The scariest stat about the South African economy you’ve never heard


We are bombarded with stats everyday, here’s another one:

The seventh constraint on growth is low levels of entrepreneurship. In 2009, only 1,4% of South Africans aged 15 – 64 owned established businesses, against 13,5% in Brazil, 2,3% in Russia and 17,2% in China. A 2012 study suggested that the new business ownership rate in South Africa, which measures what proportion of people are successfully establishing a new business that pays them an income, was a quarter of the figure of Brazil, and half of that for China and well below that of countries ranging from Slovakia to Latvia and Malaysia. – Frans Cronje in his book ‘Our Next Ten Years’ (pg 106)

Couple this low level of entrepreneurship with very high unemployment, and there we can see not only a big problem, but also a big opportunity. There is a massive opportunity for solving poverty and unemployment issues through entrepreneurship.

As I see it, there are two major obstacles to an increase in the number of entrepreneurs in South Africa, government involvement in the economy, and a strong mentality of entitlement amoung the people.

Government seems to believe that businesses need to be more restricted, and that certain markets must be regulated. They make promises with regards to education, welfare and health that they can’t possibly keep. And there is a very good reason why they do this. If they didn’t no one would vote for them. The average South African is more likely to vote for a party that promises them free amenities now (but free only means that someone else is paying for it), than for a party which says ‘hold on, let’s rather create an environment whereby people can keep a larger chunk of their resources (lower taxes) and make it possible for business to operate in a market which is not overly regulated, thereby creating economic growth, and long lasting wealth for those who are willing to work for it, instead of giving hand-outs’. Making such a drastic change, and fighting the bureaucracy and inefficiency inherent in our system will be tough, but will incentivise productivity, investment and growth. Economic growth is what will create jobs, and uplift people from poverty, not empty government promises. Throughout history, without exception, the environment, which creates the greatest prosperity, is a free society, where individuals are free to trade as they please (as long as they aren’t coercive, or infringe on the freedom of others).

It is important to note that only the private sector can create real wealth. The private sector creates sustainable jobs. It is important to remember that without the private sector there can be no public sector, because the private sector funds the public sector. But there are an ever growing number of laws and regulations businesses have to contend with. South Africans can be very entrepreneurial, but the problem is that people may have good ideas for businesses, but they simply don’t know where to start. How does one register a company? How do you begin to comply with the complex tax and BEE regulations? Will your business or market face the threat of unnecessary government regulation, or even nationalization?

Most of these laws aren’t necessary, but unfortunately we have a government of socialist indoctrinated busybodies who feel it their duty to keep the private sector in check. In Estonia for example, it takes only 18 minutes to register a company, and you can do it online. South Africa has very high tax rates, and a complex tax code. This could and should be, but won’t be rectified. The state simply does not seem to care about the well being of the economy; perhaps it just doesn’t understand its role in the economy.

There are very few instances in history where any government has solved any problems without creating unintended consequences, or imposing the costs on others through coercion.

Every country gets the government it deserves. We have an incompetent, dishonest, and fundamentally immoral government. This is merely a reflection of us as South Africans. On the whole we too are incompetent, dishonest, and fundamentally immoral if we elect such a government. And no, everything won’t get better if we just ‘stay positive and pray hard’. Unless people find the courage and dignity within themselves to stand up for what’s right pretty soon, this country will end up a typical dependent 3rd world African nation. At the end of the day nothing will change unless the people change.