It is always healthier to look on the bright side about future prospects than to sink into despairing contemplation of global recession and inadequate local growth and prosperity. After all, “government is forging ahead with strategies to foster investment, both domestic and foreign”, said our President last month. He reminded the National Assembly of various initiatives including a high-profile international marketing campaign, the work of the International Investment Council, encouraging firms to invest more in training and take on new workers, targeting inflation and reducing the budget deficit, working to attract skilled immigrants, “an effective crime-prevention programme”, improvements to the justice system, and tax incentives.
Such lists certainly invoke some of South Africa’s problems, but unfortunately without reassuring us that resolution is imminent. On the contrary, skills shortages and high inflation, crime and taxes have been around forever. Since long before the democratic transition, government has shown little stomach for tackling them wholeheartedly and solving them properly. And some steps taken and planned by various ministries seem bound to perpetuate the problems.
As if deliberately to deter foreign tourists, Minerals & Energy keep the jet-fuel price far above international norms and Transport protects SAA by denying BA and Virgin the extra landing slots they seek. As if consciously to repel foreign investors, Finance requires involvement of local black empowerment groups, introduces capital gains tax, retains exchange controls and targets inflation higher than in South Africa’s trading partners. As if wilfully to reduce unskilled employment, Home Affairs harasses immigrant workers and Labour entrenches workforce inflexibilities while extending minimum-wage requirements even to domestic and farm work. As if intentionally to chase away tomorrow’s skilled workers, Education raises school-starting age, lowers public matriculation standards, bans independent matric examinations and discriminates racially for tertiary education’s intake, while Justice adds young attorneys to the growing list of young professionals conscripted for a spell of low-paid community service.
Indeed, such measures of a mixed-economic policy may not entirely stifle growth. Neither will they kick-start it from its current modest annual 2-3% to Gear’s desired 6%, the SADC’s hoped-for 7%, or the regular 8-12% being achieved by communist China’s private sector despite the many obstacles that government still erects.
Despite its notorious human-rights record, China has four huge advantages over South Africa. First, official Chinese policy is wholeheartedly for growth and prosperity with a clear commitment to free trade rather than Malaysian-type anti-globalism and ‘levelling’ of ‘former exploiters and oppressors’ by redistribution and empowerment across ‘Two Nations’. Second, the labour force is hungry and willing to sweat for a living in the competition for global trade rather than digging in and rent-seeking by hostile and state-backed union action. So, thirdly, China has long established a track record of focused and rapid growth, well above the 4%-plus that George Soros just advised Reserve Bank governor Mboweni, big investors look for. China has made a good start in the game of global catch-up.
The fourth Chinese advantage, shared by most developing and developed countries, flows from that wholehearted pursuit of economic growth once a country’s basic food and security needs are met. It is not to let other objectives, tangential or conflicting, interfere with the pursuit of growth.
Until 11 September, Zimbabwe’s Robert Mugabe kept grabbing headlines by his assault on property rights in pursuit of land redistrution without compensation. Zimbabwe is not “forging ahead with strategies to foster investment”, unlike (supposedly) South Africa. Yet Foreign Affairs just announced South Africa’s opposition to sanctions on Zimbabwe as the European Union moves towards them, and also that South Africa will not collaborate with the US militarily in the fight against terrorism. It must be difficult for our European and American friends to ignore such non-aligned statements. And ever in the background they recall the denial of antiretroviral drugs to save the newborn of the increasingly HIV-positive electorate not quite Islamic wife-abuse, but hardly compassionate. The temptation to Afro-pessimism, and to marginalise South Africa for intellectualising and strategic impotence, is surely understandable.
It is not that government has been inactive. In fact, many liberalising steps have been implemented already, although many of them yield to the comment – “yes, but, not well enough”, a prime example being privatisation, thus far too little and too late. It is just that South Africa is not a particularly attractive investment area, for a whole host of reasons sins of omission and of commission.
So there is no simple remedy, no single magic antiretroviral pill just prior to economic take-off. We have to hope that the government can find it in themselves to do much more (or even everything), much better, to free up the economy and to stop shooting South Africa in the collective foot by adopting unnecessarily non-aligned, dissenting and anti-market stances that are bound to deter Western investors. An economics drollery It is better to be rich (globalised) and healthy (market-positive) than poor (non-aligned) and sick (HIV-positive).
Source: Dr Jim Harris is a freelance researcher and journalist. He maintains the Privatisation Update and Regulation Update which appear under Publications on this website. This article may be republished without prior consent but with acknowledgement. The patrons, council and members of the Free Market Foundation do not necessarily agree with the views expressed by the author.
FMF Article of the Week\13 November 2001
