South Africa at a Tipping Point

unemployment service delivery economic growth
Tuesday, 17 July, 2012 - 11:19

In this article, the author offers tips on how South Africa could grow its economy and create job opportunities to lift the poor out of extreme poverty

South Africa (SA) is at a critical stage of its development. The bright future that beckoned post-1994, promising the growth of a free, multiracial and prosperous nation has been disintegrating around us. There is a general state of anxiety among the country’s people as to what will happen next.

One of the major causes for alarm is that the country’s decision-makers do not appear to have a positive forward-looking philosophy. In this they are out of step with the leaders in Africa who are transforming their countries by implementing free market economic policies. Zambia, Uganda, Kenya, Namibia, and Ghana have all overtaken SA on the economic freedom index. And other countries are going to overtake us in the next few years if they continue to become more free while ours persists in its slide down the index; in the past decade we have dropped 42 places, down from 42nd to 84th place.

However, all is not lost, what is broken can be fixed. All that is required is a change of direction from negative to positive, from less free to more free, to harness the talents of all the country’s people. Their energies can be released by embracing the kind of freedom that most of us had in mind in 1994 and rapidly implementing economically emancipating policies so that discriminatory laws and actions can finally and forever be dispensed with.

After discussions with my colleagues, Leon Louw and Eustace Davie, we decided to draw up a bold plan of action which, if adopted and implemented, could make SA a truly winning nation. A plan that would allow us to reverse direction, climb back up all the indices and achieve those goals that everyone agrees we need; high economic growth, full employment, significantly reduced poverty, all taking place in a harmonious, cooperative environment.

Some proposed actions are:

  • Transfer ownership of the many state-owned industries accumulated by the apartheid government (or the proceeds from the sale of such assets) to the poor. Poor people having shares in these enterprises will mean real, direct and personal economic empowerment. At the same time, remove all barriers to entry into the competitive private provision of goods and services currently supplied by public enterprises. (The Czech Republic implemented a shares-for-the-people programme with dramatic, positive results.);
  • Upgrade all apartheid-style leasehold to full freehold title or other inferior rights to housing, at no cost to the occupants;
  • Transfer ownership - on application, of all state-owned hospitals and clinics to the people working in them, including doctors, nurses, cleaners, catering staff, and administration personnel, and, where appropriate; to residents of surrounding communities, with government contracts for the supply of medical services to the poor on a private-public partnership basis that are dependent for renewal on the delivery of efficient services;
  • Let funding follow the students in government schools on a capitation basis to create competition between schools, provide school choice, and improve the quality of schooling. (Parents will be empowered and enabled to send their children to schools that post good results. A consequence of this will be that schools which start to lose students will urgently implement the necessary measures to turn around their performance.);
  • Utilise the large government landholdings to give every homeless urban family freehold title to a 200 square metre plot of land, and, in rural areas, with the cooperation of communities, give freehold title to families in respect of their homes and yards. (The one-family-one plot scheme will result in ownership by millions of the economic asset most prized by people. Most beneficiaries, once they own them, will improve their properties, thus increasing their value and creating opportunities for trading and openings for skilled and aspiring artisans.);
  • Declare all former “homeland” areas to be Economic Development Areas. Special cost-reduction benefits, such as tax exemptions, reduced taxes and removal of restrictive labour laws and regulations for a period of (say) ten years, will attract investment and bring about accelerated growth in those areas;
  • Give jobless people who have been unemployed for six months or more Job Seeker’s Exemption Certificates (JSEC’s), valid for at least two years, that allow them to enter into employment contracts with employers on any conditions and wages that, in their sole discretion, are acceptable to them. (This measure will expedite the employment of desperate people for whom accepting less favourable employment terms is far better than being unemployed.).

For any of the above, massive wealth transfers and other benefits to succeed, in fact before the lives of our people or the economy of our country can improve, we need the rule of law to be fully applied and all provisions in laws, regulations and policies that conflict with the ‘equality before the law’ requirement in the Constitution to be removed.

The current situation in SA is characterised by, among other things, an unacceptably high unemployment rate (7.7 million unemployed) that is not getting better; high crime levels despite the best efforts of the police services; a low economic growth rate; a chaotic education system with some schools yet to receive textbooks and classes being conducted under trees; and a curtailment of economic growth due to an inadequate electricity supply. People are growing increasingly unhappy and swift, appropriate action has to be taken to avoid even more undue hardship, especially among the poorest members of our population.

Government keeps putting forward grand plans for large developments which will increase its role in the economy. No matter how involved government becomes, nothing it does that taxes or restricts the private sector, will succeed in improving conditions for the poor and unemployed. Government should rather stand back and make way for private companies to bid for, fund, own and carry out these projects. Its task then, will be to concentrate on the difficult, time-consuming but important task of transferring wealth; not from the economy-enriching activities of the private sector, but from an over-burdened and over-stretched government to a people desperate for shelter, food, work and dignity. The benefits will be dramatic.

- Temba A. Nolutshungu is a director of the Free Market Foundation. This article was first published on the Free Market Foundation (FMF).

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