Modern economics is pure propaganda

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Michael Hudson is regarded by many as one of the world’s best economists because of his willingness to pierce the veil of deceit that passes for modern economic wisdom. His latest book J is for Junk Economics exposes much of modern economic thought as pure propaganda. 

Michael Hudson is regarded by many as one of the world’s best economists because of his willingness to pierce the veil of deceit that passes for modern economic wisdom.

In 2006 he warned of the coming mortgage bubble as an inevitable result of the debt explosion, but his warnings were brushed off as the murmurings of a spoiler.

J is for Junk Economics is his latest work, and is a follow-up to his previous book, Killing the Host. Junk Economics is discomfiting to those who profess to understand free markets. It is a full frontal attack on modern banking, monopoly privilege and the so-called rentier class that has siphoned wealth away from the working and middle classes to the already wealthy.

“The 2008 banking and junk mortgage crisis saw the United States and Europe save banks and bondholders, not their economies. While governments spent trillions on bailouts and ‘quantitative easing’ to save large creditors and speculators from losses on their bad loans and gambles, public and private infrastructure has been left to crumble and median wages are drifting down.”

The printing of new money in the form of “quantitative easing” is fire-hosed into the stock, real estate and bond markets to keep asset prices aloft.

Junk economics says Hudson, is the cover for all this. Dressed up in scientific jargon, it is little more than propaganda calculated to redistribute wealth upwards, reversing the policies urged by 19th century classical economists and reformers.

Hudson is an advocate of debt Jubilees of biblical reference, where unpayable debt was simply written off – usually by rulers seeking recruits for a new war or large-scale public works programme. The ravages of compound interest guarantee that our current debt burden can never be repaid, other than by more and more money printing. But that always ends in catastrophe, and is in fact the poison that has killed civilisations from Babylon to Greece and Rome.

The way we measure gross domestic product is fictionalised by the inclusion of unearned income such as interest and rent paid to the FIRE sector – finance, insurance and real estate. Exclude these rentiers (as they were known a century ago) and our GDP figures come crashing down. Hudson distinguishes between the “real economy” of factories and commerce from the financialised economy, though it is the latter which is exalted as the engine of economic growth. This is how the US economy has been deindustrialised, as factories moved to low wage countries such as China.

What about the perceived wisdom of budget surpluses so popular among World Bank types? Hudson points out that budget surpluses are achieved by raising taxes or cutting back public spending, “taking money out of the economy to pay bondholders.” Paying down public debt sucks money out of the economy, just as consumers servicing their bank loans leads to debt deflation.

Just as commercial banks create money electronically by lending, governments can do the same thing. Government budget deficits spend money into the economy, which is not inflationary when labour and resources are unemployed. This is in contrast to neoliberal economists who preach austerity, followed by bank bailouts when their disastrous policies inflate financial bubbles to the benefit of their constituency of bankers and bondholders. He fires broadsides at modern economists for enabling the dispossession of the 99%, and smears the Nobel Economic Prize is a PR campaign for “neoliberal junk economics”.

Tough stuff, but immensely entertaining. “It is time to throw down the gauntlet and accuse the rentier financial class deceptions of being what they are: economic fictions,” writes Hudson.

J is for Junk Economics is a dictionary of sorts, explaining the theories of Adam Smith to John Mills. Even the word “free market” has been twisted by modern interlopers to mean freedom to extract unearned rent or income. This is where Hudson is at his best. “To deter regulation, taxation or nationalisation – and even to gain public subsidy and government guarantees – lobbyists for the FIRE sector depict rent and interest as reflecting their recipients’ contribution to wealth, not their privileges to extract economic rent from the economy.”

Banks and real estate speculators derive unearned “rent” from the overall improvement in property values. A new access road funded by taxpayers increases the overall value of properties in the area. Banks and speculators extract this value in the form of higher mortgage payments and commissions. The phenomenon was well known in the 19th century by Karl Marx and classical economists such as John Stuart Mill. The recommended solution to this was for governments to tax the increase in land values away, rather than hand it over to rentiers, and reinvest this back into the community to promote further prosperity. To count this unearned rent as part of national income is to pretend that banks are providing a real economic product (as opposed to bank lending for a factory, for example, which leads to tangible economic output).

