Private Sector Is No Panacea in South Africa
The government should take the lead and not expect the market to provide critical public services
John Pampallis, The New Age
Johannesburg, 30 October 2015
With the financial pressures on the government arising from the recent student protests against fee hikes, calls for the private sector to contribute to higher education have become too common.
It`;s unclear what people mean by this. In many cases though, the implication is that private companies should take action by making donations to universities or to student fees in the form of bursaries, scholarships and so on.
I believe that this is an inherently muddle-headed approach.
Private companies are in the business of making profits and, in most cases, are in intense competition with one another. Many businesses do give money for bursaries and scholarships and even for university infrastructure as well as other social causes. Such donations are normally for the purpose of improving the company's image and are really a form of marketing.
This is suggested by the way that companies boast about their corporate social investment programmes. Another reason for granting scholarships is to provide companies with skilled workers in the future. In other words businesses are not, in general, donating money out of the goodness of their hearts but to further their commercial aims.
This is not surprising. In a capitalist system, companies are established in order to contribute to the wealth of their shareholders and this is what they strive to do.
Donations that don`;t further a business`;s aims weaken its competitiveness against other businesses that do not donate. The only way that companies can contribute equitably towards the welfare of the country is through taxation.
One of the main purposes of the government is to redistribute wealth in order to promote social justice and maintain social stability. Why should it beg for money from the private sector? And why should ordinary people have to rely on charity for basic needs like education or other essential services like health, social welfare, better infrastructure or basic recreational facilities in underprivileged areas?
The government should govern courageously. It has the power to tax and to use those taxes to provide the services that the people expect it to. This is what most of its voters elected it to do and what the liberation movement was largely about.
If poverty remains a reality in the lives of most people, the government will continue to be under pressure. Today it is the students - tomorrow perhaps the workers, the rural poor, the unemployed, communities, small business and so on.
To expect the market to take care of social services is not only unrealistic but also betrays an unwillingness (or a lack of determination) on the part of the government to actually confront big business and the wealthy.
As Higher Education Minister Blade Nzimande has said, there is enough money in the country but it is in the private sector.
Private sector commentators have conceded that corporations are sitting on large piles of money that they are unwilling to invest.
One of the government`;s most important jobs is to transfer resources from where they are (that is in the pockets of the corporations and the rich) to where they are needed most urgently.
The governments of many of the richest countries have retreated from the idea of a welfare state and many of them have spent the last two decades cutting back on social welfare benefits.
However, we should remember that most of these countries - when faced with social instability and mass poverty during the Great Depression and after the Second World War - followed the route of taxing the wealthy to provide benefits to the poor.
As a result, inequality was reduced markedly, internal markets grew and economies began to prosper. Taxes on the affluent in South Africa today are paltry in comparison with those in west European countries in the heyday of the welfare state.
And yet inequality, poverty and unemployment in South Africa today are on a par with those in the US and many European countries during the Great Depression.
In the longer term, the redistribution of resources is also beneficial to business. It creates a more humane society, promotes social stability and allows the country to compete better internationally through developing a more educated workforce.
For ordinary people - the poor, the working and the middle classes - social spending forms part of a social wage, something that raises the living standards of all irrespective of their own individual earnings.
In South Africa, many have emphasised the need for the government to cut wastage and root out corruption. In this they are, of course, correct. Less wastage and corruption in both the public and private sectors could help to fund education and other social services and the government should crack down vigorously.
The Treasury and the auditor-general have put government departments under pressure to cut wasteful expenditure.
Anti-corruption measures have been adopted although they are not at all aggressively implemented. Both the government and business should also fight private sector corruption more determinedly.
Much public sector corruption takes place through public servants colluding with private business. Clamping down on tax evasion and price collusion could also provide the state with additional resources.
Nonetheless, it is unrealistic to expect corruption to disappear overnight and the struggle against it will not be an overnight process. It needs to be accompanied by measures to increase state revenues through taxation.
This does not mean that the government must use a sledgehammer in its approach to taxation or to weaken business in the process. In fact it ought to consult with all major institutions in the country, including business, in finding the resources to fight inequality, unemployment and poverty and to provide essential social services to all. This is, after all, in the interests of everyone.
As the debate around funding higher education grows, financial sector commentators will no doubt warn of the disastrous consequences of increasing taxes on the rich and the corporate sector. However, the consequences of not doing something radical to alleviate the plight of the poor, to provide education and training as well as healthcare, transport and housing for everybody will be far worse.
The government should remember its mandate and lead with resolution and purpose.
