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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. Authors: Percept and 71point4 Editor: Daryl Swanepoel 7 February 2022 Executive summary Almost three decades have passed since the fall of apartheid, and income inequality persists. Economic growth, equity and social cohesion in South Africa are generally considered poor or regressive despite considerable policy reform aimed at improving these outcomes. In this short report, we unpack and assess potential levers for change that could improve inequality in South Africa. In this document, we reflect on some of the most salient within-country factors for South Africa that could play a role in reducing inequality. The factors were identified through an earlier analysis of multidimensional inequality for the Inclusive Society Institute (see report 1). The within-country factors included in this report are: education; the markets that allow wealth accumulation; and, empowering policymakers (whether national or local) with data for building prosperous cities. Lower levels of education are associated with higher levels of unemployment. Education policies should be quality-focused, placing emphasis on shifts in outcomes (as opposed to inputs only). Financial investment alone may not necessarily improve education outcomes and innovative funding models such as social impact bonds and outcomes-based contracts could be used to incentivise quality. Roughly two-thirds of total inequality derives from inequality in labour market earnings. In the short- to medium-term, Government should continue to create employment through labour-intensive programmes that can absorb the excess supply of low-skilled workers (such as the expanded public works programme). Investment hub funding models where innovation is incentivised are also relevant for job creation. The Jobs Fund provides an excellent example of the effectiveness of targeted job creation funding. Lastly, a focus on supporting the conditions that enable job creation for the bottom 50% of the economically active in the income distribution would have a more direct impact on inequality than economic growth alone. Housing is the main driver of individual and household non-financial wealth today. Making entering the housing market easier (including a well-functioning Deeds Registry Office) is critical to improving housing inequality. Financial markets, namely the credit and long-terms savings markets also need to be better supported in enabling the type of activities that allow for the leverage of existing wealth (e.g., in the form of housing) and the gradual accumulation of wealth (through appropriate long-term savings products). Creative solutions in the areas we now know matter most for inequality, namely education and labour market access and progression, are needed if we wanted to reduce inequality in South Africa. We require both good, simple policies that support the potential routes out of inequality and better implementation of policies that have already been developed. Content Executive summary Contents page List of figures and tables List of information boxes Acronyms and abbreviations 1. Introduction 2. Drivers for growth and job creation 2.1 Improve access to quality education 2.2 Increase opportunities to enter and remain in the labour market 3. Leveraging what we have: capital markets and the facilitation of capital accumulation 3.1 Unlocking the value of the affordable housing market 3.2 Increasing access to developmental credit 3.3 Facilitate long-term savings 4. Growing sustainable cities and communities: Leveraging local government and data 5. How would inequality change if we had higher economic growth? 6. Conclusion References List of figures and tables Figure 1: Framework for assessing multiple dimensions of inequality using a capability approach[1] Figure 2: Real expenditure (in R billions) and growth trends: 2015-2021 Figure 3: Gains/losses to jobs (McKinsey & Company model, 2019)[33] Figure 4: Growth in backlog of title registrations in 2014 and later Figure 5: Cost and effort to obtain a title deed for a house of about R200,000 Figure 6: Credit origination for individuals earning R10,000-R15,000 per month, 2020 Figure 7: Household assets and liabilities in 2020 Figure 8: Developmental credit relative to the gross debtors’ book, 2021-2021 Table 1: Within-country mediators of inequality, drawing on Bucelli and McKnight’s framework[1] with inputs from authors List of information boxes Info Box 1: University of Cape Town's online high school Info Box 2: Investing in human capital to prepare for 4IR Info Box 3: Leveraging data to achieve SDGs Acronyms and abbreviations 4IR 4th Industrial Revolution BER Bureau for Economic Research CRDP Comprehensive Rural Development Programme ECD Early Childhood Development EOF Education Outcomes Fund EPWP Expanded Public Works Programme GAP Graduate Asset Programme GDP Gross Domestic Product GSG Global Steering Group ILO International Labour Organisation LER Learner to Educator Ratio MGSI Microsoft Global Skills Initiative NDP National Development Plan NGO Non-Governmental Organisation NIDS National Income Dynamics Survey NPO Non-Profit Organisation PSETA Public Service Sector Education and Training QLFS Quarterly labour Force Survey SACN South African Cities Network SDGs Sustainable Development Goals SGB School Governing Body UCT University of Cape Town UN United Nations 1. Introduction Almost three decades have passed since the fall of apartheid, and income inequality persists. Economic growth, equity and social cohesion in South Africa are generally considered poor or regressive despite considerable policy reform aimed at improving these outcomes. In a previous report we considered how inequality in South Africa has changed in the twenty-seven years after the end of apartheid. That report set out a diagnostic analysis of inequality in South Africa. In this short report, we turn to potential levers for change for inequality with a view to improving inequality in South Africa. We focus on the dimensions of the multidimensional poverty framework that can potentially provide pathways out of poverty and their relationship to within-country mediators of inequality as per the 2019 framework of Bucelli and McKnight.[1] The dimensions we’ve chosen to highlight here tend to be capabilities in the Multidimensional Human Development approach (Figure 1). Figure 1: Framework for assessing multiple dimensions of inequality using a capability approach[1] Apart from these specific capabilities, enabling conditions created (or not) by the global and local context also influence a country’s ability to reduce inequality. The impact of global factors on inequality can be mediated by within-country factors. For example, the global impact of technological change can be mitigated by a responsive policy environment. A responsive policy environment would enable a country to adapt its workforce as technology changes, to safeguard jobs and income. There are at least seven within-country factors that can mediate (positively or negatively) the impact of global level factors on inequality (Table 1). Table 1: Within-country mediators of inequality, drawing on Bucelli and McKnight’s framework1 with inputs from authors In this document, we reflect on some of the most salient within-country factors for South Africa that could play a role in reducing inequality, either implicitly or explicitly, and moving to a place of greater equality for all South Africans. The factors selected for discussion here were identified through an earlier analysis of multidimensional inequality for the Inclusive Society Institute. Specifically, education and the markets that allow wealth accumulation (economic inequality) offer pathways for the reduction of inequality in South Africa. At a more systemic level, empowering policymakers (whether national or local) with the data for building prosperous cities and communities can have a direct impact on everyday lived experiences of inequality in South Africa. 2. Drivers for growth and job creation “Economic growth since the 2000s has primarily resulted in an increase in income among the high income earners only.[2,3] Increases among the lower 90% have failed to rise substantially.” (ISI, 2021:13)[4] Understanding income inequality in South Africa is important because of its intrinsic link to economic growth and absolute poverty. The degree of initial (in)equality and changes in it during growth heavily determines the poverty reducing effect of growth. Thus, even when poverty is viewed as a more urgent problem than inequality,[5] addressing distributional issues remain critical for anti-poverty policies and interventions.[6] The COVID-19 pandemic has dramatically impacted economies across the globe, and South Africa has not emerged unscathed. The economic impact of the pandemic continues to reverberate throughout the country: In the third quarter of 2021, there was a ~660,000 reduction in employed people compared to the second quarter.[7] During the same quarter, both the narrow and broad unemployment rates increased to 34.9% and 46.6%, respectively. The narrow unemployment rate is at its highest since the start of the Quarterly Labour Force Survey in 2008 and approximately one out of every two economically active people are unemployed. The pandemic has amplified the already-urgent need for South Africa to stimulate its economy to prevent (and reverse) a further rise in poverty and extreme income inequality. The National Development Plan (NDP): 2030 (written in 2011) clearly lays out the need for robust economic growth in South Africa. It suggests that some of the ways this can be achieved is through (non-exhaustive list) (1) incentivising job creation (for example, making it mandatory for tenders over R10 million to include a job creation aspect); (2) building skills in the youth such that they are able to enter and thrive in the labour market (see MGSI in Info Box 2) and (3) by helping citizens to save money to provide a safety net during difficult times.[8] Another key suggestion was the improvement and building of infrastructure that would allow South Africa to increase its exports. In a compendium of essays published by the Bureau for Economic Research (BER), Fourie and Moloi (2020) show that progress on the NDP goals relating to economic growth and job creation have not been met. South Africa had an average economic growth rate of 0.8% between 2015-2019, whereas the NDP targeted 5.4% average annual growth rate between 2011-2030. Similarly, the NDP targeted an unemployment rate of 14% for 2020, while data shows the 2020 4th quarter unemployment rate to have been 32.5% - well off the stated target. The enabling conditions under which the benefits of the NDP would have been realised, even if the NDP had been fully implemented, have not occurred. Global factors like COVID-19 have created pressures on the South African economy that have made reach of the NDP targets very difficult. However, the dismal outcomes are largely a result of policy failures. The NDP speaks to many of the goals that the UN’s Sustainable Development Goals (SDGs), a global policy initiative, is trying to achieve. The SGDs were determined in 2015 and agreed to by all UN-member states. The intention was to create impetus behind core areas that would promote well-being (for humans and the planet), prosperity and peace.[9] South Africa is also a signatory to the SDG’s and has a commitment to report on its progress in this regard. All 17 of the SDGs will have a positive impact on inequality and the achievement of one (for example, SDG4: Education) will have positive knock-on effects on others (for example, SDG8: Decent work and economic growth). The most direct ways to increase economic growth are through improved education and increasing the employment rate. 2.1 Improve access to quality education “Of the 6.7 million unemployed persons at the end of 2019, 56% had education levels below matric, followed by those with matric at 34.7%. Only 1.9% of the unemployed persons were graduates while 6.8% had other tertiary qualifications as their highest level of education. This suggests that lower levels of education are associated with higher levels of unemployment.” (ISI, 2021:30)[4] As a key conversion factor that influences whether people are able to move out of poverty, improving access to quality education should be a key policy priority.[10] In Section 6 of the first ISI report on inequality,[4] we describe the major impact of poor early childhood development and low quality basic education on an individual’s chances of finishing matric and successfully entering the job market. The evidence provided makes it clear that education and access to jobs are intimately linked and that without good quality education, one’s job prospects – and therefore earning potential – are weak. Here we provide examples of models that demonstrate how education quality can be improved through initiatives in the public, private and public-private sectors. Novel funding models could remove financial barriers to accessing quality education during early childhood. Low household income is often a barrier to accessing quality early childhood development (ECD) centres.[11] In an effort to mitigate this barrier, the Innovation Edge, an investment hub for social entrepreneurs working in the ECD space, invested in a start-up called ‘Early Bird edu-care’ (“Early Bird”). Early Bird has a novel funding model which uses cross-subsidisation to bring quality ECD to children irrespective of income. The model works by using the revenue from their ECD centres situated in big corporates or middle-income housing estates to subsidise their ECD centres that are situated in affordable housing developments. Class size and assessment quality are pillars of this model: The ECD centres have fewer than 24 children per class and the children are assessed regularly using a standardised tool to ensure that their learning adequately prepares them for entry into grade 1.[12] There is value in innovation and investment hubs for education start-ups, as demonstrated in a technical report authored by van der Elst (2016) and funded by MIETAfrica.[13] The report highlights that the sector composition of the start-up funding source matters and specifically recommends that innovation hubs should be co-funded by the public and private sectors. Furthermore, the report stresses that emphasis should be placed on innovations that show potential to have large impact. The Innovation Edge, and the Early Bird Edu-centre example, provide evidence of the value of these models in improving access to quality education, and ultimately reducing inequality by levelling the education playing field. Low investment in the basic education space is a threat to South Africa’s aim to achieve equality and needs to be revisited. Even though the number of learners finishing matric has increased from 30% in 2011 to 45% in 2018, Government expenditure (real) on Basic Education (Grades 1-12) between 2015-2021 has shown average growth over the period of 1.07% and between 2019-2021, annual growth has dropped below 1% (Figure 2).[14] Figure 2: Real expenditure (in R billions) and growth trends: 2015-2021 Source: UNICEF 2019[14] Provincial variation in public sector education investment necessitates innovative learning and teaching models. The public-school learner to educator[1] ratio (LER) is lowest in the Northern Cape, at 28.5 learners per educator and highest in Limpopo (32.1). When only government-funded educators are counted, Gauteng (36.9) and Western Cape (35.3) have the highest LER. Because public schools in these two provinces have been able to supplement the government-funded educators with additional educators funded by the school governing bodies (SGB), they have been able to reduce their LER, which improves the quality of education.[14] Therefore, provincial income inequality (which would drive whether the SGBs are able to supplement the government educators), also has a bearing on education quality inequities. Info Box 1 describes a new initiative, spearheaded by the University of Cape Town (UCT), which aims to improve access to quality basic education through an online high school programme. Key features of this innovation include being scalable, using a subsidised fee structure and establishing micro schools where needed. Education policies should be quality-focused, placing emphasis on shifts in outcomes (as opposed to inputs only).[18] Financial investment alone may not necessarily improve education outcomes. Even if Government did provide more funding for the Basic Education sector, if that funding was not used to support initiatives that actively improve education quality and learning outcomes, the investment would not have the desired impact. Unfortunately, this has been the case in South Africa and hence the quality of education in its public schools remains a primary driver of inequality. In recent years, there has been interest by the donor community in outcomes based funding for education (the same has been tested in the health sector for over a decade).[19] The premise of these funding models (which include results-based financing, outcomes based contracting, social impact bonds and pay for performance amongst others) is that it incentivises stakeholders to focus on the activities that have the greatest impact on the desired outcomes. The incentives are financial and are given only if the outcomes are achieved. There is a substantial amount of evidence around both the value and the difficulties of introducing these types of funding models. Given the austere economic climate, Government should experiment with social impact bonds to improve learning outcomes. The international Education Outcomes Fund (EOF) provides funding for and facilitates partnerships to improve learning outcomes across the globe through social impact bonds. The World Bank has also recently advertised for a partner to support them on a social impact bond for ECD in Uzbekistan. In South Africa, the Bertha Centre (affiliated with UCT’s business school) is playing the secretariat role for the new ‘National Task Force for Impact Investing’.[20] South Africa has also joined the Global Steering Group (GSG) for impact investing, the first African country to join. The GSG aims to leverage Government, private sector, and donor funding to allow developing countries to experiment with social impact bonds to improve social outcomes. The time is ripe for South Africa to use its position in the GSG and the local National Task Force to test innovative funding models that may improve education outcomes. Public, private and NGO partnerships aimed at reducing education inequality are proving to be successful. Many private sector companies are working to reduce education inequality in South Africa by partnering with non-profit organisations, charities, or non-governmental organisations. One example of a private sector collaboration is Investec's partnership with Kutlwanong Centre for Maths, Science and Technology. In this partnership, Investec sponsors quality tuition and education to disadvantaged learners in South Africa, which is delivered by Kutlwanong.[21] This initiative helped to support 224 learners in achieving distinctions in maths and 459 learners with achieving distinctions in science in 2019. Liberty’s partnership with non-profit organisations (NPO’s) Nalibali, BookDash and WordWorks provides yet another example. This collaboration has brought about the Yizani Sifunde project, which is aimed at addressing literacy problems in the Eastern Cape through making English and isiXhosa books available for ECD centres.[22] Reaping the rewards of improving access to quality in education in South Africa will take time and is only likely to be realised in the long run. Yet the impact of unemployment, poverty and inequality are felt right now by all South Africans. For these reasons, government policies should simultaneously implement interventions directly targeted at the labour market, specifically increasing opportunities to enter and remain in it. 2.2 Increase opportunities to enter and remain in the labour market “Roughly two-thirds of total inequality derives from inequality in labour market earnings and that half of this is related to the very high levels of unemployment in South Africa.” (ISI, 2021: 13)[4] In ISI’s first report on inequality,[4] we described how high levels of structural unemployment drives poverty and income inequality. Therefore, one of the most impactful ways to decrease poverty and inequality is to increase job opportunities in South Africa. This has been a stated aim of the South African Government since the start of our democracy and yet, the National Development Plan’s 2030 target of 6% unemployment still remains far out of South Africa’s reach.[8,23] In the short- to medium-term, Government should continue to create employment through labour-intensive programmes that can absorb the excess supply of low-skilled workers. The expanded public works programme (EPWP) is one of the long-established government programmes aimed at improving employment rates amongst low-skilled South Africans through labour-intensive programmes.[24] The EPWP focuses on job creation across four sectors (infrastructure, non-state, environment & culture, and social). So far, the impact of the EPWP has been positive, improving multiple poverty metrics and increasing job opportunities for participants. In two studies, based in Ekurhuleni district (Gauteng) and KwaZulu-Natal province, participants indicated that their earnings, employability, and skills increased as a result of the EPWP programmes.[25,26] They were also able to purchase more non-consumables, technology, clothing, toiletries and accommodation- which produces a knock-on positive effect on economic growth. Investment hub funding models where innovation is incentivised are also relevant for job creation. In 2011, the ‘Jobs Fund’ was launched in order to address high unemployment rates in South Africa.[27] The Jobs Fund received R9 billion in capital to co-finance projects that resulted in the creation of jobs (another innovation and investment hub type of offering).[27] The aim was to overcome barriers by leveraging the networks of the public, private and NGO sectors to unlock opportunities for employment and investments that would create jobs down the line.[28] Jobs created through investment hub funding models should be targeted at the most disadvantaged. The Jobs Fund has successfully generated ~282,773 jobs, of which 98% went to previously disadvantaged individuals.[28] Furthermore, 57% of the jobs went to women and 64% to young people.[28] Several promising innovations have been created as a result of the Jobs Fund. Fetola’s Graduate Asset Programme (GAP) received R8 million from the Jobs Fund; they place graduates who are unemployed in internship programmes and provide them with support to ensure that they excel.[29] This allows early graduates to gain experience, and benefits companies by employing new employees (who are supported in their learning by GAP) at a lower cost. By 2015, approximately 24,000 graduates were placed in internship positions in 8,500 businesses, and 8,000 (30%) of these were later offered permanent positions.[29] The Government created and funded Jobs Fund, and initiatives like Fetola’s GAP, provide a useful case study for the value of targeted job creation funding. The Job Fund’s ~282,773 newly created jobs represent 2% of the 14.5 million employed people in South Africa. One of the Job Fund’s partners, Harambee, specifically focuses on unemployed youth (youth make up ~57% of the unemployed economically active group). Harambee’s research shows that between 2021-2026, there will be 3 million new young people who are actively seeking work. Supporting organisations like Harambee can help transform South Africa’s youth unemployment rate, and thereby decrease inequality. Given 4IR, South African youth need to be prepared for employment in a digital job market. The South African Government has acknowledged the ‘4th industrial revolution’ (4IR) and the changes this shift to a more digital and technology-centred environment may create for the country. In 2020, the Presidential Commission report on 4IR was made publicly available for comment.[30] The report lists the following recommendations for South Africa[31]: Invest in human capital development; Establish an Artificial Intelligence Institute; Establish a platform for advanced manufacturing and new materials; Secure and avail data to enable innovation; Provide incentives for future industries, platforms and applications of 4IR technologies; Build 4IR infrastructure; Review and amend (or create) policy and legislation; and Establish a 4IR Strategy Implementation Coordination Council in the presidency. The most pertinent 4IR policy recommendation in the South African context is to invest in human capital development. There are concerns that along with the 4IR, massive cuts to low-skilled labour jobs will come, deepening inequality in the country. The International Labour Organisation (ILO) has recommended a ‘human-in-command’ approach to the new job roles that are bound to arise. Given that South Africa is in its nascent phase of 4IR thinking, there is an opportunity to engage with workers, unions, public and private sectors to craft the 4IR workforce such that jobs are safeguarded and evolve with the technological change.[32] The 2019 McKinsey & Company report is often cited when considering the trade-off between technological change and jobs.[33] In their model, the authors suggest that the shift to digitisation that the 4IR brings could result in a nett increase of 1.2 million jobs by 2030 (Figure 3). Their model also shows an increase in South Africa’s GDP to 3.5% as a result of digitisation.[33] The ‘step-up’ jobs denoted in Figure 3, refer to jobs that are created if the Government decides to improve infrastructure (a pre-requisite) to ready itself for 4IR. Therefore, some of the new jobs are as a result of improving country-wide infrastructure, rather than the introduction of new digitised ways of working itself.[33] Having stated these estimates, we need to add this caveat: it is also likely that technological change in the context of a developing country like South Africa with chronic structural unemployment (surplus of low-skilled workers and scarcity of highly skilled workers) may see most of jobs being shed in the middle of the income distribution. Figure 3: Gains/losses to jobs (McKinsey & Company model, 2019)[33] Initiatives preparing youth for 4IR should target unemployed youth who have the least chance of accessing such opportunities. In Info Box 2, the Microsoft Global Skills Initiative (MGSI) is described. This global initiative is spearheaded by Microsoft, and in South Africa Microsoft has partnered with the Public Service Sector Education and Training Authority (PSETA) and the non-profit Afrika Tikkun to realise its goal of preparing unemployed youth for the digital job market. Joint public, private and non-profit sector collaborations such as these are crucial in preparing the labour market for the changes the 4IR will bring. 3. Leveraging what we have: Capital markets and the facilitation of capital accumulation “Housing is the main driver of individual and household non-financial wealth today.” (ISI, 2021:22)[34] South Africa has an exceptionally high concentration of wealth, with the top 10% earning more than 85% of the wealth.[35] Generational wealth, where wealth is passed down from one generation to another, perpetuates inequality through making it easier for young people of generationally wealthy families to enter the capital market and accumulate assets before their peers. Income is generated from these accumulated assets. Given South Africa’s apartheid history, those with access to generational wealth tend to be White- reinforcing the income inequality across racial lines experienced in South Africa.[35] Unsurprisingly, capital accumulation including housing and pension savings are very closely tied. South Africa is regressive in its facilitation of the accumulation of wealth for those previously from formal economic opportunities (evidenced by the demographic make-up of the unemployed population). However, there may be potential opportunities for unlocking the value of existing assets (like the affordable housing market), more opportunities for developmental credit through which South Africans can grow income generating capabilities and assets, and policy and market development work than can be done to expand capital accumulation through long-term savings and pensions. 3.1 Unlocking the value of the affordable housing market In ISI’s first report on inequality,[4] income in the affordable housing bracket was seen to be typically under-valued, leading to an under-estimation of households’ total wealth. Property prices in areas that have been overlooked are increasing, creating incentives for households, lenders and municipalities. In Khayelitsha, for example, median house price value rose from less than R200,000 in 2012 to R250,000 in 2015.[36] Having a title deed to a property, even a government built and funded property such as properties provided through local government housing programmes, is the only way households can leverage the value of their house to accumulate further wealth through borrowing. Effort and focus are required to eradicate the title deed backlog and prevent further title deed backlogs. The total title deeds backlog estimated at over 1.1 million units (Affordable Housing Institute, undated) is a significant challenge in enabling households to leverage the wealth of their housing. The Title Deeds Restoration Grant was established to eradicate the backlog,[37] but this has largely not been effective. At the same time, the backlog in finalising title deeds after 2014 continues to grow (Figure 4). Barriers to transfer include underlying township establishment and proclamation problems which can be difficult to resolve. In addition, beneficiary administration is complex. Given the progress of time, self-reported owners living in the properties are often not designated beneficiaries. Figure 4: Growth in backlog of title registrations in 2014 and later Source: National Treasury ENE various years, CAHF Beyond the primary title, the current legal processes and systems to maintain title over time are inaccessible for the poor and these should be simplified and reduced. For a house with a value of about R200,000, conveyancing fees can cost in the order of R9,000 (Figure 5), compared to a transactions cost of around R300 when the sale is done in the informal market. Other constraints in the formal sales and transfer market include the costs of municipal arrears (which can be extensive), a certified copy of the title need costing around R3,000 and various other search and travel costs. Figure 5: Cost and effort to obtain a title deed for a house of about R200,000 Source: 71point4 and The Centre for Affordable Housing Finance in Africa 3.2 Increasing access to developmental credit Levels of credit access in South Africa are high. It is a market that could be characterised as “Easy In”. During the first quarter of 2008, 57.7% of the total adult population (29.9 million at the time) were credit active. By the end of quarter 1 in 2021, the relative share of the credit active adult population had increased to 69% (of total of 39.9 million adults at the time).[38–40] Credit isn’t necessarily a problem. The question, however, is whether the nature of the credit allows adults to accumulate wealth over time. Most of this credit taken up by lower- or even middle-income households (in a relative sense) is not the type of credit that allows for wealth accumulation (Figure 6). Most credit extended to these households in 2020 was unsecured credit (R10.7 billion), followed by secured credit for vehicle financing (R7.8 billion). It is not clear what unsecured credit is used for but most of this is likely to go towards consumption purposes. Figure 6: Credit origination for individuals earning R10,000-R15,000 per month, 2020 Source: NCR Consumer credit report. Mortgage 12.5%, 240 months, vehicle 14%, 60 months, unsecured 25%, 24 months, facility 25%, 12 months Does credit serve the people? South Africans are over-indebted and under-leveraged at the same time (Figure 7 shows the under-leveraging), with the value of potentially wealth-supporting liabilities such as mortgages being much lower than the value of residential property (both registered and unregistered) and assets held in pension funds and life insurers. Figure 7: Household assets and liabilities in 2020 Source: SARB, CityMark Enable markets to provide more developmental credit for wealth accumulation. The markets and appropriate regulations need to provide individuals with access to credit for developmental purposes to grow their income generating opportunities. Developmental credit levels as a percentage of total credit are currently very low (Figure 8). It is here that the opportunities for wealth generation through credit markets lie. Figure 8: Developmental credit relative to the gross debtors’ book, 2021-2021 Source: NCR Consumer Credit Reports, 2012-2021 3.3 Facilitate long-term savings Another key determinant of poverty, and thus potentially inequality too, is the ability to save and leverage these funds for wealth accumulation. About half of the South African population do not have any retirement savings plan and only 6% of people are able to be fully financially independent at the time of their retirement.[41,42] A strong policy focus on the promotion of all savings, but especially long-term savings for retirement, is needed to expand the social security and wealth network for South Africans. The circumstances where more people can save and then leverage the value of assets they’ve built up, needs to be facilitated. Retirement savings are also almost exclusively accessed by those in formal employment. The following actions to increase access to savings for low-income earners and those in informal or erratic jobs could support greater capital accumulation through savings: [43] The means test associated with social grants is likely to deter long-term savings: currently one must be able to prove you have no savings or assets to access the government pension. This disincentivises any form of saving and removing the means test would encourage low-income earners to save what they can, when they can, without fear of being excluded from Government’s social grant system. Provide incentives to save: because low-income and informal workers do not have to submit tax returns, they also do not benefit from the rebates associated with savings. The South African Government could facilitate a scheme (similar to that in the United States) where any savings made are matched (or topped-up) by the Government, to incentivise saving in the same way that happens for tax paying citizens. Insurers should innovate to find low-cost ways to enrol low-income earners into savings plans - giving them viable options for saving. The incentives for insurers are that they will be able to grow their pool of clients, increasing revenue. Favour flexibility: given that many of these workers do not earn fixed salaries that arrive regularly, insurers could find ways to support more ad hoc contributions rather than the standard monthly payments. This may also reduce individual’s concerns of whether they are financially able to contribute the same amount each month. Promote financial literacy: the lack of understanding as to how to save, how much to save and why saving is important is preventing people from prioritising saving. Government and financial institutions can do more to promote financial literacy. 4. Growing sustainable cities and communities: Leveraging Local Government and data As shown in the previous report of the Inequality Society Institute (2022),[4] a multidimensional approach to inequality reveals areas for improvement in people’s lives at quite a local level, ranging from where people live and their access to transport hubs for travel to work and access to other services, water and sanitation, electricity infrastructure and even access to internet. The provision of many of these services and design of the required infrastructure is often decided at a local level. To enable the growth of sustainable cities and communities, much better planning using local level data is required. Here we consider some examples on how better data, whether more granular or spatialised, can enable better planning and, ultimately, the improvement of the lives of South Africans. Spatialised data can assist with economic development planning at a local level. Launched in May 2021, the City Spatialised Economic Data reports give fair insight into the inequality that is present in South Africa’s cities. The reports were created using anonymised income tax data from eight of South Africa’s biggest metropolitan areas.[44] In each of the 8 metro areas (Buffalo City, Cape Town, City of Johannesburg, Ekurhuleni, Mangaung, Nelson Mandela Bay, Tshwane and eThekwini), statistics like the number of firms and employees per metro, wage bands, Gini coefficient and the gender gap were measured.[44] In 2018, the Gini coefficient was found to be highest in Mangaung, which had a Gini coefficient of around 0.75, and in Johannesburg which had a Gini of around 0.71.[45] The metro’s with the lowest Gini coefficients were Buffalo City and Tshwane (around 0.6 and 0.67 respectively).[45] The report also showed that the Gini coefficient was generally the highest within the main cities in each metro, as well as in outlying business/tourist hubs.[45–48] The gender gap was found to be fairly high, with most cities showing a significantly lower median wage for females.[44–48] By showing in which areas poverty is highest and where gender gaps and the Gini’s variation is highest, the spatialised data creates the opportunity for local planning that can address these challenges. Community development workers can form the bridge between local governments and communities, enabling planning that better speak to community needs. In 2003, South Africa introduced the community development worker programme which aimed to facilitate a bridge between local government and its constituent communities. The intention was for the community development workers to communicate government policies and initiatives regularly and to feedback to Government any concerns brought up by the community.[49] The programme has had a positive impact on improving public participation. Local governments have taken on various initiatives and programmes to assist in combating inequality in South Africa. Initiatives like the National Rural Youth Service Corps Programme, the “One Household, One Hectare” Programme and the Comprehensive Rural Development Programme (CRDP) help to educate people in rural areas, improve rural infrastructure, and increase farming and food security in needy communities.[50–52] As of 2016, the CRDP had assisted in providing access to nutritious food to around 9 million students through its School Nutrition Programme.[52] Multiple farmers were assisted in accessing water to irrigate their crops, over 800 hectares of land had been distributed, and over 11 million people gained access to electricity due to the CRDP.[52] Public-private collaboration in generating ideas for how cities can be developed. An example of local government and private sector collaboration, the South African Cities Network (SACN) encourages cities to share knowledge, experience and best practice in urban development and city management. Its four pillars are Productive City, Inclusive City, Well-Governed City and Sustainable City.[53] In each of these four pillars, multiple issues are discussed and addressed. Thus far, the SACN has been able to produce a large knowledge base from which cities can draw information. It has also been involved in programmes and the initiation of task teams aimed at addressing unemployment, urban safety and environmental issues such as water management, waste management and sustainable energy.[53] Its future strategy, which aligns with various national and international development goals and agendas, focuses on Sustainable Development Goal 11 (Sustainable Cities and Communities).[54] In Info Box 3, the story of eThekwini’s data repository illuminates the catalytic role productive partnerships, good data (and evidence-based policy) can potentially have on inequality. More metro municipalities will have to take smart data-led approaches to local level planning if growth and development is to be successfully achieved. 5. How would inequality change if we had higher economic growth? A critical question to consider in identifying pathways out of inequality is whether it could be improved with higher GDP growth. As mentioned earlier in this report, South Africa had an average economic growth rate of 0.8% between 2015-2019, whereas the NDP targeted 5.4% average annual growth rate between 2011-2030. Growth rates in recent quarters have been volatile due to an initial severe drop in GDP at the start of the pandemic, with some recovery since then. However, data show that the economy is still (at the end of Q3 2021; the most recent data, released on 7 December 2021) 3.1% smaller than pre-pandemic (in real, inflation accounted terms).[59] The November 2021 Medium Term Budget Speech sheds light on the current picture, with the following summary also indicating some challenging cycles that are difficult to end: “GDP growth is expected to recover to 5.1 per cent in 2021 before declining to average 1.7 per cent over the next two years, a rate that is too low to meet the country’s development needs. Gross debt is forecast to grow from 69.9 per cent of GDP in 2021/22 to 77.8 per cent of GDP in 2024/25. Rising debt-service costs consume an increasing share of national income, crowding out spending on critical programmes necessary to alleviate poverty and create a foundation for faster economic growth. The long-term decline in South Africa’s GDP growth rate is the result of structural weaknesses in the economy – including poor education outcomes – and external shocks. Weak growth is compounded by the rapid increase in public debt, which has raised borrowing costs across the economy. Faster economic growth requires determined implementation of policy reforms to promote confidence, investment, competitiveness, entrepreneurship and job creation.”[60] From the above, a significant and sustained change in GDP growth rates does not seem imminent. However, even if it were, one should be cognisant of the fact that GDP growth will not necessarily translate into a reduction in inequality. This relationship, holding all else constant, will be very dependent on what types of jobs are generated, if at all, in the process of an increase in GDP (where in the wage distribution) and the types of skill levels required for different jobs. In fact, if growth is driven by the service industry (rather than agriculture or manufacturing), it may exacerbate inequality if an educational and skills shortage persists. The GDP-inequality relationship will also depend on how an increase in GDP is translated into more and better-quality basic services, either through public or private provision, and possibly even through items such as the topical basic income grant (BIG). And as indicated above, the GDP-inequality link will depend on factors such as debt (and servicing costs), alongside GDP. Ultimately, we need economic growth that lifts the bottom 50% of the income distribution and provides better access to jobs for this group and their families. There are endless ways to approach this, with nuances in every route. Technology, as just one example, could pose a threat to jobs as mentioned in our discussion of the 4IR, just as much as it could be the very solution to assisting quality education at scale. This same technology may be the driver of GDP growth, the relevant question is in which way? In short, the relationship between GDP growth and inequality is not straightforward. More GDP could mean more ways out of poverty, but details of the GDP growth – including where and how it is derived, and where and how it is used – will be central to the question. GDP is a necessary but not sufficient mechanism for a material change in inequality. 6. Conclusion Creative solutions in the areas we now know that matter most for inequality, namely education and labour market access and progression, are needed if we wanted to reduce inequality in South Africa. In doing so, but also in other areas examined in this report, namely financial markets that can support wealth accumulation, we need to work with what we have. We require both good, simple policies that support the potential routes out of inequality and better implementation of policies that have been developed. As a key conversion factor that influences whether people can move out of poverty, improving access to quality education should be a key policy priority. Models that demonstrate improvements in ECD education access and quality include features of innovative funding structures (cross-subsidisation in public-private partnerships), smaller class sizes, standardised assessment tools, and those that have the potential to have a large impact. Low investment in the basic education space is a threat to South Africa’s aim to achieve equality and needs to be revisited. Education policies should be quality-focused, placing emphasis on shifts in outcomes as opposed to inputs only. Outcomes based funding models (results-based financing, outcomes-based contracting, social impact bonds and pay for performance) may need to be considered to achieve the required shifts. Given the austere economic climate, Government should experiment with social impact bonds to improve learning outcomes. Public, private and NGO partnerships aimed at reducing education inequality are proving to be successful. In the short- to medium-term, Government should continue to create employment through labour-intensive programmes that can absorb the excess supply of low-skilled workers. The South African youth need to be prepared for employment in a digital job market. Initiatives preparing youth in this regard target unemployed youth who have the least chance of accessing such opportunities. The most pertinent 4IR policy recommendation in the South African context is to invest in human capital development. Any 4IR policy intervention should be co-created with workers, unions, public and private sectors to ensure that jobs are safeguarded and evolve with the technological change. We need to unlock the major source of non-financial wealth, housing, owned by many South Africans who have houses in the affordable housing bracket. The functioning of the Deeds Registry Office is not currently supporting households in having formal proof of this form of wealth and deeds registration backlogs need to be eliminated fast. Financial markets, namely the credit and long-terms savings markets need to be better supported in enabling the type of activities that allow for the leverage of existing wealth (e.g., in the form of housing) and the gradual accumulation of wealth (through appropriate long-term savings products). Much more granular data is required for the economic development of cities and local communities. Spatialised data can assist with economic development planning at a local level. Community development workers can form a bridge between local governments and communities, enabling planning that better speaks to community needs. Ultimately, much greater collaboration and dialogue between Government, civil society and the private sector are needed to develop cities and communities in a way that will enable them to thrive. While economic growth is likely to assist with poverty reduction, there are many factors that play a role in determining whether it will have an impact on a reduction in equality. As with population changes, GDP growth is a necessary but not sufficient mechanism for a material change in inequality. A focus on supporting the conditions that enable job creation for the bottom 50% of the economically active in the income distribution would have a more direct impact on inequality than only economic growth. References Bucelli I, McKnight A. Mapping Systemic Approaches to Understanding Inequality and Their Potential for Designing and Implementing Interventions to Reduce Inequality. 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Accessed November 10, 2021. https://www.itweb.co.za/content/DZQ58MVP1WbvzXy2 Africa Renewal. Youth dividend or ticking time bomb? Accessed December 10, 2021. https://www.un.org/africarenewal/magazine/special-edition-youth-2017/youth-dividend-or-ticking-time-bomb StatsSA. GDP data Q3 2021. Accessed December 10, 2021. http://www.statssa.gov.za/wp-content/uploads/2021/12/gdp1.jpg National Treasury. MEDIUM TERM BUDGET POLICY STATEMENT. Published online 2021:17. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

Photo: newerk24.com The Inclusive Society Institute (ISI) was invited to participate in a panel discussion titled “Is South Africa advancing towards the Welfare State”, which was hosted by Die Burger during the Klein Karoo Nasionale Kunstefees. The ISI was represented by its Chief Executive Officer, Mr Daryl Swanepoel. Other panellists included the well-known sociologists, Professor Christie van der Westhuizen, who is attached to the Nelson Mandela Bay University, and Professor Erwin Schwella, who is attached to the Hugenote College in Wellington, Western Cape. Well-known community activist and former editor of the Cape Times, Ryland Fisher also participated. Some points made by Mr Swanepoel included: Responding to criticism that the welfare state is wrong for South Africa, he suggested it not to be so. Many welfare states, such as Sweden, he said had a flourishing private sector and their societies consistently count amongst the happiest nations on earth (according to Gallup’s annual Global Happiness Index). Whilst the ideal should be the welfare state, cognisance needed to be taken of the financing requirements therefore. He cautioned government not to introduce the expenditure side of the welfare state before the income side proved to be sustainable. South Africa does not currently have the money to fund the welfare state. Therefore, the focus should be on the economy “über alles”. The economy needs to grow, so that the tax-base is increased, so that the state has sufficient resources to implement its safety-net and other programmes attached to the notion of a welfare state. For example, in Sweden more than 70% of working age citizens contribute towards the tax-base. In South Africa this was only around 11%, with just over 5% contributing some 97% of the personal income tax. The welfare state depended on the civil service being competent. Taxpayers needed to trust the system. If Sweden was anything to go by, citizens do not object to paying higher taxes since they trust the state to deliver quality services. South Africa has a long way to go in this regard. High levels of corruption, maladministration and incompetence caused taxpayers to be wary of government’s ability to successfully implement the welfare state in South Africa. To this end government needed to act firmly against the scourge of corruption, ensure a people-centred civil service, and drastically improve the skills-set of public officials.

