Mangosuthu Buthelezi's Online Letter
My dear friends and fellow South Africans,
In matters of this nature there is no satisfaction, but only pain in having been proven right.
Last week the parliamentary Portfolio Committee on Trade and Industry held public hearings on the Industrial Policy Action Plan 2 ("IPAP2"). Industries across the spectrum appeared at the hearings and complained about how our entire export oriented manufacturing and service sectors are being put out of business because of the strong Rand. They indicated that often it takes as much as twenty years to regain a lost foreign market segment or overseas client. The consequences for the employment of South Africans are devastating.
More than a year ago I called on the Reserve Bank and the Minister of Finance to dramatically cut interest rates and devalue the Rand as an urgent and necessary measure to save our crumbling industrial platform. It took more than a year for the seeds of my conventional wisdom to become government policy. It has now been announced in IPAP2 and by the Minister of Finance in his address to Parliament.
Yet apparently no action has been taken by the Reserve Bank to devalue the Rand, which highlights what has become a common pattern of divorce between public policies and national interests on the one side, and Reserve Bank policies and financial and banking interests on the other.
It takes no clairvoyance to predict that a strong Rand will collapse the economic success of the 2010 FIFA World Cup by dramatically reducing tourism. Unfortunately South Africa is only a marginal tourist destination on account of the enormous airfare costs to get here from the whole of Europe, the East, and North and South America alike, where people have the option of flying to comparable tourist destinations often for as little as USD200, where they also find good quality but inexpensive hotels and restaurants.
The other common element emerging from most of the presentations given by industrialists in the aforesaid public hearings was the devastating impact on our economy inflicted by the ever-present monopolies, cartels and practices in restraint of trade which have undermined our international competitiveness and are imposing huge costs on our consumers.
Again IPAP2 echoes these concerns, recognizing that the mould in which the industrial base of South Africa was cast during apartheid and its economic isolation cannot make us a living when global competitiveness is the only option. Both the President in his State of the Nation Address and the Minister of Finance in his address to Parliament stressed how our success in conquering the many social and economic challenges South Africa is facing hinge upon our capability of developing goods and services to be marketed globally.
I identified the problems of our economy being shaped around monopolies, cartels and practices in restraint of trade as early as the days of our Kempton Park negotiations in 1992, and tabled this as a necessary item to address for a successful constitutional outcome. Unfortunately my proposals were ignored. I have continued to express this concern relentlessly since then.
Since then a great deal of lip service has been paid to rectifying the problem, but little action has followed. The Competition Commission has proven to be a failure both because of its inefficiency and ineffectiveness, and because of the limits of its legislation and mandate. In countries where antitrust legislation has been successful, the possibility exists for private enforcement which grants a successful plaintiff a reward for having taken the action in the form of punitive or triple damages.
Moreover, vast segments of our economy have been frozen out of the action of the Competition Commission on account of monopolies, cartels and practices in restraint of trade having been entrenched in legislation, regulations and government practices.
Practices of this nature have become so entrenched that they have almost become part of the business model of the Industrial Development Corporation, which historically has financed businesses which it knew it could make succeed by calling on Government to impose a wall of protectionist measures around them in terms of increased import tariffs, subsidies, decreased international or domestic competition or outright hegemonic positions in the marketplace.
This also raises concerns about the IDC having become an industrial complex in itself through the broad range of equity participations it holds in the industries it has financed. In this sense, the IDC itself operates as a cartel which has no interest in financing businesses which compete with those in which the IDC holds an equity position and from which it derives the large revenue stream which has thus far supported both its operations and some of the largest salaries in the country paid to its executives.
In the end, we South Africans pay the price for all this many times over.
First, by paying often as much as twice for goods and services produced in South Africa under conditions which enable businesses to have inflated profits and market positions. Secondly, we pay often as much as twice for goods and services imported from abroad in conditions artificially created to enable excess gross profits with competing businesses in South Africa.
Third, our taxes take our money from families to transfer it in the form of subsidies.
But the greatest price we are paying for all this is that our industrial base is crumbling. Under present conditions we will not be able to create a new one, for the way of manufacturing in the 21st century is to produce for the global market. This will result in decreased employment, higher prices and a vicious circle which will keep the poor poor, progressively erode the middle class and allow profits to be made for a rapidly narrowing group of rich industrialists, politics potentates and their cronies. That would be the triumph of greed and political myopia.
I carry no brief for the upper or the middle classes. They have never supported or financed me. For the past 40 years I found myself defending their role and position in society because I receive my political brief from the poorest of the poor, who will stand to lose the most in the disintegration of the middle class and the narrowing of the upper class.
That is, unless one is still nourishing deluded dreams of a communist revolution which, worldwide, has proven capable only of spreading untold miseries equally for all.
It will now take a huge amount of strong political will to turn this mess around. At this point, this political will can only come from the President, if he rises to the challenge of taking charge and making the giant leap from words, policies and well-documented plans of action to the actual relentless set of actions which our dramatic circumstances now call for.
In so doing, he may have to push forward by leaving some behind, as the country can no longer indulge in paralysis by analysis, consensus and workshops.
Yours in the service of our nation,
Prince Mangosuthu Buthelezi MP
President: Inkatha Freedom Party
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