Black people can get out of poverty, if the government gets out of their way

28 January 2019
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Poverty has been decreasing in Africa as countries have gradually liberalised their economies, yet the South African government has chosen to go in the opposite direction and citizens are bearing the brunt. Countries like Rwanda and Ethiopia are growing their economies and eliminating poverty, but we are stagnating and losing our coveted place as the most industrialised nation on the continent.

Clearly, getting out of poverty is not impossible for black people who have governments that respect free markets.

Here in South Africa the spectre of poverty haunts everyone. That is why we are driven to work and invest. Investment costs have dropped drastically with the rise of new platforms and financial instruments like easyequities.co.za and Exchange Traded Funds. Anyone earning an income can save for the future and set themselves on the way to banishing poverty from their lives forever. All it takes is self-discipline. Skin colour has nothing to do with it.

Of course, to invest requires some income and this is where we have government setting up a barrier of labour regulations that prevent poor people from getting jobs. Much has been written on this but suffice it to say it need not be an insurmountable problem to get everyone on the first rung of the income ladder, which will happen if only government could be convinced to stop interfering in employment contracts and investment in the economy.

This also has nothing to do with being black, even though most victims of government obstacles are black people because this group is catching up from far behind everyone else due to apartheid. In many ways, the current government is perpetuating the consequences of apartheid through regulation, high taxes and a lack of respect for private property rights.

Trying to convince yourself that you are not poor by buying expensive champagne and going to art galleries is not a good idea. I, personally, don’t mind if people think of me as being poor because of the way I dress, the things I buy, and how I use my time.

Some wealthy old pensioners drive 10+ year old cars because they know it adds nothing to you if everyone can see that you are wealthy. In fact, that kind of thinking will keep you poor.

Making it is never guaranteed, especially for people who do not save or have a habit of getting into debt to finance consumption spending. No matter how much you earn, if you don’t save, you’re more than likely to end up poor. While it is never guaranteed, you can ensure that you have a very high chance of making it by denying yourself niceties like partying, luxury cars and expensive clothes. This is how members of the Indian community in South Africa have largely erased the negative effects of apartheid on themselves.

Fanon was wrong. We are poor because African leaders chose the failed ideas of controlled economies instead of letting individuals be masters of their own fate. Some countries are slowly turning their economies around and Africa is starting to rise as a result. Therefore, it is not blackness, the climatic adaptation, keeping us poor but it is rather blackness the ideology, which is popular on this continent and which, unfortunately, has at its foundation failed socialist ideas – ideas that have a 100% record of making people poor.

It is the nature of any market that any position is never secure, that’s why companies like Edcon can go into bankruptcy and others like Capitec can rise to challenge dominant players. That is why any prudent investor sacrifices higher returns in exchange for less risk and thereby protects their wealth, that is why insurance exists, that is why the strategy of diversification is championed by every responsible financial adviser.

If being in a state of poverty makes you feel inferior, that is understandable but also unhelpful. You need to deal with your internal psychological state and then figure out how to get yourself out of poverty. There are many black people who don’t have these feelings of inferiority, so fix yourself or else you are just getting in your own way.

It is not clear how “black child it’s possible” is a lie. Of course it’s possible because so many others have done it and maintained it. People like Patrice Motsepe have built empires that will likely outlive them. Assuming his descendants are equally business-savvy, the Motsepe wealth will last forever. Sadly, this is rarely the case, even in developed countries, as the generation that makes the wealth tends to hand it over to those who lose it. This is why many wealthy people put their money in trusts that restrict how their descendants can use it.

It is not clear to me what the choice between “assimilation” and “making it” is. If acquiring and using knowledge on wealth-building is assimilation, don’t be surprised if you stay poor thinking like that. If, on the other hand, it means giving up your own culture in order to gain an income and start saving, this, clearly, is not true. I am a proud Zulu man and I know many others who save and invest money while continuing to practice their cultures to the fullest.

The black middle class is no illusion. In fact, companies love to sell to this demographic and, therefore, are doing what they can to see it grow even larger. A bigger middle class means more customers for businesses. My only wish is that members of this class would borrow less and save more.

The only structural impediments to black people making it now are the policies of the present government: the regulations, taxes and policies like expropriation without compensation which lead to insecure property holdings. Secure property rights are the engine which built the prosperity of the West and now Asia. If government doesn’t acknowledge this, we will continue to have black poverty. After all, who do you think is most affected by the feudal system that operates in the former homelands where land is not held by individuals but by the state?

Mpiyakhe Dhlamini is a data science intern at the Free Market Foundation

This article was first published in City Press on 25 January 2019

 

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