Trapped in the past and stuck in a rut

John Kane-Berman says there are three key problems with the Motlanthe panel's report

There are three fundamental problems with the Report of the High-Level Panel on the Assessment of Key Legislation and Acceleration of Fundamental Change released last week.

The first is that the panel cannot bring itself to jettison the old shibboleth of blaming colonialism and apartheid for the country's major ills of poverty, inequality, and unemployment. The second is its view that these ills have come about "despite" the efforts of the government, when they might be the result of these efforts. The third is that it is more concerned with redistributing than with generating wealth. That said, the report at least recommends one excellent change to labour legislation.

Chaired by Kgalema Motlanthe, a former president, the panel recognises that legislation might have "unintended consequences". It even recognises that "overregulation and bureaucratisation" might be problems. But this does not stop it proposing the introduction of a "certificate of need" to determine where newly certified medical specialists may practise or new pharmacies may be established, or recommending measures "to deepen existing taxes on wealth and to introduce new ones".

Since the African National Congress came to power in 1994, unemployment (on the expanded definition) has risen from 3.67 million to 9.30 million. To issue a report 23 years later blaming colonialism and apartheid for this state of affairs no doubt satisfies the needs of political correctness, but it is irrational.

However, as part of its remedy for tackling unemployment the panel does at least propose reducing the powers of bargaining councils under the Labour Relations Act. The act empowers these councils to "force" small businesses to abide by wage agreements struck by large employers and large unions. The panel wants these powers removed.  

It also proposes the "setting of a separate wage" below the statutory minimum for smaller businesses, longer-term unemployed, and "first-time inexperienced employees". However, any beneficial effect of this proposal will be nullified by endless haggling over what the separate wage should be.  

To accelerate economic growth, barriers to entry should be removed, especially by "enriching the powers of economic regulators to promote competition". Further recommendations include reducing the time to register small businesses. Special economic zones for manufacturing for export should be created. Agriculture and tourism should be prioritised. Informal traders should get more resources. Labour-intensive growth must be promoted, plus a new framework law for land reform.

Some of these ideas may be useful. But the panel's recommendations fall far short of what our stagnant economy requires. Although the panel recognises that jobs are the "most efficient" way of taking people out of poverty, its proposals are pusillanimous. Some – "land redistribution is a key element to reducing wealth inequality" – are pipe dreams. Even though the report is designed to assess key legislation, there is little scrutiny of the effects of such instruments as the mining charter or other interventions that have undermined South Africa's ability to encourage investment.  

"Accelerated fundamental change" and faster economic growth are not the same thing. They may be contradictory. The panel says that "substantial challenges remain" despite "a panoply of laws and policies put in place 1994" and despite South Africa's having established "a set of fiscal policies (taxation and spending) that are among the most redistributive in the world".

The panel is trapped in its own mindset. It says that the "ills of the past are being reproduced in post-apartheid society despite extensive legislative reform". Although it acknowledges that laws should "do no harm", the possibility that "extensive legislative reform" might be the problem, not the solution, is not properly explored. As President Donald Trump said two months ago, "The problem in Venezuela is not that socialism has been poorly implemented, but that socialism has been faithfully implemented."

No doubt some of the proposed tweaks will be useful, especially more secure land tenure in former homelands, more powerful school principals, and (temporarily) easier entry of foreign skills. But what South Africa really needs is wholesale deregulation aimed at much faster economic growth. Otherwise we will have to keep on digging up the old apartheid scapegoat. 

* John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom.