This article was first published by Daily Friend on 24 August 2024
No amount of money will magically make South Africa industrialise and its economy grow; the issue with this country is not a lack of capital.
There are plenty of rich businesses, private funds, and a sophisticated banking and investment infrastructure to enable the transfer of wealth to fund any lucrative project. The fundamental problem with industrialisation in this country is that South Africa is fraught with bad policies, overregulation, government interference, and corruption.
Parks Tau, Minister of Trade and Industry, has expressed his desire for the government to allow asset managers and pension funds to be used to fund industrialisation efforts. This has understandably caused an outcry, as the move draws disturbingly close to calling for private savings to be used to fund ill-thought-out, grand government-run/owned schemes that won’t produce any real economic growth.
Unfortunately, government officials have focused obsessively only on funding sources for industrialisation, without paying any attention to what industrialisation even entails, or more importantly, why the private sector has been so reluctant to dedicate its money to growing the economy.
The truth of the matter is that even if capital exists, businesses will not invest or grow if the economy doesn’t want them. And despite paying lip service to industrialisation, the ANC-led government is overwhelmingly anti-business.
Labour regulations and policy overwhelmingly benefit unions, a bloated bureaucracy, and employees over potential employers. Hiring and firing workers opens businesses up to a hell of a time, dissuading them from growing their business and employing more staff.
Race-based legislation like Black Economic Empowerment (BEE) discourages any business from growing too large, lest it becomes noticed by corrupt officials who can leverage race quotas and political appointments to loot the business of all its worth.
Threats of violence
Unions effectively own entire industries, enforcing economy-wide wage increases with threats of violence. Wage increases ripple across the economy, raising prices that further push the unemployed and the needy into destitution.
We need economic growth, and we need industrialisation. But this will not be achieved by throwing more and more money into the black hole of the public fiscus. The only way to grow the economy is to create an environment in which businesses want to perform their function, grow their facilities, and employ more and more people.
To create this environment, we need to remove regulations and legislation that actively inhibit employment and the growth of businesses. Legislation like the Basic Conditions of Employment Act, Labour Relations Act, BEE, and others need to be amended or eliminated to make it easier to start and run businesses.
Once businesses can afford to take the risk of employing someone, we’ll see mass job creation. And once we have removed the racist legislation that necessitates race quotas and political capture, we will see businesses become less afraid to grow and prosper.
South Africa must also see to repairing and upgrading its critical infrastructure. Public-sector-owned infrastructure that can be privatised must be privatised. The government has proven itself extremely prone to incompetence and corruption. The private sector has an inherent incentive to perform well, as otherwise it won’t be paid or be able to grow. So, shifting electricity, railways, ports and other infrastructure to private sector hands will ensure that they are repaired and remain functioning.
For infrastructure that would be too complex to be privatised, more focus must be applied to get it in working order. Overpopulated courts and overworked magistrates, essential for facilitating the ongoing enforcement of the rule of law, should be eased of their burdens by decriminalising many offences that should not be considered crimes at all. They will then be able to focus on real crimes. Extra tax money from a growing economy can also be used to fund the growth of these courts.
Wealth-creation capabilities
Once critical infrastructure is in working order and legislation enables the growth of businesses, we can also improve the wealth-creation capabilities of our country even more by amending our trade relations. At the moment, ill-thought-out protectionist policies halt our ability to perform.
Protectionism doesn’t work. It is a petty policy meant to coddle local industry and protect it from foreign competition, but all it accomplishes is ensuring that local industry never needs to perform adequately, while breeding resentment with foreign trade partners. On top of this, protectionism ensures that crucial foreign commodities become exorbitantly expensive, hurting South African consumers and businesses.
Remove arbitrary and exorbitant tariffs across the board. If a local industry can’t compete against a foreigner, then it wasn’t meant to do well. Rather, allow a deregulated economy to spontaneously reveal our best industries, and allow them to grow and generate wealth and jobs. This will help far more people than protecting a bunch of costly and weak industries from growing up and facing the real world.
Industrialisation shouldn’t just be a buzzword used by politicians trying to woo investors and win votes. Industrialisation is the process by which a country ensures economic growth and prosperity. We cannot buy ourselves into industrialisation; we need to earn it through making the right choices. And all those choices involve embracing economic liberalisation and a free market.