Quarterly Review 2011.06

Quarterly review

 April – June 2011

Progress in “Perryville”

The “Perryville” title-upgrade-project is in its third year and has reached a pivotal point. From the 33,000 plots requiring upgrade to full freehold title, a sample group of 200 have been selected and a law firm commissioned to finalise transfer. Of these, the first ten have been identified and are in the process of being registered. Problems include outstanding rates and rents, mistrust by occupants fearing eviction, and the raising of unrealistic expectations.

FMF has been given the go-ahead to identify the next batch of 1,000 properties. Once whatever obstacles have been identified and ironed out on the first batch, the second and subsequent batches can (hopefully) be transferred in bulk.

The conveyancers have opened a new office in “Perryville” to facilitate the process. They are considering additional satellite offices in the region, and intend to employ and train locals to assist in the process.

Variety is the spice of life…

FMF hosted a colloquium on government’s software procurement policy on Tuesday, 19 April 2011, at the Centre for Intellectual Property Law (a joint initiative with Adams & Adams), Faculty of Law, University of Pretoria. The colloquium’s objective was to contribute to the formulation of a software procurement policy that secures the best possible outcomes. An in-depth discussion followed the two presentations: Robert Vivian, Professor of Finance and Insurance, School of Economic and Business Sciences, University of the Witwatersrand, spoke on Constitutionality and the South African state’s software procurement “policy”, and FMF’s Executive Director, Leon Louw, asked the question, What should government’s software procurement policy be?

FMF hosted a colloquium on publicly financed research on Wednesday, 25 May 2011, at the School of Economics, Middle Campus, University of Cape Town. The colloquium’s objective was to contribute to a thorough understanding of the legislation relating to publicly financed research and of the practical problems / benefits encountered in applying the legislation. An in-depth discussion followed the two presentations: Dhesigen Naidoo, Director: Research and Innovation Support at the University of Pretoria, outlined the Pros and cons of the Publicly Financed Research and Development Act, and Roux de Villiers, Director, Werksmans Attorneys, covered Progress and problems with implementation of the Publicly Financed Research and Development Act.

FMF hosted a roundtable on competition policy on Thursday, 30 June 2011, at the Sandton Sun Hotel, Sandton. Robert Vivian, Professor of Finance and Insurance, School of Economic and Business Sciences, University of the Witwatersrand, spoke on the constitutionality of South Africa’s competition policy; Johann van Eeden, Senior Economist, Econex, addressed the economics of South Africa’s competition policy.

The Act governing competition policy states that the purpose of the Act is:

  1. to promote the efficiency, adaptability and development of the economy
  2. to promote employment and advance the social welfare of South Africans
  3. to expand opportunities for South African participation in world markets and recognise the role of foreign competition in the Republic
  4. to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the economy
  5. to promote greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons

Robert concurred with Justice Robert Bork, author of The antitrust paradox – a policy at war with itself, who said “the exclusive goal of antitrust adjudication [competition law] is the maximization of consumer welfare”. He pointed out that South Africa’s competition policy – and its application – attempts to deal with more than simply “consumer welfare” and argued that for many reasons, the Act is probably unconstitutional.

While Johann argued that there is a role for government in creating an environment conducive to competition, he also queried the multiple objectives of South Africa’s policy, which places “the competition authorities in a position of having to weigh up and prioritise potentially conflicting objectives, leading to uncertainty and lobbying by well-organised pressure groups”. He said that government laws, regulations and conduct have potentially anti-competitive effects at odds with the protection and coddling of domestic firms.