Another misconception tackled by Hudson is the notion that classical economists such as Adam Smith stood for free markets and opposed government interference. What they actually opposed were governments controlled by the landlord aristocracy dominating tax policy, resulting in Britain’s House of Lords taxing labour and industry instead of land and finance.

At a time when there is discussion of starting a state-owned bank in SA, the architects should be required to read this book rather than listen to the solicitations of bankers. China’s state-owned banking system, long derided by Western analysts for its abstruse accounting, has been a major pillar of that country’s economic miracle. Rather than taxpayer-funded bailouts, as occur in the West when banks fail, Chinese banks simply write down debt.

You can watch some of Hudson’s debates and presentations on Youtube to get a sense of his staggering knowledge of economic history.

 

The most dangerous occupation in the world

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Tens of thousands of illegal miners scramble below ground each day, hoping to pull out half a gram of gold and get to it the surface without being robbed or fleeced.

Try as they might, the government and trade unions are powerless to stop the tens of thousands of zama-zamas who descend each day into the network of discarded mine tunnels underneath Johannesburg, reckoned to run to 160 000 kilometres. That’s four times the circumference of the earth, and virtually impossible to police.

They descend at dawn and resurface at 6pm when the police change shifts. Some will stay underground for days, some for months. There is a supply network that feeds those underground with food, alcohol and batteries. Armed “security guards” protect the entrances to the underground tunnels, charging R50 or more to those who enter. Nothing in life is free. Even these abandoned mines have new landlords.

A few kilometres outside the Benoni CBD to the east of Johannesburg, the authorities made an effort to curtail illegal mining by collapsing some underground entrances. A few weeks later, the entrances were reopened and it was business as usual. There are hundreds of entrances dotted around Johannesburg, and they all belong to someone.

The mining houses long ago abandoned these mines as non-viable, but there is still sufficient gold in them to attract thousands of illegal miners every day. They enter without hard hats, harnesses and the other paraphernalia required to keep them safe. Mines spent hundreds of millions of rands on support infrastructure to prevent roof collapses and provide fresh, cool air. None of this happens in illegal mining.

Most zama-zamas chip away at the gold-bearing reefs with small picks, while the better resourced use explosives. They load the ore into small back-packs and make their way to the surface, dodging the police to get the ore to the above-ground “refineries” where the ore is crushed and the gold extracted from the concentrate using mercury. The mercury is burned off, leaving a small nugget of gold.

These illegal miners have their own equivalent of fishing stories – hard to prove, but amazing if true. Three Zimbabweans working under Modder B mine are reported to have recovered 4.7kgs of gold in three days of work, worth about $200 000 at today’s gold prices. They apparently returned home, squandered the money and are now back underground at Modder B.

But the hardscrabble reality for most is far more sparse than this: the people working the illegal refineries above ground expect to make 0.5-1 gram a day, worth R420/g on the black market operating on the East Rand. Sometimes you hit a sweet spot, where the same amount of rock yields ten or 20 times this amount.

Tony Webbstock: a warrior has left us

Written by Ciaran Ryan. Posted in Uncategorized

My dear friend Tony Webbstock passed away last Wednesday morning, the result of complications from a decades-long battle with diabetes and – one has to say – poor medicine back in the day when diabetes wasn’t as well understood as it is today. Tony was a warrior with a Christian heart, a genius lawyer who put himself at the service of the people vs the banks.

I could hear it in his voice a few weeks back when I last spoke to him. He sounded strained and weak. He succumbed last week after a long fight with his ailing body. He remained his usual chirpy self, defiant and rebellious to the end. Never once was there a hint of victimhood in his voice.

Tony had been an attorney all his professional life, a devout Christian and champion of the small guy. He never once acted for the banks. With his genius and knowledge of the law, he could have made himself a rich man had he put himself at the service of the banks, but he refused this path. As an attorney, he would only ever act against the banks. Many clients he took on without charge. Whether you were from the townships or suburbs, as long as you were being hounded by the banks, Tony was always available on his phone for a consultation.

