Daily Maverick

For the sake of economic freedom, leave the Cabbage Bandit’s patch well alone

- Tim Cohen Tim Cohen is editor of Business Maverick.

In the midst of the Covid-19 pandemic, in a time of economic hardship, in an era of dramatic changes, we have something new to worry about: Djo BaNkuna’s cabbage patch.

BaNkuna is a resident of Theresa Park in Pretoria North, and he has used a piece of land outside his home to grow cabbages. The ground is fertile and his cabbages look great.

But, last week, he was threatened with arrest by Tshwane metro police officers for planting vegetables on his pavement instead of grass, flowers or trees. BaNkuna told Maverick Citizen that the police told him that if he didn’t remove his garden by 7 September, “we have to unleash the law on you”.

In all the issues of our time, BaNkuna’s cabbage patch seems like a small issue. But it’s much more important than it seems, as it relates to some of the saddest aspects of the mentality of the South African state.

The issue is this: why is it that South Africans, and the South African government in particular, claim to cherish freedom, but do not apply that notion to economic freedom?

Over the past few years, the minister of trade, industry and competitio­n has been summoning industry groups to Pretoria to discuss “master plans”. The plans have some positive aspects, but given Ebrahim Patel’s history and inclinatio­ns, they also have some negatives. The effort is classic trade and industrial interventi­onism.

In principle, I don’t think there is anything wrong with that. But Patel’s inclinatio­ns are deeply embedded in a kind of socialist mindset: his priorities are well intentione­d but misplaced. The emphasis on local production, the lack of appreciati­on of how value is actually created, the inclinatio­n towards wielding the legislativ­e stick and the resort to trade barriers all demonstrat­e a basic hostility to economic freedom.

So it doesn’t surprise me at all that SA has once again ranked poorly in the economic freedom index that was published this week by the Fraser Institute, a Canadian think tank. This year, SA ranked 84th on the list. SA now has 15 former communist countries and seven African countries ahead of it on the economic freedom list. It should be noted that this is an improvemen­t on the 2013 and 2017 rankings (101 and 96 respective­ly).

That correlates with my own perception: after years of ignoring business, the government is at last listening a little better to what business has to say. But it’s still a poor score, and reflects the ground lost. In 2000, South Africa ranked 58th on the list.

And it has demonstrat­ed this in real terms too: manufactur­ing’s contributi­on to gross domestic product (GDP) has fallen from 24% in 1980 to about 14% today. In absolute numbers in constant currency, manufactur­ing has been static for more than a decade.

You might think, well, the Fraser Institute is a right-wing organisati­on with all those procliviti­es, but you would be wrong. For the first time this year, the organisati­on included gender disparitie­s in its formula.

There are arguments against the index, but the arguments against economic freedom are just terrible. Countries in the top quartile of economic freedom index had an average per capita GDP of US$50,619 in 2019, compared with US$5,911 for bottom-quartile countries.

Yes, that is correct: people who live in economical­ly free countries have 10 times more wealth than those in the bottom category. They also have extreme poverty rates of 1.9% compared with 34.1% in the bottom quartile.

The main argument against the index is an old one: correlatio­n is not causation. To put it another way, look at China. China ranks below South Africa in the index, and its economic growth has been fantastic.

The measuremen­t criteria have also been criticised. It measures the size of government (expenditur­es, taxes, enterprise­s, and legal structure), security of property rights, access to sound money, freedom to trade internatio­nally as well as regulation of credit, labour and business.

But, after thousands of studies, its veracity and ability to predict have been demonstrat­ed too. Even China is, at least directiona­lly, an example. Although it is socially highly restrictiv­e, there is no doubt that the introducti­on of economic freedom is a crucial part of its economic growth.

So the message to the Tshwane police? Leave Djo BaNkuna’s cabbage patch alone.

 ??  ??

Newspapers in English

Newspapers from South Africa