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Time to flip the economic script in South Africa

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John Steenhuisen is the leader of the Democratic Alliance.

It is time to adopt a new economic empowerment paradigm that empowers the people who truly need it, rather than the current system that benefits only political elites linked to the ANC.

Last week, we learned that the government has sent South Africa into recession once again, with GDP contracting by a staggering 1.4% in the last quarter of 2019. Our economy has now contracted during five out of the eight quarters since Cyril Ramaphosa became president in February 2018.

It is time to face up to the fact that tinkering at the edges while refusing to address the fundamental reasons for our economic decline will not yield any positive results. We must acknowledge that the problem is systemic. The fundamental cause of this recession — which threatens to become a full-blown economic depression — is the government’s refusal to abandon the paradigm of ever-increasing state control.

It is superficial and misleading to allege that the ongoing economic crisis is merely the result of corruption and State Capture under Jacob Zuma. In fact, State Capture is itself the inevitable result of excessive state power. Corruption and State Capture are simply the predictable consequences of the real problem, which is unbridled state control over our society and economy.

And let’s not forget that President Ramaphosa personally headed the ANC’s cadre deployment committee under Jacob Zuma, making him a central part of the system that captured and corrupted both our state and economy. Since becoming president, Ramaphosa has shown nothing but enthusiasm for further expanding the destructive state control that got us into this mess in the first place.

It is not Jacob Zuma who is weakening our Constitution by destroying property rights. It is not Jacob Zuma who is doubling down on nationalising healthcare. It is not Jacob Zuma who is trying to steal pension savings to keep the looting going at failed state-owned enterprises. These are all central pillars of Cyril Ramaphosa’s presidency, and they will seal the fate of our dying economy if not abandoned.

It is important to also point out that the obsession with expanding state control is not only suffocating the private sector. It is also killing the state itself. Evermore fanciful and expensive plans to expand state control has bankrupted the state and is destroying basic service delivery. In effect, the state has chosen to keep on life support dying SOEs that benefit only the political elite, while sacrificing the basic services that the poor rely on.

As a result, we are in the middle of a fully-fledged debt crisis, with the debt-to-GDP ratio set to grow to 71.6% by 2022/23. While I commend minister Mboweni for using his Budget speech as a last-ditch attempt to get the government to tackle the wage bill crisis, the 2020 Budget continues to prioritise dying SOEs over basic services. A case in point is that minister Mboweni expects South Africans to shell out R16.4-billion on SAA while cutting spending on healthcare by R3.9-billion.

It is time to flip the script by giving power to private citizens instead of the state. This is the new guiding paradigm we need to adopt if we are to fundamentally fix what is broken in our economy.

The single most urgent change we need is to rid South Africans of the burden of SOEs, including Eskom. The government seems to believe that trying to resuscitate the dead Eskom is an end in and of itself. However, the real issue is not Eskom. The real issue is restoring a cheap and dependable electricity supply. 

Eskom needs to be put out of its misery. What we need is to sell Eskom’s coal-fired power stations and completely open up the electricity grid to private producers, with a particular focus on renewable energy. Combined with providing tax rebates to households and companies that install renewable generation capacity, and empowering well-run municipalities to procure their own energy, we can solve this crisis and rid the state of Eskom’s debt.

This will only happen if we choose to empower private citizens rather than the state.

Before we can climb out of the economic hole the ANC has put us in, we need to stop digging. It is time to recognise that we have reached a tipping point. There will be no investment, no growth and no recovery for as long as property expropriation, NHI and prescribed assets are on the table. 

Giving power to the people instead of the state means that it is high time that we reform our tax system to keep more money out of the hands of an incapable state and put more into the pockets of taxpayers. 

The same applies to reforming labour legislation. Small businesses are being destroyed by draconian bargaining council rules, which enable big business and big unions to reach wage agreements that are then extended to every business in the entire sector — even if a particular business was not part of the negotiations and cannot afford the wage increases.

This is nothing less than a cartel system designed to take power away from small competitors by making it unaffordable for them to do business. 

It is time for the government to grow a backbone and stand up to unions so that we can do away with bargaining councils, exempt small and medium businesses from strict labour legislation, and make it easier for businesses to employ talented workers. 

The same goes for minimum wage rules, where we must replace the current top-down minimum wage with a bottom-up sectoral wage that enables individual sectors to set their own minimums. We must free job-seekers who have been employed for more than 12 months to obtain certificates exempting them from the minimum wage. The fact is, when South Africans are faced with a choice between no job and a below-minimum-wage job, they will take the job every time. So let’s give people freedom to choose.

Similarly, it is time to adopt a new economic empowerment paradigm that empowers the people who truly need it, rather than the current system that benefits only political elites linked to the ANC. Like the rest of our economy, the empowerment odds are stacked against the people who need it and in favour of powerful insiders linked to the ANC.

The ANC has got away with this based on the mistaken belief that race-based policies benefit everybody in the designated racial group. The truth is, they don’t. Instead, race-based policies only benefit those with the social, financial and political capital to leverage the opportunities these policies present. 

To empower the people who need it, we must select beneficiaries for empowerment programmes on the basis of financial means. My approach will select beneficiaries on the variable of whether they are actually economically impoverished — exactly the same basis that the government already uses in selecting beneficiaries for Sassa grants, NSFAS funding, public housing and old-age pensions. 

Selecting beneficiaries on the basis of their financial means will disqualify the small group of wealthy elites who currently hijack the system at the expense of 30 million impoverished citizens. Resulting from the distribution of poverty in South Africa, 99.8% of beneficiaries would be black, coloured or Indian. And 100% of beneficiaries would be poor, earning less than the poverty line of R991 a month.

To usher in a new paradigm of prosperity, each and every decision made by the government must be guided by one central question: does a given proposal expand the power of private citizens to own and direct this economy, or does it empower our incapable state at the expense of the people? Measuring every policy decision against that simple metric — and always choosing the people over politicians — holds the key to getting on the path to economic prosperity. DM

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