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Copyright © 2023 Print ISSN: 2960-1541 Online ISSN: 2960-155X Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute D I S C L A I M E R Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. JULY 2023 Coalitions in south african local municipalities: is the constitution enabling democracy or not? by Nondumiso Sithole Msc (University of London), LLB (University of the Witwatersrand) Abstract This article aims at examining the role of coalitions in the context of South African politics, specifically within the local government or municipalities. It has become blatantly clear that the country has entered a coalition-government era. An era which is possibly going to stay for decades to come. There is certainly a projection that there will be an increase in coalitions in the national elections set to take place in 2024. This article will explore and assess what are the strengths, weaknesses, framework as well as the ecosystem in which coalitions flourish and the conditions wherein they fall apart. There will be recommendations on how to best assist with strengthening the operating of coalitions within the context of local governments in South Africa and on how the discourse of coalitions can be moulded to assist in the bettering of governance and service delivery at a municipal level. Coalitions are without a doubt becoming more relevant within local/municipal government structures, and political parties that did not have space previously are finding a niche in which to operate and have a “voice” in local councils. The primary objective of an opposition party in respect of a coalition is to unseat the incumbent, while the primary purpose of the ruling party is to ensure that they remain in power (Kadima, 2014). In as much as there is space for change and inclusivity, there are pertinent questions which must be looked at. Critical to this, is whether South Africa is able to handle coalitions. Does the country have effective systems in place to manage all that comes with the genetic set up of coalitions? Furthermore, what can be done to aid the effective functioning of coalitions in a country such as South Africa? The article also examines the effect of the legislation in place and whether the Constitution as the highest or supreme law is actually assisting at all or is but a silent tool on this matter of coalitions, which are now essential in the running of the country. Introduction South Africa’s Constitution clearly entrusts and places legislative and executive authority in municipal councils. Therefore, there is a need for the effective exercise of these vested functions. Municipal councils are considered and known to be the highest decision-making body. They are essentially the “captains” and are required to steer the directions of the municipality’s that they govern, shape the strategic direction, and take crucial decisions in respect of not only the municipalities. In coalitions, this requires close cooperation between coalition partners to ensure that the responsibilities of the council are carried out effectively. All electoral systems have thresholds of representation: that is, the minimum level of support which a party needs to gain representation. Thresholds can be legally imposed by the Electoral Act (formal thresholds) or exist as a mathematical property of the electoral system (effective or natural thresholds) – coalitions can be said to be an example of natural thresholds (Motsapi, 2022). Formal thresholds are written into the constitutional or legal provisions which define the PR system. The electoral system in South Africa is based on party-list proportional representation, which means that parties are represented in proportion to their electoral support. For municipal councils there is a mixed-member system in which wards elect individual councillors alongside those named from party lists. The 2021 local government elections produced hung councils in major metropolitan municipalities culminating in political parties being forced to enter into “contractual” arrangements in terms of coalition agreements. South Africa saw the ousting of City of Johannesburg Mayor, Dr Mpho Phalatse as well as the Speaker of Council, Mr Vasco Da Gama being removed as Speaker by the coalition government (Njilo, 2023). This proved beyond reasonable doubt that practically speaking, coalition governments are extremely unstable in nature. Furthermore, and of particular interest to followers of politics and certainly to many citizens who are severely impacted (majority of the time in the townships), is how the instability of coalition governments compromises and hinders local governments or, more specifically, their administration’s ability to deliver services to their local communities. The above hindrance occurs through various negative factors, which will be discussed in detail in the article within the section “What are the advantages and disadvantages of coalitions?”. The optimal or effective functioning of a municipality commences with its leadership. Exemplary leaders set the tone both strategically with regards to and in relation to an organisation’s or, in this instance, a municipality’s vision, mission, goals and objectives. This however requires that a tone of good morals and values be set by leaders (SACN, 2021:262-263). The above sounds good in theory, however, our local municipalities in South Africa are plagued by many challenges emanating from this exemplary leadership, which is required for the successful functioning of any organisation and even the running of a country. Local governments now have an additional layer of complexity attached to coalition governments. Coalitions are formulated out of convenience rather than ideology, which ultimately leads to instability – especially when it comes to portfolios being divided, leaders are often unable to hold coalition partners to account. Party factionalism is another cancer in the effective running of a municipality that impedes the potential of having efficient administrations, has occasioned a lack of direction and decision-making, and played a major role in the interruption of service delivery and reduced investor and business confidence (SACN, @021:262-263). What is of concern, is the position that local governments must “play”, “practically” speaking, because they are the closest government to the people, versus the hierarchy in which they are placed by the provincial and national government. It is submitted that there must be a re-thinking and assessment in terms of the autonomy that is provided to local governments in the “real sense”, versus what they are vested with by legislation or by operation of practices in frameworks or the constitution of government structures. This is one of the biggest challenges of municipalities. Mayors are seen to have less political authority than provincial leaders. Mayors are elected by the party hierarchy and not by communities through elected councillors. Mayors and municipal managers require provincial and national government to offer them support – through legislative instruments and other tools – that “does not” infringe on the autonomy of local government. In addition, the blurring of boundaries between the administration and political leadership has most often resulted in confusion over roles and given rise to political-administrative tension and conflict (SACN, 2021). It is foreseeable that there will always be political changes, however, these changes in essence should not impact on the administrative functions or affect the operating of municipal services, as they currently do. Background A coalition government can be defined as a form of government in which political parties cooperate to form a government. The usual reason for such an arrangement is that no single party has achieved an absolute majority after an election, an atypical outcome in nations with majoritarian electoral systems, but common under proportional representation. The Cambridge dictionary defines coalitions as a group of two or more political parties working together to win an election or govern an area. The term ‘coalition’ is derived from the Latin word ‘coalitio’, which means ‘to grow together’. Thus, technically, coalition means the act of uniting parts into one body or whole. Politically, coalition means an alliance of distinct political parties. When several political parties join hands to form a government and exercise political power based on a common agreed programme or agenda, we can describe the system as coalition politics or coalition government (Gahatraj, n.d.). De Visser (2021) defines a coalition as when two or more political parties agree to cooperate to govern together as a ruling coalition government. There are several different types of coalitions, namely: bare majority coalition government, grand coalition, government of national unity (at the national level), and minority government. South Africa is said to be a representative democracy. This means citizens do not govern the country themselves, but rather, it is governed by individuals or representatives who are members in the different political party organisations and who contest for positions councillors are elected (voted) for to be the representatives of citizens in the various arms of government, i.e., national government (Parliament), provincial government, and local government (municipalities and district councils). This is how political leaders ascend to holding the seats that they do in councils, Parliament, etc. The political party that wins the majority of seats in an election, be it in local government elections or at the national elections for Parliament automatically has the right to form the government, based on attaining over 50% of the votes. This is when a government party is called the majority or ruling party. In this instance the parties that receive a lesser portion of the votes become minority parties or opposition parties. It is essential to point out that the government is not permanent – the citizens give it the right to rule the country for a term of five years (Parliament, n.d.). This is how the South African Constitution is set up to be a majoritarian government system. Whether this constitutional set up is working for or against democracy and the very citizens it should serve, is something that unquestionably warrants reassessment and perhaps must be made a key priority in order to change the despairing state of local governments. What is the “genetic make-up” of coalition governments? Section 26 of the Electoral Act provides that a political party may contest an election if such party is registered and has submitted a list of candidates. Section 27 of the Electoral Act provides that a registered political party that intends to contest an election must nominate candidates and submit a list of those candidates for election to the chief electoral officer (Mhlongo, 2020). South Africa has for some years produced “hung” councils, which unfortunately leads to more problems than solutions, particularly where highly contested municipalities are concerned. A council is deemed to be a “hung council” when no political party wins an outright majority – meaning more than 50% of the seats in the municipal council – thus making the formation of a coalition or minority government inevitable (De Visser, 2023). It is important to understand what constitutes coalitions or the rationales for coalitions. It can be said that coalitions become mandatory or get “imposed” on political parties by the voters based on the outcome of voting during the elections. The outcome is generally one which results in a “hung” municipality or “hung” legislature. It is said that coalitions can create political stability and governability in areas with “hung” municipalities or in legislatures in which no single party has won an outright majority or where there are multiple choices of competitive political parties. If no political party gains a majority of seats in a specific election, the rationale for the formation of a coalition can be said to be one of political necessity. In this instance, the political parties are obliged to cooperate to avoid ungovernable situations, also taking into consideration the fact that inability to form a government may eventually lead to a by-election of the entire council and, in some instances, even provincial intervention – such as with the City of Tshwane, although this was reversed in court. Political parties have a legislated responsibility to the electorate to ensure that a stable government can be formed to respond to the needs of their communities (Ndou, 2022). Firstly, political parties that enter or wish to enter into coalition agreements normally consider the following: there must be an agreement on a policy or programmes, and they must have a consensus from the onset with regards to these policies. The agreement on the policy/policies should be joint and the policy/policies should be properly prepared by the parties to the agreement. The proposal with regards to the above founding aspect, is that coalition partners ought to aim at drafting policies that are practical and will be easy to implement. These easy-to-implement policies must be within IDP/SDBIP. This factor is inherently interesting, due to the fact that manifesto objectives of the different political parties have different party objectives, thus the coalition agreements may not necessarily be amenable to the other coalition partners, or even lawful (Motsapi, 2022). The analysis is that coalition partners must aim at adopting policies that will be easy to implement and not policies that will cause further delays in rolling out service delivery or are unimplementable, as the core objective of municipalities is service delivery. De Visser (2009) states that a policy programme of a coalition agreement must set out the objectives that the coalition wants to achieve in the municipality in which they will be governing, over the five-year council term. The lack of clear objectives by the coalition partners can lead to political parties being dependant on parties to which they are diametrically opposed in terms of party objectives. This was seen with the DA being dependant on the EFF in the City of Ekurhuleni in 2022. So, one can draw the conclusion that coalitions are necessitated by conditions that have nothing to do with party objectives. Furthermore, it is crucial that the policy programme must be detailed, realistic (meaning achievable), and one which all partners in the agreement will support. Lastly, it must be feasible and financially sound. Secondly, the distributing of political positions as equally as possible is an important condition that the coalition parties ought to agree upon. Political parties should ideally receive seats proportional to what they contribute to the coalition agreement. The allocation of seats in key and strategic positions in the executive, proportional to the contribution that the coalition parties made to the overall coalition, is paramount and can play an imperative role. It is the prerogative of the political leader to allocate executive positions. This has proven in the recent scenarios of the City of Johannesburg and City of Ekurhuleni to potentially be a major obstacle for coalition partners, as service delivery comes to a halt when there are constant votes of no confidence submitted in council by parties. We saw the two big metros that were led by the DA for most of 2021, filing papers in court in urgent motions. Therefore, the fights that get taken to court end up impacting how council is run and on council operating efficiently. De Visser (2021) emphasises that institutional arrangements of a coalition government may determine how the incentives for cooperation in a coalition are structured and how they may take formulation. An important part of this is the distribution of political positions. A cornerstone of building a solid foundation is also premised on how coalition parties must consider how political offices will be shared amongst the coalition partners. The three key positions in municipalities that are usually the bone of contention are the Mayor, the Speaker and the Whip. These three positions are now fully recognised in legislation as political office bearers with legislative authority provided for in the Municipal Structures Act 117 of 1998. There have been amendments to the Municipal Structures Act, which has seen the office of the Whip of Council being empowered legislatively and the Whip being provided with “proper” accreditation and authority as a critical office bearer for the creation or, rather, fostering and enhancement of political cohesion. Previously this was not the case when it came to the office of the Whip of Council. It was only the Mayor and the Speaker who were recognised as political office bearers. It will only be with practice and with time that one will be able to measure the role that the office of the Whip and the Whips of Council play or ought to play in the bringing about of cohesiveness within councils that have diverse views, and which are led by coalitions. In addition, to assess key indicators that play an enabling factor in the Whip being able to execute this role effectively or otherwise. Third, it is important that an actual or physical coalition agreement or document is drafted and comes into existence. This document must stipulate the arrangements of the coalition partners along with its terms and actual mechanisms of the agreement must have been entered. Political parties sometimes enter into agreements without any written documentation. Oral agreements often result in useless “he said”, “she said”, “they said” arguments, and furthermore, there is no form of proof showing, or acting as evidence, that there were indeed agreements in place or discussions that took place. This is a major pitfall as political parties cannot hold one another accountable. This point will be elaborated on in the section “Proposed Interventions”. A coalition agreement is a contract-like political agreement that “binds” the coalition parties to the full range of compromises made in the negotiations. The coalition agreement is to serve as a point of reference in respect of the terms and conditions agreed to in the negotiations by the coalition parties. In order to try and effectively constrain parties from drifting from the agreed coalition terms, the coalition agreement covers the procedural rules for decision-making in the coalition, prescribes rules for coalition behaviour, provides for the coalition programme, and reflects the composition of the coalition as well as the scope and functions of the various members in the coalition (Beukes, 2021). These mechanisms are to become the hoist that is meant to pull parties to act according to the objectives of the coalition. However, coalition agreements are not self-enforcing and it is ultimately up to the coalition parties to decide whether to abide by or depart from the coalition agreement. It is submitted that political parties are likely to stray from the terms as there is nothing binding in law. What are the advantages and disadvantages of coalitions? Whether the South African landscape is ready or not, coalitions have become the focal point of governance in the municipal context. Coalitions can become invaluable in advocacy for better and effective governance due to the fact that they have the potential to create structures for organisations’ political leadership to share ownership of common goals. The advancement of advocacy work can be strengthened considerably using coalitions. However, there are both advantages and disadvantages to forming or joining a coalition, especially when it comes to the political leadership. A proposal is that the joining or formulation of a coalition should only be taken after careful consideration following research and risk analysis. It is conceded that the high pressure to provide efficient service delivery by any municipal organisation, can lead to added pressure in terms of entering into discussions and, ultimately, coalition agreements by political organisations. It is, however, an extremely sensitive matter for any political organisation to make with haste and without proper consideration. The decision of whether working with the coalition is the best way to solve governance problems, and whether values and approaches by different political backgrounds with different political views can be shared, is life altering for the residents of any municipality. Not enough consideration is taken or even “due diligence” conducted with this point. It is therefore essential to explore the pros and cons in respect of these agreements, which have an altering effect on the scales of governance at a municipal level. The advantages may be the following: there will be consensus- or majority-based decisions, as they are taken where there has been extensive consideration of views of other coalition parties; nationalism is favoured and regionalism is lessened to a certain extent; regional aspirations may be fulfilled, as they are a result of thorough consideration by the coalition; the tyranny of a single dominant political party is lessened in a municipality or region – a result of power being spread out and no single political organisation being dominant; a more responsible government may emerge as a result of human resources and expertise being pooled together; coalitions have the potential to enlarge bases of support in networks and connections once investors see that there are collaborative efforts in a particular region or jurisdiction that is striving towards achieving similar or the same objectives; there are strengthened efforts in the facilitation of information exchange, skills, experience, materials, and opportunities for collaboration; it provides safety for advocacy efforts and protection for members who may not be able to take action alone, particularly when operating in a hostile or difficult environment; it magnifies existing financial and human resources by pooling them together and by delegating work to others in the coalition; and it helps develop new leadership skills amongst members (Anon., n.d.). While there are some attractive advantages, there are also some glaring disadvantages that come with the formulation of coalition partnerships. The damage they can potentially cause is huge, due to their nature – as witnessed recently in the municipalities of the Gauteng province. Coalitions are a new beast that is untamed and unregulated. The coalition troubles that have been most highlighted and displayed in the news recently are those that occurred in the City of Johannesburg and City of Ekurhuleni in 2022. Coalitions result in unstable governments, where decisions in respect of key issues become a time-consuming process and an exercise in which political parties can bully and strong arm each other through the reluctance of not supporting good programmes. This can have a paralyzing effect on the progress of service delivery and create a lack of clear objectives, or difficult to agree upon common objectives. The large political party which has the numbers can dominate over the smaller and minority party. Furthermore, power is not always going to be distributed equally amongst the coalition members, due to the seats that smaller partners have providing them with a limited say on issues and decisions. Coalition partnerships can also lead to political partners having to compromise their stance on particular issues to accommodate their partners and as a strategy on particular issues as well as partners compromising on their tactics. Certain dominant role players may not always get credit for progressive work and/or objectives achieved, as the coalition as a whole gets recognition rather than individual members – certain members of a different political organisation get or claim more recognition than others, causing conflict and resentment. If the coalition process breaks down, it can harm everyone's advocacy by damaging members' credibility; coalition activities can be difficult to monitor and evaluate. Lastly, there is also pressure on political parties created by legislation to enter into coalition arrangements due to timeframes which are not conducive to the proper and careful appointment of office bearers – the law doesn’t provide sufficient time. In a nutshell, coalitions can have the following negatives attached to them: they can lack clear objectives and/or political parties can have challenges in terms of agreeing to common objectives; the formulation of coalitions themselves can be a daunting task and, moreover, the managing of a coalition can be a very time-consuming and bureaucratic process that can and does take away time from working directly on campaign issues and organisational tasks that ought to be aimed at service delivery issues. One political party can be the more dominant and powerful party, which leads to the obvious uneven distribution of powers amongst the partners. This causes friction amongst the coalition partners and leads to a plethora of other problems in that diverging views crop up on matters of importance and partners end up pulling in different directions. This ultimately leads to partners not wanting to compromise in respect of the positions that they assume on critical matters and issues. The mere fact that there is shared decision-making powers, and because of this shared power, dissenting views emerge. The result in some cases is that decision-making in respect of core issues can lead to staggering, slow progress on matters, and in fact, decision-making processes may become paralyzed. There can also be constrained resources, which can hamper the implementation of policies and programmes of the partners. A coalition partner may not always get credit for the work it does; it is the coalition that gets the recognition rather than individual members. In some cases, certain members get or claim more recognition than others, causing conflict and resentment. If the coalition process breaks down, it has the potential to harm the coalition partners advocacy by damaging members' credibility. Lastly, the coalition partners activities can be difficult to monitor and evaluate, therefore making it difficult to measure or assess the progress and impact that the coalition has had on the governance of that particular municipality and/or region. Situational analysis As a result of this significant change of central power, coalition politics is now an integral part of South African politics. The voting trends and polling suggest that it may play an even more crucial role in provincial and even national politics in the coming years (Ndou, 2022). The local government elections held in November 2021 resulted in 66 hung councils in South Africa. This means that none of the political parties that competed in the elections obtained an outright majority of over 50% or at least 51%. The African National Congress (ANC), which had from the onset of 1994 been achieving over 50%, lost control of its majority councils. This obviously changed because the ANC failed to attain more than 50% and this seemingly amended the trajectory of the composition of local governments, as the ANC had to seek coalition partners. The Democratic Alliance (DA), being the second in command, did not do substantively well either as it achieved less than 22% of the total votes in the elections. These results have borne a complex situation as the two largest political parties have never trusted each other and thus were resistant to enter into coalitions with each other. Out of South Africa’s eight metropolitans there were only two that achieved an outright majority: the DA won a majority in the City of Cape Town and the ANC received outright majority in Buffalo City. The ANC retained Mangaung with only one seat majority (Moffat, 2021). The months of September and October 2022, saw the DA-led municipalities of City of Johannesburg as well as City of Ekurhuleni tabling votes of no confidence motions against their respective mayors, and importantly, the coalition partnerships that were entered into “collapsed”, so to speak. The ruling national party managed to garner enough votes to oust both the mayors. This was, however, short-lived for different reasons in both the top municipalities in Gauteng. The motion of no confidence in the City of Johannesburg was challenged in court and the courts ruled in favour of the ousted Mayor, Mpho Phalatse, citing reasons of procedurally flawed processes to unseat the DA-led coalition. The DA retook the helm, governing the City of Johannesburg via enforcement of court order. The DA-led coalition in Ekurhuleni was also destabilised by the brief removal of the DA-led coalition because of the tabling of the motion of no confidence by the ANC. The instability and ping-pong as seen above shows that the political parties have not grasped the foundations of coalitions or building proper roots for a coalition to thrive. The result of this is failed arrangements. It appears that there is a lack of time or no time to consult with the members of political parties and voters when these coalition arrangements are entered into. The ordinary citizens who voted for these political parties are left in the dark when discussions about coalitions are being conducted. It should also be borne in mind that negotiations for forming coalitions require sacrifices, including shifting from party policy ideology to suit coalition demands (Ndou, 2022). Party