In 2015, remove unconstitutional shackles from the SA economy

To solve South Africa’s myriad economic problems, government should turn to the simplest, quickest and most cost-effective method. The free market way. It is time to abandon top-down planning and focus on creating conditions that capture the cumulative benefits of allowing individuals to choose for themselves and engage in voluntary transactions as long as they do not harm others or their property.

What is a “free market”? It is the opposite of the chaos that usually results when government interventions that are inconsistent with the rule of law prevent citizens of a country from going about their peaceful purposes. The rule of law requires the adoption of general rules applicable to everyone, including government. Arbitrary government decision-making based on unfettered discretionary powers are a particular source of economic chaos and contrary to the long-term interests of citizens.  

The practical examples of the potential benefits of positive change mentioned in this article are merely illustrative, there are many more possibilities. Human ingenuity, innovation and problem-solving requires a particular kind of environment that currently does not exist in South Africa. In 2015, citizens should demand of politicians of all parties that they strive towards creating such an environment by using the rule of law as a measure against which they test all their policy proposals.

Changes that could solve problems that currently hamper the growth of the South African economy include the adoption of the following policies:

The law –

Policy: Apply Founding Provision 1(c) of the Constitution, which provides for “Supremacy of the Constitution and the rule of law”. Given that the rule of law has equal supremacy with the Constitution, it is clear that deliberate biases in any South African laws are contrary to the rule of law and therefore unconstitutional.

Purpose: Ensure equality before the law for everyone and eliminate unconstitutional discretionary decision-making on the part of the executive branch of government and its officials. An economy strictly governed under the rule of law will provide greater certainty to investors, perform better, and suffer fewer instances of corruption.

Electricity –

Policy: Determine that all future electricity generating capacity be provided by private investors and owners (including foreign companies) and that the ownership, financing and management of the high voltage electricity grid be moved to a separate independent entity, which confines its activities to maintaining and extending the grid, and ensuring its integrity and proper functioning.

Purpose: Relieve taxpayers and government of the financing, management and risks related to electricity generation. Eliminate the electricity deficit as soon as possible. Create conditions conducive to the development of a competitive electricity market and ensure that the economy is never again starved of electricity.   

Labour –

Policy: Apply Section 9(1) of the Bill of Rights to the issue of unemployed people in the country to give them a better chance of getting jobs. This provision in the Constitution says, “Everyone is equal before the law and has the right to equal treatment and benefit of the law.” Change the Labour Relations Act, which contains provisions that ensure high levels of job security for people already in employment but simultaneously prevent the unemployed from getting jobs.

Purpose: Provide equality before the law to unemployed people and allow them to enter into employment contracts on their own terms. Recognise that it is principally the private sector, and small businesses in particular, that will provide jobs to the 8.4 million people who are currently unemployed if not prevented from doing so. Recognise also that if they were to earn as little as R2,000 each per month, the total annual earnings of the currently unemployed would be in the order of R200 billion, which would be more than 5 per cent of 2014 GDP. Armchair critics can describe R2,000 to be a starvation wage but it would buy 8.4 million people R200 billion worth of food, which is a great deal better than no wage and real starvation.

Health Care –

Policy: Free up the private health care sector and allow it to grow as rapidly as possible to enable it to supply an increasing percentage of the health care needs of the population. Concentrate taxpayer health care funding on providing high quality health care to the indigent.

Purpose: With high-growth free market economic policies in place, incomes of South Africans will grow steadily and allow an increasing percentage of households and individuals to cover their own health care costs, either through medical aid funds or out-of-pocket. Government could then utilise taxpayer resources more efficiently by purchasing health care for low-income patients from competing private health care providers instead of investing such resources in expanding the public health care facilities.


Applying the rule of law

Strictly applying the rule of law, which is a constitutional imperative, would transform the South African economy. It would require the removal of many of the constraints that are preventing the economy from freely functioning. The harm caused to the economy and to relationships between the country’s citizens by failure to establish and apply general rules, including equality before the law for all citizens, goes unseen. We can never know and can only speculate what would have occurred under more beneficial conditions, such as when the law is known, certain, and treats all citizens equally.

Author: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.        


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