Economic Reconstruction and Recovery Plan

Anti-business, Central planning, Competitiveness, Corruption, Credit risk ratings, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Economic Reconstruction and Recovery Plan, Expropriation without compensation, Job creation and unemployment, Land ownership, Lockdown, Municipal efficiency, Public service delivery

Neither Red Riding Hood, nor Tito Mboweni believes CR’s statements

Johannes Wessels
@johannesEOSA1

The statements of the government and the ANC are as unrealistic as the famous stories of Baron von Münchausen: both are so far from reality that they belong to the genre of heroic fantasy. However, the differences are also glaring. Von Münchausen’s tales are creative untruths, entertaining its hearers because of the skilful transition from reality to absurdity. The ANC’s untruths are serious policy statements, parading absurdity as real truth.

Whereas Von Münchausen’s tales emanate from a witty brain, the ANC’s tales emerge from an institutionally entrenched delusional disorder.

The very first paragraphs of the January 8 declaration suggested the following reality:

“The January 8th Statement… gives inspiration and encouragement…

“The people of this country have entrusted the ANC with the responsibility to… building a better life for all. Over the course of its history, the ANC has lived up to this responsibility.

“In government, the ANC led the reconstruction of our society from the ashes of apartheid misrule.

“Prior to the onset of the global financial crisis, our policies contributed to the revival of our economy, the creation of millions of new jobs, the stabilisation of our public finances and the reduction of poverty.

“(T)hese achievements earned the ANC the confidence and trust of the South African people.”

Really?

JSE’s head of equities voices his despair

The ANC has lived up to the responsibility of a better life for all: not even Red Riding Hood will believe that.
The government has stabilised public finances! Not even Tito Mboweni believes that (and if he does, Fitch, S&P and Moodeys don’t).

Continue reading →

Anti-business, Black economic empowerment (BEE), Buying local, Company tax, Competitiveness, Developmental state, Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Economic Reconstruction and Recovery Plan, Enterprise friendly environment, Enterprise profitability, Entrepreneurial space, Export-led growth, Expropriation without compensation, Informal businesses, Job creation and unemployment, Large enterprises, Medium sized enterprises, Preferential procurement, Property rights, Registered companies / Incorporated businesses, Small and medium enterprises (SMEs), Small enterprises, Small, medium and micro-sized enterprises (SMMEs), SME, State Owned Enterprises (SOEs), White monopoly capital theory

Loan guarantee scheme overwhelmingly inadequate: cut VAT & CIT to help SMEs

Johannes Wessels
@johannesEOSA1

The centrepiece of the Ramaphosa government’s recovery and economic resuscitation scheme – the loan guarantee fund – is as helpful as giving a desperately hungry infant a dummy, pretending it is food. Not even 5% of formal registered businesses have applied for funding and by end November about 1.8% of these firms have obtained assistance from the scheme.

It is far more affordable to cut Company Income Tax and to raise the VAT threshold to get the economy growing again, than to continue with the current package of the Economic

Why the low interest in the Loan guarantee fund?

On the one hand the enterprise world was pre-lockdown already coping with difficult conditions due to an unfriendly enterprise environment with a president that is on record that he disagreed “with the view that the most effective and efficient way to provide services to our people is through the private sector.” Many business owners, especially in the case of SMEs, are reluctant to take on more debt in such circumstances, especially when running also the risk that their properties may be confiscated (expropriation without compensation).

On the other hand, the government, being out of pocket and not keen on disbursing billions that it would lose if the beneficiaries cannot service the loans, had asked the banks to apply their own existing loan assessment criteria when evaluating the applications. Were it a Khula or a SEFA process, the money would long ago have disappeared. So, despite utterances of concern about the low and slow disbursement process, the president cannot be surprised or concerned that the banks are circumspect.

In May already, EOSA had spelt out the devastating impact of lockdown measures on the enterprise world , arguing that the systemic damage caused to the spontaneous order of enterprises can best be ameliorated by a systemic response that would enable the spontaneous order to establish its own patterns again.

The government, however, kept its focus on basically two things:

Promoting Covid-19 to the highest pedestal of dangers, wilfully ignoring all other existing problems as well as the additional problems the lockdown strategy would create, and
Pursuing its social engineering efforts to reshape the South African economy in particular, and society at large, by limiting state relief measures to businesses complying with BEE (effectively throttling white sole proprietor businesses to death), deciding which kind of businesses are essential and which not, and pursuing anti-tobacco and prohibition agendas by bans on cigarette and alcohol sales.

Continue reading →

Buying local, Central planning, Developmental state, Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, ECONOMIC POLICY AND STRATEGY, Economic Reconstruction and Recovery Plan, Export-led growth, Job creation and unemployment, Large enterprises, Market economy, Medium Term Budget Policy Statement, Northern Cape, Tourism & hospitality services

Ramaphosa’s bold plan (2): weak on detail, strong on flights of fancy

Johannes Wessels
@johannesEOSA1

Two recent key government speeches gave rise to two important questions:

Is the inability of the government to effectively implement its policies & plans (?) worse than its inability to table concrete action plans, underpinned by clear strategies, designs, milestones, budgets and target dates?
Why can even Thabo Mbeki see the president is naked whilst organised big business still praises the beauty of his imaginary clothes?

The president’s tabling of the Economic Reconstruction and Recovery Plan (ERRP) was lame and lacked detail, whilst the Minister of Finance’s Medium Term Budget Policy Statement (MTBPS) left one with a feeling there is not much grasp within the collective government on how to prevent SA from slipping rapidly, if not tumbling, down the slope.

Instead of rekindling confidence and inspiration, vague and mixed messages fuelled doubt and a disbelief that the government can prevent SA from boarding the proverbial bus to Argentina (debt default). I put the following three arguments to illustrate this assessment:

Will the government stand solidly behind Mboweni’s strategy of freezing public sector wages for three years when they cannot deal with the much easier route to stop financing the effectively bankrupt SAA? Recall also how Pravin Gordhan in 2018 (knowing well that Eskom was not only overstaffed, but the personnel besides overpaid) overruled the Eskom Board and management when they had decided on a zero salary increase as part of addressing the Eskom viability issue.
Can one rely (trust would be too much to ask) on the government’s undertaking to reign in public expenditure? This, when they had failed multiple times to table a comprehensive plan on how to deal with Eskom’s debt and the growing debt burdens of other State-owned Enterprises (SOEs).
How is the “growth through infrastructure roll-out” approach different from numerous previous attempts – since the days of Thabo Mbeki – to strengthen the country’s economic fibre by infrastructure investments announcements, with the emphasis on announcements?

Flipchart notes or a detailed plan?

The Enterprise Observatory of SA reckons four fundamental problems underpin the ERRP and the MTBPS:

Continue reading →