Joe Slovo and Economic Predictions

 The extract below from the eBook ‘Marloth’ is a frightening statement of the situation that exists right now in South Africa.

“Shortly after 1994, when the new democracy was instituted, Joe Slovo, the leader of the South African Communist Party, was asked in a television debate with the Chief Editor of a major newspaper why, when almost every other Communist government around the world had collapsed, he thought that Communism would succeed in South Africa. His response was that Communism needed a stock of capital to succeed. South Africa had that. The Editor asked what would happen when that capital stock was exhausted. Slovo replied that they would then move to another system! I know several highly competent economists who believe that the country is heading rapidly towards that point. The South African Government bonds have been downgraded by the ratings agencies, as have the major banks. The exchange rate is heading south, major companies that were proudly South African are relocating their head offices to other countries, and many of the companies that had major investments in the country are pulling out. The best of our university graduates can hardly wait until they graduate to start looking for jobs in more civilized countries. The signs are clear if you care to look for them.”

The book was written and published in 2014, and the prediction made then has become a stark reality in the lives of the average South African. Even without the ravages of Covid-19 and the poor handling of the epidemic by the government, it was clear to any thinking person that the roadmap the government was following was destined to lead to an economic and fiscal cliff. The pandemic has served to speed up the bus in which we are all passengers, all of us relying on the driver to correct his course before we reach that cliff. Several of the smarter passengers saw the facts early, and jumped off the bus, accepting the injuries they would suffer as a small price to avoid the collapse that they saw to be inevitable. The rest sit in the bus, holding on, white-knuckled, as the bus veers erratically but inevitably towards the economic collapse now looking to be not far ahead.

If the citizens of the country are really earnest about saving their country, now is the time for them to act. Now is the time to take Joe Slovo’s advice and find another system of economic management. Now is the time to force the voters to understand that no others will come to our aid, not Russia, not China, not the AU.

South Africans are, in general, good-hearted and hardworking people, willing to do what is needed, if someone shows them the goal and the way to get there. Most of them would rather work at a job to earn their living, rather than relying on ‘gifts from the ANC’, gifts which can only come if there is an economy capable of earning the profits that will be taxed. Most of them are capable of understanding what the economic facts of life are, what needs to be done to dig themselves out of the hole that the Marxist promises of ‘their’ Party have trapped them in. It will be a slow and painful process, much slower and more painful than it could have been if it had started in 2014 or even earlier, but it will have a result that every honest citizen will be able to point to with pride. It will set the country on the road to taking its place amongst the leading countries of the world.

Marloth is available on Amazon at https://www.amazon.com/dp/B00NAXHGG0

Better an end with horror than horror without end

South Africa is officially in a recession, caused entirely by the crackpot policies adopted by the ANC, in defiance of all the advice offered them by people who understand economics, who have studied history, and who can see clearly where it is all headed. Ramaphosa assumed the Presidency, making promises that no-one believed he could keep, indeed, had any intention of keeping. His first act was to appoint to his Cabinet a group of corrupt, incompetent and failed Ministers, none of whom has demonstrated any understanding of modern economic thought, including several who have been found by supposedly righteous bodies to have been corrupt and incompetent to hold any public office. He has spoken several times and, tediously, at length, without telling South Africa what his plans really are to correct the course the country is on, and he has announced grand investment plans, miraculously falling into his lap, without disclosing what those plans really entail, or what the cost will be for the country of his financial rescue, if that is what they are.

South Africa is in a recession that could have been foreseen three years ago, at a time the ANC nominees in Parliament were gleefully telling the electorate that Jacob Zuma was the bee’s knees, totally disregarding the facts already clearly pointed out by the Constitutional Court, that he was delinquent in failing in his observance of his duties under the much-vaunted Constitution, clearly a criminal act of the worst kind, and clearly disregarding the compelling evidence of judgement after judgement declaring the functioning of the State to be both dishonest and incompetent. Ramaphosa took power, declaring that he would fix those failures, and then appointed David Mabuza as Deputy President, an act that induced no less a journalistic great then the New York Times to point out in painful terms that South Africa was now a Mafia state. Ramaphosa and his ANC did nothing to correct this report, allowing Mabuza to make a pretentious statement that, in effect, he was no more dishonest than Jacob Zuma.

South Africa is in a recession that will endure for years to come, with the difficulties facing the ANC of continuing to support the ever-more-rapidly declining State-Owned Entities, to provide the funding to keep buying the favour of the beneficiaries of the SASSA grants when it comes to election day, to continue to find ways to explain how Jan van Riebeeck and his horde of White Monopoly Capitalists are responsible for the ever-rising unemployment figures, the declining performance of the education sector, the public health sector, the public administration sector and all the other problems that are popping up with annoying regularity. That recession will end, in real terms, when the IMF is begged for assistance by the Government, and imposes draconian rules on public expenditure and control of corruption. The years until then will be more than painful to the South African public, as an increasing share of GDP is required to cover the interest payments on the money that the Government has thrown at the twin needs of finding projects that can be ripped off by the cadres and of buying votes to remain in power while they continue their depredations. Surely the daily horror reports from various Commissions, stating how Jacob Zuma and his gang, many of whom are still in the Ramaphosa Cabinet, viewed South Africa as their private piggy bank, to be plundered at will, how the Gauteng Provincial Government, in league with the national Department of Health oversaw the killing of 169 mentally-ill patients, with no apparent consequences for any of those ultimately responsible for the tragedy (in any sane country, the national Government would have fallen: in South Africa, not even the Provincial MEC for Health has resigned, never mind being put behind bars), while the Minister of Health plows ahead with the newest plan to rip off the public while, at the same time decimating the health care system and driving doctors to seek other homelands where they can earn an honest living. And all the while, we are sending aspirant Black doctors to learn their skills in Cuba, in Spanish, and Russia, in Russian, while the White students who want to study to serve their country in the medical field, are being sidelined, because the universities have a quota of Black students to fill, regardless of their educational standard.

South Africa is in a recession as a result of the harebrained socialist policies of the ANC, and Ramaphosa goes to China to negotiate assistance from the Chinese Communist Party to enhance the ANC’s commitment to the very policies that have brought us to this.

The only light on the horizon is the faint glimmering from business that they have the power to stand up to the Government and the Unions. They are not investing the spare funds at their command in the local economy, and it is now time for them to state that they will no longer comply with the insanity of the BBEEE policies that have made the country’s businesses uncompetitive on the international market, that they will no longer employ the workers at the blackmail rates enforced by the unions, that they will wind down their businesses until the government illustrates convincingly a commitment to supporting the very business world that earns the profits to provide the taxes that the Government needs, that employs the millions of workers who agitate daily against the ‘plague of capitalism’ that employs them. There is no doubt that this will hurt in the short term, but, if they had done this ten years ago, and brought the ANC to the realization that they can only command if others obey, South Africa would have been a booming economy today. How much is the cost of a forsaken additional annual growth of at least 5%, a figure that could easily have been attained under an effective Government? If the price is too much, close your business now, because it will be paid unless the Government is brought to understand where the wealth of the country is generated.

The price will be paid, out of a much less wealthy economy than we have even now. The sooner the price is paid, the sooner will come the recovery, and the easier it will be for all of us.

Some advice for Ramaphosa

Cyril Ramaphosa, an undeclared contender for the position of President of the ANC and so, ultimately of South Africa (if the ANC can hold onto its voter base in the face of its abjectly poor management of the economy) made the first really strong (almost) statement of his political career last night, declaring to an assembly of presumably dyed-in-the-wool Black ANC supporters that the policy of radical economic transformation is ‘non-negotiable’.

This was not the brightest thing to do at this critical time in the country’s economic history. The new Minister of Finance is in New York, attempting to convince the world’s investors, already very leery of the economic policies of the ANC, which have placed the country on a continued economic slide towards the present junk status, will not change, that it will continue on its path of ‘fiscal conservatism’. The fact that this path, together with several other elements of the ANC policy, are the cause of the current junk status, appears to have escaped his attention, and the inflammatory electioneering speech of Ramaphosa will certainly go a long way to convincing the investing public that the ANC will continue to be blind to the failings of its policies.

Junk did not happen overnight. It was the result of a long series of bad decisions, one building on the other, since the ANC came to power on the back of a voter base which is either economically illiterate or blindly trusting in the qualities and moral integrity of one man. The country has been sliding down this increasingly-steep slippery slope for the last twenty-three years, and a continuation of the political lunacy is guaranteed to bring about a continuation of the economic train smash, until, finally, the Government will be forced to accede to the harsh demands of the IMF when it begs for rescue. There are only two ways to avoid this fate: either a less-corrupt leader will take control of the ANC and change the country’s economic direction, or another Party will do the same. The only question is whether the change will come before the IMF takes control, or after.

What Ramaphosa fails to recognize is that the country simply does not have sufficient well-experienced and qualified Black managers to rescue the country. Of all people, Ramaphosa should know that a skilled manager is not born: he or she is the result of a good educational foundation, with the addition of years of on-the-job training and a wide exposure to the advice of people who have seen it all before. South Africa could have been approaching that stage now, if only the ANC had not decided that a certificate that the bearer has been educated is less important than the content of that education. The educational system has demonstrated convincingly that it is not capable of producing the managers of the future that the country needs, and no number of examples of exceptional Black graduates will change that. There are exceptional Blacks, as there are exceptional Whites, Indians, Coloureds and Chinese, but that is not proof that the system produced them – they are exceptions. The country cannot grow on exceptions. It needs an educational system that consistently produces school and university graduates who are amongst the best in the world. South Africans are capable of that, as is shown by the Model C schools that Nkosazana Dlamini Zuma so disparages, but the general system does not harness that talent. That was proven convincingly this week, when the Law Society warned the University of the Witwatersrand that it will lose approval for its Ll B school unless it tightens its law educational standards. That comes only a few years after the Law Society reported that a significant proportion of new law graduates were incapable of using language efficiently. It is a frightening state of affairs when a formerly prestigious law school, which, over the decades, has consistently represented the pinnacle of university education in South Africa, and the graduates of which have, until the past two decades, been held in high regard by most of the world’s academia as well as big business, has to be warned that its education is sub-standard. Unfortunately, in the international Management Consultancy of which the author is part, a recent degree from a South African university is treated as an indicator of below-par capabilities. Once again, the ANC has shown its belief that tens of thousands of certificate bearers is of greater value to the country than a smaller number of graduates of excellent quality.

