Ramaphorian air spray no longer conceals the stench of a decaying economy

Johannes Wessels
@johannesEOSA1

President Cyril Ramaphosa’s commitment to revitalise the economy reminds one almost of president Zuma’s commitment to combat corruption: spraying air freshener to divert attention from a rotting carcass.

Read instructions on the can for effective application…

The person who promised in his New Dawn manifesto a growth rate of 3% in 2018 through “an unrelenting focus on economic growth” has delivered after 18 months a growth rate of 1.3% in 2018 and negative growth up to date for 2019. Some people would say low growth is still growth, however economic growth below the population growth rate impoverishes the population.

He presides over an economy in worse shape than when he assumed power: one characterised by:

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From Leader to Laggard: the Brain Drain & SA’s slide to the bottom

Johannes Wessels
@johannesEOSA1

Is South Africa’s ‘radical transformation‘ from a leader to a laggard in the upper middle-income countries the cause or the result of a brain drain? It is hard to tell.  What is certain, is that there is an extremely strong inverse correlation. 

In fact, it is so strong that one can use one statistic to deduce the other. And if high-skilled emigration is going to continue, the country’s decline towards the ranks of the lower middle-income countries will also continue.

Figure 1

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Small enterprise: the canary in the coal mine of a toxic business environment

Johannes Wessels
@johannesEOSA1

Small enterprise in South Africa is unimportant for the Government. Whilst there is lip service to creating conducive conditions for small enterprise, the Government ignores the reality of small formal firms disappearing at an alarming rate. Small enterprise is the canary in the coal mine of a toxic business environment:  they die off first before the toxic conditions are lethal for large businesses.

Big Government favours Big Business (for tax income) or Big Labour (watering its socialist roots to ensure worker class loyalties). Small business cannot fulfil either these roles.  The demise of small formal enterprises in South Africa (as recorded in SARS data) is indicative of an utter indifference by Government to the plight of small enterprise.

That raises two questions:

  • Is the demolition of the small formal enterprise environment a strategy by Government to achieve its objective of radical racial economic transformation?
  • Is it also a strategy to plug a hole in the leaking SARS ship since, from a VAT perspective, businesses with a turnover below R1 million is a drain on Treasury?

Based on SARS data on Value Added Tax (VAT) covering the years 2007/8 to 2017/18 the devastation on micro and small businesses with a turnover of R1 million or less, is evident.  The number of VAT vendors in this bracket declined by 49% from 300 299 in 2007/8 to 154 559 in 2017/18. 

145 740 small enterprises gone…

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Xenophobia: the solution is not better border control, but a change in economic policy

Johannes Wessels
@johannesEOSA1

Is Donald Trump advising the ANC and the DA?  Bashing (illegal?) immigration is a key pillar in both these campaigns and both parties are as wrong and misguided as Trump on this subject, trying to address consequences and ignoring the cause.

The ANC election manifesto promises the party will ensure “those who come to South Africa do so legally and that the country knows what they do while they are in the country”. It will take “tough measures against undocumented immigrants involved in criminal activities in the country or in cross-border crimes, including those involved in illegal trading and selling adulterated food in townships and villages”. 

It is hard to spot the difference when the DA’s Musi Maimane says “securing our borders is not simply about keeping people out. It is about ensuring that all migration occurs legally and knowing who has entered the country. It is about being able to plan ahead and make sure our budgets can stretch to cover all they need to cover. It is about making it easier for those who want to enter South Africa legally – because we want legal, law-abiding people to bring their skills here and help grow our economy – but making it impossible for those who want to enter illegally.”

the fault line of prejudice …

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SA lost 83 000 companies in the financial & business sector in 10 years

Johannes Wessels@

@johannesEOSA1

The landscape of incorporated South Africa in the financial and business services sector has changed dramatically: in 2007 a total of 222 532 companies in this sector submitted tax returns, but SARS Company Income Tax (CIT) data show by 2016 this figure had shrunk to 139 664: a 37% decline.

The CIT data base records a decline by almost 83 000 incorporated firms.  What happened?

This sector includes banks, money lenders, short term insurance firms and independent brokers, investment advisors, business consulting firms as well as real estate services. Figure 1 shows how the number of firms were relatively stable from 2007 to 2010 before a rapid decline before stabilising again from 2014 onwards.

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SA Government values mice as cheese factory managers more than productive knowledge

Almost 50 years ago, in 1970, Alvin Toffler in Future Shock wrote: Knowledge will become a more important driver of growth than capital or labour.

The two parties that then dominated the South African landscape did not hear the message: they had ideological ear wax and blinkers.

Inside the country the National Party wasted an opportunity to revamp and refocus Bantu education. In the words of Verwoerd, Western education was “of no avail for training which has as aim absorption in the European community while he cannot and will not be absorbed there. There is no place for him in the European community above certain forms of labour. However, within his own community all doors are open… For that reason, it must be replaced by Bantu Education. In the Native territories where the services of educated Bantu are much needed, Bantu education can complete its full circle, by which the child is… developed to his fullest extent in accordance with aptitude and ability…”  

The harvest: the Soweto 1976 riots. 

In exile and underground the ANC under the SACP influence believed labour was all important and capital from hell and that labour time was all that gave value to a product or service – a belief still voiced in 2016 by their leader.  (That statement was never repudiated by Ramaphosa or any leader in the ANC.)

The 80’s introduced “liberation before education”, the burning of schools and the intimidation of teachers and after 1994, the ANC government ensured SA’s education system became one of the worst performers in the world at the highest cost (% of GDP).  

The harvest:  a suffocating labour regime that leaves SA businesses hamstrung (considering productivity levels) and that promotes low-employment business practices.

Whilst race remains an important indicator to measure inequality, trying to always explain situations from a racial perspective often implies ignoring solutions with better potential than betting on race.  The ANC is not alone in operating with racial blinkers. Musi Maimane’s statement that race remains “the only consistent measure we have at this point for measuring inequality”, is simply wrong.

So is Ramaphosa when he offered protection for Maimane for that remark.

And so is Chris Bateman’s editorial to a recent Bloomberg report on Johann Rupert’s comments during the Chairman’s Conversation when he wrote: “What he (Rupert)  misses in his strong argument that Eskom and other SOEs are the real monopolies, is that White Monopoly Capital, like all effective propaganda, is built on the fundamental truth that our Gini-coefficient runs on racial lines – due to the architecture of apartheid.

There are non-racial measure tapes available… and some measure more accurately than race.  After a few examples where the ANC government chose cadres rather than knowledge, the focus will fall on one non-racial explanation for income and wealth inequality.

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