Tax incentives less of a burden than state bureaucracy.

Posted On Monday, 11 August 2003 02:00 Published by eProp Commercial Property News
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What is the connection between a monolithic building in central Pretoria and an old mansion in the Johannesburg suburb of Parktown? Not a great deal, but the deliberations in either one will have a bearing on economic growth.

Property-Housing-ResidentialWhat is the connection between a monolithic building in central Pretoria and an old mansion in the Johannesburg suburb of Parktown? Not a great deal, but the deliberations in either one will have a bearing on economic growth.

Last week it was in the latter that business and civil society met over tea and scones at the Oppenheimer estate, Brenthurst, to hear about the eponymous Brenthurst initiative: the Oppenheimer plan to steer South Africa towards economic greatness, along the way addressing black aspirations of transformation.

This week it's the Reserve Bank's monetary policy committee (MPC), which will be discussing what we will all be paying on our mortgages next month or what we will make on our bank accounts.

Most of the emphasis over the last year and a half - including this writer's scribblings - has been on the MPC's deliberations rather than on government policy. Among others, I have railed against high interest rates.

But interest rates are usually the last line of economic defence: the Louis Koen of the economy, expected to slot over the kicks even as the team fails to put together sufficient try-scoring moves. It's not always a successful ploy, as rugby fans will know.

The MPC does not set tax rates or labour policies, nor does it organise state-owned entities and utilities. It does not set wages or run immigration policy or dish out subsidies. But it has to deal with the effects of all of these things, insofar as they have an impact on price stability.

Those are all the government's job, and if the government is poor at them, one of the effects will be an unstable inflation environment.

Hence gatherings in Parktown estates become important. We may chuckle about the Oppenheimers and their peculiar Anglo-South African view of the world; we may even argue stridently that with their ties in Old England, theirs is an anachronistic perspective, irrelevant to rank and file South Africans.

However, it is good to see proper debate fostered about how to get South Africa working again, but in a way that pleases the greater number of its citizens. Unemployment, at about 30 percent, is close to getting completely out of control, while black economic empowerment is a powerful and emotive topic among its proponents.

The Brenthurst suggestion is that tax incentives be used to achieve the goals. This may not be the most workable suggestion around - it is easy to see why the government and organised labour would oppose it.

It is also questionable whether tax incentives are the most efficient means of achieving this country's complex goals. This is not a small, homogeneous society.

But the issues raised by the Oppenheimers and their researchers, with all the attendant criticism of special pleading, are not going to resolve themselves easily and without some kind of intervention.

South Africa needs growth, and lots of it. It needs transformation, too.

The risk, though, is that we see a kind of low-fat, diet version of a command economy taking shape.

Transformation is less of a problem than the notion that government officials take too much of a role in the day-to-day running of ordinary businesses. This has to make business less efficient.

Hence the attraction of tax incentives, which can, in any event, be phased out as time goes by. It is less easy to phase out newly created state bureaucracies.

It is not an easy conundrum for our policy makers to deal with. Until they do, however, we will be left with having to castigate the MPC for all of our ills.

Last modified on Saturday, 17 May 2014 09:03

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