Quarterly Review 2012.12

21 December 2012
Views 128
FMF

Quarterly Review

October – December 2012

The FMF’s projects for 2012 included: civil liberties / tobacco, COMPETITION, energy, GOOD LAW, growth, HEALTH, job creation / labour, LAND REFORM / PROPERTY RIGHTS, nationalisation, and RED TAPE, as well as ad hoc issues as they arose.


Media Coverage

The FMF has been working hard to increase its media coverage and reach as wide an audience as possible with its message about the benefits of economic freedom and growth.

In the last four months (August through November), the FMF’s WEBSITE ARTICLES, sent to our mailing list weekly, were republished on 38 occasions, in other words each article was republished twice on average.

84 ARTICLES that quote or mention the FMF or originate from interviews or were written specifically for the media were published since August 2012. These include Leon Louw’s new weekly column in Business Day. The column is published each Wednesday and to date has dealt with the following:

October 3:          One man’s ‘crisis’ is another’s correction: HOW does twaddle get transformed into truth? According to peddlers of twaddle, the subprime crisis was caused by "greedy capitalists" and the ensuing financial crisis is the result of "market failure" or "capitalism in crisis". Not so. All of it was caused by extreme antimarket government intervention. Here follows my Idiot’s Guide to the Financial Crisis...

October 10:        It’s better to nationalise fashion and chewing gum: IT IS important to take the nationalisation debate as seriously as the debate about whether the earth is flat and rivers run uphill. Nationalisation is where people who don’t produce wealth confiscate wealth from those who do and ensure productive assets become unproductive…

October 17:        Labour crisis is a failure of the state, not the market: MARIKANA was inevitable, predictable and a consequence of the persistent failure to enforce the rule of law. It has become the iconic manifestation of our labour crisis, which is characterised by reluctance to enforce the law, wildcat strikes, property damage, violence and killing. To add to this dangerous cauldron, most young people in SA have never worked and have no prospect of employment. The lesson to be learnt from the youth uprising against apartheid and the "Arab Spring" is that we should be fearful of discontented youth…

October 24:        Every ‘free’ lunch has its unavoidable trade-offs: SOUTH AFRICA is the Garden of Eden, the land of milk and honey, a dreamland of free lunches. We enjoy free consumer protection, education, welfare, healthcare and services. We are promised lavish infrastructure, beneficiation and a healthy tobacco-free planet by 2040…

October 31:        What was missing from the budget statement: IN FINANCE Minister Pravin Gordhan’s world, everyone else is out of step. Commentators and rating agencies should not be downgrading us, despite violent unrest, ill-prepared police, wildcat strikes, tumbling mineral production, extreme unemployment, excessive wage hikes, endemic corruption, failed state-owned enterprises (SOEs), disastrous energy shortages, concerns about leadership, accountability and the like. We are in deep crisis even if "not in terminal crisis"…

November 7:      Nanny state wants to take your lifestyle liberty away: CS LEWIS warned that "tyranny sincerely exercised for the good of its victims may be the most oppressive. The robber baron’s cruelty (and) cupidity may at some point be satiated; but those who torment us for our own good will torment without end for they do so with the approval of their own conscience"…

November 14:   Econobabble has everyone worried over nothing: ECONOBABBLE is amazing. It has us in a tizz over our huge trade deficit. Yet there’s no such thing; it’s an accounting illusion. Whatever imbalance there might be isn’t "our" deficit. Someone has a deficit which is, or should be, their problem...

November 21:   Econobabble revisited: ‘hard data’ only guesses: LAST week’s anti-econobabble column generated predictable passion, for and against: calls, comments and e-mails from experts and conventional-wisdom junkies. "What have you been smoking?" chirped a junkie. "Fascinating, please elaborate?" asked an eminent jurist. "How can you deny the impact of current account deficits?" demanded an economic luminary. "Bravo!" and "Jislaaik!" exclaimed two others.

November 28:   Not all Ponzi schemes are actually fraudulent: PONZI schemes are news again. But what are they and how should they be regulated, if at all? What about network marketing, pyramid schemes, multilevel marketing, referral selling, scams and chain letters? What’s illegal, what’s not, and what should be?

