Tuesday, October 9, 2018

Tito Mboweni's appointment should scare, not assure, foreign investors in South Africa

'I am not available for Minister of Finance. You cannot recycle the same people all over again. It is time for young people. We are available for advisory roles. Not cabinet. We have done that.' Tito Mboweni tweeted out to the world on 19 February 2018, just months before he was set to become Minister of Finance.

Mboweni's own words perhaps show how positions in the current ANC are awarded not due to merit, but based on loyalty. Cadre deployment has been credited with the wholesale collapse of much of local government, with bankrupt state owned entities in vital parts of the economy, and with a shocking rate of joblessness. To boot, Mboweni's loyalty to the communist ideology of the ANC is beyond question. He is a public supporter of a National Democratic Revolution: a term which locally usually refers to impoverishing South Africa's 'colonists', and gradually introducing socialism. The NDR forms part of current official ANC policy. Mboweni is now Minister of Finance, after his predecessor, Nene, resigned, after it emerged Nene paid a house call to the Guptas, a family accused of having undue influence over the South African government during the Jacob Zuma presidency.

South Africa's economy has not been this bad since the end of colonial times. This, as the Centre for Risk Analysis of the Institute for Race Relations used South African Reserve Bank data to find that the economy was in the longest down cycle since 1945 (and thus the longest such cycle since independence from Great Britain).

South Africa's primary problems are well documented, with its labour relations the official worst in the world (ranking 137 out of 137 countries in the World Economic Forum - World Competitiveness Report), its union supremacist labour laws have made it a nightmare for businesses to run in the country. Companies find it next to impossible to fire employees who aren't the right fit, and will rarely hire an employee who does not have a previous employment record, leading to youth unemployment skyrocketing, and to most jobs requiring candidates with experience of several years to even be considered. The government has considered a national minimum wage as an answer to this: making it illegal for companies to hire employees for less than a certain amount. Unfortunately, companies are paying market rates for the sort of work often being done. As is often pointed out, the real minimum wage is zero: when the national one comes in, employees whose work is not worth the minimum wage to employers will be retrenched. This is what happened when it was introduced for domestic (household) staff. The real minimum wage is always zero. Yet, as government tries to enforce unsustainable pay for low skilled employees, unions have used very favourable labour laws and annual strikes to price their members and others out of the market.

In fact, speaking to the Joburg Indaba, Impala Platinum CEO Nico Muller, whose views are noted by Business Day to be shared by Harmony Gold CEO Peter Steenkamp, Anglo American Platinum CEO Chris Griffith and Lonmin CEO Ben Magara has, and have all, deemed labour intensive mining to have no future in South Africa ('Mining CEOs say deep-level mining is over in SA' by Allan Seccombe for Business Day on 5 October 2018). Future mines will be mechanised and involve mining machines moving shallow tons of earth in open cast mines. Miners blame rising labour costs, and spiralling electricity and water costs for the withdrawal, which will cost hundreds of thousands of jobs in the near future. Yet another mining charter seems set to blight the industry, and a Keynesian debt funded stimulus package will be aimed at uplifting black business, rather than focussing money anywhere it can help the economy, such as in tax reductions to drive growth. Black ownership and staffing requirements certainly have also hurt the economy dearly, as can be seen in more visible examples, such as the blight of state electricity company Eskom, which refused to do business with non-black owned entities, leading to massive price increases in electricity, and in the SABC's 90% local content policy under Hlaudi, both of which proved the point that choosing to force employment and business to be based on race or other 'accidents of birth', rather than market determined individual economic merit, is a sure way to damage an economy. Statistics show that when taking into account inflation, and the prices of basic necessities, South African wages have fallen by about 10% in the last ten years.



