Fin24

Hart: State infrastructure unaffordable

2011-09-22 10:47

Cape Town - South Africa is building an infrastructure that is unaffordable, an economist said during a Black Management Forum debate in Cape Town on Thursday.

Chris Hart, an economist at Investment Solutions, said during the debate with Public Enterprise Minister Malusi Gigaba, that the government's enormous spending on infrastructure is leading the country towards an "infrastructure recession".

"We are building an infrastructure that is unaffordable to the economy," Hart said. "It is creating erratic pricing in South Africa and we are taking our country towards an infrastructure recession."

Hart said state-owned enterprises (SOEs) are preventing competition from entering the market. The state should not be running businesses at all as SOEs tend to be "undercapitalised" and uncompetitive.

The only way to solve South Africa's employment problem, he said, is for the government to make it easy for its citizens to start small businesses.

"To create massive employment you need a small business boom, but many small businesses are being shut out of the economy by state-owned monopolies."

The regulatory environment for small businesses is "extremely complicated" and should be changed to remove barriers to entry for small businesses, Hart said. Black economic empowerment and affirmative action are also not lasting solutions for the economy, but could only be "stepping stones".

Economies at full employment grow "from the communities up", he said.

Gigaba said South Africa is dealing with an economic legacy created by colonialism, and that the economy is still defined on racial lines. The free market has failed to solve that problem in the past 17 years.

"Everyone", he said, recognises that the state has a role to play in "facilitating networks" for the poor.

"Free markets are not going to solve the problems of racialised ownership in South Africa," he said. "Just go into the JSE and look at who owns what."

SOEs could easily be well managed and efficient, he said.

Comments
  • king stukie - 2011-09-22 10:58

    "Free markets are not going to solve the problems of racialised ownership in South Africa," South Africa does not have a free market. Money creation is in the hands of privately owned corporations.

      bizos - 2011-09-22 14:16

      @King stukie,spot on 110%

  • Bilbo - 2011-09-22 11:09

    So true!

  • NowOrNever - 2011-09-22 11:13

    "Just go into the JSE and look at who owns what." Stupid comment. Last time I checked anyone could buy any shares on the JSE. So if the blacks don't buy into listed companies why make it a white problem.?

      bizos - 2011-09-22 14:09

      @NoworNever,who is sitting with the money,does that answer your question

      Sihle Manqele - 2011-09-22 14:29

      Blacks majority has no money because they have not accumulated enough wealth in the past 17 years. How long did it take the whites to own more than 70% of the economy? 17 years? On the other hand, I really wish the focus of the story is on education. Government must really invest in education and safety of its citizens. Then, over time, things can improve for a lot of blacks forever.

  • Bullhunter - 2011-09-22 11:14

    "facilitating networks" ? you mean theft and corruption by the cANCer's cadres!

  • Ian - 2011-09-22 11:21

    Excuse me! How would we know that the Free Market does not work, we have not had one yet in South Africa. The National Socialism under the Nats created many SoE which we are still encumbered with, that are often loss making, inefficient and squash small business. Take loss making SAA (or SABC.....) and the funding at taxpayers' expense of Mango to compete with and crushing the small players such as 1Time.... making these businesses marginal at best and limiting their ability to grow and create jobs. What about Telkom and the last mile, their legacy on SA is horrific, yet we can not free up the telecomms market properly, 20 years down the road. The exception would be Transnet, through their inability to meet the country's demand efficiently and economically (or at all), we have many people employed in the trucking industry, ambulances and hospitals that could otherwise be deployed if they just did their job. There is a huge list of such. That is not free market. I believe we would see a hige uplift in growth, employement and foreign direct investmment if we were to entertain a free market properly.

      Henry - 2011-09-22 13:25

      Breaking up the private food monopolies would also be another way of freeing up household expenditures for local businesses making food products. This would have a huge impact in rural economies where local entrepreneurs would not be locked out of food processing, such as making chutneys, baking bread and creating a plethora of products currently hogged by the price fixing likes of Unilever, Pioneer Foods and Tiger Brands whose profits go to shareholders and not recirculated in the local economy.

  • branden.hart - 2011-09-22 11:31

    What is the point of starting a small business if you are not given the opportunity to participate in the financial market because you are not BEE compliant. So much for entrepreneurship and innovation. Probably the reason why so many "virtual / web based" businesses are springing up that can be run off shore.

      TaxGuru - 2011-09-22 16:12

      What is the point of starting a small business if you are not given the opportunity (by the Private Sector) to participate in the financial market because you do not have pre -1994 experience?. So much for entrepreneurship and innovation.

  • PilgrimX - 2011-09-22 11:35

    Yea, fix the blinking pothole instead.

  • IC1 - 2011-09-22 12:05

    "Gigaba said South Africa is dealing with an economic legacy created by colonialism," Oh why dont we bang a different drum, just for a change. Like Motsepe you are all in denial, your policies and inability to think about anything other than balming apartheid and everything else is this countries nemesis.

