South Africa’s Stubborn Socialists

While the Europeans are wringing their hands over the fact that they just can’t get out of their recession, people in other parts of the world have even bigger problems. In South Africa, e.g., the most urgent problem is to keep the remainder of the free-market economy alive. The ANC, fostered in the traditions of Europe’s most devious socialists, knows no other way forward than aggressive statism.

Their blatant disrespect for the mechanisms that create prosperity has brought South Africa to an economically very important fork in the road: either the country turns right and rolls back government, or it turns left and continues toward the edge of the cliff.

It is rather easy to predict which way the ANC wants the country to turn. In some sort of token response to the rampant economic problems in the country, the ANC has put together a so called “national development plan” to give the impression that they know how to do something about runaway unemployment among blacks, eroding property rights, rising inflation and an increasingly mono-industrial economy. Here is what I concluded about the National Development Plan back in February:

In 2030 very few South Africans will have any first-hand memories of what life was like under Apartheid. That is probably fortunate for the ANC, if it can cling to power for that long, because the worst that can happen to them is that more and more blacks begin to compare everyday living conditions under the ANC with those they or their parents experienced under Apartheid. The racism of that government can never be excused or mitigated by attenuating circumstances, but if indeed the black population in South Africa is worse off today than it was back then, it is a monumental failure for the ANC – and for socialism. There is a lot to point in that direction, especially when it comes to unemployment. For a socialist government to perform worse than a racist, socially and economically stratifying government is an embarrassment of galactic proportions. It is a verdict on socialism so heavy that it can hopefully be eliminated from South Africa’s political institutions for a long time to come. The National Development Plan shows clearly that with the ANC in power, things are only going to deteriorate. But hopefully it will also be the motivator for the political opposition to begin formulating a common-sense alternative. South Africa deserves better than socialism.

Recently South Africa’s premier newspaper Mail and Guardian reported that the ANC is growing increasingly desperate over the implementation of the National Development Plan:

Business and the financial services sector have a critical role to play in implementing the NDP, said ANC deputy president Cyril Ramaphosa. “The implementation of the national developm [sic] is not an exercise in compliance but rather an exercise in transformation and working together,” he told the Banking Association summit in Johannesburg on Wednesday. “The task at hand requires a different way of working. The NDP challenges us to make effective use of all of our resources, especially our people, and challenges us to work together to find solutions to the difficulties that we face.”

It would be interesting to hear Mr. Ramaphosa’s explanation of why these difficulties exist after 19 years of ANC rule. But beyond that, what he is saying is, effectively, that it is time for every unemployed black person to get a job. And he wants businesses to make that happen.

Of course, businesses don’t hire people unless they think that person is going to contribute at least as much to the company’s bottom line as they take out of it. That is why they do not have more employees than they do: they can’t sell more products or services than they currently do because there is not enough of a market for them. As for banks, they do not lend money to businesses that they deem won’t be able to pay them back. But these sound free-market based principles to not resonate with socialists like Ramaphosa:

Ramaphosa, who is also the deputy chairperson of the National Planning Commission which developed the NDP, said the financial services sector needed to play a role in helping small to medium enterprises. The NDP focused on the services sector as a real generator of jobs and although it was believed that small and medium enterprises would be a big contributor to job creation, big ticket enterprises could also create thousands of jobs.

So why do those businesses not exist yet? Is it because some evil fat banker would rather buy more cigars and Bentleys than lend money to new businesses? Of course not. Every banker knows that he has to lend money to make money. But he also knows that if he lends money and the loan is not paid back he goes out of business.

Again, common-sense facts about the conditions of private business that socialists like Mr. Ramaphosa does not understand:

With the right approach the number of start-up businesses that failed could be reduced and big businesses could incorporate smaller enterprises into their own supply chain. There was massive potential for companies to transform their supply chains and support new platforms. This could be done through small business incubator models, and helping these businesses gain access to finance. “Banks need to investigate feasible ways to extend credit to small and medium businesses,” Ramaphosa said.

Not only does the ANC apparently want banks to pay less attention to credit ratings of their clients (“angel funding”) but they also want banks to pick up the slack where the government fails – without being allowed to operate on the full terms of a free market:

The sector could also contribute to infrastructure development, where private funding would need to be sourced because public finance was limited. “We’ve embarked as a country on an unbelievable dream of spending over a trillion rand on infrastructure development. And this is where the financial services sector needs to play an important role,” he said. There was a need for public-private partnerships in infrastructure, even though these partnerships could sometimes be difficult. As funders of such partnerships financial institutions had a great deal of experience and expertise that could be used to ensure that future public-private partnerships generated value.

The only problem is that banks will not be the ones who decide what “value” is in this equation. If Ramaphosa wants banks to invest in government operations, then all he has to do is ask his friends in the ANC government to issue attractive treasury bonds. But the ANC is trying to avoid growing government debt even more – they are already wrestling with a deficit – and therefore wants to invent new ways of getting their hands on private money. The talks about “public-private partnerships” is nothing more than a financial smoke-and-mirrors show.

That said, we should not rule out that behind this effort to lure more private money into various government operations is a more far-reaching effort at further socializing the economy. So called “public-private partnerships” have been used by socialist governments as models for operating all sorts of businesses where full-scale government confiscation is not possible. It is a pathway to expanding government without cooking the frog too fast.

Sounds conspiratorial? Not if you read the National Development Plan, and certainly not if you consider the fact that one of the ANC’s alliance partners is the South Africa Communist Party…

7 comments

  1. anti-sharia

    ‘…..because there is not enough market demand….’

    Excuse me; demand or supply side economics here??

    Anti-sharia

    • anti-sharia

      It isn’t.

      At first I hoped Supply, but the ‘lack of demand – let’s hand out more moneys’ made me doubt the sincerity. Are you a closet Demand-dude?

      Anti-sharia

  2. anti-sharia

    For those who cares: The lack of jobs in the RSA economy is not for lack of demand,

    Too bad production condition pushes cost up, productivity down. Ergo, output is prized out. No-body affords the output, sales volume (staffing) remains stock.

    A free, supply side, would self-adjust.

    • S R Larson

      What you purport about South Africa’s producers does not change the fact that supply cannot create its own demand. If no one is there to buy a Camry, why would Toyota build one?

  3. anti-sharia

    Aha! A freedom loving Demand’er! Now, oh boy is that something.

    Well, tell that to Henry F.; that is that his T’s require the forced collection of some’s property to offer ‘buying power’ to others desires…

    I have, as you know, taken issue with your take on the continued underpinning of the e.g. bloated Greek state, but I didn’t understand the Libetarian Demand Side confusion.

    Your inconsistency and philosophical derailing now makes sense. You are, I guess, an uber-socialist, who understands the fine limit or max of the redestribution model, but without one we would all die.

    Your arrogant answers, to me and many others, leaves me with only a slim hope of an informing reply.

    A shame, I should say, that a guy like you who is so bright on major vectors, run into such a mess on the base line (demand vs supply). It hurts to watch, frankly.

    Anti-sharia

    • S R Larson

      “that is that his T’s require the forced collection of some’s property to offer ‘buying power’ to others desires…”
      Forced??