The messaging from the State of the Nation Address (SONA), hosted 10 February 2022 for the first time outside the halls of Parliament, was both encouraging and disheartening.
The Free Market Foundation (FMF) was glad to hear the President, the Chief of the Executive, unequivocally state that the body responsible for job creation was not government, but rather, the private sector. The FMF since its inception has been in the forefront of exposing to the broader South African public and its decision makers the power of individuals trading with one another.
The SONA also saw the announcement of the Red Tape Presidential Task Team to be headed by SASOL Chairperson Mr. Sipho Nkosi. According to the President, the task team will be responsible for looking at ways in which red tape, especially in the SMME sector, can be eliminated. The FMF was encouraged to hear the President mention the necessity to get rid of regulations and red tape which stifle our country’s small businesses.
In conjunction with the Fraser Institute (Canada), FMF annually publishes the Economic Freedom of the World (EFW) report which shows that more freedom i.e. less red tape, results in more jobs. South Africa drops down the EFW ranking of free economies every year, and our unemployment rate not surprisingly increases as we do so. The FMF hopes the task team will take its task seriously and have identifiable benchmarks such as, for instance, improving the country’s position in indexes such as the EFW.
The FMF was discouraged by the opposite stance the President seemed to take in the rest of his address. The President acknowledged the limited role government can play in the employment of people and thus generating growth in the economy whilst also announcing the expansion of government welfare, like the R350 Social Relief Grant until 2023, which would be a further drain on an already overburdened fiscus. Initiatives like the Social Employment Fund by the government, directly contradict the statement that ‘government does not create jobs’.
The FMF took note of the President’s omission of any concrete cut in government expenditure. A necessity of an environment conducive for job creation by private citizens is their ability to keep more of their capital and not have most of it swallowed up by taxation. South Africa is in the top 10 of countries in terms of personal income tax obligations. The government announced unending spending obligations without taking into account the overburdened South African taxpayer or the shrinking tax base.
This contradictory stance by the President in his address is highlighted by FMF Director Eustace Davie who states: “In the early part of the SONA speech the President said “Governments do not create jobs, private businesses do! A statement to gladden the hearts of all free market proponents. Sadly, as the speech progressed, we heard about project after project to be initiated by government with the object of “creating jobs” – a direct contradiction of the earlier statement!”
The FMF hopes that this contradiction in the President’s speech will not result in a situation wherein the government is working at odds with itself. The problems of unemployment and poverty need a clear policy position to be solved. A policy that will actualise without any contradiction the notion that government truly does not create jobs. It can, however, create the environment in which private enterprise can thrive.