Many of South Africa’s problems can be laid at the foot of our state-owned entities (SOEs). Over the past ten years, the South African Government has bailed out – officially “recapitalised” – SOEs to the tune of R331.2 billion in taxpayer rands. These include underperforming companies, many of which have not turned a single cent in profit in decades. Many are involved in State Capture.
Good and bad competition
If there is one good example of a competitive market-based environment in South Africa, look to none other than our retail sector. Think of African giant Shoprite Checkers, Pick-n-Pay, Food Lover’s Market, Woolworths Food, OK Bazaars and Spar, and countless smaller retailers. Every month, they compete for your hard-earned rands. They bring their workers employment, the government its revenue, and investment in the economy of millions of rands each year.
In comparison, South Africa’s taxi industry is an example of unregulated competition that allows mafia-like behaviour and lawlessness to run rampant. In a 2020 report published by the IRR, author Ivo Vegter detailed exactly what happened: “The lack of permit enforcement enabled masses of unlicensed operators or ‘pirates’ to enter the market. It was one of the first opportunities for black South Africans to participate in the free market, fuelling competitive rivalry unmediated by effective policing or the justice system.”
Government has supported the industry to the tune of R5.9 billion since the relaunch of the Taxi Recapitalisation Programme (TRP) in March 2019. The late Finance Minister Tito Mboweni confirmed in 2021 that the entire industry only paid R5 million in Corporate Income Tax. It reportedly makes an estimated R50 billion a year.
The government also donated roughly R30 million in taxpayers’ money to the South African National Taxi Council (SANTACO) in this financial year, described by Carte Blanche as “the closest thing to a regulatory body for the industry”.
That organisation will sound familiar: SANTACO called a strike in Cape Town in August 2023, which reportedly cost the Western Cape economy R5 billion in lost economic activity and resulted in the deaths of five people.
Does the government endorse the anti-competitive behaviour of the taxi industry? Of course it does. It has made no effort to regulate the sector, despite multiple promises to do so over the years.
It has placed commuters in an unfair position and closed the market off to more affordable alternatives like trains or even municipal Bus Rapid Transit (BRT) alternatives, because the taxi industry is too scared it will lose its government-sponsored monopoly.
They’re so scared that they’ll die trying to defend their monopoly.
Back to the biggest culprits:
Fiscal burdens
Privatising Eskom, South African Airways, the SA Post Office, Transnet and the other 700 SOEs that government so proudly defends could have brought in much desired revenue for the national government to tackle infrastructure problems and the service delivery mandate of municipalities across the country.
But the government won’t.
State-owned entities are so mismanaged and beset with corrupt individuals that private companies would take one look and immediately start running for the hills.
Eskom switched our lights off for 17 years, SAA flies with crews lacking training, the Post Office takes months (or even years) to deliver packages and Transnet is in a state of disaster that is derailing South Africa’s growth trajectory.
National Treasury noted in a March 2023 presentation to the Standing Committee on Public Accounts that these SOEs have become “fiscal burden[s]”.
Undeterred, the government continues with its pro-bailout stance, held up by the unions – most notably in the case of the Post Office. It says that cutting 6 000 jobs is equivalent to “slaughter”. Never mind the point that the Post Office was run into the ground. It operated with government guarantees, reliant on public money like drug addicts who have no regard for their family.
“Family meeting”, anyone?
Skills
The key to running a successful business – state-owned or otherwise – is skill. Education provides the development of skills. Without it, the country will continue to lose out on innovative solutions to its problems.
South African children are struggling with numeracy and literacy. SA’s future generations will be woefully underprepared, under-skilled and poorer as a result. It doesn’t help that our teachers can’t teach, or that parents are neglecting their responsibilities. We will be doomed.
We must not underestimate the problems that will lie ahead if South Africa does not begin to reform the staunchly pro-union education sector into one that is pro-parents, pro-freedom and pro-children.
One way to do this is to implement tax-funded school vouchers, putting money in the pockets of parents, allowing them the freedom to choose – and stimulating competition between public and private schools.
Freedom
Margaret Thatcher once said, “[the] challenge is to create the kind of economic background which enables private initiative and private enterprise to flourish for the benefit of the consumer, employee, the pensioner, and society as a whole”.
Enabling people – unlike the Communists who want to enable the State – is a core part of freedom, I believe. No one makes better decisions than the individual involved. That is what sets liberal democracy and free competitive economies apart from all the rest.
It should then come as no surprise that the United States, Canada, the UK and other liberal democracies are more economically free than South Africa, according to the Fraser Institute’s Economic Freedom of the World Index.
Free markets of a special type?
There is something occurring in society that all South Africans should take with a healthy dose of scepticism: the “transformative” Government-Business Partnership.
Big business and big government are a danger to fair competition.
The taxi industry is the most prominent example. Another could be Multichoice’s domination of the local cable TV market, and its continental dominance. For far too long, small business and entrepreneurs have suffered, due to protectionist economic policies that create barriers to investment, job creation and growth.
Local may not be so lekker
Intervention into the economy stifles freedom. As the Tax Foundation states, “tariffs are taxes” that are imposed on consumer, ostensibly to protect local industry. South Africa has anti-competitive Master Plans for everything from chickens to cannabis and cars. For example, one plan states that the Department of Trade and Industry wants to “drive domestic demand and promote affordability.”
Often – as well-intentioned as tariffs may be – they increase costs for businesses already struggling due to failing infrastructure, crime and global supply-chain issues, like conflicts and prices of global commodities.
Africa’s answer to freer trade, the African Continental Free Trade Agreement (AfCFTA), was blocked by two of the continent’s largest economies, Nigeria and South Africa.
Trade officially began in 2021 after coming into force in 2019, but South Africa only started trade this year.
With economic freedom on the African continent being lowest in the world, due to weaknesses in the rule of law and property rights resulting in extractive institutions taking hold, experts note that Africa could only see the benefits of the AfCFTA in the next decade.
The road to economic hell is paved with “good” intentions
Whether it is in our retail sector, the taxi industry, or business partnerships, the South African and African economies can only benefit from well-regulated competition that promotes freedom of choice and the freedom to trade. In a world that is becoming increasingly protectionist, defending the freedom to trade has never been more important.
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