- The South African election is almost upon us and it promises to be a big one.
- Reading through some of the (yawn) manifestos, it would appear that most parties have joined the Santa Clause school of economics.
- There are more “free stuff” promises being made than there are STD’s at a Motley Crue festival.
- Grants for unemployed graduates? – there is more than one party to choose from.
- Increased social grants? – the red berets are not your only home.
- Free education, free housing, and now with the signing in of NHI, free Health care – the ruling party is the one to choose.
- 300 parties – one Government. The math is eye watering.
- The only Government handing out more stuff than South African political parties is the current USA administration.
- Their national debt makes South Africa’s look rather “normal”. But more about that in future musings.
- In my core I consider myself a “liberal”. A live and let live kind of guy. Therefore, I am in favour of social systems.
- Social systems work where nine people collectively are able to contribute to the uplifting of the one poor disenfranchised soul.
- Perhaps it can work where eight pay for two. But the arithmetic begins breaking down at some point.
- In the South African context, it becomes very complex given our history.
- Acclaimed economist Milton Friedman stated the following: “There is no such thing as a free lunch.”
- Its meaning is easy to understand. Someone somewhere has to pay!!!
- Today, President Ramaphosa will sign NHI into law.
- His timing is impeccable with the election just around the corner.
- A cynic would consider this to be mere electioneering for a party whose support is falling faster than a pig trying to climb a greased pole.
- And for sure, I anticipate that the entire NHI policy will spend years tied up in more litigation than Donald Trump.
- But it does bring into question (again) South Africa’s policy mix.
- There are very few, if any, pro “free market” parties. And even those that do support free market systems do so in a covert fashion.
- The reason is clear to see.
- There are so many disenfranchised South Africans that its far easier to offer free stuff in order to garner the vote, than what it would be if the massage was about austerity.
- Politics is all about getting people to vote for you. And very few people will vote for the party that tells them that we need to tighten our belts. Just ask the democratic party in the USA?
- Its far easier to promise to tax the privileged – even if that potential tax base is in decline.
- At some point the lunch bill needs to be settled.
- In the South African context, we have real unemployment at around forty percent. Sixty percent of our young people don’t have jobs.
- And so, the ratio of privileged supporting those that don’t have, is already unsustainable.
- Then add in the wastage from corruption and mismanagement and it’s not difficult to understand why SA’s budget deficit has the stratospheric trajectory seen over the last 15 years.
- Now add NHI into the mix and its implications are very clear for the fiscus.
- This lunch promises to be quite expensive.
- The rand has been performing admirably against global peers for the last month or so.
- There is a strong possibility that this is all about to change.