State infrastructure is ‘unaffordable’

2011-09-22 08:52

South Africa is building an infrastructure that is unaffordable, an economist said during a Black Management Forum (BMF) debate in Cape Town today.

Chris Hart, an economist at Investment Solutions, said during the debate with Public Enterprise Minister Malusi Gigaba, that the government’s enormous spending on infrastructure was leading the country towards an “infrastructure recession”.

“We are building an infrastructure that is unaffordable to the economy,” Hart said. “It is creating erratic pricing in South Africa and we are taking our country towards an infrastructure recession.”

Hart said state-owned enterprises were preventing competition from entering the market. The state should not be running businesses at all as state-owned enterprises (SOEs) tended to be “undercapitalised” and uncompetitive.

The only way to solve South Africa’s employment problem, he said, was for the government to make it easy for its citizens to start small businesses.

“To create massive employment you need a small business boom, but many small businesses are being shut out of the economy by state-owned monopolies.”

The regulatory environment for small businesses was “extremely complicated” and should be changed to remove barriers to entry for small businesses, Hart said.

Black economic empowerment and affirmative action were also not lasting solutions for the economy, but could only be “stepping stones”.

Economies at full employment grew “from the communities up”, he said.

Gigaba said South Africa was dealing with an economic legacy created by colonialism and that the economy was still defined on racial lines.

The free market had failed to solve that problem in the past 17 years.

“Everyone”, he said, had recognised that the state had a role to play in “facilitating networks” for the poor.

“Free markets are not going to solve the problems of racialised ownership in South Africa,” he said. “Just go into the JSE and look at who owns what.”

SOEs could easily be well managed and efficient, he said.

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