Black economic empowerment (BEE) – Page 2

Anti-business, Black economic empowerment (BEE), Central planning, Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise friendly environment, Free State, Job creation and unemployment, Limpopo, Northern Cape, Public service delivery, Small towns, Small, medium and micro-sized enterprises (SMMEs), SME, Sole proprietors, Spending power (wealth/poverty), State Owned Enterprises (SOEs), Western Cape

GDP shrinkage of 12%: It’s not the virus, but the lock-down, stupid!

Johannes Wessels (@johannesEOSA1) & Mike Schüssler (@mikeschussler)

At the end of the initial 3 weeks lock-down a GDP decline of about 5% was considered as quite a catastrophic outcome. Even at that level, it was considered worth the price since delaying the spread of the Covid 19 virus would give a window of opportunity for the health sector to get beds, ventilators and care protocols in place for the spike that would inevitably come.

The minister of trade and industry (dti), Ebrahim Patel, however dismissed the negative projections of economic shrinkage as mere “thumb-sucking”.

After prolonging the hard lock-down with just a gradual easing to level 4 to end May, the growing queues of the hungry waiting for food parcels, the increase in the claims from the unemployment insurance fund and the drastic shrinking of the state’s purse, would make a 5% decline in GDP a dream outcome.

The GDP figures for Q1 2020 will only be known end June. Data from other countries indicate that those whose governments had opted for a hard lock-down are in for excessive economic damage.

Change in GDP trend is the difference between growth in 2019 and 2020 1^st quarters, implying that the Philippines that experienced a change of -6% went from 5.9% GDP growth in Q1 2019 to -0.1% in Q1 2020. This chart reveals the following:

Countries with a hard lock-down that kept only essential services and providers open, saw an average decline of 5,2% in GDP trend.

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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.

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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?

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Anti-business, Black economic empowerment (BEE), Crime against business, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Emigration/Immigration, Enterprise friendly environment, Opportunity tax, Productive knowledge, State Owned Enterprises (SOEs)

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.

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Anti-business, Black economic empowerment (BEE), Company tax, Crime against business, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, ECONOMIC POLICY AND STRATEGY, Enterprise friendly environment, Enterprise profitability, Enterprise research, data and statistics, Small and medium enterprises (SMEs), Small enterprises, SME, Township enterprises, White monopoly capital theory

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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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.