Tuesday 26 March 2019

The exodus of the professional class, and of the rich, all quietly leaving South Africa, has begun

What a lot of legal professionals might not yet understand is that tertiary industries like ours rely heavily on the primary and secondary sectors of the economy to survive. The primary sector is on life support and every day more likely to collapse. The secondary sector of the economy relies upon the primary sector of the economy to survive. The tertiary sector relies on both.

Over the last few years, running a law firm has become more expensive, and, as an industry, our services have often become more of a grudge purchase for clients, a necessary luxury fewer can afford. Many lawyers don't increase their fees with inflation anymore, knowing their clients just can't afford to pay more. But the collapse of each sector becomes more likely as each month fades into the next.

Eskom is keeping the lights on the same way many of you do when the lights go off, with diesel. A lot of us rely on government, whether deeds or masters' offices or courts for much of our livelihood. These rely on some degree of regular power supply.

Then there is the Legal Practice Act which might be regulating industry to death. The plan has also been announced by the powers that be to change the mandate of the Reserve Bank so it can print more money, affecting supply of cash in an economy without enough demand, thus causing further inflation, what Ayn Rand called theft (of citizens' income and savings) by remote control. The state, also, has plans to introduce prescribed assets, forcing pension funds to effectively make loans to it and SOEs which no one else will make. South Africa's government is three trillion in debt and is borrowing two billion rand a day to keep the cogs of state machinery turning. The sands of the hour glass are running ever faster out.

Whether our electricity prices which are at twice international norms, breaking infrastructure, taxation well beyond the Laffer curve, on the verge of collapse water treatment, industry, or the economy itself, something is likely to give. South Africa has the worst in-out investment ratio of any non-tax-haven. South Africans, per the statistics, are moving everything they can offshore, while foreigners just aren't investing in the economy.

Surveys and statistics, as well as anecdotal evidence all find our professional class is leaving our shores. Doctors say they will not stay if NHI passes, but the state continues on with it, and so many are leaving anyway, taking their essential skills with them. A lot of the attorneys I know are leaving, they just haven't announced it officially yet. Many top law firm partners and directors, and advocates are getting jobs as legal secretaries and paralegals overseas. Engineers, per media reports, are leaving the country, due to threats at gunpoint by RET forums at construction sites.

Both Price's Law and the Pareto Principle teach us, from economics, that a tiny proportion of people produce most of what is created in an economy. The ratio is incredibly skewed, with so few hyper-productive individuals creating most of a nation's wealth. This is reflected especially starkly in South Africa where just a few hundred thousand taxpayers pay the vast majority of the tax revenue of the country. When an economy hits an iceberg, those who have means are the first to put on their life jackets and jump to somewhere safer.

A disproportionate percentage of South Africans are employed by the state, and so many survive off of social grants. Yet more survive due to doing business with the state, its employees, and with recipients of social grants. As the private sector loses its most productive citizens, its revenue shrinks, and so does collectable tax. South Africa is so far beyond the Laffer curve, that any further taxation will just shrink tax revenue. As the state's debt and responsibilities continue to increase, the bedrock of private industry it sustains itself upon is heaving under a weight which could soon collapse it.

South Africans as a people have always been robust, and its attorneys have been as well.

Those of us still in the industry are still making enough to make our careers worthwhile.

However, we are sitting on a national timebomb, or rather are within a grid of dozens of bombs. Which will go off first is uncertain, but any one could set off the rest.

Your three to five year plan should probably be open to the possibility of getting your affairs in order, saving up, updating your CV, and considering closing up shop and emigrating to more certain climes, if need be.

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