The private sector is the people’s sector

by Zakhele Mthembu BA Law LLB (Wits) is a legal researcher at the Free Market Foundation.by Zakhele Mthembu BA Law LLB (Wits) is a legal researcher at the Free Market Foundation.

The private sector in South Africa is seen as an evil that must be heavily restricted if not expressly prohibited. For a country wherein government service delivery is poor to say the least, one would expect that private enterprise, which keeps us safe through the various security firms and healthy through the various hospitals, would be celebrated. It is constantly blamed for every wrong there is in the material conditions of South Africans.

The private sector is most often seen as and spoken of, as something outside the normal confines of life. An opposite of the public sector, which is characterized by state management and ownership and seen as a necessity of life. Yet the private sector is the most ‘natural’ sector. When two individuals for instance, enter into any agreement creating duties or obligations for either, that activity, happens in the private sector.

The private sector is not only the companies listed on the Johannesburg Stock Exchange. It encompasses the entire spectrum of actions that happen outside of the state; from the hawkers and tradespeople to the professionals and top 40 companies. We are all the private sector when our interactions and their basis are voluntary, and both parties can choose not to interact should they wish to.

The natural private sector is often contrasted with the fallacy that is called the public sector. It is a fallacy because when one speaks of the public sector, one is told it makes up a portion of the total income in a country, with the assumption being, the private and public sectors are equal contributors to the hypothetical pie that is the national income.

The state, and by consequence the so-called public sector is contingent for their very existence, on the private sector. It is private individuals, entering into agreements, creating, and accumulating capital that is then taxed by the state, who are the real creators of the national income. The public sector merely appropriates the proceeds of the private sector through taxation for the generation of its piece of the national income. Therefore, it is the height of short-sightedness to be against the private sector.

In the fairy-tale of statehood, it said that the state is governed by the wishes of the people who constitute it and voted for the representatives that make it up and staff it with bureaucrats. Yet everywhere across the world, it is common cause that those who work in the state, do not magically lose their self-interest once they get government jobs. They simply harness their positions over the levers of force at their disposal, to pursue their self-interest.

This is actualized in corruption of varying kinds, from bid rigging to favour certain enterprises for kickbacks, to patronage networks for the consolidation of power through having ‘your people’ and a myriad of other ways wherein the self-betterment mostly associated with the private sector, is exhibited. Major difference being the means of pursuing this end are force, different from the means of the private sector which at most are persuasion exemplified by aggressive marketing campaigns.

The private sector in South Africa does the job of serving South African citizens - much better than the government - which takes our money through taxation by force, could ever wish to do. From the private healthcare sector, which is world class, so much so that government employees of varying shades use it instead of the public hospitals they are supposed to administer, to private education institutions which are filled with the sons and daughters of our public sector employees.

The private sector is a leader in service delivery, so much so it is simply normalised that you get what you pay for. In the public sector though, it would be abnormal to even think you would get what your forcefully taken taxes paid for.

Is the private sector perfect? No, it is not. It is after all just individuals of varying kinds interacting with one another. Some may commit actions we find immoral or criminal even. Yet the main distinction is that in the private sector there is choice; choice that is outright non-existent in the public sector since the state gets its revenue by threat of jail, while the ‘greedy’ capitalist can only hope to convince you to voluntarily patronize him to acquire his income.

The job of serving is demonstrably done better by someone who is voluntarily patronised than one who is guaranteed an ‘income’ irrespective of performance thanks to taxes and the consequences of not paying them. If we are to entertain the unsound comparison between the private and the public sector, then it is clear which sector should have ‘more power’. The private sector is the people’s sector; for a prosperous society, it should be encouraged rather than chastised.