The Real Challenge Confronting South Africa

2013-03-28 13:38

Flying to Washington from Johannesburg yesterday, I struck up a conversation with Dan an American businessman from Kansas. I was interested hearing his take on the huge financial deficit confronting the US and how this came about. Dan responded by pointing out that the original American Dream – that anyone can get anywhere through his/her own hard work – was ultimately dead.

Why?

Because it was based on your individual effort and the only good government was a small government merely creating a conducive environment for your own individual creative efforts to flourish. In the process American entrepreneurs created millions of jobs and wealthy Americans through their philanthropic endeavours put much back into community development - think here of the Bill and Melinda Gates Foundation.

Over the years, though, government became more intrusive, adding more red tape resulting in American businesses becoming ever more uncompetitive.

At the same time though, according to Dan, Americans ceased to be a nation of entrepreneurs and givers but rather a nation of takers – expecting government handouts as opposed to creating the kind of future they would like for themselves and their children. In the process an entitlement culture took shape resulting in the fast emptying of state coffers.

As Dan spoke I could not help but draw comparisons with South Africa. We too have an uncompetitive business environment, largely on account of government over-regulation. Worse, Pretoria does not even understand the business environment - people appointed to senior positions of government occupy their respective posts on the basis of their political connections as opposed to their skill sets. The dysfunctional nature of ESKOM, SAA and the SABC illustrates the point well.

Like, the US, we South Africans have also become a nation of takers as opposed to entrepreneurs. We expect government to do everything for us. In Botswana, I came across a community building their own school from funds they raised. In Kenya, last year, I was amazed to see young IT professionals starting their own businesses not expecting or desiring any government support.

The culture of entitlement is also seen in the fact that whilst five million people in South Africa are paying taxes, 15 million receive the benefit of some social grant. You do the math. This situation is unsustainable and pretty soon we too will be facing our own fiscal cliff.

At the same time, and unlike the US, there is a twist in the South African scenario: it is these takers who are the ruling party’s voting bloc. As such the ANC would not want to change the current system since any reduction of these benefits would result in the ANC losing at the polls. Whilst the ANC benefits from this system, South Africa does not and with each passing day economic catastrophe beckons.

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