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The Inclusive Society Institute has embarked on an extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. The methodology includes a series of dialogues with various sectoral stakeholders and policymakers. These dialogues each have two parts to them: (i) Gaining an understanding from the particular sectors perspective as to what the country needs to correct policy wise, and (ii) what new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory. The dialogue with the FDI community was held in collaboration with the Southern African-German Chamber of Commerce on 24 and 25 August 2021. A sampling of points made during the discussion included, amongst others: Efforts to attract investment should be directed towards areas where South Africa has a competitive advantage. Investment won’t flow to non-competitive sectors and thus such efforts would be fruitless. South Africa should set itself up as a geo-political alternative to other jurisdictions in order to replace manufacturing capacity when such capacity is disrupted. The Covid-19 pandemic has proved the need therefore. South Africa will have to be far more adventurous and expansive in providing electricity generation capacity. It will have to, for example, take into account the transforming automotive industry that is moving away from fossil fuels. Investment is about risk and reward. If government wants manufacturers of large machinery to invest, it will have to assist in creating markets for such reward via the government spend. Do less, achieve more. The country needs to rather focus on a smaller number of deliverables. It is better to get three or four crucial policy areas right, than to spread the efforts across a broad spectrum of areas without the means or capacity to implement them. Stay real. Focus on projects that are achievable within the country’s limitation. Don’t venture with unachievable grand scheme projects which serves only to defocus energy that could rather be used to implement realisable projects in line with the country’s level of development. Fix the trust deficit between government and business. This will require attitudinal changes from both government and business. A new social contract is needed. FDI investment takes a long-term view. Investors therefore need policy certainty. The fluidity of the South African policy regime does not instil confidence. Less regulation. The South African authorities should not strive to outdo the developed world in terms of regulation. The fact that developing countries are less regulated is in fact a competitive advantage that investors take into consideration. The labour force is not sufficiently skilled for the economy, which requires a significant overhaul of the education system and curriculum. A full report on the deliberations will be released in due course.

The CEO of the Inclusive Society Institute, Daryl Swanepoel, participated in a Friedrich Ebert Stiftung (FES) hosted interactive session on Global Experiences of Social Democracy: “What does Social Democracy have to offer today?” The engagement formed part of the FES’s Fort Hare Autumn School Leadership Programme. ​ The Fort Hare Autumn School Leadership Programme (FHAS) is a political and civic education programme that seeks to create a new ethical leadership culture. The programme includes 25 students, from different institutions based in the Eastern Cape; Rhodes University, Nelson Mandela University, Walter Sisulu University as well as the University of Fort Hare. ​ The discussion focussed on the programmatic and electoral journey of the Social Democratic Parties in Europe and Germany in particular; and how they interpret the fundamental values of today? And more broadly: What does Social Democracy have to offer today? ​ Key discussants at the session included Christian Krell, Prof at the University of Bonn, Member of SPD Committee on Fundamental Values of Social Democracy, and Josefine Rückert, International Secretary of JuSos (Young Socialists, Germany). The discussion was facilitated by Sebastian Sperling, the country representative of FES in South Africa.

The Inclusive Society Institute has embarked on an extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. The methodology includes a series of dialogues with various sectoral stakeholders and policymakers. These dialogues each have two parts to them: (i) Gaining an understanding from the particular sectors perspective as to what the country needs to correct policy wise, and (ii) what new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory. This dialogue, held in Johannesburg, aimed at channelling the thoughts of the SMME sector into the research. A range of concerns were raised, amongst others: The regulatory burden that is impacting the ability of enterprises to focus on their primary production activities. The inefficiency of government bureaucracy which impedes the enterprises ability to execute projects and to develop & grow. The rigid labour laws; and unbridled and uncompetitive competition with foreign nationals. Limitations to funding. A need to redesign the curriculum of the education system, since there is a disconnect connect between the education outputs and the skills requirements within the real economy. A number of proposed solutions were put forward, which proposals will be captured in the report that will emanate from this discussion, and which will be fed into the broader research project.

Eng/ქარ On 14 October 2021, H.E. Mr. Beka Dvali, Ambassador of Georgia to South Africa hosted Mr. Daryl Swanepoel, Chief Executive Officer of Inclusive Society Institute of South Africa. Mr. Roger Latchman, Honorary Consul of Georgia in Johannesburg and Mr. Teimuraz Kereselidze, the Counsellor at the Embassy of Georgia in South Africa also participated in the meeting. During the meeting, Georgian Ambassador had the honour of getting acquainted with the experience of the above organization in the process of strengthening inclusive society in South Africa. The participants of the meeting also exchanged views about the opportunities of developing bilateral partnerships between Georgia and South Africa in various spheres, including between various Think Tanks, research and educational institutions. 14 ოქტომბერს, სამხრეთ აფრიკის რესპუბლიკაში საქართველოს ელჩმა ბექა დვალმა უმასპინძლა სამხრეთ აფრიკული ორგანიზაციის „ინკლუზიური საზოგადოების ინსტიტუტის“ წარმომადგენელს ბატონ დარილ სვანეპულს. შეხვედრაში, ასევე, მონაწილეობა მიიღეს იოჰანესბურგში საქართველოს საპატიო კონსულმა როჯერ ლაჩმანმა და საქართველოს საელჩოს მრჩეველმა თეიმურაზ კერესელიძემ. შეხვედრისას, საქართველოს ელჩს შესაძლებლობა მიეცა გასცნობოდა ხსენებული სამხრეთ აფრიკული ორგანიზაციის გამოცდილებას სამხრეთ აფრიკაში ინკლუზიური საზოგადოების გაძლიერების პროცესში. ასევე, განხორციელდა მოსაზრებების ურთიერთგაცვლა საქართველოს და სამხრეთ აფრიკას შორის სხვადასხვა სფეროში, მათ შორის, ანალიტიკურ-კვლევით ორგანიზაციებს შორის კავშირების განვითარების შესაძლებლობებთან დაკავშირებით.

Measuring the "Pulse of the People" This presentaion is available for bona fide research on request. Kindly contact us on info@inclusivesociety.org.za with your detailed request.

The Inclusive Society Institute (ISI) hosted a High-level Dialogue on the Establishment of a National Anti-Corruption Agency for South Africa on 19 October 2021. The dialogue was a response to the proposal by President Cyril Ramaphosa to establish a National Anti-Corruption Council (NACC). The ISI and the Anti-Corruption Centre for Education and Research (ACCERUS) of Stellenbosch University, through its School of Public Leadership, has entered a partnership to research the realities of international and African Advisory Councils against corruption and to produce a report which will be handed to the public policymakers as a contribution to policy development in this regard. This dialogue aimed to give direction to the research to be undertaken by the ISI and the School for Public Leadership. The dialogue noted that corruption is antithetical to sustainable development, aggravating income inequality, reducing domestic and foreign investment and significantly lowering the quality of public sector services. Addressing corruption will support a more inclusive recovery from the Covid19 pandemic. The dialogue was moderated by Professor Bonang Mohale, President of Business Unity South Africa, Chancellor of the University of the Free State, and Chairperson of the Bidvest Group. Daryl Swanepoel, Chief Executive Officer of ISI, and Roger Latchman, Convenor of the ISI’s research into corruption, also spoke at the event.

Inclusive Society Institute has embarked on an extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. The methodology includes a series of dialogues with various sectoral stakeholders and policymakers. These dialogues each have two parts to them: Gaining an understanding from the particular sectors perspective as to what the country needs to correct policy wise What new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory. The dialogue with the construction community was held on 19 October 2021. A sampling of points made during the discussion included, amongst others: Do we have a construction industry? The construction sector has contracted over successive quarters, especially as a result of the pandemic. The sector is under severe strain and confidence is low. So little is happening but so many depend on the sector for survival. Infrastructure constraints in respect of water and electricity, too little land for development, losing skills and inadequate skills development processes. Fibre and affordable broadband internet access. Inadequate maintenance of infrastructure beyond project completion and sustainable employment. These constraints are recognised but not addressed. Municipalities need to function to create a conducive environment for infrastructure development. Planning approvals take too long – processes that should take 6 months takes 4 years. Water use licences process also stifle development. Municipalities seldom plan beyond 3-5 years. Political interference in the execution, corruption and mismanagement of resources. Town planning is non-existent, buildings appear haphazardly on vacant land without consideration of complementary infrastructure. Government to employ competent and experienced personnel. Long lead time to implementation of infrastructure projects and inadequate scale: Government has announced infrastructure programmes but little visible evidence. Long lead time to implementation. There is poor planning and uncoordinated implementation. Shouldn’t work in silos to build a construction section. Example of a development – private sector proceeds with the bonded section, but the budgets and the planning not aligned. Schools, police stations not built, solid waste infrastructure. Instead of stimulating growth it becomes a dormitory suburb. Plans go one way (NDP), but reality goes another, widening backlogs. Municipalities don’t have accurate estimates for their populations and in and outflows of people and businesses. Town planning is non-existent, buildings appear on vacant land without consideration of complementary infrastructure. Budgeting not integrated with planning: IDPs, SDFs not quantified, because not costed, and can’t monitor. Densification is a policy objective, but it is more expensive and may not be financially affordable. Government is not a good payer which may undermine project feasibility. Supply Chain Management: Poor budget execution including SCM and supplier selection – government can’t determine a reasonable cost of infrastructure to avoid inflated tenders being awarded, or under-estimates of the true cost resulting in budget over-runs. Results in increase in performance bonds because of uncertainty about whether private sector can deliver on spec and budget. Abuse of panels on SCM, and only panellists can bid which causes corruption and frustration. Lack of transparency in tender adjudication. Guatrans is more transparent. Disqualification of bidders appears to be arbitrary and vague. Time to adjudicate tenders is too long – frequent extensions. Ratio of bids awarded as to those requested is low which wastes private sector time. Subcontractors need to be paid within 30 days, but the main contractor isn’t paid on time. 30% transformation spend. While transformation is imperative, it is often misinterpreted – it should be where feasible for subcontracting 30% and not applied across the board, holistically in the supply chain, not just between main and subcontractors. Ideology: Government sees private sector as funders not as partners in development. Government doesn’t consult the construction industry and contractors in infrastructure planning and design. Government doesn’t appreciate that it cannot create sustainable jobs it can only create an environment. Government has been attracted to social grants rather than infrastructure investment. Lack of trust of the private sector. Limited involvement of local communities: Builder’s mafia” – how can local communities be involved to ensure skills transfer. Government isn’t geared towards smaller businesses. Recommendations: Infrastructure development can catalyse growth and reduce poverty but need to re-industrialise the industry. Instead of importing, materials in the supply chain can be developed locally e.g. valves. The design codes need to be put in place, not only for local content development but for maintenance. Need early contractor consultation as part of holistic development and a single planning vision. Need to fast track PPPs. Now these have come to a halt. Skills: Government needs to understand contracting and specifying outputs and attract competent personnel, and train them using competence based assessment and apprenticeship programmes. Not just technical but social skills and ethics. There needs to be more accountability and incentives for accountability. There needs to be a process review not a policy review. There is a proliferation of policies but little follow through and follow up to the industry. SCM: Emulate Gautrans in being transparent about the bidding process, giving feedback to the bidders. SCM bids should be clear to avoid interpretation. Get the professionals who specified these bids to be more involved in adjudication. Address interpretation of 30% BEE spend requirement – should there be feasibility studies for this? Need combined public sector/municipality-private teams can stimulate green infrastructure. International partnerships need to considered and attract foreign investment. Good practices must be interpreted in the light of our context and constitution. A full report on the deliberations will be released in due course.

On Friday evening, 22 October 2021, the Deputy Chairperson of the Inclusive Society Institute (ISI), Professor Zweli Ndevu, and its CEO, Daryl Swanepoel, met with the Minster in the Presidency, Hon, Mondli Gungubele. The objective of the meeting was to introduce the work of the institute to the Presidency and to discuss the various research projects related to urgent national issues that the ISI is currently busy with. This included, amongst others, studies into the National Health Insurance, inequality, the Basic Income Grant (BIG), crime intelligence, anti-corruption, the economy and social cohesion. The ISI shared with the Minister its desire to constructively participate as a co-builder in the national dialogue and was encouraged by both the Minister’s commitment and openness to engage the broader public policy community, and the sense of urgency and pragmatism with which the Presidency is seeking solutions to the burning socio-economic issues confronting the nation. Both sides were of the view that resolutions to the issues required the broad support of government, business, labour, and civil society and that all should work in concert within a social contract that was pragmatic, and whilst aspirational, should work within the confines of the current status quo and rules based global realities. The two sides have committed themselves to maintaining open channels of communication.

