In an email to president Ramaphosa, Mr Tito Mboweni and their councillors we urged them to ‘cross the Rubicon’, to modernise our economy by ‘picking the low hanging free fruit of deregulation’, based on the World Economic Freedom Index report, compiled by more than 60 world renowned scholars, some of them Nobel Prize laureates:
‘Botswana, South Korea, and Singapore are remarkable stories. South Africa’s per capita GDP was a third larger than Singapore’s in 1960. Singapore’s is now 7 times larger than that of South Africa. South Korea had a lower per capita GDP in 1960 than the average in sub-Sahara Africa and now has a per capita GDP 32 times larger’.
The Index challenges us to modernise our economy to regain our lost position and generate, over time, between 22m and 30m jobs in S.A. plus more than 50m jobs on the African continent, saving millions of infants starving before the age of five, addressing poverty, violence (also against women and children), crime, war and floods of refugees.
For our ‘new economic dawn’ Cofesa calls for an defining announcement that will be remembered as a turning point for our economy, similar to that of
Ms Margaret Thatcher who abolished bargaining councils in the 1980’s to turn around the British economy and
- Mr Jim Bolger of New Zealand, who abolished the nationwide agreements by monolithic union power blocks with ‘compulsory union membership that bred wasteful strikes and scandalous abuses’ . In months Mr Bolger produced startling results, bringing down inflation from 15% to 1,3% and increasing the trade surplus by 500%.
President FW de Klerk On the 2nd of May 1990, on the steps of parliament, fearlessly and publicly announced that Mr Nelson Mandela would be released from prison, and that the ANC, PAC, SACP and other liberation movements would be unbanned, and so changed our destiny.
Will president Ramaphosa announce similar comprehensive reforms and fundamental changes as the catalyst for an ‘Africa Marshall Plan’, an ‘economic new dawn’ to eventually change the face of the continent? while he has the support and stature for this?
‘We can repeat a growth rate of 6% as was previously achieved when Mr Mboweni was Governor of the Reserve Bank with Mr Trevor Manuel as Minister of Finance’.
Let us mobilise the huge pool of goodwill, experience, and skills available for our common good.
- In our email we named 18 easy steps of deregulation to modernise the economy, at no cost to government bring the ‘new economic dawn’ and catch up with South Korea, Botswana, Singapore and beat poverty. Issues such as getting rid of BBEE, EE, cancel laws that thwart employment creation; laws, inconsistent with international norms, laws that are engineered to permit unions to force independent contractors, outsourced workers and temporary employees to affiliate as members; scrap the presumption (Section 200A of the LRA) that a person (such as an independent contractor) is presumed to be an employee until proven otherwise. We found that contractors are between 50% and 300% more productive than ‘employees’ and are consequently paid accordingly. The ‘cottage industries’ of China, create valuable entry levels to the formal industries. We need similar models.
Modernise by replacing NEDLAC with an Economic Development Board with an Independent Advisory Council to enlist astute business leaders and economists to unlock the unlimited resourcefulness of the private sector, grow the economy and transform Africa into the next growth continent, implement wide ranging deregulation for businesses, commerce, trade and industry and entrust associations for commerce, trade and industry with enterprise development, interns and incubators.
- Entrust the business sector – Business in South Africa has the highest failure rate in the world. Even before Covid-19 only 2 m of 3.2 m registered businesses survived despite billions spend by government agencies in lavish subsidies to establish enterprises. The private sector, business associations, trade, commerce and industry must be entrusted to transfer business and production skills to emergent entrepreneurs like elsewhere in the world, sustainable, at little cost and effectively.
The Index found government interference in the economy through government enterprises and investment is far too great and weakens both economic freedom and the dynamism of the private sector. Consequently downsizing government will reduce costs and enable tax reduction The Index shows just how large the South African government has become in relation to the size of the economy.
Agri SA and Solidariteit are renowned for successful mentorship, coaching and partnership programmes.
Mr Ramaphosa’s thuma mina clarion enforce this as a national vision. After Landbouweekblad and Agri SA’s land indaba in Bela-Bela, Agri SA announced ‘Agri SA Enterprise (Edms) Ltd’ with a panel of professionals headed by Mr Omri van Zyl, to partner for commercial and strategic projects and to take land reform and transformation to the next level.
Solidariteit, known for innovations like Soltec , announced ‘Ons sal self’ with multi billion morning stars for an ‘economic new dawn’ initiatives. Involve and embrace the private sector
Like elsewhere in the world outsource and entrust empowerment programmes to chambers of commerce and industry and associations- to BUSA, SAACI, AgriSa, ROCCI, Cape Chamber of Commerce and Industry, Cofesa etc who engage volunteers from the commercial and industrial sector as mentors, coaches who are keen to replace failed and costly programmes of government directorates and agencies.
