The best thing South Africa’s government can do is nothing

The best thing South Africa’s government can do is nothing, as its interventions in the economy often have a negative impact on growth, employment, and prosperity. 

Due to its interventionist approach and the creation of onerous regulations, the government is often an obstacle to sustained economic growth in South Africa. 

These regulations are coupled with poor policies and state control of key economic sectors, preventing local entrepreneurs and businesses from flourishing. 

As a result, the Government of National Unity (GNU), despite intense disagreement among its members, benefits the local economy simply by limiting government intervention and creating no further regulations. 

The GNU has also forced the ruling ANC to engage in debate over its key policy proposals that it has implemented without much meaningful opposition over the past 30 years. 

Furthermore, South Africa’s government can no longer afford to be interventionist, expansionary, and control key economic sectors, as its balance sheet and those of public companies are too weak. 

This has forced it to begin implementing reforms to increase private participation in key economic sectors, such as electricity generation and logistics. 

Modern Corporate Solutions mining analyst Peter Major explained that the government can take credit in this regard, with the economy benefiting from it getting nothing done. 

Major told BizNews that South Africa’s economic fortunes have improved significantly over the past 18 months as private participation in the economy has increased. 

He also noted that the rand’s recent strength has little to do with the government doing anything and far more to do with things it can’t control, particularly commodity prices. 

“If the economy is doing well and you see that the government is frozen, then you can attribute that to the government. You can give them credit for doing nothing,” Major said. 

“Without a doubt, with less government, the more this economy flies. It has a lot of good people, it has great weather, immense mineral resources, and a great shoreline.”

“If ever there was a country that would do better with less government, it is this one.”

South Africa winning big while having less

South Africa is set to benefit immensely from the surge in precious metals prices, despite the country’s mining sector steadily declining in terms of output over the past 30 years. 

Strangely enough, South Africa is set to benefit from the surge in gold prices despite the country not having many gold mines left. 

This is largely due to the continued presence of gold miners on the JSE, a hangover of bygone years when South Africa was the world’s number one gold producer. 

Surging gold prices have also been coupled with elevated prices for platinum group metals, in which South Africa has maintained its position as the world’s number one producer. 

This is set to bring immense benefits for the country through increased export revenue and tax collection, despite the government’s best efforts to crush the industry, Major said. 

“Gold and platinum miners make up over 30% of the JSE All Share Index. They are around a third of our benchmark index,” Major said. 

“And, we don’t even have any gold mines except for a couple of small ones still operating. AngloGold has nothing here. GoldFields has one asset here and 20 overseas. And yet, gold is now a large part of our index.” 

Major explained that these companies are dragging the index higher and are expected to push the country’s economic growth higher, so long as prices stay elevated. 

“These companies are generating profits like this government has never seen. It is going to generate taxes like this government will not see again,” Major said.

“And that is with four-fifths of our gold mines being closed down that we had a couple of decades ago. Four-fifths are closed.” 

Major said that he expects the earnings of gold and platinum miners to more than double year-on-year when they next present results. 

This is set to give the government a significant tax revenue boost, which will shore up its budget and give it some more fiscal room. 

In the past, however, South Africa’s governments have tended to squander the windfalls generated by a commodity boom. 

Instead of investing the capital in infrastructure and enhancing the productivity of the country, it has been spent on consumption in the form of salaries.