In-house functions…

20 April – Brian Kantor: The rights and wrongs of the South African economy

Brian Kantor, Professor of Economics at UCT, and economist and strategist at Investec Private Client Securities, explained how South Africa can achieve faster growth and low inflation without inflation targets. He demonstrated why inflation targeting, given exchange rate volatility, is a bad idea for South Africa and why inflation expectations cannot cause more inflation. “It is the new version of the old notion of cost push inflation,” he said. Brian extended his analysis to the outlook for economic growth in South Africa, which, he contended, is constrained by the interests of newly-advantaged government employees who have little respect for market forces.
1 June – John Blundell: Lessons from the Thatcher era for South Africa today
John Blundell, Director General of the Institute of Economic Affairs (UK) from 1993 through 2009, and author of Margaret Thatcher: A portrait of the iron lady, reviewed the success of Margaret Thatcher in taking the UK economy from 19th to 2nd place in the Organisation for Economic Co-operation and Development (OECD), and tackling problems such as the nationalised industries and the trade unions. John’s book, Margaret Thatcher: A portrait of the iron lady, contrasts the desolation of Britain in the 1978-79 “winter of discontent” with the economic buoyancy and national self-confidence that prevailed by the end of her period in office over 11 years later.

29 June – Richard Pike and Loane Sharp: Challenges facing the South African labour market

Richard Pike, Chief Executive Officer, and Loane Sharp, Labour Economist, both from Adcorp Holdings Ltd, scrutinised the root causes of the impending unemployment crisis and made recommendations on how to solve each of them. Richard and Loane argued that, unchecked, the official unemployment figures could rise to 10 million over the next five years, and 16 million over the next decade. The longer we prevent the unemployed from entering the job market, they said, the sooner we will create a new apartheid, plunging our young democracy into the depths of social chaos. Co-authors (with Ted Black) of The new divide, they contested that while a high minimum wage undoubtedly improves the quality of life for unionised workers, it excludes job-seekers from the job market. They challenged government, business and labour to include the unemployed in reaching consensus on the way forward… “before it is too late”. Richard’s excellent presentation, with a host of facts and figures, can be viewed on our home page (www.freemarketfoundation.com) under Events.

In good company…

FMF Director, Temba Nolutshungu, has contributed a chapter to the book The morality of capitalism: what your professors won’t tell you, 100,000 copies of which will be distributed to student groups around the world. The book combines the writings of various philosophers, economists, Nobel Prize winners, and entrepreneurs to make the case that not only do “markets deliver the goods” as Vernon Smith says, but that a true free market system is a prerequisite for a just, prosperous, and cooperative society. Essays contained in book are:

  1. The morality of capitalism, by Tom G. Palmer
  2. Interview with an entrepreneur, featuring John Mackey, Founder and CEO of Whole Foods Market
  3. Liberty and dignity explain the modern world, by Deirdre N. McCloskey
  4. Competition and cooperation, by David Boaz
  5. For-profit medicine and the compassion motive, by Tom G. Palmer
  6. The paradox of morality, by Mao Yushi
  7. The moral logic of equality and inequality in market society, by Leonid V. Nikonov
  8. Adam Smith and the myth of greed, by Tom G. Palmer
  9. Ayn Rand and capitalism: the moral revolution, by David Kelley
  10. The market economy and the distribution of wealth, by Ludwig Lachmann
  11. Political and economic freedoms together spawn humanity’s miracles, by Temba A Nolutshungu
  12. Global capitalism and justice, by June Arunga
  13. Human betterment through globalization, by Vernon Smith, Nobel Laureate in Economics
  14. The culture of liberty, by Mario Vargas Llosa, Nobel Laureate in Literature


Malema: “I sit in the national executive committee … I know nationalisation is on the agenda of the ANC … nationalisation will be resolved as a policy position in the 2012 centenary conference of the ANC.”

In response to calls for the nationalisation of mines, banks, land and wealth, the FMF compiled a study early this year with three important purposes:

  1. to disseminate and make generally accessible the facts and empirical arguments in the debate on the policy of nationalisation and to address the moral dilemma of socialism;
  2. to provide information to those who feel uncomfortable in principle with the policy of nationalisation and perceive the potential harm that could be done to the economy if the policy proposed by the ANC Youth League is adopted and carried through;
  3. to engage with those who support the policy of nationalisation on a philosophical and intellectual level.

