“Give a tax hol­i­day for new busi­nesses for their first five years”

Rus­sel Lam­berti Econ­o­mist at ETM An­a­lyt­ics

Finweek English Edition - - COVER STORY POLITICAL ECONOMY -

1 What are the top three pol­icy is­sues that are de­press­ing SA’s growth rate?

A sys­temic and de­lib­er­ate anti-mer­i­toc­racy, over­reg­u­la­tion and na­tion­al­i­sa­tion of key mar­kets as well as ex­ces­sive tax­a­tion by a bloated pub­lic sec­tor.

2 What are the pos­i­tives? Can we strengthen and im­prove on th­ese?

Our strengths in­clude a past ac­cu­mu­la­tion of cap­i­tal that is still in­tact (al­beit un­der strain), a legacy of skills and an in­no­va­tive en­tre­pre­neur­ial cul­ture. In­come in­equal­ity is also one of the best things go­ing for SA. It cre­ates a de­sire to suc­ceed and rise above. This la­tent en­ergy of in­equal­ity needs to be har­nessed by poli­cies of eco­nomic free­dom and the econ­omy will soar. If it is har­nessed by poli­cies of en­ti­tle­ment and re­dis­tri­bu­tion, SA will be lost.

3 What can we do in the short term to boost growth?

Slash taxes and state spend­ing (cut spend­ing more to bal­ance the bud­get). Raise in­ter­est rates to bal­ance sav­ing and con­sump­tion, re­duce ma­l­in­vest­ment, and stop the un­healthy debt-based growth model. The lower taxes will cush­ion the short-term blow of higher rates for in­debted house­holds and busi­nesses. This process will liq­ui­date zombie as­sets and re­al­lo­cate cap­i­tal to where it’s needed most. Pro­duc­tiv­ity will spike. Si­mul­ta­ne­ously scrap all trade bar­ri­ers (im­port tar­iffs can be scrapped as part of the tax cuts). Lower the in­fla­tion tar­get to 1%. Scrap ex­change con­trols. Re­move min­i­mum wages, un­ban labour broking. Give a tax hol­i­day to new busi­nesses, re­gard­less of size, for their first five years. Guar­an­tee prop­erty rights to en­cour­age in­vestors. Al­low the cur­rency to strengthen.

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?

Make it eas­ier to do busi­ness. Mainly, slash the bur­den of com­pany tax­a­tion by scrap­ping pro­vi­sional tax, mak­ing VAT pay­ments less oner­ous, and low­er­ing cor­po­rate tax rates. Then, dereg­u­late the labour mar­ket and make hir­ing and fir­ing less oner­ous.

5 What would your strat­egy be to ad­dress the need for trans­for­ma­tion and em­pow­er­ment, while en­sur­ing an at­trac­tive busi­ness en­vi­ron­ment for in­vestors?

The maths is quite sim­ple. If SA does not cre­ate new wealth at a far more rapid rate, re­dis­tri­bu­tion­ist poli­cies will only leave ev­ery­one poor. The best form of em­pow­er­ment is a just so­ci­ety with poli­cies that fos­ter rapid, sus­tain­able growth. The num­ber one pri­or­ity is there­fore grow­ing the na­tion’s wealth sus­tain­ably, and that in turn re­quires the max­i­mum amount of eco­nomic free­dom. Em­ploy­ment, ex­pand­ing op­por­tu­ni­ties and choice is the essence of em­pow­er­ment.

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