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Survey synopsis - What impact have the measures taken by government to combat the coronavirus pandemic had on the socio-economic wellbeing of ANC members and supporters? In an effort to combat the Covid-19 pandemic, the South African nation is currently under lockdown. This is resulting in a considerable impact on people’s livelihoods and on the life of society. As the ruling party of the country, it has to act in the national interest, despite the potential negative impact that some government decisions may have on its own support base. The survey covered in this report assesses the socio-economic impact of the measures taken by the authorities to combat Covid-19 on the membership and support base of the ANC. It follows on a previous report on the political impact on the membership and supporters, of the measures taken by the authorities and the effect that it has had on the leadership of, and levels of support for the movement. The two reports, read together, comprise the full analysis of the survey undertaken between 13 and 15 May 2020. Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, stem from the survey undertaken from 13 to 15 May 2020 on the impact on the leadership and support of the ANC as a result of the measures taken by government to combat the COVID-19 pandemic. Content 1. Background 2. Key findings 2.1 Members and supporters who continue to receive their salary during lockdown 2.2 Members and supporters who do not receive their salary during lockdown 2.3 Findings in a nutshell 3. Recommendations List of figures Figure 2.1: Indication of access to food with regard to supporters continuing to receive their income during the lockdown Figure 2.2: Demographics of households receiving income during the lockdown, but with insufficient food Figure 2.3: Comparative analysis on perception of economic future: Respondents with income during the lockdown, but insufficient food versus all respondents Figure 2.4: No salary/wages during lockdown household demographics Figure 2.5: Comparative regarding support for the measures taken by the authorities to combat Covid-19 and retained favourable opinion of the ANC: Households not receiving salaries or wages during lockdown versus overall average Figure 2.6: llustration of new grant recipient potential additions as a result of Covid-19 lockdown Figure 2.7: Comparison between respondents not receiving salary or wages during lockdown versus overall average 1. Background The Inclusive Society Institute undertook a survey between 13 and 15 May 2020 to test the impact of Covid-19 on the members and supporters of the ANC. It tested both the impact of the measures taken by the authorities on the leadership of and support for the movement, as well as the socio-economic impact thereof on ANC members and supporters. The first report was issued on 21 May 2020 and is available on www.inclusivesociety.org.za. It dealt with the first part of the assessment, that is the impact on the support for the movement and its leaders. This synopsis contains only the key findings of the survey with regard to the socio-economic impact aspects of the survey. The motivation for the survey, background and methodology thereof is contained in the aforementioned report. 2. Key findings 2.1 Members and supporters who continue to receive their salary during lockdown Sixty-three per cent of those surveyed continued to receive a salary during the lockdown. Ninety-five per cent and 92 per cent of those respondents that continue to receive their salary during lockdown, had access to electricity and clean water respectively. Of those members that continue to receive their salary, 79 per cent had access to food (74 per cent sufficient, 5 per cent some but needed additional help), with 18 per cent indicating that they did not have sufficient access to food. The full breakdown is illustrated in Figure 2.1 below. Figure 2.1: Indication of access to food with regard to supporters continuing to receive their income during the lockdown A deeper study of the 17 per cent that receive a salary, but which did not have access to sufficient food, revealed that 74 per cent of those households had unemployed persons in their households, 54 per cent had more than three children per household and 48 per cent had unemployed persons in the household, together with more than 3 children per household. Figure 2.2: Demographics of households receiving income during the lockdown, but with insufficient food It is interesting to note that, despite not having access to sufficient food, 80 per cent of those respondents’ opinion of the ANC either improved or remained the same (52 per cent’s opinion improved, 28 per cent’s remained unchanged). And 91 per cent continued to support the measures taken by the authorities to combat the coronavirus. However, only 54 per cent, which is much lower than the two-thirds of all respondents, believed their lives would improve after lockdown. Similarly, this group of respondents were less confident in the economy’s ability to recover sufficiently in the year ahead. Seventy-six per cent believed that the economy would either not recover (11 per cent) or not to the same levels as prior to lockdown (65 per cent). This juxtaposed against the overall average of 62 per cent of all respondents – that is those receiving and not receiving income during the lockdown – that believed the economy would either not recover or recover to levels the same as prior to lockdown. Figure 2.3: Comparative analysis on perception of economic future: Respondents with income during the lockdown, but insufficient food versus all respondents 2.2 Members and supporters who do not receive their salary during lockdown Thirty-seven per cent of respondents do not continue to receive their salaries or wages during the lockdown. Of the 37 per cent, 86 per cent have access to electricity and 91 per cent have access to clean water. With regard to having access to food, the majority (61 per cent) either did not have access to food, or not access to enough food (31 per cent no food and 30 per cent not enough food). Of those respondents that indicated that they either did not have access to food or to enough food, 81 per cent had unemployed persons in the household and 85 per cent had children in the home (of which 40 per cent had 1 to 2 children in the household and 45 per cent three or more). Thirty-one per cent of households in this category of respondents had unemployed people and three or more children in the household. Figure 2.4: No salary/wages during lockdown household demographics In this category of respondents, 87 per cent supported the measures taken by the authorities to combat the coronavirus, and 79 per cent’s opinion of the ANC improved or remained the same. With regard to support for the measures taken, this is not far off the overall percentage of all respondents, where 90 per cent supported the measures. Similarly, the percentage of respondents whose opinion of the ANC improved or remained the same was not much lower than the overall percentage of 82 per cent. Figure 2.5: Comparative regarding support for the measures taken by the authorities to combat Covid-19 and retained favourable opinion of the ANC: Households not receiving salaries or wages during lockdown versus overall average Eighty-five per cent of the respondents who do not continue to receive a salary during the lockdown, did not receive a government grant or aid prior to the lockdown. Of this 85 percent, 74 per cent now need a government grant or aid, for example food. Seventy per cent of such respondents have or intend to apply for a grant or aid. Figure 2.6: Illustration of new grant recipient potential additions as a result of Covid-19 lockdown From the limited data available, it appears that those respondents that have applied for aid in one form or another have found the process quite difficult. Seventy-six per cent indicated that the process was either difficult or very difficult. A deeper understanding is required as to this perception, for which the data does not exist in this survey. Back to the respondents that do not receive their wages or salaries during the lockdown, as they perceive the future, 62 per cent of respondents were of the opinion that the economy will not in the coming year recover to levels prior to lockdown, whilst 57 per cent felt positive about their own life improving after the lockdown. Whilst the former is in line with the overall average of 62 per cent, the latter is somewhat lower than the 64 per cent overall average. Figure 2.7: Comparison between respondents not receiving salary or wages during lockdown versus overall average 2.3 Findings in a nutshell 2.3.1 Respondents continuing to receive their wages and salaries during the Covid-19 lockdown With regard to the ANC members and supporters who are continuing to receive their wages and salaries during the lockdown, they appear to be coping adequately under the lockdown situation the country finds itself in. In the main, they have access to electricity (95 per cent), water (92 per cent) and food (79 per cent). That being said, there is a material number (17 per cent) of respondents that are having difficulty in accessing sufficient food. The households that are finding the sourcing of food difficult are, to a large extent, characterised by having unemployed members in the household (74 per cent), as well as big families with three or more children (54 per cent), which conceivably contribute to their ability to provide sufficiently. Forty-eight per cent of households finding it difficult to source sufficient food have unemployed persons and three or more children to take care of. These respondents remain firm in their support for the ANC. Even those finding access to food difficult, remain loyal, with 80 per cent of their opinion of the ANC either improving or remaining the same. In all, 84 per cent of the respondents in this category have improved their opinion of the ANC or it has stayed the same. The overall average of all respondents, that is those that receive wages and salaries and those that do not, is 82 per cent. In a similar vein, this category of respondents is firm in their support for the measures taken by the authorities to combat the Covid-19 pandemic. Overall, 92 per cent support the measures, including an exceptionally high 91 per cent of those respondents that have difficulties in accessing food. The overall average of all respondents, that is those that receive wages and salaries and those that do not, is 90 per cent. However, whilst the category in the main is of the opinion that the economy will not improve to levels similar to those just prior to the lockdown, there is a diversion between those that do not have difficulties in accessing food and those that do. Those that do not have problems in accessing food stand at 64 per cent, whilst those that do have such difficulties stand at 54 per cent. The overall average of all respondents, that is those that receive wages and salaries and those that don’t, is 62 per cent. And similarly, 67 per cent of those that do not have difficulties in accessing food believe their own well-being will improve after the lockdown is lifted, this percentage drops to 54 per cent amongst those that do have difficulty in accessing food. The overall average of all respondents in the survey stands at 64 per cent. 2.3.2 Respondents that do not receive a salary or wages during the lockdown As can be expected, this category of respondents is finding it significantly more difficult to keep their heads above water during the lockdown. It has, however, not significantly swayed their support for the ANC. In the main they have access to electricity (86 per cent) and water (91 per cent). However, 61 per cent had insufficient food, and are now largely dependent on grants and/or aid to survive. These respondents remain relatively firm in their support for the ANC. Seventy-nine per cent’s opinion of the ANC either improved or remained the same. The overall average of all respondents, that is those that receive wages and salaries and those that do not, is 82 per cent. In a similar vein, this category of respondents is firm in their support for the measures taken by the authorities to combat the Covid-19 pandemic. Eighty-seven per cent of respondents in this category support the measures. This is virtually in line with the overall average of all respondents, that is those that receive wages and salaries and those that do not, which stands at 90 per cent. This category is as resonant as the other categories with regard to the economy’s ability to recover to levels similar or better than those just prior to the lockdown. Sixty-two per cent, which is on par with the overall average, believed that the economy will not improve to levels similar to or better than those just prior to the lockdown. The greatest diversion is with regard to this category’s opinion related to their own future. Whilst the overall percentage of all respondents stands at 64 per cent, in this particular category it stands at only 57 per cent. They are thus significantly less optimistic about their own future, as opposed to those continuing to receive their salary or wages during the lockdown. 3. Recommendations Recommendation 1 Whilst the data suggests continued high support levels for the ANC, there is a meaningful percentage of supporters whose views have not remained the same or improved. The ANC will have to design strategies and tactics to address the phenomena. It is important to note, however, that declined support does not equate to no support for the ANC. Respondents may have expressed a declined level of support but may very well still support the ANC in an election. Recommendation 2 Access to food, be it whether the respondents continue to receive their salaries and wages during the lockdown or not, is a significant problem. The ANC should monitor the situation carefully, as the data suggests that the category of respondents that are experiencing problems with regard to accessing food may be fickler than the others. A sustained momentum of this nature could potentially impact future support for the ANC and the measures taken by the authorities to combat the coronavirus negatively. Recommendation 3 Even though the data at the disposal of the institute is not expansive enough to make a conclusive determination, there is a suggestion that respondents that need to access state grants and or aid, are finding it difficult to do so. Whether this is perception or real is unknown. Nevertheless, it would serve the movement well in terms of retaining support, for the authorities to evaluate their current application processes and performance. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Potential constitutional issues arising from the proposed NHI in South Africa Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. Authors: Percept & Daryl Swanepoel Graphic Design: Nini van der Walt Setting the scene for the roundtable discussion on the constitutionality of NHI The Inclusive Society Institute hosted an online roundtable on the constitutionality of the National Health Insurance Bill on 19 May 2020. The roundtable formed part of the institute’s broader research into achieving universal healthcare coverage. It was facilitated by Prof Dirk Kotze, with several legal experts, and industry representatives, participating. Each of the potentially problematic constitutional issues identified in relation to the NHI Bill were examined. This report sets out the main issues identified during the roundtable. The primary focus of the Inclusive Society Institute, and to a large degree the dialogue around the table on the day, was to work on and promote a more inclusive society, as the institute’s name suggests. There is much upheaval being made in South Africa’s national discourse about various present-day issues, much of which it is not positive. The institute has been established to create a platform where this discord can be presented and discussed, in an attempt to find some middle ground in dealing with the pressing issues the country is confronted with. The question of the National Health Insurance is one of these stumbling blocks. Different stakeholders have gotten fixed on certain potentially fundamental points of disagreement around National Health Insurance. This poses the risk of a number of possible constitutional challenges. The purpose of this report is therefore to logically set out these potential areas of constitutional concern, introduce new information and perspectives and, in doing so, develop a brief that could potentially serve to obtain legal advice and certainty with regard to the constitutionality of the legislation being put forward. Content Setting the Scene for the Roundtable Discussion on the Constitutionality of NHI 1. Introduction 2. Potential constitutionality and other legal issues identified with the NHI Bill during a desktop review 3. Discussion of constitutionality issues at a roundtable of constitutional and legal experts 4. Request for legal clarification References 1. Introduction Various commentators and the media have raised the possibility of taking legal action against the NHI Bill in its current form (Cohen, 2019; Mokone, 2019). Although not all submissions on the Bill are in the public domain, some have highlighted various potential legal issues with the Bill (e.g. Van den Heever, 2019). Given these concerns, the Inclusive Society Institute commissioned a desktop review of potential constitutionality and other legal issues with the NHI Bill. This review was published in the ISI’s report on an NHI Roundtable which took place in Johannesburg during December 2019 (Inclusive Society Institute, 2020). Following the NHI roundtable, the ISI hosted an online roundtable on the constitutionality of the NHI Bill on 19 May 2020. The roundtable was facilitated by Prof Dirk Kotze, and several legal experts, as well as industry representatives, participated. Each of the potentially problematic constitutional issues with the NHI Bill were discussed and debated. In this brief to Senior Legal Counsel, various concerns with the constitutionality of the NHI Bill as identified through the desktop review are presented first. This is followed by a summary of views on each of these identified issues that were discussed at the Constitutionality Roundtable. The brief is concluded by asking for further legal interpretation and clarification on the legal muster of each of the potential issues. 2. Potential constitutionality and other legal issues identified with the NHI Bill during a desktop review The text below has been taken verbatim from the Inclusive Society Institute’s report on the NHI Roundtable (Inclusive Society Institute, 2020). Whilst state law advisor Ayesha Johaar confirmed that the Bill had been certified as being aligned with the Constitution (Gerber, 2019), the desktop study revealed various constitutional concerns from a broad spectrum of organisations. Section 18 of the Bill of Rights: the right to freedom of association The first argument relates to Section 18 of the Bill of Rights, which guarantees every person the right to freedom of association. Some in the legal fraternity argue that by being compelled to associate oneself with the NHI, one’s right to decide with whom to associate – either the NHI or a medical scheme – may be unfairly and unduly limited (Botha, 2019; Kirby, 2019; Van Staden, 2019). Section 12(2)(b): The constitutional right to bodily and physical integrity It is further argued that the freedom to choose healthcare services may well be intertwined with the constitutional right to bodily and psychological integrity entrenched in Section 12(2)(b) of the Constitution. This right guarantees all people control over their own bodies (Anonymous, 2019; Botha, 2019). Section 25: The right to property Another argument relates to Section 25 of the Constitution. In essence, the Bill does away with a medical scheme’s ability to provide and charge for services rendered under the NHI regime. This, it is argued, may constitute an “unlawful infringement of a medical scheme’s right to property”, which is specifically prohibited by Section 25 of the Bill of Rights (Kirby, 2016). Section 27(1): Infringement on the right to access to healthcare Whilst state law advisor Johaar argues that Section 27 of the Constitution, along with the Republic’s responsibilities in terms of international treaties, imposes a duty on the state to take reasonable measures to give effect to the right to healthcare, (Gerber, 2019), others rely on the Constitutional Court ruling in Government of the Republic of South Africa v Grootboom 2001 (1) SA 46 (CC) to support their argument that the current NHI Bill may in fact infringe on their Section 27(1) right to access to healthcare. In Grootboom, the court ruled that “the positive rights in the Bill of Rights – those rights that entitle South Africans to services from government, such as housing, healthcare, education, etc. – are themselves also negative rights. Whilst government is expected to progressively make possible the right to healthcare, government may not hinder South Africans from themselves giving effect to this right” (Van Staden, 2019). Yet, even though government may therefore not prevent citizens from providing their own healthcare, the NHI Bill does not include an “opt-out clause”, and clause 33 relegates medical schemes to offering only “complementary cover to services not reimbursable by the Fund” (Van Staden, 2019). Section 22: Impact on an individual’s right to freedom of trade, occupation and profession Another area of potential conflict touched on during the roundtable is the potential impact on an individual’s right to freedom of trade, occupation and profession guaranteed in Section 22 of the Constitution. Here too the Constitutional Court has provided guidance, this time in Affordable Medicines Trust v Minister of Health 2006 (3) SA 247 (CC), where it held that “there are two components to this right: it is the right to choose a profession and the right to practice the chosen profession”. The court concluded that where a law regulating a profession has a negative impact on citizens’ choice of profession, the statute must be subjected to the rationality test. Some in civil society question whether the NHI Bill in its current form will indeed pass such a test, particularly given its lack of evidence of public purpose as well as the legislature’s failure thus far to present proper financial feasibility studies (Anonymous, 2019; Botha, 2019; Van den Heever, 2019). This is despite the state law advisor’s insistence that “the bill’s provisions connected rationally with constitutional obligations” (Gerber, 2019). Exclusion of applicability of the Competition Act In a similar vein, the civil society organisations Section27 and TAC have questioned the Bill’s specific exclusion of applicability of the Competition Act 89 of 1998. Excluding the NHI from the scope of the Competition Act, they believe, is not in the interest of health or of the NHI Fund (Section27 and TAC, 2019). Section 36: Rights may only be limited to the extent that limitations are reasonable and justifiable There is also a suggestion that the Bill may fall short of the limitations clause contained in Section 36 of the Constitution, which states that “the rights in the Bill of Rights may be limited only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including … (d) the relation between the limitation and its purpose [and] (e) less restrictive means to achieve the purpose” (RSA, 1996). Proponents of this argument emphasise the lack of published evidence to prove that the NHI is indeed necessary to achieve universal access to healthcare, claiming that there are numerous other approaches that could be implemented that would be less restrictive than Section 33 of the Bill (Anonymous, 2019; Van den Heever, 2019). Vagueness and non-specific nature of the Bill Finally, both the initial NHI roundtable and the subsequent desktop study have found that the vagueness of many aspects of the legislation, including the costing and funding model, and the unpredictability of the legislation’s intended outcomes, may constitute sufficient grounds for a constitutional argument. In its founding provisions, the Constitution affirms that the state is founded on, among others, the value of the “supremacy of the constitution and the rule of law” (RSA, 1996). The rule of law suggests that legislation should be clear, unambiguous and provide reasonable certainty and sufficient information to enable those affected by it to respond in an informed manner. This notion was supported in the Constitutional Court ruling in Van der Walt v Metcash Trading Ltd 2002 (4) SA 317 (CC). Here, the court stated an absence of arbitrary power and unpredictability as essential elements of its understanding of the rule of law (Venter, 2011). Furthermore, in Affordable Medicines Trust, the court held that legislation should “indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly” (Constitutional Court, 2005). 3. Discussion of constitutionality issues at a roundtable of constitutional and legal experts An online roundtable on the constitutionality of the NHI Bill was hosted on 19 May 2020 via Google Meetup. At the start of the roundtable, participants were reminded that the aim of the discussion was to test whether the previously identified constitutionality issues have merit. Participants were also encouraged to put forth any other legal issues that may need to be considered. The questions that participants at the roundtable had to address were: (1) whether the policy is compatible with constitutional principles; and (2) whether it will also promote the principles of the constitution. The roundtable provided a platform to facilitate robust discussion and debate and not to necessarily establish consensus. Consensus on whether concern for each of the potential constitutionality issues was warranted, was rarely achieved. Below we discuss the various sections of the Constitution where the NHI Bill may be in conflict or infringe on rights as well as participants’ views on each of these possible areas of concern. While some sections raised no concern, with others there was clearer consensus amongst participants of the potentially problematic interaction between the NHI Bill and the Constitution. There was quite a lot of consensus about both Section 22 (right to trade, occupation and profession) and the irrationality argument with regards to NHI which has bearing on the relationship between the NHI Bill and Section 36 of the Constitution. Potential infringement of the NHI Bill on part (a) of Section 27(1): “Everyone has the right to have access to health care services, including reproductive health care;” Section 27(1) of the Constitution deals with the right to health and healthcare, including reproductive healthcare. The state must provide resources to allow for progressive achievement of these rights and no one must be refused medical treatment. While there is an obligation in terms of Section 27 to provide essential health services, this does not preclude an individual from making their own arrangements for access to healthcare. The fact that there is an obligation to provide access to essential health service implies both a positive and a negative right: the obligation to provide (positive) and also the responsibility to ensure that the obligation does not infringe on the right of people to provide for themselves. It was mentioned that as part of this obligation, it is important that the South African government does not take regressive steps in terms of healthcare provision, that is in an attempt to provide more care to some, take away care from others. Essential health services have not been defined in either the Bill, or by the courts. The term is lacking clear definitional content. A basic benefit package has not been set out in the NHI Bill and it is therefore not possible for the Court to pronounce on whether the health services to be provided by NHI can be considered essential or not. The major stumbling block, however, in terms of NHI is with regards to “available resources”. In NHI discussions and arguments it is generally assumed that available resources include the money spent in the private sector (4% of GDP) as well as the public sector. There’s an assumption that the equivalent private sector amount can be raised in taxes and redistributed to the whole population. This lack of definition with reference to available resources is what creates the impasse around reaching agreement on NHI between critical stakeholders. Generally there are thought to be three groups of stakeholders with regards to the resourcing of NHI: (1) those who argue ‘let’s work with the public funds available’, (2) those who say ‘let’s pool everything, both public and private resources’, (3) and stakeholders who argue for the creation of new resources through new taxes, fund raising, etcetera. Ultimately, the main mechanism to access resources in the private health sector would be the tax system. Changes to the tax system to allow for resource pooling from existing private healthcare sector expenditure would be constrained by the design of the tax system, making it difficult to match tax revenue to be collected to the full amount as currently spent on private healthcare. The lack of an NHI financing paper which stakeholders had thought would be released in parallel to the NHI Bill has not assisted with providing clarity on the likely financing mechanisms. During the discussion it was argued that the right to health does not have definite content. The courts have generally not pronounced on resource availability in the hard sense. It will be interesting to see in which direction the positive and negative rights associated with Section 27 are weighed, that is do the negative or positive rights have a heavier weight attached to them. Potential infringement of the NHI Bill on Section 18: “Everyone has the right to freedom of association.” Section 33 of the NHI Bill (National Department of Health, 2019) currently confines the role of medical schemes (the existing private healthcare funding market) to complementary cover once NHI has been fully achieved: “Once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.” Given that medical schemes will be limited to complementary cover only, there is potentially an infringement on the right to freedom of association. Citizens who want healthcare access will be compelled to be associated with NHI(1). In this context, it was argued that having a choice in terms of a medical scheme as alternative to public or NHI healthcare is a freedom of association. The NHI policy therefore potentially violates the right to freedom of association. A few questions emerged from this debate: Is there a need to create a limitation on private funders in order to increase capacity in public health sector? And more importantly, can one choose a preferred practitioner? It is important to take note that the NHI Bill does not prohibit out-of-pocket payment for private healthcare –it is individuals right to private insurance that is limited, not the right to private care. Legal experts argued that this line of reasoning is a tenuous one (a “tortured argument”). Section 18’s conception of the right to freedom of association relates more to the protection of liberty and protecting participatory democracy rather than choice in the market. The right of association has to do with the right to form groups with common interest, to associate with those we want to in public, etc. *1 There are parallels to this in other parts of the economy: the formally employed are compelled to contribute to the Unemployment Insurance Fund (UIF) and via fuel levies to the Road Accident Fund (RAF). This does not, however, preclude individuals from taking out private insurance for the same risks covered by these public funds. In this context, one of the experts voiced the concern that there is a danger of conflating the practical difficulties of questions with the crisp details the roundtable aimed to discuss. What the roundtable discussion was meant to answer remained unclear: Is the Bill constitutional, yes or no? Nothing in the Bill states that South Africans cannot belong to a medical aid scheme once NHI is implemented – it was argued that Section 33 of the Bill is forward looking and will only limit medical schemes to complementary cover once full NHI has been achieved. A counter argument to this (also made in other discussions) is that the implications of the Bill once fully implemented, rather than simply the current implications, should be considered. Potential infringement of the NHI Bill on Section 12(2)(b): “Everyone has the right to bodily and psychological integrity, which includes the right to security in and control over their body;” It is argued that the freedom to choose healthcare services may well be intertwined with the constitutional right to bodily and psychological integrity entrenched in Section 12(2)(b) of the Constitution. This right guarantees all people control over their own bodies. In debating the validity of this line of argument, it was stated that we need to be cautious of adopting a consumerist view of healthcare and avoid information asymmetries such as moral hazard and adverse selection. because the patient may not always know what’s best for them. It is usual for health systems to have referral pathways, or to select contracted providers on the basis of quality of services provided. A strength of the Bill is the referral pathway and reference to the need for evidence in the way care is delivered. Who is best equipped to make the expert medical judgements? Following the line of argument around consumers needing to choose their providers potentially leads to a minefield discussion about who is best equipped to make difficult health decisions. It was asked whether this line of argument may only become relevant in the long term. However, arguments around the envisaged endpoint of NHI need to be considered. It was argued that if the public health system is going to determine who your doctor will be and you’re not comfortable with it, then it becomes problematic (especially given that medical schemes will eventually be limited to complementary cover only). While participants noted not being able to choose your own doctor as a concern with the NHI Bill, this is already the status quo for many medical scheme products. Medical schemes also impose doctor and hospital networks. The NHI Bill also does not prohibit out-of-pocket payment for private care. Measuring the Bill relative to this section also raises the issue of whether NHI will be a funding or a servicing mechanism. The service provision aspect of NHI may ultimately limit what is possible in this regard. Section 8 of the NHI Bill states that if you do not follow the referral pathways set out by NHI, you need to pay for these services on an out-of-pocket basis. A question was raised about whether this could potentially be viewed as punitive and therefore undermining to theright to bodily and physical integrity. The public health sector currently follows strict referral pathways – patients are not allowed to access tertiary care without having followed appropriate referral pathways from the primary healthcare level. Potential infringement of the NHI Bill on Section 22: “Every citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated by law.“ The facilitator introduced the discussion on this section by asking whether there are limitations in the Bill that prevent the right to (a) trade as a healthcare practitioner and (b) enter into the health sector. Will practitioner options to freedom of trade, occupation and profession be limited? One set of opinions that were offered is that the answer to the above questions is very much dependent on how NHI will be implemented – there is not a problem in the legal construct but in the practical implications and implementation. If NHI rates (used for contracting with GPs and other specialists) are reasonable, it may not impact freedom of trade. Potential constitutionality issues arising with this section are rooted in execution. How will we protect the system as it stands? Does a right arise from the status quo? How do we protect current rights? Some legal experts believed the way the Bill is currently drafted does not create any conflict with Section 22 of the Constitution. They said there is nothing in the Bill that suggests that someone who wants to be a doctor and work in the private sector can’t work there. They expressed the opinion that the Bill, as currently constituted, was written as mainly a funding bill that may have some service design implications. There was, however, disagreement between experts. Some experts felt this particular section of the Constitution had more force with regards to the Bill than previous sections highlighted in this report. In thinking about restrictions on trade, the whole healthcare profession (not limited to the private sector) should be considered. Professions cut across both sectors and NHI may imply restrictions on the ability to trade freely and work for an employer of choice. Again, it was recommended that the Bill should be reviewed in terms of the current situation (what is currently being proposed) and what the realisation of these proposals are likely to look like. The Bill does not set out the future details of the private sector but mainly focuses on the public sector. Which assumptions underlie what the private sector is envisaged to look like? The Bill should be more forthcoming with private sector aspects of the health sector. The lack of details on the private sector leads to varied interpretations of the Bill: in some cases it refers to the private sector or where there isn’t sufficient infrastructure it mentions purchasing and obtaining infrastructure from the private sector. It was argued that the lack of clarity around the private sector in the NHI Bill has created much uncertainty and speculation about what the future is likely to look like. Potential infringement of the NHI Bill on Section 25: The right to property The Bill does away with a medical scheme’s ability to provide and charge for services rendered under the NHI regime through Section 33 (cited earlier). This, it is argued, may constitute an “unlawful infringement of a medical scheme’s right to property”, which is specifically prohibited by Section 25 of the Bill of Rights (Kirby, 2016). There was consensus amongst participants that stating that the NHI infringes on the right to property is a weak argument. While the NHI Bill may revoke the right of medical schemes to render financing for comprehensive health services, there is nothing in the Bill to suggest that it will appropriate the assets of medical schemes. However, the bill is suggesting that medical schemes will no longer be able to provide to their clients base the full suite of medical scheme products. Furthermore, the state has the right to appropriate service delivery in certain areas, for example housing. This does not, however, preclude the private sector from also providing housing. Issue about the NHI Bill’s specific exclusion of applicability of the Competition Act of 1998 The NHI Bill (National Department of Health, 2019) excludes the NHI Fund and related activities from the ambit of the Competition Act: “S3(5): The Competition Act, 1998 (Act No. 89 of 1998), is not applicable to any transactions concluded in terms of this Act.” While participants thought this will be helpful for the functioning of the private health sector by enabling collective price bargaining, this section in the Bill needs to be made clearer. More specifically, it needs to clearly stipulate the rationale for why the exclusion is required. Participants argued that many of the problems in the healthcare sector, including the absence of proper pricing guidance, were caused by the Competition Act and the section which excludes the Bill from the Competition Act was merely intended to address this shortcoming. Roundtable participants concluded that in principle the NHI Bill’s exclusion from the ambit of the Competition Act was a non-issue. Potential infringement of the NHI Bill on Section 36: “The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including...” There is a suggestion that the Bill may fall short of the limitations clause contained in Section 36 of the Constitution, which states that “the rights in the Bill of Rights may be limited only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including … (d) the relation between the limitation and its purpose [and] (e) less restrictive means to achieve the purpose”. It was mentioned that there are major concerns around the Bill’s ability to meet the requirements of rationality and being justifiable, given the potential infringements on rights. A restriction of rights needs to be clearly substantiated. How does NHI set out to achieve health systems objectives? The limitations in this section cannot be abused. In weighing whether there are less restrictive means to achieve the purpose, limitations have to be understood relative to those in other open, democratic societies. However, ultimately the limitation clause can work in both directions – limitations to public and private sector. Rights are not absolute and can be limited/infringed. To the extent that proposals are currently linked to dates (Chapter 9 of NHI Bill) and that the Minister can determine that the NHI is fully implemented, there are irrational elements contained in the Bill. It was argued that the implementation of NHI should be linked to clear, measurable milestones which should be referred to in the Bill (rationality argument). There was a strong opinion in the group that if a landing point cannot be found for the implementation issue, the bill can be rationally challenged. General issue: Vagueness and non-specific nature of the Bill The discussion on the Bill’s vagueness was introduced through a question on whether the Bill is so vague that it can challenge the notion of the rule of law. Is there a legal precedent that could show the way in terms of the specificity required in a bill to allow for implementation? It was agreed that there will always be an element of uncertainty. But the question still remained: What is the legal test for certainty and predictability? Administrative law could provide a lens/solution to this question. Ultimately, the policies and implementation approaches may matter more than the law itself. For the NHI project to be successful, concerns about the vagueness of the law, and therefore potentially also the vagueness of supporting implementation policy, have to be internalised to the system (Section 33, Rights of Just Administrative Action). There are standards to this, but their application makes a huge difference. Emerging issue: Intergovernmental relations in the Bill A further area of concern with the Bill is that it does not clearly deal with the issue of inter-governmental relations; in particular, with provincial competence and the split in service delivery responsibilities between the various levels of government – national, provincial and municipal. It is not clear what the immediate implications are. The most relevant Section of the NHI Bill (National Department of Health, 2019) is in Section 32: “S32(2) Subject to the transitional provisions provided for in section 57, the Minister may introduce in Parliament proposed amendments to the National Health Act for the purpose of centralising the funding of health care services as required by this Act, and in such cases the Minister may— (a) delegate to provinces as management agents, for the purposes of provision of health care services, and in those cases the Fund must contract with sections within the province such as provincial tertiary, regional and emergency medical services;” This type of intervention into a distributed function will have real implications for constitutionally allocated responsibilities, specifically also around procurement (Section 217). During the discussion, it was mentioned that at NEDLAC the NHI discussion is that, in principle, funding following function. Amendments will have to be made to the National Health Act to change the provincial functions. The idea is that government will amend inter-governmental responsibilities in the Health Act. The Department of Health is arguing that the level at which services are delivered does not have to be re-specified in the Constitution itself if it be amended in the National Health Act. However, this will depend on whether the National Health Act is itself constitutional. Ultimately, concerns around inter-governmental relations at the level of service delivery respond to the issue of whether the Bill is primarily focused on financing, service delivery or both. While NHI is presented as a financing model, the Bill goes much further and has significant implications for health service delivery. 4. Request for legal clarification We end this brief with a request for legal clarification on the above potential constitutional and legal issues raised by the NHI Bill. In particular, this is a brief for interested and concerned Senior Counsel to provide opinions on the issues and questioned raised in this document. References Anonymous. 2019. Confidential correspondence between the CEO of the Inclusive Society Institute and academic attached to the University of the Witwatersrand, 5 December 2019. Botha, C. 2019. Submission on the National Health Insurance Bill [B11-2019] (“NHI Bill”). Cape Town: Centre for Constitutional Rights, The FW de Klerk Foundation. Cohen, T. 2019. Is the National Health Insurance Bill open to a constitutional challenge? Business Maverick. 20 August. [online] Available at: https://www.dailymaverick.co.za/article/2019-08-20-is-the-national-health-insurance-bill-open-to-a-constitutional-challenge/[accessed 9 June 2020] Constitutional Court of South Africa. 2005. Affordable Medicines Trust and Others v Minister of Health and Another (CCT27/04) [2005] ZACC 3; 2006 (3) SA 247 (CC); 2005 (6) BCLR 529 (CC) (11 March 2005). [Online] Available at: http://www.saflii.org/za/cases/ZACC/2005/3.html [accessed: 4 January 2020] Gerber, J. 2019. NHI Bill is constitutional - state law advisers tell Parliament. [Online] Available at: https://www.news24.com/SouthAfrica/News/nhi-bill-is-constitutional-state-law-advisers-tell-parliament-20190829 [accessed: 3 January 2020]. Inclusive Society Institute. 2020. Towards Inclusive Healthcare: Roundtable report on the National Health Insurance. Inclusive Society Institute, Cape Town. Available at: https://www.inclusivesociety.org.za/ [accessed 25 June 2020] Kirby, N. 2016. Many areas of concern in NHI paper. [Online] Available at: https://www.iol.co.za/businessreport/opinion/many-areas-of-concern-in-nhipaper-1970022 [accessed: 6 January 2019] Kirby, N. 2019. No mandatory requirement for South Africans to join fund under NHI bill as currently proposed. [Online] Available at: https://www.werksmans.com/legal-updates-and-opinions/ no-mandatory-requirement-for-south-africansto-join-fund-under-nhi-bill-as-currently-proposed/ [accessed: 3 January 2020]. Mokone, T. 2019. DA to fight NHI bill ‘all the way to the Constitutional Court’. [Online]. Available at: https://www.timeslive.co.za/politics/2019-08-13-da-to-fight-nhi-bill-all-the-way-to-the-constitutional-court/ [accessed 9 June 2020] Medical Brief. 2019. Little of the criticism of the NHI Bill is ‘constructive’. [Online] Available at: https://www.medicalbrief.co.za/archives/little-criticism-nhi-bill-constructive/ [accessed: 3 January 2020]. National Department of Health. 2019. National Health Insurance Bill. Pretoria: Government Gazette. Available at: https://www.gov.za/sites/default/files/gcis_document/201908/national-health-insurance-bill-b-11-2019.pdf [accessed 25 June 2020]. RSA. 1996. The Constitution of the Republic of South Africa, 1996. Act 108 of 1996. Pretoria: Republic of South Africa. Section27 and TAC. 2019. Section27 and TAC NHI Submission November 2019. [Online] Available at: http://section27.org.za/2019/11/56382/ [accessed: 3 January 2020]. Van den Heever, A. 2019. National Health Insurance Policy Bill Review. Expert review of the National Health Insurance bill submitted by the Minister of Health to Parliament in 2019 for submission to Parliament as a response to the request for public comment. Chair in the field of Social Security Systems Administration and Management Studies Wits School of Governance. [Online] Available at: https://docs.mymembership.co.za/docmanager/1e9aea2c-b58d-4aed-b5a2-96187d705a ee/00146348.pdf [accessed: 3 January 2019]. Van Staden, M. 2019. Proposed NHI throws constitutional caution to the wind. [Online] Available at: https://www.freemarketfoundation.com/article-view/proposed-nhi-throws-constitutional-caution-to-the-wind [accessed: 3 January 2019]. Venter, F. 2011. South Africa as a “Diceyan Rechtsstaat”, in Matthias Koetter / Gunnar Folke Schuppert, Understandings of the Rule of Law in various legal orders of the World, Rule of Law Working Paper Series Nr. 18, Berlin (ISSN 2192- 6905). [Online] Available at: http://wikis.fu-berlin.de/download/attachments/173736195/Venter+- South+Africa.pdf [accessed: 4 January 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Assessing the democratic consciousness, social cohesion and integration, and the life experiences of the LGBT+ community The Inclusive Society Institute is committed to promoting the values enshrined in the South African Constitution. As its name suggests, the institute is working towards the establishment of an inclusive society, that works for all that live in and call South Africa home. The LGBT+ community are an integral part of South African society. The moral and ethical objective of guaranteeing all citizens the right to freely live and express their gender, sexual and sexual orientation preferences, aimed at correcting past injustices is enshrined in the Constitution and post-1994 legislation. This survey, which was undertaken over the period 10 – 22 June 2020, assesses the lived experiences against the stated public policy objectives. And given that the survey was executed at the time that the COVID-19 lockdown was put in place to curb the pandemic, it included an appraisal of the impact that the regulations have had on the LGBT+ community. Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, stem from the survey on the lived experience of the LGBT+ community in South Africa, which took place over the period 10 – 22 June 2020. Authors: Mpho Buntse and Daryl Swanepoel Proofreading: Olivia Maine | Graphic Designer: Nini van der Walt Content 1. Setting the scene and objectives of the survey 2. Methodology 3. Key findings 3.1 Findings in relation to constitutional and democratic rights 3.2 Findings in relation to social cohesion and the integration of the LGBT+ community into South African society 3.3 Findings related to attitudinal changes toward the LGBT+ community within South African society 3.4 Findings in relation to the family environment of the LGBT+ community 3.5 Findings in relation to the health of the LGBT+ community 3.6 Findings in relation to the impact of the measures taken to combat the COVID-19 pandemic on the LGBT+ community 3.7 Testing of the national validity of the results 3.8 Testing male versus female (as assigned at birth) differentiation 4. Recommendations 5. Summary of detailed data 5.1 Summary of data for all respondents 5.2 Summary of data for Gauteng respondents 5.3 Summary of data for Female versus Male comparative analysis using gender assigned at birth List of figures Figure 2.1: Breakdown of respondents by gender identity and sexual orientation Figure 2.2: Breakdown of respondents by province Figure 3.1: Analysis of LGBT+ community’s awareness with regard to their constitutional rights and opinion regarding whether the rights are adequate Figure 3.2: Analysis of LGBT+ perception of being discriminated against due to their gender identity/sexual orientation Figure 3.3: Analysis of service areas where the LGBT+ community are experiencing discrimination Figure 3.4: Analysis from whence discrimination is experienced by the LGBT+ community Figure 3.5: Analysis of levels of discrimination against the LGBT+ community within the cultural and religious environment Figure 3.6: Analysis of attitudinal changes in society towards the LGBT+ community Figure 3.7: Analysis with regard to the level of treatment – public versus private sector Figure 3.8: Analysis-degree to which the LGBT+ community function within a healthy family environment Figure 3.9: Analysis-degree to which LGBT+ community is being subjected to abuse Figure 3.10: Analysis of the state of the LGBT+ community’s mental and non-mental health segmented by age Figure 3.11: Analysis of the difficulties in accessing services (for the 30 per cent of respondents with problems in this regard) Figure 3.12: Gauteng province versus national comparative analysis of selected questions to test validity of national results Figure 3.13: Analysis of the lived reality of the LGBT+ community – Female versus Male using gender assigned at birth Figure 3.14: Analysis of various differentiated life experiences – Female versus Male using gender assigned at birth Figure 3.15: Analysis of discrimination against LGBT+ – Female versus Male using gender assigned at birth Figure 3.16: Analysis of COVID-19 measures on LGBT+ community – Female versus Male using gender assigned at birth 1. Setting the scene and objectives of the survey The Bill of Rights in the Constitution of the Republic of South Africa (RSA, 1996), guarantees that no one may be discriminated against by the state or any other person on the grounds of, amongst others, gender, sex, and sexual orientation. It further states that national legislation must be enacted to prevent or prohibit unfair discrimination on these grounds. In a study commissioned by the African National Congress (ANC), it is suggested that the Post-Apartheid dispensation in South Africa paved the way for a “progressive global precedent for the Lesbian Gay Bisexual Trans Intersex and Queer equality” (Brown & Buntse, 2020). South Africa, they say, was the first country to recognise LGBT+ rights in its constitution and the country has subsequently developed a suite of policies and laws to give practical effect to these rights. This, Brown & Buntse argue, has made South Africa “a global benchmark for the rights of sexual minorities”. Despite these advances, it is suggested that the LGBT+ community remains subjected to many adverse predispositions (Brown & Buntse, 2020). They argue that several of which are deep-rooted in colonial systems and institutional cultures that are antagonistic towards the LGBT+ community (Brown & Buntse, 2020). This, they say, has again been aptly exposed during the COVID-19 pandemic, where several human rights violations have illustrated that marginalised groups, including women, children, the LGBT+ community and people living with disabilities, have remained at the receiving end (Brown & Buntse, 2020). Brown & Buntse (2020), in their study proposal to the ANC, identified seven pillars that articulate the peculiar policy nuances that often disenfranchise the LGBT+ community as it relates to the provision and access to public services. These pillars are education and youth development; access to healthcare and healthcare services; safety, security and psychosocial services; experiences when accessing essential services; homelessness and access to housing; job creation, employment and access to the economy; and queer migrants and asylum seeking. The study proposed by Brown & Buntse (2020) aims to assess how South Africa’s policy frameworks relating to the LGBT+ community are ensuring their equitable benefit from government services. It will investigate the lived experiences of the LGBT+ community, as it relates to their economic and social inclusion. In addition, given the timing of the study, it was also deemed fit to assess the effect of the COVID-19 pandemic on the local LGBT+ community. The survey covered in this report serves to gather empirical data to support the aforementioned study. It will examine the level of consciousness of the LGBT+ community with regard to their constitutional and democratic rights, the level of social acceptance, integration and cohesion, and the attitudinal changes towards the LGBT+ community since the advent of democracy in 1994. Furthermore, it will delve into their lived experiences as it relates to the family, cultural, religious and personal health environment. The survey period ran from Wednesday, 10 June 2020 and closed at the end of business on Monday, 22 June 2020. It should therefore be viewed as a snapshot of the LGBT+ community’s sentiment during said period. The Inclusive Society Institute offers this survey report as a contribution towards the important study envisaged by the ANC. It will also promote the outcome of the study to public policymakers as a further contribution towards consolidating national reflexion on this key human rights issue. The institute supports measures that will advance equality, inclusiveness and solidarity. 2. Methodology In reviewing the LGBT+ population size in South Africa, this survey relied on a UK Home Office report published in 2017, wherein it is estimated that around 500,000 South Africans identify themselves as gay, lesbian, bisexual or gender non-conforming. Furthermore, up to three million present themselves in a gender non-conforming way (UK Home Office, 2017). To test its validity, a second report, published by The Other Foundation in association with the Human Sciences Research Council (The Other Foundation / HSRC, 2016) was consulted. It revealed a similar number of 530,000 adult men and women, of all population groups, both rural and urban, and across age groups, self-identify as either homosexual, bisexual, or gender non-conforming in some way – the same ratio as observed in other countries around the world. According to the study, more than six times as many people (approximately 430,000 men and almost 2.8 million women) present themselves in public (i.e. they dress and act) in a gender non-conforming way. Sampling, data collection and data subjects The survey questions were disseminated by electronic means via a number of databases associated with LGBT+ organisations. Recipients of the survey were members of the LGBT+ associations, thereby ensuring the quality of the sample, given that “the more completely the sampling frame covers the target population”, the higher the quality of the sample (European Social Survey, 2016). Standard data cleansing and validation procedures were carried out. In total, 288 valid responses, drawn from across all nine provinces, were received. Whilst the largest proportion represented cisgender (male) in terms of gender identity, there was a good spread across all classifications. In terms of sexual orientation, the greater majority of responses came from individuals that consider themselves to be homosexual. Figure 2.1: Breakdown of respondents by gender identity and sexual orientation Confidence level and margin of error In determining sample size, the institute normally relies on the 95 per cent level of confidence and five per cent margin of error, which is common for social sciences studies (Royse, 2008:209). In this particular survey, the level of confidence remains at 95 per cent, although the margin of error, at around six per cent, is slightly lower. Sample size To achieve a confidence level of 95 per cent and a margin of error of approximately 5 per cent, the institute is guided by the table published in Israel (1992) and Cochran’s (1963) formula for calculating a sample for proportions. The former suggests a sample size of 400 obtained responses and the latter, 385. In terms of the aforementioned table, 204 responses for a population size exceeding 100,000 would result in a margin of error of 7 per cent. The 288 responses received in this survey would thus suggest a margin of error midway, that is around 6 per cent. To further confirm the expected margin of error, the institute used the sample size calculator of Creative Research System (N.d.). By entering the estimated LGBT+ population sizes as suggested in the first paragraphs of this section, into the calculation, a 5 per cent margin of error for this size of population would require 384 respondents, a 6 per cent margin of error, 267 responses, and a 7 per cent margin of error, 196 responses. These calculations correspond closely with that of Israel, as outlined in the preceding paragraph. Limitation This survey was done by means of electronic dissemination. This therefore restricts the interpretation to be representative of those members of the LGBT+ community that have access to electronic means of communication. Furthermore, whilst pro-active steps have been taken to ensure data integrity, and all indications are that data is beyond reproach, the possibility of external manipulation of data input cannot be completely excluded. Question set The survey contained a total of 32 questions, which could be grouped into seven parts. Part 1 – questions of a demographic nature 1. What is your age? 2. What is your biological gender / sex assigned at birth? 3. What is your gender identity? 4. What is your sexual orientation? 5. In which province do you reside? 6. What is your marital status? 7. What is your occupational status? 8. What is your level of education? Part 2 – questions relating to constitutional and democratic rights 9. Are you aware of your constitutional rights as it relates to gender identity and sexual orientation? 10. Do you believe these constitutional rights are adequate policy? 11. Do you believe government is doing enough to guarantee your rights as it relates to gender identity and/or sexual orientation? 12. What is your lived reality in everyday South African society? Part 3 – questions relating to social cohesion and integration 13. Have you experienced discrimination as a part of the LGBT+ community in terms of social integration? 14. If yes to question 13 above, please indicate if you experienced discrimination in the following fields: Education and youth development; safety, security and psycho-social services; access to essential services; homelessness and access to housing; job creation, employment and asylum seeking; other. 15. If yes in question 13, where is the discrimination coming from: Government departments, private and NPO/NGO sector; individuals; other? 16. Do you experience any form of rejection and/or discrimination when wanting to express and participate in your own ethnic cultural practices? 17. Do you experience any form of rejection and/or discrimination when wanting to express your personal religious beliefs and/or activities? Part 4 – questions relating to attitudinal changes in South Africa 18. Do you believe that tolerance in terms of gender identity and sexual orientation has improved within South African society since the advent of democracy in 1994? 19. In your opinion, to what degree has the tolerance improved within South African society since the advent of democracy in 1994? 20. Do you believe that government departments give you fair treatment when accessing services? 21. Do you believe that the private and NPO/NGO sectors give you fair treatment when accessing services, goods or products? Part 5 – questions relating to the family environment 22. Are you accepted within your family for your gender identity and/or sexual orientation? 23. Are you in a happy relationship with your family and friends? 24. Are you abused in any way within your domestic environment? 25. If you are abused within your domestic environment, how is it manifested: Physical, psychological, other? Part 6 – questions relating to health 26. Do you have any adverse non-mental medical conditions such as diabetes, HIV/AIDS or TB? 27. Do you have any mental conditions, such as depression? Part 7 – questions relating to the impact of COVID-19 28. Has your livelihood and earnings been impacted negatively by the measures taken to combat the COVID-19 pandemic? 29. Have you experienced any difficulties in accessing basic services and food? 30. If yes in question 29 above, please specify what: Health services, security services, social services (excluding food), food, other. 31. Are you in support of the measures taken by the government to combat the COVID-19 pandemic? 32. Has your domestic environment under COVID-19 related lockdown improved, remained stable, become strained, experienced domestic intolerance or become violent? Testing male versus female (as assigned at birth) differentiation Of the 288 individuals’ responses received, 68 per cent were received from male biological gender as assigned at birth, and 42 per cent from those that identify as cisgender (male). The results are therefore heavily weighted in their favour. Furthermore, without a deeper analysis it will not be possible to determine whether there is a material differentiation to be made in terms of the results for female as assigned at birth versus male assigned at birth. The data, for selected questions, was accordingly also subjected to a deep­er analysis by comparing the results obtained between male and female (as assigned at birth). The questions chosen for this deeper examination were: What is your lived reality in everyday South Africa? Have you experienced discrimination as part of the LGBT+ community in terms of social cohesion? In what field have you experienced discrimination as part of the LGBT+ community? Do you experience any form of rejection or discrimination when wanting to express or participate in your own ethnic cultural practices? Do you believe that government departments give you fair treatment when accessing services? Are you accepted within your family for your gender identity and/or sexual orientation? Are you in a happy relationship with your family and friends? Are you abused in any way within your domestic environment? Do you have any adverse non-mental medical conditions such as diabetes, HIV/Aids, TB? Do you have any mental health conditions such as depression? Has your income/livelihood been impacted negatively by the measures taken to combat the COVID-19 pandemic? Testing of national validity Given that just half of the responses were received from the Gauteng province, with the balance more widely spread across the remaining provinces, it was important to do sampling within the Gauteng province itself, in order to ascertain whether the national av­erage was reflected in the provincial results as well. If this was so, it could comfortably be concluded that the national average stood. On the contrary, were it to be found that the provincial results differed considerably from the national average with regard to the views on the questions posed, an argument could be made as to the validity of the national conclusions. To this end, a sample question was selected from each of the questions set parts, except part one, which relates to questions of a demographic nature. The questions selected were: Part 2: Do you believe that government is doing enough to guarantee your rights as it relates to gender identity and/or sexual orientation? Part 3: Have you experienced discrimination as part of the LGBT+ community in terms of social integration? Part 4: Do you believe that tolerance in terms of gender identity and sexual orientation have improved within South African society since the advent of democracy in 1994? Part 5: Are you abused in any way within your domestic environment? Part 6: Do you have any mental conditions, such as depression? Part 7: Are you in support of the measures taken by government to combat the COVID-19 pandemic? Figure 2.2: Breakdown of respondents by province 3. Key findings The report covers the data captured for 288 individuals from across all provinces, and all LGBT+ gender identity and sexual orientation categories. It is heavily weighted in favour of male assignment at birth and cisgender (male), requiring the need for the findings to be examined more deeply in terms of assessing the level of differentiation between their lived experienced compared to that of the female at birth, cisgender (female) respondents. This report restricts itself to a comparison between male and female categorisation as assigned at birth. Furthermore, since more than half of the responses emanated from individuals residing in the Gauteng province, the data needed to be analysed in relation to the national validity of the results. The members of the LGBT+ community surveyed represent a population size of between 500,000 and 530,000 South Africans who identify themselves as gay, lesbian, bisexual or gender non-conforming. Furthermore, it represents up to three million individuals who present themselves in a gender non-conforming way. These findings restrict themselves to six main themes: (i) Constitutional and democratic rights (ii) Social cohesion and integration (iii) Attitudinal changes in South Africa with regard to the LGBT+ community (iv) The LGBT+ community and their family environment (v) The state of health of the LGBT+ community (vi) The impact of the measures taken to combat COVID-19 on the LGBT+ community 3.1 Findings in relation to constitutional and democratic rights The overwhelming majority of respondents indicated that they were aware of the constitutional rights as it relates to gender identity and sexual orientation. Eighty-six per cent indicated that they were aware of their rights, whilst only 14 per cent were not. However, this does not correlate with their belief that these constitutional rights are in themselves adequate. Only 59 per cent believe it to be, whilst 41 per cent believe it not to be adequate. This would suggest that public policymakers need to further survey the community in order to assess where the policy gaps, real or perceived, remain. Moreover, whilst the majority of respondents are both aware of their constitutional rights and of the belief that sufficient policy is in place to protect those rights, the vast majority of respondents are of the opinion that government is not doing enough to guarantee their rights. Conversely put, it appears the LGBT+ community require from government additional policy work, policy implementation and enforcement. Figure 3.1: Analysis of LGBT+ community’s awareness with regard to their constitutional rights and opinion regarding whether the rights are adequate The aforementioned data indicates that whilst the LGBT+ community are aware of their rights, and in the main believe policy to be sufficient, it seems to fail the implementation test. This is confirmed when assessing the lived reality of the LGBT+ community in South Africa. Only 34 per cent feel free (14 per cent) or mostly free (20 per cent) to express their gender identity and/or sexual orientation as they please. The balance (two-thirds) are of the opinion that bias and discrimination takes place to various degrees. Twenty-four per cent feel subtle bias and/or discrimination, 25 per cent some bias and discrimination and 18 per cent feel mistreated or discriminated against because of their gender identity and/or sexual orientation. Figure 3.2: Analysis of LGBT+ perception of being discriminated against due to their gender identity/sexual orientation 3.2 Findings in relation to social cohesion and the integration of the LGBT+ community into South African society In terms of feeling fully part of the South African society, the large majority of the LGBT+ community believe it not to be the case. Seventy-two per cent of respondents indicated that they had experienced discrimination in terms of social integration. The discrimination, it appears, is to be found across a broad range of areas, with more than half of the respondents indicating that they had experienced discrimination, citing education and youth development (69 per cent), safety, security and psycho-social services (65 per cent) and homelessness and access to housing (56 per cent) as issues needing attention. Just under half of said respondents (48 per cent) experienced discrimination in terms of access to healthcare and healthcare services, whilst 31 per cent cited access to essential services, and 22 per cent job creation, employment and asylum seeking as areas of discrimination. Eleven per cent made mention of a series of other areas of concern. Figure 3.3: Analyses of service areas where the LGBT+ community are experiencing discrimination The majority of the LGBT+ community did not consider either government departments or the private and NPO/NGO sector as the main perpetrators of discrimination, but an overwhelming majority cited individuals as the main purveyors thereof. Nevertheless, the levels of discrimination experienced across both the public and private sectors remain as an issue deserving attention. With regard to the public sector, 50 per cent did not experience discrimination from within the ranks of the public sector, in the private sector 55 per cent did not, whilst 78 per cent experienced discrimination against them by individuals. Figure 3.4: Analysis from whence discrimination is experienced by the LGBT+ community The ability for the LGBT+ community to exercise their cultural practices and/or religious beliefs, remains a major stumbling block in terms of social cohesion. Fifty-nine per cent of respondents experienced some form of rejection and/or discrimination when wanting to exercise their cultural rights, and the percentage grew to 67 per cent when wanting to express their personal religious beliefs. Figure 3.5: Analysis of levels of discrimination against the LGBT+ community within the cultural and religious environments 3.3 Findings related to attitudinal changes toward the LGBT+ community within South African society There has been a material shift in society’s acceptance of the LGBT+ community since the advent of democracy in 1994. Seventy-eight per cent of respondents were of the opinion that there was a greater level of societal tolerance in terms of individuals expressing their preferred gender identity and/or sexual orientation. Ninety-two per cent of respondents believed attitudes were improving, whilst only 8 per cent believed there were no real changes or improvements. The opinion as to the extent of the improvements differed considerably, with only 5 per cent of the opinion that there was complete tolerance of the LGBT+ community. Fifteen per cent believed there were some major changes and/or improvements, whilst 30 per cent believed that the changes/improvements were adequate. Forty-two per cent of respondents were of the opinion that only some significant changes and/or improvements had occurred. The results would suggest that whilst South Africa is certainly advancing in terms of the promotion of LGBT+ rights and inclusion, there is still some way to go before the LGBT+ community will feel completely included as fully fledged members of society. Figure 3.6: Analysis of attitudinal changes in society towards the LGBT+ community In terms of the LGBT+ community being treated fairly, the majority of respondents felt that both the public and private sectors were handling them as such, albeit to a far greater degree in the private sector. Fifty-four per cent of respondents were of the opinion that government departments treated them fairly when accessing services, whilst 70 per cent were of the opinion that the private sector treated them fairly when accessing services or when procuring products or goods. Figure 3.7: Analysis with regard to the level of treatment – public versus private sector 3.4 Findings in relation to the family environment of the LGBT+ community Generally speaking, the LGBT+ community function within a healthy family environment. Sixty-five percent of respondents indicated that their family accepted them for whom they are, and 86 per cent indicated that they were in a happy relationship with family and friends. Only 18 per cent indicated that they were abused in any way within the domestic environment. Figure 3.8: Analysis-degree to which the LGBT+ community function within a healthy family environment In terms of the 18 per cent of respondents that indicated that they were subjected to abuse, the type of abuse varied, and individual respondents were often subjected to more than only one type of abuse. Thirty-nine per cent indicated that the abuse was physical, 92 per cent indicated that it was psychological, whilst 24 per cent pointed to some other type of abuse, for example the withholding of finances, or verbal insults. Figure 3.9: Analysis-degree to which LGBT+ community is being subjected to abuse 3.5 Findings in relation to the health of the LGBT+ community The majority of respondents indicated that they were healthy. In terms of their non-mental health, 73 per cent indicated that they had no adverse medical conditions, whilst 59 per cent of respondents indicated that they had no mental health conditions. Nevertheless, the level of respondents indicating some form of adverse health condition raises the alarm. To this end a deeper analysis was undertaken in terms of age segmentation. In the age group 25 and under, it was found that 20 per cent had non-mental adverse health conditions and 53 per cent had some form of adverse mental health condition. In the age group 36 to 55, the results were 28 per cent adverse non-mental health conditions and 36 per cent some form of adverse mental health condition. The result for the age group 55 and above was 13 per cent adverse non-mental and 33 per cent some form of adverse mental health condition. The aforementioned results point to a significant finding. In terms of non-mental health conditions, the different age segments indicated similar patterns with marginal differences. However, in terms of adverse mental health conditions such as depression, even though the level across the LGBT+ community indicates a worrying pattern, it is especially high amongst the youth, that is persons under the age of 26. This would indicate a potential mental health crisis in the making. Figure 3.10: Analysis of the state of the LGBT+ community’s mental and non-mental health segmented by age 3.6 Findings in relation to the impact of the measures taken to combat the COVID-19 pandemic on the LGBT+ community Under this section, three topics are addressed: What is the level of support amongst members of the LGBT+ community for the measures taken by the authorities to combat the COVID-19 pandemic, how have these measures impacted their livelihoods and to what extent has it effected their domestic relationships. There is a significant majority supporting the measures taken by the authorities to combat the COVID-19 pandemic. Sixty-nine percent of respondents are in favour of the measures. Nevertheless, around a third (31 per cent) of respondents indicated that they are not in favour of the measures, which is higher than previous findings of surveys conducted by the institute amongst a broader segment of society. In a June 2020 survey amongst supporters and members of the ANC, it was found that only 4 per cent of respondents were not in favour of the measures (ISI, 2020). The aforementioned support in spite of the material impact that the measures have had on the income/livelihood of the LGBT+ community. Seventy-two per cent of respondents indicated that the measures taken by government negatively impacted their income/livelihood. And whilst the majority of respondents (70 per cent) indicated that they did not have difficulties in accessing basic services, a significant 30 per cent did. For those respondents indicating access difficulties, serious constraints appear to be spread across a number of service delivery areas. Sixty-six per cent had difficulties in accessing health services, 52 per cent had difficulties in accessing security services, 77 per cent had problems in accessing social services (excluding food) and 79 per cent had trouble in accessing food. Figure 3.11: Analysis of difficulties in accessing services (for the 30 per cent of respondents with problems in this regard) And finally, whilst domestic relationships seem to be holding in the main, there appears to be a disturbing negative change in the home environment. Sixty-one per cent of respondents indicated that their relationships had improved (13 per cent) or remained stable (48 per cent). Still, 39 per cent of respondents reported a turn for the worse. Thirty-three per cent indicated that their domestic relationships had become strained, 3 per cent indicated domestic intolerance, with a further 3 per cent indicating that the relationship had become violent (either physically or psychologically). Read together with the high levels of adverse mental health conditions registered in section 3.5 of this report, it would be prudent for the authorities to design a social intervention to tackle the dual impact of the COVID-19 measures and the normal lived reality of the LGBT+ community. 3.7 Testing of the national validity of the results As is elaborated on in the methodology section of this report, given that just half of the responses were received from the Gauteng province, it was necessary to compare the Gauteng provincial responses to the national responses. This was to conclude whether the Gauteng outcomes distort the national outcome in any way. To this end, the data of six questions was analysed and compared to the national outcome, so as to enable a consideration as to whether the variations impact the validity of the national results. With regard to the question as to whether the respondents believed that government is doing enough to guarantee constitutional rights attached to gender identity and/or sexual orientation, 21 per cent of Gauteng respondents were of the opinion that enough was being done, whilst 79 per cent were of the opinion that this was not the case. The national response to this same question was a close correlation, with 23 per cent in the affirmative and 77 per cent in the negative. With regard to the question as to whether the respondents experienced any discrimination from being part of the LGBT+ community, 69 per cent indicated that they were subjected to discrimination in some form, whilst 31 per cent did not. Once again, this is a close correlation with the national results, which reflected 72 per cent of respondents experiencing discrimination, and 28 not. With regard to the question as to whether tolerance for the LGBT+ community had increased since the advent of democracy in 1994, 78 per cent were of the opinion that it had, whilst 22 per cent were of the opinion that it had not. Here the provincial response was an exact match with the national response. With regard to the question as to whether the respondents experienced any domestic abuse, in the provincial response, 18 per cent indicated that they had, whilst 82 per cent said they had not. Here too the provincial response is an exact match to the national response. With regard to the question as to whether the respondents had any mental health conditions such as depression, the provincial response matched the national response. And finally, with regard to whether the respondents supported the measures taken by government to combat the COVID-19 pandemic, the provincial versus national response variation was marginal. At the provincial level 70 per cent of responses supported the measures, whilst at the national level it is reflected as 69 per cent. From the aforementioned comparative analysis, it is evident that the lived reality of the LGBT+ community in the Gauteng province mirrors that of the national LGBT+ community. The institute is thus of the opinion that in light of the clear trend in similarities across all data sets, the validity of the national trends have been confirmed. The national results conveyed in this report can, in the opinion of the institute, be relied upon. Figure 3.12: Gauteng province versus national comparative analysis of selected questions to test validity of national results 3.8 Testing male versus female (as assigned at birth) differentiation A deeper analysis was done to determine whether there is a material differentiation to be made in terms of the responses from female (as assigned at birth) participants versus male (as assigned at birth) participants. The lived reality in everyday South Africa In terms of their lived reality, for both groups the response was substantially similar across the spectrum, with male respondents slightly more empowered than females. Whereas 14 per cent of males felt free to express their gender identity and/or sexual orientation, only 10 per cent of females felt the same. As for the rest of the lived reality questions, the percentages allocated to each of the groups were neck and neck. Whereas 20 per cent of males felt mostly free to express their gender identity and/or sexual orientation, 21 per cent of females felt so. The response of both groups to the feeling of subtle bias was the same – 24 per cent. Whilst 24 per cent of males felt some bias and/or discrimination, 25 per cent of females felt so. And where 18 per cent of males felt mistreated, 20 per cent of females felt so. Experienced discrimination as part of the LGBT+ community and the fields of discrimination A far greater percentage of males experienced discrimination in terms of social cohesion as opposed to females. For males it was 74 per cent, and for females it was 66 per cent. That being said, females experienced discrimination over a wider range of areas than did males. The differentiation is illustrated below: Rejection or discrimination when wanting to express or participate in own ethnic culture Female respondents indicated a slightly higher margin of discrimination (62 per cent) than did male respondents (58 per cent). But in terms of both groups, the percentages were high and worthy of policy interventions to address the problem, which is clearly against the spirit of the rights embodied in the Constitution. Fair treatment by government when accessing services The trends regarding treatment by the authorities when accessing services were similar, although males did find them to be fairer than females. Whereas 56 percent of males found the authorities to be fair, this dropped to 51 per cent amongst female respondents. Regardless of the slight differentiation, there is a high percentage of dissatisfaction to which the authorities need to pay attention, as it goes against the Batho Pele (people first) ethos of the public service. The family environment There was a large differentiation between male and female respondents as to acceptance within the family environment with regard to their gender identity and/or sexual orientation. Here too, males were better off than females. Sixty-eight per cent of males found acceptance for their preferences within the family environment, whilst this dropped to 56 per cent amongst female respondents. However, with regard to happiness within the family environment, both groups reflected a high level of contentment. For males it was 86 per cent, and for females it was 85 per cent. Notwithstanding the high level of contentment, a material presence of abuse within the domestic environment was registered for both. In this instance, females were once again in a more precarious position than males, and substantially so. Twenty-one per cent of females indicated that they were subjected to abuse within the domestic environment, as opposed to 15 per cent of males. Health Whilst females were healthier than males in terms of non-mental health conditions, in terms of mental health, males were less affected. In terms of non-mental health, 27 per cent of males were affected as opposed to only 14 per cent of females. And in terms of mental health, 38 per cent of males were affected as opposed to 45 per cent of females. The impact of COVID-19 The income and livelihoods of both male and female respondents were hard hit by the measures introduced by the authorities to combat the COVID-19 pandemic, with males experiencing slightly more hardship than females. Seventy-four per cent of males indicated that their income and/or livelihoods were negatively affected, as opposed to 67 per cent of females. And similarly, male and female respondents both registered high levels of difficulties with regard to accessing basic services during the lockdown. In this instance the roles were, however, reversed, with 27 per cent of males indicating that they had experienced difficulties during the COVID-19 lockdown in accessing basic services, with it rising to 33 per cent for females. Conclusion Across a number of areas, both male and female members of the LGBT+ community face challenges, for which the authorities need to consider significant policy interventions. Being a female member of the LGBT+ community means that those challenges become more pronounced. In all areas explored in this section of the report, females have been placed in a less favourable position than their male counterparts. But for the loss of income during the COVID-19 lockdown period and their physical health, females were in a worse position than males. In terms of their lived reality, rejection or discrimination when wanting to express or participate in their own cultural practices, and treatment by government when accessing services, the differentiation, being within a five per cent range, was not so pronounced. In terms of societal discrimination and the impact of the COVID-19 measures, more so. But in terms of conditions within the family, which includes being subjected to abuse, and their mental health, the differentiation was quite stark. This deeper analysis of the data suggests that whilst public policy could be improved to address the concerns and challenges within the LGBT+ community in general terms, certain female-focused policy interventions are required to tackle a number of areas of acute need. Figure 3.13: Analysis of the lived reality of the LGBT+ community – Female versus Male using gender assigned at birth Figure 3.14: Analysis of various differentiated life experiences – Female versus Male using gender assigned at birth Figure 3.15: Analysis of discrimination against LGBT+ – Female versus Male using gender assigned at birth Figure 3.16: Analysis of COVID-19 measures on LGBT+ community – Female versus Male using gender assigned at birth 4. Recommendations From the data processed in this survey it can be surmised that the constitutional and democratic rights of the LGBT+ community in South Africa are in nature progressive and compare favourably within the global context. As a generalisation it can similarly be deduced that the lived experience of the community is in the main positive. Nevertheless, full inclusion, tolerance and acceptance is still some way off. To achieve the complete realisation of LGBT+ rights still requires a great measure of work with regard to public policy development, the promotion of tolerance, constitutional and democratic adherence and full societal understanding and acceptance. To this end, the Inclusive Society Institute ventures three recommendations in pursuit of the full recognition and embodiment of the noble ideals embraced by the South African Constitution and legislation affecting this particular community. Recommendation 1 The findings of this survey suggests that there remains a material disparity between the constitutional and legislative framework in relation to the advancement of LGBT+ rights and the practical implementation and execution of those rights within both the public and private sphere of society. To this end, it is proposed that the authorities embark on a systematic programme to sensitise both the civil service and the broader public on their obligations towards the LGBT+ community, and more so, the manifestation of humanitarian ethos, inclusivity and solidarity. It is recommended that the Department of Public Administration design and implement an awareness programme aimed at sensitising the public service as to the rights of the LGBT+ community to receive equal and quality service from all civil servants. Likewise, the department should develop a reporting and monitoring mechanism aimed at ensuring adherence to the constitutional and legislative obligations of public officials. More generally, all government departments and provinces need to ensure the mainstreaming of issues of the LGBT+ community in all their policies. It is further recommended that the Commission for the Promotion and Protection of Cultural, Religious and Linguistic Communities prioritise engagements aimed at eliminating vestiges of discrimination with the religious and cultural fraternities. Other Chapter 9 Institutions such as the SA Human Rights Commission and the Commission for Gender Equality also have a role in creating awareness and monitoring discrimination. Given the high levels of discrimination from individuals, general awareness and social behavior change campaigns will be critical, to promote and advance rights of LGBT+ persons. Recommendation 2 The levels of discrimination across all areas surveyed are quiet worrying. Although at face value the data suggests that the LGBT+ community are generally content with public policies and their lived experience, and although, in most cases, the majority have responded positively to the areas investigated in the survey, unacceptable levels of dissatisfaction, albeit to varying degrees, were detected across the spectrum of areas surveyed. To this end, the institute proposes that a series of focus groups be commissioned to deeper interrogate the findings of the survey. As it stands, policymakers are, through this survey, being made aware of the areas and extent of dissatisfaction, but a more pronounced understanding as to the substance of the displeasure is required in order to enhance and/or develop policy interventions that could effectively address the concerns. To this end, focus groups should, in line with the seven pillars identified by Brown & Buntse (2020), interrogate public policy as it relates to the LGBT+ communities, in the areas of: Education and youth development; Access to healthcare and healthcare services; Safety, security and psycho-social services; Accessing of essential services; Homelessness and access to housing; Job creation, employment and access to the economy; and LGBT+ migration and asylum seeking. In addition to the aforementioned focus groups, it is proposed that a further focus group be established to examine the prevalence of gender based and intimate partner violence, domestic abuse and hate crimes. Recommendation 3 In the course of analysing the data, extreme findings in relation to the presence of adverse mental health conditions amongst the LGBT+ community in general, but especially amongst the under 26 age group, were detected. Fifty-three per cent of respondents in the under 26 age group indicated that they were experiencing mental health conditions such as depression. This, in the opinion of the institute, points to a health crisis in the making. It is therefore proposed that a study be commissioned by the Department of Health, amongst others, to gain a fuller understanding of the causes and potential remedial policies and interventions that could be designed to mitigate against these acute disorders. 5. Summary of detailed data 5.1 Summary of data for all respondents 5.2 Summary of data for Gauteng respondents 5.3 Summary of data for Female versus Male comparative analysis using gender assigned at birth References Brown, A. & Buntse, M.H. 2020. Queering through COVID-19: A case study on the Social & Economic Impacts of Corona Virus Pandemic on the LGBTQI Community in South Africa and the ‘invisibility’ of the Queer voice by those Providing Government Services. Johannesburg: African National Congress Creative Research Systems. N.d. Sample Size Calculator. [Online] Available at: https://www.surveysystem.com/sdesign.htm [accessed: 13 April 2020]. European Social Survey. 2016. Sampling Guidelines: Principles and Implementation for the European Social Survey. [Online] Available at: https://www.europeansocialsurvey.org/docs/round8/methods/ESS8_sampling_guidelines.pdf [accessed: 13 April 2020]. Inclusive Society Institute (ISI). 2020. COVID-19: Its effect on ANC leadership and support. Cape Town: Inclusive Society Institute Israel, G.D. 1992. Determining sample size. Fact Sheet PEOD-6. Gainesville: University of Florida. Republic of South Africa (RSA). 1996. The Constitution of the Republic of South Africa, Act 108 of 1996. Pretoria: Government Printers Royce, D. 2008. Research methods in social work, 5th edition. Belmont: Thomson Higher Education United Kingdom, Home Office. 2017. Country Policy and Information Note South Africa: Sexual orientation and gender identity. [Online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/632481/South_Africa_-_SOGI_-_CPIN_-_v1_0_July_2017.pdf [accessed: 24 June 2020]. The Other Foundation (in association with the HSRC). 2016. Progressive Prudes. A survey of attitudes towards homosexuality & gender non-conformity in South Africa. Saxonwold, Johannesburg: The Other Foundation. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