The Inclusive Society Institute hosted its second social democracy dialogue on Tuesday, 22 March 2022. The first dialogue focused on the meaning of social democracy in the modern world. It concluded that social democracy is not a cast in stone. It changes over time. While there are underlying values that remain, such as freedom, equality and solidarity, there are different ways and interpretations that depend on context and grouping. What has changed over time is the interpretation of these values and how to pursue them. Panelists also agreed that much more discussion is needed. They identified five themes around which a series of workshops will be developed to deep-dive the issues that were identified, which are that: Social democracy requires a strategic definition; Social democracy is about people; It requires an internationalist approach It must advance a credible alternative to neo-liberalism, and a persuasive narrative needs to be developed. In this second dialogue panelists responded to the question: What are the conditions that need exist in a country in order for it to advance towards the welfare state. The objective of the dialogue was: To share the experience of the panelists' countries’ own pathway towards the implementation of their sustainable welfare programmes. To get an understanding of the participant countries’ economic, employment and fiscal structure. For example, the introduction of welfare programmes to benefit the vulnerable in society may be quite feasible in a country with single digit unemployment, high numbers of taxpayers, high taxation rates, and developed economies. In South Africa unemployment stands at 46%, the upper margin personal tax rate already stands at 45%, and around 1.58 million people out of a population of nearly 60 million are shouldering the bulk of the income tax paid. And it is estimated that just 25% of those that pay income tax pay 80% of all the income tax that is collected. Therefore, panellists needed to consider what socio-economic and socio-political conditions are needed in a country to underpin the funding and sustainability of a welfare state. This is an important discussion within the South African context. Public policymakers in South Africa have recently introduced a suite of legislation that supports the advancement of the country towards what can be termed a welfare state. This includes legislative proposals aimed at introducing a National Health Insurance, Basic Income Grant, and National Social Security Fund. This comes on top of already approved and implemented social interventions such as free housing, free schooling and tertiary education for the poor, free water and electricity, school feeding schemes, and child and other welfare grants. What is of concern to many in the policy development fraternity is the impact that it will have on the fiscus, that is the long-term sustainability of the interventions. This discussion will hopefully help shape policy in this regard. Panellists participating in the discussion were: Lord Peter Hain, A former UK Labour Party Cabinet Minister and activist Hon Maria do Rosario MP, Workers’ Party, Member of the Chamber of Deputies of Brazil Dr David Masondo MP, South African Deputy Minister of Finance and Principal of the Oliver Tambo School of Leadership, South Africa Mr Johan Hassel, International Secretary of the Swedish Social Democratic Party Dr Michael Dauderstädt, who has previously held posts at the Friedrich Ebert Stiftung as head of the International Policy Analysis Unit, and director of the Division for Economic and Social Policy. Prof Chris Mullard, Author, former Professor of Education and Ethnic Studies at the University of Amsterdam, and Visiting Professor at the University of London and at the Royal Agricultural College. Co-founder of Focus Consultancy, UK. Mr Franz Knieps, Member of the Board, BKK Dachverband, Germany. Mr Mariano Schuster, Editor, Nueva Sociadad, Buenos Aires, Argentina Dr Martyn Davies, Managing Director, Emerging Markets and Africa, Dean, Deloitte Alchemy School of Leadership, Chief Economist The dialogue was moderated by Roelf Meyer, a former South African Minister, ISI Advisory Council member and Director of In Transformation. Sebastian Sperling, Country Representative of the Friedrich Ebert Stiftung in South Africa consolidated and closed the discussion. In closing the dialogue, ISI CEO, Daryl Swanepoel said: “Globally, social democrats need to define their message in a way that establishes clear blue water between themselves and those to the right. More than ever the world cries out for social justice, and greater equality. And the Russia Ukraine conflict also proves that an internationalist approach is crucially important, also now needed more than ever. An approach based on a value system that places the wellbeing of our citizens at the centre. But equally important is the need to develop the economy, because only if the economy is successful and growing will be able to fund programmes that are needed to deliver a truly just and equitable society. How to balance these two, is what is needed to be discussed”.

Occasional Paper 3/2022 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. MARCH 2022 by Dr Motsamai Molefe MA (Developmental Studies), Phd (Philosophy) Introduction In 2011, the human population on planet Earth was just over 7 billion. A United Nations report indicates that this number could jump to over 15 billion by 2100, if the current growth trajectory continues unabated (UN, 2011; UNFPA, 2011). This would mean that by 2100 the population would have increased by over 100%. There is no doubt that population changes have serious social, economic and environmental consequences that require our earnest and urgent attention. Some of these issues are ethical in nature, as they relate directly to questions of human dignity, well-being, or even justice itself (Cripps, 2021). In relation to dignity, the question revolves around whether, as the population changes, individuals, cultures and institutions will provide conditions suitable for decent human habitation, where we can survive or even thrive. Or whether human beings will find themselves living under deplorable and dehumanising conditions. In relation to human well-being, the concern is whether human beings will have access to the basic needs and conditions required for their lives to go well. In terms of justice, the focus is on how we protect the interests and welfare of future generations. As the population grows, it throws out all manner of problems for policymakers and, in the instance of this paper, for ethicists too. The central concern then revolves around developing ethically robust “policies for reducing fertility rates and … stabilising human numbers” (Coole, 2021). The motivation for seeking to stabilise human numbers, or population, is informed by the observation that there is a direct relationship between population changes and consumption (The Royal Society, 2012). The idea of “population changes” is very broad. It encompasses more than just population growth; it also includes a variety of complex dynamics related to the population such as migration, urbanization, age structure, education structure, and so on. Human beings require access to resources – which they access from the natural environment – so that they can produce goods for consumption. The natural environment provides natural capital. And it is this natural capital, by use of technology, that is processed and converted into goods which human beings can consume to satisfy their basic and aspirational needs (Budolfson & Spears, 2021). As the human population grows, we need to extract and use more natural resources to respond to human needs. Bear in mind that it is not only the human population that relies on the natural capital of the planet for their survival, but also many other species. The complex ecosystem functions precisely to respond to the needs of other components of the natural environment, all things being equal. It is, however, human activity that has the most extensive impact and places extraordinary demands on Earth’s natural resources. The technical term “Anthropocene” is used to capture the extensive, fast-paced and pervasive human activity on the social, cultural and environmental components of the planet, and its demands and impact on planet Earth (Meybeck, 2013; Trevennon-Jones, 2022). One crucial consideration related to human activities and requirements associated with human existence, in relation to consumption, is the fact that the planet is finite (Meadows et al., 1972). In other words, as the population grows and changes, the demand for natural resources grows as a result of the increase in human needs, but the planet itself is not growing – the planet does not have a limitless supply of natural resources. To exemplify the point of the finite nature of Earth and the serious problems it presents for current and future generations in light of a growing population, consider the example of a soccer stadium. A stadium might have the capacity to carry 80,000 people. The human need to consume soccer, in this instance, can only accommodate 80,000 people. Should the population of soccer-lovers who want to go to the stadium exceed this number, the stadium would be put in a precarious situation, where it might collapse as a result of being forced to carry a number of people beyond its natural capacity. The ethical questions focussed on this paper pivot on the finite status of the natural resources provided by planet Earth. If it is a fact, as I suppose it is, that the planet has a set capacity and, therefore, its resources are limited, how should we ethically respond to this situation? In other words, what moral responsibilities are engendered by the limited nature of the natural resources of the planet? This paper provides some ethical suggestions on how we might respond to the challenges posed by population changes. Specifically, given that the problems of increased consumption have to do directly with extracting more resources from the planet, the solution will encompass suggesting means – ethical ones – to manage or reduce population growth. In pursuing the task of proposing ethical means to positively intervene in our relationship with the natural environment, its natural capital, this paper is divided into two major sections. The first section appeals to the environmental ethics framework, to inform our approach to the environment and our duties towards it, or, at least, some components of it. At the heart of the environmental ethics framework is the question of the boundary of morality. Specifically, the debate centres on whether we require an ethical framework that limits our duties to human beings or one that locates it beyond human beings. The consideration which emerges in this section is that robust ethical frameworks that could point us towards an ethics that requires us to be respectful towards the environment, are possible, which will have serious implications for our approach to the environment, how we relate to it, and what within it counts as a resource for human consumption. The second section focusses on the ethics of birth. It does so via the debate in moral philosophy regarding abortion and its direct relation to the question of contraceptives. It suggests practical ways, drawing from ethical perspectives, to reduce fertility. Section One: Environmental Ethics What is the relationship between human beings and the natural environment? One obvious answer is that human beings are located and navigate their entire lives, be it as individuals or through family, cultural groups and institutions, in the natural environment. It is our home, our only home, and we cannot begin to imagine or conceptualise human lived experience outside of it. It provides the very context for what is humanly possible. All that I have stated above is not controversial. We could ask – a somewhat controversial question – do we have ethical duties towards the natural environment, or at least some of the non-human components in it, like animals? In other words, should we think of ourselves as having duties towards mountains, rivers, forests, animals, oceans and so on? The answer we provide to this question is important for its own sake, as it will challenge both our influential ethical theories and our attitudes about how we ought to relate to the natural environment. But this question is also crucial because it has direct implications regarding how we ought to relate to nature at an “engineering” level. By engineering level, I mean we have to decide what technological means to use to produce goods in the world. This question is not a purely empirical or scientific question, it is also one that is deeply ethical. It involves what scholars in Development Ethics describe as “the ethics of means”. The underlying idea here is that “the technological, cultural and economical policies and actions” we exercise in the context of development must be ethically sound (Goulet, 1996; Crocker, 1991). The ethics of means accentuates a view which rejects the claim that the ends justify the means. Economic growth, and the means we employ to achieve it, must be subjected to ethical considerations, where ethics is primary and the pursuit of economic growth secondary (Sen, 1987). The means themselves, the “how part”, which involves the choice of technology we use to achieve our production-method-and-goals, must be ethically justified. The engineering aspect, do not forget, is crucial in the process of converting natural resources to goods which human beings can consume. So here, we are confronted by ethical reflection on two levels. On the one hand, we are asking questions about whether the whole or parts of the natural environment are objects of moral concern towards which we have duties of respect – it is this question that lies at the heart of environmental ethics. On the other hand, we have the question about how we ought to go about choosing and using technology to produce goods for human consumption – the ethics of means. Both levels of ethical reflection are crucial for how we relate to the environment. Do we relate to the environment merely as a resource? Or do we have to nurture respectful attitudes and duties towards it? In the rest of this section, I focus on the first of these two questions – the question of (1) “who else” in the natural environment is the object of direct duty other than merely human beings? and (2) what means are ethically justified to produce goods for human consumption? I hope it is clear how both questions are central in ethically relating to a finitely resourced planet. These questions have direct implications for human consumption. The first question involves concerns about what we may consume in the natural environment. The second question involves concerns about how we go about producing the things we may consume. Underlying these questions about how to relate to a finite planet and its resources are the values of dignity (respect), human well-being and intergenerational justice. These values are directly connected to human survival or even flourishing, for the current and future generations. For the sake of focus, in relation to the environmental ethics, I limit myself to the case of animals. The inquiry is centred on whether we are ethically justified to continue regarding them as a mere resource for human consumption. I select this question because it has direct implications for the environment and climate change insofar as the choice of what we consume and the methods of production we use have environmental costs. Some options have high and some low environmental costs. The question of environmental costs is crucial because it requires us to choose options that are sustainable. Moreover, my focus on animals might offer us a useful way to think about our duties to other finite resources in the environment as we proceed to search for a robust ethical framework in relation to managing finite natural resources. Our Relationship with Non-Human Components in Nature (Animals) The central question for our consideration here is whether we should see ourselves, being moral agents, as having duties towards non-human components in the environment, or even the environment itself. This question arises because of the negative consequences our attitudes and conduct has had on the natural environment. The large-scale degradation of the natural environment could be traced, in part, to our moral theories and the attitudes they foster in us towards it. The concern raised in the literature on environmental ethics is that many of our ethical theories circumscribe the enterprise of morality strictly to human-to-human relations. That is, ethical concerns are strictly limited to issues revolving around human well-being and/or dignity. The implication of such an approach to ethics is that it tends to exclude all other elements of the natural environment from the moral purview, and without a place in the moral community, they remain exposed and vulnerable to all kinds of use or, even, abuse. What is worse, such (ab)use of other non-human elements cannot be condemned, as it is not immoral, since the environment is not a proper object of moral obligations. There are at least two prominent ethical theories that have come to shape our relationship with the environment and its contents. One is religious: a Christian ethical perspective that accounts for the highest value in the world in terms of human beings as bearers of the divine image (Schroeder & Bani-Sadr, 2017). With this view, only human beings bear the divine resemblance which creates responsibilities of respect towards them. Since almost all of nature is devoid of the image of God, it is not an object of moral concern. Another theory is secular, and it explains the highest good in terms of rationality, where only entities with the capacity for rationality belong to the community of respect (Rosen, 2012). The upshot of such religious and secular ethical views is that we can “fill the earth” without any concern, and we can go on to “subdue it”, that is, extract as much as is possible from it – for our consumption – without any concern (Jamieson, 1996). These influential moral theories have tended to be human centred in ways that foster attitudes of total disregard towards the environment. Environmental ethics emerges as a concern and response to these human-centred theories and the negative attitudes they foster in society towards the environment (Brennan & Lo, 2002). The moral intuition behind many scholars’ criticism of and scepticism towards human-centred ethical approaches is that on the one hand, it does not tell us the whole story about the nature and scope of our duties towards the planet. The intuition is that surely our moral debts ought to go beyond human beings. On the other hand, human-centred moral theories reflect a false story about the environment and other non-human inhabitants in it. Theories and policies that limit the scope of morality to human beings and their well-being are described as “anthropocentric” (Grey, 1993; Almiron & Tafalla, 2019). The idea of “anthropocentrism” literally means the policy or ethical theory under consideration is human centred, which implies that only human interests, well-being and goals should matter in our moral calculus (Behrens, 2011). All other elements of the environment can be rightly regarded as a mere resource for human consumption, or tools to make such consumption possible. If all value is intrinsically connected only with the human good and the environment in its totality is reduced to a mere resource, then there is no ethical limit to the extent of the damage that can be done to it. Environmental ethics emerges precisely as an objection to this kind of theorisation about the environment and its non-human components. It is an attempt to elevate the imagination of our moral systems to carefully think about the place of the environment in our moral schemes. One way to appreciate the possibility that environmental ethics could challenge us to rethink the place and status of the environment in our ethical frameworks, policies, attitudes and conduct, is by focusing on animals for heuristic purposes. I focus on animals, and I include fish in the community of animals, for the sake of making a point about how environmental ethics could challenge us to rethink what falls within the scope of human consumption and our general attitudes towards the environment. The issue of animals (and fish) is crucial because they are an important aspect of our culture in terms of consumption, but we have tended to ignore ethical concerns around our duties towards animals. Notice that the Royal Society report on population and its impact on the planet make this point about animals and fish as a requirement for human consumption: A greater number of consumers exist than ever before because of population growth. Economic development has meant that the material needs of societies have become more complex, reflecting aspirations as well as basic needs. Over the last sixty years total fish production has increased nearly fivefold … and total world meat production fivefold ... (2012: 11). A serious ethical and policy implication related to such increases in the production of fish and animals is its environmental costs. Note, for example, that a recent study on the environmental costs of meat-and-fish production indicates that “the highest impact production methods were beef production and catfish aquaculture” (Hilborn, 2018). They used four metrics – energy use, greenhouse-gas emissions, release of nutrients, and acidifying compounds – to measure the environmental cost of meat-and-fish production, among others. At an environmental policy level, it occurs that we need to be intentional in terms of supporting the production of certain foods and we equally need to distance ourselves from others precisely because of their associated high environmental costs. Meat production, as indicated in this study, has a high environmental cost in as far as it has adverse consequences for the environment. In this light, environmental ethics could come in handy in relation to challenging our cultural, institutional and individual attitudes and conduct in relation to animals (and possibly fish) production and consumption. Environmental ethics operates with the moral intuition that our exclusion of animals, for example, from the community of respect, is premised on arbitrary and unjustified human prejudice and greed. Some scholars of ethics argue that animals do reach the minimum threshold for moral consideration warranting moral attention and respect (Regan, 1987; Singer, 2009; Behrens, 2011; Horsthemke, 2015; Metz, 2017). There are several ways to capture the minimum threshold for inclusion in the moral community, where “one” (whatever object or entity that might be referring to) may be worthy of moral recognition and respect. One influential model proposes “rationality” as a minimum standard for inclusion for moral candidacy. The problem with appealing to rationality is that it does not only exclude animals from the moral community. It excludes more than our moral intuitions and standards would permit, since it also disturbingly excludes infants and people living with serious mental disabilities (Kittay, 2013). Very few of us believe that people living with serious cognitive disabilities are not objects of ethical respect in their own right. However, taking rationality as a standard of being a member of the moral community has the unpalatable implication of excluding beings we would naturally include as objects of ethical concern, such as infants. Another influential moral theory proposes “sentience” as a minimum threshold for inclusion in the moral community (Singer, 2009). Sentience refers to the ability to experience suffering and/or joy. With this view, the worst evil in the world is pain and suffering, and the good involves joy or happiness (George & Lee, 2009). The implication of this view, which is more inclusive than typical anthropocentric theories, is that animals do have a moral standing, and, as such, deserve moral recognition, protection and respect. It is in this light that Tom Regan commented: I regard myself as an advocate of animal rights — as a part of the animal rights movement. That movement, as I conceive it, is committed to a number of goals, including: the total abolition of the use of animals in science; the total dissolution of commercial animal agriculture; the total elimination of commercial and sport hunting and trapping (1987: 179). I may not entirely agree with Regan regarding the first point on the use of animals in science. I do, however, believe many of us can agree with him on the points involving commercial animal agriculture, more so that we know its environmental costs, and the use of animals for hunting and entertainment. The underlying concern and objection informing animal ethics and animal rights movements is that animals, as components of nature, “are not merely a resource for human consumption”, but they warrant respect in their own right so they can pursue a good life according to the possibilities inherent for their species (Nussbaum, 2017). An animal free from unnecessary human interference can go and live its life to the fullest. To think of animals as objects of ethical concern, and not as mere resources for human consumption, has serious implications for human consumption and the environment. For example, Peter Singer, in his elaboration of animal liberation observes that the acceptance of the moral idea that animals are not a mere resource for human consumption – they can suffer or enjoy their own lives in their own-species-related way – has revolutionary implications for human beings and consumption tendencies. He observes that it will cause a massive change in our fridges, eating tables, restaurants, forms of entertainment, as animals and meat will no longer be a part of our diet. The entire meat industry would have to close down or drastically be reduced in respect of the rights of or duties we owe to animals. This ethical revolution in relation to our attitudes about animals would radically challenge us to rethink animals and fish as a resource for human consumption. The implication is that to mitigate the increasing consumption of meat and fish, which has a high cost on the environment in terms of energy use, greenhouse gas emissions, release of nutrients, and acidifying compounds, we may seriously have to consider promoting and educating about less costly food types and production methods. In this light, policymakers may have to promote more plant-based food choices, as they tend to be less demanding and costly on the environment, and they promise to have positive consequences for human well-being now and in the future. The one interesting conclusion we might draw from this rough discussion of environmental ethics, is that it offers us a positive way to approach the planet and the resources it offers. Environmental ethics requires us to abandon anthropocentric moral theories and policy options in relation to the planet. One consequence might be the promotion of plant-based foods and their accompanying low production costs in relation to the environment, which might have positive consequences for the environment and future generations. This means, our policy options in relation to consumption and production of food could be interpreted within a non-anthropocentric framework, which requires us to take a generally humble and respectful attitude towards the environment. The pressing implication gleaned from environmental ethics concerns what in the natural environment counts as a resource for mere human consumption. Here, we suggested that some interpretations insist on the general removal of animals as a resource for human consumption. One wonders what else an extensive analysis of environmental ethics might reveal in relation to what counts as a resource and the kind of attitude we ought to have towards the environment. There are two other useful moral-theoretical frameworks associated with environmental ethics, which might be helpful in terms of rethinking our attitudes towards the environment. Here, we might distinguish between weak anthropocentrism as opposed to the strong versions of it – the latter are represented by the religious and secular theories mentioned above. Bryan Norton (1984: 131) recommends weaker forms of anthropocentrism in as far as they “provide a basis for criticising individual, consumptive needs … providing an adequate basis for environmental ethics”. The insight here is that it is not only human interests that matter, we also need an approach to the environment that will be robust enough to identify and criticise greedy, excessive and often unnecessary human consumption, and that will foster respectful attitudes towards the environment (Passmore, 1974; Bookchin, 1990). This form of anthropocentrism is weak in that it recognises that some elements of nature, like animals, might have value in their own right, but it still assigns greater value to human beings. In other words, in a trade-off situation where one has to choose between saving a human being or an animal, all things being equal, one ought to save a human being because they have greater value. Very close to weak anthropocentrism is the “enlightened anthropocentrism”, which, like stronger versions of anthropocentrism, only locates value in human beings (Brennan & Lo, 2002). Unlike strong anthropocentrism, it recognises our general strong indirect duties towards the environment. This view requires us to be kind and respectful towards the environment because how we relate with it has direct consequences for human well-being. From this view, we might have to minimise our consumption of beef in order to manage its environmental costs and consequences. From this perspective, it is not wrong to eat meat per se, it is, however, imprudent to do so in large scale, which might end up harming the well-being of present and future generations. Weak anthropocentrism also has direct implications for the second question involving the means, or the how part, of producing consumptive goods. The general crucial point facing governments and policymakers is the awareness that we have an ethical duty to be critical and ethical when we exercise options for pursuing our goals of development or economic growth (Crocker, 1991). The Industrial Revolution was extremely costly, ethically speaking, for many aspects of the natural world. The most important goal of industrialisation was economic growth, but the growth came at a high cost to the environment and human beings. We saw in it the worst forms of environmental degradation and human exploitation. Efficient production plants were established everywhere in Europe and the Americas without any sensitivity to the environment and the damage done to it. The mantra was development or economic growth. Weak anthropocentrism promotes policies that require us to take approaches to economic growth that are sensitive to people’s cultures, by way of encouraging their participation in decision-making, respecting other non-human communities on the planet – animals, rivers, mountains – so that Earth remains habitable and beautiful. Section Two: Ethics of Birth This section focuses on another aspect that directly affects population growth: fertility rates. If we are serious about managing population growth and changes, it is absolutely essential for us to have clear ethical and policy thinking around matters relating to fertility. To properly situate the discussion of ethically reflecting on birth and fertility, I look to the debates in moral philosophy on abortion. I do not enter this debate for its own sake, I engage in it because it is directly related to the question of pregnancy, birth and contraception, which speaks to the theme of population growth. The discussion on abortion is important in contexts where you have unwanted pregnancies due to poverty, lack of economic opportunities, no access to contraceptives, and general lack of decent sexual education (Royal Society, 2012; Bongaarts et al, 2012). Reflecting on debates pertaining to abortion and contraceptives is vital if we are to make progress in addressing population growth, considering researchers predict that the human population might increase to up to 15 billion by 2100. It is also worth noting that as much as over 50% of this increase might come from Sub-Saharan Africa (Royal Society, 2012). We need to have policies grounded in clear ethical perspectives regarding how to reduce fertility rates. The first pressing ethical question focuses on whether abortion is ethically permissible or impermissible. The aim here is not to come up with a definitive or final statement on this debate, but to show how it might contribute on deliberations and policies aiming to manage population growth in ways that are ethically robust. The question pertaining to the permissibility/impermissibility of abortion (and contraceptives) is important for its own sake, as it will normatively guide us regarding our duties, or lack thereof, towards foetuses. This question is also significant as it relates directly to questions of population growth, where it might play a crucial role in informing robust family planning strategies and programmes that will speak directly to reducing fertility rates. To get a concrete sense of how abortion debates affect population policies, consider the implications of this debate. If abortion is morally justified, that is, if it is permissible to terminate a foetus, then a robust family planning policy might include the roll out of accessible and affordable, if not free, abortion clinics to manage population by responding to unwanted pregnancies. It might also require expanding access to reliable and healthy contraceptives. If, however, abortion is impermissible, then it also has direct implications for our strategies and programmes to manage fertility rates in the world. Thus, ethical considerations relating to abortion are crucial because we are informed that: Voluntary family planning is a key part of continuing the downward trajectory in fertility rates, which brings benefits to the individual well-being of men and women around the world (Royal Society, 2012). To get a sense of how ethics might help to reflect on issues of the ethics of birth and to reduce fertility rates, we have to explore ethical theories, albeit our exploration aims merely to be cursory. To begin, we can distinguish between religious and secular theories of abortion. It is worth noting that it is largely religious theories of value that usually forbid abortion. For example, Christian ethics tends to consider abortion to be immoral, and therefore impermissible. Catholic ethics considers abortion to be an instance of murder, which violates the divine commandment that forbids killing (Tooley, 1972). Many of these theories depart from the assumption that from conception, at the embryonic stage, we are dealing with a being that bears divine worth (Morgan, 2013). On the other hand, secular views generally consider abortion to be permissible, particularly before the first or second trimester, since the foetus has not developed crucial value-endowing properties like sentience (Metz, 2012). There are scholars, however, who consider abortion to be permissible throughout the entire pregnancy, thus granting women power to be the final arbiter over whether to abort or not (Warren, 1997). It is also interesting to notice that there is a continuity between a moral theory in relation to its recommendation, whether it permits or forbids abortion and its stance on the permissibility of contraceptives. If, for example, as most religious views tend to do, it does forbid abortion, it will also quite naturally forbid the use of contraceptives. If, on the other hand, as do many secular theories, it does permit abortion, then it will tend to allow individuals to use contraceptives. So, the debate on abortion should generally be understood to have serious consequences for our moral use – permissibility or impermissibility – of contraceptives, which has direct implications for implementing robust family planning education and programmes. With more societies, however, including those in developing countries, coming to embrace secular cultures, they are more open to abortion as a way to manage the problem of unwanted children. Moreover, it is very important to appreciate that questions of abortion and contraceptives can be mediated at a cultural level. Many African cultural beliefs, for example, tend to look unfavourably on abortion. Often, upon careful analysis, it will emerge that these cultural groups forbid abortion not so much on ethical grounds, but on the basis of controversial metaphysical commitments. I consider the metaphysics involved controversial not in a pejorative or patronising sense, but in light of our intuitions informed by science and the plurality of competing and contradicting views on such topics. To get a sense of controversial metaphysics, consider the case of an African practice which requires that