The quality of management of the State Owned Entities, such as Eskom, SAA, Sanral, Denel, SASSA and SABC, as well as of most ANC-controlled State Departments is an unmistakable testimony to the extremely poor standard of the Black management available in the country. The South African Police Services seems incapable of producing a Commissioner who is able to hold the top job for more than a year! Apart from the rampant corruption (another manifestation of poor management), it is clear that the policy of pushing an ANC cadre into the top job years before he has the skills, the integrity and the personal qualities to perform adequately is a virtual guarantee of failure, and no amount of Hlaudi-speak will be enough to convince the world that the financial woes of the organization are a figment of the Opposition’s fevered imagination. SABC requires another R3 billion, although the former CEO, now out of the job for only a few months claims it had a cash surplus of R800 million, and SAA requires another R4 billion only a month after the last R5 billion was injected to save it from bankruptcy – who has ever heard of a State-owned airline failing to publish its annual accounts for fifteen months after the statutorily-required date, in order to save it from insolvency! The incompetence and corruption (another manifestation of managerial incompetence) of Eskom has resulted in a massive slide in the industrial and mining output of the country, causing it to miss out on two world booms. The reliable, affordable supply of electricity is universally recognized as a promoter of economic activity, and Eskom has been singularly negative in its role in that regard, while the ANC and its leaders have benefitted enormously from the endemic corruption on the corporation.

The management talent is available in South Africa, amongst the thousands of sidelined White managers who would love to be in a position to help their Black counterparts, and tens of thousands of South Africans abroad would be delighted to return to add their skills and efforts to the drive. Believe it or not, Mr. Ramaphosa, Whites want the country to succeed as much as Blacks do! They all understand that the future of the country lies in the hands of all its citizens, and the amount of goodwill on the ground, amongst all races, is considerably greater than the ANC wants to believe. The average citizen wants the Rainbow Nation of Nelson Mandela to succeed, and he or she will do whatever it takes to make that happen, if only the Government will step aside and allow them to do that.

The real problem of the ANC and its hangers-on is that they believe that the size of the economic pie is fixed, and that the only way that the Blacks can get more is to ensure that the Whites get less. That may be true in the world of the ANC, as is demonstrated by the fact that the economic pie has been shrinking consistently since they have been in power. Numerous non-ANC initiatives to grow it have failed because the ANC policies have ensured that the preconditions for growth – good education, good experienced management, good control of corruption – have been removed, rather than being expanded. An attempt in the 1990s to bring about 350 000 sustainable jobs failed because the Premier of KwaZulu Natal demanded from the German sponsor of the project a bribe of 15% of the cost of the project, promising that payment would ensure the co-operation of the Premier and the MEC for Economic Development! The economic pie is, in fact, not fixed, as is demonstrated by the fact that several economies, around the world as well as around Africa, have been growing at a pace greater than 5% p.a., even in times of world economic slowdown (with the South African GDP growth rate now projected at under 1% in 2017/8, and likely to be less). Even a smaller share of a bigger pie will translate into a better standard of living for tens of millions of South Africans, Black and White, with a brighter future for the Blacks making their way up the educational and experience ladder. Black Empowerment will happen inevitably in a growing economy, but cannot in a declining economy. No amount of entrepreneurial training in school will substitute for the quality education that is required to allow the schoolchildren to become citizens of the world.

Mr. Ramaphosa, as an intelligent politician, it is necessary for you to recognize the facts of the situation. A continuation of the mantra of Radical Economic Transformation cannot achieve anything of value for your Black voter base. A continuation of putting down the Whites who managed the growth of South Africa from a small colony at the end of Africa to a country that was important to the world, in the face of abjectly poor political management over many decades, will only deprive the country of a significant base of skills, knowledge and entrepreneurial capability, to the cost of all.

Mr. Ramaphosa, you are the Deputy President of all South Africans, Black, White, Coloured, Indian, Chinese, not only of the ANC portion of the country. The continuation of the present Zuma-ANC lunacy will serve only to drive away an increasing number of the people who supported the delivery of a democracy in this country on the basis of the moral character of a great man, Nelson Mandela, as well as the capital that is so essential to economic growth.

Now you have the opportunity to stand up, to speak truth to your political boss and to your nation, and prove to them that you have what it takes to be the next President.