politics overshadow residents or community needs; there is always reluctance by municipal councillors and administration to engage with communities. Due to the temporary nature of partnerships, public participation is compromised. Ndou (2022) correctly states that having the coalition activity being in the hands of the elite, we, therefore, need to accept that the elite theory seeks to account for power relationships in the society. Public policy may be viewed as the preference and values of the governing elite or the leadership in power. In this respect, public policy does not emanate directly from public participation. The elite shape and mold mass opinion, then the masses shape elite opinion. Public servants and administrators carry out policies decided by the “elite” or those that are in power and public policy flows downward from nobility to the groups. The failure of dominant political parties – the ANC, DA, EFF and ActionSA – to find common ground in finding practical local coalitions hands enormous and unwarranted power to the smallest parties. The smallest parties somehow end up becoming more powerful as they maneuver the dominant parties in coalition negotiations. They also end up demanding bigger parties to dance to their tune and ultimately situations where “puppet” mayors are the result. Consequently, many coalition agreements are gross distortions of the will of the electorate. When a political party with less than one percent of the voters behind it, is handed the mayoral chain or the speaker’s hammer, it has nothing to do with democracy. That is a subversion of the will of the electorate (Nkamana, 2023). It is this distortion that ultimately leads to voter apathy and a poor turnout in South Africa during elections. The question posed in this article is whether the Constitution is enabling democracy or not when such occurs. It is proffered that the Constitution is a tool that is distorted in some instances to suit the needs of the elite and those that are in power. The Constitution considers local government as an equal and autonomous partner within a non-hierarchical structure of government “spheres”; however, this has been undoubtedly diluted by political arrangements and party structures, which are by their nature and form, hierarchical. Inevitably, the outcome is a general weakening of the local “voice”, with more importance given to provincial (rather than local) leaders and officials (SACN, 2021). Legislation, electoral and other various pieces of legislation are silent on some salient matters pertaining to the operation of coalitions, most crucial is that there is no law preventing political parties from entering into these coalition agreements. This in itself in terms of the South African Constitution would be deemed to be undermining the principles of democracy. And herein lies the epicentre of the destructive position that the very tool that is meant to serve the electorate, the Constitution, ends up indirectly protecting the “rights” of political parties instead of the population. Proposed interventions Coalitions at municipal level in South Africa are mostly chaotic, with devasting impacts on municipal administration and service delivery. Our political parties are therefore doing something wrong. It is not possible to legislate political behaviour without overreach or coerce political parties into stable coalitions. Key interventions are discussed hereunder, wherein there is already existing debate around some of the interventions that are submitted, also with the view of adding to the debate and ideas to assist in laying solid foundations for stability within coalition agreements. Firstly, there is the strengthening of municipalities existing and enabling legislation around the tabling of votes of no confidence in councils. Municipalities already have standing orders, which are effectively policy guidelines and/or by-laws that set out the procedures and processes as to the running of council. De Visser (2023) states that motions of no confidence have become the local politicians’ toy of choice. The most troubled councils experience endless motions of no confidence. These motions can throw the municipality into disarray, leaderless paralysis, and a state of limbo – a prime example being the City of Ekurhuleni. This also occurred in the City of Tshwane in March 2023. De Visser (2023) submits that the law can limit the use of motions of no confidence. There is also the notion that standing orders or policy documents of municipalities should limit the number of motions of no confidence that can be tabled in council. Secondly, there needs to be legislation that is developed specifically for regulating and founding governance procedures, rules and regulations in respect of coalitions. Legislation in South Africa in its totality from municipal right up to the other two spheres of government did not consider the subject matter of coalitions back when it was drafted. The developing or strengthening of legislation can be coupled with the publishing of coalition partners and their agreements. It is necessary that legislative timelines be revised to be able to facilitate a better transition and proper formulating of a “new government” once the general elections are finalised. Extending the 14-day period at the commencement of the term after elections can aid governance. The law insists that the newly elected council elects its main office-bearers within 14 days. In a hung council, this timeline is not practical or conducive at all for the proper establishment of a coalition. Negotiating a proper coalition agreement requires more time, therefore, even 30 days. It is highly likely that if political parties are not provided with sufficient time to enter these coalition arrangements, they only stand a small chance of succeeding. Therefore, it is suggested that the 14-day period must be extended to allow more time for negotiations, hopefully leading to coalition agreements that last. If it is not extended for all municipalities, then it must be done at least for hung councils. No municipality can withstand a prolonged power vacuum at the top. Accordingly, supplementary provisions ought to be made and it must be possible to legislate a holding pattern after the general elections, in which either the outgoing municipal executive, or the municipal manager, is empowered to take the decisions necessary to keep the municipality going (De Visser, 2023). Beukes (2021) and De Visser (2023) both advance the view that coalition agreements should be made public. The argument is that coalition agreements are political programmes of the incoming local governments, and the public ought to know the plans of its government. It is also said that having the agreement published makes it more difficult for coalition partners to breach the agreement, because the public can hold them accountable for their behaviour. Currently, coalition agreements mean little to those who signed up to them, and this is partly because the public does not know what they say. However, making coalition agreements “public” will not necessarily have a binding effect on political parties towing the line and upholding their agreements. It is suggested that South Africa should go a step further and bolster this intervention through prescriptive legislation that will state that for a coalition agreement to be valid and recognised in law, it must be set down in writing and must be made public. It is conceded to that this can be one of the founding or core requirements drafted as part of legislation. An observation is that whether documents are made public or not, political leaders as well as political parties still find themselves in various breaches and violations, in any event. The main effect that the publishing of coalition agreements may have, is that the voters of the various parties can hold parties accountable where it matters the most – at the voting polls and during elections – should parties be found to be in gross violation of coalition agreements. The public scrutiny does not make the agreement legally binding, but rather, politically binding. It is critical that legislation is revised wholistically not just for local government but also for provincial as well as national government. Germany uses practises or a methodology, so to speak, of “political rules” with regards to their coalitions. These rules govern its country through the usage of political conventions instead of legislation. It is said that compliance and conformance with a coalition agreement is not regulated by law, but instead, by “political calculation”. Parties and their leaders are cognisant of the fact that they will be assessed at the next election, for their track record and performance in a coalition as well as their capacity to deliver sound policies. Germany’s electorate does not look favourably on a party or on politicians who do not stand by their word and instead, cause the instability that comes with the breakdown of a government (Peschke, 2023). South Africa’s political landscape does not have the fertile ground nor the political maturity as yet to adopt this method solely as a mechanism, but rather, it requires a multidisciplinary approach which is the combination of both prescriptive legislation as well as political rules. Thirdly, there is a consensus that there needs to be an electoral reform with how the electoral system operates. Currently, power in councils is largely centred in caucuses of different political parties. At a local government level, public representatives are elected through a mixed system, i.e., direct election of ward councillors and proportional representation by political parties. The voice of constituencies is eliminated when decisions are made by a central command of the party caucus in council. For example, a councillor being a member of the EFF may have informed a community that they (the councillor) despise corruption and will not support the ANC, then the councillor becomes elected by that community based on these publicly pronounced views. However, when the councillor gets elected, their party takes a decision to work with the ANC. The voice of the councillor’s community and the undertaking that the councillor gave becomes mute and the voice of their community is eliminated in this manner. All the three big political parties take decisions through caucuses and not constituencies and are guilty of deal making. Another example and recent trend is smaller parties who would ordinary not be getting mayorship positions being given these positions when political parties wrangle for power. Democracy is being undermined with how some coalition agreements are being structured (Nkamana, 2023). Lastly, it seems that a strong contender for being a potentially key factor in the stabilising of coalitions is the role that committees can play to strengthen coalitions. It is therefore cardinal to provide a background on committees or rather, their basis in law. Section 79 and 80 Committees are established in terms of section 79 and section 80 of the Local Government: Municipal Structures Act 117 of 2008. Section 79 of the Act states that a municipal council may establish one or more committees necessary for the effective and efficient performance of any of its functions or the exercise of any of its powers and that the council may appoint the members of such a committee from amongst its members. Furthermore, the council may also dissolve a Section 79 Committee at any time. The Act provides that a municipal council must determine the functions of a Committee and may delegate duties and powers to it in terms of section 32 of the Act. The council of the municipality must appoint the chairperson and may authorise a committee to co-opt advisory members who are not members of the council. The council may remove a member of a committee at any time and may further determine the procedures of the committee (RSA, 1998). Section 80 provides that if a municipal council has an executive committee or executive mayor, it may appoint in terms of section 79, committees of councillors to assist the executive committee or executive mayor. It is, however, provided that such committees may not exceed the number of members of the executive committee or mayoral committee in numbers, i.e., they must be smaller focused groups. A Section 80 Committee must report to the executive committee or executive mayor in accordance with the directions of the executive committee or executive mayor. Importantly, the Act provides that when the above committees are established, “a municipality must take into account an examination of the powers, functions of the municipality and the extent of those powers”. The consideration of the above must be aligned to and tailored to suit the requirements of that municipality in terms of its needs as well as the need for efficiency and effectiveness. It is also a given that the municipality must consider the financial and administrative resources that are available to enable that committee with the support it requires to discharge its duties optimally. There have been numerous debates in terms of proposals of how committees can add more value when it comes to assisting in the strengthening of coalition agreements. Salga is of the view that committees ought to be a core anchor in providing oversight support within coalitions. It suggests that smaller committees ought to be established as the engine for oversight and scrutiny – smaller in size, more frequent, focus on specific (combinations of) portfolios and provide much greater opportunity for engagement than the council meeting; coalition partners can utilise their respective representations on committees to monitor the implementation of the coalition agreements; Section 79 Committees are generally well-suited for oversight over the municipal executive and the administration;committees can be an instrumental mechanism for coalition partners to monitor the implementation of the compromises that were agreed upon in the coalition (Joel, 2023). In addition to the above, a multidisciplinary approach must and can be strengthened through questions in council as well as committees. Most municipalities have rules and policy documents prescribing and providing guidelines in terms of how council proceedings ought to run, as mentioned above. The City of Ekurhuleni uses its Standing Orders By-law, which has as a matter of fact seen much more reliance by political parties in council. Lance Joel (2023) submits that these rules and orders of the municipal council should permit councillors to pose written and/or verbal questions in council meetings – directed at members of the municipal executive. In the City of Ekurhuleni, this has indeed been one of the best tools that political parties utilise to solicit information and answers in scrutinising decisions taken by the executive members of council. It can also be used to check progress in respect of implementation of coalition programmes. This tool can be further used by coalition partners to monitor the implementation of the coalition agreement. There is a view that the executive mayor system needs to be overhauled and the executive committee system entrenched more now that there is governance through coalitions. The submission is that there are already legislative roots to assist this. De Visser (2023) argues that executive committees function differently in that the political composition of the executive committee is largely fixed by law and is not necessarily subject to majority rule. In this regard, coalition negotiations are then able to focus on the key vacancies of the mayor, the whip of council and committee chairs. Crucially, when the coalition ends up collapsing, and the mayor is removed from office, the rest of the executive committee stays on. Consequently, there is a higher chance for a more stable governance system. De Visser (2023) correctly states that the law already provides for executive committees, and approximately 50% of municipalities have them. The MEC for local government may change a municipality from an executive mayor system to an executive committee system. Conclusion The glaring problem with coalition governments in South African municipalities can be seen and concluded to be a political one. It is not mainly a legislative or constitutional challenge; however, it is conceded that, in part, law plays a role. In scenarios where political parties that are seemingly working together have opposing policies, or where political parties are not controlled primarily by their stated ideological commitments but are driven by the urge to acquire large power and the access to resources and patronage that this presents, the normal ideological denominators that may hold coalitions together are absent or become non-existent. It is obvious that this leads to instability and thus the collapsing of coalitions and governance. Given this dynamic, imposing an additional legal requirement on political parties that seek to form a governing coalition or coalition agreements plays a factor in reducing the instability of a ruling coalition. It has been established in this article that South Africa does not have legislation drafted directly for providing guidelines, establishing or even regulating coalition government in totality, i.e., directed at all three spheres of government. It is apparent that with the coming elections in South Africa in 2024, there will possibly no longer be an outright winner or a dominating political party. South Africa is an amended or hybrid version of a parliamentary system of government in all three arms of government, instead of a system with a directly elected head of the executive, or a presidential system. The main difference between the two systems is that with the presidential system the government cannot be replaced, even if a majority of the legislature desires it. The government can be replaced in a legislative system of government if the majority of members of the legislature cease to support it; the position of the executive potentially becomes precarious when one party does not obtain a majority of seats in the legislature. The life of the government in a parliamentary system of government is dependent on the will of most elected political party representatives. Vos (n.d.) states that it is also, to a certain extent, dependant on the will of the political party leaders. A situation where no party obtains a majority of seats in the relevant legislature potentially leads to a more unstable government than in systems in which the head of the executive is directly elected by the electorate. Vos submits that the cause of this, is that in hung legislatures more than one party will have to work together to elect the head of the executive, to pass legislation, and to ensure its long-term ability to govern effectively, and to survive. This suggests that the stability of the government will formally depend on the whims of the elected representatives of political parties in a legislative body, although, in fact, it is more likely to also depend on political party leaders who, for various reasons, retain considerable control over the conduct of their elected representatives (Vos, n.d.). Literature suggests, a parliamentary system can generate more incentives for political parties to form coalitions (Mainwaring, 1990). It is said that this is more likely to transpire when the policy differences between the dominant or majority party and other minority political parties, together constituting a legislative majority, are small. Where these differences are small, it is submitted that the dominant party would be able to make necessary policy concessions to the other parties and offer them enough incentives to hold the coalition together (Austen-Smith & Banks, 1988; Cheibub et al., 2004: 566). In the hybrid parliamentary system operating in South Africa, wherein no party obtains an absolute majority in the legislature, political parties will be forced to work together, either in a formal or informal capacity, in order to ensure the election of the head of the executive, which is a precondition for the formation of a government. So, in the absence of a complete overhaul of the system of government, other smaller changes could and may be affected for the benefit of more stable and efficient coalition government. One can concede that coalitions are not as important as the maturity of the political leaders who can drive the stability and the sustainability of the coalition agreements. This, however, is not what must be a determining factor. Political leaders and political parties must be reminded of the will of the electorate and the will of the citizenry that elected them into power. Political leaders as well as their parties ought to know what accountability is. Investopedia defines accountability as “an acceptance of responsibility for honest and ethical conduct towards others. In the corporate world, a company's accountability extends to its shareholders, employees, and the wider community in which it operates. In a wider sense, accountability implies a willingness to be judged on performance”. The concept of accountability is the foundation of representative democracy. In a representative democracy, the representatives (e.g., MPs) should be held responsible (i.e., accountable) for their actions and decisions. In reality, the accountability of councillors or representatives becomes real when they contest in election. In politics and administration, responsibility was the technical term that was preferred to indicate the duty that persons in public authority had to “respond” in their conduct and actions as public officials. In law, liability was (and is) preferred to indicate that by doing a certain action (or entering into a certain contract) a person has put himself under an obligation and is therefore answerable for the consequences following from that action (or from entering into that contract) (Castiglione, 2012). This is a critical concept in politics but has lost meaning; the nature of coalitions requires the highest form of oversight coupled with accountability. Legislation can again play a role in the enforcement of legal consequences when parties to a coalition agreement fail to abide by the terms and conditions of an agreement, whereby the consequences become that a coalition collapses. The party in breach must be held liable in law and thus accountable. In conclusion, and having considered the historical background, the political and to a certain extent the economic background in line with geopolitical relations, having a single party system may very well be outdated. The political discourse within South African municipalities has demonstrated that they are still a work in progress when it comes to delivering effective governance to South African citizens. Coalitions of course are the new order of the day; however, much work needs to be done, especially when it comes to the regulating of coalitions. It is absurd to have positions of mayors – which are traditionally powerful positions – being handed over to smaller parties, who then abandon their ideologies and mission to occupy these positions, only to get “steered” from behind by the political parties that do have majority seats and are dominant in regions, provincially and nationally. This in law is termed “simulation” or rather simulated agreements or transactions. This is when parties make an agreement as a sham or pretence. They are disguised agreements that conceal the true or genuine intentions of the agreements – the same can be said to apply to some of these political arrangements. References Anon., n.d. World Animal Net. [Online] Available at: https://worldanimal.net/our-programs/strategic-advocacy-course-new/module-4/networking-and-alliances/advantages-and-disadvantages-of-working-in-coalitions [Accessed 25 November 2022]. Austen-Smith, D. & Banks, J. 1988. Elections, Coalitions, and Legislative Outcomes. American Political Science Review, 82: 405-422. Beukes, J. 2021. Dullah Omar Institute. [Online] Available at: https://dullahomarinstitute.org.za/multilevel-govt/local-government-bulletin/archives/volume-16-issue-1-march-2021/coalition-governments-guidelines-for-coalition-agreements [accessed: 11 November 2022]. Beukes, J. & De Visser. 2021. A FRAMEWORK FOR COALITIONS IN LOCAL GOVERNMENT. [Online] Available at: https://www.cogta.gov.za/cgta_2016/wp-content/uploads/2021/11/A-Framework-for-Coalitions-in-Local-Government_Dullah_Omar_.pdf [accessed: 5 October 2022]. Castiglione, D. 2021. Accountability. s.l.: Encyclopedia Brittanica. Cheibub, J.A., Przeworski, A. & Saiegh, S.M. 2004. Government Coalitions and Legislative Success under Presidentialism and Parliamentarism. British Journal of Political Science, 34(4):565-587. De Visser, J. D. 2009. Developmental Local Government in South Africa: Institutional Fault Lines. The Commonwealth Journal of Local Governance, 2. De Visser, J. D. 2023. Coalitions in local government: ideas for law reform. [Online] Available at: https://dullahomarinstitute.org.za/multilevel-govt/local-government-bulletin/archives/volume-18-issue-1-march-2023/coalitions-in-local-government-ideas-for-law-reform [accessed: 14 June 2023]. De Vos, P. n.d. The constitutional-legal dimensions of coalition politics- Chapter 9, [Online] Available at: https://mistra.org.za/wp-content/uploads/2021/10/Coalitions-Chpt-9-for-WP.pdf [accessed: 1 August 2023]. Gahatraj, D. n.d. Coalition Governments, Political Science, India: s.n. Joel, L. 2023. Coalition Governments: A SALGA Response. Alberton: Salga. Kadima, D. 2014. An introduction to the politics of Party Alliances and Coalitions in Socially divided Africa. Journal of African Elections, 13(1): 1-24. Mainwaring, S. 1990. Presidentialism in Latin America. England: Cambridge University Mbanyele, S. & Moffat, C. 2021. Hung Councils, coalitions, minority governments & the precarious future of South Africa's municipalities. [Online] Available at: https://gga.org/hung-councils-coalitions-minority-governments-and-the-precarious-future-of-south-africas-municipalities/ [accessed: 1 August 2023]. Mhlongo, L. 2020. A critical analysis of South Africa's system of government: from a disjunctive system to a synergistic system of government. [Online] Available at: http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S1682-58532020000200004 [accessed: 21 June 2023]. Motsapi, M.M. 2022. Interview with Head of Department, Corporate Legal Services, Ekurhuleni on 10 January 2022. Ndou, L. 2022. An analysis of a coalition government: A new path in administration at local government level in S.A. North West: North West University. Njilo, N. 2023. ‘Delinquent’ Joburg mayor to deliver State of the City Address despite threat of motion of no confidence. [Online] Available at: https://www.dailymaverick.co.za/article/2023-06-06-delinquent-joburg-mayor-to-deliver-state-of-the-city-address-despite-threat-of-motion-of-no-confidence/ [accessed: 21 June 2023]. Nkamana, Z. 2023. Interview with Chief Legal Specialist: Legal and Procedural, City of Ekurhuleni on 21 June 2023. Parliament of Republic of South Africa, n.d. How our democracy works. Cape Town: Parliament of the Republic of South Africa. Peschke, A. 2023. How to build a stable coalition government - the German experience. [Online] Available at: https://www.timeslive.co.za/sunday-times/opinion-and-analysis/opinion/2023-05-14-how-to-build-a-stable-coalition-government-the-german-experience/ [accessed: 1 August 2023]. Republic of South Africa (RSA). 1998. Local Government Structures Act 117. Cape Town: Government Printer. South African Cities Network (SACN). 2021. The Challenges and Issues Facing Local Government Beyond 2021. Online] Available at: https://www.sacities.net/wp-content/uploads/2022/04/S4-Challenges-and-issues-facing-government.pdf [accessed: 23 June 2023]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

On 18 March 2024, the Inclusive Society Institute conducted a workshop titled “Taking the Constitution to the People,” to Grade 11 learners of Adam Masebe Secondary School in Hammanskraal, Gauteng Province. The workshop was facilitated by Mr Patrick Morathi from the ISI. He outlined that the workshop is aimed at young adults at the end of their schooling in preparation for adult life as responsible citizens. It also seeks to stimulate awareness of constitutional principles and values. Beyond bringing awareness among the learners about their rights, the workshop aims to inspire and evoke perception about where they can become involved in civics and public affairs. How they can apply the constitution in their day-to-day lives and why is it important that they should exercise civic responsibility for their environment, community and the country at large. The learners and educators who were in attendance enjoyed and welcomed the workshop with its relevant content and material that was distributed to all participants which included: The Basic Provisions of the Constitution Taking the Constitution to the People (Know your rights and responsibilities) The workshop was so interactive that it was during the presentation that learners were given an opportunity to ask questions and also respond to questions of engagements that were posed by the Facilitator. At the end of the presentation, learners had to fill in a survey sheet which tested their understanding on the entire presentation particularly on the constitution, democracy and political parties. The Republic of South Africa Constitution, Act No. 108 of 1996 was used as a reference.

