“Post‐Truth,” “Alternative Facts” and “Fakenomics”

• Published date: 01 March 2018
• DOI: http://doi.org/10.1111/saje.12181
• Date: 01 March 2018
• Author: Gavin Keeton

“POST-TRUTH,” “ALTERNATIVE FACTS” AND

“FAKENOMICS”

GAVIN KEETON*

,†

Abstract

South African companies are accused of hoarding profits to accumulate large amounts of “idle”

cash, as well as of being the perpetrators of massive illegal capital flight. This paper argues that

much of the claimed corporate cash is either offshore or belongs to banks. It reminds that bank

deposits increase when companies borrow, not when they retain profits. It shows, too, that meas-

ures of massive capital flight actually reflect data errors. Exaggerating, through faulty methodol-

ogy the extent to which companies have cash or may be involved in illegal capital flight is

unhelpful. It exacerbates already-fraught government-business relations, and complicates the

search for solutions to South Africa’s economic problems.

JEL Classification: A11, D25, E51, F32

Keywords: Corporate cash holdings, capital flight, trade misinvoicing

1. INTRODUCTION

My career as an economist has taken me to three very different environments. So, I

thought it would be helpful in this address to reflect on what my time in a government

policy agency, in business and most recently in higher education, has taught me about

the practice of economic policy formulation and the value of economic research.

In all three spaces, I have been called upon to produce economic evaluations of possible

policy choices. For much of my career these were relatively isolated issues. But there was a

time when I was close to national policy debates, and I consider myself very fortunate that

a large part of my business career coincided with South Africa’s transition to democracy.

This transition required not just reaching a democratic political settlement, but also the

search for a new economic path, and policies that would address the gross inequalities and

injustices of our divisive and hurtful apartheid past. I was exposed to these fascinating

exchanges through my own work, but mainly in support of senior business leaders.

While there were large ideological differences, pre-1994 relations between business,

the ANC and its labour alliance partner COSATU were mostly quite cordial. There is

little doubt that relations between business and the ANC government have soured since

1994. Governing is always a difficult challenge, and the fact that so much of the last 23

years has been characterised by the slow pace of economic transformation, disappoint-

ingly low growth, limited job creation and poor service delivery has resulted in mutual

finger-pointing.

* Corresponding author: Associate Professor, Economics and Economic History, Rhodes Uni-

versity, Grahamstown, Eastern Cape, South Africa. E-mail: g.keeton@ru.ac.za

†

Economics and Economic History, Rhodes University

Presidential Address at the 2017 Biennial Conference of the Economic Society of South

Africa, Rhodes University, Grahamstown.

V

C2018 Economic Society of South Africa. doi: 10.1111/saje.12181

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South African Journal of Economics Vol. 86:1 March 2018

South African Journal

of Economics