December 5:      ‘Secrecy bill’ may just be a blessing in disguise: INSTEAD of being delighted, journalists are squealing like stuck pigs because the Protection of State Information Bill, known as the "secrecy bill", was passed by the National Council of Provinces. Why aren’t they delighted? Most journalists salivate with glee at every state intervention. Surely they knew their turn would come. Do they really think journalism is a special case? Of course they do. Their mantra that "people have the right to know" is repeated as if it settles the matter.

December 12:    Power play: economic stagnation is guaranteed: SOUTH Africans can relax: the lights will stay on during the holidays because the machines will stay off. The deepening power crisis seems to have abated because it is concealed at immense cost. Stripped of obfuscation, the situation is easy to understand, so let’s demystify it.

 

INTERVIEWS on radio and TV between August and December number 24, some of which are available as podcasts on our home page.

FMF has hosted 11 media briefings since June 2012 and plans to host two per month whenever possible. The briefings provide journalists with an opportunity to ask in-depth questions about the topic under review. Each briefing is followed by a media advisory to over 1,000 editors and journalists.

5 June:                 FMF submission to National Planning Commission on National Development Plan

21 June:               Minimum wages

19 July:                 Energy crisis: Will SA keep the lights on? Future looks dim unless regulators act now
 and adopt global best practice

26 July:                 Treasury plans to restrict choice and availability of medical insurance “gap” cover, including your hospital plan: Government’s plans regarding private health provisions are destroying the private medical scheme and insurance industries

14 August:          The hidden costs of keeping the lights on

30 August:          Government’s “blue light” approach to land reform: SA discourse on land reform is politically emotive obfuscation designed to avoid real distribution of title

9 October:          187 municipalities would benefit financially if the Electricity Distribution Industry was restructured

24 October:        Is China bleeding SA dry? No. South African citizens are being misled by false economic arguments; Protectionism means the consumer and the economy pay in the end

13 November:   Eskom’s pricing application: Smoke and mirrors or reality?

28 November:   Guilty! Competition policy in South Africa violates the Constitution and is used to garner billions
of Rands for the government

11 December:   Nationalisation is not, and never was, in the Freedom Charter; ANCYL and union calls to nationalise major industries are based on a false premise

 

See projects below for more information on project-specific media briefings this quarter.

 

Civil Liberties / Tobacco

The FMF is very concerned about the increased assault on civil liberties and individual freedom in South Africa.

 

Governments worldwide have found that it is easy to get support for state intervention on issues such as tobacco and liquor. And they have readily embraced the consequence that, once in place, such measures open the door for increased interventions in other areas that go far beyond the need to protect, for example, passive smokers, to the point of extreme erosion of lifestyle choices, freedom of association, property rights, basic liberty and personal dignity.

 

You may be aware that the FMF has been very pro-active about proposed tobacco regulations; we are broadening the discussion to include liquor; and in due course we hope to broaden it even further to include sugar, meat, salt, fat and other products. The product/health debate is, in our view, a red herring around which the passionate are willing to rally. We foresee that the greater danger is that it will not only impact on individual lifestyle choices, but that it will impact significantly and negatively on businesses, the fiscus and the economy.

 

The FMF’s stance is that freedom, property rights and choice underpin a democracy and are tampered with to the detriment of ordinary people; that tobacco (and similar) regulations are the thin edge of the wedge, already hammered home by a government ready and willing to split us and our freedom apart. Picking on an issue such as smoking that raises eyebrows and passions, allows the state to take the steps that eventually lead into our homes to determine what we eat,  what we buy (Local is Lekker), and perhaps with whom we sleep (as in the bad old days of apartheid).

 

In addition, since much of the proposed tobacco and liquor regulations are law by decree rather than parliamentary legislation, the FMF is concerned that bad laws will be ignored, not only by the public, but by the police. Societies that ignore bad laws, become societies that ignore good laws as well. 

 

In-house event

On November 6, Leon Louw presented Playing with fire: Why the FMF entered the smoking debate to an FMF audience. In a press release dated 13 June, the Department of Health accused the FMF of making irresponsible statements about tobacco use. Leon explained our “irresponsible” behaviour by answering the following questions:

  1. Do fundamental rights in a free society include ownership of your body?
  2. How does one deal with “conflicts” of rights in a free society? In other words, can you protect the rights of both smokers and non-smokers?
  3. Do tobacco regulations undermine freedom, property rights, and individual choice?
  4. Are tobacco regulations just the beginning? In other words, will regulation of this nature allow the state to take the steps that eventually lead into your home to determine what you eat,what you buy (Local is Lekker), and perhaps with whom you sleep?
  5. Tobacco regulations are badly drafted, impossible to implement, and likely to be ignored. Do societies that ignore bad laws, become societies that also ignore good laws?
  6. What does freedom really mean?

