Government deep down a hole, and frantically digging - IRR

25 February 2021 - The finance minister yesterday presented the government's budget for the years ahead. He knows, as do most South Africans, that the country desperately needs economic growth to solve its problems – ranging from poverty and unemployment to the finance minister's own burden of balancing the state's books, a challenging task amidst rising spending and declining revenue.

The finance minister yesterday presented the government's budget for the years ahead. He knows, as do most South Africans, that the country desperately needs economic growth to solve its problems – ranging from poverty and unemployment to the finance minister's own burden of balancing the state's books, a challenging task amidst rising spending and declining revenue.
 
Globally, the signs are propitious. Growth in the industrialised countries appears to be on the rebound after the painful Covid contraction. Ordinarily, South Africa's economy should benefit from this, as demand for natural resources – many of which South Africa supplies – rises when wealthy economies grow.
 
However, the South African government seems intent on driving a stake through South Africa's prospects.
 
It is clinging to labour and mining legislation that is clearly not fit for purpose, turning increasingly to protectionism and indigenisation, and all the while doggedly trying to pass a catastrophic Expropriation Bill that weights the scales in favour of government, together with a Constitutional Amendment that will explicitly allow for expropriation without compensation.
 
These are developments that investors will be following closely and with great concern.
 
The undermining of property rights is presented as being in support of land reform, but in fact all types of property will be affected, not just land or real estate. Here, investors and savers are well advised to keep an eye on the on-the-table, off-the-table discussion around prescribed assets.
 
"Prescribed assets" refers to a plan by government to tap into the pension savings of ordinary South Africans to close the many gaping holes in the national budget and unprofitable SOEs. Under this plan, the institutions managing pension funds and similar pots of savings would be required to invest a certain percentage of assets in projects specified by the state, such as Eskom or SAA. Obviously, savers would be left holding the can when these coerced investments underperform, as is to be expected.
 
The government backed off from the idea of prescribed assets under intense pressure from the IRR and other civil society actors. But it may make a comeback, either under the same name or in a different guise. Or the provisions of the Expropriation Bill, once passed, could be used to motivate for the expropriation of private property "in the public interest" of balancing the budgets brought out of kilter by the government's own wastefulness and corruption.
 
The IRR is fighting the good fight against these harmful policies. But it needs support from companies and individuals.
 
Said the IRR's Chief of Staff, John Endres: "On behalf of ordinary citizens, the IRR has been enquiring from banks and institutional investors whether they are speaking up in support of property rights, and making submissions to Parliament ahead of the 28 February deadline. They have an indisputable interest in property rights and their voices carry great weight. They owe it to South Africa's people to use their power accordingly."

 
 
Media contact: Hermann Pretorius, IRR Head of Strategic Initiatives – 079 875 4290; hermann@irr.org.za
Media enquiries: Duwayne Esau, IRR Strategic Communications Officer – 081 700 0302; duwayne@irr.org.za
Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za
Kelebogile Leepile Tel: 079 051 0073 Email: kelebogile@irr.org.za
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