Category: Tourism & hospitality services

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:

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Anti-business, Company tax, Cooperatives, Corruption, Crime against business, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Informal businesses, Municipal efficiency, National Gazelles Programme, Personal services, Public service delivery, Real estate services, SME, Tourism & hospitality services, Township enterprises

Sin tax to plug the hole in SARS coffer: the government laying the table for a Boston tea party?

Johannes Wessels
@johannesEOSA1

The prolonged lock-down has been a roaring success: not in enabling the public health system with “sufficient beds, ventilators and staff” for the inevitable “Covid-peak”, but in empowering organised crime syndicates.

Not only did the ban on the transportation and sale of liquor and cigarettes provide an unprecedented window of opportunity for already existing smuggling networks to strengthen their production and supply chain networks, they were wholeheartedly supported by the government to expand their client base exponentially.

The government by decree stopped the legal trade in liquor and cigarettes, effectively providing a protected oligopoly for the smuggling networks. Since there was no competition, they hiked their prices. That saw:

  • cigarette cartons that would cost around R450 before lock-down selling at anything between R1 500 to R2 000;
  • Gordons Gin selling at four times the pre-lockdown price, and
  • A litre red Robertson box-wine fetching R1 400, easily beating some of the prices achieved by top wines at the Nederburg Auction.

Patel hounded Dischem, but the smugglers, spazas & tenderpreneurs were the price hikers

Continue reading “Sin tax to plug the hole in SARS coffer: the government laying the table for a Boston tea party?” →
Anti-business, Corruption, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise profitability, Lockdown, Spending power (wealth/poverty), Tourism & hospitality services

The Vandals are governing

In his weekly letter from the president’s desk (13 April), pres. Ramaphosa lamented the vandalism that had caused the demolition of schools, describing it as “a great indictment of our society”. He pointed to the despicable implications: “When lock-down is lifted and learning resumes, thousands of our children will have no school to return to, depriving them of the right to education…”

The irony of his words is that the government is currently the vandal-in-chief. The damage done to schools in the president’s lament of four months ago is dwarfed into insignificance when compared to the destruction its lock-down strategy is inflicting on South Africans.

The sheer magnitude of their destruction boggles the mind. They have:

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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. 

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

Anti-business, Central planning, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, ECONOMIC POLICY AND STRATEGY, Factories, Informal businesses, Job creation and unemployment, Lockdown, Small and medium enterprises (SMEs), Small towns, Sole proprietors, Tourism & hospitality services

Lockdown? Or is it perhaps meltdown?

Johannes Wessels
@johannesEOSA1

Halfway into a five-week lockdown it is appropriate to compile a kind of “balance sheet”. When the lockdown was announced, Pres Ramaphosa made it clear that protecting lives against Covid 19 was paramount: a position he reiterated when prolonging the lockdown.

For the ANC Government, all other considerations weigh less and may be sacrificed. Mutating from a supreme commander in military camouflage uniform rallying his troops to “kill the virus” to a pope like appearance during Easter sympathizing with the population for carrying the heavy cross, almost like Simon of Cyrene, Ramaphosa has been lauded all around as “bold” and “presidential”. The few voices that since the beginning have argued that severe restrictions that limit fundamental freedoms would fuel poverty and unemployment, were brushed aside as being both inhumane and wrong.

To date it is uncertain whether the lockdown, the wide application of Bacillus Calmette–Guérin vaccine in SA or any ther factor has contributed to the (still) low infection rate in South Africa. What is dead certain is that the economy (already in a critical condition prior to the appearance of Covid 19) has been rushed into ICU to a position close to the door where the dead are wheeled out to the morgue.

Read EOSA’s proposals on how Government can assist SMEs by cutting CIT and exempting those with a turnover below R2.5 million from VAT.

Government has, as yet, to indicate its estimates of the economic impact of the lockdown measures, e.g.:

  • the decline in VAT receipts;
  • the decline in CIT (and for sole proprietors, the decline in personal income tax);
  • the additional costs of demands on the UIF;
  • the additional costs of deploying the military and the police at the current levels;
  • the cost of measures to support the informal traders, small enterprises and other assistance measures to support businesses;
  • the support measures to assist businesses in the hospitality industry;
  • how these would impact on the budget deficit and what the implications are for government debt.
Continue reading “Lockdown? Or is it perhaps meltdown?” →
Agriculture, CITIES, TOWNS AND SETTLEMENTS, Demographic-entrepreneurial relationships, Eastern Cape, Enterprise richness, Small towns, Tourism & hospitality services, Town resilience

The resilience of some small towns in the Karoo

A new article in the Journal of Arid Environments (see reference below) examines the ‘Small Town Paradox’ in eight small towns in the Eastern Cape Karoo. Normalised data (enterprise numbers per thousand residents) and estimates of enterprise richness were used in the comparisons. Willowmore, Steytlerville and Jansenville outperformed Aberdeen, Hofmeyr, Steynsburg, Venterstad and Pearston in terms of total enterprises per 1000 residents as well as enterprises per 1000 residents in the tourism & hospitality services and agricultural products and services sectors. In fact, in some measures these towns even outperformed the larger towns of Graaff-Reinet, Cradock, Somerset East and Middelburg. Over some seven decades, the enterprise richness of Willowmore, Steytlerville and Jansenville increased (like those of the larger towns) whereas the enterprise richness of the other five small towns decreased. Hausmann et al. (2017) postulated that productive knowledge is a main determinant of the wealth/poverty of nations. I think this is also true for towns and used enterprise richness as a proxy for the levels of productive knowledge in the towns.

The resilience of towns is now a hot scientific topic. It refers to the ability of towns to respond successfully to adverse changes. Some do it well and some not; hence the ‘Small Town Paradox’. The decline of agriculture, particularly wool farming, in the Karoo stressed many Karoo towns. The study was done to determine if resilience was present in the Eastern Cape Karoo. It was.

The article demonstrates two important issues: 1. There are useful measures whereby the strengths/weaknesses of the entrepreneurial development of South African towns can be compared. 2. Productive knowledge is probably an important component of the resilience of South African towns.

References

Toerien, DF (2018) The ‘Small Town Paradox’ and towns of the Eastern Cape Karoo, South Africa. Journal of Arid Environments. Available free of charge for a limited period at:
https://authors.elsevier.com/a/1WwV0Vu7-m4sz

Hausmann, R, Hidalgo, CA, Bustos, S, Coscia, M, Chung, S, Jiminez, J,  Simoes, A & Yildirim, MA. (2017) The Atlas of Economic Complexity: Mapping Paths to Prosperity. Center for International Development, Harvard University.