Peter Bruce recently pointed to something in the Stellenbosch water of the late 1960s and ’70s that produced so many rand billionaires (“That Stellies route to billions is gone — and it’s undesirable”, July 27).
They would not have been inspired by some professor of economics enthusiastic about the power of free markets telling them to do good for the nation by getting rich. They are far more likely to have been told the opposite: markets will not work nearly well enough and any faith in entrepreneurial flair would be entirely misplaced.
I have yet to meet a Stellenbosch economist who believes an economy is best left guided by the forces of competition. And one can perhaps understand why. Interventionist economic policies were adopted in SA long before 1994, and they clearly helped transform the economic and educational status of the Afrikaner nation in a generation, both absolutely and comparatively.
They might have done even better with freer markets, but this would not have been self-evident. By every measure, the Afrikaner on average lagged well behind the standards enjoyed by the average English speaker in the 1930s. By the ’60s they had caught up, even as the average incomes of both communities improved significantly.
Many of the best and brightest Maties sought their futures working for the state and its agencies. The case for ownership by the state of some of the commanding heights of the economy — steel, electricity, railways and ports — was taken as a given and not contended. But they were not, with few exceptions, seen as the path to private riches through corrupted procurement and biased tenders, to which state-owned enterprises are so conspicuously vulnerable. Nationalism and a strong sense of community may have had something to do with this restraint.
Perhaps with Johann Rupert a fellow student, the example of the ineffable Anton Rupert was the inspiration. He who went door to door selling shares in his fledgling enterprise, which was to take down a powerful near monopoly of the cigarette market in SA.
The billions of the Stellenbosch cohort, like those of the Ruperts, were made in a conventional way. Competing successfully with established businesses for their customers and executing better, combined with intelligent financial engineering, is always the leveraged and risky path to great wealth.
Taking the opportunity provided by contestable markets is characteristic of successful, dynamic economies. So Bruce is quite wrong to assert that the “Stellies route to billions is gone — and it’s undesirable. Apartheid-era billionaires can’t be reproduced in today’s democratic conditions.”
It is both possible and highly desirable for the SA economy to produce a few more billionaires in a similarly old-fashioned way — by taking on established interests, winning market share and reviving businesses that have lost their way and are now valued at far below what can be regarded as their replacement cost.
It seems to me the opportunity to acquire great wealth in rand and dollars is as open, perhaps more open than it has ever been given current market pessimism, with the help of value-adding, better-designed financial structures and appropriate incentives for managers based on what really matters: return on all capital employed.
The aspirant billionaire will not have to rob the taxpayer to get rich, though it is still unfortunately the most obvious route. More than a few future billionaires are in fact hard at work proving my point, which Bruce may not have noticed from his rural retreat.
Admittedly, R1bn today is a far lower target than it was in the ’60s and ’70s, about a third of that after inflation. To compare purchasing power in dollars you might do as the IMF does — divide billions of rand by seven, not 19, to convert SA GDP into purchasing power dollar equivalents.
If the rand had just compensated for differences in SA and US inflation since 2000 a dollar would cost about R13.50 and R1bn would buy the equivalent of $74m — more than nickels and dimes.
• Kantor is head of the research institute at Investec Wealth & Investment. He writes in his personal capacity.
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