The U.S. Consulate General in collaboration with The Desmond and Leah Tutu Legacy Foundation and the Ukrainian Association of South Africa held a special screening of 20 Days in Mariupol on Thursday, 28 March at The Labia Theatre in Gardens, Cape Town. The Inclusive Society Institute was invited and attended the screening. The Oscar and Academy Award winning documentary, 20 Days in Mariupol, shows the visceral images of the Russian invasion of Ukraine captured by an AP team trapped in Mariupol. Former Ukrainian President, Victor Yushchenko, was also in attendance and spoke at the event. He was joined U.S. Consul General Todd Haskell,  HE Liubov Abravitova, Ambassador of Ukraine to RSA, and Janet Jobson, CEO of the Desmond and Leah Tutu Legacy Foundation.

Social cohesion trends are on a downward trajectory in South Africa. The Inclusive Society Institute has therefore embarked on a study into managing diverse communities. The research entails three case studies, namely Singapore, Finland and the United Arab Emirates, all diverse communities with specific mechanisms to manage the diversity in their countries. Singapore has for example a Presidential Commission for Minority Rights and a Presidential Council for Religious Harmony, amongst other measures. Finland an Ombudsman for non-discrimination; and the UAE a Ministry of Tolerance and Co-Existence. Can South Africa draw lessons from these models? That is the motivation for the study. The first case study visit was to Singapore from 18 – 20 March 2024, which was undertaken by the Chief Executive Officer of the Institute, Daryl Swanepoel, who is also the lead researcher on this project. During the visit Mr Swanepoel met with, amongst others: S.Rajaratnam School of International Studies, Nan Yang Technological University Institute of Policy Studies, National University of Singapore Yayasan Mendaki, that is the Council for the Development of the Singapore Malay/Muslim Community Roses of Peace, who foster interfaith appreciation A member of the Presidential Council for Minority Rights.

The Global South Perspectives Network's webinar on March 1st presented a multifaceted dialogue on the Zero Draft of the Pact for the Future. Inclusive Society Institute CEO, Mr Daryl Swanepoel welcomed those in attendance, after which Dr Georgios Kostakos, Executive Director, Foundation for Global Governance and Sustainability (FOGGS), detailed the Summit of the Future (SOTF) process, setting the stage for an in-depth exploration of global governance. Chief Director: UN Political, Peace and Security, South African Department of International Relations and Cooperation (DIRCO), Mr. Zaheer Laher's, presentation focussed on the importance of collective action and global cooperation to address challenges from a Global South perspective, emphasising the need for inclusive and equitable solutions in global governance reform. Furthermore, He highlighted South Africa's expectations and priorities for the UN Summit of the Future and the development of the Pact for the Future, advocating for meaningful reforms and multilateral approaches to achieve sustainable development and peace. A diverse panel of experts enriched the event, each providing critical analysis and building upon the conversation with unique insights. The panel included Prof. Cilene Victor, Professor at Methodist University and leader of the HumanizaCom Research Group, São Paulo, Brazil; Prof. Mohammed Taher Gholi Tabar, Professor at the University of Religions and Denominations, Qom, Iran; Prof. Carmen Rico Menge, former Dean of the Faculty of Social Communication and Director of International Relations at the Catholic University of Uruguay; and Ms. Buyelwa Sonjica, former Cabinet Minister, South Africa. The engagement underscored the importance of broadening the dialogue on future international cooperation and policy-making.

A team from the South Africa’s Inclusive Society Institute (ISI) and the Brussels-based Foundation for Global Governance and Sustainability (FOGGS) met with the Thabo Mbeki Foundation in Johannesburg on Wednesday, 6 March 2024 to discuss their proposals for the establishment of a UN Global Reliance Council. The ISI was represented by its Advisory Council Chairperson, Ms Buyelwa Sonjica and CEO, Daryl Swanepoel. FOGGS was represented by its Executive Director, Dr Georgios Kostakos. The Thabo Mbeki Foundation as represented by its CEO, Max Boqwana. The two sides agreed to further explore feasible pathways for UN reform that would culminate in a more effective, just and inclusive UN system, which must provide for an equitable voice for the Global South. To this end a brainstorming session will be organised in the near future to give clarity and purpose to the work of the organisations. The ISI and FOGGS team were privileged to meet with President Thabo Mbeki, where they introduced the work that on UN reform that they are engaged with.

Copyright © 2024 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 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. 27 FEBRUARY 2024 AH Gaum (Advocate of the High Court) & M du Plessis (Attorney of the High Court) 1. INTRODUCTION The Inclusive Society Institute appreciates the opportunity to provide input on the General Intelligence Laws Amendment Bill [B40 – 2023]. We recognise the necessity of safeguarding national security to ensure the well-being of the Republic and its residents. However, we express significant concern regarding – a) Overreach in Definitions of Threat to National Security The Bill's broadening of terms related to intelligence activities risks overly intrusive government presence in private lives, extending well beyond legitimate national security concerns. Such expansions could unjustifiably encroach upon daily activities, stifling free expression and association. b) Overly Broad Vetting Powers The Bill authorises intelligence agencies to conduct compulsory security vetting for any "person or institution of national security interest." This broadly defined power could potentially encompass private individuals, non-profit entities, religious organisations, and commercial enterprises, subjecting them to invasive scrutiny. The potential for misuse of such extensive vetting authority raises alarms about privacy violations and abuse. c) Enhanced Surveillance without Adequate Oversight The proposal to bolster surveillance capabilities through the National Communications Centre, without instituting robust oversight mechanisms and essential privacy protections, is troubling. The absence of safeguards aligns poorly with constitutional rights to privacy and freedom of expression, setting a precarious precedent for mass surveillance practices. d) Insufficient Measures Against Fund Misuse The Bill does little to introduce checks against the misuse of secret funds, a notable issue during periods of state capture. Without clear accountability frameworks, there is a risk of continuing improper financial practices within the intelligence sector. 2. OVERREACH IN DEFINITIONS OF THREAT TO NATIONAL SECURITY 2.1. Defining activities that undermine section 9 of the Constitution as threats against national security 2.1.1. The Bill extends the definition of national security threats to encompass “any activity that seeks to harm the advancement and promotion of equality and equitable access to opportunities by all South Africans as provided for in section 9 of the Constitution”. 2.1.2. This broad and subjective interpretation could encompass various actions, from social media expressions to protests, risking an overreach into areas safeguarded by human rights and legal processes. 2.1.3. The Bill's approach, inspired by constitutional aspirations towards equality and peace (section 198 of the Constitution), overextends these principles into direct national security concerns. Traditionally, national security threats are identified as actions posing immediate risks to a nation's sovereignty and safety, such as terrorism or espionage, rather than issues of inequality or discrimination, which are typically addressed through dedicated legal and human rights frameworks[1], such as the Constitution read with the Promotion of Equality and Elimination of Unfair Discrimination Act (Equality Act) in South Africa’s case. 2.1.4. Implementing such a broad definition could conflate human rights issues with security threats, leading to potential misuse of security powers and infringing on freedoms like expression and peaceful assembly. Moreover, existing legal mechanisms, including the Equality Act, Equality Courts, South African Human Rights Commission, Employment Equity Act, CCMA and others, are already designed to handle discrimination and equality issues effectively, questioning the need for security agencies' involvement in these areas.  It appears to be irrational that security agencies are now afforded the authority to make judgement calls involving equality and equity of access whilst they are neither experts in this field, nor the authorities mandated by the Constitution and the law to adjudicate and investigate these matters. 2.2. Comment on the remaining defined threats to national security 2.2.1. Peace and Harmony (b) The inclusion of activities that harm the advancement and promotion of peace and harmony and freedom from fear and want is inherently vague and could potentially encompass legitimate protest or dissent. While aiming to protect societal harmony, this definition could be misused to suppress rights to freedom of expression, assembly and protest. 2.2.2. Foreign Hostile Acts (d) Defining threats to national security as foreign hostile acts aimed at undermining the constitutional order is reasonable and mirrors the security concerns of many nations. However, the challenge lies in maintaining a balance between genuine security measures and respecting international law and human rights. 2.2.3. Terrorism and Related Activities (e) The mention of terrorism, terror financing, illicit money flows, money laundering, and corruption aligns with global security norms. These are clear threats to national and international security, and their inclusion is justified. 2.2.4. Subversion and Undue Influence (f) The language around subversion and undue influence by hostile interests is broad, raising concerns about potential overreach. It is crucial that such definitions are applied in a manner that does not infringe on lawful international relations or suppress legitimate criticism of government policies. 2.2.5. Espionage (g) Espionage and the protection of economic, scientific, or technological secrets are standard concerns in national security laws. This definition is specific and directly relates to safeguarding national interests. 2.2.6. Violence, Intimidation, and Sabotage (h) Serious acts of violence and sabotage against the Republic's security and infrastructure are clear threats. However, the inclusion of "acts directed at overthrowing the constitutional order" should ensure it does not criminalise legitimate political opposition or peaceful protests. 2.2.7. Response to Force (i) This section's focus on protecting the Republic's ability to respond to force or threats is crucial for national defence. The exclusion of lawful political activity, advocacy, protest, or dissent is important for safeguarding democratic freedoms. 2.2.8. Natural or Artificial Calamities (j) Including threats of calamity, like pandemics, in national security considerations is a contemporary necessity, especially in light of global health crises. However, it is essential to ensure that emergency powers are not used to indefinitely extend government control or restrict freedoms beyond what is necessary for public safety. 2.2.9. Financial Crimes (k) The inclusion of theft, siphoning of state resources, and related corrupt activities addresses the internal threats to national security, echoing concerns raised by the Zondo Commission on state capture. This is a vital inclusion, given the direct impact of corruption on governance and public trust. 2.3. Recommendations 2.3.1. It is suggested that the definition of national security threats in the Bill be narrowed to focus on direct and immediate risks, explicitly excluding lawful political and social activities that are part of democratic engagement. Measures taken under the guise of national security should adhere to principles of necessity and proportionality, ensuring they do not unduly infringe upon human rights and freedoms. 2.3.2. The case of Amabhungane Centre for Investigative Journalism NPC and Another v Minister of Justice and Correctional Services and Others (CCT278/19 & CCT279/19, 2021) deals with the constitutionality of legislation impacting rights under Section 36 of the South African Constitution, focusing on less restrictive means to achieve the purpose of a limitation. The Constitutional Court found that the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA) was unconstitutional in parts because it failed to provide adequate safeguards for privacy, lacked independence in the appointment of judges for surveillance oversight, and did not ensure notification of subjects post-surveillance. The court emphasised the need for legislation to balance the purpose of surveillance with minimally intrusive methods, underlining the principle of less restrictive means to achieve the legislative aim, thereby protecting constitutional rights. 2.3.3. We are of the view that the principles set out in the Amabhungane case are instructive in respect of the definitions of threats to national security (and other areas of the Bill). 2.3.4. Based on the aforementioned concerns and principles, we recommend the definition of “threat to national security” should rather read as follows: “For the purposes of this Act, a "threat to national security" is defined as any action, behaviour, or circumstance that, based on credible intelligence and evidence, is likely to cause significant and direct harm to the safety, sovereignty, or integrity of the Republic or its residents. This includes: a) direct and immediate threats or actions that compromise the territorial integrity, sovereignty, or democratic constitutional order of the Republic. b) terrorism and Related Activities: Acts of terrorism, including planning, financing, and execution of terrorist acts; illicit financial flows and money laundering related to terrorist activities; and acts of corruption that directly compromise national security. c) unauthorised access, disclosure, or exposure of classified state security matters, economic, scientific, or technological secrets vital to national security, conducted by foreign entities or agents that undermine the Republic's sovereignty. d) serious acts of violence, intimidation, or sabotage that pose a clear and present danger to the security of the Republic, its critical infrastructure, or its constitutional order. e) actions by foreign states or entities directed at undermining the Republic's constitutional order or sovereignty through subversive or covert means. f) natural disasters and pandemics, where such events significantly impair the Republic's capacity to maintain national security and public order, as officially declared by competent authorities. g) acts of theft, siphoning, misuse or corrupt misappropriation of state financial resources, when such acts have a demonstrable and direct impact on the operational integrity and security of the state. Notwithstanding the above, lawful political activity, advocacy, protest, and dissent do not constitute a threat to national security.” 3. OVERLY BROAD VETTING POWERS 3.1. Who or what is of potential interest to national security? 3.1.1. The Bill authorises intelligence agencies to conduct compulsory security vetting for any "person or institution of national security interest." Furthermore, the Bill provides the following definition: “ ‘person or institution of national security interest’ means any person or institution, identified by the Agency in the form and manner prescribed, that conducts himself/herself or itself or engages in activities that are inconsistent with the principles set out in section 198 of the Constitution including any person or institution that engages in activities that are defined as a threat to national security in terms of this Act.” 3.1.2. It has been raised in submissions from other interested parties that this broadly defined power could potentially encompass private individuals, non-profit entities, religious organisations, and commercial enterprises, subjecting them to invasive scrutiny. However, we appreciate that the identity of the person or entity being subject to scrutiny is not in itself unconstitutional. Religious organisations, non-profit entities, commercial enterprises and private individuals can, in the right circumstances, legitimately be subjects of national security interest, and may even commit acts that are a threat to national security. 3.1.3. The issue for us is not how broadly the net is thrown in respect of who or what a person or institution of national interest may be, but rather how broadly and vaguely the Bill describes the conduct that would potentially render them a national security interest in the first place. The principles set out in section 198 of the Constitution 3.1.4. The Bill would make it such that any person or organisation who “engages in activities that are inconsistent with the principles set out in section 198 of the Constitution” would become a national security interest. We are of the view that this is far too broad and vague to pass constitutional muster. Section 198 of the Constitution states the following: “198. The following principles govern national security in the Republic: (a) National security must reflect the resolve of South Africans, as individuals and as a nation, to live as equals, to live in peace and harmony, to be free from fear and want and to seek a better life. (b) The resolve to live in peace and harmony precludes any South African citizen from participating in armed conflict, nationally or internationally, except as provided for in terms of the Constitution or national legislation. (c) National security must be pursued in compliance with the law, including international law. (d) National security is subject to the authority of Parliament and the national executive.” 3.1.5. Using the principles of section 198 as criteria for vetting individuals or institutions introduces a level of subjectivity and ambiguity that is incompatible with the rule of law. The rule of law requires laws to be clear, predictable, and understandable to allow individuals to regulate their conduct accordingly. As put by the Constitutional Court, “[t]he law must indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly.”[2] When laws or policies are vague, they fail to provide this guidance, leading to arbitrary application and potential abuse of power. 3.1.6. Constitutional principles, while crucial for guiding the ethos and actions of a nation, are inherently broad and open to interpretation. They are designed to set the tone for law-making and governance, not to serve as direct criteria for legal judgments or security assessments. Applying these principles as objective measures for national security interests conflates their guiding purpose with specific legal standards, which should be clearly defined and narrowly tailored to prevent misuse. 3.1.7. The rule and specificity of law are especially critical in the context of national security, where the stakes are high, and the implications of being deemed a national security interest are significant. Broad and vague laws risk encompassing a wide array of innocent activities, chilling legitimate expression and association, and potentially infringing on fundamental rights. Any person or institution that engages in activities that are defined as a threat to national security in terms of this Act. 3.1.8. The Bill’s definition of who or what is considered of interest to national security creates further vagueness and broadness by “including any person or institution that engages in activities that are defined as a threat to national security in terms of this Act.” 3.1.9. As stated previously, we are of the view that the Bill’s definition of activities that are defined as a threat to national security are too vague and too numerous, and one of the negative consequences of this is that people and institutions are at risk of too easily being “of national security interest” and subjected to vetting and other consequences under the Bill. 3.1.10. If the Bill were, however, to rework its definitions of threats to national security so as to be reasonable and not overly broad (as previously suggested in this submission), it would go a long way to addressing our concerns under this section. 3.2. Recommendation 3.2.1. In light of the above, we recommend that the definition of “person or institution of national security interest” should be limited by excluding reference to section 198 of the Constitution and focusing only on those individuals and institutions that engages in activities that are defined as a threat to national security (as per our prior recommendations on the definition of threats to national security). 4. ENHANCED SURVEILLANCE WITHOUT ADEQUATE OVERSIGHT 4.1. Context and Concerns 4.1.1. The Bill proposes significant enhancements to the surveillance capabilities of the National Communications Centre (NCC), ostensibly to bolster national security. However, the Bill does so without introducing commensurate oversight mechanisms or privacy safeguards, raising profound concerns about the impact on constitutional rights, particularly the rights to privacy and freedom of expression. 4.2. Constitutional Implications 4.2.1. The Constitution of South Africa enshrines the rights to privacy (Section 14) and freedom of expression (Section 16), foundational pillars of a democratic society. Enhanced surveillance capabilities, especially when unchecked, threaten these rights. The potential for mass surveillance not only invades personal privacy but also chills free speech, as individuals may self-censor for fear of surveillance. We are called upon here to recall the judgment in the Amabhungane case once more, which warned against this very same form of overreach in surveillance in respect of RICA. 4.3. Lack of Oversight and Safeguards in Interception Applications 4.3.1. The Bill's failure to specify robust, independent oversight mechanisms for the NCC's expanded surveillance capabilities is a critical oversight. 4.3.2. We note that section 2B(1), which the Bill proposes, states the following in respect of the NCC: ‘‘2B(1) The Centre shall, in a prescribed manner, and with regard to foreign signals, communications and non-communications— (a) gather, correlate, evaluate and analyse relevant intelligence in order to identify any threat or potential threat to national security subject to— (i) submission of bulk interception application in the form and manner, as prescribed for approval by a retired Judge appointed by the President, after consultation with the Chief Justice; (ii) two advisory interception experts appointed by the Minister based on his or her relevant qualifications and experience in the field; and (iii) the Centre supplying relevant intelligence to the national intelligence structures. 4.3.3. We recognise that the Bill at least makes more of an attempt than RICA, in its pre-Amabhungane interpretation, to ensure the impartiality of the judge tasked with considering the interception application (by adding the requirement that the Chief Justice be consulted in the appointment of the judge). However, the issue remains that the interception application is ex parte, without the possibility of review or appeal. We understand that the subject of intended surveillance, both in respect of RICA and in respect of national security considerations under the Bill, cannot be a party to their own interception application – this would defeat the purpose of the surveillance. However, the Bill’s failure to put in place measures to address the risks of the ex parte nature of the interception application is concerning. 4.3.4. In Amabhungane, the Constitutional Court held that “[i]n sum, RICA is unconstitutional to the extent that it lacks sufficient safeguards to address the fact that interception directions are sought and obtained ex parte”[3]. We are of the view that the Bill will face the same challenge should it be passed without having its own safeguards in this respect. While we recognise that information sought in terms of RICA may differ from the information that may be sought in terms of the Bill, the rights affected by both these pieces of legislation do not, and they require similar protections. 4.3.5. We therefore suggest that the Bill incorporate a public advocate to argue on behalf of the subject of the interception application, or a similar measure. 4.4. General Surveillance Concerns 4.4.1. The expansion of surveillance powers without explicit, strong privacy protections risks enabling indiscriminate data collection and monitoring activities. Clear guidelines on data collection, retention, use and sharing are necessary to protect individuals' privacy rights. 4.4.2. Instituting enhanced surveillance capabilities without adequate safeguards sets a dangerous precedent, potentially normalising mass surveillance practices. This could lead to a slippery slope, where the threshold for initiating surveillance is progressively lowered, further encroaching on individual freedoms. 4.4.3. Drawing on international human rights standards and best practices can provide valuable guidance. The United Nations' privacy principles[4] and the European Union's General Data Protection Regulation[5] offer frameworks emphasising the necessity, proportionality, and transparency of surveillance measures, alongside strong oversight and redress mechanisms for individuals. 4.5. Recommendations for Reform 4.5.1. Improve Judicial Oversight Make provision for a public advocate or a similar functionary to address the “ex parte” issue in interception applications. 4.5.2. Implement Privacy Safeguards Clearly define privacy safeguards, including limitations on data collection, retention periods, use restrictions, and protocols for data sharing, both domestically and internationally. 4.5.3. Enhance Transparency Require regular reporting on the use of surveillance powers, including the number of surveillance authorisations, the types of data collected, and the effectiveness of surveillance activities in achieving their stated objectives. 4.6. Conclusion While national security is undeniably important, it must not be pursued at the expense of constitutional rights. The Bill's current approach to enhancing surveillance capabilities lacks the necessary balance between security concerns and the protection of privacy and freedom of expression. Implementing robust oversight mechanisms and privacy protections is essential to maintaining this balance and safeguarding democratic freedoms. 5. INSUFFICIENT MEASURES AGAINST FUND MISUSE 5.1. General concern 5.1.1. The concern over inadequate mechanisms to prevent the misuse of secret funds within the intelligence sector is significant, especially in light of historical instances of state capture and financial mismanagement. The Zondo Commission made significant findings in respect 5.1.2. Effective governance and oversight are crucial to ensuring that intelligence funding is used responsibly and for its intended purposes. What follows below are essential considerations and recommendations to address these concerns. 5.2. Transparency and Reporting While the sensitive nature of intelligence work necessitates some level of confidentiality, it is possible to implement structured reporting mechanisms that allow for accountability without compromising national security. This could include classified reports to specific parliamentary oversight committees or the use of independent auditors with the necessary clearance. 5.3. Clear Legal Frameworks The legislation should establish clear guidelines on the use of secret funds, including permissible and non-permissible expenditures. These frameworks should detail the processes for approval, disbursement, and accounting of funds to prevent misuse. 5.4. Independent Oversight Independent bodies, such as an auditor-general for intelligence services or a dedicated oversight committee within parliament, can provide an additional layer of scrutiny. These bodies would require security clearance to access sensitive financial information but operate independently to audit and review intelligence funding and expenditures. 5.5. Whistleblower Protections Protecting whistleblowers who report misuse of funds or other malpractices within the intelligence sector is essential for uncovering and addressing corruption. The legislation should include strong protections for individuals who report wrongdoing, ensuring they are not subject to retaliation. 5.6. Periodic Reviews and Audits Regular and ad hoc audits conducted by independent external auditors can help identify irregularities or mismanagement of funds. These audits should be comprehensive, covering all aspects of financial management within the intelligence sector. 5.7. International Best Practices Drawing on international best practices and standards for financial management and oversight in the intelligence sector can provide models for implementing robust mechanisms against fund misuse. Collaboration with international intelligence oversight bodies can also offer insights and methodologies for effective fund management. 5.8. Sanctions and Legal Recourse Clear consequences for the misuse of funds, including legal sanctions for individuals found guilty of mismanagement or corruption, are crucial. The legislation should outline these sanctions and ensure that they are enforced to deter malpractice. 5.9. By addressing the risk of fund misuse through comprehensive legal and regulatory measures, oversight mechanisms, and a commitment to transparency and accountability, the intelligence sector can build trust and operate more effectively in its critical role of national security. 6. CONCLUSION 6.1. The General Intelligence Laws Amendment Bill, while aimed at strengthening national security, presents significant challenges and concerns in its current form. The broad definitions of threats to national security, expansive vetting powers, enhanced surveillance capabilities without adequate oversight, and insufficient measures against fund misuse, all raise serious constitutional and human rights concerns. These issues, if not addressed, risk undermining the democratic values and freedoms enshrined in the Constitution of South Africa. 6.2. The Inclusive Society Institute urges a comprehensive re-evaluation of the Bill to ensure that its provisions align with constitutional principles and international best practices. This includes narrowing the definitions of national security threats to focus on direct and immediate risks, ensuring robust oversight mechanisms for surveillance activities, implementing clear and stringent safeguards against the misuse of secret funds, and strengthening the independence and autonomy of oversight bodies. 6.3. It is imperative that the pursuit of national security does not come at the expense of the fundamental rights and freedoms of South Africans. National security legislation must strike a careful balance between safeguarding the Republic and its residents from genuine threats and preserving the human rights that form the cornerstone of our democratic society. We recommend that Parliament consider these concerns and recommendations carefully, with a view to amending the Bill to uphold the rights to privacy, freedom of expression, and the rule of law. 6.4. The Inclusive Society Institute stands ready to engage further on these matters, contributing to the development of legislation that effectively protects national security while respecting the constitutional rights and freedoms that define our democratic Republic. FOOTNOTES [1] For example, the U.S. has defined national security threats in terms of physical and cyber threats to the nation's sovereignty and safety, such as terrorism, espionage, and state-sponsored cyber-attacks. Issues of discrimination and inequality, while recognised as societal challenges, are generally addressed through civil rights legislation and judicial processes rather than as components of national security strategy. The UK's national security strategy focuses on terrorism, organised crime, military threats, and cyber security. While the UK recognises the importance of social cohesion and the risks posed by radicalisation, efforts to combat discrimination and promote equality are primarily managed through social policy and legal frameworks outside the national security context. Australia's national security policies concentrate on defence, counterterrorism, border protection, and cyber security. While there is an acknowledgment of the importance of social harmony and preventing radicalisation, issues of inequality and discrimination are largely addressed through domestic policies, human rights frameworks, and anti-discrimination laws. [2] Affordable Medicines Trust and Others v Minister of Health and Another [2005] ZACC 3; 2006 (3) SA 247 (CC); 2005 (6) BCLR 529 (CC) at para 108. [3] (CCT278/19 & CCT279/19, 2021) at para 100. [4] https://unsceb.org/privacy-principles. [5] https://gdpr-info.eu/. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 ACM has as its objective the bringing together of think-tanks from across Africa to consider, discuss and develop policy proposals that will advance development on the continent. Eight think tanks, drawn from North,  West, East, Central and Southern Africa participated in the meeting. Deliberations at the meeting focused on, in the first instance, consolidating a collective African position on major contemporary challenges facing the continent, and, in the second instance, on further  integrating the African think-tank community into the broader Global South think tank community. During the discussions concentrated on Africa’s approach to multilateralism in general, its relationships with regional formations such as the Forum for China Africa Cooperation (FOCAC), and others advancing the cause of the Global South; and peace and security on the African continent. The meeting had four objectives: To serve as an embryo for the setting up of an annual consultative meeting amongst likeminded African think tanks for the purposes of dialoguing substantive political and socio-economic issues confronting the African continent. The idea is to prepare these think tanks for engaging in various international conferences on the basis of an engaged contribution. To prepare a synthesised African position on China-Africa relations intended as a contribution to the China Africa Think Tanks Forum (CATTF) To seek cooperation amongst the participants for the development of an Africa Fragility Index. To introduce the Global South Perspectives Network and Global Resilience Council. Participants included: Ms Buyelwa Sonjica, Chairperson of the ISI Advisory Council and former Cabinet Minister Prof. Wei Xu, Deputy Director of the Institute for African Studies, Zheijiang Normal University, and Prof, Ariella Liu, Director of the South Africa – China Think Tank, based at Nelson Mandela University Business School. Mr Zine Barker, Head of Academic Chair, Arab League Educational, Cultural and Scientific Organization (ALECSO), Algeria Prof Assi Kimou, Deputy Director Cellule d’Analyse des Politiques Économiques du CIRES (CAPEC), Cote D’Ivoire, and Dr Ndiakhat Ngom, General President South-South Transatlantic Institute, Senegal Dr Melha Rout Biel, Executive Director,   South Sudan  Center for Strategic and Policy Studies (CSPS), South Sudan Prof Francis Matambalya, Executive Director, The Nyere Foundation, Tanzania, and Prof. Omar Mjenga, Centre for International Police Africa, Tanzania Dr David Monyae, Co-Director University of Johannesburg Confucious Institute (UJCI) Hon. Faiz Jacobs, a senior Member of Parliament from our host province the Western Cape Ms Febe Potgieter, a former senior diplomat at amongst others the African Union. Representatives of the Africa Women’s Association led by its President Ms Jenny Wu. Dr Georgios Kotsakis, Director of the Foundation for Global Governance and Sustainability. Mr Priyal Singh from the Institute of Security Studies.

Friedrich Ebert Stiftung South Africa (FES), the South African Local Government Association (SALGA) and United Nations Development Programme (UNDP) collaborated in hosting a two-day seminar under the theme of “Strengthening Coalition Governance for Effective, Efficient and Transformative Service Delivery”. The seminar was held on the 28th and 29th of February 2024 and was attended by esteemed politicians, academics, and civil society organizations. The seminar took place at the CSIR convention center in Pretoria. The event had speakers and panelists who have a wealth of knowledge when it pertains to arears of governance, research and political sciences contributing to the discussions such as Cllr Bheke Stofile, Prof Susan Booysen, Dr Levy Ndou, Dr Mike Sutcliffe, Ms. Phindile Kunene, Mr. Nelson Muffuh, Prof Jaap Visser to name but a few. Ms. Nondumiso Sithole, advisory council member at the Inclusive Society Institute (ISI), attended and partook in what has become a central and critical area of discussion in the South African political landscape, especially as the country draws nearer to the 2024 National and Provincial elections. The collaborative efforts are intended as actions that are meant to not only be progressive but pro-active stance in responding to the National dialogue on Coalition Government. The seminar ended with a resolution that the output of the discussions that were held in in the interactive sessions a report would be borne. The aim of the report is to document findings from the seminar that may assist in contributing to finding solutions looking at best practices not only locally, regionally but also globally. This report is aimed at adding towards the developing of an inclusive framework that can positively guide and cater for new legal and political processes that will and have thus far emanated from coalition politics. Lance Joel Chief Operating Officer at SALGA raised the point that “coalitions should be based on legal and responsive agreements that reflect the needs of communities, rather than individual or political interests of the coalition partners”.