 

Submissions

Both FMF and Law Review Project (LRP) made submissions on the latest regulations proposed by the Department of Health, the Regulations relating to the display of tobacco products at wholesale and retail. The regulations specify such absurdities as font type and height, whether warnings should be horizontal or vertical, the size of “price tickets” (less than 3200mm), and more. Our submissions can be read here.

Competition

The FMF remains concerned that competition policy is unconstitutional and does not serve its primary purpose of enhancing consumer rights and choice.

The purpose of competition policy ought not to be the protection of those who cannot compete successfully from those who are more competitive in the market place. The primary purpose of competition policy is that competitors must compete by appealing to consumers and that it is consumers who should have access to competition policy if circumstances harm their interests. If consumers, for instance, vote freely with their rands for a given supplier, competition policy should not become a means of forcing them to sustain less preferred suppliers. The sole purpose of competition policy should be to identify and remove genuine obstacles to market entry, innovation, and the like.

The Competition Commissioner has told business that if they “co-operate” when under investigation, in other words if they confess guilt, they will be fined 6% of turnover; if they do not, in other words if they defend themselves, they will be penalised by being fined 10% of turnover.

The FMF concurs 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”. South Africa’s competition policy – and its application – attempts to deal with more than simply “consumer welfare” and the Act is probably unconstitutional.

Media briefing and advisory

On November 28, Robert Vivian, Professor of Finance and Insurance, School of Economic and Business Sciences, University of the Witwatersrand, presented Guilty! Competition policy in South Africa violates the Constitution and is used to garner billions of Rands for the government. He covered the following issues:

  1. Chapter 2 of the Competition Act is used to garner billions of Rands for the government without meeting the constitutional requirements of due process.
  2. Due process” requires a trial before an impartial judiciary adhering to historically established procedures and the imposition of an appropriate sentence.
  3. All laws in the competition regime emanate from the regime itself and are endorsed by parliament, violating the “separation of powers” requirement. 
  4. Accusations of wrongdoing by the competition regime are never proven by the production of evidence tested in a court of law.
  5. Instead, adjudication is carried out in-house by the Competition Tribunal, which does not form part of the judiciary.
  6. Since the Tribunal is not a court of law the requirement that the punishment fit the crime is not properly met. 
  7. A frightening procedure has evolved during which an accused is persuaded to admit guilt and pay an enormous fine, in some cases in excess of R1bn, or face an even bigger fine! 

The FMF’s subsequent media advisory was entitled State institutions are taking billions of Rands of private property without the constitutional and legal right to do so and reiterated that “… The competition regime violates the constitutional due process requirements needed for the rule of law especially when imposing penalties and this amounts to institutional extortion … These penalties are being imposed via a strange system whereby the accused company is encouraged not to defend their case but to plead guilty without a trial and receive a fine lower than the maximum of up to 10% of relevant turnover … Furthermore there is no attempt to link the size of the fine with the harm suffered by consumers, again violating the principle that the punishment must be proportional to the crime … the competition regime has circumvented the rule of law … Investigations of alleged contraventions of the Act are done by the Competition Commission; the trial by the Competition Tribunal and any appeal can only be made to a specialised court, the Competition Appeal Court … increasingly law is made by decree by unelected officials and bypassing the checks and balances of legislation made by parliament.”

Energy

The FMF remains very concerned about the energy crisis in South Africa, which continues to impact negatively on economic growth with mines, manufacturers, property developers and others having to rein in potential expansion. The FMF’s Energy Policy Unit meets regularly to strategise about solutions to the crisis. The answer lies in an independent grid, competition between Eskom and a range of Independent Power Producers, access to the grid limited only by technical requirements, and wheeling across the grid by sellers to buyers.

Energy Policy roundtable

The FMF hosted a roundtable on energy policy on November 16. Our goal for the day: That the FMF Energy Policy Unit (EPU) be given “marching orders” on how to achieve its 2030 Vision. In other words, that we identify blockages to achieving our short-, medium- and long-term energy policy goals, that we identify solutions (particularly where opportunities exist in the status quo), and that we document the steps to be taken (road map) to progress our vision.

