JOHN STEENHUISEN: A flawed growth plan
The government’s growth plan just won’t cut it. What SA needs is a plan that encourages investment by ensuring true economic freedom
I’m sorry to break this to you, but the president’s economic recovery and reconstruction plan isn’t going to do the trick. Even if implemented to perfection by a government miraculously free of corruption, it’s not going to unleash growth at the scale required to fix poverty, unemployment, inequality and debt. It’s rooted in a failed ideology that keeps the boot of the state on the neck of the economy.
The only way to grow the economy is through increased investment in productive enterprises. Most of that will have to come from foreign investors, as we have a low rate of domestic savings and growing debt that is crowding out domestic investment. Yet foreign investors have plenty of destinations available and are wary of overly controlling governments — especially erratic, irrational ones.
Despite President Cyril Ramaphosa’s positive commitments to freeing up the energy market and digital spectrum, his policy direction is towards greater state control of the economy. Secure property rights are a cornerstone of economic freedom, yet his government gazetted the Expropriation Bill this month, enabling property of many types to be confiscated by the state without proper compensation.
The ANC also speaks enthusiastically about nationalising the Reserve Bank, which would give the government free rein to print money, putting SA on a slippery slope towards hyperinflation. Who would invest in a country following the route of Zimbabwe?
The speed with which the government withdrew social and economic liberties at the onset of Covid-19, and its reluctance to lift the state of disaster, betray its authoritarian inclinations.
And recently health minister Zweli Mkhize published amendments to regulations relating to the "surveillance and control of notifiable medical conditions" that would give him the power to impose lockdown-style restrictions, even in the absence of a state of disaster. What investor would put his money in a country where the health minister can impose curfews and close businesses and schools?
From every angle, the state is encroaching on economic freedom and personal choice. We’ve seen renewed commitment to nationalising the health system, to creating tenants of the state rather than landowners out of emerging farmers, to resuscitating SAA and other failing state-owned enterprises, to trade protectionism, and to strengthening BEE rules.
SA has the ingredients to succeed — people, ideas, climate, natural resources, a solid constitutional framework and a sound financial and monetary system — but the ANC’s ideological commitment to state control means we’re following a recipe for failure. SA will never grow in prosperity and equality while power shifts ever more to the state. More likely, we’ll become a failed state.
An economy is far too complex a web of interactions for any state to control optimally from the centre
This is where the DA differs from the ANC. We believe our pro-growth, pro-distribution agenda would create a far more prosperous and equal nation.
A growing economy produces sustainable jobs and tax revenue that can be used by a capable state to broaden access to opportunity and redistribute wealth. It ensures quality education, universal health care, effective policing, a sustainable social safety net and effective land reform. When redistribution follows growth, it leads to a virtuous cycle of more growth that enables more redistribution.
By contrast, attempting to redistribute a shrinking economic pie will only cause skills and capital flight and a shrinking of the pie, Zimbabwe-style.
How would the DA grow the economy? We wouldn’t. We would get out of the way so South Africans and foreign investors could grow it.
We don’t think governments should direct economic activity from the centre. Rather, the power to make economic decisions should be decentralised to ordinary people. There is strong evidence to support that position.
The Fraser Institute’s "Economic Freedom of the World: 2020 Annual Report" shows that economically free nations far outperform unfree nations in indicators of wellbeing.
Ranking nations by economic freedom, those in the top quartile have an average per capita GDP almost eight times higher than nations in the bottom quartile. (Zimbabwe and Venezuela are in the bottom 10, no surprise.)
SA is in the third quartile, ranked 90th, down from 67th in 2005, far below those African countries showing strong economic growth — Mauritius (seventh), Botswana (43rd), Uganda (50th) and Rwanda (59th).
Planning for success
The report shows that states that try to run the economy tend to ruin it; states that give ordinary people more freedom to take economic decisions tend to produce prosperous societies.
It’s clear why: an economy is far too complex a web of interactions for any state, even a capable one, to control optimally from the centre.
The ANC’s recent action against corruption, while welcome, isn’t sufficient to bend SA’s trajectory towards growth. Even if the party were to be purged of all corrupt elements, it would still not be capable of putting SA onto the growth path needed to fix poverty, unemployment, inequality and debt.
We cannot keep relinquishing decision-making power to a small group of economically illiterate ANC politicians who have no personal stake in the consequences of their decisions.
The 58-million people who live in SA have a strong incentive to succeed. A real recipe for success would be to give them more personal choice and freedom — this is the DA’s project.
- Steenhuisen is interim DA leader
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