An Insight last month argued that Euro-South African trade and investment relations had hit a nadir when senior European Trade Commissioner Karel du Gucht criticised South Africa's trade policy at the annual Euro-South African Trade & Investment Summit. What specifically sparked the EU's anger was Pretoria’s decision to unilaterally scrap 26 bilateral investment treaties with European companies, so doing away with major assurances to foreign investors in South Africa. De Gucht went on to warn that "European investors were watching South Africa closely".

We said this represented the low point in Euro-South African investment relations. But little did we know that shortly afterwards those relations would fall even further with motor giant BMW deciding to cancel long-term expansion plans in South Africa. It gave the very understandable reason that the losses it suffered due to strike action were simply not bearable - given the size of the losses and the fact that strikes are now part of the South African industrial DNA.

We don't believe either reason - the unilateral cancellation of the bilateral treaties or the strike-caused losses - are sufficient explanations of the EU's attitude or BMW's action. Neither do these reasons account for the fact announced last week that dividend growth in South Africa's equity markets has overtaken earnings growth for the first time in 30 years - the implication clearly being the equivalent of “an investment strike” as companies remain reluctant to further invest in local enterprises.

While no doubt strikes, policy confusion, government cold feet on the NDP, corruption, indifference and incompetence are all contributing factors, in our view there is also an ideological element which is being driven by people with a clear agenda. One public analyst speaks of the "Zanufication" of South Africa. But to see what's happening let's go back to that crazy bit of legislation – The Licensing of Business Bill - which is still on Minister Rob Davies’ legislative schedule.

For the benefit of our international readers we should explain that the bill requires the licensing of every business – yes, every business - in South Africa by the municipality in which it is based. The size and nature of the business does not matter, and the licensing process will obviously involve a massive increase in bureaucracy. Free Market CEO Leon Louw in Business Day describes the consequences:  “Nothing, absolutely nothing, will escape the clutches of the bureaucracy which the bill will require. The country will be deluged by wall-to-wall apartheid-style bureaucrats, who will control everyone who supplies anything --from the little old lady selling corncobs under a tree, to foreign multinationals, from subsistence farmers with their donkey carts, to escort agencies, from part-time ballet teachers, to alternative theatre."

Some idea of this legislation's sweeping authority is expressed in section 42, which provides that "Every municipality will be empowered (in consultation with the Minister of Trade and Industry, the Minister of Local Government, and the relevant member of the Executive Council) " to make by-laws regarding licensing of businesses in any substantive or procedural matters connected there with".  In other words, any number of onerous requirements could be added under the authority of this blanket provision and the justification for this bill.

What is the DTI’s rationale for this legislation?  “The Licensing of Businesses is intended to promote the right to freedom of trade, occupation and profession".  It is also supposed to "encourage a conducive environment that promotes compliance and sustainability of businesses”. These might be the intentions behind the bill, but in practice the proposed measure is sure to have the opposite effects - a point publicly made by at least a dozen commentators and editorial writers.

Aside from the purely practical aspects (the fact that many municipalities are notoriously inefficient and incompetent), this added red tape inhibits the emergence of small business and entrepreneurship --growth areas where South Africa already lags other similar countries - and restricts informal business, a major source of employment

The DTI also claims that it is important for each municipality to “know who is conducting business within its area of jurisdiction, so that it can curb the illegal ones that often sell dangerous and hazardous or counterfeit goods ".  As the Institute points out the selling of dangerous or counterfeit goods is already prohibited by other laws.  In addition, it remains uncertain what benefit, if any, municipalities will in fact derive by demanding details of local business operations in the way the bill requires.

The reasons offered for this bill simply do not add up. The costs in terms of red tape and increased bureaucracy to business and the cursory rationale, only become intelligible if an ideological element is injected,, namely the determination on the part of the state to control all business in this country.

