Peter Gregory says that the key to accelerating the economic development of black South Africans is to deliver them true economic freedom.
If ANC secretary general Gwede Mantashe wants “transformation” of South Africa’s post-apartheid economy, he should look down, not up. Since the nation’s transition to democracy, black South Africans have faced a new set of economic restrictions. And impinging on the property rights of white South African farmers is not the answer.
Mantashe recently told the South African Chamber of Commerce that “the debate about property rights must include debate about qualification (of ownership)” to create “a just post-apartheid society”.
He was talking about South Africa’s agriculture sector where the majority of commercial farms are still owned by white farmers and implied that the government’s practice of redistributing this land would be ramped up.
But the key to accelerating the economic development of black South Africans is to deliver them true economic freedom – not to subjugate the economic rights of white South Africans.
For everything else it was, apartheid was a system of economic repression.
Measures such as banning black business ownership, creating barriers for black access to various industries, denying property rights to non-whites and, most hated of all, the dreaded pass laws that restricted freedom of movement were first and foremost economic restrictions.
They were among the most pervasive and “everyday” components of apartheid’s wickedness.
This is because the freedom to use our talents, creativity and willpower to improve the material well-being of our families and our communities is central to the human condition.
Of course, the ANC government has rightly swept many of these restrictions away. But black South Africans are still denied various basic economic freedoms.
Primary among them are property rights. The legacy of apartheid has left many black South Africans with weak and insecure property rights. Indeed, approximately two million households live in informal settlements or backyard shacks, and in rural areas, 2.5 million households hold land as part of “communal tenure” regimes.
The transition of these people to genuine property rights must form a key part of the ANC’s economic strategy. Not only is the right to own property a human right, but improved property rights have been associated with myriad practical economic and social benefits.
These include increased women’s empowerment, investment in agricultural and urban infrastructure and labour market participation.
Not to mention the impact strong property rights can have on increasing entrepreneurship. In the US, some 70 percent of businesses are started by using a family dwelling to leverage bank loans. Millions of black South African entrepreneurs are currently restricted from doing this.
Furthermore, housing remains an issue in South Africa. The government has attempted to provide free housing for those who cannot afford it, but 2.3 million mostly black South Africans are still waiting on the so-called RDP waiting list.
However, by subsidising the housing sector, the government has crowded out the private sector, and left a “gap” in the market.
Robert McGaffin, a senior lecturer at UCT, estimates that between 20 percent and 25 percent of South Africans are earning too much to qualify for the free housing grant, but too little to secure a mortgage.
By curtailing the emergence of an affordable banking sector in South Africa that would serve all income levels, the government is restricting the continued emergence of a black middle class. The government would be better served getting out of the way and enabling people to exercise their human right of participating in a free market.
While the formal barriers to entry of the apartheid era have been cast aside, there are still many obstacles to black South Africans starting a business. This year, South Africa dropped from 56 to 64 on the World Bank’s “Doing Business” register in the category of “starting a business”. This is a trend the government must work hard to buck.
According to the Heritage Foundation, South Africa is also blighted by corruption and a lack of regulatory transparency. Both of these things stifle entrepreneurship and economic activity and it is the poorest South Africans who pay the highest price.
Finally, the government must discard the elephant in the room, Black Economic Empowerment (BEE).
Last year The Economist claimed BEE has feathered the nest of the black elite at the expense of the poorest because it incentivises having political connections over real economic entrepreneurship that creates jobs.
It is little wonder that the unemployment rate among black South Africans is 28.5 percent (41.6 percent if you count those who have given up looking for a job).
The antidote to the lingering racial inequalities in South Africa’s economy is economic freedom for all South Africans. The ANC promised a free South Africa – now is the time to deliver.
Cape Times
* Gregory is a research fellow at the Institute of Public Affairs, a free market think tank in Melbourne, Australia. He has previously worked at a microfinance institution in Limpopo Province.