Unfortunately, South Africa's over-taxation of the economy and business killing policies and laws (such as enforced racist hiring laws, and limits to what white citizens can own), seem ideologically motivated rather than anything else. They form part of a National Democratic Revolution (NDR), a common socialist plan, where the colonisers are targeted, so that they lose everything they invested in the country, and communism takes. Unfortunately for white South Africans, the South African Communist Party has long identified them as the said colonists, and the impoverishment seems aimed at the local white population. However, that population, while making up only a third of the middle class (approximately those earning above about R15000.00 a month), make up the vast majority of the upper middle class and wealthy in South Africa, and account for a good deal of its tax payers and skilled workers. Killing off the wealth of the white population via a National Democratic Revolution, will inevitably kill the economy of South Africa altogether.

'The concept of a 'national democratic revolution' emerged from within Marxism-Leninism in its analysis of the unfolding national liberation struggles in the 20th century. The NDR has historically been understood as a revolution led by progressive motive forces (mainly oppressed and exploited) to defeat repressive and colonial regimes and build people's democracies, as both an objective in itself, but in circumstances also where, due to domestic or global balance of forces, such a revolution is unable to immediately proceed to socialism.  This could be because the motive forces are either not strong or conscious enough to drive the revolution towards socialism or other objective factors pose a limitation to a transition to socialism.' Blade Nzimande, writing as General Secretary of the South African Communist Party in Volume 5, No. 66, 18 October 2006, Umsebenzi, for the South African Communist Party.

Mboweni strongly supports the National Democratic Revolution.


'THREE URGENT TASKS FOR THE NATIONAL DEMOCRATIC REVOLUTION IN SOUTH AFRICA!

1) The State must own 40% of all mining companies.This is easy to do. 2)The State Must create a Sovereign Wealth Fund for future generations from mining dividends. 3)A State Bank must be created URGENTLY.' Tito Mboweni tweeted at 1:58 AM on the 28th of April 2018.


South Africa, in appointing Tito Mboweni as Finance Minister, has a true believer in the NDR, at the helm of the treasury. Further curtailing of business and economic freedom won't help grow the economy, and government spending has never had a success story in South Africa, as it inevitably has taken resources from the most productive citizens, thrown these resources through a corrupt government system, and has usually spat them out to tenderpreneur businesses. As corporate tax cuts in America have demonstrated, cutting taxes on businesses causes them to raise employee salaries, and invest more in growth. South Africans have been taxed to an extent that tax revenues have reduced as taxes increased. Mboweni displayed a degree of economic illiteracy, by suggesting essentially a further 40% tax on mines.

As Gareth van Onselen, the Head of Politics and Governance for the IRR, and a Business Day columnist points out on his Twitter account: 'Honestly, the ANC must just put Julius Malema in charge of finance and be done with it. This charade is getting ridiculous.' (At 5:20 PM on the 9th of October 2018.)




Julius Malema, the head of the local Marxist black supremacist party, the Economic Freedom Fighters (EFF), has been among those calling for hitherto Finance Minister Nhlanhla Nene to resign or be fired. Malema's party wants all land to be owned by the South African state, and has said he isn't calling for the slaughter of white people 'at least for now'.

South Africa has attempted to mix African and Western concepts of ownership, by maintaining the Homelands established by the Apartheid government, keeping them under the control of tribal leaders by means of legal instruments such as trusts. The people living in tribal lands don't have security of tenure, they don't own their land. The result has been economic devastation, as the land is worked by locals with a serf like status, easily evicted by tribal leaders. A similar wholesale waste of productive farmland would likely result from the EFF model for the future of South Africa.

Meanwhile, speaking today, as recounted by the official account of the Presidency, President Cyril Ramaphosa seems unaware of the terrible impact on the economy of the recent strike at the national Post Office, which saw it build up a backlog of months' worth of undelivered mail:

'As we deepen economic transformation and create new value streams in our economy, our postal services are poised to bring new goods and services to the nation, create new jobs, create new wealth and help us build an inclusive knowledge society.' (At 11:04 AM on the 9th of October 2018).




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