Ignoring business will doom the economy

Policymakers evidently don’t care about adopting a realistic, fact-based approach to wealth creation, economic growth or even governance.

Photo by Carlos Muza on Unsplash

The African National Congress (ANC) and South African government as a whole needs to realise that it isn’t some lone dictator, imposing its will on South African society and the economy. It is just one pillar in a vital ecosystem. And if we are to achieve economic growth, prosperity and a better society, the government, civil society and business need to work together.

The recent threat of a VAT hike, and its subsequent reversal, has sent shockwaves throughout the business community. Retailers spent a fortune adjusting prices, labels, sending communications to their customers and clients, updating systems, and planning for the years ahead. And now, they will have to do it all again as the decision was reversed.

Zinhle Tyikwe, CEO of the Consumer Goods Council of South Africa (CGCSA), condemned the flip-flopping: “The back and forth over the VAT issue came at a cost to retailers who have had to incur financial expenses while adjusting their systems.”

The constant changing of crucial policy came as a shock to the business community, as did the raising of VAT. This is because the government doesn’t see it as its job to communicate with business leaders, consumers or anyone other than their ideological allies. Even ministers reportedly struggle to communicate across department lines, with many policies become unimplementable due to the cross-ministerial nature of some projects and the refusal of ministers to cooperate with their peers.

The postponement of the budget created further uncertainty, exacerbated by the government’s refusal to engage crucial stakeholders. This has been seen again and again over the last two decades. The government runs roughshod over industries, expecting their dictates to be all-powerful and final.

Concerns by the medical aid and healthcare industries over National Health Insurance (NHI), a vastly expensive and destructive policy, have been ignored, with ignorant politicians given more say than professional doctors, actuaries and experts who will actually be directly affected by the policy.

Despite Ramaphosa’s professed desire to attract R1.2 trillion in direct investment (an arbitrarily specific number, I might add), his government’s policies do not add to this goal. Foreign investors and companies are chased away by black economic empowerment (BEE) regulations, which the business community has made quite clear are damaging to the economy as a whole.

New regulations require gas and oil companies to handover 20% of their companies to the government free of charge, while also complying with stringent BEE requirements, race quotas in hiring, and arbitrary municipal development plans.

As argued by the editor of BusinessDay: “The proposed regulations appear to be driven more by ideology. A vital strand of this ideology is resource nationalism.”

Policymakers evidently don’t care about adopting a realistic, fact-based approach to wealth creation, economic growth or even governance. They have a strict ideology of African socialism and nationalism, where they decry private property rights, private enterprise, the free market and constitutional democracy.

That is why despite BEE costing hundreds of billions in corrupt procurement deals, and racial quotas being a relic of Apartheid that should not even be contemplated, we are still dealing with a race-obsessed authoritarian-wannabe regime.

There is no economic growth without a thriving private sector. There is no tax base without a thriving private sector. The government needs to cut red tape, and liberalise the economy to enable economic growth, while also cutting spending to alleviate the tax burden on business.

But, as it stands, the ANC stalwarts won’t do what is needed to truly reduce unemployment and rid the country of poverty. They would rather remain deaf to the concerns of business, treating them like an enemy and not a stakeholder in this country.

So, what is the solution? As voters, it is clear that we need to keep voting for the few parties that do care about all sectors of South African society. The Democratic Alliance (DA), Freedom Front Plus (VF+), African Christian Democratic Party (ACDP) are three notable examples; all three consistently opposed the VAT hike and defended all South Africans from yet another tax burden that we can ill afford.

Businesses must also become more demanding and highlight their importance to the economy. Businesses should loudly proclaim their opposition to key policies and not try to place peaceful compromiser. They should not be debating from a place of meekness, but as vital pillars of our society with strong bargaining positions.

And politicians? Politicians need to realise that businesses are the most important aspect of our economy. There is no economy without business; no taxes, no jobs, no wealth. Every state-run, centrally planned economy failed dismally. The ANC wants to embrace this model despite all evidence of its failure. It’s up to all of us to oppose this with every power at our disposal.

Nicholas Woode-Smith is the Managing Editor of the Rational Standard, an economic historian, political analyst, author and senior associate of the Free Market Foundation.