SA at economic dead-end
A conscious movement toward the not-yet is one more human activity separating us from the rest of the animal world.
We humans are actually able to think about 10, 20 or 30 years ahead.
This is, however, an attribute that politicians make a living out of: a promise of a “better tomorrow” that very often only materialises for a few!
The notion that welfare is about the quality of wants, rather than the algebraic difference between subjective wants and their satisfaction, is not dependant on any law of historical progress.
In the same vein, therefore, budgets are normally about what lies ahead and shaping the economy accordingly, short to medium term.
Unfortunately in probably what is quite the worst budget tabled for many years, Pravin Gordhan’s effort this year is only about higher tax and not about hard issues such as unemployment, a bloated administration rendering poor uneconomic services, high levels of consumption expenditure, sharply increased debt servicing costs, low foreign direct investment, a widening budget deficit and low growth.
Alarmingly, it has been reported that at an embargoed pre-budget press conference Gordhan stated that no journalist needed to worry about the jump from 41% to 45% in the top marginal income tax rate, because it was “other people”, which is the “rub”, who would be paying tax at the higher rate.
He then followed up with a more sinister suggestion, intimating that more of the same is to come, by telling his audience that his economic guru, Tony Atkinson, a British economist and writer, believed 65% was the appropriate level.
This is apparently not going to be enough for the ANC.
Post the budget we are led to believe that as part of the its latest fad, “a requirement for a new perspective on radical economic transformation”, new ways to increase tax revenue streams and wealth redistribution are to be explored – meaning, I suspect, a full-out assault on “white monopoly capital”.
What the ANC, in particular Jacob Zuma and his cronies, and it now seems Gordhan as well, do not seem to understand is that wealth is colour-blind, and all accumulated wealth in the form of investment and business ownership should be regarded as a national asset and treated as such by creating conditions conducive for these assets to be employed in the country’s as well as the owner’s best interests.
But it has to be understood that, dictated by risk, and like water, wealth will find its own level of comfort.
Right now by way of an example, because of conflicted government policies, that level of comfort is in the form of high levels of cash or near cash being reported in most published balance sheets, along with increased levels of investment in Africa and abroad, a negative risk indicator for new foreign direct investment if ever there was one.
There is nothing in the budget proposals that will take South Africa out of the present economic dead-end. Wide scale redistribution from accumulated wealth will not help either, instead it will put a further dampener on growth.
The man in the street should know that low growth on account of conflicted policy options during the remainder of the Zuma presidency will be even more damaging to society and accumulated wealth than even the replacement of a competent finance minister with an incompetent stooge was in December 2015.
There are ways of fixing the country’s economic woes which can achieve all known economic objectives so far articulated by the ANC without turning the country into a quasi-marxist state, but I will leave that for another day.
However, it is important for folk out there to realise that it is not going to be feasible to solve the country’s problems from the same level of consciousness that created them in the first place – democracy is not “vox populi” and South Africans deserve better outcomes for every rand paid in tax.
A woeful budget, I believe, again illustrates this point!