Govt should create enabling environment for business

ISAAC PINIELO
Correspondent | Tuesday November 23, 2010 00:00

She was the guest speaker at the BOCCIM Northern Annual Gala Dinner that was held at Adansonia Hotel on Saturday evening under the theme, 'Government Expectation From The Private Sector, If The Country's Revenue Continues To Erode'.

Molotlegi indicated that generally, around the world, expectations from the general population is that governments will provide basic services, adding that in order to do this it is necessary for government to leverage taxes from private sector and citizens who are economically active in order to provide these services.

'Governments in developing countries face the dilemma that large portions of the population are economically active, and the portion of private citizens that are economically active and pay taxes are generally disproportionate to the number of citizens that require financial support by means of social grants, or pensions,' said the queen mother.

She went further to state that globally, first world countries have developed different systems to support tax collection, employment and unemployment, health care systems necessary to cope with an aging population and standards of living. According to Queen Molotlegi, many political parties internationally have risen and fallen over the past century when their systems couldn't stand the test of time. She noted that systems such as health care, the dole, and national pensions, while successful in many instances, also have their own challenges.

She also mentioned that recently the global economic meltdown exposed many systems of wealth creation to be 'bubbles that popped when exponential continued growth exploded and home ownership schemes were based on unsound economic principles.'

She said with all the good intentions in the world, lending money to people who did not have financial ability or track record to repay the mortgages exposed the investors to incredible risk and loss of financial wealth.

'The people of the world looked on in amazement as governments and countries, previously recognised as icons in the world as stable and economically sound, had to bail out banks and many companies in the private sector that were looked upon as models of success and economic strength, one after the other, filed for bankruptcy,' pointed out Molotlegi. She further noted that the economy of the world is currently fragile as many countries around the world face growing unemployment, increased taxes, and anger, particularly from the youth that expect more from government and the private sector.

She said her country, South Africa, escaped a catastrophe, largely due to government's foresight in bringing in the National Credit Act, which she said put the onus on businesses lending money to ensure that the people or organisations they were lending to would be able to repay the debt.

'A penalty system was put in place for risky behaviour and lending on credit without taking the necessary precautions to ensure repayment. South African banks came off much better than their counterparts internationally that did not have this system in place,' she enthused.

Molotlegi emphasised that First World countries face an increasingly aging population and a reducing younger population. This means that, she explained, the burden of health care systems and pension funds is increasingly burdening the younger generations. She said in some countries in Europe there is a negative population growth rate as young couples chose their careers over having children, or reduce the number of children to one or two.

'This is the opposite to developing and emerging countries where the population explosion creates more and more young people, and opportunistic diseases such as resistant tuberculosis, HIV/Aids and many others are reducing the economically active population and often leaving behind orphans and vulnerable children, with grandparents often picking up the parenting role, and having to maintain an extended family on old age pensions and child and social grants,' she said.