 

Terry Markman and Doug Kuni outlined the EPU 2030 Vision and drew comparisons with the government’s 1998 Energy White Paper prior to delegates breaking into five focus teams: Trading | ITSMO (Independent Transmission and System Market Operator) | IRP (Integrated Resource Plan) & Ministerial determinations | Pricing | Policy.

 

After lunch, each team reported back on their discussions and decisions helping the FMF to prioritise its actions for 2013.

Media briefings and advisories

On 9 October, Eustace Davie (FMF Director) and Doug Kuni (Managing Director of the SA Independent Power Producers Association (SAIPPA)) presented 187 municipalities would benefit financially if the Electricity Distribution Industry (EDI) was restructured. They covered the following issues:

  1. Municipal distributors of electricity should take a keen interest in the current debate around an independent grid and the inclusion of Independent Power Producers (IPPs)
  2. Currently, the 187 electricity distributing municipalities are totally dependent on Eskom, which cannot guarantee electricity supply
  3. Many municipalities deny developers permission to invest in their areas due to insecure electricity supply and outdated infrastructure, which negatively impacts growth and job creation
  4. An independent grid and IPPs would result in security of supply, competition and lower prices
  5. EU experience shows that competition results in price decreases of between 12% and 20%
  6. Municipalities should consider what they can achieve with a cash injection from leasing or selling existing infrastructure
  7. Municipalities should have the freedom to take advantage of new smart grid alternatives

The FMF’s subsequent media advisory was entitled Financial benefits for 178 municipalities from restructuring the electricity supply industry and reiterated that “… to allow the introduction of IPPs would financially benefit the 178 electricity distributing municipalities who are totally dependent on Eskom for their supply … Instead of spending an adequate portion of their profit to undertake essential maintenance of the local distribution networks,  local distribution grids are being starved of maintenance because municipalities are using electricity resources to do other things … it is urgent that a solution is found to avoid blackouts at the municipal distribution level. When the power shuts down, local business and consumers all lose … The lack of technical skills across the whole country will mean municipalities will face extended outages and increasingly irate customers … Eskom cannot deliver an adequate supply. The reality is that the buy-back programme is load shedding in disguise and is hiding the true extent of the crisis. While the lights stay on, the problem is not visible to consumers and business and consumer anger is contained.”

On 13 November, Eustace Davie presented Eskom’s pricing application: Smoke and mirrors or reality? He covered the following issues:

Fundamental problems with Eskom's MYPD3 price application:

  1. Prices are set by a regulatory committee and not by competition.
  2. No committee can determine the ‘right prices’ to ensure efficient generation, transmission and distribution of electricity.
  3. Applications for administered prices tend to be excessive and based on inflated expenses.

The electricity crisis:

  1. There is a shortage of 5000MW of electricity.
  2. Blackouts are probable as a result of inadequate generation.
  3. Blackouts could also result from failure of distribution infrastructure.

Power shortages and the economy:

  1. Eskom is paying firms not to use electricity.
  2. New development is hampered.
  3. Industrial development is curtailed.
  4. Property development is stalled.
  5. There is a loss of GDP.
  6. Much-needed FDI is lost.
  7. Urgent action required – but what?

Massive price increases:

  1. The Eskom average prices for the 4 years to 31 March 2013 increased by an above-inflation 147.69%.
  2. The requested increases for the 5 years to 31 March 2018 result in an above-inflation 405.75% in 9 years.
  3. Replacement value accounting inflated the costs for MYPD 3 by an estimated R366 billion.

Sketching a better scenario:

  1. The high voltage transmission grid must be made independent from Eskom.
  2. Distribution grids must be made independent from electricity retailers.
  3. IPP must be allowed immediate access to the grid in an open electricity market.
  4. A functioning electricity market with active electricity wholesalers must be established.
  5. A futures market would automatically develop.

Necessary reforms:

  1. All additional electricity generation should be financed, built, owned and operated by private firms.

Independent experts should check the figures:

  1. Independent experts – technical and financial – must interrogate the figures contained in the MYPD 3 – the matter is too important to be decided upon without thorough investigation.

The briefing attracted 15 journalists from a diverse range of media including Sowetan and SABC TV, Sunday Times, Energize magazine, Daily Maverick, SAPA, Business Day, Finweek, Engineering News, The Star, Beeld and Sandton Chronicle.

