Republic of South Africa

American Journal of Economics and Sociology, The, Dec, 2000 by Godfrey R. A. Dunkley

Over the last decade in South Africa, most cities and towns have been invaded by squatters and hawkers, not only from the former homelands but from other African nations. With them has come crowding crime, and filth. People of even modest affluence no longer venture into many of the former central business districts, and most offices and better shops have moved to the suburbs. Downtown Johannesburg, once the pride of the entire continent, has become a slum; even high-class international hotels there have closed down, and vast office towers now stand virtually empty except for their basements and rooftops where squatters have set up housekeeping. This situation is, of course, in no sense attributable to site-value rating, which accounted in large measure for the city's erstwhile affluence, but rather to a well-meaning but foolish decision by a former municipal administration regarding parking spaces, and the fact that the cruel rigidity of apartheid has now given way to an official culture of permissiveness t hat protects criminals at the expense of law-abiding citizens, both black and white. It is evident that the national government has major problems to solve, and that this will not be accomplished unless good intentions are accompanied by both insight and firmness.

IV

Conclusion

THE WHOLE SITUATION is in the melting pot, with relatively few knowledgeable and dedicated advocates of site-value rating and Fewer all-out Georgists resident in the country. The system has amply demonstrated its worth in practice, but (as in so many instances) few of its beneficiaries understand or are even aware of it. Flowever, contact has been established with a number of key officials. The near future could give rise to very interesting developments.

In can be shown that, in the absence of a land tax, the present taxes continue to contribute to unemployment and mass migration to squatter camps. Value added tax can be shown to be a tax on labor which has to be met by additional wages, a cost to the employer. At each level of production, from primary industry to finished product and marketing, approximately half the value added is due to labor. So all materials and services purchased have many layers of labor included in their cost and each layer of labor has its cost increased by 14 percent value added tax (RSA 2000). In effect, the value added tax imposes a tax of approximately 87.5 percent of 14 percent after three levels of production or 12.25 percent on all material and services input. This is in addition to the 14 percent on labor at that stage of production. This is enough to put most semi-marginal industries and a large number of farms out of business.

Further estimates show that the rental value of land in the Republic in 1986 was of the order of 64 percent of the 1986-87 national budget. [7] As all taxes eventually come out of rent, the economic rental value is what is left after the existent taxes have been extracted from the economy. If the sum of all existing taxes at a particular point in time is added to the total annual rent of a nation at that same point in time, the final quantity or sum would give a fair indication of the total rent that would be available within that nation without those taxes. For South Africa, the 1986-87 figure would have been 164 percent of the budget. If 70 percent of this total economic rent were collected by the government in lieu of other taxes, the figure would exceed the budget of that period. (164 x 70% = 114.8% of budget.)