Letter: Localisation will not bring growth - Businesslive

21 February 2022 - That localisation master plans enjoy strong government support is not necessarily a good thing (“Localisation widely supported within government and parastatals, department says”, February 20). SA’s economic situation is the result of government’s chosen ideas and policies.

That localisation master plans enjoy strong government support is not necessarily a good thing (“Localisation widely supported within government and parastatals, department says”, February 20). SA’s economic situation is the result of government’s chosen ideas and policies.

Reindustrialisation and renewed manufacturing capacity — with more job opportunities — will occur much faster in an economic context of reliable, cheap electricity supply, lower taxes and less red tape, and secure property rights. Absent those ingredients, no number of localisation plans (which will be implemented through subsidies and other forms of business support, and higher tariffs on imported goods and inputs) will achieve sustainable, long-term economic growth.

Instead of new initiatives and yet more interventions in the economy, government should rather focus all resources and energy on removing as many barriers to economic activity as possible. Freer trade is strongly correlated with higher GDP, but also with concrete improvements in most people’s quality of life. At the very least, when tariffs are lower citizens have easier access to cheaper goods and services, which in turn allows them to have extra income that they can spend on other priorities.

The very spirit of the newly adopted Africa Continental Free-trade Area is focused on making trade between countries easier and ensuring that goods and services can flow better. SA’s localisation plans stand to make the area itself, as well as its intended goals, pointless in practice.

Localisation plans could well result in short-term job creation for those businesses and sectors deemed worthy of government support. However in general and over the long term, policies fundamentally assuming a “command-control” mentality — and assuming bureaucrats (however well-intentioned and knowledgeable they may be) can predict all the unintended, negative consequences of intervening in the economy — will make subsidised business more brittle, depress innovation, and cost poorer consumers more by forcing them to buy higher-priced, locally produced goods.

Chris Hattingh, Institute of Race Relations

https://www.businesslive.co.za/bd/opinion/letters/2022-02-21-letter-localisation-will-not-bring-growth/

© 2020 South African Institute of Race Relations
CMS Website by Juizi

Terms & Conditions | Privacy Policy | PAIA Manual | Accuracy Guarantee | Sponsors & Donors

m