Free Market Foundation

The Free Market Foundation (FMF) was founded in August 1975, and its inaugural congress took place in March 1977 (Swanepoel 1976b). The FMF’s goal was and remains “to encourage a free market economy in South Africa” and stop the trend of “increased government participation in and control of the economy” (Swanepoel 1975). In 1976 the FMF complained of a “paradox” where South Africa had a “declared pro-capitalist position” and “anti-communist laws,” but “against a background reality of extending, creeping state tentacles which envelop, constrict and eventually stifle” (Daily News 1976). The FMF said of itself: “The Free Market Foundation is the only organization in the Republic with the singular goal of advancing capitalism” (translated from the original Afrikaans) (FMF 1976, 7).

The FMF was born out of the South African Association of Chambers of Commerce (Assocom), of which Leon Louw was the legal manager (To the Point 1977). Louw has been the executive director of the FMF from 1978 to the present. Assocom gave the FMF direct assistance for the first ten months of its existence before the FMF became independent (Louw 1978, 5). Lou Sher, the former president of Assocom, was the FMF’s first chairman (Segal 1977). Louw was the chairman of the steering committee constituted to form the FMF (Robertson 1975) and was joined by Ed Emary, Mike Lillard, Fred Macaskill, Andre Spies, and Mark Swanepoel (Daily News 1976). After its establishment, the FMF’s interim executive committee was chaired by Dirk Hertzog, a relative of the former prime minister J. B. M. Hertzog, and was formally supported by Assocom, the South African Society of Marketers, the South African Federated Chamber of Industries, the National African Federation Chamber of Commerce, and the Afrikaanse Handelsinstituut (Clarion 1976). In March and April 1978, the FMF and the University of South Africa co-hosted Friedrich von Hayek in Johannesburg.

Stephan du Toit Viljoen, the first president of the FMF and chairman of the Bantu Investment Corporation, argued at the FMF’s inaugural congress that the unrest in South Africa was due to the inability of blacks to identify with the system in which they lived. For conflict to be abated, all races had to be included in the administration of the country. A free market in South Africa could not be successful if this was not done (Segal 1977). Louw echoed this in 1978, saying in a response to a survey showing that most blacks self-identify as communist or socialist that this was because the status quo in South Africa—Apartheid—was described as capitalist by both its promotors and detractors, which was not in fact the case (Norton 1978). At a 1987 symposium in honor of Martin Luther King Jr. in Atlanta, Louw said that peace in South Africa could only be achieved if the white electorate gave blacks citizenship and equality before the law and abolished Apartheid (Citizen 1987).

Michael O’Dowd (1930–2006) has been described alongside William Hutt (1899–1988) as a “doyen of the free market school” in South Africa (O’Malley 1988, 6). In addition to being an executive of the mining corporation Anglo American, O’Dowd was chairman of the Free Market Foundation from 1978 until 2005 and known for his “O’Dowd Thesis.” The O’Dowd Thesis, initially circulated privately in 1966, held that industrialization would lead to the end of Apartheid, just as it had led to greater democracy in Britain (Keniston 2010, 28). The thesis was inspired heavily by Walt Whitman Rostow’s The Stages of Economic Growth (O’Dowd 1996, 1). In 1987, O’Dowd wrote that the privatization of South Africa’s state-owned enterprises would make it easier for disempowered blacks to enter the market. The reform had to be combined with the liberalization of regulations that were causing small enterprises to be priced out of the market (Sowetan 1987).

Fred Macaskill, then a director of the FMF, wrote that the problem in South Africa was “not a question of violating the rights of blacks or whites.” Instead, the issue was “the state’s violation of individual rights,” implying that the racial element of oppression in South Africa drew attention away from the machinery of oppression. He criticized certain constitutional proposals—those which would ultimately culminate in the 1983 Tricameral Constitution—for not contemplating a limited government but instead further entrenching the absolute power of government. The only way to solve the problem of oppression according to Macaskill was to limit the government’s powers, especially the power to discriminate (Macaskill 1979, 215–216).