Occasional Paper 1/2022 Copyright © 2022 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. FEBRUARY 2022 Author: Dr Marius Oosthuizen BTH, Hons BTH, MSF, M.Phil, Ph.D The state of public integrity in South Africa Overview A paper addressing the current state of public integrity in South Africa, examining the impact of poor public integrity on societal stability, coordination and national decision-making. Defining an ideal-state and approach to enhanced public integrity in South Africa. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Definition of public integrity Public integrity has been defined as: “The consistent alignment of, and adherence to, shared ethical values, principles and norms for upholding and prioritising the public interest over private interests in the public sector” (OECD, 2017). From this definition we see the focus of public integrity as being fairly narrow, and related specifically to the management of affairs in the public sector. Importantly, this definition emphasises the prioritisation of public interest over private interest. As such, the definition which the OECD uses, is centred on the question of whether public affairs are managed in such a way that the prioritisation of public interests predominate in government. Another important aspect of the definition is the manner in which it links public integrity to the role of ethical values, principles and norms, and the manner in which these are upheld. Specifically, this conception of public integrity emphasises the consistent alignment of public affairs in government to ethical foundations, as a test of their integrity. The need for an expanded concept of public integrity While being a useful definition of public integrity in general terms, especially when examining conduct in the public sector, the OECD definition could be argued to not be adequate when assessing public integrity in the South African setting at a national level. For the purposes of this paper, we will refer to the OECD definition as the narrow definition, and contemplate an alternative expanded or multi-dimensional definition. As illustrated by figure 1. below, it follows that the focus of the narrow definition emphasises anti-corruption and the pursuit of governance and accountability in government. The test then, of the level of public integrity in a given national government system, is the level to which it prioritises public interest and does so in accordance with shared ethical values, principles and norms. But for this to be achieved in the South African setting, public integrity must be understood as, governance for the public good in all sectors nationally – including at the interface of the sectors. Figure 1: Narrow definition of public integrity In the context of ordinary state or governmental affairs, the narrow definition seems appropriate. That is to say, any government, acting on behalf of its public, is expected to do so in accordance with the interests of the public and with the public’s ethics, principles and norms, upheld. However, in the specific South African case, this narrow definition is insufficient to navigate the complex reality of the South African situation where public, corporate and social affairs are intertwined and inter-dependant. We will return to this point, but for the time being will consider the operational environment in which public integrity is expressed. Ethics of Functional Silos Various functional silos exist within the public sector, each with their own focus in terms of the public goods or services they aim to deliver. These range, as shown in figure 2. below, from safety and security, environmental management and social cohesion, to matters pertaining to youth, economic access, health, education and increasingly, digital access. This list is not exhaustive but merely demonstrates the range of contexts in which public integrity is contemplated, and more importantly, the range of functional silos, each with its own ethic, in which public integrity must be upheld. This is important to note if we are to contemplate the state and future of public integrity. In democratic South Africa, the functional silos are overseen and managed from a top-down point of view, by the dual processes of procedural democratic (through party-political and participatory policy processes, including the legislature), and day-to-day public management in government by political appointees and bureaucrats. It is in these realms, of politics and governance, that public integrity is expressed or negated. The situation in the private sector is similar in that governance frameworks are constituted by laws and regulations arising from the legislature and government departments, and they are upheld or negated by managers in the ranks of corporate South Africa. However, and crucially, the overall process is an expression of what is first and foremost an underlying foundation of public values and duties – agreed upon by the society. In the South African case, the Constitution is understood to be the reference point for the public values and duties that underpin the political and governance processes, and by extension, the public management or corporate silos and sectors. Figure 2: Ethics of Functional Silos However, to continue the earlier point about South Africa’s complexity: the diversity of cultural, worldview and socio-economic realities of citizens across the South African landscape alongside the interdependence of the public and private spheres, can be argued to make the notion of a homogenous public ethic illusive. Although the constitution is the formal agreed upon framework for the South African nation state, the question remains as to what degree alignment and authentic inculcation of the content thereof has occurred in the society at large, public servants and the institutions that make up the private sector. For instance, are values of individualism in some quarters and notions of collectivism in others, capable of being simply co-accommodated within the constitution’s current human rights framework? Are market-values and their accompanying structures on the one hand, and state-interventionist policies preferred by many ruling elites on the other, easily accommodated side-by-side by the current constitutional aspirations? The answer is of course ‘no’. The contradictions that mark the current South African social, economic and political reality, in terms of diversity but also in terms of relations, remain an unresolved gordian knot. What the constitution does, is to point the way from where the society is to where it wants to be, but it does not describe where it is at present. When we therefore think of public integrity in the South African context, and want to measure and reflect on the standards thereof, we ought to take a broader societal perspective. We need to reflect more deeply about the foundations on which it must be built. When we assess specific cases of public integrity in the governance silos contemplated in figure 2 above, we must also do so in light of the embodied reality of how each silo translates into the lived-realities of everyday citizens. Social location and diversities of ethical imperatives To consider an example that relates to the social dimension of public integrity: One might contemplate the day-to-day reality of a family living in Soweto, the rapidly formalising informal settlement of the apartheid period, then known as the South-Western Township. For the so-called Soweto family, of whom 40-60% of family members are unemployed and increasingly dependant on social grants, the notion of a public good such as free access to electricity is a matter of day-to-day survival and dignity in a modern, developing society. Without free energy provided by the state, it is impossible for such a family to stay warm in winter, to cook food, or have their children study or read books at night. A failure of public integrity then in terms of energy provision by government is a violation of or threat to human dignity at the most basic level. Comparatively, an upper middle class family in an established apartheid-era suburb, who duly pays their rates and taxes, does so to ensure that their up-to-date electricity bill will assure them of energy provision by the state. This will enable them to for instance charge their high-tech devices and stay connected to their offices and schools that increasingly operate online in a post Covid-19 environment. In the first community, state provision of basic services, including energy, is a matter of survival. In the latter, state provision of energy is a matter of progress and comfort. These social differences often play out along racial and group-identity lines in present-day South Africa and means that public integrity as it relates to a particular silo of government translates differently into the ethical imperatives that underpin the public good being provided in different social locations. Therefore, in a situation where the state fails to provide energy security, either due to corruption’s decaying effects on the state’s energy system or a breakdown in state capacity, or due to a failure of overall resources, the families in these communities’ rights are understood to be violated in a very different way. Whereas it is an ethical imperative for the state to provide energy security to both families, in the first case the state is solving for energy poverty to secure citizens’ basic dignity, and in the second it is solving for economic security and leisure to ensure human flourishing. In the first instance, the state has an imperative to provide for the citizens even if they cannot comply with their duty to contribute to the public purse. In the latter, the state must provide for the citizens precisely because they have fulfilled their duty to the public purse. As a result the notion of fairness in relation to state disbursements in each case, must be contextually understood. The ethical foundation of each is different, but both are important to public integrity. When one then overlays the challenges arising from limited resources available to the state, and the present impetus for the transformation of the racial composition of South Africa’s human resource component of the public services and of its socio-economic systems, the matter is complicated further. Simply stated, for the state to deliver services to one party amid resource constraints and so-called transformation imperatives, it must do so by limiting its capacity to deliver services to others. This creates ethical conundrums and competing interests in relation to how public integrity is understood. If the state must act in preferential consideration of one party over another and balance their interests, difficult judgements must be made about what constitutes public integrity. This is complicated further by the interwoven interests of the private sector among and between these same communities contemplated in the example above. Interwoven private and public sector interests in society A historically typical pattern of interests would be that the interests of the suburban citizens are widely served by the private sector due to their formal employment and disposable income levels, while the township citizens are more fundamentally and increasingly dependent on the state. Where interconnected interdependencies do exist, the South African pattern is usually that the private sector, benefiting the suburban citizen, indirectly benefits the township citizen through informal or low-paying jobs and via the tax contributions of the formally employed which contribute a considerable proportion of government revenues. As such, in cases where the state decides to advance the interests of the private sector, it disproportionately benefits the interests of the privileged and only in a secondary manner, the interests of the disadvantaged. The counterpoint is of course that, when the state favours the disadvantaged at the neglect of the private sector, it does so at the material disadvantage of the privileged, given the current composition of the South African political economy. Choices about allocation of state resources between different sectors are in and of themselves choices about public integrity. The implication of the above is that public integrity in South Africa cannot be contemplated in a narrow sense by focusing on public interest as a unitary or one-dimensional item. Nor can it account for the interdependencies in the national system by only focussing on the day-to-day governance and management of the public sector only. In light hereof, as depicted in figure 3 below, a more comprehensive definition of public integrity is needed, that accounts for the multi-level conception of societal relations, and that accounts for the social dynamics in South Africa when considering public integrity. Figure 3: Multi-level perspective of public integrity Public integrity might therefore be defined in as follows: “Nurturing the level of alignment between foundational societal values and norms, through formal institutional arrangements and the constitutional framework in a bi-directional manner. The effective management of societal interests, at social, economic and political level, through and within public institutions. The expression of personal and community values, through sectoral and group ethics, within the laws and regulation created and upheld.” Within such a definition, the role of the public sector in upholding public integrity is crucial, but exists in a dynamic interplay with the role of the private sector and of the citizenry and other social institutions at large. The state of public integrity in South Africa From this point of view, an assessment of public integrity requires an analysis of a range of issues including: The quality of public sector governance and of private sector governance The extent to which the interests of the social partners, government, business, labour and society at large, are served and promoted. The emerging institutional culture evident across the aforementioned dimensions, in terms of governance. How the political process is contributing or undermining the aforementioned and is being itself conducted in relation to ethical considerations. Whether decision-making in governance, policy- and law-making, is taking place in line with shared national interests. Whether the democratic conduct of society, whether in expressing their political views, pursuing their economic interests, or their discontent through the media and forms of public speech, promote the shared national interest. This paper therefore is interested in the question of progress or regress of these multiple factors, bearing in mind the immense scope which they represent. It therefore can merely provide a broad overview of the state of public integrity by reflecting on a range of societal phenomena against the backdrop of the multi-level definition of public integrity outlined above. When public integrity fails: corruption, including sextortion It is widely reported that South Africa is facing endemic corruption. The Analysis of Corruption Trends (ACT) report by Corruption Watch indicates that illicit acts, including the stealing of public monies or incidences of nepotism continued apace in 2021. Thanks in large part to 1964 whistle-blowers in the public and private sectors, the nature and scope of the corruption problem is well known. Corruption Watch observed an annual increase of 12% of acts of corruption in the South African Police Service (SAPS), and disturbingly, complaints of instances where school principals operated outside the regulations of their provincial departments by hiring unqualified teachers and soliciting sexual favours from temporary teachers in exchange for safeguarding their jobs (Pillay, 2021). These two instances, one in the security silo and another in the human development silo, are indicative of the depth of ethical decay that has occurred in South Africa. In the first silo, the ethic of public protection and adherence to the law and rules of society is central to public integrity, but shockingly acts of corruption are being perpetrated by the very individuals tasked with presiding over public compliance. This is starkly demonstrated by the recent case where a police officer is reported to have demanded a bribe from citizens whose family member had been kidnapped (Shange, 2021). Such conduct in the SAPS represents not only illegal and unethical activity in a broad sense but embodies the antithesis of the ethic intended to govern the silo of state activity. Similarly, in the cases of corruption in the health sector where the provision of personal protection equipment and other services were used to siphon monies from the state during the Covid-19 pandemic emergency response (Corruption Watch, 2020), public integrity is eroded at its core. Such a case represents a direct betrayal of the ethic which underpins the governance silo’s existential purpose, of using public resources to promote the health of the public. Such conduct points to a liquidation of the personal ethical substance of many who occupy positions of public service and thereby a departure from the foundations of public integrity. Misuse of public resources for private interests According to Pijoos (2021), the most common forms of corruption are reported to be bribery (28%), procurement irregularities (24%), employment irregularities (11%), abuse of power (9%) and embezzlement of funds (8%). Pijoos also observes that major cities continue to be affected by corruption, with reports to Corruption Watch by whistle-blowers in 2020, rising to as many as 125 from the City of Cape town, 166 from eThekwini, 325 from the City of Tshwane, 354 from Ekurhuleni and 700 reports from Johannesburg. Such occurrences are not limited to the public sector. According to Cala (2021), whistle-blowers allege that “companies are encouraged to corrupt the municipality by billing double the amount for services”. Pijoos (2021) argues that “consequently, the hedges of the country’s democracy are unprotected because politicians and administrators are serving personal, factional and private interests. Not even a global pandemic could make them pause and think about the people they promised to serve.” Corruption Watch has increasingly highlighted the need for the vulnerability of whistle-blowers to be addressed as a matter of urgency. According to Ncala (2021) this is crucial if there is to be any meaningful shift in the efforts to eradicate corruption. To illustrate the point, the recent fleeing from South Africa by whistle-blower Athol Williams, who is said to have been instrumental in the surfacing of illicit acts relating to State Capture. Williams’ case points to the urgency of the problem. In his letter of explanation for leaving South Africa, Williams refers to the assassination of whistle-blower Babita Deokaran, who was gunned down while dropping her daughter off at school, after blowing the whistle on corruption in the Gauteng Provincial Department of Health (Lindeque, 2021). In his public letter, Williams further laments the endemic state of corruption: "We have a very dangerous situation in South Africa where we accept the narrative that only a few bad apples are involved in state capture. The reality is that there are many important and influential people who we revere in society, who we offer awards to, who sit on boards and committees and lead grand initiatives and organisations, who are in fact enabling this capture and benefitting from it. The corrupted web stretches across our society and needs bold action to clear this out. It starts with each of us. Challenge those around you to act with conscience and with courage. Local governance and SOEs governance - Auditor-General of South Africa’s report Amid these challenges, a positive fact that must not be forgotten is that the World Bank in 2021 ranked South Africa's Auditor General as one of only two "fully independent" watchdog entities of their kind in the world. This makes the reporting of the AGSA all the more important as a source of perspective on the state of public integrity (World Bank, 2021). In 2021 the AGSA reported that in the Department of Public Works, to which SOE's such as Transnet, Eskom, SAA and Denel report, irregular expenditure of R25.9 billion was identified. Simultaneously, the AGSA reported that the 257 municipalities incurred an estimated R19 billion in irregular expenditure and over R14 billion in unauthorized expenditure, and another R2 billion in fruitless and wasteful expenditure. High levels of maladministration continue to undermine municipal performance, with News24's "Out of Order Index" estimating an additional 43 municipalities, over and above the 87 already red-flagged by government, being in danger of collapsing. The AGSA found that similar trends are now increasing in South African prisons. The system meant to mete out punitive justice is itself beset with corruption (News24, 2021a). Similar to the SAPS case and the education system and health system above, the dire state of governance in local municipalities strikes at the core of South Africa’s overall capacity to maintain public integrity. Interestingly, much of the maladministration in local government is said to be attributable to low levels of skills among officials and the mismanagement of supply chains and municipal finance (AGSA, 2021). Municipal finance, as a key component of the broader local governance system, has been shown to have been bedevilled by problems associated with the African National Congress' (ANC) policy of 'cadre deployment', but similar challenges have occurred in municipalities run by opposition parties. This points to a deeper systemic and societal origin, as a causal factors to the problem. Crucially, in terms of managing and furthering the interests of the public, the decay of local governance has resulted in an overall weakening of economic prospects for South Africa, not least by increasing the cost of financing in state entities as their risk profiles rise but also through rising administrative costs passed on to the economy, and to the consumer. This is evidenced, for instance, by the recent further downgrade of Transnet by the Moody's ratings agency in November 2021 due to a qualified audit opinion. Daily Maverick's Xolisa Phillips attests to the contestation which occurred between Transnet, Treasury and the AGSA over the audit-findings, where the parties deliberated the issues contributing to the finding as it relates to matters of compliance with the Public Finance Management Act (PFMA). As one of many such contestations between SOEs, Treasury and the AGSA, this denotes a systemic weakness in the governance environment, its framework and the related capacity of the public sector to comply with its own rules. In fact, according to the AGSA, as much as 12% of audited government departments and entities’ “ability to continue as a going concern” is now in doubt, and this includes Eskom which reported a R20.5 billion deficit in 2019-2020. The AGSA put this down to “widespread weaknesses in basic internal controls and little movement towards investing in preventative controls” as well as an overall annual unauthorised expenditure increase from R1.65 billion the previous year to R18.12 billion in 2019-20 (News24, 2021b). Other examples of the siphoning off of public funds include the construction of local social infrastructure, like the sports facilities, such as the incomplete Matatiele sport facilities in the Eastern Cape of which R18.9 million of the project’s budgeted R27 million has been paid, but barely any infrastructure has been erected (Phillip, 2021). All of these cases exemplify a dynamic where, in light of the multi-level definition of public integrity, there is a lack of alignment between citizen values, institutional conduct and the rule of law. Weak proactive monitoring Notwithstanding the AGSA’s independence lauded above, the body itself is confronted with operational difficulties such as the inadequate implementation of the R150 million real-time audits of Covid-19 spending in 2020—2021, due to which the AGSA ran into a budget shortfall of R57 million. Given that the AGSA reported to Parliament’s Standing Committee on the Auditor-General that some of the real-time audit projects were abandoned or redirected and others didn’t achieve the required objectives. The contribution of the AGSA to preventing future corruption remains questionable while its reporting, after the fact, remains crucial (Gerber, 2021). Taken together, the fraying of governance standards coupled with an incapacity to arrest a general decline in ethics, does not bode well for public integrity in the near future. The task of improving public integrity will extend far beyond the removal of so-called “bad apples” in the bureaucracy of government, and require a national reconstruction effort of the ethical foundations. Extension of basic income grants