Freedom vs freedom from competence

Back in April, South Africans celebrated Freedom Day. However, the situation in which the country finds itself certainly doesn’t warrant any celebrations, warns NICK PORÉE.

While we celebrated Freedom Day in South Africa, we must recognise that the politicians continually create delusions of freedom. In fact, “nothing is for Mahala”, and when it comes to the supply of goods and services, the state-owned monopolies are inefficient without the economic discipline of competition.

The results of this sorry situation are freedom from work (we have 40% unemployment according to the Department of Labour), freedom from power (we have rolling blackouts courtesy of Eskom), freedom from rail and port logistics services (courtesy of Transnet and PRASA), freedom from rule of law (thanks to the SAPS), increasing freedom from trade and industry (DTIC), and freedom from want (as exemplified by the South African Social Security Agency).

In a bureaucratic monopoly with no market competition, there is no way to measure value and no accountability for failure. This is not a new phenomenon. In Germany back in 1909, then-president Georg-Friedrich Knapp, while lauding the role of the civil service in creating “freedom”, wrote, “The State is a supremacy of officialdom – let us hope that it will remain so”. It should be noted that over the following 36 years Europe was embroiled in several revolutions and two World Wars.

In South Africa, the bureaucracy’s efforts at thwarting efficiency and competition through committee decisions, cadre deployment, borrowing, and looting have created government debt to the tune of R3 trillion. This has now left South Africa Ltd with a precarious future.

South Africa is the only country in the world where the government has the gall to insult the population by legislating the proposition that ethnic classification makes for inherent incompetence. Therefore, regulations must restrict minorities from competing with the majority. At the same time, the socialist mindset of government makes it illegal for a starving man to solicit employment at less than the official wage, hence 46% unemployment, thousands of hectares of land are unworked, and 18 million people depend on grants instead of work. Current Employment Equity (EE) plans will make it illegal for anyone to imbalance racial employment proportions in a company, and the draconian penalties will close many small businesses. This will provide further “freedom from work” and add to the drag of unemployment on the economy.

Economic activities require competence, and competition is essential for efficiency. According to the Oxford English Dictionary, competence is “the ability to do a task”, which implies that incompetence is the inability to do so.

The deterioration or collapse of almost all activity and services supplied by government is the inevitable result of a rejection of the concept of competence as the basis for employment. The dangerous illusion of prosperity is created by political posturing, fanciful SABC programmes, heavy borrowing, and the relative wealth of the civil service. South Africa is heavily dependent on about eight commodities for 40% of exports, some of which are now threatened by state monopoly failures, restrictive regulations, and administered costs. The realities of the situation are masked by the isolation of officials from the harsh financial realities of the economic world. Many have been on paid unemployment ever since the outbreak of Covid and the resultant collapse of budgets.

As with many historical economic failures, blame is deflected to minorities, including landowners, entrepreneurs, Bolsheviks, Jews, and foreigners. The increasing actions of “business forums”, Dudula xenophobic intrusions, the criminal actions of so-called driver associations, and trade union invective aided by labour regulations are all geared to combat competition in employment.

Government support for the racialist political mantra against minority employers is illogical and dangerous. As shown by the Institute for Race Relations report released in April, of the 14,5 million people employed in SA, 12,7 million are black and 1,8 million are white (leaving about 11,7 million unemployed). If all jobs went to black people, there would still be 10 million black people unemployed (or probably many more). According to the report, the top 10% of employed black workers earned 25% of the total national salary bill, but do not appear to be investing in industry and employment. Despite all the best efforts by government, the proportion of private investment and entrepreneurship by the black elite in sustainable and productive businesses is very low. The current political climate is merely accelerating the drain of competence to more developed or safer countries.

South Africa Ltd is unsustainable in its current format and this situation is being exposed by the recent data.

The rand weakened from R14,50/US$1 on 14 April to R16,00/US$1 on 22 April and inflation grew from 5,7 to 5,9%, whilst the IMF has projected GDP growth of 1,9% this year.

Eskom’s Energy Availability Factor (EAF) – a term for supply – “eased” (reduced) from 60,24% to 56,06% in mid-April, causing widespread power outages whilst the Department of Minerals and Energy juggles regulations to ensure “freedom” from competition.

In transport and logistics, rail transport declined by 11,1% in 2020, and 9% in 2021.

The April flooding has damaged the Natcor line, which is out of commission for three to six months, putting an end to potential third-party access and road to rail (more freedom from competition).

This year, road transport tonnage rose by 16,7% in January and 8,1% year-on-year (y/y) in February. The rash of new operator entrants taking up the shortfall from railways is likely to supply a glut of secondhand vehicles at some future date, as the increasing cost of road freight is a serious deterrent to industrial and agricultural investment and growth.

Long-haul road freight transport costs have risen by approximately 50% in the past three years and do not look like improving any time soon. This restricts the production of domestic consumer products, vegetables, and services to within economic distance from markets; handling and transport costs can amount to 50% of the selling price.

Transport costs (including delays and obstructions) now threaten mineral and agricultural exports and are a major element of the inflationary pressure on the cost of all goods, whether imported or local. In cross-border trade, the average time for road freight to cross borders is 15 hours. This compares with USA to Canada border times of 10 to 15 minutes. The bureaucratic inefficiencies are costing R550 to R650 million per week in road freight transport delays – and possibly twice as much in costs to industries due to the impacts on inventories and production.

The private sector is adversely affected by the poor service from all levels of government, while domestic costs are contributing to inflation and detracting from global competitiveness. The resulting strategic planning in industry and agriculture includes defensive contraction, automation, and the lowest levels of fixed investment since 1946. By way of contrast, Chinese manufacturing companies increased fixed investment by 15,6% y/y in the first quarter. Investment in high-tech industries and high-tech manufacturing grew by 27,0% and 32,7% respectively, with investment in the manufacture of electronic and communication equipment, medical equipment, measuring, and metering instruments surging by 36%.

The urgent solution to economic stagnation is the engagement of competent management and pragmatic regulation, less restriction, and more industrial cooperation. It is certainly not racialist legislation obstruction and prevarication. Without addressing the issues of competence (better education, training, and immigration) and competition (disaggregate and restructure monopoly state-owned companies) – as well as the repeal and refocusing of industrial legislation to encourage investment – there is a limited future for South Africa in competition with the region and for trade under the African Continental Free Trade Area (AfCFTA). Ultimately, the costs of road, rail, and ports will continue to be a major contributor to declining industrial growth.