In an industry crowded with money grubbers and vultures, Tony stood above them all for his principle and his heart. He could not turn away from the misery and suffering that the banks had inflicted upon ordinary people. After the financial crisis of 2008, it became obvious to Tony that the banks were engaged in the biggest crime of the century. Having spread their confetti money across the land in the years leading up to the crisis, they then started foreclosing and vacuuming up of assets of their customers.

It is a well-known fact that South African law firms will seldom, if ever, act for clients against the banks. This is how they have captured the justice system. Tony was a rare exception, and he was brilliant at it. He knew every nook and cranny of banking and consumer law, and surrounded himself with a team that was without equal, including his son Matt, Stephen May and Leonard Benjamin. In case after case, they schooled the banks in the law that they were abusing.

Tony had fascinating insights into modern banking, the accumulation of four decades of legal battles with the banks. He knew their every trick: failing to properly serve summons on their customers to defeat their ability to put up a defence; illegally loading bank and legal charges onto mortgage bonds; arriving in court with recreated documents, claiming the originals were destroyed in a fire; litigating clients into bankruptcy, the final indignity for those who spent their lives in toil and struggle; bringing claims before the High Court when they should be argued in the Magistrates Courts where legal costs are a fraction of the higher court; failure to attach loan agreements to summonses; unlawful selling of credit and other insurance products and then failing to honour these policies; self-dealing by the banks when they repossess properties for a pittance and then on-sell them to insiders…. The list goes on. Tony had seen it all.

He was unique in that he was not motivated by money. His Christian heart had no place for this. From Timothy in the Bible: “The love of money is the root of all evil…” Tony lived this with conviction and passion. In a broken and troubled world, Tony made a difference. Thousands of people were rescued from ruin by his intervention. He was mostly gentle and kind. I say mostly. When confronted with that miserable breed, debt collectors, he summoned up the tiger and disguised his fair nature with rage, as Shakespeare implores us in Henry V:

In peace there’s nothing so becomes a man,

As modest stillness and humility;

But when the blast of war blows in our ears,

Then imitate the action of the tiger:

Stiffen the sinews, conjure up the blood,

Disguise fair nature with hard-favoured rage:

Then lend the eye a terrible aspect.

To hear Tony dispense with debt collectors was a beauty to behold. In battle, this was a guy you wanted in your corner.

The good news is that Tony’s crusade for a fairer world is in good hands. His son Matt, Stephen and Leonard will continue the path that Tony forged. Tony leaves us, his integrity and soul intact, a rare thing to say about any lawyer.

Does SA need 35 ministers, 9 provinces and 263 municipalities?

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared at Acts Online.

SA is over-governed. We have 35 ministers, 37 deputy ministers, and 9 provinces each with their own ministers and administrations. Then there are the 263 municipalities, operating another layer of bureaucracy. Perhaps government should set the pace by scaling back on this boondoggle.

And in case you think this is all well and good, consider that just 49 of the country’s municipalities achieved clean audits in the 2015/16 financial year, according to the Auditor General, Kimi Makwetu.

The AG also reported that Irregular expenditure in municipalities increased by over 50% to R16.81bn, though the figure could be substantially more as a third indicated that the full extent of mis-spending was unknown.

Narius Moloto, president of the Pan African Congress (pictured above right), calls the nine provinces “mini bantustans” and wants to see them scrapped, with the money spent on duplicated administrations spent on job creation and uplifting the poor. The 9 provinces have a combined 430 members of the legislature to look after, not counting their entourages and hangers-on.

The Democratic Alliance (DA) thinks it’s time to scale back on the blue light brigade. “This cabinet is by far one of the biggest in the world with 35 ministers; far bigger than the United States at 15 ministers, Kenya with 18 ministers, and the United Kingdom with 21 ministers,” according to DA spokeswoman Desiree van der Walt.

This year alone, the 35 ministers and 37 deputy ministers are expected to earn R163.5 million, with their ministerial staff (limited to 10 for minister and 6 for deputy ministers) costing a further R1bn.