As part of managing the interests of society, South Africa has now developed an extensive and sophisticated social support system centred on direct cash grants. Government is now considering extending the social security system with the introduction of a basic income grant. Considered the Department of Social Development’s pre-eminent policy proposal, the grant would extend the budget of the department beyond the current R15 billion in unauthorised expenditure incurred during the Covid-19 pandemic (Dayimani, 2021), and form part of a mitigation strategy as government responds to the socio-economic setbacks experienced by citizens during the Covid-19 pandemic. What this means is that even as the state is being weakened by the self-interested abuses of public sector and private sector opportunists, the burden of public interests is shifting increasingly from the shoulders of individuals or corporates to that of the state. An embattled state, both in terms of resources and of integrity, is extending itself to being a de facto caretaker state. Naturally, argued from the point of human rights, of national security and of social stability, this policy posture is attractive and somewhat inevitable. But, considered in the context of the overall weakening of economic capacity, partly due to pre-Covid factors such as a lack of investor confidence and then after the pandemic, partly due to a demand-side shock, the national system is weakened even as its burdens rise. The prospect then of a tenuous public budget management environment, within the context of a shifting political landscape, is that anti-corruption must be prioritised at a time when there is less resources in circulation generally. This brings to the fore deep-seated and unresolved questions of whether the collectivist ethics of direct state care, versus the market ethic of indirect public benefit from the economic advancement of those who primarily benefit from the private sectors, ought to be the organising principle for public disbursements. The statists, will likely argue that more fiscal largess is both politically and morally expedient – an ethical imperative, and that the public risks associated with greater fiscal largess do not outweigh the ethical imperatives for social relief. Their market-minded opponents are likely to argue that fiscal prudence and demand-side stimulus in the core industrial and commercial economy should be prioritised on pragmatic, and from a systemic perspective, on social and long-term political grounds. Crucially, these ethical and policy debates about distribution will proceed against the backdrop of persistent post-colonial and post-apartheid legacy systems and power relations, often undertaken along racial and community lines. Importantly, this latter fact will blur the lines of public integrity between the transformation imperatives cited earlier, and individual rights relating to property, economic freedoms and competition. As controversial as it may be, it will likely mean that questionable acts of nepotism and political interference in economic processes, in the state or private sector, will continue but be shrouded in pseudo-moralistic terms by their protagonists - according to which the ends of economic transformation, justify the means of rule-breaking. Accountability for corruption has broken down To demonstrate this dynamic, according to Corruption Watch the Register for Tender Defaulters, a national register created by The Prevention and Combating of Corrupt Activities Act, is empty – meaning that zero suppliers found guilty of criminal offences from doing business with the government have been listed (Cronje, 2021). This signals a total breakdown in accountability and a symbiosis between self-interest and a decline in public integrity. It is seemingly not a stretch to imagine that the lack of accountability at the coalface is related to the interwoven interests between the public and private sector elites, particularly at the upper levels of the social strata. South Africa’s society might be said to be presided over by a plutocratic elite, who have turned narrow interests into shared interest at the top (of power), in order to secure political and economic privilege. That this is, and has for long been a defining feature of South Africa’s political economy and subsequent relations in terms of distribution. That, if allowed to continue, will create a new form of patronage-based rent-seeking which continues to shape market structures and the resultant accumulation of privilege. From that point of view, the specific instances of mutually-beneficial corruption between private and public sector actors, go beyond personal and organisational governance failures and constitute a societal plague of injustice and ethical depravity. It must therefore be asked: Can the current systems, the mid-level formal institutions that are operative between the level of the Constitutional framework at the top and the coalface of citizen interest at the bottom, be reformed? Sources of reform If so, where in the system is reform likely to emanate from? It seems unlikely that the private sector or public sector, at the apex or corporatist level, will enthusiastically lead a reform agenda that improves public integrity. It also seems obvious then, that current emerging efforts at political realignment that are in embryonic stage, constitute an attempt at forging a new and alternative political economy. The battle for better public integrity is in some ways also a class battle. The key systemic risk for South Africa, is that a combination of unethical justifications, both at the citizens level due to deprivation, and at the organising level in politics, combine to high-jack South Africa’s transformation agenda in favour of a destructive revolutionary cycle of uncoordinated social change. As seen in the phenomena of insurgency and the associated looting spree in KwaZulu-Natal in July 2021, the outcomes of such action would amount to a destructive wake of national insecurity. The impact of poor public integrity on South African society and state In terms of public integrity, South Africa is caught between two tides as depicted in figure 4 below. On the one hand, the declining capacity and effectiveness of the state, due to institutional decay as well as resource constraints, and on the other, a rising tide of structural injustices often lamented as persistent poverty, inequality and unemployment. Figure 4: Navigating between two tides As these tides interact, they bring to the fore competing ethical imperatives that will test the very notion of what is considered public integrity. It seems likely that, should they persist and not be arrested, public integrity’s foundations in relation to the seemingly opposed values or principles of collectivism versus market values will become more acute. So too, the tolerance for the disruptive effects of social change and fairness, either as evolutionary and staged, or as revolutionary and unsettling of old patterns of power and privilege sharpen. The effects of these two foundational ethical divergencies and associated debates in the public discourse, and by extension in the policies and conduct of public and private actors and institutions, cannot be overstated. The result, depending on their outcomes, are extremely divergent future natural milieu, in which public integrity will be understood and practiced. Without speculating about which ethical formulation is more likely to succeed in advancing the public interest, it seems obvious that neither an extreme revolutionary and collectivist ethic, nor a slow-burn combination of evolutionary change and market forces will advance South Africa’s public interest at a pace required for national stability. What consequently emerges is a middle-ethic, which must continue to balance the interests of society in often seemingly contradictory ways. Whether tacit or codified, it suggests that a new set of trade-offs across South African society would be required for a new equilibrium to be sustained in terms of the social contract, given the new economic, political and social reality the nation faces in a post-pandemic South Africa. Does the ethical foundation exist to rebuild public integrity? The above observations of grotesque corruption at shopfloor and government department level, along with the broader systemic view, asks if the ethical foundation exists for a public integrity which is able to manage the landscape of interests at this time? The constitution, with its deeply rooted humanist and rights orientated ethic, places at the centre equality and progressive change as its organising principle. It seems that the constitution is insufficiently expressive of the ethic which would need to underpin a patient moderation of expectations in relation to those same interests. The constitution on its own, is inept at articulating fairness in the current milieu. By patient moderation, one does not mean the patience of the poor as they wait for a better life permitted for them from on high, be it through jobs or grants. Rather, the patient moderation also of business people who might exact greater profits, were they not taking account of the ethical imperatives of a newly democratic but still deeply traumatised society. So too, the patient moderation of a politically active class and new middle class, who now see their gains slowly diminish even as they taste upward mobility for the first time. From the point of view of systems of ethical persuasion, South Africa does not have, perhaps not yet, a virtue ethic of citizen identity that can provide a basis for patient moderation. At the same time, the various constructs of collective identity and national belonging, be it the notion of a Rainbow Nation or unity amid diversity, are increasingly out of step with the national climate, and therefore unable to provide a foundation for an national public ethic. The risk thereof, is that a draconian state imposing rules and ethics in a deontological fashion runs the risk of further alienating an already distrustful population. It may be the case, in light of South Africa’s topological social diversity - itself a function of apartheid spatial planning and discrimination – that a single and centralised national ethical foundation remains elusive for South Africa in the medium term. It may be that a decentralised, pluralistic foundation, made up of community-based networks of citizens’ interest, is the only realistic pursuit in search of a solid foundation on which to build for now. Such a recognition would require a significant shift away from the current emphasis which has assumed mechanism of accountability as ideally centralised. Alongside the AGSA, National Prosecuting Authority and the judicial commissions, the strengthening of local and dispersed systems of accountability might be the most feasible instrument in practically improving public ethics. It may be that the rule of law, first at the coalface of for instance local government oversight committees, are the building blocks of a new public ethic. Similarly, it may be that social cohesion and civil obedience, two sides of the same coin, do not in the short-term stem from the constitutional imperatives. Rather, that they stem from individual and community interests, coordinated by new forms of democratic participation. It may therefore be that the South African social contract, which in 1994-1999 stemmed from a grand national effort through codified instruments of institutionalisation, of which the constitution is an example, must now be complemented by a community-by-community basis. In such an approach, the national public ethic arises from a crescendo of diverse and citizen-driven foundations, as opposed to a singular liberation movement. Harness codes of ethics and pledges for public integrity What the state, government and large institutions in the private sector can do now, is to nurture the environment for the emergence of a new framework of good citizenship, in its own ranks and also in the public. A rebuilding of public integrity may therefore require a multi-pronged political, corporate and individual effort which places personal and shared integrity at the core of institutional culture-formation. In this vein, a strategic framework for national action on public integrity may be useful, but unlikely to succeed if it does not address the aforementioned societal contradictions. In that regard, a set of social compacting initiatives that surface and mediate interests, may be required within which the pursuit of public integrity can be couched. Such large-scale social change would require that the levers for action and a theory of change be developed. Mechanisms such as new codes of ethics and a pledge for public integrity, developed in an embodied manner from within institutions, may be required. These efforts are unlikely to succeed until and unless high-profile gestures are forthcoming, that set a new standard for the prioritisation of public integrity. Given the long-term developmental character of the challenges at hand, any successful national effort in this regard will have to involve the education system and the impartation of a core curriculum on public ethics and integrity among South African children, youth and adults. In addition, even as civil society becomes increasingly active in combating corruption, their role in expanding the scope and deepening the reach of a process of national reconstruction of public ethics will be crucial. In this vein, entities such as Right2Know, Corruption Watch, Organisation Undoing Tax Abuse (OUTA) and the Ahmed Kathrada Foundation and other foundations, who have more recently been pitted against public and private sector actors, would need to become allies in a new national partnership for public integrity (Mafata, 2021). What is to be done? Implicit in the recommendations of this paper is a theory of change for the improvement of public integrity. The paper's theory of change rests on the multi-level framework for public integrity, which postulates that the constitutional framework is underpinned by the foundational values and norms of society, that these in turn inform public management conduct, which in turn manifests in the formal institutional arrangements of the state and of government as well as in the private sector in a reciprocal manner. Against this backdrop, a reform agenda which prioritizes public integrity must of necessity pay attention to four imperatives: Strengthening the ethical foundation of society by building cultural familiarity with values, ethics and principles of common interest. Aligning and enhancing the codes, frameworks, systems and monitoring of public management to give expression to higher standards, as outlined in an agreed-upon a national ethical foundation. Rectifying the collapse of adherence to the law, regulation and norms of good ethical and governance practices in formal institutions. Pursuing the first three imperatives within the framework of the Constitution and in such a way as to give expression to the Constitution's human rights and equality-orientated conception of society. The four imperatives can be advanced by the development of a national framework for the enhancement of public integrity, including the proposed development of a national curriculum on public ethics, to which citizens and public servants ought to become socialised. Such a curriculum would include pedagogical strategies to familiarize citizens with matters relating to ethical decision making, values-based conduct, the negotiation of public priorities amid the ethical conundrums of resource constraints. Also, the skills required for debating the public interest in search of the common good, the creation of shared interest and the importance of the notion of a shared future for citizens and different communities. The principles of diversity and participation would be crucial to a national effort of this kind, and ought to be geared toward enhancing transparency and accountability in the day-to-day functioning of the democratic governance process and of the economic order. Therefore, the foundational principle of the rule of law, as an expression of a shared commitment to a rules-based national order, should be sacrosanct. Practically, such a curriculum would need to address the skills gap which exists in the systems of public procurement and supply chains, to create the requisite capacity in the public sector to comply with its own rules. It would thereby need to enhance internal and preventative controls in all sectors as a result. Importantly, such a framework and curriculum cannot be created by any singular state organ, government department or segment of society, but must of necessity be the expression of a joint national effort at finding the common values and shared interests that lie at the centre of an envisioned national democratic South Africa. As previously argued, a single and centralised national ethical foundation is likely to remain illusive for South Africa in the medium term, and as such a national dialogical process must be set in motion. As postulated, it may be that a decentralised, pluralistic foundation, made up of community-based networks of citizens’ interest, is the most realistic pursuit in search of a solid foundation on which to build national consensus for now. This would require catalysing an initiative that strengthens local and dispersed systems of accountability for the practical improvement of public ethics. For this reason, the vast array of knowledge networks such as universities, the faith communities and civil society, as well as the formal public and private sector institutions, would need to be orchestrated to participate in a national ethical reconstruction process. Through such an evolutionary process of cultural restoration, a virtue ethic of citizen identity is expected to emerge, and can be codified, which would provide a basis for national ethical coherence in time. In pragmatic terms, it may provide the patient moderation required from citizens for the building of an increasingly fair democratic order. Such an effort, to quote Whistle-blower Williams once more, would require a revolution of "conscience and courage" from societal leaders, who would need to guard against short-term political expedience and self interest in their own ranks. References Auditor General. 2021a. Annual Report to Standing Committee on Auditor General 12 November 2021. Parliamentary Monitoring Group. [Online] Available at: https://pmg.org.za/committee-meeting/33780/ [accessed: December 2021]. Auditor General. 2021b. Annual Report 2020-2021. [Online] Available at: https://www.agsa.co.za/Reporting/AnnualReport.aspx [accessed: December 2021]. Bello, P. O. 2021. Do people still repose confidence in the police? Assessing the effects of public experience of police corruption in South Africa. African Identities, 19:141-159. Corruption Watch. 2020. In South Africa, Covid-19 has exposed greed and spurred long-needed action against corruption. [Online] Available at: https://www.transparency.org/en/blog/in-south-africa-covid-19-has-exposed-greed-and-spurred-long-needed-action-against-corruption [accessed: 21 January 2022]. Cronje, J. 2021. ‘Something is wrong’: Zero names in register of companies barred from doing business with govt. [Online] Available at: https://www.news24.com/fin24/economy/something-is-wrong-zero-names-in-register-of-companies-barred-from-doing-business-with-govt-20211103. [accessed: November 2021]. Dayimani, M. 2021. Another dodgy multimillion-rand stadium project surfaces in Eastern Cape. [Online] Available at: https://www.news24.com/news24/southafrica/news/another-dodgy-multimillion-rand-stadium-project-surfaces-in-eastern-cape-auditor-general-to-investigate-20211022 [accessed date: October 2021]. Gerber, 2021. Auditor General in talks with Treasury to recoup R150m spent on auditing Covid-19 corruption. [Online] Available at: https://www.news24.com/news24/southafrica/news/auditor-general-in-talks-with-treasury-to-recoup-r150m-spent-on-auditing-covid-19-corruption-20210305 [accessed: December 2021]. Lindeque, M. 2021. State capture whistle-blower Athol Williams leaves SA over safety concerns. [Online] Available at: https://ewn.co.za/2021/11/08/state-capture-whistleblower-athol-williams-leaves-sa-over-safety-concerns [accessed: November 2011]. News24. 2021. Out of Order Index. [Online] Available at: https://outoforder.news24.com/ [accessed: November 2021]. News24. 2021. 12% of govt, SOEs still not improving says Auditor-General. [Online] Available at: https://www.citizen.co.za/news/south-africa/government/2455135/12-of-govt-soes-still-not-improving-says-auditor-general/ accessed: November 2021]. Mafata, M. 2021. South Africa: Civil Society Calls on the Public to Stand Up and Fight Corruption. [Online] Available at: https://allafrica.com/stories/202111090205.html [accessed: November 2021]. Phillip, X. 2021. South Africa: Moody's Downgrades Transnet After Qualified Audit. [Online] Available at: https://allafrica.com/stories/202111080632.html [accessed: November 2021]. Pillay, K. 2021. Corruption, dodgy Covid-19 procurement deals and sextortion at schools are on the rise: Corruption Watch. [Online] Available at: https://www.iol.co.za/news/politics/corruption-dodgy-covid-19-procurement-deals-and-sextortion-at-schools-are-on-the-rise-corruption-watch-370e6cfa-5b13-4387-9ba3-b09457c47414 [accessed: November 2021]. Pijoos, I. 2021. Corruption Watch: City of Joburg tops list with most corruption allegations. [Online] Available at: https://www.sowetanlive.co.za/news/south -africa,2021-08-18-corruption-watch-city-of-joburg-tops-list-with-most-corruption-allegations [accessed: November 2021]. Shange, N. 2021. Senior cop in kidnap unit accused of extorting cash from family of victim. [Online] Available at: https://www.timeslive.co.za/news/south-africa/2021-11-22-senior-cop-in-kidnap-unit-accused-of-extorting-cash-from-family-of-victim/ [accessed: 21 January 2022]. Steyn Kotze, J., Bohler-Muller, N., Roberts, B., Pienaar, G., Davids, Y.D. & Mchunu, N. 2021. South Africa's Thuma Mina moment: public opinion and political trust in South Africa's COVID-19 response. Human Sciences Research Council, Policy Brief, July 2021. [Online] Available at: https://repository.hsrc.ac.za/handle/20.500.11910/16281 [accessed: December 2021]. World Bank, 2021. Supreme audit institutions independence index: global synthesis report 2021. [Online] Available at: https://openknowledge.worldbank.org/handle/10986/36001?show=full. [accessed: December 2021]. Further reading: Bibliography Ferreira, I.W. 2021. Government Corruption in South Africa, Tummala, K.K. (Ed.) Corruption in the Public Sector: An International. Fowkes, J. 2021. A hole where Ely could be: Democracy and trust in South Africa. International Journal of Constitutional Law. [Online] Available at: https://academic.oup.com/icon/article-abstract/19/2/476/6294785 [accessed: December 2021]. Narotam, K. 2021. The impact of transformative constitutionalism in addressing the marginalization of domestic workers in post-apartheid South Africa with specific reference to Mahlangu and another minister of labour and others. [Online] Available at: HeinOnline.org. University of Pretoria:196. https://heinonline.org/HOL/LandingPage?handle=hein.journals/pslr15&div=16&id=&page= [accessed: October 2021]. Rapanyane, M. B. 2021. Seizure of State Organs, Corruption and Unaccountability Promotion in South Africa: Case Study of Jacob Zuma Administration. African Journal of Development Studies (Formerly AFFRIKA Journal of Politics, Economics and Society), 11:251-270. Sindane, N. 2021. Why decolonization and not transformative constitutionalism. Pretoria Student Law Review,15(1):236-154. Teagle, A. 2021 South Africa needs a single anti-corruption unit and real-time monitoring. Human Sciences Research Council Review, 19(1):34-37. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 Inclusive Society Institute’s CEO, Daryl Swanepoel, was invited to attend and speak at the Tenth Meeting of the Forum for China Africa Cooperation (FOCAC), which took place on 20 and 21 October 2021. The opening ceremony was chaired by Mr. Zheng Mengzhuang, President of Zhejiang Normal University, and included addresses by high-level representatives of the People’s Republic of China as well as various African countries. Mr Swanepoel was invited to speak on the topic of the US-China-Africa nexus. He argued that Africa must seek a mechanism for triangular engagement with the US and China. In his address, he said that Africa will have to contemplate a more considered and coherent framework for its international approach in order for it to maximise the opportunities presented by the US, China and others. Mr Swanepoel also moderated a session on the topic of “The New plan for the Forum on China-Africa Cooperation and the establishment of a China-Africa community with a shared future.”