Occasional Paper 1/2024 Copyright © 2024 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 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 2024 Dr Roelof Botha Introduction The document commences with two sections that provide some background to pressing challenges facing the economy, followed by a more comprehensive discussion of a number of positive developments, some of which may realistically be regarded as growth drivers over the medium term. A concise reflection on key aspects of the 2024/25 National Budget is included and, where feasible, data sets and graphs have been updated. Erosion of public sector competence The systematic erosion of the state’s capacity at all tiers of government and the public corporations is widely regarded as one of the key obstacles to higher economic growth in South Africa. A recent report by the Growth Lab at Harvard University has examined in detail the key reasons for the below-par performance of the South African economy. Lead-authored by development economist Ricardo Hausmann, the report, titled Growth through inclusion in South Africa, seeks to explain why South Africa’s economy has consistently failed to grow at the same pace as its peers, with adverse social consequences, especially in the crucial area of unemployment. The report concurs with the findings of several domestic research institutions since the scourge of state capture came to the fore almost a decade ago and discusses several causes of the collapse of several state institutions. The include: Ideological gridlock within several government agencies, which has prevented critical decisions on the maintenance and expansion of infrastructure to be made in time. An ideological emphasis on central state planning that has effectively prevented society from contributing to supply societal needs, for example, by limiting power generation by the private sector and municipalities. A dearth of requisite skills and corporate governance standards at local government level, which has rendered many municipalities dysfunctional. A rise in political patronage, cadre deployment and corruption, as vividly proven by the Zondo Commission, which has restricted the productivity enhancement associated with labour specialisation. Inadequate public sector spending on the maintenance of the country’s infrastructure, which has led to serious inefficiencies in the areas of energy, railways, roads and harbours, resulting in supply-chain disruptions, especially permanent electricity rationing, and ultimately lower profits for many companies. This has also impacted negatively on taxation revenue growth. In December 2023, the Gauteng Division of the High Court in Pretoria handed down a judgment in a case brought by opposition parties in which three judges found that government was responsible for rolling blackouts, and the numerous failures that led to it. It also ruled that government (in the form of Electricity Minister Kgosientsho Ramokgopa) must take steps to stop the interruption of power to public health facilities, police stations and schools by the end of January. Even though it will probably take several years to end electricity blackouts, the judgement has removed all doubt over the fundamental cause of the electricity crisis. The judges have declared that it was the fault of the government. The judges also explained how the lack of investment, the failure to stop State Capture at Eskom, and all the mistakes since then brought about the energy crisis. Energy expert Chris Yelland has noted that the country’s energy availability factor (EAF) for Week 7 of 2024, was 52.8%, while the year-to-date EAF remained slightly lower than for the same period last year. This lack of progress is especially troublesome against the background of the return to service of three 800 MW generator units (Units 1, 2 and 3) at Eskom’s Kusile power station in November 2023, and the synchronisation of Kusile Unit 4 to the grid in December 2023. Figure 1 captures one of the causes related to the problems of decaying energy and logistics infrastructure in South Africa, namely gross underspending by the public corporations. Unfortunately, substantial and repeated losses by several of these public sector institutions (especially Eskom, Transnet, Petro SA and South African Airways) has severely limited their capacity to deliver services, whilst also threatening fiscal stability (via recurrent bailouts by National Treasury). Inordinately restrictive monetary policy Ever since the onset of restrictive monetary policy in South Africa at the end of 2021, the financial resilience of households has been under pressure, with a strong (and predictable) inverse correlation between higher interest rates and the Altron Fintech Household Resilience Index (AFHRI) trend. The gains that were made with the post-Covid recovery have now been wiped out by the highest interest rates in 14 years, with the current real prime overdraft rate (prime minus the consumer price index – CPI) at a level of 6.5%, which is more than double the average rate that existed during the tenure of the previous Governor of the SA Reserve Bank, Gill Marcus. The decision by the Monetary Policy Committee (MPC) of the Reserve Bank to raise interest rates to higher levels than before Covid continues to be a thorn in the flesh of most households and businesses, as this overly hawkish policy approach is not based on any signs of demand inflation in the economy. Scrutiny of the reasons for the overall downward trend of the AFHRI and the country’s leading composite business cycle indicator, reveals the following: Restrictive monetary policy by the South African Reserve Bank since the end of 2021 has raised the cost of credit (and of capital) by 68% (measured against the prime overdraft rate). In February 2020 (prior to Covid) the annualised consumer price index (CPI) was 4.7% and the prime rate was 10%. In January 2024, the CPI stood at 5.3%, with clear signs that the lower level of the producer price index (PPI) of only 4% will force it down in coming months, whilst the prime rate stood at 11.75%. This means that South Africa’s real prime lending rate is now 150 basis points higher than four years ago, despite the fact that several key sectors of the economy have not yet fully recovered from the Covid pandemic. Against the background of lower taxation revenues than the budget estimates, consistent increases in welfare grant payments and very high unemployment, it seems quite strange that the MPC has opted for excessively restrictive monetary policy, knowing full well that the short-term interest rate is a blunt instrument that directly affects the cost of credit and of capital. Unnecessarily high interest rates have a profound negative impact on the ability of households to maintain their standard of living and on the ability of businesses to invest in new productive capacity. Authoritative economists have publicly voiced alarm over the inordinate emphasis placed by the MPC on inflation expectations, which are based on surveys with minute sample groups and are not based on any control over the methodology utilised by the survey participants or whether they have sufficient knowledge of/or experience in applied macroeconomics and forecasting. One of the most valid criticisms of the MPCs ignorance of the plight of South African households is the fact that, in real terms, total household credit extension, which is valued at more than R2 trillion, has declined by 3.5% since 2017, which means that there has not been any real growth in this key macroeconomic indicator over almost a decade. History confirms that the South African economy has never been able to grow at meaningful and sustained rates unless household credit extension grows in real terms. Ever since the changes to the composition of the MPC that occurred after the departure of the previous Governor, Gill Marcus, a dramatic shift towards a more restrictive monetary policy approach has been followed. This stands in defiance of the twin mandate of the Reserve Bank, which is not only aimed at curbing inflation, but also at ensuring that economic growth and employment creation are encouraged. Figure 2 aptly illustrates the dilemma faced by South African households in the wake of the highest interest rates in more than a decade. At the end of the third quarter of 2023, the cost of servicing debt as a ratio of disposable income was higher than before Covid and was rapidly approaching double-digit territory. On the average home loan administered by BetterBond, homeowners are now paying approximately R4,000 per month more. As a direct result, the average deposit required for a first-time home buyer increased by more than 100% between the fourth quarter of 2021 (when interest rates started to increase) and the fourth quarter of 2023, whilst the number of applications for home loans for all buyers declined by 30% over the past two years. New record for manufacturing sales South Africa’s manufacturing sector ended 2023 on a high note, with the 4th quarter recording a sales figure of R876 billion, representing a new quarterly record, both in nominal and real terms, as illustrated by figure 3. It turned out to be a splendid year for the country’s factories, with each and every month recording a new year-on-year record sales performance and managing to maintain real growth of between 4% and 5%. The total manufacturing sales value for 2023 amounted to R3.3 trillion, 10% higher than the previous year (in nominal terms), and well above the average rate of inflation of 6%. The continued resilience of the manufacturing sector is especially encouraging against the backdrop of a number of intimidating challenges, including electricity rationing, high interest rates, and capacity utilisation that has not yet fully recovered from the debilitating effects of the Covid pandemic. Although a marginal improvement in the level of capacity utilisation occurred during the 4th quarter of 2023, a lack of sufficient demand remains a deterrent to a further improvement in this key economic indicator. Fortunately, two of the major manufacturing divisions, namely food & beverages and motor vehicles & parts, did manage to increase their capacity utilisation during 2023. Food and beverage processing represents the largest of the manufacturing divisions, accounting for more than 22% of total manufacturing sales. It remains a boon to South Africa to enjoy a large measure of food security, with an agriculture sector that is a significant generator of foreign exchange earnings, whilst also playing a key role in the return to price stability after the supply-side shocks of 2020 to 2022. Fiscal stability retained The 2024/25 national budget will mainly be remembered for its novel utilisation of a portion of South Africa’s gold and foreign exchange contingency reserve account (GFECRA), commonly known simply as the forex reserves. The fact that South Africa’s forex reserves swelled from less than R100 billion a decade ago to close to R900 billion has proven to be an enormous windfall in the current macroeconomic climate of subdued growth and below-par tax revenue collections. Finance minister Godongwana plans to draw down R150 billion of these reserves over three fiscal years. Most countries have official foreign exchange reserves (state-owned), held by their central banks, which can be used for purposes of maintaining macro-economic stability. The latter is exactly what has been implemented by National Treasury in the wake of the tax revenue shortfall experienced during the 2023/24 fiscal year. The latter may be attributed to weak prices for several of South Africa’s key commodity exports, sluggish world growth and weak domestic demand as a result of the record high interest rates that have been plaguing consumers and businesses alike. For anyone that is concerned over this practice, it is interesting to note that the origin of the hefty amount in foreign exchange reserves currently held by the SA Reserve Bank (SARB) was a fiscal transfer to the SARB of (merely) R28 billion made by then finance minister Trevor Manual in 2003, following the decimation of the forex reserves during the emerging market currency crisis of 1998. Capital market reaction to a country’s budget is widely regarded as the most informative barometer of its soundness in maintaining sufficient fiscal stability. National Treasury would have been most pleased by the decline in the country’s bond yield and the strengthening of the rand/US dollar exchange rate (albeit marginally) immediately after the tabling of the budget in Parliament. Although South Africa’s bond yield remains higher than most of its key trading partners, the country’s ratio of public debt to GDP of just above 70% compares favourably to other highly diversified economies - both for high-income countries and emerging markets. The country’s ratio of government expenditure to GDP is also not out of kilter with its major trading partners (see figure 4). Much detail is still required in the area of growth enhancing policies, but it is nevertheless encouraging to note that Mr Godongwana has echoed President Ramaphosa’s stated commitment to much closer cooperation with the private sector in fixing the mess surrounding the country’s infrastructure, especially in energy, roads, harbours and the railways. Progress with fixing and expanding the logistics network, combined with lower levels of electricity blackouts, an improvement in export commodity prices and lower interest rates (which are imminent), could eventually provide National Treasury with a more pleasant budget task next year. Foreign direct investment in good nick Over the 12 months ended September 2023, gross foreign direct investment (FDI) inflows on the South African balance of payments achieved a record high average quarterly level (excluding the Naspers share swap transaction of 2021). Since the decline in FDI inflows associated with the Covid pandemic, an average quarterly inflow of R28.7 billion has been realised – an increase of 140% over the prior seven quarters (see figure 5). The strong upward trend in gross FDI inflows is especially encouraging against the background of South Africa being placed on the so-called “grey list” by the Financial Action Task Force (FATF), which is the global money laundering and terrorist financing watchdog. The grey listing occurred in February 2023. Fortunately, a recent report by the FATF has indicated good progress with South Africa’s efforts to be removed from the grey list. According to National Treasury, the FATF has formally re-rated 18 of South Africa’s 20 deficiencies. Of these, 14 recommendations had been fully or largely complied with, and one was rated as not being applicable to South Africa. Following these re-ratings, South Africa is now deemed to be fully or largely compliant in 35 of the FATF’s 40 recommendations, including five of its six core recommendations. National Treasury has indicated that it hopes to conclude the necessary reforms by 2025, which will remove South Africa from the list. Once this has been achieved and considering the resilience of the South African financial sector, including compliance with international regulatory standards for banks, further impetus in FDI inflows can realistically be expected. In the interim, the attractiveness of direct investments in the country’s on-going transition to renewable energy in the Southern African region should continue to boost the balance of payments. Inflation declines further Following the recent lull in the pace of retreat of the consumer price index (CPI), inflation has now returned to a downward trajectory, both in terms of consumer prices and producer prices. Although the January reading of Statistics SA’s CPI data has seen a slight uptick to 5.3%, consumer inflation is still down from 5.5% in November and 5.9% in October (see figure 6). The producer price index (PPI), which invariably acts as a leading indicator for consumer prices, has set an even better tone, with the latest reading of 4% suggesting that inflationary trends will continue to moderate into 2024. More importantly, both the CPI and PPI are well within the Reserve Bank’s target range for inflation. Other good news for indebted consumers, especially property owners, is the welcome decline in South Africa’s long-term bond yield, which could be indicative of an imminent turning point for mortgage bond rates. Since early October last year, the 10-year bond yield has shed more than 100 basis points – an indication that international capital markets are pricing in a lower interest rate scenario for South Africa in 2024. Recovery of tourism sector South Africa’s tourism industry is well on its way to a full recovery, with the number of overseas travellers in 2023 breaching the two-million mark – an increase of 42% over the number in 2022, but still below the figure of 2.6 million recorded in 2019 (pre-Covid). Global tourism has recovered well from the negative impact of Covid lockdowns and South Africa is no exception, with the recovery rate standing at 79% of pre-Covid arrivals from overseas – marginally lower than the global average. Europe continues to dominate the South African tourism industry in terms of overseas arrivals, accounting for 64% of the total. Combined with North America, these two regions were responsible for more than 82% of all tourist arrivals from overseas in 2023. Figure 7 depicts the overseas tourist arrivals to South Africa in 2023 for the top-ten source countries, confirming the importance of maintaining sound relations with countries that share the same fundamental governance principles related to democracy and free enterprise. The imminent further recovery of tourism bodes well for the prospects of higher economic growth in 2024, as the sector possesses a pervasive value chain with other economic sectors, most notably accommodation, restaurants, transportation, and retail trade in clothing, ornaments, and artefacts. Tourism contributed almost 4% to South Africa’s GDP in 2019, a solid increase from the ratio of 2.6% in 2017. The average spending of tourists visiting South Africa via air travel is estimated at around R40,000 per person and the industry was responsible for almost half-a-million jobs in 2021, despite the negative impact of the Covid pandemic. With a bit of luck, this figure will eventually recover to above the level of 777,000 recorded in 2019. Altron-Fintech Index bottoms out The latest reading of the Altron-Fintech Household Resilience Index (AFHRI) points to a bottoming out of a downward trend that commenced shortly after the South African Reserve Bank adopted a restrictive monetary policy stance (at the end of 2021). Since then, the prime overdraft lending rate in South Africa has risen to 11.75% - a full 175 basis points higher than the rate that existed before the Covid pandemic. Fortunately, the results of the AFHRI for the third quarter of last year point to a marginal recovery in the financial disposition of households, with increases of 0.3% (year-on-year) and 0.8% (quarter-on-quarter). This trend is aligned to the recent marginal recovery of South Africa’s leading business cycle indicator, which increased by 0.4% Between the second and third quarters of 2023. The improvement in the AFHRI has been driven by higher employment levels, higher real salaries in the public sector, with real household disposable income also increasing by 6.7% (quarter-on-quarter). The rise in employment has been especially encouraging, with total employment now higher than before the Covid pandemic, as illustrated by figure 8. Even though unemployment rose marginally during the fourth quarter of 2023, a total of 800,000 new jobs were created in 2023. Total employment in the economy now stands at 16.7 million, which represents a gain of 300,000 jobs compared to the end of 2019 (pre-Covid). Other good news on labour market trends is the fact that 139,000 jobs were created in the private sector during the fourth quarter, most of which originated within the financial services sectors. Trade surplus intact Thanks to November 2023 recording the country’s highest monthly trade surplus of the year, with a hefty increase of more than 9% in exports, South Africa managed to record another trade surplus in 2023 – for the eighth year in succession. Data released by SARS at the end of January confirms a new record for total exports, breaking the R2-trillion mark for the second successive year. The R1-trillion level for exports was achieved in 2015 and, thanks mainly to a 31% increase in export earnings in 2021, a doubling of this level occurred in 2022. Over the past two years, prices for several of the country’s key export commodities have been volatile and under pressure, resulting in October 2022 recording the first trade deficit in 30 months. Fortunately, total exports have managed to continue an upward trend, confirming the absence of any significant balance of payments instability. Of late, the chances of maintaining solid export growth in 2024 have improved, with the prices of gold, coal, iron ore and platinum having increased substantially from their pre-Covid levels. Gold, which remains a major export earner for South Africa, has risen to an all-time high of marginally above $2,000 per fine ounce. At the end of February, gold was trading at a level of $200 higher than at the beginning of October last year. Iron ore, which contributed an average of more than R8 billion per month to the value of mining sector output in 2023, may also be back in demand. Although the price has dropped from its recent highs at the end of last year, it stood at $123 per tonne at the end of February 2024, considerably higher than the most recent low of just below $100 per tonne, recorded in May 2023. The Chinese government has recently started to implement measures designed to stimulate infrastructure development, including central bank loans to the China Construction Bank and a lowering of the official interest rate, which should encourage activity in the residential building sector during 2024. Capital formation back on track Capital formation seems to have decisively turned the corner after the debilitating effects of state capture and the Covid pandemic. Not only does this key demand-side indicator add value to the economy during the implementation stages, but it also facilitates