- #Hightaxesmustfall4growth Substantially reduce tax as a direct stimulus for the economy
Even before Covid 19, president Donald Trump and the UK reduced company tax: We must follow America’s example where President Donald Trump reduced company tax from 35% to 21% to turn his economy around, the United Kingdom from 30% to 19%, and in China’s CIT rate is currently 25%.
The economists of the World Economic Freedom Index found that our very high, top marginal tax rate discourages the initiative and dynamism South Africa needs to build prosperity. South Africa’s top marginal income tax rate at 41 percent is considerably higher than Botswana’s (25 percent), the subSahara African average (33.17 percent), and the world average (28.98 percent). This puts South Africa at a considerable disadvantage compared to its competitors. The Index was designed by sixty of the world’s top scholars from many disciplines, including three Nobel Price Laureates
- Reduce VAT to 10% or even to 5%. No business takes home 15% on turnover without any risk. In fact without any risk, government now profits more from businesses than the businesses themselves.
- Naamsa calls for tax cuts “Motorists are paying more than their fair share in terms of taxes, with 42% or about R189 000 of the retail price of a car costing R450 000 going to National Treasury. Naamsa wants the figure to go down to 35-38%
- Reduce company tax to 17%. Similarly Mr Mboweni should reduce company tax to a suggested 17%. from an accumulated 42% (the current 28% plus 14% on dividends) and even as high as 52%, to enable entrepreneurs to build capital and pay taxes. The fact that an expected R63,3 bn less tax will be collected than budgeted for 2020, signals that the ‘tipping point’ has been reached and that higher tax rates will generate less income.
- Reduce personal tax to 11%. Personal tax needs to be reduced from 18% to 11%.
- Reduce excessive property tax. Excessive property taxes should also be substantially reduced.
- People have been taxed into poverty. Economist Mike Schussler has broken down the weighty tax burden placed on individuals in South Africa, showing that we have one of the highest tax rates in the world and hiking these will only serve to further stifle growth. (March 2020).
- Cut down government departments and staff compliments – Austerity calls for urgent action
- Trim down salaries, fringe benefits, opulent lifestyles- not only that of the 200 000 officials with salaries of more than R1 000 000 annually. There are glaring inconsistencies between good governance, service delivery and salaries ranging from R1 137 933 per annum for junior parliamentarians to R2 825 470 for senior officials.
- Before Covid-19 the real monthly wage of an average public sector employee was R4 000 more than for an average private sector worker. In the private sector salary cuts due to Covid-19, in the order of 35% were reported. It will increase the backlog for the private sector even further.
- Cut down on fringe benefits such as international travel, expense accounts, housing, blue light brigades, spending such as for catering, funerals, workshops etc.
Compare the desperation of 10 m unemployed, hungry people, millions living in shacks, many with no clean water or electricity, while sewerage runs through stands and many schools without water and sanitation,
with the 88 travel concessions per annum for members of parliament and their dependants, by rail, road or air and daily to parliament and to airports, free tablets, laptops, furniture, stationary and insurance cover for accidents, free government accommodation in the Cape during cessions of parliament.
Clearly these luxuries are unaffordable and must be abolished.
Move parliament to a central venue in Gauteng to save on travel, accommodation and other expenses. The Cape has become an international tourist destination. An increase of tourism incentives for the Cape should compensate for this move.
National, provincial and local government have become South Africa’s biggest job creators and must be trimmed.
Deregulate and incentivise – With across the board Corona Cash Grants to rescue businesses –
R500 000 grants Instead of investing at an average cost of R250 000 for one job in emergent enterprises where the failure rate is the 75%, subsidise existing companies with a minimum of R500 000 grants. The UIF-TERS benefits paid out of R130 bn surplus is a drop in the ocean.
Ensure the recovery and sustainability of existing businesses .
A precedent has been set to award R35 000 each to small farmers and R200 million relief funding for tourism.
Similarly cash grants across the board should be paid directly to companies in a bid to rescue those in distress, to stimulate the economy and to avoid further job losses initially estimated at potentially 2 million.
The UIF is also meant for national disasters such as Covid-19. To make an impact, we appeal for grants, supplemented, from other Government sources, to be paid out as ‘distress grants’ to make an impact.
A large number of our Member Companies are struggling to keep their operations from drowning because they have had no cash inflow while cash has been flowing out to pay salaries, rent, etc. So now they have used up their cash reserves and have minimal cash to get their operations going.
Repayable loans will not solve our economic malaise. It is time consuming and costly to administer by an already bloated government bureaucracy. Grants instead, will directly and immediately stimulate spending with a ripple effect, including to generate tax.