John Pampallis is chairperson of the board of the Mzala Nxumalo Centre for the Study of South African Society
From: http://tnaepaper.co.za/
John Pampallis, The New Age
Johannesburg, 30 October 2015
With the financial pressures on the government arising from the recent student protests against fee hikes, calls for the private sector to contribute to higher education have become too common.
It`;s unclear what people mean by this. In many cases though, the implication is that private companies should take action by making donations to universities or to student fees in the form of bursaries, scholarships and so on.
I believe that this is an inherently muddle-headed approach.
Private companies are in the business of making profits and, in most cases, are in intense competition with one another. Many businesses do give money for bursaries and scholarships and even for university infrastructure as well as other social causes. Such donations are normally for the purpose of improving the company's image and are really a form of marketing.
This is suggested by the way that companies boast about their corporate social investment programmes. Another reason for granting scholarships is to provide companies with skilled workers in the future. In other words businesses are not, in general, donating money out of the goodness of their hearts but to further their commercial aims.
This is not surprising. In a capitalist system, companies are established in order to contribute to the wealth of their shareholders and this is what they strive to do.
Donations that don`;t further a business`;s aims weaken its competitiveness against other businesses that do not donate. The only way that companies can contribute equitably towards the welfare of the country is through taxation.
One of the main purposes of the government is to redistribute wealth in order to promote social justice and maintain social stability. Why should it beg for money from the private sector? And why should ordinary people have to rely on charity for basic needs like education or other essential services like health, social welfare, better infrastructure or basic recreational facilities in underprivileged areas?
The government should govern courageously. It has the power to tax and to use those taxes to provide the services that the people expect it to. This is what most of its voters elected it to do and what the liberation movement was largely about.
If poverty remains a reality in the lives of most people, the government will continue to be under pressure. Today it is the students - tomorrow perhaps the workers, the rural poor, the unemployed, communities, small business and so on.
To expect the market to take care of social services is not only unrealistic but also betrays an unwillingness (or a lack of determination) on the part of the government to actually confront big business and the wealthy.
As Higher Education Minister Blade Nzimande has said, there is enough money in the country but it is in the private sector.
Private sector commentators have conceded that corporations are sitting on large piles of money that they are unwilling to invest.
One of the government`;s most important jobs is to transfer resources from where they are (that is in the pockets of the corporations and the rich) to where they are needed most urgently.
The governments of many of the richest countries have retreated from the idea of a welfare state and many of them have spent the last two decades cutting back on social welfare benefits.
However, we should remember that most of these countries - when faced with social instability and mass poverty during the Great Depression and after the Second World War - followed the route of taxing the wealthy to provide benefits to the poor.
As a result, inequality was reduced markedly, internal markets grew and economies began to prosper. Taxes on the affluent in South Africa today are paltry in comparison with those in west European countries in the heyday of the welfare state.
And yet inequality, poverty and unemployment in South Africa today are on a par with those in the US and many European countries during the Great Depression.
In the longer term, the redistribution of resources is also beneficial to business. It creates a more humane society, promotes social stability and allows the country to compete better internationally through developing a more educated workforce.
For ordinary people - the poor, the working and the middle classes - social spending forms part of a social wage, something that raises the living standards of all irrespective of their own individual earnings.
In South Africa, many have emphasised the need for the government to cut wastage and root out corruption. In this they are, of course, correct. Less wastage and corruption in both the public and private sectors could help to fund education and other social services and the government should crack down vigorously.
The Treasury and the auditor-general have put government departments under pressure to cut wasteful expenditure.
Anti-corruption measures have been adopted although they are not at all aggressively implemented. Both the government and business should also fight private sector corruption more determinedly.
Much public sector corruption takes place through public servants colluding with private business. Clamping down on tax evasion and price collusion could also provide the state with additional resources.
Nonetheless, it is unrealistic to expect corruption to disappear overnight and the struggle against it will not be an overnight process. It needs to be accompanied by measures to increase state revenues through taxation.
This does not mean that the government must use a sledgehammer in its approach to taxation or to weaken business in the process. In fact it ought to consult with all major institutions in the country, including business, in finding the resources to fight inequality, unemployment and poverty and to provide essential social services to all. This is, after all, in the interests of everyone.
As the debate around funding higher education grows, financial sector commentators will no doubt warn of the disastrous consequences of increasing taxes on the rich and the corporate sector. However, the consequences of not doing something radical to alleviate the plight of the poor, to provide education and training as well as healthcare, transport and housing for everybody will be far worse.
The government should remember its mandate and lead with resolution and purpose.
John Pampallis is chairperson of the board of the Mzala Nxumalo Centre for the Study of South African Society
From: http://tnaepaper.co.za/
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