SUBMISSION BY PETER MEAKIN: SACPRIF

BUDGET VOTE 16:Written Submissions on Budget Review 2008/9.

1 March 2008

The problem with the Budget is that the taxes which Mr Manuel raises is destructive of jobs and makes land simply unaffordable. The poor therefore have to crowd into the cities for a few social-welfare crumbs. If they each had a hectare of two they could, through their own efforts on small-holdings, live the life of millionaires in a few years. Here is an article on the Manuel Budget:

Mr Manuel Has No Clothes [1250 words] () Peter Meakin Registered Professional Valuer

There once lived a medieval emperor who was tricked into attending a parade wearing a new suit

The emperor clearly could not acknowledge his state of dress for fear of revealing his incompetence

Eventually a child proclaimed that the emperor had no clothes. The moral of this fable was "Listed

Reading between the lines of Minister Manuel's budget speech one begins to understand why many

This is the man who oversees the key task of appropriating people's earnings, savings, and VAT to run the country. Under his watch "improving the quality of life of all citizens and freeing the potential of each person" as the Preamble to the Constitution promises has simply not happened.

What other conclusion can be drawn from the fact that 12.5M South Africans [one quarter of the population] are now poor, unemployed, or in need. They consume R67Bn in welfare grants or 22% of the total budget!

What this clearly says is that South Africa is not the place to be if one wants to work for a living. So we can reasonably ask what is the matter. Where did Mr Manuel go wrong?

Are there too many people? No there is 98M hectares of agricultural land in South Africa or 12. 5Ha for each family if it were divided up equally. 1.8Ha is arable and about as much as anyone can farm alone as a small holding. The balance of 10.8Ha is pasture, some dry land.

Is the land then too expensive for the poor to buy? Yes the average market price of an urban stand is now R395 000 according to ABSA and that is less than it will cost to buy a small holding in the open market.

What about State land? It is said that one quarter of South Africa's agricultural land belongs to the State. Each of the 3M households which receive welfare handouts could therefore be allocated enough land to make a decent living for themselves if arrangements are made.

But do the poor know how to work land? Well it does not take long to learn how to plant, sayan orange tree. A quarter of a hectare [2 500sqm or half a rugby pitch] will yield R30 000pa from two hundred trees according to Sam Motsuenyane. This former SA diplomat founded the Winterveldt Citrus Project in the North West in 2002.

Small holders can grow or raise all they need to eat on less than a hectare using simple tools. If they spend their spare time building a decent house and adding stables and barns then they should have an estate worth R1 m after five years. This photo is of a typically spacious 19th century house in the South West of France. It was built by a peasant with help from the village artisan and his neighbours.

In the Basque country everyone lives a visibly decent village life with schools and clinics close by.

In an African context the question is who is better off if one member of a family lives in a traditional house on the Transkei coast and lives off wild oysters, crayfish, mushrooms and home made beer with a field of mealies to tend and a few chickens, goats and cows to nurture or a brother who lives in Delft under a plastic sheet with no land and no job?

But is not subsistence farming frowned upon? Yes Mr Manuel reviles it. In a speech to MPs after the budget he said that one can't just inherit land and then farm, "it needs some support, some approach,

failing which you just bankrupt everybody in the process and the security of food supply has to be carefully considered. "

This is ill considered. What he is suggesting here, firstly, is that South Africans are generally stupid when it was Africans who invented the small holding when they got tired of hunting and gathering. The latter has now become an urban pastime in our cities because there is nothing else to do but to beg, borrow or steal if one is jobless and landless.

Secondly he thinks that if he made vacant State land available in small parcels then we would become like Zimbabwe. That is a connection which ignores the fact that wealth results from the labour of men and women on land. It is more likely that he will bankrupt everybody by denying them land.

Worse still he is making people dependent on handouts. Fifteen year olds are now getting a child grant. It won't be long before twenty five year olds need support if men and women are continually denied access to natures bounty.

But do not people really want jobs in the cities? If that were the case then Manuel has not heard about it because he continues taxing the work, profit, interest and VAT of South Africans. All these conventional taxes destroy jobs. In the USA it is calculated that these "dead weight" taxes reduce the annual GDP by 14% pa.

Manuel knows this well because he boasts that his miniscule reduction in company taxes from 29% to 28% "will reduce the cost of capital and boost economic output and job creation."

If this truth was taken to its logical conclusion it would mean an and to all corporate taxes in order to

significantly boost job creation. If he were to gradually phase out other taxes then even more jobs in the cities would result.

Where would he then find the R655Bn budget? To answer that requires the wisdom of Aesop "In time of dire need, clever thinking is key." The traditional way to relieve taxpayers of the burden of taxes on their work, savings and trade and to create even more jobs is to nationalise unimproved land rents, not land, and to simultaneously privatise all other tax receipts. This simply means that South Africans will start to pay taxes in accordance with the benefits that their lands enjoy not how hard they work or save.

These land rents arise from location, fertility, weather, infrastructure and services. If they are appropriated by the State then raw, vacant land looses its capital value. This makes land even more affordable.

But what about property owners? Ironically people with improved land and other assets such as shares and bonds will see a sharp increase in the value of their holdings as the price earnings ratio of all South African assets react to the good news of solutions to the land question and the dead weight taxes. Vacant land owners will only benefit from the new investment climate when they improve their properties.

South Africans will also have to be weaned off their hand outs and subsidies but as Aesop says "In the end everyone is more or less master of his own fate." This anyway is what citizens of Hong Kong, Singapore, Taiwan and Japan found when their fiscal and tenure systems were reformed. They became prosperous beyond belief. South Africans will too particularly the innocent children.

We are willing to answer questions and to meet with your committee.

Trustees

Brian Amery, Peter Meakin SACPRIF