In November 1980, Terry Markman, a council member of the FMF and well-known transportation consultant, called for the deregulation of South Africa’s state-run airline monopoly, South African Airways (SAA). He advocated that the domestic market be deregulated immediately, that SAA be required to make a profit and eventually be privatized, that airports finance themselves, that the country enter into generous bilateral agreements with other countries, and that private airlines be allowed to compete on international routes (Cape Times 1980).

In 1981, Markman called on the then-Monopolies Commission to investigate SAA, then effectively a monopoly that had the right to license other operators, for refusing a “right to operate” to another airline, Sky Couriers. Sky Couriers had been taking a large amount of cargo business from SAA, angering the freight agents’ union. Markman condemned SAA for its “coercive monopoly” and lambasted the fact that a market player could deny, by force of law, the right to participate in the market to its competitors (Duncan and Paris 1981). In 1991, the domestic aviation market in South Africa was deregulated and SAA demonopolized, allowing private airlines to compete against the state’s carrier (Mhlanga 2017, 3–5).

The FMF continues to argue for the privatization or liquidation of SAA itself, as the government persists in propping up the thoroughly uncompetitive and unprofitable airline. Since deregulation, SAA’s market share went from 95 percent in 1994 to 17 percent in 2018. By June 2018 the airline needed R9.2 billion ($6.3 million) to pay off its debts and R15 billion ($1.03 million) for operating costs (eNCA 2018). In June 2018, Louw made a R100,000 ($6,916) wager with the CEO of SAA, Vuyani Jarana, that the airline would not be profitable within Jarana’s three-year timeline. Jarana accepted the wager (Smith 2018) but resigned from SAA on 29 May 2019 (Gernetzky 2019), less than a year after taking office, citing red tape and an unwillingness of the government to help SAA succeed (TimesLive 2019).

The FMF-advanced reforms in the Apartheid homeland, Ciskei, included the abolition of various taxes, and they led to the development of new industries and greatly increased foreign investment. The FMF’s slogan for taxes in the Ciskei was “Simple, Flat, and Low,” as the personal income tax return was simple and one page long, and those who earned more than R8,000 had to pay a flat 15 percent rate. There was no company tax. The reform led to 90 percent of those who used to be liable for personal tax being liable no longer. In the wake of these reforms, over about three years, the Ciskei had an annual economic growth rate of 6 to 8 percent, whereas South Africa’s growth was near nil (Business Day 1987).

By the mid-1980s, the FMF’s funding largely came from big companies, augmented by membership contributions from individuals and smaller companies and paid consultancy work for firms and government institutions. In the late 1980s, FMF’s training program Justice For All taught politics and economics to millions of South Africans employed by participating companies, and it contributed 60 percent of the FMF’s total income (Kennedy 1987).

In line with its support of entrenching property rights protection in the 1996 Constitution, FMF opposes the government’s policy of expropriation without compensation. In November 2018, the FMF hosted a conference in Johannesburg that drew participants from Venezuela, India, Nigeria, Kenya, Ghana, and the United States, who related their own countries’ experiences with similar anti-property rights laws (Van Staden 2018b).

The FMF is known for its Khaya Lam (Xhosa for “My Home”) land reform project. The goal is to facilitate the transfer of title deeds from municipalities to indigent tenants. Under Apartheid tenure law, black South Africans could not own property in ‘white’ cities and had to rent houses from the municipalities in ‘black’ townships on the periphery of the cities. By 2019, many of these tenants had lived on these properties for more than a generation. As a pro-property rights method of realizing the constitutional commitment to land reform, the FMF believes these tenants must become full freehold owners of those properties (eProperty News 2018). By May 2019, Khaya Lam had successfully facilitated the processing of 3,610 title deeds, with another 3,525 titles in process (numbers obtained from Perry Feldman, Khaya Lam project manager, via email).

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