Governments and politicians don’t make money, they spend ours

There was already a ray of hope the President would take charge when he spoke in Parliament last week. He said, almost as an aside, that stealing money from the State was stealing money from the people who made it.

It was the clearest public recognition yet that behind the corruption that has bedevilled the country is ignorance of this most basic of economic truths -    every cent that any government spends has its origins in the hard work of ordinary people.

Every Rand of every salary paid to civil servants, policemen, teachers and nurses in state clinics has its origins in the taxes paid by those in the private sector, whether they are called company taxes on profits, personal tax on salaries or value added tax levied on purchases – it is all earned first by the private economy.

Put at its simplest, Governments and politicians don’t make money, they spend other people’s money.

It is dangerous fantasy to pretend otherwise. As the experience of countries that have attempted to prove it false have shown, the result is rampant corruption, over-borrowing, a relentless slide into a debt trap and ultimately hyperinflation and economic collapse.

The example of Zimbabwe epitomises this economic truth. Further afield, Venezuela is following the same disastrous path leading to hyper-inflation in which people need bakkie-loads of cash to pay for simple necessities.

Those who read history understand this.

Our President clearly knows the dangers of widespread economic ignorance. He must also know that the economy was in dire straits before Covid hit, and that actions taken to prevent it spreading have made it worse, wiping out large tranches of taxpaying entities.

Exiting the ranks of taxpayers are thousands of newly-unemployed individuals, companies now closed, small tourism businesses wiped out in a matter of weeks, restaurants that are no longer viable, office rental companies now without tenants, the wine industry decimated, and the liquor and tobacco sectors shutdown for months: - the list goes on.

What faces us in the public and private sector alike is the task of rebuilding the South African economy using all our skills and talents, particularly those we call entrepreneurs. Instead of suspicion, these wealth creators should be lauded for the economic heroes they really are. That means clearing away obstacles in their path, speeding up the regulatory processes, simplifying the red tape.

Couple this with an end to corruption, we can fix anything.

Issued by Dean Le Grange, Media and Digital Co-ordinator, Cape Chamber of Commerce and Industry, 4 September 2020