack of ‘foresight’ or ‘development’, the Blacks effectively excluded themselves from the process of economic development in South Africa, as well as elsewhere in the world.  As the White people grew economically, the Black people, who were also growing, but at a much slower pace in economic terms but at a much faster pace in terms of population numbers, fell further and further behind.  This disparity in development was used by the political masters, the National Party, after 1948 to see the situation in terms of an ‘Us – Them’ comparison.  That, to a large extent, given the history of oppression of the Afrikaner nation by Britain, led almost inevitably to the development of a system of separation of the races.  The Afrikaners did not want to put the future of their nation in the hands of a group that, they believed, was less able to achieve the aim of economic wealth that they believed was possible.  The result was Apartheid.
There are several features of that dark time in South African history that are conveniently overlooked by those who seek to blame Whites for everything that has gone wrong in the country, or, indeed, for everything that has not gone right.  They ignore the fact that not every White supported the system of Apartheid.  There was a large minority of voters who regularly supported the Opposition parties, however weak and ineffective the leadership of those parties might have been.  It was not unusual for the Opposition to gain 45% or 48% of the votes in any general election.  This implies that there were almost as many Whites against the system as there were in favour of it!  There was a very vocal opposition to the many extremes of the Apartheid system, and of the National Party, even in the face of the very draconian laws and regulations, as well as extra-legal actions by Government organs such as the Special Branch.  Many of the Whites who were not in favour of the system ‘voted with their feet’, and left the country, in the belief that a sacrifice by them and their families would not achieve a reversal of government policy.  Many of the Whites who did not support Apartheid, particularly the English-speakers, recognised that the Opposition parties would not be able to bring about meaningful change and refrained from voting, in much the same way as numerous Blacks refrained from voting in the recent Local Government elections because they believed that no single Party would give effective voice to their wishes.  The National Party, on the other hand, had effective community organisations, such as the Broederbond and the Church to mobilise their supporters.  Yet all of these people who would have supported a rational system of universal suffrage, a treatment of the Black people as the equal humans beings that they saw them to be, are now being demonised as ‘the supporters of the previous regime’!  Helen Zille, the Leader of the Democratic Alliance Party and a vociferous antagonist of the Apartheid system, was aggressively questioned in a radio debate about why she, who claimed to support the views of Mandela, failed to support the ANC.  Her response, that in her view the ANC was diverging from the stated aims of the “Struggle’, was treated with disdain, and her Party was accused of being a harbour for the ‘White Supremacists.
Could it be that the term ‘White’ is a convenient pot into which to dump all the problems of the past, a convenient scapegoat for problems which, after seventeen years of Black rule, are as rapidly becoming worse as the extremism gains in strength?  Could it be that the ‘Whites’ are being made the new Jews of pre-Hitler Germany?
It is important for the Black population to understand that the Whites did not see them as inferior.  They were simply not equal to Whites in terms of their ability to compete for the scarce resources and positions at a time when the world did not accept that the ‘poor’ should be entitled to anything more than they could earn for themselves.  This did not imply ‘inferior’, but rather only ‘not equipped in relevant ways’.  The goodwill of the vast bulk of the White population is shown by the numerous charities and support organisations aiding Black schools, businesses and trainees.
The second objective is the abuse of Government power by the governing Party, in the appointment of ‘cadres’ to senior managerial posts in the organs of government below the political level, the granting of government contracts to favoured nominees, the failure to report to Parliament on the doings of Government organs, the promotion of unqualified persons to very senior posts in the Police, the failure to pursue and prosecute corruption by those in favoured positions, and generally treating an elected post as being analogous to ownership of the country, without any need to account to the electorate.  It is a fact that Whites are more experienced in the exercise of their rights in a democratic society than are Blacks.  By reducing the influence of the Whites in society, the rulers conveniently reduce the demands on them for honest and responsible exercise of government.
The third probable reason is that Whites can remember ‘when things used to work’.  It cannot be convenient to have your efforts at governing constantly held up to a standard that was certainly better, if not objectively good, than the current performance of the (Black) Government.
There are, no doubt, other reasons.  The real question is “What do intelligent, thinking people intend to do about it?”  The answer to this question will result in South Africa becoming the pride of Africa, an example of what a developing country can do, or South Africa becoming a new pariah State.