future growth by virtue of expanding the country’s productive capacity in all sectors. At a level of more than R270 billion during the 3rd quarter, gross fixed capital formation was 6% higher than a year ago (in real terms) and has been boosted by new investment in machinery and equipment. Although South Africa’s ratio of capital formation to GDP declined dramatically during the disastrous state capture era (from 17.6% to only 13.8%), it has since stabilised and is now at above 15% and rising. Sufficient imports of machinery and equipment (as was experienced last year) are a prerequisite for economic growth, particularly in a developing country. During 2023, imports of machinery and equipment rose dramatically to a level of R465 billion (see figure 10), representing almost a quarter of total imports, its highest share since 2016. The imports of mineral products (which is mainly represented by oil, diesel and petrol) amounted to 21% of total imports, its second highest level since 2014. Both of these categories of imports are crucial to the expansion of productive capacity and economic growth, with the stellar performance of machinery & equipment imports also closely associated with higher investment in renewable energy by small and large businesses alike. Strong growth in construction activity South Africa’s construction sector seems to have turned the corner and is heading for expansion in 2024. The Afrimat Construction Index (ACI) for the 3rd quarter of 2023 recorded a quarter-on-quarter increase of 9.2% and builds on the positive ACI growth rate of 5.8% recorded in the 2nd quarter of the year (see figure 11). It is especially encouraging that the important indicator of job creation in construction continued to record a healthy growth rate, with 145,000 new jobs having been created since the beginning of 2023. Equally impressive is the increase of almost 10% in the volume of building materials produced in the 3rd quarter, compared to the previous quarter, with year-on-year growth also having returned to growth. Despite the slump in the residential housing market, several key drivers of further growth in the construction sector may strengthen or emerge during 2024. They include the following: Progress with public/private partnerships or outright privatisation in the area of repairing, maintaining and expanding the country’s logistics infrastructure Progress with the inevitable and gradual switch to renewable energy, which is often linked to construction activities New capital formation in the economy, which recorded its 7th successive double-digit growth rate during the 3rd quarter of 2023 (year-on-year) A larger measure of price stability in the economy, which may lead to lower interest rates, hopefully early in 2024. In addition to the sterling performance of wholesale sales of construction materials, new job creation, and the volume of building materials, other highlights of the latest ACI were the positive real growth in the value of building material sales, retail hardware sales and remuneration of construction workers (quarter-on-quarter). - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 © 2024 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 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 2024 Author: Nicola Jo Bruns Bergsteedt Editor: Daryl Swanepoel Content 1. Introduction This report delves into a comparative analysis of the labour and business relationships in South Denmark. The aim is to uncover valuable insights and lessons that South Africa can learn from The Danish labour market model, known for its balance and effectiveness in fostering a collaborative environment between labour and business. South Africa's labour market is heavily influenced by its historical context, particularly the legacy of apartheid. This backdrop has led to a labour framework that is protective of workers' rights but often cited as rigid by the business community. The high unemployment rate and stark income inequality further complicate the labour-business relationship, making it a crucial area for policy focus and reform. Denmark, in contrast, presents a unique and successful labour model known as "flexicurity”. This model is characterised by labour market flexibility, strong social security for workers, and an emphasis on mutual agreement and collaboration between employers, employees, and the government. The Danish model has garnered international acclaim for achieving a balance between employee security and business agility. The purpose of the study trip to Copenhagen, Denmark, was primarily to comprehensively understand the Danish labour-business compact. This venture was important, as it aimed to gather insights and practical knowledge from one of the world's most successful labour models. The delegation that embarked on this journey comprised a diverse and expert cohort from South Africa, including key representatives from the Inclusive Society Institute, Business Unity South Africa (BUSA), and the Congress of South African Trade Unions (COSATU). This assembly of varied perspectives – encompassing policy analysts, business leaders, and trade union representatives – was intentionally designed to ensure a holistic understanding of the Danish labour market model. The core objective was to extract valuable lessons and strategies that could be adapted and applied to the South African context, with the ultimate goal of fostering a more collaborative, efficient, and equitable labour-business relationship back home. This trip was not just about observation and study; it represented a proactive step towards possible and tangible change and improvement in the South African labour market and business environment. The primary goal participants hoped to achieve during this research trip was to glean actionable lessons and strategies that could be tailored and implemented within the South African context. The objective was to explore and understand the mechanisms and policies that underpin the Danish model's success, particularly how it balances the interests of labour and business to create a harmonious and productive environment. By doing so, participants sought to identify practices and principles that could be adapted to enhance the labour-business relationship in South Africa, aiming to create a more collaborative, dynamic, and equitable labour market. This study trip was envisaged as a crucial step in driving substantive change and progress in the country’s labour and business practices, moving towards a model that benefits all stakeholders in the South African economy. The cohort participated in meetings and presentations held at various locations during their visit, which included: Arbejdernes Landsbank, where they attended a presentation by Ms. Sofie Holme Andersen, Chief Economist at Arbejderbevægelsens Erhvervsråd. The topic of the presentation was "South Africa's Potential Inspiration from Denmark's Social Model". A meeting with former Finance Minister, Mogens Lykketoft, to discuss the formation of the Danish labour market model. A visit to the Arbejdermuseet, where they gained insights into the daily lives of Danish working-class families in the historical assembly hall dating back to 1879, located in the heart of Copenhagen. Confederation of Danish Industry (DI) in København, where they attended a presentation by DI's Signe Sørensen about DI's efforts in Social Dialogue. 3F Danish Trade Union, where Jesper Nielsen provided information about 3F, Denmark's largest and most influential trade union and unemployment fund. A presentation by labour market economist, Professor Per Kongshøj Madsen, who discussed various aspects of the Danish labour market under the theme "Upstairs and Downstairs on the Danish Labour Market". The primary objectives of this report are: To provide a detailed comparison of the South African and Danish labour/business models. To identify key aspects of the Danish model that contribute to its success. To explore how elements of the Danish approach could be adapted or implemented in the South African context, considering its unique socio-economic challenges. The analysis aims not just to contrast the two models, but also to offer a pathway for South Africa to enhance its labour relations, improve the business climate, and ultimately foster a more inclusive and dynamic economy. The lessons drawn from the Danish model could be instrumental in guiding South Africa towards a more harmonious and productive labour-business relationship. 2. Motivation and Background to the Trip In 2022, the Inclusive Society Institute, in collaboration with the Economic Council of the Labour Movement (Denmark) published a paper exploring the potential benefits of applying Denmark's Social Model to South Africa. This paper delves into the intricacies of the Scandinavian social model, particularly focusing on Denmark, and considers how South Africa might draw inspiration from Danish societal organisations. This research was motivated by President Cyril Ramaphosa's proposal to establish a written social compact in South Africa, aimed at addressing the nation's critical issues, primarily its struggling economy. The paper examines this proposed social compact and its goal to unite diverse stakeholders in tackling major challenges like skyrocketing unemployment, growing wealth inequality, deep-seated poverty, and a faltering economy. The success of this compact depends on mutual cooperation, trust, and respect. However, the existing relationship between Business and Labour in South Africa is often marked by scepticism. Labour groups are prone to strike when their demands, particularly for significant wage increases, are not met, as Mkentane (2022) notes. On the other hand, businesses frequently argue that strict labour laws impede job creation. The tension is evident, especially following a statement from Cosatu, South Africa's largest trade union, advocating for national strike action as a response to perceived class warfare by employers. The 2022 report looks to the Danish social model for potential solutions, noting how Scandinavian labour markets, including Denmark, have managed to harmonise high prosperity and employment levels with low poverty and equality. This balance is credited to effective collective bargaining, an extensive public welfare system, and a strong social safety net, supported by flexible employment regulations. Although these features have evolved from unique historical circumstances specific to Scandinavia, the Danish model specifically offers valuable lessons in achieving a balance between social welfare and economic growth. The 2022 paper specifically focuses on the Scandinavian social model, with an emphasis on Denmark, and contemplates how South Africa could adapt aspects of Danish society to address its own economic and social hurdles. Building on this research, the 2024 initiative includes a visit to Copenhagen to gain first-hand insights from businesses and workers about the Danish Labour Model, further enriching the understanding of its applicability to South African challenges. It is encouraged that this report is read in unison with the 2022 paper. 3. Introduction and Overview of the Danish Labour Market Model The Danish Labour Market Model, as aptly described by The Confederation of Danish Industry – Denmark's foremost business and employers' association – encapsulates the ethos of 'strong companies in a strong society'. In Denmark, both the business and labour sectors are excelling, owing to this exemplary model. They are not just building robust companies but are also integrating them seamlessly into a resilient societal fabric. This remarkable success is a clear testament to the model's innovative design and the effective processes it has in place. The origins of the Danish labour market model can be traced back to the early 20th century, but it was in the 1990s that the term "flexicurity" began gaining traction (Wilthagen, 1998). Denmark's approach evolved in response to the challenges posed by globalisation and the shifting paradigms of the post-industrial economy. Unlike the more rigid labour systems in many countries, where stringent regulations often govern hiring and layoffs, the Danish model provides a high degree of latitude to employers. This flexibility is seen as key to fostering a dynamic, adaptable labour market, capable of quickly responding to changing economic conditions. However, what sets the Danish model apart is not just its flexibility but also the robust social welfare system that underpins it. The safety net in Denmark includes generous unemployment benefits, extensive retraining programmes, and a strong emphasis on active labour market policies. These policies aim to assist the unemployed in returning to work as quickly as possible, through initiatives like job training, education programmes, and work trials. The state plays a proactive role in ensuring that workers are not left stranded by economic shifts but are instead equipped with the skills and opportunities to navigate the changing landscape. The model also embodies a unique collaboration between the government, employers, and trade unions. This tripartite arrangement fosters an environment of mutual trust and cooperation, ensuring that labour market policies are crafted and implemented in a manner that balances the needs of all stakeholders. Collective bargaining, a cornerstone of the Danish labour market, allows workers and employers to negotiate wages and working conditions, leading to a harmonious and productive work environment. Internationally, the Danish labour market model has been praised for its ability to maintain low unemployment rates, high job mobility, and a high level of worker satisfaction. Its success lies in its ability to combine flexibility for employers with security and opportunities for employees. This equilibrium not only enhances economic efficiency but also promotes social cohesion and stability, making the Danish workforce one of the most resilient and agile in the world. Yet, the model is not without its challenges and criticisms. Concerns have been raised about the sustainability of the extensive welfare system, especially in the face of demographic changes and economic pressures. Additionally, there are debates about the model's inclusivity and its ability to address the needs of all segments of the workforce, particularly in light of increasing automation and digitisation. The Danish labour market model, with its innovative approach to balancing flexibility and security, serves as a fascinating case study in labour economics and social policy. As countries around the world grapple with the challenges of the 21st-century economy, the lessons from Denmark's experience offer valuable insights into the creation of a resilient, dynamic, and inclusive labour market. Next, we break down flexicurity, one of the key components that make up the Danish Labour Market Model. 4. The Flexicurity Concept Flexicurity, a blend of "flexibility" and "security", is an innovative labour market policy framework primarily developed in Denmark. It has garnered widespread attention in Europe for its unique approach to modern labour market challenges (Wilthagen, 1998). This concept uniquely combines flexible labour relations with robust social security systems, aiming to balance the needs of employers and employees in a dynamic global economy. 4.1 The Dual Pillars of Flexicurity Labour Market Flexibility: Central to flexicurity is the advocacy for a labour market adaptable to changes and technological advancements. This includes easier hiring and firing processes, which encourage businesses to quickly adapt, fostering economic dynamism, and promoting job creation. Job Security and Social Protection: Counterbalancing flexibility, the model emphasises a strong safety net through comprehensive unemployment benefits, high-quality retraining and upskilling programmes, and active labour market policies (OECD, 2022). These policies, including vocational training and career counselling, ensure workers remain employable during industrial and technological shifts. 4.2 Integration and Balance Flexicurity challenges the traditional view that flexibility and security are mutually exclusive (Madsen, 2023). Instead, it posits that when integrated effectively, these elements can be mutually reinforcing, ensuring economic efficiency alongside social fairness. 4.3 Tripartite Cooperation and Social Dialogue A key to the success of flexicurity lies in strong cooperation between the government, employers, and workers' representatives. In Denmark, this collaboration has been crucial in shaping policies that benefit all parties, with collective bargaining playing a central role. 4.4 Global Implications and Challenges Flexicurity's track record, particularly in Denmark, shows its potential to achieve high employment, low unemployment, and equitable income distribution. Its principles are increasingly relevant in the face of automation and the changing nature of work, such as the gig economy. However, implementing flexicurity is complex and context dependent. It requires significant investment in social welfare and labour market policies, and its success hinges on specific cultural and institutional contexts, posing challenges in diverse global environments (Eurofound, 2013). Flexicurity represents a sophisticated approach to labour market policy, blending employer flexibility with employee security. As nations navigate the challenges of economic globalisation and technological change, flexicurity offers insights into creating resilient, inclusive, and dynamic labour markets for the future. 5. Historical Context and Development The evolution of the flexicurity model epitomises a seminal exploration in the realms of labour market innovation and socio-economic adaptation (Madsen, 2007). The development of this model mirrors Denmark's strategic responses to fluctuating economic scenarios and labour market exigencies over time (Bredgaard, Larsen & Madsen, 2005). Denmark's journey towards flexicurity commenced in the early 20th century with the genesis of its welfare state (Kvist, Pedersen & Köhler, 2008). This period was marked by policy initiatives aimed at broad social protection, laying the foundation for the extensive welfare systems, which later became a cornerstone of the flexicurity concept (Greve, 2011). The aftermath of World War II saw Denmark, akin to its European counterparts, augmenting its welfare policies (Esping-Andersen, 1990). This expansion paralleled economic growth, but by the 1970s and 1980s, Denmark confronted new challenges such as economic recessions, oil crises, and intensifying global competition (Jørgensen, 2009). These challenges underscored the limitations inherent in a labour market characterised by rigid employment protections, thereby catalysing a paradigm shift towards greater labour market flexibility and security (Torfing, 1999). "Flexicurity" garnered significant traction in the 1990s, in the wake of Denmark's labour market reforms, which were aimed at addressing surging unemployment and adapting to the forces of economic globalisation (Wilthagen & Tros, 2004). These reforms encompassed measures to augment labour market flexibility, such as the relaxation of hiring and firing regulations, while concurrently strengthening the social security system to support the unemployed (Andersen, 2023). A hallmark of the Danish strategy was the tripartite dialogue between the government, employers, and labour unions (Rasmussen & Høgedahl, 2021). This collaboration was pivotal in devising policies that judiciously balanced economic imperatives with worker protections. The consensus-driven nature of the 1990s reforms was instrumental in securing broad acceptance and efficacious implementation of the flexicurity model. During this period, Denmark significantly fortified its active labour market policies, central to its flexicurity framework (Andersen & Svarer, 2007). These policies were geared towards enhancing employability, curtailing unemployment spells, and fostering workforce adaptability, with initiatives like comprehensive vocational training and re-skilling programmes tailored to align workforce competencies with market needs (Madsen, 2004). By the early 2000s, the Danish flexicurity model had garnered international acclaim for its efficacy in sustaining high employment levels and social cohesion (European Commission, 2013. It was lauded for its innovative approach to striking a balance between labour market flexibility and robust social security. Nonetheless, the model faced challenges, necessitating adaptation to phenomena like the global financial crisis and evolving work paradigms, including the gig economy and digitalisation (Ibsen & Thelen, 2017). The flexicurity model has demonstrated a dynamic evolution, continually adjusting to new economic and social realities (Auer & Cazes, 2003). Its foundational principles have exerted influence on labour market policies in various countries, notably within the European Union (Wilthagen, 2007). The historical trajectory of the flexicurity model exemplifies Denmark's proactive and adaptive stance in addressing labour market challenges (Madsen, 2007). By harmonising employer flexibility with employee security, the model has continually evolved, maintaining its relevance and prominence in global labour market policy discourse (Bredgaard, Larsen & Madsen, 2005). 