A literature review informing critical policy choices report on the National Health Insurance Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. Authors: Percept Actuaries and Consultants 31 July 2020 ACKNOWLEDGEMENTS This research and publication was made possible through the kind support of the Friedrich Ebert Stiftung. It is part of a larger exchange of public policy and governance ideas between South Africa and Germany. Content Acronyms and abbreviations Executive summary 1. Introduction 2. A brief history of NHI policy evolution and key health system objectives SHI and NHI: Defining concepts 2.1 ANC Health Plan of 1994 2.2 Committee of Inquiry into NHI 1995 2.3 Department of Health SHI Working Group of 1997 2.4 The 1997 White Paper on the Transformation of the Health System in South Africa 2.5 The 2002 Taylor Committee of Inquiry into Comprehensive Social Security 2.6 The 2002 Ministerial Task Team for Implementing SHI 2.7 The 2009 Ministerial Advisory Committee on NHI 2.8 NHI Green Paper 2011 2.9 NHI White Paper 2017 2.10 NHI Bill 2019 2.11 Finding alignment across policy documentation and trajectory 3. A summary of key issues in the NHI Bill 4. The purchaser-provider split 4.1 Rationale behind a purchaser-provider split 4.2 Sticking points around the proposed purchaser-provider split 5. The single purchaser 5.1 Rationale behind the choice for a single purchaser 5.2 Sticking points around a single purchaser 6. The role of medical schemes limited to complementary cover 6.1 What does the NHI Bill state about the role of medical schemes? 6.2 Concerns with the role of medical schemes 7. Quality assurance and quality improvement mechanisms 7.1 What does the NHI Bill say about accreditation and quality? 7.2 How to measure quality 7.3 Concerns surrounding the proposed quality measurement 8. Financial considerations: what are we buying, and can we afford it? 8.1 What does the NHI Bill say about affordability? 8.2 What are we buying? 8.3 Can we afford it? 8.4 Who to cover? Refugees and undocumented migrants 9. Governance and accountability 9.1 Governance 9.2 Accountability 10. Timelines and progress milestones 10.1 What does the NHI Bill state about timelines? 10.2 What are some of the objections raised? 10.3 How can we prepare the way for NHI? 11. Potential constitutionality issues raised by the NHI Bill 12. Learnings from the Covid-19 pandemic for NHI 13. The way forward References Tables Table 1: Core policy objectives across the trajectory of UHC discussions in South Africa Table 2: Areas of alignment and contention Table 3: Tax scenarios 39 Table 4: Accountability in the NHI Figures Figure 1: Sticking points around having a single purchaser Figure 2: Concerns related to Section 33 Figure 3: Donabedian’s quality framework 31 Acronyms and abbreviations Executive summary How did we get here? South Africa’s proposed approach to achieving Universal Health Coverage (UHC) is articulated in the Draft National Health Insurance (NHI) Bill. The principles guiding the reform process, particularly in relation to equity, access and an orientation to primary health care can be traced back to the ANC Health Plan of 1994. There was an inflection point in the reform process in 2007 towards a single payer and purchaser system, away from a system that builds off existing medical scheme infrastructure. It was a change in direction that remains contentious. How has the context changed? In the 12 years since the shift in policy direction, there have been significant contextual changes which do not appear to reflect in how policy has developed. Furthermore, the recent Health Market Inquiry process put forward a number of proposals for health system strengthening which have largely not been incorporated into the policy process. Locally, we have experienced reduced trust in the State, a tighter fiscal space, and a more constrained health service delivery platform. Economic and health system vulnerabilities have been accentuated by Covid-19. Internationally, we have seen previously lauded UHC systems run into financial sustainability challenges, questions raised about the efficacy of strategic purchasing, and a move towards value-based contracting approaches. However, these systems have also weathered Covid-19 better than other systems, elevating the need for a more integrated and equitable system. Why do we need reform? There is no doubt that the current health system requires substantial reform. The two-tier nature of the system is inequitable, and both the public and private sectors are fragmented and unsustainable. However, the current proposals have been met with a wide range of criticisms and concerns from across the political spectrum. This report draws from the literature surrounding the reform process, together with insights from various interviews with critical stakeholders. The sticking points between different stakeholders in reaching consensus on the NHI Bill can be grouped into the following themes: We also note that a number of constitutionality issues have been raised by stakeholders. Many of these concerns relate to uncertainty or vagueness in the NHI Bill. Clarity, trust and consensus: Questions about what will be covered, how cover will be provided and who will be covered lie at the heart of the envisaged system. While all of these are likely to be dynamic in nature, a clearer sense of the intent would facilitate constructive engagement. The nebulous role of trust is a recurring theme. This has been exacerbated by State Capture, the failure of State-owned enterprises and poor governance of health-sector entities. The failure to build stakeholder buy-in through the reform process is apparent – this in itself raises concern about the likely conduct of a monopsony. What can we do while we wait for reform? Certain key elements of the purchasing function can be strengthened prior to implementation: accreditation, health technology assessment, information system strengthening, clinical coding, levelling of professional rules across the public and private sectors, and experimentation with provider contracting are all examples. Learning sites will be essential to enable experimentation and testing of alternative service delivery models. There are numerous pragmatic impediments to innovation which will need to be interrogated and dismantled, for example, budget structures, salary determination, Public Financial Management Act (PFMA) rules etc. Similarly, certain rules of the Health Professions Council of South Africa (HPCSA) will have to be amended to allow for team-based remuneration and telehealth which will be required as part of new service delivery models. Understaffing and low human resources for health (HRH) capacity will strengthen the notion of weak government capacity and quality, leading to lack of trust and buy-in to NHI as a concept. Ensuring that a sufficient healthcare workforce is available by the first roll-out and implementation of NHI needs to happen now, and requires continual planning and engagement to ensure future availability. Much needs to be done to improve public-sector working conditions, the absorption of the training pipeline into the system, and the ability of doctors to work across both sectors. Task-sharing and the role of mid-level health workers need to be strengthened, and the current problems with vacancies fixed. These improvements will be critical to regaining the trust of healthcare providers. Where to from here? This report is a precursor to a summary document laying out the critical policy choices relative to health system objectives as set out in various policy papers between 1994 and 2019, as identified in this report. To inform a way forward, there is a need for research that is cognisant of the shortcomings of the current system – both public and private – and the advantages and disadvantages of the proposed reforms. In questioning the way forward, it is useful to conceptualise an inter-connected set of reforms, enabling thinking about a series of policy choices and the sequencing of implementation. Clearly articulated goals of the reform process can be used to create a framework against which to assess alternative reform choices and pathways (including the sequencing of the current proposed reforms). 1. Introduction South Africa’s proposed approach to achieving universal health coverage (UHC) is articulated in the draft National Health Insurance (NHI) Bill. TThe proposed reforms see the creation of a purchaser/provider split in the health system (a), the establishment of a monopsonist strategic purchaser of care, and a minimisation of the role of medical schemes. There is a substantial reconfiguration of the public system envisaged i.e. provinces become providers of care (as opposed to both purchasers and providers) with new entities created at the local level to co-ordinate the provision of care. The policy development process underpinning the Bill has been drawn out – the Green Paper was published in 2011, the White Paper in 2017, and the first draft of the Bill in 2018. Prior to 2007, the policy trajectory was referred to as Social Health Insurance, which was a reform pathway that leveraged off existing medical scheme capacity. This pathway was abandoned in favour of a single-purchaser system. In the 12 years since the change in policy direction, there have been significant contextual changes. Locally, we have experienced reduced trust in the State, a tighter fiscal space, and a more constrained health service delivery platform. Internationally, we have seen previously lauded UHC systems run into financial sustainability challenges, questions raised about the efficacy of strategic purchasing (even in highly resourced environments), and a move towards value-based contracting approaches. This report was written at the point in the policy process where the public submission and public hearing processes have been concluded, and those inputs now need to be considered by Parliament. It follows on from three previous reports: The first summarises the discussions held at a roundtable (“Towards Inclusive Healthcare”) hosted by Inclusive Society Institute (ISI) in December 2019; The second reflects on lessons for South Africa on transitioning to UHC from the German experience; and The third outlines potential constitutional issues arising from the proposed reforms. There is no doubt that the current health system requires substantial reform. The two-tier nature of the system is inequitable, and both the public and private sectors are fragmented and unsustainable. However, the current proposals have been met with a wide range of criticisms and concerns from across the political spectrum. This report draws on conversations with a wide range of stakeholders through a roundtable discussion that took place in Johannesburg in December 2020 as well as individual stakeholder discussions before and after the roundtable. It has also been informed by the literature surrounding the financing reform process, including various NHI Bill submissions. The widely consultative process that informs this document included various stakeholders from Government, the political sphere, the private hospital sector, the medical schemes sector, doctor and specialist bodies and specific regulatory bodies. We clearly illustrate the areas of alignment and major sticking points between different stakeholders in reaching consensus on the NHI Bill. The report begins with a brief history of UHC policy evolution (Section 3). The key health system objectives are drawn from this historical context and used to inform the thematic organisation of the rest of the document. Section 4 summarises the key remaining unresolved NHI structural and process questions. For each of the themes, we provide an overview of the critical data, the status quo and conflicting stakeholder opinions (Sections 5 to 12). In section 13, we reflect on the implications of Covid-19 for the reform process. We conclude (Section 14) with a consideration of the way forward. *a https://percept.co.za/category/research/nhi/ 2. A brief history of NHI policy evolution and key health system objectives A clear understanding of key health system objectives is critical to assessing large-scale health reforms in South Africa. Our process of identifying key objectives involves a historical review of relevant NHI policy documents, specifically the evolution of these policies and how it birthed the most recent health reform policies. This chronological policy review will be limited to the post-apartheid period and therefore starts with the African National Congress (ANC) Health Plan of 1994(1) and continues up to the current NHI Bill of 2019.(2) SHI and NHI: Defining concepts Social health insurance (SHI) and national health insurance (NHI) are often used interchangeably in the relevant policies reviewed for this report. We therefore provide both a technical and conceptual description of these two terms. As described in the Taylor Committee process in 2002(3), SHI refers to an insurance model where only those who contribute to it are entitled to its benefits. Contributors could include all taxpayers, all employed people, or defined groups in certain industries. On the other hand, NHI refers to a model where usually the same taxpayers would be the contributors but unlike SHI, everyone would be entitled to benefits. South Africa’s Government Employees Medical Scheme (GEMS) is described as an SHI when the term is interpreted in its technical form.(4) Despite the technical distinction between SHI and NHI, the use of these terms are often blurred in practice, with some technically social systems called NHI and vice versa.(5) For example, Germany’s health system is known as SHI but covers the entire population. In contrast, Indonesia is implementing an NHI where initially only contributors are covered but with a long-term goal of slowly incorporating other groups. In essence, the term adopted for a mandatory insurance – SHI or NHI – remains a question of societal preference and values.(5) Professors Diane McIntyre and Alex Van den Heever argue against using politically loaded terms like NHI or SHI and instead refer to a more neutral term like mandatory health insurance, which recognises common ground in the proposals.(6) In South Africa, mid-1990s health reform proposals were called NHI.(1) Essentially the same proposed reform was then called SHI from around 2002.(5) In 2007, the terminology was changed back to NHI in the ANC documents emerging from the Polokwane conference(7) and has remained as such since then.(2) 2.1 ANC Health Plan of 1994 During the early 1990s, health reforms in South Africa focused on introducing mandatory health insurance. After the 1994 elections, policy initiatives that considered either SHI or NHI had its origins in the ANC Health Plan of 1994.(6) This seminal document is underpinned by the ultimate aim of health for all, i.e. a measurable improvement in health outcomes for all South Africans. This aim is framed in the post-apartheid context of a fragmented health system, inequitable access to health care and the subsequent inequities in health outcomes. It therefore follows that one of the main objectives of the Health Plan was to improve overall health system equity. The plan asserts that a reorientation of the health system towards primary health care (PHC) is the best strategy to provide sustainable and equitable healthcare to all members of South African society. The other key objective of the Health Plan was to address the rapidly escalating costs in the private health sector which rendered private health care increasingly unaffordable and reflected health system sustainability concerns. The plan described how the structure of the private health sector created incentives that prevented health for all. It envisaged a national health system (NHS) with a restructured private sector that played an important role in improving the health of the nation. It therefore viewed active cooperation between the private and public health sectors as essential to achieving health for all. In summary, the ANC proposed working towards a comprehensive, equitable and integrated national health system based on the principles of equity, right to access and a PHC approach. The SHI proposals made by the Health Care Finance Committee of 1994 were in keeping with the aim and objectives of the ANC Health Plan.(8) 2.2 Committee of Inquiry into NHI 1995 The 1995 Commission of Inquiry9 (also referred to as the Shisana/Broomberg Commission of Inquiry) upheld the objectives of the ANC Health Plan i.e. improving equity in the health system and addressing the cost-spiral in the private health sector. The Commission of Inquiry endorsed the objectives and proposals made in the ANC Health Plan and the Health Care Finance Committee but provided more detail on the role of medical schemes under the plan. It also strongly emphasised the strengthening of the PHC system. More specifically, it stressed that improvement in health access, efficiency, and effectiveness of publicly funded PHC services were urgently needed to ensure delivery of improved quality of care to all. The Commission’s report made detailed reference to universal access as a basic principle informing its recommendations. It defined universal access as a principle that should guarantee all permanent residents of South Africa equal access to all publicly funded PHC services and that the quality of these services should be equivalent for all users. The Commission of Inquiry was criticised10 because it seemed to favour the private health sector by encouraging competition between the public and private sectors when the former sector was poorly equipped to compete fairly. Serious concerns were expressed that the universal plan was not inclusive enough, thereby entrenching the existing disparities in access to healthcare. Furthermore, doubts were raised that the financial benefits of the NHI scheme would not be adequate to support the public health system. 2.3 Department of Health SHI Working Group of 1997 None of the proposals put forward in the ANC Health Plan and the Commission of Inquiry into NHI were further developed.(8) Instead, in 1997 the Department of Health (DoH) established the SHI Working Group with the stated objective of generating additional revenue for the public health sector.(11) The proposals developed by the SHI Working Group formed the regulatory framework for the Medical Scheme Act in 1998. The Act aimed to regulate private health insurance as well as establish the principles of open enrolment, community rating, prescribed minimum benefits and better governance of medical schemes. Despite the introduction of the Act and its supporting principles, the level of coverage for the South African population remained below 16 percent.(12) 2.4 The 1997 White Paper on the Transformation of the Health System in South Africa The 1997 White Paper on the Transformation of the Health System in South Africa put forward the main aims of restructuring the health system. These aims included developing a single unified and comprehensive NHS to deliver quality health care to all; ensuring national, provincial and district levels play different but complementary roles in the health system; increasing access to an improved package of PHC services, and uniting public and private sectors to promote these aims.(13) The White Paper provides a comprehensive list of objectives to achieve the above-mentioned aims. These objectives can be condensed into two core objectives: improving equity in the health system and generating additional revenue for the public health sector. In summary, this White Paper regards SHI as the main vehicle to increase finance for public health and proposes that an SHI scheme should be introduced. Again, the proposals to establish an SHI were not taken forward for implementation. This was mainly due to continued opposition by National Treasury.(8) 2.5 The 2002 Taylor Committee of Inquiry into Comprehensive Social Security The Department of Social Development appointed Professor Vivienne Taylor to chair the 2002 Committee of Inquiry into Comprehensive Social Security to provide a vision for the transformation of all aspects of social security, including retirement reform and health care reform.(3) The Taylor Committee Report remains an important document and its recommendations are still being implemented. It provided the first set of policy recommendations on mandatory health insurance that explicitly called for an NHI.(8) The broad objectives underpinning the Taylor Committee’s proposals on NHI included the provision of universal access to basic health care, ensuring social protection and solidarity as well as addressing the persistent issue of escalating costs in the private health sector.(8) More specifically, it was proposed that the universal cover should provide a minimum level of essential benefits that could be provided by both the public and private health sectors. The public health sector would continue to be the foundation of the overall health system, while the private health sector was envisaged as increasing levels of funding above the usual tax allocations. It was recommended, however, that private sector activity should take place in a closely regulated environment. The Committee argued that addressing the problems arising from the private health sector would promote efficiency in the health system.(3) 2.6 The 2002 Ministerial Task Team for Implementing SHI To implement the Taylor Committee recommendations that would achieve an NHI in the long-term, the DoH established a Ministerial Task Team (MTT) on SHI(b). In addition to the Taylor Committee recommendations, the MTT also considered findings from the Risk Equalisation Fund (REF) Task Group and the International Review Panel on REF. The MTT’s main objectives were to ensure affordable universal cover and a consistent system of cross-subsidies.(8) The MTT concluded that implementation of an NHI was not practical in the near future and that the focus should be redirected to planning for SHI.(14) However, the path to achieving universal coverage through the SHI model was not supported and implementation of the MTT’s recommendations were stalled.(12) 2.7 The 2009 Ministerial Advisory Committee on NHI In 2009 the Ministerial Advisory Committee was established to advise the Health Minister and DoH on health system reforms including the design and implementation of NHI.(12) The Committee’s mandate was rooted in Resolution 53 which was passed at the ANC’s Polokwane Conference in 2007.(7) This resolution explicitly called for the implementation of an NHI, stating that the NHI Fund urgently be set up using state revenue by 2014 and that the ANC should mobilise social support for the NHI and continue developing the White Paper and NHI legislation (envisioned to be finalised by 2013). A broad description of the ANC proposal for an NHI system was included in the ANC’s 2009 election manifesto.(15) The objectives that guided the Ministerial Advisory Committee were drawn from this manifesto and included reducing inequalities in the health system, improving the quality of care (in both the public and private sectors) and increasing human resources for health care to ensure improved health outcomes for all South Africans. *b Authors have been unable to source this document (Social Health Insurance Options: Financial and Fiscal Impact Assessment. Unpublished technical report to the Department of Health. June 2005.) 2.8 NHI Green Paper 2011 In August 2011 the DoH published the NHI Green Paper (titled: NHI in South Africa), which proclaimed that the NHI would ensure that all South Africans had access to appropriate, affordable and quality health services, regardless of socio-economic status.(12) It was proposed that the NHI would be phased in over a period of 14 years and would require major changes in service delivery structures, as well as administrative and management systems. The implementation of NHI was intended to bring about health systems reform that would improve service provision by promoting equity and efficiency. Additional guiding principles of NHI included social solidarity and effectiveness. The NHI Green Paper offered high-level solutions to achieving the following four health system objectives: to provide improved access to quality health services, irrespective of employment status; to improve equity in the health system by pooling risks and funds to create a single fund; to address rapidly escalating costs in the private health sector by procuring services on behalf of the entire population and efficiently mobilising and controlling key financial resources; and to improve health systems performance by strengthening the under-resourced and strained public sector. The Green Paper was broadly criticised for its lack of detail on the complete package of services, financing mechanisms, the role of private medical insurance schemes and implementation plans and processes. 2.9 NHI White Paper 2017 In 2015, the DoH released a draft of the NHI White Paper (titled: National Health Insurance for South Africa: Towards Universal Health Coverage).(16) Commentators indicated that few of the NHI Green Paper submissions were incorporated in the draft NHI White Paper, which appeared to be quite similar to the NHI Green Paper. The final NHI White Paper was published in 2017.(17) The NHI White Paper states that it lays the foundation for moving South Africa towards universal health coverage by implementing NHI and establishing a unified health system. The Paper proceeds to describes how implementing NHI is based on principles of the constitutional right of citizens to have access to quality health care services that are delivered equitably, affordably, efficiently, effectively, and appropriately. Furthermore, it states that NHI is based on social solidarity, progressive universalism, equity, and health as a public good and a social investment. The objective upon which NHI should be based, according to the White Paper, seems to be closely linked to the objectives of UHC: equity in access to health services, access to good quality health services, and financial risk protection. More specifically, policy trajectory of the NHI should achieve the following three objectives for all citizens: to provide adequate financial risk protection; to provide an opportunity to equitably benefit from the health system; and to ensure contributions towards the funding of the health system are based on the ability to pay. Therefore, there was some disagreement over whether the term NHI was the right choice, given that the policy expanded beyond just the financial mechanisms. The DoH highlighted that implementation of NHI would require amendments to related legislation and enactment of new laws to ensure that there is both legislative alignment and policy consistency across government departments and spheres of government. The NHI White Paper served as the precursor to the NHI Bill. 2.10 NHI Bill 2019 The NHI Bill was tabled in parliament on the 8 August 2019(2) and remains under consideration by the National Assembly’s Portfolio Committee on Health after receiving submissions via the public participation process. These submissions may inform amendments to the Bill before it is put to a vote in the National Assembly. The NHI Bill is based on two overarching but similar principles: universality – all will be able to access the same essential health care benefits regardless of their financial means; and social solidarity – all, regardless of their socio-economic status, will benefit from a national system of health care. As stated in previous policy documents, the goal of the NHI is to move towards universal coverage. The NHI Bill refers to six specific objectives that the Fund will strive to achieve to provide universal protection against financial risk; to ensure an equitable distribution of the burden of funding the universal health system; to ensure equitable and fair provision and use of health services; to ensure efficiency in service provision and administration; and to provide quality in service delivery; and to ensure good governance and stewardship. 2.11 Finding alignment across policy documentation and trajectory Table 1 below, outlines the key objectives and principles of the policies discussed in the sections above. Note the similarities in the policies, despite the different names and parties who were involved in their drafting. Table 1: Core policy objectives across the trajectory of UHC discussions in South Africa Based on this analysis, we have identified five objectives that have been consistently present over the years, while South Africa has tried to move closer and closer to UHC: To improve equity in the health system, including the sharing of resources (human and other) across the public and private health systems; To address escalating costs in the private health sector; To provide universal access to quality health care; To ensure efficiency in service provision and administration; To ensure good governance and stewardship. These key objectives of the health reform process will be used to create a benchmark against which to assess the feasibility of various policy choices and pathways. It may also assist in guiding the sequencing of current reform proposals. 3. A summary of key issues in the NHI Bill The ISI hosted an NHI roundtable in Johannesburg in December 2019. The purpose of the roundtable was to enable a high-level stakeholder dialogue to identify key areas of policy agreement and disagreement. Through discussion and presentation of the various viewpoints of different stakeholders, it was clear there are certain positions on the NHI Bill on which stakeholders are in agreement. However, some areas still require interrogation in order to arrive at a place of consensus. Table 2 sets out: The proposals where stakeholders agreed that the position taken represents the accepted or preferred route; Areas of uncertainty that possibly need to be revisited; and The proposals that are disputed, where resolution and ultimately consensus are required in order to move forward. At this point the disputed areas outweigh the areas of alignment. Table 2: Areas of alignment and contention In the following sections, we unpack these areas of misalignment, to illustrate from where the disagreements arise. This will help to inform further engagement. 4. The purchaser-provider split 4.1 Rationale behind a purchaser-provider split The NHI Bill18 outlines that the purchasing and provision of health care services will become two distinct and separate functions, performed by different entities: the former will be the responsibility of the NHI Fund alone, which will contract directly with both public and private providers. Provision of services will be the responsibility of the providers themselves and the district health authorities. The provinces currently play the roles of both purchaser and provider. A purchaser-provider split with the NHI Fund as the single purchaser was first proposed in the NHI Green Paper of 2011.(12) It is important to note that the creation of a purchaser-provider split is not necessarily linked to the creation of a single purchaser. The creation of a purchaser is intended to support more strategic purchasing.(19) This includes determining who to purchase from (putting in place both accreditation and contracting requirements), what to purchase (the design of a benefit package) and on what basis to purchase (including the development of payment mechanisms to enable provider payment).(19) A purchaser-provider split has the potential to generate multiple benefits: The suggested purchaser-provider split is expected to increase accountability of healthcare providers, by creating a distance between the Fund, as the sole purchaser, and the various providers with which it contracts.(19) The NHI Bill specifies two ways in which such accountability can be driven: through enforcing minimum quality standards for providers and reimbursing providers based on the quality of care provided (determined by measurable outcomes).(18) Additionally, the purchaser-provider split is theorised to increase competition among providers, driving innovation and efficiency, as providers attempt to improve quality and/or decrease costs so as to remain competitive.(19) If the Fund institutes price ceilings, as is expected, providers won’t be able to compete on price. The idea is that this would force competition based on quality.(20) Lastly, the proposed purchaser-provider split also has the potential to increase access to private sector resources.(19) In other words, the creation of a purchaser would enable pluralistic purchasing – purchasing from both public and private providers. The current procurement paradigm limits the extent to which this is possible. The extent of health resources in the private sector translates to a potential increase in access to quality health services under the NHI,(21) with the Fund being able to purchase services from a wider set of providers. 4.2 Sticking points around the proposed purchaser-provider split A number of potential concerns have been raised about whether the foreseen benefits of a purchaser-provider split are likely to be realised in South Africa: Evidence from other countries (such as England) has shown that there are often not enough health care providers in a given geographic area for the benefits of competition to materialise.(19) In South Africa, where many regions have very few health resources available, this is likely to be the case. It will be vital to ensure that appropriate quality measures are strongly enforced by the Fund in order to avoid competition based on unimportant aspects of health care provision, such as the aesthetics of facilities.(19) To enable competition across the public and private sectors, consideration will need to be given to the structural differences across the two sectors (for example, VAT applies only in the private sector) that may hinder fairness in their ability to compete with one another.(19) The purchaser-provider split increases accountability from a top-down perspective, which should be balanced with a bottom-up ability of clients to demand accountability and quality care from providers.(19) 5. The single purchaser 5.1 Rationale behind the choice for a single purchaser The NHI Bill(18) states (page 7, section 2) that the NHI Fund will serve as the sole purchaser of health care services under the NHI: “The purpose of this Act is to establish and maintain a National Health Insurance Fund in the Republic funded through mandatory prepayment that aims to achieve sustainable and affordable universal access to quality health care services by (a) serving as the single purchaser and single payer of health care services in order to ensure the equitable and fair distribution and use of health care services […]”(18) The choice for a centralised pool of funds was borne out of the current fragmentation of health care funding pools in the South African health system – both between public and private sector, and within each sector. The aim is to create one integrated fund that can ensure equity in spending for all South Africans. The NHI Bill states that the NHI Fund will serve as the “single purchaser and payer”(18) in order to reduce the cost of health care while simultaneously improving quality of care, through economies of scale and more strategic purchasing.(19) Shifting to a single purchaser even within the public sector alone is expected to improve equity between provinces by allowing provinces to deliver more services than historical budgets may have allowed.(19) All NHI policy papers (since the Green Paper of 2011) have indicated that the NHI Fund will serve as the single purchaser of health care services. However, previous conceptualisations of NHI were based on multi-purchaser models, expanding on the medical scheme environment.(22) This has therefore been a notable change in the policy as it essentially changes the role of provincial departments of health and limits the role of medical scheme administrators and managed care organisations. 5.2 Sticking points around a single purchaser Concerns have been raised around the rationale for a single purchaser: the NHI Bill does not explicitly state or explain why a single purchaser is preferable to several purchasers.(23) The NHI Bill emphasises the main issue to be “fragmentation of health care fund pools in the South African health system”(18), which are proposed to be addressed through the development of an integrated pool for funding.(23) Previous official documents relating to the NHI also tend to focus on the pooling function, providing little rationale or evidence in favour of a purchaser-provider split (with a single purchaser) in the South African context.(23) There are alternative mechanisms to ensure equitable funding that do not require a single purchaser, for example, risk equalisation mechanisms, needs-based budgeting, and the implementation of capitation and Diagnosis Related Groupers (DRGs). Professor Alex van den Heever argues that no evidence is provided in the Bill as to which aspects of the proposed health system reform and the current problems experienced in the health system necessitate a single purchaser.(23) In other words, can economies of scale and strategic purchasing be achieved without the creation of the NHI Fund? The State currently purchases pharmaceuticals at a national level, for example. The health component of the Provincial Equitable Share formula provides an opportunity to improve equity between provinces, and an equivalent mechanism at district level would further this equity. DRGs, as a means for directing funding towards hospital events, could also be implemented without a central fund, as could health technology assessment and other dimensions of strategic purchasing. As mentioned, having a single purchaser creates a monopsony, which, in the case of an entity as large as the NHI Fund, raises concerns around both efficiency and corruption. The Fund will have complete market power through its sole control of purchasing health care services and many argue that this will impede on provider autonomy and bargaining power.(19) Furthermore, the Bill lacks clarity around the costs of administration of such a large, centralised purchasing mechanism.(24) If the management of the Fund does become corrupted, there is the risk of a reduction in the availability of health care funds. While the concept of a single purchaser (with the State as the single purchaser) is no longer new within the NHI discussion space,(25) there are still major concerns around the concept. Firstly, the NHI Bill does not explicitly state or explain any problems directly relating to the need for a single purchaser, nor provide any evidence as to why a single purchaser would be preferable to other options in the South African context.(23) Based on this lack of evidence, the most recent investigation of health systems purchasing and pooling problems in the South African context is considered: the Health Market Inquiry (HMI) report published by the Competition Commission, based on the private sector.(23) In contrast to the proposal of a single purchaser in the NHI, the HMI recommends that the number of purchasers should increase and that purchasing should remain a decentralised function.(26) However, a centralised risk-adjustment scheme is recommended to improve the fragmentation of pools and equity across pools.(26) Although the HMI calls for more purchasers, this would differ from the current private sector context where each scheme has its own risk pool. This is an important distinction, both in terms of equity and the basis of competition between purchasers. The incentive would be to compete on the basis of quality and not on the basis of risk selection i.e. cherry picking. The centralisation of the purchasing process could come at the expense of a decrease in responsiveness to local needs and adaptability, as well as an increase in lengthy bureaucratic processes, due to the centralisation of the Fund at the national level.(19) These issues are particularly pertinent, given the size and scope of the health system.(27) In contrast to the proposed centralisation under NHI, the majority of countries are moving towards decentralising financial management functions, so as to enable critical financial decision- making to happen more locally.(27) While the benefits of economies of scale may be clear in some aspects of the health system, the importance of local relevance may outweigh these benefits in others.(19) To allow for increased local responsiveness, the NHI Bill has proposed local-level contracting units for primary health care, which will choose the combination of services and providers best suited to the relevant population.(27) The German experience, where purchasing functions are largely centralised at a national level (with some purchasing at a state level) demonstrates that various compromises between national and local levels, achieved through constructive conversation between stakeholders, need to be made in order for the system to work.(28) Germany has selected a multi-funder approach with multiple public insurance schemes that are able to be responsive to local-level needs while still benefitting from risk pooling at a national level.(28) In the proposed single purchaser model for the NHI, there is no room for competition between purchasers. This raises the concern of purchaser complacency, through the elimination of the potential benefits of such competition, both in relation to clients of the health system and health care providers. The benefits include improved service levels, improvements in the ability to purchase on the basis of value, the impact of strategic purchasing interventions and attempts to secure contracts with providers.(19) This lack of competition also removes incentives for efficient administration in the provision of and access to health care.(27) A single purchaser could, therefore, create an imbalance in the relationship between providers and the purchaser, as well as between clients and the purchaser, owing to the elimination of choice.(27) The Fund is reliant on a trusting relationship between the State and providers. Providers (public and private) will become heavily dependent on the fairness, rationality and effectiveness of the Fund(19), and vice-versa, the Fund will become heavily reliant on providers.(19) One of the risks driving the choice of a single purchaser, is the concern that providers would not choose to contract with the NHI Fund, given historical mistrust between the public and private health sectors. To prevent this, the Fund will need to build trust and credibility with providers.(19) Figure 1: Sticking points around having a single purchaser 6. The role of medical schemes limited to complementary cover 6.1 What does the NHI Bill state about the role of medical schemes? The medical schemes referenced in the Bill include medical schemes registered in terms of the Medical Schemes Act 1998 (Act No 131 of 1998) and any voluntary private health insurance scheme. The role of medical schemes is outlined in section 33 of the NHI Bill. This section was not included in the prior version of the Bill (from June 2018) and its inclusion has been contentious. Section 33 of the NHI Bill states: “Once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.” 6.2 Concerns with the role of medical schemes The inclusion of Section 33 in the NHI Bill has led to a great deal of uncertainty around the role medical schemes will play once the NHI has been implemented. The ISI roundtable meeting in November 2019 highlighted the dissatisfaction with this addition to the Bill. Medical schemes have stated their intent to fight the clause on its constitutionality.(25) Given that the Bill does not specify the benefit package, it is hard for schemes to know the extent of the services they would still be able to deliver under the NHI. It is also anticipated that the NHI benefit package will change over time raising pragmatic concerns around ongoing required changes to the corresponding medical scheme packages. It is also unclear precisely how complementary is defined in relation to referral pathways, clinical protocols, formularies, provider choice and waiting times. The Helen Suzman Foundation(29) highlighted confusion on whether the ‘complementary cover’ would only be relevant for those who choose to opt into NHI (individuals or providers). This is an unlikely interpretation given the Bill’s intention to collapse the current twotiered system. However, other stakeholders expressed similar confusion in classifying ‘complementary cover’ and there is widespread frustration at the vagueness of the role of medical schemes.(30) (29) (23) (25) The Bill and supporting documentation fail to provide justification for the inclusion of Section 33, which has led stakeholders to make assumptions about the rationale and present their arguments against this assumed rational: Section 33 may be intended to deal with maldistribution of provider resources across the private and public sectors. However, it is argued that a key challenge regarding resources is a lack of funding in the public sector together with poor working conditions, which contribute to pushing health care providers into the private sector. This links to the monopsony concern raised in relation to a single purchaser. Moving all health care to the NHI is expected to lead to a reduction in income for private hospitals, private doctors, and pharmaceutical companies, among others. This could lead to job losses and decreases in tax revenue. Many in the private sector do not believe that the agreed upon tariffs will be acceptable, even with the increase in volume.(25) This may result in a ‘brain drain’, with health care workers choosing to leave South Africa for other countries offering a higher earning potential. Section 33 may be intended to redirect existing medical scheme funds into the NHI Fund, or at least replace household contributions to medical schemes with increased taxation directed to the NHI Fund. The former is unlikely as scheme funds belong to their members, 25 i.e. this is not legally possible. There is no connection between prohibiting private schemes and implementing an NHI that is tax funded. The individuals who would make use of medical schemes post NHI implementation would still be contributing toward the NHI Fund through tax (i.e. a duplicative system is possible, where contributions to the NHI Fund are compulsory, but membership is not). The inclusion of Section 33, without sharing the evidence driving the decision, negatively affects investor sentiment. A key concern from a UHC perspective is that preventing medical schemes from providing cover could increase out-of-pocket expenses thereby reducing access and driving inequality.(25) It is argued that the inclusion of Section 33 will adversely impact both the health care system and economy. The economic consequences include the direct impact on the private health care funding industry. There is also the second order impact on health care providers in relation to reduced revenue, and there may be foreign direct investment (FDI) and multinational implications due to limitations on access to private cover and care. The inclusion of Section 33 increases the burden on the State by forcing those who can afford to fund themselves to transfer to the NHI – these are typically clients with a high degree of agency and an expectation of higher levels of utilisation. While this pressure on the NHI Fund may drive system improvements, the pressure could also have negative implications. Furthermore, scheme members are generally older, which makes them a more expensive cohort of individuals, given the relationship between age and non-communicable diseases such as diabetes. By including more people, and a ‘riskier’ group of people, the Fund will require more money to successfully purchase the necessary care. The increase in clients for the State will place further burden on both the purchasing and provision side. A potential solution for the dilemma of expensive older clients in the Fund is the opt out system followed in Germany. Individuals are able to opt out of public health insurance funds before the age of 55.(28) Once they have reached the age of 55 they are not allowed to join public insurance funds anymore. This is used as a way of encouraging people to belong to statutory sickness funds rather than private insurance schemes at younger ages and contribute when their health need is not as high yet. Given the shortage of human resources for health in the country, many have expressed concern that the system would not cope with the demand for care under a complementary cover set up, particularly as some private providers may choose to emigrate or leave their professions rather than accept regulation by the NHI Fund. Many stakeholders feel that it would be more sensible to allow those who can afford to pay for private health care to do so, while still mandating that they contribute to the NHI Fund. This is aligned with the approach used in the United Kingdom, where there is a successful National Health Service alongside an active private health insurance sector.(25) Stakeholders largely agree that medical schemes need intervention as their current operations were not aligned with the goal of UHC. However, the role of medical schemes presented in the latest NHI Bill fails to consider the numerous measures that the HMI report recommended to strengthen the private health care sector. The recommendations are referenced by most stakeholders as less drastic actions to take in the first steps in moving towards UHC. Although there is acknowledgement that private health sector costs are far too high, the HMI’s solutions include more closely regulating pricing, strengthening social solidarity mechanisms and increasing the incentives for strategic purchasing rather than significantly reducing the role of the sector. The combined effect of these factors is therefore a questioning of Government’s ability to implement UHC without the involvement of the private sector. Stakeholders see the move to NHI as an opportunity to focus on successfully regulating the private sector rather than banishing it.(23) (29) (30) Figure 2: Concerns related to Section 33 7. Quality assurance and quality improvement mechanisms 7.1 What does the NHI Bill say about accreditation and quality? The NHI Bill positions the accreditation of health service providers as a mechanism to ensure the quality of health services provided. The Bill states that accreditation of health service providers includes certification from the Office of Health Standards Compliance (OHSC) (page 21, section 39): “In order to be accredited by the Fund, a health care service provider or health establishment, as the case may be, must (a) be in possession of and produce proof of certification by the Office of Health Standards Compliance and proof of registration by a recognised statutory health professional council, as the case may be.” The NHI Bill then goes on to explain that the first phase of implementation will improve quality through certification (page 47, section 2.2.1): “The intermediate preparatory phase involves improving the quality of the health system by first certifying the health facilities to ensure they meet the requirements of the Office of Health Standards Compliance.” The Bill also makes some reference to purchasing care (it refers to contracting) from accredited public and private providers (page 20, section 37.1.2(b-c): “A contracting unit for primary health care… must assist the fund to b) identify accredited public and private health care service providers at primary care facilities; c) manage contracts entered into with accredited health care service providers, health establishments and suppliers in the relevant sub-district in the prescribed manner and subject to the prescribed conditions”. Furthermore, in the Schedule to the Bill a “provider payment” is defined as “payment to providers in a way that creates appropriate incentives for efficiency in the provision of quality and accessible health care services using a uniform reimbursement strategy”. However, there is no detail provided on how the creation of these incentives is envisaged to take place. 7.2 How to measure quality The measurement of quality of health services is a complex undertaking, owing to the multi-dimensionality and depth of the concept of quality itself. It is therefore useful to differentiate which aspects of quality are being measured, and by which measures. Quality measurements can be broadly grouped as structural measures, process measures and outcome measures as per Donabedian’s framework (Figure 3).(31) Figure 3: Donabedian’s quality framework(31) The certification of health facilities by the OHSC (which is one of the prerequisites for provider accreditation as per the NHI Bill) ensures that facilities meet a minimum set of requirements, through measuring the structural aspects.(32) Given their tangibility, structural aspects are the easiest to measure and assess but they lend themselves to less frequent assessment. While structural quality serves as a necessary foundation for the provision of quality care, it is not sufficient on its own to reflect the quality of care delivered.(32) Accreditation is only one aspect of quality measurement. Accreditation is generally a static process. Quality measurement can be used in a more ongoing way by using the data created when interacting with the health system as part of the measurement toolkit. Therefore, a purchaser is able to relatively quickly pick up where there have been episodes of poor quality (for example, by analysing the occurrence of bed sores in hospitalised patients) and intervene timeously. Accreditation processes can also be costly, given that assessors would need to visit facilities semi-regularly to ensure compliance. The other process and outcome measures provide a more efficient way to measure quality between assessments. Linking reimbursement to quality measures can also help to improve quality. If the NHI Fund is seen to value quality and is able to quickly pick up and intervene where there are quality issues, it could also help the provider space to self-regulate to ensure their continued contracting with the Fund.(32) 7.3 Concerns surrounding the proposed quality measurement Various NHI submissions have raised concerns around the accreditation of providers and the implications thereof on quality of health services. A key concern is that while the NHI Bill highlights the need to ensure quality health care, it provides little detail as to how this will be achieved(33) or monitored.(24) The lack of process quality measures, with regard to treatment guidelines and protocols, was a common complaint.(24) Many feel the Bill also fails to acknowledge the complexity of ensuring and improving quality.(33) There is also concern that a large number of public health facilities will not meet the certification requirements of the OHSC, based on the OHSC 2016/17 Annual Inspection Report which found only seven of the 696 investigated facilities achieved scores of 80 percent (the benchmark score for compliance) or more.(23) The low level of compliance in the public sector raises the concern as to whether there will be enough accredited providers to deliver the care envisaged by the NHI, since the Fund can only contract with accredited providers.(32) An insufficient number of accredited providers will result in over-burdening of facilities that are contracted by the NHI, and is likely to translate to decreased quality of care as a result.(34) This also poses a threat to access to health care, which will be reduced if many existing facilities are not contracted by the Fund, especially in rural areas where there may only be one health facility for a large geographic region.(33),(35) Furthermore, there is a question as to what will happen to public facilities, and their employees, that are not accredited.(33) Stakeholders have also questioned whether the OHSC has sufficient budget and personnel to routinely investigate and monitor compliance to certify all the health facilities in the country.(33) The Department has attempted to answer this by stating that the non-compliant facilities will be supported to become compliant. However, public health facilities should technically already be providing quality care and therefore the Department’s ability to ensure this, within a relatively short time frame, is questionable. Using certification to improve quality relies on the fear of not being certified to incentivise providers to improve quality. However, they may lack the necessary skills and tools to improve quality and may need to be supported through this process. The NHI Bill lacks a coherent framework for ongoing quality improvement. 8. Financial considerations: what are we buying, and can we afford it? 8.1 What does the NHI Bill say about affordability? The Bill makes mention of affordability only once, as a consideration for what the NHI Fund can purchase. The Minister of Health at the time made it clear that the NDoH was leaving the financial aspects to the National Treasury. The National Treasury was due to release a financing paper in support of the draft NHI Bill, that would detail the fiscal space available for NHI and the mechanism for revenue collection. Unfortunately, to date, the financing paper has still not been released. As mentioned in previous sections, the Bill does not include any detail on the benefit package. It states that the Benefits Advisory Committee, in consultation with the Minister and the NHI Fund Board would be responsible for determining the final package. 8.2 What are we buying? The lack of detail has made it impossible for stakeholders to comment on the benefits package and whether what we are ‘buying’ is appropriate or sufficient for the need. This came up in most submissions on the Bill and in our stakeholder interviews. Notably, it also came up in the Davis Tax Committee report of 2017, which analysed the 2017 NHI White Paper. In that report, the committee was clear that affordability cannot be measured without details of what is included in the package.(36) However, in the University of Witwatersrand’s School of Public Health NHI Bill submission, the authors argue that it may not be necessary to detail the benefit package. Instead it is recommended that the NDoH work on a ‘negative list’ of services that will definitely be excluded.(37) This is the method used in Thailand, on which South Africa has in many ways based its NHI policy. This would help medical schemes to begin to know what their complementary cover might include and will also give citizens and stakeholders a better idea of what services the NHI Fund is aiming to purchase. Furthermore, a sentinel book focusing on benefit package design and funding has emphasised the need for the benefits package to be a living document.(38) By writing into the Bill the specific package, the Government may prevent innovation and learning as the NHI takes off. Of keen concern then is the process for determining the benefit package. It is worth noting that the Bill does not currently link the benefit package process to the budget setting and affordability process nor the provider negotiation and reimbursement processes. The Bill also makes mention of a Health Technology Assessment unit, that will assist in cost-effectiveness decision-making to ensure affordability.(18) This body would ultimately inform what can be included in the benefits package. Transparency on how the HTA will assess cost-effectiveness would also assist to build support for the Benefits Advisory Committee. The lack of a benefits package to interrogate has remained a sticking point for almost all stakeholders. It has also inflamed discussionsaround the complementary cover clause for medical schemes. 8.3 Can we afford it? In 2017, the DPME conducted an impact assessment on the NHI White Paper.(39) Although the document references some more recent work by the NDoH supported by PWC, the majority of the costs still derive from the original Green Paper costing in 2011. This is problematic as the financial picture in South Africa has shifted dramatically since then. PWC has estimated that ~R3.6 billion is needed to implement the infrastructure and personnel-related costs for NHI implementation over six years for the ‘base scenario’. There is, however, no detail on what the base scenario includes and the NDoH has subsequently distanced itself from this costing as it was not based on sufficient evidence.(23) Most submissions also focused heavily on affordability. In one of our stakeholder interviews, it was emphasised that irrespective of what the State includes in the benefit package, the final available services will have to be in line with the available funding envelope. This could create a liability for the NDoH, where users are able to litigate against the State if they do not provide the services outlined in policy documentation, or if there is a contraction is services over time. This is further incentive to include a ‘negative list’ only, to prevent this scenario. Alternatively, a detailed and pre-costed package is required to ensure that the package is within the affordability parameters. The costs associated with the Fund should not be considered only a single-year time frame, or even over the short term. Long-term projections and stress-testing are necessary. The reimbursement mechanisms used for providers are relevant for consideration of longer-term costs. For example, a system like DRG’s allocates funds for every hospital admission. If hospital admission rates were to rise, so to would the financial obligation of the Fund. The fact that the financing paper still has not been released has also alerted stakeholders to perceived tension between the NDoH and National Treasury, bringing up further worries that the Bill has not been costed. The DPME impact analysis outlines five different scenarios (see Table 4) for revenue collection (with a stated preference for Scenario B). Table 3: Tax scenarios39 The Davis Tax Committee also outlined several options for revenue collection but still concluded with the finding that the scenarios for revenue collection outlined in the NHI White Paper (2017), would be insufficient to fund the NHI, thereby concluding that the NHI policy, as it was written in the White Paper, was unaffordable.(36) The use of general taxes and personal income tax has also been widely disputed as insufficient and overly punitive given the small tax base.(23) Professor van den Heever’s Bill submission further outlines the concern that no detailed financial feasibility assessment has been done since the 2011 Green Paper. Given South Africa’s current fiscal climate, including the ramifications locally and globally of the Covid-19 pandemic, stakeholders expressed grave concern over whether the NHI is achievable and particularly, whether it is achievable by 2025/26. The University of Witwatersrand submission cautions that if user expectations are not managed, the Fund may overspend on its budget, threatening its financial sustainability. A negative spiral has occurred in other lower- and middle-income countries (LMIC) where providers refuse to deliver care to registered patients, because they are not reimbursed or cannot rely on being reimbursed timeously. Essentially, this scenario would result in providers losing confidence in the Fund. Therefore, the submission calls for an implementation time frame that allows for gradual phasing in to build trust and for the development of an information system to safeguard quality and efficient provider payment. One stakeholder we interviewed for this report suggested that the State could, in the meantime, contract in some services from the private sector without much system reform, to bolster quality and availability in the public sector. This is meant to happen as part of Phase II of the NHI implementation. The lack of movement on this front has also made stakeholders more doubtful of the State’s ability to be a single, centralised, purchaser of health care services. Until the financing paper is released, questions of affordability will remain. In the absence of a benefit package, the finance paper would have to come from a top-down approach, outlining the funds that could be available for the NHI under the most palatable revenue collection scenario. It would then be up to the NDoH and the Benefits Advisory Committee to cost and prioritise which services it can reliably offer, within the given financial envelope. This would then need to be tested against current benefits offered in the largely free-at-the-point-of-use public health system. 8.4 Who to cover? Refugees and undocumented migrants The inclusion or exclusion of undocumented migrants and refugees has been a standing concern since the 2011 Green paper was circulated. As a way to curb costs, Government has suggested limited access for refugees and temporary residents. This has caused concern given South Africa’s Constitution, which allows for health care for all within its borders, irrespective of status. The move to exclude refugees and undocumented migrants would require a change to the Constitution,(40) which is unlikely. Section27 also notes that by excluding these populations from sexual and reproductive health care and HIV prevention and management services, South Africa is placing population health at risk. The DPME impact assessment offers a potential solution by suggesting a contingency fund for undocumented migrants and refugees. It suggests engagement with SADC countries and the African Union. The DPME assessment involved multiple stakeholders, and there was widespread agreement that these population groups should be covered within the NHI. 9. Governance and accountability The themes of governance and accountability were repeatedly raised in various NHI submissions and in interviews with stakeholders. Although the themes are related, here we discuss them separately and interpret governance arrangements as dealing with the structures that will govern the NHI Fund and its operations, while accountability refers to feedback, choice and incentive mechanisms that will ensure the NHI Fund and its providers are kept accountable to various stakeholder groupings. 9.1 Governance Fund governance was a common concern in Bill submissions and stakeholder engagements. In particular, many are worried about the relationship between the Minister of Health and the NHI Fund Board. The Bill currently states that the Minister will be ultimately responsible for selecting the Board and has the powers to dissolve the Board if s/he feels they are not performing. This creates a concern around the potential for corruption and poor accountability under this set up. The University of Witwatersrand submission also highlighted that the NHI reform is to institute a purchaser-provider split. The Minister would likely play a coordinating role between these two arms. Therefore, the Minister should not have a vested interest in either arm, in order to play a neutral arbiter role ensuring that the NHI meets its policy objectives.(37) The submission by Section27 and the TAC supports this point, calling for an oversight mechanism to safeguard the Fund from nefarious activity.(40) The history of State Capture in South Africa unfortunately has made many stakeholders suspect of centrally controlled, large government funds. A final key consideration highlighted by one of the stakeholders is that the results of the HMI report indicate that the state has failed to adequately regulate the private sector, despite it being a policy goal since the early 1990s. Weaknesses across the range of health regulators point to existing gaps in health system governance, and weaken trust in the likelihood of the Fund being well governed. 9.2 Accountability There are several concerns related to accountability within the NHI, we detail these, together with stakeholder-suggested remedies in Table 4 below. Table 4: Accountability in the NHI 10. Timelines and progress milestones 10.1 What does the NHI Bill state about timelines? The NHI policy papers (Green, White, and draft Bill) all speak of the rollout of NHI taking place over phases. In the draft Bill, the initial phase (2012-2017) was viewed as the testing phase of health systems strengthening initiatives, while the current phase 2 (2017-2022) is the phase during which supporting legislation has to be developed, the foundations of the Fund have to be established and interim purchasing of health services for vulnerable groups (e.g. women, children and the disabled) has to take place. Lastly, in the final phase (2022-2026), additional resource mobilisation by the Fund may start (e.g. contribution collection from salaried employees), and the Fund will start to purchase services from providers (the Bill refers to ‘selective contracting of services from private providers’).(18) 10.2 What are some of the objections raised? Six NHI submissions were considered (TAC, Section27, SAPPF, Helen Suzman Foundation, FW De Klerk Foundation and Professor van den Heever’s submission) and all six highlighted an objection to the proposed timeline. Largely, these objections related to the timeline being too short for successful implementation. Many of the necessary steps and considerations to achieve the timelines are not included in the latest Bill. The Helen Suzman Foundation highlighted that the State has previously failed to timeously implement a simpler initiative: the payment of social grants by SASSA in 2017. This does not instill confidence in the State and their ability to implement NHI. There is concern that the implementation of the NHI is being rushed. Section2740 and the TAC41 were also particularly concerned that the Government was continuing into phase 2 before there had been any publicly available assessment of the success of the initial phase.(41) Further, there appear to be no benchmarks or milestones set, making it difficult for external bodies to hold Government accountable. The FW De Klerk Foundation(30) also raises concern on the lack of feedback from the initial phase. The initial phase (2012 to 2017) planned to include activities in preparation to implement NHI such as strengthening the health system. There were lessons to be drawn from this phase and recommendations were provided based on an evaluation of this phase. However, the Bill does not mention how it will implement the recommendations and it does not acknowledge the existence of the initial phase which both hinders the ability to draw lessons from the initial phase/pilot but also creates confusion. Another salient concern was the lack of detail in the timeline – the Bill often defaults to providing the Minister with the power to decide on the detail at a later stage. A further criticism is around the lack of clarity in the transitional arrangements presented in the Bill.(42) For example, it is stated that interim purchasing of personal health services for vulnerable groups will occur in the current phase yet there is no mention of which legal framework the purchasing will occur under nor when such a framework will be established. Similarly, the transitional arrangements outlined for the final phase are vague and fail to provide meaningful detail. The Helen Suzman Foundation(29) states that the lack of detail in the implementation plan allows the minister to decide on when the publication of necessary regulations will occur and effectively construct their own timeline. Lastly, there is doubt that enough public health facilities will be fully accredited by the OHSC in the provided implementation timeframe in order to deliver meaningful access to quality care. Given the current weaknesses in the public sector and infrastructure, the low level of resourcing of the OHSC and the lack of a quality improvement framework, this may lead to insufficient capacity to rollout the NHI or an NHI reliant on sub-optimal providers. This threatens support for the reform. Van den Heever(23) supports the notion that the proposed institutional framework cannot be achieved in the given timeframe, labelling the Bill unjustifiably optimistic and over-ambitious. 10.3 How can we prepare the way for NHI? Strengthen the purchasing function while enabling innovation in service delivery: It is possible to strengthen the purchasing function in the short term in the public and private sectors. Certain key elements of the purchasing function can be strengthened prior to implementation: accreditation, health technology assessment, information system strengthening, clinical coding, levelling of professional rules across the public and private sectors and experimentation with provider contracting are all examples. The current budget structure limits innovation in public service delivery. Learning sites will be essential to enable experimentation and testing of alternative service delivery models. This can be done ahead of full implementation. There are numerous pragmatic impediments to innovation which will need to be interrogated and dismantled – budget structures, salary determination, Public Financial Management Act (PFMA) rules etc. Similar to the strengthening of the purchasing function, certain rules of the HPCSA will also have to be amended to allow for team-based remuneration and telehealth that will be required as part of new models. Invest in people now: Reflection on years of provision of universal health coverage by the UK’s NHS has shown that getting the human resources right is critical to the success of UHC (Friebel et al. 2018). South Africa’s last Human Resources for Health (HRH) Strategy in 2011 (Department of Health 2011) was never comprehensively implemented. The development of a clear human resources operational plan was articulated as an outcome of the Presidential Health Summit that took place in October 2018 (Gonzalez 2018). HRH shortages have been noted in terms of doctors (GPs), specialists, nurses and dentists. Ensuring a sufficient healthcare workforce is available by the time of the first roll-out and implementation of NHI is something that must happen now already and requires continual planning and engagement to ensure future availability. Under-staffing and low HRH capacity will strengthen the notion of weak government capacity and quality, leading to lack of trust and buy-in to NHI as a concept. Much needs to be done to improve public-sector working conditions, the absorption of the training pipeline into the system, and the ability of doctors to work across both sectors. Task-sharing and the role of mid-level health workers need to be strengthened, and the current problems with vacancies fixed. These improvements will be critical to regaining the trust of healthcare providers. Take stakeholders along on the journey: The German process of transitioning to UHC has shown how important it is to take all critical stakeholders along on the journey.(28) Significant trust can be built by being responsive to the needs of stakeholders and involving them in the transition process. In Germany, it was found that a medium-term process of working intensely with important stakeholder groups supported a transition process. An independent research group worked closely for a period of three years with key health system stakeholders to arrive at consensus outcomes and ideas on the changes required.(28) Six books were published from this engagement. It meant the perspectives of all stakeholders were captured and shared in a public way.(28) 11. Potential constitutionality issues raised by the NHI Bill The ISI produced a separate report(43) that focuses only on the constitutionality issues that may arise from this Bill. Many of the concerns raised relate to areas of uncertainty in the draft Bill, and, depending on the implementation of the Bill, constitutional issues may arise at a later stage. Note that further legal input is required to engage with whether the issues outlined below are meaningful concerns, or not. Many stakeholders have questioned the constitutionality of Section 33 of the draft NHI Bill, in particular. For brevity in this report, we only include those issues foremost in stakeholder engagements and in various NHI submissions. (30) (25) (29) (23) Section 18 of the Bill of Rights guarantees every person to the right to freedom of association. It is argued that requiring all citizens to fall under the NHI may be limiting one’s right to decide who to associate with. Entrenched in section 12(2)(b) of the Constitution is the right to bodily and psychological integrity. It is argued that the freedom to choose health care services is tied to this right. Section 25 of the Bill of Rights speaks to the right to property and it is argued that the inclusion of Section 33 in the NHI Bill may be infringing on this right. Section 27(1) of the Constitution speaks to the right to access to health care. Government may not hinder individuals from themselves giving effect to this right. Section 33 of the NHI Bill may therefore be infringing on this right by reducing access to health care for some. By taking away substitutive or duplicative medical scheme cover and thereby forcing individuals to register to become users of the NHI Fund, the State is argued to be potentially infringing on “the most basic contours” of a person’s life “through coercion”. Section 36 of the Constitution states that rights in the Bill of Rights may be limited if the limitation is reasonable and justifiable. This includes taking into consideration the relationship between the limitation and its purpose and consideration of less restrictive means to the purpose, among other considerations. Stakeholders suggest that the Bill will fall short of this clause due to the inadequate justification and lack of evidence of considerations of other measures to achieving UHC. 12. Learnings from the Covid-19 pandemic for NHI South Africa is likely to fare worse than the Global North as a result of Covid-19 because our health system and economy are both more fragile, we have fewer health workers, and access to health care in rural parts of the country is poor. The pressure on the health system impacts not just on patients but on health workers too. Weak leadership is made visible because it exacerbates the situation by not being sufficiently responsive and clear. Covid-19 has highlighted the weaknesses in both the public and private health system, and driven home the need for UHC in South Africa. In our engagements with one stakeholder they expressed a desire for an integrated health system and argued that Covid-19 should make the need for such a system very clear. Systems that have functional UHC, like Germany, have managed to weather the Covid-19 storm better than those without UHC or with weak health systems. Covid-19 has also given us a glimpse of what is possible for health system reform: rapid innovation in digital access to health, the deployment of community health workers to accelerate our response, home delivery of medicines in the public sector and private sector doctors willing to roll up their sleeves for the public good. The centrality of stewardship is beyond question. There are many things that would have made our health system more resilient but were missing because of lackadaisical regulation and oversight. Examples include the lack of progressive telehealth regulations and the absence of risk-based capital regulations for medical schemes. Other elements of the health system have also been highlighted through the pandemic. A gross under investment in technology has resulted in difficulties with patient management across facilities and sectors (for example, electronic patient records) and the availability of tracking and tracing technology to curb the spread of Covid-19. Manual and paper-based systems have fallen over with high patient volumes, and this is critical to improve before instituting a nation-wide system. Covid-19 has highlighted some of the contracting capabilities that we need to build as we move toward NHI. For example, agreement on tariffs for Covid-19 patients to be treated in private hospitals was challenging albeit eventually reached. Covid-19 has provided an opportunity for NDoH and Treasury to ensure that provider reimbursement is timeous and fair during this period. Dealt with appropriately, this could go a long way to building trust between the sectors. However, most pressing on everyone’s mind is the way in which Covid-19 has decimated economies around the globe. This has further weakened stakeholders’ belief that the NHI is an affordable option for South Africa. Given the increased reliance on loan funding, it is likely that South Africa will come under increased lender scrutiny around the financial sustainability of major policy changes. During the pandemic, medical schemes came together to discuss how their reserves could be used to ensure care during an unusually high utilisation period. The WHO has asked how the NHI Fund plans to ensure there are enough reserves to allow for the same kind of security. As we continue to weather the storm, no doubt there will be more lessons and more opportunities to practice some of the mechanisms that the NHI and the NHI Fund plan to rollout. If done well, this could provide the experience needed to build trust and confidence in NHI reforms. 13. The way forward This report is a precursor to a summary document laying out the critical policy choices relative to health system objectives as set out in various policy papers between 1994 and 2019, as identified in this report. The intention of this report was to provide an overview of various critical issues and concerns stakeholders have raised with regards to the NHI Bill. Arguments for and against certain positions taken in the bill were presented. The report ended with reflections on how the Covid-19 pandemic is already shaping the future of NHI. Critical interrogation of key sticking points between stakeholders is required in order to not only question the way forward proposed by the NHI Bill, but to also find a practical road ahead that can take all critical stakeholders along on the journey. There is a need for research to inform a way forward that is cognisant of the shortcomings of the current system, both public and private, and the advantages and disadvantages of the proposed reforms. In questioning the way forward, it is useful to conceptualise an inter-connected set of reforms – enabling thinking about a series of policy choices and the sequencing of implementation. 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South African Med J 107 109. 2017;107(12):1099. doi:https://doi.org/10.7196/SAMJ.2017. v107i12.12539. Van den Heever AM. South Africa’s universal health coverage reforms in the post-apartheid period. Health Policy (New York). 2016;120(12):1420-1428. doi:10.1016/j.healthpol.2016.05.012 Van den Heever A. National Health Insurance Policy Bill Review.; 2019. South African Private Practitioners Forum. Submission on Draft NHI Bill to National Department of Health.; 2019. Inclusive Society Institute. Towards Inclusive Healthcare. Cape Town; 2020. doi:10.4018/978-1-4666-4245-4.ch011 Competition Commission. Health Market Inquiry. Pretoria; 2018. http://www.compcom.co.za/wp-content/uploads/2018/07/Health-Market-Inquiry-1.pdf. Percept Actuaries and Consultants. Strategic Purchasing HASA Policy Brief Series: Brief 7. Cape Town; 2019. Inclusive Society Institute. Lessons for South Africa on Transitioning to Universal Health Coverage from the German Experience. Cape Town; 2020. doi:10.1017/CBO9781107415324.004 Helen Suzman Foundation. The National Health Insurance Bill Submission by the Helen Suzman Foundation to the National Assembly’s Portfolio Committee on Health.; 2019. The FW De Klerk Foundation. Submission on the National Health Insurance Bill [B11-2019].; 2019. Donabedian A. Evaluating the quality of medical care. Reprinted 1966 article. Milbank Q. 2005;83(4):691-729. doi:10.1111/j.1468-0009.2005.00397.x Percept Actuaries and Consultants. No Strategic Purchasing HASA Policy Brief Series: Brief 5. Cape Town; 2019. Helen Suzman Foundation. The National Health Insurance Bill Submission. Cape Town; 2019. The FW de Klerk Foundation. Submission on the National Health Insurance Bill. Cape Town; 2019. Section27, Treatment Action Campaign. National Health Insurance Bill Submission. Cape Town; 2019. The Davis Tax Committee. Financing a National Health Insurance for South Africa.; 2017. Goudge J, Kawonga M, Mosam A, Wishnia J. Comments on the NHI Bill.; 2019. doi:10.1017/CBO9781107415324.004 Glassman A, Giedion U, Smith PC. What’s In, What’s Out: Designing Benefits for Universal Health Coverage.; 2017. DPME. Socio-Economic Impact Assessment System (SEIAS): Final Impact Assessment (Phase 2): White Paper on National Health Insurance.; 2017. Section27, TAC. Submission On The National Health Insurance Bill 2019.; 2019. Section27, TAC. Section27 And Treatment Action Campaign Submission.; 2018. SAPPF. Submission on Draft NHI Bill to the National Department of Health.; 2018. Inclusive Society Institute. Briefing Document: Brief to Senior Counsel for Formal Legal Opinion; Potential Constitutional Issues Arising from the Porposed NHI in South Africa. Cape Town; 2020. https://drive.google.com/file/d/1oaNITNgYc618G2A_uYEu6HzCLz-dVhty/view. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Summary of themes from the panel discussion hosted on June 29, 2020 Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place on June 29, 2020 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel Motivated by the objective of fostering accelerated, transformative and broad-based growth, the Inclusive Society Institute is aiming to develop a new economic blueprint for South Africa. As part of this work, the institute is assessing the country’s current economic model and is seeking to benchmark economic policy frameworks against best-practice frameworks of other countries. This report considers lessons for South Africa from examining the growth path that the Japanese economy followed after World War Two. Content Abbreviations and acronyms Introduction Japan’s post-war growth Lessons from Japan Building a shared national vision Fostering social cohesion Strengthening the State’s role in development Providing policy support to exports Promoting food productivity Nurturing capital investment Conclusion References Abbreviations and acronyms ANC African National Congress B4SA Business for South Africa DTI Department of Trade and Industry GDP Gross Domestic Product GFCF Gross-fixed Capital Formation JETRO Japan External Trade Organisation MITI Ministry of Trade and Industry NDP National Development Plan NGP New Growth Path RDP Reconstruction and Development Programme SARB South African Reconciliation Barometer SADC Southern African Development Community SoE State-owned enterprise WW2 World War Two Introduction South Africa’s economy remains stubbornly sluggish. Even before the Covid-19 pandemic, the country was unable to produce the growth needed to address historic backlogs and propel the economy into a new growth phase. Prior to the new novel coronavirus that turned the global economy upside down, South Africa’s gross domestic product (GDP) growth was forecast to be below 1% (National Treasury, 2020). The shutdown measures to contain the spread of the virus further throttled the economy, which is now on course for its biggest contraction in nearly 90 years. GDP is forecast to shrink by 7.20% in 2020 (Mboweni, 2020). The global economy is also heading for its deepest recession since World War Two (WW2), with a decline of 5.20% forecast, compared with a pre-Covid-19 estimate of a 3.30% expansion in 2020 (World Bank, 2020). Globally joblessness is rising. In South Africa, using a narrow definition that excludes many of the long-term unemployed who have ceased actively looking for employment, South Africa’s unemployment rate increased by one percentage point to 30.10% in the first quarter of this year (Stats SA, 2020). Unemployment is forecast to increase further to 35.30% by the end of the year (IMF, 2020). Tax revenues are projected to fall sharply in South Africa’s 2020/21 financial year from about R1.43-trillion to R1.12-trillion, contributing to a sharply higher-than-expected consolidated budget deficit of about 15.70% of GDP (Mboweni, 2020). The growth trajectory of public debt is rising sharply. Finance Minister Tito Mboweni says the country has a “Herculean task” to stabilise its national debt, which will be close to R4-trillion, or 81.80% of GDP, by the end of the 2020/21 financial year (Mboweni, 2020). The coronavirus pandemic has exacerbated South Africa’s problems and highlights the need for reforms to generate strong and sustainable growth. Inclusive Society Institute CEO, Daryl Swanepoel, says imaginative thinking is required to catapult the country out of its current downward trajectory. Simultaneously, the economy must be transformed to address inequality, to mainstream the informal sector and to become more demographically inclusive. The institute’s deputy chairperson, Professor Zweli Ndevu, who is also head of the School for Public Leadership at the University of Stellenbosch, says South Africa must scrutinise its current economic policies and fix the shortcomings of those policies. “The Covid 19 pandemic offers a portal to another world, one which we may call a new world. Because we cannot dare to go back to the normal – the ‘old world’ as we know it,” says Ndevu. “Everywhere, everyone is talking about reinventing, changing the economy to be equitable and more sustainable, but the question remains, what form will this take and will this be an inclusive process?” The Inclusive Society Institute aims to work towards developing a new economic blueprint for South Africa – motivated by the objective of fostering accelerated, transformative, and truly inclusive and broad-based growth activity. As part of this, the institute is assessing the country’s current economic model and is seeking to benchmark current and future economic policy frameworks against best-practice policy frameworks that have been effective in other countries and which have been effective at promoting inclusive growth, while beneficially integrating their economic activity into the global economic trade and investment architecture. As part of this overall mission, this report published by the Inclusive Society Institute considers lessons for South Africa that can be gleaned from examining the growth path that the Japanese economy followed after WW2. The information in the report is based on a June 29, 2020, webinar hosted by the Inclusive Society Institute. Participants in the webinar included: Dr Katsumi Hirano, executive senior research fellow at the Institute for Developing Economies, which is associated with the Japan External Trade Organisation (JETRO). Hirano was the former vice president of JETRO. Theo Vorster, a South African economist, and CEO at Galileo Capital. Professor Tania Ajam, associated with the School for Public Leadership at the University of Stellenbosch. She is also a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council. Vusi Khanyile, chairperson of Thebe Investments and a director of several public and private companies. He serves on the Presidential State-Owned Enterprises Council. Khanyile is also the chairperson of the Inclusive Society Institute. Professor Zweli Ndevu, head of the School for Public Leadership at the University of Stellenbosch. He is the Inclusive Society Institute’s deputy chairperson and chair of the institute’s Research Committee. Japan’s post-war growth The spectacular growth of East Asian nations in the decades following World War Two (WW2) led to their being considered the economic wonders of the world. Japan and the four ‘Asian Tigers’ – South Korea, Taiwan, Hong Kong and Singapore – have been dubbed the ‘miracle’ economies, because of their unparalleled accomplishments in the latter half of the twentieth century. Development economists recognise Japan’s rise after WW2 as the first appearance of the ‘East Asian Miracle’. Devastated by WW2, including nuclear bombardments and other raids, the ravaged Japanese economy rose from the ashes of WW2 to become the second-largest economy after the US. In 1964, Japan became a member of the Organisation for Economic Cooperation and Development, signalling its successful transformation into a fully industrialised economy. Numerous economists, political scientists and historians have examined Japan’s economic acceleration. The country’s growth story is mostly credited to intensive and systematic cooperation between government bureaucrats, such as those working in Japan’s Ministry of Trade and Industry (MITI), and businesspeople, such as the leaders in major companies – dubbed the zaibatsu – involved in the manufacture of, among others, steel, ships, automotives and electronics, which set the economy on a path of export-led expansion (Imade, 2016). This process was buoyed by aggressive domestic investment, selective protectionist barriers, industrial policies that promoted targeted industries, research and development, as well as technology imports from the developed world. Growth in real GDP per capita in Japan, Britain and the US, 1870 to 2008 Source: The Maddison Project US involvement in the immediate aftermath of WW2 and during the Cold War, when the US was cultivating global alliances, also contributed to Japan’s economic rebound. Between 1945 and 1958 – considered the recovery period – Japan’s per capita GDP increased at an average of 7.10% a year. This was followed by a period of high economic growth from 1959 to 1970, averaging 9.50%. During this period, economic growth exceeded 10% in 8 out of 12 years (Beckley, Horiuchi and Miller, 2018). By 1973, Japan had nearly caught up with Western nations, with a GDP per capita of 95% that of Britain and 69% that of the US. That was the last year of the so-called rapid-growth era, but the Japanese economy continued to expand at a comparatively rapid rate for almost two more decades (Tetsuji, 2015). By 1991 – the last year of the ‘bubble economy’ – Japan’s GDP per capita was 120% that of Britain and 85% that of the US. From 1986 to 1991, real estate and stock market prices were greatly inflated. In early 1992, the price bubble burst and Japan’s economy has since then continued to stagnate, with persistently low rates of economic growth and ongoing risks of deflation, exacerbated by the demographic realities associated with an aging population (Tetsuji, 2015). Lessons from Japan The key lessons that South Africa can learn from Japan’s economic development can be categorised under the following headings: Building a shared national vision Fostering social cohesion Strengthening the State’s role in development Providing policy support to exports Promoting food productivity Nurturing capital investment Building a shared national vision The development experience of Japan reflects the importance of a shared vision or common focus that a country can rally behind. For many decades, Japan’s top national priority was to catch up with industrialised economies. The vision took hold during the Meiji era in the late nineteenth century and continued after WW2 until the early 1970s, when Japan’s economy matured. During this time, economic policies and corporate strategies were geared to achieving a common vision: ‘to catch up with the West’ (Tetsuji, 2015). The lesson for South Africa is that for accelerated inclusive growth to be achieved, it will be necessary that a common strategic vision be developed that is shared among those in the country’s public and private sectors, non-governmental organisations and by society as a whole. Unlike a relatively homogenous society like Japan, South Africa, which is more racially, ethnically and regionally diverse, will also need to develop a common ‘sense of us’ – uniting the people of the country in their diversity – to effectively create a rallying point. A common vision will enable people to address and overcome historical exclusion and inequality and make the sacrifices needed to fast-track development. This approach has been broadly reiterated by South Africa’s governing political party the African National Congress (ANC) in its document on ‘Reconstruction, Growth and Transformation’, released in response to the Covid-19 pandemic, where it has stated that: “The private sector, workers and the rest of civil society will variously and jointly have critical contributions to make in devising and implementing the [country’s economic growth and development] plan, ranging from investment, implementation of initiatives agreed upon in recent summits and in sector charters, to broad agreements on productivity and income, a new approach to representivity in enterprise governance structures and management of relationships between enterprises and communities in which they are located” (ANC Economic Transformation Committee, 2020). Many overlapping and similar points have been outlined in South African business’s response to the Covid-19 crisis contained in the B4SA document ‘A New Inclusive Economic Future for South Africa’, which states that the country “requires a social and economic compact between all partners with the focus on shared prosperity” (B4SA, 2020). Post-apartheid South Africa has a history of such intentions, but the problem has been in the lack of effective execution of well-intentioned plans. The Reconstruction and Development Programme (RDP) that the ANC government of Nelson Mandela implemented in 1994 tried to facilitate and create such a national vision. The RDP was aimed at addressing the socio-economic problems facing South Africa at the time. Although viewed as the cornerstone of government development policy, the RDP did not deliver as hoped for, particularly in terms of economic growth and transformation (South African History Online, 2020). Consequently, the ANC government unveiled a new vision in 2011, the National Development Plan (NDP) – to chart a path for the country, arguing that South Africa looks “very different to the one left behind in 1994” (NPC, 2011). Yet, for many poor South Africans, there is still much that looks the same, highlighting serious shortcomings in the country’s development path. In December 2012, the NDP was adopted as the blueprint for future economic and socio-economic development. Dr. Katsumi Hirano Inclusive Society Institute chairperson, Vusi Khanyile, who is also chairperson of Thebe Investments and a director of several public and private companies, argues that one of the shortcomings of the socio-economic policy framework is that programmes are often administration bound. When an administration changes, so do its plans. “Administrations must know we are all in a relay. You pick up the baton and you know where you are running to. We need to improve our capacity to develop a vision that goes beyond the timespan of an administration.” “I long for the time that we can say as South Africans, we have a generally accepted vision of South Africa that we desire, how it will function and what it will look like,” says Khanyile. Fostering social cohesion A cohesive society is one where citizens feel they can trust their neighbours and State institutions. One where individuals can seize opportunities for improving their own well-being and the well-being of their children. Social cohesion is often described as the glue that holds societies together (OECD, 2011). Still transitioning from its racially divided past, South Africa remains mired in inequalities and lack of social cohesion. In the case of democratic South Africa, the foundations for social cohesion were laid by President Mandela. However, from an outsider’s perspective, executive senior research fellow at the Institute for Developing Economies, Dr Katsumi Hirano, says it appears that South Africa has lost its way in its drive to become a non-racial society. Hirano, who was stationed in Zimbabwe in the 1980s before being posted to South Africa, says he is “deeply disappointed” in the political development of both countries post-democratisation. The emigration of many white businesspeople, in his view, poses serious problems for the future growth and development of the South African economy. “Becoming a truly non-racial society is the big starting point for South Africa’s reconstruction,” he says, arguing that the marketplace must develop the fundamental right for all to participate without regard for social position. Khanyile suggests that South Africa should prioritise the need to improve collaboration among South Africans, irrespective of race or gender. “For as long as we are kept apart by the historic division that we have had, we cannot talk of social cohesion.” Source: South African Reconciliation Barometer 2019 Strengthening the State’s role in development The economic policy of the State was a key factor in the fast growth that Japan experienced in the post-WW2 era. The MITI was the central architect of Japanese industrial policy and was one of the most influential agencies of the government. At the height of its influence, MITI effectively ran much of Japan’s research and directed investment. MITI facilitated the early development of nearly all major industries by providing protection from import competition, technological intelligence, help in licensing foreign technology, access to foreign exchange and assistance in mergers. A major objective of MITI was to strengthen domestic manufacturing interests. Today, it is known as the Ministry of Economy, Trade and Industry. Hirano describes the model that Japan followed as an administrative State, or a developmental dictatorship – one in which Parliament has less influence and the administration office, especially in the economic department, significant power to lead the country on a path to high economic growth (Hirano, 2020). It is said that, in a political system where bureaucracy is given sufficient scope to take initiatives and operate effectively, politicians ‘reign’, while bureaucrats ‘rule’. Japanese bureaucrats were well acquainted with economic and industrial knowledge, and the government bureaucracy attracted the ‘brightest and the best’ to help to administer and manage the programmes of Japan’s developmental State. Collaboration between the State and big business has long been acknowledged as the defining characteristic of the Japanese economic system. Hirano says there should be closer collaboration between government and business in South Africa, a suggestion with which Professor Tania Ajam, from the School for Public Leadership at the University of Stellenbosch, agrees. Currently, mutual distrust exists between government and business, as South Africa is only just starting to emerge from a decade of State capture. The damage that State capture inflicted on the South African economy has been laid bare during the response to the Covid-19 pandemic. State capture under the administration of former President Jacob Zuma has destroyed trust and State capacity. Ajam emphasises that the country needs honest and competent people in government. “When you mention issues around cadre employment, you always get told ‘oh, but America does it’. If you look at [US President] Donald Trump and you see the deployment of incompetent cadres, you see why America is bearing the cost now of eroding the State capacity they have” (Ajam, 2020). The quality and types of bureaucrat also play a vital role in advancing economic development. Individuals in bureaucratic positions must be independent of political and business networks. “The people we have in the Department of Trade and Industry (DTI) and a lot of these small business agencies have never run a business themselves. They do not have networks in business. All they have is political connectivity. We want to get to the type of bureaucrat who understands politicians, because that is very important, but also understands business people,” Ajam says. This is particularly important if South Africa is to successfully manage the vision it needs its State-owned enterprises (SoEs) to fulfil. The country’s SoEs are facing severe financial difficulties and operational problems, yet government has placed these enterprises at the centre of the State developmental agenda. Whereas State-owned power utility Eskom had the potential to play a major developmental role on the African continent, it is now a burden on the fiscus, with debt of R450-billion. Providing policy support to exports Export-oriented industrialisation was characteristic of the development of the national economies of Japan and the Asian Tigers in the post-WW2 period. Through export-led growth, governments seek to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets. Much of Japan’s growth was based on competitive exports of products in which the country had a specific benefit or relative competitive edge. Two of South Africa’s export success stories are the motor vehicle industry, which is incentivised by government, and citrus fruit exports. South Africa is currently the world’s second-largest citrus fruit exporter. Export performance, according to former World Bank chief economist, Anne Krueger, is a function of effective government policies. Success with the export-promotion model requires supportive government intervention. However, South Africa will need to be selective in choosing in which sectors it is most likely to have export success. To successfully build an export market, South Africa must start with the industries in which it already has a strong foothold and see how those could be moved up the value chain. In some areas, such as the automotive sector, as well in the export of table grapes and citrus fruit, the country already has private-sector vibrancy. Government interventions could also be used to further develop sectors such as the labour-intensive renewable-energy industry and fertiliser production. The country already has the skills and some of the infrastructure required in these sectors. South Africa’s current policies and government programmes, including the NDP, the New Growth Path (NGP) and the Industrial Policy Action Plan, call for “developmental trade policies” to encourage and upgrade value-added, labour-absorbing industrial production. The NGP states that South Africa’s trade policy should seek to promote exports, while addressing unfair competition towards domestic producers and assisting new activities to achieve competitiveness. It calls for trade policies to become more focused, identifying opportunities for exports in external markets, using trade agreements and facilitation to achieve these (NPC, 2011). The NDP envisages 6%-a-year export growth by 2030, with non-traditional exports increasing by 10% a year (NPC, 2011). South Africa’s access to global markets is enhanced by its trade agreements, such as the Southern African Development Community (SADC) Free Trade Area, the EU-SADC economic partnership agreement, preferential access to the US market under the African Growth and Opportunity Act, and the new African Continental Free Trade Area. Promoting food productivity Raising agricultural productivity and accelerating agricultural growth is a core development strategy employed by developing countries. Japan and other East Asian economies experienced impressive growth in agriculture, sparked by the Green Revolution after WW2. This facilitated rapid industrial expansion and a decrease in relative poverty. The Green Revolution refers to a series of research, development, and technology transfer initiatives, occurring between the 1940s and the late 1970s that increased agriculture production around the world, beginning most markedly in the late 1960s. Between mid-1950 and about 1970, Japan’s rice production productivity increased sharply (Hirano, 2020). Food productivity is one of the main reasons for the competitive advantage that East Asian countries have in labour. The cheaper price of food materials makes it possible to lower average wages in the manufacturing sector, which contributes to the competitive advantage of the labour force. Using price indices of cereals and meat, Hirano points out that between 1985 and 2000, Asia’s food prices have remained well below that of Africa (Hirano, 2020). Food productivity is therefore important to ignite higher economic growth and for the sustainability of society. Japan: Economic growth and food production Source: Dr Katsumi Hirano High productivity brings low price Price index of cereals Price index of meats Source: Dr Katsumi Hirano (citing ILO statistics) Ajam agrees with Hirano’s proposal about improving food productivity. South Africa must improve on its research and development in agriculture to gain better market intelligence, as the effects of climate change and water shortages are becoming more visible in the country. At the same time, the country also has to address the issue of land reform. Ajam posits that land reform in South Africa has been a failure, arguing that the redistribution of land has not resulted in a redistribution of productive capacity. Nurturing capital investment Japan’s era of high growth was accompanied by very aggressive investment. Gross fixed capital formation (GFCF) peaked at 38% of its GDP in 1973. In the preceding five years, Japan’s yearly GDP growth rate averaged more than 9% (Hirano, 2020). The NDP envisages GFCF of about 30% for South Africa by 2030. Weighed down by persistent low business confidence, sluggish real economic activity and the further deterioration of the fiscal position, GFCG declined to 17.90% in 2019 – the lowest since 2005 (NPC, 2011). Although South Africa has invested vast sums in the past decade, the investment has not been productive, partly owing to State capture. To crowd in investment, the public sector must ensure that the investment delivers what is expected. Ajam emphasises that policy certainty is crucial to attract more private investment. Investors require at least 20-year visibility and certainty that goalposts will not shift. “You cannot have mixed signals – one minute you want to do renewables and the next you suddenly want to go back to nuclear.” In its post-Covid-19 recovery, government is placing infrastructure at the centre of its economic stimulus, but public finances are under strain. As a result, government will need to signal a consistent, pro-investment message if the private sector is to be expected to play an increasingly important role in financing infrastructure projects. There are growing calls to amend pension fund regulations to enable more investment in infrastructure. Regulation 28 of the Pension Funds Act limits the extent to which retirement funds may invest in particular asset classes. The aim of this regulation is to ensure that the savings South Africans contribute towards their retirement is invested in a prudent manner and not only protects the retirement fund member, but is channelled in ways that achieve economic development and growth. Head of the ANC’s economic transformation committee, Enoch Godongwana, has said: “If properly packaged, there is no reason why pension funds should not invest in infrastructure directly, instead of using third parties in the form of asset managers.” Ajam is of the opinion that pension funds could be used more productively for infrastructure investment, noting that this has been done in other countries. The guidelines, however, have to be very stringent to ensure that pension funds do not become a looting pot. The State-owned Public Investment Corporation, which has about R2-trillion of assets under its management, including that of the Government Employees Pension Fund, has been under pressure from politically connected people who want access to it for sub-optimally productive purposes. Hirano says that, frankly speaking, South Africa has become “un-investible”. Conclusion Although Hirano is hesitant to offer blanket support to the idea of Japanese society and experience being a development model, there are lessons that South Africa can learn from the Japanese experience. His three suggestions for South Africa are: Focus on food production. Establish an effective developmental State and a social contract. Sharpen policy support for exports, as foreign market competition is beyond government discretion and leaves little room for corruption (Hirano, 2020). South Africa should also extend collaboration between the people who have the political mandate to govern and the professionals involved in policy making and execution. Hirano cites the Japanese model where economic policy was made by professionals in the MITI as an example to imitate (Hirano, 2020). Further, more tangible ideas on policy, especially around employment, and education and motivation of the younger generation, will go a long way to reinvigorate the economy. Khanyile has underscored the need to increase the knowledge index of the country and to improve the health outcomes. “You cannot have a well-functioning economy in a population of sick people. Health, education and economic development go hand-in-hand . . .” Economist, Theo Venter, highlights that South Africa cannot emerge from the Covid-19 pandemic with an “old normal”. “We need a normal that is much more effective, more efficient and fairer. We need to establish a normal where each and every South African is part of the long-term future and success of this country.” Swanepoel concludes: “We cannot have transformation of our society, without economic growth. Similarly, you cannot have transformation in society if you do not have social cohesion. For that you need a vision as a nation and you need to have a structured plan that can go from one administration to the next administration.” References African National Congress (ANC) Economic Transformation Committee. 2020. 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The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Summary of themes from webinar hosted on 5 August 2020 Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or its Board or Council members. All records and findings included in this report, originated from a panel discussion on developing a new economic blueprint for South Africa, which took place November 2021. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place on August 5, 2020 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel The Inclusive Society Institute is developing a new growth-centred economic blueprint for South Africa. The project comprises a number of phases, the first of which is to study several economies from historically distressed jurisdictions that have successfully turned themselves into winning nations. This report focuses on lessons that South Africa can glean from the South Korean development experience. Contents Abbreviations and acronyms Introduction ‘Miracle on the Han river’ Lessons from South Korea Prioritising human and social capital Stepping up rural development Incentivising growth through differentiation Improving coordination and accountability Conclusion References Abbreviations & acronyms GDP gross domestic product GNI gross national income ISI Inclusive Society Institute IMF International Monetary Fund KAIST Korea Advanced Institute of Science and Technology PIRLS Progress in International Reading Literacy Study Stats SA Statistics South Africa Introduction Even prior to the coronavirus pandemic of 2020, the South African economy was for a number of years unable to produce the levels of economic growth required to address historic backlogs and create opportunities for its large number of unemployed. Recent economic choices have not been able to propel the economy into a new growth phase and high levels of corruption have had an adverse impact on State capacity and on the economy’s ability to gain momentum towards inclusive growth. Through a series of dialogue sessions with economic policy experts, the Inclusive Society Institute (ISI) is exploring the development paths of previously distressed economies, which were able to successfully implement turnaround strategies, including Japan, South Korea and Germany. The ISI aims to develop a new economic blueprint for South Africa, and as part of this work, the institute is assessing the country’s current economic model and is seeking to benchmark it against best-practice policy frameworks that have been effective in other countries. The ISI believes that the South African economy has to be transformed to address inequality and to become more demographically inclusive. CEO Daryl Swanepoel says the depressed state of the economy obligates policymakers to take decisive action to make the structural reforms that are needed to reignite growth. “As we have learnt and will learn from some of the countries we are exploring, it may not be all neoliberal reform that is needed. We could also more aggressively start moving towards an effective mixed economy where the State and private sector work in a more closely coordinated manner, guided by social and national democratic values,” says Swanepoel. This report, the second in a series published by the ISI, focuses on South Korea’s rise from an economic minnow to a global powerhouse. Even though in the late 1950s South Korea had a per capita income comparable to West African country, Ghana, South Korea has, for decades, so accelerated its rate of economic growth that it is now the world’s eleventh-biggest economy with a per capita income of more than $30 000, compared with Ghana’s current per capita income of just over $2 000 (IMF, 2019). This report is based on an August 5, 2020, webinar hosted by the ISI. Participants in the webinar included: Dr Jong-Dae Park, South Korean Ambassador to South Africa. He is an economist by trade and author of the book Reinventing Africa’s Development. Theo Vorster, a South African economist and CEO at Galileo Capital. Professor Tania Ajam, associated with the School for Public Leadership at the University of Stellenbosch. She is also a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council. Joan Fubbs, director for the Centre for Education in Economics and Finance. She is also a former chairperson of the Parliamentary Portfolio Committee on Trade and Industry. ‘Miracle on the Han river’ The economic growth of South Korea has been a remarkable success story. Considered one of the poorest nations in the 1950s, South Korea has established itself as a developed, high-income country in just a few generations. The rapid development has been dubbed ‘the Miracle on the Han river’. When the Korean War ended in 1953, South Korea was poorer than many African countries at that time, with per capita gross domestic product (GDP) of $67. In extreme poverty, the nation suffered food shortages, depended on foreign aid for survival and was considered by Western powers to be a “hopeless country” (Chun, 2010). When Park Chung-hee came to power during a military coup in 1961, he proclaimed that economic development would be the central feature of his administration. He began a series of economic reforms that transformed the peninsula nation into one of the world’s biggest exporters. The government in 1962 launched its first five-year economic development plan, which set out its ambition to modernise the industrial sector and enhance its international competitiveness. The success of the first five-year plan encouraged the government to continue forging ahead, with six subsequent five-year plans pursued in the decades that followed. Each successive development plan upgraded South Korea’s manufacturing capabilities. Source: Shanghoon Kim The first five-year plan (1962 to 1966) consisted of initial steps toward the building of a self-sufficient structure, focusing on light industry, such as textiles. The second five-year plan (1967 to 1971) focused on modernising the industrial structure and rapidly building import substation industries, including steel, machinery and chemical industries. The third five-year plan (1972 to 1976) promoted heavy and chemical industries, with industries including iron and steel, automotive, household electronics and shipbuilding receiving attention. The fourth five-year plan (1977 to 1981) fostered the development of industries to compete effectively in the world’s industrial export markets. Technology-intensive and skilled labour-intensive industries were supported, such as machinery, electronics and shipbuilding. In the fifth and sixth five-year development plans in the 1980s, the emphasis shifted from heavy and chemical industries to technology-intensive industries, such as precision machinery, electronics, including televisions and semiconductor-related products. The seventh five-year plan, launched in 1992, gave preference to developing high-technology fields. One of the most fundamental problems South Korea faced, was how to finance its growth plans. To encourage domestic savings from which capital could be funnelled to development projects, interest rates were raised substantially in 1965, and, accordingly, savings grew rapidly (Park, 2019). The ‘select and focus’ strategy has been a key to economic development Source: Sanghoon Kim Under the Park administration, the central government played an important role in economic development, with the Economic Planning Board serving as the nerve centre. Headed by a deputy Prime Minister and staffed by highly capable bureaucrats, the Economic Planning Board allocated resources, directed the flow of credit and formulated economic plans (Savada & Shaw, 1990). Cooperation between government and large family-run conglomerates, or chaebols, was essential to the country’s economic success. Government generously supported chaebols, such as Hyundai, Samsung and LG Corporation, nurturing them into globally recognised brands. The practice was similar to that of the other Asian Tigers (Albert, 2018). Government and chaebols have long had a symbiotic relationship. They dominate South Korea’s economy and wield extraordinary influence over its politics (Albert 2018). However, the cosy relationship, once seen as an instrument for growth, has in recent years increasingly roused the public’s ire. Public discontent with the chaebol reached a new peak in 2016/17, with the eruption of an influence-peddling scandal that led to the ouster of President Park Guen-hye. South Korea’s economic development strategy lifted the nation out of poverty and set it on a path of high economic growth. South Korea and Taiwan are the only two countries that consistently grew at more than 5% a year for 50 years. Park argues that South Korea’s trajectory is perhaps more impressive than Taiwan’s, owing to the scale of its economy and how it has performed in its post-industrialisation phase. South Korean economic growth from 1953 to 2012 Source: Jong-Dae Park South Korea successfully overcame the oil crisis in the 1970s, the Asian financial crisis in 1998 and the global financial crisis in 2008. South Korea in 2012 joined the so-called ‘20-50-club’, those with per capita GDP surpassing $20 000 and a population of more than 50-million. At the time, the country’s Finance Ministry described it as an “unprecedented feat” for a newly industrialised economy. South Korea was the first country that was not an industrialised economy before World War 2 and the seventh country in the world to achieve this feat. In 2018, South Korea joined the even more exclusive ‘30-50 club’ of economic powerhouses, with a 50-million population and a per capita GDP of more than $30 000. South Korea’s gross national income (GNI) was $1.68-trillion in 2018 and $1.74-trillion in 2019, with a per capita GNI of $32 610 and $33 720 respectively (World Bank, 2020). While South Korea’s economy has performed well in recent years, short-term growth is moderating and long-term growth is facing headwinds (IMF, 2019). Lessons from South Korea In his 2019 book, ‘Reinventing Africa’s Development: Linking Africa to the Korean Development Model’, Jong-Dae Park categorises the essence of the South Korean model of economic development into two main elements: compressed economic growth and effective social mobilisation for change. South Korea’s development is considered unique because the country has advanced by promoting industrial transformation, while instilling the ‘can-do-spirit’ into its people and encouraging them to be active agents of development (Park 2019). There were four fundamental cornerstones upon which compressed economic growth and effective social mobilisation were realised: land reform, empowerment of the people, revolution in education and governmental reform. The most important of these, according to Park, being land reform and empowerment of people. The lessons that South Africa can take from South Korea’s economic model can be categorised under the following headings: prioritising human and social capital stepping up rural development incentivising growth through differentiation improving coordination and implementation Prioritising human and social capital Unlike South Africa that has abundant mineral resources and arable land, South Korea has little natural resources to rely on for wealth creation. Instead, effective social mobilisation and its ‘can-do spirit’ drove South Korea to become an advanced country. Besides government’s critical intervention in advancing economic development, people’s mindset and action-oriented movements played an equally important role in South Korea’s overall development. “It is not our resources that fuelled our growth, but the work of people,” says South Korean Ambassador to South Africa, Jong-Dae Park, noting that there is an important lesson in that for South Africa. “It is up to people to make use of what they have, to work hard and to be entrepreneurial. Despite the adversity you may face, if you have commitment and the people are working together, you can achieve development.” Leaders have to motivate and inspire people to be more productive and to be empowered. Centre for Education in Economics and Finance director Joan Fubbs agrees that South Africa should make its citizens an essential component of its development. “If we adopted that principle more rigorously, we would not have some of the challenges we have now.” Education plays an important role in facilitating a mindset change. The South Korean State’s investment in, and people’s passion for, education laid the foundation for the country’s economic rise. Education investments delivered a capable labour force, willing to work and to get out of poverty. Education was the biggest item in the South Korean government budget, after defence, in the late 1950s and 1960s, at which time the literacy rate reached almost 90% (IMF, 2016). The South Korean government has continuously expanded the provision of free education to all students. Starting with free primary education in 1958, which was expanded to middle school between 1985 and 2005. The country plans to provide free education to all high school students, starting in 2021. In South Korea, education is a basic right stipulated in its Constitution. South Africa’s Constitution guarantees a similar right, but Professor Tania Ajam, from the School for Public Leadership at the University of Stellenbosch, is concerned about the standard of the country’s education output. She argues that South Africa is not producing a quality education or the type of skills that a modern economy requires. Source: University of Pretoria, Faculty of Education's Centre for Evaluation and Assessment Realising the importance of science and technology in its development, South Korea also took a different approach with tertiary education. The country placed its leading science and technology university under the aegis of the Ministry of Science and Technology, instead of the Ministry of Education. This improved the quality of graduates that the prestigious Korea Advanced Institute of Science and Technology (KAIST) produces. The highly qualified scientists and engineers from KAIST have played a big part in the status that the nation currently enjoys as a large exporter of high-technology goods. Fubbs states that South Africa’s human capital remains comparatively weak in technology and skills: “There is a potential and willingness in human capital, but we are yet to grapple with how to empower people technologically as fast as we can.” Despite a spate of recent scandals, ethics has a strong foothold in the South Korean society, something which is arguably lacking in South Africa. In South Korea, the value and importance of ethics are taught to children throughout primary and secondary school, through to university. The aim is that ethics should become internalised rather than something that people have to learn as adults when they enter the work place. Stepping up rural development Although South Africa has made efforts since the dawn of democracy in 1994 to improve the lives of rural communities and regenerate rural economies, it has had limited success. Poverty has remained consistently high among South Africans living in rural areas. South Africa’s 2011 Census reported that nine out of ten households in the upper-income category are from urban settlements, whereas no-income or low-income households are more prevalent in rural areas. About 43% of rural households are living below the food poverty line, compared with about 28% of urban households (Stats SA, 2015). At the start of its industrialisation, South Korea also faced a widening urban-rural gap, as people rushed to cities for jobs. In 1971, income in rural areas was 78.80% of that in urban areas. Through a focused rural development programme, this trend was reversed and average incomes in rural areas overtook those in the cities. The average income of rural families was higher than that of urban households in 1975, and comparable to that of urban households until the early 1990s, whereafter rural households were having increasing difficulty maintaining economic parity with their urban peers. In 2010, the average farm household income was 66.70% of urban household income (Hwang, Park & Lee, 2018). South Korea’s successful land reform programme and the launch of Saemaul Undong – a community-based integrated rural development programme – contributed to narrowing the economic gap between urban and rural communities. Also known as the New Community Movement or New Village Movement, the programme emphasised that people in rural communities should not expect the State to help them, but that they should help themselves. The State provided small startup subventions for projects to develop local communities, mostly in the form of raw materials or occasionally financial subsidies, while villagers had to contribute labour. With a ‘we can do it’ approach, Saemaul Undong was based on three doctrines: diligence, self-help and cooperation. The development approach induced locals to work voluntarily in a self-help fashion to generate resources and income on their own. Citizens realised that their fate and future depended on themselves. Simultaneously, the programme instilled a belief in the power of unity, which manifested in care and encouragement for one another. There are similarities between the principles of Saemaul Undong and the African philosophy of Ubuntu, which places emphasis on ‘being self through others’ and President Cyril Ramaphosa’s Thuma Mina campaign, which focuses on volunteering and community activities to build an improved South Africa. Income growth through Saemaul Undong Source: Jong-Dae Park Park says South Africa should seek to internalise community responsibility. He suggests starting by “bringing back and rekindling” the value of community and by making better use of its rural and traditional leaders to engage people more directly. An increased focus on rural development could also address problems that are associated with South Africa’s dual economy, where on the one hand it has a small, high-skilled, high-productivity economy, and on the other hand a large, low-skilled, low-productivity economy. The large, traditional sector, is mostly in rural areas. “The benefit of rural development policies is that you skill the poor and make them more productive to work in the manufacturing sector,” says Park. The foundation for South Korea’s successful rural development was laid by the land reform programme, which is considered one of the most successful of its kind. Under the Farmland Reform Act of 1949, government pursued land reform on the principle of ‘compensated forfeiture and non-free distribution’, whereby farmland was bought from landlords at predetermined prices and sold to farmers at below-market prices. The reform ended the past landlord-tenant system and fostered self-employed farmers. When the Farmland Reform Act was passed in 1949, South Korea was still dominated by conservative members of the landowning class, reluctant to carry out land reform. However, the Korean War disrupted these vested interests and presented an opportunity for accelerated land reform led by an emerging technocratic and meritocratic leadership. South Korea’s land reform was rapidly implemented and completed in only ten years. This is in stark contrast to the disappointing results seen by many other developing countries, including South Africa, in their land reform endeavours. Ajam states that State capacity remains a hurdle to the successful implementation of South Africa’s land reform programme. Progress has been slow and redistributed land has not always been productive. Fubbs suggests that the land reform challenges in South Africa are so deeply embedded, that had South Africa followed the South Korean model by driving its land reform during a time of crisis, when the country became a democracy in 1994, it may have been easier to implement than it is now. Park believes South Africa should find a pragmatic way that balances various interests, to resolve the country’s land issues. Incentivising growth through differentiation Economic discrimination was an important driver in South Korea’s development model. It is based on the principle of meritocracy and provides selective incentives for superior economic performers. Park suggests that the concept of economic discrimination, or differentiation, be employed to encourage people to act. “If you reward everyone the same, despite their economic performance or work input, how will you grow the economy? Where is the work motivation?” he questions. Equally, people will be less inclined to repeat misdeeds if there are sanctions. Such systems and policies, which allowed for performing companies to reap rewards and where there were consequences for non-performance, meant that a healthy degree of competition was fostered in South Korea, unleashing competitive forces and efficiency gains for the country. Park explains that economic discrimination does not mean that government picks ‘winners’. The ‘winners’ perform first, then get rewarded. It is merit based. There is no controversy and no corruption. For instance, performing companies would be allowed to gain access to low-interest bank loans, import privileges, permission to borrow from foreign sources and tax benefits, whereas such preferential opportunities would not be available to non-performing companies. Citing Sung-Hee Jwa’s ‘General Theory of Economic Development: Towards a Capitalist Manifesto’, he argues that economic discrimination is essential for economic development. The so-called holy trinity of economic development – markets, government and corporations – should work together, using the principle of economic discrimination, to steer the economy towards real transformation. The ‘holy trinity’ of economics and economic discrimination Source: Prof Seung-Hee Jwa South Africa is a deeply unequal country, with deeply entrenched historical advantages and disadvantages. Since the advent of democracy in 1994, the country has not been able to effectively overcome historical inequalities or develop a system of rewards or sanctions for organisations or individuals. In fact, Ajam says that in government and the private sector, there are no obvious consequences for incompetence and corruption. Improving coordination and accountability Developing economic policies that deliver growth requires not only commitment and strong political leadership, but also efficient coordination, strong implementation and close inspection. Park implores developing countries to improve coordination, stating that the work of various offices and agencies will not be effective without it. The same goes for implementation. Ideas and plans are only as good as their implementation. South Africa continues to stumble, not because of a lack of resources or the means, but because of a management problem. According to Park, implementation hinges on ‘development-mindedness’: knowledge, practising, ownership and passion, also known as “KPOP”. Fubbs argues that South Africa has some of the best policy internationally, but its challenge remains implementation. South Africa has been struggling to apply various well-intentioned policies that are aimed at fostering economic growth and uplifting the nation. South Korea, on the other hand, successfully implemented seven consecutive five-year economic development plans between 1962 and 1996. Its first development plan was implemented during a time when the situation was dire for South Koreans. They could either give up and live poor, or do something about it. South Korea’s success in implementation hinged on several key pillars, but it came down to social capital – a mindset change and mobilising people to make it work. Often experts share knowledge and present strategies for development, but fail to address the gap between the intellectual community and the people who have to implement plans. Park suggests that specialists, under authority from government, work with the bureaucracy to direct and implement plans. On the role of government and the market in driving development, Park says both have an important role to play. He states that it is a myth that a smaller government is better. Although he does not believe that governments should necessarily be involved in running companies, he says that they have a key role in providing the framework for economic growth and development. Conclusion Park, who has been the South Korean Ambassador to South Africa since February 2018, believes that South Africa has the potential to prosper. “It can be done,” he says, but notes that the drastic transformation that is needed will require a profound change in people’s behaviour. Although fundamental rules of economic development and industrialisation apply, South Africa is in a position to leapfrog certain stages of development, owing to its existing strengths in finance, technology and its democratic system. Park does not believe that South Africa should replicate South Korea’s model step by step, but should ‘learn by doing’ and develop its own model based on its individual circumstances and strengths. “There isn’t a model you can just follow as a manual. South Korea did not develop because we were given a model by the World Bank or the IMF [International Monetary Fund]. Our model came after trial and error.” He states that Covid-19 has revealed South Africa’s underlying weaknesses and that it is a perfect time to reflect. “South Africa has many rich things that people envy all over the world. Success will come only through doing the right things, through hard work and through the changing of minds. It cannot be business as usual.” Park cautions against downward equalisation – ‘don’t kill the goose that lays the golden eggs’ and says the essence of growth is wealth creation, not wealth transfers. References Albert, E. 2018. South Korea’s chaebol challenge, May 4, 2018. [Online]. Available at: https://www.cfr.org/backgrounder/south-koreas-chaebol-challenge [accessed September 2, 2020]. Chun, S. 2010. Strategy for Industrial Development and Growth of Major Industries in Korea, April 19, 2010. Seoul: Korea Institute for Development Strategy. Available at: https://web.archive.org/web/20131011120833/http://www.kds.re.kr/pds/102/MRDA_2010_4.pdf [accessed September 2, 2020]. Hwang, J., Park, J. & Seongwoo, L. 2018. The Impact of the Comprehensive Rural Village Development Programme on Rural Sustainability in Korea. Sustainability 2018, 10, 2436. Available at: https://www.mdpi.com/2071-1050/10/7/2436/htm [accessed September 2, 2020]. Howie, S.J., Combrinck, C., Roux, K., Tshele, M., Mokoena G.M., and McLeod Palanie, N. 2017. PIRLS Literacy 2016: South African highlights report. Centre for Evaluation and Assessment.[pdf] Available at: https://www.researchgate.net/publication/326588545_South_Africa_Grade_4_PIRLS_Literacy_2016_Highlights_Report_South_Africa [accessed September 2, 2020]. Inclusive Society Institute. 2020. Developing a New Economic Blueprint for South Africa: Lessons from South Korea [webinar], August 5, 2020. [Online] Available at: https://www.inclusivesociety.org.za/economic-blueprint-for-sa-s-korea [accessed September 2, 2020]. International Monetary Fund. 2019. 2019 Article IV Consultation, May 2019. [Online] Available at: https://www.imf.org/en/Publications/CR/Issues/2019/05/13/Republic-of-Korea-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-46890 [accessed: August 31, 2020]. Kim, S. 2020. STI Policies in Korea: R&D, Technology Innovation. August 5, 2020. Seoul: Korea Institute for Industrial Economics and Trade. Kim, Y. 2012. Korea joining ’20-50 club’ marks new chapter: Finance Ministry. The Korea Herald. June 24, 2012. [Online]. Available at: http://www.koreaherald.com/view.php?ud=20120624000084 [accessed September 2, 2020]. Park, JD. (2019) Korea’s Path of Development in Retrospect. In Re-Inventing Africa’s Development, January 2019. London: Palgrave Macmillan, Cham. [Online] Available at: https://doi.org/10.1007/978-3-030-03946-2_7 [accessed September 2, 2020.] Park, JD. 2020. Korea’s development model: evolution, essence and implications, August 5, 2020. Pretoria: Korean Embassy in South Africa. Savada, A & Shaw, W. 1990. South Korea: A country study, Library of Congress, 1990. [Online] Available at: http://countrystudies.us/south-korea/ [accessed August 31, 2020]. Statistics South Africa. 2015. Census 2011: Income dynamics and poverty status of households in South Africa. [pdf] Available at: http://www.statssa.gov.za/publications/Report-03-10-10/Report-03-10-102014.pdf [accessed September 2, 2020]. Statistics South Africa. 2020. Quarterly Labour Force Survey: Q1 2020, June 23, 2020. [pdf]. Available at: http://www.statssa.gov.za/publications/P0211/P02111stQuarter2020.pdf [accessed September 2, 2020]. Watkins, T. Economic Development Plans of South Korea, San Jose State University [Online] Available at: https://www.sjsu.edu/faculty/watkins/skoreaplan.htm [accessed: August 31, 2020]. World Bank. 2020. World Development Indicators database, July 2020. [pdf] Available at: https://databank.worldbank.org/data/download/GDP.pdf [accessed: 31 August 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa Registration: 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place on August 20, 2020 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel The Inclusive Society Institute is developing a new growth-centred economic blueprint for South Africa. The project comprises several phases, the first of which is to study several economies from historically distressed jurisdictions that have successfully turned themselves into winning nations. This report focuses on lessons that South Africa can learn from examining the relationship between social cohesion and Germany’s economic prosperity. Contents Abbreviations and acronyms Introduction The Bertelsmann Social Cohesion Radar Lessons for South Africa Focusing on grassroots activity Building trust and perceived justice Ensuring labour market inclusion Conclusion Reference list Abbreviations and acronyms ISI Inclusive Society Institute OECD Organisation for Economic Cooperation and Development Stats SA Statistics South Africa Introduction South Africa’s transition in 1994 to a democratic dispensation, hailed as the ‘Mandela Miracle’, received international praise. However, despite positive strides since the advent of democracy, South Africa still has a long way to go in addressing limiting factors that are holding back reconciliation, social cohesion and unity. Inequality remains a stumbling block. The privilege attached to race, class and gender has not been sufficiently reversed in the quarter-century since the end of Apartheid, despite the 1996 Constitution laying the basis for the progressive realisation of a truly democratic, non-racial, non-sexist, united and prosperous society. South Africa has a vision for a society that embraces diversity – one in which opportunity is not determined by race or birth right. The National Development Plan 2030 calls for South Africans to be united around a common programme, to strive for a sense of togetherness, to achieve prosperity. Social cohesion, defined as the extent of connectedness, solidarity and trust that exists among different groups of society, is an important driver of long-term prosperity and competitiveness. Social cohesion ensures the sustainability of competiveness. Cohesive societies are politically stable and focus on economic growth and business development (Bris, 2014), attributes that are desperately required in South Africa, where growth has stalled. Considering the experiences of Germany, South Korea and Japan – three countries that the Inclusive Society Institute (ISI) has considered in its quest to develop a new economic blueprint for South Africa – it is clear that social cohesion, unity and rallying behind a common goal were important building blocks for their respective economic successes. Germany has an enduring history of economic success. Despite suffering numerous setbacks during two world wars and challenges with the reunification of West Germany and East Germany and migration, the country has maintained a leading position among developed nations. Germany industrialised in the late 1800s and remains among the top five biggest economies, weathering the rise of emerging nations. In 2019, Germany had the fourth-biggest gross domestic product, after the US, China and Japan (World Bank, 2020). The social market economy was an important factor in Germany’s success after World War 2. Grounded in German ‘ordoliberalism’, the German variant of economic liberalism, the social market economy seeks to strike a balance between market forces and the political desire to serve the common good. It is geared towards inclusion and aims to allow for as many as possible to benefit from social development, from the labour market and from consumption (Folkerts-Landou & Schneider, 2016). West Germany invested in social cohesion during its high growth period from 1948 to 1960. Although the formerly rich in West Germany remained wealthy during the ‘economic miracle’ years and the powerful stayed in power, a broad base of the West German people benefitted enough from increasing economic prosperity that they were generally happy and social cohesion was quite high. With the reunification of West Germany and East Germany in the early 1990s the West was more economically prosperous than the East, and lower-wage skilled workers from East Germany put downward pressure on the wages of workers in West Germany. German trade unions proved equal to the task of accepting this adjustment, building the foundation for successful German reunification, as well as for the ongoing growth, competitiveness and strengthening of the German economy in the decades that followed, although residual inequalities remain between the historically Eastern and Western parts of the country. This report, the third in a series published by the ISI, considers the relationship between citizens’ wellbeing and economic prosperity, based on the case of Germany and other Organisation for Economic Cooperation and Development (OECD) countries. The information in this report is based on an August 20, 2020, webinar that the ISI hosted with the following participants: Professor Klaus Boehnke from the Jacobs University Bremen, Germany. Theo Vorster, a South African economist and CEO at Galileo Capital. Professor Tania Ajam, associated with the School for Public Leadership at the University of Stellenbosch. She is also a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council. Joan Fubbs, director for the Centre for Education in Economics and Finance. She is also a former chairperson of the Parliamentary Portfolio Committee on Trade and Industry. The Bertelsmann Social Cohesion Radar Although the concept of social cohesion in Europe goes as far back as the French Revolution in the 1790s, it is only in recent years that an instrument has been developed to define and measure the state of social cohesion, the determinants that shape it and its consequences for society. Commissioned by the Bertelsmann Stiftung and under the leadership of Jacobs University Bremen professor Klaus Boehnke, the Social Cohesion Radar provides empirical information on a country’s social integration. It breaks down the concept of social cohesion into three dimensions: social relationships, connectedness and focus on the common good. Each of these domains comprises three measurable dimensions: social networks, trust in people, acceptance of diversity, identification, trust in institutions, perception of fairness, solidarity and helpfulness, respect for social rules, and civic participation. The radar is based on a broad set of indicators and has been applied in a wide range of studies, including an international comparison of the OECD nations, the 16 German federal states, the 78 communal units of the Free Hanseatic City of Bremen and non-Western societies, namely 22 countries in South, Southeast and East Asia. The research found that, in the Western world, economic prosperity, low levels of income inequality and acceptance of cultural diversity have positive effects on social cohesion. “Modern societies are based not on solidarity rooted in similarity, but on solidarity rooted in diversity and mutual interdependence. Therefore, they need an inclusive form of social cohesion that not only accepts a multitude of lifestyles and identities, but views them as a strength (Dragolov et al, 2018).” Dimensions of social cohesion Source: Klaus Boehnke Progression towards a knowledge society with more access to modern technology also helps social cohesion. “The higher a country ranks on the World Bank’s Knowledge Index, which compiles information on educational level, economic innovation and infrastructure related to information and communication technology, the more likely that country is to show high social cohesion (Dragolov et al, 2013).” A 2017 study focusing on Germany found that acceptance of diversity, compliance with basic social rules and identifying closely with one’s community fosters high levels of social cohesion. Boehnke says that in areas where social cohesion is high, people are happier, healthier and more satisfied with their lives. “In socially cohesive societies, there is also less support for populist parties,” he adds. Recommendations for strengthening social cohesion do not travel easily from one world region to another, as can be seen from the 2018 Bertelsmann Stiftung study, titled ‘Social cohesion and its correlates: A comparison of Western and Asian societies’. This study has concluded that while Western and Asian countries share similarities on economic prosperity and social cohesion, there are differences when it comes to income equality and political conditions. In the West, the larger the gap between the rich and the poor, the less cohesive the society. In Asia, however, disparities in income seem to foster social cohesion, as long as they are not excessive. In Asia, authoritarian regimes also have stronger, not weaker, cohesion, whereas in Western societies, democracy strengthens social cohesion (Walkenhorst, 2018). Lessons for South Africa Focusing on grassroots activity Considering that policy recommendations on social cohesion cannot be based on a “one-size-fits-all” approach, Boehnke is a strong proponent for measuring social cohesion and then using empirical data to shape policies. “South Africa needs to know where it stands before it can decide on policies,” he says. It would be beneficial for South Africa to apply evidence at a disaggregated level, so that it could hone in on specific areas and activities. Boehnke emphasises that fostering social cohesion is a grassroots activity and not something that can be decreed from the top. “Actions and activities of people are at the core of social cohesion. So is perceived justice and acceptance of diversity in everyday life. It is the people themselves that make social cohesion.” Cohesion benefits from individuals who have an open outlook on life and who believe that all people, regardless of social status, heritage or culture, have something in common (Bertelsmann Stiftung, 2017). In its 2017 ‘Social Cohesion in Germany’ study, the Bertelsmann Stiftung has some suggestions for fostering social cohesion that could have touch points for South Africa. “When people live in close proximity, but rarely interact or engage with each other, measures must be taken to include them more in community life, for example by promoting volunteering activities that reflect modern lifestyles. And opportunities for cross-cultural and inter-religious exchange that can help reduce feelings of not belonging are needed most where people encounter each other every day: in the cities and towns in which they reside (Bertelsmann Stiftung, 2017).” “Activities that will bring people across different races and languages into favourable exchange will improve social cohesion.” Overcoming apartheid spatial planning, including the deracialisation of suburbs in South African cities and towns by encouraging social and emotional engagement between neighbours, will go a long way in helping the country to achieve more social cohesion, says Centre for Education in Economics and Finance director Joan Fubbs. Building trust and perceived justice Central to the concept of social cohesion is the notion of trust: the level of trust in others and confidence in social and political institutions, as well as perceived justice – whether people feel that the system treats them justly. Trust in institutions, Boehnke says, arises from institutions that are perceived to be acting justly. Redistribution of wealth, for instance, is one such “just act” that could facilitate trust in institutions. University of Stellenbosch Professor Tania Ajam emphasises that social cohesion in South Africa will be difficult to achieve unless the rich are prepared to share their wealth, a sentiment that other panellists agreed with. A new “wealth tax”, as proposed by the Davis Tax Committee, could be one way to alleviate the high levels of income inequality. South Africa already has a wealth transfer tax in the form of estate duty, donations tax and capital gains, but it does not have a tax on the net wealth holdings of individuals (BusinessTech, 2020). While wealth distribution is important, the country must increase its ability to generate more prosperity, says Ajam. Further, it is difficult for the poor to share in the small available pool of wealth, because of corruption. Widespread corruption, nepotism and maladministration have dented trust in public institutions. Although several attempts have been launched to tackle corruption since the end of the Jacob Zuma administration, there is still widespread disregard for the rule of law and social integrity. Boehnke emphasises that a corrupt society cannot be a socially cohesive one. “Corruption very clearly stands in the way of social cohesion.” High economic prosperity must also be coupled with measures to improve equality. If an entire society gains prosperity, it will aid social cohesion, but if the gained prosperity is not distributed equally and people are not perceived to be treated fairly, it will damage cohesion. Meanwhile, Boehnke points out that trust in neighbours or other people is more difficult to achieve than trust in institutions and says it can differ widely between different countries. For instance, in China trust levels in neighbours are high, while Myanmar exhibits high levels of distrust. South Africans also do not fully trust people and/or public services and institutions, according to the Baseline Survey by the Foundation for Human Rights. The 2018 survey, billed as the biggest attitudinal survey in South Africa, shows that although respondents have relatively high levels of trust for relatives or neighbours, the same cannot be said for trust in people from other countries, with about two-fifths of adults indicating they had ‘no trust at all’ in foreigners. The survey also shows that more than half of respondents have some degree of distrust in at least one or more groups of people, based on race, language, religion, political affiliation, sexual orientation and nationalities (Foundation for Human Rights, 2018). Fubbs believes that some “softer skills”, like emotional intelligence and building relationships will go a long way in helping society work together. Strong relationships, built on trust in people and institutions, foster greater creativity, critical thinking and cognitive flexibility to appreciate diversity, particularly cultural diversity. However, trust and values cannot be imposed on people from the top. Values are assimilated at home, she says. However, South Africans have shown a political, social and economic resilience that defies much analysis. “Deep down, there is a reservoir of ‘Afrinism’ in all of us, in our capacity to reach out as South Africans across races,” says Fubbs. Ensuring labour market inclusion People need to realise that it is in their self-interest to have a society in which everyone feels that they have a chance, including the youth, says Ajam. Youth unemployment is one of South Africa’s most pressing socio-economic challenges and one that has a bearing on social cohesion. In a country with an already high unemployment rate, the youth (aged 15 to 34 years) is the group most affected by joblessness (Stats SA, 2020). Statistics South Africa’s (Stats SA’s) Quarterly Labour Force Survey for the first quarter of 2020, indicates that 63.30% of the total number of unemployed persons were aged 15 to 34 years. The unemployment rate within this group was 43.20% in the first quarter of 2020 (Stats SA, 2020). Ajam laments that South Africa’s education system does not equip young people with the right skill sets to enter the labour market. A lack of skills and work experience reduces the chances for young people to find employment, which ultimately results in some losing hope of ever finding a job, resulting in them becoming discouraged work-seekers. In the first quarter of 2020, 1.90-million of the young people without work were discouraged from looking for jobs (Stats SA, 2020). Ensuring that more young people gain access to the labour market will have a positive impact on social cohesion. This is evident from the 2017 Bertelsmann Stiftung study on Germany, which finds that cohesion is stronger in regions and states in the country in which more young people can find jobs. It is also true of those areas that were more successful in preventing social exclusion. Germany’s eastern states, where more young people are excluded from the labour market, score lower on the social cohesion index than their western counterparts. Conclusion South Africa faces many challenges in its endeavours to build a socially cohesive nation, but it is a goal worth working towards as there is clear evidence that social cohesion has a positive influence on economic growth and development. In addition to the German experience, social cohesion also emerged as an important factor in the two recent ISI reports focusing on the lessons that South Africa could learn from Japan and South Korea. Executive senior research fellow at the Institute for Developing Economies Dr Katsumi Hirano urged South Africa to become a “truly non-racial society” as a starting point for its reconstruction, while South Korean Ambassador to South Africa, Jong-Dae Park emphasised a rekindling of community spirit and said a “profound change” in people’s behaviour was needed (ISI, 2020). Government wants to develop a stronger social compact, through which it hopes to address issues around equal opportunities, inclusion and redress. Initiatives around social cohesion and nation building are spearheaded by Sports, Arts and Culture Minister Nathi Mthethwa, who believes that greater cohesion is within South Africa’s collective grasp. Achieving such cohesion will require “interventions that recognise and seek to bridge past divisions and simultaneously deal with the question of improving the material conditions of previously marginalised communities, mainly black and poor” (Mthethwa, 2020). Although government recognises the value of a stronger social compact in the development of the country, it appears that social cohesion has taken a backseat, while political leadership grapples with the country’s severe economic challenges. Economist and Galileo Capital CEO Theo Vorster, however, says that without social cohesion, many other policies will find it difficult to succeed. ISI CEO Daryl Swanepoel agrees, arguing that the success of economic restoration in South Africa will hinge on the ability to achieve social cohesion. “I think authorities, political leaders, community leaders and civil society would be well advised to re-emphasise the importance of social cohesion and make sure that it is built into any economic plan that is developed.” Swanepoel states that it has become clear that three elements must be built into the guiding principles of the ISI’s planned blueprint for the South African economy. These are economic prosperity, social cohesion and social justice. “If people do not feel that the system is fair, you will not have social cohesion.” Canadian writer and political philosopher John Ralston Saul has said that social cohesion of the future will require diversity and community. “Empathy, respect for difference and the willingness to accept the complexity of society, rather than exclusion and fear are the factors that will pave the way toward a successful future (Saul, 2019).” References Bertelsmann Stiftung, 2017. Social cohesion in Germany, English summary, 2017. [Online]. Available at: http://aei.pitt.edu/102573/1/LW_Abstract_Social_Cohesion_in_Germany_2017.pdf [accessed October 16, 2020]. Bris, A. 2014. Social cohesion – why it matters, April 2014. [Online]. Available at: https://www.imd.org/research-knowledge/articles/com-april-2014 [accessed October 15, 2020]. BusinessTech, 2020. How a possible wealth tax in South Africa could work, October 16, 2020. [Online]. Available at: https://businesstech.co.za/news/finance/441344/how-a-possible-wealth-tax-in-south-africa-could-work/ [accessed October 18, 2020]. Dragolov, G., Ignácz, Z., Lorenz, J., Delhey, J. & Boehnke, K. 2013. Social cohesion radar, measuring common ground – an international comparison of social cohesion. [Online]. Available at: https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/GP_Social_Cohesion_Radar.pdf [accessed October 16, 2020]. Dragolov, G., Ignácz, Z., Lorenz, J., Delhey, J. & Boehnke, K. 2018. Social cohesion and its correlates: A comparison of Western and Asian societies, June 14, 2018. [Online]. Available at: https://brill.com/view/journals/coso/17/3-4/article-p426_10.xml?language=en [accessed October 16, 2020]. Folkerts-Landau, D & Schneider S, 2016. Beacon of stability: The foundations of Germany’s success, December 15, 2016. [Online]. Available at: https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000441807/Beacon_of_stability%3A_The_foundations_of_Germany%E2%80%99s_.pdf?undefined&realload=qaIvBCiQ5Ly3lUdstn0kcqYoLX50gy2OIcgHESdbbdEqOgeq~bN2kXMo/oFd1jXAhW7AKbAkTpBUlcO6AXVJ~A [accessed October 15, 2020]. Foundation for Human Rights. 2018. SEJA Baseline Survey, 2017. [Online]. Available at www.fhr.org.za/index.php/download_file/1408 [accessed October 15, 2020]. Inclusive Society Institute. 2020. Developing a new economic blueprint for South Africa – lessons from Japan, August 18, 2020. [Online]. Available at https://www.inclusivesociety.org.za/isi-publications [accessed October 18, 2020]. Inclusive Society Institute. 2020. Developing a new economic blueprint for South Africa – lessons from South Korea, September 18, 2020. [Online]. Available at https://www.inclusivesociety.org.za/isi-publications [accessed October 18, 2020]. Mthethwa, N. 2020. National convention on nation building, social cohesion and safe communities, February 6, 2020. Pretoria: Ministry of Sports, Arts and Culture. Saul, J. 2019. How to make social cohesion work, September 4, 2019. [Online]. Available at https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/ST_Trying_Times_2019_Saul_How_to_make_social_cohesion_work.pdf [accessed October 15, 2020]. Statistics South Africa. 2020. Vulnerability of youth in the South African labour market, June 24, 2020. [Online] Available at: http://www.statssa.gov.za/?p=13379 [accessed October 18, 2020]. Walkenhorst, P. 2018. Comparing social cohesion in Western and Asian societies. [Online]. Available at https://www.bertelsmann-stiftung.de/en/our-projects/germany-and-asia/news/comparing-social-cohesion-in-western-and-asian-societies [accessed October 16, 2020]. World Bank. 2020. World Development Indicators database, July 1, 2020. [Online]. Available at https://databank.worldbank.org/data/download/GDP.pdf [accessed October 15, 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

A response to the Constitutional Court judgement of June 2020 Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. Author: Carene Marais Editors: Daryl Swanepoel & Roelf Meyer Setting the scene In the light of the recent Constitutional Court judgement declaring the current Electoral Act unconstitutional, the Inclusive Society Institute (ISI) has embarked on a process to design potential new electoral models for South Africa. The institute has appointed an expert panel, led by Mr. Roelf Meyer, to undertake the work and has mandated its research panel to design electoral models that respects the findings of the judgement, the boundaries set out in the Constitution, retains proportionality as a basis for representation and which promotes inclusivity and accountability. The necessity to develop a new electoral model has been spurred by the recent Constitutional Court judgement declaring the current electoral model unconstitutional. The court has given the legislature 24 months to introduce new legislation that will enable independent candidates to stand for election in the national and provincial spheres of government. The institute’s findings will be presented to the political establishment and public policymakers as its contribution to the formal legislative process, for which the Constitutional Court has set two years aside for the work to be completed. Both the panel and process will benefit from the deep and varied experience that is represented by these experts. The members are: Mr. Roelf Meyer: In Transformation Initiative. Chief Government negotiator during the democratic transition in South Africa, former Minister of Constitutional Development, and currently a director of In Transformation Initiative. Ms. Deyana Isaacs: University of Stellenbosch. Researcher and lecturer in Political Governance at the School of Public Leadership, University of Stellenbosch. Prof. Dirk Kotze: University of South Africa. Professor in Political Sciences at the University of South Africa (UNISA), a Vice-president of the International Political Science Association and National Secretary of the South African Association of Political Studies. Prof. William Gumede: University of the Witwatersrand & Democracy Works. Professor at the University of the Witwatersrand School of Governance and Chairperson of Democracy Works Foundation. Mr. Ebrahim Fakir: Auwil Socio-Economic Research Institute. Political commentator and Director of Programs at Auwil Socio-Economic Research Institute. Former academic, head of political parties and parliamentary programme at EISA, visiting fellow at the Institute for Development Studies at the University of Essex, and visiting Drapre Hills Summer Fellow at Stanford University. Ms. Dren Nupen: The Elexions Agency. Former Executive Director of the Electoral Institute of Southern Africa and former Regional Director for Africa at the Open Society Initiative. She brings extensive election experience to the dialogue. Prof. Firoz Cachalia: University of the Witwatersrand. Professor at the Law School at the University of the Witwatersrand. Professor emeritus Jørgen Elklit: Aarhus University, Denmark. Member of the South African 1994 IEC and of the 2002-2003 Electoral Task Team (aka the van Zyl Slabbert Commission). Formerly also a member of the board of directors of EISA. Secretary to the 2008 Independent Review commission in Kenya. Prof. Cherrel Africa: (Flexi-member) University of the Western Cape. Formerly at the Institute for Democracy in South Africa, election analyst for the SABC and ENCA and currently associate professor and chair for political sciences, University of the Western Cape. Prof. Rassie Malherbe: University of Cape Town. Currently offers an extra-curricular programme in the drafting of legislation at the University of Cape Town. Former professor of public law and Head of the Department of Public Law at the University of Johannesburg. Dr. Denis Kadima: Electoral Institute of Southern Africa. Currently Executive Director of EISA. Previously, Senior Programme Manager at the National Democratic Institute for International Affairs. Dr. Brigalia Bam: Private. Former Chairperson of the Independent Elections Commission of South Africa. Mr. Daryl Swanepoel: Chief Executive Officer of the Inclusive Society Institute and former Member of Parliament. Content Setting the Scene Content 1. Introduction 2. Unpacking the constitutional judgement declaring the electoral act invalid 3. Discussion on the judgement and preferences related to new models that need to be developed 4. Assessing and determining the degree of electoral reform that is desired 5. Conclusion References 1. Introduction The Constitutional Court, on 11 June 2020 declared that it “is declared that the Electoral Act 73 of 1998 is unconstitutional to the extent that it requires that adult citizens may be elected to the National Assembly and Provincial Legislatures only through their membership of political parties” and that the “declaration of unconstitutionality referred to in paragraph 4 is prospective with effect from the date of this order, but its operation is suspended for 24 months to afford Parliament an opportunity to remedy the defect giving rise to the unconstitutionality.” The Constitutional Court thus declared the current electoral act as unconstitutional in that it believes independent candidates have the right to participate in both national and provincial elections. It is now a constitutional requirement to reform the act in light of the ruling. Therefore, the purpose of the panel is to draft some proposals on reforming the country’s electoral system to allow for independent candidates at provincial and national levels. The objectives of the panel are to design electoral models that will: Respect the findings of the Constitutional Court judgement declaring the current Electoral Act invalid Respect the boundaries set out in the Constitution Retain proportionality as a basis for representation Promote inclusivity Allow for independent candidates to participate in elections at provincial and national levels Other objectives as set out by the panel also include: Conceptualise proposals as how to address the limitations of the current electoral model Present the proposals to the African National Congress (ANC), the National Assembly, public policymakers, civil society, and the broader public The project is planned to take place in 5 phases; however, the process may also require some flexibility to be adjusted as is necessary. The first phase is aimed at attaining a clear understanding of the judicial prescript as it relates to the electoral act, while also understanding the boundaries in terms of the Constitutional requirements and what such a reformed electoral system needs to look like. Moreover, the panel will also work towards developing a set of guiding principles that should be incorporated into the panel’s legislative proposals, whilst also gaining consensus on the boundaries that should be applied when developing these proposed models. As part of phase 1 of the process, the expert panel held its first discussion on Monday, 20 July 2020. The aim of this initial discussion was to gain a common understanding of the court’s intentions and to develop the parameters that will guide the panel’s deliberations. The panel met again on 3 August 2020 to further elaborate on the boundaries of the research to be undertaken in the development of a new electoral model for South Africa, while also assessing the strengths and challenges of the country’s current electoral system. During this meeting, the suggestion was made to extend the panel’s work beyond the mere development of a technical model that would accommodate the requirement for independent candidates to stand for election. It would also use this opportunity to develop proposals as to how to address the limitations of the current electoral model. Presentations were made to the effect that when developing the proposed models, consideration would be given to systems that would improve accountability to the voters by elected representatives and promote meaningful and inclusive demographic representation within the legislatures. The second phase of the process will comprise of presentations by other international experts regarding electoral models in other jurisdictions that combine proportionality with the right for independent candidates to participate. To this end, the third meeting of the expert panel is scheduled for 25 August 2020. The main purpose of the meeting will be to stimulate the panel’s thinking as to what electoral model will be best suited for the South African environment, by presenting a number of electoral models from various jurisdictions. Prof Elklit will also give a presentation on the electoral models contained in the 2003 van Zyl Slabbert Commission on Electoral Reform, together with the motivations behind each of the models. The presentations will be preceded by a short dialogue by the panel to discuss the limitations and weaknesses of the current electoral system that would need to be considered and addressed as part of the broader electoral modelling exercise. The expected outcome of the meeting: Agreement as to which limitations contained in the current electoral system need to be addressed in the work of the panel; and insight into existing electoral models combining proportionality with the right of independents to stand for election. Furthermore, as part of the second phase in this process, the next discussion of the panel will follow, where each panellist will be asked to develop their thinking around models that they think will work within the South African context, based on the previous two discussions and the presentation on the different electoral models. The aim of the third phase will be to narrow down the different models, as presented by the panellists, to two or three options which can be presented to policy makers for consideration. During this phase, the preferences of the expert panel will be expressed. During phase 4, the institute will develop a report based on the proposed electoral models. Once this report has been completed, the concepts will be tested with the broader public and civil society by means of surveys, focus groups and stakeholder engagements. Lastly, in the final phase (phase 5) of the process the models will be adjusted based on the feedback from the public and stakeholder engagements and presented to politicians and policy makers as the panel’s proposed electoral models that would best suit the context and needs of the South African society today. 2. Unpacking the Constitutional judgement declaring the Electoral Act invalid A subsequent analysis by one of the expert panel’s members regarding the Constitutional Court’s judgement declaring the current electoral act unconstitutional, provides a concise summary of the judgement. On 11 June 2020, the Constitutional Court declared the following: “4. It is declared that the Electoral Act 73 of 1998 is unconstitutional to the extent that it requires that adult citizens may be elected to the National Assembly and Provincial Legislatures only through their membership of political parties. 5. The declaration of unconstitutionality referred to in paragraph 4 is prospective with effect from the date of this order, but its operation is suspended for 24 months to afford Parliament an opportunity to remedy the defect giving rise to the unconstitutionality.” Upon assessment, the judgement does not provide extensive guidance but is focused on the shortcoming or deficiency of the electoral act with regards to independent candidates. Moreover, the judgement also does not provide guidance as to how the act should or can be amended. The electoral act is subject to the Constitution, and therefore the task of the panel must be accomplished without breaching the Constitutional boundaries relating to electoral systems. The following provisions in the Constitution can be considered boundary posts regarding the amendments that can be made to the electoral act: Section 1(d): Multi-Party democracy Section 1 in the Constitution is the value clause that speaks of multi-party democracy. The Constitutional Court was referred to this clause, however, its view on the matter is that independent candidates do not stand in the way of or impede on the functioning of multi-party democracies. This is considered a boundary post, as the amendments that give effect to the judgment may not undermine this value clause. It is also of importance since this value clause is in the Constitution to safeguard South Africa from becoming a one-party state. Section 19(3)(a) Right to vote This section is normally seen as comprising four aspects: General - For all who qualify according to the basic requirements to vote. Equal - To ensure that some votes do not weigh more of less than others, which has an implication for the type of electoral system that is established and how, in this case, independent candidates can be accommodated. Direct - Every vote has a direct influence on the outcome Secret - Every voter votes voluntarily and without coercion Therefore, equality of the votes forms another boundary post that affects the amendment. An electoral system cannot be established where some votes outweigh others. Independent candidates cannot be accommodated in such a way that the votes brought out for them weigh more or less than for others. Section 19(2): Right to Free, Fair and Regular Elections Section 19 is of importance as it is the political rights in the bill of rights. Three aspects are contained in this section: Regular elections - Legislature has a fixed term, enforcing that there will be elections at regular intervals. Free - To participate without interference or coercion and to ensure that candidates and political parties must be able to participate. Fair - Equal opportunity for all parties or candidates to contest the elections. These aspects will have a bearing on the type of amendments made to the electoral system. Sections 46 and 105: Electoral system that results, in general, in proportional representation Section 105 refers to the provinces. Proportional Representation (PR) is not defined in the Constitution. However, it may include: Proportional Representation of political parties and Proportional Representation as to voter preference. There are many PR systems that give effect to both PR for political parties and voter preference such as list-systems, preferential systems, and combined systems. The current South African electoral system is based on party-list proportional representation, which means that parties are represented in proportion to their electoral support. The preferential system entails that the voter can indicate preference for a party and candidates on the ballot. The ballot can list party representatives in order of preference and can also move over party lines in this system. The combined systems incorporate PR with constituencies. Therefore, section 46 and 105 of the Constitution serves as another boundary post within which amendments to the system must be made. The system chosen must, in general, provide for Proportional Representation. Additionally, within the Constitution and consequently, because of the court judgement, parliament assumes the responsibly to choose a particular electoral system. The particularities of the system are left to parliament and it has some leeway on how to give effect to the judgement. Section 19(3)(b) Right to stand for and if elected to hold public office This is the provision that the Constitutional Court judgement focused on and forms the main grounds for the Electoral Act being declared as unconstitutional. Within the current electoral system, the exercising of section 19(3)(b) right can only be channelled through political parties. Therefore, the act does not provide for candidates to participate in elections as individuals or independent candidates. This is the crux of the judgement and what the majority of the courts’ ruling dealt with. Furthermore, Justice Mandlanga added another aspect, which can also be considered a boundary post, namely: section 18 the Freedom of Association. Justice Mandlanga’s argument was that this also includes the freedom NOT to associate. Under the current electoral act, candidates are “forced” to join a political party in order to be a candidate and exercise their right under 19(3)(b), which negates the right NOT to associate. therefore, the electoral act violates this right. Furthermore, the court also dealt with a number of other provisions that was put to the court, including the following: Sections 46(1)(a) AND 105(1)(a): The electoral system is prescribed by national legislation. The national legislature (parliament) is subject to the Constitution, thus whatever the national legislature decision, it is still subject to the Constitution. Sections 47(3)(c) AND 106(3)(c): Loss of membership of legislatures. The Constitutional Court said that this only applies to political parties and does not affect the issue of independent candidates. Sections 57(2), 178(1)(h), 193(5) AND 236: Participation by parties in legislatures. 57(2): deals with the rules and orders of the national assembly providing for minority parties to participate in the proceedings. Section 70(2): Rules and orders of National council of provinces providing for participation. Section 116(2): rules and orders of Provincial legislatures providing for participation Section 178: Participation of opposition or minority parties in the process for the appointment members of the judicial service commission. Section 193(5): Deals with chapter 9 institutions where minority parties will also participate. Section 236: Legislation to be made for the funding of political parties All these provisions are about political parties’ participation in legislature. The court found that that these provisions strengthen multi-party democracy and do not prevent making provision for independent candidates to participate. These are boundaries that dictate that whatever amendments are made; they cannot undermine the participation of parties in legislature. Section 157(2)(a): The municipal election system can either be a pure PR system according to the list system where only parties are being presented on the ballot or a PR system combined with wards. This section does not affect the national and provincial spheres. Thus, this only affects municipal level and does not prevent the court to declare the electoral act unconstitutional. Section 6, Items 6(3)(a) and 11(1)(a): Nominations by Political Parties. This only refers to the first elections after the 1996 Constitution came into effect and is thus not applicable anymore and have no current influence. In conclusion, all the above listed sections are boundary posts that the Constitution imposes on the electoral act and the amendments brought to the act. These can be viewed as the most important ones within which the amendment of the acts must take place. Below is a diagram representing the constitutional boundary posts. 3. Discussion on the judgement and preferences related to new models that need developed The question of “Proportional Representation (PR), in general” was an important point of discussion, pertaining to how this needs to be considered and incorporated as part the court ruling. It was emphasised that PR as stipulated within the Constitution must remain a prominent boundary point when considering reforms to the electoral system that will provide for the participation of independent candidates. Absolute proportionality under any system does not exist and that is one of the reasons for the use of “in general”. Sometimes a political party falls short of the votes for representation of a next member in national assembly. The surplus is allocated elsewhere and thus the end result is not 100% propositional. However, it was noted that, currently, South Africa’s electoral system is the most proportional of all systems in the world due to the fact that an electoral threshold on the size of the National Assembly does not exist. This means that parties get a certain number of seats in parliament according to the percentage of votes that they receive in an election. So, for example, if your party gets 15% of all the votes in the country then it gets close to 15% of the seats in Parliament. There are 400 seats in the national parliament, so for every 0.25% of the vote a party gets -in principle- 1 seat. “In general” does not give any additional meaning to it, but the constitution demands that the electoral system must result in proportional representation. Consequently, it can be argued that when independent candidates are incorporated within the electoral system the requirements pertaining to PR can be the same as for political parties. If the independent candidate gets sufficient votes and qualifies to get into national assembly or provincial legislature they will be regarded as a “type of party“ and it will need to be assessed if the number of seats allocated to those candidates correlates with the distribution of votes in the election. The challenge for them could be how to get to the minimum number of votes to gain a seat in legislature. The campaign system must thus also make provision for candidates to gain exposure. The key point regarding PR is that representation must be a result of the voting and thus the composition of parliament must reflect in a proportional manner, the preferences of the voters. Furthermore, it was highlighted that regardless of the electoral system proposed by the panel, several issues will need to be considered. South Africa’s current electoral system functions on two house system, with one house being the National Assembly and the other being the National Council of Provinces (NOCP). Some of the necessary considerations when implementing a PR electoral system, where the size of parliament is fixed and incorporating independent candidates includes the following: Should independent candidates or lists of independent candidates be allowed in both houses? Should the PR electoral system be the same for both houses? Should the system allow voters to cast their votes for one (or more) individual candidates (so-called personal or preferential votes) or shall it only be possible to vote for the list as such? Should independent candidates or list of independent candidates be allowed for both houses? What will the ballot papers requirements be pertaining to: Parties elected in previous parliament and still represented in parliament? Direct access, a deposit, or a certain number of seconding voters? New parties? Payment of deposit or a certain number of seconding voters? Independents or lists of independents, if allowed? Payment of a deposit or a certain number of seconding voters? Will electoral thresholds be different or the same for parties and individual independent candidates, for example based on a certain percentage of the vote, an absolute number of votes or some other criteria? These options and key decisions must be assessed by the electoral panel through their considerations and debates pertaining to the different levels of electoral reform that the panel will consider in developing proposed electoral models for the South African context. Furthermore, the argument has been made that if individual candidates are to be accommodated in the PR system, then apart from the electoral act having to change, the political party funding act has to be amended to require Individuals to also disclose funding and support they receive. Moreover, during the discussion on the court judgement, it was also debated whether the national and provincial legislatures, may have to re-think how they function, as a consequence of the judgement and the requirement of incorporating independent candidates. Furthermore, this also raised the question of what impact this amendment to the act would have on the rules and functions of legislature, and if this may require some constitutional amendments. As it stands, the rules of the national assembly under section 57(2)(b) of the constitution, indicates that the representation of political parties is also accommodating to minority parties and currently not every political party is represented on every committee in the national assembly. Consequently, with the incorporation of independent candidates this could also be the case. Therefore, the argument was made that as the wording on party representation stands (minority parties), it may in future not be adequate to provide for the participation or representation of independent candidates. While discussing the desired preferences and guiding principles that a new electoral model would need to include, A presenter proposed a number of core elements that should be focused on within a new system. Additional points raised indicated that a new system would need to provide greater ability for voters to directly elect candidates, as well an influence over how party candidates are elected. The current electoral system does not create any room for this. The electoral systems must continue to encourage diversity through minimising racialised and class-based electoral election results, as well as demographic, ethnic and religious diversity through the diversity of candidates. The system should be relatively simple to administer and to be navigated by voters. Furthermore, it was also argued that for any meaningful balance between accountability, responsiveness and representativity, inclusivity, and diversity to be achieved, bold comprehensive reforms that are in the public interest, more so than that of political party or personalities, may be necessary. Therefore, the following guiding principles should be considered in the drafting of a new electoral system or model: Representation: Representation should be translated into legislative seats and needs to represent the expressed will of the voters as to the people who will represent them. Representation can take the form of geographical representation where the voters in each region, town city, province or electoral district choose the candidates who will represent them, and these candidates are ultimately accountable to the voters in these areas. Other forms of representation are prescriptive representation where national legislature is a mirror of the nation or ideological representation, according to the party politics or ideology to which voters align themselves. Additionally, the lack of constituency-based voter representation should be considered. Transparency: Transparency should exist in both the process as well as the electoral system. Inclusiveness: The electoral system should be easily understandable and accessible to all voters in order to create a system that can allow as many as possible citizens to vote. Increased Accountability: Increased accountability is fundamentally important as the current system allows for a trade-off between accountability and representation. 4. Assessing and determining the degree of electoral reform that is desired In order to determine the degree of electoral reform that is desired, and the options that can be explored while considering some guiding principles, as well as the constitutional boundaries identified, an analysis of the strengths and weaknesses of the current electoral model was proposed. Presentations by the two of the members on the electoral expert panel outlined the strengths and challenges of South Africa’s current electoral system. The strengths of the current system are related to the emphasis that is placed on multi-party politics which aims to include as many political parties as possible. The current system also provides for diversity of political parties; therefore, voter have various parties to choose from although they cannot exercise choice over specific candidates. Moreover, diversity of pollical preferences, various demographics, ethnicities, and religious diversity are also represented through political parties. The current system further provides the possibility for minority parties to secure seats due to the PR system. Other strengths of the system also include the fact that votes carry equal power, and that the system is relatively simple to be administered and easily understood by voters. Furthermore, the panellists also presented some of the challenges pertaining to the current electoral system. Firstly, some of these issues are related to representivity as voters are currently only represented through multiple parties and not in the form of multiple candidates. Furthermore, as the current electoral system operates through a closed party list system, voters are unable to express their personal preferences regarding the candidates elected as party representative, as they cannot directly influence these appointments. Secondly, voters do not have any direct influence over who will become their representatives in legislature. Similarly, voters do not directly influence the election of the president as this is carried out by the National Assembly. Therefore, this could possibly lead to the election of party candidates or presidents that do not possess the necessary expertise and capabilities required in the legislature. This further presents an accountability challenge to voters as they cannot hold individual candidates accountable and cannot recall ineffective representatives. Although the system does allow voters to raise their complaints with the party structure, as has been seen, this rarely influences the branches to take action against representatives. Moreover, fairness is also compromised in the relationship between votes cast and the composition of the legislature and cabinet. Voters can cast their vote for a specific political party, but they have no influence over the composition of the legislature after they have cast their ballot, as these appointments are determined by the party leadership. It was further highlighted that the ruling party appointed candidates in legislatures rarely question the executive, lest they be removed by the party. Consequently, the risk is created where legislatures can become a lame-duck and lose public credibility and trust. This forces extra-parliamentary politics, where politics happen outside parliament and civil society becomes involved. Furthermore, citizens and civil society approach the courts to deal with issues that should be dealt with by legislature. Overall, the aforementioned challenges result in large numbers of voters becoming disillusioned, resulting in many citizens choosing not to participate in formal politics but rather engaging in extra-parliamentary politics. Moreover, these system weaknesses also culminate in the youth becoming disinterested and steering away from the multi-party system in the country. During the second dialogue discussion, the panel also addressed some of the practical considerations that should guide their thinking regarding a new electoral system. Practically, developing a new electoral system will take time to devise. Therefore, the 24-month time limit as stipulated by the court judgment must be considered, as it may not be possible to execute far-reaching changes within the 24-month period. Moreover, the cost factor should also be a focus, as a new system may be expensive, potentially complicated to be administered and difficult to be understood by voters. The point was raised that only changing of parts of the system, in its most limited form, would create room for independent candidates, but could possibly be easier, less costly, and quicker. However, problems with the overall system will remain under this option. Consequently, it was pointed out that the criteria for a new system should not compromise on providing representation and making elections accessible and meaningful. Moreover, the system should empower voters to participate in elections and needs to ensure that voters experience that their votes count and are meaningful. The new system should also provide an incentive for conciliation as a conflict management tool between parties or individuals. Furthermore, the new system should facilitate stable and efficient governance and includes measures for holding the government and individual representatives accountable. Legislative opposition and oversight should be promoted, and the system should encourage political parties. The election process must be workable, sustainable, cost effective and viable for every election. Additionally, international standards should be taken into account to ensure free and fair elections, the secrecy of the ballot and the principle of one-person-one-vote. While debating the different options available regarding a new electoral system, the question arose whether reforms should only be limited to including independent candidates or if some should apply to the whole system? If the panel choose to address wider reforms of the whole electoral system, then the question becomes, should they change the system within proportional representation or go outside of the system and essentially create a new system? This could however require major constitutional amendments, which the panel believes best to steer away from. Thus far, three different options for reform were identified by the different presenters on the panel: Option 1: Amending the current system to allow for independent candidate. The question to consider is if it can be done in such a way to resolve the weaknesses of the current system, and will the most minimal reforms remove the weaknesses of the current system? Option 2: Amending the current Proportional Representation system to deal with the weaknesses of the system and make the changes needed to allow for independent candidates. Option 3: Changing the entire electoral system and including the changes needed to allow for independent candidates. One of the key points raised during the panel discussion indicates that one of the biggest needs in a new system is accountability. However, in addressing this issue, as well as the other challenges currently facing the electoral system, the practicalities of developing a new system will consciously need to be considered. This includes, but is not limited to, the costs of a new system; conceptualising a system that can be understood by voters; and choosing a model that can also be effectively administered during each election. 5. Conclusion Following the two discussions held regarding electoral reform, it was emphasised that the re-design of an electoral system should fit within the current boundaries of the Constitution and the prescripts of the Constitutional Court judgement. Therefore, this will entail the retention of an electoral system that results, in general, in proportional representation, along with mechanisms providing for independent candidates to stand for election at all three spheres of government. However, it should be noted that any eventually that could require some amendments to the constitution in order to implement the amendments required, should not be entirely disregarded at this stage. The next phase of deliberations will continue on 25 August 2020. The main purpose of this meeting will be to inform the panel’s thinking on what model will best suit the South African context, through exploring several different electoral models from various jurisdictions, including the German, Spanish, Danish and Irish electoral models. Additionally, Prof Elklit will also do a presentation on the electoral models contained in the 2003 van Zyl Slabbert Commission on Electoral Reform, together with the motivations behind each of the models. The models all combine proportionality with the right of independent candidates to stand for election, which should serve to inform the panel on examples of implemented alternative electoral models. The expected outcome of the discussion includes reaching an agreement as to which limitations contained within South Africa’s current electoral system must be addressed through the work on the panel, as well as gaining insights into existing models that combine proportionality and participation of independent candidates in elections. References Inclusive Society Institute, 20 July 2020, Electoral reform dialogue with expert panel. Inclusive Society Institute, 3 August 2020, Electoral reform dialogue with expert panel. Prof Rassie Malherbe, 3 August 2020, Boundaries for Amending the Electoral Act. Professor Jørgen Elklit, 21 July 2020, Decisions necessary for implantation of a PR electoral system. Ebrahim Fakir, 14 June 2020, “Constitutional Court hands MPs an electoral reform nettle to grasp. Parties won't want to vote for legislation that spells their own demise”, Sunday Times. Available at: https://www.timeslive.co.za/sunday-times/opinion-and-analysis/2020-06-14-constitutional-court-hands-mps-an-electoral-reform-nettle-to-grasp/[accessed: 14 August 2020]. Ebrahim Fakir, 25 June 2020, “A referendum thorough-going system reform is the way to political rehabilitation”, Africa News 24-7. Available at: https://www.africanews24-7.co.za/index.php/southafricaforever/a-referendum-and-thorough-going-system-reform-is-the-way-to-political-rehabilitation/ [accessed: 14 August 2020]. Prof William Gumede, 3 August 2020, Electoral Reform presentation regarding the Challenges of the current electoral system, Democracy Works Foundation. Deyana Isaacs, 3 August 2020, Presentation on Electoral Reform Criteria, School of Public Leadership at Stellenbosch University. The Constitution of the Republic of South African, (1996). Government Gazette. (No.17678). - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. Authors: Percept Actuaries and Consultants Edited: Daryl Swanepoel 9 October 2020 Acknowledgements This research and publication was made possible through the kind support of the Friedrich Ebert Stiftung. It is part of a larger exchange of public policy and governance ideas between South Africa and Germany. Setting the scene The Inclusive Society Institute fully supports the notion of an affordable and universally accessible health care for all. As such, it endorses the objectives of the National Health Insurance (NHI) Bill which is currently before Parliament. The ability of a state to care for the health of its citizens is a measure of its commitment to human rights and its standing within the economic development evolution. A healthy nation is after all a pre-requisite for a growing and prosperous economy. Whilst the urgency and the importance of the NHI Bill is recognised and appreciated, its legislative passage must be accompanied by its realisation in every-day South African life. In this regard, certain questions remain unanswered: Can the country afford it, and are other less intrusive pathways available to incrementally achieve its objectives? The research which the Inclusive Society Institute has embarked on goes to the heart of these two questions. It recognises that the health policy dialogue is taking place in the absence of an agreed long-term financing roadmap and that there is still much uncertainty as to the practical manifestation of the envisaged system, especially as it relates to the role of the private sector / public sector mix. The Institute is concerned that the absence of a funding plan may undermine the just objective of improving the overall quality of health care in the country, and that an over-ambitious approach may undercut its potential. To this end, the Institute’s NHI research is aimed at providing options to aid policymakers in the health policy choices they are about to make. The first part of the Institute’s research, the literature review and stakeholder engagements, assessed the level of consensus within the sector, and delineated the areas of agreement, dispute and those that required further consideration. This, the second part of the research, provides a series of pathways to universal health care. It attempts to stimulate thinking as how best to tackle the all-important national project of providing an inclusive universal health care system, where the healing of the patient is based on the condition that needs to be treated, not their social or economic standing. The final phase of the Institute’s NHI research will endeavour to cost the pathways elaborated on in this report. The Institute offers this research to public policymakers as a further tool to inform their decision-making, in the hope that it contributes to rationalising the national dialogue towards what is achievable and practical in current-day South Africa. The progressive realisation of the constitutional right of access to universal and affordable health care – which an inclusive and socially just society demands – is best achieved by choosing workable programmes over unattainable aspirations. Daryl Swanepoel, Chief Executive Officer of the Inclusive Society Institute Executive summary This document aims to open debate and discussion about alternative pathways to universal health coverage (UHC) beyond the proposals contained in the Draft NHI Bill (2019). The proposed reforms, as they stand, represent a combination of policy building blocks sequenced in a particular way. This design is by no means the only path to UHC. There are several reasons to revisit our chosen reform pathway. We find ourselves in changed circumstances, entering a period of austerity, accentuated by Covid-19. The reform pathway, as currently conceptualised, requires substantial reorganisation of a fragile system in a relatively short time frame. This big bang approach poses several risks; the biggest risk being that our system is never reformed because of resistance from across the political spectrum. In Part A of this document we synthesise the various arguments around limited or reduced support for many of the critical positions taken in the Draft NHI Bill. Incremental reform processes, with realistic milestones, are better suited to building trust and stakeholder buy-in. Our starting point is one of an ailing public sector, a resource-intensive private sector, fragmented financing, inequities within and between the public and private sectors, weak accountability, and a significant trust deficit. It is a far cry from the widely-supported principles of equity, efficiency, quality, sustainability and good governance which guide the reform process. One way to ensure that UHC continues to move forward is to remove the specifics of the modes of implementation in the policy documentation and to incrementally build stakeholder consensus as we move through the reform process. This will allow for a more agile and responsive process which is cognisant of shifts in context. Building trust in the State’s ability to steer the system through the reform process is not just a ‘nice-to-have’ but has been shown to dramatically improve and strengthen UHC implementation in other countries. There is a large trust deficit in South Africa, in part due to the many false starts for UHC over the years, but also due to missed opportunities to showcase the public sector’s strengths. The wounds from State Capture and the failure of numerous large state institutions mean that reform processes that rest on the creation of new centralised institutions reliant on top-down accountability mechanisms are unlikely to be favoured over those that are more participatory in nature. The starting point for reform is one of the most contentious areas. Does the implementation of a single purchaser (the NHI Fund) require strengthened service delivery in the public sector? Or is the only way to strengthen service delivery by creating a single purchaser? There is consensus that irrespective of the exact route taken, the private sector cannot continue to function as is and will require reform. And regardless of the reform pathway, there will be a role for the private sector in the system. Reform of the system requires stewardship, and the National Department of Health (NDoH) will need to play this role. Considering the positions taken by the NHI Bill on certain certain critical building blocks in a health financing system, relative to the UHC objectives, allows us to identify alternative approaches to achieving these same objectives. We do this using Joseph Kutzin’s framework of the functions in a healthcare system which include revenue collection, pooling, purchasing and service delivery. The details on revenue collection to fund the NHI Fund are still limited. In terms of pooling in the form of a single fund envisaged under NHI, the primary objective being pursued through this reform is equity. This could, however, be achieved in other ways, including income cross-subsidisation at the premium collection stage; virtual pooling in the form of risk equalisation or reinsurance; the further risk-sensitisation of the Provincial Equitable Share (PES) through better use of data; and the fast-tracking of the medical scheme Prescribed Minimum Benefit (PMB) review to establish a coherent package of services across both sectors. In terms of purchasing, it is foreseen that the NHI Fund will act as the single purchaser of healthcare by entering into contracts directly with accredited healthcare providers (public and private) on the basis of a basic benefit package. It is assumed that this approach will help to achieve the objectives of quality, efficiency, good governance, and stewardship. Nevertheless, the same objectives could be achieved through alternative approaches: by creating a multi-funder environment and allowing patients to choose providers; by ensuring top-down and greater bottom-up accountability; and by increasing the public sector’s contracting with the private sector. In terms of the last health system function – service delivery – it is planned that under NHI, accreditation will be used to guarantee a minimum level of quality. The private sector will be contracted to provide primary healthcare, but there is no mention of contracting with private hospitals or specialists. It is anticipated that these reforms will help achieve the objectives of greater equity, quality, efficiency, and improved governance and stewardship. There are, however, other approaches available to achieve the same objectives. Procurement legislation could be changed to become more flexible to allow for private provision of care. A combination of reimbursement approaches, such as capitation and performance-based financing (along with strong accreditation mechanisms), could incentivise improved service delivery. In Part B of this report, we outline several scenarios that allow the reader to reimagine UHC implementation in South Africa. The four scenarios are: ‘Status Quo Gold Standard’, ‘NHI Rejigged’, ‘Power to the People’, and ‘Reorienting Towards Value’. We used the comprehensive literature review conducted prior to this report, as well as interviews and documentation, to pinpoint these scenarios. At their core, each scenario addresses the five policy objectives embedded within them, and therefore the scenarios present a reimagining of the ‘how’ for NHI (see Table 1). These scenarios may help the South African Government and the various UHC stakeholders to continue furthering the important UHC agenda, without risking the public purse or service continuity as it does so. Table 1: Alternative UHC scenarios explored in this document List of figures Figure 1: Some of the key recommendations of the HMI (24) Figure 2: Components of value-based care (38) Figure 3: Porter and Teisberg model of value-based care (39) List of tables Table 1: Alternative UHC scenarios explored in this document Table 2: Areas of consensus, uncertainty, and dispute on the NHI Bill among critical stakeholders Table 3: Examples of how NHI timelines can be linked to activities and milestones achieved Table 4: A summary of the building blocks of NHI reforms and alternative policy options Table 5: Summary of alternative UHC design scenarios Acronyms and abbreviations DHIS District Health Information System DHO District health office GDP Gross domestic product GP General practitioner HIS Health information systems HMI Health Market Inquiry HR Human resources HRH Human Resources for Health IYM In-year monitoring MoF Minister of Finance NCS Norms and Core Standards NDoH National Department of Health NHA National Health Act NHI National Health Insurance NHRPL National Health Reference Pricing List OHSC Office of Health Standards Compliance PDoH Provincial Department of Health SAG South African Government UHC Universal health coverage VAT Value-added tax Content Setting the scene Executive Summary List of figures List of tables Acronyms and abbreviations 1. Introduction Part A: Where are we now 2. What are we trying to achieve? First principles 3. Where to begin? 3.1 The argument for starting with the public health sector 3.2 The argument for implementing UHC policy alongside health system strengthening 4. Separating the principles from the approaches and mechanisms 5. Trust as a catalyst for UHC reform 6. The current fiscal climate may force a change in approach and cadence 6.1 The dire global economic situation and South Africa’s fiscus 6.2 Dramatic need for Human Resources for Health 6.3 The need to work smarter with what we have Part B: Exploring and imagining alternative pathways for UHC 7. Alternative conceptualisations of the building blocks of NHI reforms 7.1 Revenue collection and pooling 7.2 Purchasing 7.3 Service delivery 8. Alternative UHC designs 8.1 ‘Status quo gold standard’: No purchaser-provider split and strengthening the public sector 8.1.1 Improving data quality 8.1.2 Taking steps toward quality 8.1.3 Budget and spending transparency 8.2 ‘NHI rejigged’: NHI, but sequenced differently 8.2.1 Improving equity in each of the sectors (private and public) 8.2.2 Improving equity between the two sectors 8.3 ‘Power to the people’: Purchaser-provider split but with multiple purchasers 8.4 ‘Reorienting towards value’: a value-based approach to UHC 9. Conclusion References 1. Introduction In South Africa, we are at a critical point in the road with universal health coverage (UHC): an NHI Bill is currently up for discussion and scrutiny by the Parliamentary Health Portfolio Committee. With a high volume of submissions received, media reports have focused on how the Committee will be able to effectively process all these submissions. The massive response to the call for submissions indicates the level of public and stakeholder interest, support, and concern that the envisaged health-system-wide reform through NHI has evoked. Given the long history of the reforms, the severely constrained fiscus, and lessons from the Covid-19 pandemic, it is important that we pause to reflect on the range of policy choices and sequencing that are possible to achieve UHC. Large-scale reform processes need to be reflective, and open to learning and course correction. This document has two main contributions (Part B): the disaggregation of the reform process into its constituent building blocks with an analysis of how these could be reconceptualised in a way that allows the system to achieve the same policy goals; and the presentation of four alternative conceptualisations of how UHC could be achieved in South Africa: ‘Status Quo Gold Standard’, ‘NHI Rejigged’, ‘Power the People’ and ‘Reorienting Towards Value’. These are not the only possible alternatives but also serve to illustrate that we have choices about how to proceed. However, to know where we are going, we need to start at the beginning (Part A). We first consider the principles guiding the reform process and the various arguments for strengthening the current health system, before focusing on the areas of consensus, uncertainty, and dispute in the NHI Bill. Part A: Where are we now 2. What are we trying to achieve? First principles South Africa has been grappling with the path to UHC for over two decades. Despite differences in policy, rhetoric and plans, the intention has always been the same: to improve equity between the provinces and the health sectors, to ensure quality care is provided at the lowest possible cost, and to ensure the health system is governed optimally and with sound leadership. As support for this report, we conducted a comprehensive literature and stakeholder review of NHI in South Africa. Based on this, we identified five policy objectives that have been consistently present across policy documentation, while South Africa has tried to move closer and closer to UHC. These policy objectives are: To improve equity in the health system, including the sharing of resources (human and other) across the public and private health systems. To address escalating costs in the private health sector and contain future escalations in costs across the health sectors. To provide universal access to quality health care. To ensure efficiency in service provision and administration. To ensure good governance and stewardship. These key objectives of the health reform process will be used as a benchmark against which to assess the feasibility of various policy choices and pathways that have been put forward during the UHC debate. This report may also assist in guiding the sequencing of current reform proposals. Through this document, we propose that the combination of cost, quality and efficiency could be collectively reconceptualised as orienting the South African healthcare system towards value. 3. Where to begin? From the literature review, which included submissions on the Draft NHI Bill as well as more formal literature, there was a fundamental disagreement between the South African Government (SAG) and others on how the shift to UHC should begin. The disagreement, at its core, comes down to whether we should strengthen the public health sector first, or whether we should begin with massive system restructuring to improve quality and equity across the entire health system. 3.1 The argument for starting with the public health sector Many stakeholders believe that the current state of the public health sector is a non-starter for NHI (1–3). Beset with ailing infrastructure and poor quality care (4,5), many think that rolling out UHC within the current system is impractical and doomed to fail. Furthermore, the narrowing fiscal envelope for public healthcare is likely to slow down the State’s ability to improve these infrastructural or resourcing issues in the short term. This means that the State risks collecting funds to enable UHC without having the resources to successfully do so. The result is that citizens resent having to spend more money on healthcare (through tax) while still experiencing the same poor quality, and this will negatively impact on people’s trust in a state-run system, like NHI. Therefore, if rushed and implemented poorly, there will be long-term damage to the UHC project in South Africa. There are three main reasons why some stakeholders believe that the State should start within the public health sector, in order to lay a better foundation for the larger system restructuring envisioned in the Draft NHI Bill. 1. Restoration of faith in the system through high-quality services is required to enable a smooth switch to UHC. The primary argument for starting with the public health sector pertains to the quality of services currently provided. The National Treasury has expressed its concerns with health departments’ inability to spend and as such, when announcing the 2019/20 budget, the Minister of Finance (MoF) announced that unused NHI grant funds would be redirected to fund additional Human Resources for Health (HRH). Increasing availability of healthcare personnel is one way in which public health departments can improve the quality of care provided. In addition, most public health facilities are old, and require major renovations to be fit for purpose (6). Facilities are often under-resourced, not only by staff but also with equipment and other goods and services. This results in poor quality of care and is partly responsible for the proliferation of medicolegal claims against the State. It currently takes a very long time to upgrade facilities, given budget challenges and poor oversight of construction projects. Therefore, by starting on these upgrades now, using the Office of Health Standards Compliance (OHSC) assessments to guide the Department on where to invest, the public health sector could dramatically improve quality for its users. This would also restore faith in the system for many users and make the switch to UHC, with the public sector as the main vehicle for healthcare, more palatable to the South African population. 2. Large scale contracting of private providers is risky and could divert funds away from essential services. The difficulties associated with contracting are illustrated throughout the history of the NHI reforms. In the first phase of NHI, provincial departments of health (PDoHs) were able to contract in private general provider (GP) services. However, the project was largely a failure due to issues with payment and a lack of oversight (7). Nevertheless, in phase II of NHI (the phase we are currently in), the scope of privatesector provision was to be widened, to allow for contracting of services for high-risk maternity clients, among others (8). This has not happened yet. There was also an attempt to tender for oncology services from the private health sector, given the collapse of oncology services in the public health sector. However, the tender was never awarded. In August 2019, the National Treasury reported substantial underspend on the NHI grant (9). The Covid-19 pandemic increased the demands placed on the health system, in particular, the public sector. This created the need for the public system to purchase from the private sector to keep up with the requirements. However, developing a mutually agreed upon structured payment model with a clear package of care proved challenging (10). This has left many feeling that the State is not using available funds to strengthen the public health sector and has brought into question the State’s ability to manage the NHI Fund. Most importantly, many believe that this was a lost opportunity to not only showcase the State’s ability to procure efficiently, but also for vulnerable users to be afforded better care that will improve their health outcomes, a key objective of UHC (quality). Departments of health could experiment with contracting private services now without big bang NHI reforms. To improve equity, the departments of health could begin to contract with private sector services for vulnerable groups or for services that are currently unavailable. Building up a contracting capability will take time and will require learning from experimentation. 