Wednesday, 11 May 2011

Apartheid – What is it’s Legacy?


Listening to radio talk shows in South Africa is an interesting occupation.  Many of the items of ‘fact’ known to those who phone in, as well as to the moderators, are, at least, questionable.  The largest of these is the legacy of Apartheid.  Apartheid was, and is, without question abhorrent to modern thinkers.  It was based on a belief that there are differences between the races that would be best accommodated by separating the races.  There is nothing new in this, either in history or in geography.  People have always tended to stay with those they consider to be like them.  This is clear in India, where the caste system continues to dominate, based on an accident of birth; in Germany, where a person with German ancestry, even if three generations in the past, is entitled to citizenship while a person with Turkish ancestry, even three generations earlier, is not; in Switzerland, where a French-speaking Swiss treats a German-speaking Swiss with contempt, even though the Swiss Federation has existed for nearly eight hundred years; in Zimbabwe, where membership of one tribe entitles one to benefits that are denied the members of another tribe; in Nigeria, where religion plays a similar role; in Britain, where noble birth separates a man from his equally competent peers.  Examples of Apartheid in its various guises are legion.  They can be found throughout the world and throughout history.  They are inherently wrong, but they exist.
The problem in South Africa today is that it is an article of faith that Apartheid is the reason for everything that is not working properly today, seventeen years after Black majority Government came into effect. 
The education system is a disaster ‘because of the legacy of Apartheid.’  Perhaps the real reason is that the new Government dismantled all that was good, together with the bad, of the education system it inherited, a system that worked better then, in terms of the products it delivered, than it does now.  Ask anyone who gained a degree in Apartheid days if he or she considers the current crop of degrees comparable in quality.  The verdict has been handed down by the international business community.  A pre-Apartheid degree is accepted as a quality statement, a post-Apartheid degree is viewed with suspicion.  Even the Law degree, the Ll B, is now treated with some disdain, as is evidenced by a recent statement by the Law Society that new Ll B graduates are unable to use language effectively.  This in a degree that is reliant on the effective use of language more than most degrees!
The Local Government administration is in disarray, ‘because of the legacy of Apartheid’.  Local Government under Apartheid worked well, because the people running it were professionals.  It was not inspiring, but it worked.  After the new Government came into power, the experienced and competent managers of Local Government were replaced by people who were incompetent, corrupt or, most likely, not sufficiently experienced to recognise a problem and find a solution to it.  That skill takes many years to develop.  It is no accident that a young person joining an organisation could not expect to reach a senior level without having undergone years of training, exposure, mentoring and experience-building.  The new Government decided that this was subsidiary to its goal of ensuring that the management of the economy would pass quickly into the hands of the majority.  Laudable certainly, but unrealistic.  That cannot be ascribed to the ‘legacy of Apartheid’.
Central Government has suffered equally.  MPs claim to work hard, and, in many cases, they do.  However, any competent Management Consultant will tell you that the secret of success in any enterprise is to work smart, not hard.  Again, a question of experience, compounded in many cases by a question of honesty and integrity.  Do MPs strive to attain the position of trust in order to serve their fellow man, or in order to ensure the maximum benefit for themselves?  In many cases, the answer is clear.  Is this the ‘legacy of Apartheid’, or the result of a system that has been fostered by corrupt politicians who seek to draw others into their net?
The training of nurses and teachers, both now recognised as key functions of Government, was undertaken by specialist Colleges, which turned out graduates of such high quality that they were poached by many other countries.  A qualification from one of these institutions was recognised as an entry ticket to Australia, Britain, Canada and many other First World countries.  These ‘legacies of Apartheid’ were dismantled under the new Government, and are now being rebuilt, at great cost.  The same applies to the Atomic Energy Corporation, which, at its peak under the Apartheid Government, was recognised worldwide as a centre of excellence in its field.  It was dismantled, losing the millions of man-years of knowledge and experience and is now being rebuilt. 
