The ‘cigarettes and whisky conundrum’ and the advice of the Red Queen

The Red Queen said to Alice: “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” 1 This advice also seems to hold for the cigarettes and whisky conundrum of South African communities.

Why the cigarettes and whisky conundrum? These are two products widely used in South Africa, e.g. cigarettes, also by many of the poor, and whisky by many of the officials and politicians. Together they represent the oft-forgotten fact that all communities in South Africa are dependent on products manufactured elsewhere. To acquire these products, funds have to leave the community to pay the suppliers of the products. To be able to acquire the same products in the future, more funds have to be generated by activities and actions that bring money into the communities. In the words of the Red Queen: “[I]t takes all the running to keep in the same place.” Stated differently: if you want to import, you have to export.

So how do communities generate or source funds from elsewhere? One can think of farmers selling produce to external vendors, mines exporting ores, remittances sent back from locals working elsewhere, salaries paid to government officials staying in the community, government welfare payments, other government remittances, pensions paid to retired persons, investments from external sources, etc. There are many different sources of external funds. What is worrisome that few, if any, local authorities seem to have a good grip on how much and from where funds are generated for their local economies. They do not have a good grip on their cigarettes and whisky conundrums.

Part of the reason is that few local authorities balance where funds are generated with where employment is created in their domains. Kopanong municipality in the Free State is used as an example and the relative contributions of different business sectors to its Gross Value Added (GVA) and employment are presented below.

Kopanong Municipality

Three sectors are the main providers of employment in this municipality: agriculture and hunting, households and public administration. The balance between agricultural GVA and employment is skewed in favour of employment. Households provide the second-most employment opportunities but generate no external income. In other words, households redistribute funds earned by other activities. The third most employment is created by public administration. The importance of agriculture and hunting in generating external funds is clearly seen.

It seems that for Kopanong to handle the cigarettes and whisky conundrum and “do the running it can to stay in the same place”, three important questions have to be dealt with: (i) what will happen to value addition and job creation under the radical economic transformation plans of the ANC, (ii) are household jobs sustainable under radical economic transformation, and, (iii) given the pressures on Treasury to balance South Africa’s books, can the same levels of government remittances/inputs be maintained?

Kopanong, and most other local authorities, will benefit from listening to the Red Queen. Just to keep in the same place they have to “do all the running they can”. If they want to fulfil the government’s dreams about job creation and black ownership, they will “have to run at least twice as fast”. Can they handle the cigarettes and whisky conundrum in the long term? Only time will tell.

Reference

  1. Carroll, Lewis: Through the Looking-Glass and What Alice Found There, Chapter 2

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