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South Africa: Government slows down business

The amendment of article 25 of the Constitution brings the country back to a time when their property rights were subject to the discretionary agreement of the apartheid state.

By Chris Hatting.
An article from Libre Afrique

The confidence of South African companies is at its lowest for two years. It does not surprise anyone. It should be noted that politicians are fully aware of what they are doing when they try to expropriate without compensation (ESC) part of the population.

The wave of optimism that followed the election of President Ramaphosa has finally faded. Clearly, South Africa is moving away from economic freedom, and by extension, its pace of economic growth. The "Ramaphoria" that was submerging the country was not based on anything. The beautiful seductive words anesthetized the critical spirit vis-à-vis the measures taken.

Uncertainty over property rights

ESC is the biggest threat that can affect a business. The amendment of Article 25 of the Constitution allowing this type of expropriation will lead to the dilution or even dissolution of the notion of individual property rights. Property rights can not be applied selectively: either all goods are recognized and protected as such, or we amend Article 25, and then we try to live in a country in which anyone's property is susceptible to be arbitrarily seized by the State.

ESC is the antithesis of the relationship of trust between citizens and the state. It annihilates any sense of security in the future of a company that has taken years to develop. With ESC, everyone's property is likely to be monopolized by the state. Farmland, houses, cars, the contents of your bank account, your factories, your commercial buildings and the capital associated with it are in danger.

So far in the very young democratic history of South Africa, the property rights of every South African were recognized and protected by the Constitution. Black South Africans, who had their legitimate property rights recognized before 1994, are the people most affected by ESC. The amendment of article 25 of the Constitution brings the country back to a time when their property rights were subject to the discretionary agreement of the apartheid state.

The poorest trapped

Obviously, wealthy South Africans can transfer their wealth, their businesses and their capital abroad if things become unsustainable in their own country. This is not the case of everyone. The poor South Africans, the vast majority of whom are black, will suffer the consequences of anti-freedom and anti-growth policies and laws such as ESC.

As for the minimum wage and the national health insurance, which seem to be good measures for the poor, it has the practical consequences of ousting them. Indeed, expensive labor legislation effectively excludes the least skilled who are often the poorest. These different measures oppose the very idea of ​​individual freedom and the creation of wealth. Instead, they justify more money being mobilized by the government rather than the citizens of the country. They allow the state to swallow larger and larger parts of the economy.

No incentive to invest

South Africans are right to invest less and less time, resources and wealth in the country. The latest blow to business confidence is the desperate situation of Eskom, the state-owned electricity company.

How can we accept deplorable management that causes such uncertainty in the electricity supply, which is crucial for a company? Large companies can afford to have their own generators and can bear the associated costs, but small businesses simply can not afford an additional operating cost.

As a result, the latter must choose between moving or closing completely, which will still have a negative impact on employment. If South Africa had three or four different energy producers and distributors, the situation would be less risky than with a single company such as Eskom. The fundamental problem is that the state considers itself as custodian and responsible for meeting all needs. This explains why it will surely be a long time before competition is allowed in the energy sector.

Mutual trust between business and government is a fragile thing. Many politicians implore the private sector to contribute more, to take more responsibility for advancing the country. Remember that without companies the situation of society would be even worse than it is now.

Politicians know how to ask but ignore the problems faced by companies: the cost of creation and management. The obstacles they encounter on a daily basis are already difficult to overcome. Instead of asking them to do more, the government should look at solutions to improve economic freedom in the country. The more businesses are stifled, the more the country will regress.

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