LETTER: SA has not been open for business for years - Business Day

Your editorial would have reached its readers as they were digesting with relief the suspension of the proposed VAT hike (“Is SA (still) open for business?”, April 24). The two issues are sides of the same (increasingly debased) coin.

The escalating fiscal crisis in which SA is now ensnared is the consequence of two things: a failure to grow the economy and a failure to govern effectively. Each failing can be ascribed not only to venality and incompetence — which are in plentiful supply — but to the predictable outcome of a policy environment that deters productive activity.

 Foremost here is SA’s so-called empowerment regime. With demands that investors cede a part of their equity to approved partners, it’s hardly surprising that investment comes in at about 15% of GDP, fully half of what the National Development Plan envisioned. And it’s entirely in line with an anaemic economy and the increasing gap between policy aspirations and the revenue needed to support them. “Empowerment” policy is a tax on growth.

A financially stressed state compounds its predicament by paying sizeable empowerment premiums on its sizeable procurement spend. While the government has been coy about putting a number on this, we estimate that about R17bn is directly spent every year on such premiums, with another R132bn committed through wasteful and unproductive expenditure enabled by these preferences.

Prescient readers will note that within this cumulative R150bn or so is more than enough room to meet the R58bn fiscal hole that prompted the VAT proposal in the first place.

All of this comes on top of a business environment that is severely compromised by crime, corruption, inadequate education, failing infrastructure and often appalling municipal governance; to which has been added renewed threats to property rights via the Expropriation Act and the introduction of demographic quotas in all but name for firms employing more than 50 people, as well as the resource regulations to which your editorial draws attention.

You argue that “this newspaper supports transformation and BEE as an economic imperative. But this has to be carried out through sensible policymaking”. Yet policies such as BEE have clearly not worked — South Africans are poorer now than they were at the beginning of the century and unemployment continues to rise, especially for black South Africans. The best way to “transform” SA and empower black South Africans is through rapid economic growth, not through racial preferencing policies that only benefit connected elites.

Is SA open for business? Quite the contrary; it has not been open for years. Current policy is undermining growth and pushing the country ever deeper into a trap it will struggle to escape. This needs empowerment through growth — in excess of 5% annually at a bare minimum, which is simply not conceivable under present circumstances.

Terence Corrigan and Marius Roodt
Institute of Race Relations

https://www.businesslive.co.za/bd/opinion/letters/2025-04-25-letter-sa-has-not-been-open-for-business-for-years/