It is within the ambit of the UIF Board to pre-empt an estimated further millions of job losses linked to Covid-19. (Other sources reported considerably more job losses). While workers contributed 1% of their total earnings, excluding commission, to the UIF, employers contributed a further 1%. Their is morally and logically merit to use the funds to rescue businesses.
UIF surpluses have also accrued due to many contributors who have emigrated and left their benefits behind, also by contributors such as senior staff and company directors who tend to abandon their benefits, as well as long deceased people. The fund also accrued an estimated R70 -bn income on investments over the last 10 years.
- Modernise the transfer title deeds and land reform with 4IR IT with a Marshall Plan upshot
Fast tracking the transfer of title deeds will generate R5bn – R10bn in VAT income and potentially create 3m jobs in services and retail. With title deeds in hand, the new owners will access bank loans and bonds to upgrade, repair and extend their houses, buy white goods, cars, etc, thereby stimulate the economy. The Free Market Foundation has, from its own experience, ample evidence to support this contention.
Issuing title deeds will have a Marshall Plan upshot – ‘THE BENEFITS WOULD BE EVEN GREATER THAN THOSE SEEN IN POST-WAR EUROPE’- Bruce Cameron, of the JSE commented.
- Modernise by deregulating manufacturing. Abolishing outdated bargaining council restraints
‘Bargaining councils’ increase wage bills by between 18% and 33%. Abolishing bargaining councils will open the economy and enable the establishment of an estimated 200 000 SMME’s with 2m+ jobs.
- Bargaining councils – 07% legitimacy
- 07% of our total population of 60 m are employees and members of trade unions that is parties to Bargaining Councils.
- Bargaining Councils are statutory forums for trade unions to negotiate benefits for their 07%; 41 713 (in 2017) members. Councils enable a small collective of employers to protect and monopolise their market shares at the cost of economic growth and job creation for between 27- 47% of unemployed people.
· Modernise by deregulating and abandoning excessive fines imposed on businesses
We could not find similar excessive fines in BRICS countries: 44 firms, some of them listed on the JSE, were criminally prosecuted in 2018 under the Employment Equity Act. The majority were fined R1,5m. Companies face a daunting task of reflecting the country’s demographic profile, calculated as 77% black employees by the Department of Labour: Fines from R1 500 000, with R1 800 000 for a previous contravention and R2 100 000 for further contraventions, or 10% of turnover.
- Modernise by wide ranging deregulations – simplify and bring in flexibility and advance 4IR IT systems
A 121st ranking for business regulation disastrous for job creation –
The international panel of economists of the World Economic Freedom Index ranks South Africa 121st on business regulation and noted that few challenges are more important for South Africa than job creation and for that it needs to free its business to create employment. Overly stringent regulation can slow business expansion and weaken profits, which are both the means of further investment and the motivation for further investment. 121st ranking is a disastrous rank for South Africa and means that red tape is strangling business’s ability to create jobs and prosperity.
Decline of SMME’s and corporates
- Registered companies declined from 3,2 million to the present 2 million From 2015 the number of companies registered at SARS declined from 3,2 million to the present 2 million.
- SMEs have been under particular strain over the last 10 years, failing at a rate of 75%, the highest failure rate in the world.
- Start-ups declined from 250 000 (2001) to 58 000 (2011) and have been declining ever since.
Despite the economic ’boom’ experienced in the country between 2004 and 2006, the growth of small businesses has stagnated since 2003. Our remaining SMME’s not only need protection, but we need to see them rapidly growing in numbers.
Loss of entrepreneurs- Diaspora/brain drain More than 400 000 high income professionals plus their families have emigrated since 1994 and millions of remaining individuals are utilising the easing of foreign exchange controls to let their money emigrate. (Thank you for calling for their return). About 3 000 super-rich (those with wealth of $1million or R15million or more) “migrated” from South Africa over the past 10 years, Andrew Amoils, head of research at New World Wealth, told Fin24 in April 2019. The monthly loss in tax is estimated to be between R10 bn and R20 bn.
· Modernise the entry levels for interns, the unemployed, the untrained, unskilled, students, learners, persons who ‘shadow’, the disadvantaged, disabled
For inclusivity- Let the sun set on the general application of minimum wages
Minimum wages prevent new entrants to the work force and should not apply to trainees, interns or small businesses, and as in Germany, should not apply for the first six months or perhaps one year for previously unemployed persons. Since December 2018, 34 000 domestic workers have lost their employment.
- Modernise empowerment
Modern effective HR practice of recruitment, selection, placement and management to take candidates to their full potential in career paths and as entrepreneurs with tailored programmes for coaching, mentoring, role models, incubators, interns, communication and networking skills have evolved, while black empowerment and land reform became counter-productive (similar to statutory discrimination under apartheid) .
