Socialist ANC Slowly Destroying South Africa’s Economy

The problems inflicted by big government are not confined to Europe or the United States. I have reported on the enormous problems plaguing Argentina, and in August I concluded about South Africa:

The failure of South Africa over the past 18 years to become a prosperous nation is entirely attributable to the radically leftist policies of the ANC government. In addition to corruption, the ANC has handed out entitlements right and left and promised all kinds of perks to people without neither requesting nor providing an opportunity for them to work for the very same goodies. Instead of creating an economic climate of economic freedom and self determination, the ANC imposed its radical political agenda with no regard for how it was going to pay for it. And just like every welfare state, the South African one has failed.

The situation in South Africa has not improved since then. Violent labor conflicts have shattered the mining sector, but that is only part of the nation’s problem. More important than anything else is the fact that the country is suffering under the heavy hand of a corrupt and economically intrusive government. This government is combining incompetence and arrogance into a poisonous pill that is slowly killing the South African economy. For one, as the Business Day news site reports, unemployment is enormous:

Almost 30% of South Africa’s labour force is unemployed, according to the 2011 census results — a rate far higher than estimated by other surveys. Statistics SA’s quarterly labour force survey (QLFS) recorded the official unemployment rate for last October as 23.9%, while the census, which was conducted at the same time, estimates unemployment to be 29.8%. This includes only people who have actively sought work in the week prior to the survey. When those who have given up looking for work are included, the census says 40% are unemployed.

How about that? Four in ten working-age South Africans can’t find a job or won’t even bother looking for one.

The report also explains that even in the provinces that are doing relatively well, the prospect of finding a job is not exactly good:

According to the census, South Africa therefore has between 5.5-million unemployed people on the “narrow definition” and 8.7-million on the broad definition, which includes discouraged workseekers. However, these figures mask large variations between provinces. Unemployment is worst in Limpopo at just less than 40% on the narrow measure and 50% on the broader one. This is followed by the Eastern Cape with rates of 38% on the narrow definition and 51% on the broader. The province with the lowest unemployment rate is the Western Cape with a rate of just more than 20% on the narrow measure and slightly more than 30% on the broader.

South Africa’s problems are deeper than just a current recession. They are inseparably tied to the socialist ANC regime, which took over after Apartheid with a promise of a better future for Africa’s most prosperous nation. They could easily have shown that they were even better at building a strong economy than what the Apartheid regime had accomplished in spite of its racist power structure and the sanctions it merited. Basically, they sat down to a laid table with food on the plates and wine in the glasses.

Instead of doing the obvious, though, the ANC chose to create a corrupt power structure entirely focused on handing out entitlements to select segments of the population while imposing crippling taxes on the nation’s productive sector. They did this partly because the ANC leadership is, by ideological conviction, a bunch of communists. However, they were also driven by reversed racism.

I am absolutely no fan of the racist Apartheid regime, which originated in British colonialism. Quite the contrary – I actively supported the anti-Apartheid movement and I will never forget the joy of seeing Nelson Mandela free and taking the oath of office as South Africa’s first black president.

That said, the ANC cannot hide behind the atrocities of Apartheid. They have had two decades to build the South Africa they wanted. The verdict is in: rampant unemployment, deplorable poverty, a limping-along private sector and a negative outlook on the future.

Either they have created exactly what they wanted, which means they are nothing but a bunch of totalitarians – or they have been galactically incompetent. In plain American English: they have screwed up royally. With their focus on big government, racial vengeance and corruption they have completely squandered a historic opportunity.

Their treatment of the indigenous white Boer population is criticizable almost to the level of what the Apartheid regime did to the black majority population in South Africa. The Boer never wanted the white supremacy structure – they fought wars against the British and tried hard to build their own, separate nation. They are hard-working, entrepreneurial and patriotic. They are a resource for South Africa to benefit from.

Instead of promoting economic growth, job creation and prosperity, all the ANC has accomplished over the past two decades is a slow destruction of the foundation for prosperity that was in place when they took over. Four in ten working-age South Africans are paying a very high price for their policies.

And things won’t get better. According to the Business Report, the nation’s economy is slowing down. The Report is a bit uncertain as to what is causing this…

South Africa is likely to see slower economic growth for the rest of 2012, but inflation is likely to remain within the target band, the Reserve Bank said on Tuesday. “Global conditions are shaping South Africa’s economy,” said Chris Loewald, the Reserve Bank’s senior deputy head of research, at the bank’s monetary policy forum in Pretoria.