Is this value for money? The DA has done some decent homework on this subject and concludes that government should set a good example by cutting back on the number of ministers. What do we need a sports minister for, other than to cheer on our soccer team and complain about race quotas not being met? What does our science and technology minister hope to achieve that the private sector cannot? Then we’ve got higher education and basic education. Why 2 ministries (both rather miserable in their academic achievements)?

That’s just one side of this boondoggle. Public Works doled out R188m on 33 properties in Pretoria and Cape Town for the ministers and deputies, a princely R5,7m per property. Another R48m is to be spent in the current fiscal year for 6 more properties – a cost of R8m per property. The R236m spent on ministerial properties could have built 2,000 RDP houses, says the DA.

Then there’s the travel and entertainment budgets coming in at a shade under R300m this year. But the real shocker is the VIP protection services, costing R1,5bn in the current fiscal year, and close to R5bn over the next 3 years.

The DA says part of the problem lies in the ministerial handbook, which provides rather generous staffing and expense limits on ministers and their deputies.

Previous presidents had smaller cabinets. Nelson Mandela – total cabinet size 50 (28 ministers); Thabo Mbeki – total cabinet size 50 (28 ministers); Kgalema Motlanthe – total cabinet size: 47 (28 ministers); Jacob Zuma/Cyril Ramaphosa – total cabinet size 73 (35 ministers).

Says van der Walt: “If the president is serious about helping National Treasury reign in the runaway budget deficit he will have to cut executive spending by finalising a stricter and more frugal ministerial handbook, as well as cutting the overall size of the cabinet.”

 

Thank Trump and Bibi for higher oil prices

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared at Acts Online.

 

Thank Donald Trump and Bibi Netanyahu for higher oil prices, which spiked from around $40 to nearly $80 a barrel after the US president announced last week he was pulling the US out of the Iran nuclear deal. Israeli prime minister Netanhayu’s signature is all over this. 


Oil prices are now at levels last seen in 2014. The fear is that Iran’s oil exports will suffer as a result of renewed US sanctions, resulting in a worldwide shortfall (even though Iran only accounts for 3% of global oil supply).

What this means for SA is rising fuel prices, a weaker balance of payments and higher interest rates. In other words, more poverty. You can thank Trump and Netanyahu for this outrage.

It looks like our hopes for reaching 2% growth this year can now be put to bed. Clive Eggers, head of Investment Analytics at GTC, says if the oil price continues to climb  – which it will if the US actions against Iran remain in place – and inflationary pressure builds, the SA Reserve Bank may be forced to raise interest rates to stabilise the economy.

South Africa imports its oil primarily from Saudi-Arabia, Nigeria and Angola. Higher oil prices will contract GDP by 0.3%, and could get worse if oil prices continue to rise – which seems likely.

“Trump’s announcement has essentially put the entire Middle East into a state of flux and risked a potential destabilisation of the area. The other signatories to the agreement have – for now – agreed to maintain the status quo and continue with the deal, though American sanctions would make it very difficult for many global companies – including MTN, Airbus, Total and Peugeot – who resumed doing business in Iran after the original nuclear deal was announced, to continue dealing with Iran,” says Eggers.

SA has strong historical ties with Iran, as it first started importing Iranian oil after World War II and has constructed refineries to accommodate Iranian light crude oil. Until 2011, when sanctions were imposed by the US, SA was the third biggest importer of Iranian oil.

Within days of pulling out of the Iran deal, we were treated to visuals of Israeli troops shooting unarmed Palestinian protesters with live bullets, while 50 miles away in Jerusalem Ivanka Trump was cracking open the champagne to inaugurate the new US embassy building, in defiance of Palestinian claims to the city.

SA’s foreign minister Lindiwe Sisulu immediately recalled her ambassador to Israel in condemnation of the killings. The EFF wants the Israeli mission to SA shut down. The DA and the Jewish Board of Deputies “slammed” the ambassador’s recall, but not the killings, which were merely “regretable”. The Daily Maverick reports on the killing of “peaceful” protesters (note the parenthesis, a craven attempt at even-handedness). Other papers spoke of “clashes” between the Palestinians and Israelis. No. There were no clashes. It was a turkey shoot. This could turn out to be Israel’s Amritsar or Sharpeville moment, a slaughter so ugly that the world can no longer look away.