  • Caterwauler - 2011-09-22 12:05

    "SOEs could easily be well managed and efficient" - How about they start with local Government, Eskom, Transnet, Portnet, SABC, et al and then look at new possibilities? EE / AA has badly damaged the Government's ability to manage anything efficiently, unfortunately.

  • Gierg Seiznem - 2011-09-22 12:22

    "SOEs could easily be well managed and efficient, he said" - Yes, by privatising them. Removing barriers to and encouraging small business would benefit blacks more than whites (seen as it always has to be about race in SA, which both infuriates and saddens me). If big corporations are white-owned and untransforming, doesn't it mean that new, small start-ups would be the best avenue for economic convergence? What about selling SOE's to black owners who could then make employment decisions (transformation and privatisation)?

  • errol.wagner - 2011-09-22 12:26

    None are so deaf than those who will not hear.

  • Really - 2011-09-22 12:29

    Anyone can buy shares on the JSE, the last time I checked. Ag wat, Apartheids fault again. Can't they be a bit more creative?

  • Sven - 2011-09-22 12:34

    The anc has no idea of how to stimulate an economy. All they want is TOTAL power over every facet of the South African citizen, the fact that centralised economies have always failed, will not deter the Grey-backs in Loot-Freely-House one iota.

  • Sammo - 2011-09-22 12:38

    Free markets will eventually solve the issue of "racial ownersip" of companies. It starts with education and then over time the majority will prevail through force of numbers. However, the key is for the black majority to get decent education and then work experieince. The problem with this approach is that it takes time - possibly 2 or 3 generations and hence we have BEE etc to speed things up. Free markets typically reward those with the skills, initiative, hard work and capital. The reality is that the whites still hold most of the top positions - this is largely due the fact that not sufficient blacks have come through the system. I am not convinced it is racism as alluded to by our labour minister. A top manager in a JSE listed company will typically have 30 years industry experience. Blacks have typically only allowed to compete for 17 years. It is an unfortunate truth that there has just not been enough time for sufficient black South Africans to get that sort of experience. Backed up with poor eduction there are not enough skilled people entering the system from the bottom which will delay the ability of the free market to correct this. We will get there though I have no doubt. The police force, defence force, health dept, local gov, parastals etc have proved that just putting unqualified/underskilled people in top positions is also not a solution.

      Slartibartfast - 2011-09-22 14:16

      Thank you Sammo ... AT LAST a decent, thought through and logical comment!!

  • cj - 2011-09-22 13:00

    What does " facilitating networks for the poor" even mean ?

  • AndV - 2011-09-22 13:36

    Hallo, welcome to the real world!! Infrastructure grant the dear National government is dispensing in breathtaking amounts to local government amazes me. LG don't have the operational funds to maintain these elephants they are building all over the place and it is already obvious that many of these infrastructure is busy falling into a state of delapidation, 5 years after constructed, simply due to NO maintenance. What a waste! How dumb can you be? We have enough money available in this country to uplift quality of life of everyone, only if we can get a leader/s that understand!!! how to manage and prioritise. Forget about lowering the speedlimit, concentrate rather on more important things like efficient financial management.

  • news.moler - 2011-09-22 13:53

    Gigaba says that the economy is still defined on racial lines... Until we get our mindset around "ownership" being defined around racial lines which is what he is really saying and accept that it is the educated and exposed that will create the employment that will filter down to the next generation in education (which needs to be funded and managed by gov) there is only a decline on the cards. The gov needs to see that it is capital and exposure that employ, not giving handouts or part ownership just to make things appear fair. I wont give a piece of my concept, vision or effort to anyone, black, white or green with little purple spots unless they can add value in one form or another (including staying out of the way while they give me line of sight to government tenders that cost the taxpayer a premium and more for the extra executive mouth to feed).

  • bizos - 2011-09-22 14:12

    Free markets will eventually solve the issue of "racial ownersip" of companies,Never,and this is not base on race,it is just human,people in general do not like share when it comes to money"MONEY IS POWER"

  • Sharkie - 2011-09-22 14:33

    "To create massive employment you need a small business boom, but many small businesses are being shut out of the economy by state-owned monopolies." And because the owners arn"t buying off the right politicians

  • TaxGuru - 2011-09-22 16:23

    Black owned SMEs don't get private sector tenders because they don't have experience. It is left to the Gov to take the risk of giving tenders to BEE SMEs! ANC give tender along racial lines (if we don't give it to them, who will?), Private sector give tenders along racial line (Let their government feed them attitude). Interesting country!

  • mcgrathr20 - 2011-09-22 17:05

    Yes I agree with Mr Gigaba in that the government is dealing with the economic legacy created by colonialism. They are dealing it out bit at a time, and not to the poor whom they love so intensely. I always get the feeling when listening to to certain politicians that colonialists arrived with guns and weapons to wrest hospitals, schools, universities, and industries from the locals. Sure the colonialists arrived intent on carving a better life out for themselves, and sure locals got the short end, but look at the positive side too - forced to modernise, to join a global world with some power at hand, no longer so out gunned.

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