Concept note 5/2021 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 those of their respective Board or Council members. OCTOBER 2021 Author: Stephen Langtry Content 1. Introduction 2. The problem 3. Objectives 4. Activities References 1. Introduction The Inclusive Society Institute and In Transformation Initiatives hosted a series of panel discussions to assess the state of crime intelligence in South Africa. These discussions were held on 19 July 2021 and 6 October 2021. They arose from a general concern about the negative impact that high levels of crime had on the social and economic development trajectory of the country. Critical was the lack of intelligence to combat high levels of crime. Particular areas of concern were: A vast number of arrests do not result in court action; The poor prosecution rates through the judicial system; The lack of preparedness of the security services to deal with the riots and looting from 9 to 18 July 2021 in KwaZulu-Natal and Gauteng, which resulted in more than 300 deaths and billions of Rands worth in damage to infrastructure (Harper, 2021). The hostage-taking of the Minister of Defence and Military Veterans, Thandi Modise, Minister in the Presidency, Mondli Gungubele, and Deputy Minister of Defence and Military Veterans, Thabang Makwetla, on 14 October again illustrated the breakdown of crime intelligence (Haffajee, 2021). The panel discussions reflected on the politicisation of crime intelligence and how it has affected the effectiveness of the intelligence and security community. The consensus view of panellists was that there was an urgent need for a comprehensive assessment of national security and intelligence. 2. The problem None of the six National Commissioners of Police since 2000, have completed their terms of office. Notably, Jackie Selebi was arrested and convicted of corruption in July 2010. The former Head of Police Crime Intelligence, Lieutenant General Richard Mdluli was convicted and sentenced to five years in prison for kidnapping and assault in July 2020. These incidents have had a serious impact on the crime intelligence environment resulting in low morale and many experienced officials leaving the service. The result has been low levels of capability, with little to no capacity to collect intelligence. In addition, there has been a lack of coherence in the intelligence and security community. The panel discussions found underperformance and dysfunctionality within the intelligence services. This state of affairs is not satisfactory and seeks to undermine South Africa’s social and economic development as well as its political stability. All this does not auger well for the growth trajectory envisioned in the National Development Plan. This problem and the threat that it presents is well known. If we do not solve the problem, we could face in the coming months a much bigger threat than what we saw in July 2021. There have been several attempts in the past, and currently, to address this. These include the following interventions: The appointment of the Mufamadi Committee of Inquiry into the State Security Agency in 2018. The establishment of a joint parliamentary committee to probe the violence of July 2021. This committee is an initiative of the Portfolio Committee on Police and will consider what relevant information and intelligence were available to the security agencies prior to, during and after July’s deadly unrest in KwaZulu-Natal and Gauteng. The Joint Standing Committee on Intelligence has embarked on an inquiry into allegations of intelligence failures by the intelligence services. There are reports that the Presidential Economic Advisory Council has established a working group on policing and public safety in the economy. Within both the Hawks and SAPS Crime Intelligence there was renewed interest to revisit the late Lieutenant General Sindile Mfazi’s idea to establish an investigative academy. The appointment of Dr Sydney Mufamadi as the National Security Advisor. The appointment of the expert panel, chaired by Professor Sandy Africa, to probe the violence and security lapses in KwaZulu-Natal and Gauteng in July 2021. In the light of these interventions, it can be asked whether a national assessment is necessary. It is worth repeating the following excerpts from the report of the first discussion on Assessing Crime Intelligence in South Africa. The Mufamadi Committee of Inquiry into the State Security Agency (SSA) found: 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 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. Based on these 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 National Intelligence Coordinating Committee (NICOC). The mandates of the intelligence departments, including crime intelligence, be refined, and that clearer and more focused definitions of mandates be developed. The national intelligence training and education capacity for the intelligence community be reviewed. South Africa’s intelligence doctrine, policies and prescripts, which should be oriented towards the Constitution, and based on the revised White Paper, be confirmed. 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. (Inclusive Society Institute, 2021) Participants in the panel discussions noted that there was no known progress on the implementation of the recommendations. In addition, the question of to what extent the findings and recommendations of the Mufamadi Committee were still relevant had to be addressed. Furthermore, if they were still relevant, what needs to be done? The panel also noted that where structures had been established to conduct this work they struggled to get up and running in terms of administrative support. Work in this area also seemed to be piecemeal and not done in a coordinated and coherent way. In addition, investigations and reviews by different structures were often met with scapegoating, political grandstanding, resistance, secrecy, and hostility. This does not allow for honest reflection. 3. Objectives On the basis of recent events and various interventions, there is an urgent need to reconsider the overall intelligence architecture to improve the fight against crime. Due to national financial constraints, it is important that the security and intelligence architecture be optimised. The two panel discussions form a good basis from which to do a scoping exercise and to further conduct the assessment. Through the proposed National Security and Intelligence Assessment it is hoped to achieve an understanding of: What the mandate is of the various security and intelligence organs. This will entail a review of the composition, structure and mandate of the security and intelligence establishments in South Africa. These structures include the police, the SANDF, the various intelligence agencies, the Border Management Authority, and the entire criminal justice and the judicial system itself. How the various national security and intelligence organs interact with each other. What are their specific responsibilities? How do they communicate with each other? How to optimise our security agencies, for their roles and functions by looking at the overlap in the intelligence systems; between the military, the police, and state security. 4. Activities In order to achieve the objectives stated above it is necessary to: Put together a portfolio of things to be looked at as part of the assessment. Find a political champion from within government, who is trusted and who really wants to put time and effort into starting a process, which will involve a dialogue with both civil society, academia, practitioners, and current and former members of the various agencies. Engage the expert panel, chaired by Professor Sandy Africa, and the National Security Advisor, Dr Sydney Mufamadi. Initiate closed, small group discussions with people, in order to create a safe dialogue process that will enable people from both the public sector and civil society to reflect, and think innovatively about how practically we can deal with what we are faced with now. This concept note forms the basis from which the institute will develop a comprehensive scoping exercise for the research aimed at assessing the National Security and Intelligence Services in South Africa. It is imperative that the research design provides for an inclusive approach which ensure wide public sector and civil society participation in the research. The Inclusive Society Institute and In Transformation Initiate will convene such research. References Haffajee, F. 2021. “Government’s go-slow on ‘insurrection’ paved the way for ministers’ hostage drama.” Available at https://www.dailymaverick.co.za/article/2021-10-15-governments-go-slow-on-insurrection-paved-the-way-for-ministers-hostage-drama/ [accessed on 17 October 2021] Harper, P. 2021. “Phoenix killings: 22 suspects held.” Available at https://mg.co.za/news/2021-08-03-phoenix-killings-22-suspects-held/ [accessed: 17 October 2021] Inclusive Society Institute. 2021. Assessing Crime Intelligence in South Africa: an initial discussion. A report by the Inclusive Society Institute and the In Transformation Initiative. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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. 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 August 2021 With appreciation to the South African German Chamber of Commerce and Industry, with whom this dialogue was jointly hosted. Author: Mariaan Webb, Creamer Media Edited: Daryl Swanepoel Content Abbreviations & acronyms Introduction Identifying weaknesses Broad-based black economic empowerment Corruption and declining State capacity Crime and security concerns Exchange rate volatility Market concentration Quality of infrastructure Skills and education Strategic planning Interventions for fostering growth Conclusion Reference list Abbreviations & acronyms BBBEE broad-based black economic empowerment BLSA Business Leadership South Africa CPI Corruption Perception Index FDI foreign direct investment GCI Global Competitiveness Index GDP gross domestic product IMF International Monetary Fund ISI Inclusive Society Institute SARB South African Reserve Bank SoE State-owned enterprise Stats SA Statistics South Africa Unctad United Nations Conference on Trade and Development YES Youth Employment Service WEF World Economic Forum Introduction Foreign direct investment (FDI) is sought after by emerging economies such as South Africa. FDI is an integral part of the international economic system and acts as a major catalyst for development, with resources often channelled to infrastructure and manufacturing investments. Over the years, South Africa has developed its reputation as a ‘gateway’ for international companies looking at the African continent as an investment destination, but in recent years its ‘gateway to Africa’ status has come under threat, as a result of electricity and logistical weaknesses within the South African economy and a preference for direct bilateral relations between investors and a number of African countries. The United Nations Conference on Trade and Development (Unctad) ‘World Investment Report’ shows that FDI inflow into South Africa was $9-billion in 2008, before the global financial crisis (Unctad, 2010). This has decreased in subsequent years, with FDI inflow falling to $5.13-billion in 2019 and to $3.11-billion in 2020 (Unctad, 2021). The sharp year-on-year decrease in 2020 is attributed to the impact of the Covid-19 pandemic, with South Africa, as with most other countries, having borne high human and economic costs owing to the health crisis. However, the country entered the pandemic in an already precarious position, with high public-sector debt, particularly among State-owned enterprises (SoEs), electricity shortages and a frustratingly low economic growth rate. Much like the rest of the world, South Africa has been through challenging times as a result of the impact of the Covid-19 pandemic. Gross domestic product (GDP) contracted by 7% in 2020 (Stats SA, 2021a). Economic activity rebounded in the first two quarters of 2021, with first-quarter GDP growth of 1% (4.20% annualised) and second-quarter GDP growth of 1.20% (4.70% annualised). Despite the gains, the economy is still 1.40% smaller than what it was before the Covid-19 pandemic (Stats SA 2021b). Helped by a commodities boom, the International Monetary Fund (IMF) is forecasting that South Africa’s economy will expand by 5% in 2021 and 2.20% in 2022 (IMF, 2021). Foreign investment could play an important role in supporting South Africa’s economic recovery following the pandemic. Although the South African government, in principle, encourages FDI, investors and market analysts are concerned that, in practice, its commitment to assist foreign investors is insufficient. The Inclusive Society Institute (ISI) has met with foreign investors to canvass their views on the barriers to investment in South Africa and to gain an understanding of what new initiatives or changes are needed to shift the economy into a higher growth trajectory. This report is a summary of themes from discussions between the ISI and the FDI community, held in collaboration with the Southern African-German Chamber of Commerce in August 2021. It highlights that South Africa still has many strengths that make it a preferable market. The country continues to be anchored by the institutional strength of the National Treasury and the South African Reserve Bank (SARB), and its infrastructure, although deteriorating, is relatively superior to that of its African neighbours. The discussions, however, have also highlighted limitations regarding crime and security, corruption, skills, electricity supply problems, ethics and governance concerns, as well as diminished State capacity. The dialogue of FDI forms part of the ISI’s comprehensive research to develop a new growth-centred economic blueprint for South Africa. The intended blueprint aims to reignite economic activity, restore investor confidence, and create sustainable jobs for the millions of unemployed who call South Africa home. In the first phase of the research, the ISI studied economies – such as, Japan, South Korea and Germany – which at different points in history recovered from distress and turned themselves around, often within a short space of time. In the second phase, the ISI is studying South Africa’s current economic policies to better understand what the country is doing right, what should be changed and what new policies should be pursued. Identifying weaknesses 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 viewed by many as a barrier to entry and a disincentive to foreign investment. The Act and associated codes of good practice require levels of company ownership and participation by black South Africans, if inter alia a company is to get bidding preferences on government tenders and contracts. It is acknowledged that multinationals have global practices, which make it difficult for them to comply with the ownership element of BBBEE through the sale of shares to black South Africans. In this instance, the Department of Trade, Industry and Competition has created an alternative equity equivalence programme for multinational or foreign-owned companies to allow for them to score on the ownership requirements. Many, however, view the terms as onerous and restrictive. Changing of goalposts is also a concern – as it results in uncertainty among investors and potential investors. It is argued that if black economic-empowerment requirements are removed or made easier and more certain, then it is likely that poorer South Africans could benefit more by ensuring that the country achieves higher economic growth and job creation by attracting more FDI. Corruption and declining State capacity South Africa continues to grapple with corruption, eroding public trust and weakening of the State’s capability to deliver services. Transparency International’s Corruption Perception Index (CPI), which ranks countries and territories by their perceived levels of public-sector corruption, scores South Africa at 44 points on a scale where zero is ‘highly corrupt’ and 100 is ‘very clean’. This compares with Botswana’s CPI score of 60. In terms of the 180 countries analysed, South Africa is ranked sixty-nineth, Botswana (35), Namibia (57), Lesotho (83), Zambia (117), Mozambique (149) and Zimbabwe (157) (Transparency International, 2021). The most common types of corruption include maladministration, procurement corruption and abuse of authority (Corruption Watch, 2021). State capture – a type of systematic political corruption in which private interests influence the State’s decision-making – became synonymous with Jacob Zuma’s Presidency. President Cyril Ramaphosa has denounced corruption since assuming office in February 2018 and has vowed to tackle the scourge at all levels of government. South Africans, however, believe corruption has continued during the tenure of Ramaphosa, despite his Presidency’s anticorruption efforts. Large portions of elected officials and civil servants are perceived to be involved in corrupt activities and the police are widely perceived as corrupt (Patel & Govindasamy, 2021). Systematic corruption, poor skills at critical levels and not holding officials accountable have undermined State capacity. The World Bank’s World Development Indicators show that the South African State’s capacity has declined. It has gone backwards on indicators measuring control of corruption, rule of law, regulatory quality and government effectiveness, among others (World Bank, 2021). Critics of the ANC’s cadre deployment policy argue that the practice, which Ramaphosa continued to defend recently at the Judicial Commission of Inquiry into Allegations of State Capture as a means of quickening transformation, has laid the foundations for corruption and inefficiencies in government and SoEs. Corruption, fraud and bribery influence perceptions of a country and it could deter investors from investing in South Africa. The declining capacity and performance of the State were mentioned by many participants in the ISI dialogue. Crime and security concerns South Africa has a long history of crime and violence, including State-sponsored violence during the Apartheid era. The high levels of crime experienced in South Africa worry citizens and foreign investors alike. Business Leadership South Africa (BLSA) has warned that foreign investment will be difficult to attract if South Africa’s crime levels, particularly violent crime levels, remain high. High levels of crime may also encourage people with scarce skills to emigrate, negatively affecting the efficiency of the workforce (BLSA, 2021). While South Africa still enjoys strong, democratic political institutions and the overall political environment is stable, the July 2021 unrest in KwaZulu-Natal and parts of Gauteng have cast a pall over the investment climate. The unrest and looting, which was triggered by the jailing of Zuma for contempt of court, may portray the country as an undesirable destination for foreign capital. The events that unfolded in July 2021 were severely damaging to South Africa’s image abroad. The images of unrest, violence and looting, which required the intervention of the South African Defence Force, caused distress among domestic and foreign investors, as well as the international community, with the potential to do long-term harm to the perception of South Africa as a stable investment destination. High-profile crime cases, such as the murder of a senior manager of mining major Rio Tinto in May 2021, also damage investors’ perceptions. It was reported that the mining company may hold back on a R6.50-billion investment in Richards Bay, KwaZulu-Natal, owing to violence and unrest near its operations (TimesLive, 2021). Exchange rate volatility Exchange rate volatility is seen as a key deterrent to FDI. The rand is a relatively volatile currency, reflecting the extent of domestic and external shocks combined with the SARB’s floating exchange rate policy. Higher volatility generally increases uncertainty and the risk premium, discouraging firms from investing. Higher currency volatility and depreciation also have negative effects in the presence of currency mismatches in investors’ balance sheets, reducing resources available for investment (IMF, 2020). By reducing the rand’s volatility to that of developing country peers, South Africa could boost FDI inflows by a potential 0.25 percentage points of GDP (Hanusch, Nguyen & Algu, 2018). Market concentration A concerning structural feature of the South African economy is the high level of market concentration and low levels of competition. Market concentration can be beneficial in terms of economies of scale and keeping down inflation in certain sectors. The large players, mostly in banking and retail, also managed to weather the Covid-19 epidemic and the recent social unrest better than smaller participants. However, a lack of competition holds back innovation, keeps prices high and denies many people access to services and opportunities to start businesses. Competition is good for an economy and South Africa does not have enough of it. Quality of infrastructure The quantity and quality of infrastructure have an impact on economic growth and investment inflows. The World Economic Forum’s (WEF’s) 2019 Global Competitiveness Index (GCI) views South Africa’s transport infrastructure as one of its established strengths. The GCI ranks South Africa sixty-nineth out of 141 countries for infrastructure (WEF, 2019). However, while the quality of road and air transport infrastructure ranked well, rail and power capacity shortages are a severe constraint on trade. The performance of South Africa’s ports, for instance, has substantially declined and the country’s container ports are rated among the world’s worst performers (Maleke, 2021). Electricity and water supply issues also weaken the country’s overall infrastructure performance. South Africa’s electricity supply constraints are well documented. A continuing decline in the performance of State-owned power utility Eskom’s coal fleet has been driving intensive periods of load-shedding. In the first six months of 2021, rotational power cuts were implemented for 650 hours, or 15% of the time (Calitz & Wright, 2021). Government has announced plans for 11 813 MW of new power capacity from various sources, has eased licensing regulations for self-generation for projects of up to 100 MW and is unbundling Eskom into three separate entities to address its significant debt levels. Skills and education Despite a population of nearly 60-million, South Africa continues to experience a shortage of human capital, meaning companies find it difficult to fill key positions to conduct their business. The skills most in demand, but hardest to source locally, are: engineering; information, communication and technology specialists; foreign language speakers; media and marketing specialists; artisans; C-suite executives; senior financial executives; healthcare specialists; science professionals and accounting professionals. According to XpatWeb’s ‘2021 Critical Skills Survey’, 77% of organisations report that they struggle to source critical skills in South Africa for local and cross-border operations (XpatWeb, 2021). Although unemployment is high, employers argue that they cannot risk the integrity of their operations by hiring inexperienced employees (XpatWeb, 2021). Companies say that a lack of required skills is a major obstacle to growing their investments in South Africa. Getting the basics of schooling and tertiary education right could assist in narrowing the skills gap. Currently, South Africa’s education system – in which expenditure on primary, secondary, and post-secondary nontertiary education is relatively high when compared with Organisation for Economic Cooperation and Development countries (Education GPS, 2021) – is not delivering the desired outcomes. South African learners, for example, are among the world’s worst performers in mathematics and science (Reddy et al, 2020). Young people who exit the schooling system are not appropriately skilled for employment. The same can be said for tertiary education, with a gap between what higher education institutions produce in their graduates and what employers require (Bernstein & Osman, 2012). South Africa’s businesses also struggle to fill the void left by emigration, with a steady exodus of professionals leaving for other countries. It is essential South Africa attract and secure critically skilled workers. However, skilled foreign workers find the work permit and visa application process cumbersome (Matthes & Bisseker, 2021.) South Africa needs to ensure that it creates, attracts and retains the skills that are needed to reindustrialise the economy. Strategic planning South Africa has a multitude of development plans and policies, but these policies fail to be properly implemented and often lack coordination. Government often has many conflicting interests and tries to be all things to all people, leaving its economic planning without a clear focus. Government should be more selective about what investments it wants to attract and must be more realistic about the sectors that it targets for investment. Its focus should be where the country has a competitive advantage. South Africa’s governance style also lacks coordination, with various offices and agencies operating in silos. A recent example of this uncoordinated approach is the Social Development Department’s Green Paper on Comprehensive Social Security and Retirement Reform. The paper triggered outrage among taxpayers and the business sector, as it proposed that all South African earners pay up to 12% of their income into a new government-managed investment fund. The Green Paper was gazetted without approval from Cabinet and ultimately National Treasury settled the matter clarifying that it was not official government policy. The Green Paper was withdrawn (Fin24, 2021). South Africa could learn from the experiences of Singapore, a small nation State with about 5.70-million people and no natural resources. Singapore has experienced an impressive economic transformation over the past 50 years, producing rapid economic growth and delivering extraordinary improvements in social welfare. Singapore’s economic model is characterised by superior organisation ability, pragmatism and deep-seated values, such as meritocracy, multiracialism, and dedication to ordinary people. These principles have provided the foundation for a set of interlinked polices that have served Singapore since its independence (Bhaskaran, 2018). Singapore conducts deep-rooted strategic planning with a long-term perspective, and executes it impressively. Investors are also held accountable and must prove that the subsidies received have been spent. Interventions for fostering growth Suggestions to enhance investor confidence Build on strengths and focus on competitive advantages South Africa should build on its strengths, in addition to trying to overcome its weaknesses. Money flows where there is a competitive advantage. Instead of entering industries in which South Africa may not be competitive, the country should focus on industries where it has a competitive advantage such as agriculture, mining and the automotive industry. For instance, efforts should be directed to ensure that the automotive industry and supply base are even more internationally competitive. The country is already competitive in agriculture and should focus on related industries such as food processing. By ensuring the quality, and improved marketing and branding, of locally produced food products, we could compete globally. Create a geopolitical alternative The world is in for a bumpy ride, from a political and economic perspective, in the next couple of years. South Africa should establish itself as a geopolitical alternative if manufacturing, supply chains or trade routes are disrupted in other jurisdictions. Disruptions caused by the global Covid-19 pandemic highlighted the role that South Africa could play as a geopolitical alternative for global companies. Incentivise youth employment and training The Broad-Based Black Economic Empowerment scorecard could be reconfigured to incentivise businesses to invest more in youth employment and training. It is suggested that the Youth Employment Service (YES), started by President Cyril Ramaphosa, be extended to allow for three years of employment. Currently, businesses that participate in the YES programme create one-year positions for youth aged between 18 and 35. Many young people who completed only a one-year internship still end up without a job. It is suggested that this be extended to three years, offering those who received the internship a better chance of finding permanent employment. SUGGESTIONS TO ENHANCE INVESTOR CONFIDENCE – CONTINUED Pursue sustainable energy investments South Africa is in a prime position to pursue sustainable energy investments and invest locally in ‘green’ hydrogen in a big way, with key resources readily available. These investments would come at a time when there is a global shift to advancing an environmental, social and governance mindset. Should South Africa manage to deliver cheap and sustainable energy, it could attract industries that are no longer viable in the West, owing to space constraints or the higher cost of electricity. Sustainable energy investments will also assist South Africa to deal with its electricity supply issues. This is also of particular importance, considering the automotive industry’s impending shift to electric vehicles. A suggestion for sustainable energy investment is that companies with big warehouses, for instance, be incentivised to install solar panels on their roofs for own use and to feed excess electricity back into the grid. Selective priorities for implementation success South Africa must curtail its ambitions, focus on a smaller number of deliverables, and ensure that they are implemented effectively. Succeeding in three to five policy areas, rather than spreading the efforts across a broad spectrum of areas without the means or capacity to implement them, will yield more positive results. Priorities that would bolster the economy most are education, infrastructure and digital connectivity. Strengthening the capacity of the State is needed to ensure the successful implementation of polices and plans. Technical skills at national, provincial and local levels must be reinforced to deliver on plans. Speed up privatisation Fast-tracking the privatisation of certain State-owned enterprises (SoE) will improve the efficiency of service delivery, freeing up funding that government can use to focus elsewhere. Government has announced the sale of 51% of South African Airways to a private consortium, marking a shift from the State’s stance on SoE control and ownership. SUGGESTIONS TO ENHANCE INVESTOR CONFIDENCE – CONTINUED Support foreign investors and rebuild trust Government should be prepared to support manufacturers of large machinery and equipment if it is to attract investment. Currently, South Africa lacks the volumes required for multinationals to view the country as an attractive investment destination. Investors must feel there is a ‘reward’ justifying the ‘risk’ that they take investing in a country. There is also little trust between government and business, specifically long-term investors. A concerted effort is needed to build trust between government, authorities, and businesses. Unless trust is restored, business may view South Africa as being ‘too risky’. Rebuild the education system South Africa cannot solve its unemployment problem without also solving its education problem. More emphasis should be placed on the first 12 to 15 years of life, ensuring that young people are properly educated, with a stronger focus on effectively teaching science, technology, engineering, and mathematics. This will benefit not only the labour force, but also make people more employable, chipping away at the country’s high unemployment rate. However, government cannot solve the education issues on its own and more private-sector involvement is encouraged, although private-sector participation should not compromise access to education, which the State makes available on a fee-free basis. The private sector could also collaborate, pooling together funds to address pressing needs at schools in their region. Use transformation funding more effectively The automotive industry’s collaboration on transformation funding is an example for other industries to emulate. The Automotive Industry Transformation Fund was established as a collective equity-equivalent investment programme, as defined in the Broad-Based Black Economic Empowerment Codes. It aims to facilitate transformation in the automotive sector’s value chain through the provision of access to developmental funding, access to market and access to capacity development for qualifying black-owned entities. Pooling resources together could amplify the impact. The same could be done with corporate social investment funding, where several large corporates pool their funds together for a bigger impact than smaller initiatives. Weed out corruption Law enforcement capacity must be strengthened to deal decisively with corruption in the private and public sectors. Holding government more accountable will assist in fighting the scourge of corruption. Conclusion Despite slow economic growth in recent years, South Africa remains a good investment destination with some highly desirable fundamentals, and significant growth and profit-making potential. This is the key message that should be communicated to the global investment community. To continue to attract FDI, government must acknowledge that improved investor confidence will be the cheapest and most effective stimulus for the economy. A commitment to policy certainty is needed, as policy instability does not instil confidence and create increased perceived risk for international capital. Serious foreign investors take a long-term view, and any uncertainties make their calculation of the reward required for an investment that much higher. 