Symptoms of Collapse

The big moves in a country such as South Africa capture the headlines.  Moves such as the firing of the Minister of Finance in order to ensure the willing compliance of the incumbent of that post with the corrupt desires of the people steering the country.  Such a move creates a situation in which the replacement of the replacement is lauded as the savior of the country, regardless of how compliant he may have been in the same conditions in the past, when the wash from the world boom was still having an effect in allowing the country to continue to operate, though even at a more gentle rate of decline.

The real incompetence of the Government is brought to light for its citizens when the things that impact them directly and noticeably occur.  The problem with the macroeconomic decline is that a downgrading of Government securities does not hit the voter on the head.  The interest rates increase.  So what?  The Government explains that the world is going through a tough time, and we must share it, but don’t worry, things will improve.  After all, we have our democracy!  However, when the Bryanston Post Office is closed, without warning or notification, all of those voters who rely on it to receive some of their mail – the part that is not stolen by Post Office employees on the search for a quick bonus – are given a direct and pertinent example of what is taking place throughout the country.  The example, after enduring no mail delivery for three months, and then being promised that it will be sorted out ‘soon’, a promise that has been made weekly since the beginning of January, only to find that there is no change, and that the employees who made that promise are becoming discouraged, brings home to those voters, and taxpayers, that the slide of the country to the level of yet another African banana republic is a reality.

While all of this is happening, Jacob Zuma does a walkabout in Pretoria, and boasts afterwards that ‘the country loves the ANC, the people love Jacob Zuma!’  The Deputy State President makes statements that the country is doing well, the Government is fighting corruption, only a day after an admission is made in the Constitutional Court by Zuma’s representatives that he breached his Oath of Office in stealing R246 000 000 from State coffers and then covering it up by subverting the Minister of Police to produce a report absolving him of any liability to repay.  Gwede Mantashe then declares in a TV interview that the ANC has always wanted a formal investigation of the affair, but was prevented from achieving that by the Opposition!  Jacob Zuma declares that the replacement Minister of Finance is better qualified for the job than any other Minister of Finance has been, totally disregarding the fact that the citizens of the town in which the ANC nominated him as Mayor were so enamoured with his performance that they expressed their pleasure by burning down his house!

Against this background, the Marxist-Stalinist new new Minister of Finance is seen as a saviour!  The Press expects that he will suddenly see the light, and make the changes that will set the country back on the road to improvement.  They are already explaining that times will be hard during the recovery period, while Zuma declares in SONA that the ANC will introduce legislation to deprive foreigners of the right to own property, so ensuring the continued reduction of Foreign Direct Investment (down 74% last year!), and further legislation to ensure that White farmers donate (under compulsion) half of their farms to the Black workers, because ‘ownership of land is an important element in making a man free!”, to ensure that agricultural production continues its slide (farmer numbers down from 66 000 in 1994 to 24 000 today, with over 90% of redistributed farms failing).  The anti-White, anti-west rhetoric is being wound up to ensure that racism plays its role in the forthcoming local government elections, and then things will go back to normal, with 80% of the local authorities failing the audit tests for clean governance, SAA being handed another R5 billion in Government guarantees before further cash injections become necessary in order to keep it afloat, so that Zuma and his cronies can plunder it further, more cash being pumped into Eskom to fill the coffers so that the large buddy contracts can be funded, with ‘finders fees’ being paid to the ANC, and more instant billionaires being created amongst the politically elite.  Zuma will be replaced by another friendly face, probably Nkosazan Dlamini Zuma, who produced such a sterling performance at the Department of Homeland Affairs that South Africans now must have visas to visit virtually every other country, and who will screen the Prez that everyone so loves from investigations into his crooked dealings.

And things will go back to normal, with the country sinking into the abyss that ensured that most thinking Whites voted for the National Party, even though they hated the policies of that Party. 

And so we go on.

Zuma still does not get it

All knowledgeable observers are in agreement.  South Africa is in the early stages of a financial crisis.

Business confidence has collapsed, and is still heading south at an increasing rate.  The investor world is in agreement that the country is one tiny step away from junk status.  Economic growth has collapsed, with the World Bank and the IMF in agreement that growth this year will be considerably less than 1%, less than half of last year.  The Rand is testing new limits against all other currencies.  The cost of living is skyrocketing, with prices moving up on a daily basis.  Local companies are looking elsewhere for new areas of investment, with the assurance that the South African market is close to dead.  Inbound foreign investment is dying off rapidly, and existing foreign direct investments are fleeing the country.

The only body that sees a different world is the ANC.  Gwede Mantashe, after the State of the Nation fiasco, stated in a TV interview that we are not in recession.  ‘Recession,’ he said in an arrogant tone, ‘requires three quarters of negative growth, and we have not had that yet.’  His one concession to the truth was that telling word ‘yet’.  Even Mantashe apparently knows that South Africa is on a slide under the leadership of the ANC.