3. Pervasive state sector corruption first requires establishment of good governance and oversight before centralising funds. It is worth noting a final argument that underscores why stakeholders want the State to start with the public health sector. Corruption in the State has been brought to the fore as we have been emerging from a period of extensive State Capture. Many have concerns that centralising funds into an NHI Fund, before good governance has been embedded and corruption dealt with to prevent misuse of funds, is simply too risky. Stakeholders are therefore eager to cement the governance principles and oversight mechanisms to protect healthcare funds before moving to NHI implementation which would radically centralise health budgets. If open to corruption, the damage is even more devastating, given the quantum. In Section 7, we use these arguments for starting with the public sector to build a UHC scenario where no purchaser-provider split is implemented, and the public sector is simply strengthened. Given that public healthcare is currently available, at no charge for the indigent, it can be argued that UHC is already present, but the quality, efficiency and effectiveness of the system is poor. This scenario therefore details the steps to improve the existing UHC platform with no system restructuring. This improvement to services and quality would impact over 80% of South Africa’s population. 3.2 The argument for implementing UHC policy alongside health system strengthening Given that South Africa has been on the UHC trajectory for several years now, some – especially those within the public sector – believe that without the impetus that new policy brings, the public health sector will remain ailing and under-resourced. Some of the difficulties experienced by departments of health in contracting private providers relate to outdated and ill-suited public financial management regulation. Similarly, to truly improve quality, the system needs to change the kind of data that is collected, and make data more readily accessible for analysis. These shifts require regulatory change. A number of stakeholders believe that the NHI Bill will provide the mandate to begin these reform processes – many of which will take several years to enact. Another reason to begin implementation is that the NHI structure may help to stimulate systemic change, given the shifts in control from PDOHs to district health offices (DHOs). The NHI finally mandates the move to decentralised governance, and literature abounds on the reasons why this is better for population health and service delivery (11). Again, without the impetus for UHC from NHI implementation, this is unlikely to happen, as decentralisation has formed part of district health services policy since 1997 with limited success (12). There is broad consensus on the principles of NHI. Therefore, while the approaches are contested, it is widely supported that the health system needs to be reformed. Therefore, some feel that with this level of support for NHI principles, the mechanisms and methods can be worked out along the way without delaying the implementation phase. It is important to note that currently, the Draft NHI Bill is specific on the mechanisms and approaches for NHI. Some loosening of this language could assist in getting the principle of UHC through and allow for further discussions and debates on the ‘how’. There exists a strong belief among many NHI stakeholders that a single purchaser is needed to effect improvement in service delivery, i.e. without a purchaser-provider split, accountability won’t exist, and accreditation of service facilities will not be achieved. However, as shown in Section 7, the objectives that UHC seeks to achieve can be met in other ways. A purchaser in the form of a single fund is not a prerequisite for improved transparency, centralised stewardship, quality improvement strategies and various other policy actions which are being pursued on the back of NHI. 4. Separating the principles from the approaches and mechanisms Table 2 (below) is taken from the comprehensive literature review mentioned in the executive summary (7). It succinctly describes where there are disagreements on the approaches and mechanisms of NHI. We will unpack each one and suggest alternative pathways that still achieve the principles of NHI, albeit through different mechanisms. Table 2: Areas of consensus, uncertainty, and dispute on the NHI Bill among critical stakeholders Linked to the ‘fundamental misalignment’ we described in Section 3, is the widespread concern that the current policy implementation timelines are unattainable. Several Bill submissions described feeling rushed into formalising the Bill and lamented the lack of tangible benchmarks and milestones that would help the South African population to hold its government to account. This is linked to the issue of ‘where to begin’ because it dictates the milestones and short-term activities of the Department of Health. For example, if the State implements NHI as currently envisioned, then some of the milestones to be included will be the contracting of private providers for public sector clients, at agreed-upon tariffs. However, if the State were to start with strengthening the public health system first, the milestones could include, for example, ‘number of public sector health facilities who meet the Office of Health Standards Compliance (OHSC) accreditation standards’. Some NDoH policymakers, however, recognise the impossibility of achieving the NHI implementation timelines set out in the Bill, strengthening the case for a step-by-step approach. Given the technocratic realism around timelines, the legislation should be amended to take this into account. An option to reach consensus on timelines, is to break NHI policy down into discrete actions that can then be monitored. For the actions pertaining to strengthening the public health sector, no new policies are required, the current National Health Act (NHA) is sufficient. Therefore, the system could begin to build trust and support for the greater NHI vision by showcasing its capabilities within the public health sector. Using this method doesn’t mean the State has to discard the current NHI Bill or goal. Rather, it would be about breaking the policy up into its component pieces. Each component piece may require legislation enactment, but this should become easier and easier as the State builds up credibility. Some examples of the components are provided in Table 3. Table 3: Examples of how NHI timelines can be linked to activities and milestones achieved 5. Trust as a catalyst for UHC reform The practice of building trust between stakeholders is critical. Ultimately, trust is built by doing what you say you are going to do and by working together on a shared problem that allows disparate groups to feel heard and build consensus. In the extensive report of the Dullah Omar Institute (13) on decision-making in health, NHI is used as a case study to consider the various positions of different stakeholders and players in the South African health system. The report makes the absence of trust clear, even between different government entities, like Treasury and departments of Health. To date, the shift to NHI has been marred by a lack of true consultation and consensus-building between stakeholders. Many stakeholders feel that their proposals and recommendations were not taken into account in the final version of the NHI White Paper or the latest Draft NHI Bill. Non-NDoH government bodies similarly felt their recommendations were ignored. We see this most clearly in the lack of an accompanying financing document from National Treasury for the NHI Bill. The ability to successfully implement UHC reforms rests to a large extent on building trust between the State and private providers, a process which should begin ahead of financing reform implementation. Private providers currently contract with multiple purchasers and are understandably nervous of engaging with a single purchaser as they become dependent on that purchaser being rational, fair and effective. There are already examples within the private sector where providers feel over-powered by funders. Additionally, past experience of contracting with the NDoH has not been positive, and trust will need to be re-established to attract sufficient private providers into the reformed health financing space. In Sweden, it has been found that the most effective implementation of a purchaser-provider split was in those regions that moved beyond formal agreements and competition, to dialogue and consultation to shape the future of healthcare (14). Cooperation and trust were found to be important qualities in the creation of a purchaser-provider split. Similarly, in Germany, it was found that a medium-term process of working intensely with important stakeholder groups supported a transition process to a reformed health financing space (15). This engagement meant the perspectives of all stakeholders were captured and shared publicly, facilitating transparency and thereby trust. Another useful approach in Germany is that the committee which is tasked with making health financing decisions is representative of many different stakeholders (15). These international lessons are important for South Africa and sound the call to focus on consensus-building and open dialogue before settling on the modes and mechanisms of implementation. There is currently not enough trust in the health system between different stakeholders to power a big bang approach to UHC. Change will have to be incremental with more accountability built along the way. 6. The current fiscal climate may force a change in approach and cadence In this section, we make the case that we will need to work with what we have (available funds, infrastructure, and human resources) given the difficult economic and fiscal situation South African currently finds itself in. 6.1 The dire global economic situation and South Africa’s fiscus The global health crisis that rapidly arose as a result of the Covid-19 pandemic has triggered the deepest global recession observed in the last eight decades. This has come about due to the Covid-19 national lockdown policies to curb the spread of the disease. These lockdowns resulted in the loss of trade and tourism, and decreased capital investments which escalated debt both at the individual and the macro level. These disruptions have been further compounded by the effects on wellbeing and the massive shock to healthcare systems worldwide. Countries that had historically weaker health systems fared worse in the pandemic (16,17). While the exact impact remains uncertain, contraction in economies and long-term negative consequences are expected globally, particularly in emerging markets and developing economies. The World Bank predicts an average contraction of 2.5% in the global economy in 2020, largely as a result of the disruptions caused by the pandemic (17). A decline in per capita income by 3.6% is also anticipated, resulting in an increase in the rate of extreme poverty. Furthermore, the effects of the pandemic on schooling and access to healthcare may worsen the long-term economic impact. While global economic growth is expected to rebound to 4.2% in the following year, the decline in the economy may be as much as 8% globally, and a 5% contraction in output in emerging markets and developing economies may be observed in 2020, with only a 1% recovery in 2021. Although policy measures have been put in place by most countries to combat the economic effects of the pandemic, the recession is likely to send many individuals into extreme poverty. The economic downgrades expected globally may undo years of progress and decrease the chances of many countries achieving the Sustainable Development Goals. South Africa is no different and has been hard hit by the pandemic. The country was already vulnerable to economic decline preceding the pandemic, with a contraction of 1.4% and 1.8% observed in the fourth and third quarters of 2019, respectively (18). However, the impact of Covid-19 was far-reaching and worse than could have been anticipated. The national lockdown regulations were set in motion from April 2020 and continue to date. The second quarter of 2020 was particularly hard hit as a result of the most restrictive parts of the lockdown falling within this period (19). Despite fiscal and monetary attempts at tackling the dire economic constraints caused by Covid-19, the national budget remains in deficit due to the increased expenditure and decrease in tax collection, and is likely to have lasting impacts. Due to these constraints, rapid growth in healthcare expenditure as a share of GDP is unlikely. Rather, there exists the very real possibility of cuts to healthcare budgets. This threatens UHC implementation. 6.2 Dramatic need for Human Resources for Health The Covid-19 pandemic has highlighted the need for a strong health workforce in order to provide equitable access to quality healthcare and has shed light on the inadequacies in our current Human Resources for Health HRH mix and availability across and within the sectors. Investing in HRH is essential for the implementation of UHC, and the National 2030 HRH Strategy outlines optimistic targets for HRH in South Africa (20). However, the fiscal climate threatens to undercut the laudable goals of the 2030 HRH strategy and as such, we need to keep finding ways to innovate our service delivery platform to ensure healthcare workers are used optimally. 6.3 The need to work smarter with what we have Considering the potential that no additional funding will be allocated to healthcare and the possibility that funding may even be reduced, it is imperative that existing resources and infrastructure are utilised efficiently and effectively. Public sector To do more with less, innovative ways of thinking about the path taken to achieving UHC are required. The retention of the current workforce and the redistribution of teams in an equitable way may assist in making better use of scarce HRH. Similarly, there is significant scope to improve the allocation of existing resources across geographies. The pandemic has halted or, in some cases, inhibited the progress. However, it has also stimulated innovation through the incorporation of various technology-enabled solutions to accessing healthcare in part due to a relaxation in associated telehealth regulations. Making use of the innovations that are found to be more cost-effective may help to reduce spending while also decongesting the health system. With a focus placed on primary healthcare as a means of enabling UHC, current infrastructure may be well utilised. Promoting and strengthening PHC systems presents a way to lower the costs associated with management at higher levels of care. Currently, ward-based outreach teams are established throughout South Africa (21). These teams provide care at a community level and consist largely of nurses and community health workers. These teams have been found to be both effective and cost-effective when providing care to impoverished, high-risk individuals (22). The cost-effectiveness of using community health workers is further increased when they have access to information and technology systems as this allows for the smallest workforce required and more streamlined care through the availability of data (23). Private sector The recommendations from the Health Market Inquiry (HMI) present a detailed roadmap for reforming the private sector – specifically in relation to escalating costs (one of the core policy objectives). Legislation that facilitates multi-disciplinary teams and global fees would be catalytic in curbing costs (24). It would also improve quality and health outcomes in the private health sector (24). Despite the high expenditure of the private sector, a low proportion of the population is currently part of private risk pools (with the associated social solidarity mechanisms). Including the private sector in the financing of the NHI may assist in diverting some of the strain currently placed on government because of the pandemic. This will be further discussed in the alternative scenario below. Excess capacity exists within the private sector, and this may be utilised in order to improve access and quality of care provided to those currently receiving care within the public system. Making use of the private healthcare system through contracting of private services may also aid in decongesting the public health system, thereby improving quality. This would require mechanisms for tariff negotiation, as well as the data and technical capabilities to support contracting. Reform of the now-outdated National Health Reference Price List (NHRPL) tariff system would be a good starting point. A recent (2018) project undertaken by National Treasury and NDoH to explore private sector contracting for Primary Healthcare (PHC) services using capitation was illustrative of a consultative process together with the required technical work. The public sector has a shortage of medical specialists available to provide care. By allowing the private sector to train additional registrars, ggovernment may be relieved of some of the financial burden while still increasing the workforce substantially (if they ensure these registrars still provide services to the public sector). Attention should also be placed on stabilising the operating environment of the medical schemes market. This includes reforming the current minimum benefit package to enforce a reorientation of the private sector to PHC services, which would drive down costs. Incremental reforms With the aim of achieving UHC, South Africa can take incremental steps over time, despite the current economic climate. Making use of the current available infrastructure will allow the healthcare system to recover, improve quality and build capacity over time, while avoiding the massive financial implications of a radical shift to an NHI system. In implementing small steps over time, trust and transparency can also be built, improving social support of the system. Part B: Exploring and imagining alternative pathways for UHC 7. Alternative conceptualisations of the building blocks of NHI reforms Rather than seeing NHI as one big bang approach to UHC, it is useful to think of many of the technical proposals, which form part of NHI, as being specific policy choices with regards to certain critical aspects of any UHC system. The most widely used conceptual outline of the various functions within a healthcare system is that proposed by Joseph Kutzin (25). Kutzin distinguishes between four key areas: revenue collection, pooling, purchasing and service delivery. This section draws extensively on work previously done by Percept on the purchaser-provider split and its various important dimensions (26–28). A summary of each section’s content in the form of health systems functions, policy goals to be achieved, specific policy architecture choices made under NHI, and potential alternatives are provided in Table 4 below. More narrative detail is provided in the sections below. Table 4: A summary of the building blocks of NHI reforms and alternative policy options 7.1 Revenue collection and pooling Revenue collection refers to the way in which a health system is funded. Examples include general taxation, taxes that are directed specifically to health and household/employer contributions to health insurance. Pooling refers to the accumulation of money for healthcare for a specific population, such that the contribution by a specific household is not necessarily equal to their expenditure. Money can be accumulated in government departments, funding vehicles such as medical schemes or a new entity like the NHI Fund. Pooling offers the benefits of pre-funding, and the engineering of income and risk cross-subsidies (i.e. between healthy and sick, young and old). What is proposed under NHI, and which UHC goals will it satisfy? The revenue collection components of NHI are not yet clear, but the fact that the NHI Bill puts forward a complementary role for medical schemes is driven by the assumption that the revenue currently spent on medical schemes will rather be channelled towards the NHI Fund. However, there is likely to be some degree of leakage, not yet quantified, from the financing system and, hence, the assumption that all money currently spent on medical schemes will be available for NHI is incorrect. The NHI benefit package, referral pathways, clinical protocols and queues are unlikely to be a substitute for the current care provided in the private sector, with reduced cover for elective care and less freedom of choice. Revenue collection is likely to occur through some type of payroll tax for the formally employed and probably general tax increases. The fiscal allocation will be pooled in one fund, the NHI Fund, with a clear split between the purchaser and the provider (see below for discussion on the purchaser function). Pooling all funds into one pool and allocating them based on need through a basic benefit package is thought to help meet the goal of improved equity. How could the UHC policy goal of equity be achieved in other ways? There are other ways to achieve the goal of equity other than creating a single pool of funds. Income cross-subsidisation can be done at the revenue collection stage, resource allocation to sub-pools can be done on the basis of the needs of the population covered by the pool, and retrospective adjustments can made for higher than expected need. The technical methods used to balance resources between sub-pools are referred to as virtual pooling, risk-equalisation and/or reinsurance, and have been used successfully in systems such as the Netherlands and Germany. There is a parallel to the existing provincial equitable share (PES) formula which effectively splits the budget on a risk-based per capita basis. The PES can potentially be made more risk-sensitive by drawing on detailed improved population health data as these become available. The fast tracking of the medical scheme PMB review will also move us closer to a basic benefit package that is coherent across both sectors. 7.2 Purchasing The purchasing function in a healthcare system is about deciding how to allocate money from the pool to providers of care. This means deciding what services to purchase for which client,(*1) and how to pay for them. The terms purchaser and payer are sometimes used interchangeably, although it is possible to separate payment and purchasing functions. Our focus is on the concept of a purchaser because it is more strategic in nature. The term payer de-emphasises the need for explicit thought to be given to questions of what to purchase, from whom and on what terms. What is proposed under NHI and which UHC goals will it satisfy? The NHI Fund is to act as the single purchaser of healthcare by entering into contracts directly with healthcare providers. Through the establishment of the NHI Fund as a purchaser, a clear purchaser-provider split will be implemented. Purchasing will be done based on a basic benefit package, yet to be defined. The intention is to select providers based on criteria such as the quality of service, geographical footprint and service capacity. The OHSC will play a certification function, assessing which providers meet minimum norms and standards, with the Fund being responsible for final accreditation. Providers that satisfy certification criteria and some additional accreditation requirements set by the Fund will be granted accreditation, and will thus be eligible to contract with the Fund. To date the OHSC has highlighted severe and widespread quality failings in the public sector, and it is unclear what the process is to ensure improvement within the envisaged timelines. Accountability, and ultimately quality and efficiency, are expected to increase because of a more arm’s length contracting relationship between the purchaser (the NHI fund) and providers of care (for example, individual public and private facilities). There is also an implicit assumption that by moving the direct funding (rather than purchasing) of healthcare away from PDoHs, governance and stewardship of health resources may improve through centralisation. There is, however, no evidence to support this assumption. A key effect of the purchaser-provider split in the South African context is that it enables the NHI Fund to purchase healthcare goods and services from private healthcare providers in a way that is more flexible than under current procurement rules. For example, currently the public sector would need to enter into individual contracts with providers if they wanted to contract services from the private sector. Under the purchasing scenario set out in the NHI Bill, the provinces effectively move from being purchasers and providers currently to being primarily providers of care. The ability to purchase from both sectors is referred to as pluralistic purchasing. There is a range of ways in which the purchaser can drive accountability through pluralistic purchasing. For example, the purchaser can put in place requirements, such as minimum quality standards, that providers have to meet in order to be contracted (ideally accompanied by mechanisms for driving quality improvement in those facilities that do not meet the standards). The purchaser can also pay providers based on the quality of care delivered, by using health outcome data to measure impact. Both of these concepts are articulated in the draft NHI Bill (29) at a conceptual level. How could the UHC policy goals of quality and efficiency be achieved in other ways? It is important to recognise that the theoretical benefits sought through a purchaser-provider split are not always achieved. A single purchaser is not enough to change incentives – attention must be paid to how providers are contracted, how the purchaser measures their performance, and how the purchaser addresses poor performance. There are inherent risks associated with a large bureaucracy – an insufficiently motivated monopsony and the scope for large-scale corruption. In fact, many of the recent corruption and irregular expenditure scandals in South Africa have occurred in national-level and centralised bodies, including the Passenger Rail Agency of South Africa (PRASA) (30) and, most recently in the wake of the Covid-19 pandemic, the Unemployment Insurance Fund (UIF) (31). *1 The term client is used instead of patient, because not all users of a healthcare system are ill. The envisaged health system encompasses preventative care, family planning and other services for those who are well. The term client is preferred to the term user as it more strongly signals the centrality of those receiving services in the system (as opposed to being passive recipients of care). Much of the allure of a purchaser-provider split relies on the effects of competition between providers (see below) to incentivise quality and bring down prices. However, even in high-income countries like the United Kingdom, where there is a long-standing purchaser-provider split, there have not always been enough providers in each regional area for these competitive mechanisms to be key drivers of efficiency. In the case of Kenya, it was found that the purchasing done by the Kenyan Hospital Insurance Fund (KHIF) was not sufficiently strong to help achieve the objectives of equity, quality and efficiency (32). This was because provider monitoring and contracting by the Fund was generally weak and due to the limited geographic distribution of certain providers (32). Strategic purchasing will only ever be as good as the technical capabilities of the purchaser and requires access to good data and analytics. Other ways to achieve the benefits of purchasing without a purchaser-provider split include investing in the resources or capability for contracting with private sector resources – this includes how to design contracts and how to determine tariffs. Driving accountability through a purchaser is a ‘top-down’ approach as opposed to a bottom-up approach where clients are empowered to demand quality care from providers. Ideally, you need both mechanisms in place. An over-reliance of top-down approaches erodes sensitivity to the client voice, their autonomy and their dignity. Further ways to achieve improved accountability, and ultimately also quality and efficiency, would include giving clients choice about which funder/purchaser to pay their NHI contributions to and having funders/purchasers compete in a multi-funder environment. However, as experienced in the medical scheme environment, the basis of competition is critical. The incentives need to be in place for funders to compete on the basis of their purchasing capability, and the optimal number of funders will require investigation. 7.3 Service delivery Service delivery is the easiest part of the health system to understand. The service delivery function is performed by all the entities that provide healthcare goods and services. These include doctors, nurses, traditional healers, allied health professionals, pharmacies, and healthcare facilities like hospitals. The entities are referred to as providers, and can be either public or private. What is proposed under NHI, and which UHC goals will it satisfy? Given the resources such as hospital beds and medical specialists in the private sector, this ability to purchase care from private providers would improve access (33) and thereby also equity, leveraging these resources for the population as a whole. However, the NHI Bill focuses on purchasing primary care from private providers and is largely silent on the possibilities of enabling access to private hospitals and specialists. NHI holds the potential of simpler pricing and mechanisms for contracting. However, for some providers the accreditation criteria and data collection requirements that will be imposed could lead to an increase in their administrative burden. Ultimately, we may see competition between public and private providers vying for contracts from the Fund, which could lead to innovation and improvements in the quality of care, as well as efficiency (more services could potentially be provided with the same level of resources). A fair playing field in terms of prices across the two sectors is an important consideration to ensure that competition is possible between the two sectors. Private providers are subject to different cost and financial structures to public providers, for example: value added tax (VAT) applies; there is a need to realise a return on capital; and, at present, there are different rules relating to employment structures. The notion of competition across the two sectors is politically loaded. Private providers are likely to be concerned about the risk of political pressure to protect public providers from competition from the private sector, while public providers are likely to be concerned about the diversion of funds to private providers. There is a question of equity, presuming a quality differential between public and private providers: which patients will access private providers, and which patients will access public providers? The Bill is largely silent on principles to guide the allocation of funds across sectors. How could the UHC policy goals of equity in access, quality and efficiency be achieved in other ways? A purchaser provider-split and a single fund are not necessarily required to establish equity through better access to private sector resources, nor are they required to improve the quality of healthcare services available in both the public and private sectors. If procurement legislation were to become more flexible, PDoHs would be able to purchase more services from the private sector, thereby increasing equity through improved access. Even within the current regulatory frameworks there is room for experimentation with purchasing. Furthermore, improved quality and efficiency can be achieved without establishing a purchaser-provider split. One of the most prominent mechanisms through which quality can be promoted is through alternative reimbursement approaches. Neither a fixed-cost approach (salary remuneration), as is the case in the public sector, nor fee-for-service payment mechanisms, as is the case in the private sector, lend themselves to incentivising improving quality. Reimbursement mechanisms that reward high quality care, implicitly or explicitly, can play a large role in improving quality, although some of the pitfalls of performance-based financing (e.g. it may not have a long-lasting impact on organisational culture and the impact dwindles once incentives are removed) may remain and will have to be carefully managed. Ideally, a combination of reimbursement approaches such as capitation and performance-based financing may work best to achieve an optimal level of servicing (avoiding both under- and over-servicing) while also encouraging quality. This, coupled with strong accreditation mechanisms, either through the OHSC or through the establishment of a supply-side regulator as recommended by the HMI, can steer the health system to delivering high quality care (24). Thailand offers an example of how strategic purchasing through alternative reimbursement mechanisms can work (34). In Thailand, the National Health Security Office (NHSO) acts as the strategic purchaser for the Universal Coverage Scheme (UCS), the scheme which covers the population not covered by the Civil Servant Medical Benefit Scheme (CSMBS). The NHSO uses a capitation approach to remuneration in its negotiation and purchasing of services from the Bureau of Budget representing the Thai Government and its healthcare providers. The purchasing done by the NHSO on behalf of the UHC in Thailand is cited as an example of a strong strategic purchaser (35). 8. Alternative UHC designs In this section, we present a series of alternative design visions for achieving UHC in South Africa. These are intended to stimulate dreaming, visioning and alternative ideas of what UHC could look like. It is also intended to help break the stalemate in discussions between stakeholders. There is no one right path to achieving UHC. The conceptualisation of UHC as set out in the NHI Bill is only one, very particular way of achieving the most important objectives underpinning UHC. However, these objectives can also be achieved in other ways, as discussed below. Irrespective of the reform pathway chosen, there will be a role for the private sector in the system. Reform of the system will require stewardship, and the NDoH will need to play this role. 8.1 ‘Status quo gold standard’: No purchaser-provider split and strengthening the public sector As discussed, there is a strong push for the public sector to first focus inwards, strengthening its hardware and software for NHI implementation. Hardware refers to the tangible components of the health system, like HR, finances, and infrastructure. Software refers to the relationships and culture within the system. There are substantial hardware failings in the current system, such as ailing infrastructure, and scarce human and financial resources. Some of these issues are borne out of systemic software issues, such as poor leadership and governance, while others are a product of an under-invested system. Therefore, to strengthen the public health sector, one would need to approach the challenges with both facets in mind. We suggest three sets of approaches to drive improved equity and quality of care that do not require the creation of an NHI Fund. 8.1.1 Improving data quality A way to have better accountability and governance in the health system is by ensuring that the health information systems (HIS) are accurate and up to date, to allow for evidence-based decision-making. Given that HR make up the lion’s share of public health expenditure, an appropriate place to start would be the PERSAL system. PERSAL is a National Treasury-owned system which should be an up-to-date record of all government personnel, including details such as where they work and what their role is. PERSAL is unfortunately notoriously inaccurate for several reasons: The system is not owned by the PDoHs, and therefore, it is difficult to adjust it to be reflective of the reality on the ground. Sometimes a person is hired and placed in the incorrect post on PERSAL, due to errors in capturing or purposefully, as that is the only available post with a budget associated. PERSAL needs to be manually updated/analysed to reflect resignations or vacant posts – this makes it difficult to plan around imminent retirements and difficult to hire within the allocated time frame on vacant posts. Each PDoH should do a PERSAL clean-up and verification process. The National Treasury should support the provinces to be able to allocate staff to their correct posts or provide an option where someone is paid from one cost centre but is allocated to a different facility. The long-term goal would be that PERSAL posts accurately reflect organograms, and that the organograms accurately reflect the need. By doing this, the system would have a much better idea of how HR are shared across the provinces and districts and ensure that no ‘ghost staff’ are being paid for services no longer rendered. The next HIS worth strengthening is the District Health Information System (DHIS). The DHIS2 has been developed to allow for an electronic health record and is slowly being rolled out at facility level. However, training and usage still need to take place. Furthermore, work should begin to translate the patient-level data that will arise in the DHIS2 into cost and health outcomes data. This data should be de-identified and made publicly available for citizens, clients and research use to measure progress in the health system. By actively tracking costs, health outcomes and data stratified by age, sex and condition, the system would be able to begin to measure value. One would expect that as the system strengthens, we should see an improvement in health outcomes, morbidity and mortality in the public sector users. It will also allow for much more robust planning. 8.1.2 Taking steps toward quality Certification is one of the building blocks for quality. At its simplest, certification entails the assessment of healthcare facilities, whether hospitals, clinics or other types of health facilities, against a defined set of standards (36). South Africa began actively working towards certification in 2008, developing the first set of Norms and Core Standards (NCS) in 2010. The NCS were then used to measure public facilities from 2011, with the process managed by the NDoH. In 2013, the National Health Act was amended and the OHSC was set up as a semi-independent certification body. If the information collected through healthcare quality measurement processes is publicly shared, consumers of healthcare can use this information to make better decisions about where to obtain high(er) quality healthcare. The information then becomes part of a larger accountability process. If the information is actively used by both funders and purchasers of healthcare, as well as clients of the health system, it can help the system to become more efficient by directing healthcare in the direction of providers who are better and more efficient (37). This assumes, of course, that clients will have a degree of choice as to where to access care. Certification by the OHSC should be a first step in getting public facilities’ infrastructure up to standard. The data coming from the OHSC should allow the NDoH and PDoHs to prioritise, with the lowest scoring facilities getting maintenance and infrastructure upgrades first. Infrastructure upgrades can be expensive, and therefore, it may take several years to bring the full sector to an acceptable standard. We therefore suggest that a realistic target is set for each year, and progress is reported on publicly. If the OHSC results do not influence spending decisions, then the assessments will be a waste of limited public resources. The health outcomes published (as described above) should also show the facility where the data was collected, to illustrate the relationship between outcomes and certification, which would shift the sector to measuring quality and not just who was able to meet the minimum standard on the day of inspection. 8.1.3 Budget and spending transparency In August 2020, President Ramaphosa announced that all personal protective equipment tenders and contracts would be published openly, for all citizens to scrutinise. This was an act by the President for the State to be more accountable to its citizens. Organisations like the Budget Justice Coalition and Vulekamali have attempted to make public sector budget data available in an easily accessible format. This has been in partnership with the National Treasury. Making PDoH expenditure data and in-year monitoring (IYM) monthly progress available publicly will assist in more accurate evidence for resource allocation decisions and set up the PDoHs to be more accountable to the public. Furthermore, transversal tenders for key goods and services, managed centrally at either the province or nationally, could assist to bring down costs – but only if the tender prices are made public. This would assist in getting better economies of scale and locked-in unit prices, particularly for routine spending items such as groceries, that would relieve some of the administrative burden and reduce the opportunity for corruption and predatory pricing by suppliers. There is also a case to be made for using the current resources more equitably. The current process to revise the PES formula is a step in this direction. Including risk adjustment measures that are closely linked to health outcomes is an important way to ensure maximum effectiveness of spend. Currently, the system is characterised by historical budgeting. This embeds annual mis-allocations into the system and makes it difficult for districts and provinces to allocate resources in terms of what their performance data is showing them. 8.2 ‘NHI rejigged’: NHI, but sequenced differently Currently, the NHI has three distinct phases. While the first phase focused on piloting of innovations, the second phase deals with the establishment of the NHI Fund. This is a substantial jump and requires legislation changes such as the promulgation of the Bill. This could take years given the lack of consensus on NHI generally. Therefore, another option to begin implementation of UHC is to sequence the building blocks differently, to lay the foundation for NHI down the line. 8.2.1 Improving equity in each of the sectors (private and public) The findings from the HMI are clear, and offer implementable solutions to the problem of escalating cost and over-utilisation in the private sector. Given that private sector spend makes up more than half South Africa’s total health expenditure, despite only caring for ~16% of the population, its regulation is critical. The recommendations from the HMI are multiple and are outlined fully in the publicly accessible report (Figure 1). The major take-home in terms of NHI is that the NDoH, in the current regulatory environment, does have the mandate to regulate the private sector, and that it has not fully stepped into this role. This opens the door for more transparency on pricing, pooling, and ensuring quality care and value for money in the private sector. Figure 1: Some of the key recommendations of the HMI (24) In tandem with the private sector regulation process, the public health system could embark on the quality improvements discussed earlier in this report (see Section 3.1. Investing in infrastructure, data collection and use, and better resource allocation). As part of this quality improvement, the Government could also develop the regulations to allow for easier purchasing of private sector services for the public sector population. Furthermore, testing out the contracting mechanism and the work to negotiate fair tariffs could provide test cases for the NHI Fund when it does go live. There is also an opportunity to build trust in this process before the NHI is fully functional, which could ensure more support from private providers. A NHI Fund may also be established to experiment with strategic purchasing from both the private and public sectors on a small scale. As discussed in previous sections, availability of data is a core tenant of a functional and responsive health system. The NHI Bill currently discusses the need for a central repository for data across the health sectors. This will take time to develop and to ensure smooth dataflow between providers, sectors and funders. Given that this data repository will need to be across the sectors, there needs to be engagement on the specifications, scope and regularity of data. 8.2.2 Improving equity between the two sectors In parallel to improvements in both sectors, a process of improving equity between the two sectors should be embarked on. This will firstly require the establishment of the same benefit package between the two sectors. As suggested previously, the CMS’s PMB review process should be fast-tracked to move the basic benefit package in the private sector closer to the public sector package. A clear basic benefit package for the public sector should also be defined and costed. Once basic benefit packages are operational in both sectors, the key challenge which has to be acknowledged will be moving from multiple funds (medical schemes and the NHI Fund or via the various PDoHs) to a single fund. A risk equalisation fund, allowing for risk-sharing across the two sectors, could assist with the transition process. There could be an interim process of consolidation and putting in place criteria for fund performance across the two sectors, but also for the central risk sharing fund. Over time, learnings from purchasing and the central risk-sharing fund will enable moving to the final end-point of a single NHI Fund. 8.3 ‘Power to the people’: Purchaser-provider split but with multiple purchasers In the two scenarios presented above, there is an implicit assumption of limiting choice for those citizens that mainly rely on the public sector to one fund or purchaser. In the first scenario, citizens that currently use the public sector will remain reliant on its delivery capacity, and where some services are purchased from the private sector, its purchasing capacity. In the second scenario, the same applies, although a single NHI Fund may be established over time. In both scenarios, choice, and therefore power to citizens, is limited. Competition between multiple purchasers allow for bottom-up, or social, accountability. Clients of the UHC system should be able to exercise their assessment of the quality and efficiency of purchasing by being able to switch purchasers at least once a year. Not many countries go for a single purchaser model, and there are some risks associated with this model and the centralisation which accompanies it, such as a lack of competition and sluggishness. Although having a single purchaser brings monopsony power in price negotiations with providers, these benefits may be outweighed by the loss of efficiency through the absence of competition and choice. Given that there are already several purchasers in the private sector who could perform the funder role if need be, it makes sense to develop legislation to allow for multiple purchasers, even if South Africa does decide to remain with the single NHI Fund. The process of enabling multiple purchasers should be up for discussion and thorough review. However, some of the possibilities include allowing the current Government Employees Medical Scheme (GEMS) to act as a purchaser in parallel to the NHI Fund, and putting the opportunity to manage two or more additional purchasers out for bid to the private sector. Any bid document and the selection of the final purchasers should be a public process, with information shared freely. As long as a carefully designed benefit package is developed, risk pooling and sharing can be implemented through a central risk equalisation fund. It is recommended that this fund be free of political management and interference through the implementation of various best practice governance arrangements. A critical learning from the German health financing system has been to keep the bureaucracy that supports the financing system as lean, efficient and technical as possible (15). The German risk equalisation fund (Central Fund) is a system of algorithms managed by a small group of staff at the national insurance office. It is mainly staffed by data scientists who are able to derive and implement these algorithms. The same approach can potentially be taken in South Africa. South Africans feel the State is not responsive to service provision needs. A much greater level of bottom-up accountability is needed than is currently available in the health system. Selecting a UHC model with multiple purchasers is the most direct way to establish bottom-up accountability. 8.4 ‘Reorienting towards value’: a value-based approach to UHC Taking a value-based approach to UHC is strongly coherent with the principles laid out in the South African reform process. The notion of ‘value’ is about optimising patient outcomes, within a financial envelope. It implies a population health perspective – optimising patient outcomes, not for individual patients, but across the system as a whole – which in turn implies a focus on equity and access. In the conceptualisation of access to quality care for all, it front-ends the notion of quality and forces deeper thinking about what we mean by quality, how to measure quality and how to incentivise quality. Historical approaches to UHC, which focus on the access component of the conceptualisation, run the risk of orienting health care systems to volume, instead of value. This creates a longterm sustainability risk because the cost of the system increases as volumes rise. The implicit assumption is that a higher volume of service delivery leads to improved outcomes, but global research indicates that this is not true. The role of volume orientation in the South African private sector is illustrative of the risks associated with this paradigm. Research from the Lancet Global Commission on High Quality Health Systems indicates that “of the mortality amenable to healthcare, 60% is due to poor quality of care, compared to 40% due to lack of access” (4). Value-based approaches have a continuous improvement mindset built in – something that is lacking in the current articulation of the NHI reforms. With a value-based approach, it is less about accrediting facilities, and more about working with facilities to improve the quality of care that is delivered. The current policy lens on UHC focuses on scale and centralisation to achieve health system transformation. A value-based approach, by contrast, “requires local specificity and, once validated in the local setting, implementation at scale to truly transform systems” (38). The value-based approach builds accountability in a way that is strongly participatory, leveraging the use of data instead of through the creation of a purchaser-provider split (Figure 2). This directly questions the idea of whether a monopsony can generate the degree of behavioural change required throughout the system. Approaching the reforms with value located front-and-centre provides an alternative sequencing of reforms by starting with measurement, then focusing on delivery, and only then considering mechanisms to pay for care. This approach to reform sequencing is referred to as the ‘Leapfrog to Value’ approach which has been designed with low-and-middle-income countries (LMIC) context in mind. Figure 2: Components of value-based care (38) The required measurement reforms are significant – they require the tracking of cost and outcome information per patient. The progress to a unified health system begins by measuring the same patient outcomes across the two sectors, reforming the same patient care pathways across public and private providers, and ultimately paying for care in the same way across both sectors. The Porter model of value-based care also provides some insight into the necessary reforms to support improved outcomes (Figure 3). Figure 3: Porter and Teisberg model of value-based care (39) The starting point in the Porter model, requires reorganisation in integrated practice units – these are effectively multi-disciplinary teams. The Health Professions Council of South Africa (HPCSA) regulations currently stand in the way of the creation of these teams in the private sector, pointing to the urgent need for review of their rules (24). The Porter model places more emphasis on payment than the Leapfrog to Value model, reflecting the orientation of the model to the American health system which is largely private. The scope for payment reform that will drive quality improvement behaviours is far more limited in our public sector where staff are salaried and therefore not financially incentivised. 9. Conclusion This document aimed to stimulate thinking around alternative ways that UHC can be achieved in South Africa. There is overwhelming consensus that UHC is an important goal, and that its objectives are ones that South Africa should subscribe to. It is the path to achieving the objectives that has remained contentious. Therefore, in this document, we have proposed alternative pathways for achieving the UHC objectives. The alternative building blocks and scenarios (Table 1 repeated as Table 5 in this section) were borne out of the NHI Bill submissions, interviews and key literature and documentation. The scenarios are not exhaustive or mutually exclusive. Ultimately, we recommend a slow and steady approach to building the foundation for UHC, with several accountability mechanisms built in – both top-down and bottom-up. Regulating the private sector and improving quality in the public sector are two areas of broad consensus that could begin in the interim, even if the private sector is eventually relegated to complementary care only. Mutual trust between the State, private sector and South African citizens is not just a ‘nice to have’. It has been shown to meaningfully improve the rollout and implementation of UHC in other countries. Therefore, the process taken to begin UHC reform is exceptionally important for long-term sustainability of UHC in South Africa. We recommend alternative pathways are sought out, given the stalemate due to the current pathway proposed in the Draft NHI Bill. Table 5: Summary of alternative UHC design scenarios References 1. Section27, Treatment Action Campaign. Submission on the National Health Insurance Bill 2019. 2019. 2. South African Medical Association. Comments in respect of White Paper for National Health Insurance for South Africa: towards universal coverage. 2016. 3. South African Private Practitioners’ Forum. Submission on Draft NHI Bill to the National Department of Health. 2018. 4. Kruk ME, Gage AD, Arsenault C, Jordan K, Leslie HH, Roder-DeWan S, et al. High-quality health systems in the Sustainable Development Goals era: time for a revolution. Lancet Glob Heal. 2018;6(11):e1196–252. 5. Kruk ME, Ataguba JE, Akweongo P. The universal health coverage ambition faces a critical test. Lancet. 2020;6736(20):9–10. 6. Office of Health Standards Compliance. Annual Inspection Report. 2018. 7. Inclusive Society Institute. Universal health coverage pathways for South Africa. 2020. 8. National Department of Health. National Health Insurance Policy (White Paper). 2017. 9. fin24. Treasury worried about NHI funds not being used as planned, MPs hear. 2019. 10. Daily Maverick. Urgent need for payment deal on non-medical aid Covid-19 patients in private health facilities. 2020. 11. Abimbola S, Baatiema L, Bigdeli M. The impacts of decentralization on health system equity, efficiency and resilience: A realist synthesis of the evidence. Health Policy Plan. 2019;34(8):605–17. 12. South African National Department of Health. White Paper for the transformation of the health system in South Africa [Internet]. 1997. Available from: https://www.gov.za/sites/default/files/gcis_document/201409/17910gen6670.pdf 13. Waterhouse AS, Mentor-lalu V, Daphine A. Decision-Making on Health in South Africa – What Can We Learn From NHI? 2017. 14. Siverbo S. The Purchaser-Provider Split in Principle and Practice: Experiences from Sweden. Financ Account Manag [Internet]. 2004 [cited 2019 Jul 16];20(4):401–20. Available from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=611192 15. Inclusive Society Institute. Lessons for South Africa on Transitioning to Universal Health Coverage from the German Experience. Cape Town; 2020. 16. United Nations Industrial Organization. Coronavirus: the economic impact – 10 July 2020. UNIDO. 2020. 17. World Bank Group. Global Economic Prospects. 2020. 18. Statistics South Africa. GDP falls by 2,0%. Statistics South Africa. 2020. 19. Statistics South Africa. Steep slump in GDP as COVID-19 takes its toll on the economy. Statistics South Africa. 2020. 20. National Department of Health. 2030 Human Resources for Health Strategy: Investing in the Health Workforce for Universal Health Coverage. 2020. 21. National Department of Health. Policy Framework and Strategy for Ward Based Primary Healthcare Outreach Teams. 2018. 22. Daviaud E, Besada D, Council SAMR, Budlender D, Sanders D, Kerber K. Saving lives, saving costs Investment Case for Community Health Workers In South Africa. 2018. 23. Bennett R, Marcus TS, Abbott G, Hugo JF. Scaling community-based services in Gauteng, South Africa: A comparison of three workforce-planning scenarios. African J Prim Heal Care Fam Med. 2018 May;10(1). 24. Health Market Inquiry. Final Findings and Recommendations Report. 2019. 25. Kutzin J. A descriptive framework for country-level ananlysis for health care financing arrangements. Health Policy (New York). 2001;56(3):171–203. 26. Percept. Strategic Purchasing Policy Brief Series Brief 1: Implementation of a purchaser-provider split. 2019. 27. Percept. Strategic Purchasing Policy Brief Series Brief 2: What is strategic purchasing? 2019. 28. Percept. Strategic Purchasing Policy Brief Series Brief 5: Certification, accreditation, quality measurement and quality improvement. 2019. 29. National Department of Health. National Health Insurance Bill [Internet]. Pretoria: Government Gazette; 2019. Available from: https://www.gov.za/sites/default/files/gcis_document/201908/national-health-insurance-bill-b-11-2019.pdf 30. Malingo B. Prasa suspends 12 senior officials to root out “corruption and fruitless expenditure.” Times Live [Internet]. 2020 [cited 2020 Sep 29]; Available from: https://www.timeslive.co.za/news/south-africa/2020-03-13-prasa-suspends-12-seniorofficials- to-root-out-corruption-and-fruitless-expenditure/ 31. Nicolson G. UIF bosses suspended as auditor-general details Covid-19 relief chaos. Daily Maverick [Internet]. 2020 [cited 2020 Sep 29]; Available from: https://www.dailymaverick.co.za/article/2020-09-02-uif-bosses-suspended-as-auditor-general-details-covid-19-relief-chaos/ 32. Munge K, Mulupi S, Barasa EW, Chuma J. A critical analysis of purchasing arrangements in Kenya: The case of the national hospital insurance fund. Int J Heal Policy Manag [Internet]. 2018 Mar 1 [cited 2020 Sep 29];7(3):244–54. Available from: https://pubmed.ncbi.nlm.nih.gov/29524953/ 33. Dell AJ, Kahn D. Geographical maldistribution of surgical resources in South Africa: A review of the number of hospitals, hospital beds and surgical beds. South African Med J [Internet]. 2017;107(12):1099. Available from: http://www.samj.org.za/index.php/samj/article/view/12143 34. Patcharanarumol W, Panichkriangkrai W, Sommanuttaweechai A, Hanson K, Wanwong Y, Tangcharoensathien V. Strategic purchasing and health system efficiency: A comparison of two financing schemes in Thailand. Fan VY, editor. PLoS One [Internet]. 2018 Apr 2 [cited 2020 Sep 29];13(4):e0195179. Available from: https://dx.plos.org/10.1371/journal.pone.0195179 35. Hanson K, Barasa E, Honda A, Panichkriangkrai W, Patcharanarumol W. Strategic purchasing: The neglected health financing function for pursuing universal health coverage in low- and middle-income countries: Comment on “what’s needed to develop strategic purchasing in healthcare? Policy lessons from a realist review.” Int J Heal Policy Manag [Internet]. 2019 Aug 1 [cited 2020 Sep 29];8(8):501–4. Available from: http://ijhpm.com 36. Jovanoviæ B. Hospital accreditation as method for assessing quality in healthcare. Arch Oncol. 2005;13(4):156–7. 37. Carvounes A, Childs B, Dreyer K, Kantor G, Ranchod S. Quality Measurement and Reporting in the South African Private Hospital Industry. Cape Town; 2017. 38. Leapfrog To Value. How nations can adopt value-based care on the path to universal health coverage. 2019. 39. Institute For Strategy And Competitiveness, Harvard Business School. Key Concepts. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. 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Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or its Board or Council members. Introduction by Vusi Khanyile, Chairperson of the Inclusive Society Institute As this is the first annual lecture hosted by the Inclusive Society Institute (ISI), let us briefly visit the whys and wherefores of the Institute itself. In a nutshell, the Institute is an autonomous and independent institution, a not-for-profit organisation (NPO), which was founded for the purpose of supporting and promoting non-racialism, non-sexism, social justice and cohesion, economic development, and equality in South Africa. The Institute has existed for just 12 months and is governed by a board of directors and advised by the Advisory Council. Vusi Khanyile Chairperson Inclusive Society Institute The Institute puts its purpose into practice by conducting research and analysis which contributes to debate on public policy. It also seeks to promote education on democracy through special briefings, seminars, and conferences. Furthermore, the Institute aims to create a portal that will archive our liberation heritage, for it is within this heritage that the division of a democratic, prosperous, caring, and inclusive South Africa is enshrined. The Institute’s motive behind carrying out these aims is to encourage the country further along the path that moves it in the direction of its strategic vision. The Institute is broadly aligned with social democracy – an ideology that promotes social and economic interventions that are aimed at advancing social justice. It does so within a framework of a democratic, free-market society. Hence, it promotes the voices of the people in determining government actions, supports a competitive economy, whilst also offering a safety net to the poorer and more vulnerable in our society. This economic growth and sustainable social development need to be balanced. The ISI considers the developmental state model as the most appropriate approach for transforming the economy and society in South Africa. It believes that the well-being of South Africa is best served by an inclusive society in which the composition of the economy, government, and civil society equitably reflects the composition of the nation. In fact, issues of public ethics, morality and social cohesion are uppermost in the national psyche and mood at the present time. It is with this in mind that the ISI hosted the first Annual Lecture – with the promise of frank and open debate on these issues, at the event and moving forward. Interview with Judge Albie Sachs (Ret.), Constitutional Court Judge, conducted by Lwando Xaso, writer at the Daily Maverick Lwando Xaso Interviewer I would like to start by focusing on how the courts, and specifically the Constitutional Court, can shape the moral character of our nation. In 1962, Nelson Mandela was arrested when he returned to South Africa, for leaving the country without a valid passport and for inciting an illegal labour strike. He was sent to the Old Fort prison, which is today the home of the Constitutional Court. During that trial, he made the decision to represent himself, against the advice of his lawyer, Bob Hepple, who knew that Mandela was going to provide a very political defence and that he was going to ask the magistrate in the trial to recuse himself, because he did not believe the magistrate was able to dispense justice. Bob Hepple, having listened to Mandela’s argument for recusal, told him that it wasn’t a legal argument he was making, but a political argument. Nelson Mandela responded that it wasn’t a legal trial, but a political trial. Nonetheless, Mandela stood up in court and said: “In a political trial such as this one, which involves a clash of the aspirations of the African people and those of whites, the country’s courts, as presently constituted, cannot be impartial and fair. In such cases, whites are interested parties. To have a white judicial officer presiding, however high his esteem and however strong his sense of fairness and justice, is to make white judges in their own case. “It is improper and against the elementary principles of justice to entrust whites with cases involving the denial, by them, of basic human rights to African people. What sort of justice is this that enables the aggrieved to sit in judgement over those against whom they have laid a charge? A judiciary controlled entirely by whites, and enforcing laws enacted by a white parliament in which Africans have no representation, laws which in most cases are passed in the face of unanimous opposition from Africans, is untenable.” Judge Sachs, or Albie, what was it like to be a lawyer at that time, one that is an accused, as Nelson Mandela was? What was the justice system like for African people, specifically, in 1962? Mandela himself said, “I feel uneasy in this court.” I get a sense that Mandela was already imagining an African court. What does an African court look like? Judge Albe Sachs I’m going to start off with a correction in relation to Bob Hepple's role. Bob and I were both sons of activists, both in the underground, both lawyers practising in courts that were, of course, promoting injustice, but we were using every possible space available to change that. Bob was thrilled with what Mandela was doing because they were comrades. But Bob said, “I can't do it. I’m an officer of the court and it would be complicated for me to make that challenge. In legal terms, it’s not going to get us anywhere. But, Comrade Nelson, you could do it.” with such power and such forcefulness and with such dignity that, I read, afterwards, the prosecutor in that case went to his office and cried. This was a white prosecutor, part and parcel of this repressive system. The magistrate listened and then sentenced Mandela to the fullest term possible. At that stage, he had the power to sentence him to five years' imprisonment. It was a very important moment in the life of our nation, it was a prelude, if you like, to the full liberation struggle. However, the fight wasn’t simply within the framework of the existing legal system to achieve greater rights. t was also to challenge the whole framework itself. Although the armed struggle had really begun before that, now Mandela’s connection with the armed struggle was highlighted. It was enormously difficult functioning in those courts. The laws were overtly racist. The law said only whites could be members of Parliament. It reserved most of the land for whites. It brought about the Native Administration Act. People like you, Lwando, weren’t citizens with rights. They were subjects to be administered. Despite the fact that they could have ‘rights’ in the Bantustans, and ‘rights’ under tribal leaders, it was a grim system in which we didn’t have rule of law, we had rule by law. It was all being challenged with characteristic dignity and poise and thoughtfulness, and also power – power that came from the oppressed, through the words of Mandela. It was difficult not only for black people functioning in the courts, but for all who had to witness the injustice. Black people had to stand at places reserved for them. Even Mandela’s law partner, Oliver Tambo, was told by the magistrate in a case to move to that reserved space to address the court. But Tambo refused to do that and, as a result, was threatened with contempt of court. Eventually, it was Godfrey Pitje who took over that role because Tambo and Mandela had political work to do. One of the functions of a legal assistant then, in addition to doing everything else, was to take the rap for your principals, so that they could carry on with revolutionary activities. Tambo was sentenced to a fine and imprisonment. The case went on appeal to the Appellate Division and the Chief Justice Steyn ruled that you can address the court as well from one place as you can from another. He upheld the indignity of being told you're not a lawyer, you're a black lawyer, and therefore you have to stand in the place in the court reserved for black lawyers in order to address the white magistrates, white prosecutors, white officials in charge of everything. And the accused were overwhelmingly black. So, for all of us practising in the courts in those days, the mental gymnastics was just terrible. We had to find the language or dignity or poise to deal with it. Even simple things, like how to address a witness, were skewed. For example, if the witness was a white woman, you would address her as Miss or Mrs and with her surname. Whereas, with a black woman, who could be the same age or older, you had to address her simply with her first name. Now, what do you do then when you are counsel and you want to call the witness? Do you say, ‘Mrs Shabalala, what did you see?’ It would be like slapping the magistrate in the face. And that’s fine, but it might be bad for the case of the accused. We were doing these gymnastics all the time, in a racist environment, with racist vocabulary, racist assumptions, trying to uphold principles of dignity in relation to laws that are racist, courts that are racist. But we tried to manage as best we could to manoeuvre in those circumstances. What Mandela was doing, in a sense, was anticipating the liberation of all of us as lawyers. He was throwing off these chains. He was standing up and saying: I have no disrespect for you, Your Worship. And what I’m saying is not directed at you as a person. It is directed at the situation that I am clearly a black man in a white man's courts, and I shouldn’t feel that way. I should feel I'm just a human being. It was one of the great moments in South African history, and I'm glad that we're starting off the discussion with that particular moment. I’m imagining Nelson Mandela at that moment, standing up in court, wearing his cultural clothing, an African kaross. What do you think he was communicating in court, being dressed the way he was? I know, when it came to conceiving a new court, what the judges would be wearing in court was something that you and your colleagues thought about. The other thing I'd like you to comment on is as to why, during the struggle, courtrooms were seen as an opportunity? Why make a statement like that from the dock, like Mandela did in the Rivonia Trial as well? I am myself a lawyer, and I don’t know if I would have wanted to be a lawyer under apartheid, because when I became a lawyer in 2008, I had to swear to uphold the Constitution of this country. That's something that I'm proud to do. But back then, we didn’t have the Constitution that we have now. You always talk about being a lawyer, but at the same time being labelled a terrorist. So, you had this dual relationship with the law, in that you were supposed to dispense justice within an unjust society, but at the same time, you were also trying to sabotage the very system of which you had sworn to uphold the laws. Let me deal with the dress, first of all. Mandela was a very natty dresser, and he could carry off good clothing. He wasn't a show-off, but he paid attention to his appearance, as did Oliver Tambo. As a lawyer, he deliberately chose not to wear a suit. He chose to wear traditional garb to make a strong statement, not just to the magistrate, the people in court and the press, but to the African people. He was saying: I am speaking as an African and I'm wearing, proudly, the clothing of an African person in the community I grew up in. Today, I'm wearing a Madiba shirt. He didn't like being trapped in the formal clothing imported from Europe, with strange things like bowties. He wanted to wear something that was expressive of his personality. He even invented a dress style – an interesting, informal, comfortable kind of garb that has a certain value, an emotion to it. It happens to connect South Africa and Asia. And so, he even made something out of the Madiba shirt, which he was wearing when he signed the Constitution. It became a representation of Africa joining with the world. It was a batik design from Indonesia, styled in a way that he felt comfortable with, expressing himself as Mandela. When it came to the Constitutional Court, the question of style wasn’t more important than substance. But it wasn't unimportant. We didn't want a building that looked like a copy of the US Supreme Court, with its grand steps and massive columns representing power. The irony of the Supreme Court is that you don’t enter it by going up those steps. For security reasons, instead, you enter around the side, the back of the building. All of that in front is just for show. It gives an indication of that court representing a certain power. We wanted a court that didn’t represent power, but, rather, control of power – in terms of ethics, values, accessibility, humanity, human dignity. Not of form over substance, but of substance of the human heart, the human soul, the human suffering, human aspirations, to be represented in the style and functioning of the court. We chose the site of the Old Fort prison to erect our court, to locate the court that would dispense justice and uphold fundamental rights, on the very site of Number Four prison. The site of pain, the site of suffering, the sword where people have been locked up and denied their rights, was transformed into the ploughshare of justice. We also wanted the building to be open, comfortable, inviting, free and friendly, with all the fabric, texture, light, and sensibility of a space in Africa. Not a space in Europe planted in Africa, but a space in Africa planted in Africa. Drawing on the imaginations of the world, the architectural possibilities of the world, but containing a strong African flavour. In 2004 we opened the building. This was before there was talk about decolonisation – we were decolonised, I'm proud to say, in our minds – before it became a very important issue that was being raised by young black people challenging aspects of the colonial, the old imposed value system and ways of looking at the past. We were challenging it in terms of the architecture, and in terms of our style. The last part of my previous question is that when you decided to be a lawyer under apartheid, why did you see that as an opportunity? Considering how oppressive the law was, considering how the justice system was biased, it was not impartial. Why did you think that would be a worthy endeavour, becoming a lawyer? This a question I would have loved to ask Nelson Mandela and Oliver Tambo, and many other black people who became lawyers at the time, who saw the justice system as an opportunity when it was so clearly biased and partial. It was Thuma Mina [ send me]. We wanted them to be there. Quite a few people who became lawyers had been teachers. When Bantu Education was imposed, they were thrown out of the schools where they were teaching, where they couldn’t bear to teach Bantu Education. Many of them, like Godfrey Pitje, became attorneys. But it wasn’t simply a job to earn a living, to survive. It was a terrain of struggle. You could fight in the courts; you could fight to expose the tortures, the injustices; you could fight to challenge the laws. And we won big victories. In the 1950s, we won all our cases, even the big Treason Trial, because the prosecutions were so ridiculous. Then, in the 1960s, we lost all our cases. When you took a case in those days, you were fighting against the death penalty. You were fighting to get some of the accused acquitted, to expose the torture, to give the accused a sense of dignity, and so that there would be somebody listening to them, believing them. We had some good judges: John Didcott, John Milne and Andrew Wilson were all wonderful judges. We also had other judges who were at least open-minded. Michael Corbett played an important role in the transition afterwards. He fought against Hitler; he was anti-fascist. He was an open-minded person functioning within a racist framework, and he had to use what space was available to try to shift that. There was a famous debate between Raymond Wacks and John Dugard. The question was whether the judges should resign. Raymond said that they should, that they were simply progressive judges giving legitimacy to an oppressive system. But John, who was fighting in the courts, in the trenches, said they shouldn’t resign. And we who were in the resistance also believed they shouldn’t resign. We wanted good judges there to soften the impact of the law, to win the few little victories, and to prepare the way for the day when we would have a truly democratic nation. Some of the judges of that era, like Johann Kriegler, Laurie Ackermann, I've already mentioned John Didcott, Richard Goldstone, used the tiny glimmers of space in the courts to trip up the apartheid laws, to start coming up with a vision of what law could be like one day in South Africa. They served wonderfully on the new Constitutional Court during the transition, so that the brilliant new South African Constitution could be applied with style, with dignity, with force, in an experienced way. So that we weren't tripping over our own feet, as we were starting something completely new. For those who don’t know, South Africa has had five constitutions. I would say it's had three illegitimate constitutions – 1910, 1960 and 1983 – and then our first somewhat democratic constitution was produced in 1993, after a process of negotiations between the liberation movement and the apartheid government. The significant achievement with the 1993 constitution was to establish a Constitutional Court. The sense was that having a new court would transform this judiciary, which was known to be oppressive, that the people wouldn't trust that the courts which had existed under apartheid would dispense justice in an impartial manner. Albie, at that point, I'm sure you didn’t think that you would be one of the people sitting on that court in two years' time. But when the Interim Constitution was adopted and there was a vision of transforming the judiciary, what role did you think the court could play in the country? Was it simply in legal matters? Symbolically, what role did you think the creation of a new court could play, in the effort of transforming a judiciary that was known to be so oppressive, in a broader society? We were such a strange court, with the backgrounds of the people on it being so vastly different. But that was also such a great source of strength for the court. In my own case, I never dreamt I'd be a judge. Judges were the people up there on the bench; I was simply an advocate practising on ground level. There were some judges who were kinder and more thoughtful and more open than others. There were also many who were openly racist and reactionary, and so on. To me, judges belonged to another world. Suddenly, though, when we had a Bill of Rights, fundamental rights, and everybody could vote, then we had the chance to create a new constitution. The Constitution became a richly-imagined thing, a marvellous creation of South Africans, and to be using my skills to defend it was just the most incredible experience. I still recall so vividly, it was just before the elections in 1994, when we didn’t know what was going to happen. We'd been fighting for freedom long and hard, and suddenly we were going to get it. We had to change our whole mindset. We were no longer living for the future; we were becoming part of the future. We assumed Mandela would become the President, but we were wondering who the Minister of Justice would be. We wondered whether it would be one us: Kader Asmal Zola Skweyiya, Dullah Omar, or Albie Sachs. At that point, I couldn’t bear the thought of having invested my whole life in an ideal that would now become a job. I thought about getting out of that line of politics. I could still be politically active, but not in that way. Then I realised that it would actually be fantastic to be on that court, an unbelievable opportunity for me, as a freedom fighter, to be on that court, defending the changes we'd been fighting for. But I decided that if I wanted to be available for the court, I couldn’t have a loyalty to both the ANC National Executive and to the Constitution, constantly having to choose between the two. I would still be Albie the freedom fighter, I would still have the same ideals, but those ideals would now be in a document that we would all sign, and I would have to defend that document. And if the ANC was going to be a party to litigation, I couldn’t be worrying about what the comrades would say about any decisions I gave from my position on the court. I knew it would be quite impossible to be giving decisions from my position on the court one moment, and then heading to a branch meeting the next. So my conscience told me I needed to resign from the NEC, and afterwards, to resign from the ANC, to be free and fair. It wasn’t a repudiation of my beliefs; it was a continuation of our beliefs, because the Constitution now incorporated what we'd been fighting for. It was thrilling to be with such extraordinary people … Arthur Chaskalson, whom I'd stayed with many times – a great intellectual. He wasn't in the underground, in the resistance. He fought within the framework of the courts and gave up a lucrative legal practice to set up the Legal Resources Centre. He gave up that combative style that you need to be a tough advocate – sharp elbows, witty, quick, smart – for a much more collegial, collective way of working. One where you're not fighting just to earn a good salary in fees from the cases that you undertake, to win particular battles, but you're also fighting together with a team to try and deal with the Group Areas Act, to deal with the Pass Laws, to try and trip them up, and so on. Ismail Mahomed was brilliant, sharp, brave, thoughtful, living in his head, living for the law, difficult, complicated in many ways. But he could soar, he could reach heights that none of us could reach in terms of the lyrical things. Johann Kriegler had his own particular beautiful style of writing. He was deeply, profoundly committed to the country, the cultures of the country. Yvonne Mokgoro, having grown up in a rural area, worked as a hospital nurse in order to earn money to study, and became a professor and a judge on the court. Kate O'Regan, being my colleague at UCT. And many more. A wonderful team, a group of people who couldn’t be more diverse in personality and style but couldn’t be more united in terms of our hatred of apartheid and love of the Constitution. In any event, we established a style and a way of working, sitting around the table. Those of us who'd been in the struggle were used to debating everything, through the night if necessary. We weren’t going to give that up simply because we were judges now; we continued to debate, round and round the table. Fortunately, our colleagues like Didcott and Kriegler and the others, also loved debates and openness. They loved that style. They hated formalism – if they had loved formalism, they wouldn’t have been on the court. They all had passion and they all knew we were doing something remarkable, something new. New, I would say, in the world, in terms of the kind of court, the kind of constitution and the role that was given. We knew that there would be resistance from many of the judges on the existing judiciary, despite the imbalance. At the time of the new Constitution, there were about 150 High Court judges: 148 white, two blacks, 148 men and two women. So, it wasn’t just that the public had a distrust of an institution that had been part and parcel of the system of oppression – sending people to jail because they didn’t produce their passes, forcing people out of their homes, applying all these racist laws, turning a blind eye to the torture, the police throwing people out of buildings, and magistrates saying nobody was at fault, saying that Imam Haron got all the bruises on his body by slipping on a piece of soap and falling down the stairs. It wasn't only that. It was also that they didn’t see themselves represented on the bench. They didn’t feel that wisdom, a sense of justice, a sense of fairness, an understanding of human life was represented on the bench. In fact, only a small minority of the people were. We had to be a new court both symbolically, and in terms of the way we worked and upheld the new values of the Constitution. Values that were based on human dignity, equality, freedom, on totally turning the apartheid legal system on its head. This was a marvellous challenge, and I had wonderful colleagues. I was so proud of the role that the Constitutional Court played then, and I continue to be proud of the role that it is playing today. I think one of the sad things about apartheid is that it really robbed the country of so many talented people who could have contributed so much to South Africa. It robbed the country of innovation, of creativity, by saying that certain people, by virtue of their gender or their skin colour, couldn’t assume certain positions. That, for me, is one of the truly tragic outcomes of apartheid. When I think of our constitution now, it's about opening up South Africa. It's about creating a very integrated South Africa, an imaginative South Africa, a creative South Africa. I truly believe that the Constitutional Court is one of the few examples of what a decolonised institution looks like. And I think it’s because you and your colleagues were given a blank slate and you were told to create something that was authentically South African from scratch. What you did with that was question to everything. Why do judges have to wear black robes? Why do judges have to sit above everybody else in court? Why does a court building have to look like a sterile environment with no imagination, no artwork, just bland? You questioned every single thing, and because of that, you were able to build an institution that is still strong today. Albie, I want to take you back to the 14th of February in 1995. Nelson Mandela is sitting on the bench with all 11 judges and he is inaugurating the court. You're all wearing your green robes. You're about to hear your first case, which is a very sensitive matter that could change the moral character of South Africa in a significant way. For me, it's a full-circle moment, because in 1962, Nelson Mandela said, “I do not feel at ease in this courtroom. I'm a black man in a white man's court. I'm an accused.” And there he is, in 1995, in a courtroom again. But this time, not as an accused, as a president who is inaugurating a brand-new court that is partially conceived from his imagination. That is being built by African hands and minds. What was Nelson Mandela's call to the 11 of you on that day? What did he set as an expectation to all of you as the judges of this new institution? I remember that moment so well. It was temporary accommodation. We couldn’t have a raised Bench, because the ceilings were quite low, but afterwards, in our new high-vaulted building, we decided to keep the low seating for the judges. Allow me to paint the scene. Mandela's sitting with us. It's a small room jam-packed with our relatives and friends. We're all very excited and he's in the middle. I was on the Visitors Committee, so I had to plan the whole meeting. Everything was going beautifully, until he got a bit hoarse and reached for a glass of water. But I hadn’t thought of that glass of water! So, I'm sitting up on the bench now, the biggest moment in my life, and I'm chastising myself for not thinking of that glass of water for Mandela. But he was nice about it, and put the moment sharply in context when he opens up by saying, “The last time I was in court was to find out if I was going to be sentenced to death. Today, I inaugurate South Africa's first Constitutional Court, a court on which the future of our democracy will depend.” He was far-seeing. This wasn’t just another court sitting in the background, like a longstop in cricket, to pick up any failures in society. It was a court that was deeply integral to the implementation and the development of the democracy and would be for transformation. In some countries, the courts are there just in case there's some kind of failure. You feel you're in a functional society, and the courts are simply there to make sure nobody slips up. In our country, the court is there to say we're living in a dysfunctional and unequal society, and we are trying to change that. We have a constitution that requires change and remembers the injustices of the past. At the same time, the change must take place according to law, according to the Constitution. Not through anarchy, grabbing, and self-enrichment, or corruption. So, seeing the central role the court played, it was wonderful. Mandela was so loving and protective of the court, and he showed it in the best way he could. And how did we show our respect for Mandela, who had appointed us, who had given so much of his life to the Constitution? To show our gratitude, six months after being inaugurated, we struck down two highly important proclamations issued by Mandela! People have forgotten about it now, but they were the proclamations that were supposed to give us our first democratic local government elections. They were very good laws; they were necessary laws for democracy. But we stopped them. Parliament had asked Mandela to pass the laws, to save time, to save expense, to get the show on the road. They trusted Mandela would do a good job. But it was against a profound constitutional principle, namely, that Parliament had to pass the laws itself, and not ask the President to do so... Mandela appeared on television afterwards and said that his legal advice had been that he had the power to pass that law, but that he now accepted that the legal advice was wrong. Fink Haysom, our former comrade on the Constitutional Committee, was the one who had given that legal advice. Mandela wasn’t throwing Haysom under the bus, though. He was saying that, as President of the country, he must be the first to accept the rulings of the Constitutional Court. That moment was as important as the 27th of April in 1994, when we became a democracy. On that day, later in 1995, we became a constitutional democracy, when the president accepted, and afterwards Parliament accepted, the rulings of the Constitutional Court, affirming the Constitution. Since then, each President has accepted the rulings of the court. Thabo Mbeki accepted the rulings on access to HIV antiretrovirals in the TAC case, whether he was happy with them or not. And we now have the biggest antiretroviral programme in the world. Jacob Zuma accepted the ruling of the court in the Nkandla case. I don’t think Cyril has had a ruling against him yet, but I fully expect that if there were to be a ruling against him, he would accept it too. And he wouldn’t be the first to have to accept the ruling, he would be the fourth. That is so fundamental. I saw Gloria Steinem on TV the other day, saying the Constitution doesn’t open with the words: “I, the President”, but rather with: “We, the people.” That idea was being upheld through the Constitutional Court having authority, having legitimacy and prestige, and having a Constitution that the people admired so much, that it didn’t matter whether we were in the ANC, were non-political, or in other parties, we all agreed. It wasn't your party-political allegiance that mattered, it was allegiance to the Constitution. It somehow transcended the harsh battles. Of course, you need harsh political battles, you need contestation, you need anger, you need joy, you need a whole series of different emotions in public life, But you also need a cool, calm and collected body, filled with the passion and energy of the nation, to rule. The Constitution rules, that's the fundamental theme, and that came through from Mandela, and hopefully will continue into the future. I think you're so right, Albie. That day was the day we became a constitutional democracy. First there was the ruling against a sitting president – a very popular president who'd been elected by an overwhelming majority – there was the court impeding him from doing something. Leaving the question: where does the court get the right to do that, when the judges are not elected, but Mandela is? I think the way that Nelson Mandela dealt with that moment, as you said, has really set the foundations of how the judiciary and the government interact with each other. But it hasn’t been easy, in that there was a moment where you, a freedom fighter, a revolutionary, were called counter revolutionary. What did that feel like? Did that feel like a threat to our constitutional democracy in that moment? That if you have politicians and public servants saying the judges are counter revolutionary, that could build up a resentment by the people against the judges, and against the judiciary? It did feel like a threat. It reminded me of the kind of highly schematic language used in the struggle days. I felt it was very unfortunate. Now, I'm speaking as somebody who had been in the ANC and felt the ANC's greatest achievement. But the most undeniable achievement, the most enduring achievement, was the Constitution. Though not on its own, it had to find counterparts. I was thrilled to see Roelf Meyer as part of the board or the advisory group for the ISI. But the thrust, the idea of creating the court and the values it symbolises came from Nelson, from Oliver Tambo, from ANC people. So, to start undermining and attempting to trash one of your greatest creations would have been self-defeating for the ANC at the time. I don’t think I’m giving away any secrets when I tell you that not long after Dikgang Moseneke made his controversial statement at his 60th birthday party, “I'm not answerable to the NEC or to anybody else” Kgalema, who was Deputy President at the time, came to the court for an off-the-record discussion. And Kgalema Motlanthe responded, “You're absolutely right. You're not answerable to the NEC”. He made it clear about any challenges there might have been had been made by one particular individual. An individual that is sometimes referred to as colourful, strong, a personality, and a person who says untoward things. Kgalema felt that particular individual regretted having made that statement, and although he's not the kind of person who is quick to say: “I'm sorry”, he wouldn’t repeat that particular error in future. My last questions, before I ask you questions from the audience, have to do with a time before we even got to the judgement that was made against our former president, Nelson Mandela. It has to do with the first judgement of the Constitutional Court, that of the death penalty. It's quite mind-blowing to know that in 1995, South Africa was still a state that had the legal power to kill its subjects and that this extremely sensitive matter became one of your first judgements. And in a country that, at the time, was very divided on the issue, with strong arguments for retaining the death penalty. Even to this day, people still want to retain the death penalty. What do you think the ability to kill its subjects, that power, does for the moral character of a country? What was the tension in that case, amongst the 11 justices? What did you see as an opportunity, in your first judgement, to declare as a new way of being, despite the popularity of the death penalty at the time? Why was the State versus Makwanyane such an important case, even today? Not just for us in South Africa, but globally it's seen as a landmark judgement. After the case was heard, Arthur wondered whether we had made a mistake, whether we should have started with a much more technical case with a constitutional dimension, and not with something so dramatic. I disagreed, I said we chose the most difficult case, the hardest case, and in a constitutional state, hard cases make good law. They force you to go deep into the values, and to think profoundly. Ismail Mahomed said that in some countries, you have incremental advances and then you get a Bill of Rights, a constitution, that consolidates the advances that have been made. That wasn’t the case in South Africa, where we had a radical rupture with a past that was uncaring, that was cruel, inhumane, and disrespectful to human dignity. Now our constitution envisaged a country that will be caring and respectful, and respect human dignity. The death penalty case forced us to take an issue that would be unpopular in terms of the mass feeling – kill them, they've done terrible things, they deserve to die, to confront themselves – and bring in the idea of Ubuntu. It was Yvonne Mokgoro who raised it first. Ubuntu, the idea of the interconnectedness of human beings. The idea that if we kill each other in cold blood, in a sense, we are cutting off our own limbs. We are destroying ourselves a little bit. We are destroying a part of our society. I must have appeared in about 55 cases as a young advocate, with a potential death sentence. Two of my clients were sentenced to death. One was hanged. One the judge spared through a recommendation of mercy. The feeling of horror when you are a lawyer defending someone and their life could depend upon your skill, is indescribable. To make matters worse, in those days the outcome depended on the race of the victim and the race of the accused. If it was black on black, white on white, white on black, then there was no death sentence. But black on white, that was the main cause of the death sentence being issued. The other factor it depended on was the judge. Didcott never passed a death sentence. Herbstein, in the Cape, never passed a death sentence. We had another judge, I won't mention the name, six death sentences every year. There was something arbitrary in it. And they have a similar situation in the United States, where it depends so much on which state you're in and the kinds of juries and the prejudices, and so on. It's too much that the state has the power to take the life of a human being, cold-bloodedly, whether it's done through electrocution or hanging or poisoning. There's something awful about it. We all become party to this, and it reduces respect for human life. That was our thinking. We didn’t discuss the case before we went into the court. We only discussed it afterwards as we sat around the table, all 11 of us, with our very different backgrounds: some deeply religious, others committed secular people. Different backgrounds, different life experiences, all unanimously felt, in the new South Africa, that the state should not have the power to take the life of its citizens, however horribly they've behaved. The real deterrent is not that you’ll be sent to the gallows, it's that you'll be caught. You need to improve law enforcement. You need to deter people from doing things on the basis that they'll be caught and punished with long periods of imprisonment. I was very moved yesterday to see, in the United States, the mother of one of the men killed by ISIS, saying she's so pleased that Britain said they will hand over the prisoners for trial in the United States, on the basis that they will not be executed if found guilty. She said: rather let them suffer in prison. Let them not become martyrs. Let us not become party to the cold-blooded killing of somebody else. Albie, what I've gotten from our talk is that part of creating a new country is in the small details and in the big things. The small details of how you built an institution: the symbols of the court, the character of the judges who are on the court, the character of the building. Then the big things like the big judgements that you have handed down, which has literally changed the national discourse in South Africa on very divisive matters. The Constitutional Court has been the steady hand that all South Africans, even when we do disagree with the court, we respect, out of the three arms of government. I think it's thanks to the early work that you all did in those dark days. I'm going to move on to the questions that the audience has for you. The first one is, what is your view on the current political narrative in respect of the question of race, and the impact that it has on promoting reconciliation? The second question, is South Africa measuring up to the 1994 vision? There was a clear upwards trajectory just after 1994. Where do we stand now in terms of ethics and social cohesion? Then the third question I have is, what is your view on state capture, and it's undermining of the 1994 vision? The question of race: I dealt with it when I was a political activist and when I was a judge. You can't get away from race in South Africa, and we shouldn’t try to get away from it. If you do, you might say you're colour-blind, when in fact, you are simply socially blind. You are humanly blind. It's real, it's important, and our strength in South Africa, and our capacity to get through tough times in the future, comes from acknowledging the differences and difficulties of race. It’s better to face up to them and deal with them in a principled way, rather than to say they don’t exist. Race is not just a proxy for poverty and injustice, and so on. It's intertwined with injustice, with accumulated injustice that still exists in our minds, our ways of doing things. At the same time, we must confront race in order to create a non-racial society. We must deal with it openly and honestly. We must create conditions for advancement. Acknowledging the realities of race could be extremely important for whites in South Africa. To acknowledge, also, their potential vulnerability because of race, because of stereotyping of whites, because they are in a minority and they are seen by many as the source of all evil. We've got to combat the realities of anger and the tensions that are created around race, but we need to do so in a manner that is non-racial, principled, and based on the Constitution, which is there for everybody’s protection. When we drafted the Constitution, I remember people saying they simply wanted to forbid unfair discrimination, that that would be enough, but many of us didn’t believe that was enough. We looked at the Supreme Court in America, which struck down the rule in Richmond, Virginia, that said in any transactions that were undertaken, 15% of municipal contracts had to be set aside for minority service providers. The Supreme Court majority struck that rule down, saying that it was taking account of race, and they believed in a race-free society. Thurgood Marshall almost wept when he wrote his dissent, and he said those of us who knew the realities on the ground, knew how important it was that here was Richmond City Council, mainly whites, taking a progressive step to undo hundreds of years of oppressive history, and the Supreme Court, in the name of non-racism, just struck it down. So, we added section 9[2] to the Constitution, which expressly allows for measures of redress based on race and gender to be taken. If you look at the preamble, look at the injustices of the past, all of this relates to race. But we're not trapped in race, it’s not the only factor. We can't use race, then, as a proxy for self-advancement, corruption, getting ahead or for deployment of people who are not qualified for particular jobs, whatever their race might be. Furthermore, we can't use identification of people because they happen to be of Indian origin or from the coloured community, as mechanisms for marginalising them or denouncing them or creating rage against them. I don’t want to get into the subject of hate speech, that's very much before the courts at the moment, but in cases where hate speech has cropped up, the Constitutional Court has made it very clear that freedom of speech doesn't allow freedom to promote hatred in a way that undermines the very foundations of our society, which depends upon respect for every person. Hate speech, from that point of view, has to be looked at with constitutional eyes. I won't say anything more on the subject, because the Constitutional Court is in the process of dealing with that particular issue. In terms of the 1994 vision, our vision then, in creating the Constitution, wasn't to say now that we have the Constitution, we'll have a great society. The Constitution doesn’t create the society, it provides the mechanism and the values for creating the society. It doesn’t build homes, it doesn't build schools, it doesn’t stop corruption. It doesn’t end racism. And it doesn’t eliminate racism. But it gives you the mechanisms for doing that. Our vision then, of empowering the people through elections, through voting, through having fundamental rights, to that extent our vision has been maintained. South Africans speak freely. They speak their minds. They can set up different organisations and groups. They campaign. We have wonderful investigative journalists. We, South Africans, can take pride in the fact that we brought down Bell Pottinger. They were supporting the crooks and the rascals all over the world. South Africa brought them down. They struck a rock, in that sense, a hard, painful one. It's not just the President of the country who had to pay back the money, South Africa forced KPMG to pay back the money too. We have institutions that work. We have electoral mechanisms that work. They could work better, but they are working. Our elections are freer and fairer than the elections coming up in America quite soon. Some of the vote suppressing mechanisms that are being tried there, would never be allowed in South Africa. We have a strong judiciary, a wonderful constitution that can be invoked, and strong institutions. We have a strong civil society that is free to function, to operate – whether it's marching in the streets, or thinking things through, or having debates. We also have a people that speak their minds. So, from that point of view, the 1994 project is alive and kicking. Unfortunately, it has to kick a bit harder than we thought it would have to do. I'd like to mention at this point, I lived in Mozambique from about 1977 to 1988. It was a wonderful experience in so many ways. Great people who were very progressive on the emancipation of women, and on combating racism, on doing things for the poor. But we couldn't pull it off, and we ended up with a bitter civil war. I lost an arm, and many others lost limbs because of the landmines. So, when I came back to South Africa and my comrades were still waiting for the Revolution, and as we were on the verge of it, there was a decision made to bring about a constitution, to go the peaceful road, I was so relieved. I’m so grateful that we didn’t have the violence that beset Mozambique. We have violence and corruption, but we don’t have it to the degree that they have had it there. And we have mechanisms to deal with it. From that point of view, I feel the project that we embarked upon of having a constitutional democracy where the people can make their claims, and try and right their wrongs, that project is strong. Albie, before we run out of time, there is this last question that has come in. It says, we said no to the death penalty, but did we change the culture of violence in the country? How do we change the culture of violence in South Africa? We don’t change it through state violence. That's not the way to go. We change it through developing a culture of non-violence, and that's hard. It's not just violence from the state, it's gender-based violence. Our constitution is the only one in the world that provides a constitutional right, a protection against violence in the home, not just criminal law violence. That requires men to come forward and women to speak out. It requires education in the schools and jobs for everybody, so that people don’t go joining gangs, because there's no other occupation for them. It's a whole range of measures that have to be taken. The one thing that gives me a source of hope is that the issue is out there in the open. We don’t take it for granted. In that sense, we're not passive, we're not immobilised. We do stand up against violence and speak out against violence. We try to hold people to account for violence that is illegitimate and unacceptable. State capture, I leave that to my former colleague, Zondo, to deal with that. It's a whole other big issue in itself. What is important is that we don’t take these things for granted. We need to fight against the negative. We can use the Constitution as a mechanism to advance the positive, to advance hope, humanity, human dignity against all the things that are resisting and undermining our country. Thank you so much, Albie. One thing I've learnt from clerking at the court for Justice Edwin Cameron, and working with you now in the work that we do for Constitution Hill, is that we run the risk of overburdening our judiciary with issues that should be dealt with through other tactics and strategies. And that the Constitution was never meant to be a panacea for all the things that ail our community. What the Constitution is, is merely an opportunity, and unless we take that opportunity, then we can't expect it to self-actualise, because that's not what documents do. I'd like to thank you for this very enlightening conversation. I hope people have gleaned from your answers that there's so much we can do, in terms of looking at the world through a creative way. If we change our institutions and learn from how the court built itself, if we take some of the lessons from the court, we can really build inclusive societies. We could really build a better South Africa, just through small things that we decide to do within our sphere of influence. So, thank you so much. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute D I S C L A I M E R Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. Author: Daryl Swanepoel Language editor: Olivia Main 31 January 2021 CONTENT Abstract Introduction Literature review Methodology Limitations Findings Discussion and interpretation Conclusions Recommendations References Acknowledgements Cover page image: www.popsci.com Abstract The South African economy is currently on its knees, with public policymakers seized with finding solutions to bring about economic recovery. In tinkering with the economic architecture, no effort is being spared to promote GDP growth. This report suggests, however, that GDP growth on its own is incapable of placing the economy on a sustainable growth path. Equal importance has to be afforded to reducing the currently too high population growth rate. One without the other will fail to address the most pressing problem confronting the economy – unsustainably high unemployment. Through analyses, a number of scenarios linking GDP and population growth variations are explored to test the impact of their interconnectivity on reducing the country’s critically high levels of unemployment. It finds that unless the country is able to place its population growth rate onto a downward curve, it is highly improbable that sufficient GDP growth can be established to adequately address the country’s unemployment crisis. It recommends that the South African authorities, and indeed broader society, grasp the urgency to start addressing the population growth problem, that they prioritise programmes to give effect thereto, and that they recognise that avoiding the inevitable will come with prolonged suffering and at great cost to the economy. Introduction Unemployment has reached an all-time high in South Africa. As at the end of the first quarter of 2020, the official unemployment rate stood at 30,1 percent. Whilst it did decline to 23,3 percent in the second quarter of 2020, this was because of the increase in the expanded unemployment rate, which rose by 2,3 percentage points compared to Q1:2020. This was due to the significant increase in the number of people that were available for work, who are no longer actively looking for work (Stats SA, 2020(a)). In terms of the expanded definition of unemployment, the rate soared from 39,7 percent to 42 percent (Zwane, 2020). Of particular concern is the extreme unemployment amongst the youth of South Africa. Unemployment in the age group 15-24 for 2020 stood at 55,97 percent (Statista, N.d.). At the same time, GDP has also been falling. According to Statistics South Africa, the economy, at the time of writing this article, registered three consecutive quarter on quarter declines. GDP (seasonally adjusted and annualised) in the first quarter of 2020, fell by two percent. It contracted by 1,4 percent and 0,8 percent in the fourth and third quarters of 2019, respectively (Stats SA, 2020(b)). Much emphasis has been placed on the need for material GDP growth to arrest the spiralling unemployment. To reduce unemployment to about ten percent, the South African economy will have to register growth of around five to six percent per annum for the next twenty years (Cotterill, 2019). This, whilst average GDP growth over the ten-year period 2009 to 2018 averaged a mere 1,5 percent (CRA, 2020:86). Mainstream arguments advanced by the South African government as to the root causes for the growing unemployment include the legacy of apartheid and poor education and training, labour demand – supply match, the hangover effect of the 2008/2009 global recession, the role of trade union federations in government, a general lack of interest for entrepreneurship and slow economic growth (RSA, N.d.). Little mention is made in the general public discourse of the impact that the relatively high population growth has on the economy’s ability to generate sufficient numbers of jobs to satisfy the demand. This whilst empirical evidence confirms the link between population growth and the economy’s ability to generate sufficient jobs. It furthermore suggests that by reducing population growth in middle income countries, it seems to benefit mainly young workers aged 15 to 19 (Newhouse, 2015), which is of great importance in the South African context of extreme youth unemployment. Over the nine-year period 2011 to 2019, the South African population grew by an average of 1,65 percent. In hard numbers, the population has over the period 2011-2019 grown by an average of 898,000 per annum (Trading Economics, N.d.). On average, there are 600,000 new entrants into the labour market each year (Altman, N.d.:159). It is evident that should the population grow at a pace greater than the number of new jobs in the economy, unemployment will rise. The average number of jobs created in the economy in the same period averaged about 278,222 (CRA, 2020:246). That means that, on average, new jobs are created for only around half of new entrants into the labour market. This report examines the relationship between population growth in South Africa and growing unemployment. It, in the first instance, imagines what the state of unemployment would have looked like today, had South Africa been able to since the advent of democracy in 1994 achieve the half a percent population growth rate envisaged as the ideal in the country’s National Development Plan (NPC, N.d:29). It will then unpack two sets of scenarios: In the first set of scenarios, it will project, over a ten-year period, the South African unemployment rate on the basis of the population growth continuing along its current trajectory. It will consider the outcome based on low, medium and high GDP growth paths. In the second set of scenarios it will project, over a ten-year period, the South African unemployment rate on the basis of a reducing population growth rate applied to the same three GDP growth projections. And finally, it will attempt to reflect the scenarios in projected South African unemployment rates. It does so, to highlight the need for a greater emphasis to be placed on public policy initiatives aimed at reducing South Africa’s population growth rate, as a tool to reduce unemployment. Literature review The objective of this investigation is to determine the relationship between GDP growth and population growth on unemployment in South Africa. The review will therefore peruse precedent related to the two concepts: The impact of GDP growth on unemployment and the impact of population growth on unemployment. It will also, in an effort to provide lessons from other jurisdictions, explore what the impact was on economic growth and employment in territories that have managed to contain their population growth. And finally, what public policy interventions can be employed to achieve the objective of curbing population growth. The relationship between GDP and population growth According to Mandel and Liebens (2019:18), authors agree “that among all economic variables that have high impact on the unemployment rate, GDP is probably the most important”. Most argue that there is a negative correlation between the GDP and the unemployment rate in a country. Whilst there are a number of factors that influence GDP and unemployment, historically, in line with Okun’s law (Okun, 1962:89-104), unemployment increases at around double the rate that GDP decreases (Sánchez & Liborio, 2012). However, a 2014 International Monetary Fund study found that, although professional forecasters believe in the basic tenets of Okun’s law, which is that unemployment forecasts are revised down when GDP forecasts are revised up (Ball, Jalles & Loungani, 2014:12), many economists now use a dynamic version of Okun’s law. This is due to the accuracy of Okun’s law being eroded in the past decades. The dynamic version suggests that both past and current output can impact the current level of unemployment. This “would have current and past real output growths, and past changes in the unemployment rate as variables on the…[one] side of the equation”, which “would then explain the current change in the unemployment rate on the…[other] side”. (Rahman & Mustafa, N.d.:42,48). That said, it does not always hold true that low population growth spurs GDP growth. There are analysts who believe that although high population growth in low-income countries may slow their development, a low population growth rate can result in high-income countries experiencing relatively slow economic growth. One reason advanced for this is that it requires new adjustments to support the growing burden of dependent elderly (America, N.d.:82). The South African age demographics are, however, heavily skewed towards the youth. It seems the effects vary with the level of a country’s development, the source or nature of the population growth, or other factors that lead to non-uniform impacts (Wesley & Peterson, 2017:1-2). It depends on the institutional, economic, cultural, and demographic setting (America, N.d.:105). Nevertheless, rapid population growth, in most developing countries today, acts as a brake on development. It has resulted in less progress and lost opportunities for raising living standards, particularly among the large numbers of the world's poor (America, N.d.:79). The relationship between population growth and unemployment A growth in population is connected to other economic dynamics, particularly poverty and unemployment. A study into the impact of population growth on poverty and unemployment in India, suggested that population growth gave rise to a growth in unemployment within the labour force of the community which leads the substantial chunk of population (Pethe, in Singh & Kumar, 2014:5919). In a similar study to test the impact of population growth on unemployment in Nigeria, the authors cited literature which suggested that population growth has a direct relationship with unemployment. This was so, given that when the working population grows, it means an increase in the supply of labour to the labour market, thereby creating an excess supply of labour over its demand, which is what causes persistent unemployment (Maijama’a et al, 2020:81). It found that a population increase of 1 percent causes the rate of unemployment to increase by 2.577 percent (Maijama’a et al, 2020:87). The Maijama’a study thus provides further empirical support for Okun’s law, albeit that Okun’s law is somewhat more conservative. On the other side of the dialogue are those who argue, such as the position expressed in South Africa’s National Development Plan, that having a large number of young people who are able and willing to work is an advantage – the so-called ‘youth dividend’ (NPC, N.d.:29). It has been intimated that former US President Bill Clinton, held a similar view. He is reported to have opined that “because most of America’s competitors – Russia, Japan, China, and Europe – have low birth rates and aging populations, we will have a younger workforce with a lower old-age dependency ratio”, so the growth in the youth population will solve the US’ unemployment problems (Kummerow, 2012). Kummerow, however, maintains that “the notion that population growth cures unemployment is false”. He argues that a growing population leads to high unemployment. He asks: “If a young population leads to prosperity, why aren’t places like Nigeria, Rwanda, and Uganda thriving? Why has China gotten so much richer since starting its ‘one-child policy’?” It’s common sense, he says, that should the population continually increase, it would be harder, not easier, for everybody to be employed. “The problem is not too few jobs; it’s too many people”. Lessons from territories that have successfully curbed population growth South Korea is hailed for its miraculous transformation, which it managed to achieve in a mere 60 years. It progressed from being a poor agriculture-based economy in the 1960’s to the 10th-largest economy in the world in terms of GDP in 2019 (The Korea Times, 2020). World Bank data on South Korea’s population growth trend reveals a sharp decline in the country’s population growth since 1960 to 2018 (World Bank, N.d.). It dropped from 2,9 percent in 1960, to 0,3 percent in 2018. The year-on-year decline is reflected in Figure 1 below: Figure 1: South Korea population growth 1960-2018 Over more or less the same period, that is 1960 to 2020, South Korea’s GDP rose at an average of 1,74 percent per annum. It has, apart from brief periods, remained largely in positive growth territory (Trading Economics, N.d.). The combined effect of the healthy GDP growth and population growth decline resulted in a dramatic decline in unemployment. The non-agriculture unemployment rate reduced from a 16,3 percent high in 1963 to 2,3 percent in 1996. For the aggregate economy, it decreased from 8.1% in 1963 to 2.0% in 1996 (Chang, Nam & Rhee, 2003:2), suggesting that the non-agricultural and agricultural sector were now more closely aligned. Figure 2: South Korea GDP, population and unemployment interplay 1960-2000 Brazil has a different story to tell. In 1991, Brazil had an unemployment rate of 6,37 percent (Macrotrends, N.d (a)). Despite a dramatic decline in its population growth rate from 2,9 percent in 1990 to 0,8 percent in 2018 (World Bank, N.d.), its unemployment rate rose to 12,08 percent. The differentiating factor has been its erratic GDP growth, which declined from 10,28 percent in 1960 to 1,14 percent in 2019. Furthermore, it has recorded a series of dramatic dips over the period. A dip from 13,98 per cent to -4,39 percent was recorded over the period 1973 to 1981. Another dip was recorded from 7,53 percent in 2010 to -3,55 percent in 2015 (Macrotrends, N.d.(b)). The review confirms that a decline in the population growth rate in itself will not reduce unemployment, it needs to happen in tandem with GDP growth. Tools available to curb population growth One of the tools, amongst a whole suite of economic structural reforms, that China used to help eradicate poverty, was to address high population growth. China introduced a one-child policy in 1979 with the aim of limiting families to just one child. The programme was initially introduced on a voluntary basis but was, however, made compulsory in 1980. A number of enforcement mechanisms were deployed, including making contraceptives widely available, offering financial incentives and preferential employment opportunities for compliant citizens. The authorities also imposed economic and other sanctions against those that did not comply. At times, even stronger measures such as forced abortions and sterilizations were invoked. By the mid-1990s the fertility rate dropped below two children per woman and China’s overall rate of natural population increase declined (Pletcher, 2020). Within South Africa’s constitutional dispensation, the enforced introduction of a one-child policy similar to that of China’s will not be judicially permissible. Article 12 (2) (a) of the Bill of Rights in the Constitution of South Africa, for example, guarantees everyone the right to bodily and psychological integrity, which includes the right to make decisions concerning reproduction (RSA, 1996:6). Nevertheless, the advantages of a one or two child family should be actively promoted to coerce citizens into voluntary compliance. Since the 1960s the implementation of voluntary family-planning programmes have advanced. Contraceptives have been made widely available, often on a subsidised basis. The key reason has been to reduce the number of unwanted pregnancies and abortions. In the developing world, around 74 million unplanned pregnancies occur, half of which end in induced abortion (Bongaarts, 2016:409-412). Reasons advanced for the unwanted and unplanned pregnancies range from low levels of female education, insufficient knowledge about access to contraception, insufficient distribution services, and cost. Other problematic issues include opposition from spouses and families and traditional customs that desire large families (Bongaarts, 2016:419-512). Many religious beliefs, such as Catholicism and Buddhism, are also opposed to contraception and abortion, as are cultural customs (FPA, 2016). In the South African context, the impact of the high prevalence of gender-based violence (GBV) will need to be considered. For example, in 2012, a study conducted by Gender Links found that 77 percent of women in Limpopo, 51 percent in Gauteng, 45 percent in the Western Cape and 36 percent in KwaZulu-Natal had experienced some form of GBV. Men were the main perpetrators of this violence. To illustrate, 76 percent of men in Gauteng, 48 percent in Limpopo and 41 percent in KwaZulu-Natal admitted to perpetrating GBV. In a 1999 study by Abrahams et al. surveying 1 306 women in three South African provinces, it was found that 27 percent of the respondents from the Eastern Cape, 28 percent from Mpumalanga and 19 percent from Limpopo, had been physically abused in their lifetime by a current or ex-partner (CSVR, 2016). These and other obstacles need to be reduced and eliminated. Cross-sectional coordination will be required. It will have to be promoted at an individual, community and public level, also, in an effort to bridge the divide, in consultation with the religious and cultural fraternity. To this end, academics from The Overpopulation Project (TOP) have compiled a list of actions, reflected below, that, amongst others, could help reduce population growth trends. Actions on the individual level Have fewer children! One is good, two is enough Consider adoption! Read, educate yourself about population issues Reduce your personal consumption: go vegan, limit flying, share your household with others, and Educate your teenage child(ren) about sex and contraception early, without taboos Spread your knowledge and concern among your friends and family, raise awareness about overpopulation on social media Donate to family planning programmes in your own or other countries Vote for politicians who acknowledge the detrimental impacts of population growth and propose political solutions Actions on the community level Join local environmental groups, encouraging them to “connect the dots” between population and the environment and address population issues Write opinion pieces for local newspapers, contact local media sources requesting more reporting on population issues Municipalities should set growth management boundaries, discouraging sprawl development on their fringes Towns and cities should purchase surrounding lands, or the development rights to such lands, in order to set them aside as nature preserves and open space City councils should pass resolutions accepting limits to growth, and directing their national governments to develop policies to stabilize or reduce national populations Actions on the national level In high fertility developing countries, governments should … Generously fund family planning programs Make modern contraception legal, free and available everywhere, even in remote areas Improve health care to reduce infant and child mortality Restrict child marriage and raise the legal age of marriage (minimum 18 years) Introduce obligatory education as long as possible (minimum until the age of 16), and generously fund the necessary infrastructure In low fertility developed countries, governments should … Embrace rather than fight aging and shrinking societies Reorganize pensions and other socio-economic systems to accommodate aging societies Eliminate baby bonuses, government funding for fertility treatments, and other incentives to raise fertility rates Reduce immigration numbers (at least to a level that will stabilize national populations, preferably to one that will lower them) Reduce resource consumption and pollution through an effective mix of taxes, incentives and regulations In every country, governments should … Empower women, assuring equal rights, treatment and opportunities for both genders Provide information and access to reproductive health care, including all types of low cost, safe, effective contraception Make sterilisation free, for men and women, or at least covered under all healthcare plans Legalise abortion without restrictions or social stigma Integrate family planning and safe motherhood programmes into primary health care systems Make population and environmental issues and sex education part of the basic educational curriculum Disincentivise third and further children non-coercively, by limiting government support to the first two children* Create a national population policy built around an optimal population size, and work to achieve it Set aside half the national landscape free from intensive development and dedicated to biodiversity protection * Disincentivising a third or subsequent children from public benefits such as social grants or subsidies for health or education would be unconstitutional in South Africa, where the right vests in each individual child, not the parent or caregiver (RSA, 1996). The past practice of focussing exclusively on family planning to reduce rapid population growth is no longer adequate. “Population policy needs to be broadened to include health care, education, and poverty reduction” (Bongaarts, 2016:409-412). Special emphasis should also be placed on including women in the workplace, since there is a high correlation between smaller families in households where women are employed. This is confirmed in a study by Sutanto (2000) delving into working women and family. It found that there is a strong association between women's rising labour force participation and drastically lowered fertility rates. Methodology As mentioned in the introduction, in examining the relationship between population growth and growing unemployment in South Africa, three analyses were performed: The first analysis took the form of an imagined outcome of what the state of unemployment would have looked like today, had South Africa been able to since the advent of democracy in 1994, achieve the half a percent population growth rate envisaged as the ideal in the country’s National Development Plan (NPC, N.d:29). The second analysis contained a set of scenarios, in which it projects, over a ten-year period, the South African available jobs to potential labour force (age group 15-64) ratio, based on the population growth rate continuing along its current trajectory; that is a 1,48 percent average population growth rate over the last five years (CRA-SA, 2020:12). It considered the outcome based on low, medium and high GDP growth paths, that is two, three and four percent respectively. A healthy GDP growth rate for middle income countries is between two and three percent (Ngugen, 2019). The third analysis also contained a set of scenarios, in which it projects, over a ten-year period, the South African employment scenario based on a reduced population growth rate being applied to the same three GDP growth projections. The population growth rate applied in this scenario was half a percent, as this is the growth rate aspired to in the NDP. The exercise is done with the caveat that in the real world it would not be possible to change the population overnight from the existing 1,48 percent to half a percent. What the exercise does do, is to give an indication as to what the future could have looked like, had the country been able to by 2020 bring its population growth rate down to half a percent. These three analyses enabled conclusions to be drawn on the combined impact of three GDP growth scenarios and two population growth scenarios on the basis of ratios representing the number of potential workers for each job in the economy. It is not a representation of the unemployment rate. For this, a separate calculation was required, which calculation needed to draw on a combination of source information and the outcome of the three analyses. These analyses and the unemployment rate calculation enabled conclusions to be made regarding the impact of population growth on unemployment in South Africa. It emphasises the importance that public policymakers should be attaching to the population growth phenomena in the country. First analysis: Imagining South Africa’s employment scenario based on a consistent half a percent population growth rate for the period 1994-2019 In undertaking this analysis, three sets of population data was required. The data was then captured in a five-column table as illustrated in Table 1 below. The first column contained the actual number of employed persons for each of the years 1995-2019. This is an indication of the number of jobs that were available in the country over that period. The second column contained the actual population numbers for the age group 15 and older (the economically active population) as at 1995 (one year into the new democratic dispensation) and 2019. The third column contained year-on-year calculations, in which half a percent was added to the preceding year’s number. The first number reflected the actual number of employed in 1995. This calculation simulated an imagined population growth over the period based on a half a percent population growth rate. Columns four and five reflected the ratio of the number of jobs available to the potential labour force: Column four being the true position, and column five the imagined position based on a half a percent growth in population. By comparing the two ratios, conclusions could be drawn as to how the employment position could improve by curbing the population growth. Table 1: Calculation method workers to available jobs ratio under actual and 0,5% growth scenarios Second analysis: Ten-year available jobs to potential labour force ratio based on current population growth trajectory This analysis required four sets of data. The data was captured in an eight-column table (see Table 2 below). Line one of columns one to three, contained the true number of employed people, representing the number of jobs available as of 2019. Columns one to three were then further populated by adding double the GDP growth rate to the preceding year’s available job number. For example, column one represented jobs to be created at a two percent GDP growth rate. In accordance with Okun’s law, jobs grow at approximately double the GDP growth rate. Thus, the number of jobs were escalated at four percent per annum. At a 3 percent GDP growth rate (column two) jobs would be escalated at 6 percent, and at a 4 percent GDP growth rate (column three) jobs would be escalated at an 8 percent year-on-year growth rate. Column four represented the size of the potential labour force. Row one contained the true actual size of the labour force, that is the number of people aged 15 and older as of 2019. Each row (year) thereafter was escalated by 1,48 percent, being the current population growth trajectory. Columns five to seven represented the respective ratios of potential labour force size over the number of jobs available as reflected in the three GDP growth scenarios. Table 2: Method for calculating workers to available jobs ratio under 2, 3 & 4% GDP growth scenarios The analysis was then repeated in line with the dynamic version of Okun’s law, that is based on the actual historical GDP and labour growth trends for the 10-year period 2011 to 2019. Historical data suggests that in the South African environment, employment grows at around 0,43 percent of the Okun’s law ratio, that is 1,72 percent for the 2 percent GDP growth rate, 2,58 percent for the 3 percent GDP growth rate and 3,44 percent for the 4 percent growth rate. The formula below illustrates: GDP growth rate x 2 (Okun’s law) x 0,43 (historical trend in South Africa) = employment growth 2% x 2 x 0,43 = 1,72% 3% x 2 x 0,43 = 2,58% 4% x 2 x 0,43 = 3,44% The aforementioned analysis allowed conclusions to be drawn as to how the employment scenario can be expected to develop under low, medium and high GDP growth scenarios based on the current population growth trajectory, firstly forecasted in terms of Okun’s law and secondly in terms of the dynamic version of Okun’s law. Third analysis: Projected ten-year employment scenario based on a half percent population growth rate This analysis is a repeat of both versions of the second analysis, with the exception of changing the population growth rate from 1,48 percent to half a percent. The aforementioned analyses allowed conclusions to be drawn as to how the employment scenario could have expected to develop under low, medium and high GDP growth scenarios based on an aspired to half a percent population growth rate. Determining impact on the unemployment rate (expanded definition) The aforementioned analyses do not interpret the impact on the unemployment rate. An attempt is made to make such a determination, based on the calculation set out in Table 3 below. Table 3: Method for calculating unemployment rate @ 2% GDP and 1,48% population growth scenario Limitations The research is reliant on secondary data, although the base data thereof is the official statistics of Statistics South Africa. Furthermore, no attempt was made to make actuarial adjustments based on potential changes to South Africa’s mortality rate, which may very well, in line with international precedent, improve in tandem with economic recovery. That said, the effect if any, over the ten-year period tested, will, in all likelihood, not be material, given the marginal impact on the unemployment rate and struggling social and health services of the country. In terms of the available workers to jobs ratio, the workforce includes people over 65, since in the modern world people work beyond the age of 65 and/or get involved with charity/advising activities. The workforce may thus be slightly overstated, but by no more than five percent. Once again, the objective of the study is not to project an exact position, but rather to illustrate realistic trends. This paper has been written in the midst of the COVID-19 pandemic. The latest full-year statistics available at the time of writing was year-ending 2019. The statistical abnormalities registered in 2020 as a result of the pandemic could not be factored in. Nevertheless, a V-shape recovery is expected once the economy re-opens after the COVID-19 lockdown, enabling the trendline to re-establish itself. Moreover, the paper essentially holds the structure of the economy and the existing technology constant, and then makes future projections. It does not consider the potential positive impact that an improvement in the quality of the education system holds, nor advances in technology. It takes a ‘business as usual – all things being equal approach’, and views the problem as one dimensional, whilst in reality the economy is multi-dimensional. It does so, not to predict precisely where the real economy is going, but rather to demonstrate the correlation between the rate of population growth and the rate of unemployment over the next decade. Whilst recognising that changing the education system and transforming the technological environment will impact employability, composition of the economy takes some time and will thus not be immediately visible in labour absorption. Furthermore, whether the impact of the 4th Industrial Revolution will be a net contributor to jobs or not remains a topic of much debate and research. Findings The findings of the three analyses envisaged in the aforementioned methodology section are set out hereunder. Analysis 1: Imagining South Africa’s employment scenario based on a consistent half a percent population growth rate for the period 1994-2019 Table 4: Calculation of imagined employment scenario assuming 0,5% population growth since 1994 Analysis 2: Ten-year available jobs to potential labour force ratio based on current population growth trajectory Table 5 below reflects employment growth projected in line with Okun’s law, which is two times GDP growth. Table 5: Projection of ten-year labour force to jobs ratio scenarios at 2, 3 & 4% GDP growth – based on current population growth trends (using Okun’s law) Table 6 below reflects employment growth projected in line with the dynamic version of Okun’s law, calculated as around 43 percent of Okun’s law ratio, or, 0.86 times the rate of GDP growth. The average GDP growth over the period 2011 to 2019 was 3,2 per cent, whereas actual jobs over the same period only grew at 1,31 percent per year on average. Table 6: Projection of ten-year labour force to jobs ratio scenarios at 2, 3 & 4% GDP growth – based on current population growth trends (using dynamic version of Okun’s law) Analysis 3: Ten-year available jobs to potential labour force ratio based on a half percent population growth rate Table 7 below reflects employment growth projected in line with Okun’s law, which is two times GDP growth. Table 7: Projection of ten-year labour force to jobs ratio scenarios at 2, 3 & 4% GDP growth – based on 0,5% population growth (using Okun’s law) Table 8 below reflects employment growth projected in line with the dynamic version of Okun’s law, calculated as around 43 percent of Okun’s law ratio, or, 0.86 times the rate of GDP growth. The average GDP growth over the period 2011 to 2019 was 3,2 per cent, whereas actual jobs over the same period only grew at 1,31 percent per year on average. Table 8: Projection of ten-year labour force to jobs ratio scenarios at 2, 3 & 4% GDP growth – based on 0,5% population growth (using dynamic version of Okun’s law) Unemployment rate (expanded definition): 2029 calculations based on current true population growth trajectory and a simulated half a percent population growth percentage In the calculation (Table 9) hereunder, unemployment is projected on Okun’s law, which is double the GDP percentage of jobs growth. Table 9: Projecting 2029 unemployment scenarios based on Okun’s law at 2% GDP growth using current (1,48%) and ideal (0,5%) population growth trends In the calculation tables hereunder, unemployment is projected on the dynamic version of Okun’s law, that is using historical date, which equated to jobs escalating at 0,86 percent of the GDP growth rate. For two percent GDP growth, as illustrated below, jobs would grow at 1,72 percent year on year. At three percent GDP growth it would be 2,58 percent and at four percent it would be 3,44 percent. Table 10: Projecting 2029 unemployment scenarios based on dynamic version of Okun’s law at 2% GDP growth using current (1,48%) and ideal (0,5%) population growth trends Table 11: Projecting 2029 unemployment scenarios based on dynamic version of Okun’s law at 3% GDP growth using current (1,48%) and ideal (0,5%) population growth trends Table 12: Projecting 2029 unemployment scenarios based on dynamic version of Okun’s law at 4% GDP growth using current (1,48%) and ideal (0,5%) population growth trends Discussion and interpretation The various analyses revealed that South Africa will continue to face a jobs crisis well into the future. At best, over the next decade, it will be able to cut its unemployment rate to about a third of the current position. This is however highly unlikely, as will be elaborated on in this section of the report. Available jobs in the market As at the end of 2019, there were jobs for only about one out of every three (2,57) citizens in the age group 15 and older. The actual number of persons employed numbered 16,3 million, whereas the actual number of persons aged 15 and older numbered 41,9 million. Based on the current population growth trajectory, that is 1,48 percent growth per annum (based on the actual past five-year trend), the position is likely only to improve by around 2,3 percent by 2029 should South Africa be capable of maintaining a constant 2 percent annual GDP growth rate. This is based on the dynamic version of Okun’s law. There is no evidence to suggest that the country would miraculously break from the current 10-year historical trend of achieving jobs-growth at around 43 percent of the standard 2 to 1 ratio of Okun’s law. It would mean that, by the end of 2029, there would be around 2,51 persons (as opposed to 2,57 in 2019) in the age group 15 and older for every available job. Even if the country were capable of accelerating its GDP growth rate to a constant 3 or 4 percent over the next decade, the position would only improve marginally. At a GDP growth rate of 3 percent, there would be 2,3 persons (2,57 in 2019) for every available job (a 10,5 percent improvement), and at a 4 percent GDP growth rate there would be 2,12 (2,57 in 2019) persons in the age group for every available job (a 17,4 percent improvement). As alluded to in the earlier part of this article, the reduction of unemployment requires both an increase in the GDP growth and a decrease in the population growth rate. Given the improbability of maintaining a GDP growth rate in excess of the two to three percent range (the literature review suggests such a range to be healthy in a developing economy), the authorities will have to place renewed emphasis on the second part of the equation, that is to reduce the current unsustainable level of population growth. To illustrate, had South Africa, since the advent of democracy in 1994, been able to sustain a half a percent population growth rate (as is the ideal reflected in the country’s National Development Plan), the unemployment situation in South Africa would have looked completely different as to the actual 2019 reality (2,57). In such instance, there would have only been 1,7 persons in the age group available for every job in the country. It would have cut a third off the current jobs / available workers reality. Moreover, projections indicate that the persons to job ratio would improve by between nine and ten percent over the next decade should South Africa be able to cut its population growth rate from the current 1,48 percent annual average (based on the last five years) to half a percent. The aforementioned ratios do not have a bearing on the expanded unemployment rate per se, as it includes all persons in the age group 15 and older. Currently (as at the end of 2019) 36,62 percent of persons in this age group were not seeking employment. These would typically include students, people in retirement or not seeking work, etcetera. It is, however, useful to illustrate the impact of population growth on the likelihood to improve one’s ability to find a job. The impact on the unemployment rate is discussed in the section that follows. Should the 36,62 percent be excluded from the ratio determination, the position in 2029 would be as follows: *Note: A cross-check against the unemployment calculations in tables 9-11 revealed a similarity of 99,999%, or a discrepancy of 0,0001% due to rounding. On a side note, the same exercise repeated on a one percent per annum GDP growth trajectory reveals an alarming position. On the current population growth path, the unemployment position would worsen from 1,64 workers per available job in 2019 to 1,73 workers per available job in 2029. And, whilst at the half a percent growth rate the position would improve marginally from 1,64 workers per available job in 2019 to 1,57 workers per available job in 2029, it should be borne in mind that this is an illustrative scenario in that it is not possible to reduce the population growth rate from the 1,48 percent to half a percent overnight. What this means is that unless the economy grows at 2 per cent GDP per annum or higher, unemployment is bound to continue to increase. *Actual population 2019 x 63,38% / actual number employed (see Table 4) Impact on unemployment Once again, the focus of this discussion will be on the analyses using the ratios attached to the dynamic version of Okun’s law, since historical trends point to this version being the more likely outcome of any interventions. Nevertheless, for academic purposes, projections based on Okun’s law reveal that the expanded unemployment rate will, based on a 2 percent GDP growth rate and a continuation of the current population growth trend of 1,48 percent year-on-year, reduce from the current 38,5 percent, that is 10,2 million unemployed versus 16,3 million employed (CRA, 2020: 246 & 285) to 21,44 percent by 2029. At half a percent population growth, unemployment cut dramatically to 13,44 percent by 2029. This is however, given the historical trends over the last decade, an unlikely outcome. The application of the dynamic version of Okun’s law is likely to deliver a more probable outcome. These scenarios paint a bleak picture with regard to the persistence of high unemployment in the country, should GDP growth not be accompanied by a significant reduction in the population growth rate. At current population growth rate levels, a constant two percent increase in GDP over the next decade, that is to 2029, will see unemployment being cut by an insignificant 1,44 percent, from 38,5 percent (2019) to 37,06 percent (2029). At three percent GDP growth over the same period, unemployment will drop to 31,54 percent, and at 4 percent it will drop to 25,57 percent. However, a somewhat more encouraging outcome reveals itself when applying half a percent population growth rate to the scenario modelling. Under this scenario, unemployment will be reduced from the current 38,5 percent to 30,65 percent by 2029, and at three and four percent constant GDP growth to 2029, even though still high, more respectable percentages of 24,56 percent and 17,99 percent, respectively. It would signal a significant downward curve in the unemployment rate. Conclusions The South African economy is in a precarious position, with the current record high level of unemployment threatening to cripple any significant recovery. For the foreseeable future it is foreseen that the country’s GDP rate will not grow significantly above the two percent range (IMF, N.d.). This will, at the current level of population growth, at best stabilise unemployment at its existing unsustainable levels. Even at three to four percent GDP growth, the fortunes will not be significantly reversed. Growth in excess of four percent will be required to turn the unemployment tide. This is highly improbable, as there is no evidence to suggest that South Africa is poised to buck the economic trends normally applicable in developing economies, let alone its own decade-long low growth historical trend. Similarly, the current levels of population growth serves to exacerbate the economic woes, and will, if unattended to, prolong the pain. Evidence suggests that, were the country able to place population growth onto a lower growth path, its combination with achievable GDP growth goals of between two and four percent, could serve as the catalyst to significantly reduce unemployment. Changing population reproductive behaviour is a long-term endeavour facing many obstacles, such as cultural and religious hurdles. It will require a concerted national campaign and short-term dividends should not be expected. That said, avoiding the issue will be at the country’s peril, in that it will serve only to prolong and deepen the economic defects. If left unaddressed, it could very well push the economy over the proverbial fiscal cliff. Any future economic recovery plan will have to place equal importance on the reduction of the population growth rate, as it does on interventions to spur GDP growth. The two concepts are tied at the umbilical cord. Recommendations This report has highlighted the importance, for purposes of economic sustainability, of reducing the population growth rate. Projections contained herein, as they relate the reduced level of half a percent year-on-year population growth, paint an encouraging picture. However, expectations must be tempered, since, as can be learned from the transitions in other societies, a reversal of the current trend will take some time to effect. It will require heightened levels of education and will need to confront cultural and religious dogmas. Notwithstanding the daunting nature of the task, it is recommended that the South African authorities and broader society, as a matter of urgency, prioritise programmes aimed at reducing the population growth rate as a critical feature of any economic recovery plan. Failure to urgently embrace the need, will simply, and with great economic cost and suffering, prolong the inevitable. References Altman, M. N.d. The state of employment and unemployment in South Africa. [Online] Available at: Do Forecasters Believe in Okun’s Law? An Assessment of Unemployment and Output Forecasts https://www.gtac.gov.za/Researchdocs/The%20State%20of%20Employment%20and%20Unemployment%20in%20South%20Africa.pdf [accessed: 21 October 2020]. America, L. N.d. The consequences of rapid population growth. [Online] Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/5967/9780195204605_ch05.pdf?sequence=6&isAllowed=y [accessed: 22 October 2020] Ball, L., Jalles, J.T. & Loungani, P. 2014. 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South Korea GDP Growth Rate 1960-2020. [Online] Available at: https://tradingeconomics.com/south-korea/gdp-growth [accessed: 23 October 2020]. Wesley, E. & Peterson, F. 2017. The Role of Population in Economic Growth. [Online] Available at: https://journals.sagepub.com/doi/pdf/10.1177/2158244017736094 [accessed: 22 October 2020]. World Bank. 2018. Population growth (annual %) – Korea, Rep. [Online] Available at: https://data.worldbank.org/indicator/SP.POP.GROW?locations=KR [accessed: 23 October 2020]. Worldometers. N.d. Brazil population 1950 – 2020. [Online] Available at: https://www.worldometers.info/world-population/brazil-population/ [accessed: 23 October 2020]. Zwane, T. 2020. Jobless rate drops to 23,3%, while expanded measure soars to 42%. [Online] Available at: https://www.news24.com/citypress/news/jobless-rate-drops-to-233-while-expanded-measure-soars-to-42-20200929#:~:text=The%20rate%20in%20the%20expanded,42%25%20in%20the%20second%20quarter [accessed: 21 October 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

A response to the Constitutional Court judgement declaring the current electoral legislation unconstitutional Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or its Board or Council members. Cover photograph: www.briefly.co.za Setting the scene In the light of the recent Constitutional Court judgement declaring the current Electoral Act unconstitutional, the Inclusive Society Institute (ISI) embarked on a process to design a potential new electoral model for South Africa. The institute appointed an expert panel, convened by Mr. Roelf Meyer, to undertake the work and mandated the panel to design an electoral model that will meaningfully give effect to the judgement, respect the boundaries set out in the Constitution, retain proportionality as a basis for representation in that it best promotes inclusivity, and which enhances representativity, accountability, and transparency. The court has given the legislature 24 months to introduce new legislation that will enable independent candidates to stand for election in the national and provincial spheres of government. The institute has prioritised the development of proposals in this regard so as to, in an effort to enrich the public dialogue, timeously provide its findings to the political stakeholders and public policymakers, of potential solutions. This report will also form the basis of the institute’s own advocacy in the legislative process that lies ahead. The institute wishes to acknowledge the work of the panel and thanks its members who generously gave of their time and expertise. The members were: Mr. Roelf Meyer: In Transformation Initiative. Chief Government negotiator during the democratic transition in South Africa, former Minister of Constitutional Development, and currently a director of In Transformation Initiative. Ms. Deyana Isaacs: University of Stellenbosch. Researcher and lecturer in Political Governance at the School of Public Leadership, University of Stellenbosch. Prof. Dirk Kotze: University of South Africa. Professor in Political Sciences at the University of South Africa (UNISA), a Vice President of the International Political Science Association and National Secretary of the South African Association of Political Studies. Prof. William Gumede: University of the Witwatersrand & Democracy Works. Professor at the University of the Witwatersrand School of Governance and Chairperson of Democracy Works Foundation. Mr. Ebrahim Fakir: Auwal Socio-Economic Research Institute. Political commentator and Director of Programmes at Auwal Socio-Economic Research Institute. Former head of political parties and parliamentary programme at the Elecoral Institute of Southern Africa (EISA), researcher at the Institute for Democracy in South Africa (IDASA) and the Centre for Policy Studies (CPS). Visiting fellow at the Institute for Development Studies at the University of Sussex for 2006 and visiting Draper Hills Summer Fellow at Stanford University for 2011. Ms. Dren Nupen: The Elexions Agency. Former Executive Director of the Electoral Institute of Southern Africa and former Regional Director for Africa at the Open Society Initiative. She brings extensive election experience to the dialogue. Prof. Firoz Cachalia: University of the Witwatersrand. Professor at the Law School at the University of the Witwatersrand. Professor emeritus Jørgen Elklit: Aarhus University, Denmark. Member of the South African 1994 IEC and of the 2002-2003 Electoral Task Team (aka the van Zyl Slabbert Commission). 1996-2009, a member of the board of directors of EISA. Secretary to the 2008 Independent Review Commission in Kenya. 2013 recipient of IFES’ Joe Baxter Award. Prof. Cherrel Africa: (Flexi-member) University of the Western Cape. Formerly at the Institute for Democracy in South Africa, election analyst for the SABC and ENCA and currently associate professor and chair for political sciences, University of the Western Cape. Prof. Rassie Malherbe: University of Cape Town. Currently offers an extra-curricular programme in the drafting of legislation at the University of Cape Town. Former professor of public law and Head of the Department of Public Law at the University of Johannesburg. Mr. Grant Masterson: Programme Manager: Africa Peer Review Mechanism at the Electoral Institute of Southern Africa. He has lectured at the University of Witwatersrand on international relations and the international political economy. Mr. Daryl Swanepoel: Chief Executive Officer of the Inclusive Society Institute and former Member of Parliament. Acronyms and abbreviations CC Constitutional Court ETT Electoral Task Team FPTP First past the post MMC Multi-member constituency MMP Mixed-Member Proportional (system) NCOP National Council of Provinces IEC Independent Electoral Commission PR Proportional representation Content Setting the scene Acronyms and abbreviations Chapter 1: The Constitutional Court judgement 1.1 Unpacking the Constitutional Court judgement declaring the Electoral Act unconstitutional 1.2 Discussion on the judgement and preferences related to new models that need to be developed 1.3 Assessing and determining the degree of electoral reform that is required 1. 4 Conclusion Chapter2: Interrogating options for a new South African electoral system 2.1 Introduction 2.2 Minimalist approach 2.3 Multiple modelling approaches regarding multi-member constituencies and PR balancing lists 2. 4 Hybrid parallel electoral model combining majority ‘first past the post’ with closed list proportional representation 2.5 Additional points to be considered in developing a new electoral model 2.6 Conclusion Chapter 3: A proposed new electoral system for South Africa 3.1 Introduction 3.2 Specifics of the proposed electoral system 3.3 Illustration of the outcome of proposed electoral model based on the 2019 national election 3. 4 Ancillary matters to consider 3.5 Testing the new system against the guiding principles and criteria 3.6 Question and answer guide to understand the proposed system References Annexure A 1. Introduction 2. Findings of Van Zyl Slabbert Commission & Presentation on the Danish electoral model: Presented by Prof Emeritus Jørgen Elklit, Aarhus University, Denmark 2.1 The Van Zyl Slabbert Commission 2.2 Danish Electoral Model 3. German mixed member proportional (MMP) system: Presented by Prof Michael Krennerich, University of Erlangen-Nurnberg 4. The Irish system - Proportional representation by the single transferable vote: Presented by Prof David Farrell, University College Dublin 5. Spanish electoral model: Presented by Prof Ignacio Lago, University Pompeu Fabra, Barcelona 6. Turkish electoral model: Presented by Prof Ali Çarkoglu, KOÇ University, Istanbul, Turkey Chapter 1: The Constitutional Court judgement 1.1 Unpacking the Constitutional Court judgement declaring the Electoral Act unconstitutional On 11 June 2020, the Constitutional Court declared the following: “4. It is declared that the Electoral Act 73 of 1998 is unconstitutional to the extent that it requires that adult citizens may be elected to the National Assembly and Provincial Legislatures only through their membership of political parties. 5. The declaration of unconstitutionality referred to in paragraph 4 is prospective with effect from the date of this order, but its operation is suspended for 24 months to afford Parliament an opportunity to remedy the defect giving rise to the unconstitutionality.” Upon assessment, the judgement does not provide extensive guidance but is focused on the shortcomings or deficiency of the Electoral Act with regards to independent candidates. Moreover, the judgement also does not provide guidance as to how the act should or can be amended. The Electoral Act is subject to the Constitution, and therefore the task of the panel must be accomplished without breaching the constitutional boundaries relating to electoral systems. The following provisions in the Constitution can be considered boundary posts regarding the amendments that can be made to the Electoral Act: Section 1(d): Multi-Party democracy Section 1 in the Consitution is the value clause that speaks of multi-party democracy. The Constitutional Court was requested to consider this clause in respect of independent candidacy in elections. Its view on the matter, however, is that independent candidates do not stand in the way of or impede on the functioning of multi-party democracies. This is considered a boundary post, as the amendments that give effect to the judgement may not undermine this value clause. It is also of importance since this value clause is in the Constitution to safeguard South Africa from becoming a one-party state. Section 19(3)(a): Right to vote This section is normally seen as comprising four aspects: General - For all who qualify according to the basic requirements to vote. Equal - To ensure that some votes do not weigh more or less than others, which has an implication for the type of electoral system that is established and how, in this case, independent candidates can be accommodated. Direct - Every vote has a direct influence on the outcome. Secret - Every voter votes voluntarily, without coercion, intimidation or duress and in secret. Therefore, equality of the votes forms another boundary post that affects the amendment. An electoral system cannot be established where some votes outweigh others. Independent candidates cannot be accommodated in such a way that the votes brought out for them weigh more or less than for others. Section 19(2): Right to Free, Fair and Regular Elections is of importance as it is the basic political right contained in the Bill of Rights. Three aspects are contained in this section: Regular elections - Legislature has a fixed term, enforcing that there will be elections at regular intervals. Free - To participate without interference or coercion and to ensure that candidates and political parties must be able to participate. Fair - Equal opportunity for all parties or candidates to contest the elections. These aspects will have a bearing on the type of amendments made to the electoral system. Sections 46 and 105: Electoral system that results, in general, in proportional representation Section 105 refers to the provinces. Proportional Representation (PR) is not defined in the Constitution. However, it may include: Proportional Representation of political parties and Proportional Representation reflecting voter preference. There are many PR systems that give effect to both PR for political parties and voter preference such as list systems, preferential systems, and combined systems. The current South African electoral system is based on party list proportional representation, which means that parties are represented in proportion to their electoral support. The preferential system entails that the voter can indicate preference for a party and candidates on the ballot. The ballot can list party representatives in order of preference and can also move over party lines in this system. The combined systems incorporate PR with constituencies. Therefore, section 46 and 105 of the Constitution serves as another boundary post within which amendments to the system must be made. The system chosen must result, in general, in proportional representation. Additionally, within the Constitution and, consequently, because of the court judgement, Parliament assumes the responsibly to choose a particular electoral system. The particularities of the system are left to Parliament and it has some leeway on how to give effect to the judgement. Section 19(3)(b): Right to stand for and if elected to hold public office This is the provision that the Constitutional Court judgement focused on, and forms the main grounds for the Electoral Act being declared unconstitutional. Within the current electoral system, the exercising of the section 19(3)(b) right can only be channelled through political parties. Therefore, the act does not provide for candidates to participate in elections as individuals or independent candidates. This is the crux of the judgement and what the majority of the courts’ ruling dealt with. Furthermore, Justice Mandlanga added another aspect, which can also be considered a boundary post, namely: section 18, Freedom of Association. Justice Mandlanga’s argument was that this also includes the freedom NOT to associate. Under the current Electoral Act, candidates are “forced” to join a political party in order to be a candidate and exercise their right under 19(3)(b), which negates the right NOT to associate while simultaneously seeking to stand for representative political office. Therefore, the Electoral Act violates this right. Furthermore, the court also dealt with a number of other provisions that were put to the court, including: Sections 46(1)(a) AND 105(1)(a): The electoral system is prescribed by national legislation. The national legislature (Parliament) is subject to the Constitution, thus whatever the national legislature decides, its decisions are still subject to the Constitution. Sections 47(3)(c) AND 106(3)(c): Loss of membership of legislatures. The Constitutional Court said that this only applies to political parties and does not affect the issue of independent candidates. Sections 57(2), 70(2), 116(2), 178(1)(h), 193(5) AND 236: Participation by parties in legislatures. 57(2): Deals with the rules and orders of the National Assembly providing for minority parties to participate in the proceedings. – Section 70(2): Rules and orders of National Council of Provinces providing for participation. – Section 116(2): Rules and orders of provincial legislatures providing for participation. – Section 178 (1)(h): Participation of opposition or minority parties in the process for the appointment of members of the Judicial Service Commission. – Section 193(5): Deals with chapter 9 institutions where minority parties will also participate. – Section 236: Legislation to be made for the funding of political parties. All these provisions are about political parties’ participation in legislatures. The court found that these provisions strengthen multi-party democracy and do not prevent making provision for independent candidates to participate. These are boundaries which dictate that whatever amendments are to be made; they cannot undermine the participation of parties in the legislature. Section 157(2)(a): The municipal election system can either be a pure PR system according to the list system, where only parties are being presented on the ballot or a PR system combined with wards. This section does not affect the national and provincial spheres. Thus, this only affects the municipal level and does not prevent the court from declaring the Electoral Act unconstitutional. Section 6, Items 6(3)(a) and 11(1)(a): Nominations by Political Parties. This only refers to the first elections after the 1996 Constitution came into effect and is thus not applicable anymore and has no current influence. In conclusion, all the above listed sections are boundary posts that the Constitution imposes on the Electoral Act and the amendments brought to the act. These can be viewed as the most important ones within which the amendment of the act must take place. Below is a diagramme representing the constitutional boundary posts. 1.2 Discussion on the judgement and preferences related to new models that need to be developed “Proportional Representation (PR), in general” was an important point of discussion. The panel was of the view that “in general” was an important qualification that needed to be taken into account when considering how to give effect to the court ruling as it pertains to the inclusion of independent candidates. It was adamant that PR, as stipulated in the Constitution, must continue to remain a prominent feature of the new electoral system that will provide for the participation of independent candidates. Absolute proportionality under any system does not exist. It is for this reason, the panel believes, that the term “in general” has been used. More often than not, political parties fall short of the votes to secure the next member to represent them in the legislature. The surplus is then allocated elsewhere and, accordingly, the end result is not 100% proportional. That said, the panel noted that, currently, South Africa has the most proportional electoral system in the world, due to it not having an electoral threshold for a party to be represented in the legislature and due to the size of the National Assembly. Proportional representation means that parties get a certain number of seats in the legislature in accordance with the percentage of votes that they received in an election. So, for example, if a party gets 15% of all the votes in the country, then it gets close to 15% of the seats in Parliament. In South Africa, there are 400 seats in the national parliament, so for every 0.25% of the vote a party gets, in principle, one seat. Consequently, when independent candidates are incorporated into the new electoral system, the requirement pertaining to PR, should, as far as practically possible, be the same for them as for the political parties. If an independent candidate gets a sufficient number of votes to qualify for a seat in the National Assembly or Provincial Legislature, the candidate will be regarded as a “type of party” for purposes of distributing seats. The independent candidate will therefore require an equal number of votes as would a party for gaining a seat in the legislature. The challenge for independent candidates will be to mobilise the minimum number of votes needed to gain a seat in the legislature. Campaign rules must therefore also make provision for independent candidates to share in the public resources made available for purposes of gaining exposure. The key point of PR is that the composition of the legislature must reflect, in a proportional manner, the preferences of the voters, as expressed in the number of votes cast in a particular election. Regardless of the electoral system proposed by the panel, there were several issues that needed to be considered. South Africa’s current electoral model, at the national level, results in the constitution of a National Assembly with 400 members. The National Assembly is one of the two houses of Parliament, the other being the National Council of Provinces (NCOP). When designing the new electoral system to give effect to the inclusion of independent candidates, the following will need to be considered: Some of the necessary considerations when implementing a PR electoral system, where the size of Parliament is fixed and incorporating independent candidates includes the following: The size of the legislature is fixed. Should individual independent candidates or lists of independent candidates be allowed in both houses? Should the system allow voters to cast their votes for one (or more) individual candidates (so-called personal or preferential votes) or shall it only be possible to vote for the list as such? What will the ballot paper access requirements be pertaining to: – Parties elected in previous parliaments and still represented in Parliament? For example, direct access, a deposit, or a certain number of seconding voters. – New parties: Payment of deposit or a certain number of seconding voters? – Independent candidates (or lists of independent candidates, if allowed): Payment of a deposit or a certain number of seconding voters? Will electoral thresholds be different or the same for parties and individual independent candidates, for example, based on a certain percentage of the vote, an absolute number of votes or some other criteria? Consideration to these key decisions were given by the panel, the outcome of which will unfold later in the report. And in addition to the procedures to elect representatives, the introduction of independent candidates may very well have consequential implications for a number of other pieces of legislation. For example, the argument has been made that if individual candidates are to be accommodated in the PR system, then apart from the Electoral Act having to change, the Political Party Funding Act has to be amended to also require independent candidates to disclose the funding and support they receive. So too, the national and provincial legislatures may, as a consequence of the judgement, have to re-think how they function now that independent candidates may take up seats. The rules and procedures of the legislature may require amendments, as may the constitutional provisions providing for minority party participation in the business of the legislatures, which will have to be expanded to include independent candidates. For example, section 57.2 of the Constitution, which provides for the rules and procedures of the National Assembly to be made with due regard to the participation of minority parties. It will have to be expanded to include independent members. Similarly, section 61, dealing with the allocation of delegates to the National Council of Provinces, may have to provide for a formula broader than just parties in order to accommodate independent candidates. To illustrate: the current rules of the National Assembly under section 57(2)(b) of the Constitution, indicate that the representation of political parties in the structures of the legislature, for example committees, must also accommodate minority parties. This is proving difficult in that it has not been possible to accommodate every political party represented in the legislature on every one of its committees. This will prove more difficult with the introduction of independent candidates. Moreover, the text on party representation as it now stands (minority parties), may in future not be adequate to provide for the participation of independent candidates. In discussing the desired preferences and guiding principles that a new electoral model would need to aspire to, the panel articulated a number of core essentials that they sensed needed to be included in the new system. It should provide a greater ability for voters to directly elect candidates, and to exercise an influence over how party candidates are elected. The current system is lacking in this regard. Likewise, the new electoral system should, in their view, continue to encourage diversity. Demographic, ethnic and religious diversity and inclusivity should be encouraged through promoting a diversity of candidates. Other features, the panel believed necessary, were that the system should be relatively simple to administer and easy for the voter to understand. And there had to be a meaningful balance between accountability, responsiveness and representativity. To achieve this, it will require bold and comprehensive reforms that are in the public interest, more so than in the interest of political parties or personalities. Therefore, the panel established the following principles that they considered necessary to guide the design of a new electoral system: Representation should be translated into legislative seats and needs to represent the expressed will of the voters. Representation can take the form of geographical representation, where the voters in each region, town, city, province or electoral district choose the candidates who will represent them, and to whom the candidates should ultimately be accountable. The national legislature should be a mirror of the nation and its ideological diversity. To achieve this, some form of link with a particular constituency needs to be established. Transparency should exist in both the process of electing the representatives as well as in the overall electoral system itself. Inclusiveness: The electoral system should enable as many voters as possible to participate in the voting process. Inclusion will be promoted through a system that is easy to understand and easily accessible to all voters. Accountability to the electorate is considered fundamental and needed to be improved. In the current system accountability to the voter was traded for party compliance. 1.3 Assessing and determining the degree of electoral reform that is required In order to determine the degree of electoral reform that is desired, and the options that can be explored in considering aforementioned constitutional boundaries and guiding principles, the panel analysed the strengths and weaknesses of the current electoral system. Strengths included the emphasis on promoting multi-party politics through the inclusion of as many political parties as possible. This provided wide-ranging diversity in terms of political ideology, demographics, ethnicity, religious beliefs, amongst others. This was important given the country’s history and need for healing, reconciliation, and nation-building. A further strength of the current system is that it provides the possibility for minority parties to secure seats, which is important to promote inclusion. Moreover, the system is relatively easy to administer and for voters to understand. And it is fair and just in that every vote carries equal power. One weakness, some argue, is that voters are represented by parties and not individuals. This reduces the ability of the voter to hold individual representatives accountable. Moreover, since the current electoral system operates through a closed party list system, voters are unable to express their personal preferences regarding the candidates standing for election. Neither can they effectively influence these appointments, nor recall ineffective, or rogue representatives. Whilst the current system does allow voters to raise their complaints and concerns with party structures, to date this has proved to rarely influence action against non-performers. Another weakness is that the voters do not have a direct influence over who will become their representatives in the legislatures. In fact, neither do they have a say as to the election of the president, as this is carried out by the National Assembly. The panel decided, however, that it would not explore the presidential aspects of electoral reform, since its focus was on giving effect to the Constitutional Court ruling. That said, since the voter votes for a party and not an individual, the reality is that the electorate has no influence over which individuals will be appointed to the legislature. It is the domain of the party leadership and party organs. It is the aforementioned, many argue, that has led to the ruling party appointing candidates in legislatures that rarely question the executive, lest they be removed or sanctioned by the party. As a consequence, the legislature risks becoming a lame-duck, which leads to a trust deficit and loss of public credibility. This compels extra-parliamentary politics, forcing, in a sense, civil society and the courts to become involved in what should rightfully be the domain of the legislature. These challenges have resulted in large numbers of voters becoming disillusioned, with many citizens feeling politically disenfranchised, choosing rather not to participate in formal politics, but to engage in extra-parliamentary activism. This is particularly worrisome amongst the youth who have become disinterested in party politics and participation in the formal multi-party electoral processes. In addition to the strengths and weaknesses analysis, the panel also considered some of the practical considerations that should guide their thinking regarding a new electoral system. Considering that the designing of a new electoral system takes time to devise, the 24-month time limit stipulated by the court suggests that immediate electoral reform should focus mainly on giving effect to the requirement of accommodating independent candidates in the election processes. Wider and more far-reaching reform would require more time and should therefore be considered only in the longer term. Another consideration must be cost. Far-reaching reform could potentially be complicated to administer, and difficult for the voter to understand. This will require greater budgetary resources to implement and to carry out voter education. Recognising that by limiting the extent of reform, problems with the overall system would remain, the panel nevertheless felt it prudent to limit the current reform to creating room for independent candidates to participate. However, where consequential improvements could be made as a result of system changes needed to include independent candidates, they should be taken on board. Thus, of the three reform options identified by the panel, the first two could be considered. Option 1: Make minimal technical adjustments to the current system only to allow for independent candidates to be added as candidates. This option would not address the weaknesses in the current system. Option 2: Make targeted design changes to the proportional representation system which will give effect to the court ruling and go some way in dealing with the weaknesses of the current system. Option 3: An entire overhaul of the electoral system. The panel was of the view that a minimalistic change allowing only for independent candidates to be added to the ballot papers under the current system, would not be practical. Imagine adding say 100 independent candidates to the current 48 parties. That would mean an unwieldly ballot paper containing 148 options to vote for. Accordingly, the panel opted for Option 2. 1.4 Conclusion In designing a new electoral system to give effect to the Constitutional Court judgement requiring the Electoral Amendment Act to be amended to allow for independent candidates to stand for election at national and provincial level, the panel concluded that the new system should: Give effect to the Constitutional Court judgement Fit within the current boundaries prescribed by the Constitution Be guided by the principles of representativity, transparency, inclusiveness and accountability Be relatively easy to administer, and easily understood by the electorate. The panel’s deliberations to this point provided them with the necessary background and information to enable them to proceed to the next step – that is the design of the system. But before they did so, they received several presentations on different electoral models from various jurisdictions, including Germany, Spain, Denmark, Ireland and Turkey. All of these models combine PR with the right of independent candidates to stand for election. They also received a presentation on the electoral models contained in the 2003 Van Zyl Slabbert Commission on Electoral Reform Report. A summary of these presentations are contained in Annexure A of this report. Chapter 2 that follows, interrogates options for a new electoral system for South Africa, whilst Chapter 3 provides the panel’s proposed model. Chapter 2: Interrogating options for a new South African electoral system 2.1 Introduction During the next phase of the expert panel’s deliberation, they started to conceptualise a unique South African electoral system that may give effect to the court judgement. Various panellists presented their initial thinking with regard to potential electoral models for South Africa. The merits and specifications of each of the proposed models were interrogated and discussed. This chapter offers a summary of the various electoral models presented by the panellists, as well as additional issues identified during the dialogue. 2.2 Minimalist approach A preliminary minimalist approach suggests that the current PR closed list system should be maintained, while independent candidates would be accommodated either individually or in a different form. Therefore, this model should remain within the current boundaries of the Constitution, not requiring any amendments. It therefore satisfies the ruling of the Constitutional Court which requires provisions to be made within the electoral system, on both national and provincial level, to accommodate independent candidates. This model therefore calls for the most basic amendments to only make provision for independent candidates, without changing the electoral system in any extensive manner. The electoral system can in time be further improved to mitigate against the limitations and weaknesses of the current system, including issues such as a lack of accountability, representativity, weak parliamentary oversight and the effects and consequences of the closed list system. The PR closed list system will be used to accommodate the independent candidates, simply by amending the Electoral Act to include a provision for the participation of independent candidates. These candidates would, in a sense, be considered in the same manner as smaller political parties, with the same rules and processes applying. Consequently, the question of how to maintain overall proportionality, would be resolved. It should be noted that there are, however, still a few issues relevant to this proposed model that will require attention. Firstly, due to the fractious nature of current South African politics, the possibility exists that an increased number of smaller parties and independent candidates resolve to contest elections. In order to manage this, a reasonable threshold for access to the ballot paper would have to be considered, and, in this regard, a 1% threshold of registered voters is the suggested approach. Parties and independent candidates would therefore have to demonstrate that they have this level of support by providing a required number of verified signatures from voters. The required number of seconders will depend on whether parties and independent candidates are running in provincial or national elections, respectively. This, however, would place an additional administrative burden on the Electoral Commission of South Africa (IEC), who would be responsible for verifying seconding signatures and ensuring that there is no abuse of the system. An assessment will have to be made as to the capacity of the IEC to undertake this task and whether they would be able to adapt their systems accordingly. Concomitant additional resources may have to be allocated by Treasury. On the downside, the introduction of a threshold requirement may be interpreted as a way of undermining the constitutional value of inclusivity. Secondly, the minimalist approach may be considered a more viable and implementable system over shorter a period. The danger of this approach is, however, that it could allow for too many parties and independent candidates and it may become too difficult and unwieldly a system to manage and control. With this in mind, a few minimal requirements should be set in order to limit the number of candidates on the ballot paper. Reaching agreement on these requirements could be complicated and time-consuming. On the upside is that the model suggests that it could be relatively easy to enforce gender parity by requiring parties to effect a quota within their lists. The same does however not hold true for independent candidates, as each candidate will only represent him- or herself. 2.3 Multiple modelling approaches regarding multi-member constituencies and PR balancing lists During the panel’s discussions, the multi-member constituency and PR compensatory/balancing list appeared to be a preferred model suggested by most individual panellists. The Van Zyl Slabbert Commission on Electoral Reform (the Electoral Task Team [ETT]) reviewed the PR closed list system after the 1999 national and provincial elections. The report was published in January 2003 and proposed a number of electoral reforms and electoral models. This model is based on the ETT majority recommendations for a preferred electoral system for South Africa, with some adjustments made. This model proposes that an electoral system should guard against excessive fragmentation as it could lead to difficulty in the composition of government and the functioning of Parliament. This model promotes accountability to the electorate as it pertains to the representation in national and provincial legislatures. Oversight will be improved, since MP’s carry constituency mandates. And this model will not require significant constitutional amendments. In designing the model, consideration was also given to, amongst others, political party and independent candidate’s threshold, registration qualification, distortion of proportionality, and prevention of candidates being elected without real support. The electoral model proposes that the National Assembly consist of 300 representatives elected from multi-member constituencies (MMCs). A further 100 compensatory seats at national level will be used to ensure overall proportionality. The constituency or PR split can be adjusted slightly, nevertheless the overall number of seats should not exceed 400. The constituencies will need to coincide with metropolitan and district municipal borders. Small districts can be combined with neighbouring districts to ensure workable units. And metropolitan areas could be subdivided along sub-council or regional lines for similar purpose. The aim would be to have approximately 70 MMCs with three to seven seats in each MMC. To ensure that parties or independent candidates with significant numbers of votes have a chance of winning a seat, each MMC must have at least three seats, but not more than seven. The number of seats will be based on the quota of registered voters in the particular MMC. The quota will be calculated according to the number of registered voters in the country, divided by 300 (the number of MMC seats nationally). As it stands, the number of current registered voters is 26 756 649, which divided by 300 seats, suggests the current quota to be 89 189. Therefore, an MMC will have approximately 270 000 to 624 000 voters, that is an MP to voter ratio of around 90 000. Under this MMC system, the voter votes for either a candidate, through an open list, or the party as such. Consequently, voters only vote in the multi-member constituency. The political parties’ overall share of all 400 seats will be calculated based on the total sum of votes received for all parties’ candidates across all MMCs. Proportionality will be restored through the use of the PR lists. Both independent candidates and candidates representing political parties can stand in constituencies. The IEC will be responsible for the preparation of ballot papers, which will be based on the list of names of candidates received for each MMC. To fill the political party’s compensatory or national seats, a national list with up to 100 candidate names is required. Political parties may also nominate more than one candidate per constituency, provided that the number of candidates does not exceed the number of seats in that constituency plus one. This will allow for sufficient reserves, should vacancies need to be filled from the list. With regard to the allocation of seats under this system, it is suggested that as an alternative to the quota system for allocation of the MMC seats, the Sainte-Laguë divisor system be considered. Under this divisor system, the sum of votes for each party and the votes for independent candidates is divided first by 1, then 3, and finally 5 in a 3-seat MMC. The three highest quotients (in declining order) are allocated a seat each. In a 7-seat MMC, the divisors are again 1, 3, and 5 – and then 7, 9, 11, and 13. The Sainte-Laguë system is generally considered a very fair system, securing a high level of mathematical fairness as good quota systems also do. But the Sainte-Laguë system is less dependent on the comparison of decimals in determining the eventual allocation of seats. In the MMC, a “natural” threshold is at play. In a 7-seat MMC, a party or a candidate with more than 7.15% of the vote is guaranteed a seat. In the 3-seat constituencies the natural threshold guaranteeing a seat is 16.67% (see explanation in Chapter 3). The actual thresholds might be lower than the percentages prearranged, depending on the actual vote distribution among parties and independent candidates, nonetheless the values mentioned will guarantee a seat. If an independent candidate obtains more votes than required for election, the surplus of votes is, however, discarded. With regard to independent candidates accessing the ballot under an MMC system, candidates will be required to demonstrate that they have voter support in the chosen MMCs. This they do by submitting signatures and voter registration numbers of seconding individuals that are registered in the specific MMC. A threshold of 1% can be considered as a reasonable number. For example: in a 3-seat MMC the number of signatures might amount to between 2 500 and 3 000 signatures and in a 7-seat MMC the number will be between 5 000 and 6 000 signatures. It should be mentioned though that it may be much easier for independent candidates to qualify to participate in the election, than to actually win a seat. Political parties elected in the previous election and which are still represented in the National Assembly, are automatically eligible to participate in the election. These parties may submit lists of names in a few or all MMCs and have their share of the 100 compensatory seats. Other (new) political parties may become eligible by submitting names and voter registration numbers of a substantial number of voters. Parties who are not able to collect substantial voter support (and thus demonstrate that they actually have support on the ground), should not be allowed to participate. The verified number of supporting voters should be equivalent to the valid votes in the previous election divided by the number of seats (400). That can be said to be the price of one seat, which is currently 43 591 signatures. Voters can only second one party (or one independent candidate) prior to each election. The IEC will have to verify the number of voters’ support. A monetary fee should not be levied to qualify for electoral participation. The use of only two ballot sheets is proposed. The first ballot sheet will be allocated for the constituency (MMC) list for the National Assembly, with the names of the political parties fielding candidates in the MMC as well as the independent candidates marked as such. The second ballot sheet will consist of the constituency (MMC) list of names for the Provincial Legislature. Consequently, if this model is implemented, the following needs to be considered: All advantages and disadvantages of an open or closed list need to be measured. The question to be answered is whether the country is ready for an open list system. The possibility to continue with a closed list system for national and provincial elections and only move to an open list system at a later stage should also be considered. Should candidates be allowed to stand for election both in an MMC and be on the proportional list? What needs to be done if vacancies cannot be filled from the political party’s candidates list? Should the quota system or Sainte-Laguë divisor system be used? The number of seconding signatures required for both political parties and independent candidates must be determined. If floor crossing is allowed, should it only be from a political party to independent candidate? And if so, what impact will it have on the composition of the National Assembly in terms of party proportionality? If yes, this may break the stranglehold that political parties have over the MPs, but it should eliminate opportunism. Similarly, an independent candidate may come to the conclusion that his or her views can best be promoted through joining one of the parties, but, again, this may promote opportunism. 2. 4 Hybrid parallel electoral model combining majority ‘first past the post’ with closed list proportional representation This proposal is made bearing in mind the need to overhaul South Africa’s election system to improve representativity, oversight, accountability and responsiveness in the governance architecture. The proposal recognises that each electoral system has distinct advantages and disadvantages. For instance, pure proportional representation systems account for every single vote in determining the outcome of an election, but do not embed the potential for closer constituency responsiveness and accountability. In addition, pure proportional systems often provide inordinate power to political party elites to determine policy. Pure First-Past-the-Post systems (winner takes all), on the other hand, bear the potential for greater accountability to constituencies, allow ordinary members of political parties and back-bench legislators greater influence in policy by virtue of the constituencies they command, but are only rarely a fair reflection of the choices made by an electorate. In this system winners of an election by very slim margins take all the power, with all the other votes for candidates who might lose by small margins, being discarded. Mixed systems may minimise disadvantages and maximise advantages, but depending on the mix used, can potentially create such overwhelming systemic complexities that they are rendered indecipherable to citizens. In addition, they create serious complications in the management and administration of elections as well as the tabulation of results. This can cast a pall of doubt on the credibility of electoral processes and consequently serve to delegitimise the electoral outcomes, as oversight over and transparency of the calculation and counting of outcomes are rendered ever more complicated. Simplicity of the electoral system should not be under-estimated as a great virtue. A hybridised parallel system envisages a simple First-Past-the-Post system requiring a 50% +1 majority to have won the seat for 350 or 400 seats in a 600-member Assembly. Alongside it, would be 250 or 200, closed party list PR seats. This would combine the benefits of Proportional Representation with single-member constituency representation. This proposal is made, bearing in mind the principles of: Accountability, responsiveness and openness – Act 108 of 1996, 1(d) Human dignity, equality and freedom – Act 108 of 1996, 7(1) Effective Choices – Act 108 of 1996, 19(1), 19(1)(c), 19(3)(b) Maximising Representation. Preferably at its most basic and decentralised level – Act 108 of 1996, 42(3) Responsibility and Responsiveness Inclusivity, diversity and representativity Proportionality Oversight and Accountability (in executive) – legislative relations, between party representatives, party organs, leaders and members, and finally between elected public representatives and the voting public/communities/constituencies. Simplicity and Transparency for voters, parties, candidates, and election management and administration. The model would necessitate that section 46(1) of the Constitution be amended to read “National Assembly consists of no fewer than 525 and no more than 600 women and men…” and there be an amendment to section 46(1)(d) to read: “reflects an element of proportional representation in its result”. It also envisages a unicameral Parliament with a single National Assembly and no second chamber. The NCOP would then disappear and all constitutional references to it, including in the legislative process, would be amended accordingly. If it is to be retained, its size would need to be reduced dramatically to at least half. The model envisages retaining the Provincial Legislatures in their current form, with reduced size and with the oversight powers maintained. Their legislative powers would largely remain intact, except to expand their scope with respect to the legislative process. In orientation, the model seeks to harness the benefits of proportional representation without making it the primary feature of the system, and privileges would increase responsiveness, accountability and a closer fit between constituencies and elected representatives, while simultaneously sublimating the overweening and inordinate influence, extra ordinary power of political party elites and party bosses. While parties will no doubt remain hugely influential, as will party elites, this mode does provide greater leverage – even if only in theory – to voters in communities and constituencies. In this hybrid parallel system proposed, of the 600 MPs, 400 would be elected from 400 single-member constituencies in a majoritarian First-Past-the-Post (FPTP) system, with a 50%+1 majority. Constituencies would correspond to the current, approximately 234 municipalities and their municipal boundaries (excluded are the 44 district municipalities that don’t exist as constituencies but as coordinating structures of two or three individual municipalities). These current municipal boundaries would then be reduced further, to enable the creation and delimitation of constituencies of a reasonable, meaningful and manageable size for effective representation. This delimitation and demarcation exercise would best be left to the Demarcation Board, using the Demarcation Act’s current provisions to determine and delimit constituency sizes according to a balance between land mass, population density and concentration of services. This can be augmented if necessary. Of course, gerrymandering of boundaries may be an issue, but the oversight and transparency safeguards in the current act and in electoral administration with regard to inspection, and objections and remediation of delimitations are sufficiently robust. This approach is premised on the idea that multi-member constituencies may still be too large and might fail to adequately address the element of responsiveness and to some extent accountability, since the constituencies would not only remain too large, but responsibility may be shirked, from among the multiple members in the multi-member constituencies. The remaining 200 seats in the National Assembly would be elected from a Proportional List, with an appropriate number of PR seats to be allocated for election in each province, based on population size, as is the current practice. This would be implemented to establish a modest degree of proportionality, by electing 200 MPs from the existing PR list without it resulting “in general”, in a proportional outcome for the whole election result. For greater proportionality in the overall outcome, the system could be changed for a more balanced distribution, such as 350 MPs from constituencies and 250 from a PR list, to have greater proportional representation, bearing in mind that this then increases constituency sizes and therefore may affect responsiveness adversely. It is also proposed that the model be replicated at Provincial Legislatures. It is recommended that the size of each Provincial Legislature be reduced by between 20% and 25%. That means each Provincial Legislature will be faced with a reduction of between three seats at the smallest and 16 at the largest, and it is estimated that on a combined 20% reduction across Provincial Legislature sizes, there will be at the least 80 seats reduced, available for absorption nationally. The total seats to be elected in the Provincial Legislatures will be on the basis of 2/3rd of seats elected directly in constituencies, and 1/3rd off PR lists. The size of constituencies in the provinces combine two national constituencies into one, for Provincial Representation purposes in the Provincial Legislature. Consequently, consideration would have to be given with respect to costs. First, with no NCOP or second chamber, or at least drastically reduced second chamber, those costs would be allocated and absorbed in additional NA seats. Second, the Provincial Legislatures will be reduced by at least 80 seats nationally (based on a 20% reduction), which will also be absorbed nationally. Third, there is a definite need to moderate the remuneration, benefits and perks accruing to public representatives at national and provincial levels. Adjustments here should not be hard to deal with and should not prove unpopular with the public. In this system, each voter would be given four ballots: One for the National Constituency Representative One for the National PR Representative One for the Provincial Constituency Representative One for the Provincial PR Representative While this may prove administratively and logistically burdensome for Election Administration, it is not insurmountable with proper planning, supervision and management. Its greatest advantage is that it retains the elements of simplicity and trust in the system for voters and in the process of voter registration, voting, counting, tabulation, audit and verification processes. This model consequently seeks to address the issue of inclusivity, by allowing independent candidates and to be elected from a mixed system, while addressing issues of accountability and responsiveness through maintaining the majority of political parties. 2.5 Additional points to be considered in developing a new electoral model As mentioned previously, additional points for consideration were raised through individual contributions by members of the panel during the discussions on the initial proposals for electoral reform. The following are worth recording: Some panellists emphasised that caution should be taken not to create new electoral challenges through amendments to the current system. Any new electoral model should be simple to administer and the principles of inclusion should be the central aim. It was also stressed that threshold changes should be considered attentively. Political parties play a crucial role in fostering accountability and accessibility for voters, therefore mechanisms to enhance internal democracy and the representative composition of parties should be addressed. These mechanisms should include opening the list process and requiring gender representation. Furthermore, improved access to the system could be established by introducing automatic registration when identity documents are applied for. Reference was given to a report by Steven Friedman entitled: “The system’s not to blame? Electoral systems, power and accountability”. It deliberates the subject of the deficit of accountability in South Africa’s electoral systems, which has been a significant point of discussion for the panel. The issue of accountability through geographical representation has been demonstrated at municipal level, where the electorate votes for a specific ward candidate. It has, in Friedman’s view, not improved accountability. It is therefore questionable to assume that accountability will automatically prove more efficient at the provincial or national level when it fails at municipal level. Nevertheless, the inadequate accountability of elected representatives is a widespread concern. Many attribute this to the current electoral system. But electoral reform on its own may not be sufficient to address the problem as it is embedded in other root causes as well. The suggestion that accountability could be enhanced purely by increasing the voters’ capacity to choose and rank candidates is thus debatable. To the contrary, it may also serve to weaken political parties and legislatures, as well as to contribute to the fragmenting of the political system, which may open possibilities for more political corruption. This view was also held by Rosenbluth and Shapiro (2018) in their book: “Responsible Parties: Saving democracy from itself”. Consequently, whilst provision could be made for electing individual party candidates (from an open list), the extent to which they are accountable to the electorate versus their nominating parties will need to be considered. This will include the extent to which parties may sanction their members and the right for elected representatives to change party affiliation. However, this discussion is not new in South Africa. A constant theme throughout the panel’s deliberations has been the desirability to allow all political parties, including smaller parties, the possibility of having representatives elected to the national and provincial legislature. This despite the concern that a growing number of parties, and now including independent candidates, contesting the elections can present a logistical challenge for the IEC. It may also be frustrating for the voters. Nevertheless, in the panel’s mind, smaller parties, in the South African context, cannot be excluded, as they have offered a political home to diverse segments of the electorate that do not feel accommodated within the bigger political parties. To address the divided society, South Africans should be offered a choice to vote for these smaller parties. In light of the aforementioned, it is recommended that the call for the introduction of a reasonable threshold be considered, that balances the aforementioned with the need to eliminate opportunistic parties and individuals that do not enjoy real support on the ground. There was also a view that democracy works best with strong, disciplined and programmatic political parties, who are able to offer large groups of voters clear choices and incentives to coalesce. Political parties are essential vehicles for collective action and democratic accountability. Thus, the system should guard against over- fragmentation which undermines this. That said, mechanisms should be introduced to promote greater levels of democracy within the parties, as representatives should be empowered to exercise their conscience and be responsive to the electorate. For this, transparency is key. And the closed list system inhibits transparency. Therefore, the candidate list should, ideally, be opened. Should the closed list system be adopted, however, the names of candidates must be well publicised so that the electorate know who will be representing them. And it empowers them to exercise sanction over non-performing or disreputable candidates. This is especially important in the MMCs and quite practical given the small number of candidates being put forward in each MMC. It is also suggested that political parties reveal their presidential and provincial premier candidates to the voters before the election, as opposed to announcing their decisions after the fact. Additional proposals emanating from the discussions included the following: The Van Zyl Slabbert Commission on Electoral Reform (the Electoral Task Team [ETT]) report should be used as a baseline for developing a new electoral model. Specific affirmative proposals should be made to ensure gender representation, as the introduction of multi-member constituencies could potentially have an adverse effect on gender representation. The current closed list system does not necessarily have to be immediately abolished as political parties could in the interim choose to introduce a system of primaries for their own candidates. Once the electorate has become accustomed to the new system, further reform could allow for the opening up of the lists. 