those who are serving a king should be killed on the day of his burial and be buried with or around him, so as to accompany and continue serving him in the afterlife (Wiredu, 1996). What is controversial in this practice is the belief, a metaphysical one, that there is an afterlife. Note, my claim is not that the belief is false, I am simply claiming that it is controversial. It is upon this controversial belief of the afterlife – and that the king would still need his vassals around him to serve and attend to him in light of his status as a king – that the practice of killing people and sending them off as servants to attend to the dead king in the afterlife was justified and generally accepted. Analogously, some beliefs about the permissibility of abortion in some regions might rest on such cultural or metaphysical beliefs. Note, for example, that African scholars tend to construe an African community as constituted by three distinct members: the unborn, the living and the living dead (Magesa, 1997; Bujo, 1998; 2001; Ramose, 1999). The category of the unborn is taken to be an actual community of those that have not yet made it into the real world but will be joining it in the near future. We also have the community of the living, you and me. The third community consists of those who continue to live after their physical death as spiritual members of the community. From this African view, abortion is impermissible because it harms the unborn, who are living in a state of readiness to join the living (Molefe, 2020). It is upon this controversial view about the existence of the community of the unborn that many individuals and groups in Africa believe in the impermissibility of abortion and contraceptives (Tangwa, 1996; Bujo, 2001). Here, I wish to propose an approach which might assist us to resolve the challenge posed by cultural beliefs that may forbid abortion. This intervention does not suggest that we should not have robust discussions about abortions, its implications for family planning, and our strategies to manage population growth. These debates are important, but it is crucial to underscore the relation between religious and secular ethical theories and the inclination to forbid or permit abortion and contraceptives. My intention is to suggest ways in which conceptual clarity might be useful to distinguish proper moral and metaphysical issues. It is easy to conflate cultural or metaphysical for proper ethical issues. The examples of the practices of servants of the king being killed to accompany their king challenge us to separate pure ethical from metaphysical issues. I take it many of us might contest this practice, even among Africans, at several points. For starters, one might question the metaphysical presupposition that informs this practice – the belief in the afterlife. One must rightly ask critical questions, without being condescending toward those who embrace the belief, concerning why we should accept that there is an afterlife in the first place. Asking this question is important for its own sake because it might teach us a lot about what we believe about the world and our destiny as human beings. It might lead us to think critically about the implications of our deeply held beliefs. One might also question the ethical implications of such a belief in terms of whether they coincide or diverge from our deeply held moral intuitions. In other words, we might ask whether it is morally correct to kill another person so that they can accompany another one. Here our concern is to evaluate the ethical appropriateness of the practice of killing innocent persons and cutting their lives short for the sake of another. The point I am trying to make, in a roundabout way, is the importance of not only education in general, but also proper ethical education. Education about the debates inherent in our varied cultures and beliefs on issues that might affect policy and our goals for managing population growth. The theoretical challenge I am bringing to attention is the ability for us, as we evaluate cultures on controversial issues like those of abortion and contraceptives, to distinguish mere metaphysical from proper ethical issues. But although in most instances we should take upon ourselves a duty to be sensitive and respectful towards the diversity of human cultures and their metaphysical beliefs, we should never elevate cultures to be an ethical standard. We should also note that some cultural beliefs are objectionable on ethical grounds – killing servants to accompany the king, for example. Even in the debates on abortion, as societies adopt secular approaches like those anticipated in human rights policies, we will be able to set up proper family planning services that are compatible with rolling out abortion clinics and making contraceptives easily accessible. Moreover, in the evaluation of our cultural beliefs, in relation to abortion and contraceptives, we should be careful of the undue and continued influence of cultural norms riveted on the undemocratic values of patriarchy and unscientific basis (Gillighan and Snider, 2018). Often, human cultures frown on abortion and contraception because there is a tendency, sponsored by patriarchy, to reduce women to mere makers of children. It is for this reason that we need to imagine robust education contexts and programmes for both women and men, which are emancipatory in their orientation and empower women to take charge of their own lives, which surely ought to involve voluntary family planning options. The research clearly indicates that there is a relationship between access to education and women’s attitudes towards family planning, abortion and contraception, which will definitely have implications for population growth (Potts et al., 2009). The expansion of meaningful access to education for women, in particular those living in areas with high fertility rates, who have the potential to contribute greater proportions towards population growth, will have a telling consequence. As education and economic opportunities open and expand for women, we might expect positive developments in relation to our efforts to manage population growth. Martha Nussbaum (2004: 327 - 328) in an interesting paper, Women’s Education: A Global Problem, makes the following remarks: Women’s education is both crucial and contested. A key to the amelioration of many distinct problems in women’s lives, it is spreading, but it is also under threat, both from custom and traditional hierarchies of power and from the sheer inability of states and nations to take effective action. In this article, I shall try to show, first, exactly why education should be thought to be a key for women in making progress on many other problems in their lives. I think Nussbaum is correct to identify the education of women, or the lack thereof, as a global problem. Many societies and countries still fail to equalise women by empowering them through access to robust and meaningful education, and to create conditions through which they can liberate themselves from the shackles of traditional hierarchies of power. It is through access to education and economic opportunities that women can make progress in resolving many challenges facing them such as poverty and gender-based violence. The suggestion being made here is a macro-ethical-and-political one, where global and local policymakers need to prioritise the education of women, as a group, particularly those from poorer regions of the world. The prioritisation of women in education is decisive in as far as it has direct implications for solving many problems in the world. Two of those problems stand out in the context of our discussion on population growth: one is that between one to two billion people living in extreme poverty and the other is high fertility rates. With regards to the first, there is an urgent need to pull the over one billion people out of the absolute poverty they currently live in. This we need to do in ways that raises consumption without further depleting limited natural capacities. The second problem resonates with the observation that as we meet the sustainable development goals, and, as women gain access to education, fertility rates tend to drop (Royal Society, 2012). Hence, the macro-ethical intervention to prioritise their education will go a long way in our quest to addressing population growth, by addressing their access to education and economic opportunities. Conclusion This paper offered cursory ethical reflections on issues of population growth. Its discussion was situated within the context of seeking to achieve the goals of reducing population growth and understanding how to respond to the increasing depletion of our finite resources. To do so, it suggested that environmental ethics and the ethics of birth might offer useful ways to respond to challenges posed by population growth. In relation to environmental ethics, I suggested how it could point us to earth-friendly policies, which might challenge us to rethink some of our habits and cultures that rely on the production of meat and fish, which has relatively high costs for the environment. The weak and enlightened versions of anthropocentrism might also challenge us to take a humble and sensible approach to the environment for the sake of ensuring the well-being of the current and future generations. Such approaches could involve making more judicious choices in relation to how we relate to the finite resources of the planet, and how we might maximise them for the benefit of all, including future generations and non-human elements in nature. In relation to the ethics of birth, I pointed to the relationship between abortion and contraceptives. If a moral theory forbids abortion, it is also more likely to forbid the use of contraceptives. While if it does permit abortion, it is also more likely to permit contraceptives. In addition, I indicated that religious ethical theories and traditional societies tend to forbid abortion, whereas secular and more modern societies tend to permit it. This general awareness of the debates about abortion is important because it will inform how policymakers frame their efforts to promote a robust culture of family planning, which has direct implications for increasing or decreasing fertility rates. I concluded the last section by accentuating the importance of education, particularly for women, in addressing poverty and fertility rates. The more women have access to meaningful education and economic opportunities, the more they may adopt different family-life options, and this may drastically reduce fertility rates. References Almiron, N. and Tafalla, M. 2019. Rethinking the Ethical Challenge in the Climate Deadlock: Anthropocentrism, Ideological Denial and Animal Liberation. Journal of Agricultural and Environmental Ethics 32: 255-67. Behrens, K. 2011. African Philosophy, Thought and Practice and Their Contribution to Environmental Ethics. Johannesburg: University of Johannesburg. Bookchin, M. 1990. The Philosophy of Social Ecology, Montreal: Black Rose Books. Brennan A. & Lo, Y. 2016. Environmental ethics. In: Zalta EN (ed) The Stanford encyclopedia of philosophy. [Online] Available at: https://plato.stanford.edu/archives/sum2021/entries/ethics-environmental/. 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[Online] Available at: https://plato.stanford.edu/entries/grounds-moral-status/ [accessed: 13 October 2019]. Magesa, L. 1997. African religion: the moral traditions of abundant life. Orbis Books, New York. Metz, T. 2012. An African theory of moral status: a relational alternative to individualism and holism. Ethical Theory and Moral Practice: International Forum 14:387-402. Meybeck, M. 2003. Global analysis of river systems: from Earth system controls to Anthropocene syndromes. Philosophical Transactions of the Royal Society B 358: 1935-1955. Morgan, L. 2013. The Potentiality Principle from Aristotle to Abortion. Current Anthropology 54: 15-25. Nussbaum, M. 2004. Women’s Education: A Global Challenge. Signs 29: 325-355. Nussbaum, M. 2017. Working with and for Animals: Getting the Theoretical Framework Right, 94 Denver Law Review. 609. Passmore, J. 1974. Man’s Responsibility for Nature, London: Duckworth, 2nd edition, 1980. Potts M, Campbell M, Gidi V and Zureick 2011. Niger: too little too late. International Perspectives on Sexual and Reproductive Health 37: 95-101. Regan, T. 1987. The Case for Animal Rights. In Advances in Animal Welfare Science 1986/87. vol. 3., edited by M. W. Fox and L. D. Mickley, 179-189. Dordrecht: Springer. Royal Society 2012. People and the Planet. Royal Society: London. Schroeder, D. & Bani-Sadr, A. 2017. Dignity in the 21st century Middle East and West. SpringerOpen, New York. Singer, P. 2009. Speciesism and Moral Status. Metaphilosophy 40: 567-581. Tangwa, G. 1996. Bioethics: an African perspective. Bioethics 10: 183-200. Tooley, M. 1972. Abortion and Infanticide. Philosophy and Public Affairs 2: 37-65. Trevennon-Jones, A. 2022. The Next Frontier: South Africa and Participatory Local Government in the Anthropocene. Journal of Inclusive Public Policy 2: 44-55. United Nations (UN) 2011. World population prospects: the 2010 revision. Department of Economic and Social Affairs. United Nations: New York. United Nations Fund for Population Activities (UNFPA) 2011. The state of world population 2011: People and possibilities in a world of 7 billion. United Nations Population Fund (UNFPA): New York, NY. Warren, A. 1997. Moral Status: Obligations to Persons and Other Living Things. Oxford: Clarendon Press. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 © 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. 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 February 2022 Author: Mariaan Webb Editor: Daryl Swanepoel Content Abbreviations & acronyms Introduction Identifying weaknesses Bureaucratic impediments Central planning shortcomings Education, training and skills development Energy pricing and regulation Infrastructure backlog Restricted local opportunities Stagnant refining sector Sustainability of IPP model Uncertainty about end-state of energy Suggestions for fostering growth Conclusion References Abbreviations & acronyms Introduction South Africa’s well-documented electricity crisis is a binding constraint on economic growth and solving power supply challenges is one of the key interventions needed for faster, more sustainable and inclusive economic growth. Ageing power stations and underinvestment in maintenance, compounded by years of corruption and maladministration at State-owned power utility Eskom, have weakened the electricity system, resulting in debilitating load-shedding that has become the default in managing grid stability when demand exceeds supply. Plant availability, as evidenced by the energy availability factor has fallen to 62%, against a target of 70% (Eskom, 2022). At the same time, electricity prices have increased by 175% over the past decade, which, combined with unreliable supply, has constrained economic growth as customers lower their demand and adopt alternative sources of power (Nersa, 2021). The Council for Scientific and Industrial Research (CSIR) has published data that show 2020 and 2021 were the worst years on record for load-shedding. According to a 2020 report by the CSIR, load-shedding is estimated to have cost the economy between R60-billion and R120-billion in 2019, when the country experienced 530 hours of outages, amounting to 1 353 GWh. The total economic impact of load-shedding over the past ten years could be as high as R338-billion (Wright & Calitz, 2020). Government acknowledges that power constraints must be addressed, with several policy interventions and new energy generation projects set to come on line over the next few years to close a capacity shortfall that is estimated to be between 4 000 MW and 6 000 MW. Business Leadership South Africa has called for the accelerated procurement of additional electricity from independent power producers (IPPs), potentially doing away with ‘bid windows’ in favour of procuring “on an ongoing basis as the situation demands” (BLSA, 2021). While stakeholders agree that there are no simple solutions to South Africa’s energy crisis, there is a need to identify creative, short-term measures to help better manage and stabilise the situation, while simultaneously advancing South Africa’s low-carbon, clean energy transition. South Africa has secured an initial offer of $8.50-billion (about R131-billion) to fund a just-transition to a low-carbon economy by investing in renewable energy, green hydrogen and electric vehicles (European Union, 2021). Stabilising electricity supply will help improve business confidence, improving sentiment towards South Africa and making it more attractive to foreign and domestic investors. The Inclusive Society Institute (ISI) met with energy experts in February 2022 to gather sectoral insight for a broader research project that will culminate in a new blueprint for economic growth and development. This report is a summary of discussions with industry participants, whose expertise pertain mostly the electricity sector, as opposed to the energy sector. Identifying weaknesses Bureaucratic impediments Bureaucracy and overregulation are considered as structural impediments that make it difficult for South Africa to achieve meaningful economic growth. Officials are sometimes fixated on compliance requirements, instead of seeing the ‘bigger picture’. More rules and regulations are therefore not seen as the answer to subvert fraud and corruption, instead inhibiting delivery. Concern about the level of compliance necessary in undertaking the procurement involved in systemic power system maintenance has recently been expressed by top management of Eskom. Central planning shortcomings The energy sector lacks a centralised, coordinated approach to synergies in the value chain. For example, a lack of coordination in the energy value chain, made worse by security weaknesses, led to a situation where the Richards Bay Coal Terminal’s export volumes in 2021 dropped to the lowest level since 1996. That, at a time when global coal prices were at record levels, resulting in a missed opportunity for the country. Education, training and skills development The quality of South Africa’s education and training system has been highlighted as an area of concern. The basic education system is considered flawed, with poorly performing teachers, poor work ethic, a lack of community and parental support, and poor control by education authorities, all exacerbated by low levels of accountability. The result is learners that lack discipline, high levels of absenteeism and poor performance in essential areas of mathematics and literacy (Mouton et al, 2012). As the basic education system informs the tertiary sector, its shortcomings are widely felt. While there is an opportunity to draw South Africa’s unemployed youth into the energy sector, there is a risk that the country may not be able to fully transition into a new technological model and sophisticated value chains, if it does not have the requisite domestic capabilities. There is a view that South Africa is not imparting its youth with the correct skills for the transitioning energy sector. Energy pricing and regulation The entire regulatory regime needs to be rethought to consider the purpose it serves, the value that it adds and the capabilities it unleashes. The point was made that the National Energy Regulator of South Africa (Nersa), which sets and approves tariffs, must review its policies. Nersa’s determinations and tariff approvals could potentially have major implications for the fiscus and mispricing has been a major cause of Eskom’s unsustainable debt problem. Nersa released a consultation paper in September 2021 to develop a new price determination methodology, arguing that the revenue-based methodology has fallen short in providing stable prices. Infrastructure backlog There is a significant backlog in infrastructure investment, which is vital to economic recovery and growth (World Bank, 2022). The deficit cuts across many different sectors, including energy, water and sanitation, transport, digital infrastructure and housing, among others. The National Development Plan envisions the ratio of gross fixed-capital formation to gross domestic product to be between 25% and 30%. Currently, the ratio is estimated at 14% to 16%. While the deficit can be attributed to a shortage of funding, participants have noted that the issues run deeper. It is argued that, often funding, in a variety of forms, is available, but projects are not well planned, implemented or completed. Tenders are another area of concern, mirroring an issue that was raised by the construction sector during a previous ISI workshop. It is argued that the time that it takes to award a tender is too long and that the ratio of tenders that are awarded is too low. The tender process has been described as onerous and complicated, while political influence also plays a role. There is also a lack of people with the required skills and competency, especially at municipal level, to handle tenders effectively and to manage infrastructure throughout its life cycle. At municipal level, many people with valuable skills and experience are either leaving municipalities or are not in the right positions to make critical decisions that are needed for economic development. Restricted local opportunities South Africa does not focus enough on creating local opportunities and developing local supply chains. Too much work is outsourced to foreign contractors or companies, instead of using local expertise or accumulating the required skills and expertise. Eskom’s flagship Battery Energy Storage Systems project, which involves the development of a 360 MW storage system at a substation in Vredendal, in the Western Cape, has been cited as an example of a missed opportunity to develop the local supply chain. According to a participant in the ISI discussion, project criteria, in many instances, were not conducive to South African companies taking part. Competitiveness is a serious constraint to local manufacturing, with the country struggling to compete, for instance, with the cost of solar panel manufacturing in China, or other Asian manufacturing hubs. Powering up a competitive manufacturing landscape in which products that are used not only domestically, but also have export potential, are produced will be key to establishing local supply chains. Stagnant refining sector The crude oil refining industry has for years struggled with financial viability, ageing infrastructure, power interruptions and the need for massive capital investment to produce cleaner fuel. Many refineries have closed in recent years, including the Engen refinery in eThekwini, in December 2020, and the Astron Energy refinery in Milnerton, in mid-2020. The Engen refinery will now reopen as a fuel-storage facility, while the Astron refinery may restart “at some point” this year (Business Report, 2022). Sapref, South Africa’s biggest crude oil refinery, jointly owned and operated by BP South Africa and Shell Refining South Africa, is the latest to announce that it will “pause” refinery operations from the end of March 2022, for an “indefinite period”. Concerns have been raised about the refining industry’s preparedness for the future, especially in preparation for the roll-out of more electric vehicles in the country. Sustainability of IPP model The sustainability of the IPP model has been questioned, given that it is predicated on insulating the investor, to a large extent, by providing guarantees. Although it may be politically attractive, as private-sector funding is mobilised to shift green infrastructure investment off the national balance sheet, it has been argued that guarantees create mounting financial risks to the fiscus. The National Treasury contends that contingent liability risks for IPPs represent a low risk to the fiscus, although it is considering a reduction or elimination of guarantees to reduce the stock of contingent liabilities. Treasury states in the 2022 Budget Review that a government study is under way to explore alternative support for the REIPPPP. The value of signed IPP projects, which represents government’s exposure, is expected to amount to R177-billion by the end of March 2022, decreasing to R156.60-billion in 2022/23, R137.80-billion in 2023/24 and R120.80-billion in 2024/25 (National Treasury, 2022). Electricity produced by REIPPPP projects is bought by Eskom, which is the designated single buyer, after government has entered into power purchase agreements with the IPPs. The purchases are funded through a revenue allocation in the Eskom tariff, which is determined by Nersa. The IPP model is also considered to offer limited participation for local entities, because foreign investors tend to be selective about with whom they work, an industry participant argued, stating that the programme’s true impact on broad-based black economic empowerment must be further interrogated. Uncertainty about end-state of energy There is too much uncertainty about the vision for the end-state of the electricity sector, with political, economic, technical and regulatory challenges reported. For instance, South Africa previously pursued a now-abandoned model to separate the distribution division from Eskom and to merge it with the electricity departments of municipalities to form a number of financially viable regional electricity distributors. Instead, Eskom is now being restructured, set to be split into three divisions – generation, transmission and distribution. The legal separation of the transmission unit along these lines has started and will help open the grid to private suppliers. Suggestions for fostering growth Conclusion South Africa’s electricity crisis is a great threat to economic and social progress, thus resolving the supply shortfall and reducing the risk of outages is one of the most important interventions that will revive economic growth. President Cyril Ramaphosa has committed to reforms to transform the industry, including lifting the threshold for electricity generation projects for which a licence is not required for projects up to 100 MW, and bolstering energy supply with the ongoing massive procurement of utility-scale power. While these reforms will take time to bear fruit, implementing some of the ‘quick wins’ that the ISI energy sector roundtable discussion identified, could have immediate positive impacts and provide the economy with breathing space to catalyse some of the more complex opportunities that are presenting themselves. References Business Leadership South Africa. 2021. Press release: The impact of loadshedding, November 15, 2021. [Online]. Available at: https://hub.blsa.org.za/energy/press-release-the-impact-of-load-shedding/ [accessed: February 22, 2022]. Business Report. 2022. South Africa’s biggest oil refinery to ‘pause’ operations for an undetermined period, February 11, 2022. [Online]. Available at: https://www.iol.co.za/business-report/companies/south-africas-biggest-oil-refinery-to-pause-operations-for-an-undetermined-period-88a6b8b6-a3c7-4247-8426-f4702f313af0 [accessed: February 24, 2022]. Department of Mineral Resources and Energy. 2021. Renewable Energy IPP Procurement Programme Bid Window 5 announcement of preferred bidders, October 28, 2021. [Online]. Available at: https://ipp-projects.co.za/PressCentre [accessed: February 25, 2022]. Engineering News. 2022. Mantashe confirms some RMIPPPP projects won’t close, outlines six-monthly renewables procurement tempo, February 15, 2022. [Online]. Available at: https://www.engineeringnews.co.za/article/mantashe-confirms-some-rmipppp-projects-wont-close-outlines-six-monthly-renewables-procurement-tempo-2022-02-15 [accessed: February 22, 22]. Eskom. 2022. Media statement: Eskom makes major strides in its operational recovery process, cautions the path to sustainability will be long and hard, January 27, 2022. [Online]. Available at: https://www.eskom.co.za/eskom-makes-major-strides-in-its-operational-recovery-process-cautions-the-path-to-sustainability-will-be-long-and-hard/ [accessed: February 22, 2022]. European Union. 2021. Press release: France, Germany, UK, US and EU launch ground-breaking Just Energy Transition Partnership with South Africa, November 2, 2021. [Online]. Available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_21_5768 [accessed: February 24, 22]. Mouton, N., Louw, G.P. & Strydom, G. 2012. Critical challenges of the South African school systems, December 2012. [Online]. Available at: https://www.researchgate.net/publication/297722032_Critical_Challenges_Of_The_South_African_School_System#:~:text=When%20analysing%20the%20school%20system,very%20low%20levels%20of%20accountability [accessed: February 24, 2022]. National Energy Regulator of South Africa. 2021. A consultation paper to determine a new pricing methodology, October 2021. [Online]. Available at: https://www.nersa.org.za/wp-content/uploads/bsk-pdf-manager/2021/09/Consultation-paper-to-determine-a-new-price-determination-methodology.pdf [accessed February 24, 2022]. National Treasury. 2022. Budget Review 2022, February 23, 2022. [Online]. Available at: http://www.treasury.gov.za/documents/national%20budget/2022/review/FullBR.pdf [accessed February 25, 2022]. Ramaphosa, C. 2022. 2022 State of the Nation Address, February 10, 2022. [Online]. Available at: https://www.gov.za/speeches/president-cyril-ramaphosa-2022-state-nation-address-10-feb-2022-0000 [accessed: February 24, 2022]. World Bank. 2022. Databank: Gross-fixed capital formation as a percentage of GDP, 2020. [Online]. Available at: https://data.worldbank.org/indicator/NE.GDI.FTOT.ZS [accessed: February 24, 2022]. Wright, J.G. & Calitz, J.R. 2020. Setting up for the 2020s: Addressing South Africa’s electricity crises and getting ready for the next decade, January 2020. [Online]. Available at: http://researchspace.csir.co.za/dspace/handle/10204/11282?show=full [accessed: February 22, 2022]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 on Wednesday, 9 March 2022, hosted the first session of a consolidation exercise of the final phase of its economic blueprint research project. The meeting brought together several industry experts to discuss the Institute’s research with the aim to consolidate those findings into a comprehensive report to identify the themes that require public policy interventions as well as the structural reforms that need to be introduced to put South Africa’s economy onto a more acceptable growth path. The final report will include economic modelling to project the impact of such policy adjustments and structural reforms over the short to medium term. Some of the issues raised: The participants all agreed that the most pressing issue impacting South Africa’s economic growth is the energy crisis, with one pointing out that it “is a ceiling on South Africa’s economic growth potential.” An energy and infrastructure strategist noted that the private sector very often criticises government for not prioritizing the biggest challenges, and therefore trying to tackle everything at once and failing. He questioned whether a new approach should be deliberated, especially considering the severe impact of the energy crisis on economic growth. An economist also mentioned that transport and logistics have the same paralysing impact on the economy as the electricity crisis, which are all strongly interrelated. Another expert noted that while the discussions are arriving at good insights, the research needs to be refined to make it more precise and specific for the final report. A number of participants observed that general consensus exists around the importance of the pre-requisites for unlocking economic growth; however, the immediate action steps – identifying 'what' needs to be done to move the economy forward – must be prioritised and executed. What needs to be added to the narrative around these opportunities is the 'downside risk' posed by the disintegrating social fabric, lawlessness and the dysfunctional and ineffective criminal justice system. Perhaps modelling the downside and its impact on the outcomes might shift this perspective. A full report will be published in due course

Source: weforum.org 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. This dialogue with the agricultural sector was held on Tuesday, 1 March 2022. Some key points raised included, amongst others: Insufficient and deteriorating infrastructure was impeding development within the agricultural sector, especially as it relates to getting produce to markets. The great international potential was particularly vulnerable. Unreliable electricity supply was of specific concern. Public Private Partnerships (PPPs) needs to be embraced. This would, for example, help with the rapid development of current insufficient veterinary services. South African farmers receive little to no subsidies, as opposed to generous regimes abroad. This impacts the competitiveness of South African farmers. Vulnerable telecommunication infrastructure stands in the way of new data technologies that could enhance agricultural performance. The agricultural colleges need to be re-thought, re-jigged, and re-equipped, so as to ensure a pipeline of technically proficient workers in the agricultural sector. There is a need to assess the impact of mining on good agricultural land and water resources. Only half of animals are in the hands of commercial farmers. Fifty percent of animals from subsistence farm, provide only ten percent of protein on the table. They are also not geared to participate in sector, for example, the need for health and source tracking technology. Inadequate vaccine manufacturing in South Africa, and slow, complex and ineffective vaccine registration procedures and timelines. Government departments tend to be insular, working within silos. Greater cooperation and synergies need to be developed. The private sector stands ready to work with and help government. They feel they have the answers, but have to fight for access and acceptance every step of the way. A full report on the deliberations will be released in due course.

On 2 March 2022, the Inclusive Society Institute presented its proposed electoral model to the National Assembly Portfolio Committee on Home Affairs during the Public Hearings on the Electoral Amendment Bill. The institute appointed an expert panel, convened by Mr. Roelf Meyer, to undertake the work and mandated the panel to design an electoral model that will meaningfully give effect to the Constitutional Court judgement that declared the current electoral act unconstitutional, respect the boundaries set out in the Constitution, retain proportionality as a basis for representation in that it best promotes inclusivity, and which enhances representativity, accountability, and transparency. The outcome, which was a new electoral model, was presented to the National Assembly Portfolio Committee on Home Affairs by Mr Roelf Meyer, Prof William Gumede and the institutes' CEO, Mr Daryl Swanepoel. Written submission to the National Assembly Portfolio Committee of Home Affairs: Submission and comments on the Electoral Amendment Bill (B1-2022) Annexure A - Proposed electoral model for South Africa Annexure B - Boundaries for Amending Electoral Act Presentation video:

On 22 February 2022, H.E. Mr. Han Peters, Ambassador of The Netherlands to South Africa, hosted Mr. Daryl Swanepoel, Chief Executive Officer of Inclusive Society Institute of South Africa. During the meeting, the CEO acquainted Ambassador Peters with the work and experience of the Institute; and the current projects they are working on with the objective of working towards greater inclusivity within South African society. They also exchanged views about the opportunities of developing bilateral partnerships between The Netherlands and South Africa in various spheres, including Think Tanks, research and educational institutions.

On 22 February 2022, H.E. Mr Tobias Elling Rehfeld, Ambassador of Denmark to South Africa, hosted Mr. Daryl Swanepoel, Chief Executive Officer of Inclusive Society Institute of South Africa. During the meeting, the CEO acquainted Ambassador Rehfeld with the work and experience of the Institute; and the current projects they are working on with the objective of working towards greater inclusivity within South African society. They also exchanged views about the opportunities of developing bilateral partnerships between Denmark and South Africa in various spheres, including Think Tanks, research and educational institutions.

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 Advisory Council (NACAC). 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 research is now proceeding towards finalisation. An academic panel discussion was held on Thursday, 17 February 2022 to consider the proposals made in the report, and to robustly engage the proposals made in the preliminary findings. The emphasis of the deliberations was on effective mechanisms to protect whistle-blowers and the final proposed organisational structure of the NACAC).

