Policy flip-flops are poisoning the economy
Even our regulations, which are meant to provide a consistent framework, enable inconsistency and prevent businesses from planning ahead.
The government needs to adopt a policy framework that embraces consistency, reality and good economic sense. As it stands, the VAT hike should never have been contemplated. And the reversal only fuels the fires of uncertainty, as businesses and consumers must wonder if the reversal will be reversed.
Certainty is one of the most important factors in a thriving economy. Businesses and consumers need to know what to expect from the government, regulations and their environment. Planning cannot occur without certainty, and every investment becomes risky and less desirable when there is a risk that the money could disappear due to the mad utterings of a president, or the implementation of a hefty tax.
According to a CSIR report, loadshedding cost the economy an estimated R481 billion in 2024, down from R2.9 trillion in 2023. That isn’t just due to lost work hours due to blackouts. The inconsistency of rolling blackouts led to businesses halting expansion plans, shrinking their operations, and being unable to plan for the future.
I have batteries for my work computer, and I lost work hours due to impromptu loadshedding and unplanned maintenance. I was unable to attend online meetings as back-to-back outages left my power supplies drained.
And even when businesses acquired generators and large power supplies, they still must plan around the complete mediocre uncertainty of Eskom’s maintenance schedule and addiction to burning diesel, not to mention how attempts to escape the grid through solar energy have come under attack by regulators attempting to strangle South Africans’ attempts to produce their own electricity.
Even our regulations, which are meant to provide a consistent framework, enable inconsistency and prevent businesses from planning ahead.
Black-Economic Empowerment (BEE) and other race-based regulations, not to mention whole swathes of other policies, create a labyrinthian nightmare for lawyers and business owners to navigate just to do the simplest aspects of their business. Employers now must engage in complicated mathematics to try to determine what race their new employee is allowed to be and must delay their expansion and the creation of jobs when they can’t find a suitable employee of said race. Not to mention that the race quotas keep changing.
BEE by itself provides a host of problems, pushing the cost of state procurement up by exorbitant amounts. Officially, BEE state procurement contracts can charge up to 25% more. But in practice, the state has forced itself do deal with opportunistic, corrupt monopolists of their own making, who end up charging almost a million Rand for kneepads and building a R15 million school for the cost of R45 million.
The government can’t even plan adequately, as its own regulations force it to spend exorbitantly on contracts with corrupt businesses enabled by BEE.
Construction mafias and their ilk are only capable of surviving due to government regulations which push BEE, equity and localisation quotas. Businesses and government developers would have increased ability to push away extortionists if the extortionists weren’t able to hide behind walls of legislation.
South Africans need consistency. We need to know that the fruits of our labour won’t be looted by politicians, mafias and criminals. Raising taxes should not be considered an option; we are already overtaxed as it is.
Rather, the government needs to identify regulations that provide confusion and enable corruption and abolish them. This is not some shock therapy as seen in post-Soviet Russia. Tenderpreneurs and corrupt officials are the only people who suffer, and they are not representative of the South African people.
Alongside this deregulation, and the consolidation of laws into a more understandable and cohesive whole, parastatals that currently cost the fiscus billions in bailouts, while also wrecking entire sectors of the economy through incompetence but be privatised. This can be as gradual and as slow as needed, but a clear plan needs to be put forward to allow for this decentralisation and privatisation.
And most of all, the government must stop treating businesses and minorities as enemies. We’re all in this together, and the government must allow all stakeholders a seat at the table to plan, while learning ahead of time of policy changes. A clear plan of action will go a long way to reduce the stress of inconsistency.
South Africa can flourish. We just need to embrace a free market governed by sound economic principles.
Nicholas Woode-Smith is the Managing Editor of the Rational Standard, a political analyst, author and senior associate of the Free Market Foundation.