The state is not an employer!
Election season is coming up soon in South Africa, and those with governmental power have started promising jobs to the millions who are unemployed. Yet anyone who has an inkling of economic knowledge would know that the politicians are writing cheques with their mouths, and that they will be unable to cash their actions.
South Africa’s state-owned enterprises (SOEs) and public entities number in the hundreds. Yet, one will still find commentators in some quarters decry the ‘neo-liberal’ state that they claim South Africa is. One is left asking themselves, if South Africa is so neo-liberal, with SOEs galore, monopolised and state- dominated markets with their respective enterprises, what would a socialist South Africa be like? More of the same?
If one looks at the policy offerings of most mainstream political parties in South Africa, more of the same seems to be prevailing attitude. The mixed economy, that combines these SOEs with a private sector that has been the saving grace of South Africans, is the supposed ideal – just with differing degrees. These degrees matter, though, as the employment figures between the provinces shows.
The South African government, and the party that administers it, are committed to an understanding of economics wherein the state is a key player in the creation of wealth for citizens. This has led to the current situation wherein the sole electricity provider in the country, government-owned and run of course, is failing at doing its job and there is no alternative to which consumers can go.
The Treasury, through its head Minister Enoch Godongwana, has expressed the need to cut down on the number of SOEs. This is a very welcome pronouncement, since our SOEs, which are usually inefficient monopolies, have hamstrung the economy.
Should the number of SOEs be cut down, the government will create an environment conducive to economic growth. The markets that are currently monopolised or dominated by SOEs crowding out private investors will be open for new entrants. This will create revenue for the state and wealth for citizens without any commercial activity by the government.
The blackouts caused by Eskom have cost the economy over R35 billion from the period of 2007 when they began, to 2019. According to the South African Reserve Bank, these blackouts cost the economy R899 million every day they occur.
Until the very idea that jobs are created by the state is discarded into the dustbin of policy ideas where it belongs, SOEs will never be thoroughly tackled. This idea in South African politics is undergirded by the National Democratic Revolution, a guiding philosophy for the ruling tripartite alliance that sees the ideal South African state as socialist, and the ruling party as having a mission to bring about this socialist utopia.
The idea of a state that is ‘developmental’ or one that has ‘capacity’, is found in policy documents as recent as the 50th national conference resolutions of the ruling party. The prevailing attitude of those who administer the South African state is to use it and its interventions to bring about whatever vision they have of society.
The commitment to state commercial activity is unshaken regardless of the multiple failures and the consequences thereof caused by SOEs. Instead, more and more money is taken from South Africans through taxes to essentially protect these institutions from the consequences of their actions. An example of SOE consequence insulation are the multiple bailouts Eskom has received, despite failing repeatedly at fulfilling its primary mandate.
Whenever statistics about the amount of people employed in the public sector are mentioned, we must remember that those jobs are only there thanks to taxes paid by privately employed people, even though legally everyone with an income pays taxes. On a real numerical basis those who are not remunerated from the common tax pool like public sector employees are the only true taxpayers.
The private sector ought to be the largest employer. When more people are employed privately than in the state, the revenue which the state receives in taxation will grow due to there being more people paying taxes on a net basis. Instead of using taxes to employ people, the taxes can be used for other activities that may have low employment prospects but are still nonetheless needed.
For the private sector to be a major employer it must be set free from the inhibitions that are currently strangling it. Deregulation of markets like labour or finance/banking, and currently monopolised ones like energy, is a necessity to unleash the productive power of South Africans. Discarding ideas of the state as a parent that is supposed to solve all our problems is also a necessity, lest our march down the road to serfdom continue unabated.