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. 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 October 2021 Author: Mariaan Webb Editor: Daryl Swanepoel Content Abbreviations & acronyms Introduction Identifying weaknesses Construction mafia Cumbersome licensing and permitting Infrastructure constraints Competency shortcomings Long project lead times Poor planning and budgeting Skills deficit Subcontracting requirements Tenders and procurement Weak partnerships Interventions for fostering growth Conclusion References Abbreviations & acronyms BER Bureau for Economic Research DPWI Department of Public Works and Infrastructure DWS Department of Water and Sanitation IDP integrated development plans GCI Global Competitiveness Index ISI Inclusive Society Institute PPP public–private partnership Safcec South African Civil Engineering Contractors Stats SA Statistics South Africa Introduction The construction industry is diverse and is involved in projects ranging from the development of civil infrastructure, such as roads, bridges and ports, to residential and nonresidential buildings, as well as small private projects. The last decade, and 2020 in particular, has been tough for the industry. Already in deep trouble before the Covid-19 pandemic, the construction industry contracted by 20.30% in 2020, marking the sector’s fourth consecutive year of economic decline (Stats SA, 2021a). Despite some improvement in 2021, construction remains severely affected by the Covid-19 pandemic and weak investor sentiment (Reserve Bank, 2021). The industry is a key employer, especially for low- and medium-skilled workers, providing jobs to about 1.22-million people. Between March 2020 and March 2021, the industry shed 264 000 jobs (Stats SA, 2021b). Due in the main to a post-Covidlockdown rebound the sector increased employment in the second quarter of 2021, with gain of 143 000 jobs (Stats SA, 2021c). Government spending has a material impact on the health of the construction industry as it accounts for more than two-thirds of civil revenue and about 40% of nonresidential construction revenue. As a result of weakening project flow and spending by the public sector in recent years, many civil construction companies have turned to foreign contracts to survive, and an unprecedented number of big contractors have gone into business rescue or liquidation. This is largely attributed to a lack of big government contracts, late payment and the shouldering of lossmaking contracts (DPWI, 2021). The National Infrastructure Plan 2050, a draft of which was released, for comment in August 2021, can act as an economic stimulus for the industry, provided that a credible pipeline of projects is put forward. It is estimated that the cost of delivering infrastructure to meet the country’s infrastructure development needs will be more than R6-trillion between 2016 and 2040. It is estimated that the finance gap that needs to be closed is about R2.15-trillion (DPWI, 2021). The private infrastructure investment sector will be called upon to help fund infrastructure, with public–private partnerships (PPPs) expected fill a finance gap of about one-third of the amount that needs to be invested by 2050. Amendments to Regulation 28 of the Pension Funds Act will assist to mobilise resources for infrastructure. The changes will seek to mobilise a higher proportion of retirement savings for infrastructure investment, as South Africa is currently behind other countries on this indicator (Business Times, 2021). This Inclusive Society Institute (ISI) report is a summary of themes that emerged from virtual discussions, held on October 19 and November 7, 2021, with construction industry participants to gather their views on what the country must do to place it on a path of higher, sustainable, and inclusive growth. The report identifies constraints to economic growth and development, from the construction industry’s perspective, and puts forward suggestions to improve the status quo. The report is one in a series of dialogues that the ISI has held with different sectors of the economy and forms part of the institute’s economic research project to develop a blueprint for rejuvenating the South African economy. Identifying weaknesses Construction mafia The violent disruption of construction sites is one of the biggest threats to economic activity. A so-called ‘construction mafia’ has been plaguing the industry for some years, with syndicates disrupting projects and causing damage worth billions of rand. These armed groups visit construction sites and demand a share of work. In January 2020, estimated losses owing to the disruption of construction projects amounted to R40.70-billion (IOL, 2021). Criminality is affecting not only the construction industry, but is also weighing on the electricity sector with serious allegations of sabotage of power group Eskom’s infrastructure, as well as in the rail industry with unprecedented theft of cables. Eskom believes the recent collapse of a distribution-line tower at its Lethabo power station, in the Free State, is a “deliberate act of sabotage” (Engineering News, 2021a). The theft of overhead cables and vandalism of freight utility Transnet’s property continues to be on a steep increase. From January to October 2021, Transnet Freight Rail lost more than 1 000 km of copper cable, while an average of 600 theft and vandalism incidents a month were recorded (Engineering News, 2021b). The criminal activity is a serious constraint on the economy and left unaddressed, will curtail South Africa’s growth prospects (BER, 2021). Construction projects are also disrupted when there is limited community involvement and support. The Mtentu bridge project, in the Eastern Cape, is but one example of a megaproject that has suffered severe delays owing to community protest. The former contractors, a joint venture of Strabag and Aveng, terminated their contract with the South African National Roads Agency Limited in early 2019, stalling the Mtentu project. At the time of writing, a new contractor was yet to be appointed (Engineering News, 2021c). A concerted effort is needed to ensure proper community engagement and redress to prevent the project disruptions. Investment in local skills transfer and training of local emerging contractors will enable communities to benefit more from infrastructure projects. The South African Forum of Civil Engineering Contractors (Safcec) believes “throwing the book of law at disruptors is not enough, so too must a book of opportunities be handed to them” (Webster, 2021). Safcec argues that thugs must be isolated from genuine grievances of communities and community-based entities that feel excluded from participation in local economic activities. Some business forums in the construction sector, whose members were in the past accused of violent disruptions, have transformed themselves and have started to undertake legitimate business activity. Cumbersome licensing and permitting The construction sector is highly regulated and requires permits in advance of construction. These processes can be slow and cumbersome, leaving many private projects trapped in an ineffective licensing and permitting system. The World Bank’s 2020 Ease of Doing Business Ranking places South Africa 98 out of 190 countries on regulations pertaining to construction permits and 108 regarding the registering of property. To build a R4-million warehouse in Johannesburg, Gauteng, it will take 20 procedures and 155 days to obtain licences and permits, to complete required notifications and inspections and to obtain utility connections. By comparison, sub-Saharan Africa’s average is 15.10 procedures and 145.40 days to do the same (World Bank, 2020). Infrastructure constraints South Africa faces serious limitations when it comes to basic infrastructure and services that are required for the successful execution of projects. The electricity supply issues are well documented, with the country having experienced intense periods of loadshedding in recent years. South Africa is also facing a water crisis, in part owing to a lack of skilled water engineers and insufficient infrastructure maintenance and investment. About 56% of the more than 1 150 municipal wastewater treatment works and about 44% of the 962 water treatment works are in a ‘poor’ or ‘critical condition’ and in need of urgent rehabilitation and skilled operators. About 11% of this infrastructure is completely dysfunctional (DWS, 2019). Road infrastructure is also deteriorating. More than half of the country’s unpaved road network is in ‘poor’ to ‘very poor’ condition, while about one-third of the paved network is in similar condition. The Eastern Cape, Free State, Limpopo, Mpumalanga and the North West, in particular, are struggling with the maintenance of their respective road networks (Frost & Sullivan, 2021). Competency shortcomings The lack of appropriate skills in strategic positions in government is a concern. Local government, in particular, grapples with low competency levels as municipalities battle to attract, retain and train and employees with the requisite skills leading to a deficit of experienced staff. There is a disparity between metropolitan and rural municipalities and their ability to attract talent. Each year, billions of rands are spent on wasteful expenditure, highlighting the lack of accountability, weak project management and the high level of vacancies in key positions across municipalities across the country. The Auditor-General’s report for 2020/21, however, paints a bleak picture of the state of local government, with only 27 (11%) of the 257 municipalities receiving clean audits. It also shows that the resourcing of 122 finance units (32%) was either ‘concerning’ or ‘requiring intervention’, owing to staff vacancies, inadequate skills or a combination thereof (Maluleke, 2021). Shortcomings in municipalities have a direct impact on project planning, execution and management. Concerns have been raised about whether municipal employees understand contracting or what contracting methods are used. The private sector should be called upon to assist municipalities in project management and project spend. Long project lead times The government infrastructure programme lacks urgency and adequate scale. Industry players participating in the ISI discussion argue that, despite pronouncements by government, actual projects are slow to materialise. Poor planning and budgeting Weak integrated and spatial development planning, misaligned government budgets and weak leadership and management are to blame for project failures. Government often operates in silos, which hampers the effective delivery of infrastructure. For example, an affordable housing development will be delivered on time, but a lack of coordination among government departments means that bulk services upgrades or social infrastructure, such as a school or a clinic, are not delivered at the same time. A development that should have been conducive to growth is relegated to a dormitory suburb. Municipalities also fall short in project management, despite being required to draft and present annual integrated development plans (IDPs), in which all projects that are planned and ongoing are listed. The failure to properly plan, present and implement IDPs results in failing infrastructure. For example, raw sewerage flowing into freshwater catchment areas or erratic water supply. It is argued that IDPs and other strategic plans fail when the task at hand is not appropriately quantified, resulting in faulty budgeting and a failure to measure and track progress. There is also a mismatch between policy and affordability. In housing for instance, the focus is on densification, but that is not necessarily affordable. Town planning failures exacerbate problems at municipal level, with buildings being erected on vacant land without consideration of complementary infrastructure. Political interference in planning and execution of projects, a lack of accountability, as well as corruption further stifle development. Municipalities are hamstrung by a short-term view, and they seldom look past the medium-term expenditure framework. The focus on this three- to five-year horizon is not conducive for multiyear projects or developments. Budget and funding decisions often focus on the capital expenditure for the creation of infrastructure and do not take into account the full life-cycle cost of infrastructure, resulting in poor maintenance planning later on. Skills deficit South Africa’s skills deficit is a widely reported concern. The country is not only losing engineers and other highly skilled technical people through emigration, but skills transfer and training are not keeping up with requirements. Training of skilled and semiskilled personnel in the construction industry is important to ensure that infrastructure work is of high quality. Subcontracting requirements Government has introduced a requirement that 30% of public procurement contracts be subcontracted to designated groups to advance transformation in the economy. Where feasible, subcontracting is compulsory for tenders above R30-million (National Treasury, 2017). While the industry considers transformation as imperative, the 30% subcontracting requirement is a contentious issue. There is concern that in a competitive market, adverse cost effects are mainly being borne by main contractors, which is not sustainable in the medium to long term. The requirements increase the risk for the main contractor and reduce its span of control over the delivery timeframe, budget and quality of work (Massey, 2021). The payment of subcontractors is also an area of concern. Smaller subcontractors must be paid within 30 days, but often the main contractor is under pressure as payment from the client is delayed. It is important that there be improved synchronisation of such payment cycles. Tenders and procurement Several issues were raised regarding tenders and a lack of trust between government and the private sector in the tendering process. Government’s inability to correctly determine the cost of infrastructure results in inflated tenders being awarded, or tenders that underestimate the true cost of delivering the infrastructure. There is frustration regarding the disqualification of bidders, which appears arbitrary and vague amid a lack of transparency in the tender adjudication process. To address these concerns, professionals who specify the bid should be involved in the adjudication process. The Gauteng Department of Roads and Transport’s open tender system is a model to emulate to restore confidence in public procurement. The open tender process includes public scrutiny of the opening of the tender boxes and imprinting of all documents, appointing external, independent probity auditors to scrutinise every phase of the tender evaluation process, and importantly, the public adjudication of the decision on the recommended service provider where bidders, the media and interested members of the public can watch the proceedings. It also takes too long to award tenders and the ratio of tenders that are awarded is low. Safcec has called out the City of Cape Town for its slow pace in awarding tenders. According to the forum, the City advertised a road rehabilitation project in May 2019 and gave contractors only one month to tender, while it took the city 16 months to assess the applications and appoint six contractors for the work in October 2020 (IOL, 2020). Further, a lack of trust between the public and private sectors in the tendering process results in more demands for performance bonds. A performance bond protects the client from a contractor’s failure to perform according to contractual terms. In the current circumstances, the low level of trust means that even smaller projects with contract values of under R5-million require performance bonds. Concern has been raised about the abuse of tender panels, comprising a selection of prequalified providers, who are considered preferred suppliers. Although a tender panel simplifies the procurement process, it may reduce competition and open the process to corruption. Weak partnerships Industry participants raised concern about partnerships between government and the private sector. There is a view that government does not consult the construction industry and contractors in early infrastructure planning and design. Early contractor involvement will mitigate many risks during the implementation phase of projects and will save government money. PPPs also need to be streamlined. Interventions for fostering growth Suggestions to enhance investor confidence Build leadership and management skills Leadership and management failures are arguably the greatest single stumbling block to effective service delivery and development. It is stated that it is often not the lack of capital that stops service delivery, but the inability by senior officials to activate and manage the process. Enhance private-sector involvement Move away from a public-sector driven economy to a PPP-driven economy, in which the private sector is more involved in driving infrastructure investments. The private sector will fund infrastructure if there is a return on investment and if corruption can be rooted out. The private sector must be treated as an equal partner to the public sector to foster real partnerships. Consult contractors and the construction industry early on in a project to save government money by mitigating risks during the implementation phase. Embrace PPPs where they deliver better value for money. PPPs will reduce demands on the fiscus and can be used to fill finance gaps for infrastructure development. Streamline PPPs to reduce complexity. Fix municipalities A new way of thinking is required regarding municipalities, particularly district and rural municipalities, where competency is lacking. Some of the suggestions to get municipalities working again are: Establish a model to allow for the private sector to partner with local government. This will speed up development. The private sector must be involved throughout the entire cycle, from budgeting, financial management, maintenance and supplementing professional skills. Professionalise local government to maximise its development impact. Municipalities need to conduct proper planning and improve the management of budgets and cash flow. Enforce accountability for qualified audits and take people to task for failures. Equally, promote clean audits and prioritise the eradication of corruption. Consider bonus-driven targets that incentivise better performance. Simplify management systems. Officials set themselves up for failure because of unwieldy procedures. Local participation and skills transfer Ensure skills are transferred to local communities surrounding big infrastructure projects. Increased local participation could assist, to some extent, with the problems that the industry faces regarding the so-called construction mafia and the disruption of project sites. Maintain infrastructure Abandon the ‘run-to-failure’ approach where maintenance is conducted only when infrastructure fails. Budget for the full life cycle of a project, including operations and maintenance, rather than considering only the cost of planning and construction. A focus on proactive, as opposed to reactive or emergency, maintenance will save costs and prolong the infrastructure’s life span. Remove bottlenecks to development Red tape and bureaucracy are slowing down development. Regulatory timeframes for approvals must be expedited. A suggestion is to establish a council overseeing the approval processes and to deal with any appeals. For example, should an application fail to be processed in the specified timeframe, the overarching body should determine the reasons for it – whether it be an apathetic official or an issue with bulk services. More land must be made available for development. A rapid land release for housing is needed and government has tracts of land that can be used for this purpose. Accelerate the planning for bulk services and invest in the provision and maintenance of services, such as electrical installations, water reservoirs and distribution networks, sewerage treatment works and roads. Dedicated spending is needed to get maximum delivery traction. Rework the tender process The tender process is cumbersome, expensive and an inhibitor for development. While the tender system should not be done away with, there is a need for government tenders to be more specific, streamlined and simplified. Tender submissions tend to contain a lot of duplicated information, which adds time and costs to the process. Bids out for tender must be awarded timeously. Industry participants are concerned that too many government tenders are issued for purely speculative or budgeting reasons with no intention or ability to follow through. Sharpen focus on sustainable developments A greater emphasis must be placed on planning and building sustainable developments – cities that are planned with job opportunities in mind, with fit-for-purpose infrastructure and that are built with materials that have sustainability in mind. Conclusion The discussions with the construction industry have highlighted that South Africa must move away from a public-sector driven economy to one in which PPPs play a more predominant role. Government must acknowledge that it alone cannot create the jobs that are required to place the economy on a path of faster economic growth. Instead, a conducive environment must be created for the private sector to flourish and to attract the investment that is required. There is also a unanimous view that failing municipalities, often run by staff and managers who do not have the required skills set or who lack ethical leadership, must be fixed urgently to unleash a new wave of development. To achieve this vision, the private sector should be roped-in to partner with municipalities to better leverage private-sector expertise, capacity and experience. The restoration of working municipalities is key to a working and growing economy. Overall, process must be kept simple and transparent. This must include keeping tender and approval procedures simple, and streamlining PPPs to maximise efficiency and remove bottlenecks to development. References Bekker, G. 2021. Municipalities’ project management falling short, July 23, 2021. [Online]. Available at: https://www.engineeringnews.co.za/print-version/municipalities-projectmanagement-falling-short-2021-07-23 [accessed November 27, 2021]. Bureau for Economic Research. 2021. Weekly Review, Number 45, November 22, 2021. [Online]. Available at: https://www.ber.ac.za/knowledge/pkviewdocument.aspx?docid=15053 [accessed November 27, 2021]. Business Times. 2021. Infrastructure investment set to get a leg up from new forum, November 28, 2021. [Online]. Available at: https://www.businesslive.co.za/bt/businessand-economy/2021-11-28-infrastructure-investment-set-to-get-a-leg-up-from-new-forum/ [accessed November 29, 2021]. Department of Public Works and Infrastructure. 2021. National Infrastructure Plan 2050, August 10, 2021. [Online]. Available at: http://www.publicworks.gov.za/PDFs/44951_10-8_ PublicWorksInfras.pdf [accessed November 27, 2021]. Engineering News. 2021a. Eskom officially declares Lethabo tower collapse an act of sabotage. November 19, 2021. [Online]. Available at: https://www.engineeringnews.co.za/article/eskomofficially-declares-lethabo-tower-collapse-an-act-of-sabotage-2021-11-19 [accessed November 27, 2021]. Engineering News. 2021b. TFR bemoans unprecedented levels of cable theft, vandalism, November 10, 2021. [Online]. Available at: https://www.engineeringnews.co.za/article/tfrbemoans-unprecedented-levels-of-cable-theft-vandalism-2021-11-10 [accessed November 27, 2021]. Engineering News. 2021c. President urges communities to support N2 toll road project, September 23, 2021. [Online]. Available at: https://www.engineeringnews.co.za/article/ president-urges-communities-to-support-n2-toll-road-project-2021-09-23/rep_id:4136 [accessed November 27, 2021]. IOL. 2020. City of Cape Town slammed by civil engineers for slow pace of awarding tenders. November 22, 2020. [Online]. Available at: https://www.iol.co.za/capeargus/news/city-of-capetown-slammed-by-civil-engineers-for-slow-pace-of-awarding-tenders-efab7ea5-4f48-4328-a27c48cf0491697f [accessed November 27, 2021]. IOL. 2021. Call for government to deal decisively with dangerous ‘construction mafia’, September 10, 2021. [Online]. Available at: https://www.iol.co.za/news/politics/call-forgovernment-to-deal-decisively-with-dangerous-construction-mafia-52388153-c811-4058-acde9eb73bad6345 [accessed November 27, 2021]. Maluleke, T. 2021. Consolidated general report on the local government audit outcomes 2019/20, June 30, 2021. [Online]. Available at: https://www.agsa.co.za/Portals/0/Reports/ MFMA/201920/2019%20-%2020%20MFMA%20Consolidated%20GR.pdf [accessed November 27, 2021]. Massey, I. 2021. Opinion: South African construction contract participation requirements appear to be out of touch with reality, October 28, 2021. [Online]. Available at https://www. engineeringnews.co.za/article/opinion-sa-construction-contract-participation-requirementsappear-to-be-out-of-touch-with-reality-2021-10-28/rep_id:4136 [accessed November 27, 2021]. National Treasury. 2017. Preferential Procurement Policy Framework Act, 2000: Preferential Procurement Regulations, January 20, 2017. [Online]. Available at: http://www.thedtic.gov.za/ wp-content/uploads/PPPFA_Regulation.pdf [accessed November 27, 2021]. Reserve Bank, 2021. Quarterly bulletin – no 301, September 28, 2021. [Online]. Available at https://www.resbank.co.za/en/home/publications/publication-detail-pages/quarterly-bulletins/ quarterly-bulletin-publications/2021/FullQuarterlyBulletinNo301September2021 [accessed November 27, 2021]. Statistics South Africa. 2021a.Gross domestic product, Q4 2020, March 9, 2021. [Online]. Available at: http://www.statssa.gov.za/publications/P0441/P04414thQuarter2020.pdf [accessed November 28, 2021]. Statistics South Africa. 2021b. Quarterly Labour Force Survey, Q1, June 1, 2021. [Online]. Available at: https://www.statssa.gov.za/publications/P0211/P02111stQuarter2021.pdf [accessed November 27, 2021]. Statistics South Africa. 2021c. Quarterly Labour Force Survey, Q2, August 24, 2021. [Online]. Available at http://www.statssa.gov.za/publications/P0211/P02112ndQuarter2021.pdf [accessed November 28, 2021]. Webster, M. 2021. SONA infrastructure pronouncements: Safcec suggested points of emphasis for 2021 Budget Vote, February 24, 2021. [Online]. Available at: https://www.safcec.org.za/ news/553366/SONA-Infrastructure-Pronouncements-SAFCEC-Suggested-Points-of-Emphasisfor-2021-Budget-Vote.htm [accessed November 27, 2021]. World Bank. 2021. Doing Business, November 2021. [Online]. Available at: https://www. doingbusiness.org/en/data/exploreeconomies/south-africa#DB_dwcp [accessed November 27, 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

The Inclusive Society Institute is currently engaging various economic sectors as part of its extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. In a series of dialogues, the various sectoral stakeholders and policymakers are engaged in seeking answers to the all-important questions aimed at gaining an understanding, from the particular sector’s perspective, as to what the country needs to correct policy wise, and what new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory. In the constructive dialogue with labour, which was held 15 February 2022, some important issues raised, including, amongst others: An acknowledgement that the economy is in crisis and needed all hands-on deck to place it onto a new growth trajectory. There were problems with the current macro-economics, which, in the view of labour, relied too heavily on neo-liberal values. There needs to be greater focus on positioning South Africa as a developmental state. The state is failing, or at least failing to implement policy. And the continual shifting of ideology is not helpful. Public policymakers need a wake-up call with regard to the state of social cohesion in the country. On corruption, there was a strong feeling that “the crooks must be jailed”, and that those from the political establishment need to be prioritised so as to set the example and create investment confidence. The place of immigrants in the economy needs to be thoroughly considered. Localisation and circulation of the Rand within the country was now more crucial than ever. The tax-system needs to be re-looked. Are the rich sufficiently taxed? Is there space for targeted solidarity taxes? Don’t keep changing policies every five years. Policy certainty is needed. There needs to be balancing between the needs of the financial sector and that of the real economy, for example, credit allocation to emerging manufacturing firms. Urgent policing of infrastructure is needed. Take home message: Dealing with the economic woes as a matter of urgency. Either leadership must do it, or society will do it for them.

Occasional Paper 2/2022 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 by Prof William Gumede Associate Professor, and former Convener, Political Economy, School of Governance, University of the Witwatersrand; and former Senior Associate and Programme Director, Africa Asia Centre, School of Oriental and African Studies (SOAS), University of London; and author of South Africa in BRICS (Tafelberg) Introduction Singapore’s People’s Action Party (PAP) offers valuable lessons for the ANC and other African liberation and independence movements, in how to turn themselves into effective developmental parties. This type of political body has the necessary capacity to govern diverse countries inclusively and manage the complex development strategies that are needed to turn ethnically diverse former colonies into highly industrialised, racially inclusive and peaceful countries. The PAP transformed itself from a party of independence – a typical broad front spanning trade unions, communists and small business – into a developmental party with pragmatic policies, merit-based leaders, and with honest, anti-corrupt and ethical governance. Unlike many other independence and liberation movements, especially those in Africa, once in power, the PAP did not wallow in victimhood, or blame colonialism or imperialism for everything that went wrong or for self-inflicted failures. Instead, it focused its energy firmly on the present, the future and on tackling problems pragmatically[1]. The PAP used its postcolonial hegemony over society better than Africa’s dominant independence and liberation movements. It transformed Singapore within one generation from dirt-poor at independence from Great Britain in 1965, into a highly developed economy. At independence Singapore had no mineral resources, no significant industries and imported its energy, food and water[2]. In 1965, Singapore’s nominal GDP per capita stood at US$500 – the same as Mexico at the time. In 2015, GDP per capita rose to US$56,000 – similar levels to Germany[3]. Singapore had caught up with industrial and former colonial powers. The country managed to make income distribution more equal on the back of concentrated focus on quality education, improving technical skills and fostering entrepreneurship in both the public and private sectors[4]. In contrast, almost all African countries within one generation became significantly poorer, more corrupt, more ethnically divided and more dysfunctional than they were at independence. By delivering industrialisation, widespread prosperity and racial peace, the PAP ensured its continued legitimacy[5]. With few exceptions, African independence and liberation movements have been successful in opposing colonial or apartheid regimes. However, they have failed to use their hegemony over their societies to make the transition as governing parties who can successfully manage the kind of intricate state-building, industrialisation and development so effectively implemented by the PAP. Most importantly, the PAP is the only party after independence that renewed itself while in power. It changed independence-era policies, ideologies and ideas for pragmatic ones, and forcefully retired veteran struggle leaders who were not competent, in spite of their “struggle” credentials. The party brought in new leaders, many of whom were never part of the “struggle” or, in some cases, were not even members of the party. The PAP dealt firmly with corruption within the party and state – jailing senior leaders in the party and government implicated in corruption, even if they were struggle grandees. The party introduced a strict meritocratic system and governed at all times in the widest public interest, not only in the interest of its struggle leadership elite, members or core constituencies. The shock therapy introduced by the PAP to renew itself offers many lessons for the ANC and other African liberation and independence movements, such as Namibia’s Swapo or Algeria’s FLN, who have backslid in government. PAP – an independence party of the Left The PAP was established in 1954 as a party to fight for the independence of Singapore from Great Britain. Lee Kuan Yew, the founding father of post-independence Singapore, was one of the founders of the PAP. The party was similar to many African liberation and independence movements, a party of the Left[6]. However, unlike many African liberation and independence movements who adopted either Marxist-Leninism, African variants of socialism and communalism, democratic centralism, and state-led development, the PAP pursued social democracy, adopted pragmatic market-based policies, and partnered with business, including multinationals. The Singaporean thinker, Chan Heng Chee says that the PAP ideology was that of pragmatism[7], meaning adopting policies based on whether they produce results, and if they do not, rejecting them, and not basing policies on dogma or the belief in an absolute truth. Lee Kuan Yew explained the PAP policy approach as “rational” decision-making[8]. Michael Hill and Lian Kwen Fee said that the PAP adopted ‘‘purposive rational policies’’, which “requires planning and considerable quantitative analysis to complement a very strong strain of empiricism. If the leaders find that a policy is not working or that it is producing unintended results, the PAP will jettison it without any sentimentality”[9]. Many African liberation and independent movements of both the left and the centre, often also pursued left populist social, political and economic policies, whereas the PAP consistently rejected populism. The PAP essentially almost became “non-ideological” in government[10]. The PAP has been exceptionally “responsive” to citizens’ concerns[11], contrary to most African liberation and independence movements, who often take for granted that their supporters will vote for them because they supposedly brought “freedom”. The PAP also focused on the long term, rather than the short term, whereas many African liberation and independence movements focused largely on the short term, undermining long-term sustainability. The PAP focused on making “things work”, delivering quality basic public services on time, making “basic utilities function efficiently”, and ensuring new “infrastructure is intelligently planned with a long-range vision in mind”[12]. PAP’s pragmatic policy turns away from liberation ideology At independence local and international business were alarmed by the rise to power of the PAP, because of its left-wing history. As a result, many local and international companies moved their head offices to other countries[13]. However, the PAP proved the market doubters wrong. The PAP cobbled together an industrialisation strategy, focusing on export manufacturing, unlike many African liberation and independence movements, who rarely focused on industrialisation, but rather concentrated on redistribution of colonial or apartheid-inherited assets, land and businesses as the main strategy. Ravi Menon, Managing Director of the Monetary Authority of Singapore, the country’s central bank, says that in 1965, Singapore made two strategic economic decisions which broke from accepted left-wing developing country independence ideology. Firstly, it moved away from a strategy of import-substitution to one of export-led industrialisation. Secondly, the country went all out to attract foreign multinationals – given the fact that it did not have its own industry players, to drive industrialisation. “The government developed industrial land, put in place infrastructure facilities, reformed labour laws to promote industrial peace, and invested in basic education with emphasis on technical skills relevant to industrialisation. Sound fiscal and monetary policies ensured macroeconomic stability and underpinned investor confidence.”[14] By 1975, the country’s manufacturing share of GDP had expanded to 22% from 14% in 1965 and the economy almost reached full employment[15]. The country’s manufacturing drive focused on making basic products that were needed by the population, such as fishhooks, matches and mosquito coils. When it reached a sizeable new manufacturing base, it changed track to focus on “moving up the value chain towards more capital-intensive and skill-intensive activities”[16]. The new capital- and skill-intensive strategy, by the late 1980s, yielded a large value-added sector in electronics, component and precision engineering and petrochemicals[17]. Such was the expansion of the electronics industry, which started from a zero-base, that in the 1980s Singapore became the world’s leading producer then of hard disk drives, the early method of memory storage used in computers[18]. “The first two decades of Singapore’s economic history could be described as the ‘take-off' phase. It was the period when the economic fundamentals of prudent public finances, sound monetary policies, co-operative industrial relations, outward orientation, and market-based strategies took root. The economy grew by an average of about 10% each year during this period, and Singapore emerged as a newly-industrialised economy at the forefront of developing countries”[19]. Private sector-led growth, rather than state-led growth The PAP encouraged private sector-led growth, rather than state-led growth, unlike many African liberation and independence movements, who discouraged private sector-led growth, prioritizing state-led growth. It focused on export-led manufacturing. It eschewed import substitution, the policy of replacing foreign imports with domestic production, to focus on manufacturing locally for export abroad. The party’s post-independence economic strategist, Goh Keng Swee, strongly pushed industrialisation as a way to foster growth and create jobs, rather than using redistribution of existing or colonially inherited wealth[20]. The state partnered with business – predominantly foreign multinationals. In contrast, African independence and liberation movements nationalised many local and foreign companies, or introduced indigenisation or empowerment programmes, where the state or local political capitalists close to governing parties get slices of local or foreign companies. The PAP used private sector individuals who had previously successfully managed large companies to lead the implementation of critical government policies. For example, the banker, Lim Kim San, was appointed to lead the government’s pillar redistribution and industrialisation strategy, its housing development programme, which he led spectacularly successfully. It is very unlikely that a PAP politician or activist who had never led a complex commercial organisation, as Lim Kim San had, would have been so successful in driving the housing development programme. The party sought out progressive outside expertise for help. They did not take on Marxist-Leninist or neo-liberal advisors. Instead, Singapore took lessons from Japan’s successful post-Second World War industrialisation, the Dutch and German industrialisation following the end of the Second World War, and the United Nations Development Programme, which is more sustainable development-orientated, than say the World Bank or International Monetary Fund. It particularly sought the advice of the Dutch social democratic economist Albert Winsemius, who became economic advisor for the country from 1960 to 1984[21]. The PAP uniquely used multinationals in Singapore to lead industrialisation – because at independence there were no large indigenous companies, international multinationals led the export manufacturing expansion[22]. The PAP government did not nationalise colonial-era local and foreign businesses – as has been the case in many African independence and liberation movement-led countries. The party’s government encouraged local and foreign investment, introducing tax holidays, low taxes, and establishing the Jurong industrial estate[23]. It also involved foreign multinationals in partnering with the government in industrialisation and partnered with local and foreign businesses to stimulate growth, industrialisation and development. The PAP government focused all-out on revamping the colonial education system, making the system fit for purpose for industrialisation. It put pressure on the trade union movement, aligned with the PAP to strike compromises to encourage economic growth, employment and business creation. Redistribution that focuses on industrialisation, infrastructure and education The PAP government-built redistribution strategies on industrialisation, infrastructure and education. It constructed its infrastructure programme around building low-cost housing – forging a manufacturing industry link to the inputs of the housing programme, fostering technical education and forming inclusive ethnic communities around the housing programme[24]. As stated earlier, the banker, Lim Kim San, was put in charge of the rollout of the housing programme – which he did very successfully. The government also used the housing expansion to integrate different ethnic communities, to foster multiracialism and common nationhood. The PAP’s land reform strategy was pragmatic, not ideological or vengeful or emotional. In 1966, the party enacted the Land Acquisition Act, which made it possible for the government to acquire private land for public purposes[25]. The Act provided for compensation to private owners of land acquired by government, which was land that was in “surplus”, vacant or that private owners wanted to willingly sell. Land in productive use remained largely untouched. Between 1959 and 1984, the government acquired around one-third of the total land area of Singapore. An Appeals Board was established, with independent members, to mediate in any disputes over the amount of compensation between private landowners and government. The Act fixed compensation at market value as of 30 November 1973. The PAP did not pursue affirmative action and empowerment programmes for previously disadvantaged communities, such as the Malay communities. They prioritised lifting everyone out of poverty, giving the poorest of all communities a leg up. They focused especially on education as a development, growth and empowerment strategy. In 1981, the Prime Minister established Yayasan Mendaki (Council for the Education of Muslim Children) to boost the educational performance of poor Malays and to promote a cultural change to make education a priority among the community[26]. To finance the Mendaki scheme, the government deducted 50 cents from every