The FMF’s subsequent media advisory was entitled Free Market Foundation questions the role of Eskom as primary energy supplier and asks serious question about the financial basis of the MYPD3 application and reiterated that “…Eskom’s proposed tariff hikes are unaffordable and disastrous for the economy and that the figures should be robustly interrogated by technical and financial experts… that Eskom should not be solely responsible for supplying the nation’s electricity...  Providing all new generating capacity required in future should be the job of the private sector... SA has an outdated vertical monopoly owned and managed by the state which is a system that has been discarded by most developed and growing economies... They have moved to an open and competitive market and those consumers have seen prices decrease... Eskom pricing is determined by a regulatory committee (NERSA) subject to political oversight rather than a free and competitive market which would ensure efficient and optimum allocation of resources and prices… Altogether Davie has highlighted R366 billion of costs that could potentially be cut from the application if the assumptions are changed… Think what this could do to the average tariff increase.”

Submissions

The FMF has made numerous submissions on energy over the years, the last on the list below during this quarter:

  1. Eskom’s Revenue Application Multi-Year Price Determination (MYPD2)
  2. Integrated Resource Plan 2010
  3. Independent System and Market Operator Draft Bill
  4. National Energy Regulator Amendment Bill
  5. Electricity Legislation Second Amendment Bill
  6. National Development Plan
  7. Independent System and Market Operator Bill
  8. Electricity Distribution Industry
  9. Eskom’s Revenue Application Multi-Year Price Determination (MYPD3)

Articles this quarter

  1. Creating a competitive electricity supply in South Africa
  2. How to avoid a 405% above-inflation increase in electricity prices

Growth

The FMF argued in its submission on the National Development Plan that if you want employment, you must have growth; if you want growth, you must understand the determinants of growth and you must implement pro-growth policies regardless of whether they meet, in the short term especially, developmental goals; growth requires economic freedom; the cornerstones of economic freedom are: personal choice, voluntary exchange, freedom to compete, and security of privately owned property.

Media Briefing and advisory

On October 24, Jasson Urbach, FMF economist, presented Is China bleeding SA dry? No. South African citizens are being misled by false economic arguments. Protectionism means the consumer and the economy pay in the end. He made the following arguments: Recent calls to instigate tariff barriers against China, on the premise that "China is bleeding SA dry", are misguided attempts to protect special interest groups within South Africa. They are based on a false premise and misunderstanding of economics. Protectionism, a policy that discriminates against foreign goods and services, is a short sighted and dangerous policy that disproportionally harms the poorest members of society the most. Free economies and enlightened governments are dismantling trade barriers, not imposing them. No country can reserve its domestic market for domestic producers and hope to prosper.

The FMF’s subsequent media advisory was entitled Free Market Foundation economist refutes claims that "China is bleeding SA dry” and reiterated that “… Tariffs and other artificial trade barriers imposed on goods coming out of China deny the very poorest citizens the opportunity to access the world’s cheapest commodities …  A tariff is a compulsory import tax paid by consumers on foreign goods that artificially raises the price … The most principled case is a moral one: voluntary economic exchange is inherently fair, benefits both parties, and allocates scarce resources more efficiently than a system under which government dictates or limits choices … Government intervention on behalf of special interest groups necessarily comes at the expense of freely contracting parties and is inherently unfair, inefficient, and subverts the rule of law … at their core, trade barriers are the victory of oppression and politics over freedom and economics.”

African Development Bank consultation

Jasson, “… As one of the leading commentators on the South African economy”, was later asked to consult with the African Development Bank on their “China–Africa Project: How does the Beijing model of economic growth illuminate a path for African nations?” via Dr Michael Fairbanks, “a highly regarded fellow of the Center for International Affairs at Harvard University”. Leon participated instead as Dr Fairbanks was in Johannesburg for a limited period only and Jasson is based in Durban.

Monetary policy

The FMF argued in its submission on the National Development Plan that governments and central banks are not in a position to create wealth directly – that creating money is not creating wealth. Our suggestions: Do not increase the base money supply at a higher rate than the increase in GDP. Do not debase the rand, which sends confusing signals to entrepreneurs and industry, and creates uncertainty for investors and others. Abolish exchange controls. Allow the market to determine interest rates. Make the rand strong by backing notes and coins in circulation 100% with gold and persuade BRIC to do the same.