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Corruption Perceptions Index 2020, February 2021. [Online]. Available at https://images.transparencycdn.org/images/CPI2020_Report_EN_0802-WEB-1_2021-02-08-103053.pdf [accessed October 15, 2021]. Unctad. 2010. World Investment Report 2010: Investing in a Low-Carbon Economy, July 22, 2010. [Online]. Available at: https://unctad.org/system/files/official-document/wir2010_en.pdf [accessed October 12, 2021]. Unctad. 2021. World Investment Report 2021: Investing in Sustainable Recovery, June 21, 2021. [Online]. Available at: https://unctad.org/system/files/official-document/wir2021_en.pdf [accessed October 12, 2021]. World Bank. 2021. World Development Indicators, 2021. [Online]. Available at: https://databank.worldbank.org/source/world-development-indicators [accessed October 16, 2021]. World Economic Forum. 2019. Global Competitiveness Report, October 9, 2019. [Online] https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf [accessed October 16, 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 November 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 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 October 2021. Author: Mariaan Webb, Creamer Media Editor: Daryl Swanepoel CONTENT Introduction Key barriers to growth Excessive regulations and red tape Bribery and corruption Unhealthy competition Distrust in local government Impotent revenue collection Education and skills development Soaring unemployment Survival grants vs empowerment grants Towards a new dispensation of growth Suggestions for addressing barriers to growth Lift regulatory burdens Build healthy platforms Incubation centres Develop scares skills Rehabilitate municipalities User-friendly e-government Curtail unemployment Tackle corruption Conclusion References Introduction Small, medium and micro enterprises (SMMEs) are undoubtedly the lifeblood of South Africa’s economy. In fact, President Ramaphosa has asserted that, “the growth of our economy will be sustained by small businesses, as in the case of many countries” (SBI, 2019). They represent more than 98% of businesses, employ between 50-60% of the country’s workforce, and contribute 39% to GDP (McKinsey & Company, 2020). But the SMME sector also seems to be the most vulnerable in a global crisis. In an industry already facing strong headwinds – a contracting economy, ratings downgrades, increasing bureaucratic red tape, corruption, lack of healthy competition, defunct payment systems and revenue collection, climbing unemployment, skills deficiencies, among others – the Covid-19 pandemic has done more than just exacerbate these longstanding challenges, it has created new ones. The impact of the ongoing lockdowns has decimated many small businesses and left others battling to survive. The entrepreneurial ecosystem is in danger of collapse. The number of SMMEs in South Africa declined by 11% (or 290 000) year-on-year from 2.65 million to 2.36 million in 2020:03. Of this contraction, 232 000 occurred in 2020:02. A further 58 000 SMMEs closed for business in 2020:03, despite the general economic rebound during the third quarter. Furthermore, of all jobs lost in the economy, 90% were lost in the SMME sector (SEDA, 2020). And these trends show no sign of abating any time soon. In this report, the Inclusive Society Institute (ISI) draws on discussions held with representatives at the coalface of the small business sector as a barometer of the barriers to operational growth and to glean new insight into how we can navigate our way through them. This forms part of an extensive economic research project the institute has undertaken to forge a desperately-needed blueprint for resuscitating and reviving a drowning South African economy. The first phase of this research – looking at the methods adopted by Germany, Japan, South Korea and Rwanda to rapidly lift their economies out of the doldrums – is complete. Currently in phase two, the institute is engaging with spokespeople on the ground within the various sectors to gauge the obstacles from their viewpoint and gather fresh ideas on how to move towards resolution and an economic upswing. Phase three will take place from January to March of 2022. It will involve rallying the policy experts, academics, the present economic advisory council members, etc., together around the table to consolidate all these inputs and develop them into a workable model, to measure the impact that structural adjustments could have on our economy over the next 20 years and generate high-level policy proposals and plans around those outcomes. Key barriers to growth Excessive regulation and red tape New legislation constantly being introduced impacts on the ease of doing business negatively and makes it difficult to grow the economy and create jobs. Recently, South Africa was ranked 84 in a total of 190 countries in the World Bank Ease of Doing Business Index – a drop of two positions since Ramaphosa set the ambitious goal of being in the top 50 during his keynote address at the World Economic Forum on Africa in 2019 (Ramaphosa, 2019). The level of red tape and bureaucracy that burdens business in dealing with government remains a major stumbling block across all the sectors. It strangles the capacity of business to compete globally by causing needless costs and delays; putting the brakes on new businesses; and placing existing enterprises in a predicament about their sustainability and growth. A concern raised during the discussions was that small businesses are being forced to throw more capital, cash flow and human resources at administrative problems to remain compliant; or admit defeat and sell out to a larger company. Some new businesses are choosing to turn a blind eye or even avoid the red tape altogether by flying below the radar and remaining in the informal sector. The reality is, many SMMEs simply lack the resources and information to deal with the issues arising from regulations. The business owner is then caught in a catch-22: either spend more time and money on jumping through hoops to achieve compliancy, risking the survival of the business, or focus on running and improving the business in the hopes of not being caught until compliancy can be afforded. In addition, there is a sense that an extensive list of legislation is being introduced, without the capacity to enforce that legislation. This bureaucratic ineptitude makes it all the more difficult for law-abiding businesses to comply with the rules. It also creates a situation where there are increasing rules that aren’t being properly implemented and monitored. Bribery and corruption Corruption is contributing on a vast scale to creating a platform that could eventually destroy SMMEs, and the economy. During the discussion, participants were asked to indicate by a show of hands whether they had been confronted with corruption in their own business dealings. The response was a staggering 50% in the affirmative. In 2020, South Africa scored 44 points and ranked 69th out of 180 on the Corruption Perceptions Index (CPI), the most widely used indicator of corruption worldwide. The scale has a range from 0 to 100, where corruption increases, the higher the number is (Transparency International, 2020). It is well documented that there is a huge problem with corrupt government officials and state-owned enterprises (SOEs), but this is a two-way street, said a representative during the dialogue. Corruption cannot thrive in a vacuum. Businesses contribute to corruption by participating with government in corrupt actions – for instance, there are many instances of dodgy tenders, offered and accepted. However, these small enterprises are being backed into a corner where they are coerced, and sometimes blackmailed, into either paying a bribe for an opportunity or suffering the consequence: losing their business. There is tremendous pressure on honest business owners to be politically connected in one way or another, a form of comrade, in order to survive (Fin24, 2020) Private corruption affects the entire supply chain – distorting markets, undermining competition, increasing costs to enterprises, reducing the quality of products and services, and leading to missed business opportunities (UNODC, 2021). But the most severe damage is done through the perpetuation and normalising of corruption by highly influential individuals, creating a veneer of acceptability around what is actually a deep-seated malaise (Fin24, 2020). Unhealthy competition A concern raised among participants during the webinar was the monopoly by big companies, especially the multinationals, as it precludes fair competition and denies small businesses the opportunity to reach wider markets. Monopolies also have the potential to gain political power and thereby the power to shape communities in an undemocratic and unaccountable way (Pettinger, 2020). This issue ties in with another concern: keeping the rand local. In Africa, the power and the money stay within the local communities, families and neighbourhoods. South Africa’s system is flawed; there is marginal payback to the community in which people are working. Much of the money is largely not making it into the formal coffers, so it is not benefiting the taxpayer or the economy. And, on the other hand, that which does flow into the formal sector to a large extent supports established businesses with little transformational impact. Big corporations, and South African employers in general, are exploiting illegal immigrants, who have lower wage demands, rather than employing local workers. These workers often don’t pay tax and send large portions of their wages back to their families in their home countries. Citizens are also spending their hard-earned money at shops run by foreign nationals and buying products made in foreign countries because of affordability. All of which are a drain on the rand and stall growth. Distrust in local government Entrepreneurs in South Africa are confronted with such high levels of unnecessary interference by local officials that they often don’t even make it out of the starting block. The very departments that are supposed to provide help to SMMEs end up acting as barriers to their growth. When asked to indicate their level of trust in local authority, none of the seminar representatives indicated more than a 60% level of trust, with the bulk indicating a low 20-40%. The late Auditor-General Kimi Makwetu said in 2018 of the sorry state of local government that “on average almost 60% of the revenue shown in the books will never find its way into the bank account”. With such rampant corruption and incompetence going unchecked, it is inevitable that there would be a growing mistrust and an escalating resistance to paying rates and taxes (Everatt, 2021). Combine that with the increasing deterioration of already poor service delivery, and businesses are left in jeopardy. Case in point is dairy manufacturer Clover, who announced in June this year that it would be moving its operations from the Ditsobotla Municipality in North-West Province, to Durban, following losses due to unreliable water supply, defective roads and power outages. The resulting financial and job losses for the company will have a disastrous knock-on effect for the community (M&G, 2021). This mismanagement is reflected in the Auditor-General reporting an amount of R32-billion for fruitless and wasteful expenditure during the 2018 to 2019 period, with many of these failing municipalities being placed under administration. Between November 2018 and May 2019, 39 municipalities fell under administration – 15 in North-West Province alone (IOL, 2021). Impotent revenue collection Municipalities were already battling to collect revenue from service charges and rates before the pandemic hit and worsened the situation. Recently, international ratings agency Moody’s downgraded five South African municipalities, highlighting rising liquidity pressure as a result of shortfalls in revenue collection (ESI Africa, 2021). Another key diagnosis in terms of a lack of revenue collection was in connection with state bodies. According to SARS, South Africa collected R1.25-trillion in tax revenue in the financial year ended March 2021, around 12% less than the government’s original target of R1.425-trillion (Reuters, 2021). If businesses and residences are getting away with not paying rates and taxes, our ability to build infrastructure, provide service delivery, fund grants, suffers. It becomes a vicious circle of declining revenue, refusal to pay for dysfunctional services and, ultimately, business failure. The effect on small businesses when not enough revenue is collected, is that they are not prioritised for payment. The revenue that is collected is earmarked for inflated government salaries, Eskom, water boards, service providers, which leaves scant funds for the plumber or the construction worker, for the SMMEs on the ground. Just more than half of the participants in the SMME sector discussions indicated that they do business with government in some form or another. Yet not one could say that they were absolutely satisfied with the payment issue, and the majority showed that their businesses were in peril due to non-payment. We need to get our systems right. Education and skills deficiencies It has been widely quoted that education is the backbone of a nation. It affects every aspect of the economy, and in South Africa, it is far behind international standards. In relation to SMMEs, students are not being taught the content and skills they need to be employable in the practical world of business. Colleges are churning out students with theoretical knowledge that have to be taught from scratch when they enter an organisation. There is a disconnect between education and real-world needs. The latest Xpatweb Critical Skills Survey 2020/21 revealed that 77% of organisations are still struggling to recruit and obtain critical skills for their local and cross-border operations and that they are being forced to look internationally to meet their objectives. The survey also mapped out the scarcest skills in South Africa: being in the science, technology, engineering and maths (STEM) areas (BusinessTech, 2021). On another level, there is a deep-seated skills deficiency within our government and state-owned entities (SOEs), with many of the growth initiatives supported by government prioritising the creation of low-skill jobs and development of high-level skills. The findings of a 2020 research study by the Local Government Sector Education and Training Authority (LGSETA) on the effect of the skills mismatch indicate that the country has a widespread case of under-qualified staff. Another study, by the Department of Higher Education (DHET) in 2019, echoed this with their findings that as a whole, almost one-third of workers in South Africa are mismatched by their area of study (LGSETA, 2020). Although municipal officials have the resources at their disposal from National Treasury to deal with service delivery setbacks, they lack the skills to prepare a business case, submit it to National Treasury for funding, and implement the plan. Or they lack the will to write those reports. This results in infrastructure not being maintained and slow, or stalled, service delivery, creating a domino effect of massive revenue and business losses. The issue of employees being hired solely on political grounds without being put through a vetting process, also means that we often end up with officials in positions that they are simply not qualified for. In July 2020, Freeman Nomvalo, CEO of SAICA, said that “municipal audit results continue to show worrying trends of the lack of financial skill and accountability in our municipalities”. Nomvalo believes that it is not possible to improve accountability and internal controls if the skills needed to perform these controls are lacking (M&G, 2020). Soaring unemployment South Africa's unemployment rate is one of the highest in the world. According to the Statistics South Africa (Stats SA) Quarterly Labour Force Survey (QLFS) for the second quarter of 2021, unemployment has hit a record high of 44.4%, using the expanded definition which includes people who have stopped looking for work, or 7.8 million jobless people (Stats SA, 2021). A large proportion of these people are from the townships and rural areas. Part of the problem here, as suggested by the representatives during the discussion, is that when we look at attracting investment, our focus is on turnkey projects that don’t involve the townships and rural SMMEs in their roll out. In turn, when the products that these big companies are selling enter the township market, the people who reside there cannot afford to buy them because they don’t have jobs. When we neglect the township economy, we, in effect, cut off the circulation in the greater economy. Another angle on this issue is that there is too much focus on redistribution in the country, instead of on creating new opportunities to foster loyalty within the townships, with the outcome of building the resources of these areas from within by creating business and work prospects. Survival grants vs Empowerment grants In South Africa, social grants are a key element of individual and social well-being considering the relentless unemployment, poverty and health crisis in the country, compounded now by the pandemic. But the grants need to be effectively and equally dispensed if they are to have the desired end goal of true social welfare. The concern is that some measures may pose a risk to fiscal sustainability by undermining people’s incentives to work, save or invest (HSRC, 2013). This sentiment was echoed by participants at the SMME sector dialogue – the idea that grants create dependency on government and stifle economic liberation. In this way, we are failing to implement the social development policies that could free people from a cycle of poverty: skills development, SMME support, job creation, fair minimum wage, among many others. The Financial and Fiscal Commission has estimated that the cost of a basic income grant based on R350 per month would amount to approximately R243-billion per year, or just under R45-billion if it was only offered to unemployed working-age people. Business Unity South Africa (BUSA) fears that once implemented, it would be a permanent expense and would compete with a broader social security safety net within the economy. Although BUSA supports the extension of the social relief of distress grant, it believes that a universal income grant is not sustainable (Fin24, 2021). Towards a new dispensation of growth Suggestions for addressing barriers to growth Lift regulatory burdens Small business doesn’t need new legislation, it needs more relevant and business-friendly legislation. We need to consolidate current policies and properly implement only those rules and regulations that are necessary. Suggestions to ease bureaucracy and red tape include: Access to information about regulations should be made easily available to SMMEs at minimum cost. Policymakers should be transparent about the legislature and ensure that compliance procedures are not costly, complex or lengthy. Set up a “one-stop-shop system”, where all information is made available in one place, as already exists in some countries. Build healthy platforms Government needs to deal decisively with platforms that have been created which oppress SMMEs rather than help them thrive. Competition is good, but it needs to be healthy. The public policymakers need to look at breaking down turnkey projects into biteable chunks to widen the spectrum of businesses that can be pulled into the project. We need to take the development of the township economy more seriously and develop a “township business network” to ensure that there is circulation taking place within the townships. Focussing on creating new opportunities for small businesses as opposed to redistributing what we already have will garner far more economic growth. Big business is encouraged to support and buy shares in SMMEs, which will allow small enterprises to expand and close the funding gap. Incubation centres Handouts can create dependence and undermine growth, for the person and the country. Whereas using those funds to create a business environment, an incubation centre, where the basic costs are covered will be more valuable for government spend. Develop scarce skills Education and skills development are vital to South Africa’s long-term success in upping productivity, social involvement and inclusive growth. But the curricula need to be relevant, prioritising business needs. Suggestions to improve skills deficiencies include: Build more technical and agricultural high schools in close proximity to poorer communities. Equip students with courses on entrepreneurship and technology. Foster partnerships between government and business. Offer more on-the-job training opportunities. Rehabilitate municipalities As the bedrock of government, we need our municipalities to be reliable and trustworthy. We need to capacitate our municipal departments with highly skilled, apolitical personnel. This is at the epicentre of municipal failure. We also need to ensure that professional conduct and ethics are upheld at the highest level by both municipal staff and consultants. The mandatory minimum skills and qualifications required for financial management positions in local government must be reviewed and staff must be trained or upskilled. One solution is to outsource e-skills and services. There is a growing trend towards on-demand human capital. User-friendly e-government The use of information technologies in public administration will streamline and integrate systems that are currently awkward and inaccessible. It will also manage data and information more productively and help with smoother-running public service delivery. In this way, communication will reach a wider audience, empowering people and backing economic growth. Curtail unemployment Rife unemployment kills any real chance of economic recovery and growth and increases crime rates, violence and health concerns. There are ways in which established SMMEs can lessen this concern: share resources with other small businesses such as staff when a company is down sized. Formalise and register all employees with the Unemployment Insurance Fund. Rather than letting staff go, businesses should consider rotating staff. Upskilling can be a mutually beneficial solution. Tackle corruption Corruption erodes trust in government, undermines the social contract and impedes investment, with consequent effects on growth and jobs. We need to put in place institutional systems and incentives to prevent corruption from occurring in the first place. The systems must be credible, with accountability and enforcement mechanisms, sending a strong message to potential wrongdoers of the cost of misconduct. For example, administering fair and transparent tender processes will help to drive down corruption, encourage investment, and create an equal playing field for SMMEs. Conclusion Small businesses have been in the eye of the storm that is the Covid-19 pandemic over the last 18 months. But while many have fallen and some are still fighting to stay alive, there is a sense of hope and a stronger leaning towards collaboration among the small business community. Being entrepreneurs, there is a deep-rooted innovative and courageous spirit that keeps these out-the-box thinking risk-takers moving forward. And they will need it for the rocky road ahead. South Africa needs to grow at 4-6% of GDP, which sounds like a pipedream considering our current position. But it is possible; we have done it before, not too many decades ago, under the Mandela/Mbeki era. If we grow at 4-5%, we can start chipping away at the unemployment figure in this country. From there, we can take the normal economic development expected of us and turn it into extraordinary economic development. Under the right conditions, the SMME sector has the power to be a dynamic transformational force – small businesses enrich competition, job growth and champion economy-wide efficiency, innovation and growth. Although there is still much to be done to create these conditions, government is coming to the party. In August this year, Trade, Industry and Competition Minister Ebrahim Patel announced a new funding facility, making available R342-million to support more than 500 businesses and generate more than 1000 jobs (SAnews, 2021). Despite the hardships, small business owners remain optimistic about the future of the sector, saying that now is not the time to lose hope, it is the time to start our own engines, put our shoulder to the wheel and drive our own businesses, and with them the South African economy, into a flourishing future. References BusinessTech. 2021. Here are the 10 critical skills needed in South Africa right now, April 4, 2021. [Online]. Available at: https://businesstech.co.za/news/business/479723/here-are-the-10-critical-skills-needed-in-south-africa-right-now/ [accessed October 25, 2021]. ESI Africa. 2021. Moody’s downgrades 5 SA municipalities as revenue collection declines, July 21, 2021. [Online]. Available at: https://www.esi-africa.com/industry-sectors/finance-and-policy/moodys-downgrades-5-sa-municipalities-as-revenue-collection-declines/ [accessed October 24, 2021]. Everatt, D. 2021. South Africans are revolting against inept local government. Why it matters, March 1, 2021. [Online]. 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Available at: http://www.statssa.gov.za/publications/P0211/Media%20release%20QLFS%20Q2%202021.pdf [accessed October 25, 2021]. Transparency International. 2020. Corruption Perceptions Index, 2020. [Online]. Available at: https://www.transparency.org/en/cpi/2020/index/zaf [accessed October 18, 2021]. United Nations Office on Drugs and Crime. 2021. Consequences of private sector corruption, 2021. [Online]. Available at: https://www.unodc.org/e4j/en/anti-corruption/module-5/key-issues/consequences-of-private-sector-corruption.html [accessed October 22, 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