Over the last 20 years we have actively reinvented EE, BEE and land reform. Statutory EE and BEE became counter-productive (similar to statutory discrimination laws under apartheid), and must be abolished to conform to constitutional and international norms
Modern empowerment programs for employees and entrepreneurs conform with constitutional and international norms.
- Modernise – Let the sun set on black empowerment; statutory protection for an elitist few
Modernise for structural reform and business turnaround solutions, place a moratorium on all race based legislation such as on BBEE, affirmative action, race quotas and similar growth restraining concepts.
An analysis by a leading economist, Mr Mike Shussler, of 2019 stats of Statistics SA found that BBBEE and affirmative action benefitted an elitist group, a maximum of between 30 000 possibly only as few as 10 000 people to the detriment of millions of under- and unemployed people. Moreover it distorts the economy. (Beeld 18 November 2019 page 12).
It is notable that before the imposition of affirmative action and black empowerment ESKOM was internationally recognised as one of the five most efficient power producers in the world. Now many large corporations have relocated to elsewhere in the world, leaving skeleton offices behind, to get away from the burdens imposed by affirmative action which made them uncompetitive internationally and to retain their highly skilled expertise.
Professor William Gumede of Wits University wrote late last year: ”The purpose of Black Economic Empower (BEE), said the ANC in 1994, is to remove ‘all the obstacles to the development of black entrepreneurial capacity’ and ‘unleash the full potential of all South Africans to contribute to wealth creation’. In practice, however, BEE has had precisely the opposite effects. Close to R1 trillion has been transferred in BEE share deals’, said Professor William Gumede of Wits University late last year, but these deals have gone to ‘a handful of politically connected politicians, trade unionists, and public servants”.
The favoured few have done little to expand the economy. Instead, adds Professor Gumede, they have ‘crowded out genuine black entrepreneurs and killed the development of a mass entrepreneurial spirit in black society because all you need to secure a BEE deal…is the right political connections’. BEE preferential procurement in the public sector and state-owned enterprises (SOEs) has also been inordinately damaging. By abrogating normal procurement rules, it helped pave the way for the ‘Zupta’-linked ‘state capture’, estimated to have cost between R500bn and R1.5 trillion.
Modernise strike handling (collective action) with Pendulum Arbitration
Enforce Pendulum Arbitration as an alternative practical way of managing and resolving labour disputes quickly and fairly. We need to ensure that legal strikes are both peaceful and of shorter in duration, without causing damage to the economy. Compulsory “Pendulum Arbitration’’, an internationally recognized mechanism, would ensure this ideal.
- Modernise our strategy for continental economic development
We have the resources to change the face of Africa and improve the living standards of more than 120 million hungry and poor people.
- Modernise- Water “highway” from the Nile river to the Western Cape
Water development The Water Commission back in 1970 concluded that SA will, in due time, need to bring water from surrounding countries to help S.A. That is where the Lesotho Highlands Scheme started. Many more projects remain in the planning stages.
- Modernise strategies and policies to fast track the role out of our valuable human capital
We have spare capacity in construction, engineering, manufacturing, transport, management, finance, technology, agriculture, nature conservation, tourism, training, etc and other resources that can be used for an ‘African Marshall Plan’ to change the face of the continent
Since the completion of the 2010 World Cup, the South African capital project environment has witnessed a steady decline in activity and productivity
- Modernise by aligning to international norms and qualify for IMF loans. ‘Pick the ‘low hanging fruit’ of reform, deregulate, privatise and commercialise-
IMF loans – To qualify we need an inclusive economy aligned with international norms of inclusiveness SA would be required to implement major microeconomic reforms, especially for state-owned enterprises (SOEs) as well as product and labour markets’. and is called Building a bridge with improved conditions for private sector-led growth –
Inclusiveness also resonates with the ANC’s Freedom Charter June 25 1955:
‘The rights of the people shall be the same, regardless of race, colour or sex’
‘All people shall have equal rights to trade where they choose, to manufacture and to enter all trades, crafts and professions’.
‘We will exceed our own expectations’ President Mandela told Springbok captain Francois Pienaar and his team before the Rugby World Cup Final in 1995, our first World Cup winning with 15 points to 12 against New Zealand. Inspiration Let’s follow suit and beat Covid 19 and poverty. Pienaar says Mandela’s backing ‘meant the world’ to him and his team of underdogs. Rugby pundits had written off their chances of winning the trophy, but the Springboks eventually battled through to the final. Their opponents were the New Zealand All Blacks, who at the time were the mightiest force in international rugby. Again, the experts maintained South Africa had no chance of victory.
Thuma mina now calls for an electrifying moment such as when Madiba stepped out in a Springbok jersey.
God bless the brave and generating sustainable jobs in the private sector.
Dr Lawrence McCrystal Chairman and Adv Hein van der Walt