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Open Letter to President Jacob Zuma

An Open Letter To President Jacob Zuma.
Dear Mr. President,
You rightly express your dissatisfaction with the way the State Owned Enterprises and Public Utilities are being run, your frustration rising to the point where you would be ready to privatize them.

There is a better way for the good of all the people which should be seriously considered, and more so in the light of the outcomes of many BEE deals where a few families have obtained great wealth leaving the masses of the poor of our people absolutely where they were before. The way I suggests harnesses the powerful motivating principles of Capitalism to provide the full benefits of Socialism for the people. I will outline the way in brief in this letter but could offer more detail when required.

Let shares in an SOE be allocated 50% for sale to private investors and 50% to be held by the State on behalf of all the people. Understanding that in the Capitalist system the profit motive dictates that the best possible management structure is in charge, the 50% held by the State will be non-voting shares allowing the CEO and Directors of the company full control with limited interference from the Public Sector. In Private Sector organizations, the CEO’s position-security depends on his ability to limit costs and maximize profit. It is thus also part of his expertise to use every possible means to minimize tax liability which then limits the benefit to the State. In this proposed system, taxation is replaced by Dividends which the State receives equally with the private shareholders.

To elaborate, in this system the Dividend is in place of all taxation exacted in the current system. The Company is tax-exempt from all forms of taxes — Company Tax, VAT, Employee PAYE and SITE taxes. Dividends are also not subject to Dividend Tax in the hands of the shareholder (but Capital Gains tax on sale of shares are taxable).

The sums should work out such that Revenue from Dividends will equal, or even exceed, Revenue from taxes because Gross Profit will be higher by the amount that cost of taxes would normally appear as an Expenses. Dividends paid to shareholders would be at normal competitive private sector-level investments so that shares in the new company would always an attractive investment opportunity.

Within the Company, salaries, wages  and remuneration packages will not be inflated to allow for taxes to be deducted before take-home-pay, which means  lower cost of salaries and wages set off against Income. Employees in such a Company will not be liable for SITE or PAYE, which reduces Administration costs both within the Company and at the office of the Receiver of Revenue.

It follows that with careful negotiation the system could be extended to all private companies listed on the JSE which could be converted  progressively until the Dividend Revenue system mainly replaces all forms of taxation as the source of Inland Revenue for the State. The work of Revenue collection will be greatly simplified leading to cost savings in the Department. In the private sector, the opportunities for Tax avoidance and tax evasion will be virtually ruled out.

The State can at a high level influence Company policy but cannot vote at the AGM so that the appointment of directors, and then management of the Company,  is left in the hands of experts in the private sector who have the skill to run it efficiently. The focus of the CEO of a private sector Company, whose success and continued employment in that capacity depends on it, will no longer be on minimizing tax commitment and maximizing profit for shareholders but will now be concentrated only on maximizing profit. The change will yield greater Dividends to the benefit of all shareholders including the State.

This provides a better alternative to the nationalization process advocated by the ANCYL of the 15% rising to 25% shareholding to be made available under the BEE scheme. That would have the disadvantage that, as in the past, the wealth would be handed over to a privileged few families and the poor would be left where they are today. My proposal will make the 50% share in the economy of our country available for all our people.

I predict that with less cost to the economy, more money will be available for job creation through infrastructure envelopment by the State, and more and better services will be provided for the poor of our country.