6. Key Components of the Model The model combines labour market flexibility for employers with security for employees, fostering both economic vitality and social protection (Andersen & Svarer, 2007). At its core, flexicurity centres around labour market flexibility, emphasising eased regulations in hiring and firing to allow businesses to rapidly adapt to economic changes, technological progress, and market variations (Madsen, 2007). This approach lessens the administrative and financial burdens tied to employment changes, enhancing business agility (Wilthagen, 2007). To balance this flexibility, the model includes a comprehensive social security system, featuring extensive unemployment benefits for significant income replacement over extended periods. These benefits are integral in providing financial stability and enabling a less pressured job search (Wilthagen & Tros, 2004). Active Labour Market Policies are pivotal and designed to expedite the reintegration of unemployed individuals into the workforce. They encompass initiatives like job training, skill development, and career counselling, aligning with modern labour market requirements (Larsen & Andersen, 2007). The model also stresses lifelong learning and continuous skill development to maintain workforce adaptability in the face of rapidly evolving work environments. Continuous education and training are essential for keeping pace with new technologies and industry shifts (Eurofound, 2007). The success of flexicurity is further attributed to robust social dialogue and cooperation among government, employers, and trade unions. This tripartite approach is vital for shaping labour policies that benefit all parties, with collective bargaining playing a key role (Rasmussen et al, 2016). Emphasising equality and inclusivity, the Danish model ensures that various societal groups, including the young, older workers, and marginalised groups, have equal access to employment and training opportunities (Eurofound, 2012). A defining feature of flexicurity is its inherent adaptability to economic and social changes, with policies continuously evolving in response to globalisation, technological advancements, and shifts in work patterns (European Commission, 2013). In summary, the flexicurity model integrates key components like labour market flexibility, comprehensive social security, ALMPs, lifelong learning, social dialogue, inclusivity, and adaptability. This framework supports economic growth and social protection, drawing the interest of policymakers worldwide. 6.1 Impact on Employment Rates The flexicurity model has a significant impact on employment rates. Studies show that Denmark's application of flexicurity is associated with consistently higher employment and lower unemployment rates compared to many European countries (Heyes, 2011). The model's emphasis on labour market flexibility enables employers to swiftly adapt to economic changes, fostering a dynamic job market and frequent job creation. In tandem, the extensive welfare system and active labour market policies in Denmark ensure that unemployed individuals receive adequate support and training, shortening the duration of unemployment and sustaining high labour market participation (Andersen & Svarer, 2007). 6.2 Influence on Economic Growth and Stability Flexicurity also plays a crucial role in promoting economic growth and stability. The flexibility component of this model encourages entrepreneurship and innovation, as it allows businesses to quickly respond to market opportunities without the constraints of stringent employment laws. This responsiveness is pivotal in driving economic growth and fostering new industry development. Additionally, the security facet of flexicurity, particularly the robust social safety net, is essential in stabilising the economy during downturns. By guaranteeing financial support during periods of unemployment, the model helps sustain consumer spending, a key element for economic stability. 6.3 Effects on Social Equality and Worker Well-Being In terms of social equality and worker well-being, the flexicurity model has positive implications. The comprehensive social safety net under this model prevents workers from descending into poverty during unemployment periods. Furthermore, active labour market policies are designed to avert long-term unemployment, which can lead to social exclusion and inequality. The emphasis on lifelong learning and skill development under flexicurity aids workers in adapting to evolving labour market demands, thereby reducing the risk of job obsolescence, and enhancing career prospects. 6.4 Comparison with Other Labour Market Models When juxtaposed with other labour market models, like those in the United States or Southern Europe, Danish flexicurity presents a unique equilibrium. In the U.S., the labour market is marked by high flexibility but low job security and weaker social safety nets, often leading to greater income inequality and reduced social protection for the unemployed. Conversely, some Southern European countries feature highly protective labour markets with strict employment laws, which can inhibit job creation and lead to high long-term unemployment rates, especially among youth. The Danish flexicurity model strikes a balance between these extremes, melding the flexibility seen in liberal market economies with the social security characteristic of more protective models. This balance has been effective in maintaining high employment rates, spurring economic growth and stability, enhancing social equality, and ensuring worker well-being (Larsen, 2022). However, it's pertinent to acknowledge that the success of the flexicurity model is also contingent upon Denmark's specific socio-economic context, including its strong welfare state, culture of social dialogue, and relatively small and homogeneous population, factors that may limit the model's direct applicability in other contexts (Wilthagen, 1998). The Danish flexicurity model, while acclaimed for its balanced approach to labour market management, raises important discussions about its sustainability and cost, its role in addressing inequality and  labour market segmentation, and the critical function of unions and employer associations. 6.5 Sustainability and Cost Concerns A critical aspect of the Danish flexicurity model is its sustainability, particularly in light of the financial demands of a comprehensive social safety network. The model's viability partially hinges on considerable public investment in welfare and active labour market policies, financed through elevated taxation (Green & Harris, 2021). The model's fiscal sustainability, in the context of economic fluctuations, demographic shifts, and evolving labour dynamics due to globalisation and technological changes, is a point of contention (Jensen, 2022). 6.6 Adapting to Evolving Labour Patterns The changing nature of work, including the emergence of gig economy and contract-based jobs, challenges traditional social security systems predicated on stable, full-time employment. Modifying the model to ensure extensive coverage in this evolving employment landscape presents significant financial and administrative hurdles. 6.7 Addressing Inequality and Labour Market Segmentation Despite its inclusive objectives, the flexicurity model grapples with inequality and labour market segmentation. Notably, the disparity in security between permanent and temporary or gig economy workers is pronounced, with the latter often having limited access to social benefits and active labour market policies (Andersen, 2023). Additionally, the model's effectiveness in integrating marginalised groups, such as immigrants and the long-term unemployed, into the labour market is crucial for diminishing social inequality and preventing labour market fragmentation (Heyes, 2011). 6.8 The Critical Role of Unions and Employer Associations Unions and employer associations are pivotal in the Danish labour market, embodying a collaborative approach to governance. Their substantial involvement in collective bargaining helps balance employer flexibility with worker rights (Ibsen & Mailand, 2011). These organisations' significant roles in policy development and the administration of the welfare state, including unemployment insurance funds, underscore their importance in tailoring programmes to workforce needs, thereby enhancing the initiatives' effectiveness (Jørgensen & Schulze, 2011). 6.9 Summary of Findings The Danish labour market, characterised by its 'flexicurity' approach, represents a unique and effective combination of employment flexibility and comprehensive social security. This model encompasses several key elements: Labour Market Flexibility: This involves streamlined processes for hiring and firing, enabling businesses to promptly respond to economic shifts. Comprehensive Social Security: It provides substantial support for the unemployed, including generous unemployment benefits. Active Labour Market Policies (ALMPs): These policies facilitate the swift reintegration of unemployed individuals into the workforce through training and skill development. Lifelong Learning: This component promotes ongoing skill enhancement to align with evolving job market demands. Tripartite Cooperation: Involving government, employers, and unions in policymaking, ensures balanced and practical labour market reforms. Equality and Inclusivity Focus: The model strives to offer equal opportunities across all societal segments, including marginalised groups. 7. Impacts and Challenges The flexicurity model has yielded positive outcomes, notably high employment rates, economic growth, and enhanced worker well-being. However, it faces challenges, including sustainability concerns due to high costs, addressing inequality and labour market segmentation, and adapting to the evolving nature of work. 8. The Future of the Danish Labour Market Model The model's future success depends on its adaptability to various emerging trends and challenges: Economic and Demographic Shifts: Addressing the fiscal sustainability of welfare systems amidst an ageing population and global economic changes is critical. Globalisation and Technological Change: Adapting to an increasingly interconnected and digital global economy requires continuous skill development. Rising Gig Economy: The growing prevalence of freelance and gig work necessitates the adaptation of traditional welfare and social security systems. Environmental Sustainability: The transition to a green economy poses both challenges and opportunities for labour market adaptation. Continued Role of Social Partners: The involvement of unions and employer associations remains crucial in negotiating fair labour practices and balancing employer flexibility with employee security. Inclusivity and Equity: Addressing labour market segmentation and ensuring equal opportunities for all, including immigrants and temporary workers, is vital for maintaining social cohesion. Policy Innovation: Continuous innovative policymaking, responsive to labour market trends and societal needs, is essential. International Collaboration and Learning: Engaging in global dialogue and learning from other countries can enhance and refine the Danish model. The Danish model of flexicurity, a paradigm of balancing labour market flexibility with social security, has significantly contributed to high employment, economic stability, and social well-being. Its future effectiveness hinges on adaptability to new economic realities, technological advancements, and workforce dynamics. Ongoing collaboration between government, employers, and unions, coupled with innovative policymaking, will be pivotal in sustaining the model's relevance and efficacy amid evolving challenges. 9. Lessons Learned The study tour to Denmark offered an enriching exploration of the Danish labour market model, providing us with detailed insights and valuable lessons that extend beyond our initial observations. Here's an expanded view of the key takeaways, beyond the model in its impressive state: 9.1 Reflections for BUSA 9.1.1 Holistic Sustainability Approach The Danish commitment to sustainability encompasses more than environmental concerns, integrating economic and social dimensions. This holistic perspective permeates the Danish business and social landscape, where companies prioritise social welfare and environmental stewardship alongside profitability. The efficiency and authority of the Danish legal system, particularly in swiftly addressing labour disputes, foster a culture of respect and compliance. 9.1.2 Innovation and Collaboration in Labour Relations Central to the Danish model is the harmonious collaboration between employers, employees, and unions. This collaborative ethos is crucial for fostering an environment conducive to innovation and adaptability. In Denmark, labour relations are primarily governed through collective bargaining, supported by state endorsement of unions, ensuring mutually beneficial agreements based on real-world workplace dynamics. 9.1.3 Exemplary Work-Life Balance Practices Danish industries set a benchmark for achieving a healthy work-life balance. The deeply ingrained policies of flexible working hours and parental leave significantly contribute to employee satisfaction and productivity, exemplifying corporate well-being initiatives. 9.1.4 Commitment to Environmental Sustainability Denmark's commitment to environmental sustainability is both visible and impactful. The business integration of renewable energy, efficient waste management, and circular economy practices aligns with global efforts to combat climate change and promotes a culture of environmental responsibility. 9.1.5 Inclusive and Comprehensive Social Welfare The inclusivity and comprehensiveness of the Danish social welfare system are remarkable. Universal access to healthcare and education not only supports individual well-being but also fosters a more cohesive society. Denmark's strategic approach to job offshoring in industries with decent work deficits balances global trade dynamics with domestic labour market integrity, while the investment in free tertiary education prepares a skilled workforce aligned with national economic and social objectives. 9.1.6 Overall Reflections The Danish model offers key insights for South African businesses. The transparent and efficient functioning of government and labour institutions, free from corruption, establishes a trust foundation essential for effective social dialogue and collaboration. Embracing sustainable business practices, fostering a culture of collaboration and trust, and prioritising employee well-being are areas where South African businesses could derive significant benefits. The insights gained from this study tour provide a range of strategies and practices that, with appropriate adaptation, could enhance South Africa's labour market and economic landscape. 9.2 Reflections for Cosatu 9.2.1 Main Takeaways The visit underscored the uniqueness of the Scandinavian model, particularly the Danish approach to labour market policies. Notably, there exists a self-regulated equilibrium between business and labour, with minimal government intervention, leading to a robust economy characterised by low unemployment, employer flexibility, and secure retraining and employment placement for workers. The union density rate in Denmark, standing at 70%, reflects a strong appreciation for the role of unions by both employers and employees, albeit with concerns about a decline from the previous 80% rate. However, the impact of international migration on the Danish labour market, which seems to have sparked political and social tensions, was not deeply explored. Emerging trends, such as the rise of e-platform work, present challenges, and the struggle to attract young workers to unions is a shared concern with South African unions. 9.2.2 Learning for South Africa Initially, replicating the Danish model in South Africa seemed implausible. However, upon reflection, it offers viable ideas for South African labour market enhancement. South African businesses seek flexibility in hiring and firing, which is counterbalanced by labour's concerns over high unemployment and the lack of a comprehensive social security and training network. Building such a network could provide a foundation for future labour market reforms. The level of trust and collaboration between business and labour in Denmark, independent of government intervention, is a crucial aspect to consider for South Africa's economic growth. Addressing the fragmentation and disconnection in the South African labour landscape, particularly in unionisation and employer associations, is vital. 9.2.3 Improving Labour Relations To enhance labour relations in South Africa, key aspects to emulate from the Danish model include building trust and increasing unionisation and business association membership. Fostering a strong, trust-based working relationship and gradually developing a social security and training framework akin to Denmark's could be strategic. South Africa already has foundational elements like UIF, SRD Grant, NSFAS, SETAs, and NSF, which, despite challenges, could form the basis of this development. 9.2.4 Mutual Learning South Africa's approach to legislative minimums and norms, particularly for atypical workers, could offer insights for Denmark. The close collaboration between government, business, and labour in South Africa, evident in responses to broader societal issues like the COVID-19 pandemic, showcases a model that Denmark could find beneficial. Additionally, the role of South African unions in championing broader social issues like National Health Insurance could be relevant to the Danish context, promoting a more active civil society consciousness. 10. Recommendations and Conclusions In conclusion to the exploration of the Danish Labour Market Model and its applicability to South Africa, it's clear that transformative lessons and strategies can be gleaned to enhance the symbiotic relationship between labour and business within the South African context. The journey towards a more collaborative, less adversarial labour-business environment requires a multi-faceted approach, incorporating lessons learned, inter alia, from the Danish model, particularly its flexicurity compact. This concluding chapter proposes three actionable strategies aimed at fostering a cooperative labour-business landscape in South Africa, ultimately contributing to sustainable economic growth and social equity: Shift from Adversarial to Collaborative Mindsets: The primary lesson from Denmark is the importance of perceiving labour and business not as adversaries but as co-builders of business success. This mindset shift is foundational for any substantive change in labour relations. Importance of Continuous Dialogue and Education: Establishing platforms for continuous dialogue, like workplace forums, where both parties can engage in economic education, change management, and discussions on rights and responsibilities, is crucial for mutual understanding and growth. Balancing Flexibility with Security: Denmark's flexicurity model demonstrates the value of balancing the flexibility in labour markets with security for workers, ensuring transitions between jobs are supportive and conducive to overall economic health. 10.1 Recommendations 10.1.1 Establishment of Workplace Forums Enterprises should consider the introduction of workplace forums across where management and workers meet regularly to discuss: The economy in order to instil a better understanding of business operations and economic fundamentals. Change management aimed at collaboratively exploring ways to adapt to and manage changes within the business and industry. Rights and responsibilities in order to equip workers and management with knowledge about their rights and responsibilities, fostering a sense of co-ownership and joint participation in the business's success. 10.1.2 Creation of a Labour-Business Compact It is recommended that an informal dialogue be set in motion between Business and Labour, thereby opening communication channels between the two sides for purposes of ensuring an ongoing, constructive dialogue between labour and business leaders, which should focus on common goals and problem-solving strategies; to contemplate the role and extent of government involvement in labour relations; how to strengthen autonomy in decision-making to swiftly address and adapt to challenges and opportunities; and envision a shared vision for the economy, including commitments to limit protest actions to reasonable demand to work collectively towards a living wage, moving beyond the minimum wage paradigm. Once sufficient consensus has been developed, the dialogue could be formalised either as an independent body or as a structure within NEDLAC. 10.1.3 Transition Support and Basic Income Research Research should be undertaken to explore greater flexibility in the labour market, including how to expand support for those losing jobs, and measures, such as a basic income grant, to make job transitions smoother. By adopting these strategies, South Africa can lay the groundwork for a labour-business relationship characterised by mutual respect, shared goals, and a robust, flexible economy. The journey towards these objectives will require commitment, openness to change, and continuous dialogue, but the rewards – a more inclusive, prosperous, and equitable society – are well worth the effort. This conclusion not only encapsulates the delegation’s learnings, but it also charts a path forward, inspired by the Danish model, tailored to South Africa's unique challenges and opportunities. 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'The concept of ‘flexicurity’: A new approach to regulating employment and labour markets', Transfer: European Review of Labour and Research, vol. 10, no. 2, pp. 166-186. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

5 - 6 December 2023, Wellington #integritasza – Coalition-Conference 2023 with the theme Coalition Governance in South Africa: Dedicated Desired State or Destructive Disasters, was held on 5 and 6 December 2023 at the Andrew Murray Centre of Spirituality, in Wellington.  The conference aimed to explore the challenges and opportunities of South African coalition governance, in the context of the 2024 South African national and provincial government elections. Daryl Swanepoel, Stephen Langtry, Edwin Mc Queen and Berenice Marks represented the Inclusive Society Institute at the conference.  Daryl Swanepoel, CEO of the Inclusive Society Institute was one of the keynote speakers. There were many esteemed speakers, amongst others, Prof Jaap de Visser from the Dullah Omar Institute, Dr Heather Thuynsma from the Pretoria University, Dr Harlan Cloete, from the University of Free State as well as Mr China Dodovu, Chair of the CoGTA and he serves the ANC NCOP, Pieter Groenewald, National Leader of the Freedom Front Plus and Mark Willemse, a previous Mayor of the Knysna Municipality. The themes were, problem identification and co-creation of solutions for coalitions as desired futures. Prof Erwin Schwella, who hosted the event, was extremely satisfied with the robust debate and the input of the various speakers.