It’s getting hard to make sense of Donald Trump. It looked for a time as if he was Reagan 2.0, a right-wing pro-business president breathing fire and brimstone who miraculously brought an end to the Cold War with Russia.

Trump is nothing like Reagan. Reagan was more gas than propane. He pulled US troops out of Lebanon after a bomb attack on a US army station in that country, and dialled down the kind of crazy rhetoric were are now hearing whenever the subject of Russia comes up. Reagan, though he invaded Grenada for a bit of weekend sport, still managed to make the world a safer place. Trump may sincerely want better relations with Russia, but he is clearly hostage to the crazies in his government who need enemies to keep military spending faucets on maximum.

He twice ordered the firing of missiles into Syria in the last year over dodgy evidence of chemical attacks by the Syrian military. Netanyahu wants nothing more than to rid the region of Syrian leader Bashar al-Assad. A weakened Syria suits Israel (don’t imagine for a minute Israel will stop at breaking up Syria – it now has Iran squarely in view). Trump then surrounded himself with some of the most reckless pro-war hawks that had been lurking in the shadows of the Obama administration, bringing the world once again to the brink of a superpower war. Russia has warned that it would retaliate should any of its troops in Syria be harmed. “Brinkmanship” has returned as official US policy after a three decade sojourn, though this time could easily spiral out of control.

In his election campaign, Trump promised better relations with Russia, but has since cycled back from this hopeful talk. Russia’s entry to the Syrian conflict has virtually rid the country of jihadis, changing the dynamics of the region.

It was Trump’s predecessor, Obama, who signed off on the Iran nuclear deal, which lifted sanctions on Iran in return for the latter limiting its nuclear activities. Trump always maintained it was a “bad deal” without offering any sound proof. Netanyahu is leading Trump by the nose with his cartoonish exaggerations of the Iran threat. The International Atomic Energy Agency and US intelligence have on numerous occasions confirmed Iran is in compliance with its nuclear obligations.

Remember this the next time you refuel your car, or have to pay higher interest rates on your mortgage bond.

170 billion reasons why the Reserve Bank is a target for state capture

Written by Ciaran Ryan. Posted in Journalism

This article first appeared at Moneyweb.

Dawie Roodt

Former Reserve Bank employee and now senior economist at Efficient Group, Dawie Roodt, says there are 170 billion good reasons why the state would want to get its hands on the assets of the Reserve Bank.

He says last year’s failed attempt by the public protector to alter the mandate of the South African Reserve Bank may be a prelude of what’s to come.

Assets worth R170 billion are reflected on the Reserve Bank’s balance sheet as belonging to the state – most of them unavailable for state spending. The state will have to borrow R224 billion in the current fiscal year to finance its budget, and will be looking for any cash it can lay its hands on.

Of the R170 billion Reserve Bank assets belonging to the state, R70 billion was accumulated when Trevor Manuel was finance minister and tax revenues exceeded budget projections. The economy was powering ahead and foreign inflows meant too much money was in circulation, with the danger that inflation would ratchet out of control. An amount roughly equivalent to R70 billion was transferred from the state to the Reserve Bank to take some of this money out of circulation, but with the agreement that this money could not be used for state spending in the future. It was a smart idea by Treasury, which seems to have anticipated that a future administration would make a claim on this money. These funds now sit on the Reserve Bank balance sheet as a liability to the state.

The Reserve Bank also holds about R100 billion in forex that belongs to Treasury, but this too may only be used for foreign currency transactions, and is not available for domestic state spending.

Roodt says the state would love to get its hands on this money to help solve some of its budgetary constraints: “R170 billion would solve a lot of problems, like SAA, Eskom and other state-owned entities, which have huge debt obligations falling due. I suspect this was the reason the public protector last year brought out a report recommending a change in the Reserve Bank’s mandate. Though this was rejected by the High Court, I believe we may see further attempts to weaken the Reserve Bank.”

