14 October 2019 05:32:51 AM

Low business confidence to be expected

- 2019-03-29 12:21:43 PM

That business confidence is at its lowest point in the last two years should not come as a surprise. And it is not as a result of policy uncertainty - the politicians punting expropriation without compensation (EWC) for example, are very conscious of their plans and what they aim to accomplish. The wave of optimism following President Ramaphosa’s election has definitely ebbed. Quite clearly, South Africa is not pursuing pro-economic freedom policies, and, by extension, policies that would enable economic growth. The Ramaphoria that swept through the country was devoid of any real substance - we fell for the good buzzwords without examining the actions being taken.

Expropriation without compensation is the biggest existential threat that can be made to any business. Amending section 25 of the Constitution to allow for EWC, will see the diluting, and eventual dismissal, of any notion of individual property rights we currently have. Property rights cannot be selectively applied - either all property is acknowledged and protected as such, or we amend section 25 and then try to live confidently in a country in which anyone’s property is up for arbitrary seizure by the state.

EWC is the antithesis of trust between citizens and the state. It negates every degree of security you may feel you have in the business you have spent years building up. With EWC, everyone’s property is up for grabs. Agricultural land (farms), homes, cars, the contents of your bank account, factories, business properties and the capital thereto attached - all of this and more falls under the notion of property rights.

Up until this point in SA’s very young democratic history, the property rights of each and every South African have been acknowledged and protected by the Constitution. Black South Africans, who were denied their individual, rightful property rights before 1994, are the people who will be affected the most by EWC. Amending section 25 of the Constitution will take us back to a time when their property rights were opaque at best, ‘granted’ to them only at the whim of the Apartheid state.

Richer South Africans can take their wealth, businesses and capital overseas if things become untenable in SA. Poor South Africans, the overwhelming majority of whom are black, will suffer the consequences of anti-freedom, anti-growth policies and legislation such as EWC, the National Minimum Wage (NMW), National Health Insurance (NHI), and onerous labour legislation. All of these  oppose the very idea of individual freedom and creating our own wealth. They instead open up avenues for more funding to flow into government coffers rather than into the hands of the country’s citizens. They allow the state to swallow up bigger and bigger portions of the economy.

South Africans are being presented with more and more reasons to not invest their time, resources and wealth in the country. The latest salvo against business confidence in SA is the precipitous Eskom situation. How can anyone run a business with so much uncertainty hanging over the electricity supply? Bigger businesses can afford their own generators and the accompanying cost - smaller businesses simply cannot afford yet another operating cost and many will have to either move elsewhere in some capacity, or close completely, with even more job losses as a result. If SA had three or four different energy producers and distributors we would not have to rely on Eskom. The fundamental problem is that the state sees itself as our caretaker and responsible for all our needs, therefore it may take a long time for competition to be allowed in the energy sector. The longer it takes, though, the more pain we will endure.

Trust between business and government is a frail thing at the best of times. Many a politician implores the private sector ‘to come to the party’, to contribute more, to take responsibility for moving the country forward. This may surprise those in the corridors of political power, but without business SA would be in an even worse situation than it is right now. The cost of starting and running a business is a huge challenge in and of itself; in SA it looks like we thrive on making it even more difficult for both new and established businesses to do their thing.

Operating a business, trading with others, employing people, creating wealth; this is all profoundly moral. The more we stifle the confidence of businesses to operate in SA, the more we stifle the very spirit of the nation.

Chris Hattingh is a Researcher at the Free Market Foundation

 
 

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