The present Local Governments battle to provide services to a massive influx of people from the land, South African as well as foreign.  An interesting news item recently reported that the Police had been stoned by a mob of ‘land invaders’ demanding the provision of services.  Influx control, one of the hated systems of the Apartheid years, was introduced in an attempt to prevent this exact problem, one that the Apartheid Government feared, as it knew that it would be impossible to provide adequate services to the millions who would otherwise flock to the cities.  Even so, the Apartheid Government provided four-room houses to the rapidly-growing Black population, in contrast to the tiny RDP houses, that are now being renovated at a cost of about R100 000 a piece, and the cardboard and plastic shanties of the squatter camps that now surround almost every town in the country.  Another ‘legacy of Apartheid’?  At the same time, the farmers, who produced sufficient food to make South Africa a consistent net exporter of food, even under the sanctions imposed by other countries at the behest of the ANC, are being driven off the land by a wave of farm killings, or simply by the policy of land redistribution of productive farms to people who have a history of subsistence agriculture, and who have managed, in most cases, to destroy the highly-productive agricultural ventures they were handed.  This has removed the employment of millions of agricultural workers, driving them to the cities to find employment, and made South Africa a net importer of food.  Another ‘legacy of Apartheid’?
The subject of ‘hate speech’, of attacks by people against gays and lesbians, including ‘corrective rape’, has recently been described as a ‘legacy of Apartheid’.  This ignores the fact that similar events take place regularly in Zimbabwe, in Uganda and in numerous other African countries.  It seems to be a characteristic of Black countries, or possibly of underdeveloped countries, as the same phenomenon does not seem to be as widespread in Europe or other European dominated countries.  Surely this cannot be a ‘legacy of Apartheid’?
Apartheid was a system that was accepted, if not supported, by Whites who saw the examples of other African countries that became independent of their ‘colonial masters’.  With only Botswana as an exception, these countries fell into decay, bringing death and misery to millions, and incredible wealth to the few corrupt leaders of the countries.  The problems in those countries seem to have related to exactly the phenomena that have been identified here.  Strong, corrupt leaders took control of Government, maintaining their power by violence and corruption, lying to their electorate and rigging the system where lying did not appear likely to achieve the objective of prolongation of political control indefinitely.  They applied policies learned by their tutors in Communist Russia, Communist Cuba and Communist East Germany, all countries which are marvellous examples of the benefits of socialism, all countries which have proved conclusively that these policies do not work in the real world.  They have conglomerated small, viable social units to form large Local Governments which fail their electorates on a large scale while increasing the payoff to corruption, they have applied policies to advance the strength of the Trade Unions, concentrating economic power in the hands of allies of the governing Party at the cost of economic growth and millions of jobs.  Unemployment has grown from 1 600 000 in 1994 to over 4 500 000 presently.  Is this the ‘legacy of Apartheid’ working against us after 17 years of these policies?
One is reminded of a television interview of Joe Slovo, then the leader of the South African Communist Party, in 1995.  The interviewer asked a question.  “Mr Slovo, you are advocating the application of Communist principles in South Africa, a Capitalist country.  It has been shown throughout the world that Communism simply does not work.  Every country that has espoused Communism has failed miserably.  What makes you believe that Communism will work in South Africa?”  “Well,” replied Mr Slovo, “You must understand that any economic system, even Communism, requires capital to work.  In Russia, in East Germany and in Cuba, that capital has been exhausted.  That is why those countries failed.  South Africa has a very large capital, that will, ensure that Communism works here!”  “But, Mr Slovo, what will happen when that capital has been exhausted here?”  “Then we will try another system!” replied Mr Slovo.
Perhaps South Africa will soon be reaching the point where it will be necessary to discard the excuse of the ‘legacy of Apartheid’ as a reason, and start looking for some real reasons that can be resolved.  In this search, it may be wise to look at the Apartheid times, and extract the many elements that were good, while we continue to reject the elements that were bad.

Wednesday, 4 May 2011

World Economic Development


Anyone listening to the participants in the World Economic Forum, and the commentators on it, must come away with the feeling that there is an urgent need to shift from the capitalistic system that has been the mainstay of the Western World for many decades towards a system in which the ‘poorest of the poor’ play a dominant and decisive role.  While the sentiments behind this may, to a certain extent, be laudable, a realistic assessment of the winners and losers in the past decades must give rise to concerns in this strategy.