Zuma read his normal SONA speech, apparently oblivious of the fact that he now is acceptable as a leader of the nation to fewer than 16% of the population.  He spoke passionately about how some Black soldiers had died at the Battle of Delville Wood, a hundred years ago, after they had been badly treated by the Government.  He raised the point that, fifty years ago, the residents of District Six, which was a slum, were moved to another area to make way for Whites, a development that never took place.  He also referred to the school riots in 1974, including the killing of Hector Pietersen, riots which were instigated by the ‘freedom fighters’ in order to create martyrs in the fight against Apartheid and have since been sold by the ANC as spontaneous outbursts of student anger.  He referred to the fact that the University of Fort Hare, a Black university attended by Nelson Mandela and Chief Buthelezi, is celebrating a hundred years of existence, conveniently ignoring the mantra that the Apartheid Government refused education to the Blacks.  All of these references were undoubtedly a snide racist attack on the Whites and the Party he claims to be White-dominated, the DA, and then he went on to denounce racism and announce a campaign against racism.  It is a sure sign of the duplicity of the man, a clearly racist attack followed by a denial that he meant it.

The speech made the apparently important point, reiterated in his post-SONA interview a day later, that Government plans to cut the costs of international travel while Zuma’s travel budget has been exceeded by sixty million Rand), the size of international delegations (only a fortnight after an eighty-man delegation attended the World Economic Forum at Davos, during which Zuma failed to attend a panel discussion on Africa), the after-budget parties (although SONA is preceded by a praise singer extolling the virtues, imagined or otherwise, of the Great Leader of the Nation) and similar petty cash items.  Mantashe made the point after SONA that not all of these were new.  After all, he pointed out, there had never been any rule regarding the size of delegations!  Really?  Any competent businessman imposes limitations on expenditure, and demands accounting of the results of the expenditure, which has never been done by the ANC Government!

Zuma carefully avoided any mention of:

• the hijacking of the Government by the Gupta family, together with his own family,
• his admission to the Constitutional Court that he had breached the Constitution and his Oath of Office in regard to his own plundering of State resources and in contravention of a binding Finding by the Public Protector, rumoured to be in excess of R150 000 000,
• his subversion of the rule of law in co-opting the Minister of Police to produce a fictitious report exonerating his boss from any liability for repayment of the stolen funds used for Nkandla, using the flimsy excuse offered by all evil men, including the Nazi war criminals at Nuremburg, that he was following orders,
• his blunder in replacing a standing Minister of Finance with a failed nonentity, which was followed three days later by an about face, all without reason (other than an outright lie) or explanation, although it cost the economy an immediate R500 billion with much more to follow in the form of dramatically-increased cost of borrowing,
• the downgrading of Government securities by the Ratings Agencies, taking them to one tiny step above junk status, which will remove them from the list of permissible investments for most of the organisations that have provided funding to the country and to its banks,
• his breach of a High Court Order that the Government enforce a Warrant of Arrest of al Bashir, permitting him to flee the country while telling the huge untruth that ‘his name was not on a passenger list (!), an outright breach of the legally-binding Treaty of Rome and a flagrant statement of support for a terrorist leader accused of genocide,
• the fact that South Africa’s economic performance alone brought the economic growth of the African continent down from 7,4% without inclusion of South Africa to 4,3% with inclusion, stating that the country faced difficult external economic conditions, of which, apparently, the rest of the continent was unaware,
• the continuing brain drain, of all racial groups, fleeing the disastrous conditions in the country to seek their fortune in other economies, all subject to the same economic conditions,
• the collapse of the mining industry under the weight of trade union demands for uneconomic wages, supported by ruinous strikes accompanied by extreme violence,
• the abject failure of the education system to provide an acceptable education to millions of children, even at the highest cost in the world as a proportion of GDP,
• the continuing disasters in State-Owned Entities, such as Eskom, SAA, SABC, PetroSA,
• the worst drought in fifty years, exacerbated by a total lack of preparation of the necessary supportive infrastructure, even though the drought was known to be on the cards for several years, and by a lack of foreign exchange and economic strength to import the necessary food to prevent widespread starvation,
• the status of South Africa amongst the lowest in the world on indices of
• transparency,
• corruption,
• education,
• attractiveness as an investment destination,
• security of investment, after the country cancelled Treaties in this regard with European countries, the source of most of the foreign direct investment,
• ease and speed of starting a new business.

Zuma read his speech, badly, as though he was going through the motions.  He believes that his hold on the Party is strong enough to enable him to muddle through to the end of his term (remember the FBI’s Mc Carthy and his famous files on Congressmen?) and possibly even longer, by use of his seven thousand-strong personal security force.

After witnessing Zuma’s State of the Nation address, one can be left with only one thought.  Zuma really does not get it, and the ANC will continue to support him for as long as they can, to continue their depredations.  They have no interest in governing the country.  Their only interest is what they can take from it.  Joe Slovo, the leader of the Communist Party responded, in the early years of the ‘new South Africa’, to a question why he believed that the proposed form of government would succeed when all others that had tried it had failed.  “Communism needs capital, and South Africa has that capital.”  “And when the capital is exhausted, what the?”  His famous response was “Then we’ll try another system.”

