Policy limits investment
In a most informative article (Conglomerates did not deliver their side of the postapartheid bargain, February 28) Andrew McGregor and Nimrod Zalk provide an excellent analysis of the major restructuring of South African commerce and industry and the benefits that have flowed to the “previously disadvantaged”. However, it can be argued that the conglomerates did deliver their side of the bargain as far as they could control the process.
Over the period from 1990, there occurred some major changes in overall business philosophy, or saw them drawing to a conclusion. The international move away from conglomerates (who now remembers Ling Temco Voight?) towards more focused structures was followed later by local entities. From the 1950s onwards, the philosophy of Anglo American and Anglovaal in particular had been to reinvest much of their profit and surplus capital in the purchase and growth of South African industries at a time when their major shareholders were also largely local.
There was an underlying view that the wealth of our land should be invested locally for the benefit of all South Africans, albeit mostly whites, although there was substantial job creation at low wages. The exchange control policies of the time largely locked in the capital of South African companies, thus encouraging agglomeration. The steady change in exchange control policy from 1995 facilitated the export of capital and indeed, whole companies, from the country, while the attraction of our high investment yields, necessary under the National Party regime, resulted in a substantial inflow of foreign purchases of South African shares and gilts. The maximising of profits, which increasingly flowed abroad, was the result.
Unfortunately, the policies instituted by the newly installed, inexperienced and Marxist-influenced government quite rapidly reduced the enthusiasm of the private sector for continuing real fixed investment in the country. The real problem with black economic empowerment is that it simply promotes transfers of assets rather than increased investment. Business with government, directly or indirectly, forms a substantial portion of our country’s overall commerce and industry.
Why should a white person or white-controlled company, or foreign company, invest with an obligation to take in essentially freeloading black partners as well as deal with an increasing administrative load and difficult workforce? And now a higher tax rate on dividends! I am well aware of the historical and social imperatives that drive current government policy, but suggest it is necessary to understand some of the underlying factors that limit local private fixed investment from both South Africans and foreigners too.
Robert Stone
Linden