There is a fairly simple recipe for countries to progress to economic success. Why is it so difficult for South Africa to grasp this point? Instead, our country seems hell-bent on trying to prove that while economic success has eluded so many places, like Venezuela, Zimbabwe, Cuba and many others in Africa and South America, applying the same failed policies here will turn this country into an economic success.
President Ramaphosa is a very wealthy man indeed. Without having to create a business or to provide new work and opportunities for workers, or expand our economy, he was given shares in many companies, becoming exceedingly rich in the process. He is, of course, clever, a gifted speaker and a thoroughly engaging man.
A good politician. No one seems to know what his core principles are, however. Is he still a socialist, as his background would suggest? Or has he become a capitalist? Or at least a follower of the free market? Or does he still believe in the rubbish about the National Democratic Revolution, so beloved of the left wing in the ANC? The answer seems to be that it depends on the views of his audience.
The president knows what works economically and what does not. And yet…and yet… when it suits him he promotes changing the constitution to provide for expropriation without compensation (EWC), pretending that this will solve the land question for the millions of landless people in this country. Also, well knowing that the white voters now make up 7.5% of the electorate and the Afrikaners around 4% of that, he told black voters in the last election that if they did not go and vote “The Boere would be back in power.”
There are many places the president could look for inspiration about growing the South African economy. Let’s take just one of them: Mauritius; a member of the African Union. I know it quite well, having first visited there in 1973 when it seemed poor, very backward and with few prospects of success, and several times since then, with my last visit in February this year. What a metamorphosis in 45 years!
Andrew Amoils, head of research at New World Wealth issued a report for AfrAsia Bank and NWWealth on 3 August this year, stating that Mauritius is the fastest growing wealth market in Africa and one of the top three fastest growing worldwide over the past ten years.
Amoils reports that the growth in wealth in Mauritius has been assisted by a number of factors:
Strong economic growth.
A thriving and growing financial services sector.
Strong high net worth individual growth (a large number of wealthy people have moved there from Europe and Southern Africa and many locals have achieved HNW status because of the growth of the local financial sector.
Secure ownership rights (This being the most critical component of successful wealth creation globally.
Low taxes encouraging business formation and appealing to retirees. Company and personal tax rates are only 15% with no inheritance or capital gains tax.
Low level of government regulation.
Automatic permanent residency when buying a home for US$500,000+ .
Ease of doing business (1st in Africa and 25th worldwide).
Low joblessness and low inflation.
Well developed banking system and stock exchange.
No exchange control and freedom to invest overseas.
So many of the items speak for themselves. If we forgot ideology and accepted the realities of the modern world we would be able to turn our situation around in a couple of years. We have great people and many advantages as a country that would enable us to compete with and surpass Mauritius on all the items on the list.
Why can we not as a country follow the example of Mauritius, instead of hankering after some last century romantic ideas about socialism? Or feel sure that we can apply socialist policies and make them work here? If Mr Ramaphosa headed a government that had demonstrated a high level of competency, one might be a little tempted to let him apply his theories (prodded by the EFF and their ignorant schemes). The truth, however, is that the present government and a couple of million public servants have shown that they are unable to run a modern economy.
There is almost no example that I am aware of, apart from SARS and the Treasury, that has delivered an acceptable standard of government. Most government departments and SOEs preside over grossly inflated staffs, many vastly overpaid for what they do, many of whom are corrupt, and many more unable to do the work they were hired for because too many are ANC deployees who needed to be given a payola.
Peter Bruce pointed out in Business Day recently that personal income tax this year is projected to be R506bn, whereas public sector salaries will be R587.1 bn. Doing this for any length of time will mean that our country will go insolvent. Bruce warned that we are very close to disaster.
The International Monetary Fund (IMF) is hovering around and if we have to call them in to save us, they will impose conditions that will take away our sovereignty. The Star’s Business Report said last Thursday that the IMF has warned that South Africa’s fiscal policy needed to focus on containing the rise in public debt and building buffers against potential shocks.
Let’s pray that our president and his cabinet will wake up to the danger we are in and leave aside the politic stunts aiming at the election. Mr Ramaphosa needs to start leading us, instead of misleading us. Follow the Mauritian example instead of that of Zimbabwe and the better life for all will surely follow.
This article first appeared in The Star newspaper.