Last year public protector Busisiwe Mkhwebane attempted to have the Constitution amended to change the Reserve Bank’s mandate, which is to protect the value of the currency. The Constitution also requires the Reserve Bank to perform its functions “independently and without fear, favour or prejudice”, but in consultation with the cabinet.

Mkhwebane also ordered Absa to repay a R1.12 billion Reserve Bank bailout stemming from its acquisition of Bankorp in the 1980s. Absa and the Reserve Bank are opposing this, and the matter is currently before the court. The attempt to alter the bank’s mandate was rejected by the North Gauteng High Court, but Roodt believes that this was not the final attempt to capture the Reserve Bank.

Zimbabwe was once the freest economy in the world

Written by Ciaran Ryan. Posted in Journalism

This article first appeared at Lewrockwell.com.

Zimbabwe is best remembered as the country that clocked up a jaw-dropping inflation rate of 231 million percent a year.

That insanity came abruptly to an end in 2009 when the country adopted the US dollar and South African rand as the official means of exchange.

How did it get to this Olympian inflation rate? The same way it always happens, by rampant money printing.

Less well known is what happened immediately after this. The ruling Zanu-PF party lost its outright majority in the 2008 election and was forced to share power with the opposition Movement for Democratic Change (MDC). In came opposition member of parliament Tendai Biti as finance minister, and in a 30 minute speech to parliament he announced the end of virtually any form of government interference in the economy. No more exchange controls, no more price controls, no more import permits needed. Government was getting out of the business of trying to regulate the economy.

Within weeks, shortages of fuel and food had vanished and once-empty supermarkets were stacked to the roof. Inflation, which just a year previously had been doubling every few hours, fell to minus 7 per cent. Within two years, Zimbabwe’s inflation rate was the lowest in the southern Africa region. The economy grew at an average 8% a year over the next four years, albeit off a bombed-out base. Zimbabweans could scarcely recognise the country in which they were living. Entrepreneurs were making money hand over fist. They were buying cars, going on overseas holidays and sending their kids to the best private schools.

This free market experiment came to an end in 2013 when Mugabe won outright control in an election most believe was stolen, and reverted to form, reintroducing exchange and other controls.

If crisis makes its own opportunity, here is a case in point. Zimbabwe had hit such a low ebb, it was ripe for the kind of radical free market economics that frighten the bejeezus out of other countries.

Regulators have an innate fear of anything that moves freely and without hindrance. Take exchange controls, which we Africans have endured our entire lives. South Africa has had exchange controls since the apartheid years, a policy mindlessly extended under the African National Congress-led government.

The great fear is that removing exchange controls will lead to a flight of capital and all the attendant dangers that implies to the balance of payments, inward investment and tax revenue.

Zimbabwe’s experience is quite the opposite. Government tax revenue shot up nearly eight-fold in four years, and there was no shortage of foreign currency. The balance of payments did deteriorate, but this was partially offset by much higher inward investment flows.

MDC opposition member of parliament Eddie Cross, an economist by training, says this flowering of economic prosperity should be heeded by other countries. “We could solve Venezuela’s problems (with inflation and shortages) in an hour,” he told Moneyweb.

That’s right. He is saying we should look at Zimbabwe as a model for economic reform.

Two months ago, Robert Mugabe was deposed in a soft coup after 37 disastrous years at the helm. His successor, Emmerson Mnangagwa, through cut from the same party political cloth as Mugabe, made a decent impression at the recent Davos confab, promising sweeping reforms and respect for democratic outcomes. Though as Cross points out, he hasn’t followed this up with substantive reforms.

Zimbabwe’s next election comes up in June, and there is a real chance the country will have an opposition party in government, or at least a coalition. That holds out the exciting prospect of a free market finance minister such as Tendai Biti once again taking over the country’s purse strings.

If that’s the case, Zimbabwe, with a population among the best educated in Africa, is a miracle waiting to happen. I’d put money on it.

More people on welfare than have jobs in SA

Written by Ciaran Ryan. Posted in Journalism

This article first appeared at Moneyweb. Pictured below: Narius Moloto, head of trade union federation (NACTU).