Malay-Muslim employee’s pension fund contribution – which the government matched[27]. Prioritising entrepreneurship After the Second World War, Singapore – like other successful East Asian economies such as South Korea, Taiwan and Japan – pushed entrepreneurship. This is the reason why the country is now more advanced than all African countries, which did not follow that route. By the late 2000s, Singapore had become one of the world’s leading countries for start-up ecosystems[28]. High-tech manufacturing is now the country’s main focus in its drive to ever-increasing manufacturing output. The PAP, after coming into power, ditched the rigid ideological view that almost all independence parties of the Left – whether in Asia or Africa – had during their independence struggles, that only the state should lead development (Gumede 2017). Rather, the party’s leadership under Lee Kuan Yew prioritised entrepreneurship[29]. The PAP’s focus was not on what is called “necessary entrepreneurship”, meaning “people who by necessity, the unemployed or the unemployable, resort to creating or starting their own business”[30], but on a whole-of-society entrepreneurship[31]. The PAP government initially focused on attracting foreign multinationals. But by the late 1970s it began to concentrate on transforming the local small business sector into an export manufacturing sector. A 1985 government report, the Sub-Committee Report on Entrepreneurial Development, proposed that the government foster a countrywide entrepreneurial spirit by inculcating entrepreneurship into the education system, into the country’s work culture, and by encouraging local companies to internationalise, to force them to become more entrepreneurial[32]. The Singapore government itself also played the role as an entrepreneur. Tony Fu-Lai You describes the term “state entrepreneurialism” and David E. Osborne and Ted Gaebler (1992)[33] called it “entrepreneurial government” for the way a state itself could function as an entrepreneur[34]. The PAP introduced merit-based appointments to the public service, rather than cadre deployment, which brought large numbers of entrepreneurial minded new public servants into government. Lichauco (1988) called such entrepreneurial minded public servants “entrepreneurial agents of the state”[35]. When the PAP’s left-wing, communists and trade unions opposed the new entrepreneurial direction, Lee Kuan Yew, like other leaders of independence movements did not try to hold the left and moderate factions of the party together for the sake of “unity”, which would invite policy paralysis, but instead encouraged them to leave. The far-left faction’s opposition to the party’s focus on driving the private sector to become prominent in leading industrialisation, combined with its opposition to securing a merger between Singapore and Malaya, caused it to eventually leave the PAP in 1961. The PAP leadership did not try to accommodate them by backing away from private sector-led industrialisation for the sake of unity. Most African governments and leaders have either actively discouraged or were indifferent to entrepreneurs, and rarely fostered supporting institutions, policies and environments for entrepreneurship. Since independence from colonialism, African industrialisation, development and growth have been stunted because most governments have not explicitly encouraged entrepreneurship. And not much has changed since then. Entrepreneurs change society[36]: they create new industries, new jobs and new wealth, which more people can benefit from. They increase the size of economies and fuel economic growth. They inspire a virtual cycle of others trying their hand at starting new businesses, developments and initiatives too[37]. The French economist, Jean-Baptist Say, who in 1800 coined the term entrepreneur, described entrepreneurs as being able to “shift economic resources from an area of lower productivity into an area of higher productivity and greater yield”[38]. The celebrated economist Joseph Schumpeter wrote that an entrepreneur is “an individual who introduces something new in the economy, a method of production not yet tested by experience, a product with which consumers are not yet familiar, a new source of raw material or of new markets”[39]. Researchers Robert Hirsch, Michael Peters and Dean Shepherd in their book, Entrepreneurship, described entrepreneurship’s role in economic development as involving “more than just increasing per capita output and income; it involves initiating and constituting change in the structure of business and society”[40]. There is a widespread wrong belief among many in the ANC – in fact, among many African left-leaning liberation movements – that entrepreneurship is something bad, that it will lead to capitalist “exploitation” and will take power from the state. Such movements minimise the impact of entrepreneurial individuals to bring developmental transformation. In African liberation ideology, the individual often does not matter, and everyone is lumped as part of the “collective” or the “masses”. This is one of the reasons for the misguided phenomenon that anyone can be appointed to run complex organisations, even if they do not have the skills, as long as they are a “cadre”, which has led to the collapse of many African countries, state-owned entities and agencies. For another, in South Africa, tenderpreneurship – getting a tender, or political entrepreneurship, being middle-men or women based on one’s political connections, rather than competence or skill – is often falsely seen as entrepreneurship. It is not. It undermines entrepreneurship. Repositioning the PAP from an opposition independence movement into a pragmatic developmental party that can govern effectively The PAP, like African liberation and independence movements, was also at its inception a broad church, or popular front, bringing together different ideological groups – from the left, centre to the right – trade unions, businesses and conservative religious leaders, under one umbrella to oppose colonialism. Communists and trade unions were aligned with the PAP, a left-wing nationalist party which had “a reasonably broad working-class base”, the “English-educated” middle class, the “Malay blue- and white-collar workers”, and “the Chinese clan associations, trade guilds, and blue-collar workers’’[41]. At the party’s inaugural meeting more than 90% of those present were from the trade union movement. At independence, the PAP was dominated by strands: one the central democratic wing, led by Lee, and the other, the communist grouping, led by Lim Chin Siong. When the PAP repositioned itself into a governing party, with pragmatic policies, rejecting fixed old independence movement-era ideologies, appointing leaders on merit and firing incompetent, corrupt and dishonest leaders, many struggle cadres rebelled. The party’s left-wing groups also objected to repositioning the party as a pragmatic developmental party. Lee pushed to realign the PAP to turn it into an effective governing party. In August 1961, Lee forced out the communists from the PAP broad church because of irreconcilable ideological, policy and leadership differences. The PAP communists then, in 1961, formed the Barisan Socialist Party and took 35 out of 51 branches of the PAP with them. Extraordinary for any independence party, the PAP actively discouraged populism among members and leaders – at the threat of expulsion[42]. The government established a social pact coordinated body, like the Dutch equivalent, to forge a consensus between organised labour, business and the government on growth, industrialisation and multiracialism strategies[43]. Importantly, business had equal power to that of labour, although the PAP started off as a party aligned to trade unions. Trade unions were compelled to compromise short-term interests in favour of the country’s long-term industrialisation[44]. For example, they had to agree to productivity targets, accepting lower wages and increases and not to strike, to foster an investor-friendly labour market. African liberation and independence movements aligned to trade unions often give preference to their labour allies above that of business. This results in these governments alienating business, and therefore losing out on having the support of business, with its resources, ideas and capacity for the industrialisation programme. Many African liberation and independence movements, when in power, still keep together the different and opposing ideological groups which were part of the broad church of the anti-colonial or anti-apartheid struggle. However, keeping such disparate ideological groups within one governing party in power causes continual paralysis in decision- and policy-making and direction. This undermines development, industrialisation and societal peace, which need clarity in decisions, policies and direction. Introducing the rule of law and tackling corruption regardless of leadership seniority The PAP was from the start very firm against corruption, prosecuting its own powerful leaders for such malfeasance, to show that liberation leaders are not above the law, as is the case in many postcolonial societies. No successful country development can take place amidst corruption, incompetence and lawlessness. Most of the postcolonial African development initiatives were carried out under leaders who were corrupt, incompetent and acting above the law – which predictably caused these efforts to fail. Corruption included elected and public representatives living beyond their means or being unable to explain wealth, property or assets. Very early on in power, the PAP came out hard on corruption within its leadership ranks. In 1959, Education Minister Chew Swee Kee was forced to resign after evidence emerged of his involvement in corruption. The PAP prosecuted a key leader, Phey Yew Kok, who was also the powerful leader of the National Trade Union Council (NTUC), sending him to jail for accepting bribes. The party was also more determined to establish the rule of law at independence – and making everyone equal before the law. When Singapore was granted self-government by Great Britain in 1959, not at independence, which came only in 1965, PAP won the 1959 general elections and Lee became Prime Minister. In the first thirty days of gaining power in 1959, the PAP government broke up criminal gangs, mafia networks and illegal activities. The government continued with enforcing the rule of law – bringing to book both party members and leaders and ordinary citizens who were corrupt – which entrenches the rule of law. When they get into power, many African liberation and independence movement governments often exempt party members and leaders from the rule of law, while they police ordinary citizens not connected to the liberation or independence movement leaders. This unequal treatment of citizens depending on their connection to the leaders of the governing party undermines establishing a culture of rule of law – crucial for industrialisation, growth and development. In addition, party members did party organisational work as volunteers – receiving no payment or benefits[45]. Ethnic inclusivity in party and government Singapore is a multi-ethnic and a multilingual state. It consists of 77% Chinese, 14% Malay, 7.7% Indian and 1.3% Eurasians. Within these individual groups, there is extensive diversity. The PAP went out of its way to represent all ethnic groups at ‘‘all levels of the state and in state institutions’’[46]. It adopted multiracialism, a respect for and equality of all ethnic groups, and tolerance of differences, as one of the post-independence country’s “founding myths”[47]. In its policy of meritocracy within the party and the state, the PAP rewarded performance, excellence and efficiency on merit, rather than basing it on ethnicity. It went out of its way to protect minorities. The PAP was scrupulous in electing and appointing leaders who came from diverse ethnic backgrounds in the multiracial country, making multiracialism a guiding ideology. In elections to the central executive committee, to Cabinet, and for candidates for parliament, the party took care to have ethnic diversity and gender equality. Ahead of every election, the PAP vigorously reviewed existing representatives in terms of their performance, and to make place for new talent. Many African independence and liberation movements were often dominated by and prioritised one ethnic group, colour or region, excluding others. And thereby, marginalising the talents, ideas and resources of other groups who could have been marshalled for industrialisation, development and nation-building. Furthermore, in many African countries, one ethnic, colour or regional group, has often been scapegoated for the lack of advancement of another community. Many countries in which this happens have been plunged into ruin, social disorder and economic stagnation. Diversity in government, political parties and private organisations brings different skills, experiences and ideas together, which collectively spark innovation, boost performance and unleash dynamism. Merit-based deployment system to bring talent and marginal ethnic groups into the leadership in government and party In 1958, the PAP introduced one of the most successful cadre deployment policies of any former independence party[48]. The system, where minimum educational standards were set to become a cadre and certain kinds of people were excluded, was initially used to raise the quality of new party members. The Singapore cadre system was only used for the party itself, initially to recruit quality ordinary members, and then later to recruit talented ethnically and gender diverse members from outside the party for leadership within the party. In addition, the party used the cadre policy to headhunt new leaders who were not members of the PAP for leadership positions in the party, parliament and government. The public service of Singapore was ring-fenced from cadre development and had an inclusive merit-based system. The PAP vigorously pursued the strategy of merit within its own party and within the state. Elections to party leadership were largely on merit, but also included all ethnic groups, which lifted the best talent among its support base to the leadership of the party. The PAP was “obsessive about co-opting talent”[49] and they “ ‘constantly’ replaced ‘older MPs’ with the ‘best and brightest’ young talent that can be recruited”[50]. Parliamentary candidates were selected after interviews, competency assessments and lifestyle audits[51]. The PAP headhunted new talent based on their performance record, educational background and values for leadership in the party. During the first years in power, when it faced fierce competition from opposition parties, Lee Kuan Yew made a case for the PAP to recruit the country’s top talent: ‘‘It is a battle of ideals and ideas. And the side that recruits more ability and talent will be the side that wins’’[52]. In 1976, the PAP modified Shell, the oil company’s system of testing new executives to evaluate new recruits for party leadership. The Shell system involves testing candidates’ ability to analyse, imagination and sense of reality[53]. Critics have slammed the rigorous selection process saying it promoted elitism[54]. However, the merit-based system in the party and government was a key reason for the country’s economic growth, racial peace and political stability miracle. The PAP also established a meritocratic public service, setting entry examinations for new entrants, to recruit the nation’s best talent, no matter their ethnic, political or language affiliation. No African liberation or independence movement has created meritocratic public services. Rather, most appoint only cadres of their parties, or in some cases members of the ethnic, language or regional group dominating the party, to public service positions. Bringing the best talents continuously into leadership, getting rid of corrupt and incompetent ones and ensuring ethnic diversity in leadership appointments, made the PAP a much more dynamic political party than most African liberation and independence movements. These entities often elected leaders based on struggle credentials, loyalty to the leader and ethnic, colour or religious affinity to the dominant leadership group. In contrast to the PAP in Singapore, in South Africa, the then general secretary of the ANC said the party will not do away with cadre deployment because the ANC do not want “graduates and businessmen and women who are competent, but who are hostile to the programme of the ANC”[55]. Lessons from the PAP for the ANC The ANC and other African liberation and independence movements would do well to learn from how the PAP, one of post war’s most effective former independence movements, transformed Singapore from a poor backwater into a prosperous, ethnically inclusive and peaceful society. The ANC is in deep crisis. It urgently needs renewal of policies, leaders and ideologies; to introduce merit in the party and state; and to make the party more racially, gender and youth inclusive. It needs to genuinely tackle corruption. African liberation movements like the ANC, in their fight against colonialism or apartheid build broad fronts, ranging from African traditionalists, Marxist-Leninists to free-marketers. But in power, governments need one set of policies, not a multitude of conflicting policies. To be an effective governing party, the ANC must have one set of coherent policies, and shed the groups that have ideologically different outlooks. Genuine renewal of the ANC necessitates realignment of the internal forces, groups and factions within the party. As the PAP got rid of the far-left, so too will the ANC have to rid itself of the populists. The ANC must also shed its ideological opposition to entrepreneurship, its dismissal of business, civil society and professionals, and instead genuinely partner with these social partners, in order to leverage the resources, ideas and capacity of these social partners to improve the capacity of the state. In fact, it needs to build new kinds of social pacts between itself, civil society, business and communities. Like the PAP, the ANC now needs to recruit new talented leaders from outside the party structures. The South African public sector must be fully ring-fenced from cadre deployment, which should be restricted to the ANC as a party deploying talent, ethnic, youth and gender diversity into their party ranks as part of deployment, not into government. South Africa’s public service must be an inclusive merit-based system – seeking out those from previously disadvantaged communities on merit also. The ANC leaders must restore the rule of law, by making everyone equal before the law. Top ANC leaders who have mass support, but who are corrupt, dishonest and criminal should not be shielded from prosecution. They must be expelled from the ANC. But the ANC government must also break untouchable parallel governments such as gangs, violent taxi associations and autocratic traditional leaders. The ANC must also firmly tackle the party’s own militia, such as the MK military veterans. Trying to renew, modernise and clean-up the organisational culture of any organisation, let alone the ANC, where corruption has become so entrenched, will meet with fierce resistance. When organisational cultures are deeply entrenched, leaders who want to change them are often deposed by members of the organisation. Serious reforms by President Cyril Ramaphosa to change the ANC organisational culture will likely cause a similar rebellion against him at the party’s December 2022 national elective conference, as happened against former ANC President Thabo Mbeki at the ANC’s 2007 Polokwane conference, when he tried to introduce overdue modernisation reforms of the ANC[56]. ANC President Cyril Ramaphosa will need to introduce shock therapy to shake up the ANC: be bold and lead, sack all corrupt leaders, and on merit bring in large numbers of new ANC leaders who have not been part of the current corrupt ANC structures. The party needs new ideas, new partnerships with business, civil society and professionals. If the ANC does not change, the party will lose the 2024 national elections. 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Psychology Press, p. 41. [46] Joseph B. Tamney (1996) The Struggle Over Singapore’s Soul, Berlin and New York: Walter de Gruyter, p. 111. [47] Mauzy, Diane K.; Milne, Robert Stephen (2002). Singapore Politics Under the People's Action Party. Psychology Press, P.49; Lee Kuan Yew (1998) The Singapore Story: Memoirs of Lee Kuan Yew, Singapore: Prentice Hall, p. 56. [48] Mauzy, Diane K.; Milne, Robert Stephen (2002). Singapore Politics Under the People's Action Party. Psychology Press; Lee Kuan Yew (1998) The Singapore Story: Memoirs of Lee Kuan Yew, Singapore: Prentice Hall; Chan Heng Chee (1989) ‘‘The PAP and the Structuring of the Political System’’, in K.S. Sandhu and P. Wheatley (eds.), The Management of Success, Singapore: Institute of Southeast Asian Studies, pp. 70–89. [49] Mauzy, Diane K.; Milne, Robert Stephen (2002). Singapore Politics Under the People's Action Party. Psychology Press. P.39. [50] Mauzy, Diane K.; Milne, Robert Stephen (2002). Singapore Politics Under the People's Action Party. Psychology Press. P.39. [51] Mauzy, Diane K.; Milne, Robert Stephen (2002). Singapore Politics Under the People's Action Party. Psychology Press. P.39. [52] Lee Kuan Yew (1998) The Singapore Story: Memoirs of Lee Kuan Yew, Singapore: Prentice Hall. [53] Mauzy, Diane K.; Milne, Robert Stephen (2002). Singapore Politics Under the People's Action Party. Psychology Press, P.49; Lee Kuan Yew (1998) The Singapore Story: Memoirs of Lee Kuan Yew, Singapore: Prentice Hall. [54] Chan Heng Chee (1989) ‘‘The PAP and the Structuring of the Political System’’, in K.S. Sandhu and P. Wheatley (eds.), The Management of Success, Singapore: Institute of Southeast Asian Studies, pp. 70–89. [55] Gwede Mantashe (2014). “Comments following the ANC’s National Executive Committee meeting”. Johannesburg, June 9. [56] William Gumede (2012) Restless Nation: Making Sense of Troubled Times. Tafelberg. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 (ISI) is working with the Swedish Embassy on a number of initiatives aimed at strengthening people to people relations. As part of this collaboration a dialogue between the Swedish Embassy, politicians and civil society held a roundtable discussion on social dialogue and the future of work. The ISI partnered wish the embassy in mobilising delegates to the dialogue, which proved to be a highly successful interactive session. The main thrust of the dialogue was to share the experiences of the Swedish companies’ initiatives and programs in South Africa under the auspices of the Swedish Workplace Programme. The ISI was represented by its Advisory Council Chairperson, Ms Buyelwa Sonjica, its CEO, Daryl Swanepoel and Dr Klaus Kotzé, who is coordinating the institute’s social democracy programme.

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. 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 November 2021 Author: Mariaan Webb Editor: Daryl Swanepoel Content Abbreviations & acronyms Introduction Identifying weaknesses Electricity tariffs and supply Infrastructure shortcomings Labour and community relations Localisation and black empowerment Mining narrative Planning and implementation gap Policy and regulatory uncertainty Slow on innovation Weak government Suggestions for fostering growth Conclusion References Abbreviations & acronyms BEE black economic empowerment GDP gross domestic product ISI Inclusive Society Institute PGM platinum-group metals Introduction South Africa is one of the world’s leading mining and mineral-processing nations. The country has the world’s biggest reserves of platinum-group metals (PGMs) and manganese, and is ranked among the top three countries for chromium, fluorspar, gold, vermiculite and zirconium reserves (Minerals Council, 2021a). For many years, mining has been the mainstay of the South African economy and the industry continues to be a valuable contributor. In 2020, mining added 8.40%, or R371.90-billion in nominal terms, to gross domestic product (GDP). Mining also provides the single greatest part of South Africa’s export revenues and employs directly, and indirectly, more people than any other comparable sector. The industry in 2020 provided direct employment to more than 452 000 people, which is 4.70% of the total formal nonagricultural employment (Minerals Council, 2021a). As a major exporter that competes with international players, South Africa must be competitive if it is to realise the true potential of its rich resource endowment. However, regulatory uncertainty, unreliable power supply, high electricity tariffs and rail and logistical shortcomings continue to negatively affect the sector, holding back investment and limiting its contribution to economic growth and development. This report by the Inclusive Society Institute (ISI) is a summary of themes that emerged from virtual discussions, held in November 2021, with participants from the mining industry to gather their views on what South Africa must do to remove constraints to economic growth and development. The report also puts forward suggestions on what can be done to accelerate GDP growth. The report is one in a series of ISI reports, which forms part of a broader research project to develop a New Economic Blueprint for South Africa. Discussions were also held with other sectors, including finance, manufacturing, construction, information communication and technology, and retail to canvass their opinions as part of the broader research project. Unless South Africa achieves much higher levels of economic growth for a sustained period, the country’s economic and social problems of poverty, inequality and unemployment will not be resolved. Identifying weaknesses Electricity tariffs and supply Electricity tariff increases since the onset of the power crisis in 2008 have been significantly above inflation levels, with a doubling in real prices from 2008 to 2012 and a further increase of 25% above inflation from 2012 to 2016 (Minnaar, 2021). Power utility Eskom argues that the pricing regime does not meet the requirements for cost-effectivity at an efficient operational level, but customers are concerned about affordability in relation to other countries. Above-inflation tariff increases have a substantial impact on the mining industry’s cost structure, jeopardising the viability of marginal and lossmaking mines and threatening to accelerate job losses at energy-intensive mines. In 2021, mining input cost inflation averaged 8.80%, but this will increase to 13.30% should Eskom’s latest requested tariff increases for 2022/23 to 2024/25 be approved (Langenhoven, 2022). The Minerals Council argues that the mining sector is a price taker and cannot influence selling prices. Therefore, cost increases erode profit margins and jeopardise the sustainability of the sector. The mining industry has also called for a more predictable price path for electricity. While Eskom will continue to supply the bulk of the mining sector’s power needs for some time, Minerals Council member companies have announced a pipeline of 3 900 MW of potential renewable-energy projects worth more than R60-billion that would, when implemented, substantially contribute to bridging the large country electricity supply deficit, diversify the country’s supply, reduce the sector’s carbon footprint and stabilise costs (Mining Weekly, 2021). Infrastructure shortcomings The mining industry has singled out logistics as one of its biggest domestic constraints, particularly for those companies producing bulk commodities, like iron-ore, coal, chrome and manganese. These firms have been unable to benefit from higher global commodity prices, in some instances record prices, because of rail and port inefficiencies. State-owned Transnet’s rail system faces major impediments stemming from high levels of theft and vandalism, among other operational challenges. The parastatal loses about 120 km of overhead cables a month, owing to criminality. Security incidents across the freight rail network have increased 177% in the past five years and the cost to Transnet and its customers has increased exponentially (Transnet, 2021). Africa’s top iron-ore producer, Kumba Iron Ore, has said that it cannot transport its premium steelmaking material from the mines in the Northern Cape to the Port of Saldanha on the West Coast, because of rail bottlenecks, costing the company billions of rand in lost revenue. Logistical issues also affect the movement of coal, with major producers Exxaro Resources and Thungela Resources having flagging concerns about rail shortcomings. The Richards Bay Coal Terminal last year exported its lowest volume of coal since 1996, owing to an inability to get coal from the mines to the export terminal, in KwaZulu-Natal. The rate mining companies are charged for rail services is also deemed to be uncompetitive. As mining companies are not the owners or operators of the rail services, it is difficult to influence Transnet to be more productive, innovative or to introduce better technology. In many other countries, private companies own or partially own the infrastructure in the logistics value chain. More private-sector involvement in rail and port logistics is considered a key enabler that can make South Africa more competitive. Plans are afoot for more private participation in logistics. Government is promoting greater private-sector participation in rail, including through granting third-party access to the core rail network and the revitalisation of branch lines. A major ports reform is also under way. Labour and community relations A stable labour workforce and sound community relations are key enablers in making mining companies globally competitive. Without stable relationships, the industry will not produce the tons that are required to compete on a global level. Civil society has a role to play in levelling the playing field between labour and mining companies. However, the mining industry is perceived as being too defensive in its interactions with civil society. Localisation and black empowerment Localisation, procurement and broad-based black economic empowerment (BEE) can be burdensome on the industry, when sufficient capacity does not exist in the value chain of smaller players. The Mining Charter requires that 44% of the total procurement budget be spent on South African manufactured goods by BEE-compliant companies, 21% on South African goods manufactured by black entrepreneurs and 5% on goods manufactured by BEE women entrepreneurs or youth-controlled companies. In respect of services, even higher percentages are set for procurement from majority black-owned suppliers. The Mining Charter provides that 60% of the total services must be procured from BEE entrepreneurs, 10% is to be procured from BEE-compliant companies and 10% from BEE women entrepreneurs or youth-owned companies (Department of Mineral Resources, 2018). Mining narrative The tone from politicians, some senior State officials and communities is one that is not always supportive of the mining industry, with a narrative that mining is the ‘big evil’. These messages sow mistrust and negatively affect investment appetite. Planning and implementation gap South Africa seems to be stuck in a phase of ongoing planning, often without much progress on the implementation front. This could be owing to a lack of political backing for certain plans or owing to a shortage of people with the necessary skill, professionalism and capabilities to implement plans. The private sector feels its assistance, offering specialists skills through secondments, is met with an unwelcoming attitude. Policy and regulatory uncertainty South Africa must address policy and regulatory uncertainty if it is to attract more investment in exploration and mining. South Africa attracted $194-million a year in exploration expenditure between 2000 and 2018, compared with Canada’s $2-billion a year and Australia’s $1.80-billion a year (Baxter, 2021). The Canadian public policy research organisation, the Fraser Institute, in its 2020 Survey of Mining Companies, released in early 2021, shows a regression in perceptions relating to South Africa as a mining investment destination. South Africa ranked sixtieth out of 77 jurisdictions for investment attractiveness and its attractiveness score worsened from 64.79 in 2019, to 56.33 in 2020 (Yunis & Aliakbari, 2021). In comparison, Botswana has been the top-ranking African country in the Fraser Institute survey for more than 20 years. In 2020, Botswana was the eleventh most attractive jurisdiction in the world for mining investment, with an investment attractiveness score of 81.48 (Yunis & Aliakbari, 2021). Minerals Council South Africa CEO Roger Baxter attributes Botswana’s success to the stability of its regulatory system. He notes that Botswana changed its Mines and Minerals Act in 1999 and has left it untouched since then. By comparison, South Africa has sought to implement an ongoing sequence of major changes to its mining laws and policy frameworks over the past 25 years. Botswana’s mining and prospecting rights application processes are also more streamlined than South Africa’s. In Botswana it takes 20 days to get a mining right for a major project and 40 days for a prospecting right. It takes vastly longer in South Africa to obtain the same licences. In South Africa, to secure a mining right takes on average 355 working days and a prospecting right 245 working days (Minerals Council, 2021b). Unresolved licensing applications currently hold back about R30-billion of committed investment by companies that cannot be spent, owing to red tape, including delays in approval of permits and mining right transfers, issuing of water-use licences and environmental permits (Baxter, 2021). Mining companies have difficulty explaining to shareholders, credit agencies and investors what the future of investment in South Africa holds, when the regulatory framework is not stable. At times the mining regulations, and the bodies empowered to implement them, are experienced as punitive and combative, rather than as collaborative. Slow on innovation South African mining urgently needs innovation. Over the past decade, multifactor productivity in South Africa, an indicator of innovation, has fallen by 7.60% (Baxter, 2021). The local industry is lagging its competitors when it comes to innovation. The mining industries of Australia and the Americas are at the forefront of, or leading, the charge in making their mines safer. They are introducing technology to get to deeper ores that using older technologies are not currently accessible at an economic rate. This is particularly important for South Africa, which has some of the world’s deepest mines. South Africa is not implementing policies, or support measures, to allow for productivity-enhancing measures to be introduced into its mines. Government is not clear on what its social strategy is with regard to innovation and technology, and how the country is going to adapt to it. Weak government The weakness of State entities and the failing of local and provincial governments are areas of concern for the industry. When the State fails to provide services, mining companies are forced to take on the role of ‘surrogate State’ as near-mine communities often expect private businesses to pick up the slack and provide housing and related services. This can result in tension between the industry and communities. Suggestions for fostering growth Conclusion South Africa has vast mineral resources – estimated to be worth $2.50-trillion – but unless the country manages to attract investment in exploration and mining, its minerals are going to stay in the ground. Providing certainty of policy and a predictable regulatory environment could speed up investment, which will drive up inclusive economic growth and much-needed employment creation. Improving the global competitiveness of South Africa would change the country’s economic growth trajectory. Modernising the economy, including the mining sector, will be key to achieving this goal and will require a new approach to technology and innovation. Partnering with the private sector will help the country be more competitive, and will unlock greater private-sector investment required in core infrastructure such as railways, harbours and electricity. To encourage private-sector participation, the country must continue to implement long-awaited structural reforms. In an environment often characterised by talk, rather than action, it is time for the country to roll up its sleeves and get things moving to create an investment framework that is conducive for investors to commit to South Africa. At the same time, the mining industry must seek buy-in from all stakeholders and be more vocal about the consequences of a scenario in which South Africa fails to encourage more resources investment. References Baxter, R. 2021. Address to the 2021 Minerals Council Annual General Meeting, May 26, 2021. [Online]. Available at: https://www.mineralscouncil.org.za/industry-news/publications/annual-reports [accessed January 23, 2022]. Bloomberg News. 2021. Coal and iron pile up in South Africa on rail constraints, October 21, 2021. [Online]. Available at: https://www.bloomberg.com/news/articles/2021-10-21/coal-and-iron-pile-up-in-south-africa-on-rail-constraints [accessed January 23, 2022]. Department of Mineral Resources. 2018. Draft broad-based socioeconomic empowerment charter for the mining and minerals industry, June 15, 2018. [Online]. Available at: https://www.gov.za/documents/mining-charter-broad-based-socio-economic-empowerment-charter-mining-and-minerals-industry [accessed January 23, 2022]. Langenhoven, H. 2022. MYPD5 – Nersa public hearings, January 21, 2022. [Online]. Available at: https://www.mineralscouncil.org.za/industry-news/media-releases/2022 [accessed January 23, 2022]. Minerals Council South Africa. 2021a. Facts and Figures 2020, October 14, 2021. [Online]. Available at: https://www.mineralscouncil.org.za/industry-news/publications/facts-and-figures [accessed January 23, 2022]. Minerals Council South Africa. 2021b. Integrated Annual Report 2020, May 26, 2021. [Online]. Available at: https://www.mineralscouncil.org.za/industry-news/publications/annual-reports [accessed January 23, 2022]. Mining Weekly. 2021. Minerals Council members could deliver up to 3 900 MW of supplementary electricity supply, November 23, 2021. [Online]. Available at: https://www.miningweekly.com/login.php?url=/article/minerals-council-members-could-deliver-up-to-3-900-mw-of-supplementary-electricity-supply-2021-12-10/searchString:minerals+council+members [accessed January 24, 2022]. Mining Weekly. 2021. South Africa’s RBCT exports lowest coal tonnages since 1996, January 25, 2022. [Online]. Available at: https://www.miningweekly.com/article/south-africas-rbct-exports-lowest-coal-tonnage-since-1996-2022-01-25/rep_id:3650 [accessed January 25, 2022]. Minnaar, U. 2021. Energize: A brief perspective on Eskom’s electricity tariffs, September 27, 2021. [Online]. Available at: https://www.energize.co.za/article/brief-perspective-eskoms-electricity-tariffs [accessed January 23, 2022]. Transnet. 2021. Media statement: Transnet continues to implement interventions to curb cable theft, June 10, 2021. [Online]. Available at: https://www.transnet.net/Media/Press%20Release%20Office/TRANSNET%20CONTINUES%20TO%20IMPLEMENT%20INTERVENTIONS%20TO%20CURB%20CABLE%20THEFT.pdf [accessed January 23, 2023]. Yunis, J. & Aliakbari, E. 2021. Fraser Institute Annual Survey of Mining Companies, 2020. [Online]. Available at: https://www.fraserinstitute.org/studies/annual-survey-of-mining-companies-2020 [accessed January 23, 2022]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