Cry the Beloved Country.

Budget 2015 - The South African Quandary

 

The Minister of Finance has delivered his Budget for the forthcoming year, a speech full of words and signifying nothing.

The Budget proposals are remarkable for a number of factors.  It is rearranging the deck chairs on the Titanic on a national scale.  It fails to recognise the many impediments to economic growth that the ANC Government policies and practices have built into the economy, the huge number of hidden costs and difficulties confronting the entrepreneur seeking to start and to operate the new businesses that should be the lifeblood of the economy.  It starts with the basis of what was done last year, and increases from there, without looking at the real value that each item of expenditure generates, or fails to, or at the real cost of the costs and taxes raised, but simply assumes that they are good and goes on from there.  There is virtually no understanding of the real blocks that are holding back the economy, and assumes that a 1% or 5% increase will not make any real difference.

Let us start with the real question:  Do we need taxes?

It is an almost universal view that taxes are, at best, unpleasant or, at worst, evil.  A tax is money taken from the economy, money that, in the hands of the taxpayers, would probably be applied to the most effective purpose, and then given to people with little understanding of the value or the alternative uses of it who either spends those taxes on items of expenditure that the taxpayer would not himself, or invests them in elements of infrastructure that are needed by the country or a large part of it, rather than by the individual taxpayer.  The taxpayers in Switzerland are willing, if not exactly happy, to pay their taxes because they know that the funds will be applied to purposes that they support and, in most cases, to purposes which will benefit them.  They believe that the money will be correctly used.  That is certainly not the case in South Africa.  Most taxpayers in South Africa, if they were given a line item choice of what expenditure to support and which to reject, would accept no more than 20% of the expenditure that the Government so willingly throws away in the name of the taxpayers.  Those paying the taxes (a class of people substantially different from those receiving the benefits) would reject the expenditure of 47% of the Budget on Civil Servants.  An amount of 20% would be too much for the value these people add to the economy!  They would reject the wisdom of paying social grants to 13 000 000 people (and growing!) with a taxpayer base of 3 500 000!  They would be unwilling to fund the possible R200 000 000 on Nkandla, the R54 000 000 over-expenditure on travel by the Presidency, the R30 000 000 on a fence to the Ministerial Compound in Pretoria (where an adequate fence already existed), the cost of thirty-four Ministries, where the United States has only twelve.  They would not support the high cost of the Defence Force, a body that appears to exist solely for the dual purposes of maintaining the rule of African dictatorships and providing a backstop for the overthrow of the ANC as the ruling Party (what other use has the $5,4 billion expended on munitions in the 1990s accomplished?)  That amount could have solved the education crisis, if there had been political will to do so, with change left over to pay the bribes.)  They would want a clear statement of what the South African Police Services intends to accomplish in the field of fighting crime, also within its own ranks, how the National Prosecuting Authority intends bringing the 748 criminal charges levelled against the President to a conclusion that is consistent with an even-handed justice for all.  They would want to impose a limit of a C Class car on any Civil Servant, with the Range Rovers being sold on public auction for the benefit of State coffers, and they would want the personal bodyguard of the beloved President reduced to three persons, without a need for one of them to trot alongside the Presidential limo a la Barrack Obama.

The answer to the question is that we do need taxes, but any dispassionate review would find that the funds raised by the present VAT (at the rate of 14% - those old enough to remember will recall that, when he raised the rate from 3% to 4%, the then Minister of Finance made the commitment that there would never need to be a further increase!) would be more than adequate to fund the necessary requirements of the citizenry.  There would not be a need to increase the fuel levy by 30 cents per litre to a level of nearly 50% of the cost of fuel, nor the levy to fund the Road Accident Fund at an increase of 50 cents per levy, there would be no need to pay e-tolls for the use of roads that were largely built using taxpayers’ money, with more than a third of the amount collected going to some anonymous company is Austria, the contract details with which and the ownership of which have never been divulged.

The removal of the heavy overburden of officialdom, more than half of which is simply a disguised form of unemployment benefit to reduce the official unemployment statistics and to secure the votes of those persons for the ANC, would have the immediate effect of enabling start-up businesses to get going, without the cost and time delay (currently eight months!), and would enable those businesses to start employing people.  The largest constraint on the development of Black-owned businesses is the Government!

Heinrich Himmler stated that, if you tell a lie often enough, it becomes the truth.  That could certainly be applied to the need for tax.

The writer is a Management Consultant, with vast experience in the streamlining of business processes, and with considerable in-depth knowledge of the operations of Government Departments.  She can say with absolute assurance that it would be possible, within a year, to cut the salary costs of Government by at least 20%, without doing anything clever.  Those jobs cut would not result in unemployment.  The application of the salaries paid to those people for one year could easily generate over five hundred thousand sustainable jobs, something that the Government has shown itself totally unable to achieve in its twenty years of misgovernment, with the application of the Multiplier Effect generating at least another four million sustainable jobs within the next three years.  Why has she not done that?  The answer is simple.  An approach to one of the Provinces resulted in a request for a bribe of R1 800 000, payable in cash in advance in order to obtain Provincial Government approval, with the assurance from the bagman that ‘the payment includes the Premier and the MEC for Economic Development’!  That request was refused, and the next two letters to other Provinces are still awaiting a response, after some years, despite reminders and requests for response!