…mistakenly blaming the global economy. According to the United Nations GDP statistics database, in 2010 gross exports of goods and services was 23 percent of the South African GDP. That is about half the share it has in the average European economy. In other words, domestic factors are much more important in explaining the dismal performance of the South African economy.

But then the Business Report comes to its senses, noting in the very next sentence:

Household spending had declined, and was expected to diminish further in the third and fourth quarters of the year. Despite the softer economy, deterioration in South Africa’s gross domestic product (GDP) had been mild so far this year, although forecasts could be revised in November when the bank’s monetary policy committee met. At previous monetary policy meetings, some optimism about the economic outlook had “crept in”, but this was now gone. “Compared to where we were 18 months ago, expectations have certainly taken a turn for the worse,” Loewald said.

And what does the ANC government do about this? Well, not much that could help. As Claire Bisseker of the Financial Mail explains, the nation’s political leadership believes that more government is the solution. Andrew Wellsted, also with the Financial Mail, points to another aspect of South Africa’s intrusive government, namely the nation’s troubled tax system:

One of the cornerstones of a well-functioning tax system is that it should achieve a suitable balance between government’s funding requirements and the taxpayer’s right to only pay an amount of tax which is fair in the circumstances. Taxpayers should be treated fairly from a procedural and administrative perspective by the revenue authorities. … [There are] aspects of the tax assessment and collection process that are unsatisfactory.

He points to, e.g., a lack of predictability:

The finance ministry and [South African Revenue Service] Sars have been at pains to berate the taxpaying community regarding its lax attitude to payment of taxes and to stress the morality of paying appropriate taxes. However, the fiscal legislation governing the collection of taxes and the lack of careful consideration of certain changes means taxpayers are increasingly struggling to keep pace with changes in the fiscal laws and to interpret many of them. … There are varied reasons for the rapid introduction of new provisions in fiscal legislation or the substantial amendment to existing provisions. The most problematic type of amendment includes changes which have been introduced as specific anti-avoidance measures, aimed at curbing perceived avoidance structures being used by taxpayers. From numerous public statements by the finance minister and treasury and Sars officials it is apparent they are extremely concerned about tax avoidance – particularly with regard to large commercial transactions (transactions in the financial sector and those undertaken by high net worth individuals).

This is an argument that is being used globally in defense of ever more intrusive tax measures. But the problem with tax avoidance is the tax, not the avoidance. The simpler a tax code is, and the lower the tax rates, the easier and cheaper it is for people to comply and pay their taxes.

The problem in South Africa is evidently that it is cheaper to pursue legal and grey-zone tax avoidance measures than to pay your taxes. In other words, the government itself has created incentives toward tax avoidance.

Wellsted notes this and gives us more insight into how sloppy the ANC government apparently is, even in dealing with something as important for a government as collecting taxes:

Though there is evidence the authorities’ concerns are justified in a number of instances, the balance between government and taxpayer needs to be carefully considered when dealing with these types of structures. In our experience these changes are often hastily drafted and implemented, which leads to unanticipated consequential issues, many of which are prejudicial to taxpayers. The net effect is uncertainty for taxpayers as to not only the calculation of their tax, but the exact scope of application of the new provisions, as well as the timing of the introduction: many changes have been introduced retroactively, which is unacceptable from a tax legislative drafting perspective. This uncertainty is unfair to taxpayers and discourages not only foreign investment but tax compliance by the bewildered taxpayer. Moreover, the volume of amendments means it is impossible to keep pace with the tax laws or to properly consider their effect. The magnitude of the Taxation Laws Amendment Bill 2012 is further evidence.

He concludes that the bad shape of South Africa’s tax system is a contributing factor to the nation’s poor economic performance:

Fiscal uncertainty, particularly for foreign investors, which is created by a constantly shifting fiscal landscape, is not good for the economy or taxpayers. Overly complicated legislation not only discourages taxpayers from attempting to keep abreast of their obligations but can encourage sophisticated taxpayers into complex schemes to circumvent laws which appear to be unfair or unintelligible to them.

A government that is more concerned with ideology and grabbing more power will always destroy the economy it feeds off. It is abundantly clear that South Africa is a good example of this. Hopefully, the people will wake up at some point and reverse their collective slide into the chasm of perpetual misery.

That is a major challenge for a nation with communist ideologues in power, up to 40 percent unemployment and a gloomy economic outlook.