Quarterly Review 2011.12

Quarterly review

October – December 2011

Green Paper on Land Reform, 2011

Both the Free Market Foundation and the Law Review Project submitted comments on the Green Paper on Land Reform, 2011 on 29 November 2011.

Some economic and jurisprudential points made:

  1. There is no need for new costly bureaucratic institutions like the proposed Land Management Commission, Office of the Valuer-General or Land Rights Management Board.
  2. Prices agreed by willing buyers and sellers do not distort markets.
  3. The proposed imposing of limits on the extent or hectarage of private-owned land would prejudice the productive use of land.
  4. The resale by land-reform beneficiaries of their land is not a sign of failure. Freely-tradable assets gravitate into optimal hands.
  5. It is a myth that land reform should focus on redistribution of rural land. Reform should be concerned with access to the more-valuable urban land and housing.
  6. The government should immediately redistribute its own land. A small proportion of superfluous government land will suffice to provide, free, to all landless and homeless South Africans the full unambiguous freely-tradable ownership of a plot of urban residential land or viable agricultural land. All land parcels permanently held by black South Africans on government- or municipal-owned land should be summarily converted to full unambiguous freely-tradable ownership at zero cost to beneficiaries.
  7. It would be unconstitutional for the proposed Land Management Commission to be given the power to invalidate title deeds and confiscate land as proposed.
  8. It would also be unconstitutional if the proposed Office of the Valuer-General purports to make final determinations of the financial compensation payable in cases of land expropriation.
  9. We point out that it is already state policy to give land-reform beneficiaries merely lessee’s rights. The government’s leasing policy ties land beneficiaries to onerous lease obligations to farm the land or lose their rights. The government apparently applies similar restrictive conditions when providing urban housing. There is no security of tenure, properties are liable to forfeiture for prescribed reasons, and disposal requires official consent. We submit that the government thus in substance imposes on blacks the same land-tenure restrictions as were imposed under apartheid.

The full submissions can be read here:

We have moved offices…

NEW postal address: PO Box 4056, Cramerview 2060

NEW physical address: Floor 0, Prime Meridian House, Block 6, Bryanston Gate, 170 Curzon Road, Bryanston (cnr Main Road and Homestead Avenue, opposite Sandton Clinic)

(Alternative entrance during office hours only: Homestead Avenue)

Our telephone number, fax number, and email address remain unchanged

 “South Africa slides 48 places in a decade”

South Africa dropped five places to 87th in the Economic Freedom of the World: Annual Report 2011 released September 22 by the FMF, a member of the Economic Freedom Network.

A decade ago South Africa ranked 39th, a slide of 48 places from the top 30% to the bottom 40% of the 141 countries measured. This is a matter of grave concern.

The 2011 report shows that government is having a greater say in the economic decisions of its citizens, both in the proportion of state involvement in the economy relative to private ownership, and in the regulation of business.

The key ingredients of economic freedom are choice, voluntary exchange, freedom to compete, and protection of persons and property. The index published in Economic Freedom of the World (EFW) provides the most comprehensive measure of economic freedom available.

EFW 2011 includes an in-depth analysis of South Africa’s economy by Dawie Roodt and a CD compiled by Neil Emerick. The CD includes a software programme, the EFW data, and the World Bank Development Indicators. The software makes it easy for researchers to test the economic freedom variables against real-life outcomes. For example: Does more economic freedom result in longer, healthier lives and higher levels of income? (The answer, by the way, is yes to both.)

The EFW findings were launched in Johannesburg on October 5.

The printing, distribution and launch of EFW 2011 were sponsored by the Friedrich Naumann Foundation for Liberty and Lephatsi Investments (Pty) Ltd. Thank you.

Nationalisation project

The ANCYL asserts that nationalisation is on the agenda of the ANC and that it will be resolved as a policy position at the ANC’s 2012 centenary conference.

The ANC, in response to the Youth League’s calls to nationalise, undertook research of nationalisation in 12 countries: Chile, Norway, Sweden, Finland, Zambia, Brazil, Venezuela, Namibia, Botswana, Malaysia, China and Australia.

COSATU, too, calls for nationalisation, arguing that the following countries “all rose on the basis of strong state ownership of strategic sectors”: Korea, Taiwan, Singapore, France and Scandinavia.