Bearing out this interpretation of the legislation are policy decisions and developments in other areas. Here the Government's decision to terminate all bilateral investment treaties (BITs) is a case in point. The South Africa government, one has to assume, because it doesn't want its power to expropriate limited in any way, has chosen autarky in preference to encouraging international economic involvement.

Outside of the BITs issue, four examples of the trend of concentrated control are firstly the Government’s rescinding of TELKOM 's decision to sell 20% of the companies’ equity to South Korea's KT Corp - a company which played a pivotal role in providing the necessary ICT backbone for South Korea to become one of the eight richest economies in the world. We accept that Government did this because the involvement of the South Koreans would complicate Telkom’s nationalisation. Very similar sentiments apply to the Government's approach to financially struggling South African Airways. British Airways and Lufthansa were both in serious financial trouble, but their governments decided to privatise them -- BA in the mid - 1980s and Lufthansa in 1997 - and both have done relatively well since then notwithstanding difficult times for airlines in general. Neither have received state funding. Their diplomatically expressed message as recently as last year to the South African Government and SAA is to do the same - privatise. But it is not going to happen because it is actually a dilution of state power and that is not what this Government is driving for. It is going for a concentration of power. The third expression of the same sentiment is the vigorous and embarrassing opposition by three Cabinet ministers - including Minister Rob Davies - to the merger of Wal-Mart and Massmart - an action which not only caused concern and embarrassment among potential foreign investors but raised questions  about the nature of Cabinet solidarity and governance in South Africa. And the fourth are the amendments before Parliament to the Mineral and Petroleum Resources Development Bill which, if passed in its present form, will effectively end competition within the fossil fuel market by designating state entity Petro SA the custodian of the allocation for onshore, conventional and unconventional resources.  Petro SA would have complete control and determination over all the country’s gas resources, including shale gas extraction.

What this essentially amounts to is that the ANC government or elements within the government have an agenda of concentrating state power over the economy. The drive to state centralisation is evident also in legislation amending the Universities Act which gives the Minister of Higher Education, Blade Nzimandi, powers that clearly undermine the concepts of university autonomy and academic freedom. This legislation shocked the higher education sector because neither Higher Education South Africa (HESA), which represents the Vice Chancellors of the country’s 23 universities, nor the statutory advisory Council on Higher Education (CHE) were consulted, both entities having made presentation to parliamentary bodies, arguing that the amendments will affect their autonomy. The only response now to restoring full university autonomy and academic freedom is to resort to the Constitutional Court.

It doesn’t stop at the universities.  Minister of Justice Jeff Radebe is determined to see the Legal Practice Bill which is already before Parliament, into law. This legislation has been authoritatively described as the biggest single threat to an independent legal profession, and thereby to the courts, in South Africa's history. As one authority has said, the allure of a government -controlled legal profession (like controls over the media, universities and even churches), is as old as power itself.   In South Africa, the National Party government flirted with the notion but, fearing an international outcry, drew back. If Minister Radebe is to be believed, this is not something that bothers the ANC.  If this legislation is passed it will destroy the legal profession and reduce it to an agency of the state.

How do we respond to this? One response is to insist on the implementation of Cabinet responsibility and solidarity. Starting with the Licensing of Business Bill, the question is whether this legislation was before the cabinet? Does it carry cabinet approval? Until now Rob Davies, a perfectly likeable man, has been catching all the flak. We think he deserves it - because we don't think a majority in Cabinet can possibly support such an extraordinarily foolish measure.

After that, there needs to be a powerful campaign demanding the government come clean on just what its agendas are. This is not some sort of favour that ministers would be doing.  The people of this country have a right to know just where the ANC government is taking this country. And business people need to get involved as Tito Mboweni and Woolworths’ chairman Simon Susman recently did.

A note from managing editor Stacey Farao:
This Insight points to a pretty bleak scenario and we welcome your views. Is this analysis accurate? And if so, what needs to be done? Incidentally, we did invite Minister Rob Davies to respond to the original Insight. But to no avail.