“Recognition of the need to sustain the constitution is surprisingly robust”
Stephen Meintjes Analyst at Momentum SP Reid and co-author of Our Land Our Rent Our Jobs
We are missing a great opportunity to address the land issue once and for all via collection of land rentals and instead we are relying on a Eurocentric model
1 What are the top three policy issues that are depressing SA’s growth rate?
Land, tax and state intervention: we are missing a great opportunity to address the land issue once and for all via collection of land rentals and instead we are relying on a Eurocentric model of taxation and a misunderstanding of Chinesestyle state intervention.
China has emerged from total communism, but allowed private enterprise to flourish [...] without, for example, imposing minimum wages. This misunderstanding is leading to a downward cycle of weakening economic growth in SA, strengthening the belief of those who favour state intervention and increased taxation, à la Thomas Piketty, author of bestselling book Capital in the Twenty-First Century.
His calculations on capital returns do not accurately reflect the extent to which the returns on capital include rent on land. His analysis is therefore flawed in as much as it does not reveal the extent to which “capital” grew faster than GDP due to uncollected rent.
2 What are the positives? Can we strengthen and improve on these?
Recognition of the need to sustain the constitution is surprisingly robust despite the onslaught of special interests to the contrary. We also have a world- class financial and corporate sector and entrepreneurial potential at all levels. To enable the government to get out of the way of unleashing this, we need fundamental tax reform.
3 What can we do in the short term to boost growth?
Roll out the gold mines tax formula to the rest of the mining industry (the gold mines tax formula has been i n place for many decades, and provides that smaller mines with operating margins of less than 10% pay no company tax, whereas richer mines with operating margins in excess of 50% would pay company tax at 40.5%), restore site value rating in urban areas (as used to happen in SA prior to the introduction of the Local Government Municipal Rates Act of 2004), and then increase rates and reduce VAT and, later, other taxes.
4 SA has slid a further four places to 73 out of 189 countries in the World Bank’s latest
Doing Business report. Do you agree that SA is slipping, and if so, how would you fix it?
Shifting from taxation to l and and other natural resources collection would lead to upside surprise in economic growth, reducing the perceived need for i ncreasing state intervention.
5 What would your strategy be to address the need for transformation and empowerment, while ensuring an attractive business environment for investors?
Recognise that there are limits to the extent to which public sector tenders can create enough “black industrialists” and go for thousands i nstead of hundreds ( of empowered i ndivi duals) by c r eati ng a massively i ncentivising environment for economic activity in rural as well as urban areas.