Government’s Message to the World: "Do Not Invest Here"

South Africa’s government continues to dabble in social engineering, and citizens will continue to suffer the consequences.

In a country with an unemployment rate over 42%, serious service delivery shortcomings, the steady outward migration of wealth, and a rising sense of discontent, protest, and hopelessness, one would expect the government of that country to slash regulations, taxes, and other inhibitors to growth as quickly as possible. 

With economic growth (and make no mistake, South Africa needs 5-7% growth per year for at least the next five years, to make progress after the lockdown) comes improvements in quality of life, and social progress. But even after the deep damage caused by government’s desire and hubris to ‘lead’ on COVID-19, bureaucrats stick to the belief that the state needs to be present in all facets of our daily lives.

Elon Musk, the South African-born advocate of Dogecoin, and Tesla and SpaceX CEO, has been busy with lofty projects such as sending people into orbit. But arguably some of his company’s most important work centres on increasing people’s access to the internet - something that, once they can do it more affordably, unlocks unmatched amounts of potential knowledge and business opportunities for people around the world.

SpaceX is working on a project known as Starlink: “a low latency, broadband internet system to meet the needs of consumers across the globe.”

We are often told that data is increasingly unaffordable in South Africa, and indeed, across sub-Saharan Africa. If we accept that premise, a project such as Starlink, that will disrupt the entrenched players and is aimed at “connecting rural areas left out of the fibre rollout,” should be greeted with open arms. But this government will, under the sway of its outdated, irrational and immoral ideology of collectivism, continue to make job-creation, technological innovation, and growth generally, as difficult as possible - if not ultimately, impossible.

But, to operate in this country, Starlink (or its South African version) will need to adhere to new regulations proposed by the Independent Communications Authority (ICASA), specifically those that will pertain to internet service providers. These require that: 

“An Individual Licensee must have a minimum of 30% of its ownership equity held by black people, determined using the flow through principle.” 

Further:

“[I]ndividual licensees must have a minimum of 30% of its ownership equity held by historically disadvantaged groups, which include black people, women, people with disabilities, and youth.”

Ostensibly, affirmative action policies are aimed at redressing the wrongs of the past. South Africa’s past is one of oppression on the basis of skin colour, adding weight to the view that affirmative action is needed to ensure progress, and some kind of ‘level’ playing field. In practice, though, affirmative action-thinking necessarily increases the amount of power in the hands of the government of the day and, in all cases, by arbitrarily defined ‘standards.’

Insofar as the government views itself as the saviour of people - and as their ultimate hope for economic upliftment - it will always seek to find new avenues for increased power, and shift the goalposts in terms of when ‘progress’ has been achieved. The stakes of political power increase, and having the necessary connections and insider clout ensures that one’s business ultimately ‘wins’ out. In the long run, red tape increases and the vast majority of people whom these policies are supposed to ‘help,’ suffer from not having the necessary connections.

Affirmative action, as a basis for policy formulation, ultimately views wealth as fixed, that it can only change hands from one ‘group’ to another, and ignores the state’s own role in erecting barriers to entry, competition, and actually meaningful growth.

From a broader perspective - the entire history of humanity - the advent of free-market capitalism can indeed be perceived as a miracle. Before the spread of industrialisation, and more importantly the idea of treating each person as an individual in themselves, wealth was mostly forcibly seized from one group for the next. With the entrenching of the rule of law, more efficient methods of trade, and more people engaging voluntarily with each other instead of violently, more individuals, families and communities could create wealth - not only play a game of redistribution.

But when one understands that certain ingredients are necessary to increase the possibility of prosperity, the ‘miracle’ aspect falls away. Governments and societies always have a choice regarding the system they choose, and they won’t be able to avoid the consequences of making the wrong choice.

Judging people - and creating policy - on the colour of their skin, a random accident of birth, is not only a reprehensible, immoral view. When policy is formed from this perspective, the practical social and economic effects are devastating, to the ultimate cost of all citizens. South Africa’s government continues to dabble in social engineering, and citizens will continue to suffer the consequences. Our only hope lies in freedom.

Chris Hattingh is Executive Director at the Centre For Risk Analysis (CRA). With a special focus on trade, investment, and economic matters.