As reported in Part 1 of this dialogue, the Inclusive Society Institute has embarked on an extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. The methodology includes a series of dialogues with various sectoral stakeholders and policymakers. These dialogues each have two parts to them: Gaining an understanding from the particular sectors perspective as to what the country needs to correct policy wise What new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory. The second dialogue with the construction community was held on Tuesday, 2 November 2021, with the focus being on new thinking aimed at catapulting South Africa onto a higher economic growth trajectory. Proposals were made aimed at: Maximising available private sector capital by harnessing the potential through holistic and coordinated developmental planning Better cashflow management, and a range of smaller may be better than mega. Maintenance of existing infrastructure Removal of red tape, keep real accountability to streamline procedures and to ensure greater simplicity within the bureaucratic processes Incentivise remuneration, clean audits and the removal of corruption The strengthening of municipalities by treating the private sector as an equal partner Measures need to be put in place to remove bottlenecks that are suffocating development Greater focus on sustainable development as opposed to vanity projects Tenders need to be more specific, simplified and streamlined Leadership, skills, capacity and decisive decision-making needs to be enhanced A full report on the deliberations will be released in due course.

Inclusive Society Institute (ISI) CEO, Daryl Swanepoel, met with the founder of the Gift of the Givers Foundation, Dr Imtiaz Sooliman, on Saturday morning, 6 November 2021. The two organisations are exploring areas of cooperation. Discussions evolved around the desire and ways to achieve an Inclusive society. Dr Sooliman shared his ideas as how to restore the hope and dignity of the most vulnerable in society, rebuilding prosperous communities and empowering leaders of tomorrow. Much of the discussion also focussed on strategies to rebuild the South African economy. The ISI is currently involved in extensive research into the development of a strategy to rejuvenate the South African economy, and has much to learn from the pragmatism employed by the Gift of the Givers. It was agreed that the two organisations will further their deliberations in this regard. The two organisations will follow up this exploratory discussion with a more formal engagement aimed at solidifying concrete cooperation.

