Regulatory Uncertainty

When a radical idea is thrown into the political arena, a short-term consequence is massive uncertainty. Loose talk by a junior politician can cause much uncertainty if the government fails to quash the notion he is putting forward and reassure the nation. When such radical ideas go forward for serious discussion by the governing political party, the level of unease increases substantially and untold harm is done to the economy. For any economy to flourish, regulatory certainty is essential.

All industries in South Africa are attempting to overcome the effects of a worldwide recession. Mining companies have already endured a trying minerals nationalisation episode, and now, after a brief interval of being able to operate under moderately improved conditions, face a renewed threat and are once again hampered by a suffocating pall of uncertainty.

Government owes its citizens good governance, which includes the creation and maintenance of a regulatory and policy environment that is conducive to sound business decision-making. The nation depends on its business firms to utilise resources efficiently, make profits with which to expand their operations, employ increasing numbers of people to absorb the millions that are unemployed, and be the major source of the taxes utilised in governing the country. The nation therefore deserves to be given a stable environment that is marked by regulatory certainty in which its firms can flourish and provide the jobs, goods, and services the people expect of them.

Author: Eustace Davie is a director of the Free Market Foundation. The above is an excerpt from the chapter, True Empowerment and Good Governance, he wrote for the recently published FMF book, Nationalisation.

FMF Policy Bulletin/ 8 February 2011