21st Century Megatrends
24 April
Nwanda internal news: April 2013
24 April

The silent death of the private sector

psdeath_BCommunists in South Africa must be popping the corks of their champagne as they witness the dream of a state-run economy coming true. Socialists must be wearing a wry smile as, despite their belief in a mixed economy, they do have reservations about the profit motive. Why all this celebration? Because the big picture suggests that, with some illustrious exceptions, the decline and fall of the private sector is happening before our eyes.

  • South Africa is no longer seen as the premier investment destination in Africa. The World Bank’s list of faster growing economies over the next five years has seven African countries in the top ten. They are embracing free enterprise while we continue to be dogged by policy uncertainty and increasing bureaucracy;
  • Graphs shown by economists at seminars indicate that the destruction of jobs in the private sector over the last five years offset by growing public sector employment and government grants. In January, the overall drop of 50 000 jobs countrywide hardly dented the stock marker or merited any press comment. In America, the Dow would have fallen 5% on the news and the president would have been furious.
  • The hikes in electricity tariffs – past and future – are completely undermining our competitiveness as a nation: meanwhile, the country’s flagship project – Medupi, which is also the largest project in the Southern Hemisphere has had no construction activity for over a month. Any hopes of the private sector having access to greater electricity supplies in the near future are currently being dashed;
  • New small business formation has stalled as a result of lack of support from the entrepreneurs and overregulation. At the same time, many small businesses are going bankrupt on account of an inconsistent payment culture in government and big business. For many in the union moving entrepreneurs have no right to exist as entrepreneurship does not count to decent work. As members of the tripartite alliance, they can adversely influence the ruling party’s attitude to small business;
  • Cadre deployment and corruption have shut down many opportunities for the real stars in the private sector to be awarded to state contracts. Equally, the cost of maintaining and building new infrastructure has gone through the roof, further undermining the cost-efficiency of the private sector;
  • Hard time in the global economy combined with the growing anarchy in the workforce (where even established unions are no longer listened to by employees) have seriously squeezed many out of our resource business which are a prime element of our economy. Even the largest companies in South Africa have limited cash reserves and borrowing facilities. If exhausted, the go bust;
  • Unrestricted imports are causing havoc in our textile and food industries, lowering production capacity and making the nation more reliant on the private sectors of other countries. Farmers are dreading land reform and selling up. I could go on, but I think I have given enough examples to show that something is rotten in the state of South Africa. We need to reserve the downward slide immediately.

The only way we are going to do this is by having an Economic Codesa with measurable outcomes. Please, Cyril, step up the plate. If you want to triple the size of the economy by 2030 and reduce underemployment by 6% – which is the objective of your and Trevor’s plan – you have to have a thriving private sector. But you know that already.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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