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Picture: 123RF/JACEK SOPOTNICKI
Picture: 123RF/JACEK SOPOTNICKI

The government-mandated expropriation of property, whether introduced via a change to the Bill of Rights, or through the back door via the proposed Draft Expropriation Bill, will have horrific economic consequences for SA and irreversibly heighten social and racial tensions.

In this context the edited collection of essays, “Security of Property Rights in SA”, is relevant reading. The essays, authored by public policy experts from several countries, provide irrefutable and irrebuttable empirical evidence of the negative socioeconomic consequences of expropriation of property without compensation (otherwise known as nationalisation).

Impoverishment will be the ultimate consequence. If this proposed policy intervention were to be enacted South Africans would have to brace themselves not just for an even more moribund economy than we have at present, but for something worse — a plunge over the economic abyss. At a time when economic statistics have come to the fore reflecting a seriously alarming situation in SA, it is incomprehensible that the government persists in pursuing such an ill-conceived and suicidal policy.

In January investment strategist Magnus Heystek wrote an article, “Will our Decennium Horribilis turn into a Vicennium Horribilis?”, that provides a miserable catalogue of our prevailing socioeconomic ills. It is useful to dwell on a few of his statistical lowlights. The growth rate of the SA economy has been averaging 1.2% annually. If one relates this to the average annual population growth of 1.28% and the average birth rate of 1.67% it becomes clear that SA’s per capita GDP is shrinking relentlessly.

Driving the point home, Heystek states that this economic growth rate constitutes the lowest average returns outside a war scenario. The official unemployment rate of 42% is another devastating statistic, and some statisticians and economists believe the actual rate is even worse than that. Nevertheless, from this Heystek infers that there are more people of working age in SA who are unemployed than those in employment. It is notable that Stats SA officially records that in the fourth quarter of 2021 the number of unemployed increased by 278,000 to reach 7.9-million.

To worsen this situation, the debt of state-owned power utility Eskom has spiralled to R400bn. Heystek notes that over a period of five years R650bn has left the JSE. And all of this misery is self-inflicted.

It is abundantly clear that the weak growth in GDP and the rising rate of unemployment is a direct consequence of misguided government policy. It is clear that what is required is a change in direction: we must abandon policies that negate the spirit of free enterprise. We must urgently create an enabling policy environment that is conducive to the proliferation of business enterprises, especially in the small business sector.

This would produce a rising tide that floats all boats, big and small. SA could again become an attractive destination for foreign direct investment, while simultaneously stimulating reinvestment by domestic producers. Removing unnecessary, artificial legislative and regulatory barriers to enterprise would relaunch SA on a steep upward trajectory of economic growth. 

Yes, the solution is that simple. The sinking ship can be salvaged and turned around in no time. Recall the words of former Czech Republic president Václav Klaus in 1991: “Never believe politicians when they state that things cannot be done overnight, especially when they are in power.”

If only our makers of economic policy could dismount from the high horses of their ideology and study what happens in a free economy where the spirit of enterprise is unencumbered by statist interventions and all manner of regulatory obstructions. They will understand that the economies that deliver are those that are characterised by the protection of private property, freedom to compete, voluntary exchange and freedom of choice, with its concomitant personal responsibility.

Economic policies that are uncompromisingly predicated upon the sum total of these principles unleash the spirit of enterprise. Empirical surveys such as the Economic Freedom of the World study (published by the Fraser Institute together with 100 other think-tanks worldwide), Index of Economic Freedom (Heritage Foundation) and the International Property Rights Index (Property Rights Alliance), demonstrate the correlation between economic freedom and economic growth.

High growth rates are the empirically proven prerequisite for good socioeconomic outcomes such as rising per capita incomes, higher levels of productivity, higher standards of education and longer lifespans. In short, all the good outcomes that define prosperous and happy societies. The higher the level of economic freedom, the higher the economic growth rates and the higher and better the welfare of all the people.

This scenario has nothing to do with any ideology but is based on the reality of human nature. It is in the DNA of humans that they are impelled to strive in pursuit of their aspirations, and that they are further motivated when the fruits of their labour accrue to themselves and their loved ones. Thus, the greater their satisfaction in their personal endeavours the greater the level of their economic productivity. Svetlana Alliluyeva, daughter of the Russian despot Joseph Stalin, knew this reality when she said: “It is human nature that rules the world, not governments or regimes”.

A good start towards a high-growth economy would be to do away with the idea of expropriation of property without compensation. The mere fact that parliament is discussing this destructive measure, irrespective of whether it is passed, sends a negative signal to domestic and (especially) foreign investors that SA is a market hostile to business and therefore not a good investment destination.

Another easy measure to implement overnight is the total removal of the counterproductive vestiges of financial exchange controls, which serve no purpose other than to send a negative deterrent signal to investors that things are somehow amiss in the country, which thus finds it necessary to adopt or maintain regulations to prevent capital outflows. Whose money is it anyway? Preposterous and irrational reasoning indeed, especially given that the late former president Nelson Mandela had committed to the scrapping of all exchange controls. This commitment was given further impetus by Trevor Manuel when he was finance minister and in 1995 announced a repeal of all exchange controls phased over a five-year period.  

The overall solution to poverty and economic decline in SA does not lie in state welfare, affirmative action or borrowing money from international financial institutions. It certainly does not lie in propping up failed state-owned enterprises. Nor in costly exercises such as international investment conferences aimed at seducing wealthy foreigners to invest in SA. And it definitely does not lie in punitive policies that are informed and motivated by envy, covetousness and an insatiable retributive agenda.

The solution is encapsulated in the words of Mandela: “As I moved around the world and heard the opinions of leading people and economists about how to grow an economy, I was persuaded and convinced about the free market.” 

• Nolutshungu is a director of the Free Market Foundation. He writes in his personal capacity. 

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