Category: Accelerated and Shared Growth Initiative for South Africa (ASGISA)

Accelerated and Shared Growth Initiative for South Africa (ASGISA), Anti-business, Anti-poor, Black economic empowerment (BEE), Black-owned businesses, Business and economic indexes, Competitiveness, Complexity economics, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Emigration/Immigration, Enterprise richness, Expropriation without compensation, Inequality, Investment/Divestment, Job creation and unemployment, Opportunity tax, Preferential procurement, Productive knowledge, Township enterprises, White monopoly capital theory

Skills more important for the economy than splitting fine or frizzy hair: it’s education, not race, that counts

Johannes Wessels (@johannesEOSA1)

A tumult about a shampoo advertisement diverted attention from the biggest economic decline under the ANC government to date. A quarterly GDP figure that confirmed the country is plunging into poverty got less attention than a Clicks advertisement. The deteriorating economy will entrench the country in the bottom half of the Economic Complexity Index (ECI), making it less and less attractive as a destiny for both skills and capital.

Splitting “frizzy and dull” hairs from “fine and flat”, however, is apparently for South Africans far more important than worrying about an additional three million unemployed or thousands of businesses pushed into the abyss of loss and debt. Reading Figure 1 (ECI data) reminds of the typical good-news, bad-news joke: the bad news is that SA has slipped from the top third of countries to the middle third. The good news is that this ranking is far better than where the country is heading for. The ECI, developed by Ricardo Hausmann of Harvard and Cesar Hidalgo of MIT, measures the productive capabilities of large economic systems, whether cities, regions, or countries and is based on the knowledge accumulated in a population that gives expression to the diversity and complexity of economic activities. 

Almost simultaneously with the DA’s embrace of non-racialism as a pillar of their redress strategy that will not use race as a yardstick to address inequality, the 2020 Q2 GDP demolition figure was released. The throttling of the economy by the government’s lockdown strategy made far less ripples than what TREsemmé claims to smoothen out in frizzy hair.

The commentariat treated the DA like TREsemme

It was not only the Twitterati that underplayed the economic news: the same sentiments dominated in serious opinion pieces and radio and TV talk shows. And the commentariat effectively placed the DA in the same box as TREsemmé:

  • Carol Paton, editor at large of Business Live, reckons race will matter forever and lamented the DA’s policy removal of race-based redress “since that will affirm suspicions that the DA is a party whose real agenda is to defend white privilege by denying that such privilege exists at all”. 
  • Stephen Grootes, radio presenter and Maverick columnist, echoed that “firm evidence and the lived experience of South Africans” indicate whites are rich and blacks are poor.

A Coalition of the Offended encompassing inter alia Julius Malema, the Daily Maverick, Justice Malala and Twitters’ @BiancavanWyk16 emerged: all deeply shocked and emotionally wounded, found Clicks’ sacking of an executive and suspension of selling TREsemmé insufficient.

Some called for “attacks” on Clicks stores and the malls that provide rental space for Clicks. Others demanded a sort of #BlackHairMatters kneeling, some were just happy to find something to be unhappy about and some considered the actions of others in the coalition either overboard or underwhelming.

Whilst one can understand that the EFF, the ANC and a plethora of beneficiaries or wannabe-beneficiaries of BEE, are obsessed with affirmative action, expropriation without compensation and preferential procurement mechanisms enabling hiked prices, it remains amazing that leading commentators such as Paton and Grootes ignore the hard evidence that race is not the best proxy for measuring inequality and that the application of race fails to target those really at the bottom of the pit. 

Way back, Census 2011 already provided evidence that education is a far more reliable marker.

Race as a marker for household income inequality weighed and found wanting

Continue reading “Skills more important for the economy than splitting fine or frizzy hair: it’s education, not race, that counts” →
Accelerated and Shared Growth Initiative for South Africa (ASGISA), Anti-business, Black economic empowerment (BEE), Business incubation, Central planning, Company tax, Cooperatives, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise friendly environment, Informal businesses, Job creation and unemployment, Lockdown, National Gazelles Programme, Registered companies / Incorporated businesses, Small and medium enterprises (SMEs), SME, Sole proprietors, Spontaneous order, Tourism & hospitality services

Enterprises, unlike bears, don’t hibernate: lockdown will cause the death of firms and people

Johannes Wessels
@johannesEOSA1

Government’s decision for a stringent lockdown has put at least 100,000 formal enterprises – incorporated and sole proprietorships – on death row by effectively freezing the economy. Unlike bears, firms do not hibernate well: without customers and clients buying their goods and services, they starve and die.

Business relief measures by the government and the funds established by the Ruperts, Oppenheimers, Motsepes and others may enable some enterprises to pull through. But a substantial percentage of formal SMEs will not. Not with an economy that is likely to retract by between 6 and 10%.

Enterprises are already in a predicament and have run up more losses than profits since 2014. SARS data shows that the assessed losses exceed the assessed taxable income for the period 2014 to 2018 by R830 billion (Figure 1).

An economy already damaged by anti-growth policies has now been dealt a vicious blow. The damage is systemic and a systemic approach is required to restore a healthy business environment.