The idea is not entirely mine but arises from a suggestion made by Dr. E.F. Schumacher in his excellent book ‘Small is Beautiful’ published in 1973 by Random House under their Vintage imprint. The subtitle is a suggestive ‘A Study in Economics as if People Mattered’. And, Mr. President, our people do matter very much.
Sincerely,
Jessop Sutton.

~~~~~~~~~~~

H J Sutton,

8 Churchdown

LaneBergvliet

7945

jessopsutton@vodamail.co.za076 696 9433.

Fifty percent (50%) for the people.

The ANCYL for a while has been advocating the nationalisation of the mines in South Africa, and recently also the banks. They aim at a 15% shareholding rising over the next few years to 25%.

I say NO! NO! The people can have a 50% interest in every Company listed on the Stock Exchange and the way to do it is fair and simple.

Start with one Company.

Whatever number of shares there are in the Company, create an equal number of non-voting shares in favour of the State to be administered by an office in the Revenue Department. The State then receives dividends along with all private shareholders.

The Dividend is in place of all taxes paid in the current system which  means that the Company is tax-exempt. This applies to all forms of taxes — Company Tax, VAT, Employee PAYE and SITE taxes. Dividend are not subject to Dividend Tax (but Capital Gains on sale of shares are taxable).

The maths works out such that Gross Profit is higher by what would otherwise be paid over in taxes which means that the Dividend paid to shareholdes, private and public, is maintained so that investors in the Company are not prejudiced and share value is maintained.

Salaries and wages to Company employees will not be inflated to allow for taxes to be deducted which means  lower cost of salaries and wages.

Companies will be converted  progressively until the Dividend Reveue system mainly replaces all forms taxes. The work of Revenue collection will be greatly simplified leading to cost savings in the Department and, in the private sector, the opportunities for Tax avoidance and tax evasion will be virtually ruled out.

The State can at a high level influence Company policy but management is left in the hands of experts in the private sector who have the skill to run it efficiently. The CEO of a private sector Company is placed in thet position by the Directors and is charged with the job of maximizing returns for investors. The State benefits from this expertise which in the current system is also employed in minimizing tax payable to government.

I predict that with less cost to the economy, more money will be available for job creation in the public sector and more and better services will be provided for the poor of our country.

Out and About

 

An attractive silhouette.

Andrew and I were struck by the contrast between the two trunks on the same for tree, the one full of needles and the other almost bare.

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Two doves in the tree!

There are two doves  in the tree — you will see them if you look carefully. My little Nokia 6234 cell phone is a handy size and weight to carry on my walks around Bergvliet – Meadowridge – Constantia but it is not very powerful and doesn’t have a zoom facility for close-ups (at least I don’t know if it has!) 

 

Amazing tree!

This is a Walking Tree straight out of Tolkien’s ‘Lord Of The Rings come to retire in Newton Drive, Meadowridge after the last great battle for Middle-earth! 

 

Tree art! This gnarled old tree -- I think it is a Brazilian Pepper -- also looks as if it got its wounds in the battle for Middle-earth -- or is it simply tree-art?

Behind the Red Door

Today is a quiet Sunday Dorothy and I are spending at home. The day us nice and warm, a perfect Autumn day in Cape Town. Our little garden is inviting so I took some photos with my cell phone camera.

This royal coloured pansy grows in a hanging pot on the wall beside the sliding door to the living room.

Possibly the prettiest specimen I have photographed in a long time.

The secret of the little garden behind the Red Door is the faithful gardener. Here she is giving the pot plants some water to tide them over until the next rainy day.

Out and About

Some photos taken with my small Nokia 6234 while on my walk to Constantia Villiage on 20090501, Workers’ Day  public holiday.

The tree-trimming team has been at work! When I walked down Spaanschemat River Road in Constantia this morning, branches which had grown rank so that a walker on the sidewalk needed to duck under them were now trimmed off and piled on the verge waiting to be picked up.

 

The Two Oceans marathon has been and gone some weeks ago but these two ‘monuments’ remain, either forgotten or waiting for a future event!

I love Autumn. But it would be nice if our trees would show the beautiful Autumn (Fall) colours that our American cousins enjoy. For us the trees gostraight from green to brown and then fall off. Pity –but then we can’t have everything can we? Many people from the northern hemisphere would love to live in our beautiful Cape Town with our mild climate..

Behind the Red Door.

Flowers in our garden — some views of the bougainvillea and a pansy in our garden.

The Bougainvillea floret in the heart of the bract is small but beautifully formed.

Wednesday 20090418.

We took the Micra to the dealer today for it’s regular service. We were at the dealer;s at 7:20, second in the queue behind a Nissan Alvaro bakkie. With the car cheked in, Dorotthy and i walked the two kilometres back home. Now we wait for the call to say the car is ready  when we will walk down to fetch it.

In the meantime, Dorothy is painting the front door. It was blue, she is now painting it red. She is also changing the number on the wall beside the door from blue to red. It will give the house a new look, red door to match the red Micra car.

I took a phone call from Graham at Royal Palms. The gate is giving trouble again after all the work we did getting a whole new system with new remotes for every flat. THe gate didn’t open at 5:30 this morning so someone knocked on Graham’s door to get him to open it. Which he did by switching it to manual operation. When Andrew left for work, he switched it back to automatic and it worked. I contacted Sixth Sense and Ricardo is now fixing it but it is awkward that we can’t get there to sort it out with him. We are stuck without the car.

Dorothy painting the door, changing it from blue to red to match the Micra!

Photos on my Journal.

I need to learn how to add photos with text in context so that I can present an illustrated record of life as it goes along. So far I have not succeeded but I will keep on trying until I get it right..

My blank canvas waiting for the brush!