The Interim
Budget Speech by the new Minister of Finance Nene was as unconvincing as
intelligent South Africans have come to expect.
It repeated all the pious hopes uttered by previous Ministers, and by
President Jacob Zuma, but it offered no new ideas or glimmers of hope. And there is good reason why this should be
so.
The
underlying cause for the numerous problems that beset South Africa is very
simple. The governing Party is using its
political power to buy votes. It
concentrates its efforts on ‘improving the lives of the poorest of the poor’,
but, unfortunately, economic activity does not grow in that politicised sector. Growth comes from business, industry and
agriculture. Government has put a large
amount of effort into making doing business in South Africa more difficult,
with numerous charges, levies, fees and innumerable reports and submissions to
a multiplicity of Government bodies, none of which appear to have the
capability to make any meaningful use of the data gathered. The fact that the labour unions represent a
large portion of the voter base for the ANC and the SACP has resulted in a very
militant labour situation, with demands for high wages that do not reflect the low
productivity of the workers, and an apparent inability on the part of
Government to moderate such demands to accord with economic realities. The demands for increased participation by
the Black population in the management and ownership of existing businesses
represents to huge threats to such businesses.
They result in a much higher cost of doing business. The average businessman would be delighted to
employ a Black worker at an appropriate level, but having to employ an
under-qualified person to do a job merely to meet a quota requirement has two important
results. It makes that business
uncompetitive, reducing its ability to compete internationally, and it drives
up costs locally, becoming an important driver of inflation. The need to ‘sell’ a substantial shareholding
in the business also represents a sizable cost factor. Regardless of the disingenuous protestations
of the ANC politicians and their stooges, the canny investor knows what level
of profit can be achieved from the investment.
Any action that reduces the net profit to the investor on his investment
must be balanced by an increased level of profit, sufficient to make that
investment an acceptable one. Bear in
mind, the ‘investment’ is not necessarily expressed in financial terms – it can
also be the value of the business creator in terms of his ideas, skills,
ingenuity and experience. If the return
on the investment is not sufficient for any reason, that investment will seek
an alternative home. This is certainly
one of the reasons that so few new innovative businesses have been established
in South Africa in recent years. And
foreign investors are not the suckers that the ANC seems to believe them to be. They have followed the discussions regarding
the handover of 50% of established farm businesses to the workers. On the face of it, this is the sort of thing
that would appeal to a Marxist Party member.
It makes a large handover to the voter base at no cost to the
Government, it gives a wonderful ‘story’ at the next election, where the ANC
will use it as a reason to be returned to power, and it provides a wonderful opportunity
for the Party faithful, with large bank accounts derived from their Party
affiliation, to rake off another substantial bite of the wealth presently owned
by the Whites. However, it ignores the
fact that it is no more than institutionalised theft. To take from a man, or a family, the farm
that he has built up over generations, with personal effort, investment and
risk, and to hand it to the employees without paying any compensation to the
dispossessed owner, is no better than highway robbery. It will result in farmers taking pre-emptive
action to protect his assets and his source of income, as is already happening,
and it will result in a catastrophic collapse of agricultural output. More than two-thirds of farms already handed
to Black farmers have failed, and there is no reason to believe that the new
idea will work any better. Already, the
number of commercial farmers in South Africa has reduced from 62 000 when
the ANC came to power to less than 25 000 today, drained by the continuing
threat of farm killings, which the Government still fails to combat in any
meaningful way, by the politically-inspired farm labour strikes which have
driven up costs to an unaffordable level, and by the continued attack on this
bastion of White effectiveness in the re-opening of Land Claims, and the new
Zimbabwe-inspired theft of productive farms.
Canny
investors see the new idea, of legislating a requirement to hand over farms to
employees without any compensation, as being the first signs of a new wave of
dispossession of businesses and assets.
After all, if it is done in relation to farms, why should it not be done
in relation to banks, insurance companies, IT firms, security firms and every
other productive asset? The short answer
is that the ANC certainly has this in its long-term planning (next year or the
year after, but, in any event, before the next general election, when it will
be in dire need of another ‘good story to tell’). Any intelligent investor will see the clouds
on the horizon, and either get out while the going is good (consider Anglo
American, Billiton, SA Breweries, Old Mutual and many others) or simply not
come. In the Consultancy business of
which the writer is part, several reports written to evaluate South Africa, amongst
other potential investment destinations, have concluded that it ranks low in
practically every meaningful criterion – ease of doing business, honest dealing
by Government, corruption, education stand of the workforce, worker
productivity, energy cost and security, safety of employees, labour relations, security
of repatriation of the investment, time required to get into business, and many
other factors. The result has been that
the potential investors have elected to establish their businesses in other
destinations. An increasing number of
companies which have already invested in South Africa have requested a similar
evaluation of their investments, and an increasing proportion of them are
withdrawing from the country. These are
not high-profile decisions. The
companies making them do not generally want to make a political statement, but
the number of job losses is mounting, running to many thousands per year, and
the unfortunate consequences of these decisions are mounting, as the investors,
previously strong proponents of South Africa, have come to realise that this is
no longer a place they wish to be, and spare no efforts to inform their
colleagues of the reasons for the decisions.
It is time
for the politicians running this country to realise that it is no longer
possible to make political decisions based on their personal financial
benefit. They must now take the ‘radical’
steps of demanding that any person benefitting unjustly from a Government
contract be brought to justice, serve jail time, be banned from any form of
business with the Government and its bodies in the future, and be forced to
refund any benefit unjustly received. It
is time that the Ministers and the State President accept that they are not
kings and queens, but servants of the people, elected to work solely in the
interests of the public, and subject to the Constitution and the laws that bind
all of us. It is time for politicians to
understand that they represent all of the people, not only the constituents who
elected them. It is also time for the
politicians to understand that, if they cannot come up with anything better
that populist moves, the sole objective of which is to gain re-election, they
must stand aside, to allow people who are competent to manage the economy.
There is
not much time left to pull this country back from the brink of African mediocrity.
No comments:
Post a Comment