The study comprises six freestanding chapters, each with an executive summary, dealing with various aspects of the nationalisation debate. The reader can therefore select what to read and the order in which they wishe to do so.

Analysis of the ANCYL’s nationalisation proposals – Leon Louw audaciously interrogates the reasons why the ANCYL wants to nationalise mines and other businesses. This leads to a thorough and objective analysis of the Freedom Charter and its intentions.

The economics of nationalization – Prof Richard J. Grant, former chief economist at the Chamber of Mines, discusses the economics of nationalisation and examines why privatisation is the most likely eventual outcome of nationalisation.

True empowerment and good governanceEustace Davie puts forward alternative policies that can be utilised to address poverty and unemployment such as transferring state-owned assets to the people at no cost.

Problems with state ownership of enterprises – Jasson Urbach outlines the problems experienced with state ownership of enterprises via case studies of Zambia, Venezuela, Bolivia, the Democratic Republic of the Congo, Chile and Ghana, and Botswana.

Nationalisation and black advancement – Vivian Abit Atud finds that black economic advancement has been considerable since 1994 and shows that through in/direct ownership of the JSE, blacks own a substantial share of mining companies.

Rewards of economic freedom – Eustace Davie and Jasson Urbach explain how government control over economic resources reduces consumer sovereignty and show that there is a correlation between economic freedom and progress.

Nationalisation sparked a lot of media (8 interviews and 12 press articles) and other interest. Of the 3,000 copies printed in January, none remain. Most of the books were distributed free of charge to the ANCYL, Cosatu, NUM, the Black Management Forum, government officials, the media, economics students, Nafcoc, business people, and others; some were sold to mining houses and interested individuals. Those distributed free of charge were done so at the request of the recipients in most cases.

The FMF is in the process of printing an additional 4,000 copies – due date approximately July 20.

If you would like to contribute toward the second print run and distribution, please contact Gail Day on gailday.fmf@mweb.co.za.

If you would like to purchase a copy at R125 (inclusive of VAT and postage), please complete the relevant form at www.fmfevents.co.za.

Power to the people…

“That was the best energy conference I have ever attended,” said one delegate after the FMF’s June 9 conference, Unlocking the electricity transmission grid: An independent system and market operator for South Africa. The purpose of the conference was to advance the implementation of an independent system and market operator as proposed by the Department of Energy. We explored alternative grid models from the US, UK, Scandinavia, India and Brazil, considered appropriate grid options for South Africa, and garnered the viewpoints of key role-players.

Leon Louw opened the conference with an overview of the status quo and was followed by Karl Lawrenz of TransAfrican Energy who explained the terminology associated with an independent system and market operator (ISMO).

The five overseas speakers who detailed the pros and cons of various grid models were:

Robert Lane, Cameron McKenna: Regulated Industries Team, United Kingdom

Barun Mitra, Liberty Institute, India

David Waltenberg, Advocacia Waltenberg, Brazil

Ashley Brown, Dewey & LeBouef | Harvard Electricity Policy Group, North America

Peter Fritz, Sweco: Energy Markets Analysis Group, Scandinavia

South Africa’s ISMO Bill, gazetted shortly before the conference, was explained by the DoE’s Deputy Director General Ompi Aphane, and Mark Pickering of Meridian Economics detailed the policy elements of an independent grid.

Our final panel considered an appropriate grid model for South Africa, garnering viewpoints from the following:

Department of Energy – Deputy Director General Ompi Aphane

Chamber of Mines – Dick Kruger

SA Independent Power Producers Association – Doug Kuni

Cosatu – Jonas Mosia

Energy Intensive User Group – Thomas Garner

Business Leadership South Africa – Jayendra Naidoo

Meridian Economics – Mark Pickering

The FMF thanks the sponsors who helped make the conference the success it was:

Ackerman Family Foundation

Anglo American

Arup (Pty) Ltd

Business Leadership South Africa

Dewey & LeBoeuf

EE Publishing (Energize magazine)

Exxaro Resources Limited

Group Five

Lebone Engineering

Werksmans Attorneys

The FMF’s submission on the draft ISMO Bill can be viewed on our home page (www.freemarketfoundation.com) under Events.

