The Civil Engineering Contractor November 2018 | Page 3

COMMENT How to end the ‘technical’ recession A lean and efficient government is necessary now more than ever. The size and the scope of government has to be reined in drastically. We are where we are because of politics: talk of expropriation without compensation must cease immediately; the new National Minimum Wage Act will further retard growth, especially for small businesses which are unable to comply with the R3 500 a month price-tag; and meaningful steps must be taken to trim back the government headcount and with it, bureaucracy and interference. The signs are everywhere: at the August launch of the 2018 edition of the International Property Rights Index, it was revealed that internationally, South Africa has been the biggest loser, losing 0.65 points compared to its 2017 ranking. Since 2000, South Africa has consistently dropped on the ranking of economic freedom, as expressed in the Free Market Foundation (FMF) co-produced Economic Freedom of the World report. In 2000, South Africa ranked 46th in the world, but had fallen to 105th Eamonn Ryan - editor [email protected] A Government uses your hard- earned money to employ public sector workers — in the case of Eskom, at the ratio of about four or five times what is the average global rate of worker-to-megawatt produced. This inefficiency is replicated in almost every state- owned enterprise. How much better could that money be used if it went to productive jobs rather than deadweight ones. The Institute of Race Relations reported in April that government’s wage bill of R587- billion stands at about one third of its annual budget. It employs over two million people in all spheres of government. Despite such an abundant workforce, South Africa still struggles with service delivery and is notoriously unresponsive. This suggests that having one civil servant for every 30 South Africans is an entirely wasteful expense. www.civilsonline.co.za t the time of writing, it had just been announced that South Africa is in a recession —referred to as a ‘technical’ recession as though it’s not really real. In fact, it’s all too real. Throughout 2018, everyone in the civil engineering contracting world has been fully aware that South Africa is not just in a technical recession but in a deep economic depression. Economic growth has failed to keep up with population growth for a full decade now — and this is something caused entirely by the deadweight of government. by 2017. The plunge in our ranking on these indices is the direct result of government’s policy of economic intervention. The FMF argues that the source of the problem is that South Africa’s institutions are skewed towards increasing the role of the State at the expense of the private sector. The jobs ‘created’ by government disguise the fact that jobs would have been created in the private sector had that money not been taxed or borrowed by government. Government is merely redistributing money from a productive to a non-productive sector of the economy. The lack of growth in South Africa, especially recently, has been largely due to an uncertain policy environment and the threat of government seeking to expropriate privately owned property without paying compensation. Whether the threat is real or imagined, what investor would engage with a country that behaves in this manner? CEC November 2018 | 1