An undoubted winner in the past decade has been China, which has progressed from the stranglehold of Communism to a variant of capitalism.  In earlier years, China was backward and effective in the world largely through its massive population and its military muscle, brought about at the expense of the bulk of its population.  Then it changed its policies, driving industrial growth mainly by adopting capitalistic methods, and achieved economic wonders.  Those achievements continue to be at the cost of a large part of the population, the ‘poorest of the poor’.  It is generally accepted that, as the economic empowerment of the Chinese population progresses, greater heed will be paid to those poor, bringing them into the mainstream of the economy, and this will result in a slowdown of the economic growth of the country.
Let us digest the essence of this phenomenon.
Economic growth in China has been high at a time when the capital of the country was concentrated strongly in the hands of those whose interest was development.
In the United States, or Britain, in contrast, economic growth was similarly high at a time when the economic muscle of the country was concentrated mainly in the hands of the entrepreneurial class, whose interest was economic development.  However, that economic growth slowed, and even declined, as the policies of the Governments in power shifted to buying the votes of the ‘poorest of the poor’ by offering them increased handouts in the form of social benefits and improved working conditions.  There was a minor blip in this process when Maggie Thatcher faced down the Trade Unions and succeeded in moving the focus of the economy from support of the poor to support of the entrepreneurs who created the economic activity, and thereby the jobs.  However, over the past decades, economic growth has slowed, and a large part of the actual economic growth has not involved a large increase in employment.  The ‘plight’ of the poor has been alleviated to some extent, but an increasingly large number of middle class ex-workers has joined the ranks of the poor.
Let us digest this phenomenon.
Economic growth was high at a time when the capital of the country was concentrated strongly in the hands of those whose interest was development.  Economic growth slowed, or even went into reverse on a per capita basis when the wealth of the country was dissipated by the payment of social benefits to those who supported Governments that concentrated on spreading the wealth of the country.  It was said at the time that Harold Wilson, a Prime Minister who presided over the collapse of Britain as a world power, came to power with the desire to spread the wealth of the country amongst its population.  He found that he was unable to do so, and so settled for spreading the poverty amongst the entire population.
Do you recognise the moral of the stories?
The South African Government is facing an increasingly dissatisfied poor population.  These are people who are willing, even keen, to work, but who can’t find jobs.  This is the result of two main reasons, and several subsidiary causes.  The Government has worked assiduously to take wealth from those who create it, to satisfy the desires for increasing handouts by the non-working population.  A large number of the new jobs created have been in the Government sector, essentially a non-productive sector.  This diversion of wealth has decreased the ability of the entrepreneurs, the creators of wealth, to do their jobs effectively.  At the same time, the population has increased enormously in the nearly two decades of ANC rule, partly as a result of opening the country’s borders to foreign (African) immigration (remember that Thabo Mbeki stated that South Africa belonged to the Africans?), and partly as a result of the subsidisation of children, a factor largely concentrated in the poor, as the birth rate of the wealthier population has generally declined, and one which the Chinese recognised and countered with their ‘One Child per Family’ policy.  The lesson from the reunification of Germany is particularly relevant here.  West Germany, with 70 000 000 highly educated and productive citizens has battled since 1989 to upgrade the 15 000 000 relatively educated and industrially-competent citizens of East Germany.  South Africa is attempting to achieve the same result, with 3 000 000 economically active people supporting a total population, with low education and often very little industrial training, of over 50 000 000, and growing! 
A study covering several countries has shown that the average capital investment, in total, of creating a single new job in a developing country, amounts to about US$250 000!  The Government desires to create 5 000 000 new jobs over the forthcoming ten years.  That translates to a total investment of $US1 250 billion!  And that is where the industrialists are willing and able to co-operate, and are not faced with the numerous burocratic obstacles and labour market constraints that confound so many people of goodwill in South Africa.  And even if this goal succeeds, it will not meet the employment needs of the all new entrants to the job market in the first five years!