On Tuesday, 9 November 2021, Inclusive Society Institute (ISI) CEO, Daryl Swanepoel, and Deputy Chairperson, Professor Zweli Ndevu, led a delegation that met with the Deputy Minister of Finance, Dr David Masondo. Discussions focused mainly on the ISI’s research into the National Health Insurance (NHI), but also on its research into inequality in South Africa, and the Basic Income Grant (BIG). The meeting was also an opportunity for the deputy minister to meet the ISI research team, which included Dr Anja Smith, Dr Shivani Ranchod, and Rose Tuyeni Peter. The ISI delegation briefed Dr Masondo on its forthcoming research reports. The ISI wants to create an opportunity to open up conversation in order to allow for more consensus-building. Both parties expressed the desire for continued engagement.

As part of an extensive research project, the Inclusive Society Institute (ISI) hosted a second dialogue with the mining sector on 16 November 2021. These series of dialogues with various sectors will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. To date, the dialogues had two parts to them: Gaining an understanding from the particular sectors perspective as to what the country needs to correct policy wise What new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory. The second dialogue with the mining sector generated several proposals. These included: INFRASTRUCTURE. To make the mining industry cost-effective, role-players such as ESKOM and Transnet have to improve. Public-private partnerships are a solution. Vaccine rollout is a good example of PPPs and what can we learn from it? Is it the crisis that forced the partnership or the lives of South Africans? Shared enemy and the race between the virus and the response. Need moretrust between government and social partners. Are there “brokers” that can fulfil this role? Sector has not been vocal about a “do nothing“ scenario in 20 years’ time. Good at short term forecasts (e.g., commodity prices) but not with longer term scenarios (e.g., if we can’t solve the energy and community issues, where will the sector end up in 10 -15 years’ time?). Economic, Social and Governance (ESG) need to be scaled up. More discussion on ESG required. Cannot operate without recognising the impact of mining houses on broader societies. Could Marikana have been avoided? Leadership and certainty in government is critical – need different perspectives in advice including communities Urgency and implementation: Why can’t we move faster? Can we have low hanging fruits to demonstrate success? PRODUCTIVITY IMPROVEMENT AND INNOVATION in the operation of ageing mines, labour productivity and innovation. CAPITAL FOR NEW DEVELOPMENTS: We can have all the capital in the world, but the July insurrection and violence means that mining industry cannot operate in isolation of the broader SA context. EMPLOYMENT ABSORPTION: Unemployment concentrated among the youth, but political leadership is much older and not necessarily attuned to these issues. ATTRACTION OF TALENT TO MINING: Youth do not find mining as attractive compared to the financial or health sectors. You need to attract the brightest minds not only in private sector but labour and government. Indonesia, Australia and other jurisdictions are competing for scarce skills. RENEWABLES: SA has the factors which can position it as a leader in renewables. Platinum groups metals (PGMs) needed for the transition and with most of that in SA, it needs to be unlocked. Renewables over time could create more sustainable jobs than carbon-based industries. Private and public sector can unite around a just transition and bring in civil society and labour. SA IS EXPLORATIVE: International roadshows by government to demonstrate commitment, and facilitate exploration. PARTNERSHIPS WITH OTHER AFRICAN COUNTRIES for multilateral trade. A full report on the deliberations will be released in due course.

