How to fix the South African economy

 

South Africa has become a complex mess of problems, and most of them point to a decline in its economy.  That factor alone will exacerbate the underlying problems.  A suggestion has been made by Stephen Lings that the country needs a growing and vibrant business sector to achieve the sort of employment levels that will solve some of the underlying problems.  That is self-evident to any economist, but how can that be achieved? 

There is no quick fix possible, but there are several fixes that are vitally important in achieving that objective.  Here are some of them, not in any order of importance.

Fix the drift towards Communism.  The opportunistic socialist policies that are the hallmark of the ANC Government have done much to destroy faith in what was a healthy capitalistic economy.  The Apartheid economy managed to survive through years of sanctions and governmental ineptitude because the businessmen had the confidence to invest in the future.  That confidence has waned dramatically.  The reason?  No intelligent businessman can miss the signs of rampant Communism at its worst.  A street in Pretoria is to be renamed after Mao Tse Dung, the man who did more to destroy the Chinese nation than any organisation since the British occupied China.  That follows the example of Durban, in naming a street after Joe Slovo, the former leader of the South African Communist Party and a man who explained to Stephen Mulholland, a renowned and highly intelligent journalist, how the SACP planned to survive in South Africa when Communism had failed everywhere else in the world.  “Communism needs a capital base on which to work,” he explained with his normal smile.  “South Africa has that capital.”  And what will you do when that capital base has been exhausted?” asked Mulholland.  “We’ll then change to another system!” was the smiling reply.  The examples of Cuba and North Korea, East Germany, Czechoslovakia, Poland and all the other former USSR Republics should be clear to the most obtuse leader of a nation, yet we, together with the other sparkling example of a failed African economy, Zimbabwe, persist in following the policies learned at the desks of Moscow, Havana and East Berlin.  With a Communist as Minister for Higher Education, how can we expect our upcoming business leaders to do otherwise?

The standard of education is critically in providing the basis for the business leaders of tomorrow.  That standard in South Africa is amongst the lowest in the world, and the cover-up of the ineptitude of the Government in improving it, by lowering the requirements for a matric certificate only serves to make it lower.  Granting a matric to a student who achieves a pass of 30% in five subjects merely ensures that our economy has a plethora of certificated morons.  Would you drive your car over a bridge that was designed by an engineer who achieved a pass of 30% in mathematics?  No businessman or –woman would want to take the chance of investing their life savings in a company which will have to employ those people!  South Africa has a good number of highly intelligent people.  It is the responsibility of the education system to foster that intelligence, to force those young people to apply their minds in the achievement of a certificate that really has value.

The policies and intentions of the Government are very clear to those with the experience to understand them.  The discussion about forcing commercial farmers to hand over 50% of the ownership of their farms to their workforce is a guarantees way to ensure that those farmers do not make the investments that will ensure that the farms will remain sustainable.  The policies of the Government in land restitution – the purchase or expropriation of farms and their handing over to unqualified Blacks – has worked wonders in the farming sector.  The number of farmers has dropped to a quarter of the total when South Africa was able to export quantities of food on a reliable basis.  That fall will continue for as long as farmers do not have the certainty that what they invest today will have benefit for their children in the next few decades.  That certainty is what grew the agricultural sector beyond any other African country, and it is the removal of that certainty that will bring it to the level of the agricultural sectors in that country our political leaders seem to admire so much for their political example, Zimbabwe. 

However, that is not the worst.  Any perceptive observer will see that the policy of redistribution – theft of the assets of the Whites – will be extended to other areas of business.  There has already been much rhetoric about the obligation of the miners to bring the workforce into the ownership of the mines.  How long will it be before the Government decides that the mines must hand over 50% of the ownership of the assets which they developed at high risk of their own capital to the workforce?  And then the banks, the insurance companies and, eventually, all the other businesses.  If one puts the question to a foreign investor, the source of a huge portion of the capital that has brought the South African economy to the stage of development that the ANC now proudly claims to be responsible for, the answer is remarkably clear.  The question “Would you invest in a company in which you will be compelled by Government edict to hand over a half of the ownership and control to the workforce?”  The answer “You must be out of your mind to suggest that!  Where else in the world can I put my money where the Government has an understanding of economics?  That is where I will invest!”

