Never mind Greece – it’s Argentina’s fate we must avoid

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Never mind Greece – it’s Argentina’s fate we must avoid

In May 1973, British Prime Minister Edward Heath told the House of Commons that the bribery and corruption practised by mining house Lonrho in Africa, under the swashbuckling Tiny Rowland, represented ‘’the unpleasant and unacceptable face of capitalism.’’

Heath’s famous phrase got local application recently when retailer Lewis Ltd was exposed by the enterprising Summit Financial Partners for ripping off the poor and ignorant by effectively charging R25 996 for a flat screen television notionally priced at R9 999. The small print on credit sales enforced all manner of ‘insurance, delivery, handling and credit sales charges’ which inflated the price a whopping 140%.

Financial Mail journalist Rob Rose got it exactly right when he accused Lewis CEO John Enslin of being a ‘’vulture feasting on the ignorant.”

More forgotten by history was the qualifier which Heath attached to his remark on ugly capitalism. He added, “But one should not suggest that the whole of British industry consists of practices of this kind.”

Just before the Lewis Stores fulfilled, literally with interest, Heath’s putdown of predatory capitalism, Stellenbosch-based wine farm owner and philanthropist Wendy Appelbaum provided an antidote to the poison of predatory lending practices.

She spearheaded the court victory engineered by the Stellenbosch University legal aid clinic and law firm Webber Wentzel (disclosure: my brother is a partner at the firm) on behalf of impoverished farmworkers, including her own employees. In some instances the court found, their ignorance allowed up to 80% of their monthly wages to be sucked up by repayment schemes, which charged an effective 60% annual interest rate.

Summit Financial Partners is a private company specialising in consumer advice, while Appelbaum a hard-driven businesswoman with a conscience. Fortunately they provide proof that business is not just about extracting profit at any cost and preying on the most vulnerable.

Both these exposes doubtless provide fodder for the naysayers against business and the noose government, and its alliance partners, are erecting around enterprise in this country.

But apart from regulators asleep at the switch in both these cases, and the fact that it was other business forces which rode to the rescue, we should ask how government’s model is bearing up in the straitened economic times we find ourselves in.

The academic and author RW Johnson has produced a page-turning read with the gloomy title “How Long Will South Africa Survive ? The Looming Crisis.”

Strangely, despite the book moving off the shelves at a fast clip, the author advised that he has yet to be invited to a single local literary festival or even to seminars where the title of his work is the featured topic. There is a complaint that local book events are unfriendly to black authors; apparently to politically incorrect whites as well.

No matter. At the recent Franshchhoek literary shin dig, I asked well known analyst and scion of a famous ANC family, Moeletsi Mbeki, whether he agreed with the central contention in Johnson’s analysis.

Having provided chapter and verse on what he terms “the State’s repression of economic activity”, Johnson reaches this conclusion: “ South Africa can either choose to have an ANC government or it can have a modern industrial economy. It cannot have both.”

Mbeki responded by saying that ‘’while it pained him to have to agree with RW Johnson, in this matter he is correct.”
Doubtless the debate and the evidence and counterclaims around this will continue at a furious pace. But if one central idea percolates from government economic thinking and actions these days, it is that growth and employment will be driven by the ‘development state.’

Since we are barely over 1% GDP growth this year and a record 8.3m. work-ready South Africans can’t get employment, the evidence suggests, to put it diplomatically, that we are on the wrong track.

Undeterred, deputy president Cyril Ramaphosa went to China recently to check on how the developmental state is doing there. Unfortunately for him – that economy is in deep trouble. In June, $3tn was wiped off the Shanghai Stock Exchange as its much vaunted state-centric growth model reaches a fork in the road. This led the Washington Post to ask the essential question: “Can political authoritarianism coexist with market freedom?”

Back at home we have plenty of political freedom, unless you are an enquiring journalist and wanted to accompany MPs on their Wednesday visit to Nkandla. In which case the old National Party playbook has proved useful for the current ANC police minister. Nathi Nhelko’s misuse of ‘security’ as an all- purpose smokescreen to block the media and hide unjustified enrichment is uncomfortably reminiscent of his NP predecessors.

Meanwhile, on the economic front, government this week announced that it would double down, in fact double up on BEE. New draft preferential preferment procurement regulations were published. Never mind the crying need for more infrastructure, fixing ESKOM and providing cost-effective services, the new proposals add a staggering 90% cost to certain tenders. That’s according to the number crunching on it provided by Western Cape Premier Helen Zille.

Her summary of the new rules: “More cronies getting more tenders, and charging the state almost double the market value.”

Many commentators here are drawing parallels between our ‘looming crisis’ and the busted economy of Greece. I think they’re wrong. Argentina, where I spent three years observing how the once seventh richest country in the world fell off the economic cliff through populist policies and corrupt practices, fits us better. It also provides a special case , or another face, of capitalism.

Outgoing president Cristina Fermandez de Kirchner’s economic model was aptly described as “capitalism for her friends and socialism for her enemies.”

Any self-respecting Argentinean would recognise that at play right now in South Africa.

This article first appeared in the Sunday Times

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