We recently donated 80 copies of Real money by Dr Richard Grant (please see contents below) to the SA Banking Council and are hoping the SA Reserve Bank will reintroduce copies to staff and students. Dr Grant spent two days with SARB officials in 2002 (at the request of Tito Mboweni). We like to think that partially as a result of this visit the bank regained control of increases in the money supply to the extent that the year-on-year increase in M0 to the end of February 2003 was 3.26% compared to 30.51% at the end of February 2002.Contents: The constitution of money | Money and exchange| Inflation: The cause | Orders of causation | Marble-floor inflation | Stealth and measurement | The role of time | Growth or recessions | Crossing frontiers | Money: Supplied or demanded? | Banking: Central or free? | Rules and agreement | Options and politics | “We start from here”.   

Health

FMF made the following points on healthcare in its submission on the National Development Plan:

  1. If South Africa wants better health outcomes, it must have economic growth. There is a strong relationship between income and health, not least because greater wealth buys greater access to the basic determinants of health: nutrition, better accommodation and sanitation.
  2. The private supply of competitive healthcare 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.
  3. Government should not be in the business of providing health care to all South Africans. Rather, government should devote its limited health budget to the supply of services to the indigent, 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.
  4. Moreover, it should be noted that the private sector is in fact the only source of funding for all health care. Private individuals pay for health care through contributions to medical schemes and insurance vehicles, out of pocket payments and, most importantly, through taxes that finance the governments’ provision of healthcare services.
  5. Public health care is not in fact cheaper than private health care and that this assertion misdirects public policy in the healthcare arena.
  6. Given the revealed preferences of South Africans, to access private medical facilities whenever possible, reforms should focus on enrolling more individuals in private medical schemes. This will reduce the burden on public sector healthcare facilities and free up scarce taxpayer resources so that the government can focus on purchasing the best available care from privately competing healthcare providers.
  7. Considering South Africa’s relatively small tax base and thus limited available pool of revenue, and given our chronic levels of unemployment as well as our limited number of skilled healthcare personnel, an NHI-style system is simply inappropriate for South Africa.

Articles published in Medical Chronicle and Health Review this quarter

Doctors’ tariff guidelines are a straw man. Medical Chronicle, October 2012. Re-published by the Health Policy Unit and the Free Market Foundation…

Further price regulation: A logistical nightmare. Medical Chronicle, November 2012. Re-published by the Health Policy Unit and the Free Market Foundation …

And never the twain shall meet. Healthcare Review, 2012. Re-published by the Health Policy Unit and the Free Market Foundation … 

Job Creation / Labour

In our submission on the National Development Plan, FMF pointed out that growth results in full employment, which in the long run ensures “decent” jobs, increased wages, and improved living conditions; that the focus should be on growth, growth, growth (and therefore jobs, jobs, jobs), not income gaps and decent jobs; that job creation should be left to the private sector as government is a net consumer of wealth and can only “create” jobs at taxpayers’ expense. We argued that inflexible labour legislation should be reviewed and abolished or, alternatively, that the unemployed and SMMEs should be exempted from inflexible labour legislation.

We pointed out that government’s primary economic role is to create an environment in which the private sector can flourish. This includes less government intervention, legislative certainty, lower taxes, low inflation, sound money, rule of law, security of property rights, an independent judiciary, and impartial courts; government and the ruling party must understand that an economy cannot be “planned” – they must choose freedom over control.

In-house event

On October 10, Martin Brassey, senior counsel at the Johannesburg Bar and Visiting Professor at the University of the Witwatersrand, presented Labour law and the free market after Marikana: Is institutionalised collective bargaining in SA wilting? If so, should we be glad or sad? to an FMF audience. In the course of examining the current state of South African labour law and industrial relations, he contended that our institutions of collective bargaining are under siege. He explained why this is so and suggested ways in which the law might promote the free market and enhance prosperity.

Jobs Jobs Jobs

We recently distributed copies of our book Jobs Jobs Jobs to the 14 members of the Portfolio Committee on Labour.

Presentation

On November 21, Leon Louw participated in a panel discussion at Wits Business School “to formulate ideas and pointers that will contribute to an equitable post Marikana dispensation”. Other participants included: Archbishop Dr Thabo Makgoba, Khanyisile Kweyama (Chamber of Mines), Patrick Craven (Cosatu); and a community leader from the Bapo Ba Mogale Community.