Add to that the almost incredible stupidity of statements made by Trade Union leaders.  A trade union is an organisation in which extravagant promises are made to the members to convince them that they should contribute to the equally extravagant lifestyle of the leaders, and then convinced that a strike will achieve those unrealistic promises.  Both the employers and the employees lose.  The only winners are the trade union bosses.  Although some part of the wage demands in the recent platinum mines strike were achieved, that was a pyric victory.  Only the workers, not amongst the smartest economists on the planet, could believe that the higher wages would not lead to massive job cuts.  Shafts will close, mining companies will withdraw from this country which has now been shown to be an unreliable investment destination.  The withdrawal of Gencor / Billiton from South Africa has benefitted only the few Black ‘investors’ who were able to move in on the assets that were sold at a cheap price.  Anglo American is withdrawing from its homeland, a completion of the move that started when it established a holding company abroad, Lonmin is planning on downsizing its South African presence.  And that is just in the mining sector.  SA Breweries saw the future coming years ago.  So did Old Mutual.  So has Sasol.  It is not necessary to list the dozens of companies that have understood the future of politics in South Africa, but even a complete listing would probably fail to include the other business potential that has fled these shores.  Paypal could have been South African, and so could Tesla, if only the Government had ensured that the leaders of those dynamic companies could believe that the results of their efforts and risk-taking would remain theirs in the future.  It is no coincidence that Australia, a country that lagged behind South Africa in terms of economic development two decades ago, should have far outstripped South Africa in economic growth in that time.  The secret?  It is twofold.  The Australian Government gave the assurance that there would be no Government-sponsored theft of the fruits of the work of the entrepreneurs who would work to build the economy, and that assurance attracted the brightest and best of those who left their homeland because they feared the communisation of that country.  The biggest still unanswered question in this regard is when will the Government read the signboards that have been there for twenty years?

If the Government sincerely wants to promote business and so the creation of jobs, the most important move it can make will be to clear away the logjams of bureaucracy that it has built up.  It is wonderful to have the most progressive (?) Companies Act in the world, but explain to the shack-dweller in Alexandra, who has looked for any work for the past five years, how that benefits him.  Numerous people complain that the registration of a company can take nearly a year!  One German businessman, has written eight letters to the Companies Office requesting a listing of the Directorships registered in his name.  His enquiry stems from a suspected fraud perpetrated in his name.  Unfortunately, no reply, or even acknowledgement, has been received over the past eighteen months.  In the UK, a company can be registered within eight hours, and the details of directorships are available on-line!  The dozens of meaningless reports required by various Departments of Government add significantly to the hurdles any businessman has to jump over each month before he can even start to think about running his business in one of the highest-risk economies in the world, and then he has to face the possibility that the South African Revenue Services will take it into its head to destroy his business in order to advance the interests of favourites!  These are not imaginary problems.  They are faced by the real businessmen and –women who work to create the jobs that Government talks of.

The problem of corruption continues to bedevil the business community.  That takes place not only in Government, but the supreme indifference of senior members in Government to finding a way to deal with corruption continues to promote.  When has a public trial of a Minister resulted in a lengthy jail sentence, a sentence that will be served in prison, not on the golf course?  The BBEE legislation has promoted a new brand of corporate corruption.  In order to run their businesses in anything approaching a profitable way, many businessmen have been induced to set up elaborate structures to present the BBEE front, with multi-level contractual relationships to ensure that the shares handed to Black partners will not be disposed of for a quick profit, in many cases foiling the Black shareholder element, and ensuring that the effective control remains in the hands of the businessman who has spent twenty years gaining the experience and qualifications necessary to make the business successful, while the new partner, who often has little to offer in the form of experience or capital or, most importantly, a good educational foundation for learning, has as his prime priority a new 7 Series BMW or a Range Rover!  In the past, a well-educated person started at the bottom and worked his way up the organisation over fifteen or twenty years before he gained the position, and salary, that is now demanded by twenty-five year olds.  That process, although frustrating, was the foundation on which the economic success of the nation was built, and the lack of that foundation of learning, education and experience is the likely cause for the failure of the economy that we are witnessing today.

Finally, for today, if we want to have an economy that will grow, we must have a Government that we can trust.  We must have leaders who accept the pronouncements of the Courts and the Public Protector, and give effect to them.  We cannot afford to have a Minister who appoints a Chief Executive of the SABC in direct contradiction of the requirements of the findings of the Public Protector, with the lame excuse that an independent firm of attorneys found that he was not guilty of any wrongdoing!  When did an unnamed firm of attorneys gain precedence over a Constitutionally-grounded Chapter Nine institution?  That action prompts any thinking person to ask the obvious question.  What does the executive in question know about the Minister to warrant that action?  We don’t need a President who presents red herrings instead of complying with a clear finding of the Public Protector.  He gained unjustly from the improvements made to his mansion and must inform the public of how much he is to repay, and when he will make that repayment.  The question is simple, the prevarication clear.  We don’t need a President who has remained under suspicion of having engineered the withdrawal of criminal charges against him by the exercise of political persuasion, and has failed to comply with a clear order of the High Court to deliver the (incriminating?) tapes.  Instead, we need people like the present Public Protector, with the power to enforce a finding in the same way as an Order of the High Court can be enforced, with the power to imprison those who don’t comply on the basis of Contempt of Court (yes, even the President!), subject only to an appeal to the Court of Appeal.  We need a rule that, when a Government Department or body goes to Court wastefully, the responsible Minister or Director General must pay the wasted costs personally.  Most of all, we need a Government that speaks the whole truth to its citizens, in a way that allows them to make a rational decision on the correctness or otherwise of the policies and actions of that Government.