Save these dates

Jul 27 – Dawie Roodt, Chief Economist, Efficient Group, to speak at FMF

Oct 20 – FMF’s annual “intellectual property rights” indaba

Words of wisdom

Leon Louw this quarter…

11 Apr – ran a full day workshop on fraud in Cape Town

13 Apr – spoke on Current trends in intellectual property protection at the Securing Innovation Conference

19 Apr – addressed the Pretoria colloquium (see above) on What should government’s procurement software policy be?

20 Apr – addressed the Mining Law Update on The nationalisation debate: Evaluating the legal side of nationalisation of mines

12 May – participated in a panel discussion at the SA Property Owners’ Association convention on South Africa’s macroeconomic policies, and Boehringer Ingelheim later in the day on Nationalisation

16 May – presented The world economy and global market trends to the SA National Defence Force College

19 May – Nuclear Forum’s conference on Economic reality of energy price and cost

24 May – presented Nationalisation to mining magnates at an Alexander Proudfoot breakfast

27 May – presented Nationalisation to a select group at a luncheon hosted by Merrill Lynch

3 Jun – addressed SAUMA on the Financial services environment and ombud issues

9 Jun – spoke at the FMF’s “independent grid” conference on the status quo of electricity provision in SA

24 Jun – presented Nationalisation to a select group at a luncheon hosted by Citi

27 Jun – ran a full day workshop on fraud at Victoria Falls

In addition…

28 Apr –  Temba Nolutshungu addressed the Cape Town Toastmasters Club on Liberty as an alternative to Affirmative Action / BEE

31 May – Jasson Urbach presented Balancing access and innovation to the second annual SA Medical Devices Conference (SAMED) at Helderfontein

Ideas for a free society…

The FMF has been working with the International Policy Network (IPN) to promote the contents of their CD, Ideas for a free society, to South African students. IPN says:

“Ideas have consequences. They influence the political, economic and social systems that govern our actions and affect the way we live our lives. Ideas have inspired many of the political and economic arrangements that have existed at different times in different places. Some of these arrangements have promoted creativity, innovation, peace and prosperity, leading to improvements in quality of life and enabling people to fulfil their myriad needs and goals. Other political and economic arrangements have undermined creativity, inhibited innovation and lead to civil unrest, oppression, starvation, poverty and misery...

Over the course of the past two hundred years, the number of countries with such beneficial political and economic arrangements has gradually increased. As a result, this period has seen rapid improvements in technology and economic conditions…

The title of the CD … was inspired by the observation that the political and economic arrangements that seem to be most conducive to peace and prosperity are those that exist in free societies. In such societies, there exist certain institutions that guarantee political, economic and social freedom, and those institutions are in turn underpinned by ideas.

Such ideas have been explored by individuals from many different perspectives… the CD contains a selection of contributions by some of the primary scholars and thinkers who have developed ideas which relate to the free society.”

The following presentations took place:

7 Apr – Leon to two student groups, one in Pietermaritzburg and one at the UKZN School of Economics and Finance

9 Apr – Leon to Management College of SA (Mancosa) master’s students

28 Apr – Temba to University of Stellenbosch political science students

17 May – Jasson Urbach to University of Zululand students

20 May – Leon to University of Johannesburg economics students

13 Jun – Temba to Zambia Catholic University, Zambia

14 Jun – Temba to Mulungushi University and Kwame Nkrumah College, Zambia

15 Jun – Temba to Evelyn Hone College for Further Education, Zambia

17 Jun – Temba to National Institute for Public Administration, Zambia

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