If South Africans are really concerned for the future of their country, it is time for them to demand a clear statement, by line item, of how their taxes are to be spent, and the choice to refuse to support any item of tax they disapprove.  It is time for them to realise just how much money they each pay to the Government, and how little benefit they receive for it.  It should no longer be sufficient for the President to say blithely in regard to Eskom, a State body that has been in a condition of crisis, a condition that would have brought a listed company to the Insolvency Court, since 2008 (seven years for those who can’t calculate!), that “we have a plan”.  The truth is that the Government does not have a plan, or, if there is the vestige of a plan, it does not have any capability or desire to implement it before Eskom, and the country, goes into a terminal collapse.

If South Africans continue to shirk the responsibility of realising that the Government has achieved for South Africa a financial and fiscal state approaching that of Greece, and of then taking action to correct what they have allowed to happen, they must realise that others will take that action for them, in a way that is sure to be less pleasant.  The first signs are already there, in the withdrawal of good companies from South Africa, the cancellation of early plans by international investors to invest in new industries, and the continuing lowering by the ratings agencies of the credit standing of the Government-issued and –backed securities, with the concomitant lowering of the securities of South African financial corporations.  There is not a single negotiating body to tell us of this, as happened in the case of Greece, but the effect will be the same.  Is that what South Africans want?

Eskom is only the tip of the Iceberg

 

Eskom is a summary of the crises facing South Africa.  The corporation, which, until the ANC put its cadres in to ‘manage’ it, was known as a reliable, forward-thinking and efficient producer of electricity.  It was one of the factors that enable the country to thrive, when all other African countries were languishing in mediocrity.  Since the ANC has had its fingers in the pie, the corporation has abandoned the principle of planned maintenance.  It has, in fact, forgotten how to plan.  Its management capability has sunk to an historic low, along with the staff morale.  The interruption of supply from Koeberg nuclear power station was caused by a worker dropping a piece of scaffolding onto a critical transformer.  That single event should have sent waves of near-panic through South African society.  If the standards of care applied in a simple maintenance procedure are as indicated by that event, it raises significant doubts about the capability of the present management of the corporation to operate what is, in fact, a controlled nuclear explosion.  That event, coupled with the copious evidence that has become available in recent months regarding the incapability of Eskom to do anything to at least a minimum standard of competence, must put up a huge warning sign to the public of South Africa and of the world.  Eskom is not capable of operating nuclear reactors in a safe manner.

If the continuing crises caused by Eskom (yes, even by the strange definition of the Minister of Energy, that a crisis is a disaster that is unplanned) were the sole major problem that has arisen under ANC management of the country, it would be a warning sign that cold not pass unheeded.  Unfortunately, it is not the sole crisis.  Look at the other ‘isolated’ problems which the country is facing:

·         South Africa Airways is a public body that failed to publish annual accounts for more than two years, because such publication would show that the corporation is insolvent.  Unfortunately, the fact of insolvency is not created by the publication of the accounts.  A corporation is insolvent if it is financially unable to pay its debts.  The fact that the demand for repayment has not been made does not make it solvent, nor does the fact that it does not disclose its inability to pay.  South African Airways has continued to trade in an insolvent state, to the knowledge of its shareholder (ultimately the South African State) for years, being saved from actual collapse from time to time by the continuing injection of taxpayer money, as a way of papering over the cracks caused by incompetent management.  If South African Airways were privately owned, its Directors and top management would have been behind bars for their breach of the laws regarding insolvency.

·         The South African Police Services seem, to the public, to be little more than a band of thugs, showing remarkably little capability of controlling crime, or of investigating those actual crimes that it does turn its attention to.  Stories abound of criminal acts reported to the Police without any attention being paid to their investigation or prosecution.  A group of German investors known to the writer speak to their many investor friends of the seventeen criminal acts reported to the Police at Brakpan, including several where a Police officer was present at the apprehension of the criminal and obtained written and signed acknowledgements of guilt from those accused, all without any trial of the accused resulting.  The fact that a Commissioner of Police could have been found guilty of corruption speaks for itself.  The fact that he was a senior figure in Interpol at the time has caused incalculable damage to the image of the country amongst investors abroad.  Yet there is no sign that any meaningful action is being undertaken to correct this situation.

·         The South African Broadcasting Corporation was headed by a Chairperson of the Board who lied about her educational qualifications.  The requirement that the senior officials of banks, insurance companies and other financial services organisations should be fit and proper persons, with the correct qualifications, is a recognised part of the law relating to privately-owned companies, yet that seems to have been flagrantly ignored.  The Minister chose to ignore the findings and recommendations of the Public Protector, reappointing the CEO, who was found to have lied about his qualifications, and also to have breached the regulations in granting himself and his girlfriend substantial salary increases.  The Minister’s explanation was that ‘he has done nothing wrong’!