2.6 Conclusion This chapter represents the collection of ideas for reforming the electoral system in South Africa, as introduced by the panellists. Whilst the main objective is to design a system that gives effect to the Constitutional Court’s ruling to allow independent candidates to stand for election at national and provincial level, they recognised that such a step will require a new model. A minor tweaking of the current system will in all probability be too unwieldly; and may not give effect to the court’s underlying intention for the system to provide a reasonable and fair chance for independent candidates to be elected. In developing the new model, panellists considered it prudent to also use the opportunity to address some of the flaws in the current system, insufficient accountability, representativity, and transparency being key, amongst others. In the next chapter, the panellists’ combined thinking culminates in a proposed new electoral model for South Africa. Chapter 3: A proposed new electoral system for South Africa 3.1. Introduction This chapter contains the culmination of the panel’s thinking as informed by the discourse between the members of its expert panel and the presentations of the international contributors. The criteria set for the system’s design included that it: accommodates independent candidates adheres to the constitutional prescript requiring the composition of the legislature to reflect, in general, proportional representation requires no or minimalistic amendments to the constitution be simple for the Independent Electoral Commission to implement and for the voters to understand promotes gender parity within the legislature promotes demographic and geographic inclusiveness promotes representativity promotes, to a certain extent, accountability. In essence, the panel needed to decide between three broad approaches: A winner take all, pure constituency approach A simplistic proportional representation model A hybrid model that accommodated constituencies together with a compensatory proportional list allowing for overall proportionality to be established The pure constituency approach was rejected out of hand as its design would not make it possible to meet the constitutional prescript of the outcome to reflect, in general, proportionality. It would also not accommodate sufficient diversity within the legislature. The simplistic proportional representation model – a single proportional list at the national level and nine proportional lists at the provincial level – would be impractical to administer. Imagine the length of a ballot paper should, say 100 independent candidates wish to stand in addition to the 48 existing political parties. It would also not necessarily advance geographic representation and will do little to improve voter representativity and accountability to the voters. Thus, the model being proposed in this report is a 400-seat National Assembly of which 75% (300) of the seats are allocated to multi-member constituencies (MMC) comprised of three to seven members per MMC. The constituencies will be supplemented by a proportional list of 25% (100 seats), which will be used to ensure overall proportionality, in general, in terms of the total number of votes cast for parties in the election. The key tenets of the system are set out hereunder. For purposes of explanation, only the election to compose the National Assembly is described, although in reality nine provincial legislatures will be simultaneously composed. The elections for each of the provincial legislatures will, however, follow the same methodology. Furthermore, the panel did not consider detailed structuring of the NCOP, suffice to agree that it should be retained and, in the main, retain its existing construct. It should be borne in mind that delegations in the NCOP represent provinces, not individual constituencies. Accordingly, independent candidates will not be able to be elected to a permanent seat in the NCOP, as these representatives are appointed by parties based on their relative strength in each of the provinces. Rules can, however, be provided for within the provincial legislatures to allow for some flexibility for independent members to be nominated as one of the special delegates deployed by the legislature in terms of Section 60 of the Constitution to deal with matters before the NCOP affecting the province. 3.2 Specifics of the proposed electoral system 3.2.1 Structure There would be two components to the establishment of the legislature. The first would be representatives elected via MMCs to the legislature (with 66 MMCs of three to seven members each). The second component would comprise representatives elected via a compensatory PR list (which ensures that the political parties will be represented proportional to their share of the overall national vote). 3.2.2 Number of seats There will be 400 seats, with 300 seats allocated to 66 MMCs and 100 compensatory seats, which will be used to ensure overall proportionality based on votes cast for each of the parties. It is necessary to have at least three members per MMC to promote diversity within each of the MMCs. Too large a number would be counterproductive in terms of promoting geographic representativity, or for bringing the representatives closer to the electorate. Accountability is strengthened when the representatives are closer to the electorate. It should be borne in mind, however, that given the closed list system being proposed, the electorate will to a lesser extent be able to hold the candidates accountable than would be the case under an open list system. Nevertheless, knowing one’s representative and thereby having accessibility to him or her, strengthens the voter/representative nexus. Thus, the maximum number of seats per MMC is suggested as seven. MMCs are demarcated along the current district and metropolitan municipal lines. Where the number of voters within a district council border is too few to warrant at least three representatives, two or more district councils can be added together. Where the number of voters within a metropolitan council are too many, MMCs can be allocated along sub-council or metropolitan regional lines. Each vote cast should carry, more or less, equal weight. Therefore, in determining the borders of the MMCs, the total number of registered voters will be divided by 300 (the number of MMC seats), which results in a quota per seat. In the 2019 general election, there were 26 756 649 registered voters, which, if divided by 300 seats would equate to a seat-quota of 89 189. Therefore, an MMC will have approximately 270 000 to 624 000 voters. 3.2.3 Ballot papers, candidates and seat allocation For the national election, there will be one ballot paper in each MMC, comprising only the names of the parties (not the parties’ individual candidates), followed by the names of the independent candidates. Parties are permitted to nominate a number of candidates equal to the quota size of each MMC plus one. Therefore, parties will be able to nominate four candidates to a three-seat MMC, or eight candidates to a seven-seat MMC. The additional candidate is to provide for filling any vacancies that may occur over time. The voter will cast a single vote for either the party or the independent candidate of his/her preference and seats will be allocated proportionally based on the number of votes received for each party or independent candidate. Should an independent candidate receive enough votes to be elected, he or she will be appointed to the legislature. Party candidates are allocated in order of their appearance on the closed list for the party in the particular MMC. For example, should a party receive enough votes for two candidates to qualify, the two candidates at the top of the party’s MMC list will qualify. This is the so-called closed list system. The electorate will know who the various party candidates are through voter education and information sessions organised in the run-up and during the course of the election campaign. This would include information on IEC-posters at the voting station and would also be available by means of media campaigns, party adverts, pamphlets, town hall meetings, etcetera. The panel did consider the open list system, that is where voters select their specific candidate of choice, and the individual candidates (party or independent) who then receive the most votes qualify. However, this was an option the panel felt best be left until later when voters have become more accustomed to the new system. In the first instance, the closed list system would ensure procedural simplicity, and in the second instance, gender parity could be promoted by requiring parties to alternate their candidates based on gender, that is man followed by woman, or woman followed by man, on the MMC candidate list. It must be mentioned, however, that it will be difficult to promote gender parity through the ballot paper amongst independent candidates, as each candidate represents only him- or herself. The table below lists the pro and cons of the closed and open list systems: In allocating the candidates to seats, either the quota system or Sainte-Laguë divisor system can be used. Whilst the panel prefers the Sainte-Laguë divisor system, it may be prudent to retain the quota system purely on the basis that it is known and trusted by the current political establishment. For academic purposes, an explanation of the two systems are outlined below. No threshold for a party to qualify to take up seats in the legislature is being proposed. This is because, as explained earlier, in the MMC a “natural” threshold is at play (as is also now the case in the election of the 400 members of the National Assembly). In a 7-seat MMC, a party or a candidate with more than 7.15% of the vote is guaranteed a seat. In the 3-seat constituencies the natural threshold guaranteeing a seat is 16.67%. The idea is that a small party (or independent candidate) cannot lose the last seat in the MMC to a big party winning all votes other than what the small party (independent candidate) wins, as long as the votes for the small party (v) is more than what the big party wins, divided by five (the divisor for the three seats). So, the small party’s vote share (v) must be bigger than (100 – v)/5 (which is 100/6 or 16,666%). The actual thresholds might in some cases actually be lower than the percentages prearranged, depending on the actual vote distribution among parties and independent candidates. Nonetheless, the values mentioned will guarantee a seat. Therefore, if independent candidates obtain more votes than required for election, the surplus of votes is discarded, in that a single (independent) individual cannot be more than a single individual. Thus, only parties will compete for seats on the compensatory proportional lists. The combined number of votes received by a party, across all MMCs, determine its proportional share of the 400 seats in Parliament. This implies that parties receive an additional proportion of the excess votes forfeited by the independent candidates. For purposes of explanation, a hypothetical scenario is sketched below: Using a 40-seat legislature as an example, 30 seats will be elected from say 10 MMCs of three seats each, with the remaining ten seats coming from the compensatory PR list. What happens in a situation where in a few MMC constituencies seats are won by independents, whilst the remaining constituency seats are won by two dominant parties from amongst four participating parties? The hypothetical seat calculation is set out below The scenario shows that Party A, although it received only 45% of the total votes cast – suggesting 18 of the parliamentary seats – they would in fact receive one additional seat, that is 19 seats, because seats won by independent candidates are not included in the proportional allocation of seats to parties. In this example, Parties A-D have 37 seats to distribute among the four of them, and the quota method gives 19 to Party A, 14 to Party B and 4 to Party C. In this way, the relative strengths between the competing parties is maintained and the end result is – as required – in general, proportional. This is justified, in that the Constitutional Court must have foreseen that absolute proportionality is not possible with the introduction of independent candidates, and thus a higher reliance would by necessity have to be placed on the notion general proportionality. The aforementioned example shows that the proposed system does marginally advantage political parties. It does, however, not come at the expense of the independent candidates, in that, whilst the parties are advantaged, it does not diminish the legitimate claim that any one independent candidate may have, that is, him- or herself represented in Parliament. Furthermore, alternative remedies are available to independent candidates, as highlighted in the next paragraph, should they so choose. Should the independent candidates wish to lay claim to the additional votes cast over and above that required to secure a single seat in the legislature, they should arrange themselves as a group, i.e., in reality a party, and register at the IEC as such. In such instance the same rules would apply to the group as it would to a party. An independent candidate cannot by definition choose to be a lone representative in Parliament but at the same time claim the benefits and rights of a party. 3.2.4 How do parties/independent candidates get ballot paper access? The panel proposes that parties already in Parliament (and still represented when the election is called), automatically qualify with no further requirements. For new parties, the panel considered a monetary fee or a certain number of seconding voters. It rejected the notion of a monetary fee, in that the system should not be weighted in favour of the well-resourced. Instead, it proposes a certain number of seconding voters, for example, votes in the previous election divided by 400, for automatic access to register candidates in all MMCs (with specific candidate lists for each MMC) and to have access to a share of the proportional seats, if eligible. The figure as it stands now, would be 43 591. In MMCs, a local party should have access to register for running candidates in a particular MMC, if it has seconding voters equal to 1% of the registered voters in the MMC. For example, based on current registered voter numbers, in a three-seat MMC the number of signatures might be around 2 500 to 3 000 signatures, and in a seven-seat MMC the number will be between 5 000 and 6 000 signatures. For individual candidates, the same rules apply as for new parties at the MMC level, given that independent candidates can only stand within a single MMC. The requirement for independent candidates and new parties to obtain seconding voters will inevitably require additional procedures and resources for the IEC to administer. They will have to, for example, check that seconding voters are legitimate, registered in the MMC, and that they have personally agreed to the secondment. Nevertheless, the seconding route is preferred over a financial fee for the reason mentioned. The IEC is well-acquainted with the procedures, albeit currently at much lower intensity. 3.2.5 Threshold to qualify for representation in Parliament As already alluded to, for tier one, no formal threshold is proposed, as is the current position. Also, for tier two, no formal threshold is proposed, in that the low number of seats in the MMCs (three to seven) provide for a high natural threshold at the MMC level. 3.3 Illustration of the outcome of proposed electoral model based on the 2019 national election To understand the system being proposed, the panel modelled its proposal based on the results of the 2019 national election. The summary is shown below, with the available calculations accessible by using the link: https://www.dropbox.com/s/sqq0y547qyxxlfe/Electoral%20Reform%20Findings%20%28002%29.xlsx?dl=0 Allocation of Multi-Member Constituencies Note: SL = Sainte-Lague What the illustration highlights is that the proposed system does not negatively (or positively) impact any party. It shows that the existing power ratios between parties would be maintained in the new system. This is not at all surprising, as the overall distribution of the 400 seats is done according to the same procedures as are described in the Electoral Act. It also shows the geographic spread of seats, indicating that allocated seats continue to reflect, in an undistorted manner, the strongholds of the individual parties. For example, the DA’s stronghold is clearly reflected in the Western Cape, as is the IFP’s in KwaZulu-Natal. 3.4 Ancillary matters to consider A number of further technical issues were considered: 3.4.1 What happens if a vacancy arises and the names on the MMC lists (and indeed compensatory PR lists) are exhausted? It is proposed that the IEC, in such instance, allow parties to supplement their lists. The solution for filling vacant independent candidate seats is, however, somewhat more complex. The seat could either remain vacant, or some other mechanism and/or system of by-election will have to be considered. 3.4.2 Can a candidate stand in both an MMC and on the compensatory PR list? It is argued that this is a matter for parties themselves to determine. Of course, independent candidates can only compete in the MMC, where they register for participation. 3.4.3 What about progressively advancing racial, ethnic, sexual orientation, etc, representation through the ballot? This matter is an overly complex one and no precedence exists. It may also be too prescriptive. It is a matter best left for parties to decide. That said, in that independent candidates can stand for election, it opens the door for any orientation to make him/herself available to represent a specific cause in the legislature. 3.4.4 Should voter registration be compulsory and what role can the Department of Home Affairs play therein? The panel flags this issue without making a recommendation thereon. It does however recognise that some 30% of potential voters remain outside of the electoral system and a concerted effort is required to motivate them to participate in future elections. In the age of digitisation, there could be some synergy between the Department of Home Affairs and the IEC, where Home Affairs automatically funnels data to the IEC for inclusion into the IEC’s voter register. 3.4.5 Can a candidate stand at both national and provincial level? Party candidates, yes. Individual parties will however set their own internal rules as to how they wish to approach the matter. Although, whilst they can stand for election at both the national and provincial level, if elected to both positions, they will have to choose in which level they wish to serve. They can only take up one seat. Independent candidates, no. An independent candidate will have to select whether he or she wishes to run for a seat at either provincial or national level. This is because no person may receive two salaries from the state, and it will not be in the voters best interest since he or she will not be able to devote sufficient attention to both positions. 3.5 Testing the new system against the guiding principles and criteria This section aims to test the outcome of the new proposed system against the initial criteria accepted as the departure point. The table below illustrates the extent to which success has been achieved: 3.6 Question and answer guide to understand the proposed system Question 1: What are the changes being proposed? The country will introduce 66 multi-member constituencies (MMC) based on district and metropolitan boundaries. In each MMC there would be between three and seven members, with a compensatory PR list used to ensure that general proportionality between the parties is maintained. 300 representatives will be elected via the MMCs and 100 via the compensatory PR list. Question 2: Why is the change being proposed? The change is being proposed to accommodate the Constitutional Court’s ruling that independent candidates ought to be able to stand for election. The Constitution also prescribes that the composition of the legislature should be generally proportional in terms of party representation. A pure PR list would, in the first instance, be too unwieldy to manage, and would most probably also make it more difficult for independent candidates to get elected. At the same time, the system being proposed by the panel improves the accountability of representatives towards their constituents in that they represent their local communities. And since the electorate now know who represents them, they are able to access a “local MP”. The distance between the voter and MP is shortened. The system also ensures greater geographic representativity, in that there are MMCs spread across the length and breadth of the country. Question 3: What would stay the same? There would still be a maximum of 400 members of Parliament, and general proportionality will be maintained. The voter will still only have one ballot paper at the national level to complete and will still only vote for the party (or independent candidate) of choice. Question 4: What would be the benefit of the proposed change? It fulfils the requirement of the Constitutional Court judgement that compels the electoral system to enable independent candidates to stand for election in the national and provincial spheres of government. The system is simple to understand, easy to administer, promotes representativity and, to a certain extent, accountability towards the voter. Question 5: How would the change work at the provincial level? The same system is applied at provincial level. Here too the voting procedure will remain unchanged. Question 6: What are the differences for the voter as they enter the ballot box? Basically, there will be no change. The only difference will be that when voting, the voter will also be presented with the parties’ list of candidates (or the list of independent candidates) which will represent his or her specific geographical area. The voter will thus, unlike in the current scenario, in future know who his or her local MPs will be. References Çarkoglu, A. Election System in Turkey Main Characteristics and Challenges. Presentation to the Inclusive Society Dialogue on Electoral Reform, 25 August 2020. Electoral Task Team. 2003. Report of the Electoral Task Team. Pretoria: Electoral Task Team. Elklit, J. 2020. The ETT Majority Model for a SA Electoral System & a Brief Comparison with the Danish Electoral System. Presentation to the Inclusive Society Dialogue on Electoral Reform, 25 August 2020. Fakir, E. 2014. The Electoral System: Is There Virtue or Vice in Reform? Daily Maverick, 22 May. Fakir, E. 2020. Constitutional Court hands MPs an electoral reform nettle to grasp. Parties won’t want to vote for legislation that spells their own demise. [Online] Available at: https://www.timeslive.co.za/sunday-times/opinion-and-analysis/2020-06-14-constitutional- court-handsmps-an-electoral-reform-nettle-to-grasp/ [accessed: 14 August 2020]. Fakir, E. 2020. A referendum thorough-going system reform is the way to political rehabilitation. [Online] Available at: https://www.africanews24- 7.co.za/index.php/southafricaforever/a-referendum-and-thorough-going-system-reform-is-the-way-topolitical-rehabilitation/[accessed: 14 August 2020]. Farrell, D. 2020. The Irish system of Proportional Representation by the Single Transferable vote. Presentation to the Inclusive Society Dialogue on Electoral Reform, 25 August 2020. Friedman, S. 2015. THE SYSTEM’S NOT TO BLAME? Electoral Systems, Power and Accountability Report Commissioned by the Council for the Advancement of the South African Constitution (CASAC). [Online] Available at: http://casac.org.za/wp-content/uploads/ 2020/05/Public-Accountability-and-Electoral-Systems-Report-edited.pdf [accessed: September 2020]. Gumede, W. 2020. Electoral Reform presentation regarding the Challenges of the current electoral system. Johannesburg: Democracy Works Foundation. Inclusive Society Institute. 2020. Electoral reform dialogue with expert panel, 20 July 2020. Inclusive Society Institute. 2020. Electoral reform dialogue with expert panel, 3 August 2020. Inclusive Society Institute. 2020. Electoral reform dialogue with expert panel, 25 August 2020. Inclusive Society Institute 2020. Electoral reform dialogue with expert panel, 7 September 2020. Inclusive Society Institute, 2020. Electoral reform dialogue with expert panel, 28 September 2020. Inclusive Society Institute, 2020. Electoral reform dialogue with expert panel, 16 November 2020. Krennerich, M. 2020. The German Mixed Member Proportional System. Presentation to the Inclusive Society Dialogue on Electoral Reform, 25 August 2020. Lago, I. 2020. Designing electoral systems: Some reflections from Spain. Presentation to the Inclusive Society Dialogue on Electoral Reform, 25 August 2020. Republic of South Africa (RSA). 1996. Constitution of the Republic of South Africa, Act no. 108 of 1996. Pretoria: Government Printer. Rosenbluth, F.M. & Shapiro, I. 2018. Responsible Parties: Saving Democracy from Itself. New Haven: Yale University Press. Annexure A Exploring alternative electoral systems that combine proportionality with the rights of independent candidates to contest in election 1. Introduction The electoral reform expert panel’s 3rd meeting on 25 August 2020 formed part of the process of developing new electoral models for South Africa. The preceding meetings aimed at garnering a clear understanding as the prescripts of the Constitutional Court’s judgement; the electoral boundaries set by the Constitution; the extent that electoral reform should take; as well as how reform of the Electoral Act could possibly assist in improving oversight, accountability and representativity. During this meeting of the panel, presentations were made by experts on electoral models in several jurisdictions that employ proportional representation electoral systems which also provide for the participation of independent candidates. Presentations were made by: Professor emeritus Jørgen Elklit, Aarhus University, Denmark, on the findings of the Van Zyl Slabbert Commission on Electoral Reform in South Africa and the Danish model. Professor Elklit is also a member of the Inclusive Society Institute’s expert panel on electoral reform Professor Michael Krennerich, University of Erlangen-Nürnberg, on the German electoral system Professor David Farrell, University College Dublin, on the Irish PR/STV system Professor Ignacio Lago, Universitat Pompeu Fabra, Barcelona, on the Spanish electoral system Professor Ali Çarkoglu, Koç University, Istanbul, on the Turkish electoral system The main purpose of the meeting was to stimulate the panel’s thinking as to what electoral model will be best suited for the South African environment. The following sections serve to present a summary of each of the aforementioned models as presented by the guest speakers. 2. Findings of Van Zyl Slabbert Commission & presentation on the Danish electoral model: Presented by Prof Emeritus Jørgen Elklit, Aarhus University, Denmark 2.1 The Van Zyl Slabbert Commission The Constitution of the Republic of South Africa, 1996, outlined the electoral system which would be used for elections in 1999; however, the system was not automatically extended beyond 1999. The aforementioned led to the establishment of a task team, referred to as the Electoral Task Team (ETT), that would propose legislation for an electoral system to be used in future elections. Dr Frederik van Zyl Slabbert was selected to be the Chairperson of the ETT, which is why the ETT is also known as the Van Zyl Slabbert Commission. The core values of the ETT for judging an electoral system were fairness, inclusiveness, simplicity and accountability. Fairness stipulates that each vote should be equal, as well as that votes should be used to compound elected representatives, i.e., ensure proportional representation. Inclusiveness intended to ensure active participation for all demographics, hence, no legal/formal thresholds should be applied in South Africa. Taking into consideration the use of two ballot papers, simplicity refers to the comprehensive understanding a voter should have of how the system functions, that despite having several ballot papers, voters should be able to use them without difficulty. As an example, in Kenya voters are able to distinguish between six ballot papers. Lastly, accountability was also a main concern for the ETT, as the current system does not allow voters to hold individual politicians accountable, as they can only do that by voting for another party, which may be too much to ask from a voter. As it is now, it is the political parties that have to account collectively to the electorate for their performance as a party. The opportunity to reject a disliked individual politician in an election very seldom materialises. Panel members proceeded to discuss constituencies, specifically single-member constituencies and multi-member constituencies. The majority recommended a system with 65-70 multi-member constituencies, which will allow 300 members to be elected to the National Assembly. The nine current multi-member constituencies, which are the nine provinces, have 200 seats allocated proportionately. The number of constituencies is thus recommended to be expanded considerably. The number of seats allocated in each new MMC should be at least three and not more than seven, to ensure that voters can easily recognise and evaluate their representatives in the National Assembly. Furthermore, the proposal envisages two sets of closed lists of party candidates, as now, one for national (but prepared for and issued separately in each MMC) and one for provincial. The candidate lists can become open at a later stage, which will further increase the level of accountability. In light of the abovementioned, several concerns were noted for reflection: A large number of political parties that do not necessarily have political support to contest in elections confuses and aggravates voters, which motivates the introduction of stringent ballot paper access requirements for parties intending to contest elections. The number of seconding voters should be used instead of a monetary fee for participating. Provisions for independent candidates are lesser; therefore, have an improved prospect of contesting in the proposed 3- to 7-member multi-member constituencies in provinces or nationally, where between 50 000 and 95 000 votes are required. Whether independent candidates and political parties should appear on the same ballot paper. If independent candidates would only stand in one multi-member constituency, while (national) parties contest on a national level and also have access to 100 compensatory seats. Requirement for an independent candidate to introduce a number of voters to second him or her as an independent candidate in that specific multi-member constituency. The number should not be less than 1% of registered voters and the validity of signatures is to be verified by the IEC. If a multi-member constituency seat allocation system, more or less identical to the current quota system, is implemented, one would like to see the long strings of decimals removed from the computations. A divisor system would be simpler to handle and is therefore to be preferred. The Sainte-Laguë system delivers a more proportional outcome than the D’Hondt system and is therefore suggested here. 2.2 Danish Electoral Model A comparison of the electoral systems in South Africa and Denmark outlines several key points that can be extracted to review whether a two-tier compensatory system is a category of its own. When comparing the two systems, several similarities and disparities were noted pertaining to voter registration, access to ballot papers, seat allocation system, formal threshold, party order on ballot papers, amongst others. With regards to voter registration, approximately 69% of citizens eligible to vote register in South Africa, while in Denmark citizens are registered automatically resulting in a 100% voter registration. In South Africa, political parties are required to pay a fee to contest in the elections, whereas in Denmark they submit a number of voter signatures. Currently, the value of one seat in the previous election is around 20 000 voter signatures. While the proportional representation consists of closed lists of party candidates, in Denmark, the parties decide for themselves if they want to run on open or semi-open (or semi-closed) lists. Although South Africa and Denmark both have two spheres, in South Africa with nine lower multi-member constituencies the voters are represented by 400 seats of which 200 seats are allocated to provinces, while in Denmark there are ten lower-level multi-member constituencies and voters are represented by 175 members in Parliament, of which 135 are allocated proportionally in the ten MMCs. The natural threshold in South Africa is a little bit less than 0.25%, while in Denmark the formal threshold is 2.0% of the votes. The party order on ballot papers is alphabetical in both South Africa and Denmark; however, in South Africa the first letter to appear on a ballot paper is determined by lot. Conversely, in Denmark the letter A (used by the Social Democrats) always appears first on the list. Refer to the below image as an example of a ballot paper in the 2019 parliamentary election. Please note that in this particular MMC five independent candidates are running. They are found at the bottom of the ballot paper as “Uden for partierne” (outside the parties). 3. German Mixed Member Proportional (MMP) system: Presented by Prof Michael Krennerich, University of Erlangen-Nurnberg The Bundestag is comprised of 598 members, in addition to surplus seats referred to as overhang mandates, as well as compensatory seats. The basic features of the Bundestag are stipulated as follows: There are currently two votes. The first vote is an individual vote provided to a candidate in one of the 299 single-member constituencies and the second vote is a party list vote, which is given to a closed regional party list in one of the 16 states the candidate resides in. The candidates who achieve a plurality in the single-member constituencies are elected as direct mandates. The second vote determines the seat allocated for each party in the Bundestag. Parties that obtain more than 5% of the second vote at the national level, or that have three members elected in the single-member constituencies are considered in the national allocation of seats, as stipulated by the legal threshold. The aforementioned is referred to as the legal threshold. In the Bundestag, the seats are allocated proportionately according to the party lists on the regional level of the states, which is determined by the second vote. The proportional seat share of each party is calculated according to a PR formula at the national level. In the event that a party wins more constituency seats (direct mandates) in a state, above what is allocated to it by the second votes in that state, the votes remain that of the party. These votes are referred to as overhang seats. It should be noted that since 2013, all parties that have passed the legal threshold receive additional seats to compensate for any disproportionality by the overhang mandates in the respective 16 states. (However, there will be another electoral reform in two steps before the elections of 2021 and 2025). The German electoral system produces highly proportional results for those political parties that have passed the legal threshold. When reviewing the inclusiveness of the German electoral system, it can be said that only very small parties are excluded from parliamentary representation. However, this legal threshold is not a necessary element of an MMP system. With regards to simplicity, German voters are familiar with the current voting system and the management of an MMP system is well known by German authorities. However, there is some difficulty in understanding the calculation process of the MMP system, especially following the reform in 2013. When the reform took place during 2013, there was no pre-calculation of the seats in the Bundestag. However, following the reform, 598 seats are distributed to 16 states according to the population. The seats are distributed among parties according to second votes won by each party in that respective state. If the number of seats won by a party exceeds the number of allocated seats for the state, the higher number of constituency seats is taken as a basis for further calculation, which is referred to as “hidden” overhang seats. Although the MMP system enjoys legitimacy in Germany, it should be noted that due to the number of seats of the Bundestag, the size is considered problematic. A half-hearted electoral reform (in two steps) before the 2021 and 2025 election aims at reducing the seats in Parliament, making the seat calculation, however, even more difficult to understand. With regards to political parties, their role is supported through using closed party lists while also allowing candidates to compete in single-member and regional party lists simultaneously. Floor-crossing of MPs is also allowed, regardless of whether they have been elected through party lists or single-member constituencies. In terms of individual accountability, single-member constituencies aim to secure a close constituency-based voter-representative relationship. Moreover, no independent candidate has thus far obtained a parliamentary seat in a single-member constituency in Germany since 1949. Candidates in single-member constituencies are mainly elected on the basis of party preferences rather than the personality of the candidates. In addition, women have generally been more successful in the nomination and election of the party lists than in single-member constituency. However, the proportion of women elected to the Bundestag is significantly lower in constituencies than on the party lists. Against the backdrop of the basic features of the German MMP system, the following would be the possible effects on the system in South Africa: Fairness: The multi-member proportional system would produce equally proportionate results if no electoral threshold was applied. Legitimacy: The increase in the number of seats in the National Assembly may contradict the Constitution. Accountability: Party and independent candidates would be more accountable to their electorate if elected in constituencies. Compared to single-member constituencies, however, small multi-member constituencies (e.g. 3 to 5 seats) may have the same effects but would additionally allow candidates of different parties to gain constituency seats. Simplicity: Voters would need to adjust to the features of an MMP system. With constituencies, a careful elucidation of electoral boundaries would be required. Possible weakening of parties: With an MMP system, political parties still select both party list candidates and constituency candidates. Some politicians may be inclined to stand as independent candidates, however, whether independent candidacies would be successful is an unanswered question. 4. The Irish system - Proportional reprepresentation by the Single Transferable Vote: Presented by Prof David Farrell, University College Dublin The limitations presented by the South African electoral system differ from those of Ireland in many aspects. Ireland uses a proportional representation electoral system with a single transferable vote. The system consists of multi-seat districts, and as in the Irish case, they have small districts or constituencies. There is a maximum of five members of Parliament per district. Ireland makes use of an electoral formula, namely the “Droop quota”. Since the electoral formula and the multi-seat districts are used together, the result is a proportional outcome. The “Droop quota” is a standard electoral formula. To obtain one seat in a district, a candidate needs a sufficient number of the votes in that district, which is determined by the size of the Droop quota: the more seats in the district, the lower the quota. The country’s proportional system is often referred to as a semi-proportional system, due to the small size of the districts. Ireland has many political parties, approximately 13, for a country of just under five million people. The Parliament consists of 166 members and is evenly spread out between the three major parties, Fianna Fáil, Fine Gael and Sinn Féin. However, the electorate votes for a candidate instead of a political party. Within the single transferable vote system, voters rank the order of their preferred candidates on the ballot paper. Additionally, no specific requirements exist regarding the number of candidates that a voter should rank, as they can choose to only rank a few candidates, or all the candidates listed on the ballot. The Irish electoral system is a candidate-based system. It was developed in the 1850s independently, in both Britain and Denmark. The system is often also referred to as British proportional representation. Formerly it was useful for the British to test this new electoral system on colonies, which is why Ireland makes use of the system and upheld it when the country became an independent nation in 1922. Furthermore, political party names did not appear on the Irish electoral ballot paper until 1965. There seems to be some anti-party bias built into the logic behind the system in its original or traditional way. Another feature is that the candidates are listed alphabetically. Moreover, along with candidates’ names being listed alphabetically, the names of the political parties and their logos are given next to full-colour photographs of each of the candidates. Provision for independent candidates Since 1922, independent candidates have been a permanent fixture in Ireland’s Parliament. In 2016, 15% of the seats in Parliament were won by independent members. According to data gathered by a colleague from University College Cork, the number of independent members in the Irish Parliament tends to be greater than the number of independent candidates from all other European Parliaments, combined. The Irish electoral system assists independent candidates in many ways, including through the usage of liberal ballot access rules. Candidates are only required to obtain 30 supporting signatures to appear on the ballot paper. Previously, only political parties had special recognition as parties in Parliament. Prior to 2016 it was possible for independent candidates to form a single technical group providing they had at least seven members. A change of the parliamentary rules in 2016 allowed Ireland to have as many technical groups in the Parliament as they might need, provided there are at least five MPs. These technical groups have access to similar resources as political parties in terms of funds, parliamentary speaking time and committee membership. Funding Most political parties are funded generously, with two-thirds of party income stemming from the State. This is a high figure and above the average in Europe. It is also extended to independent candi-dates, who are granted an annual party leader’s allowance. Accountability and representativeness In terms of accountability and representativeness, Ireland is not fully proportional. For example, the Irish Parliament has an unstable history in terms of the representation of women. In 2011, electoral quotas were introduced for the first time, however, despite these quotas the Irish Parliament still has fewer women than in the British House of Commons. Some level of accountability in the Irish electoral system can be seen in the way candidates prefer door-to-door campaigning during electoral campaigning. Candidates are known for persevering until they are certain that they will have secured substantial voter support, despite being ranked lower on a ballot paper. Additionally, every MP has a well-resourced constituency office located within the con-stituency, which provides greater opportunity for contact between the public and representatives. Moreover, research among voters indicated that in elections, voters have tended to have between 12% and 16% contact with MPs. Therefore, this indicates that there is regular contact between MPs and their constituencies. Accountability is a key principle in Irish politics, however, some shortcom-ings in this practice have been noted as many MPs spend more time on constituency contact than on legislation, which can result in a weakened Parliament. Positive and negative features of the system A positive feature of this system is that it offers an abundance of choice and accountability to voters, as well as being accommodating towards independent candidates. However, against this, representa-tiveness can be considered weak and the system is not as proportional as it could be. Another perturb-ing factor is the impact these types of shortcomings would have if a similar system were to be ap-plied in a larger country, such as South Africa. 5. Spanish electoral model: Presented by Prof Ignacio Lago, Universitat Pompeu Fabra, Barcelona There are three key issues when considering electoral models. The first is two crucial trade-offs that must be considered when deciding on an electoral system. Secondly, consideration should also be given to how the Spanish electoral system is dealing with these two trade-offs. Finally, one would have to look at what to do within the South African context. The first trade-off when deciding on an electoral system is the option between the inclusive representation of citizens’ preferences and the accountability of government. If the goal is to have a system in which all views of the society are to some extent reflected in Parliament, the best option is to have a proportional representation (PR) electoral system with large districts. This is the model of Portugal, Finland, Spain and South Africa. On the other hand, if the goal is to emphasise individual accountability, the best option is to have a first-past-the-post (FPP) system with single-member districts. A midway between these two options is to have mixed-member systems. How these mixed-member systems administer this trade-off depends on whether they are dependent or independent. Lower House elections in Spain are conducted according to the D’Hondt formula, where representatives are elected using a PR system in 52 districts ranging from 1 to 37 seats. Moreover, there is a 3% threshold at the district level. Therefore, in this first trade-off, Spain prefers the representation of the different opinions in society instead of having majority governments or giving more influence to individual candidates. Consequently, following the November 2019 elections, Spain has a minority coalition government, with 16 political parties obtaining seats in Parliament. Additionally, Spain uses the limited vote method for the Senate election operating on a simple majority vote. The principle rule is that four seats are allocated to each province, where each voter then has three votes. Once a PR system has been adopted, the second trade-off is whether the electoral system will provide priority to parties or to individual candidates. In Spain it has been found that most voters cast their votes in the same direction in Congress and Senate elections, which are held simultaneously. In the 2000 Senate elections, for instance, only 3% of the respondents in a survey said that they voted for candidates from different parties in both elections. Thus, the focus will be on the lower house electoral system used in Spain, which has a closed list system. In contrast to this, there is also the option of having a PR system with an open list such as in the case of Switzerland. Moreover, a third possibility exists, whereby voters have the option to display their preference on the ballot paper. Independent candidates in Spain In Spanish elections, officially registered parties, coalitions, and independents can contest elections. In each district, the number of candidates presented by each party must be equal to the number of seats to be filled. An example of this is Madrid, which is a 37-seat district and, therefore, parties must present 37 candidates. Furthermore, there are two possible options for independent candidates in Spain. Firstly, candidates in the party list who are not members of a political party can be identified as independents on the ballot. Secondly, a group of candidates not belonging to a specific party can decide to run in the election together, however, they do not constitute a formal political party, but are referred to as “voter groups”. Moreover, in order to participate in the Lower or Upper House election, a “voter group” must obtain the support (signatures) of 1% of the individuals included in the district electoral census. Consequences of the Spanish electoral system One of the most relevant consequences of the Spanish electoral system is that voters view individual candidates as less relevant than parties. This was revealed by a survey that was conducted after the 2000 elections, where 74% of the respondents said they could not recall the name of the first candidate of the party for which they voted. In the Senate elections of the same year, only 3% of the votes went to candidates from different parties. Voter preference is therefore not in the forefront of Spanish elections. Should Spain’s electoral system and process be used as a reference to make minor changes in the South African electoral system, these changes can be categorised in three different ways: Citizens should be allowed to run in elections, even if they do not belong to political parties. Candidates should also obtain the minimum support for their candidacy before they contest the elections. There should be a ballot paper per candidacy running in the election including the names of all candidates. Candidates in a party list who are members of a political party, should be identified as independent candidates on the ballot paper. 6. Turkish electoral model: Presented by Prof Ali Çarkoglu, Koc University, Istanbul, Turkey Within the Turkish electoral system, seats in the representative assembly are translated from the population figures, as they are divided based on provinces’ geographical boundaries. Each province has a provincial governor, “vali”, appointed by the central government in Ankara. Each province is also sub-divided into districts with district governors, “kaymakam”, and then into villages and neighbourhoods, each having a headman or “muhtar”. While the central government appoints valis and kaymakams, the muhtars are elected by their local constituencies. In addition, provinces and districts also have an elected executive mayor working with provincial assemblies. At the national level, the Turkish Grand National Assembly (Türkiye Büyük Millet Meclisi [TBMM]) is the representative legislative assembly, with a total of 600 seats. Each one of the 81 provinces is first allocated one seat irrespective of its population, thereafter the remaining 519 seats are distributed in accordance with provincial population figures. Such distribution necessarily creates seat allocations with fractions. The integer part of these seat allocations are made, and the fractions of seats are ordered and ranked from the largest to the smallest for all provinces. The integer seat allocation will always leave a certain number of undistributed seats due to the fractions. Consequently, the undistributed seats are then allocated from the largest seat fraction for the corresponding provinces down in the list until all remaining seats are allocated. The list system of proportional representation (PR) As seats are allocated to provinces, each province is comprised of a large electoral district, with a PR system and multiple seats, as determined by the D’Hondt formula, which translates party votes to seats in the TBMM. Furthermore, each political party formulates a list of candidates to occupy the number of available seats in each province or electoral district. For example, if a given district is allocated 10 available seats, then each political party typically forms a list of 10 candidates. According to the system formula, each party sends the top candidates from their list who win, in proportion to their share of the vote. In an attempt to avoid the formation of coalition parties within the TBMM, the 1980’s military regime in Turkey imposed a threshold of a minimum 10% nationwide electoral support to obtain any seats in the national legislature. Therefore, should a regional party win a substantial majority in several provinces, the party’s total votes must constitute 10% of the valid votes nationwide. If this threshold is not achieved, the party will not gain any seats from those provinces. Thus, this practice served to circumvent the fragmentation of seat distribution in Parliament through small parties voting in coalitions and has also worked to exclude regional minority ethnic parties from Parliament. Moreover, the arrangement also made it increasingly difficult for minority groups to form new political parties that would realistically be able to obtain this threshold. Consequently, these smaller constituencies grouped along specific issues of ideologies, assembled under larger umbrella parties, effectively introducing coalitions into party organisations. From this, party politics were played out in the shaping of party lists put forth for elections in sizeable multi-member district PR elections. Independent candidates As the nationwide electoral threshold is only applicable to parties contesting national elections, independent candidates who run at a district level are only constrained by the D’Hondt formula requirements to win a single seat. If each of these candidates receives a level of support that qualifies for a seat, they can all get elected as independents from a multimember district. However, if an independent candidate receives more votes than necessary to win a seat, those excess votes are, in a sense, “wasted”. Furthermore, parties may support multiple independent candidates. Administering such a system where many independent candidates from a party do not necessarily pass the national threshold, each running separately in different provinces, requires a great deal of coordination and voter mobilisation. Political parties have been known to support independent candidates as a means to bypass the 10% national threshold limitations, as seen during the 2007 and 2011 elections when Kurdish parties used this strategy. This has helped the Kurdish parties to grow and nationalise the previously regional bases of support. Additionally, there have also been a few independent candidates who have contested elections in their hometowns based on their name recognition, family, or tribal ties, which renders their election easier. The importance of district magnitudes A 2011 decision by the Supreme Election Council (Yüksek Seçim Kurulu, YSK) effectively reduced the district sizes in large metropolitan provinces, which had serious electoral consequences, particularly impacting smaller parties and independent candidates. The decision stated that single provincial election districts will be used for provinces with 1-18 available seats; two election districts will be used for provinces with 19-35 available seats; and three election districts will be used for provinces with 36 or more available seats.Consequently, cities like Istanbul and Ankara would have three election districts. To illustrate the importance of district magnitudes in the outcome of elections, Istanbul will be used as an example. As Istanbul has 98 seats available, the first election district has 35 seats, the second election district has 28 seats and the third district also has 35 seats. As the D’Hondt formula is applied for a total of 98 seats, the number of votes that would be required to win a seat is lowered considerably when compared to a district where only 35 total seats are available. Therefore, the larger district size increases smaller parties’ and independents’ chances of winning seats in an electoral district. In other words, in a province like Istanbul, where there are nearly 10.5 million voters, an independent candidate with slightly more than 100 000 votes could win a seat if all 98 seats are available in a single district. However, when the province is divided into three electoral districts with about 30 seats each, the minimum level of support for an independent candidate rises by nearly threefold. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town, 8001 South Africa Registration: 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place in March 2021 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel Contents Abbreviations & acronyms Introduction Identifying weaknesses Policy uncertainty Broad-based black economic empowerment Education Fiscal crisis Incompetence and corruption limiting State capacity Institutional weakness Labour and skills Lack of competition Interventions for fostering growth Conclusion References Abbreviations & acronyms AfCFTA African Continental Free Trade Area BBBEE broad-based black economic empowerment ISI Inclusive Society Institute IMF International Monetary Fund IPP independent power producer MP Member of Parliament NDP National Development Plan OECD Organisation for Economic Cooperation and Development PGM platinum-group metals SABC South African Broadcasting Corporation SEZ special economic zone SoE State-owned enterprise Stats SA Statistics South Africa UN United Nations Introduction This report is a summary of themes from discussions held by the Inclusive Society Institute (ISI) with the financial sector on the reasons behind South Africa’s depressed growth performance, but more importantly to gather innovative thought and a new perspective for placing the country on a path of sustainable and inclusive growth. The dialogue forms part of the ISI’s comprehensive research to develop a new growth-centred economic blueprint for South Africa, assessing the current performance of the National Development Plan (NDP) and presenting fresh ideas. The first phase of the research involved studying previously distressed economies that have turned themselves around within a short space of time, with a focus on Japan, South Korea, and Germany. The second phase delves into South Africa’s policies, highlighting strengths, weaknesses, and interventions that could catapult the sluggish economy onto a higher growth path. Owing to the impact of the Covid-19 pandemic, South Africa’s economy contracted by 7% in 2020 (Stats SA, 2021a). This severe contraction is estimated to have pushed about two-million people into poverty, as defined by those living below the poverty line for upper-middle income countries of $5.50 a day (World Bank, 2021). It is projected that the economy’s annual growth will be 3.10% in 2021 and 2% in 2022 (IMF, 2021). The ISI believes South Africa requires at least 4% to 5% economic growth to effectively begin to reduce the country’s entrenched high levels of unemployment, inequality, and poverty. Participants, both local and international contributors, were asked to identify the weaknesses in South Africa’s economic policies and to offer ideas about where the country’s focus and priorities should be. Identifying weaknesses South Africa has severe and deep-seated structural weaknesses. The unemployment rate has risen to 32.50% (narrow definition) in the fourth quarter of 2020 – the highest in at least 13 years (Stats SA, 2021b). Per capita growth has been declining since its peak of 2014 to a level last seen in 2005 (Stats SA, 2021c). South Africa is also one of the most unequal countries in the world, reporting a per capita expenditure Gini coefficient of 0.65 in 2015. The top 10% of the population spend nearly eight times more than the bottom 40% (Stats SA, 2020). The Covid-19 pandemic exacerbated existing shortcomings, exposing the economy’s major weaknesses, including, among others, stagnant growth, inequality, rising national debt and severe electricity challenges. Despite substantial social spending, government outcomes remain poor – whether that be in education, health, or social grants. Several participants mentioned South Africa’s unsustainable debt situation, which will require higher growth to address it. More foreign investment will be needed for economic growth and to restore fiscal soundness. Observations were made about policy formulation, implementation and communication across different sectors, such as improving education outcomes, dealing with land reform, and restructuring State-owned enterprises, including power utility Eskom. The country is also only just beginning to address a decade of State capture, run-down and repurposed State capacity, and related institutional weaknesses. Policy uncertainty Policy certainty is critical to driving investment in any economy. South Africa is ultimately competing for global investment, but uncertainty is undermining its drive to attract investors and thereby its prospects for growth. Concerns have been raised about policy certainty in energy, mining, and land reform. Investors are uncertain that laws will not change, and this makes the investment climate uncompetitive. Policy implementation paralysis, especially related to the NDP, policy communication and policy discord are hampering progress. The NDP, which serves as an overarching policy blueprint for the country and aims to eradicate poverty, inequality, and unemployment by 2030, was effectively shelved under the previous administration. While widely regarded as a well-written document, the NDP is considered too broad and the time in which reform is expected too long. Although strong in certain areas, particularly its broad economic plan, the NDP lacks specifics when it comes to certain sectors, for example financial services. It acknowledges the need for financial inclusion and refers to access to capital, but lacks substance on how this should be implemented. Targets are also no longer attainable and need to be recalibrated. Some other emerging economies have had substantial success with development plans that have a shorter timeframe than the long-term planning period of the NDP. Malaysia, for instance, practices a system of centralised economic development planning with five-yearly development plans (OECD, 2016). Policy plans should also be supported by effective participation of citizenship (OECD, 2017). The NDP has been ineffective in communicating its plans to the public and does not encourage a system of accountability. In the past ten years, various sector-focused policies have also been developed and launched with much fanfare, but a few years down the line, not much has happened. One example is Eskom – despite government hiring financial adviser Lazard in 2018 to draft a plan to shore up the struggling utility’s balance sheet, it remains a real risk to the sovereign (Reuters, 2018). This begs the question: Why should an investor, without an emotional attachment to South Africa, believe what the South African government is saying about implementing what they set out to do? A failure to conduct economic-impact studies when a new policy is drafted or considered for implementation is seen as a negative. For example, the National Health Insurance Bill, which proposes a fund to achieve universal health care coverage, has been published without an accompanying financing paper (ISI, 2020). On the other hand, where policies have succeeded, they are not necessarily deployed more widely or scaled up. Broad-based black economic empowerment The broad-based black economic-empowerment (BBBEE) policy, which aims to increase the participation of black people in the management, ownership, and control of South Africa’s economy, is seen by many as a disincentive to foreign investors. Although investors express support for the BBBEE objectives, there is frustration with the way the policy has been implemented and with the codes through which compliance is measured. A study, funded by the European Union, has found that the policy, primarily effected through the BBBEE Codes of Good Practice, has become “convoluted and complex, often frustrating businesses rather than encouraging transformative practices”. The frustrations experienced in implementing BBBEE range from “too many ambiguous and often-changing rules (making reference to the Codes that have undergone multiple changes in recent years), to trying to stay focused on business imperatives while attending to the intricacies of BBBEE compliance” (Samaai-Abader, 2020). In its current form, the policy has become an additional cost to industry and has also resulted in rent-seeking rather than productive business activity. There is a view that black economic empowerment has made a few politically connected people exceptionally wealthy while failing to improve income distribution for the majority of South Africans. Education Education is one of the biggest problems in South Africa. Beset by infrastructure shortcomings, overcrowded classrooms, a lack of teacher capacity and relatively poor learning outcomes, which are exacerbated by systemic inequalities, the education system does not equip young people with the right skills to enter the labour market. After initial improvements in learning outcomes – notably between 2003 and 2011 – gains have plateaued, as evidenced by the country’s performance in international assessments (Spaull, 2019). South Africa, for instance, underperforms in the Progress in International Reading Literacy Study and the Trends in International Mathematics and Science Study. Failure to deal decisively with education challenges will consign future generations to poverty and perpetuate the legacy of Apartheid (Spaull, 2019). A more skilled workforce will require improvements in the education system. Fiscal crisis At the heart of South Africa’s economic woes is a fiscal crisis, with the country on the edge of a proverbial fiscal cliff. South Africa’s fiscal cliff is the point where government expenditure on social grants, compensation to civil servants and interest on government debt exceeds total government revenue (Rossouw & Joubert, 2020). Having increased too rapidly in recent years, these items now practically account for almost all government revenue. Public-service compensation absorbed 47% of revenue in 2020/21, while debt-service costs – the fastest-rising item of government spending – consumed 19.20% of tax revenue. (National Treasury, 2021). Reducing the proportion of the Budget spent on salaries and debt-servicing will enable government to focus on priorities such as healthcare, education, and service delivery. With a diminishing base of 7.10-million individual taxpayers, of which less than 307 912 earn more than R1-million a year (National Treasury, 2020), personal income tax is only enough to fund about 80% of the civil servant bill and debt serving. Incompetence and corruption limiting State capacity The political environment is not conducive to growing the economy. Political leadership in a number of government positions lacks competency. This is highlighted by the use of consultants and outsourcing rather than the building of capable and competent State machinery. If there were a conducive political environment, incompetent government employees would leave their positions to make way for those who can do the job. Evidence emerging from the Zondo Commission of Inquiry into Allegations of State Capture points to a serious lack of competence and a high incidence of corruption at State institutions and State-owned enterprises (SoEs), including at Transnet, Eskom, Denel, the South African Broadcasting Corporation (SABC) and law enforcement agencies (Zondo Commission, 2021a). Institutional weakness Political risk is rising globally, particularly since the onset of the Covid-19 pandemic. Dealing with political risk in an emerging market requires strong institutions, many of which have been significantly eroded in South Africa in the past decade. For example, failure to insulate the SABC from vested political interests has left the public broadcaster in a crippled state, hobbled by financial bankruptcy and dependent on government bailouts (Ndlovu, M, 2019). Institutional weakness and cadre deployment enabled State capture to flourish. Had certain checks and balances been in place, many problems related to State capture may have been avoided (Zondo Commission, 2021b). There is also concern that Parliament acts as nothing more than a rubberstamp for what comes from the executive – another example of how institutional weakness affects the country’s ability to perform. Parliament’s oversight failures have been laid bare at the Zondo Commission of Inquiry, with testimonies of how administrative proceedings were used to sidestep oversight. Former African National Congress Member of Parliament (MP) Zukiswa Rantho testified in early 2021 about MPs being more loyal to the ruling party than doing what is right (TimesLive, 2021). Labour and skills South Africa has a fairly sophisticated formal sector, but suffers from extensive unemployment. Only 16. 40-million out of a labour force of 23.10-million have managed to find employment. The 6.70-million-strong cohort of unemployed people is compounded by a further 2.90-million who have given up looking for a job and 12.70-million who are not economically active (Stats SA, 2021). Exacerbating unemployment is a mismatch between labour demand and supply, with the labour force retaining a large number of low and unskilled people. A nonalignment between the skills that graduates are being equipped with and those which are required by the economy is contributing to the unemployment crisis. South Africa has been suffering from a chronic shortage of skills for many years, notably in the engineering and information and communication technology fields, but government has only recently moved to plug the skills gap through importing skilled labour. Although the move to assist foreign workers with critical skills to gain work permits is welcomed, concerns have been raised about how long it took government to reach this point. Lack of competition The economy is bedevilled by high concentration, little competition, and anticompetitive behaviour. One participant mentioned that South Africa is a country of fives: Five big banks, five big retailers and five big construction companies. Big players have been accused of questionable collaboration. Collusion, for instance, has occurred in the construction, banking and telecommunication industries. The Competition Commission in 2013 fined 15 construction firms a collective R1. 46-billion for collusive tendering (Engineering News, 2013) and in 2017 referred cases of collusion against several international banks for alleged price fixing and market allocation (Engineering News, 2017). A lack of competition holds back innovation, keeps prices high, and denies many people access to services and opportunities to start businesses. Interventions for fostering growth Several sectors were identified as ripe for potential policy improvements, ranging from power utility Eskom and independent power producers, to SoEs, skills development and beneficiation of platinum-group metals (PGMs) and other minerals. Alleviating small business regulatory compliance, improving the ease of doing business, rethinking BBBEE and acknowledging the cost of crime were also mentioned. Conclusion South Africa needs to celebrate its successes and seek to replicate these in other areas. Some of its successes include a vibrant democracy, a free media and free expression, an independent judiciary, a constitutionally protected South African Reserve Bank and the way inflation is contained with sound monetary policy. The turnaround of the South African Revenue Service since the State capture period is also worth nothing, allowing for improved tax collections efforts. Another positive is the country’s demographic dividend, although opportunities may be somewhat limited by South Africa’s already having had its urban transition. Projected to 2030, South Africa could benefit from a major demographic dividend, as the proportion of working people in the total population increases. Although it should also be noted that too sharp a population growth rate without the necessary concomitant growth in GDP can result in too many people looking for jobs, which can be a risk to the economy and fiscus. The bigger pool of possible employment seekers could, however, create opportunities for new businesses. There is also potential for increased trade with the rest of the continent through the African Continental Free Trade Area (AfCFTA), which creates a single continental market for goods and services in Africa. AfCFTA is the world’s biggest free trade area, measured by the number of countries participating. The pact connects 1.30-billion people across 55 countries (World Bank, 2020). AfCFTA is considered a game-changer for the continent. It will help reduce trading challenges, such as different regulations from one African country to another. By facilitating the movement of goods and services among African countries, AfCFTA will create opportunities to accelerate intra-Africa trade, grow local businesses, create jobs, and increase infrastructure development on the continent (Williams, 2019). It has been noted that, although the Ramaphosa administration is taking measures to redress policy implementation paralysis, progress is slow. To get the economy on a sustainable growth trajectory, policy uncertainty and implementation paralysis must be addressed. Strengthening institutions is also critical going forward. Linking the NDP to an active citizenship will also be of benefit to the country. Getting people involved in every level of society – from rural area to towns and cities, nationwide – will assist in addressing accountability failures and set the stage for sustained and inclusive economic growth. Although South Africa is facing serious challenges there are opportunities to rejuvenate the economy and hope prevails. References Engineering News. 2013. Construction companies fined R1.46bn for collusion, June 24, 2013. [Online]. Available at: https://www.engineeringnews.co.za/article/construction-majors-fined-r146bn-for-collusion-2013-06-24 [accessed April 23, 2021]. 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Priorities for education reform – background note for Minister of Finance, January 19, 2019. [Online]. Available at: https://nicspaull.com/2019/01/19/priorities- for-education-reform-background-note-for-minister-of-finance-19-01-2019/ [accessed April 23, 2021]. Statistics South Africa (Stats SA). 2020. How unequal is South Africa? February 4, 2020. [Online]. Available at: http://www.statssa.gov.za/?p=12930 [accessed April 23, 2021]. Statistics South Africa (Stats SA). 2021a. Gross domestic product, fourth quarter 2020, March 30, 2021. [Online]. Available at http://www.statssa.gov.za/publications/P0441/P04414thQuarter2020.pdf [accessed April 23, 2021]. Statistics South Africa (Stats SA). 2021b. Quarterly Labour Force Survey, Quarter 4:2020, February 23, 2021. [Online]. Available at http://www.statssa.gov.za/publications/P0211/P02114thQuarter2020.pdf [accessed April 23, 2021]. Statistics South Africa (Stats SA). 2021c. GDP: Quantifying SA’s economic performance in 2020, March 9, 2021. [Online]. Available at: http://www.statssa.gov.za/?p=14074 [accessed April 23, 2021]. TimesLive. 2021. Former Eskom inquiry chair throws the ANC under the bus at Zondo commission, February 2, 2021. [Online]. Available at: https://www.timeslive.co.za/politics/ 2021-02-02-former-eskom-inquiry-chair-throws-the-anc-under-the-bus-at-zondo-commission/ [accessed April 23, 2021]. United Nations (UN). 2018. World Urbanisation Prospects, 2018. [Online]. Available at: https://population.un.org/wup/Country-Profiles/ [accessed April 23, 2021]. Williams, P. 2019. African Continental Free Trade Area (AfCFTA): The dream of our founding fathers coming to life, South African Government, July 19, 2019. [Online]. Available at: https://www.gov.za/blog/afcfta-dream-our-founding-fathers-coming-life# [accessed April23, 2021]. World Bank. 2020. The African Continental Free Trade Area (AfCTFA), July 27, 2020. [Online]. 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Available at: https://www.statecapture.org.za/site/files/transcript/359/Day_345_-_2021-02-18.pdf [accessed April 23, 2021]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 May 2021 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place in May 2021 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Content Abbreviations & acronyms Introduction Key considerations Economic recovery Deindustrialisation and productivity Environmental challenges Infrastructure bottlenecks Job losses and employment Macroeconomic stability Social spending Suggested interventions for South Africa Conclusion Annexure A – South Africa’s Economic Outlook, Wolfgang Fengler, lead economist southern Africa, World Bank Annexure B – Reinvigorating South Africa’s Economy, Dr Arthur Minsat, head of unit for Africa and Middle East Development Centre, OECD References Abbreviations and acronyms GDP gross domestic product ICT information and communications technology ISI Inclusive Society Institute OECD Organisation for Economic Cooperation and Development Ters Temporary Employer-Employee Relief Scheme WCY World Competitiveness Yearbook Introduction This report is a summary of discussions held between the Inclusive Society Institute (ISI) and representatives of multinational funding institutions to gain a better understanding of what policies South Africa should be pursuing to encourage welfare-enhancing growth. Economists from the World Bank and Organisation for Economic Cooperation and Development (OECD) participated in the April 2021 webinar, providing their insights on policy interventions. The discussion forms part of the ISI’s comprehensive research to develop a new growth-centred economic blueprint for South Africa. This report highlights that: South Africa is at a critical juncture, with a combination of challenges on the economic, social, environmental and fiscal fronts emerging simultaneously. These issues must be responded to at the same time, presenting development challenges. South Africa’s short-term economic recovery is fragile, and the country is underperforming against other emerging nations. For the first time in democratic South Africa, macroeconomic stability has been flagged as one of the country’s top three concerns. The public-sector wage bill is high by international standards and wage levels of employees in the public sector are high, compared with private-sector employees in South Africa. A demographic dividend is big opportunity, although there is concern about population growth that is not supported by economic growth. The report concludes with recommendations for policy interventions in green energy, digital transformation, skills, infrastructure investment and employment to help place South Africa on a path to sustained growth and inclusive development. Participants included World Bank country director for Southern Africa, Marie Francoise Marie-Nelly; World Bank lead economist for Southern Africa, Wolfgang Fengler; and OECD Development Centre’s unit for Africa, Europe and Middle East head, Arthur Minsat. Key considerations Economic recovery Against the backdrop of a deep recession in 2020, South Africa is experiencing only a mild recovery, measured against other emerging nations. Growth is forecast to resume at 3% in 2021, lower than the OECD average of 3.30% and the Brics group – Brazil, Russia, India and South Africa – average of 6.70%. Economic expansion will plateau at about 2% in 2022 – well below what is needed to aid job creation (Minsat, 2021). Owing to the combined effect of the 7% contraction in 2020 and lingering structural constraints to growth, South Africa’s real gross domestic product (GDP) is not expected to return to prepandemic levels before the latter part of 2023 (National Treasury, 2021). A global economic rebound of 5.60% in 2021 and 4% in 2022 presents an opportunity for South Africa to “ride the global wave” of recovery (OECD, 2021). However, as a relatively small economy with a pre-Covid GDP of $351.40-billion, global integration will be key to taking advantage of opportunities that may emerge. Thus far, South Africa’s exports have failed to follow the ‘V-shape’ recovery of foreign demand, which highlights a potential issue with their competitiveness. There is, however, an opportunity to capitalise on intra-African exports. Further, South Africa is among a few economies that have not achieved much in terms of economic prosperity in the past ten years and has been urged not to repeat the failures of the “lost decade”. Originally coined to refer to Japan between 1991 and 2000 – a time when the economy collapsed, stock markets crashed, and unemployment and debt soared – the term has come to be applied to a wider range of economies that experienced sustained periods of low, or negative, growth rates owing to political and economic policy failures. For example, warnings were issued by US President Barack Obama that the US risked a lost decade in the wake of the Great Recession of 2007-2009 (Meckler, 2009). In the South African context, President Cyril Ramaphosa in January 2019, spoke about South Africa’s “nine lost years” resulting from the State capture and related corrupt practices that gripped the country from 2009 to 2018. While the per-capita GDP of many other developing nations accelerated, South Africa’s stagnated and now reflects the same level as 2006. Had the country managed to replicate its pre-global financial crisis growth over the past ten years, its per-capita GDP would have been R65 000, compared with the current R50 000 (Fengler, 2021). Deindustrialisation and productivity South Africa has suffered a major deindustrialisation pattern in the past three decades. Manufacturing as a percentage of GDP has declined from 21.60% of GDP in 1990, to less than 12% in 2019 (World Bank, 2021). Although certain sectors are performing well, most notably automotive, the overall industry has been underperforming by global standards. This analysis is buttressed by the fact that total factor productivity – a crucial measure of efficiency in manufacturing – has declined in the past decade (Minsat, 2021). The automotive industry is South Africa’s lead manufacturing sector. Its growth and success can be ascribed to the constructive cooperation that exists between industry and government. Government has adopted industrial polices to support the industry. The Motor Industry Development Plan started in 1995 and was replaced by the Automotive Production and Development Programme (APDP) in 2013. The South African Automotive Masterplan 2021 to 2035, alongside amendments to the APDP, take effect in mid-2021. The APDP is a trade-related investment measure that uses import tariffs, rebate mechanisms, including a vehicle assembly allowance, a production incentive, as well as a cash grant in the form of the Automotive Investment Scheme to incentivise investment (Lamprecht, 2021). Environmental challenges South Africa faces many environmental challenges, the cost of which is directly affecting the country’s coffers. The welfare cost of premature death resulting from ambient particulate matter pollution is estimated to be about 5% of South Africa’s GDP. This is deemed excessively high, when compared with China’s 10%, given the disparity in levels of industrialisation. Infrastructure bottlenecks Infrastructure weaknesses in energy, rail and ports, are chokepoints for growth and productivity. The quality of South Africa’s infrastructure is relatively low, compared with other countries. This is underscored by the nation’s performance in the latest World Competitiveness Yearbook (WCY), which rates the ability of 63 industrialised and emerging economies to create and maintain an environment that empowers enterprises to generate value. South Africa’s ranking in 2020 fell three notches to 59 out of 63 countries rated. Of the four groups of criteria evaluated, South Africa’s weakest performance was in infrastructure, with its rating having dropped to 61 in 2020, from 60 in 2019 (Department of Employment and Labour, 2020). Job losses and employment South Africa’s economy lost 2.20-million jobs in the second quarter of 2020, a period marked by a hard lockdown to combat the spread of Covid-19 (Stats SA, 2020). Only about 40% of the jobs lost had been recovered by the end of the year. The job losses were most severe for those living in lower income households before the Covid-19 pandemic, with a heavy burden among low skilled and less educated workers. At the end of 2020, South Africa had a labour force of 22.30-million, of which 15-million are employed and 7.20-million are unemployed. There are another 17-million who are not economically active, 2.90-million of whom are discouraged work-seekers (Stats SA, 2021). South Africa’s working-age population is forecast to expand in the next decade, exceeding the dependent population (below 15 and above 64 years of age). This could yield a demographic dividend, although a growing workforce will need a growing economy. In the absence of economic expansion, the dividend could well convert to a liability. Macroeconomic instability For the first time since the advent of democracy in 1994, the World Bank has identified macroeconomic stability as one of South Africa’s top three challenges – the other being inequality and a lack of jobs. Although not considered to be at a “dangerous level”, the World Bank has flagged the issue as a worry (Fengler, 2021), echoing concerns raised by local economists. The country’s fiscal position is weak, because of low growth and rising expenditures, which have not translated into better economic prospects. The budget deficit, at 14% of GDP in 2020/21, is at its highest ever and gross debt reached 80.30% of GDP in 2020/21 (National Treasury, 2021). South Africa is not in a more vulnerable position owing largely to the strength of the country’s financial sector, which allows for a large degree of domestic borrowing. External borrowing remains at prudent levels, limiting the degree of currency risk. The National Treasury presented two debt scenarios in the June 2020 Supplementary Budget. In the passive scenario, which is not deemed a viable option for South Africa and was presented for illustrative purposes only, debt will spiral upwards, exceeding 100% of GDP from 2022. The possibility that government will not be able to repay its debt leads to higher debt-service costs. This essentially redirects money that could be spent on health, education, and other policy priorities to local and overseas bondholders (National Treasury, 2020). In the active scenario, government stabilises debt through a combination of reforms to boost economic growth and measures to increase revenue collection and lower expenditure. The deficit would be reduced strongly starting in 2021 and the debt level would start decreasing from a peak of 87% of GDP in 2023 (National Treasury, 2020). The OECD has presented a third, progressive consolidation scenario where government fails to implement bold economic and fiscal reforms and the reduction of the deficit is only progressive. In this scenario, the debt level will stabilise by 2028. The progressive consolidation scenario is based on a deficit reduction of 1% a year of GDP and 2% GDP growth from 2025 (Minsat, 2021). The National Treasury, in its 2021 Budget Review, announced a fiscal strategy to stabilise debt at 88.90% of GDP in 2025/26. Over time, this will reduce borrowing costs and the cost of capital (National Treasury, 2021). Besides high debt-service costs, public-service compensation has also risen sharply. The average renumeration of public servants is high by international standards and compared with private-sector employees in South Africa. Government’s payroll costs have become increasingly unsustainable, driven largely by average increases of more than 3% a year above inflation for more than a decade (Intellidex, 2020). To safeguard public finances, Finance Minister Tito Mboweni has taken a hard stance with a proposed freeze on wage increases for 1.20-million public servants. Indexing public-sector wages below inflation for three years (at inflation minus two percentage points) could generate about R30-billion in savings over three years. This measure, the OECD says, will have a limited real cost to civil servants as inflation has receded and given that they would still benefit from annual progression in the pay scale. Wage indexation should also be linked to productivity developments (Minsat, 2021). Social spending South Africa allocates substantial amounts each year to roll out its social welfare programme. The social grants programme, which is the main government instrument to reduce poverty and inequality, reaches more than 17-million beneficiaries and about half of all South African households (OECD, 2020). The World Bank, however, warns that the social protection system cannot be a substitute for growth and jobs. The World Bank also argues that the social protection system is becoming unsustainable, owing to shrinking fiscal space (Fengler, 2021). Meanwhile, high social spending must also be converted into better results. South Africa’s investment in health and education, as a percentage of GDP, is higher than that of Turkey, but its outcomes are worse (Fengler, 2021). Suggested interventions for South Africa Conclusion South Africa will ultimately have to undertake its economic planning within the confines of the global economic architecture. By providing insight on best practice, sharing comparative data, and offering recommendations, multinational funding organisations help to shape the debate around policy interventions. Further engagement among civil society, think tanks, African universities and policymakers is needed to deliver a framework for a strategy to accelerate inclusive economic growth. It is recommended that policymakers take heed of the international thinking contained in this report and that planning is measured against it. This does not mean a wholesale copying of what international funding institutions dictate, but finding unique South African solutions capable of responding to what are universal concerns. Annexure A Annexure B References Department of Employment and Labour. 2020. South Africa hits all-time low in competitiveness ranking. June 17, 2020. [Online]. Available at http://www.labour.gov.za/ south-africa-hits-all-time-low-in-competitiveness-ranking [accessed May 10, 2021]. Fengler, W. 2021. South Africa Economic Outlook, Inclusive Society Institute panel discussion. April 14, 2021. World Bank. Intellidex. 2020. The Public Sector Wage Bill – an evidence-based assessment and how to address the challenge. November 2020. [Online]. Available at: https://www.intellidex.co.za/ wp-content/uploads/2020/11/Intellidex-Public-Sector-Wage-Bill-Nov-2020.pdf [accessed May 10, 2021]. Lamprecht, N. 2021. Automotive Export Manual 2021, Journey to 2035, April 2021. [Online]. Available at https://naacam.org.za/wp-content/uploads/2021/04/ AutomotiveExportManual2021.pdf [accessed May 10, 201]. McKinsey & Company. 2019. The Future of Work in South Africa: Digitisation, Productivity and Job Creation. September 4, 2019. [Online]. Available at: https://www.mckinsey.com/~/ media/mckinsey/featured%20insights/middle%20east%20and%20africa/the%20future%20 of%20work%20in%20south%20africa%20digitisation%20productivity%20and%20job%20 creation/the-future-of-work-in-south-africa.pdf [accessed May 10, 2021]. Meckler, L. 2009. Obama Warns of Lost Decade, February 10, 2009. [Online]. Available at: https://www.wsj.com/articles/SB123419281562063867?mod=djemalertNEWS [accessed May 26, 2021]. Minsat. A 2021. Reinvigorating South Africa’s Economy: Key Considerations, Inclusive Society Institute panel discussion, April 14, 2021. Organisation for Economic Cooperation and Development. National Treasury. 2021. Budget Review 2021, February 24, 2021. [Online]. Available at http://www.treasury.gov.za/documents/National%20Budget/2021/review/FullBR.pdf [accessed May 10, 2021]. Organisation for Economic Cooperation and Development (OECD). 2020. OECD Economic Surveys: South Africa 2020, July 2020. [Online]. Available at https://www.oecd-ilibrary.org/sites/ d6bc2d63-en/index.html?itemId=/content/component/d6bc2d63-en [accessed May 10, 2021]. Organisation for Economic Cooperation and Development (OECD). 2021. OECD Economic Outlook, Strengthening the recovery: The need for speed, March 2021. [Online]. Available at https://www.oecd.org/economic-outlook/ [accessed May 10, 2021]. Statistics South Africa (Stats SA). 2020. Quarterly Labour Force Survey, Quarter 2:2020, September 29, 2020. [Online]. Available at http://www.statssa.gov.za/publications/P0211/ P02114thQuarter2020.pdf [accessed April 23, 2021]. Statistics South Africa (Stats SA). 