In response to calls for the nationalisation of mines, banks, land and wealth, the FMF in early-2011 compiled the book Nationalisation, which comprises six freestanding chapters, each with an executive summary, dealing with various aspects of the nationalisation debate.

The FMF subsequently undertook an additional study of nationalisation in the above countries and launched our findings in Johannesburg on November 3 and in Cape Town on November 24.

Nationalisation, is available via www.fmfevents.co.za; the subsequent case studies can be read here: http://www.freemarketfoundation.com/DynamicData/Event_46.pdf, and our “alternatives” to nationalisation here: http://www.freemarketfoundation.com/DynamicData/Event_47.pdf.

Jobs Jobs Jobs

In response to the fact that nearly half (46%) of the economically active population is idle, with a staggering proportion (74%) of these under the age of 24, the FMF published and launched its new book, Jobs Jobs Jobs at the Southern Sun Grayston on November 8. The chapters, by various authors, deal with aspects of un/employment and each includes an executive summary. Jobs Jobs Jobs is available via www.fmfevents.co.za. The chapters include:

Labour Market Review – Problem Analysis by Richard Pike, Chief Executive Officer, Adcorp Holdings Limited

South Africa’s Labour Laws in an International Context by Loane Sharp, Labour economist and analyst, Adcorp Holdings Limited

Economics of Job Creation by Leon Louw, Executive Director, Free Market Foundation

Identifying the Causes of South Africa’s Mass Unemployment by Eustace Davie, Director, Free Market Foundation

Freedom to be Enterprising: Job Creation in the Informal Sector by Lawrence Mavundla, President, The National African Federated Chamber of Commerce (NAFCOC) 

Increase Employment by Giving Small Firms a Break by Michael Bagraim, Owner, Bagraims Labour Lawyers

Freeing the Unemployed from the Poverty Trap by Eustace Davie, Director, Free Market Foundation

Job Creation Zones by Leon Louw, Executive Director, Free Market Foundation

‘Sweatshops’ and Other Irresponsible Western Campaigns by Ann Bernstein, Executive Director, Centre for Development and Enterprise (CDE)

Hong Kong’s Remarkable Solution to Mass Unemployment by Eustace Davie, Director, Free Market Foundation

The Futility of State Welfare by Temba Nolutshungu, Director, Free Market Foundation

Fixing the Laws that Govern the Labour Market by Martin Brassey, Senior Counsel, Johannesburg Bar, and Visiting Professor of Law, University of the Witwatersrand

Work without Workers: What Happened to Employment in SA? by Professor Darma Mahadea & Dr Richard Simson, School of Economics and Finance, University of KwaZulu-Natal

Black Economic Empowerment and Job Creation by Vivian Atud, Economist, Free Market Foundation 

Analysis of the New Growth Path by Leon Louw, Executive Director, Free Market Foundation

How Labour Legislation Impacts on Job Creation and Unemployment by Graham Giles, practising attorney, Michalsons, and part-time Professor of Law, University of Johannesburg & Daan Groeneveldt, independent organisational researcher and Director of The Institute for Accountability in Southern Africa

IPR Indaba 2011

The Intellectual Property Rights Indaba 2011, Innovation for accelerated growth, was hosted by the FMF at the FNB Conference and Learning Centre on Thursday, 20 October 2011. It was attended by approximately 110 delegates, and covered various aspects of intellectual property rights.

Panel topics were: Innovation and its challenges; Cloud computing; Healthcare and intellectual property; Government’s software procurement policy; Counting the cost of counterfeit.

Keynote speaker, John Weresh, Head of Microsoft’s Intellectual Property Group, presented a paper with the title, The prime dividend of software innovation: Jobs, noting that software innovation drives IT employment.  In South Africa, for example, the IT market is expected to drive the creation of 2,000 new businesses by the end of 2013. Increased adoption of Cloud Computing will transform software spending from an often prohibitive capital cost to an operating cost well within the budgets of the small and medium-sized companies that create the most local jobs.

Something new with Leon Louw

Leon Louw (amongst others) was recently “interviewed” for an SABC2 TV edu-drama. The drama series is called 90 Plein Street and airs at 21h30 every Tuesday night (beginning November 1) for 26 weeks.

The interview/s will be played back during the broadcast of the drama series as interviews on television that the lead character, Dineo Nkgatho, MP for Parys and Minister of Human Settlements, watches from time to time. She is informed by these views and many of her arguments in parliament are based on the views of leading business, political and social personalities.

