By Peter Bruce
The best thing about the big EFF march Julius Malema led through Johannesburg last week is that at least one opposition party has the economy at the centre of its politics.
The march stopped at the Chamber of Mines, the Johannesburg branch of the Reserve Bank and the JSE, each time with a list of demands to be acted upon in a month or they would be back to close the institutions down.
I’m a stakeholder capitalist. I think capitalism that includes people is safer than the Victorian model we have now. The exclusion of millions of people from the economy in this country is madness.
For capitalism to survive here, it has to be more inclusive. We must somehow democratise the way we create and spread wealth. Try as you might, there is no other way. And the good thing about the march, for me at least, is that the poor want in to the system, not to break it. How lucky can you get?
If Julius were sensible, he’d get a group of retired business leaders to help him craft a new economy both they and he could live with.
At the Reserve Bank, he presented 23 demands that would have made the officials there sweat. Some play to the gallery, some are naive, some are useful. But they have to be respected. I’ll do the JSE list next week but here’s the Reserve Bank’s homework, with brief comments from me:
1. Greater state intervention‚ ownership and control of the Reserve Bank given its strategic role in our economy. Private shareholders of the Reserve Bank should all concede their shares to the state without compensation. The state already controls the Reserve Bank, dictates policy and appoints its leadership. A small group of private shareholders has no clout at all.
2. Cut interest rates and abandon inflation targeting to incentivise more money into productive and manufacturing sectors to stimulate job creation rather than speculative sectors. Detail please. Which sectors would create sustainable jobs quickest? How do you control inflation, a curse for the poor? How do you avoid Venezuela’s annual rate of price increases (inflation) of more than 80%?
3. Together with the Treasury‚ help create a state bank with a direct relationship with the Reserve Bank, to finance rural development and industrialisation‚ mortgage and vehicle finance and financing of small and medium enterprises. A state bank is not a new idea nor a bad one. It would need to make profits.
4. With the department of agriculture and the Treasury‚ create an interest-free agricultural bank to subsidise small-scale agriculture and encourage millions of citizens into productive agriculture to guarantee food security. How would it make money? No bank lends money if it can’t get it back.
5. Recover immediately all monies and gold that was stolen before the 1994 elections and still gets stolen from the Reserve Bank in billions‚ even under the stewardship of the inclusively elected government‚ and bring all those responsible to justice. Erm, next?
6. Investigate all private banks on price collusion‚ particularly on bank charges‚ loans‚ vehicle and mortgage finance and loans. Not a bad idea. There’s not much competition in banking. The regulator worries more about the financial strength of the banks. He has to.
7. Instruct private banks to stop imposing bank charges on all recipients of government grants‚ inclusive of child support‚ foster care‚ disability‚ and old-age grants. Surely the banks could do more here?
8. Instruct private banks to offer free banking services to all workers who earn less than R4 500 per month. No one on a minimum wage should pay bank charges.
9. All banks should remove interest on loans for education. In an economy our size, education for the poor should be free. A competent state would be able to ensure all education for the poor is free.
10. All banks and insurance companies should stop using labour brokers. OK. But lower profits mean lower tax revenues.
11. All blacklisted citizens should be removed from the credit bureaux and allowed to live their lives without dark clouds. First-time blacklisted, yes. Repeats, no.
12. Banks should support entrepreneurship without insisting on collateral; most black entrants into the economy do not have collateral‚ but great ideas and innovations. Right on collateral but why so quiet about iniquitous forms of traditional land allocation?
13. With the Treasury and SARS‚ the Reserve Bank must immediately end transfer mispricing and profit shifting. Agreed. Profits earned in SA should generate tax in SA.
14. Make public all cross-border transactions where money moves from SA abroad, in particular jurisdictions of low tax rates, reported to the Reserve Bank by all banks. Already happening. Privacy is a right. Illegal transfers must be prosecuted, not negotiated.
15. With SARS‚ the Financial Intelligence Centre and Treasury, start forensic investigation into aggressive tax avoidance‚ which is illegal, by multinationals to recover monies shifted to tax havens. Avoidance is legal. You mean evasion, which is already criminal.
16. With SARS and Treasury introduce regulations and laws to outlaw all forms of tax avoidance and profit shifting in and from SA. See above. Among the worst tax base eroders are parastatals that use expensive foreign consultants.
17. Immediate end to free trade agenda for massive protection of industries and fight for a different framework for regulating trade internationally; one based on fairness‚ equity and solidarity. In reverse. If you want an exporting siege economy, get a new global framework first. Current world trade talks still on after 20 years.
18. Urgent action and programmes to research dual currency. The apartheid financial rand/ commercial rand didn’t work. Arbitrage always finds true value.
19. Reintroduce capital controls on all money leaving the country legally or illegally‚ to make it difficult for finance capitalists to expatriate capital without consequences. Capital controls already exist. The Treasury turns the tap.
20. The Reserve Bank (must) closely monitor professional services companies that offer auditing and accounting services to multinational companies in SA. OK.
21. The Reserve Bank, with Treasury, to introduce reforms to radically transform the insurance industry so its control and ownership is reflective of all South Africans. Just insurance?
22. Reserve Bank and Treasury to establish a state-owned insurance scheme to secure cars, houses and other property without high premiums imposed by private insurance companies. Low premiums mean low salaries, weak balance sheet; trouble raising funds.
23. An end to insurance companies imposing health (HIV) tests as a prerequisite to granting insurance. They would simply increase premiums for everyone.
If the Post Office were run by competent people, a Post Bank might help here. And while Julius may be scary, he reminds us of what we face if we fail. He should consider tabling a detailed budget early in February next year.