The Portfolio Committee on Home Affairs and the Select Committee on Security and Justice held Public Hearings on the Electoral Matters Amendment Bill [B42 – 2023] on Tuesday, 6 February 2024. Daryl Swanepoel, CEO of Inclusive Society Institute did a 10-minute submission. Click here to view the presentation Click here to view the submission YouTube recording below (Timestamp: 1:39:03)

Copyright © 2024 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 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 2024 Author: Olivia Main Editor: Daryl Swanepoel This report has been enabled through the generous support of the Embassy of Finland in Pretoria, South Africa Content Chapter 1: Setting the scene Introductory remarks by Ambassador Anne Lammila, Finnish Ambassador to South Africa Presentation by Daryl Swanepoel, CEO of the ISI, on the Institute’s latest poll on electoral support in South Africa Chapter 2: Input by Panellists Jenni Karimäki Professor Liisa Laakso Virva Viljanen Chapter 3: Discussion Chapter 4: Summary of Lessons to be learnt and gained from the Finnish Model Cover photo: istockphoto.com – Stock illustration ID: 1852275835 Chapter 1 Setting the scene Coalitions is a hot topic in South Africa. With general elections looming in 2024, the ruling party’s power and support is ebbing, largely due to corruption and loadshedding. On the other hand, the opposition is gaining increasing support. It appears that the country is heading in the direction of a coalition government. In fact, a number of opposition political parties have already come together to sign the Multi-Party Charter 2024 – a landmark pre-election coalition agreement to share power if they cumulatively beat the ANC in the polls. But some analysts have suggested that South Africa is not yet prepared for a coalition government. Its legislation is not ready, and it simply does not have that culture in place, with the parties’ tendencies towards stubbornly pushing party agendas and using bullying tactics in government negotiations. And with so many people still casting votes based on tradition, history and loyalty, rather than on the basis of informed, rational decisions. Also, polling in South Africa is often unreliable, which means much will come down to voter turnout. The bottom line is, trying to build democratic coalitions without the right attitude and political education is foolhardy and will not lead to stability. In light of this, the Inclusive Society Institute (ISI), in conjunction with the Finnish Embassy in South Africa, hosted a high-level webinar on 8 October 2023 on lessons South Africa can draw from the Finnish experience on coalitions. Three expert panellists were invited to share their knowledge on the topic: Jenni Karimäki, University of Turku in Finland; Professor Liisa Laakso, Nordic Africa Institute; and Virva Viljanen, Demo Finland. A key insight from the Finnish experience is that coalition governments are both a result and precondition of inclusive political systems and inclusive political institutions – which feeds the stability and legitimacy of the democratic system. In order to form a coalition government, and especially a majority coalition, a number of parties are required to cooperate. Even though it is a case of, the bigger the party, the more ministers and the more say they have in the government programme, it is still a negotiation, a coalition, and therefore, nobody gets all the power. And the discussions taking place within spending limits means parties cannot come with outrageous promises, they have to work within that framework. The Finnish system of coalitions is very much reliant on the “rule-of-law” approach and mechanisms that sustain coalitions and make them viable, aspects that build trust between the political actors and among the civil society. This allows parties that have had very little trust in each other to make the necessary compromises in order to build healthy coalitions and move forward. Finland also has long-held traditions regarding different types of civil society organisations, other than parties. In Finnish government negotiations, experts from various fields – from civil society to the ministries or administration and NGOs – are brought in to mediate, to help build common ground and level the playing field. Coalition is often thought of in terms of enabling a governing majority. However, coalitions might also be useful in diverse and fragmented societies, such as in South Africa, where it is not necessarily about forming a governing majority, but rather, it might be a way to increase social and political cohesiveness in the country – with the proviso of always guarding against the danger of co-option. Introductory remarks by Ambassador Anne Lammila, Finnish Ambassador to South Africa Finland achieved independence in 1917. In the beginning, the country’s parliamentary system was not ready for it, which resulted in often very short-lived governments, most of which were minority governments. The Social Democrats appeared in government for the first time in 1926, which also happened to be when Finland’s first female minister, Deputy Minister of Social Affairs Miina Sillanpää, was voted in. In 1937, the Social Democratic Party (SDP) formed the first of the “Red-Earth coalitions” with the Agrarian League, bringing together the parties representing the two largest social groups. Then, in 1939, the Winter War between the Soviet Union and Finland broke out, which moved Finland towards building a firmer national government. Then came the Continuation War. This whole period marked the start of the coalitions. And since 1937, the country has had several of them. First, there were two dominant parties, the Centre Party and the right-wing parties. However, since the Second World War, there have been many different kinds of coalitions in government – from the right, to the left and the far left parties. Nowadays, the Finnish people are so used to this tradition of coalitions that they sometimes forget it has not always been the case. In terms of the current coalition, Finland had its elections on 2 April 2023. The Coalition Party – the conservative party – received most of the votes, winning 48 seats in the 200-seat Parliament. The party that came in second was the True Finns, a populist far-right party, with 46 seats. When the Chairperson of the Coalition Party started to build the government, the Social Democrats were omitted from the plans, even though they were also winners in the elections, with 43 seats. It was one of the longest processes of building a government that Finland has experienced in its history. The process started in April, and the government was only finalised in Finland’s midsummer in mid-to-late June. The reason for this seemingly drawn-out process is that the government needed to negotiate its programme with four very different parties, and doing this effectively takes time. The current government is going strong, and it has proved that the coalition mechanism works well. Those who win in the elections, get the chance to govern. Presentation by Daryl Swanepoel, CEO of the ISI, on the Institute’s latest poll on electoral support in South Africa This information is taken from a poll conducted by Ipsos – a global leader in market research that is known to deliver accurate polling in terms of how it matches up to the real world – on behalf of the Inclusive Society Institute. It is a very large poll of 3,600 participants, taken across all nine provinces in South Africa, and in their home languages. In the poll taken in June of 2023, it was revealed that since 2015, the ruling party’s support has systematically been reduced from a high of 63% in 2015 to 33% in 2023. Whereas the opposition has been steadily growing to the point where the combined opposition has now overtaken the ruling party, coming in at 48%. There are still the undecideds and don’t-knows of 19% to consider, therefore this does not reflect the full picture, however, it does show that the ruling party is systematically declining and the opposition party is systematically climbing. That said, the opposition is very fragmented, they do not conduct themselves as one cohesive instrument. In the last year, the poll shows a big change in the ANC’s national position. The figure in the November 2022 poll was 39% support for the ANC, declining quite dramatically in the following six months to 33% in June 2023. The question is: Why the rapid decrease in support? In a previous poll, 65% of the respondents indicated that if loadshedding were to continue, it would impact their vote, and 45% said that they would not vote. It seems that if the government gets loadshedding under control, they could regain some support, but if it continues, they may lose even more support. However, other factors also affect the numbers. There are three important words to consider: eligible, registered and turnout. Eligible voters are those citizens over 18 – in South Africa, anybody over the age of 18 has the right to vote. Then there is a separate registration that needs to take place for the voters’ roll. In other words, in order to vote, a person has to be eligible, they have to register, and then they have to turn out at the poll. In South Africa, there are approximately 42.3 million people who are eligible to vote, but only 26.1 million are registered to vote. This means there is a huge gap between the number who are able to vote and those who are actually registered to vote. Applying the figure of 33% support for the ANC only to the registered voters, shows a very different picture. Support for the ANC then increases to around 43%, the DA to about 20%, and the EFF to about 18%. And this means the other smaller parties have to come into play, for example the IFP, which is an important player in KwaZulu-Natal. There are different outcomes under various scenarios. A high voter turnout would mean that around 66% of the registered voters go to the polls. The last time those sorts of figures were seen was in the first and second elections, and that number has dwindled to approximately 55% in the later elections. On the opposite end of the scale is the low voter turnout scenario based on a dramatic drop in turnout, from 55% to 36%, which is also highly unlikely. Realistically, what could be expected in the national election is a medium voter turnout. In such a scenario, the ANC will fall just below the 50% mark, which means that they will require a smaller party to help them form a governing majority. The opposition parties will battle to put a coalition government together, because that will only give them roughly 39% of the votes. Although a lot can change before the elections in May 2024, from the above snapshot, and under the present circumstances, the ANC would most probably continue to be the leading party in government, albeit with the support of at least one smaller party. But there would certainly be coalition governments in many of the provinces. In Gauteng, the ANC would only get about 36% of the support, the DA, 15%, Action SA, 12%, Freedom Front Plus and ACDP, 1% respectively. This would make it difficult for the opposition to form a coalition government on their own in Gauteng without the support of the EFF. The ANC will have the difficult choice of deciding between a number of smaller parties to form a coalition with them in Gauteng, or they will have to either take the EFF on as a coalition partner or at least have the support of the EFF to form a coalition in Gauteng. That is a worrying scenario. In the Western Cape, it is believed that the DA will not win an outright majority. They will have to go into coalition with a number of other parties. They have already formed an agreement – the Multi-Party Charter – with the opposition parties Action SA, Freedom Front Plus and the ACDP and a number of other smaller parties. This seems to confirm suspicions that there will be a DA-led coalition in the Western Cape. The scenario in KwaZulu-Natal is a particularly challenging one, because the ANC only have 22% of the support, whereas the DA have 13%, the IFP, 17%, and the EFF, 13%. It is too early to say what configuration will come into play, but it appears that, once again, the EFF will be the kingmaker in KwaZulu-Natal, either by siding with the ANC or by at least giving support to the combined opposition. That is not to say the combined opposition at the moment – being the DA, the IFP and Action SA – cannot still garner a majority in KwaZulu-Natal, it is a developing picture. In conclusion, if an election were held tomorrow in South Africa, the outcome would most probably be a coalition government at the national level, one that is easy to form. And certainly, there would be coalition governments in a number of provinces, some coming together more easily than others. The EFF could play quite a kingmaker role in many of those provinces. However, for coalitions to succeed, and to simply function, South Africa needs policy cohesiveness in setting up these coalitions, and there must be an acceptable culture of cooperation, etc. This is certainly new terrain for the country, and it will need to rely heavily on the advice of those who have gone before, such as Finland. Chapter 2 Input by Panellists Jenni Karimäki Finnish traditions regarding building and maintaining coalition government Jenni Karimäki is a contemporary historian, currently working at the University of Helsinki, and is also a fellow at the University of Turku. Karimäki’s research expertise is in parties, ideologies, political culture, political systems and party systems. This is a short historically and empirically inspired presentation on what the key elements and trajectories of the Finnish multi-party system are in order to understand the foundations on which the long tradition of Finnish coalition governments is built. There are currently nine different parties in the Finnish Parliament, with altogether 200 seats. The biggest party, the National Coalition Party, has 48 of those seats. In order to form a coalition government, and especially a majority coalition, to which Finland is accustomed, a number of parties are required to cooperate. The current coalition government consists of four parties: the National Coalition Party, Finns Party, Swedish People’s Party and Christian Democratic Party. These four parties have altogether 109 seats in the Parliament. In terms of elections, Finland has a proportional representation. It uses the D'Hondt method to calculate and count the votes. There are no electoral thresholds in Finland – if a party gets enough votes to gain a seat in an election district, then it gets the seat. In other words, there is no percentage of votes that a party has to win in order to get seats. The Finnish party system has evolved from the late 19th century until the 21st century. Several parties that were established over 100 years ago are currently represented in the Finnish Parliament, and they still occupy over half of the seats in the Parliament. These long-held traditions not only reflect stability, but they also reinforce stability. The Finnish multiparty system has been able to endure over time and also over considerable turmoil, including crises like the Civil War, the radical right activism of the interwar period, and the Second World War. However, the power dynamics between the parties have changed over time. Only once, in 1916, has one party, the Social Democratic Party, had a majority in the Parliament. Since then, it has been either the Social Democratic Party, the Centre Party or the National Coalition Party that has formed the biggest parliamentary group. In over 100 years, none of those parties have come even close to securing a majority of the seats in the Parliament. This stability is in part due to the party system being born to accommodate several different societal conflicts, some of them present already before the unicameral Parliament that is in place today. And that has been the case since 1907 – Finland has had a unicameral Parliament for well over 100 years. Conflicts between labour and capital, between urban and rural areas and between different languages – there are three native languages in Finland: Finnish, Swedish and Sami – are still relevant and they are still represented across the political spectrum, despite the fact that they have been present from the beginning. This relatively unchanged party system is also a testament of the parties’ and voters’ willingness and ability to commit to the pluralist multiparty structure and its preconditions. In this regard, the Civil War has served as an example of the worst-case scenario of an extreme conflict that polarises a nation. It left deep divisions in society but also an understanding of never wanting to experience that again. Even though during the interwar period, from the 1920s-1930s, Finland did not have one majority government or majority coalition, it still had coalitions. It was in 1937 that the first majority coalition was built in Finland. The stability and legitimacy of the democratic system has also been, in part, guaranteed by including all parties in government coalitions. Radical ideas and those parties or actors willing to destabilise the status quo have been tamed through offering responsibility, and at the same time, willingness to take responsibility has been expected of them. And this has thus far worked quite well. But it also means that the parties have been able to evolve over time, and with time. This is the third observation. From the 19th century onwards, Finland has evolved from an agrarian country into a post-industrial consumer economy, known for advanced technology and high levels of expertise. The parties have not only been able to sustain their original mobilising of societal conflicts and constituencies but have also been able to attract new audiences among upcoming generations and new professions. The changes affecting the current politics and political situation the most have occurred during the 1990s and 2010s, when first the Green Party, in the 1990s, and then the Finns Party, in the 2010s, established their strong positions within the Finnish party system. This has caused the party system to fracture, but when it comes to coalition governments, both parties have adapted to the Finnish system and taken part in the executive. The work of Professor James A Robinson, who has, together with Professor Daron Acemoglu, written books such as Why Nations Fail and The Narrow Corridor, focusses on, among other things, examining inclusive and extractive elements in societies, and how these elements contribute to economic and social welfare and practices of democracy. It can be deduced from their work that coalition governments are both a result and precondition of inclusive political systems and inclusive political institutions, at least from the Finnish perspective. The strong legalistic tradition in Finland descends from the 19th century, when Finland, as an autonomous grand duchy of Russia, was born first as a nation, and subsequently, as a state. This created the foundation for the strong Finnish state. And this is how, alongside the strong state, the pluralist multiparty system created a basis for inclusive political institutions, among many other things. The strong state and inclusive political system in some sense incarnated from the 1960s onwards in aspirations to develop Finland into a Nordic welfare state and enhance and strengthen the liberal democratic features. These aspirations and ideals were then embraced throughout the party system, resulting in a consensus and compromise-seeking political culture. Even if the economic and social welfare of the Finnish state and nation has been a driving force behind the consensus on compromise-prone political culture, it is important to remember the geopolitical setting that has always had a significant impact on Finland and had an impact on why there have been strong aspirations for national unity. Being a neighbour to Russia and, during the Cold War, the Soviet Union, has been a key element contributing to the understanding that a small nation must be internally united in order to survive externally. Regarding the institutional framework that has contributed to the long tradition of coalition politics in Finland, it is important to look at local democracy and local democratic practices. During the 19th century, Finnish citizens were united in the face of the common external adversary, which was then the Russian Empire. But after the Civil War, they came together in the newly independent Finland under the lowest common denominator: the rule of law. After the war, previous bitter enemies had to cooperate, first and foremost, at the municipal level. In order to do that, the one thing they could all agree on was abiding by the law. Up to and during the 1990s, as an example, the law stipulated that decisions regarding especially important financial decisions had to be made with two-thirds majority in the municipal councils. In most councils, this meant that cooperation and coalitions were unavoidable. This was one institutional key element contributing to coalition tradition being strengthened in Finland. Most politicians began, and still begin their careers, from the local level. Thus, the experiences gained there have an impact on how they relate to cooperation and coalitions in their later careers. Nowadays, the so-called council agreements, based on coalitions, consensus and compromise, are negotiated after the municipal elections, and these agreements outline those actors participating in the agreement as well as the policies promoted during the term. The last point is to outline very briefly, the constitutional framework and to elaborate a little on the coalition government negotiation process. Before the promulgation of the current Constitution in 2000, government formation was a process led by the President of the Republic, who had significant power to influence the composition of the government as well as the content of the government programme. Even if the parliamentary groups took part in the negotiations, the President still had a lot of say in the process and the outcome. This semi-presidential system and its presidential prerogatives began to dismantle at the same time as the Cold War came to an end. Presidents from the early 1980s onwards chose to encourage a more parliamentarian system. Even though they still could have resorted to their prerogatives, they instead wished to encourage broader distribution of power. From the 1980s onwards, the negotiation process itself began more and more to resemble the current procedure, with the parties and parliamentary groups in charge of the process and outcomes. These developments towards a parliamentary system were then, in the year 2000, codified in the new Constitution. Today, the process adheres to the election outcome, with the party chairperson of the biggest party leading the negotiations. The composition and the power dynamics of the government also resemble the election outcome in two ways: The bigger a party’s parliamentary group, the more the party has the ability to influence the contents of the government programme, and the bigger the share of the cabinet ministers they have. Simply put, the bigger the party, the more ministers and the more say they have on the government programme. Bearing in mind that it is still a negotiation to form a coalition, and therefore no party gets all the power. That