LETTER: SA economy fettered by ANC policies

Kuben Naidoo rightly points out the dire consequences of our recent fall in rail capacity (“SA’s strong and centred democracy poised for economic upswing”, October 10). Coal exports fell from their long-term average of nearly 90-million tonnes per annum to the current 60-million.

However, the overall picture he paints is unduly clouded. He uses the market rand-dollar exchange rate to derive our annual income per capita of $6,000, and then compares this to the US and Europe’s equivalent of about $50,000.

But this is misleading. One should employ not the market rate but the purchasing power parity rate. The picture is then far brighter. At purchasing power rates, our per capita income is not $6,000 but a far greater $14,000. This is still far less than the US equivalent, but only about four times lower as opposed to eight times lower.

When comparing relative living standards between countries one should use purchasing power currency exchange rates as these portray the actual relative costs of a basket of goods and services. We should be aware that there is a substantial element of political risk built into market currency exchange rates, for SA, China and many other countries.

While market rates are, of course, critical for foreign investors, they are hardly relevant for domestic consumers. The import of this is that we have only to quadruple (and not octuple) our economy to catch up with the West. In other words, we would need to double, and double again. 

If we were to grow our economy at a perfectly achievable 5% per annum we would double in 15 years, and quadruple in 30 years. This means if the ANC had put the right policies in place we could have already quadrupled our economy over the three decades post liberation.

But there is little point in crying over spilt milk. The lesson we should draw is that with the right attitudes and policies we should in future be able to quadruple the size of the economy over the next 30 years. This is only a few years beyond mid-century!

Sadly, the right attitudes and policies are more or less the reverse of those espoused in the past via the ANC’s national democratic revolution. At the very least we must ensure the ANC is aware of the enormous lost opportunity costs of its revolutionary obsessions. 

Willem Cronje 
Cape Town

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