The David Gleason Column
This is the last column I shall write this year – and I have to say I’m rather glad 1998 has come to a writing end. It has been a brutal year for me personally, but also for many thousands of South Africans who have been trampled upon, caught by the economic and currency trauma that began in South-East Asia in 1997, and which has spread like a virus since then.
An inevitable concomitant has been the loss of many jobs in the formal sector; and, as you’d expect, this trend has stimulated the deeply felt anger of the trade union movements, notably that led by the Congress of South African Trade Unions (Cosatu). It is certainly worth noting that, during a period of job fragility – just when you’d expect trade unions to be most careful – they have, instead, exhibited all the characteristics least in the interest of their members.
Nineteen ninety-eight turned out to be a bloody awful year in the history of labour-employer amity.
This leads me to note another feature which I think has been too often ignored in recent months: it is that, or so it seems to me, South Africa’s big corporate battalions have an agenda to retrench on a serious scale. This has been the case for some years in the mining industry. It will be worse, I think, in general industries over 1999. And it is a perfectly logical progression. Big business in this country has for far too long acted as an employer of last resort. The result has been a labour force swollen out of all proportion in relation to its productivity and, therefore, in terms of its economic inefficiency and its inability to compete on an international scale.
The logical alternative is that South Africa must seek to encourage and stimulate the growth of small and medium-sized businesses. This is the only sector capable of providing the employment opportunities so desperately needed if this country is to avoid being a nation of the unemployed.
And if entrepreneurs are to be encouraged – because the only way small businesses are started is by persuading ordinary men and women that risk-taking is worthwhile – then they simply must be offered incentives. How is that best done? The logical answer is that some form of tax benefit has to be put in place.
It really is not enough for the Minister of Finance, Trevor Manuel, to pour scorn on the perceived wisdom that South Africans are heavily taxed. Whatever he says, the truth is that those people who do pay tax in this country, have to pay too much. Manuel needs to take counsel from the Japanese who, desperate as they are to get their economy moving again, have announced tax cuts from next year of 20%.
It is an established fiat of taxation that the lower the imposition on the people, the wider is the tax base. Conversely, the higher the tax rate, the fewer individuals and companies are around to support it. The rest somehow manage to fade away.
Another problem, of course, is that, as in so many African states, the bulk of the electorate expects state intervention in areas such as social services to grow rather than retreat. This is a legacy not of colonialism, but of inadequate job creation and subsequent preservation.
A real display of courage is needed in this area. What is required is a determination to shrink the public sector (even though this may be politically incorrect) and to reduce taxes by a huge proportion. As soon as there is even a hint that action such as this is forthcoming, the economic response will be massive, and we shall enjoy an investment boom and an economic expansion approaching the size necessary to address unemployment and, therefore, the poverty endemic in so many of our communities.
As I wrote this column, the news from the Cape Labour Court is that an argument between former Gensec equities dealer Gawie Botha and Gensec Asset Management as to which side is to bear which costs, is in progress.
The fight arises out of Botha’s earlier effort to seize the tape recordings of conversations between Gensec dealers and various stockbrokers. I understand these tapes are now in the possession of the Investigating Directorate into Serious Economic Offences (IDSEO), and this begs another question.
Gensec’s counsel has made play of the “front-running” aspect of the fracas; very little mention has been made of the “window dressing” or price manipulation factors alleged to lie behind the quarterly results of some unit trusts – which is what Gensec and Sanlam are accused of by Botha.
So the issue is whether the IDSEO intends to concentrate on whether one dealer acted improperly to benefit himself (front-running), or the extent to which window dressing or price manipulation is commonplace in the South African unit trust industry.
For all our sakes, investors especially, the IDSEO had better get its priorities right.
l I wish all readers of the Mail & Guardian (with a special fondness for readers of this column) a very safe, secure, happy and prosperous last year of the millennium. Go well.