·         The Department of Education has continued to show a remarkably high level of incompetence, bringing the South African education system to a position of 183 of 187 countries.  The latest ‘achievement’ of under 75% of children passing the Matric examination was ‘regretted’, but the fall from 78% was explained by the ‘new curriculum’, for which, apparently, the teachers were nor prepared!  The fact that 150 000 youngsters failed to pass an examination for which they had been studying for twelve years was totally ignored.  The fact that the lowering of the pass marks required, in order to achieve even this lamentable result, is also ignored, although this has had the result of bringing the qualifications achieved at South African schools and universities under suspicion.  Before the ANC took over management of the education system, a South African degree was recognised unquestioningly around the world; now it has practically no value.  South African businesspeople will attest that a matric, and even a degree, is now no longer an indicator that the applicant for a job will be able to perform to reasonable expectations.

·         Spoornet has done more to destroy the export capability of South African industry than any other of the ANC-managed public bodies, with the possible exception of Eskom.  Examples abound of trains being unavailable for the transport of export commodities, either on time or at all.  It is not unusual for customers being compelled to employ the services of a Black-owned ‘Consultant’ to negotiate the availability of trains.  One client found that Spoornet failed over a period of several weeks to make the trains available, as they had been promised in writing, until the exporter, which was paying demurrage on a ship waiting to load in Durban at the rate of $25 000 per day, until a Black ‘Consultant’ was employed at a cost of R300 000, after which the trains suddenly arrived at the siding!  That client has ensured that every potential foreign investor in South Africa has come to know of this.  The result has been the withdrawal of at least two billion dollars of potential investment in the country.

·         SANRal, the body entrusted with the development and maintenance of the roads system in South Africa, has repeatedly shown an arrogant disdain for the desires and needs of the South African public, the ultimate owners of the Corporation, with the imposition of the e-toll system, after effectively selling off the right to recover tolls on practically every major arterial road, which were previously funded entirely by the taxpayers, at the cost of a significant reduction in the economic activity for which those roads were built.  The refusal of SANRAL to make publically available the details of the contracts underpinning the e-toll system, and the very high cost of operating that system (which any competent manager would have warned of at an early stage in the planning), have clearly demonstrated the high level of managerial incompetence and the distance of the corporation from the final owners of the corporation.  SANRAL is a clear case of a Government entity running wild.

·         The Municipalities under the control of ANC cadres have been found to have suffered losses in the hundreds of billions of Rands by corruption and probably multiples of that by inefficiencies, leading to a culture of rioting and destruction of properties by communities who have been deprived of the public services to which they are entitled.  Numerous municipalities have been placed under administration as a result, and this process continues.  Nowhere in the world is this phenomenon so clear as in South Africa under the ANC.

·         Parliament has been shown to be ineffective as an organ of Government, with a clear reluctance by the Speaker to permit any debate that might tend to show the corruption, dishonesty or ineffectiveness of the ANC.  This tendency was arguably started under the Presidency of Thabo Mbeki, who showed remarkable effectiveness in stifling any attempt to debate the Arms Scandal in the late 1990s, and has been continued under his successor, with the ‘debate’ on the Nkandla Scandal creating a new lowlight in the history of democracy in South Africa.  It is remarkable that a claim by the President, the man responsible for the effective government of the country, that he did not notice the expenditure of R245 000 000 on his own property, should have been made and then could have been accepted by the Members of Parliament, the men and women who have undertaken the sacred duty of representing the people of the country.  It is even more remarkable that Zuma should now make his first appearance in Parliament, the body to which he should be accountable for his and his Administration’s actions, on February 12, a few days short of six months (!) after he was effectively driven from Parliament by the active questioning of his conduct by the EFF.  It is even more remarkable that it could have taken twenty years of witnessing the arrogance, the corruption and the ineffectiveness of the ANC in their management of the country, its organs and its economy, for the official Opposition Party to have finally started to show signs of growing a backbone.

There are numerous other examples of the crises facing South Africa now.  The State of the Nation address tonight will almost certainly be a whitewash of the Government’s ineptitude, arrogance and corruption, rather than a clear statement of a well-considered plan to bring the country back to the state of optimism that existed under President Mandela. 

At that time, the country had problems, but its citizens also had hope. 

Now the country has a seemingly endless array of crises, each of them major and probably beyond any hope of recovery under the ANC.

One can only hope that the successor to Zuma as leader of the Party will recognise that the party has been so tainted that the best course of conduct will be to step aside, and allow competent managers, rather than graft-seeking politicians, to take over the recovery efforts.  It was clear to thinking persons a decade or longer ago that the country had entered a decline that, without a dramatic about-turn, would inevitably lead to a crash, from which it would probably take years to recover, even with the efforts of the best people available.  Unfortunately, it appears that the crash is now inevitable and imminent.