After more than a year of enterprise-killing lockdowns, and a decade of declining economic growth, South Africa was gripped by violence and looting recently.
Attempting to give a glimmer of hope, during two public addresses, and in his July 12 letter, President Cyril Ramaphosa said:
But as South Africans have learnt over the last while, mere words from government can only take one so far. Years of ideological and policy decisions by this government, policies that discourage economic activity, business- and capital-formation and job creation, have led the country into this present crisis.
Ramaphosa also highlighted phenomena such as hunger, poverty and inequality, as factors contributing to the current spate of looting. Yet he did not address any government policies that exacerbate, if not cause, these burning issues.
Because of an anti-entrepreneurial and anti-wealth creation environment, many South Africans will feel that inequality is a static phenomenon and that the only way to take care of themselves is to take what they can get from others, while they can.
Many in government, and in the commentariat generally, assume that wealth is fixed, and that it can only ever change hands through force.
There is little to no acknowledgement of the fact that government controls every facet of the economy (in some instances blatantly, in others subtly). This state of affairs has steadily manifested to where we are now, where it matters more who you know politically, and that government must ultimately decide how a fixed amount of wealth ought to be distributed among competing interest groups.
Busisiwe Mavuso, CEO of Business Leadership SA, has indicated that by the afternoon of July 12 more than 200 shopping malls had been looted and retailers had lost an estimated R2 billion. Rebuilding businesses, and reinforcing and expanding supply chains, will take a long time.
At this point, it is not a case of “lives vs livelihoods” anymore; after a year of destructive lockdowns, the economy – and everyone’s economic well-being – is experiencing yet another battering.
In the latest budget, Finance Minister Tito Mboweni announced cuts in healthcare and education. This was the inevitable, harsh outcome resulting from years of government pouring billions into state-owned enterprises (read: black holes).
Indigent citizens will feel these cuts the worst.
With a 42% unemployment rate, and a 74.7% youth (15-year-olds to 24-year-olds) unemployment rate, a sense of hopelessness and frustration permeates the country. Citizens are told to vote, to give the state more power, and then their problems will be solved. When nothing happens, hopelessness often manifests as violence.
In the decade up to 2019, South Africa’s GDP growth averaged 1.4%. The credit rating is currently at junk level, and government’s debt-to-GDP ratio is projected to breach 100% in the next few years. This would add further pressure on the private sector, and government will become ever more desperate to control any and all possible sources of revenue.
To ever effectively arrest, and reverse the ongoing decline, the country needs real, transformative economic growth. Focusing on “the rich” can only get you so far, as within the paradigm of redistributionism at some point there will be nothing left to redistribute.
Transformative growth does not mean more government control and regulation. Rather, it entails:
- Protecting and strengthening individual property rights;
- Respecting the rule of law (even the highest figures in a political party can be arrested and sentenced when guilty of corruption, for example);
- Removing small to medium business-punishing license requirements;
- Providing education vouchers for parents to be able to choose where to enrol their children, creating competition in the public sector and encouraging a rise in quality;
- Removing government-created barriers that price people out of the labour market (the national minimum wage);
- Abandoning legislation that will remove yet more ingredients necessary for growth, such as land expropriation without compensation; and
- Stripping away or suspending various taxes that serve to prohibitively prevent business- and wealth-growth, and that are invariably passed onto consumers in the form of higher priced goods and services.
Some will blame the devastation on one individual.
Ramaphosa’s ideals of building up, of real job creation, will come to nought unless South Africa becomes investment-friendly.
Hattingh is the deputy director at the Free Market Foundation