Occasional paper 2/2020 Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. by Daryl Swanepoel MPA, BPAHons, ND: C.Admin Abstract The COVID-19 pandemic has resulted in strained relations between the two largest global economies, the United States of America (US) and China. This discord requires countries who have longstanding and strategic relations with both these nations to carefully navigate their affairs, adopting foreign policy positions that would maintain and strengthen their interactions with both. This paper examines the effect that COVID-19 and these strained relations has had – and may still have – on South Africa’s and Africa’s foreign policy towards China. In reflecting on the tricky position in which the US-China discord is placing South Africa and many other countries on the continent, the paper comes to a few key conclusions. Firstly, the US’s withdrawal from the WHO is ill-considered, especially at a time when the global COV ID-19 pandemic requires all nations to work together in solidarity to combat this disease. Secondly, based on the multitude of new cooperation commitments and aid packages extended from China to Africa during the pandemic, relations between the two are unlikely to be affected by the COVID-19-charged feud between China and the US. Thirdly, however, as the US too remains an integral partner to South Africa and Africa, this might see the African continent performing a difficult balancing act between the two feuding parties and their respective allies in the months and years to come. Upon writing this paper in early July 2020, more than 11 million people worldwide had contracted the COVID-19 virus, and more than 550 000 deaths had been linked to the disease (Deutsche Welle, 2020). The virus was first detected in the Chinese city of Wuhan, where officials started reporting cases in December 2019 (WHO, 2020). Its genetic sequence was shared publicly between 11 and 12 January 2020. All indications are that it has a natural animal origin and is not a manipulated or constructed virus (WHO, 2020). Nevertheless, accusations that the COVID-19 virus was created in a laboratory seem to persist. A study in Canada, for example, revealed that one in four Canadians believed there was at least some truth in the claim that the virus had emerged from a laboratory in Wuhan (Stecula, Pickup & Van der Linden, 2020). However, this notion appears to have been dispelled now that many researchers have studied the genomic features of the virus and have found no evidence of it being a laboratory construct. If it were, the genome sequence would have shown a mix of known and unknown features, which it does not (WHO, 2020). Yet the United States of America (US) continues to insinuate that “COVID-19 originated in a Chinese biolab” (Ecarma, 2020). They also blame China for not being transparent when COVID-19 was first detected, and for having tried to suppress the outbreak. At a news briefing in April 2020, the US secretary of state told reporters that his country believed that Beijing had failed to report the outbreak in a timely manner, in breach of World Health Organisation rules (Brunnstrom & Pamuk, 2020). The notion of China having behaved inappropriately in respect of COVID-19, and of the World Health Organisation (WHO) somehow being an aider and abettor, continues to gain momentum in US rhetoric. By 8 July 2020, it had escalated to the point where the US officially started the process of withdrawing from the WHO (Cohen, Hansler, Atwood, et al., 2020). How this growing discord between the US and China will affect other nations’ relations with China remains to be seen. Whether these tensions will sway or at least dampen enthusiasm to further strengthen ties with China is yet to be determined. That it could still have an impact cannot be ruled out, especially given the current US administration’s inclination to pressurise other nations to follow its lead. In 2018, for instance, the US threatened to cut funding to South Africa through its USAID programme when it emerged that South Africa had voted against their motion in the United Nations (UN) to declare Jerusalem the capital of Israel (Pather, 2018). USAID, through the United States President’s Emergency Plan for Aids Relief (PEPFAR), supports South Africa’s efforts to prevent and treat HIV/Aids and tuberculosis (USAID, n.d.). Granted, the aid was eventually not cut; in fact, South Africa received even more assistance in the form of a US grant of at least R410 million to combat the COVID-19 pandemic in the first half of 2020 (Home, 2020). For now, therefore, South African relations with the US appear to be sound (US Department of State, 2020). But how could the discord being sown by the US in relation to China and the COVID-19 pandemic affect Sino-South African and Sino-African relations, if at all? Placing South Africa in a tricky position The US is a key strategic partner to both South Africa and other African countries who share its values of democracy, the rule of law and good governance (DIRCO, 2020). It is also South Africa’s third-largest trading partner (South African Market Insights, n.d.). At the same time, South Africa’s strategic collaboration with China extends beyond bilateral interests, as the two nations have similar views on many global issues (DIRCO, 2020). In addition, China is South Africa’s largest trading partner (South African Market Insights, n.d.). The South African position to date has been that, given the global gravity of the COVID-19 pandemic, the US and China should engage in dialogue to address their concerns and resolve their issues in a peaceful and constructive manner. Convinced that the pandemic calls for a global inclusive solution, South Africa believes that the two global giants’ focus should be on providing support and assistance to vulnerable countries (DIRCO, 2020). As the world’s two largest economies, the US and China both have a responsibility to help restore the well-being of people across the globe by reviving the world economy, which has been devastated as a result of the COVID-19 outbreak (DIRCO, 2020). Already, the US-China trade war poses threats to the South African and African economies. Whilst Africa is not a direct target of the conflict, the impact of the quarrel is affecting the continent. The imposition of US tariffs on Chinese products has caused commodity prices and local currencies to fall. Major stock exchanges across Africa have been badly hit, which has shaken investor confidence in the continent. Indeed, it is predicted that the resulting slowdown of the Chinese economy could hinder the exports and government revenues of many economies across the African continent (Cazares, n.d.). The COVID-19/WHO spat adds another dimension to the threat that the uneasy US-China relationships hold for the African continent. Keep in mind that Africa is heavily dependent on WHO funding. The continent receives “more than double the budget allocation of any of the five other regions the WHO administers globally,” of which approximately 60% goes towards reducing infectious diseases (Baker & Hincks, 2020). Against this backdrop, the US’s decision [to cut funding to the WHO] could have its greatest impact on Africa’s ability to fight the pandemic since it is probably the region least equipped to fight it on its own (Fabricius, 2020). So, whilst South Africa has been measured in its response, this should not be mistaken for a lack of concern over the tensions between the US and China, especially during this period of global turmoil. Resolving US-China tensions is clearly in the global interest, particularly in so far as it affects Africa. In South Africa’s engagements in the multilateral arena, the country has emphasised the importance of the US and China bridging their differences. This it has done independently, and as chair of the African Union, as well as in the capacity of non-permanent member of the UN Security Council (DIRCO, 2020). Pointing to the US’s key role in the sustainability of the WHO and, therefore, in the prevention of future pandemics, South Africa has urged the US to reconsider its withdrawal from the WHO. Ultimately, the capacity of all global nations is required to help combat the deadly COVID-19 pandemic and similar future outbreaks (Lindeque, 2020). Impact of COVID-19 US-China discord on South Africa's and Africa's willingness to deepen Sino-African relations South Africa’s foreign policy is driven by five priorities. These are (i) strengthening cooperation within the Southern African Development Community (SADC), (ii) promoting the African Agenda, (iii) strengthening South-South cooperation, (iv) strengthening multilateralism, and (v) cooperating with strategic formations from the North. Its underpinning values are the promotion of global peace, development, and economic prosperity (DIRCO, 2020). This is the policy and values system within which the country’s strategic partnership with China is positioned. The South Africa–China partnership goes beyond narrow bilateral considerations, extending into the multilateral arena. The two nations have similar views on several global issues. The strategic partnership is guided by the respective partners’ shared aspiration to promote economic growth, development, and mutually beneficial cooperation to help eradicate inequality, poverty, and unemployment (DIRCO, 2020). At a national level, South Africa considers its relationship with China an important vehicle to achieve the development goals articulated in its National Development Plan (NDP) (DIRCO, 2020), which was developed by the National Planning Commission in collaboration and consultation with South Africans from all walks of life (National Planning Commission, n.d.). To this end, South Africa pursues several agreed cooperation mechanisms with China that provide opportunities to exchange views, adopt best practice and deepen cooperation so as to create a better future for both countries’ peoples. These mechanisms include: a bi-national commission, which serves as a strategic platform to address issues of common interest between the two countries, such as trade promotions and economic exchanges (RSA, 2019); a joint working group, comprising cabinet ministers from both nations, who monitors the implementation of cooperative pro jects, and manages and solves challenges that arise during the implementation of those projects (Fahamu, 2014); and a strategic dialogue, which provides a platform for the regular review of the bilateral political and economic relations between the two countries (DIRCO, 2019). As current chair of the African Union (RSA, 2020), South Africa understands the complexities and importance of China’s engagement with and on the African continent. China’s focus has been on economic development and the provision of crucial socio-economic infra structure. It has also been willing to invest in geographic areas that other international financial institutions, Western governments, and companies have steered clear of to date (DIRCO, 2020). As the largest trading partner of South Africa and the rest of the African continent, China plays a critical role in supporting economic diversification, beneficiation, human resource development and employment, as well as the expansion of the continent’s manufacturing base. Its position as the global engine of economic growth has presented both the South African and African economies with significant growth opportunities (DIRCO, 2020). In the context of COVID-19, this close cooperation was again demonstrated when South Africa and China cooperated closely on research and the exchange of medical supplies and expertise during China’s initial outbreak of the coronavirus. During this period, South Africa made several donations of medical equipment to help China combat the virus (news24.com, 2020 & DIRCO, 2020). Similarly, China is now supporting South Africa and Africa by supplying them with much-needed medical equipment, training, and information, and deploying medical research teams (Mekuto, 2020). As to whether the COVID-19-charged discord between the US and China has had an adverse impact on Sino-South Africa and/or Sino-African relations, the answer seems to be in the negative. If anything, the sustained level of Chinese involvement on the African continent, whether COVID-19-related or not, has served to strengthen relationships. Attempts to weaken trust in China and its intentions do not measure up to the reality experienced by Africa’s leaders. Through the Forum on China-Africa Cooperation (FOCAC), a dialogue platform that formalises Sino-African exchanges on various topics (King, 2019), China has pledged to continue supporting African countries in their fight against COVID-19. More so, it has pledged financial support, partly through the suspension of debt servicing and repayment. China has also undertaken to construct the African Centre for Disease Control. And through the Belt and Road Initiative, in which a number of African countries such as Egypt, Ethiopia and South Africa are taking part (Chatzky & McBride, 2020), greater cooperation with international organisations such as the UN and WHO is also on the agenda (Temba, 2020). Beyond COVID-19, China’s President Xi Jinping has committed to support the development of the African Continental Free-Trade Area (ACFTA), which will aim to create a single continental market for goods and services, with free movement of businesspeople and investments (AU, n.d.). China will help enhance connectivity, strengthen industrial capacity, and develop supply chains. In addition, it will explore broader cooperation with Africa in new areas, such as the digital economy, smart cities, clean energy and 5G mobile technology to boost the continent’s development and revitalisation (Xi, 2020). China also announced measures to support WHO efforts to establish a global humanitarian response depot, which will facilitate anti-epidemic supply chains and foster “green corridors” to fast-track transportation and customs clearance. It has undertaken to make available $2 billion over the next two years to respond to the COVID-19 pandemic, especially in developing countries, many of which are in Africa. Through FOCAC, the construction of the China-Africa Friendship Hospitals and the pairing of Chinese and African hospitals were announced. China has also pledged to prioritise African countries once it has succeeded in developing a COVID-19 vaccine (Abumaria, 2020). Clearly, therefore, many of the new economic developments, cooperation commitments and aid packages from China to Africa were announced, and indeed commenced, during the period of combatting the COVID-19 pandemic. Moreover, this has taken place notwithstanding the US-China discord. Thus, it is safe to conclude that despite the dissonance between the US and China, FOCAC will remain an important platform for Africa and China to jointly implement their cooperation initiatives (Xinhuanet, 2020). There is little evidence to suggest that this particular dispute between the world’s two greatest economies is affecting Sino-African affairs. Instead, the scenario sketched above not only suggests South Africa and Africa’s willingness to deepen China-Africa relations in the current international environment and under present conditions; it also confirms a deep commitment on Africa’s part to honour its partnership with China and work towards taking this relationship to even greater heights. Conclusion To ensure economic growth and development in the wake of the COVID-19 pandemic, and effectively combat the disease at a global level, South Africa believes that the international community needs to sustain and strengthen cooperation at both bilateral and multilateral levels. Within this context, it considers China to be a proven and reliable partner to both itself and the African continent (Lotz, 2020). This in itself is bound to drive a deepening of relations between South Africa and Africa on the one hand, and China on the other. This is particularly so given that South Africa’s foreign policy towards China is rooted in decades of solidarity and friendship. Going forward, this will mean walking the tightrope between maintaining good relations with China and with the US. That tightrope might even become more treacherous if other countries follow the US’s lead in ostracising China because of its handling of the coronavirus, which the United Kingdom lately seems inclined to do (Langfitt, 2020). References Abumaria, D. 2020. Beijing offers Egypt, other African nations first use of future vaccine. [Online] Available at: https://www.jpost.com/international/beijing-offers-egypt-other-african-nations-first-use-of-future-vaccine-634575 [accessed: 14 July 2020]. African Union (AU). N.d. CFTA Continental Free Trade Area. [Online] Available at: https://au.int/en/ti/cfta/about [accessed: 11 Jul 2020]. Baker, A. & Hincks, J. 2020. What Trump’s WHO Funding Freeze Means for the Most Vulnerable Countries. [Online] Available at: https://time.com/5823297/trump-who-funding-freeze-africa-coronavirus/ [accessed: 15 July 2020]. Brunnstrom, D. & Pamuk, H. 2020. US ups criticism of China over COVID-19 transparency and data. 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[Online] Available at: https://issafrica.org/iss-today/africa-feels-the-repercussions-of-the-us-china-global-spat [accessed: 14 July 2020]. Fahamu. 2014. South Africa committed to enhancing bilateral relations with China [Online] Available at: http://www.fahamu.org/ep_articles/south-africa-committed-to-enhancing-bilateral-relations-with-china/ [accessed: 11 July 2020]. Home, W. 2020. VSA gee nog geld aan SA vir virusstryd. Cape Town: Netwerk24. King, K. 2019. [Online] China–Africa Education Cooperation: From FOCAC to Belt and Road. Available at: https://www.researchgate.net/publication/292528132_The_forum_on_China-_Africa_cooperation_FOCAC [accessed: 11 July 2020]. Langfitt, F. 2020. How The Coronavirus Has Strained U.K.-China Ties. [Online] Available at: https://www.npr.org/2020/05/22/857767920/how-the-coronavirus-has-strained-u-k-china-ties [accessed: 24 July 2020]. Lindeque, M. 2020. Coronavirus: SA calls on Trump to reconsider decision to cut funding to WHO. 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[Online] Available at: https://www.gov.za/speeches/acceptance-statement-south-african-president-he-cyril-ramaphosa-10-feb-2020-0000?gclid=CjwKCAjwxqX4BRBhEiwAYtJX7V_cH1QS0ocSDgSDuj2TWdTsKyt7klr4eomTHI69fNUbr0sY6u49rRoCQCYQAvD_BwE [accessed: 11 July 2020]. South African Market Insights. N.d. South Africa’s Trade Data Page. Last updated: 4 April 2020 Category: International trade and eco nomics. [Online] Available at: https://www.southafricanmi.com/south-africas-trade-data-page.html [accessed: 11 July 2020]. Stecula, D., Pickup, M. & Van der Linden, C. 2020. Who believes in COVID-19 conspiracies and why it matters [Online] Available at: https://policyoptions.irpp.org/magazines/july-2020/who-believes-in-covid-19-conspiracies-and-why-it-matters/ [accessed: 10 July 2020]. Tembe, P. 2020. China’s leadership during the Covid-19 crisis has been exemplary. [Online] Available at: https://www.iol.co.za/busi ness-report/belt-and-road/chinas-leadership-during-the-covid-19-crisis-has-been-exemplary-49605815 [accessed: 14 July 2020]. USAID. N.d. Our Work. Health. [Online] Available at: https://www.usaid.gov/south-africa/our-work [accessed: 12 July 2020]. US Department of State. 2020. U.S. Relations with South Africa. [Online] Available at: https://www.state.gov/u-s-relations-with-south-africa/#:~:text=U.S.%2DSOUTH%20AFRICA%20RELATIONS,%2C%20environment%2C%20and%20digital%20economy [accessed: 12 July 2020] World Health Organisation (WHO). 2020. SUBJECT IN FOCUS: Origin of the severe acute respiratory syndrome coronavirus-2 (SARS CoV-2), the virus causing COVID-19. Coronavirus disease 2019 (COVID 2019) Situation Report - 94. Geneva: WHO. Xi, J. 2020. Enhanced China-Africa cooperation vital to soften impact of Covid-19 - Xi Jinping. [Online] Available at: https://www.iol.co.za/news/africa/enhanced-china-africa-cooperation-vital-to-soften-impact-of-covid-19-xi-jinping-49508208 [accessed: 14 July 2020]. Xinhuanet. 2020. FOCAC leads int’l cooperation with Africa: Chinese FM [Online] Available at: http://www.xinhuanet.com/eng lish/2020-01/13/c_138699366.htm [accessed: 14 July 2020]. Opinion: COVID-19 and China - No stopping the giant by Ambassador Gert Grobler, BA (Hons) Institute of African Studies, Zhejiang Normal University in Jinhua, China The outbreak of Covid-19 has changed the world in many respects. It has also led to a new era at international relations level, with far-reaching implications for the global geopolitical, economic and security situation. China, especially, has come into sharp focus given the significant and growing role that the country played on the international political and economic scene, prior to the outbreak of Covid-19. There is currently worldwide speculation on what the implications of Covid-19 will be for China. This raises the question of what the impact of Covid-19 will be on China's domestic political and economic situation as well as on the country's future role internationally, including its relations with Africa. China's political agenda On the domestic front, one senses a deep-seated unity, pride, and unashamed patriotism among the Chinese people. Their overwhelming support for President Xi Jinping and the government is therefore unsurprising, as is their belief that he should be credited for the effective and resolute manner in which Covid-19 was contained in China. All of which has further consolidated President Xi Jinping's strong position as the leader of the Communist Party of China. But there is an urgent need in China for wide-ranging discussion on political, economic, and social matters as well as international relations. These issues were addressed at the most important event in the Chinese political calendar, the "Two Sessions", which entails the twin plenum of the National People's Congress and the China People’s Political Consultative Conference, the topmost political advisory body to the government. This critical event took place in Beijing, from 22 May 2020, against the backdrop of Covid-19, and will significantly change domestic and international realities. Economic affairs On the economic front, Covid-19 has had a serious negative impact on the economy, which already showed signs of slowing down, prior to the onset of the virus, due to external factors. While there are observers who are predicting that China's growth rate of 6,1 percent in 2019 could drop to anything between 1 and 3 percent in 2020 – due to the significant drop in consumer spending and industrial production as well as declining demand from overseas countries, particularly in the West – the Chinese government remains optimistic that, by and large, China will still make progress towards the achievement of its broad political, economic and social goals for 2020. On China's economic performance, there are many observers who point out that, based on China's phenomenal economic growth over the last few decades (the size of the economy doubled over the last decade), the inherent robustness of the economy, the introduction of sensible fiscal and monetary policies and the dynamic technology/digital sector, combined with the expected gradual recovery of the global economy, the speed of the recovery of China's economy will come as a surprise to many. This is an opinion I entirely share. This being said, an important factor in future global economic growth is the ongoing trade/tariff "war" between China and the USA, which is accompanied by the current deterioration of bilateral relations between the two countries. The current attempts by President Trump and others to initiate a major shift of the economic supply chain away from China is unlikely to make any substantial progress though, given the strength and the existing integral role of China's economy in the global economic arena. In fact, this would serve as a disincentive to many countries from following Trump's counterproductive approach. There is a growing frustration and despair on the Chinese side as regards the uncertainty as to whether Trump has the real intention to pursue the implementation of Phase 1 of the trade/tariffs agreement, agreed upon earlier, which holds significant benefits for both sides and which should have kicked in, early in January 2020. The question remains whether Trump has the "political will" to proceed with the implementation of the agreement as well as continued discussions on trade matters, due to a recent Pew poll in the USA which reflected that 66 percent of all Americans hold "negative views" of China. This must unfortunately be ascribed to the ongoing unfounded attacks against China made by Trump and the USA Congress. This is a short-sighted approach by Trump, as it is generally stated by observers that lack of progress on the trade talks would cause considerably more economic headaches for the USA than for China. International relations With the situation regarding Covid-19 now rapidly normalising in the country, China is highly active and admirably supporting approximately 130 countries around the world with medical equipment and advice in their battle against Covid-19. The Chinese government and private enterprises are currently also busy supporting Africa – where Covid-19 is now increasingly spreading – on a big scale with comprehensive aid packages and advice. But despite this, and the fact that the international community overwhelmingly gave credit to the Chinese government for its efforts to contain Covid-19 in China, President Trump and his cohorts continue to launch unjustified attacks on China as regards "China's handling of Covid-19", with the unfortunate result that China has now become a "political football" in the domestic affairs of the USA. It is generally said in the international community that the reason for Trump's unfair attacks on China, is to conceal his own glaring mistakes which failed to protect the USA citizens from Covid-19 and also, of course, to try and boost his chances in the upcoming presidential elections. The USA and others have even gone so far as to propose an "investigation into the origin of Covid-19 and related issues". It can be expected that the Chinese government may agree to this, but subject to the condition that the investigation is conducted in an "independent manner" under the auspices of the World Health Organisation and without any notion of "presumption of guilt" on China’s part, and also once the battle against Covid-19 has further progressed, which should be the main priority now. Covid-19 emerged at a time when China was making increasing progress with its political and diplomatic acceptance in the international community as a "responsible world leader ". It is against this background, that it is doubtful whether the attempts by the USA and others "to sue China for compensation as a result of Covid-19" will succeed. Apart from a number of international law obstacles, it is a fact that there is no great appetite on the part of many leading countries in Europe, Asia and among international organisations for this counterproductive and unjust initiative. It is also highly unlikely that SA and the African Union would support it. I agree with observers who argue that “Covid-19 will help China to enhance its role as a responsible world leader". In fact, China through its responsible actions, have already, even prior to Covid-19, moved into the global leadership "vacuum," left behind by leaders like Presidents Trump and Bolsanaro. It is a fact that China's constructive approach on burning international issues such as global peace and stability, development, climate change and support for multilateralism, is much more closely aligned to that of Europe, Asia, and Africa, than to the erratic and unpredictable policies of Trump on these key issues. Given the significant role that China is playing in the global economy as well as the ongoing constructive role that China is adopting in the multilateral arena and global affairs, it can be expected, once the worst of Covid-19 has passed, that the international community will increasingly reach out to China, to further consolidate and promote bilateral and multilateral cooperation. The China-Africa cooperation Despite the recent incidents about "alleged racism against Africans in China" which the western media tried to exploit to China's detriment, but which was subsequently resolved between China and the AU through constructive dialogue, it can be expected that the excellent cooperation between China and Africa will continue to gain momentum, particularly at this juncture, where Covid-19 is bound to have a serious negative impact on the economy of the continent. The growing China-Africa friendship and cooperation was, as predict ed, an agenda point at the "Two Sessions" plenum in Beijing, where a strong endorsement and affirmation was given to the continued China-Africa cooperation and friendship in the context of the Forum on China/ Africa Cooperation (FOCAC) in the foreseeable future. China is already Africa's most important economic partner and largest trade partner, with total trade increasing from USD10-billion in 2000 to USD204-billion in 2018. The economic as well as people to people cooperation between China and Africa will also be significantly enhanced in the context of the exciting and commendable Belt and Road Initiative. In closing, despite many prophets of doom, particularly in the West, it is predicted that China will overcome all the challenges flowing from Covid-19, through its typical determined, focused and industrious hard work approach, and that China will not only resume its key role in global political and economic affairs but will further strengthen it in the years to come, towards a shared destiny of mankind. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

Occasional paper 3/2020 Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. by Daryl Swanepoel MPA, BPAHons, ND: C.Admin Abstract Some accuse the United Nations (UN) of having turned into an irrelevant, toothless organisation. According to these critics, the disconnect between the UN General Assembly and the UN Security Council undermines the legitimacy of UN resolutions that are meant to advance human rights, socioeconomic development, and peace and security. The exclusive nature of the Security Council, member state inequality, uneven regional representation and the unfairness of the permanent five members’ veto power are issues said to diminish the credibility of the UN’s work. As a result, the body is confronted by two sets of critics: those who believe that it is no longer fit for purpose, and those who say that the need for a reinvigorated and reformed UN is now greater than ever before. UN proponents, on the other hand, maintain that the body remains best positioned to coordinate global responses to the growing number of transnational challenges confronting our interconnected world. This paper examines South Africa’s position in the debate. It finds that while South Africa has not lost faith in the UN’s role in global affairs, the country does seem to side with those pushing for comprehensive UN reform. The United Nations (UN) was founded in 1945 following World War II, primarily for the purpose of preserving global peace and security, fostering sound international relations between nations, and promoting human development and human rights (UN, N.d.(a)). A snapshot of the UN The UN is neither a government, nor does it have an army or levy taxes. Instead, it is an organisation of member states, on whom the organisation relies on to carry out its decisions (UN, N.d.(b)). It is funded by means of mandatory payments and voluntary contributions by its member states, and also receives significant donations from philanthropists and charitable organisations (Shendruk, 2018). At present, the UN has 193 member states (UN. N.d.(c)) and comprises six organs: The General Assembly comprises representatives from every member state, affording each state a single vote (UN, N.d.(b)). It takes decisions relating to key issues such as international peace and security, membership and the organisation’s budget, for which a two-thirds majority is required. Other General Assembly matters – for instance the promotion of international cooperation, development of international law, and human rights – are decided by a simple majority. Although generally regarded as an articulation of the global opinion on pertinent issues, General Assembly recommendations are not compulsory to execute (UN, N.d.(d)). The Security Council (UNSC) has 15 members, each with a single vote. Five of these members – the United States, United Kingdom, France, China and Russia – are permanent. The remaining ten are elected by the General Assembly for two-year terms. Unlike General Assembly recommendations, however, UNSC decisions are binding on all 193 member states. Nine affirmative votes are required for a decision to carry. However, substantive decisions of a non-procedural nature cannot be made if not supported, or if vetoed, by a permanent member (UN, N.d.(e)). The Economic and Social Council (ECOSOC) makes policy recommendations regarding global economic, social and environmental challenges (UN, N.d.(b)). The Trusteeship Council was established to provide international supervision for eleven trust territories. Its purpose was to take steps to prepare these territories for self-government or independence (UN, N.d.(b)). All these territories have since attain independence, but the Council is yet to be formally disbanded (UN, N.d.(f)). The International Court of Justice is charged with settling legal disputes between states and issuing advisory opinions to the UN and its agencies (UN, N.d.(b)). The Secretariat sees to the day-to-day functioning of the UN. It serves the principal organs of the UN and its programmes, and implements their policies (UN, N.d.(b)). Why is the UN important, and is it stile relevant? In short, as the global architecture designed to prevent war and restore security in areas of conflict, the UN’s significance lies in its founding purpose to protect people, advance human development and social progress, and achieve global cooperation aimed at resolving economic, social, cultural and humanitarian challenges. This is premised on the vision of an ideal world, where everyone feels protected, is able to live their lives in freedom and peace, feels loved and wanted, and has their basic housing, food and work needs fulfilled. In pursuit of this vision, the UN harnesses teamwork and mutual trust, compassion and understanding between nations, peoples and cultures. (Paradiso, 2015) However, these noble ideals are of little consequence if the mechanism to achieve them is broken, insufficient or lacking. While the mainstream opinion still is that the UN’s objectives are as relevant today as they were 75 years ago, many in society have started questioning whether the UN is still fit for purpose, with United States president Donald Trump on record for having described the body as “just a club for people to get together, talk and have a good time”. Other world leaders who have expressed an urgent (yet perhaps more eloquently phrased) need for UN reform include German chancellor Angela Merkel, Chinese president Xi Jinping and Canadian prime minister Justin Trudeau (Merelli, 2018). The question of the UN’s relevance hinges on the two issues of inconsequence for member states’ non-adherence to UN resolutions, and the UNSC’s decision-making regime. The difficulty regarding inconsequence for non-adherence to UN resolutions was illustrated when the United States chastised the UN for its inability to hold Iraq accountable for its violation of 16 UNSC resolutions. Moreover, back in 2002 already, it was reported that, in reviewing five decades of UN resolutions, Prof Stephen Zunes of the University of San Francisco had identified at least 91 resolutions – in addition to the 16 Iraq violations – that were clearly being violated. In many instances, enforcement was blocked by powerful countries. The degree of compliance, Prof Zunes suggested, “depends on the influence of each state and its backers” (Farley, 2002). These consistent breaches underscore the conundrum of the UN: While the has the power to pass resolutions, it often lacks the authority to enforce them, which erodes its overall credibility (Farley, 2002). And as stated earlier, adding to this problem is the fact that many General Assembly decisions are non-binding on members. In terms of the UNSC’s decision-making regime, several concerns have been raised. The most significant of these relates to the distinction between the UNSC’s five permanent and other, non-permanent members. No substantive decision can be adopted without the permanent five’s concurring votes, and a single permanent member can veto a UNSC decision, rendering it invalid (Security Council Report, 2020). In essence, therefore, although fourteen of the fifteen member states serving on the UNSC, as well as the vast majority of member states in the General Assembly, may support a particular position, all would come to naught should a single permanent UNSC member veto it. And there’s the rub: Permanent members are known to use the veto to defend their own national interests or the prescripts of their foreign policy, or even to advance a single issue that is important to them (Security Council Report, 2020). Another matter raised with regard to the UNSC’s decision-making is the need for better representation, both in terms of size and geographic spread. Seventy-five years ago, the UN was formed by 51 states, with the UNSC comprising five permanent and six non-permanent members. By 1960, the UN had grown to 99 members, and the non-permanent members of the UNSC were increased from six to the current ten. With a current UN membership of 193, the size of the UNSC seems out of touch with reality: In 1945, the five permanent members accounted for 50% of the world’s population; today, they account for only 26% (of whom two-thirds are in China alone) (Thibault, 2020). Geographic representation on the UNSC is equally skewed. Altogether 47% of the seats are occupied by Western and Eastern Europe, Australia, Canada, Israel, New Zealand, Turkey and the United States, who account for only 17,1% of the global population. On the other hand, the Asia-Pacific group of countries, who account for 58,6% of the global population, and the African group of countries, who account for 15,8% of the global population, are each allocated 20% of the seats. Latin American and Caribbean countries, who represent 8,5% of the global population, occupy 13% of the seats (Thibault, 2020). Yet the UN remains a relevant force. It has helped ward off hunger, poverty and violence for hundreds of millions of people. It leads the fight against climate change. Its agencies take care of approximately 60 million refugees and other vulnerable people across the world. UN observers help ensure free and fair elections worldwide. Its peacekeepers have intervened in conflicts where few countries would consider doing so alone. The Non-Proliferation Treaty has ensured the limitation of nuclear weapons (Santamaria, 2020). It also remains relevant in terms of providing an enormous range of basic services that people take for granted. And while there are a growing number of alternative platforms where world leaders can engage in multilateral cooperation, “there is no entity matching the standing capacity of the UN’s agencies across the board” (Gwertzman, 2010). The solution to the stated concerns relating to the process and structures of the UN, therefore, does not necessarily lie in withdrawal of funding or participation. The UN still has a key role to play. Instead, it might be time for a comprehensive overhaul of the organisation’s structure, systems and, most importantly, its decision-making processes and mechanisms to ensure adherence to its resolutions. Call for UN reform Despite numerous successful interventions over the lifespan of the UN, calls for reform of the organisation are growing louder. There appears to be a growing sense of discomfort that failure to reform will erode the organisation’s relevance even further. Germany, for instance, has increasingly insisted on the reform of the UNSC, and has been openly supported by France in calling for the expansion of the number of permanent seats. Turkey, in turn, wants a rotational format in the UNSC, without increasing the number of permanent members. Other countries calling for reform include Japan, Canada, Brazil, Italy, Spain and Argentina. Some have called for a greater number of permanent seats on the UNSC, while the “Uniting for Consensus” movement opposes the expansion call, instead suggesting the principle of rotation and the rejection of certain states’ veto privilege. (Erkut Eyvaz, 2019) It would seem, therefore, that failure by the UN to reform would feed into the narrative of an increasingly irrelevant organisation clinging on to old-world structures and processes, with a growing sense of disenfranchisement among many of its members. This could very well drive the global dialogue towards alternative emerging cooperation platforms. Against this backdrop, where does South Africa stand in the UN reform debate? South Africa's position on UN reform In terms of UN management reform, South Africa continues to support the UN secretary-general’s comprehensive Management United to Reform, which sets out a new management paradigm for the Secretariat. This paradigm envisages a UN with, among others, simplified processes, a better operational set-up and improved strategies and structures. South Africa also believes that there should be greater transparency, predictability and oversight in UN funding, and in the implementation of its peace mandates, especially as they relate to the African continent. Furthermore, due consideration should be given to, among others, the UN’s human resource and procurement policies, gender parity and equitable geographic representation. (DIRCO, 2020) South Africa believes that revitalisation of the UN General Assembly is a critical aspect of overall UN reform. Key to this is the recognition of the General Assembly as the most representative and democratic political organ of the UN, and so its role and authority need to be strengthened accordingly. The objective with structural reforms should be for the organisational design to support the implementation of the 2030 Agenda for Sustainable Development effectively and efficiently. (DIRCO, 2020) The 2030 Agenda enshrines the seventeen sustainable development goals (SDGs) and 169 targets that the UN aims to achieve over the next fifteen years, and with which national governments are expected to align their political agendas (EDF, N.d). In terms of the UNSC also, South Africa is concerned about the slow pace of reform, believing that reform efforts need to be urgently reinvigorated. Although global consensus on the need for the early reform of the UNSC was reached in 2005 already, no significant reform has been achieved to date. (DIRCO, 2020) The Ezulweni Consensus as a basis for South Africa's stance South Africa’s position on both UNSC and General Assembly reform is guided by the African Common Position as enunciated in the Ezulweni Consensus (DIRCO, 2020). The African Union (AU) adopted the Ezulweni Consensus in Addis Ababa, Ethiopia, in March 2005. It contains the combined African thinking on the reform needed in the various organs of the UN. In that document, the AU expressed the need for the UN General Assembly to be strengthened. While it should retain its intergovernmental character and remain essentially as a forum for intergovernmental dialogue, measures should be taken to improve its effectiveness, including its ability to ensure that its decisions are implemented. Furthermore, the relationship between the General Assembly and UNSC needs to reflect a more balanced distribution of competence (AU, 2005). Keep in mind that in 1945, when the UN was formed, most of Africa lacked representation. And in 1963, when the first UNSC reform took place, the continent was still not properly represented. Now that Africa is fully represented in the UN, however, it is better placed to influence reforms. The AU’s goal, therefore, is for Africa to be fully represented in all the decision-making organs of the UN, particularly in the UNSC, which is considered the principal decision-making organ in matters relating to peace and security (AU, 2005). In the AU’s opinion, Africa should be allocated at least two permanent seats on the UNSC. These appointments should be accompanied with all the prerogatives and privileges of permanent members, including the right of veto, should the principle of veto rights be maintained. Although opposed to the principle of a veto, the continent’s leadership argues that, as long as it exists, it should be made available to all permanent members of the UNSC as a matter of common justice. Furthermore, Africa should be allocated a further five non-permanent seats on an expanded UNSC (AU, 2005). The selection of Africa’s representatives on the UNSC should be the AU’s responsibility. Criteria should include continent-wide representation, and the chosen member states’ capacity to represent the continent and to effectively execute its responsibilities within the UNSC (AU, 2005). Although the Ezulweni Consensus stipulates that the AU reserves the right to elect the two permanent members to the UNSC, a number of African states have already pronounced themselves ready to assume such a seat (Anon., 2020). UNSC reform from a South African perspective South Africa agrees with the Ezulweni Consensus that, since Africa’s member states make up 54 of the 193 UN members, the continent should be given two permanent seats on the UNSC. Such a step also seems fair given that most of the issues affecting Africa are dealt with by UNSC, and Africa has contributed immensely to conflict resolution, peacekeeping and peacebuilding. Currently, Africa does have three non-permanent seats, but they are rotational, which poses challenges in terms of creating institutional memory – an issue not faced by the permanent five. (Anon., 2020). Reform does not relate to composition alone, however. Going hand in hand with composition is the decision-making process. Simply adding additional permanent members without either abolishing the veto right, or at least extending it to all permanent members, may only serve to complicate decision-making. With more players at the table, retaining the veto in the hands of only the initial permanent five could very well lead to increased tension and frustration. Therefore, South Africa believes that all permanent members, including the proposed two African-held permanent seats, should be afforded the veto right as long as such right exists (Anon., 2020). Yet it is also South Africa’s belief that the veto right is often misused, thereby stifling important UNSC business: For instance, the UNSC could not even pass a resolution on the all-important topic of COVID-19 because of the United