IMO well over R5 trillion has been squandered since 1994 — plus, South Africa has also lost out on growth of at least R5 Trillion. Traditional corruption — theft in other words — is the tip of the iceberg. Underneath, there is a vast cesspool of systemic maleficence — made up of millions of crooked dealings, blatant criminality and gross ineptitude. South Africa’s economy is severely hamstrung by this burgeoning maleficence — it is substantial and persistent.
Systemic corruption, criminality and extortion
Unchecked, low-key corruption and (petty) crime generally morphs into systemic corruption, criminality, mafia-styled extortion rackets and kidnapping — welcome to South Africa in 2022! Systemic corruption and criminality have beset South African society for decades. Disturbingly, extortion and kidnapping are escalating rapidly as the ability of the state diminishes. This adds a whole new dimension to living and doing business in South Africa — we are now certainly a failed state!
Due to unprecedented loadshedding, the scale of corruption, sabotage, theft, etc. that is occurring at Eskom, has been revealed to the public. It is horrendous; yes; yet it is what businesses in South Africa face as well. So, even though they are legislatively constrained, private security forces are replacing the duties of the Police at a very high cost to individuals, business and state enterprises. And, therefore, billions are being lost every day due to loadshedding, crime (theft), extortion, corruption …
Policy errors, unproductive spending and malinvestment
Policy errors such as multiple layers of idiotic red tape that enforces prescribed actions (rules), suck the life out of the economy. Enough said! The multi-billion Rand bridge to nowhere scenario is the mascot of malinvestment. However, it is the many small malinvestments that destroy the fabric of society. For example, scarce capital is spent on a stadium named after a ‘struggle hero’ rather than upgrading the water purification system is what South Africa is typically plagued by.
Billions are misallocated by municipalities, parastatals and government departments in this seemingly benign way every year. However, these billions end up as trillions when you add them all up. Of course, after decades of poor maintenance and infrastructure investment we have a BIG problem. So now, on top of the ongoing wastage of public funds, malinvestment in the trillions of Rand is in the pipeline — they are getting ready for deployment right now!
The outcome of unproductive spending is sometimes malinvestment but not always so. Advertising campaigns that cost a fortune relative to their societal benefit are a good example of unproductive spending. If the same money was used to build a school for example, then it would be a productive investment. However, if the school is built in a place with no children then it is malinvestment. The other forms of unproductive spending are covered elsewhere in this article.
Over-employment and general incompetence
Eskom is probably the best example of over-employment and general incompetence. An inflated wage bill — having too many staff for the job and / or staff being overpaid for their qualifications or task — quickly destroys the viability of any business. The same should be true for parastatals or public entities. However, public entities are monopolies that are able to force their inflated wage bills onto the people. When one adds general incompetence, one has a recipe for disaster. South Africa!
The cost of this ‘high-prices-for-bad-service’ curse is playing out in the dysfunction that we face every day. This is true for municipal rates, Eskom fees, licence fees, etc. and for the multitude of taxes that support droves of overzealous government bureaucrats and their minions — haphazardly imposing superfluous legislation on society. B-BBEE is a good example of this superfluous legislation. Why? In 28 years the economy has decreased in size and inequality is growing by the day!
The only reason why this inequality isn’t worse is that the government overpays its ballooning staff component. National Government salaries and debt devour over 80% of all tax revenue — less than 20% is available to pay for social grants, education, healthcare and infrastructure development. This figure does not include the portion of municipal salaries that are paid for by municipal rates or the salaries funded by fees. Therefore, billions are wasted on staff that are effectively shuffling paper!
Low expenditure on maintenance and poor workmanship
When an entity — be it government, parastatal or private — spends more on staff than it does on maintenance (materials and parts), then temporary band-aid solutions become the norm. Slowly but surely the entity’s infrastructure begins to fail more and more often until it collapses. This is what has happened to most of South Africa’s infrastructure. Many government entities have well paid staff idled by lack of fuel, tools, machinery, etc. Billions are being wasted this way every day …
This also has dire consequences for the economy. Businesses find it difficult to function efficiently when infrastructure is dysfunctional. The business community has been maintaining much of the public infrastructure at their own cost — this has been happening at an unprecedented rate of late. This is effectively taxation in a different form. Notably, revenue that is lost because of loadshedding, breakages due to potholed roads, strikes, riots, rail-dysfunction, etc. is an astronomical amount.
High salaries and price gouging by suppliers
The public sector Is renowned for overpaying for products and services — most are overpriced by using exorbitant mark-up rates — mark-ups from over 100% to well over 1000% are commonplace! The proceeds of this ‘quasi-legal-theft’ are often spent on imported luxury goods and cars — which means that all this money leaves South Africa permanently! The double blow of this maleficence is unacceptable and accounts for a major portion of the R10 Trillion that the economy has lost.
With salaries that are significantly higher than the private sector, the public sector’s wage bill is draining a disproportional sum from the fiscus — around 60%. A problematic knock-on effect of bloated salaries in the public sector, and B-BBEE legislation, is very high salaries for qualified black staff, and the exclusion of white staff from getting promoted. And, B-BBEE rules are getting stricter! This is a major viability risk for companies. Building a more robust economy is the best way to attain equality!
Conclusion
In conclusion, I hope that it is easy for you to see how R10 Trillion could have been squandered in 28 years — mostly through wastage, corruption, crime, lost opportunities, etc. With average wastage / loss of R1 Billion per day we easily get to R10 Trillion! Stage 6 load shedding costs South Africa over R4 billion a day! Transnet’s woes have cost South Africa R50bn in lost exports of bulk commodities like coal and iron ore so far in 2022, Roger Baxter ~ 05 Oct 2022. And many many more …
The expenditure on salaries by the government (national and municipalities) and the public enterprises (Eskom et al) would have be cut by over R2 Billion a day to reach parity with local business and global averages. For example; with a wage bill of around R30 Billion per year, Eskom’s average employee costs R735,000! According to analysts, Eskom is overstaffed by around 60%. Furthermore, a significant percentage of Eskom’s R150 billion revenue is lost to crime and corruption.
All the agricultural land owned by whites in South Africa, around 65 million hectares, could be purchased for less than R2 trillion … For 10 trillion South Africa could have purchased all the ag land and most of JSE shares owned by SA whites. WTF — I know!!! The de-development of South Africa will in the end, result in less jobs and less money. The only way to rebuild South Africa is the polar opposite to what we are currently doing. If we carry on on this destructive track, complete collapse awaits us.
SOLUTION: Firstly, the only way out of this unsustainable quagmire is for civil society to make their voice heard through organisations and local forums. Secondly, civil society can reclaim and rebuild their neighbourhoods using the collective strengths of local volunteers. If we develop a culture of volunteerism (for labour), and with the support of willing donors (for materials), then we will be able to rebuild a more prosperous South Africa and a more equal society. This is the #Volunteer4SA model.