 

 

 

 

 

 

 

 

 

 

 

There are now more people receiving social grants in SA than there are people with jobs.

Finance Minister Malusi Gigaba’s budget highlighted the predicament government finds itself in: there are 17.6 million people receiving grants, against the 16.2 million people with jobs in the country.

In 2001 there were 12.5 million people employed and just 4 million people receiving social grants, according to an Institute of Race Relations survey. The number of people on social grants has exploded more than four-fold in 17 years, while the number of official jobs has gone up just 30% over the same period. Aggravating the situation is the growth in public sector jobs from 2.1m to 2.7m since 2008. Public servants’ salaries – which are more than a third higher than the private sector average – now account for nearly half the annual budget.

“This situation is not sustainable,” Dawie Roodt, chief economist at the Efficient Group, told the Austrian Business Chamber at a post-budget briefing in Sandton last week. “I disagree that this is a conservative or reasonable budget, as some have claimed. It is an awful budget. SA has become a country of social upliftment, rather than a country of economic upliftment. We’re among the most highly taxed countries in the world, and there is no apparent recognition of how we got here or how we are going to get out of this mess.”

Rather than trying to focus on job creation, Roodt says the government should be looking at economic growth as the primary engine of job creation, flanked by privatisation, massive infrastructure development and a world class skills development programme.

Mike Schussler of Economists.co.za says a worrying aspect of the structural dependence being created in the country is that of the roughly 16 million people with jobs, 10 million are in the formal sector and only 7.5 million of those pay tax. “If you add people who are pensioners, we are on our way to having 19m people who are dependent on some form of social grant or pension. This leaves the few who are working to carry the burden. This cannot continue.”

The returns that South Africans receive on their taxes are abysmal. SA learners score among the worst in the world when it comes to maths and science, due in part to the high learners-to-educators ratio: 32 in SA versus 24 for the rest of the world. This is despite spending 22.5% of the budget on education each year. Social assistance will account for R197 billion or nearly 13% of the budget in the coming fiscal year. Coming in just behind this is interest spending, which will swallow R180 billion or 12% of the budget.

Narius Moloto (pictured above), leader of the Pan African Congress and secretary-general of trade union federation Nactu (National Council of Trade Unions), says while the tax base is becoming smaller, government welfare grants are ballooning out of control – a situation that is unsustainable, even in the short term: “The cash grants system is another form of political patronage and does not encourage upward progression in the economy. The way it is structured at present entrenches dependency. With some of this money that is being spent on social grants, we could have established cooperatives and micro-enterprises in poor communities with a view to permanently weaning them off welfare. That’s not happening and the programmes aimed at job creation are not working.”

One quick way to cut spending is to eliminate the provinces, which are little more than super-Bantustans with mini-presidents, says Moloto. “SA is over-administered. There’s huge duplication between national, provincial and local government. We can save billions a year by eliminating this duplication.

Michael Komape died because he was a rural African child

Written by Ciaran Ryan. Posted in Journalism

This article first appeared at GroundUp.

The Michael Komape trial wrapped up on Friday in the Limpopo High Court in Polokwane, with counsel for the family, Vincent Maleka, asking Judge Gerrit Muller to compel the provincial Department of Education to attend to the dire state of school sanitation in the province (Limpopo is one of nine South African provinces).

Five-year-old Michael drowned in a pit toilet at a school near Polokwane in 2014. Limpopo’s Department of Education has already admitted liability for the death. It now remains for the court to decide on the amount of damages to be awarded to the family, which is seeking compensation for emotional shock, trauma and grief.

The state has opposed calls for so-called Constitutional damages on top of the common law damages being claimed by the family.

Much of the argument in the last two days centred around whether the Limpopo Department of Education should be compelled to address the sanitation backlog of schools in the province, and by what means.

The court raised the prospect of a so-called structural interdict, which would likely compel the Department to address its sanitation backlog within a fixed time period.

Maleka (pictured right) argued against this on the basis that it would require each violation of the interdict to be argued afresh in court. The Department was unlikely to comply with a structural interdict, given its tardiness in addressing the existing sanitation backlog in schools, he said.

