South Africa is on a path of destruction and is on its way to becoming an “unhappy country” like Zimbabwe and Venezuela.
This is the view of Efficient Group founder and chief economist Dawie Roodt, who was speaking at an event hosted by the Free Market Foundation.
Roodt said that while unhappy countries – where their economies are destroyed – are not all the same, there is a similar pattern on how the economic destruction takes place.
- Destroy the existing capital in the country.
- Frighten the taxpayers by continuing to increase taxes.
- Scare savers by targeting their money.
- The country tries to inflate itself out of debt.
Roodt said the destruction of a country’s economy always ends the same, with high levels of inflation.
Destroy existing capital
Roodt said the first step to destroying a country’s economy is when politicians start to destroy existing capital.
He said Eskom is a good example, where a well-functioning and valuable company was gutted by political meddling and mismanagement.
The reason for this capital destruction is simple – politicians want money to execute their ideologies and for self-enrichment.
Instead of using money on infrastructure and maintenance (in the case of Eskom), they spend it on non-essential things which destroy companies and capital.
The next step is to frighten the taxpayers in a country, which is done through ever-increasing tax rates.
This is already happening in South Africa, with tax rates hitting an all-time high as the country is struggling with a large fiscal deficit.
Roodt explained that even when the government increases taxes further, they will not increase tax collection much, as the taxpayers are already overburdened.
The penultimate step in destroying a country’s economy is where savers are getting scared that the government will hurt their savings.
Roodt said this is happening in South Africa with the ANC’s prescribed assets plans, which will give politicians control of pension funds and where this money is invested.
This means that financial institutions will be forced to invest a percentage of their assets in sectors or companies prescribed by the government.
Roodt said the end is always the same – the country has a huge mountain of debt without a simple solution.
“You cannot take money from taxpayers because you ran out of taxpayers, and you cannot take more money from savers either,” Roodt said.
“The only option which remains is to inflate yourself out of debt, because inflation reduces the value of money and hence the value of debt.”
This, Roodt said, is the reason why the ANC wants to get control over the SA Reserve Bank (SARB), because if you can control the SARB you can get rid of your debt.
He added that this will not happen within the next two to three years while SARB Governor Lesetja Kganyago is in charge.
However, with South Africa’s destructive government in power, Roodt said it is the inevitable end to what we are seeing today.
What South Africans should do
Roodt said there are four things which people who are staying in South Africa should focus on.
- Become successful
- Be profitable
- Put yourself first as an individual
- Pay as little tax as possible without breaking any laws
He added that people should assess their risk correctly, which includes taking money out of South Africa.