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How SA can experience its own economic revolution

May 08 2017 13:59
Temba Nolutshungu*

Cape Town - South Africa's economic junk status is a direct result of policy intransigence. Current government decisions appear to be based on a lack of consideration for the lessons of history. Economies are fragile. Persistent adverse policy-making breaks down an economy, reduces productive investment and economic activity, and causes untold harm to citizens.

It is time for a policy about-turn - one that places the interests of the people above the narrow interests of politicians at the helm of the government and their rent-seeking bedfellows.

Policies to bring about dramatic positive changes would include:

  • Abandon all race-based legislation and regulations that cause racial tensions, slow economic growth, and increase - not reduce - the poverty of the poor.
  • Give the poor people of the country, on a means-tested basis, ownership shares in all state-owned enterprises inherited from the apartheid government as was done successfully in the Czech Republic; give full and unrestricted ownership of the municipal houses they rightfully live in to the occupants; and give traditional communities (as communities) title, with full ownership and management control, over the land that is rightfully theirs. This double-edged measure alone would be a catalyst for economic self-empowerment on an unprecedented scale.
  • Adapt labour legislation to allow people without jobs who have been unemployed for six months or more to voluntarily enter into any contracts they wish with employers, especially owners of micro-enterprises.
  • Remove all red tape that imposes unnecessary costs on entrepreneurs and prevents them from providing goods and services to consumers in the most efficient and effective manner. When this is done, the consequence will be a proliferation of businesses, especially in the labour intensive SME sector.

These proposals would directly target the poor and free them from poverty in a manner that enhances economic growth and allows the economy to function optimally. In considering the proposed changes, it would be useful if government were to take note of world economic history.

The Industrial Revolution that changed the world forever was set in motion by specific policy changes.  

The graph below, published by and based on the work of the late Professor Angus Madisson, shows how per capita GDP in the world only started to rise rapidly from the late 17th Century. Until just over two centuries ago, most people on earth lived in poverty and misery.

During the last decades of the 18th and the first of the 19th Century, England underwent a major transformation, which came to be known as the Industrial Revolution. These changes were to positively influence events in the rest of the world, including South Africa, and result in higher incomes and improved living conditions for the average person that would have been inconceivable in previous centuries.     

Source: The Madison Project

It is generally understood that one of the most important changes that occurred during the Industrial Revolution was mass production made possible by the introduction of machinery. The Education Revolution that accompanied the Industrial Revolution, which made the English highly literate and numerate and enhanced their technical skills, is less well known.

Technical developments made some jobs redundant but many more were created, in the same way that telephones replaced speaking tubes and computers replaced hand-written books of account. In 1951, 37% of England’s economically active population, more than 6 million people, were classified as skilled artisans. A further 30% were white collar workers, a substantial increase on earlier times.

The Industrial Revolution is often misrepresented as an era of increased hardship for workers. The truth is that the people who left farms and domestic employment to work in the factories did so to improve their incomes as well as their working and living conditions.

Similarly, the ongoing urbanisation in South Africa is motivated by a search for better long-term opportunities for families than are to be found on farms and in rural areas.  

Change in South Africa has to consist of transforming conditions for people who have missed out on becoming literate and numerate; to make it possible for them to learn skills that will enable them to earn a living for themselves and their families and not be reliant on others for their well-being.

If the proposals described in this article were adopted, South Africa would experience its own Economic Revolution, a positive transformation that has everyone in the country working towards higher economic growth and a better life for themselves and everyone else.

To live and let live, with equality before the law for everyone, is the way to foster co-operation across-the-board and improve the lives of all in the country.

*Temba Nolutshungu is a director of the Free Market Foundation. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.

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