Whatever one thinks of aspects of the Oppenheimer family’s Brenthurst initiative, it stimulated debate on the most important issue facing South Africa.
Transformation and growth are undoubtedly linked, but growth is the horse that pulls the cart of transformation. We must take care not to put the cart before the proverbial horse. The transformation cart does, however, carry a few carrots with which to encourage the draught animal.
It has been credibly argued that the biggest factor in apartheid’s demise was economic expansion. Increasingly with growth, black people had to be integrated into the modern economy.
Apart from its inhumanity, apartheid became more and more obviously illogical. Eventually, there were too few whites to control all the levers of power.
Ironically, the seeds of apartheid’s destruction were sown during the phenomenal growth of the 1960s, when the system was at its most vicious. Harry Oppenheimer foresaw this, while Helen Suzman, Harry’s political soulmate, tirelessly pointed it out to the Nationalist government. In spurning her advice, it made the most painful and expensive mistake in our history.
Whites now constitute about 9% of the South African population and a mere 6% of school-leavers. Even if the economy grows at a pedestrian plod, the doors will be open for blacks to gain wealth, jobs, careers and other benefits of transformation. The faster we grow, the faster we will transform.
Under the law of compound interest, at 10% annual growth, wealth doubles in seven years; at 7%, it doubles in 10. Imagine what we could do if the economy was twice as rich in 10 years’ time!
China has grown at between 7% and 11% for some years. In a generation it will probably be the world’s largest economy — which is why the brightest European politicians are pressing for the rapid integration of Europe’s economy. They know single European countries will eventually be too small to compete in the world.
India has transformed itself in 15 years and now leads the world in the production of computer software and CDs.
The message for Africa is clear: it must become a dynamic economic bloc and South Africa is the obvious foundation stone on which to build. That is why our many influential friends around the world were so enthusiastic about President Thabo Mbeki’s New Partnership for Africa’s Development initiative — and why they shake their heads in sorrow at our mistakes.
Growth and more growth must be our aim. Growth creates jobs and its attendant benefits; it puts more in state coffers for welfare and bolsters the trade union movement. When order books are full, it is easier to negotiate above-inflation pay rises.
Income and wealth are most effectively redistributed through negotiation, rather than compulsion, and a strong union movement is vital to democracy. All other social institutions, from churches, the media and universities to jockey clubs and philately societies, are driven by elites. Uniquely, the unions are driven by the people.
If China can grow so quickly, South Africa, with its comparative advantages, should be able to grow at about 6,5% a year. Why have we fallen short of this? We have no unifying idea of ourselves as a thriving, dynamic, cosmopolitan society. We need a leap of faith, boldness and originality.
An idea that could spur growth is that of abolishing all taxes and replacing them with a single, low, flat rate of “transactions tax” or “turnover tax”. Yes, scrap value added tax, income tax, capital gains tax, property transfer duty — the lot.
Modern technology enables a computer programme to automatically rake off this tax as a percentage and pay it to the state.
Significantly, the idea is supported by some left-wing economists, like Margaret Legum, presumably because the rich make more and larger transactions and the tax would be inherently progressive.
Not only would such a tax simplify business and everyone’s lives, it would act as a massive incentive for employers and employees to boost the economy by spending.
It would be impossible to evade, except on cash transactions — which would benefit the poor. As it would be a small percentage, the security and convenience of settling debt through the banks would ensure the viability of the system.
The real evil of tax evasion is that it gives evaders a competitive advantage — they can set prices lower. A transactions tax would level the playing fields. Municipalities could be given a fixed sum per head of the population. This would be politically neutral, increase efficiencies — it would be much harder to disguise incompetence or justify exorbitant pay — and encourage competition between municipalities.
Most significantly, it would favour small, poor, rural municipalities battling with insignificant tax bases. Huge social benefits would flow from thriving rural communities, as overly rapid urbanisation brings many evils.
Former United States senator Robert Kennedy made a world-famous anti-apartheid speech at the University of Cape Town in 1966, where he spoke of tiny ripples of hope and ideas that can build a current. This small ripple of an idea for growth could build into a current that transforms our society.
Nigel Willis is a Johannesburg High Court judge and a member of the Labour Appeal Court. He is also a fellow of the Institute of Bankers