LETTER: Stop making SA uninvestible
If property is not protected from expropriation without compensation the result will be catastrophic
The SA Revenue Service’s Mark Kingon is correct to raise concerns about the shortfall in SA’s tax take (“Growth too low to meet revenue target, says Mark Kingon”, August 28). With nothing but anaemic growth in the offing, this shows no signs of turning around.
This has all manner of implications, not least for the sustainability of SA’s extensive (relative to its level of development) welfare system. A few years ago the Treasury was warning that current social spending could be sustained on GDP growth of 3% a year, and we are now well below that. Policymakers show no signs of moderating their intentions. If anything, the proposed National Health Insurance points in the other direction.
Accelerated growth is critical for SA’s viability. So it is breathtaking that the drift of policy on the most elementary of investment conditions — the protection of assets — is into greater insecurity. Since the end of 2017 the governing party and the government it leads have proclaimed their intention to implement expropriation without compensation (EWC). This destroyed whatever windfall the accession of President Cyril Ramaphosa to the presidency might have offered.
Economic modelling suggests, on the basis of historical evidence, that the consequences of putting it into action will be catastrophic all round, not least to tax revenues. We have repeatedly heard from business people that EWC makes the country “uninvestable”. Unfortunately, EWC-style thinking seems to be catching on elsewhere, notably in suggestions for the introduction of prescribed assets.
For SA to claw back its prospects, it needs to rethink its approach to the economy. EWC, for its part, needs to be taken unambiguously off the table.
Institute of Race Relations