Figure 1: The pre-Covid 19 situation of SA firms was dire

The economy doesn’t resemble Eskom’s electricity supply. Load-shedding means no electricity during the power lockdown, but when the switch is thrown on again with the transmission lines conveying electrical current, the lights burn, the fridges cool, the stoves cook and TVs entertain just like before. 

Continue reading “Enterprises, unlike bears, don’t hibernate: lockdown will cause the death of firms and people” →

Accelerated and Shared Growth Initiative for South Africa (ASGISA), Black economic empowerment (BEE), Competitiveness, Demographic-entrepreneurial relationships, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise friendly environment, Job creation and unemployment, Preferential procurement, State Capture, State Owned Enterprises (SOEs), Township enterprises, White monopoly capital theory

30 years on: Is Ramaphosa preparing his version of FW’s “to-the-dustbin-with-ideology” speech?

Johannes Wessels
@johannesEOSA1

Thirty years ago (on New Year’s Eve 1989), FW de Klerk knew that the South Africa was on the verge of massive change. The combined debilitating effects of apartheid’s shackles on the economy (including sanctions) and the impossibility to continue with the disenfranchisement of the majority of the population, prompted him to prepare his watershed 2 February 1990 speech in which he effectively pulled the plug on apartheid.

Will the combined negative legacy of the transformational drag on the economy and the implosion of state-owned enterprises (SOEs) prompt Ramaphosa to discard the ANC’s ideological stance in 2020? 

Continue reading “30 years on: Is Ramaphosa preparing his version of FW’s “to-the-dustbin-with-ideology” speech?” →
Accelerated and Shared Growth Initiative for South Africa (ASGISA), Black economic empowerment (BEE), ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Emigration/Immigration, Expropriation without compensation, Marxist-Leninist ideology, Productive knowledge, Public service delivery, State Owned Enterprises (SOEs)

Ten wasted years: Preferring “Dumbing Down” to “Productive Knowledge”

Johannes Wessels

@johannesEOSA1

TEN WASTED YEARS…  Tito Mboweni’s colloquium “to think outside the box about economic growth” is akin to closing the stable door after the racehorse had not only bolted, but already won a race elsewhere. Scavenging in the ANC dustbin of rejected advice, Mboweni picked Harvard economist Ricardo Hausmann as advisor, knowing well Hausmann’s advice on productive knowledge had been flatly ignored by the ANC Government since 2008.

Hausmann considers productive knowledge as the key factor that separates successful countries from unsuccessful ones. A lack of productive knowledge therefore retards economic growth and development.

From 1990 to 2003 South Africa lost 7% of its professionally qualified people, predominantly high-skilled whites.  After some stability that came during the high growth Mbeki-Manuel years the exodus was re-triggered by the growing ineptitude of an administration that radically transformed departments and state-owned enterprises (SOEs) into little more than facades.

The police service, SAA, Transnet, the NPA and municipalities are some examples where cadre deployment trumped productive knowledge. The result:

  • At township level, the disgruntled resorted to service protests.
  • At professional level, they packed their bags and headed to the emigration counter with highly skilled blacks now outnumbering their white counterparts, bound in solidarity by a deep non-racial gatvolheid in the slide into corruption, lawlessness, dismal public services and the undermining of property rights. 
  • At investor level, South African businessmen have emigrated through FDI:  fixed investment by South Africans abroad exceed fixed investments lured to our shores.
  •  

Make BEE growth compatible

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Accelerated and Shared Growth Initiative for South Africa (ASGISA), Black economic empowerment (BEE), Central planning, Crime against business, Demographic-entrepreneurial relationships, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Job creation and unemployment, Marxist-Leninist ideology, Productive knowledge

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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Accelerated and Shared Growth Initiative for South Africa (ASGISA), Black economic empowerment (BEE), Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise friendly environment, Entrepreneurial space, Investment/Divestment, Job creation and unemployment, Preferential procurement, Productive knowledge, State Capture

The Chairman’s Conversation: Triggering a Groot Trek of productive knowledge out of SA?

Johannes Wessels

@johannesEOSA1

Stark dividing lines on the economy and the future of the country were drawn during the Chairman’s Conversation when Johann Rupert of Richemont, Remgro & Reinet was interviewed by Given Mkhari of the MSG Afrika Group.  The Black Management Forum called for controlling the “levers of legislation to determine what happens with capital, opportunities and business prospects” (state control of the economy) with Rupert hinting that “it would be quite easy to lose interest: South Africa has one last chance…”

On talk radio, news websites and social media reactions rolled in, many calling Rupert “racist”, “paternalistic” and even “an arrogant ignorant” whilst others concurred with his comments about the young chasing BMWs and immediate satisfaction,  rather than patiently building their businesses and wealth.

The event and the reactions thereto is far more than a storm in a tea cup and one that the whole business community should take note of, as well as every company and politician that had attended the recent Investment Summit. 

The contours of the Chairman’s Conversation, the few comments from the floor and the tsunami of social media condemnation reminded me of a period in world history that had changed and influenced (almost) everything since then. My sense is that both Rupert and the BMF reckon South Africa is at the brink of society-shaking change as well.  That change does not necessarily bode well for the future of South Africa…

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