Subsidiary reasons include the high level of corruption present in the State, with many of the beneficiaries of corruption at the highest level of Government, resulting in many decisions being made to undertake projects which have the highest potential payoff to those in control, not necessarily those that are economically justifiable.  Numerous examples of this abound, ranging from a R54 billion splurge on unnecessary munitions, to a school building that costs nearly three times the cost that would normally be expected.  Another reason is that, in its drive to ‘africanise’ all State functions, a large pool of talent and experience was lost, and continues to be lost, as under-qualified and inexperienced Managers replace those who grew up through the ranks.  An interview of President Jacob Zuma after his State of the Nation address in 2011 highlighted this reason, as he explained that, after 16 years of ANC rule, the Government had now identified weaknesses in Government functions and policies in area after area, and was now introducing new policies to remedy these!  It did not seem to matter to him, or to the interviewer, that these weaknesses, which were known to most intelligent observers of the ANC bumbling, had cost many hundreds of millions and set the economy of the country back many years, or that the ‘new policies’ were very much untried and untested, and had as little likelihood of achieving their objective as had the policies now recognised as having failed! 
A further reason is that the ANC continues to experiment with public opinion by floating ideas such as the nationalisation of the mining industry or of agriculture through extremists such as Julius Malema, leading to considerable doubt amongst potential foreign investors regarding future policy direction, and, to a large extent, certainty amongst those foreign investors that the extremists in the ANC are destined to come to power, in many cases sooner rather than later.  If you were an investor in a new factory, where would you rather locate it?  Stable Brazil, or unstable South Africa?
Of course, this discussion is superficial.  Any discussion of economic questions needs diligent analysis by people with the mental equipment to understand the essence of the discussion, and with the inclination to deviate from their prejudices if this is warranted by the facts and the analysis.  For the purposes of this present discussion, several matters need to be recognised.
Economic development should be left to entrepreneurs with as little intervention by Government as possible.
The focus of development should be the development of business opportunities.  Creation of jobs and the economic development of the ‘poorest of the poor’ will follow.  Focusing on improving the state of the ‘poorest of the poor’ will inevitably lead the economy downhill.
The political leaders of the Government must be clean, and subject to rigorous scrutiny in all their dealings, both in the political sphere and in their private lives.  If they don’t want the scrutiny, it is probably an indication of their having a reason for this aversion, and they must leave politics.  If any dishonesty is found in any level of Government, it must be investigated by an independent body and guilty parties promptly and severely punished.
Potential investors, whether foreign or local, must be courted and treated with the respect that their scarcity and value to the economy deserves.

Tuesday, 5 April 2011

Dishonesty


The current Government in South Africa is riddled with corruption.  Why is that so?
There are many reasons offered by persons with differing points of view.  Some say that it is a product of the deprivation suffered by the majority at the hands of the Apartheid regime.  Others say that it is because the ANC Party has such an overpowering hold on Government that its members believe that they ‘own’ the country and have a right to exploit it.  Numerous other reasons are advanced.  One reason that has apparently not been advanced lies in the nature of democracy itself.
Democracy is a system of government under which the majority applies the wealth of the country to the advancement of the interests of the majority.  In the hands of a Government elected by an unsophisticated electorate, this translates into a licence to ‘redistribute’ the income, and in many cases the assets, of the few who earn the income of the country, to the many who either receive wages and salaries from them or who receive benefits from the Government.  It is implicit in this system that the ruling Party is able to ‘buy’ the votes of the beneficiaries of such largesse by making payments or distributing benefits to those who are potential voters for that Party.  The fact that a large proportion of the income generators of the society vote for Parties other than the ruling Party is a clear indicator that they do not wish the funds taken from them by means of taxation to be distributed in this way.  The fact that a large proportion of the recipients of these handouts vote for the ruling Party is an indication that they wish the largesse to continue.
The effect of this is that the system of democracy, as it is practiced in South Africa, leads to a culture in which the majority of people come to believe that they are entitled to benefits for which they have never worked.  People who migrate from the countryside to the cities believe that they are entitled to the provision of housing by the Local Government, people who move into unoccupied properties are entitled to the provision of alternative housing before the rightful owners of the properties are able to evict them.  Workers are entitled to hold work positions or to be compensated for losing them, regardless of the quality of work they render to the employers, or the economic conditions confronting the employers, which may cause substantial loss to the employers.  People who apply for jobs may not be subjected to checks of their criminal records unless the prospective employer can show that a previous criminal conviction is directly relevant to the job in question.  People who are under-qualified or under-experienced believe that they are entitled to employment simply because they have the indispensible asset of a black skin.  All of this leads to an attitude that the entitlement is not necessarily related to work or performance. 
