Enterprise regularities

Black economic empowerment (BEE), Black-owned businesses, Business incubation, Buying local, Central planning, Company tax, Cooperatives, Developmental state, Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise friendly environment, Enterprise regularities, Enterprise research, data and statistics, Entrepreneurial space, Export-led growth, Job creation and unemployment, Lockdown, National Gazelles Programme, Predictive capabilities, Preferential procurement, Small and medium enterprises (SMEs), Small, medium and micro-sized enterprises (SMMEs), Spontaneous order, State Owned Enterprises (SOEs)

Elastoplast for the knocked-out economy

Johannes Wessels
@johannesEOSA1

Just as a heavy punch on the side of a boxer’s head can disrupt his brain’s neurovascular coupling processes causing him to fall like a log, the lockdown blow had disrupted the intricate flow of funds in the economy. BankServAfrica’s figures for Black Friday confirmed consumers are still on the canvas: turnover declined by a whopping 52% and there was a 30% decline in the number of in-store card transactions.

The pockets of the majority of individuals and a substantial share of businesses now resemble those of the state-owned enterprises.

People are hesitant to spend with unemployment dramatically higher than before lockdown, due to the government turning off the income tap for most enterprises for at least 3 months, declaring them non-essential (in the case of the hospitality sector almost 8 months). The government has thus achieved not only the lengthening of the jobless queues but also driving the rest of the population closer to poverty.

It was a cruel knock-out blow by the government

The religion of the developmental saviour

The subconscious neurovascular coupling process ensures oxygen supply in nano-seconds through blood flow to the brain segments most active at that split second. A boxer can recover from a knock-out if there was no rupture of arteries and quick restoration of normal flow of blood in the brain. If not, there can be permanent brain damage, even death.

Our thought processes depend on continuous uninterrupted subconscious processes. Likewise, an economy depends on the continuous uninterrupted flow of funds that is totally unregulated in the sense that no entity controls or directs the trillions of individual transactions by billions of consumers (both individuals and enterprises) buying their daily requirements and selling their products and services, either worldwide, or at a lower scale in different countries.

The Bleak Friday data indicates the government’s lockdown punch caused chronically reduced demand.

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Anti-business, Central planning, Cities, Developmental state, Differentiated products, Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Emigration/Immigration, Enterprise density, Enterprise friendly environment, Enterprise regularities, Enterprise richness, Entrepreneurial space, Export-led growth, Free State, Immigration/Emigration, KwaZulu-Natal, Large towns, Municipal efficiency, Population size, Predictive capabilities, Spontaneous order, State Owned Enterprises (SOEs), Trading services, Urban economy and growth

The City of Surreal Ramaphosa on the banks of the Rubicon

Johannes Wessels
@johannesEOSA1

Cyril Ramaphosa’s vision of “a first post-apartheid city with skyscrapers, schools, universities and factories” (if implemented) has all the potential of becoming a disastrous social engineering experiment wasting resources on a massive scale. Not because the idea of a new city is wrong per se, but simply because the president is ideologically wedded to state-led development, holding a very negative view of the role of the private sector.

Ramaphosa doesn’t consider the private sector as efficient or more effective than the public sector, despite the fact that State-owned enterprises are mismanaged, bankrupt and a drag on economic development with Denel and the SABC even struggling to meet salary commitments.

Peas of the same pod

The creation of such a city is, in the Ramaphosa framework, not a vision of dynamic economic growth, but an ideological blinkered perspective of how government can improve society. Ramaphosa and all the social engineers within the ANC are, in that sense, not far from the approach of Hendrik Verwoerd. The National Party was, just like the ANC, a force pursuing transformation through prescription and limitation of choices.

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Business incubation, Central planning, Competitiveness, Developmental state, Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise regularities, Expropriation without compensation, Job creation and unemployment, Land ownership, National Gazelles Programme, Preferential procurement

White Monopoly Capital: astute reverse double somersault or a Janus performance?

Is the presidential acknowledgement of entrepreneurs as heroes and not villains the equivalent of Pope John Paul II’s admission that the church was wrong to condemn Galileo for endorsing a helio-centric view? If so, it is one of the most astute political reverse double summersaults. As deputy-president Mr. Ramaphosa himself sung heartily the “Down with White Monopoly Capital” song in the Zuma choir.

Janus Ramaphosa

Does the comment during the dinner of the Investment Summit really signal the dawn of economic freedom or was it merely a modern manifestation of Janus? Will the future reveal a Ramaphosa butterfly that was an ugly caterpillar under Zuma or is the two-mouths-two-messages the real reality?

