KEITH BRYER: Local business organisations show courage in taking on Big Government

A “massive victory”, an “emphatic judgment”. That was how local commentators saw the recent high court victory by the Nelson Mandela Bay Business Chamber and Pietermaritzburg & Midlands Chamber in a case they brought against the National Energy Regulator of SA’s (Nersa) municipal tariff methodology.

While the verdict will probably be appealed by Nersa using taxpayers’ money, it will be hard-pressed to come up with a believable argument. The essence of the judgment is to stop the practice of municipal managers loading the price of electricity — one of many regulatory prices that are at the whim of officials, not only at the local level but also at the provincial and central government.

Its significance is that it brings into focus the difference between the private sector’s attitude to its customers and a local authority’s attitude towards ratepayers. When conglomerates or companies charge arbitrary prices that customers don’t like they lose business. If they trade in a free market, customers vote with their feet and buy alternate products or services. In short, they lose money.

Municipalities have been getting away with setting their prices with impunity for years. So have national and provincial administrations. You could say they have been able to charge whatever they like. These officials are in charge of various permissions: vehicle and other licenses, building plan approvals, traffic and parking fines, and other things such as the price of water, rubbish collection and sewerage fees.

The result is that municipalities, being a “public service”, have behaved as though antimonopoly laws do not apply to them. They treat ratepayers like cash machines. When they need more cash they simply up the price of their services. Despite the rhetoric to the contrary, there is scant evidence of the state of the economy or average wages and salaries in the real world being taken into consideration.

The beneficiaries are the inefficient and/or corrupt municipalities and all who work within them. While pavements crack and potholes in roads spread, municipal offices are refurbished. When 100-year-old iron lamp poles become a danger they are replaced with poorly treated gum poles — some still dripping with tar or creosote. Mayors buy million-rand motor cars, and salaries for senior municipal officials compete with those working and creating wealth in the private sector.

By winning their case against this practice because these prices are arbitrary, Pietermaritzburg and Nelson Mandela Bay businessmen and women have struck a blow against the unfettered power of all officials. They have stepped up to the plate in favour of markets where customers have a say and a choice.

They have challenged the overmanned government bureaucracies that have encroached on the public purse, legally and illegally, to the detriment of every direct and indirect taxpayer in SA. They may have opened up the first significant crack in the concept of Big Government that has paralysed private enterprise and economic growth.

Our bloated, overmanned and unelected bureaucracy, equipped with wide regulatory powers, is the single biggest hurdle in the way of economic expansion and the job creation that is so desperately needed.

SA’s Big Government is the reason we are in the mess we are in. And it applies as much to the (insert/pick any central government department) as to the municipal bureaucracies of the major cities.

Yet the albatross of Big Government is seldom recognised, perhaps because the economic and political malaise we suffer from daily in this country is also eating away at countries that pride themselves in being developed.

This is not to suggest civil servants are unnecessary. The problem arises when they are granted so much regulatory power that they assume they are no longer our servants but our masters.

A recent example is the civil servants’ strike action, where union leaders are backing a demand for a pay increase way above the economy’s ability to pay it. Union leaders have a Magic Money belief and encourage the same belief among their members.

It was not always like this. Some are old enough to have known public servants who were civil and served the public for little pay but a stable job with medical aid and a pension at the end of it. Some think it started in 1995 in SA, but the rot actually set in as far back as the French Revolution in 1789 and was accelerated mightily during the first and second world wars.

Revolutionary chaos and the existential threat of wartime make people in the West expect government to take over everything. Both situations created a boom in government jobs, with numbers rather than quality taking first place.

But the public service did not shrink in peacetime. The state was continued to be expected to provide everything from jobs to housing, schooling and medical care for demobilised soldiers and the rest of the population. It was a triumph of the idea of Big Government.

The numbers of public servants grew so large that they became a significant political constituency. It became unwise for any political party to upset public servants. They grew to know more about running the country than those the voters elected, so even changes in government meant more of the same.

Seventy years after the end of World War 2, thanks to human resource managers (known more correctly as personnel officers) who flattered senior civil servants into believing they were the equals of CEOs of multinational companies, equivalent pay and perks became the norm.

This rise of the unproductive over the productive has now infected all of SA’s state-owned enterprises and our municipalities — the latter protected by a professional closed shop called the SA Local Government Association, which can enforce pay increases across the board without taking into account local ratepayers’ ability to pay.

Today, a managerial job in a municipality can come with a free car, a fat pension, generous private medical aid and parking on-site, with hours of 8am to 4pm and an hour off for lunch. Some tedious time with the public is required on Saturdays for some officials, but not all.

Who pays?

Working for the public service or a municipality in SA has in the past two decades become as desirable — if not more so — than a job with a major international oil company (a major difference is that you can be declared redundant if you work for an oil company).

Where does the money come from to feed this new breed of aristocrats? Mostly from homeowners and private businesses that live in the real world where people are seen as customers, not serfs.

That is the mess we are in, and it has taken the small-to-medium business people of Nelson Mandela Bay and Pietermaritzburg to take steps to stop it. To its shame, Big Business has been silent all along.

Melanie Veness and Denise van Huyssteen, CEOs of the PMB and NMB Business Chambers respectively, dared to take on the practical impact of regulatory pricing by municipalities. They deserve to be feted by every taxpayer in the country.

• Bryer, a freelance journalist and communications consultant, is a contributing author for the Free Market Foundation. He writes in his personal capacity.