By Chris Hart

As South Africans again head to the polls, it is worth reflecting on the achievements, and failures, of three decades of ANC government.

Will things get better, or is the electorate being asked to vote for more of the same?

Unemployment is THE biggest issue facing South Africa. More than 50 parties are promising jobs. Most are offering rubbish or wishful thinking.

Most parties are advocating more poverty alleviation while being clueless regarding what needs to be done to achieve poverty reduction.

Poverty alleviation involves shifting resources to consumption. (Perpetuates the problem); Poverty reduction, however, involves shifting resources to investment. (Reduces the problem)

The choices are stark.

For instance, the National Health Insurance (NHI) is a policy of poverty alleviation – shifting more resources to consumption. The NHI essentially means more unemployment, as investment is crowded out.

The Basic Income Grant (BIG) is also about more consumption and will also crowd out investment. Once again, we have a policy proposal that will create more unemployment.

To generate investment, South Africa must be an attractive country in which to invest.

Investors have a choice, and South Africa must compete for investment. The government should enact policies that encourage investment in the country. Its track record is exactly the opposite.

Several measures must be taken:

• Lower taxes (both the tax rates and the number of taxes). If we are to become more investment-friendly, lowering taxes is key.
• Slashing red tape is also essential.
• Capital formation (savings) must also be supported and improved.

Unemployment will not be solved by what exists but by what needs to come into existence. That needs investment. The current economy is simply too small to absorb and serve all the people. We need a bigger economic cake, not merely to redistribute existing cake. A bigger cake needs investment; redistribution is about consumption.

The tax base is already exhausted. It is both narrow and shallow. It cannot bear the burden of additional consumption-driven poverty-alleviation measures. These have become poverty-perpetuation policies. Consumption-driven measures are crowding out investment.

The nature of investment is also important. If jobs are to be created, investment must be directed to SMEs and start-ups.

This is where the tax and regulatory burdens are extremely onerous. SARS extracts taxes out of SMEs before they have made a cent of profit.

The cost for SMEs of regulatory compliance is also huge – they face massive costs of compliance before they have made a cent of profit., Yet SMEs are the most important job-creating element in any economy.

The nature of taxes must be fully evaluated and reformed. South Africa is an emerging market with massive unemployment and a shortage of capital. Yet the tax system aggressively targets capital formation in the form of taxes like Capital Gains Tax and property taxes.

Taxes that target capital and capital formation act in the same way as eating the seeds that are needed for the next harvest.

Meanwhile, high personal taxes inhibit the ability to save and create the capital necessary for funding the structural expansionary growth required.

That is why South Africa struggles with unemployment.

South Africa’s extremely high unemployment is unusual in the global context. There are no external factors that we can blame for unemployment – however much our ministers may insist that there are. To assert the contrary is just gaslighting the electorate.

Unemployment is a problem inflicted on the country by our political elites. Bad policies implemented badly have caused this problem – directly causing job losses and unemployment.

In addition, the corruption that has descended into wholesale looting negatively affects investment attractiveness. Especially trust. No investor wants to invest in an untrustworthy jurisdiction.

The myriads of parties contesting the elections are all promising jobs.

So how can we tell if it is just wishful thinking jabbering and magic wand waving to the electorate? Or do they have an actual coherent plan to create jobs?

If a party is serious and credible in wanting to create jobs, it MUST have the following elements:

• 1. Tax reform. SA must become more competitive. Parties must pledge to lower tax rates and the complexity of tax administration. They must agree to shift the tax burden onto consumption and away from capital formation.
• 2. Regulatory reform. SA must become a cheaper – and easier – jurisdiction in which to do business. Especially for SMEs and startups.
• 3. Create channels and mechanisms for SMEs and start-ups to access capital. They must provide regulatory and tax exemptions for SMEs and startups.
• 4. They must have a commitment to a genuine crackdown on corruption. Trust must be restored to encourage investment in SA.
• 5. They must undertake to get rid of exchange controls. These inhibit investment and only exist to shield bad policy. Good policy does not need the protection of exchange controls.

What we do know (from its actual track record) is that the ANC has created the unemployment problem we have today. The jobless rate stood at 22% 10 years ago (which was already extremely high) and has risen to 33% now. No external factors are to blame.

The ANC’s latest best ideas are the NHI and the BIG. More consumption. More unemployment.

There has been more and more poverty alleviation at the expense of poverty reduction. We have not seen a single idea or initiative on poverty reduction.

The MK and the EFF just mirror these ideas – they will merely implement the same mistakes, but bigger and more damaging than the ANC has done.

The DA’s record on governance is much better than that of the ANC. This has yielded better employment outcomes, but their direct policies on job creation are not well-founded. It is more hope than a plan, as the above elements are either not well developed or absent. There is also a heavy emphasis on poverty alleviation measures.

The PA’s plans sound good but their record is not great – having sided with the ruling party and having indulged in the delicious budgets.

On job creation, the FF+, the ACDP and the UIM seem to have credible, coherent plans.

Action SA also sounds promising, but its policies are still weakly formulated and lack coherence.

So, as the country goes to the polls, another reminder of the unemployment statistics:

South Africa’s official unemployment rate now stands at 32,9%. In 2008, the unemployment rate stood at 21.5%. 16 years of high and rising unemployment. Youth unemployment is an even bigger disgrace.

Does the electorate know that this situation has been delivered to it by the misguided policies of recent governments? The election promises come with an (unstated) caveat: vote us in again and we will ensure that more of you will become unemployed.

Unemployment is entirely avoidable. It just depends on the choices our elected officials make on our behalf.

Vote wisely!

• Chris Hart is the executive chairman of the Impact Group