South Africa faces an economic depression years in the making, worsened by the prospect of a sovereign debt crisis that seems more like an inevitability than a threat.
Calls are mounting from the ruling elite for more public sector involvement in an economy killed by that very same thing. The private sector – the free exchange of value among individuals expressed in service or commodities – however, is our only saviour and it can only thrive if the public sector diminishes.
First, the labour movement in South Africa, which has always been a valuable constituency for those in power since the time of the National Party, has managed to make the private sector the bogeyman embodied as White Monopoly Capital. Since the 1950s, the ANC has fully embraced Marxism has thus has an ambivalence to the private sector. During former president Thabo Mbeki’s term this ambivalence was perceived to be stayed. Perceived, because it was largely during his term that the most heinous labour legislation, that had the effect of increasing unemployment in South Africa, got enacted.
The private sector is the only sector that creates value, despite the rhetoric from politicians looking for someone or something to blame and the incessant think pieces from academics decrying the evil capitalist system while enjoying its trappings. It is only a sector insofar as it is contrasted with the public sector – or the plundering sector – which is mainly just the government spending money it seized from the private sector, that is, private individuals. It is founded on the plunder of the private sector, on the plunder of the resources of individuals, families, and communities. Without this plunder, there is no public sector.
The private “sector” is the amalgamation of commercial transactions that do not involve the state. The private sector encompasses any trade between individuals. The private sector is the cigarette market that seems to have sprang up after the criminalisation of vices by government during the Covid-19 coronavirus lockdown. It is the retail sector, the mining sector, the services sector, the banking and manufacturing sectors. Essentially any instance of individuals engaging in voluntary trade/exchange is private.
The public sector, on the other hand, assumes the existence of and relies on the private sector to generate revenue for it in the form of taxes, which it plunders from individuals and businesses. In this respect, these two sectors are in a symbiotic relationship in favour of the state and at the expense of the private sector. The private sector generates its wealth by serving society what society demands, and the public sector generates its wealth by seizing it, without consent and without a measurable return, from the productive private sector.
We need this sector, that has as its engines individuals who go about solving the problems of their fellow man, to be as free as is reasonably possible. Instead of more state regulation, we need the private sector to grow and it can only do so if the public sector shrinks. The strength of the public sector is dependent on the already existing strength of the private sector, as the former is sustained by taxes, which are created by valuable economic activity, a domain of the private sector.
We need to make the entrepreneur’s job – solving problems and meeting demands – easier. First and foremost, we need to make it less strenuous to hire South African employees. Remove the million hoops that burdensome labour laws make entrepreneurs jump through to create employment. Make established markets, like banking, the ICT sector, and energy generation and distribution, easier to enter and thrive in because there would be no state-imposed barrier to entry like regulations whose costs are a deterrent to potential new entrants. Easier by not taking a large part of entrepreneurs’ wealth through taxation, so much so that we discourage their aspirations for growth because the more they earn, the more the state takes away.
Above all else, South Africa needs deregulation on such a large scale that it would make the ghost of Karl Marx come and try to haunt us.
The private sector is premised on two or more parties exchanging goods voluntarily. By nature, a regulation, which is a third party imposition, is alien to this sector. It is a virus, for if regulation was necessary as most proponents posit, it would have been part of the terms for the original trade between the two or more parties. The private sector can only thrive and prosper, therefore, if the public sector in all its manifestations, shrinks to the point of being a non-entity.
Instead of “more state” this, or “more state” that we need to, as a country, create an environment that allows for the best among us – the problem solvers – to do their job to the best of their abilities. For it is the nature of free trade that it is mutually beneficial. Instead of plundering the resources of private individuals for some state project, we need the scope of the mutually beneficial nature of private transactions to grow even larger.
The state must stop trying to kill the private sector, and ironically itself in the long run, for South Africa to prosper.
Zakhele Mthembu is law student at the University of the Witwatersrand. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.