2021. Quarterly Labour Force Survey, Quarter 4:2020, February 23, 2021. [Online]. Available at http://www.statssa.gov.za/publications/P0211/ P02114thQuarter2020.pdf [accessed April 23, 2021]. World Bank. 2021. World Bank, Data. Manufacturing, value added (percentage of GDP) – South Africa. [Online]. Available at: https://data.worldbank.org/indicator/NV.IND.MANF.ZS?locations=ZA [accessed May 10, 2021]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. Authors: Percept Actuaries and Consultants Edited: Daryl Swanepoel 17 June 2021 Foreword South Africans deserve access to quality and affordable healthcare. This notion is indeed entrenched in the Constitution’s Bill of Rights that grants everyone the right thereto. It furthermore obliges the state to take reasonable measures to progressively achieve the right. To this end, the National Department of Health has embarked on a process to establish a National Health Insurance (NHI) Scheme for South Africa. It is a health financing system that is designed to pool funds to provide access to quality, affordable personal health ser­vices for all South Africans based on their health needs, irrespective of their socio-economic status. These ideals cannot be faulted. Of concern to the Inclusive Society Institute (ISI), given South Africa’s current economic realities, is the affordability of NHI and whether it will be implemented incrementally, as funds become available. On the one hand, one would not want to disrupt the status quo without a clear understanding of the costs attached to the ultimate goals of the NHI, and on the other, the existence of the current world class health infrastructure needs to be assured for future generations. As the former German Federal Minister for Health, who oversaw the implementation of the national health system in Germany, Hon. Ulla Schmidt, puts it: Do not break down what you have until you have an alternative in place that works. There is a dearth of studies into the costing of the proposed NHI. To this end, the ISI has ventured such a costing. The process has involved extensive consultation with a wide spectrum of health sector stakeholders, the discussions of which have culminated into a presentation of four alternative models to secure universal and affordable quality healthcare for all in South Africa. And, in an attempt to give direction, each alternative, together with the Department’s NHI proposal, has been costed. It is this costing that is contained in this report. The report is not a criticism of the Department’s NHI proposals, neither does it profess to be accurate in all respects. What it is, is an attempt to ensure feasibility and sustainability, a fresh look at the approach to implementing universal healthcare, and an assess­ment as to how best to ensure the progressive realisation of the basic right to quality and affordable healthcare for all. As regards the costing: undoubtedly there is room for improvement. The public debate in this regard is bound to identify gaps that could improve the modelling. That said, the Institute is confident that the report is a sound starting point on which dialogue can build. The Institute chooses not to be descriptive as to the final path that legislators need to take. It however hopes that the policymakers will accept this contribution as a further evaluation tool to ensure that the finally chosen funding model delivers for future genera­tions, a legacy that is indeed capable of delivering on its goals. Executive summary This document sets out the costs of the four alternative universal health coverage (UHC) scenarios that were presented in the previous paper released by the ISI, entitled ‘Reimagined Pathways for UHC in South Africa: A critical policy assessment of NHI choices’ (2020). The scenarios we’ve analysed are described in Table 1. The four scenarios are alternatives for the fifth scenario, NHI as De­scribed in the Bill. The proposed reforms as they stand in the Draft NHI Bill represent a combination of policy building blocks sequenced in a particular way. This paper aims to unpack how and where these policy blocks could be reshuffled or re-envisioned to better achieve UHC, given the current South African health and economic outlook. There are several reasons why it’s important to consider the costs of alternative scenarios relative to the likely costs of NHI as it’s currently envisioned. Firstly, it will allow policymakers, citizens and civil society to be cognisant of the trade-offs between cost, quality and access. Without transparency in trade-offs, it’s impossible to fully grasp the long-term consequences of a particular policy choice relative to others. Secondly, once the trade-offs and considerations related to a particular UHC path are transparent, policy choices can be reconsidered, if needed. Understanding what drives the costs and outcomes of each scenario allows for the adjust­ment of policy options, which will help South Africa reach UHC as efficiently and effectively as possible. The alternative UHC scenarios presented in the previous report are shared below. Table 1: Alternative UHC scenarios explored in ISI (2020) How the model was constructed The cost model presented here uses the current health system structure and the combined total health expenditure in the public and private sectors (including out-of-pocket spending) as a starting point. We believe it’s a pragmatic approach to work with what we have, rather than with what we wish we did. As a reminder, we include a summary table to tell the story of what is likely to happen to the South African health financing sector as we currently know it under each scenario. Table 2: Summary of how different components of SA health financing and delivery system are affected in different scenarios We make assumptions about the main demographic and structural cost drivers to arrive at different costings for the five healthcare scenarios, while also considering macro-level indicators such as the consumer price index (CPI), healthcare cost inflation, population growth and GDP growth over the 2021-2040 period. Given that there are many uncertainties about how these variables will play out over time, we’ve provided our best estimates given the available information. Changes in total health expenditure (THE) can be understood in terms of three main categories of expenditure: Publicly funded: centralised public expenditure (a form of risk pooling, even if not explicitly managed as a risk pool); Private risk pooling: the vast majority of this is located in medical schemes; and OOP (out-of-pocket expenditure) and (non-medical scheme) private insurance by households for private and public servic­es not covered by either medical scheme funding or public-sector expenditure. This includes, for example, private pharmacy expenditure by those who consult the public sector, or private GP visits for those who don’t have medical scheme cover. Collectively, these three categories form the total funds currently available for health expenditure, unless other funding sources – such as a mandatory payroll tax, income tax, health taxes or value-added tax – are enacted to increase the available amount for spending on health services. The cost model creates a framework that makes the trade-offs between different policy choices evident, and this is the real value of the model. It shows how total health expenditure, and its various components are likely to play out over time if we do or don’t take certain actions now. It makes the long-term costs of inaction evident, and in doing so, provides valuable information that can be used for NHI policy development. Detailed assumptions about the overall financing structure and cost drivers for each scenario are shared later in this report. What the model says about the costs of the various scenarios By 2030, Status Quo Gold Standard is the most expensive model in terms of total healthcare expenditure. In 2040, NHI as Described in the Bill is the most expensive model. In contrast, Power to the People is the least expensive model in 2030 by a slight margin, while Reorienting Towards Value is the least expensive scenario by 2040. We also see that Reorientating Towards Value starts off relatively expensive due to the investments needed to reorientate a health system. However, by 2035, this scenario is the most affordable and sustains this position in 2040. Why does NHI as Described in the Bill emerge as the most expensive scenario? UHC implemented through a single-risk fund is not necessarily expensive. However, the current description in the Bill, with its lack of detailed and clear information on accountability structures, creates uncertainty about whether it will be implemented with the necessary attention and rigour. The NHI Rejigged scenario shows the potential for NHI to achieve its goals, if it’s implemented with the current reality and context in mind, which would make the milestones more achievable and realistic. NHI Rejigged is less expensive than NHI as Described in the Bill over the longer term as the greater accountability and information and data systems with which it is implemented will greatly reduce administration costs and wastage (through corruption). Because NHI Rejigged has a longer preparation phase during which the quality of public health facilities will be improved, there will be more buy-in from system users and lower out-of-pocket expenditure later on. In calculating the relative costs of estimated total healthcare expenditure, three different growth scenarios are used: mid-growth (1% real growth), low-growth (0% real growth) and high-growth (3% real growth). We only share the results of the mid-growth scenario here. In the mid-growth scenario, the most expensive health financing scenario, NHI as described in the Bill constitute 13.2% of the GDP by 2040. Such a large percentage of GDP being allocated to total health expenditure relative to current expenditure levels (around 8.7% of GDP) is unlikely to be affordable relative to other social priorities, but this must be viewed considering low to modest economic growth and a system that would have pushed many people to increase their OOP expenditure (and therefore total healthcare expenditure) by that time. The least expensive scenario costs R638 billion (real 2020 Rands), with the costs of the other four scenar­ios ranging from R720 to R885 billion (also real 2020 Rands). What the costs and scenarios mean for policy choices? The model’s results help to illustrate what is gained and lost through different policy choices, relative to the objectives being pursued by moving to UHC: equity, access to quality care and quality outcomes, efficiency, stewardship and governance. These gains and losses are not just about the financial costs of system change, but ultimately also about healthcare outcomes and overall system resilience. Equity The goal of equity should take into account both where funds come from (with contributions based on the ability to pay), and where funds are going (with more funds directed to those with the greatest need). The option that fares worst in terms of equity is Status Quo Gold Standard, where it’s assumed that the public and private sectors mostly continue operating as they are, albeit with improved quality and efficiency. NHI as Described in the Bill doesn’t fare well either due to the high OOP expenditure dependency. Those who can pay out-of-pocket will likely be able to access better care, resulting in a highly inequitable outcome. Access to quality care and quality outcomes Comparing policy options based on cost can mask what really matters – namely whether we can expect the future system to help the population thrive. But which clear signs indicate that the system is performing? System performance is visible in overall outcome metrics (such as life expectancy and maternal mortality rates), disease-specific outcomes metrics (which our system currently lacks) and through secondary measures (such as the extent of medical malpractice claims). Apart from considering how many units of care a system can afford, there is a range of dynamics that impact a system’s ability to deliver high-quality care. They include: Investment in the service delivery platform – including infrastructure and IT systems. Financing reforms have limited scope to strengthen the quality of care if the service delivery platform is compromised. This is illustrated in the cost comparison of NHI as Described in the Bill and Status Quo Gold Standard. The balance between primary and hospital care. A weak system will have too many resources directed towards relatively ex­pensive hospital care due to a bypassing of referral pathways, weak preventative care, and late intervention. This is illustrat­ed in the cost comparison of NHI as Described in the Bill, Power to the People and Reorienting Towards Value. Systems that are patient-oriented, that have greater bottom-up accountability and that measure and incentivise quality care tend to produce better health outcomes – and ultimately deliver greater value for the money invested in the system. This is illustrated in the cost comparison of NHI as Described in the Bill, Power to the People and Reorienting Towards Value. Strong systems that support health outcomes. From a patient perspective, this means strong linkages between care, better continuity of care and strong care coordination. System performance is supported by system stability (i.e. the absence of system shocks), a balance between centralised support and ground-level responsiveness, and ongoing investment in the ser­vice-delivery platform. Big-bang reform (NHI as Described in the Bill) is likely to weaken system resilience in an already fragile system. Policy options that support ongoing quality improvement and system strengthening are likely to outperform over the long term. This was clearly illustrated by the global impact of Covid-19, where countries with resilient and unified health systems have outperformed countries with weak ones. Healthcare worker capacity and satisfaction. Healthcare outcomes rely on having healthcare workers who deliver quality care. A large monopsony creates the risk of a system that isn’t sufficiently oriented towards supporting healthcare workers and enabling supply-side innovation. Efficiency: Accountability to users (bottom-up) and societal buy-in as levers Much of the rationale for NHI as Described in the Bill is the creation of a single purchaser to achieve efficiency through strategic pur­chasing. There’s no doubt that the current system is weak from a strategic purchasing perspective. This is likely to continue in Status Quo Gold Standard, and care needs be taken in NHI Rejigged to improve the structural impediments to strategic purchasing in both the public and private sectors. The Health Market Inquiry (HMI) recommendations are very relevant in realising this goal. Strategic purchasing is necessary, but not sufficient for improving system efficiency. Efficiency can also be supported in the following ways: Offering those who use the system a choice of funder and the ability to move. Having multiple funds can create competitive pressure based on strategic purchasing (if, for example, funders have to publish value metrics). The risk of a single fund is complacency and a lack of customer-centricity. This is illustrated in the comparison of NHI as Described in the Bill and Power to the People, where individuals can choose between joining different UHC funds. Value-based approaches shift the responsibility for both quality and cost to healthcare providers – who happen to be best placed in the system to innovate the ways in which care is delivered. This removes layers of administration centred on man­aging providers of care – with the emphasis shifting to empowering providers. Value-based systems are most likely to have supply-side innovation, which allows for a move towards more efficient models of care over time. Minimising the cost of corruption, waste, and abuse. Central control of a system seems attractive from an efficiency per­spective. However, large institutions increase the risk of large-scale corruption. A system with strong bottom-up accountabil­ity and empowered healthcare providers may be more efficient in the long term than a single fund system that’s susceptible to bureaucracy and governance failure. Stewardship and governance Table 3 and Table 4 show the additional cost burden for public healthcare and for total healthcare, respectively. These are shown per scenario and are considered relative to various sized potential payer groups, ranging from the total population (referred to as per capita) to only those who are active taxpayers. We present the additional cost burden in 2040, relative to the baseline cost(a) burden in 2040. We do not, however, aim to determine the optimal financing source for additional health expenditure. The additional cost burden can be spread across groups of many sizes. Considering just the public health expenditure then the largest group (the total population) would have a financing implication of R461 (2020 real Rands) per month per capita by 2040 for the most expensive scenario. For the smallest group (active income taxpayers), there would be an additional financing implication of R4,267 per month per taxpayer. If we consider the total health expenditure (as opposed to just public) then we get a different picture. For the most expensive scenario, there would then be a financing implication of R229 per month per capita (the total population), or R2,121 per month per active taxpayer (smallest group). The most expensive option for public health expenditure is NHI Rejigged, while for total health expenditure it is NHI in the Bill. The differences are driven by OOP and private risk pools where appropriate. Table 3: Additional PUBLIC health expenditure burden of different scenarios relative to potential payer groups *(a) Baseline cost in 2040 is calculated by growing the 2020 expenditure by the population, i.e. it is how much we would spend in 2040 if each we continue to spend the same amount per capita. Table 4: Additional TOTAL health expenditure burden of different scenarios relative to potential payer groups The imperative for economic and employment growth is evident when we take a long-term perspective and consider how best to achieve health-system objectives within fiscal constraints. An expansion of the economy will permit much-needed investment in the health system, whilst employment growth will allow for a more robust tax base to enable income cross-subsidies and sustainable social solidarity. Any changes to the health financing system cannot be consider without understanding the strong need for economic and employment growth. Without this growth, far more gradual choices will have to be made. Content Foreword Executive summary List of figures List of tables Acronyms and abbreviations 1. Introduction 2. What are we trying to achieve? First principles 3. What do we have to spend on health services? Recent trends in healthcare expenditure 4. Previous NHI costings 5. NHI and the four UHC alternatives 6. Assumptions informing cost-modelling for each scenario - Status Quo Gold Standard: No purchaser-provider split and strengthening the public sector - NHI Rejigged: NHI, but sequenced differently - Power to the People: Purchaser provider split but with multiple purchasers - Reorienting Towards Value: a value-based approach to UHC - NHI as Described in the Bill: the policy proposal currently on the table 7. Approach to cost modelling and key cross-scenario assumptions 8. Results of cost modelling for the scenarios 9. What do the model results mean for policy? The trade-offs between NHI and other UHC options - Why does NHI as Described in the Bill cost so much more than the other models? - Considerations in weighing the different policy options 10. Conclusion References Appendix A: Out-of-pocket health expenditure in South Africa Catastrophic health expenditure Expenditure in absolute terms Appendix B: Additional detailed model results Appendix C: Model assumptions by scenario List of figures Figure 1: Annual public health expenditure per capita uninsured (Real) Figure 2: Public health expenditure per capita uninsured, by province (Real) Figure 3: PHC utilisation rate by province Figure 4: Professional nurses per 10k population uninsured Figure 5: Total healthcare expenditure by scenario (Rands, standardised so NHI Bill scenario is R100 each year) Figure 6: Real total healthcare expenditure (2020 Rand billions) by scenario for 2030 vs. 2040 Figure 7: Breakdown of public sector costs by scenario for 2030 and 2040 Figure 8: Total real expenditure (2020 Rand values) per capita per year over time Figure 9: Real total health expenditure growth over time vs. population and medical inflation growth combined Figure 10: Total health expenditure as % of GDP (1% growth, mid-growth scenario) by scenario over time Figure 11: Total health expenditure as % of GDP (3% growth, high growth) by scenario over time Figure 12: Total health expenditure as % of GDP (0% growth, low growth) by scenario over time Figure 13: Real total costs (2020 Rand billions) by scenario over time Figure 14: Real expenditure over time (Rand billions) List of tables Table 1: Alternative UHC scenarios explored in ISI (2020) Table 2: Summary of how different components of SA health financing and delivery system are affected in different scenarios Table 3: Additional PUBLIC health expenditure burden of different scenarios relative to potential payer groups Table 4: Additional TOTAL health expenditure burden of different scenarios relative to potential payer groups Table 5: Costs and implications of various NHI costing models Table 6: Alternative UHC scenarios explored in this document Table 7: Assumptions driving costs for Status Quo Gold Standard in model framework Table 8: Assumptions driving costs for NHI Rejigged in model framework Table 9: Assumptions driving costs for Power to the People in model framework Table 10: Assumptions driving costs for Reorienting Towards Value in model framework Table 11: Assumptions driving costs for NHI as Described in the Bill in model framework Table 12: Model variables Table 13: Equity Table 14: Access to quality care and quality outcomes Table 15: Efficiency: Accountability to users (bottom-up) and societal buy-in as levers Table 16: Stewardship and governance Table 17: Potential payer groups Table 18: Additional PUBLIC health expenditure burden of different scenarios relative to potential payer groups Table 19: Additional TOTAL health expenditure burden of different scenarios relative to potential payer groups Table 20: Concepts and indicators used in OOP health expenditure studies Table 21: OOP health expenditure in South Africa Table 22: 2030 detailed model results Table 23: 2040 detailed model results Table 24: Model assumptions by scenario Acronyms and abbreviations 1. Introduction South Africa currently has a draft NHI Bill before Parliament1. The period for submissions on the Bill has ended, with a record number being received2. The significant number of submissions indicate the concern among civil society, funding bodies, health sector stake­holders and citizens about the massive step-changes that have been proposed for the health sector3. The Covid-19 pandemic continues to highlight the extent of inequities between the public and private sectors – as well as between provinces and districts4–6. Furthermore, the pandemic-related impact on health system resilience provides an impetus to deepen universal health coverage (UHC). The set of reforms in the draft NHI Bill is only one way to achieve the policy goals that would put South Africa’s health system in a stronger position to handle the impact of Covid-19, as well as other challenges and stressors. However, there are also other ways of conceptualising and implementing a move to UHC. In a previous report7, four alternative scenarios for achieving UHC for South Africa were shared. They are: · Status Quo Gold Standard; · NHI Rejigged; · Power to the People; and · Reorienting Towards Value. At their core, each scenario addresses the five UHC policy objectives embedded within them (see Section 2) and present a reimagin­ing of the ‘how’ for UHC. This report aims to stimulate debate and discussion about alternative policy pathways. Investigation the potential long-term costs of policy change is a useful way to bring the implications of both action and inaction to light. We’ve modelled the potential costs of the four scenarios and NHI as Described in the Bill and provided high-level costings for the five scenarios from 2021-2040, with 2030 as a key midway point. Most scenarios improve equity and resource-sharing in healthcare between the private and public sectors. It is also demonstrated that while some scenarios may perform better over the medium term, their real success in terms of cost, quality, efficiency, stewardship and governance can only be assessed over the longer term (2040). Long-term costings are by nature highly uncertain. The costings presented here are illustrative and intended to highlight the underlying factors driving costs, and the trade-offs between policy decisions. What the model offers: The cost model presented here uses the current health system structure and combined health expenditure in the public and private sectors (including OOP) as a starting point. We believe it’s a pragmatic approach to work with what we have, rather than with what we wish we did. We make assumptions about the main demographic and structural cost drivers to arrive at estimated costs for the five healthcare scenarios, while also considering macro-level indicators such as the consumer price index (CPI), healthcare cost inflation, population growth and GDP growth from 2021-2040. More details on these cross-cutting variables (not specific to any one model) are provided later in the report. The assumptions informing the variables are based on available evidence and aim to illustrate the differences be­tween the policy choices. They should be seen as point estimates in a wide range of possible outcomes. By nature, they’re subjective, and useful to stimulate discussion and debate. Considering the likely costs of each scenario, we looked at the total cost of the health system, which is consistent with the idea of a unified system. It’s also helpful in terms of considering the total envelope of funding directed towards healthcare, regardless of the source of the funding. Total healthcare expenditure encompasses three main categories: 1) Publicly funded: centralised public expenditure (a form of risk pooling, even if not explicitly managed as a risk pool given that resource allocation is decentralised, as well as the absence of a fully articulated basic benefit package); 2) Private risk pooling: the vast majority of this is located in medical schemes; and 3) OOP expenditure and (non-medical scheme) private insurance by households for private and public services not covered by either medical scheme funding or public-sector expenditure. For example, the private pharmacy expenses of those consulting the public sector, or the GP visits of those who don’t have medical scheme cover. Collectively, the three categories represent a ceiling on funds currently available for health expenditure, unless other ways are found to increase the available amount – such as an earmarked health tax or increases to payroll tax, income tax or VAT. A large proportion of this current funding envelope is discretionary, with households and employers making voluntary contributions to medical schemes or paying for care on an out-of-pocket basis. The cost model allows for compelling storytelling that clearly highlights the trade-offs between the different policy choices. This is the real value of the model: to show how the total healthcare costs and their various components are likely to play out over time if we do, or don’t, take certain actions now; or, if certain much-needed steps aren’t taken in future. It highlights the long-term costs of inaction, and therefore, helps to inform both policy and implementation. Previous costings of the NHI proposals have compared costs to the current system (doing nothing to change the system) – we hope to make it clear that there are other possible counterfactuals. There are several reasons why it is important to consider the costs of alternative scenario relative to the likely costs of NHI. Firstly, it will allow policymakers, citizens and civil society to be aware of the trade-offs between equity, cost, quality and access. With­out transparency in trade-offs, it’s impossible to know the long-term consequences of a particular policy choice relative to others. Secondly, once the trade-offs and various considerations of the various UHC options are clear, it will be possible to reconsider policy choices, if necessary. Once it’s clear what is driving the costs and outcomes of a policy direction, the policy can be adjusted to im­prove costs and outcomes. This could entail tweaking the overall financial structure and approach of a UHC policy option, or opting for a completely different approach altogether. What the model is not: While offering projections for the five scenarios, this is not a detailed bottom-up costing model. We have not evaluated the finer points of a basic benefit package that are needed for a bottom-up costing, since no such package for NHI was set out in the draft NHI Bill – or in any other official government document. It is useful to keep the intention of the model in mind while reading the results of the five scenarios, while also paying attention to its limitations. The hypothetical nature of the UHC scenarios, as well as the NHI Bill, also constrained our ability to accurately estimate the as­sociated costs. For example, the NHI Bill provides scant information on the single-purchaser model, which is needed for a detailed bottom-up costing. We therefore often had to make bold assumptions about both NHI as Described in the Bill as well as the other scenarios to determine ultimate costs and illustrate the differences between policy choices. The results are normative as they’ve been informed by a large set of hypothetical assumptions. They can’t be viewed as objective cost assessments of the policy options given the multi-layered and interconnected nature of the cost assumptions. While the model is potentially subjective, it does provide a much-needed framework informed by logic. In the absence of real policy alternatives that have been clearly articulated in terms of service and funding design, the estimat­ed future costs for the different scenarios provide a starting point for us to collectively imagine alternative ways to achieve our UHC objectives. Report structure: Section 2 of this report provides a summary of the five objectives of UHC (as identified in the previous ISI report, ‘Reimagined Path­ways for UHC in South Africa: A critical policy assessment of NHI choices’ (2020). Section 3 sets out the current total healthcare expenditure in South Africa. Section 4 offers a review of previous NHI cost models in the public domain. Section 5 provides high-level descriptions of each of the five scenarios. Section 6 details the assumptions that underpin the cost modelling for each scenario. Sec­tion 7 sets out the structure of the model and the nature of the cross-cutting variables. Section 8 presents the results of the model and in Section 9, the implications of the results for policy are articulated. Section 10 provides a conclusion. 2. What are we trying to achieve? First principles South Africa has been struggling to find its path to UHC for more than two decades. Despite differences in policy, rhetoric and plans, the intention has always been the same: to improve equity between the provinces and health sectors, to ensure quality care is pro­vided at the lowest possible cost, and to ensure that the health system is governed optimally and with sound leadership. To support this report, we conducted a comprehensive literature and stakeholder review of NHI in South Africa8. Based on the review, five policy objectives were identified that have been consistently present across policy documentation as South Africa has been trying to move closer and closer to UHC. These policy objectives are: To improve equity in the health system, including the sharing of resources (human and other) across the public and private health systems. To address escalating costs in the private health sector and contain future escalations in costs across the health sectors. To provide universal access to quality healthcare. To ensure efficiency in service provision and administration. To ensure good governance and stewardship. These key objectives of the health reform process will be used as benchmarks to assess the feasibility of various policy choices and pathways that were put forward during the UHC debate. This report may also assist in guiding the sequencing of current reform proposals. Throughout this document, we propose that the combination of cost, quality and efficiency could collectively be reconcep­tualised as orienting the South African healthcare system towards value. 3. What do we have to spend on health services? Recent trends in healthcare expenditure Since 2012, the public health budget in South Africa has become severely constrained as a result of the deepening austerity after the 2008 global recession9. Prior to 2012, the National Treasury was able to shield the social sectors from the declining fiscal en­vironment, but from 2012 onwards, health, education and other social service sectors also bore the brunt of South Africa’s ongoing fiscal austerity measures. Figure 1 shows the real expenditure per capita uninsured from 2010/11 to 2019/20 in South Africa10. The dip in health spending in 2012/13 is evident, as is the erratic nature of the public health allocation over the 10-year period. Figure 1: Annual public health expenditure per capita uninsured (Real) Our analysis shows little predictability in the health budget year-on-year, which impacts the sector’s ability to plan appropriately. The analysis also shows that in the decade between 2010/11 and 2019/20, the overall per capita spend for the uninsured popula­tion has only grown by 15%. This growth is worrisome given that medical inflation constantly supersedes average general inflation (CPI) and we would anticipate at least a CPI-linked increase for each year, which would result in a growth rate well above the 15% shown. Once the above-CPI price increases have been taken into account, it has not left much additional growth to account for a growing disease burden and greater health needs. This has no doubt contributed to the dire conditions in the public health sector in terms of its dilapidated infrastructure, limited human resources for health and rising quality concerns – the Eastern Cape being an example of this decline11. Figure 2 shows the average expenditure per capita uninsured by province. The erratic nature of budget availability is clear over the period, highlighting the difficulties that an uncertain budget creates for health sector planning. The impact of this on a long-term plan to rollout NHI is immediately evident; there is no way to be certain that next year’s budget will be able to include new, major health reform costs. Figure 2: Public health expenditure per capita uninsured, by province (Real) Figure 3 provides a clear picture of the impact of this declining budget on service delivery. All the provinces show a substantial de­cline in primary healthcare (PHC) utilisation rates between 2010/11 and 2019/20. Accessible and quality PHC is a critical part of keeping a population healthy – with the reduction in utilisation of these services, one can expect the population to become sicker as the system is unable to perform key prevention and health promotion activities. Figure 3: PHC utilisation rate by province Another casualty of the declining budget has been the sector’s inability to hire more human resources. Professional nurses are the backbone of any health system and they’re particularly integral to a well-functioning PHC system. Figure 4 shows the professional nurses per 10k population uninsured per South African province. Almost every province shows a declining trend. Figure 4: Professional nurses per 10k population uninsured The public health budget has been declining since 2012/13. This has placed severe pressure on the sector as it attempts to main­tain service delivery and respond to new crises of non-communicable diseases. Expenditure has increased by only 15% over the past decade, pointing to a severely constrained fiscal climate. The effect of this is evident in both utilisations, the overall health status of the population and rising medical negligence claims as facilities are unable to render effective and quality care with the resources at hand. 4. Previous NHI costings There have been several NHI costing models in South Africa, only some of which are in the public domain. For those in the public domain, this report provides an overview of the costing approach used, as well as a high-level summary of both the absolute and relative costs. Econex(12) used a demand-based approach (in 2010) to estimate the utilisation (demand) for different sub-groups of the population, and for different cost components, and then aggregated it. Based on a comprehensive package that incorporated all the essential features of NHI at the timeb, utilisation patterns of the uninsured population, unchanged unit costs and a conservative addition of R8 billion for NHI public health administration costs, Econex estimated the cost of a full NHI to be R287 billion (in 2008 Rand values). This upper threshold of their costing estimate (base case) was more than four times the total amount spent by the state on health­care at the time (R62.8 billion in 2008 Rands), and almost double what was spent on total healthcare at the time ((R144.5 billion in 2008 Rands). In addition to the base case, Econex estimated five alternative costing scenarios that made varying assumptions about the degree of savings and rationing. At the lowest costing thresholdc, the total NHI cost was estimated to be R174 billion (in 2008 Rand values). If the costing scenarios were extended to account for the impact of HIV/AIDS, the authors added R6 billion (in 2008 Rand values) to their cost estimates. McLeod, Grobler and Van der Berg(13) used an actuarial costing method in 2009 to estimate the cost of NHI. The model accounted for both the prevalence of various conditions and the cost of treating each, taking into account the age and sex distribution for a reference population. The reference population was drawn from the ASSA2003 provincial model14, as recommended by McLeod d 15. McLeod, Grobler and Van der Berg’s model estimated NHI costs for five different packages across four levels of delivery efficiency. Their findings showed that a fully comprehensive package (with all healthcare benefits) delivered at the medical scheme efficiency level (100% of cost) would amount to R334 billion (in 2009 Rand values). This was the upper-most limit of their NHI costing range. At the lowest threshold of the range, a package of Prescribed Minimum Benefitse delivered at the staff model efficiency level (50% of cost) was estimated at R78 billion (in 2009 Rand values) for the same year. These costings excluded NHI administrative and managed-care costs, and didn’t fully account for the impact of HIV/AIDS. For these reasons, the authors regard their NHI costing as preliminary. The McIntyre NHI costing approach of 201016 could be described as demand-based, as cost estimates were derived from the product of population, utilisation rates and unit costs. For the universal coverage scenario, the model estimated the cost of public healthcare if the population were to be covered by the public sector. The benefit package used by McIntyre leaned more towards the public sector framework of service delivery than the private sector framework, so the services covered were limited and explicit. However, the unit costs in this model were higher than public sector unit costs at the time – to account for the required improvements in public sector resourcing or the option to purchase services from the private sector. McIntyre also assumed a substantial increase in health services utilisation, particularly at the primary healthcare level. NHI administrative costs as well as the cost of HIV/AIDS were accounted for f in the modelling. Costing estimates for the universal coverage scenario g ranged from R193 billion to R200 billion (in 2010 Rand values). It’s clear from all three models that the estimated cost of NHI (in GDP terms) was for the most part incredibly close to estimated total health expenditure (THE), except for a small margin that was allowed for OOP and other private risk pooling schemes. Given uncertainties about the elements that would constitute the basic benefit package, some of the relative upper-cost thresholds were more than total healthcare expenditure, going as high as 14.1% of the GDP. Such a high allocation of total GDP towards healthcare expenditure means that resources would have to be directed from other types of expenditure – possibly education, social development or even housing. *(b) Universal coverage of the population (irrespective of contribution), comprehensive cover, service to be sought from the provider of choice, no co-payment. *(c) After accounting for severe rationing and savings. *(d) This policy brief strongly recommended that all NHI costing work use the ASSA2003 provincial model (or updated versions thereof). *(e) These are the benefits that medical schemes are required to delivery by law. *(f) Used the ASSA2003 AIDS and Demographic model 43. *(g) Inclusive of those who chose to remain on scheme cover over in addition to their universal cover. In addition, there are several NHI costing models not in the public domain that have been commissioned and produced by different organisations: The PWC model produced for the Ministerial Advisory Committee; The 2016 model by the Clinton Health Access Initiative (CHAI) and Insight Actuaries & Consultants; The Government Technical Advisory Centre (GTAC) 2018 model; The GTAC 2019 model; and The 2018 Actuarial Society of South Africa model. Table 5: Costs and implications of various NHI costing models *(1) Own calculations: numerator sourced from respective NHI costing model; denominator sourced from relevant National Treasury Budget Reviews *(2) Own calculations: numerator sourced from respective NHI costing model; denominator sourced from relevant National Treasury Budget Review 5. NHI and the four UHC alternatives In the earlier report 7, the four scenarios that were presented (Status Quo Gold Standard, NHI Rejigged, Power to the People, and Reor­ienting Towards Value) allowed the reader to reimagine UHC implementation in South Africa. We conducted a comprehensive literature review before the report and also used interviews and documentation to differentiate the scenarios. Each scenario has the five policy objectives embedded into its core, and therefore represent a reimagining of the ‘how’ for NHI (see Table 6). The scenarios may help the South African government and various UHC stakeholders to continue furthering the important UHC agenda, without risking the public purse or service continuity. Table 6: Alternative UHC scenarios explored in this document 6. Assumptions informing cost-modelling for each scenario The assumptions driving the cost model structure for each scenario are set out below. Each discussion starts with a narrative sum­mary of the overall structure and anticipated changes. Status quo gold standard: no purchaser-provider split and strengthening the public sector Summary The public sector is improved while the private sector is left to continue as is. Medical schemes remain operational in their current form and OOP expenditure from private sector users follows current trends, while reducing for public sector users. The state contin­ues its role as funder for the dependent population, with provinces as purchasers. Public facilities are improved and regularly as­sessed against a set of standards to monitor quality. If facilities fail to meet the standards, there is an intervention to swiftly address issues. The public sector budgeting process is done in a transparent manner, contributing to a reduction in corruption. What drives costs in this scenario? Under this scenario (Table 7), costs relative to the current health expenditure will initially increase due to expenditure on health information systems (DHIS2 and PERSAL, as examples), while focused quality improvement approaches in the public sector will also lead to initial cost increases. Over time, however, these investments pay off and quality improves dramatically. A lack of competition in the purchaser space may result in sluggishness and sub-optimal performance and total health expenditure costs may not be as low as possible. Table 7: Assumptions driving costs for Status Quo Gold Standard in model framework NHI rejigged: NHI, but sequenced differently Summary NHI is eventually implemented as envisaged in the NHI Bill, but it occurs more gradually. Medical schemes are phased out and the pub­lic sector serves the entire population through the NHI Fund. While still relevant, the private sector is regulated, largely in line with the main recommendations of the Competition Commission’s Health Market Inquiry 17. The public sector is improved as outlined in Status Quo Gold Standard and develops the capacity to contract from private providers. The process to achieve NHI is incremental and by the time it is implemented, there will be a greater capacity to do so successfully and efficiently. OOP expenditure decreases over time as the state covers a greater proportion of needs. The incremental implementation of the fund provides time to establish governance structures that lead to a reduction in corruption. What drives costs in this scenario? Similar to the previous scenario, many of the initial costs for NHI Rejigged (Table 8) will be driven by data system investments as well as concerted efforts to improve quality in the public sector through certification and a broader quality improvement process. The implementation of the Health Market Inquiry’s recommendations will over time lead to relative cost reductions in the private sector. Relative to the two multi-payer scenarios (Power to the People and Reorienting Towards Value) the eventual monopsony payer (NHI Fund) may lead to a loss of efficiency due to the absence of competition. Table 8: Assumptions driving costs for NHI Rejigged in model framework Power to the people: purchaser provider split but with multiple purchasers Summary NHI end results are largely achieved as set out in NHI Rejigged, with the primary difference being the multi-purchaser environment. A purchaser-provider split is still maintained. Provincial Departments of Health (PDoHs), local municipalities and private providers are providers of care. There is a process to apply to be a purchaser, but the envisaged purchasers are the government body (through a fund such as the NHI) and medical schemes (that would be appointed by the relevant body to act as purchasers for UHC) as they have experience in performing the purchaser role. Users can select their preferred purchaser, who is then allocated funds accordingly. There is a clearly defined benefit package in place and these are used in the contracting between purchasers and providers. As with NHI Re­jigged, the public sector is improved, medical schemes in their current form are closed and OOP expenditure and corruption decrease over time. What drives costs in this scenario? This scenario (Table 9) has many of the same cost drivers as the NHI Rejigged scenario (e.g. information systems and quality improve­ment costs), with some additional cost drivers. The big potential cost saving factor associated with this scenario the choice given to citizens between multiple purchasers. This potentially allows for better bottom-up accountability, compelling purchasers to move to greater efficiencies, which could lead to lower administrative costs and lower health expenditure over time. Table 9: Assumptions driving costs for Power to the People in model framework Reorienting towards value: a value-based approach to UHC Summary A value-based approach to UHC is implemented on the financing structure of the Power to the People scenario. Medical schemes as known in the private sector are eventually closed off, but may apply to become UHC funds that serve the public through a multi-payer approach to UHC. It’s assumed that at least a few schemes (most likely the largest ones) continue to exist in the form of UHC funds. Health facilities are continually improved as needed and are not necessarily accredited. Accountability is built and maintained using strong data systems and strengthened by the multi-purchaser environment which provides user choice. Purchasers compete on value. The measurement systems are crucial and require tracking of cost and outcome information per user. Measurements are the same across providers, which consist of public facilities and private providers. There is a strong emphasis on primary care, which eventually leads to a decrease in the need for hospitalisations. As with the Power to the People scenario, the public sector is improved, medical schemes in their current form are closed and OOP expenditure and corruption drop over time. Overall health costs are herded in over time as there’s a shift away from expensive hospital treatments towards cheaper preventative care. What drives costs in this scenario? In the conceptualisation of access to quality care for all, it front-ends the notion of quality and forces deeper thinking about what we mean by quality, how to measure quality and how to incentivise quality. Historical approaches to UHC, which focus on the access component of the conceptualisation, run the risk of orienting health care systems to volume, instead of value. This creates a long-term sustainability risk because the cost of the system increases as volumes rise. The implicit assumption is that a higher volume of service delivery leads to improved outcomes, but global research indicates that this is not true. The role of volume orientation in the South African private sector is illustrative of the risks associated with this paradigm. Research from the Lancet Global Commission on High Quality Health Systems indicates that “of the mortality amenable to healthcare, 60% is due to poor quality of care, compared to 40% due to lack of access” 18. Value-based approaches have a continuous improvement mindset built in – something that is lacking in the current articulation of the NHI reforms. With a value-based approach, it is less about accrediting facilities, and more about working with facilities to improve the quality of care that is delivered. This scenario (Table 10) allows for, similar to Power to the People, a multi-payer approach to UHC. This potentially creates better bottom-up accountability, compelling purchasers to achieve greater efficiencies, which could lead to lower administrative costs and lower health expenditure over time. Table 10: Assumptions driving costs for Reorienting Towards Value in model framework NHI as described in the bill: the policy proposal currently on the table Summary NHI is rolled out as proposed in the Bill. The Bill is silent on many details, such as the basic benefit package and how hospital services, for example, will be funded. This lack of detail in the implementation plan is assumed and built on in the financing model. The process is swift, medical schemes are closed as proposed in the Bill (quicker than in other scenarios) and the population is served by the new NHI Fund. Medical schemes are only allowed to fund health services not covered by the NHI Fund. The NHI Fund is the single purchaser. The Fund purchases from provincial and local departments as well as private providers. The quick implementation without a slow and gradual reform process to prepare the system for the changes that will follow leads to a less robust system and lower levels of trust. Accountability is limited and corruption initially increases in the early years of the Fund, given the ease of implementing large-scale corruption in a centralised fund as seen with other centralised public funds, e.g. the Road Accident Fund 19 20 and the Covid-19 Relief Fund 21. The public sector attempts to improve facility standards to levels acceptable to the new population now serviced by the Fund (formerly covered by medical schemes), but struggles to offer quality care to the population. OOP expend­iture and private insurance (non-medical schemes, but hospital cash plans) grow exponentially as those who can afford to, seek to access services outside the public finance scheme. What drives costs in this scenario? NHI as Described in the Bill (Table 11) currently proposes large health system shifts over a short period. These pose substantial risks to the system which are likely to manifest as increased costs over the longer term. Corruption is likely to increase with a centralised fund, as seen with other central government funds, especially given the clear lack of accountability mechanisms in the Bill. The lack of choice between payers means that a strong accountability mechanism (bottom-up accountability) will be removed. This is likely to manifest in poor quality healthcare, especially given the absence of a long NHI preparation phase, leading to private sector clients choosing to pay on an OOP basis for their healthcare. Table 11: Assumptions driving costs for NHI as Described in the Bill in model framework 7. Approach to cost modelling and key cross-scenario assumptions An Excel-based model was used to estimate the costs of the proposed scenarios. The model allows the user to enter assumptions for each of the 20 forecast years (2020 to 2040), for each scenario. The key variables/assumptions per scenario are outlined below. These assumptions, along with a series of base costs (2019 costs) are used to model all future expenditure. The expenditure is split between private risk pools (medical schemes), public healthcare and out-of-pocket and private insurance. The model further breaks down private risk pool expenditure into administration, primary healthcare and other levels of healthcare. It also breaks down public expenditure into administration, primary healthcare, hospital care, infrastructure, medico-legal claims and savings from IT systems and reduced corruption. The assumptions and outputs are used to calculate and compare final output values from the various scenarios. As a reminder: this is not a detailed bottom-up costing model working from the basis of a defined benefit package. Rather, we use a top-down approach and use the available financial resources spent on health services as our starting point. We believe this is a more pragmatic approach in the absence of the detailed basic benefit package that is missing from the current NHI Bill. Table 12 outlines the key variables that went into our scenario assumptions and provides a brief explanation for the range of assump­tions used. Table 12: Model variables 8. Results of cost modelling for the scenarios This section highlights the estimated costs of each scenario in 2030 (interim costs) and the estimated costs in 2040 (final costs) to distinguish between shorter-term investments and a longer-term steady state. The costs of the models are presented in standardised terms (relative to the NHI Bill scenario at a cost of R100) to rank the different scenarios. Absolute amounts are shown and expressed in 2020 terms (in real terms). However, they should be interpreted with caution due to various inherent uncertainties and assumptions. Three elements of expenditure are distinguished: publicly funded, private risk pooling, and OOP & private insurance expenditure. Private insurance, as opposed to medical schemes, is similar to OOP due to the limited nature of risk and income cross-subsidies, as well as the absence of a strategic purchaser. Risk-pooled private expenditure refers to medical schemes. In most scenarios, this sector no longer exists in its current form. The total estimated cost of the five scenarios: By 2030, Status Quo Gold Standard and NHI as Described in the Bill are the most expensive scenarios in terms of total health expend­iture (Figure 5). By 2040, NHI as Described in the Bill is the most expensive scenario. By contrast, Power to the People is the least expensive scenario by 2030 by a slight margin, while Reorienting Towards Value is the least expensive scenario by 2040. We also see that Reorientating Towards Value starts off relatively expensive due to the investments needed to measure the quality of care and the longitudinal costs of care. However, by 2035, this scenario is the most affordable. It sustains this position in 2040. Figure 5: Total healthcare expenditure by scenario (Rands, standardised so NHI Bill scenario is R100 each year) The breakdown of total health expenditure into the three main categories (publicly funded, private risk-pooling OOP) provides some insight into what is driving total health expenditure (Figure 6). OOP provides an essential third factor in understanding how the overall financing structure drives total healthcare expenditure. Under conditions of low-quality healthcare and limited choices to users within the chosen UHC system, OOP increases. Conversely, when users are satisfied with the quality of healthcare and have some choice in who provides their care, OOP reduces. South Africa currently has one of the lowest OOP levels for a low- and middle-income country 33 34. In 2030, NHI as Described in the Bill will have resulted in the closure of all private risk pooling (medical schemes). It is envisioned to have the highest OOP of all scenarios by 2030. By 2040, OOP has increased even further and constitutes a very large share (R210 billion of almost R900 billion) of total health expenditure, which is multiples greater than all other scenarios. By contrast, Status Quo Gold Standard has the highest share of private risk pooling in 2030 as it assumes the medical scheme sector will continue to operate. By 2040, this is the only scenario with a substantial remaining proportion of private risk pooling. For NHI Rejigged, Power to the People and Reorienting Towards Value, private risk pooling has disappeared by 2040 although some medical schemes are likely to continue to exist in the form of the multi-fund UHC structure. Most of total health expenditure goes towards the UHC structure, with relatively small amounts spent as OOP. Figure 6: Real total healthcare expenditure (2020 Rand billions) by scenario for 2030 vs. 2040 It is also useful to look at what money is spent on in the various scenarios to get a sense of what drives the overall costs. The various components that drive total health expenditure are illustrated in relative terms (Figure 7). NHI as Described in the Bill has the highest proportion of expenditure on administration and medico-legal claims by 2040. Power to the People and Reorienting Towards Value have the lowest administration expenditure by 2040. Reorienting Towards Value has the lowest relative expenditure on hospital care, as the system is oriented towards primary and preventative care. Figure 7: Breakdown of public sector costs by scenario for 2030 and 2040 The role of population growth and medical inflation in driving real costs Expressing total real expenditure in per capita terms per year (Figure 8) clearly shows the differences in expenditure between the scenarios, while taking population size into account. By 2040, there are sizeable differences in per capita terms between the lowest cost scenario (Power to the People) and the two highest-cost scenarios (NHI as Described in the Bill and Status Quo Gold Standard). Figure 8: Total real expenditure (2020 Rand values) per capita per year over time It’s not only growth in the population and medical inflation that drives growth in total healthcare expenditure. The burden of disease and demographic changes (changes in sex and age) can also lead to variation in costs over time. These were not explicitly included in the model and they are not considered as sources of growth in the analysis. This would increase the total healthcare expenditure even more than what is presented in this report. Figure 9 shows the difference between the growth in total health expenditure of the highest-cost scenario (NHI as Described in the Bill) relative to population growth and medical inflation. There is a clear gap in growth between the two lines at certain periods. This indicates that even with large increases in real expenditure, funding for this scenario is not able to keep up with the demands that will be posed by medical inflation and population growth. Figure 9: Real total health expenditure growth over time vs. population and medical inflation growth combined Health’s share of the total economy In calculating total health expenditure relative to the GDP, three different growth scenarios are used. The results of the mid-growth scenario – the most likely growth scenario at this stage – is presented first. Mid-growth assumes real economic growth of 1%. The high growth scenario assumes real growth of 3% per year, while the low-growth scenario assumes no real growth. The different growth scenarios highlight that our capacity to invest in healthcare is very closely related to the overall economic wellbeing of South Africa. These figures are calculated by taking the total health expenditure and dividing it by the size of the economy (its GDP). When the economy grows, it is easier to accommodate growth in healthcare expenditure. Figures 10-12 show the percentage of GDP (for the different growth scenarios) constituted by total health expenditure under each of the policy scenarios for four periods: 2025, 2030, 2035 and 2040. In the mid-growth scenario (Figure 10), the most expensive policy scenario, NHI as Described in the Bill, constitutes 13.2% of the GDP by 2040. Such a large percentage of GDP being allocated to total health expenditure relative to current expenditure levels (around 8.7% of GDP) is startling, but it needs to be viewed in the context of low-to-modest economic growth and a system that would have encouraged many people to increase their OOP by that time. Figure 10: Total health expenditure as % of GDP (1% growth, mid-growth scenario) by scenario over time Total health expenditure as a percentage of GDP for all scenarios seems much more reasonable against sustained real economic growth of 3% per annum (Figure 11). The proportion of GDP spent on healthcare is even lower than current levels for all scenarios. Using the high growth scenario, the highest cost policy scenario (NHI as Described in the Bill) only totals 8.6% of GDP by 2040. Figure 11: Total health expenditure as % of GDP (3% growth, high growth) by scenario over time Lastly, in the highly unlikely no-growth scenario (Figure 12), NHI as Described in the Bill reaches a relative cost of 16.5% of the GDP by 2040 – from 10.8% in 2025. Figure 12: Total health expenditure as % of GDP (0% growth, low growth) by scenario over time By viewing total health expenditure by year (Figure 13) – or summarised over two periods (2021-2030 and 2030-2040 – Figure 14), certain patterns emerge. In Figure 13, the steep increases in expenditure in NHI as Described in the Bill, Power to the People and NHI Rejigged in the later periods are evident. The relatively stable costs in the earlier years are mostly due to the closing of the private risk pools. In Status Quo Gold Standard, where private risk pools are not affected, total health expenditure rises steadily over the 20-year period. Figure 13: Real total costs (2020 Rand billions) by scenario over time Figure 14 provides a better view of health expenditure over larger time frames. Considering the two time periods presented, it is clear that Status Quo Gold Standard is quite expensive for the first ten years. Reorientating Towards Value requires similar total expendi­ture to NHI as Described in the Bill in the first ten years. But in the next ten years, it requires much less than the NHI as described in the Bill scenario. Figure 14: Real expenditure over time (2020 Rand billions) Figure 14 highlights the long-term cost of under-investment in the quality of care, and mechanisms to support a human-centred health system. 9. What do the model results mean for policy? The trade-offs between NHI and other UHC options In this section, we interpret the model results to understand their implications for sensible policy choices. The results help to illustrate both what is gained and what is lost through specific policy choices; these gains and losses are not just about the finan­cial costs of system change, but ultimately also about healthcare outcomes and overall system resilience. Healthcare systems can become fragile when they’re put under undue stress, as the Covid-19 experience demonstrated in many low- and middle-income countries around the world. We have divided the key emerging insights associated with the different policy options into themes and presented them in summary style throughout this section. Why does NHI as described in the bill cost so much more than the other models? Before focusing on the themes and policy choices raised by the cost modelling, it is important to understand why NHI as Described in the Bill emerges as the most expensive UHC option of the scenarios considered. UHC implemented through a single risk fund is not necessarily a problem. Rather, the current description in the Bill and its lack of detail and clear information on accountability struc­tures creates uncertainty about whether it will be implemented with the necessary attention and rigour. A lack of attention to critical structural aspects will generate various inefficiencies and the NHI Rejigged scenario illustrates the potential for NHI to achieve its goals when implemented more thoughtfully than currently suggested by the Bill’s proposals. Financing as the focus, rather than health delivery A focus on finance in the delivery of health services, as in the NHI Bill, introduces the risk that the quality of care in the public sector will not be sufficient to satisfy the population’s needs – particularly those who previously had medical scheme-mediated access. We foresee an increase in OOP expenditure along two pathways: an opting out of UHC structure usage by the middle class, and a crowd­ing out of the public sector as more people rely on the system than it is able to serve. OOP expenditure is the most inefficient and inequitable way of financing care. South Africa currently has very low OOP expenditure because of the role medical schemes play in risk pooling private expenditure and the free services offered in the public sector. The ongoing weakening of the public sector delivery platform has broader economic costs arising from long waiting times and reduced productivity, and there are also costs associated with malpractice claims. These costs don’t only reflect low-quality care. A weak health delivery system is also fertile ground for increased claims. Preferencing private providers over the public system The NHI Bill allows for the Fund to purchase from providers based on whether they meet accreditation criteria. A lack of investment in strengthening the public sector delivery platform will result in increased reliance on private providers. In theory, this should result in competition between providers and improve the overall quality of care. However, international experience has shown that there are not enough providers in underserved areas for competition dynamics to have an effect. Increased reliance on private providers increases the risk of state reliance on large market players. The upward pressure on costs can be curtailed through effective contracting, but there is a risk that costs will not be capped in the same way as public sector global budgets. Insufficient attention to capacitating the primary healthcare system Over the last decade, we have seen a disconnect between health policy and healthcare expenditure in terms of the split between primary healthcare and hospital care. Policy has been, and continues to be, primary-care focused – but each year, relatively more resources are directed towards the hospital sector. In our view, the NHI Bill is insufficiently clear on the mechanisms to support and capacitate the primary care system. We anticipate a weakening of linkages between primary and hospital care as the provincial role is weakened – and a healthcare system with insufficient attention to preventative and primary care is a more expensive system, especially in the longer run. Increased risk of corruption The large institutional nature of the NHI Fund increases the risk of large-scale corruption and governance failure. This is accentuated by the lack of bottom-up accountability articulated in the NHI Bill, and we considered it in our cost modelling. What about fiscal constraints? The illustrated rising costs of implementing the NHI Bill may appear unrealistic in the context of fiscal constraints. The public health budget has been declining since 2012/13, and expenditure has increased by only 13% over the past decade, pointing to a severely constrained fiscal climate. However, healthcare service delivery occurs within a constitutional framework of the progressive realisa­tion of rights. At a minimum, the system would need to continue to deliver the current level of services – albeit to a larger population. It is important to recognise the true costs of delivering a desired set of quality services, and in doing so, the impact of fiscal con­straints that limit access to quality care. Considerations in weighing the different policy options Table 13: Equity The goal of equity should take into account where funds come from (with contributions based on the ability to pay) as well as where funds are going (with more funds directed to those with the greatest need). The option that fares worst in terms of equity is Status Quo Gold Standard, where it is assumed that the public and private sectors continue operating mostly as they are, albeit with improved quality and efficiency. NHI as Described in the Bill fares poorly too, due to the high OOP expenditure dependency. Those who can pay out-of-pocket will likely be able to access better care, resulting in a highly inequitable outcome. Public sector equity. There are currently considerable differences between provinces and districts in the allocation of funds, access to services and the quality of those services. Focused effort to strengthen the public sector delivery platform will serve to improve eq­uity. Quality improvement efforts could be directed towards addressing areas of weakness. It is also possible to improve the equity of financing within the public sector by refining the ways in which resources are allocated – the healthcare component of the Provincial Equitable Share, and an equivalent sub-provincial equivalent. All the policy options bring about an improvement in the current public sector equity situation. Private sector equity. While there are some mechanisms to support social solidarity in medical schemes, there is scope to further strengthen this through income cross-subsidies, mandatory contributions, and risk equalisation. Private sector equity is strongest in the NHI Rejigged, Power to the People and Reorienting Towards Value options. Equity across the system. A key difference between Status Quo Gold Standard and NHI Rejigged is the introduction of a risk equal­isation fund to improve equity between the public and private sectors. Risk can be shared between the public and private sectors, thereby ensuring equity across sectors within the health system. NHI Rejigged, Power to the People and Reorienting Towards Value all fare well in terms of equity across the system (as a whole), as they all have some form of shared risk pooling across the public and private sectors. This highlights that it is possible to achieve equi­ty without necessarily having a single risk pool. This is a very important consideration when selecting an appropriate UHC structure for South Africa. The inequity of out-of-pocket funding. There is a risk of out-of-pocket expenditure increasing over time due to weaknesses in the public sector service delivery platform and an absence of private pooling mechanisms in the NHI as Described in the Bill scenario. This outcome would have adverse implications for equity, because there is no risk pooling for OOP expenditure and therefore no way to engineer cross-subsidies and ensure that funds are directed to those most in need. Income cross-subsidies and access to funding. Equity is strengthened in any option where funds flow through the fiscus because it allows for income cross-subsidies. This does not require a single fund, and the extent of equity will depend on the tax collection mechanism chosen. Table 14: Access to quality care and quality outcomes When policy options are compared based on cost, the most important question tends to be overlooked – whether the future system will ensure a thriving population. Signs of a system that is performing include visible overall outcome metrics (such as life expectancy and maternal mortality rates), disease-specific outcomes metrics (which our system currently lacks) and secondary measures (such as the extent of medical malpractice claims). Up to a point, there is a relationship between utilisation and quality. People need to have access to the system to have a chance of improving their health outcomes. An inefficient health system with a high level of fraud, waste and abuse has fewer resources direct­ed towards delivering care. Apart from considering how many units of care a system can afford, there is a range of dynamics that impact a system’s ability to deliver high-quality care. They include: Investment in the service delivery platform, including infrastructure and IT systems. Financing reforms have limited scope to strengthen the quality of care if the service delivery platform is compromised. This is illustrated in the comparison of NHI as Described in the Bill and Status Quo Gold Standard. The balance between primary and hospital care. A weak system will have too many resources directed towards relatively ex­pensive hospital care due to a bypassing of referral pathways, weak preventative care, and late intervention. This is illustrat­ed in the comparison of NHI as Described in the Bill and Power to the People and Reorienting Towards Value. Systems that are patient-oriented, that have greater bottom-up accountability and that measure and incentivise quality care tend to produce better health outcomes – ultimately delivering greater value for the money invested in the system. This is illustrated in the comparison of NHI as Described in the Bill, Power to the People and Reorienting Towards Value. Having a strong system supports health outcomes. From a patient perspective, this means strong linkages between care, better continuity of care and strong care coordination. System performance is supported by system stability (i.e., the ab­sence of system shocks), a balance between centralised support and ground-level responsiveness, and ongoing investment in the service-delivery platform. Big-bang reform (NHI as Described in the Bill) is likely to weaken system resilience in an already fragile system. Policy options that support ongoing quality improvement and system strengthening are likely to outperform over the long term. This was illustrated by the global impact of Covid-19, where countries with resilient and unified health systems have outperformed countries with weak ones 35. Healthcare worker capacity and satisfaction. Healthcare outcomes rely on having healthcare workers who deliver quality care. A large monopsony creates the risk of a system that is insufficiently oriented towards supporting healthcare workers and enabling supply-side innovation. Table 15: Efficiency: Accountability to users (bottom-up) and societal buy-in as levers Much of the rationale for NHI as Described in the Bill is the creation of a single purchaser to achieve efficiency through strategic purchasing. There is no doubt that the current system is weak from a strategic purchasing perspective. This is likely to continue in Status Quo Gold Standard, and care needs to be taken in NHI Rejigged to improve the structural impediments to strategic purchasing in both the public and private sectors. The HMI recommendations are very relevant. Strategic purchasing is necessary but not sufficient for improving system efficiency. Efficiency can also be supported in the following ways: Giving users of the system some choice of funder and the ability to move. Having multiple funds can create competitive pressure based on strategic purchasing (if, for example, funders have to publish value metrics). The risks of a single fund are complacency and a lack of customer-centricity. This is illustrated in the comparison of NHI as Described in the Bill and Power to the People, where individuals are given the choice between joining different UHC funds. Value-based approaches shift the responsibility for both quality and cost to healthcare providers – who happen to be best placed in the system to innovate the ways in which care is delivered. This removes layers of administration centred on man­aging providers of care – with the emphasis shifting to empowering providers. Value-based systems are most likely to have supply-side innovation, which allows for a move towards more efficient models of care over time. Table 16: Stewardship and governance Minimising the cost of corruption, waste and abuse. Central control of a system seems attractive from an efficiency perspective. Howev­er, large institutions increase the risk of large-scale corruption. A system with strong bottom-up accountability and empowered health­care providers may be more efficient in the long term than a single-fund system that’s susceptible to bureaucracy and governance failure. Additional cost burden to be covered Given uncertainties about the elements that would constitute the basic benefit package, our estimates of the cost of NHI have put it as high as 14.1% of the GDP. The ultimate relative cost of NHI as Described in the Bill, or of any other UHC scenario, is dependent on the size of the economy. If South Africa experiences low growth in the next twenty years, together with undertaking an uncertain reform, it’s possible that costs could spiral to much higher levels than currently experienced. Table 18 and Table 19 show the additional cost burden for public healthcare and for total healthcare, respectively. These are shown per scenario and are considered relative to various sized potential payer groups (outlined in Table 17), ranging from the total popula­tion to only those who are active taxpayers. We present the additional cost burden in 2040, relative to the baseline cost burdenh (if we were to continue on our current health system trajectory) in 2040. We do not, however, aim to determine the optimal financing source for additional health expenditure. First, we consider just total public health expenditure. The additional cost burden can be spread across groups of many sizes. For the largest group (all individuals), there would be a financing implication of R461 per month (2020 Rands) per capita by 2040 for the most expensive scenario, NHI Rejigged, for total public health expenditure. For the smallest group (active income taxpayers)i, there would be an additional financing implication of R4,267 per month (over and above what’s already contributed to the financing of the public health sector). In any scenario, the effect of this additional tax burden would be gradual. If we assume the tax burden increases each year, then the most expensive scenario would lead to a R213 increase in monthly tax for each year over the 20-year period until 2040. *(h) Baseline cost in 2040 is calculated by growing the 2020 expenditure by the population. I.e. it is how much we would spend in 2040 if each we continue to spend the same amount per capita. *(i) Active tax payers are those counted by SARS as “expected to submit”. SARS states “expected submission counts for each tax year include all taxpayers who have been assessed for a tax year as well as taxpayers with an “active” status who were assessed in any of the two previous years.” These are effectively the individuals paying income tax in a given year. The monthly figure for the active payer group may appear concerningly high, considering the average medical scheme contribution for 2020 was R2,817 per month 22. However, the active taxpayer grouping makes up a small proportion of the population, less than 11% in 2020. The R4,267 per month may be paid by one individual but would support eight other South Africans. Such a system relies on social solidarity with those better able afford it taking the financial hit. It is also important to better contextualise these amounts by considering how much would be spent on other healthcare services outside financing for the public UHC structure. We now consider the total health expenditure. The story looks markedly different when also accounting for OOP and private risk pools. In Table 19, we can see that the alternative scenarios could reduce overall health expenditure in South Africa. Reorienting Towards Value presents overall healthcare savings, leading to a saving of R476 per month per taxpayer. NHI as described in the Bill is the most expensive scenario for total health expenditure and could lead to additional health expenditure of R229 per month per capita, or R2,121 per month per active taxpayer. The tax burden values presented here could change significantly if our economic prospects change. In particular, the small proportion of active taxpayers have the potential to grow to a much larger base if the economy performs well. This would lessen the burden on the typical taxpayer. We can consider the registered taxpayer grouping as a proxy group for how much lighter the burden could become if costs were spread over a larger personal income tax paying base. Additionally, the values presented are averages. So, in the case of NHI Rejigged’s public health burden of R4,267 per taxpayer, the higher income taxpayers may pay multiples more that this value while the low-income end of taxpayers pay much less than the value presented. Table 17: Potential payer groups Table 18: Additional PUBLIC health expenditure burden of different scenarios relative to potential payer groups Table 19: Additional TOTAL health expenditure burden of different scenarios relative to potential payer groups 10. Conclusion Covid-19 and its associated interruptions to normal political processes decelerated parliamentary processes around the NHI Bill. The pandemic has also shown the importance of a high-quality, accessible health system that provides care to everyone who needs it. For the foreseeable future, South Africa’s public funding for health is likely to be constrained by a tough fiscal environment. The political pause, together with a dramatically changed context, provides an opportunity to reconsider the UHC policy pathway that would work best for South Africa. This cost modelling highlights that many of the policy objectives underpinning NHI as Described in the Bill can be achieved by other lower-cost and higher-quality (i.e., better value) UHC policy pathways. The selection of policy options should not only be about money, but also about service delivery design. Services and the way they are delivered drive both costs and patient outcomes over the longer term. The imperative for economic growth and employment growth is evident when we take a long-term perspective and consider how best to achieve health-system objectives within fiscal constraints. An expansion of the economy will permit much-needed investment in the health system, whilst employment growth will allow for a more robust tax base to enable income cross-subsidies and sustainable social solidarity. 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Exploring the expected, unexpected and everything in between. South African Heal J. Published online 2020:27-40. Actuarial Society of South Africa (ASSA). ASSA 2003 full AIDS and Demographic Model. Published online 2003 Appendix A: Out-of-pocket health expenditure in South Africa Various concepts and indicators are used to measure OOP health expenditure. We’ve drawn on the work of Wagstaff et al. 36 to sum­marise these concepts and indicators in the table below. Table 20: Concepts and indicators used in OOP health expenditure studies Source: Wagstaff et al. (36) For the purposes of this costing report, we extracted evidence on OOP health expenditure in South Africa from literature that uses the following concepts and their respective indicators: expenditure in absolute terms, budget share and catastrophic expenditures (highlighted in Table 20 above). We’ve limited this rapid literature review to these three concepts, since they’re intuitive and therefore more easily understood and used when making assumptions for the NHI costing models. Catastrophic health expenditure The most recent literature on OOP health expenditure in South Africa showed a limited incidence of it being catastrophic, irrespec­tive of the threshold or method used to determine it 33. More specifically, in 2010, less than one percent (0.07%) of the population faced catastrophic healthcare expenditures at the ≥40% threshold (see Table 21), a figure which was in keeping with previous studies 34,35. Based on the rare incidence of catastrophic expenditure, very few households in South Africa were impoverished due to healthcare costs. However, it was notable that in more recent years, larger shares of households’ capacity-to-pay were being allocated to healthcare 33. It must be emphasised that the above findings did not account for foregone earnings or travel costs. More than three-quarters of South Africans who report that public healthcare is unaffordable believe that it’s due to travel costs 39. It’s not hard to imagine that seeking healthcare would add the cost of lost income for many poor South Africans who work informally. Expenditure in absolute terms In absolute terms, OOP health expenditure per capita was $80 in South Africa in 2013 40. Compared to other BRICS countries, this level was relatively low, with OOP expenditure amounting to $762 per capita in Russia, $435 in Brazil, $219 in China and $125 in India in the same year. An earlier study reported that the average OOP payment per person per annum for outpatient care was R695.57 in 2008 41. When disaggregating this average by sector, OOP expenditure for outpatient care in the public sector was far lower than OOP expenditure in the private sector (see Table 21). This is mainly because of exemptions and subsidised care in the public health sector. Medically insured South Africans are not exempt from OOP health expenditure. Cairncross et al. 42 found that in 2019, insured South Africans paid an annual average of R3,914 per capita for OOP health expenditure (see Table 21). This amount roughly has an 80:20 split when disaggregated into out-of-hospital and in-hospital expenditure. Table 21: OOP health expenditure in South Africa *(j) Only included percentages for the most recent year reported in the study. *(k) Only included amount for the most recent year reported in the study. Appendix B: Additional detailed model results Table 22: 2030 detailed model results Table 23: 2040 detailed model results Appendix C: Model assumptions by scenario Table 24: Model assumptions by scenario Notes * Ranking provided in brackets (xth) is the ranking for each assumption in 2040 where the 1st is the least costly and 5th is the most costly. * Where referring to private risk pools, the rankings are based on the assumption at the time where private risk pools are closed. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place in July 2021. The engagement with the manufacturing sector was enabled through the kind support of the National Employers Association of South Africa. Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel Contents Abbreviations & acronyms Introduction Identifying weaknesses Bureaucracy and red tape Education, skills, and work ethic Impact of crime Misalignment in credit provision Municipal malaise Onerous labour legislation Overreliance on grants Steel protection measures Transformation policies Interventions for fostering growth Conclusion Reference list Abbreviations & acronyms AMSA ArcelorMittal South Africa BEE black economic empowerment GDP gross domestic product HRC hot-rolled coil ISI Inclusive Society Institute LRA Labour Relations Act Neasa National Employers Association of South Africa SMME small, medium-sized, and micro enterprise Introduction Although still a sizeable component of the South African economy, the manufacturing sector has been performing poorly over the years. The country is in effect deindustrialising, with manufacturing’s contribution to gross domestic product (GDP) having decreased to a low of 12.90% in 2020 (IDC, 2021). At this level, its contribution to GDP is less than half of what is appropriate for a country at South Africa’s stage of development (Manufacturing Circle, 2017). The decline in manufacturing over the past two decades has had detrimental impacts on the overall economy and on jobs. Manufacturing could generate significant employment, which is essential if South Africa is to tackle persistent inequality and high joblessness. The unemployment rate is currently 32.60% (narrow definition) and 46.30% (expanded definition) (Stats SA, 2021a). In the Covid-impacted year of 2020, total manufacturing production decreased by 11% – the worst performance since the 2009 global financial crisis – and all ten manufacturing divisions reported negative growth rates (Stats SA, 2021b). The Manufacturing Circle, an association of corporate manufacturers, estimates that if manufacturing were to expand to 30% of GDP, between 800 000 and 1.1 million direct jobs could be created, with five to eight times that number in indirect jobs (Manufacturing Circle, 2017). On a mission to craft a new growth-centred economic blueprint for South Africa, the Inclusive Society Institute (ISI) is engaging with different economic sectors to identify the reasons behind the country’s depressed growth performance and to provide a forum for innovative thought on forging a path of higher growth. The ISI has held discussions with the financial sector and sought input from multinational funding institutions to gain an understanding of what policies should be pursued. This report focuses on the discussions that were held with representatives of the manufacturing industry. The engagement showed that the automotive industry, which is the country’s biggest manufacturing sector, is generally content with its current state. The industry has for decades benefitted from consecutive industrial policy plans and detailed incentives programmes. South Africa’s automotive sector is a centre of strength and technical know-how, which is highly integrated into global supply chains. Through industry associations, original-equipment manufacturers and component producers have made great strides in their collaboration with government. However, the automotive industry, with its long history of substantial government support, is the exception and does not reflect the general mood among manufacturers. Acknowledging that the industry is diverse and that not all subsectors are as strong as the automotive sector, the report argues that there is a common thread that calls for a more a business-friendly environment, more flexible labour polices, improved education outcomes, more competitive inputs, and the fixing of municipalities, among others. Identifying weaknesses Bureaucracy and red tape The bureaucratic obstacles that businesses face have a direct impact on economic development and growth. A lot has been said about the need for reform to improve South Africa’s ranking on the World Bank’s yearly Doing Business index, which defines the extent to which the regulatory environment is conducive to the starting and operation of a firm. South Africa is aiming to be among the top 50 global performers by 2022 (Ramaphosa, 2019). That objective seems far off as South Africa fell from 82 to 84 out of 190 countries assessed in the ‘Doing Business 2020’ survey (World Bank, 2019). Participants in the webinar have raised concerns about bureaucracy and red tape, stating that it is particularly burdensome for smaller firms, and acts as a disincentive against new business start-ups. To comply with the onerous administrative legalities is time consuming and slays the entrepreneurial spirit so desperately needed in the country. It uses resources that could have been channelled towards growing rather than bureaucratic compliance issues. Education, skill and work ethic Education quality contributes considerably to a country’s economic growth and getting the basics of schooling right will be important to place South Africa on a sustainable growth path. However, the South African education system continues to fall behind when achievement is measured against international metrics. The result is an education system that does not adequately prepare young people for the workplace. In the most recent Trends in International Mathematics and Science Study – a project of the International Association for the Evaluation of Educational Achievement, measuring Grade 5 level mathematics and science accomplishment – South Africa scored among the five lowest performing countries of 64 nations that took part in the assessment. The top five countries were from East Asia and include Singapore, Hong Kong, South Korea, Chinese Taipei, and Japan. (Reddy et al, 2020). These countries have also been successful in achieving accelerated economic growth in recent decades. The ISI has studied South Korea and Japan to draw lessons for the South African economy. In both instances, education was a key factor in their success. South Africa’s education outcomes are inadequate despite substantial investment. Total public expenditure on education for primary, secondary, and post-secondary nontertiary education, as a percentage of total government expenditure, is relatively high when compared with Organisation for Economic Cooperation and Development countries (Education GPS, 2021). Educational failures filter through to the job market. The manufacturing industry experiences the impact of education challenges first-hand and believes it is an important weakness that must be addressed. A well-educated workforce is central to reviving the sector and ensuring that it is globally competitive. The education system must also cultivate skills that better prepare learners for the future workforce. Each year, too many matriculants are graduating into joblessness. Statistics show that although those with higher levels of education are more likely to find a job, the unemployment problem is so pervasive that as many as 37.70% of those who are unemployed have passed Grade 12 (Stats SA, 2021b). There is also a sense that work ethic and pride are lacking among the work force. A lack of a productivity mindset, culture and accountability damages the country’s potential. An attitude of entitlement must make way for a spirit of hard work and honesty. The values that a nation adopts influence actions and are thus key predictors of a country’s success (Steel, 2017). Impact of crime Businesses are finding it increasingly difficult to absorb the impact of crime. According to the Global Peace Index, the economic impact of violence on the South African economy in 2019 was R145-billion a year (Institute for Economics and Peace, 2020). With the July 2021 wave of looting and unrest in Kwa-Zulu Natal and Gauteng having exponentially increased these costs to society. An increasing lack of faith in the capabilities of the police has led to an increase in the use of private security, pushing up the cost to companies and the prices of end-products. Misalignment in credit provision Research for the South African Reserve Bank has indicated that access to finance is not a major concern for most manufacturing businesses, but it concedes that smaller firms do have a higher probability of facing financing constraints (Smith, 2019). A participant in the webinar representing a medium-sized industrial business has identified the misalignment in the provisioning of credit for industrial development as a concern. According to the participant, banks appear to finance the building of shopping centres or buying of new vehicles more easily than they do investment in new equipment to allow factories to modernise or expand. “Imagine if we built factories at the rate that we build shopping centres and if we then exported these products?” Municipal malaise The disintegration of municipalities, causing a lack of service delivery, is having a severely negative impact on business. Companies suffer large losses from unmaintained infrastructure, such as potholes and water and electricity disruptions. These concerns have been highlighted by poultry producer Astral’s High Court order against the Lekwa municipality for failing to deliver basic services to its factory in Standerton, Mpumalanga, and dairy group Clover, which is closing its cheese factory in Lichtenburg, in North-West, has blamed ongoing poor service delivery by the local municipality for its decision (News24, 2021). The demise of service delivery is linked to financial mismanagement at local government level. The auditor-general’s report on municipalities produces a grim picture, underlining the persistent underperformance as far as financial management and performance reporting is concerned. The report for the 2019/20 financial year shows that the financial position of more than a quarter of the 257 municipalities is so dire that there is significant doubt that they will be able to continue as going concerns, while almost half are exhibiting indicators of financial strain. Only 27 municipalities achieved a clean audit in 2019/20 (Business Day, 2021). To deal with a lack of basic service delivery in municipalities, many businesses are taking it upon themselves to clean up towns, fix roads and maintain other infrastructure. However, this duplicates the cost of municipal services, impacting on companies’ bottom lines. The ever-increasing cost of water and electricity are also negatively impacting on business. Between 2007 and 2020, electricity tariffs increased by more than 500% and average municipal water tariffs have increased four times faster than inflation since 1996 (IOL, 2021). Onerous labour legislation South Africa’s labour legislation mediates the relationship between employers, employees, and trade unions. Although aimed at ensuring fair practices, some issues have been raised about the inflexibility of current labour laws and their impact on small, medium-sized, and micro enterprises (SMMEs). Centralised collective bargaining provided for in the Labour Relations Act (LRA) elicits strong opinions on both sides. The National Employers Association of South Africa (Neasa) has been vocal in its opposition to the ‘one-size-fits-all’ wage approach of centralised collective bargaining, which culminates in bargaining councils extending agreements to non-parties. Neasa states that a statutory dispensation, as contained in the LRA, marginalises the voting power of SMMEs. An employer whose cost of labour as a percentage of turnover is less than 5%, can enforce a wage on another employer whose cost of labour as a percentage of turnover is more than 50% (Papenfus, 2018). Trade unions are generally powerful, which is a concern for business owners considering the threat they pose to economic stability when things do not go the unions’ way. The law on dismissals also makes it cumbersome for business owners to dismiss unproductive employees. Wary of the difficulty of dismissing staff, employers are reluctant to hire people, contributing to the high unemployment rate of the country. Labour legislation does not make provision for the different economic realities of a small employer in a rural area, compared with a big business situated in an economic hub. Those two types of employers, for instance, are judged by the same economic and operational measures when it comes to collective bargaining and the national minimum wage. The national minimum wage, if it is set too high, could have adverse impacts on employment. Critics of the national minimum wage, which is currently set at R21.69 an hour, argue that the requirement denies a work seeker the right to negotiate for a wage that he or she finds acceptable, and which would have offered an escape from unemployment. Proponents argue that it begins to address the problem of the millions of working poor, whose wages are kept low by the prevalence of high rates of unemployment. Overreliance on grants At 3.30% of GDP, South Africa is among the biggest spenders on social protection, through which it seeks to tackle poverty and inequality (World Bank, 2021). The social assistance programme provides direct income support to the elderly, children, war veterans and people with disabilities. The welfare system has expanded fast in the past 20 years and currently has about 18.2 million beneficiaries, with another 1.1 million expected to become beneficiaries over the next three years (National Treasury, 2021). Although social transfers do protect the most vulnerable members of society, it cannot be a substitute for growth and jobs (World Bank, 2021). There is concern that an overreliance on grants creates a culture of dependency. Steel protection measures There is growing frustration within the steel industry about ongoing tariff protection for primary steel producer ArcelorMittal South Africa (AMSA). Several downstream steel customers have expressed unhappiness with safeguard duties, as well as about steel backlogs and pricing developments. South African flat-steel prices are set using a government-approved ‘basket price’ methodology, whereby the price is arrived at following analysis of selling prices in a range of markets included in the basket. Flat and long steel product imports are subject to base tariff protection of 10%, but certain flat products are also subject to safeguard duties of a further 8%, resulting in overall protection of 18% on certain grades. The 8% safeguard on hot-rolled coil (HRC) was initially meant to expire in August 2020 but was extended following an AMSA application to the International Trade and Administration Commission of South Africa (Engineering News, 2021a). Safeguards were first introduced on a sliding scale in 2017 to level the playing field against unfair import competition. South Africa’s biggest steel merchant, Macsteel, took the Department of Trade, Industry and Competition to court over the extended implementation of safeguard duties on HRC imports. The case was settled in the High Court in June, following an agreement that, once the current 8% safeguard expires in August 2021, there would be a moratorium on the implementation of further safeguard duties on HRC for at least two years (Engineering News, 2021b). Steel industry players participating in the webinar have questioned the economic benefits of sustaining a primary steel producer in the form of AMSA. They say locally manufactured steel products have become uncompetitive, owing to expensive AMSA steel and that access to cost-effective, high-quality, duty-free input material is needed to revive the downstream industry. In June 2021, the ‘South African Steel and Metal Fabrication Master Plan 1.0’ was adopted by business, labour, and government. The document aims to create a platform for the revival of the embattled downstream steel fabricators. The plan has been developed on three pillars, namely: boosting demand for steel and steel products, primarily by reviving South Africa’s stalled public infrastructure roll-out; driving localisation, or import substitution; and by leveraging the market access being created through the implementation of the African Continental Free Trade Agreement; addressing supply-side constraints, including electricity disruptions and tariff hikes, logistics bottlenecks, uncompetitive inputs and inadequate skills and research and development; and a series of cross-cutting interventions, including the creation of a Steel Industry Development Fund, to be capitalised through the introduction of a levy of between R5/t and R10/t on all steel sold domestically, whether it be produced locally or imported (Engineering News, 2021c). Transformation policies The manufacturing industry is subject to the broad political environment in which it functions. To a large extent, that is informed by the policies of the African National Congress, the ideology of which aims to transform the country from an Apartheid State to a non-racial, non-sexist, united democratic society. The principal policies that seek to reverse inequality, poverty and exclusion are through stimulating inclusive growth and investment, bolstered by black economic empowerment (BEE) and employment equity, along with the safety-net of an expansive welfare system. Concerns have been raised that transformation policies, such as the Employment Equity Act and the Broad-Based Black Economic Empowerment Act, do not foster an environment in which entrepreneurs can flourish. Although there is an acceptance that transformation is needed, there is doubt over whether narrow BEE policies are the way to go. Instead of promoting true empowerment, critics say BEE has made it more difficult for many SMMEs to do business with government or big enterprises and that it has created a detrimental side-effect in the form or ‘tenderpreneurship’. In general, complying with employment equity and BEE policies has raised the cost of doing business. Interventions for fostering growth SUGGESTIONS FOR FOSTERING GROWTH Enhance export competitiveness Faster export growth will help propel economic growth, but to achieve this, manufacturing competitiveness must improve. South Africa’s score on the 2020 Competitive Industrial Performance index dropped four positions to 52 out of 152 countries assessed (Unido, 2020). Suggestions to enhance export competitiveness include: Implement export incentives. Reduce port tariffs and improve port efficiency. Consider re-instating rail subsidies for containers destined for export. Emulate the automotive support programme for key industries. Fix municipalities It is imperative that municipalities function properly. To achieve this, ethical leadership, service orientation and good governance are required. Local governments need to be properly capacitated and free from political interference and constant churn. Strong external controls must be in place to prevent financial loss and wastage. Given the central role that the manufacturing sector plays in creating jobs and national wealth, and the need for a well-functioning manufacturing sector to ensure the economic sustainability to ensure the wellbeing of the nation, the maintenance of municipal infrastructure and services within industrial areas needs to be prioritised by local authorities. Communities also need to be more involved in municipal matters and hold local government accountable. Flexible labour laws Labour legislation is viewed as onerous and hampers employment. Suggestions to modernise labour laws include: Revisiting the centralised collective bargaining model. Making it easier for employers to hire and fire workers. The current standard three-month probation period should be extended to at least one year to properly establish a person’s skills and attitude. Implement transport subsidies It is expensive for workers, who often live far from their places of employment, to commute to and from work. Implementing transport subsidies will assist manufacturers and help overcome spatial distortions. Improved access to financing Having access to sufficient financial resources is crucial to enable entrepreneurs and smaller businesses to grow. The current financing rules should be revisited to ensure that they actively promote economic development by mobilising and allocating resources efficiently – making it easier for entrepreneurs to access credit. Increase domestic demand Creating additional demand for local goods is key to a virtuous cycle that promotes economic growth. Demand for local goods can be stimulated by increasing the procurement of locally manufactured goods, provided their cost and quality are competitive. Local industries could be protected more through assertive trade policies, but this should be pursued based only on competitiveness. Keep costs down Allow business to catch its breath by keeping increases in rates and services below inflation for the next five years. Unions’ wage demands should also not exceed the inflationary rate. South Korea’s experience shows that a competitive agricultural sector with low food costs helped keep labour costs competitive. Reduce red tape Business owners are being inhibited by red tape. Making the business process simple to navigate will foster enthusiasm, investment and support entrepreneurial growth. Revitalise ‘old’ industrial parks Revitalising ‘old’ industrial parks located in former Apartheid-era homelands acts as a catalyst for economic and industrial development in lagging rural areas. These parks support job creation in manufacturing and arrest the migration of people to overpopulated urban areas. Government embarked on an initiative in 2016 to revitalise ten State-owned industrial parks located in underdeveloped former homeland areas. This initiative dovetails with the special economic zones programme, which is a major focus for attracting investment and promoting industrialisation. Scrap raw material protection mechanisms Steel protection measures have been severely criticised by domestic steel consumers, which argue that without a safeguard duty, fabricators will be able to compete on a level playing field and export steel products. Primary steel producers should not enjoy more protection than what the downstream sector is afforded. If such circumstances persist, then similar protection measures will also be required for downstream participants. Speed up technology commercialisation Centres must be developed at universities to transition technologies from the research lab to the marketplace faster. Technology commercialisation centres will require collaboration between tertiary institutions, the private sector, and entrepreneurs. Stimulate battery industry Batteries are at the core of a modern energy system and play an important role in the shift to electric mobility. South Africa is presented with an opportunity to carve out a niche for itself in what is a fast-growing and rapidly evolving market. South Africa already has some battery manufacturing capabilities and experience with beneficiating minerals. Besides lithium, the value chain for lithium-ion batteries includes a host of materials produced at scale in South Africa, such as manganese, iron-ore, nickel, and titanium. Conclusion Although the manufacturing sector has been in decline, it continues to be of great importance to South Africa and has pockets of excellence – such as in the automotive sector – that could be replicated elsewhere in the economy. The long-term strategic partnership between government and the automotive industry provides a clear illustration of the power of cooperation between government and business – local and global – as well as the importance of a shared vision and a common purpose among business managers, trade unions and surrounding communities. Faced with a global pandemic, South African manufacturers, business, and labour formed a united front, bringing together vision, ingenuity, and technical skills to accomplish two highly successful projects in 2020: the local manufacture of medical equipment and personal protective equipment, as well as the national ventilator project. These are both prime examples of what could be achieved through greater collaboration, and the lessons learnt from their successful execution should be reproduced across various industries. Through such a spirit of cooperation and common purpose it will be possible to move South African manufacturing forward into a new era of success; to blow life-giving breath onto the embers of the once-roaring furnaces of South African industry and to see the lights come on once again through the grimy windows of abandoned factories. Reviving the manufacturing sector can restore a much-needed engine for growth for the South African economy. References Business Day. 2021. Auditor-general appalled by the state of municipal finances, June 30, 2021. [Online]. Available at: https://www.businesslive.co.za/bd/national/2021-06-30-auditor-general-appalled-by-the-state-of-municipal-finances/ [accessed July 9, 2021]. Education GPS, Organisation for Economic Cooperation and Development. 2021. 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Available at: http://www.statssa.gov.za/publications/P30412/P30412December2020.pdf [accessed July 9, 2021]. Steel, P. 2017. The Conversation: A recipe for a successful nation, November 2, 2017. [Online]. Available at: https://theconversation.com/a-recipe-for-a-successful-nation-86516 [accessed July 9, 2021]. United Nations Industrial Development Organisation. 2021. Competitive Industrial Performance Report 2020, April 28, 2021. [Online]. Available at: https://stat.unido.org/content/publications/competitive-industrial-performance-report-2020 [accessed July 9, 2021]. World Bank. 2019. Doing Business 2020, October 24, 2019. [Online]. Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf [accessed July 9, 2021]. World Bank. 2021. South Africa Economic Update Edition 13. Building back better from Covid-19, with a special focus on jobs, July 12, 2021. [Online]. Available at: http://worldbank.org/en/country/southafrica/publication/south-africa-economic-update-south-africa-s-labor-market-can-benefit-from-young-entrepreneurs-self-employment [accessed July 12, 2021]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Summary of the learnings from a joint workshop by the Inclusive Society Institute and the Swedish Institute of Future Studies Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. Authors: Percept Actuaries and Consultants Edited: Daryl Swanepoel Graphic Design: Nini van der Walt AUGUST 2021 Content 1. Introduction and background 2. Some questions on poverty and inequality in South Africa 3. Measuring inequality in developing economies Issues with the Gini coefficient The many dimensions of inequality A systematic approach to understanding inequality 4. Broader discussion on inequality and inequality measures Rethinking the research questions Abundance of inequality literature in South Africa Wealth and inequality Which multidimensional approach? 