He asked instead for the judge to develop a common law remedy which would allow specific damages for grief, or alternatively for damages specifically related to violations of the family’s Constitutional rights, such as the right to life, dignity and equality.

He also asked for a declaratory order declaring that the Department has failed in fulfilling certain of its Constitutional obligations. Such an order would have a practical effect, said Maleka. It would hold the Department accountable for its violations of the Constitution, and it would vindicate the rights of Michael Komape and other learners in the province.

It would also give teeth to the Constitution, in that basic education envisaged by the Constitution is impossible without functional school toilets.

“There surely cannot be justice for Michael Komape if the defendants are allowed to plunder the public purse to pay the damages for their willful negligence without any further sanction. As we stated earlier, this case requires a judicial sanction that is exemplary and the declaratory order is an important component of the groundbreaking relief that we ask this Court to grant,” said Maleka.

Oral evidence in November last year showed the Limpopo Department’s sanitation and toilet system to be among the worst in the country. Even the Department’s own annual reports show the extent of the sanitation backlog in the province’s schools. The court heard evidence that funds earmarked for sanitation infrastructure went unspent several years in a row and were then returned to the Provincial Treasury.

In his heads of argument, Maleka pointed to the legacy of apartheid-era discrimination that afflicted rural schools. “We submit that the fact that Michael was an African learner living in a village in Limpopo and that he died in a school toilet is not a coincidence. It is precisely because Michael was an African learner at a rural public school that he died and that he died in the manner in which he did. It is difficult to argue that this could have happened to a learner of another race or in an urban school. It follows then, that this type of pain, suffering and grief could not have befallen anyone other than a rural African family.”

Judgment was reserved. It remains to be seen whether this turns out to be a precedent-setting case that provides backbone to the Constitution and holds government departments accountable for their actions and omissions. This is the outcome being sought by Maleka and public interest law firm SECTION27, which is representing the Komape family. If the Komapes are successful in their case, it will force government departments to examine their actions in light of Constitutional rights to equality, dignity, and to life. It will force government departments to re-prioritise budgets to avert the kind of tragedy that befell Michael Komape in 2014.

Zim has a message for South Africa and it’s not good

Written by Ciaran Ryan. Posted in Journalism

This article first appeared at Acts.co.za

As we launch into the New Year, there are some positive developments to consider as we ponder the plight of over-indebted consumers, the push-back against entitlement politicians, and the message trickling across the Limpopo from Zimbabwe as it confronts a glimmer of hope.  

The change of leadership in Zimbabwe is a signal to the rogues in our own country who expect to lead forever, as if this were an heirloom of entitlement.  Adolf Hitler promised the 1,000 year Reich, Ian Smith of Rhodesia said his racist party would likewise rule for 1,000 years, Jacob Zuma said the ANC would rule till Christ returned. It’s time to start counting the days and months whenever some fool politician starts making predictions.

Old man Bob Mugabe has gone, along with his wife and entourage, and the new incumbent, Emmerson Mnangagwa, promises free and fair elections and a revitalised economy. Hell, they’re even talking of giving some stolen farms back to whites. I’m betting on Zim becoming the great African success story of the next five years, regardless of which party eventually rules. Mnangagwa is no saint, as the families of slaughtered Ndebele in the early 1980s will tell you (when upwards of 20,000 supposed political opponents were shot or buried in mine pits), but he understands what has to be done to claw the country back from the brink of outright ruin that it has faced for close on 15 years.

There is no other way out of this mess: Zimbabwe has 90% unemployment, and the only way to create jobs is to let the private sector in. A SA-style Truth and Reconciliation Commission is needed to expose the architects of the plunder and fratricide that sent nearly half the population into exile. That’s a crime against humanity, and while the army cleaves tightly to Mnangagwa’s tailcoat, this will not happen. But in time it will.

Meanwhile, foreign investors are waiting on the sidelines, but they will not jump until there are solid assurances that their property will not be confiscated by arbitrary indigenisation rules and policy changes. This realisation will eventually trickle across the Limpopo to SA, where investment has similarly evaporated.