The first requirement to assess future options is a proper understanding of the present. Let us explore that by assessing the ANC Government’s (and Ramaphosa’s) views on SMEs: does it indicate an embrace of private initiative or something else?

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Anti-poor, Cities, CITIES, TOWNS AND SETTLEMENTS, Construction services, Consumer-led development, Demographic-entrepreneurial relationships, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise regularities, Enterprise research, data and statistics, ENTERPRISE SECTORS, Entrepreneurial space, Local economic development (LED), Population size, Predictive capabilities, Pro-poor strategies, Trading services, Urban economy and growth

Pro-poor LED fails our cities, towns & the poor: Enterprises of the right kind generate city growth

Johannes Wessels
@johannesEOSA1

There is an intriguing symbiosis between cities and towns on the one hand and enterprises on the other. As the world population urbanise, so are business activities.

Physicist Geoffrey West in his “Scale: The Universal Laws of Life, Growth and Death in Organisms, Cities and Companies” says based on city growth one can state precisely what will happen with the number of businesses in that city: a doubling of population does not require a doubling of grocery stores or filling stations, economies of scale kick in in a predictable manner. The reverse is also true.

Unfortunately, South Africa’s economic and enterprise development policies and strategies ignore these predictable realities. In addition, LED plans by municipalities in the main demonstrate a lack of understanding of what drives development.

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Black economic empowerment (BEE), Black-owned businesses, Developmental state, ECONOMIC POLICY AND STRATEGY, Enterprise dynamics, Enterprise regularities, Enterprise research, data and statistics, Population size, Predictive capabilities, Religion and economics/Ideology and economics, Small and medium enterprises (SMEs)

Are our enterprise policies shaped by obsessions? Paradigm paralysis (2)

Ramaphosa’s Manifesto – “A New Deal” – envisages the “massifying” of black enterprises to promote growth and job creation. It is shaped – like the National Development Plan – by the paradigm of SMEs as prime agents for growth and jobs. As the belief in the curative effects of bloodletting – it was the general consensus – acted as a barrier that prevented the consideration of alternative treatments, the belief in SMEs obscures evidence that net job creation is largely independent of firm size.

Convictions, one must remember, do not necessarily yield to evidence.

Masaai Mara crossing

For the creation of several hundred thousand successful businesses (or would “massifying” – Ramaphosa’s term – imply businesses by the million?) there needs to be at least a similar number of entrepreneurs with effective business skills and plans for these businesses to have a chance of survival.

But for a business to succeed one needs other ingredients than mere entrepreneurial aptitude and astute management: it requires support from customers and clients. Successful “massifying” of new businesses would therefore depend on a prior (or at least simultaneous) mushrooming of the spending power of existing consumers and/or the “massifying” of consumers.

On that, the New Deal is silent… Could a 2016 warning about economic transformation hold the explanation?

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ECONOMIC POLICY AND STRATEGY, Enterprise friendly environment, Enterprise regularities, Job creation and unemployment, Pro-growth strategies, Small and medium enterprises (SMEs), Small enterprises, Sole proprietors

Enterprise policies as untested as the practice of bloodletting: no wonder they fail (1)

Johannes Wessels
@johannesEOSA1

More than 3000 years the practice of bloodletting was applied to cure a range of illnesses: intense headaches, constipation, abdominal pain, boils or fever… It was administered by barbers (they had sharp blades) and later by qualified doctors. Some of the famous who received this treatment were Marie Antoinette (when giving birth in 1778 to her daughter Marie-Therese) and George Washington in 1799 on the day of his death when doctors drew about 40% of his blood in an attempt to cure him from a severe throat infection.

In Washington’s case one can only wonder to which extent the bloodletting had contributed to his death. In 1793 acute bloodletting by guillotine definitely caused the demise of Marie Antoinette.

Why did the bloodletting practice with its origins in ancient Egypt continue until a century ago as an esteemed medical practice? Two reasons:

The existing paradigm considered bloodletting successful, elevating it to the realm beyond questioning or doubt. It was practised by all the trained practitioners. It was therefore not questioned. Respect for specialist insistence on accepted practice re-enforces paradigmatic reign. Even after the description of the circulatory system by William Harvey in 1628 it took three centuries before the practice of bloodletting was largely abandoned as an unproven cure. One of the most striking examples of this blind acceptance of so-called “expert opinion” is the 1500 years that Greek physician Galen’s doctrines were revered. Galen said of one of his cures: “All who drink of this remedy recover in a short time, except those whom it doesn’t help who all die. It is obvious that it fails only in incurable cases.“

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