5. Data limitations and alternative data sources Issues with pre-1994 data in South Africa Useful datasets Exploring additional data 6. Conclusion and way forward References List of figures Figure 1: Bourguignon triangle (2004) – the relationship between growth, inequality, and poverty Figure 2: Scheme of social stratification – a poverty dynamics approach to structured inequality Figure 3: The Multi-Dimensional Inequality Framework (LSE & Oxfam, 2018) Acronyms and abbreviations 1. Introduction and Background South Africa has the highest income inequality in the world as measured by the Gini coefficient. Twenty-seven years after the end of apartheid, despite multiple and deliberate policy attempts to grow the economy, increase income for all, and improve the welfare of South Africans, inequality remains stubbornly high. Income inequality matters because it is intrinsically linked to economic growth and absolute poverty: Initial equality and changes in inequality during growth heavily influence the poverty reducing impact of growth. Hence, even if poverty may be regarded as a more pressing problem than inequality (Fields, 2007), distributional issues remain critical for anti-poverty strategies (Ravallion, 2001) This conundrum has implications for South African policy debates and underscores the need to understand the drivers of income inequality. A recent review by Stats SA, the Southern Africa Labour and Development Research Unit (SALDRU) and the Agence Française de Dével­oppement (AFD) Group (Statistics South Africa, 2019) of inequality in South Africa from 1993/4 to 2018 found that South Africa con­sistently had a high Gini coefficient over the period, irrespective of the data source, with little decrease in inequality levels. However, the high Gini coefficient may obscure underlying positive redistribution dynamics. For this reason, the comprehensive review went beyond reporting the Gini coefficient and used multiple metrics and approaches to analyse the many dimensions of inequality including economic inequality, wealth and asset inequality, labour market inequality, gender inequality, inequality in the social domain and social mobility. Unfortunately, media reports of the review focused on the aggregate Gini coefficient, and this drowned out many of the positive findings in the broader analysis of inequality. The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI's work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa. This desire is pursued through a value system that embodies the social and national democratic principles associated with a developmental state. The Swedish Institute for Future Studies (IFFS) is an independent research foundation that promotes future perspectives in research and public debate. The research program that has set the IFFS’s framework for recent research activities is called “Which future? Challenges and choices for the 21st century”. The research programme focuses on five themes, of which one is Equality. It therefore has a strong interest and experience base in measuring inequality and how best practices in inequality measurement could be applied in South Africa. To promote knowledge sharing and mutual learning on inequality measurement and the inequality context in South Africa, ISI and IFFS hosted a workshop on 1 July 2021 to discuss best practices and alternative approaches in inequality and poverty measurement. The workshop was attended by representatives of the Inclusive Society Institute, representatives of IFFS and independent academics from South Africa, Sweden, and Germany. Percept Actuaries and Consultants and 71Point4 presented initial ideas and research ques­tions for an agenda on inequality research in South Africa which is being supported by the Frederich Ebert Stiftung. This report sets out the focus of ISI’s research on inequality and the themes and issues which were discussed at the workshop 2. Some questions on poverty and inequality in South Africa Before defining a research agenda on inequality, it is important to understand the contentious and sometimes controversial inter­relationship between inequality, poverty, and economic growth. While it is undisputed that economic growth leads to a decrease in absolute poverty, the extent of this decrease and how it is distributed depends on the level of inequality and changes in it. The interrelationships between growth, inequality and poverty are best captured in the Bourguignon triangle (Figure 1). The causal chain from income and wealth inequality to growth (also known as the ‘inequality–growth’ link) are underpinned by two conflicting schools of thought: the traditional (classical) perspective and the ‘new’ political economy of development theories (modern). Figure 1: Bourguignon triangle (2004) – the relationship between growth, inequality, and poverty The classical perspective highlights the growth-enhancing effects of income and wealth inequality through the saving-enhancing effects (the rich save proportionately more than the poor), as well as the existence of investment indivisibilities and incentive effects (Aghion & Bolton, 1997; Kaldor, 1955). In contrast, the modern perspective links greater inequality to reduced growth through condi­tions such as resultant political and social instability leading to greater uncertainty and lower investment, high transaction costs, unproductive rent-seeking activities, and increased insecurity of property rights (Thorbecke et al., 2002). The Kuznets hypothesis of the inverted U-shaped relationship between growth and inequality describes the opposite causal direction (i.e., the ‘growth–inequality’ link). The modern approach, however, suggests that growth patterns resulting in more inequality would lead to lower future growth paths, which negatively impact growth-induced poverty reduction. Ultimately, the poverty-reduction effects of growth depend on how the growth pattern affects income distribution, since inequality acts as the ‘filter’ between growth and poverty reduction (Thorbecke, 2013). Effective poverty reduction would therefore require some combination of higher growth and a more pro-poor distribution of the gains from growth. There are signs of movement towards a more equal South African society, with a small but growing black middle-class population. However, the COVID-19 pandemic has entrenched unemployment in South Africa, particularly among this group (Futshane, 2021). Although the decline in employment observed was similar for all age groups (and age and education subgroups), it was marked by substantial churning that far exceeded churning estimates during pre-COVID years. The aim of future ISI inequality reports is not to redo the StatsSA (2019) inequality report and its underlying analyses, but to add more nuance using the same and alternative data sources to explore different research questions and identify positive micro channels out of inequality and poverty, into prosperity. This is being done to obtain a deeper understanding of the impact of transformation initia­tives in post-apartheid South Africa which is not reflected in high-level metrics of income inequality. Our chosen approach will provide a more accurate description of the poverty alleviating strides that have been made, which would otherwise not be recognised. Metrics and approaches for measuring poverty and inequality: Are there other metrics that should be considered when designing policy interventions? To understand what lies beneath the average poverty and inequality measures, it is useful to build a poverty and inequality profile. This profile is derived by decomposing poverty and inequality metrics by socio-economic or demographic characteristics. To capture the dynamic aspects of poverty and structural inequality, Schotte et al. (2018) suggests a social stratification scheme that identifies the relationship between individual and household characteristics and patterns of economic mobility. This scheme has advantages over both purely money-metric and multidimensional approaches: it remains anchored in a money-metric threshold (the cost-of-basic-needs poverty line) to broadly determine who can and cannot afford to meet their basic needs (first column in Figure 2), but further distinction between the poor and non-poor is then determined based on propensities for poverty transitions (second column of Figure 2). These propensities are derived from a set of individual and household characteristics that allows inference of multidimensional determinants of economic empowerment. Figure 2: Scheme of social stratification – a poverty dynamics approach to structured inequality Source: Schotte, et al., 2018. Note: Solid lines denote absolute expenditure thresholds. Dashed lines denote probability thresholds. The research reports to be published by the ISI will not experiment with alternative inequality measures but will rather explore differ­ent lenses of analysis (e.g., gender, youth, employment) to existing measures to shed light on the main drivers of inequality and likely policy options to address them. Future phases of the research will consider a more multi-dimensional approach to inequality, pov­erty, and well-being because it provides a more comprehensive view of the changes in inequality that have occurred across multiple dimensions over time. It also allows for further interrogation of the persistent issues that prevent equality from being achieved, thus informing more progressive policy development. Structural unemployment and inequality: Is aggregate unemployment the biggest driver of inequality? Approximately two-thirds of overall inequality in South Africa is driven by inequality in earnings, and about half of this is due to the ex­tremely high levels of unemployment (Statistics South Africa, 2019). A key question for those who are employed and earning income, is how much of a difference does variation in income between individuals contribute to inequality? Second, what then, e.g., access to education and variation in quality of education, explains this variation? What are the gender dimensions to inequality? This overarching question will be explored through the gender dimensions of unemployment, income availability, gender and grants, and gender and post-school education. Gender intersects with many disadvantages and inequities, including income inequality. Even though women represent over half of the South African population, their share of household income and expenditure is significantly lower than that of men (Statistics South Africa, 2019). By exploring the gender dimensions of household formation, unemployment, income availability (including grants), and post-school education, we may gain a deeper understanding of how inequalities accentuate vulnerabilities, and which levers may contribute to achieving income equality for women. Household composition dynamics: To what extent is inequality in South Africa driven by generational wealth dynamics? It may also be useful to consider generational wealth dynamics and to what extent it drives inequality in South Africa. In higher-in­come groups, income and opportunities to access income (e.g., education) may be derived from existing wealth. There is robust evi­dence that wealth is more unequally distributed than income in South Africa (Orthofer, 2016). Lower rates of population growth among high-income groups, compared to low-income groups, further drive inequality through the concentration of inherited wealth (Peterson, 2017). Questions for research here include the specific nature of the inequality dynamics of certain age groups and cohorts. Working with 71point4, wealth dynamics can also be explored using alternative (non-survey) data on housing and credit markets. The contribution of global inequality dynamics: What components of South African inequality are not necessarily South Afri­can-specific but related to the way economies function globally? There is a growing consensus amongst scholars that a major contributor to increasing income inequality globally are the top 1% of individuals on the earnings distribution and this elite subgroup is where more attention should be paid (Alvaredo et al., 2013). Income generated from the wealth of the top 1%, in addition to their earned income, are important to consider when exploring income inequal­ity and how best to target interventions. This approach may be of relevance in the South African context where wealth has accumu­lated along racial lines for decades. If, for example, we exclude the top 1% of earners from inequality calculations, would it change the inequality measure and if so, how? There is, however, a strong social justice component to understanding the disparities in income between the top 1% and the rest of the population and this dimension should not be ignored. For the first workstream of ISI’s work on inequality, the more nuanced questions that need further appraisal and analysis using the Stats SA (2019) report but also other available inequality, wealth, and poverty analyses will be identified. We propose to primarily focus on literature that analyses the more recent household surveys and panel studies like GHS, QLFS, and NIDS as more recent data will provide a clear direction for change and required policy actions. We also propose looking at alternative sources of data relating to wealth, access to financial services, property ownership and other relevant dimensions. This piece of work is necessary to add depth and nuance to the current discourse. 3. Measuring inequality in developing economies The discussion in this part of the workshop was informed by short presentations and insights shared by researchers of the IFFS, as well as research-related questions of clarity posed by both the IFFS and the ISI’s participants. The discussion mostly focused on broad themes around the measurement and nature of inequality in South Africa. Issues with the Gini coefficient The Gini coefficient is often used as an inequality index due to its invariance properties and its ability to satisfy the transfer principle. However, it was considered useful only in cases where it is decomposed, which is often done in the current literature. Despite this, the Gini has several limitations that make it a poor indicator of progress and distribution. In the South Africa context, the Gini was further highlighted as a poor metric to target because it excludes income generated from the informal sector that may not always be accurately captured by surveys (this may speak to the shortcomings of survey data, rather than the Gini itself). By focusing on the Gini, a grim picture of inequality is painted in South Africa. This ignores the political reforms and improvements in access that have taken place. In order to present a more accurate depiction of inequality in South Africa, a broader approach, which focuses on overall welfare and progressive reform is necessary. A multidimensional approach, that still places economic indicators at its core, provides the granularity required to view inequality in a more holistic way and highlight the roots of the problem. The many dimensions of inequality Although income and wealth dimensions remain at the forefront of measuring inequality, the inclusion of dimensions such as education (Hoxby & Avery, 2013), health (Ataguba et al., 2011), crime (Sampson et al., 2005), and spatial inequality (Reardon & Bischoff, 2015) have been investigated to provide a more comprehensive view of the development progress that has taken place in South Africa. The post-apartheid development policy largely focused on addressing existing economic, social, and spatial inequalities along racial lines. This has led to several reforms that have improved the overall quality of life and living conditions of disadvantaged groups in South Africa. This progress is often under-reported in the media. Basic living conditions are at the forefront of progressive reforms. Housing, with the addition of water, sanitation, electricity, and telephone access, saw a 152% increase in the budget allocation following apartheid (Brook, 2017). To date, approximately 2-3 million government-subsidised homes have been built (Centre for Affordable Housing Finance Africa, 2021). The benefits of housing have been enhanced by the expansion of water and sanitation to 95% of the population 20 years after apartheid (Jacobs et al., 2014). Access to education and opportunities for employment have also improved over the last three decades. The once racially segregated schooling system has been dismantled to expand access to integrated schooling. Reforms have attempted to decolonise the school­ing system, particularly by allowing students to be taught in their mother tongue language. Approximately 20% of the overall budget has been allocated to education to ensure equitable access to free schooling for all South Africans (Brook, 2017). To ensure long-term economic shifts, affirmative action policies have been introduced to tackle the employment disparities among racial and gender groups. Twenty years after the end of the apartheid era, the racial gap in employment has been reduced, however, this gap still remains large, with a more than 50% difference in employment between the Caucasian and Black population (Fredericks & Yu, 2017). The gender gap has also remained, making African women highly vulnerable to unemployment (Fredericks & Yu, 2017). Healthcare access and supply was recognised as critical in the post-apartheid era. In an attempt to address health inequalities, approximately 3% of the budget was allocated to healthcare sector reforms (Brook, 2017). This has led to the expansion of primary healthcare clinics nationwide and free access to primary healthcare services for all, along with free access to higher levels of care for impoverished individuals. Similar to the education sector where access has increased, policy discussions in the health sector are now moving towards addressing the quality of the services provided so that real changes can be seen in outcomes. Multidimensional approaches to measuring inequality, such as the Level of Living approach (Kaldaru et al., 2009), have the advantage of tracking progress over time at an individual (including children) and household level. This approach seeks to determine whether indi­viduals have the resources needed to govern their own lives. Overall progress can be evaluated by reviewing the average level of each dimension and the proportion of individuals without important resources. Inequality can be evaluated by reviewing dispersion of the population and differences between groups. This creates a shift in thinking from wealth creation to establishing overall welfare. The multidimensional approach was considered more comprehensive and indicative of how inequality manifests in the lived experi­ences of South Africans when compared to the aggregate Gini coefficient. The StatsSA 2019 report provides a more comprehensive approach to capturing the gradual reforms made in post-apartheid South Africa (Statistics South Africa, 2019). It was hypothesised that combining economic indicators with other dimensions such as life expectancy may denote the state of inequality more clearly. A systematic approach to understanding inequality Another proposed framework was a systemic approach to understanding inequality. This approach provides a holistic multidimension­al view of inequality and the power relations of influence. It includes seven domains, four of which are linked to financial security, with several indicators under each domain Figure 3. Figure 3: The Multi-Dimensional Inequality Framework (LSE & Oxfam, 2018) By taking this broader perspective, multiple domains can be evaluated. In addition to inputs, processes can also be reviewed, and the various types of inequality can be more accurately identified (Bucelli & Mcknight, 2021) This framework attempts to empower communities (International Civil Society Centre, n.d.). It emphasises the need for agenda setting, policy reform and indicators to be driven by the input of marginalised communities. Despite the benefits that may be derived from community participation, these approaches can be challenging to apply as they often require additional tax and property data. 4. Broader discussion on inequality and inequality measures In this part of the workshop, the discussion shifted towards how the initial research questions presented earlier could be reframed and how best to think about the measurement of inequality in South Africa. Rethinking the research questions A theme that emerged during the discussion was the need to consider the research question(s) more carefully. The suggested research question of excluding the top 1% of the income distribution from inequality measurements was viewed as bypassing a fun­damental cause of inequality. It was also viewed as signaling the wrong political measure if a structure of privilege is excluded from measurement. Instead, it was suggested that it would be more helpful to focus on the top 1% of the income distribution to better understand how fiscal instruments could be best used for income redistribution, most notably of the wealth tax base. At a broader level, it was suggested that researchers take a step back and ask the following questions: Which types of inequality matters the most? Which type of inequality do we want to understand more and why? Is this study only useful for policymakers, or for community participants too? How should the lived experience be incorporated into the measurement of inequality? The discussion also emphasised the need to veer away from measuring the level of inequality, to why inequality continues to remain high and what can be done to address this. This is of particular importance when reviewing the high levels of income inequality that persist despite improvements in absolute poverty and access to social and essential services. There was some speculation that is may be due to current policies being unable to identify and address the root causes of inequality. The abundant literature on poverty and inequality in post-apartheid South Africa make the root causes clear, which suggests that the issues may lie in policy design and implementation. The limitations of quantitative data in capturing the full picture of inequality were acknowledged, and there was agreement that gaps in qualitative data need to be filled. Abundance of inequality literature in South Africa The literature on income inequality in South Africa is vast and the quantitative measurements of inequality presented in this literature show little variation over time. This literature is useful to establish best practices for policy design in South Africa (Leibbrandt et al., 2021). Most of the academic literature on income inequality is often misinterpreted or misrepresented by the media. Media attention needs to shift away from a sole focus on income inequality towards a multidimensional approach of reporting on inequality that pre­sents the state of the country in a more nuanced way. To delve further into the structural and demographic factors associated with inequality, disaggregation of indicators with a focus on gender and the young may lead to more meaningful results. The capacity to investigate these measures are apparent in the Stats SA 2019 report which includes multiple dimensions of inequality (Statistics South Africa, 2019). Wealth and inequality Wealth inequality has largely been excluded when investigating indicators of inequality, with more emphasis being placed on pover­ty and marginalisation related to income inequality. The multidimensional approach goes beyond income inequality and has the advantage of allowing wealth disparities to be included as an additional factor rather than an alternative one. By adding wealth inequality to the debate, power inequality, mentioned in the systemic approach, becomes increasingly relevant. The inclusion of mul­tiple economic indicators, including wealth, presents a more comprehensive picture and allows us to answer questions related to the lack of distributional progress following the end of the Apartheid era. Which multidimensional approach? The inclusion of several dimensions of wealth and well-being provides a more accurate representation of the current economic state of South Africa with respect to equality. Various metrics have been studied to date, and are already available as a means of evaluating South Africa in a multidimensional way. However, the outcomes of these are often similar regardless of the metric used. Although the need to interpret inequality through a multidimensional lens is evident, the ideal method of doing this has not been made clear. Various weightings can be used to determine the final measure of inequality, and the relevance of each contributing domain needs to be explored. The inclusion and weighting of indicators needs to be carefully considered and critiqued in the South Afri­can context. 5. Data limitations and alternative data sources In the last part of the workshop, participants focused on the nature and shortcomings of the datasets typically used for inequality analyses. Issues with pre-1994 data in South Africa The benefits of reviewing longitudinal data were expressed in the workshop, particularly when following multidimensional progress over time. The comprehensive collection of data, related to several important dimensions of inequality, is currently reported in the Stats SA report. However, progress over longer periods of time is challenging to see due to the limitations of pre-1994 data. Histor­ical datasets do not provide information on all population groups. Census data collected during the Apartheid era often excluded black South Africans who were severely impoverished and often unemployed. This has heavily affected the ability to review all dimensions of inequality over time as data cannot accurately be collected retrospectively. The Stats SA reports and various household surveys therefore provide a starting point for the collection of multidimensional data (Statistics South Africa, 2019). Useful datasets Several relevant and useful datasets were identified for studying multidimensional inequality. NiDS and GHS were highlighted as key sources of data on various indicators of the multidimensional poverty index between 2008 and 2017. The lack of wealth data in household surveys can be overcome through the use of property market, pension, credit and anonymised tax data. The inclusion of these data sources often results in variations in the findings obtained by income inequality data, highlighting the need to include wealth indicators. Additionally, HEMIS may be useful for tracking individuals through higher education and the tax system. Despite the availability of a wide array of data sources, collecting longitudinal data in multiple dimensions, including wealth, may be difficult to access due to tedious application processes and restricted access. The new implementation of the POPI act has also created difficulty in accessing data due to the uncertainty surrounding how data is distributed and the fear of prosecution if the act is breached. Due to these limitations, it is important for existing literature to be considered and used to improve efficiency. Exploring additional data The discussion highlighted the need to explore inequality in various population sub-groups. This may improve the quality of data and supplement the already available literature. Focus groups were proposed as a source of qualitative data which can be used to em­power communities and emphasize the indicators that are considered valuable to the population. The inclusion of vulnerable groups, such as youth and children, during national surveys can also be considered a goal for South Africa. This has the ability to improve the quality of data that is currently available and provide a longitudinal view of progress made in the country. It is important to note that progress may appear to be slower when including youth. 6. Conclusion and way forward After a robust debate on inequality and inequality measures, there was consensus that aggregate measures of inequality are not as useful as measures that lend itself to more nuance and granularity, especially in the South African context. Based on the current inequality literature, it is evident that strides have been made in South Africa post-1994 (Statistics South Africa 2019). However, structural issues remain a binding constraint for further growth and development. All participants agreed that more could be done to rectify this position. An important outcome regarding the way forward was the need for a second workshop that focuses on policy options for reducing inequality. References Aghion, P., & Bolton, P. (1997). A Theory of Trickle-Down Growth and Development. Review of Economic Studies, 64(2), 151–172. https://doi.org/10.2307/2971707 Alvaredo, F., Atkinson, A. B., Piketty, T., & Saez, E. (2013). The Top 1 Percent in International and Historical Perspective. Journal of Economic Perspectives, 27(3), 3–20. https://doi.org/10.1257/JEP.27.3.3 Ataguba, J. E., Akazili, J., & McIntyre, D. (2011). Socioeconomic-related health inequality in South Africa: evidence from General Household Surveys. International Journal for Equity in Health 2011 10:1, 10(1), 1–10. https://doi.org/10.1186/1475-9276-10-48 Bucelli, I., & Mcknight, A. (2021). Mapping systemic approaches to understanding inequality and their potential for designing and implementing interventions to reduce inequality. https://www.lse.ac.uk/International-Inequalities/Publications/All-LSE-III-Working-Papers Centre for Affordable Housing Finance Africa. (2021). RDP Assets in South Africa. https://housingfinanceafrica.org/projects/rdp-assets-study/ Diane Brook. (2017). South Africa After Apartheid: Recent Events and Future Prospects. http://www.socialstudies.org/sites/default/files/publications/se/6107/610705.html Fields, G. S. (2007). How much should we care about changing income inequality in the course of economic growth? Journal of Policy Modeling, 29(4), 577–585. https://doi.org/10.1016/j.jpolmod.2007.05.007 Fredericks, F., & Yu, D. (2017). The effect of Affirmative Action on the reduction of employment discrimination, 1997-2015. Futshane, V. (2021). Recovering from COVID-19 and inequality: the experience of South Africa. Prepared for the United Nations Virtual Inter-agency Expert Group Meeting on Implementation of the Third United Nations Decade for the Eradication of Pover­ty (2018-2027). Hoxby, C., & Avery, C. (2013). The Missing “One-Offs”: The Hidden Supply of High-Achieving, Low-Income Students. https://www.brookings.edu/wp-content/uploads/2016/07/2013a_hoxby.pdf Inga Jacobs, Mitzi du Plessis, Kim Trollip, & Lani van Vuuren. (2014). South Africa’s 20-year journey in water and sanitation research. http://www.wrc.org.za/wp-content/uploads/mdocs/WRC20-FINAL.pdf International Civil Society Centre. (n.d.). Making Voices Heard and Count. Retrieved July 26, 2021, from https://voicescount.org/about/ Kaldaru, H., Kaasa, A., & Tamm, K. (2009). Level of Living and Well-being as Measures of Welfare: Evidence from European Coun­tries. Estonian Discussions on Economic Policy, 17(0). https://doi.org/10.15157/TPEP.V17I0.908 Kaldor, N. (1955). Alternative Theories of Distribution. Source: The Review of Economic Studies, 23(2), 83–100. Leibbrandt, M., Andrés, F., & Pabón, D. (2021). Reinstating the importance of categorical inequities in South Africa. http://open­saldru.uct.ac.za LSE, & Oxfam. (2018). Multidimensional Inequality Framework Final draft. OPHI. (2020). Global MPI 2020. University of Oxford, Oxford Poverty & Human Development Initiative. https://ophi.org.uk/multidi­mensional-poverty-index/global-mpi-2020/ Orthofer, A. (2016). Wealth Inequality in South Africa: Insights from Survey and Tax Data. www.REDI3x3.org Peterson, E. W. F. (2017). The Role of Population in Economic Growth: Https://Doi.Org/10.1177/2158244017736094, 7(4). https://doi.org/10.1177/2158244017736094 Ravallion, M. (2001). Growth, inequality and poverty: Looking beyond averages. World Development, 29(11), 1803–1815. https://doi.org/10.1016/S0305-750X(01)00072-9 Reardon, S. F., & Bischoff, K. (2015). Income Inequality and Income Segregation1. Https://Doi.Org/10.1086/657114, 116(4), 1092–1153. https://doi.org/10.1086/657114 Sampson, R. J., Morenoff, J. D., & Raudenbush, S. (2005). Social Anatomy of Racial and Ethnic Disparities in Violence. American Journal of Public Health, 95(2). https://doi.org/10.2105/AJPH.2004.037705 Schotte, S., Zizzamia, R., & Leibbrandt, M. (2018). A poverty dynamics approach to social stratification: The South African case. World Development, 110, 88–103. https://doi.org/10.1016/J.WORLDDEV.2018.05.024 Shifa, M., & Ranchhod, V. (2019). Handbook on inequality measurement for country studies. University of Cape Town. Statistics South Africa. (2019). Inequality trends in South Africa: A multidimensional diagnostic of inequality. StatsSA. www.statssa.gov.za Thorbecke, E. (2013). The interrelationship linking growth, Inequality and poverty in Sub-Saharan Africa. Journal of African Econo­mies, 22(SUPPL. 1). https://doi.org/10.1093/JAE/EJS028 Thorbecke, E., Charumilind, C., Thorbecke, E., & Charumilind, C. (2002). Economic Inequality and Its Socioeconomic Impact. World Development, 30(9), 1477–1495. https://EconPapers.repec.org/RePEc:eee:wdevel:v:30:y:2002:i:9:p:1477-1495 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

A report by the Inclusive Society Institute and the In Transformation Initiative Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO In Transformation Initiative PO Box 11071 Silver Lakes, 0054 South Africa All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or the In Transformation Initiative or those of their respective Board or Council members. Author: Daryl Swanepoel Language editor: Olivia Main Content Introduction Assessing the status quo Why is SAPS crime intelligence not yielding adequate results? Assessment Way forward References Introduction The Inclusive Society Institute and In Transformation Institute (ISI & ITI) have registered their serious concern with the high levels of crime in South Africa, the fact that a vast majority of the arrests do not result in court action, and the poor prosecution rates through the judicial system. They identified, as a serious concern, their impression that crime intelligence has broken down in the country and that it had become dysfunctional. The institutes’ intuition was confirmed by the riots and looting, triggered by former President Jacob Zuma’s incarceration at Estcourt Prison for contempt of court charges, which, in mid-July 2021, ran wild in KwaZulu-Natal and Gauteng. This resulted in more than 300 deaths, over R20 billion worth of infrastructure damage, and the loss of thousands of jobs (Aljazeera, 2021), setting back South Africa’s economic recovery from already strained levels as it battles to recover from the aftermath of the COVID-19 pandemic. “The state’s inability to foresee or forestall this frightening and destructive series of events that occurred on such a mammoth scale was a monumental failure [of the State Security Council (SSA) and Crime Intelligence] that defies explanation” (Araie, 2021). The breakdown was confirmed by South African President, Cyril Ramaphosa, who confirmed that “the government had failed to meet the riots and violence with an adequate response, and [that] intelligence had failed them on the ground” (BusinessTech, 2021). With this as background, the ISI and ITI held a workshop with experts from the security research fraternity to assess the state of crime intelligence in South Africa; and to consider interventions needed to restore effectiveness in South Africa’s crime intelligence capabilities. The workshop considered whether the ISI and ITI’s intuition with regard to a breakdown in crime intelligence was indeed justified, the problems that were being experienced in the field, and what initiatives the institute could consider in assisting and giving advice and direction to improve the situation (Swanepoel, 2021; Meyer, 2021). Assessing the status quo There are two components to Crime Intelligence (CI), namely, operations and intelligence information management. The strategic objective is to: prevent, combat and investigate crime. evaluate, analyse and collate data. submit intelligence to the National Intelligence Coordinating Committee (NICOC); and institute counter-intelligence measures within the South African Police Services (SAPS). In addition, they often work on police corruption, and they support international cooperation in the field of crime intelligence (Newham, 2021). In terms of the availability of financial resources to carry out its mandate, the police budget has over the last decade (2011/12 to 2019/20), increased by 81 per cent, rising from R53,5 billion to R96,8 billion. And although CI forms only a small component of that budget (R4 billion), its proportional share has, over the same period, risen at a much higher rate (113 per cent) (Newham, 2021). In terms of personnel, there are around 8,300 people working in the division. They are allocated across the country, mostly at station and provincial level, as well as a strong component at the national level (Newham, 2021). This would indicate that, given the budget and capacity, potentially, there should be substantial intelligence gathered. But analyses of the SAPS annual reports show an alarming decline in performance. An assessment of network operations – which normally lasts between three to six months, and which is aimed at organised crime or criminal networks – shows a drop from 49,019 such operations in 2011/12 to a mere 859 in 2015/2016. It dropped even further to 311 in 2018/2019, whilst recovering slightly to around 700 last year in 2019/2020. Since 2016/17, CI has repeatedly changed their annual performance indicators so that it is not possible to obtain a clear understanding of performance trends since then. This in itself is of concern, as are the types of indicators used. They are output indicators, so it is not possible to assess the impact of the resources and work undertaken (Newham, 2021). This points to a serious problem, as the work of crime intelligence, regardless of the performance indicators they choose to use, is supposed to guide policing in terms of visible and proactive policing, such as by identifying emerging trends, patterns, geographical hotspots and modus operandi. In addition, it is meant to aid reactive policing, like detective work, by providing insights as to how criminal networks operate to store, transport and distribute stolen and illicit goods or services, how money is laundered and where particular criminal suspects might be found (Newham, 2021). In terms of proactive reports, about 4,500 were generated at national level in 2019/2020, most of which were operationalised, that is, contributing to some kind of policing operation. At provincial level there were around 14,000 such proactive reports of which some 11,000 were operationalised. And at cluster level there were 44,476 of which almost 39,554 were operationalised. In terms of reactive reports, 253,538 were generated in 2019/2020 of which 195,727 were operationalised (Newham, 2021). The SAPS annual reports provide no additional information about what these statistics mean but given the deterioration in the police’s ability to reduce organised and violent crime, raises the question as to what value society is deriving from these reports. Certainly, there has been no improvement in the crime and public safety situation in the country. For example, last year, just under 20 per cent of the reported murder cases were solved – a drop of 38 per cent since 2011/12 and just under 17% of aggravated robberies were solved – a drop of 24 per cent since 2011/12. And over the same period murder increased by 37 per cent, and aggravated robberies increased by 43 per cent (Newham, 2021). Why is SAPS crime intelligence not yielding adequate results? Firstly, it is not only Crime Intelligence that is not performing well. Overall, most SAPS policing functions have deteriorated since 2012. The key reason was identified already in the National Development Plan, which spoke of a “serial crises of top management in the police”. Essentially, too many people were appointed to the top ranks of General or Brigadier for political rather than policing reasons. A former senior manager, who investigated the phenomena, suggested four categories of people that constitute CI, namely: those who were appointed for political reasons primarily to act in the interests of the dominant faction of the governing party the ANC. those whom they appoint to support their interests and control in CI (they could be family members, friends or those in their networks). professional operatives that have gone rogue or just lost interest; and a minority of highly motivated professionals who were trying to move the organisation to one in which their position became the dominant position in CI. (Newham, 2021) The difficulties with regard to the political interference started with the appointment of Richard Mdluli as SAPS National Head of Crime Intelligence by Jacob Zuma two months after he was sworn in as President in 2009. Mdluli himself was responsible for well over 200 appointments, many reportedly including family, friends and loyalists. Despite his history in the apartheid Security Branch, he expressed his loyalty to former President Zuma allegedly by playing a role in providing the so-called ‘spy tapes’ that were used to illegally withdraw corruption charges against Zuma, enabling him to rise to the presidency. In addition to interference in the work of SAPS Crime Intelligence, Zuma made a number of appointments to the State Security Agency (SSA) also with the view of supporting his control of the ANC and the country. To understand the extent of the deterioration, the Mufamadi Committee of Inquiry into the State Security Agency, was appointed at the beginning of the Ramaphosa Presidency in 2018. This committee found: That there had been a serious politicisation and factionalising of the intelligence community over the past decade or more. These factions were largely based on factions within the ruling party, resulting in an almost complete disregard for the Constitution, policy, legislation and other prescripts. It turned what should be a civilian intelligence community into a private resource to serve the political and personal interests of particular individuals. A doctrinal shift away from the prescripts of the Constitution, the White Paper on Intelligence, and from the ‘human security’ philosophy, towards a much narrower, ‘state security’ orientation. That the cumulative effect was the deliberate re-purposing of the SSA. Excessive secrecy stifled effective accountability. Abuse of resources. Involvement of Ministers in operational matters. (Anon., 2021) Based on the findings, the committee recommended: That a comprehensive review of the architecture of the South African security community (community-wide architecture) and legislation be done, which should include a review of intelligence coordination and the NICOC. That the mandates of the intelligence departments, including crime intelligence, be refined, and that clearer and more focused definitions of mandates be developed. That the national intelligence training and education capacity for the intelligence community be reviewed. That South Africa’s intelligence doctrine, policies and prescripts, which should be oriented towards the Constitution, and based on the revised White Paper, be confirmed. That options for and consequences of repealing the Security Services Special Account Act No. 81 of 1969, and the Secret Services Act, No. 56 of 1978, be explored. (Anon., 2021) Disappointingly, implementation of the recommendations has not progressed. A further confusing dynamic developed around the question as to who heads CI. Indeed, the situation remains confusing, to the point that it is unclear, given the ongoing legal proceedings in which Peter Jacobs, who was appointed shortly after Cyril Ramphosa’s rise to the presidency to ‘fix’ this division, has successfully halted the irregular disciplinary proceedings against him that resulted in his re-deployment to another component in the SAPS. To outsiders it is unclear as to who is actually currently in charge of CI, nor who will be permanently appointed as the head of SAPS Crime Intelligence. All of which creates accountability issues (Anon., 2021). Moreover, since the political dimensions within the intelligence community seem to run deep, it has become a complicated chess game, with serious consequences as a result. There are worrying suggestions that elements from outside the police may well be able to activate and deactivate elements of the intelligence community (Anon., 2021). The leadership instability at CI is aptly demonstrated in the graphic below, which was published in the Daily Maverick on 13 July 2021 (Dolley, 2021). The central question is why people would want to disable or manipulate crime intelligence, which has been going on for some time? It is suggested that one purpose of making crime intelligence dysfunctional would be to undermine any attempt or likelihood of having successful investigations into high level corruption committed by senior politicians and officials in the state and their partners in the private sector. These have been clearly exposed by the Zondo Commission, but further evidence is required if successful prosecutions are to follow. The second reason could be certain factions are motivated by attempts to gain control of the substantial resources, as alluded to earlier in this report, including for purposes of channelling monies from the Secret Service Account in Crime Intelligence for example, for political purposes. A third reason could be to hollow out CI’s ability to predict, report or investigate political machinations and instigations behind, for example, the looting and unrest experiences in mid-July (Marais, 2021). Apropos the intelligence failure of the looting and unrest: Whether it be attributable to the factional politics within the ruling party or not, whether it is simply the socio-economic needs that led to the opportunistic exploitation of the situation, or whether there was an element of organised crime involvement in the looting and vandalism, CI had a responsibility to know a lot more, and to analyse with much more clarity, than they did. As such, it was a spectacular failure, and no amount of blame-seeking can excuse it (Marais, 2021). The failure also has to do with mandate interpretation of the various intelligence agencies and the propensity of people from the various agencies not wanting to work in multi-structure teams. The SSA would have been engaged, given the strong political motivation behind the unrest, and as well as CI, given the criminal motivation. Until the intelligence structures find a way to efficiently coordinate amongst themselves, crime intelligence will remain weak and dysfunctional. They need to find a way to form joint teams to work together, and to jointly investigate specific threats, in order to mitigate risk (Marais, 2021). Assessment An analysis of the panel discussion leads the institutes to conclude that: Financial and other resources appear not to be the inhibiting factor for the delivery of the timeous, accurate and effective intelligence information required to combat crime and civil unrest threats in the country. Actually, when considering the resources versus output, as has been illustrated in this report, performance of the period prior to 2011/12, CI should, in theory, be able to perform at higher levels than then. Fixing the crime intelligence dysfunctionality lies in matters other than finances. One area of concern is what appears to be the widescale appointment of political associates, and nepotism. Not only has this neutralised operational efficacy, but it has also led to a force that lacks the requisite skills capacity to perform optimally. There appears not to be a cohesive and strategic understanding at the executive level as how to fix the current dysfunction within the intelligence community. The spat between the police and intelligence ministers as to the timely provision of intelligence related to the July unrest is a prime example. In fact, the whole political dynamic within the intelligence community remains problematic, and the provision of timely and efficient intelligence will continue to deteriorate until such time that political leadership is given at the highest level. The two-year timelapse in implementing the recommendations of the Mufamadi Committee’s report is, for example, indefensible, since failure to act has proved to hold a serious real national security threat for the country. The broader intelligence community, and CI in particular, is in dire need of reform. Key changes need to be made to ensure an increase in the functionality of the intelligence community. The National Security Advisor to the President, which post is currently vacant, could play a key role in driving such reform[1]. This position should be filled on an urgent basis with a person who he fully trusts and who has the ability to work over the boundaries of current factions and departments. In similar vein, the National Security Council’s role needs to be properly defined and its relevance as a key instrument in the crime intelligence arsenal settled. There seems to be inadequate accountability, even at ministerial level. The squabbling within and between agencies and their inability to have timeously assessed the situation in the wake of former President Zuma’s incarceration, and to have advised the president, accordingly, is a manifestation thereof. In the main the problem is not technical, it is political (Anon., 2021). The underperformance and dysfunctionality within the intelligence services raises a number of questions that need answering: To what extent do the findings of the Mufamadi Committee of Inquiry into the SSA remain relevant, with particular emphasis on those findings related to CI and its nexus with the SSA? To what extent has the politicisation of CI undermined its capabilities and effectiveness, how deep has the contamination been and what steps are being taken to remedy the situation? In tandem, such an analysis should include an assessment as to the skills set of the unit and the extent to which the qualification requirements of CI were circumvented through the politicisation; and what should be done to remedy the situation. Linked to the aforementioned, to what extent is the doctrine, policies and prescripts of the various intelligence agencies aligned to the Constitution, and where not, what amendments are needed to bring them in line? Likewise, is the skills set and capabilities within CI sufficient for the task at hand; and are there indeed intelligence capacity shortages? Are the mandates of the various intelligence agencies still fit for purpose, what cooperation mechanisms are in place, to what extent does information sharing between CI and the SSA take place, and how effective is such information sharing? And once again, how should this be remedied? In the context of a top-heavy organisational structure, the organigram of CI needs to be assessed. The South African Police Service has around 200 Generals and 600 Brigadiers. The proliferation of chiefs leads to unnecessary duplication of functions and resultant turf battles. To what extent are the internal mêlées impacting the CI and the ability of SAPS operational components to process and act on intelligence received? Way forward The deep-rooted factional divisions within the crime intelligence environment and its politicisation, probably rules out any meaningful prospect of finding internal solutions and remedies to overcome the current dysfunctionality within CI; and to establish in its place a professionalised, capable, efficient, constitutionally inspired, human-orientated service. Such solutions and remedies will have to emanate from an external intervention, which presents its own challenges. Given the security setting within which CI is located, and which by its very nature is wrapped in a veil of secrecy, it will be difficult for external advocates to, without sufficient executive mandate, penetrate the CI establishment. To this end, it is recommended that an independent review panel, comprised of security and intelligence experts from both within and outside of the public service, similar to the then Ministerial Defence Review Committee, be established by the President. Said panel should be mandated to seek answers and solutions to the questions posed in this report, together with others identified whilst engaging the broader security establishment during the process of developing the panel’s mandate. It will assess the continued relevance of the now three-year-old High-Level Review Panel on the State Security Agency report, whether progress has been made with its implementation and broader questions as identified during the dialogue. In order to take the discussion forward, and to give further content to the recommendations contained in this report, the Inclusive Society Institute and In Transformation Institute will co-host a second, more broadly representative dialogue, which will have as its objective a deeper and more nuanced analysis of the status quo, from which: The parameters and rules can be established within which the intelligence services of the country need to confine itself in order to be conducive to the behaviour expected within a constitutional and democratic state. A draft comprehensive mandate for the proposed review panel can be expounded. The process of reviewing the composition, structure and mandate of the intelligence establishment in South Africa can be defined. Recommendations for the structuring and composition of the review panel can be developed; and A proposed mandate for the review panel can be fleshed out. The sobering events sparked by the recent imprisonment of former President Zuma has served as a timely reminder of the crucial role that the intelligence services of a nation play. It illustrated the devastating impact that a broken and dysfunctional intelligence service can have on the economy and general well-being of the nation. We live in a fragile society. Time is of the essence. The necessary thing to do, is act now. References Aljazeera. 2021. South Africa unrest death toll jumps to more than 300. [Online] Available at: https://www.aljazeera.com/news/2021/7/22/south-africa-unrest-death-toll-jumps-to-more-than-300 [accessed: 2 August 2021]. Anon. 2021. An independent consultant with extensive experience in policy and advocacy on policing, community safety and post-conflict reconstruction that participated in the Inclusive Society Institute / In Transformation Institute dialogue called to assess crime intelligence in South Africa, which was held on 19 July 2021. Araie, F. 2021. Intelligence failure on co-ordinated insurrection will cost South Africa billions. [Online] Available at: https://mg.co.za/opinion/2021-07-13-intelligence-failure-on-co-ordinated-insurrection-will-cost-south-africa-billions/ [accessed: 2 August 2021]. BusinessTech. 2021. Government moves to stop ‘next phase’ of insurrection in South Africa: report. [Online] Available at: https://businesstech.co.za/news/government/506884/government-moves-to-stop-next-phase-of-insurrection-in-south-africa-report/ [accessed: 2 August 2021]. Dolley, C. 2021. Zuma’s legacy: The build-up to breaking down Crime Intelligence. [Online] Available at: https://www.dailymaverick.co.za/article/2021-07-13-zumas-legacy-the-build-up-to-breaking-down-crime-intelligence/ [accessed: 13 July 2021]. Marais, N. 2021. Panellist at the Inclusive Society Institute / In Transformation Institute dialogue called to assess crime intelligence in South Africa held on 19 July 2021. Nel Marais is the founder of Thabiti, a specialised risk consultancy in South Africa. Meyer, R. 2021. Convenor of the Inclusive Society Institute / In Transformation Institute dialogue called to assess crime intelligence in South Africa held on 19 July 2021. Roelf Meyer is a Director at In Transformation and a member of the Inclusive Society Institute’s Advisory Council. Newham, G. 2021. Panellist at the Inclusive Society Institute / In Transformation Institute dialogue called to assess crime intelligence in South Africa held on 19 July 2021. Gareth Newham is the Head of the Justice and Violence Prevention Programme at the Institute for Security Studies. Swanepoel, D.W. 2021. Panellist at the Inclusive Society Institute dialogue called to assess crime intelligence in South Africa held on 19 July 2021. Daryl Swanepoel is the Chief Executive Officer of the Inclusive Society Institute [1] Subsequent to the drafting of this report, Dr Sydney Mufamadi was appointed on 5 August 2021 as the National Security Advisor. [2] The proposed panel’s mandate will be broader than that of the panel announced by President Ramaphosa on 5 August 2021, who were appointed to focus on a thorough and critical review of the preparedness and the shortcomings in its response to the recent lootings and riots in KwaZulu-Natal and Gauteng Provinces. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. Author: Daryl Swanepoel Content Introduction US-Africa relations US-China relations The US-China-Africa nexus Conclusions References - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Introduction When President Joe Biden assumed office in January 2021, analysts attempted to predict how the relationship between the United States of America (US) and Africa would unfold under his administration. The relationship needed some healing given the decline in rapport between the two sides under the previous Trump administration, where the US’s “relations with the continent flitted between perfunctory and hostile” (Thomas, 2021). The US foreign relations decline under the previous administration, was not restricted to Africa. Across the globe this held true. It was, however, especially severe between the US and China, where it turned into a direct trade-war confrontation between them (BBC, 2020). All the while, the US has suggested that China’s growing influence in Africa poses a growing threat (Associated Press, 2021), leaving African leaders with the quandary: How to respond to the US-China nexus as it plays out on the African continent? Analyses directly after the Biden administration’s assumption of office was that, broadly speaking, there would be a normalisation of diplomatic relations between the US, China and Africa. In this regard, general consensus was that the Biden administration would build on and deepen the pre-Trump initiatives as they relate to Africa, and that they would take a keener interest in Africa. Similarly, the contestation with China would remain, especially as it relates to trade and human rights; but the narrative will be more civil and competitive as opposed to the combative approach taken by the previous administration. To date there have been mixed signals. Whilst the Biden administration has “reaffirmed the desire for collaboration and cooperation with China in areas that serve American interests, in sharp contrast to the ‘all-encompassing decoupling’ policy toward China in the final year of the Trump administration” (Cheng, 2021), US Secretary of State, Anthony Blinken, as late as May 2021, accused China of acting more aggressively (BBC, 2021), and some analysts are now suggesting that the US is even opening up new fronts in the trade war with China (Miller, 2021). What to expect going forward? Questions remain: How is US policy on Africa shaping up? And likewise, how is their approach to China being moulded? How should African countries, who wish to retain good relationships with both sides, respond to the dynamics as they play out on the African continent and how should they position themselves to achieve mutually beneficial outcomes? This paper, in an attempt to find answers to the questions posed, summarises the dialogue on the theme of this paper. The dialogue between a range of academics and policy analysts, drawn from both the United States and Africa, took place in late June 2021. US-Africa relations Through the lens of African analysts In a sense, the jury is still out as to what the Biden administration is going to do with regard to its foreign policy towards Africa. It is fair to say that despite the commitments made during the presidential campaign and what has happened subsequently, Africa remains anxious as to what the Biden policies will hold for the continent. It is also fair to say that following the benign disinterest of the previous administration, African leaders are keen to understand what the new approach to Africa will hold (Grobler, 2021). Obviously, following the lows of the Trump era, a unique opportunity presents itself for the United States to improve the relationship visibly and concretely between the US and Africa. The negative dispersions of the previous US president towards Africa, the fact that he did not visit the continent and his failure to support the former Nigerian Finance Minister for the post of Secretary General of the World Trade Organisation, are all examples that served to strain US-Africa relations. The Biden administration can correct and rectify this (DIRCO, 2021; Grobler, 2021). Echoing this is the assertion that at this time in 2017, four years lay ahead under a Trump administration, which saw US-Africa relations reach its lowest ebb. There is a definite sense that the US could have done more during those years. However, what we are now going through is a normalisation of relations between the two sides (Weseka, 2021). The South African Department of International Relations and Cooperation (DIRCO) seem to agree. It is of the view that the inauguration of President Biden has not only set the stage for a reset of the South Africa-United States (US) bilateral relationship, but also for a fresh approach by the US in its relationship with the African continent. They say that President Biden has since his inauguration taken decisive steps to move the US away from the nationalist, confrontationist and unilateralist “America First” policies of the Trump Administration. It has sent strong signals that Africa will be accorded greater priority in US foreign policy (DIRCO, 2021). So, in a sense, there has been a quiet return to normality, and business as usual – the period under the previous administration was an anomaly. It is now a continuation and a return to the policies under the Obama and Bush administrations. The continent has generally appreciated these efforts (Weseka, 2021). It remains to be seen as to whether there will be concrete US economic interest, strongly focussing on trade and investment with the continent, or whether it will be business as usual. Six, seven months into the new administration, there are some green shoots. The fact that Biden has appointed a few very experienced officials that know Africa, such as Ambassador Linda Thomas-Greenfield as the US representative to the United Nations, bodes well for US-Africa relations. Moreover, a well-regarded University of the Witwatersrand academic and US analyst said that Thomas-Greenfield worked with China on joint projects on the ground when she was stationed on the continent. Hopefully, she will serve as an advocate for Africa and possibly for a more sensible US policy towards China. And Mary Catherine Phee – an old hand as it relates to Africa – who has been nominated as Assistant Secretary of State for African Affairs, engenders hope, in that they would be strong advocates for a more strategic relationship with Africa (Grobler, 2021; Weseka, 2021). The fact that a number of Nigerian-Americans have also now been appointed to senior positions in the Biden administration bodes well for a fresh approach, as does the codification of Juneteenth as a public holiday in the US, as this will bring new insights into the political discourse (Weseka, 2021). There have been many statements on Africa: President Biden’s virtual address to the African Union (AU) Summit, positive decisions on US’s re-joining of the World Health Organisation and COVAX, all of which were well received and welcomed by Africa (Grobler, 2021; Weseka, 2021). What Africa would now want to see is a US that is pursuing a calculated high level dialogue strategy and to develop a clear comprehensive bi-partisan long-term vision for its US-Africa policy (Grobler, 2021). DIRCO also views Biden’s address to the 34th Summit of the African Union on 4 February 2021 as an indication of the US’s willingness to re-engage with the Continent. In his address, for example, Biden made it clear that the United States stands ready to be a partner of Africa in solidarity, support and mutual respect (DIRCO, 2021). The department also points to discussions between the leaders of South Africa and the United States, where President Biden, once again, expressed the need to engage on matters such as the strengthening of US-South Africa and US-Africa relations, as well as the importance of international solidarity to overcome the Covid-19 pandemic (DIRCO, 2021). The recent indication of support from the Biden Administration for the TRIPS Waiver initiative that is being championed by South Africa and India at the WTO is a further indication of a changed posture towards Africa, especially given the Administration’s willingness to now alter its stance, as it was initially opposed to the request for a temporary waiver (DIRCO, 2021). Although details of the Biden Administration’s Africa policy will only become clearer over time, the Chair of the US House of Representative’s Subcommittee on Africa, Global Health and Human Rights, Congresswoman Karen Bass, has underlined three key issues: (a) US support for the Africa Continental Free Trade Area (AfCFTA), (b) the undertaking by the Biden administration to extend AGOA beyond 2025, and (c) the proposed convening of a US-Africa Summit (DIRCO, 2021). This will help immensely with the challenges confronting the continent, including issues such as industrialisation, infrastructure and human resource development (Grobler, 2021). In terms of this proposed strategy, Africa would hope for the US to constructively support the AU Agenda 2063, which is a commendable attempt by African leaders to get Africa to speak with one voice (Sonjica, 2021). The Biden administration inherits important mechanisms and initiatives, such as the President’s Emergency Plan for Aids Relief (PEPFAR), Prosper Africa, which aims to link US and African business in terms of trade and investment, and AGOA, the African Growth and Opportunity Act (which expires in 2025), which was established to encourage and support trade between the US and Africa (Grobler, 2021). DIRCO concurs. They argue that a common understanding and alignment is developing between the US and Africa pertaining to trade and investment, and indeed other areas such as the environment, science and technology, education, the fight against climate change and cybercrime, and public health. In this regard, an important recent development has been the US’s joining of other countries in offering support to help South Africa strengthen its capacity for the local manufacturing of vaccines (DIRCO, 2021). These matters are going to be key elements for the Biden administration, who will now have to chart a new way forward. They may have to go beyond AGOA, and also rethink their strategy for US-Africa relations, which will have to be much broader and much more strategic (Grobler, 2021). For the US to be regarded as a valued partner, it will be important for it to consult African countries on the continent’s developmental needs when designing its Africa policy, particularly in the current context of the US-China strategic competition for political influence and economic dominance, and the current status quo, where China is significantly investing in the African continent through its bilateral partnerships and through the Forum for China-Africa Cooperation (FOCAC) (DIRCO, 2021). Early evidence would suggest that there is hope that the US will move in such a direction (Grobler, 2021). Through the lens of American analysts There has been a shift in US-Africa relations, away from the fairly combative approach taken by the Trump administration (Sheehy, 2021). In the interim national security strategy, for example, when referring to Africa, the previous administration’s paradigms have been taken out and replaced with the bi-partisan themes as ensconced during the Bush and Clinton administrations (Snyder, 2021). It says that the US will continue to build partnerships in Africa, invest in civil society and strengthen long-standing political, economic, and cultural connections. It will partner with dynamic and fast-growing African economies, provide assistance to countries suffering from poor governance, economic distress, health, and food insecurity, especially as exacerbated by the Covid-19 pandemic. The US, it says, will work to bring an end to the continent’s deadliest conflicts and prevent the onset of new ones, while strengthening their commitment to development, health, security, environmental sustainability, democratic progress, and the rule of law. It will help African nations combat the threats posed by climate change and violent extremism and support their economic and political independence in the face of undue foreign influence (Snyder, 2021). Indeed, continuity, even expansion, of the policies of US agencies for development should be expected. For many years, the US has done a lot to help Africa in improving its health environment, and to empower women. This has saved many lives and should be appreciated. Now development agencies have submitted higher budget requests, so there will most probably be more resources available for these activities in Africa (Sheehy, 2021). Also, programmes, such as Prosper Africa (Sheehy, 2021) – which aims to double two-way trade and investment between the US and Africa, attract capital and create millions of jobs (Snyder, 2021) – is expected to continue, although they most probably need more meat on the bones (Sheehy, 2021). One can expect the deployment of resources made available by the Development Finance Corporation (DFC) to increase, since it has doubled its capacity and can therefore do more lending. The DFC has strong bi-partisan support, which is bound to see it become more engaged in Africa with support for investment by the US, and even other foreign companies (Sheehy, 2021). There are clear indications that the US wants to get more involved with the combatting of climate change in Africa, which is a positive development given the severity of its impact on the continent. But at the same time, one of the critical issues facing the Biden administration is with respect to green issues. In this regard there are suggestions that the DFC should not support fossil fuel activity and thus some trimming of the DFC’s energy finance activities in Africa should be expected (Sheehy, 2021). The DFC has, for example, approved more than USD2 billion in environmental and energy projects in Africa, including a natural gas pipeline in Egypt, marine conservation in Kenya, and natural gas extraction in the Capo del Gado region of Mozambique (Snyder, 2021). An assessment will need to be made as to how such withdrawal will impact African economies; to which end, Africans will need to have their voices heard as to how they feel about it (Sheehy, 2021). Another area that will require Africans to lobby the US, is the extension of the Africa Growth and Opportunity Act (AGOA), which expires in 2025. Whilst there are contrary views, there are a number of policymakers and analysts that have a sense that it should be extended, and even go beyond the current provisions. Their view is that the US should be very careful about taking away unilateral trade benefits from the poorest economies, and poorest countries. In fact, AGOA should be built on, they suggest, by, for example, extending the benefits to duty free and quota free access to US markets for agricultural products from Africa, such as peanuts, nuts and even cotton. Consideration as to AGOA’s future will require careful thought and deliberation, especially in the wake of the Covid-19 pandemic, which has had a devastating effect on African economies (Sheehy, 2021). Truth be told, however, is that the Biden administration is battling somewhat with figuring out its trade policy with Africa. Whilst the Trump administration preferred a bilateral approach, such as that which he sought with Kenya, this seems to have paused as the Biden administration figures it out. On this point, there has been some discussion at the US State Department about creating deal teams at US embassies across Africa to push the US’s commercial interests (Sheehy, 2021). To this end, the US will undoubtedly be grappling with how to take advantage of the recently implemented African Continental Free Trade Area (AfCFTA), the largest free trade area to be established since the founding of the World Trade Organisation (WTO), and in which Africa intends to integrate its fragmented markets into a single market home to 1,2 billion people. By eliminating restrictions on the free movement of goods, capital and people, it will create an attractive opportunity for US companies to sell and invest in a combined consumer and business base of USD6,7 trillion by 2030. This is not a market that the US will ignore (Snyder, 2021). Fortunate for US-Africa policy and relations, is that there are a number of strong pro-Africa appointees to the Biden administration. The USAID Director, Samantha Power, is, for example, quite powerful and well-regarded in Washington (Sheehy, 2021). She will henceforth also have an expanded role since she will also sit on the National Security Council. Power’s diplomatic career includes significant African experience and she has worked as a journalist reporting from a number of African countries including Rwanda, Sudan, and Zimbabwe. The nomination of Power could very well see a revitalisation of USAID’s mandate in Africa following repeated cuts to the organisation’s budget under President Donald Trump (Thomas, 2021). Similarly, Linda Thomas-Greenfield has been appointed as Ambassador to the United Nations. She has previously served as Ambassador to Liberia, and as the Assistant Secretary for the Bureau of African Affairs since 2013. And whilst the Assistant Secretary for Africa, Molly Phee, has a stronger Middle East background, it is known that she has strong links with Thomas-Greenfield (Snyder, 2021). Equally important are the pro-Africanists in Congress and the Senate. The Chairman of the House Committee for Foreign Affairs, Gregory Meeks, has called for a new Africa policy, which he has made his top priority. His Africa subcommittee chair, Karen Bass, has long been a supporter of Africa. And in the Senate, Senator Chris Coons did not hesitate in answering the call to travel to Ethiopia to mediate the recent and currently ongoing Tigray conflict (Snyder, 2021). These allies will be powerful voices to convey the African message. African diplomats should liaise regularly with these US counterparts, with a unique opportunity existing at the United Nations, as all African countries have diplomatic missions there (Snyder, 2021). Another channel that the Biden administration will undoubtedly tap into in order to advance US-Africa relations, is the extensive African diaspora in the United States. As of 2015, there were 2,1 million African immigrants living in the US. One can envisage them partnering with the International Career Advancement Programme and the Congressional Black Caucus Foundation (Snyder, 2021). But having pro-African appointees and allies does not mean that the US will be uncritical towards Africa. The Biden administration will definitely continue to promote a rules-based democratic and human rights world order (Sheehy, 2021). For Africa, the goal would be to advance democracy and governance, peace and security, trade and investment, and development (Snyder, 2021). On this matter, truthfully, it needs to be recognised that much of Africa is struggling, in that a number of African countries are not moving in the right direction. There is a real sense in the US that it has not been tremendously successful in realising democracy, human rights and good governance across Africa. Thought needs to be given as to how the US could be more successful on that front (Sheehy, 2021). Where there is inequality and poverty, democracy will suffer. One has often heard African leaders despair: Don’t tell me about democracy when my people are hungry (Sonjica, 2021). One tactic which may be expected, is for the US to be more supportive of civil society organisations that promote democracy and human rights (Sheehy, 2021). The Biden administration will also place great emphasis on combatting corruption in Africa. There is, for example, growing interest in promoting transparency in the fight against corruption. In January 2021, the administration deployed the Magnitsky Act, by freezing the assets and placing travel restrictions on several Ugandan government officials and businesspersons, who were considered to have undermined free and fair elections in that country (Sheehy, 2021). Then too, there is a security deficit in Africa. The US would want to coordinate more closely with the African Union, as they do, for example, with Europe. However, up until now that pull from Africa has not been there. This is an area worth considering given that both sides would benefit from such cooperation (Snyder, 2021). US-China relations Through the lens of African analysts It was predicted that China would remain a political football in terms of US domestic politics. Americans expect President Biden, and indeed all their politicians, to be tough on China. It would therefore not be realistic to expect the Biden administration to change US-China policy dramatically. And this has now become evident. They are, more or less, pursuing the policy of the previous administration (Grobler, 2021). The first post-Trump US-China engagement did not start on a good footing. Their first engagement in Alaska was confrontational. It seems the Chinese side was taken aback, and surprised by this. They had hoped that a more constructive approach, based on mutual respect, would have been adopted. That did not happen and the Chinese delegation, determined to safeguard its legitimate interests, promptly retaliated in a comprehensive and hard-hitting manner (Grobler, 2021). The sense in China is that the US should realize that they do not represent the world and that they are no longer the undisputed global leader. And since they also anticipate to soon become the largest economy on earth, it is, in their view, only right for them to be approached with the necessary respect, in good faith and integrity. That said, China does not see itself as being in a long-term ideological struggle with the US. To the contrary, they have repeatedly stated that they are ready to engage the US on the basis of mutual respect and on the basis of good faith (Grobler, 2021). But, in their view, this is not the case. President Biden laments the stiff competition with China, inferring that its ambition is to be the leading, wealthiest and most powerful country in the world. It seems, given President Biden’s retort that this would not happen on his watch, that the US’s view is that it is not noble for China to overtake the US (Grobler, 2021). This notion is affirmed by the US Secretary of State, Anthony Blinken, who says that, whilst it is not the US’s purpose to contain China, or to hold it back, or to keep it down, it is necessary for them to ensure that China upholds the US-led rules-based order, to which China is, according to him, posing a challenge (Grobler, 2021). Needless to say, this does not sit well with China. In their view, they are a strong multilateral country, committed to multilateralism under the banner of the United Nations. Their commitment, China argues, is to multilateralism and not to the US-led rules-based order that represents a minority of the world’s people. The US’s approach, China senses, is unfortunately motivated by a sort of Cold War mentality (Grobler, 2021). China is uncomfortable with the Biden administration’s push for a strong democratic alliance against them. The notion that the Western nations must present a more united front against China is not acceptable to them. China objects to bloc politics and small cliques targeting a certain country and playing up the ‘China threat’ narrative. They find solace in the fact that these nations are not unanimous on the issue. Countries such as France and Germany take the view that they need to continue to consult and cooperate with China, by working together on issues where they can agree, but also understanding that they will need to constructively oppose those issues that they cannot agree on (Grobler, 2021). It is also unfortunate, some posit, that the US administration’s approach is exacerbated by the US Senate’s continued churning out of sanctions against China, since this is leading to a tit-for-tat as China responds with its own measures to combat the perceived onslaught (Grobler, 2021). It is held that any measures aimed at containing China’s economic or diplomatic progress is destined to fail. Many argue that it is counter-productive and not in the interest of global economic growth and development, for the two major world powers to be on a destructive path. Many countries from across Europe, Asia, the Middle East and Africa want to continue with a constructive engagement, relationship and economic cooperation with China. Whilst there may be obvious differences, for example developments in Hong Kong, evidence seems to suggest that the international community, in the interest of economic cooperation and peace, is eager to pursue the route of dialogue and cooperation as opposed to confrontation (Grobler, 2021). And the potential for such cooperation does not exclude the US. There are many areas that are ripe for enhanced collaboration as well as harnessing their economic competitiveness in a manner that advances the interests of humanity (Grobler, 2021). Yet, despite the current uncomfortable disposition between the US and China, hope remains that cool heads will prevail, and that as the dust settles, and as the US starts to engage China on multinational issues such as climate change and global economics, so too, good sense will prevail. That officials will again start talking to each other and that the bilateral mechanisms that fell by the wayside under the Trump administration will eventually be reactivated. As one analyst puts it: The US and China will never be beer buddies, but there is ample reason for the two sides to work together on the basis of mutual respect, non-interference in each other’s domestic affairs and in the interest of global security and development (Grobler, 2021). Through the lens of American analysts The US position on China is informed by its interpretation of the historical developments within China. According to them, China, over the period 1949-1989, that is up until the events of Tiananmen Square, broadly speaking, sought to redefine its national identity, industrialise, and secure the Communist Party of China (CCP) as the legitimate governing regime capable of filling the political, ideological and security vacuum left by the overthrowing of the Kuomintang (KMT), which thrust the country into turmoil (Stone, 2021). After 1989, China made a strategic shift in which it committed itself to comply with international norms. President Deng Xiaoping was of the view that the country should hide its capabilities, rise peacefully and conform with international norms (Stone, 2021). Then, in 2013, the US argue, there was a divergence from Deng’s policy, when President Xi Jinping assumed office. China would, under President Xi, no longer hide its capabilities from the international community, it would advance nationalism, restore its prestige and rise (Stone, 2021). All the while, the US, together with its allies, were building a liberal international order, which would consist of international institutions, with rules that would guide relations among nation states and contend with non-state actors. These institutions include, amongst others, the United Nations (UN), the North Atlantic Treaty Organisation (NATO), the International Monetary Fund (IMF), and World Bank. In their view the rules of these institutions were necessary to enhance predictability. States should follow these rules in that they offer outlets to conflict, and enforce principles of conduct. The US, together with its partners, accepted liberal democracy as a necessary dispensation to ensure a uniform liberal order. They work in tandem to ensure the spread of democracy around the world, promotion of capitalism and to integrate all states into this world order (Stone, 2021). China’s military and economic rise, in the US’s view, challenge this international order, since the Chinese system is not compatible with the liberal order that America has embraced. The two systems of governance, and their respective national ambitions, both equipped with significant economic and military might, pretend a return to a type of Cold War once had between the Soviet Union and United States. Whether this is desirable, or inevitable, remains to be seen (Stone, 2021). Against this background, the Biden administration are now also contending with a China that aims to reform the status quo in favour of their own interests, by replacing the US as the hegemon in the immediate sphere of China, that is East Asia and South-East Asia. The US also charge China of attempting to change the nature of the debate with regard to the liberal international order, because liberal values do not, the US protests, reinforce the Chinese priorities, both at home and abroad. State repression, mass detention, border conflicts with India, aggressive actions against Taiwan, cyber espionage, alignment with autocratic regimes – such as Iran, Russia, North Korea, Pakistan – a domestic social credit system, an absence of legal rights, inhibiting freedom of movement internally in China, are all, in the US’s view, antithetical of liberal ideals that are meant to manifest freedom of speech, justice, pluralism, and economic and security cooperation. Collectively, China’s military, economical, and political influence, and contrasting foreign and domestic priorities, the US contend, challenge the very nature of the liberal international order (Stone, 2021). The US charge China of pursuing an integration doctrine, aimed at filling the vacuum left by the US since 2001 as a result of its campaign to combat international terrorism around the world, particular in the Middle East. Nation states can achieve such integration through three different means: compliance, coercion, conflict. This period, the US fears, is one of coercion, which could potentially lead to conflict (Stone, 2021). The aforementioned, sketches the relationship that the Biden administration needs to manage. In doing so, the US and its international partners actively pursue a dual policy of compensation and cooperation aimed at sustaining the liberal international order (Stone, 2021). This it will do by: Firstly, cooperating on issues of mutual concern, such as climate change, cyber security, and nuclear proliferation; and Secondly, reaffirming the rules of the road, and insisting that access to international institutions and their benefits are given only to those that meet the prescribed standards of conduct, which at minimum prohibits genocide, nuclear proliferation, military aggression (unless in self-defence), and oppression in domestic affairs (Stone, 2021). The Biden administration’s China policy is designed within the context of Americans being more concerned with domestic issues that are affecting their daily lives in the now. Moreover, the liberal international order, has, in the wake of the Cold War, borne out the good, bad and ugly results, that is the limitations of foreign interventions, open borders and disparity in collective security. The US and others sold to the world the idea that they would guard against these evils, and that capitalism would reduce inequality, yet it persists. In their wake, it has left a cry for nationalism (Stone, 2021). Therefore, a third objective of the Biden administration is to, within the US, restore faith in the efficacy of the American model. Its focus is on investment in infrastructure and education, and a redefinition of ‘open system’ to include respect for borders and trade with dignity, and the raising of liveable standards to meet the cost of living (Stone, 2021). This forms the foundation of the US’s trade confrontation with China. The US-China-Africa nexus Through the lens of African analysts Even though China considers itself a friend and partner of Africa, the current post-Covid era requires a less emotional and a more critical action-based approach and strategy. This practical and results-orientated policy approach has been institutionalised within the Forum for China-Africa Cooperation (FOCAC), which has embedded a close policy-based working relationship between the two sides. Indeed, it is expected that when FOCAC convenes in Senegal later this year, the relationship will most probably be taken to higher levels. It is not foreseen that this bond is about to change any time soon (Grobler, 2021). Africa does not share the perspective that doing business with China is to its detriment. At the same time, it wants to continue building its relationship with the US. It wants to work with China and the US without having to take sides and again be caught up in a new Cold War situation. As such, Africa, in its own pragmatic interest, would like to see a process unfolding that would lead to the normalisation of relations between China and the US. Such a situation would be in the interest of Africa, but also for a stable world order, development and security (Grobler, 2021). In fact, at the recent G7 meeting in the United Kingdom, President Ramaphosa, with reference to China, the US and Africa, made the constructive comment during the media conference, to the effect that Africa welcomes those who come on good terms and that the continent does not want to see the one pushing the other out (Grobler, 2021). But one must also expect different approaches. For the US-Africa relations it is normal to anticipate change and continuity; whereas this would not be so in China-Africa relations. This is because of the different political systems that are at play. In the US, administrations frequently change after regular elections, where leadership priorities and policies are bound to vary. This it not so under the Chinese system which by its very nature ensures greater continuity. Hence, China-Africa relations are likely to display greater continuity than would be the case with US-Africa relations (Weseka, 2021). Another point of distinction is the fact that Africa looks to the US and China for cooperation in different fields. For the US it would be for issues such as democracy, human rights, governance, etcetera. Much of this flows from their British and French colonial roots and its entrenched traditions, which civil society and political entities, whilst there could be some variances here and there, have embraced (Weseka, 2021). This also holds true for issues of media and culture. African television viewers tend to watch CNN and/or BBC; very few watch CGTN. Same with newspapers. It is the New York Times, Washington Post, etcetera, not so much the People’s Daily. Many Africans grew up on Hollywood movies. Thus, in the fields of politics and culture, Africans are persuaded to go the American way (Weseka, 2021). When it comes to the economy, the story changes quite dramatically. China overtook the US in 2009 to be Africa’s largest trading partner. This is aptly illustrated in the ICT and tech industries, where despite the Trump administration’s attempts to dissuade African countries away from Chinese 5G telecoms, African countries chose and are committed to Chinese-built telecom infrastructure and fibre optics. Chinese companies such as Huawei and ZTE, dominate the telecom infrastructure in Africa (Weseka, 2021). As a side note, there is a real fear that the US-China tensions have the potential to impact the achievement of its economic and development targets, especially as this relates to investment in the communications and digital sectors, such as the roll-out of 5G technologies. In this regard, the US targeting of the Chinese telecommunications company, Huawei, which is accused by the US of violating IP protections, could hamper South Africa and Africa’s effective engagement with – and leveraging of – the benefits of the 4th Industrial Revolution, which it is relying on to propel their economies forward and to lessen the widening equality gap (DIRCO, 2021). This sentiment is exacerbated by many in the West who push the narrative that African countries ought to be cautious with regard to the conditions that are attached to Chinese investment, and the toxicity and so-called debt traps that, according to them, comes with their funding (Weseka, 2021). But African countries have not been dissuaded. They continue to look to China for such assistance, countering that the West cautions against Chinese funding, but is not forthcoming with the finance needed to build the roads, ports, and other economic infrastructure (Weseka, 2021). To navigate the dual relationship, Africa will have to contemplate a more considered and coherent framework for its international approach. This will be necessary for it to maximise the opportunities presented by the US, China and others. It needs to be optimally positioned to exploit to its own and mutual benefit, the increasing number of opportunities being made available by the US and China, and indeed others as well. In developing concrete specific objectives, it would have to pursue its own homegrown solutions, ideally developed in concert with both China and the US (and others), who should ideally also align their policies with that of the AU’s Agenda 2063. The launch of the African Continental Free Trade Area could, for example, serve as a powerful catalyst for trade and investment opportunities (DIRCO, 2021; Grobler, 2021). In so doing, Africa will have to encourage both sides to engage in dialogue with a view of resolving the impasse. This will be necessary to effectively address Africa’s socio-economic deficits and for ensuring sustainable growth, development, and the eradication of poverty. The support of reliable international partners is required – in this case both the US and China (DIRCO, 2021). Both countries are considered strategic partners, and hence, both can play an important role in supporting the achievement of Africa’s domestic imperatives. Consequently, both countries should be encouraged to resolve their differences through dialogue (DIRCO, 2021). Mutual cooperation would not only have benefits for both of them, but indeed for the international community. And although US-China interests may diverge in many areas, there is scope for cooperation between the two countries, particularly in areas where their interests coincide. This includes the multilateral arena of climate change, and where the promotion of peace, security and development are concerned, issues that are also crucially important for Africans (DIRCO, 2021), to which end, it may be the opportune time to start triangular consultation and cooperation between Africa, the US and China (Grobler, 2021). Through the lens of American analysts In the early days of the Biden administration, Secretary of State, Anthony Blinken made it clear that African countries would not be forced to choose between China or the US. There was a broad realisation that the Trump style of demanding that countries work with the US against China could not be followed. Such an approach is not popular with African leaders (Sheehy, 2021), who do not want to take sides, as was the case during the Cold War (Stone, 2021). They want the freedom to choose their own international cooperation partners. Also, given the depth and width of Chinese involvement and investment in Africa, it would not be a realistic path to pursue (Sheehy, 2021). Nonetheless, the US will, in large measure, continue with US-China policies as inherited from the previous administration. As to the nexus in Africa, demand will be replaced with an element of persuasion, for example, with regard to information technology, where Chinese enterprises such as TEL are deeply engrained. Another approach could be a shift from diplomatic pressure to the offering of subsidies to countries that opt for Western technology – this approach was discussed at the G7 summit in the United Kingdom in June 2021. It is argued that from an African perspective this should be embraced, in that it presents to them a broader range of options. This, it is reasoned, is also in the interest of African development (Sheeny, 2021). Stepping up US-Africa relations as a countering to China-Africa relations, the US accepts is no easy feat. There is a strong realisation that they are far behind China in Africa (Sheehy, 2021; Snyder, 2021) and that personal relationships matter. If one simply considers the sheer number of personal and diplomatic visits between the heads of states of Africa and China, China is putting the US foreign policy to shame. Then US Assistant Secretary of State for African Affairs, Tibor Nagy, commented in an op-ed that the US is being outcompeted in Africa. It is hoped and anticipated that the Biden administration will invest in building personal relationships across the African continent (Sheehy, 2021). To counter, whilst President Biden has already addressed the 34th African Union Summit via video-conferencing in February 2021 (Grobler, 2021), it is anticipated that, at some point, he will visit the continent in person. During 2021 there will also be another US-Africa Leaders’ Summit. It is also expected that senior US government officials will increase their visits to the continent. They will undoubtedly use these opportunities to build and strengthen personal relationships between US and African leaders (Snyder, 2021). The US has also fallen behind China in trade with Africa. As previously mentioned, China overtook the US in 2009 to become Africa’s largest trading partner (Weseka, 2021). Bilateral trade between the US and Africa during the period 2017-2018 rose from USD55 billion to USD61 billion, dwarfed by China whose bilateral trade with Africa rose from USD155 billion to USD185 billion over the same period. The US will deploy various strategies, including those cited in this article, to play catch-up. This it believes it can do, if focussed, as trade is something that the US does well (Snyder, 2021). It should also be recognised that China has taken a march forward with its Belt and Road Initiative (BRI) (Snyder, 2021). Research conducted on the BRI in various places, shows that political acceptance levels for Chinese investments are high. But how those resources are spent, allocated, implemented, will stress-test socio-political relationships. This will happen in Africa too (Stone, 2021). Nevertheless, through this initiative, China has made a considerable contribution to infrastructure development, also in Africa. The US, on the other hand, does not do infrastructure investment well, neither does it have a history of participating therein (Snyder, 2021). To counter and carve for itself its niche position, the Biden administration could very well continue with the previous administrations’ provision of technical assistance to African governments. For example, in the field of fiscal governance and the countering of debt trap diplomacy, the US government could assist African finance ministries and budget officials, to give them the tools to better assess potential loans. Frankly, some African loans are good, but many are not, and don’t make sense. The capacity needs to be developed in order to determine whether the loan makes economic sense, what the environmental implications are, what the employment implications are, and whether they employ local folk or provide opportunities for expat employment. In so doing, the US could play an important role in Africa’s development, which role, they anticipate, should be well received by African leaders (Sheehy, 2021). So, who is best positioned to compete in Africa? Is it China or the US? Actually, it will be Africa. They will be able to benefit from both US and Chinese opportunities, which offerings, in essence complement each other (Stone, 2021). But China’s goal in Africa, caution the Americans, is to integrate. It is not benevolent or malevolent, its agnostic to Africa’s situation lest disruptions occur that will harm China’s reputation. This is why China’s largest push into Africa is not economic or political, but symbolic. A public relations campaign that is fed by economic inducements (Stone, 2021). Conclusion As alluded to in the introductory part of this paper, in the days following President Biden’s assent to office, analysts attempted to predict what the US’s policy would be towards Africa, and China, and how these dynamics would play out on the African continent. There seemed, at the time, to be a general consensus that the US would take a keener interest in Africa, and, although it would in large measure continue with the previous administration’s China policy, the tone would shift from combative to being competitive. Since then, there have been mixed signals as it relates to US-Chinese foreign policy. On the one hand, the Biden administration has reaffirmed the desire to collaborate and cooperate with China in areas that serve American interests, in sharp contrast to the Trump era of an all-encompassing decoupling policy towards China. However, on the other hand, it is accusing China of acting more aggressively, especially as it relates to the abuse of human rights. Some analysts are even suggesting that the US is opening up new fronts in the trade war with China and mobilising a concerted international opposition to China’s alleged disregard for the US-led rules-based democratic and human rights order. However, predictions, as they relate to US-Africa foreign policy, on the other hand, seem to be, in large measure, playing out as expected. There is a definite sense that the US’s policy toward Africa is normalising from the Trump-era interruption. Indeed, continuity of Bush and Obama administration policies, and even an expansion of US development agencies activity in Africa, could comfortably be anticipated. This expectation is given further impetus with the range of pro-African appointees in the new Biden administration. That said, Africa should not expect a free pass as the US will remain critical where African countries and leaders do not follow the rules-based democratic and human rights world order. Then too, it was predicted that in terms of US domestic policy, China would remain a political football. This also appears to hold true. China, of course, had hoped for a more constructive approach based on mutual respect and non-interference in each other’s domestic affairs. This did not happen. Thus, on the global stage the relationship between the US and China remains strained, which unfortunately spills over to Africa (Sonjica, 2021), leaving it in a quandary: How do they respond to these dynamics? In an effort to ease the discomfort, the Biden administration has, to their credit, sought to calm the waters. They have made it clear that they do not expect African leaders to take sides between them and China. There is a realisation that the Trump-era style of demanding that African countries work with the US against China was not popular with African leaders and could not be followed. Also, the US’s approach towards Africa’s China relationship is shifting from combative to persuasive. It is recognised that during the last four to five years under Trump, China leapfrogged the US in Africa in terms of infrastructure, technology, and financing, posing a formidable challenge for Biden to overcome. Much of the future African economic development is going to be built on Chinese investment. China has also surpassed the US as the largest trading partner of Africa (Gumede, 2021). That said, the US and China, in their African strategies, seem to, in many respects, be focussing on different priorities. For the Chinese it is infrastructure and technology. Whereas for the US alternative opportunities exist in the provision of technical assistance and the promotion of rules-based democracy and human rights through the strengthening of civil society and the media (Gumede, 2021). Areas of competition between the two global giants will be in the field of renewable energy, trade and financing, with development financing being the key issue (Gumede, 2021). As for the way forward in terms of rebuilding US-Africa relations: Africa should strongly lobby their American counterparts, with, given the range of pro-African appointees to the new US administration, unique opportunities being presented for securing face-time and warm body engagements with them (Gumede, 2021). Crucially, Africa needs to learn to speak with one voice (Sonjica, 2021). To take advantage of the opportunities Africans need to get better organised in the US to engage the policymakers in a more coordinated way, with a clear strategy aimed at taking advantage of identified key priorities, which could include, amongst others, the extension and further expansion of AGOA, technical assistance with regard to matters of governance, security issues, and the advancement of democracy and human rights (Gumede, 2021). Africans must accept that there is always going to be an element of competition between the US and China (Snyder, 2021). The US will follow a rules-based approach to international relations as it had before, whereas China will continue to promote its mutually beneficial approach to trade and investment and to expand its influence through its Belt and Road Initiative. African countries need to figure out, from an African point of view, and by defending its own interests, how to position themselves between these two approaches for maximum benefit (Gumede, 2021). They need to come up with a plan that appreciates the uniqueness of these two powers (Sonjica, 2021). Moreover, in order to navigate the not-by-choice tricky dynamics imposed on them, Africa should seek a mechanism for triangular engagement between themselves, the US and China. Enticing former African leaders that excelled in multilateralism to help facilitate this notion may be advisable (Weseka, 2021). Who knows, such a continental solution may even serve to alter the global discourse for the good. References Associated Press. 2021. 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Written response to questions posed to the department pursuant to the issues raised during the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021. Grobler, G. 2021. Contribution as an expert-panellist in the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021 via Zoom. Ambassador Gert Grobler is a former senior South Africa diplomat and currently a Senior Research Fellow at the Zheijiang Normal University. Gumede, W. 2021. Moderator of the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021 via Zoom. Professor Gumede is the Executive Chairperson of Democracy Works and Associate Professor at the School of Governance, University of the Witwatersrand. Miller, C. 2021. Biden Opens Sneaky New Front in Trade War Against China. [Online] Available at: https://foreignpolicy.com/2021/06/22/biden-semiconductors-south-korea-china-trade-war/ [accessed: 28 June 2021]. Sheehy, T. 2021. Contribution as an expert-panellist in the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021 via Zoom. Professor Tom Sheehy is the Principal, Quinella Global, and former staff director of the House Foreign Affairs Committee. Snyder, C. 2021. Contribution as an expert-panellist in the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021 via Zoom. Professor Charlie Snyder is Professor of African Studies at the Institute for World Politics, and a former National Intelligence Officer for Africa. Sonjica, B. 2021. Participant in the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021 via Zoom. Ms Sonjica is a former South African Cabinet Minister and currently the Chairperson of the Inclusive Society Institute’s Advisory Council. Stone, J. 2021. Contribution as an expert-panellist in the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021 via Zoom. Dr Joshua Stone is, inter alia, a former Professor of International Instruction, Beijing, China—DePaul University, and a former Congressional Aide to Congresswoman Barbara Lee. Thomas, D. 2021a. Biden bids to reverse US-Africa decline. [Online] Available at: https://african.business/2021/01/trade-investment/biden-bids-to-reverse-us-africa-decline/ [accessed: 28 June 2021]. Thomas, D. 2021b. Samantha Power to head USAID in boost to Africa projects. [Online] Available at: https://african.business/2021/01/trade-investment/samantha-power-to-head-usaid-in-boost-to-africa-projects/ [accessed: 30 June 2021]. Weseka, B. 2021. Contribution as an expert-panellist in the Inclusive Society Institute’s dialogue on “Rebuilding US-Africa relations under the Biden Administration and its nexus with China”, which was hosted on 22 June 2021 via Zoom. Dr Bob Weseka is the Coordinator of the African Centre for the Study of the US, University of the Witwatersrand. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

The CEO of the Inclusive Society Institute (ISI), Daryl Swanepoel, at the invitation of the Friedrich Ebert Stiftung, travelled to Germany from 14 – 18 October 2019, with a delegation led by ANC Treasurer General, Paul Mashatile. The visit presented an ideal opportunity for the introduction of the institute to the Friedrich Ebert Stiftung (FES) and the German Social Democratic Party (SDP). Both the FES and SDP were of the view that the politically aligned foundations of Germany played an important role in supporting and promoting multiparty democracy, the development of public policy and the engagement of civil society in the political discourse of the country. The idea of setting up such an institute in South Africa that would promote progressive, social and national democratic values was to be welcomed. To advance the aim of creating a progressive and just world, international cooperation between likeminded organisations was important. To this end, the FES, SDP and ISI agreed to further explore avenues and means of cooperation. Visit to Willie Brandt House, headquarters of the German Social Democratic Party. Konstantin Woinoff, SDP International Secretary (second from left) Visit to Friederich Ebert Stiftung. Dr. Ernst Kerbusch, representing the International Division at FES (third from left)