The rand’s recent downgrade to junk status by S&P, brought on by rampant looting of the state, will hurt the poorest most. It is a clarion call to action. We South Africans need to make some smart changes to reverse our spiralling poverty and debt trap. We must enable an open, high growth, high jobs economy.
South Africa is a country of two nations. Around 45% of us enjoy the freedom to live lives of worth and dignity, while the other 55% are trapped below the poverty line, literally locked out of the economy. This divide is structural, meaning that it is sustained and reinforced by an embedded unequal access to opportunities. We remain a deeply unfair society.
During Apartheid, the unequal access was entrenched and maintained by race-based legislation that denied black people access to ownership and job opportunities. Since 1994, that unequal access has largely been perpetuated by a combination of poor governance and ill-considered legislation that seeks to enrich and empower a connected elite at the expense of the many.
If we are to end this insider-outsider dichotomy and become one prosperous nation, we need to tackle the governance and legislative issues that are sustaining the great divide of insiders and outsiders.
For every single policy decision, we must ask the question: will this help the 30 million people locked out and left behind? Will it open the economy to the 9.4 million jobless adults, 6 million of whom are under the age of 35? And if the answer is not an unequivocal yes, then the policy isn’t worth the page it’s written on.
On this basis, the DA proposes some critical policy interventions that can be implemented fairly rapidly at no great cost to the fiscus.
First, we must radically reform our SOEs. They are haemorrhaging public money and delivering dismal services at exorbitant prices. On a case by case basis, we have to sell those that are not strategic – or turn them around and then sell them, or even just close them down to stem the bleed. Those that are strategic, we need to appoint fit-for-purpose leadership to make sure they deliver a quality service to the public at the best possible price. The public just cannot keep funding these inefficient, costly companies which only benefit those who’ve captured them.
Eskom is the highest priority. The only reason for the high and growing price of electricity from a company that is teetering on the edge of collapse, threatening our whole economy, is rank failure of leadership. Eskom has been a bottomless pit into which we’ve thrown so much money that our social welfare system is now at risk.
Second, we must reform our labour market so that young people emerging from our dysfunctional schooling system can find employment. SMEs need maximum flexibility if they are to grow, employ as many people as possible, and compete with big businesses. They must not be held back by restrictive regulation and red tape. Even Kgalema Motlanthe’s High Level Panel has admitted that we must not force small businesses to comply with wage bargaining agreements made between unions and large businesses. .
The most important gap to close is not between those who earn high and low wages, but between those who have a job and those who don’t. Until the vast majority of the labour force actually has a job at all, we cannot afford regulation which actively prevents businesses from hiring people. A society with a 36% unemployment rate is completely unnatural and unnecessary, and is brought about by a labour market designed for those with jobs, not for those without jobs. When the schooling system has failed you completely, the very last thing you need is any more obstacles put in your way of finding work.
Third, we need to simplify and reform the empowerment system. Ask 100 black South Africans whether BEE has benefitted them personally and 99 will tell you it has not. That’s not good enough. The current system has been used as a mechanism for elite re-enrichment and corruption. It imposes a heavy regulatory burden on businesses and raises the cost and lowers the quantity of service delivery to the poor. We want companies’ greatest contribution to be to society in general, not just to the elite. That’s why we need a Jobs and Justice Fund, an investment fund that will incentivise companies to help fund new entrants into key sectors.
Fourth, we must reduce corporate taxes, abolish exchange controls, remove trade barriers and establish export processing zones to signal to investors that South Africa is open for business. Wealth and estate taxes are much more effective ways to redistribute wealth, because they do not chase away investors.
Fifth, we must issue visas on arrival to tourists. Tourism is a massive potential source of growth and jobs, as well as foreign exchange. We must fling our doors and skies open to the world’s tourists.
Sixth, we must appoint the best prosecutor to head the NPA – with a constitutional amendment to follow later, that removes the President’s exclusive power to appoint. Corruption is destroying our nation and we need to signal a zero tolerance attitude henceforth.
Without doubt, we need to reduce the size of our state, and make it much more efficient. Our public sector wage bill is entirely unsustainable. And we must fix our education system. These will take time, but they must be done.
But right now, in our tightly constrained fiscal environment, there are many low cost, high impact, immediately implementable policies which will do much to bring economic freedom, fairness and opportunity to our thirty million struggling fellow South Africans – and a new beginning for all of us.