The Inclusive Society Institute has embarked on an extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. The methodology includes a series of dialogues with various sectoral stakeholders and policymakers. This dialogue, held on 8 November 2021, aimed at channelling the thoughts of the retail sector into the research. A range of constraints and opportunities were noted, amongst others: Business needs to step back from politics but engage on policy Government operates in silos that place sectoral interest above the bigger picture Growing lack of trust in government to deliver on commitments and to implement policies Career civil servants do not understand how business operates and their role in creating an enabling environment Civil service salary bill is high but coexists with too little skills and often vacancies in critical positions Energy supply Dealing with corruption, from both supply and demand Environmental issues because of country’s big carbon footprint Rising tax bill Immigration challenges Red tape from DTI and SARS is prohibitive Incapacity of municipalities in small towns to provide services Impact of insurance costs due to civil unrest Implementation of BEE Slow pace of vaccination A number of proposed solutions were put forward, which included The need for bold leadership Visible accountability Need for incentivisation of good performance Need to fight crime, corruption, and gender-based violence Relooking at the insurance industry and SASRIA Partnerships with government Bringing back teaching, nursing and artisan training colleges Change in how governments support small businesses Proposals will be captured in the report that will emanate from this discussion, and which will be fed into the broader research project.

In the South African setting, the governing party is committed to social and national democracy. At the same time, it prides itself on being a broad church, capable of accommodating a wide spectrum of individuals from various ideological persuasions. This may be good from a support perspective, but does it promote policy cohesion? This background was one of the factors that informed the decision of the Inclusive Society Institute to host a dialogue on “The Meaning of Social Democracy in the Modern World.” The dialogue took place on 23 November 2021. The following points were raised, among others: Social democracy is not static; it changes over time. The underlying values are unchanged: freedom, equality, solidarity. What has changed is the interpretation of the values. Social democrats are working from a similar point in terms of what we are up against: inequality. We are up against the neoliberal zeitgeist which is responsible for this increased inequality. We are up against a crisis of democracy. Social democrats are making policies with and for the broad majority. We have to build broad alliances. In fragmented societies, social democrats are the best-placed to build alliances. Social democracy is about showing that there is an alternative. We need to come out of the closet. We are not just about the welfare state but also about investment in people. Social democracy is an international agenda. This influences how we address issues and what alliances we build. It is envisaged that the event will form part of a two-part dialogue: Part 1: What does social democracy mean in the modern world? Part 2: What preconditions are required in a country for it to advance towards a welfare state? The aim would be not only to contribute to the global discussion in this regard, but, more specifically, to also provide guidance in the South African context.

1 - 3 December 2021, Wellington The Inclusive Society Institute (ISI) participated in the #Integritasza Conference which was held from 1 to 3 December 2021 at the Andrew Murray Centre for Spirituality in Wellington. The theme of the conference, which was hosted by the Centre for Good Governance in the School of Social Innovation at Hugenote Kollege, was “Integrity Based Good Public and Corporate Governance Leadership.” The first day of the conference took the form of a free open day showcasing partnership, which was an opportunity for institutions and individuals to showcase their work. Dr Motsamai Molefe of the ISI presented a paper on “Integrity in Inclusive Societies” and ISI Board Chairperson, Mr Vusi Khanyile, presented a paper on Board Leadership Integrity. In his paper, Dr Molefe said that integrity is the quality of being honest and fair. It had personal and social dimensions. He added that integrity implies proper self-development and moral overtones involving quality of character. Ubuntu accounts for integrity by appealing to other-centered and self-centered forms of respect. We therefore need leaders who are other- and self-respecting. Mr Khanyile pointed out that the conference was taking place at a moment in the evolution of our nation when the very foundations of our society were being tested. He said that it is when the creative potential of our national systems seemed most weakened that we must regain our strength and revisit our founding vision. A pattern of a public sector beset with a lack of integrity had emerged, Mr Khanyile said. He concluded by saying that there were glimmers of hope and that we must take up this challenge to make public integrity the cornerstone of a new dispensation of efficient and effective governance. The conference was well-attended and presented an opportunity for the ISI to connect with likeminded organisations and individuals. It concluded with setting an action agenda to achieve impact in the area of integrity-based leadership.