A little-noted post-election building boom provides valuable lessons for the recovery of our injured economy, writes Terence Moll
‘IF you’re a small builder and aren’t working every day,” the salesman said, “then you must be either lazy or fast asleep.” He should know: he works for a firm which sells precision saws, drills and concrete-cutting machines to builders. If they are doing well, he notices it immediately.
I met him last month at the Interbou Exhibition in Johannesburg. A variety of building materials and products was on show, and displays were buzzing with excitement. Almost everybody to whom I spoke agreed that there had been a turn-up in construction sales and inquiries since May or June — after the election. Some small builders have orders piled up for two months ahead, compared to almost nothing early this year.
It was a matter of confidence, I discovered. “When you add a room to your house,” observed a draftsman, “you’re looking five years ahead. Before the election, people felt insecure and didn’t build. But now, they’re going ahead and putting in that bathroom or swimming pool which they’ve been wanting for so long.”
To judge by the products I saw, the building boom has been led by reasonably well-off people. It seems the middle class is voting for the new South Africa with jacuzzis and fitted kitchens. But poorer people are building, too. And when the reconstruction and development programme (RDP) takes off, this segment of the market should spurt ahead.
The most impressive feature of the show was the versatility of the exhibitors. The range of products was stunning — from low-cost housing and industrial paints to security doors and luxury American Hot Tubs. If buyers had the cash, somebody had it for sale.
This raises an intriguing question: the housing and building-materials market in South Africa is sophisticated and flexible, responsive to demands backed by money, so why should the state intervene in the housing market? Why not leave it to function freely — and seemingly efficiently?
The answer is obvious: too many households can’t afford perhaps R400 to R800 a month for housing, so the state must help provide them with shelter. An obvious answer, but unsatisfactory. Of course, destitute families should certainly have homes to live in. Not only is this humane, but it’s an investment in society’s future, by giving children the chance to grow up in decent conditions and earn their way in life eventually.
But simply focusing on housing can be misleading. Poor housing reflects widespread poverty, which in turn is due largely to unemployment. Estimates of unemployment range from 30 percent to 50 percent of the labour force, depending on how it’s measured. And most people without jobs can’t afford to buy or rent houses or flats.
Providing all of them with houses via large subsidies would munch up a huge proportion of the government’s annual budget. And the individuals concerned would still be poor and unemployed — unable to pay their bonds, electricity, water and rates. Some would find jobs on labour-intensive public-works schemes, and might help to build the houses in which they end up living. But these are not permanent solutions to unemployment.
Other countries which reduced poverty quickly combined state support for the poor with rapid job creation. In Chile and Malaysia, for example, poverty is modest and declining largely because their economies are growing and unemployment is low, under five percent.
Likewise, solving poverty in South Africa will entail some state commitment, but must be complemented by private business prospering and creating lots of jobs. Otherwise poor people will become burdens on the government, leading to higher taxes and slower growth eventually.
If you break a leg, taking Stopyn will ease your suffering. But without a splint and plaster cast, you may never walk again. In our injured economy, I suspect the RDP concentrates too much on painkillers — houses, water, health care — and not enough on the plaster cast — private-sector jobs. The danger is that the government’s stress on short-term measures to ease the pain of poverty may obstruct business and prove self-defeating.
Maybe this stress isn’t too surprising. It’s easy to preach before TV cameras about providing poor people with houses and roads — this is vote- reaping stuff, which politicians love. It’s not nearly as sexy to praise private-sector profits and investment, freeing up labour markets and limiting wage rises to boost employment.
I’ll only be convinced politicians are taking poverty seriously when I see squads of cabinet ministers championing the private sector of the economy — both in their speeches, and in their actions.
Trade and Industry Minister Trev-or Manuel is taking the lead in understanding the needs of business. He could do with some company.
Dr Terence Moll is an Old Mutual economist