States’ insistence that there be no reference to the World Health Organisation. Similarly, when discussing the political and humanitarian crisis in Venezuela, no substantive discussion was possible given the introduction of two completely opposing resolutions by two members holding veto rights, namely Russia and the United States. Referring to these two resolutions as “equally hopeless”, one commentator eloquently captured the folly of having any expectation of a sincere consensus-seeking discussions while the “world’s most powerful nations displayed their bitter differences” within the confines of the UNSC machinery (Roth, 2019). Thus, the veto right has rendered the UNSC increasingly divided and less credible, which is not conducive to its work or the execution of its UN Charter mandate to ensure the maintenance of international peace and security (Anon., 2020). South Africa will continue advocating for genuine negotiations to commence in the UN General Assembly, as this is the only way to achieve Africa and like-minded countries’ common goal of a more representative UNSC (Anon., 2020). The Intergovernmental Negotiations (IGN) on UNSC reform that the UN General Assembly established in 2008 has been mandated to deliberate on five substantive areas of UNSC reform. These are (i) categories of membership (permanent and non-permanent); (ii) the question of the veto right; (iii) regional representation; (iv) the size and working methods of an enlarged UNSC; and (v) the relationship between the UN General Assembly and the UNSC. To date, there has not been any progress (Anon., 2020). To move the reform process forward procedurally, negotiations should, in South Africa’s view, be text-based, as “that is how negotiations are conducted in the UN” (Anon., 2020). While the UN resolved in 2015 already to follow such a text-based approach to reform negotiations, at least as it relates to the UNSC (Singh, 2015), there has been no concrete steps to advance the discussions. It appears there is currently no consensus among the permanent five for text to be put on the table. In addition, it seems that some powerful countries opposed to reform are blocking the process by arguing that there are still divergent views on the matter, and that text-based negotiations are premature and will be counterproductive (Anon., 2020). The United States and other advanced democracies, for example, reject the notion that the UNSC’s legitimacy should rely on its composition, believing that its “primary mission is to be effective, not representative” (Patrick, 2019). Although Africa is united in terms of the need for UNSC reform as expressed in the Ezulwini Consensus, South Africa’s view on the procedure to be used to negotiate such reform is not necessarily shared by other African states. Some African countries feel that the environment is not yet ready for text-based negotiations, as views within the UN are still too divergent. They believe that since the impasse is still too great, negotiations have no chance of succeeding (Anon., 2020). Another tricky area is that some African members, including South Africa, also belong to the L.69 Group, a cross-regional grouping of developing countries from Africa, Latin America and the Caribbean, Asia and the Pacific pushing for lasting and comprehensive reform of the UNSC. The L.69 Group is bound by the firm conviction that expansion in both the permanent and non-permanent categories of UNSC membership is imperative to better reflect contemporary world realities and achieve a more accountable, representative, transparent and relevant UNSC. They derive their name from the draft resolution number “L.69” they tabled in 2007, calling for intergovernmental negotiations on UNSC reform, which ultimately saw the creation of the IGN mechanism in the UN General Assembly. In the current IGN, Africa is represented by the Committee of Ten (C-10), which was established through a decision of the special AU summit in Addis Ababa in August 2005 to coordinate engagement on UNSC reform. Chaired by Sierra Leone, the other nine members are Algeria, the Republic of the Congo, Equatorial Guinea, Kenya, Libya, Namibia, Senegal, Uganda and Zambia (APAUNR, N.d.). Whilst not explicit in their criticism of the L.69 Group, the C-10 has requested African countries not to be part of other negotiating groups in the IGN to ensure that Africa remains united in the negotiations. (Anon., 2020). Yet the L.69 Group supports the Ezulweni Consensus and has indeed helped strengthen the C-10’s position in the IGN. The L.69 Group and the C-10 have a similar stance on most issues, including that the veto should either be abolished or extended to all permanent members (Lättilä, 2019). As such, South Africa believes that the L.69 Group remains one of the progressive groups and plays a supportive role in the IGN (Anon., 2020). UN General Assembly revitalisation from a South African perspective In South Africa’s view, unlike UNSC reform, reforms pertaining to the revitalisation of the General Assembly have been making some progress. The negotiations on the relationship between the General Assembly and the other principal organs of the UN have been ongoing. South Africa has underlined the need for the General Assembly to work in close collaboration with all principal organs, in particular ECOSOC and the UNSC. South Africa further believes that the General Assembly should be given a more prominent mandate in overseeing the implementation of the UN’s priorities of human rights, peace and security, and socioeconomic development. At present, even though all member states have an equal vote in the General Assembly, decisions are mere recommendations and are of no binding force on member states. South Africa’s position is that, as the most representative organ in the UN, the General Assembly should be given more teeth to hold countries accountable to the decisions it takes. Thus, South Africa will continue to work with fellow UN members to strengthen the role and authority of the General Assembly in executing its responsibilities, including those relating to the maintenance of international peace and security, and the implementation of the 2030 Agenda (Anon., 2020). Moreover, South Africa reaffirms the important role played by the United Nations secretary-general amidst the global challenges facing the world today, and in implementing the UN pillars of peace and security, human rights and sustainable development. In this regard, South Africa holds the view that the selection and appointment of the secretary-general should be more transparent and democratic. More specifically, the country believes that the secretary-general should ideally be appointed by the General Assembly, at the recommendation of the UNSC. While not an official South African position, mention has been made of the option for the secretary-general rather to be elected for one longer, non-renewable period, as opposed to the current five-year term with the option of extending the appointment by another five years (Anon., 2020). In terms of driving the South African UN reform agenda, the country uses all available platforms to do so, both within and outside the UN structure. These include high-level general debates in the UN and at other multilateral fora such as the AU, which it currently chairs, as well as the Non-Aligned Movement and IBSA (India, Brazil, South Africa) (Anon., 2020). South Africa also often raises the issue of UN reform in its bilateral discussions with other likeminded countries (Anon., 2020). How South Africa views the way forward Moving the UNSC reform process forward will be an uphill battle. With no consensus on the substantive issues between the permanent five, no reform will happen. Furthermore, the permanent five consider their veto a fundamental right articulated in the UN Charter and so not seem willing to relinquish that right any time soon (GüIler, 2019). Therefore, one could understand why many have concluded that the annual and ongoing deliberations relating to UN reform largely ring hollow. To give impetus to the negotiations, those seeking reform will need to reach out more directly to the permanent five, either as a group or individually, to find a negotiating path that will satisfy the five’s insistence on knowing upfront what the negotiated outcomes will deliver. For example, the permanent five will not agree to any expansion of the UNSC, nor to the relinquishment of their veto, without them knowing in advance who the aspirant candidates for seats on the UNSC will be. Historical conflicts and conventions will affect the likelihood of the permanent five agreeing to the candidature of countries to whom they have traditionally been opposed (Anon., 2020). China, for instance, believes that Japan’s past occupation of China disqualifies it from a permanent seat (GPF, 2006). France, in turn, while amenable to Germany’s call for extending the permanent membership of the UNSC, was not open to Germany’s proposal to convert the French seat into a European seat (DW, 2018). Of course, the idea of the permanent five vetting aspirant candidates is in direct contrast to the AU’s position, which insists on Africa determining for themselves which countries should represent the continent on an extended UNSC (AU, 2005). The AU approach may be counterproductive, however, as a group, they believe that the election of African candidates can be resolved at a later stage; to them, it is more important first to establish the principle of Africa being allocated at least two permanent seats on the UNSC. Knowing that the permanent five have indicated that they want to know upfront who the candidates will be, a rigid African approach could very well lead to a stalemate in the negotiations. This is an issue that South Africa will have to start breaching on the continent, especially since it has been asked to indicate its availability to take up a UNSC seat. Other African countries interested in the seats include Egypt, Kenya, Nigeria and Senegal (Okumu, 2005). South Africa also has other work to do among its fellow African states. As mentioned earlier, there is no consensus on the continent on a text-based approach to UN reform negotiations. Anxious not only to see the negotiations move forward, but also to strengthen Africa’s negotiation effort, South Africa will have to be more proactive by starting to approach progressive countries across the continent to advance the reform process (Anon., 2020). The South African government is pleased that it was able to have a call for the reinvigoration of the UNSC reform negotiations included in the heads of state declaration that will be adopted at the special high-level commemorative event to mark the UN’s 75th anniversary, scheduled for 21 September 2020. The country hopes that the president of the 75th session of the General Assembly will appoint, as a matter of priority, co-facilitators to take the IGN’s work forward (Anon., 2020). Conclusion For those who deride the UN as a toothless instrument (Dejevsky, 2016), South Africa has a clear message: For all its faults, the UN still has an important role to play, now more than ever before. The COVID-19 pandemic has proven this. The UN and its agencies remain the only intergovernmental body able to bring all nations together to find a coordinated approach to resolving global problems. Withdrawal from the UN or from multilateral agreements, or the cutting of funding to multilateral institutions, will not only be detrimental to the country doing so, but will have global implications for noble humanitarian and development programmes, as well as for the pursuit of the SDGs. To say that the UN is a toothless body is to say that countries can go it alone. They cannot. There are too many transnational challenges facing the globe – no country can go it alone. Thus, current global challenges such as COVID-19 warrant a renewed commitment by the international community to uphold and defend the purposes and principles of multilateralism, with a view to establishing a world that is peaceful and prosperous, along with a just and equitable system of global governance (Anon., 2020). Nevertheless, no sober assessment of the workings of the UN can ignore that the organisation is facing serious issues relating to its credibility, legitimacy and relevancy. The choice is this: either business as usual, which will undoubtedly further erode the UN’s standing, or reform, which will gear it for the future and enable it to build on the critical humanitarian, socioeconomic development and peacekeeping work it has carried out since 1945. In recognising the relevance of the UN as a global instrument to promote human rights, socioeconomic development and peace, South Africa has chosen to promote reform. Some major flaws have been identified in the UN’s design. These include inequality resulting from the veto right and UNSC permanent versus non-permanent seats, and exclusivity resulting from limiting the UNSC’s membership to a small portion of the total UN membership (Lättilä, 2019). South Africa’s approach to UN reform acknowledges the inherent complexities encapsulated in these flaws. It attempts to weigh the question of exclusivity in the UNSC against inclusivity in the General Assembly. It does so by acknowledging the need for decision-making efficiency in the UNSC, and the strengthening of accountability mechanisms in the Assembly (Damianou, 2015). In its quest for UN reform, South Africa seems to be singing from the same hymn sheet as UN secretary-general António Gutteres, who called for a “new social contract” and a “new global deal” in delivering the annual Nelson Mandela lecture on 18 July 2020. He said: “For this new social contract to be possible, it must go hand in hand with a new global deal. The global political and economic systems are not delivering on critical global public goods: public health, climate action, sustainable development, peace. A new model for global governance must be based on full, inclusive and equal participation in global institutions. Without that, we face even wider inequalities and gaps in solidarity. A new global deal, based on a fair globalisation, on the rights and dignity of every human being, on living in balance with nature, on taking account of the rights of future generations, and on success measured in human rather than economic terms, is the best way to change this. People want a global governance system that delivers for them. The developing world must have a far stronger voice in global decision-making.” References African Parliamentary Alliance for UN Reform (APAUNR). N.d. Committee of Ten. [Online] Available at: http://apaunr.org/c10.php [accessed: 26 July 2020]. African Union (AU). 2005. The common African position on the proposed reform of the United Nations: The Ezulweni Consensus. Addis Ababa: African Union. Anonymous. 2020. 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[Online] Available at: https://www.un.org/en/model-united-nations/trusteeship-council [accessed: 25 July 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Occasional paper 4/2020 Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. by Joanmariae Fubbs MSc in Public Policy and Management, 2012 (University of London), Postgraduate Diploma in Economic Principles, 2000 (University of London), MSc Development and Planning, 1993 (University of the Witwatersrand), BA Hons degree in Clinical Psychology, 1990 (UNISA), BA Political Science and Psychology 1980 (UNISA) Abstract In the midst of growing inequality, poverty, and unemployment South Africans were hit by the Covid-19 pandemic which exacerbated the socio-economic decline. To make matters even worse, corrupt officials played havoc with the Covid-19 funding, with no thought for the impact it would have on the vulnerable and the economy broadly. So, what can be done to arrest this erosion of the objectives of a better life for all, and a prosperous society with an inclusive economy? What measures can we employ to significantly reduce and then eliminate poverty? Surely, there is a need to adopt realistic targets and implementable policies that can be monitored and measured to track outputs and outcomes. Statistics South Africa (Stats SA) enjoys an enviable reputation. The statistical tables, graphs and figures it produces are backed by current research and are readily available. One of the issues that Stats SA has identified as highly relevant to the current stagnant economy is the deficit in trust. No amount of money can establish trust. However, this paper attempts to show that through the establishment and pursuit of social cohesion by all spheres of government, departments and entities, business and corporates, trust can be re-established. Poverty and inequality can then be confronted with a multi-dimensional approach but from a strong social cohesion base backed by a social compact. The struggle for economic, social, and political freedom has reached a defining moment in South Africa. Many South Africans fought for this and established a constitutional people’s democracy which encompassed the conception of democratic socialism within a mixed economy. Today, we live not only in a Covid-19 environment, but worse, in a contaminated moral environment. Nevertheless, the struggle for socio-economic and political freedom pursued by the African National Congress (ANC) is enshrined in the Constitution and should continue to drive transformation. The 2008-2009 financial crisis emphasised that unregulated markets are unsustainable, and that the intervention of the State is essential for the well-being of the population and the long-term eradication of poverty, according to Edigheji (2010:1). This view is echoed by Ben Fine (2010:171) who in contrasting the “political school” with “economic school” raises the danger of the latter’s pre-occupation with exclusively correct economic policies. Income inequality has been rising as evidenced by 2011 and 2014 statistics (Statistics South Africa, 2011; 2014). Unfortunately, the growing tendency and subsequent trend to resolve unemployment, service delivery, strategic skills development, poverty, poor educational outcomes, and deteriorating health of people in low-income groups focused largely on using purely economic measures. Former Statistician General Dr Pali Lehohla, in the Indlulamithi 2020 Scenarios this year, responding to this approach re-emphasised those issues related to unemployment, poverty and inequality, and low growth are complex and best resolved socio-politically, not purely economically. To “build back better” we need to examine the superiority of the “multi-dimensional poverty lens”, after which we should be more specific with our solutions, by developing “believable employment” figures and lower poverty and inequality rates (Lehohla, 2020). The ANC ideological programme The ANC deems itself a force of national liberation in the post-apartheid era; it officially defines its agenda as the National Democratic Revolution. The ANC is a member of Socialist International. In 2004, the ANC declared itself to be a social and national democratic party. Socialism theory had its genesis in Europe in the revolutionary theories of Karl Marx (1818-1883), the evolutionary theories of Eduard Bernstein (1850-1932), and in Africa, socialism was interpreted by the philosophical theories of Kwame Nkrumah (1909-1972). Nkrumah’s (1970) theory of consciencism draws together strands from the three main traditions that make up the African conscience: Euro-Christian, Islamic, and African. Nkrumah characterises traditional African society as essentially egalitarian, arguing that a new African philosophy must draw its nourishment chiefly from African roots. Supporters of the idea of a more just society were given the umbrella term socialists and included social democrats and democratic socialists. Peter Lamb, in his book Socialism: Key Concepts in Political Theory (2019), identifies the key ideas and principles of socialism and explores different (often conflicting) interpretations that have appeared in Europe, Asia, Africa and the Americas, from the early nineteenth century until today. Social democracy is a political, social, and economic philosophy within socialism that supports social, political, and economic democracy. Many countries, from Sweden to Ghana and New Zealand, consider themselves as enjoying a social democratic form of governance, and consequently there are just as many definitions. The instruments used in a social democratic government include ensuring strong workers representation, support for trade unions and parliamentary processes all aimed at achieving a better society. Democratic socialism evolved to include both reformist and revolutionary forms of socialism arising from the pursuit of reform measures and those that evolved from revolutionary measures. Today, the ANC, which is pursuing the National Democratic Revolution, is arguably advancing modern day social and national democratic values. A strong thread links the 1943 African Claims, 1955 Freedom Charter, 1969 seminal Morogoro Conference, 1979 Green Book, and the National Development Plan first drafted in 2012, and with its workshopped 2030 vision of “unfolding learning” knowing that social cohesion is anchored in our strategies to provide services to the people. It seeks to refocus South Africans on what they have in common rather than their differences. Furthermore, South Africa should, as Joel Netshitenzhe put it, “join the progressive humanity in fashioning a more equitable world order from the ruins of the Covid-19 pandemic” (2019). Social democracy has been in “terminal decline in the last decade”, reflected in the lack of voter support for social democratic parties in Europe (Servaas, 2020). However, since the 2008-2009 financial crisis, socialism has made a dramatic comeback in the 21st century. With rising inequality and social decay, socialism is becoming more relevant as people become disillusioned by the lack of ethical good governance and hope of a better life. The Covid-19 pandemic has simply underlined the challenges of inequality, social and economic justice, and poverty. In South Africa, the land issue is directly linked to socio-economic justice and poverty. As Nyerere said: “To us in Africa land was always recognised as belonging to the community” (Lamola, 2018). The land question can therefore be understood as a socio-economic issue. The “forced seizure of land led to the disintegration of the African social and economic fabric” (Lamola, 2018:8). The land question is historically linked to the basic principles of socio-economic justice which can be traced back to the Land Act of 1913, which legally disposed the indigenous population of their land. The Freedom Charter also states that those who work the land should share it. Land was the fundamental source of income for black Africans who were dispossessed without compensation. Establishing an inclusive South African economy The establishment of an inclusive economy demands that we first address the many inequalities that are becoming more pervasive every year, whether it is income disparities, gender anomalies or the accumulation of wealth through unproductive means. In the last decade, a young economist, Thomas Piketty, shot to prominence because he tackled the growing inequality, in his book Capital in the Twenty-First Century (2013). His studies went back two centuries and showed that the rate of return on inherited wealth will always grow faster than the income one earns through one’s compensated labour. However, in his following book – Capital and Ideology – Piketty roots inequality in ideology (2019). He argues convincingly that societies justify this through their political-ideological environment, which shows that inequality is not a natural phenomenon and can be reshaped when confronted effectively through socio-political mobilisation. When one examines the modern legacies of colonialism and slavery, whether in Brazil, South Africa, or China, it becomes clearer that inequality can be transformed if the legal, fiscal and education spheres are confronted effectively. This is the intention of the national democratic struggle as South Africa pursues the establishment of a society in which social, economic, and educational justice prevail. The Constitution provides a solid foundation from which to launch the fight against inequality. The crisis generated by the devastating effects of Covid-19 offers South Africa the opportunity to use more focused strategies to overcome the growing inequality in the country and to track its impact. This is achievable first through the deployment of regular robust oversight institutions from the legislature, civil society, and the executive, and second, by the identification and use of appropriate technical tools that shine light on the multifaceted nature of poverty and the development phenomena. Balancing State power with people's rights Rights and responsibilities are balanced in a social democracy; therefore, the citizens can expect the government to do things for them like providing protection, health services, education, and housing. Citizens also have responsibilities like obeying the law and paying taxes to the state. The rights of the majority in a social democracy are also balanced with the protection of minorities, for example those of the Khoisan community. Thus, social democracy is about achieving a greater balance in society, which arguably South Africa’s system of representative and participatory democracy provides. However, neither the Constitution nor legislation can protect South Africans from corruption, only a paradigm shift in the mindsets of all the people can predispose us to an environment in which integrity, a commitment to serve the people and ethical good governance can create such an enabling environment. Former Statistician General Dr Pali Lehola called this “the eye of the needle” approach, referring to the ANC document which focusses on the disciplined and selfless character of the kind of cadre required to lead. More than 50 years ago, when the balance of forces had shifted against the forces of change and the ANC and other progressive movements were being assailed on all fronts, the Morogoro Conference took place. Three key themes characterised this seminal conference: first, the methodology to be used in assessing and managing the balance of forces in a given conjuncture. The conference took place during the international context of transition to a socialist system following the breakdown of the colonial system, as a result of national liberation and socialist revolutions. The ANC leadership at the conference acknowledged this and realised that their first strategic objective then was to change the methodology in assessing the balance of forces during a given conjuncture. The second strategic objective required the contextualisation of these global changes so that the complex challenges that faced the “people’s government” could be addressed. The leadership during the Morogoro Conference appreciated the urgency demanded to meet the economic needs of the oppressed people, which could only be done if all basic resources were “at the disposal of the people” as a whole and not manipulated by sections or individuals, black or white. The third theme and strategic objective revolved around the national question which Joel Netshitenzhe quotes from the document: “The main content of the present stage of the South African revolution is the national liberation of the largest and most oppressed group – the African people. This struggle must govern every aspect of the conduct of our struggle.” As the document points out, if “properly channelled and properly led”, this would not be in conflict with the principles of internationalism but rather become the foundation for a lasting and more meaningful cooperation that would be self-imposed (Netshitenzhe, 2019). This recognition of a stronger social content had first been raised in the 1943 African Claims and again in the 1955 Freedom Charter. Together with the Morogoro Conference, these documents reinforce the organic social and national democratic character of the ANC. The current inequality arising from distortions in the socio-economic environment that continue to plague South Africa is at the root of unemployment, poverty, and distorted spatial patterns, which threaten to destroy the soul of South Africa. South Africans and people all over the world no longer trust their governments. So, what can be done to overcome this disillusionment? Early this year, in February, Minister Nathi Mthehwa reiterated that “social cohesion can never be separated from economic justice”. To achieve this, Minister Mthethwa believes that a social compact between business, government, labour, and civil society, who agree to “work together to bring about future change”, needs to be put in place (Polity, 2020). Development needs social cohesion In the last ten years or so there has been growing recognition globally and in South Africa that social cohesion in communities, and regions, can rebuild people’s trust in their political leaders. Social cohesion draws upon a broad body of studies and research across the social sciences and is leading to a more effective understanding of “its effects on the economic life” (Ritzen, Easterly & Woolcock, 2000). “Social cohesion” according to them is central to development as it relates “to an inclusive civil society and responsive political institutions” (Ritzen, Easterly & Woolcock, 2000). So how do we define social cohesion? Having read a number of studies on this subject, I believe it relates to the cooperation in a neighbourhood, community, city, and even a geographical area as large as a country. Defining social cohesion, Prof Klaus Boehnke, who has undertaken research across continents including Africa, Asia, America, and Europe, stated that the “commonality of values remains at its definitional core” (2018). As Minister of Arts and Culture Nathi Mthethwa stated in his briefing to the media prior to the Social Cohesion Compact Convention early this year, if it does not “seek to bridge the past divisions and simultaneously deal with the whole question of improving material conditions of the previously marginalised communities … it cannot succeed” (Polity, 2020). University of Cape Town’s Poverty and Inequality Initiative (PII) also identified social cohesion as a significant factor in poverty and inequality and concluded that it is an important policy goal for South Africa. The research argues that without finer definition and measurement it would, however, be to formulate polices that could promote cohesion. An overview of the current environment in South Africa exposes the high incidence of not only poverty and inequality but also violence, gender conflicts and mistrust. These are all factors that influence social cohesion and inclusive development. Alongside other academics the PII project recognises that social cohesion is “multi-faceted” and therefore requires a multidisciplinary approach which includes history, economics, political science, sociology, law, and psychology (UCT, 2018). Through the establishment of an active network of researchers and practitioners whose work speaks to the issue of social cohesion in South Africa, the project aims to engage effectively with policymakers in achieving the vision of the National Development Plan 2030. This research project also recognises the relationship between social cohesion and economic inequality and asks, what kinds of institutional change does South Africa need to promote social cohesion and reduce inequality? It also raises the growing intergenerational divide. Isaac Khambule and Babalwa Siswana, both of the Human Sciences Research Council, argued in a paper on how inequalities are undermining social cohesion in South Africa (2019). The “triple socio-economic challenges of poverty, unemployment and inequality” have been compounded by the high unemployment rate of more than 27 percent, with a youth unemployment rate of more than 50 percent. This has undermined the campaign promise of a “better life for all” and widened the gap between rich and poor (Statistics South Africa, 2014; International Labour Organisation, 2014). This in turn has impeded the country’s aspirations to eliminate poverty through doubling the GDP as noted in the 2030 National Development Plan. Statistics continue to reflect the widening gap between wage disparities, which impacts directly on inequality, along racial lines. According to research done by Uslaner, as quoted by Khambule and Siswana, social cohesion is undermined “because of the racial socio-economic disparities and … the fight for resources with foreign nationals” (2019). Inequalities are not unique to South Africa but are reflected in countries such as Brazil, also identified by Piketty. The South African situation is different by virtue of its high inequality in comparison to other countries. This toxic relationship between inequalities and social cohesion is reflected by the measure of “trust by Statistics SA showing that only 34 percent of South Africans trust” local governments. According to the World Bank in its 2019 Overview of South Africa, it projected a growth of 1.3 percent and accelerating to 1.7 percent in 2020, but that was before the full impact of Covid-19. Unfortunately, progress towards poverty reduction has “slowed”, which is put down to structural challenges and the weak growth since the global financial crisis of 2008. However, there is also a reference to the strategic skills deficit and the reality that South Africa with its dual economy continues to have one of the highest inequality rates in the world, with the Gini coefficient standing at 0.63 in 2015. Again, there is the gap between the top 10 percent of the population, which holds 71 percent of the net wealth, and the bottom 60 per cent holding only 7 percent of the net wealth. The World Bank also confirms that a further negative social cohesion factor, namely intergenerational mobility, continues to pass down its inequality from generation to generation (2019). Again, Ritzen, Easterly and Woolcock of the Development Unit of the World Bank in Paris 2020 refer to the four dimensions of social exclusion: firstly, the economic dimension which it linked to poverty. Secondly, the social dimension, where in some societies, unemployment deprives one of not only income but also of status. Exclusion, according to Ritzen, Easterley and Woolcock, also has a political dimension. This third dimension directly affects “women, ethnic, racial, and religious groups, especially minorities, who find access to their rights being limited”, or impeded in some countries. The fourth dimension, in which South Africa led the way with its identification of “non-sustainable modes of development”, is reflected in the Constitution and the Bill of Rights, where First degree and Second-degree human rights are expressly acknowledged. It is also recognised that unsustainable modes of development “compromises the survival of future generations” and it is this that leads to generations living in poverty, because of their exclusion from the benefits of valid and robust development. Conclusion In times of significant transition and in the face of harsh global economic challenges, social cohesion in a social and democratic society will create space for the government to manoeuvre. Given that South Africa is pursuing a national social democratic path, there is hope that this trajectory of inequality can be changed, but only if we can re-establish trust in our institutions and political leaders. South Africa has a National Development Plan which already identifies the need to address the manifestations of inequality and poverty by anchoring its strategies in social cohesion. People are planet Earth’s custodians and as the NDP has emphasised, social cohesion should anchor the country’s strategies to overcome the increasing poverty, deprivation, and to reduce inequality. The stagnant economy and persistent energy challenges existed before the advent of Covid-19, so a socially just economy with tangible prospects for a better life for even the most vulnerable should be the focus. Strategies that simply offer scenarios that existed pre-Covid-19 are not a potential solution. Instead, a stagnant and socially unjust economy needs a fresh approach that will generate an inclusive economy. Focusing on social cohesion offers a realistic and fresh approach to re-establishing trust upon which to generate implementable policies. References Adelzadeh, A., Malumisa, S. and Benecke, J. 2020. Covid-19 and South Africa’s Future Economic Outlook. [pdf]. Applied Development Research Solutions (ADRS). Available at: https://adrs-global.com/resources/static/downloads/adrs_report_on_covid_19_and_SA_future_economic_outlook.pdf [18 September 2020]. Alt, J.E., Chambers, S., Garrett, G., Kurian, G.T., Levi, M., and McClain, P.D. 2010. The Encyclopaedia of Political Science Set. Washington: CQ Press. Boadi, K. 2000. The Ontology of Kwame Nkrumah's Consciencism and the Democratic Theory and Practice in Africa: A Diopian Perspective. Journal of Black Studies, 30(4):475-501. Boehnke, K. 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Impact of balance of forces on the cause of social transformation. In: Umrabulo, (49). Nkrumah, K. 1970. Consciencism. New York: Monthly Review Press. Piketty, T. 2013. Capital in the Twenty-First Century. Cambridge, Massachusetts: Harvard University Press. Piketty, T. 2020. Capital and Ideology. Cambridge, Massachusetts: Harvard University Press. Polity. 2020. SA: Nathi Mthethwa: Address by Minister of Sports, Arts and Culture, on the upcoming Social Cohesion Compact Convention (05/02/2020). [Online] Available at: https://www.polity.org.za/article/sa-nathi-mthethwa-address-by-minister-of-sports-arts-and-culture-on-the-upcoming-social-cohesion-compact-convention-05022020-2020-02-06 [accessed: 16 September 2020]. SA Local Government Research Centre. 2014. The SA Local Government Briefing, May Issue. Cape Town. Statistics South Africa. 2011. Census 2011. [Online] Available at: http://www.statssa.gov.za/?page_id=3839 [accessed: 18 September 2020]. Statistics South Africa. 2012. Census 2011 Statistical Release: P0301.4. [pdf] Available at: http://www.statssa.gov.za/publications/P03014/P030142011.pdf [accessed: 18 September 2020]. Statistics South Africa. 2014. Poverty Trends in South Africa: An examination of absolute poverty between 2006 and 2011. [pdf] Available at: http://beta2.statssa.gov.za/publications/Report-03-10-06/Report-03-10-06March2014.pdf [accessed: 18 September 2020]. Statistics South Africa. 2019. Inequality Trends in South Africa: A multidimensional diagnostic of inequality. [pdf] Available at: http://www.statssa.gov.za/publications/Report-03-10-19/Report-03-10-192017.pdf [accessed: 18 September 2020]. Storm, S. 2020. The Economics and Politics of Social Democracy: A Reconsideration. Institute for New Economic Thinking Working Paper Series, (122). [Online] Available at: https://www.ineteconomics.org/perspectives/blog/the-economics-and-politics-of-social-democracy-a-reconsideration [accessed: 18 September 2020]. (Ritzen, J., Easterly, W. & Woolcock, M. 2000). On "good" politicians and "bad" policies - social cohesion, institutions, and growth. [Online] Available at: https://www.researchgate.net/publication/23722390_Ongoodpoliticians_andbadpolicies_-_social_cohesion_institutions_and_growth/link/55e9058208ae65b6389ae666/download [accessed: 18 September 2020]. University of Cape Town (UCT). 