SABC2, through this series, aims to not only provide drama and entertainment, but also to educate South Africans about the processes of parliament and how various departments work together to ensure that the people of South Africa are properly taken care of.

The producer said this of Leon’s input: “Leon’s insights brought substance to the series and helps us to widen the debate on issues which affect all South Africans.”

Leon’s “interview” will air on February 21.

Leon Louw presentations

Oct 1: Are multinational states more conducive to individual liberty than nation states? Mont Pelerin Society, Istanbul

Oct 7: Fraud and corruption, Global Net Conferencing, Harare

Oct 19: The importance of protection of property rights in a modern SA economy, REIM Investor Breakfast

Oct 19: Insurance and finances, Wits

Oct 20: Does government’s software procurement policy make economic sense? IPR Indaba 2011

Nov 1: The world economy and global market trends, SANDF

Nov 3: Alternatives to nationalisation, FMF

Nov 5: History of Achib and Lawrence Mavundla, Achib 25th anniversary

Nov 8: Nationalisation, Fedusa National Congress

Nov 8: Jobs Jobs Jobs, FMF launch

Nov 18: Nationalisation, Northern Cape Mine Managers Association, Kimberley

Nov 23: Nationalisation, Exxaro Resources Lekgotla, Pretoria

Nov 24: Alternatives to nationalisation, Friedrich Naumann Foundation, Cape Town

NHI submission

In December, the FMF made a submission on the National Health Insurance Green Paper, which can be read here: http://www.freemarketfoundation.com/DynamicData/Event_51.pdf.

The FMF’s Health Policy Unit (HPU) is dedicated to promoting a sound economic policy approach to the provision and funding of health care. The HPU maintains that the private supply of competitive health-care services and the incremental extension of private funding is the most effective method of supplying high quality health care to the entire South African population.

The HPU urges government to devote its limited health budget to the supply of services to the poor, to purchase an increasing percentage of those services from private providers, and to allow and encourage the rapid growth of the private healthcare sector, enabling it to provide services to an increasing percentage of the population.

The National Department of Health (DoH) published the draft Policy on National Health Insurance (NHI) in the Government Gazette on 12 August 2011 (the Green Paper), and invited interested persons to submit comments and representations on the draft Green Paper policy proposal.

The current government is disturbed by the rapid growth of what it regards as “uncontrolled commercialisation” of private healthcare. However, private healthcare in South Africa is already heavily regulated and for the government to imply that this is “uncontrolled” suggests that its laws and regulations are ineffectual. We have seen substantial market movements in response to government’s regulations, which display compliance with regulations and the effects of regulation.

For example following the introduction of the Medical Schemes Act of 1998 South Africa witnessed a substantial consolidation of many medical schemes, whilst others exited the market.

The Green Paper suggests that the existence of a two-tier health care system in SA is the fundamental cause of the poor service provision and performance of the entire health care system. More specifically, the Green Paper seems to suggest that this poor performance is primarily the result of the existence of the private sector. This is a fundamentally flawed argument. The evidence to the contrary is that the existence of the private health care sector (in all its aspects) is highly beneficial to the people of South Africa, including the poorest members of the population. The Green Paper does not address the root cause of the poor performance of the overall South African health care sector, which according to international surveys is detrimentally affected by the poor performance of the public health sector. The proposed NHI will not and cannot address South Africa’s health care deficiencies fundamentally since the Department has misdiagnosed the problem.

“Economic freedom”

During Julius Malema’s march for “economic freedom” (see Leon Louw’s article Economic freedom definedhttp://www.freemarketfoundation.com/ShowArticle.asp?ArticleType=Issue&ArticleId=3266), the FMF distributed around 1,000 summaries of Themba Sono’s book, From poverty to property, to participants and onlookers milling around at the JSE. The author proposes “five steps to real transformation”.

  1. Distribute a “democracy dividend” (by privatising state assets).
  2. Give land to the homeless, secure title to the people, and allow home building without red tape.
  3. Create Economic Development Areas (EDAs).
  4. Sell state property to pay government debt.
  5. Target welfare spending so that it benefits only the really needy as directly as possible.

Best wishes

The directors and staff of the FMF trust you had a peaceful Festive Season and wish you all the best in 2012.


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