There have been numerous investment summits and international roadshows over the past few years. President Cyril Ramaphosa has often talked up his desire to encourage billions of rands in investment into the country as part of his presidency and administration. However, glacial implementation – and contradictory, anti-growth policy choices – have undermined any notable level of transformative investment.
At present, the country is burdened with a 44% unemployment rate and a 74% youth unemployment rate. The only way to unlock business growth, with the concomitant job opportunities, is by enticing meaningful capital formation and investment through the correct policy decisions.
Speaking at an elections campaign event on the October 2 weekend, ANC national chairperson Gwede Mantashe said government cannot solve South Africa’s high unemployment rate by itself.
Mantashe is absolutely correct, but he and the current government should also realise that it is within their power to repeal and reform their very own policy choices of the past 20 years that have steadily undermined economic freedom and caused our national unemployment crisis.
At this moment, expropriation without compensation legislation is working its way through the corridors of power, and no local or foreign businessperson or investor would want to sink their expertise and capital into a country where their property would be subject to arbitrary seizure by future governments.
There have been indications that the labour department is preparing to introduce the amended Employment Equity Act in 2022. The amended act would allow the employment and labour minister to set employment equity targets for different business sectors. The minister can set targets for different occupational levels, sub-sectors or regions. Given that the world is opening up again after nearly two years of lockdowns, and people are looking for new work opportunities, would such legislation encourage business start-ups and growth here, or rather push businesspeople (of all races) to foreign shores?
Speaking at an investment summit on September 30, Finance Minister Enoch Godongwana gave quite a candid assessment of the Past decade of attempted “structural reform”: “Government has spent 13 years trying to fix Eskom. We need a paradigm shift. What has got to be the focus is fixing the electricity supply. Let’s not talk Eskom, let’s talk security of supply.”
The minister rightly identifies the area of electricity generation and distribution as one of massive frustration and a lack of speedy reform – the government-enforced monopoly that is Eskom has, through its consistent blackouts, arguably done more than anything else to inhibit the country’s economic growth. And while the recent announcement regarding self-generation of up 100MW without a licence was, on the face of it, fantastic news, it remains to be seen how quickly permits will be granted and whether it will be a transparent, market-focused process.
Minister Godongwana further went on to say, “The compounding cost of regulatory overreach, barriers on skills, labour rigidities, empowerment ownership transfer requirements, relative cost of levies and taxes, inefficiencies of municipalities and the hidden cost of corruption, crime and waste have produced an environment where the returns on capital have declined.” Given the past two decades of stubbornness in government circles regarding pro-market reforms – and in some instances ideological opposition against anything even remotely resembling economic freedom – it is rather stunning to hear such words uttered. But, to give the minister his due, it indicates he recognises just how bad things currently are, and what is needed to get the economy going again.
There is a risk that politicians, bureaucrats and policy analysts will place the blame for the country’s current economic woes squarely on the shoulders of the Covid-19 pandemic. But the pandemic hit us within the context of years of low growth and declining foreign direct investment. The unemployment crisis is the result of anti-economic freedom and anti-individual rights policy choices. Therefore, while the above quotes from high-level government representatives are excellent signs, they will remain mere signs until proper structural reforms are implemented.
Government, as a whole, must realise that it should not be at the centre of the economy – and people’s lives – and that the only path toward prosperity, for the majority of South Africans, would be one of more economic freedom, strong property rights and a pro-business policy environment.
Chris Hattingh is deputy director at the Free Market Foundation. The views expressed in the article are the author’s and not necessarily shared by the members of the Foundation.