By proposing a wealth tax exclusively on white people because he claims they benefited from apartheid and because black impoverishment persists, Archbishop Emeritus Desmond Tutu displays not only an ignorance of economics, but also a degree of amnesia.
Like painkillers, the idea of throwing money at marginalised sections of society does not provide a cure, and at best, it may bring short-lived relief – and only to some. The more serious downside of punitive, redistributive economics is that it discourages wealth creation. That, in turn, results in fewer jobs, capital flight or relocation and greater impoverishment.
Tutu’s concern for the plight of those who continue to face economic hardship 17 years into the new South Africa is one shared by all reasonable people, regardless of colour. However, if accountability for this state of affairs is to be investigated, Tutu’s historical record is not without blemish.
In the 1980s he actively promoted the imposition of sanctions and disinvestment against the apartheid government, thereby triggering a massive wave of black unemployment. Between 1984 and October 1989, some 192 US companies disinvested from South Africa. They were joined by 160 others, including 76 British and 24 German firms (The Mercury, November 1, 1989).
As a result of Tutu’s disinvestment promotion, economic growth in 1986 slowed to 0.5 percent. Capital outflows of R24 billion occurred between 1985 and 1988. The damage to the economy saw the cost of living soar by 12 to 14 percent. In May 1990 the Washington-based Investor Responsibility Research Centre estimated that sanctions cost South Africa between R45bn and R60bn and that consequently our economy diminished by 20 percent to 25 percent.
When President Reagan denounced the US Congress for pushing ahead with the Comprehensive Anti-Apartheid Act in 1986, stating that “the victims of an economic boycott of South Africa would be the very people we seek to help”, Tutu said he found Reagan’s speech “nauseating” and that the “West can go to hell” (Time magazine, August 4, 1986).
Significantly at the time it was Mangosuthu Buthelezi who warned against the folly of sanctions and disinvestment, saying that its economic legacy would render political emancipation “meaningless”.
Finally, there is no need for Tutu to attempt to quantify the extent to which whites benefited from apartheid because they have already paid for it. As late as 1989, taxes paid by whites amounted to 91 percent of the revenue collected from individuals.
DUNCAN DU BOIS
Durban
Proposed white tax is counterproductive
Archbishop Emeritus Desmond Tutu’s wealth tax is sentimental, impractical and unconstitutional because of its racial definitions and, at best, would only assuage the guilt of a few.
It does, however, rekindle the important debate around the need for economic reconciliation in this unequal and divided country. In general, very few people relinquish their wealth voluntarily.
The failure of the last 17 years of neo-liberal economic policies to address the legacy of apartheid is self-evident. It is high time that the powers that be, urgently consider alternative economic policies in order to prevent explosive social unrest at the very least.
First, the immediate implementation of a basic income grant to every citizen is imperative in the context of soaring fuel, food and electricity prices, as well as the unfolding peak oil crisis and an imminent global recession. We have just read in Business Report that Iran has successfully done this in their economy (cash hand-outs of R300 a citizen a month) and averted social unrest when the government removed its fuel subsidies in spite of a seven-fold increase in petrol prices and a doubling of bread prices.
Second, we need to implement a financial transactions tax immediately (a small tax on both sides of all transactions) to raise revenue efficiently and progressively for National Health Insurance and all government infrastructure programmes while simultaneously phasing out income tax and VAT. President Nicolas Sarkozy of France is advocating such a tax for the EU.
We should not be taxing honest hard work and enterprise if we want to develop this economy, hence the need to abolish income tax and VAT and replace them with a more equitable flat transaction tax.
Third, we need a land tax, based on the land value, to free up land for redistribution at more affordable prices on a willing buyer, willing seller basis without the need for expropriation.
Fourth, we are obliged, because of climate change and peak oil, to implement a carbon tax which will incentivise investment in labour intensive job-creating ventures and renewable energy infrastructure.
Finally, we need a solid publicly owned banking system to provide the capital and credit at very low interest to entrepreneurs and small businesses for such useful and desirable enterprises aforementioned.
Fundamental transformation of the economy is required to meet the challenges of the 21st century for the benefit of all South Africans regardless of race, and not short-term knee-jerk responses like this white guilt tax of dubious effect.
Yaj Chetty
Communications officer, Association for the Study of Peak Oil
Claremont
People desperate for jobs need the mines
I note with considerable concern the prominence given by your publication on August 23 to a piece by Nick Hiltermann, the chairman of the Mapungubwe Action Group (MAG), headlined “CoAL shirks legal obligations with big promises”.
While I do not dispute your publication’s right to publish such comment, nor Hiltermann’s right to his opinion, I ask that Coal of Africa Limited (CoAL) be given the same editorial opportunity to argue its position and to take issue with at least his most glib assertions that otherwise could be taken as statements of fact.
Although I do not intend to dispute point by point the content of Hiltermann’s piece, there are some issues I must challenge immediately.
Hiltermann’s assessment of the flow of dividends is facile and thus disingenuous. To claim that cash flows will simply enrich CoAL of Africa’s offshore shareholders clearly ignores the most basic principles of economic activity. The simplest level of scrutiny will show that investors – who risk significant capital investment in new mining ventures – are the furthest down the queue regarding returns.
The most significant component of our cost base will be labour, followed by goods and services. The direct and indirect taxation on profits, VAT and that paid by employees will significantly exceed any returns to shareholders.
I also fail to understand Hiltermann’s claim of a net loss of jobs as a result of our activities. The direct jobs created by CoAL will be real, permanent and meaningful; training and development will be provided, along with the opportunity for growth and mobility. Employees’ wages and benefits will facilitate significant direct and indirect economic upliftment, and cannot be compared with the minimum wages paid to highly seasonal, part-time farm workers, who gain little from their endeavours.
Another point to note: the proposed immediate mine activities are 15km from the boundary of the Mapungubwe Park and 30km from Mapungubwe Hill. The mine will not be visible from the heritage site at any stage of its life and, at the time at which these activities will be closest (22km) to Mapungubwe Hill in around 35 years’ time, these will be underground.
Our proposal to Hiltermann is simple: take a step down from your lofty perch that envisages a world without mining and engage with local people who are desperate for jobs, education, health care and economic development. Work with us to ensure that we – and other exploration and mining companies – turn our country’s mineral wealth responsibly to account, to benefit the broadest range of stakeholders.
My closing retort to Hiltermann’s final question would be: have we as a society properly examined the actual benefits of mining, or are we allowing a very small group of those with significant wealth and advantage to satisfy their own short-term private interests, at the cost of the interests of the community at large?
John Wallington
CHIEF EXECUTIVE
CoAL of Africa Limited
Why doesn’t union want Xstrata shares?
Regarding the edition of Tuesday, August 23, “Samwu to challenge Cape order” is a very interesting round-up of strikes and possible strikes in Wiseman Khuzwayo’s article.
Tucked in this article was the fact that the National Union of Mineworkers had declared a dispute with Xstrata over the employee share ownership programme. It needs to be said that this share ownership programme is a gift from the employer to the employees. This gift has been spurned on the basis that the union is opposed to a link between benefits and grades.
This gives a whole new meaning to the phrase “don’t kick a gift horse in the mouth”. This share ownership scheme is probably the wisest way for the black staff to gain ownership in the mining sector.
Here we see a system where this ownership is being given purely as a reward for service, and the unions have turned it down.
Mineral Resources Minister Susan Shabangu has come on record to state that the government wants to increase black ownership in the mining sector.
Maybe the minister should look to the unions and ask them why they are refusing a share ownership scheme which is given to the black mining staff as a gift.
MICHAEL BAGRAIM
CAPE TOWN