Land Reform / Property Rights

Secure property rights represent one of the most important requirements for the protection of both economic freedom and civil liberties. The FMF remains concerned about the slow pace of land reform, especially as the solutions that exist require only political will to implement. The FMF proposes that:

  1. All black occupied council-owned urban plots be converted to full ownership (“freehold”) (see “Perryville” below).
  2. Superfluous government land be redistributed to the victims of apartheid as a substantial once-off compensation for the crime of apartheid.
  3. Pre-emptive clauses be removed from existing and future RDP titles.
  4. In tribal areas, communities be allowed to grant private title over homesteads while maintaining communal rights over arable land.
  5. The Subdivision of Agricultural Land Act, 70 of 1970 should be repealed because it would make it easier for poor individuals to finance smaller, more affordable plots of land. Furthermore, lowering the statutory costs of subdividing and transacting farmland would allow commercial banks to finance lower income individuals’ applications.

“Perryville”

FMF is working with “Perryville” to convert 33,000 council-owned urban plots to full freehold title thus granting black South Africans the same land rights as whites and releasing around R3bn into the local economy. We believe this project can be replicated countrywide, converting “dead capital” into “dynamic capital” and altering forever South Africa’s landscape.

Having resolved (some) of the more difficult technical issues relating to the granting of freehold title, a process that took several years, FMF and its partners are finally making some real progress though new issues arise daily.


Nationalisation

Threats to nationalise mines, banks and industry remain a major concern.

Media briefing and advisory

Ahead of the ANC’s elective conference in Mangaung, Leon Louw (FMF Executive Director) presented Nationalisation is not, and never was, in the Freedom Charter; ANCYL and union calls to nationalise major industries are based on a false premise at a media briefing on December 11. He dealt with the following:

The ANCYL asserts that nationalisation is on the agenda of the ANC and that it will be resolved as a policy position at Mangaung. 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. Both argue that nationalisation is required by the Freedom Charter and that the Freedom Charter is binding ANC policy. They are wrong: Nationalisation is NOT in the Freedom Charter.

Both organisations put forward secondary reasons based on unsubstantiated assertions of what the economic benefits will be. Again they are wrong: Economic theory and empirical evidence show that nationalisation will be ineffective in achieving these benefits.

Leon asked (and answered) the following questions: Are there any success stories? Are we getting the most out of our mines? What are the “alternatives” to nationalisation?

The FMF’s subsequent media advisory was entitled Nationalisation is not, and never was, in the Freedom Charter, and reiterated that “… According to the ANCYL … nationalisation is in the Freedom Charter, the Charter is ANC policy, therefore nationalisation is ANC policy ... in fact its authors studiously avoided using the term “nationalisation” at a time when this was mainstream policy in many countries … far from being pro-nationalisation, the Charter is consistent with pro-market ideas …”

Presentations This Quarter

During this quarter, our Chairman, Herman Mashaba, addressed the following audiences on issues of relevance to the Free Market Foundation: SACCI Annual Convention | CNBC Great Economic Debate | Transaction Capital Executive Conference | Cape Chamber of Commerce | Rotary Club | Official Launch of Botswana Global Expo 2012 | Regenesys Entrepreneurship Forum.

Temba Nolutshungu was a panellist at the following: a roundtable organised by the Parliamentary Office of the Southern Catholic Bishops Conference on Social grants | Goedgedacht Forum Roundtable on Business, labour and civil society.

Leon Louw addressed the following: the Department of Human Settlements convention on Land reform | the DA’s Ward 88 on RDP title deeds | the Black History Month Conference on Nationalisation | the Annual Women in Politics Africa on The role and relevance in corruption of gender, culture, race and values.

 

Reading…

…this article on the The Heritage Foundation (US) website quotes the Free Market Foundation: South Africa needs a roadmap to economic freedom.

…this article reviews Why peace to which Temba Nolutshungu contributed a chapter entitled The Berlin wall: An African perspective.

…in bookshops, How to fix South Africa, includes Herman Mashaba’s article originally published by the Sunday Times for their each-one-hire-one series.

 

Best Wishes

The Board members, Directors and staff of the FMF wish you all a peaceful Festive Season and a productive and fulfilling 2013.



Comments on Quarterly Review 2012.12