It is only a very short jump to the belief that the asset of another is also the subject of entitlement.
None of this is made any better by the actions of senior members of Government in supporting members of their inner circle who have been convicted by the Courts.  Far from being a cause for disgrace and humiliation, it appears that a charge of dishonesty or, even better, a criminal conviction for fraud or corruption, is a passport to a good position in the ruling Party or in Government.  The mere fact that the State President gained power at a time when he was the subject of several criminal investigations for fraud and corruption is very revealing of the attitude towards dishonesty in the ANC.
It is a sad fact that nearly 50% of the population of the country has below-average intelligence.  By the very nature of the world and how it works, it is inevitable that the bulk of the poor populace will fall within this group – it is almost inevitable that people of lower intelligence will be poorer than those of higher intelligence.  The fact that the voter base of the ANC lies in the poor part of the population has several consequences that should not be ignored.
The ANC is driven, in its need to gain votes, to offer increasing benefits to the ‘poorest of the poor, that nonsensical catchword that seems to have become a justification for almost any policy aimed at redistributing income from those who earn it to those who do not.  This implies that the proportion of the GDP that is dedicated to supporting the indigent and the low-producers will increase steadily.  Do not forget that a benefit, once given, becomes a right, and not something to be grateful for.  Ever-increasing and ever-newer benefits must be given in order to keep the ‘generosity of the ANC’ fresh in the minds of the non-thinking public.
The diversion of income from those who earn it to those who consume it is, to a very large extent, a sterilisation of those funds.  South Africa is in desperate need of investment if it is to avoid the credit trap that much of the Western world has fallen into.  Investment requires that funds are available in excess of the living needs of the population.  Every million that flows to the poor is a million less that could be invested in capital equipment that could be used to create the jobs needed to lift the poor out of their poverty while, at the same time, disincentivising the poor from doing the things that are necessary to escape from poverty.  The effect?  Perpetualisation of poverty!
Of course, that would be bad enough in itself, but the real problem lies in the fact that a diversion of R1 000 000 to the poor probably cost R10 000 000 before that R1 000 000 hits the intended target.
A side-effect of the redistribution of income is that many projects that are started with a prime objective being the generation of jobs is promoted by the newly-wealthy, or the aspirants to join that class, as a way of participating in the flow of redistributed wealth.  The construction of roads had, as far as can be seen from the outside, little economic benefit in most cases other than providing jobs to the large number of unemployed.  It has now been revealed that the actual cost of building these monuments to poverty was between 100% and 240% greater than would be expected in terms of international experience!  Even if building a road is inefficient if done to the greatest extent possible by the employment of manual labour, one would not reasonably expect a doubling of the cost, or even more!  Where did the rest go?  Following the dictum of “Follow the Money”, it is more than likely that a considerable portion of the extra cost went into the pockets of those directly associated with negotiating the contracts.  One cannot forget that the building industry has recently been found to have been colluding with the intention of increasing prices.  Of course, this conduct is much easier if a part of that increased price flows to the counter-party in the negotiation, the party awarding the contract.  This has not yet been alleged and presently constitutes pure speculation, but, on the basis of the munitions contracts, the SANDF Air Force contracts and numerous other such Government dealings, it would hardly be a surprise to any thinking person to find the old names attached to the sticky fingers.
Where does all of this get us in an investigation as to why dishonesty has become so much a part of the South African way of life?  It seems likely that any person desiring to become successful, which is, in South Africa, defined as becoming wealthy, is likely to follow the examples set by those who have visibly made it.  An investigation into the sudden wealth amassed by so many of the leaders of the nation, both politicians and ‘entrepreneurs’, is likely to reveal a substantial role of dishonesty or, at least, undue advantage achieved by using the inequities of the system.  The aspirant wealthy person will almost certainly emulate the examples in trying to join the club.  Once the threshold of dishonest conduct is crossed, even by the simple paying of a bribe to secure a right or approval, the floodgates open.  The amounts involved grow rapidly.  After all, if dishonesty nets R5 000, why balk at dishonesty to net R500 000, or R50 000 000?  Paraphrasing Winston Churchill, the question then becomes “Once we have established that you are dishonest, the only matter to be decided is the price!”
What is your price?