2018. Building a social cohesive society. [Online] Available at: http://www.povertyandinequality.uct.ac.za/social-cohesion-0 [accessed: 18 September 2020]. World Bank. 2016. South Africa Overview. [Online] Available at: https://www.worldbank.org/en/country/southafrica/overview [accessed: 18 September 2020]. World Bank. 2019. Overview: South Africa. [Online] Available at: https://www.worldbank.org/en/country/southafrica/overview [accessed: 18 September 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Post-Second World War lessons from selected democratic states, developmental states and populist states Occasional paper 5/2020 Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. Author: Prof. William Gumede Associate Professor, and former Convener, Political Economy, School of Governance, University of the Witwatersrand; and former Senior Associate and Programme Director, Africa Asia Centre, School of Oriental and African Studies (SOAS), University of London; and author of South Africa in BRICS (Tafelberg) Introduction Prudent macro-economic policy, especially the management of monetary, fiscal, and public debt is more crucial in developing countries wanting to catch up to or surpass industrial countries in terms of development. In the postcolonial period many developing countries who genuinely pushed broad-based development fell short when they neglected fiscal and monetary discipline, undoing their development efforts. Unpacking the terms: “Fiscal policy” relates to the policy decisions on the levels of government spending, taxation and borrowing. Whereas “monetary policy” is the coordination of the supply of money in the economy to influence inflation, the value of the currency and employment. Many developing countries put little focus on curbing inflation, keeping exchange rates stable or managing public debt levels. Furthermore, they often allow large budget deficits, where expenses exceed revenue by huge margins. Milton Keynes in his General Theory made an argument for “functional finance”, the use of deficit spending to overcome “cyclical fluctuations in the economy” (Keynes, 1936). However, many developing countries by the 196os onwards pursued persistent deficit spending which over time ballooned into large national debts (Emenike et al, 2017). For example, by the 1960s many African governments had, on average, budget deficits of 30% of GDP. The Nigerian economist Bade Onimode writes that many African countries have, since independence from colonialism, experienced a “chronic balance of payments crisis” (Onimode, 2000). The economists John Healy and Mark Robinson say: “There was a fairly common pattern to African economic policy in the 1970s and early 1980s which included the following recurring features: the persistence of high and volatile public sector deficits, often financed from the banking system; failure to stabilise inflation, especially in the face of terms-of-trade shocks; lack of clear prioritisation of public expenditure and weak economic appraisal of investment together with overvalued exchange rates” (Healy & Robinson, 1992). Chronic balance of payments crises undermine development Many developing countries also mismanaged their balance of payments situations (Ocampo, 2016). The balance of payments being the record of all transactions between the residents, firms and government of a country and the rest of the world. There are three parts to this record: a current account, a capital account and an official financing or balancing account. The current account is the balance of trade, which includes both government and private sector payments and the earnings on foreign investments excluding payments made to foreign investors and cash transfers. Whereas the capital account is sales and transfers of contracts, ownership of fixed assets and patents. The financial account is the transfers of financial assets and liabilities between residents and non-residents, including banking flows – hot money, portfolio flows – debt and equity and foreign investment flows, and official reserves. Developing countries often struggle to manage their budget deficits, current accounts, and their exchange rates. Setting developmental interest rates – which promote the outcomes set out in the national industrial or developmental plan, keeping inflation manageable and setting sustainable exchange rates are crucial for development. Moreover, public spending is often not disciplined and in many cases developing countries do not use taxes towards increased development. The result is that they pay the price in rising levels of poverty, underdevelopment, and financial instability. Therefore, the challenge for many developing countries is “balancing the competing objectives of economic policy: price stability, exchange rate stability and free capital mobility” (Nassif et al, 2011; Williamson, 2008; UNCTAD, 2011; Rodrik, 2008). Furthermore, the Brazilian economist Luiz Carlos Bresser-Pereira points out how “the experience of the East Asian countries has demonstrated, keeping the budget deficit as well as the current account under control is a necessary condition for keeping the macroeconomic prices right and the macroeconomic aggregates balanced” (Bresser-Pereira, 2017). Naturally then, when developing countries pursue expansionary fiscal policies – whereby they increase public spending to stimulate aggregate demand in the economy – ill-discipline results in unchecked government spending, which may cause harm including rising inflation and crowding out private investment. Developing countries often increase public spending to levels where they end up increasing the budget deficits. The government spends more than it collects in revenue and grants, thereby running a budget deficit, resulting in macroeconomic imbalances. Unless the budget deficit is covered by private savings, it creates a current-account deficit with the rest of the world, obliging the country to borrow to finance said deficit. If the government cannot finance the deficit by borrowing, pressure builds to finance it through depreciation of the national currency. Depreciation then leads to greater exports and, hence, reduces the current-account deficit. The problem with this is, firstly, that many developing countries export single commodities, with prices dependent on demand in buying countries. Secondly, depreciation may lead to inflation, which cuts purchasing power. Another issue is that developing countries often hold their currency at too high a rate for the state of the economy, meaning the country’s exports are more expensive than its imports. And during periods of low growth, an overvalued currency is bad for the economy. Brazil, for example, experienced overvaluation of its currency for most of the mid-1990s period. It has worsened now because many industrial country investors move their money to developing countries when interest rates in those countries are low, to seek higher investment returns. Then, when interest rates increase again or during times of economic and political uncertainty within those countries, the investors move their money out to avoid losses. Post-Second World War macroeconomic management success in Japan For a brief period following the Second World War, during the occupation of the country, the operations of the Bank of Japan (BOJ), the central bank, was suspended and a special military currency used in the country. The bank was restructured in 1949 and began to play its central developmental role in Japan’s post-war economic miracle. The BOJ operated with reasonable autonomy during the post-war period, although critics throughout have criticised it for being too independent (Horiuchi, 1993). Many East Asian developmental states have been successful in reducing the volatility in their currencies by building up large international reserves (Aizenman & Ito, 2014; Rodrik, 2008; UNCTAD, 2011). Many of these states, such as South Korea, Malaysia and Singapore, pegged their currencies to a basket of currencies. In the post-war period, Japan focused its monetary policy on promoting “export- and investments-led growth”, focussing determinedly on ever-diversified exports. A pillar of the BOJ’s monetary policy was called “window guidance”, in which the central bank gives credit quotas to commercial banks, which they must channel to specific industries prioritised by government as growth sectors (Cargill, Hutchison and Itō 1997; Werner 2005). The BOJ would directly communicate the industries that should get quicker loans, thereby directly influencing the activities of commercial banks. Japan’s Ministry of International Trade and Industry (MITI) was one of the key institutions in setting fiscal policy. MITI managed the allocations of foreign exchange to companies, with which they bought raw materials or equipment. Government subsidies to prioritised industries were also crucial to expand industrialisation. To secure foreign exchange, companies had to, in return, support the government’s export and investment-led strategy (Pham, 2017). Many Asian economies, more recently including China, have copied the Japanese monetary policy of “window guidance” as “an effective tool to control the total volume of credit to financial institutions” and to “regulate the growth rates of money and investment spending more easily” (Pham, 2017). In the two decades before the collapse, in 1971, of the Bretton Woods System of linking currencies to the value of gold, the Japanese currency was fixed at 360 yen to the US dollar. The collapse of the Bretton Woods System caused the Japanese currency to appreciate sharply. Japan then devaluated its currency, and in 1973, set a floating exchange rate with the mission to stabilise the exchange rate. In the immediate post-war period, Japan’s external current account had large deficits which were financed by US aid. The country also experienced hyper-inflation. “Monetary policy faced difficulty in pursuing two contradictory purposes at the same time, namely stimulating investments to restore supply capacity and depressing the hyper-inflation” (Suzuki, 2017). During the same period, Japan rolled out a massive infrastructure rehabilitation and expansion programme. In addition, the government had to make large payments in reparations for damage it inflicted during the war – both of which were financed by government bonds, underwritten by the Bank of Japan (BOJ). The government formed the Reconstruction Public Finance Corporation in 1947, underwritten by the BOJ, to issue bonds to state-owned entities for industrial rebuilding. Private businesses also expanded dramatically, borrowing from private banks to finance their expansion. The BOJ provided lending to private banks who in turn provided lending to private firms. Importantly, the country’s savings were channelled into investment projects (Hamada & Kasuya, 1992). The government provided subsidies to crucial sectors, called “priority production system” (Hamada & Kasuya, 1992). By 1948, such subsidies came to 24% of the country’s general account (Hamada & Kasuya, 1992). These subsidies were financed by the Bank of Japan and also increased inflation. The Japanese government had a Trade Financial Special Account which sold crucial imports at a much lower price than the international prices. This was subsidised by the BOJ. This also caused additional inflation. There were strong arguments for deficit budgeting – which was rejected In 1946, then Fiscal Minister Tanzan Ishibashi, in his budget speech, basing his argument on Keynes General Theory, argued: “In order to achieve the goal of resuming production there is no harm if government deficits occur. Since both capital stock and labour force were clearly underemployed, the problem was simply that bottleneck factors such as the lack of raw materials from overseas stood in the way” (Hamada & Kasuya, 1992). The government until the 1950s maintained a balanced of payments equilibrium, maintaining similar levels of investments abroad to foreign investment locally. During this period, infant industries became competitive. Japan, from the 195os to the 1970s, undervalued its currency in relation to the US dollar. Furthermore, throughout the post-Second World War period, Japan undervalued its currency to encourage export manufacturing. Then, from the 1970s, the focus became currency stability (Green, 1990). The government regularly intervened in the market to either buy or sell dollars to gain that stability. Furthermore, the government regulated capital flows (Hutchison, 1984; Suzuki, 1986). Japan’s current account was in surplus since 1968. The country accumulated large foreign reserves and the country’s citizens were encouraged to save. Until 1965, the Japanese government implemented a balanced budget principal. Then, in 1965, the Japanese economy experienced a recession. The government for the first time introduced an expansionary fiscal policy, financing a budget deficit with a national bond (Takagi, 2015). The government maintained price stability – targeting inflation at 5.5% per year. The export growth focus provided a surplus in the country’s balance of payments with the world, and foreign investment was introduced selectively in targeted industries. However, capital liberalisation, whereby foreign companies could enter unencumbered, was only introduced in 1973. From 1966 to 1973, the government financed a deficit on the capital accounts, through the issuing of a national construction bond. The government also built up foreign exchange reserves which, by the early 1990s, totalled over US$100bn – a record amount for the IMF (International Monetary Fund, N.d.). During the period leading up to 1990, Japan’s currency was knocked by three international crises. In 1971, the US withdrew from the Bretton Woods System which pegged the US dollar to the value of gold. This caused an appreciation in the yen, which had been under a fixed rate to the value of the US dollar. The government responded by depreciating the currency and adopting a free-floating currency exchange policy. During the first oil shock, in 1972, Japan’s balance of payments accounts declined. This put pressure on the value of the currency, and so, the government restricted capital outflows (Green, 1990). The first oil crisis in 1973 exposed the deficit financing through national bonds. All throughout Japan’s high growth period, the government used monetary policy as a counter cyclical tool to encourage growth, rather than fiscal policy (Funabashi, 1988; Ito, 1987 and 2003; Takagi, 2015). Another shock to the Japanese yen was the Plaza Accord and Louvre Accord of 1985-1987, which again appreciated the value of the dollar. Between 1980 and 1985, there was a dramatic appreciation of the dollar against the currencies of the major industrial countries – almost 50% against the Japanese yen. All as a result of the US Federal Reserve System fighting stagflation, which hounded the US dollar in the 1970s (Frankel, 2015). However, the intervention went belly-up when the dollar became overvalued (US Department of Treasury, 1983). In 1985 the Ministers of Finance and central bank Governors of the G5 countries – the US, Japan, Germany, France and the United Kingdom – signed the Plaza Accord, which agreed on a planned devaluation of the dollar, with the other countries coordinating their activities with that of the US central bank. By the time of the Plaza Accord the US economy was in recession, its current-account deficit was at 3.5% of GP and its exporters uncompetitive. The intervention helped to narrow the US trade deficit with major industrial countries. By 1987, the devaluation of the US dollar had now decreased the value of the dollar against the yen by 51%, and Japan had restrictions on imports. The appreciation of the yen forced the country to respond with an expansionary monetary policy. It increased the money supply, lowered interest rates and decreased the value of the yen – to increase aggregate demand, the total use of goods and services in the economy. However, this in turn caused an asset price bubble, deflation and low growth. The combination of these would become known in Japan as the Lost Decade (Obstfeld, 1990). In 1987, the US industrial country partners signed the Louvre Accord to stop the devaluation of the dollar. In a coordinated approach, the US would in 1988, reduce its deficit to 2.3% of GDP, cut interest rates and cut government spending by 1% (US Department of Treasury, 1983; Krugman, 1991). All four of Japan, Germany, France and the UK would cut interest rates, reduce public spending and taxes. Japan would reduce its trade surplus. Throughout the period, the Japanese government emphasised currency and price stability. The government maintained a low interest rate policy throughout the high growth phase and contained inflation. It also eschewed used tax increases to finance budgets and channelled savings to support targeted export manufacturing, infrastructure and housing. Lessons from Japan Independent central bank, the Bank of Japan (BOJ) Developmental monetary policy prioritised export- and investment-led growth Ministry of International Trade and Industry (MITI) set fiscal policy Monetary and fiscal aligned to prioritise export and investment-led growth Throughout Japan’s post-Second World War high growth period, monetary policy was used as a counter cyclical tool to encourage growth, rather than fiscal policy The BOJ provided lending to private banks who in turn provided lending to private firms Throughout the post-Second World War period, Japan undervalued its currency to encourage export manufacturing The government regulated capital flows Until 1965, the Japanese government implemented a balanced budget principle Only in 1965, when the economy was in recession, an expansionary fiscal policy was introduced, financing a budget deficit with a national bond The government maintained price stability throughout the postwar period, targeting inflation at 5.5% per year Capital liberalisation, whereby foreign companies could enter unencumbered, was only introduced in 1973 From the 1970s currency stability became the focus Persistent balance of payment crisis undermined Brazil's post-Second World War development In Brazil, the military took power in 1964 and ruled until 1985. The military governments prioritized high growth rates to maintain support. The high initial growth rates – from 1960 to 1980, came through state investments in infrastructure, telecommunications, mining and atomic energy. It was dubbed the Brazilian Miracle. The high economic growth rates came with high inflation and large budget deficits. From 1981 to 1994, growth slowed down, and was accompanied with hyperinflation and large deficits (Ayres et al, 2018). Throughout the period from 1960 to 1994, Brazil’s central bank was not independent (Ayres et al, 2018). Brazil fell into a balance of payments crisis in early 1970s, as global demand for its commodities slumped because of slowdowns in industrial country economies buying its commodities (Ayres et al, 2018). The government pursued import substitution industrialisation, economic diversification and self-sufficiency. The import of products that were already locally produced was restricted. The costs of this conversion were paid by foreign loans. The plan was that over time a structure in the economy would materialise, whereby more local products would be produced for export, and the foreign earnings would pay for the accumulated debt. The Brazil government ran a large current account deficit. In 1973, the deficit was US$1.7bn and by 1980 it was US$12.8bn. Foreign debt became more expensive to repay because of higher interest rates charged by lenders. In the 1960s Brazil introduced what it called “indexation”, in which it tried to align prices, interest rates and wages, to past inflation levels, to keep inflation constant across the economy. This, in the absence of firm monetary policy, actually increased inflation (Ayres et al, 2018). By the mid-60s until the early 1970s, the government increased taxes to plug deficit holes, including introducing value added tax (VAT). Until 1964, Brazil had no official central bank. The Treasury implemented monetary policy through the Bank of Brazil, which was a state-owned bank, while at the same time being a commercial bank (Ayres et al, 2018). The government had in 1945 established a Superintendency of Money and Credit (SUMOC) committee, with powers over monetary policy. The Bank of Brazil had majority seats on the SUMOC, giving it a controlling say over monetary policy. In 1964, the government created the Central Bank of Brazil (CBB). At the same time the government restructured the SUMOC into a National Monetary Council (CMN), which oversaw the central bank. The Central Bank of Brazil has been nominally independent, however, in 1994 the bank was given formal independence, and put fully in charge of monetary policy (Ayres et al, 2018). By 1983 Brazil had the largest foreign debt of any country in the world – standing at US$92bn. The government responded by hiking interest rates to record levels, and Brazil’s terms of trade – the ratio between a country’s export prices and import prices – deteriorated by 10% between 1971 and 1979. The 1973 oil crisis, in which the price of oil spiked, hit the economy badly. In addition, the US ran up large budget deficits in the early 1970s, of US$200bn annually, which forced its main trading partners to increase interest rates. Developing countries such as Brazil with very high foreign debts struggled to pay interest on their debts because of the higher interest premiums. Worse, Brazil imported large numbers of products, from machinery, components and raw materials. Efforts to diversify local production of at least consumer goods were pedestrian. The government also repeatedly devaluated the currency, which increased inflation. Low growth, high inflation and high interest rates caused the collapse of many local companies. The second oil crisis in 1979 gave the Brazilian economy another knock, increasing the foreign debt, as interests on repayments of foreign loans rose further, lowering the terms of trade and worsening the balance of payments crisis. Until then, the early 1980s, the government maintained its strategy to lift growth. However, as the debt accumulated, the government changed tack to foster trade surpluses, by pushing exports, and using the income to pay off debt. The 1982 Mexican debt crisis had a further knock-on effect on the Brazilian economy. The International Monetary Fund and Western commercial banks put pressure on the government to introduce a structural adjustment programme, adopted by the country’s legislature in 1983, which included reducing inflation, cutting wage increases and privatisation of state-owned entities. In 1994, Fernando Henrique Cardoso was elected president, and introduced a stabilisation programme, the Real Plan, with a new currency. Monetary policy was tightened, the new currency was anchored to the US dollar, and inflation was reigned in. Lessons from Brazil Military took power in 1964, ruled until 1985 In 1945 a Superintendency of Money and Credit committee was established, with powers over monetary policy Until 1964, Brazil had no official central bank In 1964, the government created the Central Bank of Brazil Throughout 1960 to 1994, Brazil’s central bank was not independent Treasury implemented monetary policy through the Bank of Brazil, a state-owned bank, operating as a commercial bank Import substitution industrialisation strategy, a trade and economic policy focusing on replacing foreign imports with domestic production The military governments prioritised high growth rates to maintain support Initial growth rates – from 1960 to 1980 - came through state investments in infrastructure, telecommunications, mining and atomic energy. It was dubbed the Brazilian Miracle. The high economic growth rates came with high inflation and large budget deficits. From 1981 to 1994, growth slowed, accompanied with hyperinflation and even larger deficits Overvalued currency in early 1970s undermined export 1970s oil crises caused a trade imbalance Heavy borrowing increased the current-account deficit Current account deficit financed through foreign debt Expected import substitution industrialisation with exports rising over time, which was anticipated to result in trade surpluses, failed In 1983, the International Monetary Fund and Western commercial banks pressured Brazil into a structural adjustment programme, resulting in the reduction of inflation, the cutting of wage increases and the privatisation of state-owned entities. Prudent macroeconomic management under Sweden's Rehn-Meidner economic model Left of centre governments in industrial countries – such as Sweden, which was governed by the Social Democratic Party – maintained prudent monetary and fiscal policies to finance the welfare state (Braconier & Steinar, 1999; Calmfors, 1993; Calmfors et al, 2001; Erlandsen & Lundsgaard, 2007; Forslund and Krueger, 1997). In 1951, Swedish trade union economists Gosta Rehn and Rudolf Meidner, at the Swedish Trade Union Congress, designed what would be called the Rehn-Meidner economic model (Rehn, 1952, 1969, 1977, 1982 and 1987; Meidner, 1952 and 1988), which was based on high growth, low inflation, full employment and income equality (The Swedish Confederation of Trade Unions [LO], 1951). The model was based on a “third away” between Keynesian, central planning and neoclassical economics. After the Second World War until the end of the 1970s, the Swedish model was “able to combine a relatively fast rate of GDP growth with full employment, considerable economic security, and a rather equalitarian distribution of income” (Lindbeck, 1997: 1273). The Swedish economist, Assar Lindbeck, who chaired what became the Lindbeck Commission - an inquiry in 1993 into the reasons for Sweden’s economic decline in the late 1980s and early 1990s - listed seven crucial institutional elements of the Swedish “third way” model. These are according to Lindbeck (1997: 1274): “ (a) large public-sector spending and high taxes; (b) a stabilisation policy, to foster full employment, with an active labour market policy as a tool; (c) government intervention to influence aggregate saving, credit supply, and investment, as well as their allocation, by public sector saving, capital market regulations, taxes, and subsidies; (d) strong central government control of local governments; (e) centralised wage bargaining on a national level; and (f) centralised decision making in the private sector, where a small group of large firms dominates on the production side and where the holdings of financial assets, including shares, are highly concentrated in a few large institutions, banks, insurance companies, and investment firms; with (g) the centralised private sector system being combined with a strong free trade regime.” At the heart of the Swedish model was a growth policy, based on disciplined macroeconomics, with price stability, but still advocating for fair wages, through using an active labour market policy. Immediately after the Second World War, a number of Western European Social Democratic Parties implemented Keynesian policies, which were “counter-cyclical” fiscal policies, by reducing spending and raising taxes during boom times, and increasing spending and reducing taxes during downtimes (Beveridge, 1944). These governments pursued expansive macroeconomic policies. They used expansionary fiscal policy by using their budgets to increase spending or cut taxes; and expansionary monetary policy through expanding the money supply through lowering reserve requirements, lowering interest rates and lowering the currency. In the Swedish model, applied during the country’s golden growth period from the late 1940s to the late 1970s, the “expansionary macroeconomic policy measures are combined with selective fiscal measures and with regulation to conquer inflation” (Erixon, 2010). For example, the Swedish Social Democratic Party reduced possible rising inflation, current deficits and overvaluation of the currency that would result from expansionary policy, by “regulation, including informal incomes policy, and by extraordinary fiscal measures” to “moderate price and wage increases in the most overheated industries” (Erixon, 2010). The Swedish central bank, the Riksbank, had both functional and institutional independence, and was one of the agencies that were directly reporting to Parliament (Commission of Inquiry, 2007). The country has a National Debt Office, a public entity reporting to Parliament, which ensures that government borrows prudently. The government used restrictive fiscal policy, particularly indirect taxes to hold down inflation. The country introduced consumption taxes – taxing people when they spend money on goods and services, rather than on income or profits, and devaluated the currency in 1949. “Sweden met actual and expected deficits in the current account with a devaluation of the krona, not with deflationary macroeconomic policy measures” (Erixon, 2010). Sweden in the 1950s to the 1970s began to coordinate wage bargaining, to protect weak industries and to manage inflation (Nickell et al, 2005; Johannesson, 1981). Although the model envisaged wage increases linked to productivity, and wage restraint during tough times, underproductive firms would necessarily go under (Rehn, 1982). However, the argument was that new industries would be created simultaneously through investments in new more market-relevant industries, active labour policies, including continuous industrially relevant training and social welfare (Gowan & Viktorsson, 2017). Wages are determined centrally through collective bargaining. This often resulted in uncompetitive and low-productivity firms, that were unable to afford the agreed wages, to collapse. More productive firms secured comparatively lower wages “than they would have to pay in a ‘free’ labour market” (Ryner, 2003). In the Swedish model, during recessions, a countercyclical fiscal policy, reducing spending and raising taxes during boom times, and increasing spending and reducing taxes during downtimes, was still part of the macroeconomic arsenal. In the model, during a recession the temporary use of budget deficits, moderating wage increases and selective employment subsidies in weaker industries are practical options. To prevent inflation, the government used prudent public finance management. It pursued strict fiscal policy, focusing on generating budget surpluses. Uncompetitive companies with high costs and poor price structures struggled, whereas highly productive companies, with favourable cost and price structures were advantaged (Erixon, 2010). Through effective coordination of the economy, the government continually shifted employees from low-growth to high-growth sectors (Blanchflower et al, 1995). The government managed an active labour market policy: comprehensive industrial skills, training, education, life-long adult-education programmes to cushion the “losers” (Erixon, 2010). Full employment was seen as unemployment below 3%. A core part of the Swedish welfare state was universal education, health and pensions. The model also has a high degree of gender equality, including in the labour market. Private property rights and the freedom of companies to trade internationally were pillars of the model (Bergh, 2017). Progressive taxation, including that on property, funded many of the welfare programmes (Lindbeck, 1997). During the 1950s to the 1970s, Sweden extraordinarily for the country’s size, had large global engineering firms – SAAB, Ericsson, SKG, Electrolux, Volvo and others – which by the 1960s had accounted for 20% of the country’s total exports. In the early 1970s there were criticisms that wage constraints in profitable firms meant that massive profits went to a small circle of private company shareholders and owners. The Swedish Trade Union Confederation (LO), ally of the Social Democratic Party, proposed the establishment of a worker controlled, “wage-earner” funds, which would be funded through taxes. The proposal would give trade unions a direct say in the investment decisions of listed companies. Organised business saw it as a “collectivism of corporate ownership” (Gylfason, 2020). The Swedish government established commission in 1973, proposing employees become shareholders over time. This would be done through setting up sector-based wage-earner funds which would get a proportion of company profits through shares. These funds would be managed by employees. Proportions of the proceeds of the wage-earner funds would be reinvested in their companies, used to finance research and specialist management training for employees, to provide them with the skills to run businesses. However, the wage-earner fund proposals were not implemented – as it faced opposition from employer organisations (Gowan & Viktorsson, 2017). More importantly, the disagreement over the wage earner proposals would collapse the famous Swedish tripartite consensus model (Lindbeck, 1997). Sweden was also hit by the 1973 and 1979 oil crises. The Bretton Woods System of fixed exchange rates, with the US dollar’s value fixed to gold, was ended in 1971, essentially collapsing the fixed currency system (International Monetary Fund, 1972-810). In addition, Sweden struggled in the new conditions to stabilise the value of its currency. The rise of Japan and East Asian developmental states now also provided competition to Swedish global manufacturing. Furthermore, the global recessions sparked by the oil and currency crises meant diminished markets for Swedish products – the Swedish economy faced headwinds (Erixon, 2010). The Swedish Social Democratic Party lost power in the 1976 elections; and only returned to power in 1982. A limited form of wage-earner funds was established in 1984, funded through “excess” profit tax over a 7-year period, rather than through acquiring company shares (Gowan & Viktorsson, 2017). It was not employee managed. The Swedsh Social Democratic Party lost power again in 1991, and the funds were privatised by the new government post-1992, after the Social Democratic Party were out of power again. In the post 1970s oil crisis period, Sweden, whether governed by the Social Democratic Party, or the centre-right coalitions that took power for periods thereafter, struggled to maintain Sweden as an open, competitive economy. And amid the global economic crises, together with increased competition from the rising East Asian economies, they battled to maintain the social benefits of the welfare state, (Bergh, 2017). Until the early 1990s, successive governments tried to maintain the economy’s competitiveness through currency devaluations (Lindbeck, 1997). The policy of high marginal taxes to fund the welfare system, saw many high net individuals seeking ways to avoid tax; and at the same time generous welfare benefits discouraged many who could work from seeking work (Bergh, 2017). The support to companies to protect jobs often led to the cushioning of uncompetitive businesses. Rather than innovate to stay competitive, many companies sought government bailouts. Furthermore, wages increasingly rose above productivity increases, causing rising inflation. “Repeated currency devaluations led to both a lower living standard and investment-sapping uncertainty” (Bergh, 2017). Between 1991 and 1993, struck by the most severe financial crisis since Great Depression that hit several Scandinavian countries, the Swedish government instituted an inquiry into why the successful post-war model had faltered after three decades and how it could be refined for new times. Both the government and opposition parties accepted the criticisms and advice of the report and implemented its key proposals to modernise the Swedish welfare state (Gylfason, 2020). Lessons from Sweden “Third away” between Keynesian central planning and neoclassical economics Growth policy, based on disciplined macroeconomics, with price stability, but still advocating for fair wages, using an active labour market policy Expansionary macroeconomic policy combined with selective focused fiscal measures Combat possible rising inflation, current deficits and overvaluation of the currency that result from expansionary policy Through regulation, including informal incomes policy, fiscal measures taken to moderate price and wage increases Focused on generating budget surpluses Restrictive fiscal policy, using indirect taxes to lower inflation Dealt with expected deficits in the current account through a devaluation of the currency Actively coordinated wage bargaining to protect weak industries and to manage inflation During recessions, a countercyclical fiscal policy, reducing spending and raising taxes during boom times The temporary use of budget deficits during recessions, moderating wage increases and practical options such as selective employment subsidies in weaker industries Increasing spending and reducing taxes during downtimes part of the macroeconomic arsenal To prevent inflation, the government used prudent public finance management Central bank, the Riksbank, has been relatively independent and one of the agencies reporting directly to Parliament Botswana's prudent macroeconomic management is an African post-colonial exception Botswana is one of the few African countries since colonialism to pursue prudent macro-economic policy, especially the management of monetary, fiscal and public debt (Maipose, 2008). When Botswana became independent in 1966 it was among the poorest countries in the world, but through prudent economic management, the country achieved real GDP growth averaging 9 percent between 1965/66 and 2005/06. The country is now an upper middle-income country (Rodrik, 2003). Immediately after independence, Botswana borrowed from abroad, like many African countries (Maipose, 2008). However, the foreign loans were used for infrastructure, unlike in most African countries in the immediately post-colonial period. Botswana also immediately went searching for foreign investment, specifically to develop new industrial sectors (Maipose, 2008). Many African countries immediately after independence discouraged the entry of private investment, often nationalising or indigenising, replacing the owners, managers and employees with locals, frequently members of the governing party, not necessarily with the experience to manage sophisticated private sector firms (World Bank, 1989; Young, 1982; Elbadawi, 1996; Rosberge and Jackson, 1982; Ndulu & O’Connell, 1999; Collier & O’Connell, 2007). The government was also tougher on corruption than most African countries. In 1976, it enacted a law, the Finance and Audit Act, which made accounting and project officers personally liable for waste, misuse and stealing of public funds (Crisuoldo, N.d.). The government ran budget surpluses for 16 years since 1982; and only in 1998/99 ran up a budget deficit (Harvey, 1997; Gaolathe, 1997; Lewis, 1993; Mupimpila, 2005; Sentsho, Eds.; UNDP, 1998). It judiciously accumulated foreign reserves and used the savings from these to finance the budget deficits of the 1998/1999 and 2002/2003 financial years. The Botswana government has a National Employment, Manpower and Income Council which annually determines public service wage increases. The Council does this by taking into consideration the overall macroeconomic targets, including inflation levels, whether the country has a budget deficit and the levels of public debt. During budget deficit years, the government has capped public salary increases (Maipose, 2008). Like many other African countries, Botswana relied on a single or two commodities – in the case of Botswana, beef. This often causes “boom and bust” cycles, with revenue depending on the price and uptake of the commodity (Brautigam, 1996; Gaolathe, 1997; Hyden, 1983; World Bank, 1989). Since commodity prices are volatile, African economies have years of booms followed by recessions, depending on the global commodity price they export. In 1973, the Botswana government put together a long-term strategy which would build up reserves during boom periods to be used during downturns. The government planned much more competently than most other African governments. “The government explicitly pursued a counter-cyclical policy in the management of foreign exchange reserves and government cash balances, basing year-to-year spending decisions on the intermediate-term forecasts of export earnings and government revenue, and on a realistic view of spending capacity” (Maipose, 2008). Furthermore, the Bank of Botswana has exceptionally been one of the most independent central banks in Africa, where central banks are often appendages of the governing party or used by the leader as a private bank. It has been central to consistent exchange rate stability, low inflation and sustainable current account levels (Hill & Knight, 1999). The Bank of Botswana also judiciously invested commodity surpluses. Monetary and fiscal policies are tightly coordinated between the central bank and the Department of Finance and Development Planning to ensure alignment of objectives. The Pula has been consistently under-evaluated to “a level below the perceived equilibrium” (Maipose, 2008), to promote exports. In 1973, the Botswana government resolved to establish three funds to stabilise debt, reserve and to fund local development. In 1979, the Public Debt Service Fund (PDSF) and the Revenue Stabilisation Fund (RSF) were established. The main Revenue Stabilisation Fund became the repository of export surpluses to finance the budget during downturns. By 1995 Botswana had the highest domestic savings rate in Africa at 45% of GDP (Motsomi, 1997). In 1975 it was 16% of GDP (Motsomi, 1997). By 1984, all gross fixed capital formation, the acquisition of new fixed assets, minus disposals, by government, business and households were financed by local savings (Maipose, 2008; Motsomi, 1997). The Botswana government have maintained strict discipline in using the Revenue Stabilisation Fund only for the purposes of creating budget surplus during downturns and not for other things, as is the case in many African countries which set up such funds (World Bank, 1989; Elbadawi, 1996). The government also built up large foreign exchange reserves. “The high level of foreign exchange reserves is a result of a deliberate policy to accumulate as much as possible for unexpected changes regarding the balance of payments” (Maipose, 2008). The Public Debt Service Fund was to pay off public debt. It was financed by appropriations from the national budget, budget surpluses and the profits of investments that were made by the fund. The fund essentially, over time, became an investment fund, loaning funds to state-owned enterprises for the purposes of infrastructure, new investments and buying new stock. Subsequently, the government established the Domestic Development Fund to finance local development. Foreign funding was initially deposited into the Domestic Development Fund. Later, money specifically set aside for capital spending is also deposited into the fund. Development project proposals are evaluated by the fund, and if they meet the requisite standards, funds are disbursed (Maipose, 2008). Depositing donor money into a separate fund, dedicated to development, is also a departure from general African practice of donor funding going uncoordinated to different government departments and local projects (Brautigam, 1996; Gaolathe, 1997; Hyden, 1983; World Bank, 1989). Lessons from Botswana The Bank of Botswana has been one of the most independent central banks in Africa The central bank has been central to consistent exchange rate stability, low inflation and sustainable current account levels Botswana ran budget surpluses for 16 years since 1982 Only in 1998/99 did Botswana run up a budget deficit for the first time since 1982 It judiciously accumulated foreign reserves and used the savings from these to finance the budget deficits of the 1998/1999 and 2002/2003 financial years To ensure alignment of objectives, monetary and fiscal policies are tightly coordinated between the central bank and the Department of Finance and Development Planning The Pula has been consistently under-valued to promote exports Export surpluses finance the budget during downturns By 1995 Botswana had the highest domestic savings rate in Africa - 45% of GDP The government built up large foreign exchange reserves After independence Botswana borrowed from abroad, however the loans were used for infrastructure Botswana also searched for foreign investment, specifically to develop new industrial sectors The government was tougher on corruption than most African countries A National Employment, Manpower and Income Council determines public service wage increases on an annual basis The Council takes the overall macroeconomic targets, including inflation levels, whether the country has a budget deficit and the levels of public debt into consideration During budget deficit years, the government has capped public salary increases The government pursued a counter-cyclical policy in the management of foreign exchange reserves and government cash balances It based year-to-year spending decisions on the intermediate-term forecasts of export earnings and government revenue Developmental fiscal and monetary policy lessons for South Africa Developmental fiscal and monetary policy must, in the public interest, be done in partnership with social partners and be part of an overarching national industrial plan. Brazil during its period of high growth with inflation, balance of payments crises were run by dictatorship – and alternative policy voices were snubbed out. Botswana in the first two decades after independence was more inclusive in economic policymaking, bringing in government and business to cobble together macroeconomic policy. In Sweden, there was a partnership between government, labour and business to jointly strike developmental fiscal and monetary policies. Japan, Asia’s most democratic nation, struck up partnership agreements over economic policy between governing and opposition parties, and with business and labour. Macroeconomic policy must be aligned to and support the national industrial plan. It must focus on growth. However, successful broad-based development necessitates prudent macroeconomic policies. It needs fiscal and monetary discipline. This means keeping inflation at low levels, keeping exchange rates stable and sustainably managing public debt levels. Public spending has to be disciplined. Setting developmental interest rates, keep inflation manageable and setting sustainable exchange rates are crucial for development. Developmental fiscal and monetary policy is complicated, sophisticated and complex. It means the institutions that oversee fiscal and monetary policy must be staffed by competent people. There has to be the policy sophistication to deliberate on the appropriate policy solution, to correctly analyse the environment and to change tactics, when there are economic shifts. All of this demands coordination between the private sector, government and local and global markets. For government to be trusted by the markets, private sector and implementing government entities, it must be seen as credible, honest and competent. 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New Haven: Yale University Press. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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. 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