is the key finding. The negotiations have no time limit, and there is substantial variation as to how long the negotiations take. After the last elections, the negotiations took 46 days, whereas the previous negotiations of the Antti Rinne and, subsequently, Sanna Marin government took only 24 days. Should the negotiations result in a stalemate, the party chairperson of the second biggest party is given a chance to attempt to form a government, and so forth. Only if there is no prospect of the parliamentary groups being able to form any kind of a coalition, be it minority or majority, are new elections arranged. However, this has never happened in the history of Finnish independence. During the semi-presidential era, stalemate-like situations did occur, but they were resolved either by forming a caretaker government or with the then President Urho Kekkonen, using his leverage to persuade parties to cooperate, usually by appealing to Finland’s precarious geopolitical situation and the risks of not having a democratically responsible government. In conclusion, the Finnish pluralist multiparty system as well as political system have a long legacy, with parties and voters committed to preserving the stability and legitimacy of the democratic system. And much of this has come as a result of the long history of Finnish independence putting substantial emphasis on these inclusive political and economical institutions. Geopolitical position and pressures have, in good and bad ways, contributed to aspirations of unity. But all in all, internal and external factors, institutional arrangements and historical traditions have generated a political culture where ideological differences are, for the most part, deliberated through the political process. As a result, as well as a precondition, this tradition of coalition governments can be considered a key element. Professor Liisa Laakso Multi-party government: sharing power or building coalition? Prof Liisa Laakso is a Finnish researcher working at the Nordic Africa Institute, a 60-year-old institute based in Uppsala, Sweden, partly supported by the government of Finland. As a political scientist, Prof Laakso has also done empirical research on democracy and elections in Africa and on conflict resolution. This presentation reflects on the topic of coalition governments from a comparative point of view and also from the point of view of the experiences on the African continent. The focus is on multiparty government. Is it about sharing power or building a coalition, and what is the difference between these two patterns? First, is the question of power sharing as a solution for political divisions in divided societies. A map from Andreas Mehler’s book about power-sharing agreements in Africa, between 1990 and 2009, shows that this experience of bringing together different political sections from the society to share political power is common in Africa. And power sharing, usually, is the kind of arrangement through which peace can be reached. Not all of these conflicts have been actual civil wars, but they have involved violence, for instance, in the case of Zimbabwe, where a coalition government emerged in 2008. A general observation of this arrangement is that there are short-term merits. The violent conflict can be solved. But what about the long-term prospects? Very often, that kind of power sharing does not, or has not, led to stable political cooperation. Arend Lijphart, who has also written about South African political divisions, believes that the democratic future in South Africa should be based on consociational democracy, which, according to his theory, creates the possibility for fragmented societies to reach stable political systems. Lijphart’s theories are based on the experiences of the Netherlands, Belgium and Luxembourg – states which are all ethnically divided, and with linguistic and, in the case of the Netherlands, also religious divisions. Lijphart’s theory is that this kind of subcultural segmentation is neutralised by consensus mechanisms. The experience of African states with fragmented societies in terms of ethnic, linguistic and religious divisions, has been an experience of one-party states soon after independence, the years of African countries becoming independent being in the early 1960s, and also of dominant party legacy, strong presidents and presidential systems. And all of this has made the distinction between the ruling party – or the dominant party – and the state a difficult one. Within that setting, what power sharing in practice has often turned out to be, is co-option, if not direct repression, of the opposition. Nowadays, it is referred to as dominant party systems, because most African states – discounting those currently under military rule, or eSwatini, which is a monarchy, or Eritrea, which is a non-party system – are implementing multiparty systems. The factions within that dominant party are quite remarkable. There are also the much discussed issues or patterns of patrimonialism or clientelism which, in one way or another, could also be linked to corruption. Currently, the biggest threat to democracy and democratic competence in Africa, and elsewhere in the world, is corruption. In terms of the South African experience, immediately after the political transition, the Government of National Unity (GNU) was an example of power sharing. At that time, the strong parties were also very strongly ethnically divided, therefore being a case of what Lijphart would have called consociational arrangement. But the GNU did not last very long, and the National Party disappeared from the political map in 2005. The critique of power sharing and consociational democracy or consociational models has been that it is very elitist and that it also, in a way, freezes the differences, ethnic differences in this case, in the political structures, which then also means that political competition is taking place inside of the party. Consequently, it can cause deep factionalism inside the parties instead of becoming a competition between different kinds of political programmes, which would attract different kinds of interest groups in the society. In that kind of setting, for a political party to participate in power sharing could damage its support among voters. The threat of being co-opted is a real one. The critique, in a way, also shows the importance of strong opposition in a stable democracy. The Finnish experience of coalition governments and government-building is that there has always been an opposition playing a role. In addition, this opposition has been one which has had the possibility of becoming a partner in the coalition after the next elections. In other words, the opposition has always had the prospect of being able to form a government or being part of the government in the next round. This is why the role of presenting criticism to the current government and being active in policy formulation is so important for the opposition. The opposition also has an important role in civic education, or political education, among its supporters and the wider public, and in the provision of information to its supporters. Therefore, one important element is that the opposition must be strongly institutionalised and must remain active between the elections. Regarding political pluralism, some of the parties in the Finnish system have a long history, and their support base has been very stable in reflecting the divisions between urban and rural Finland and also the linguistic divisions. The country has one more or less ethnically-based party – the Swedish People’s Party – which represents the interests of the 6% of the population who speak Swedish. Although Finland does have the kind of party system that is based on long-term loyalties, the idea of voluntary association and the ability of the citizens to form political parties and other interest groups freely is still an important component of political mobilisation. Sartori’s claim is very clear, that the mere existence of different groups in a society is not indicative of pluralism. What does create political pluralism is when there are cross-cutting cleavages, where people can be members of different groups and, in that way, learn how to find compromises and perhaps also learn what other people are thinking and what their interests are. This idea of adjusting different interests to changing coalitions is important in the political culture. It is useful to highlight that, after Finland’s independence, the Civil War that the country fought in was a particularly bloody one – in fact, it is still regarded as one of the bloodiest in European history, relatively speaking. It was a war where, literally, brothers were fighting against each other. It was a very traumatic experience for a newly independent country. Another highlight is that the presidential, or semi-presidential, system was exceptionally strong for a lengthy period of time. One element in Urho Kekkonen’s – who was president from 1956-1982 – position was, at least rhetorically, that he presented his leadership as one that was necessary for Finland to keep good relations with the Soviet Union. Some years during his rule were not ones in which Finland could celebrate democracy. Kekkonen even continued in the position of president without elections in the 1970s, as the majority of political parties in the Parliament at the time decided that there was no need to arrange presidential elections in Finland. Other aspects that have been very important in Finland’s political stability include the consensus culture between employers, employees and government – they have negotiated and collaborated when agreeing on increase of salaries, on tax levels and social policies. The country also has a strong tradition of agreeing on the basic elements of the welfare system. In addition, the state committees were very strong institutions, particularly previously. Nowadays, there are many arguing that Finland should go back to those kinds of strong committees, which do not exist in many sectors anymore. These were committees for the preparation of laws, where the government was involving different kinds of stakeholders and experts to discuss, openly and informally, different kinds of policy issues before the preparation and actual writing of the laws took place. This committee system – which Finland inherited from the Swedish system, and which has long historical origins – was in fact pushing civil society to get organised, which meant the skills and knowledge of citizens, through different kinds of interest groups and civil society groups, was also enhanced. That has supported political participation in the country and also the legitimacy of the political system. To conclude, Finland’s parties are more or less medium-sized, and they are not dominant parties. It is not clear before the elections which party will be the biggest one. Particularly during the last few years, the elections in that sense have been quite exciting. And although there are party loyalties among the supporters, there are also swing voters, so the parties are actually competing with their programmes. Finland has had a large variety of government coalitions. Despite operating within different coalitions and having to cooperate with very different parties, the parties have been able to exist. Sometimes, the coalition experience has led to parties losing their support. For example, the previous government experience of the Centre Party in Finland, which is the old Agrarian Party, was one which was regarded very negatively among its supporters. Currently, on the political fora, the country has a relatively new populist party, the Finns Party. It is new in the sense that, although it is strong and big, this party is not as experienced and institutionalised as far as its programme and its working structures are concerned. But perhaps now, when the party is in the government, Finland will also see institutionalisation on its part. Lastly, a few words on the minority right’s Swedish People’s Party. In the Finnish system, this is the party that has most often been in the government coalitions – both in the leftist and rightist coalitions. This is the party that during the latest government negotiation was called the kingmaker. Some of the politically heated discussions within the current government coalition have taken place between the Swedish People’s Party and the nationalist Finns Party. Virva Viljanen Legal framework and best practices of coalition government in Finland Virva Viljanen is the Dialogue Advisor for Demo Finland, a cooperative organisation of all nine Finnish parliamentary parties. She leads the programme working with Finnish politicians to facilitate dialogue between the political parties, and also organises training for the politicians. Demo Finland enhances democracy by strengthening the political participation of women, youth and persons with disabilities, in particular, and supports dialogue between political parties. Demo Finland works not only in Finland but also in eight countries internationally – Ethiopia, Kenya, Mozambique, Myanmar, Somalia, Sri Lanka, Tunisia and Zambia in cooperation with local partner organisations – to implement Finland’s democracy support. This presentation looks at examples of formal and non-formal practices of coalition governments and multiparty collaboration in Finland, as these two link to each other. Finland relies heavily both on legalist tradition, in other words, laws, and also the somewhat trust-based culture of working together between political parties. The legal framework of forming a coalition government in Finland is based on the Constitution of Finland, which states that before the Prime Minister is elected, the groups represented in the Parliament must negotiate on the political programme and composition of the government. This means that all of the parties that are elected to the Parliament take part in the preliminary negotiations or formation talks. And then, usually, the winner of the elections and the biggest party will invite a group of political parties to the actual negotiations. The parties then draft a government programme, and equally important is the central government spending limits, which is the ceiling budget expenditure for the four-year election term. There is the temptation to create several different policies, but these central government spending limits tie them to the actual decision-making. This means that what political parties promise has to be linked to the budget. At the end of the negotiations, each political party represented in the government chooses its ministers – the biggest parties get more cabinet ministers than the smaller parties in the coalition government. The government needs the confidence, or the majority of votes cast in Parliament, and this is why Finland usually has a majority government, so more than half of the seats in the Parliament. In Finland’s latest parliamentary elections, the government negotiations between the four political parties took over a month. There was a long list of party representatives and invited experts in different thematic groups negotiating during the discussions. This resulted in a government programme which was over 200-pages long, including central government spending limits. The coalition governments are also based on the multiparty collaboration in the Parliament. There is also institutionalised dialogue between the government and opposition that is based on law. Both the Constitution of Finland and, under that, the Rules of Procedure of the Parliament ensure this kind of institutionalised dialogue between political parties in the Parliament. The laws state that reports must be submitted to the Parliament. In other words, the government is obliged to hand over reports on its activities and policies to the Parliament. The Parliament also has the right to receive information, and this is especially intended for the opposition groups having access to information about what government is doing. There is parliamentary question time every Thursday. There are also interpellations to the government or an individual minister and then several non-formal procedures. It is not stated in the law that shadow budgets need to be discussed in the Parliament, but this is something that is repeated every year. Opposition groups will present their shadow budgets, and then they are addressed in the Parliament discussions. There are two of these law-based institutionalised dialogue methods in the Parliament that are worth highlighting. First is the parliamentary question hour: every Thursday, the government ministers will reply, unrehearsed, to the questions of members of Parliament, and especially opposition representatives. The second one is also mentioned in the law, that the government must reply to an interpellation – this is a formal question presented by a group of MPs – in a plenary session within 15 days of being given the question. After receiving the reply to the interpellation, Parliament then debates on the matter and proceeds to vote on whether the government or this particular minister in question enjoys the confidence of the Parliament. This is also an important way for the opposition to raise questions and issues on policy matters and then test the confidence of the government. Most of the time, the members of the Parliament that represent government political parties will then vote on the confidence, and the Parliament, the government, can continue its operations. One key element that is also based on the Constitution and the Rules of the Procedure Law in the Parliament is parliament committees. The Parliament of Finland has 17 permanent committees, with a proportional representation of parliamentary parties. This means that all the committees have members from both government and opposition groups. These are thematic committees which work on legislation and committee reports. There are, for instance, finance, education and culture, social and health affairs committees. One worth mentioning here is the Committee for the Future, which is a 17-member committee that works on future-related questions. The aim is to rise above the day-to-day politics and talk about future issues that need to be resolved within the democratic process. One aspect that the Finnish members of Parliament appreciate greatly is that meetings are confidential. The agenda is published, but all the discussions are private. This allows the members of Parliament to have discussions without heated debates that are shared by the media. The committees routinely hear from experts – the committee discusses which experts they want to hear on the policy matters. These experts can be representatives of the administration, for instance, ministries, or NGOs, researchers and so on. One key element of coalition governments in Finland is that political parties also collaborate on the local level. Often, these are the same political parties that then operate on the national level, and frequently, the same representatives work on the local level as well as in the Parliament. In fact, most members of the Parliament begin their careers on the local level, meaning they already have experience of working together at that level. Finland has more than 300 municipalities and 21 regions. This local government is based on the Constitution and then on the Local Government Act, which states how municipalities must organise their administration. Basically, municipal councils choose the members of their municipality boards, which is the executive body, proportionally reflecting the election result and the number of seats each party holds in the council. The result is that there is no government and opposition on the local councils, because most of the biggest political parties do have representation in the executive party. Therefore, there is no need for opposition leaders. In terms of non-formal best practices of political parties working together and forming coalitions: first, there is the matter of using parliamentary working groups on issues that require long-term decision-making. In Finland, if there is a difficult policy issue that requires long-term decision-making – for instance, election laws – then, often, all the parties represented in the Parliament are invited to a joint working group aimed at unanimous decision-making. The goal is to ensure that when the power changes between elections, there are no hesitant policy changes. For example, the new group in power would not change election laws, and they would have more legitimacy when they are passed into Parliament. Another Finnish example of non-formal collaboration is campaigning during elections, side by side. It is customary in Finland for political parties to share, for instance, marketplace meetings and campaign side by side at marketplaces and other events. They also have election panel discussions and public debates together. The third example, as with Demo Finland, is where there are other cooperative organisations for political parties. One influential example is the Coalition of Finnish Women’s Associations (NYTKIS), which is an umbrella organisation consisting of the women’s organisations of the parties represented in the Parliament, working together, especially on gender equality. In these organisations, such as Demo Finland and NYTKIS, there is often a common denominator bringing them together – for example, gender equality or, in Demo Finland’s case, democracy. Briefly, in Finland, Demo Finland closely collaborates with the Parliament, with committees, with political parties and their suborganisations, such as political youth and women’s organisations. It organises seminars and training events, inviting all the political parties and representatives. And its work is based on the understanding that all political parties commit to the laws and culture of inclusive democracy. Chapter 3 Discussion Who sets the government spending limits during the negotiations in Parliament? The Treasury? The previous government? The Finance Ministry prepares a budget, and then the government discusses the political aspects. There has been a very different approach to the spending limits in this government versus the previous one. This government is downsizing the budget, whereas the former government wanted to include more initiatives within the spending limits. Although the ministries prepare the spending limits, they are not set in stone. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Is it correct to say they can downsize, but they can also shift monies between various programmes? Yes, exactly. And this is something that is under a lot of heated political debate. Where does Finland invest, and where does it downsize? This is the question. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - What advice does Finland have for South Africa, where coalitions at local government level have been very unstable? The country is expecting coalitions in certainly some of its provinces and maybe even at the national level. What advice would Finland give to a country that is finding these arrangements very new and very unstable? Looking at how it was possible that after the Civil War in Finland, when it is safe to say that the different political parties and different aspects of society were very much against each other and were very suspicious of each other, then, in fact, it was the minimum denominator that everyone agreed to. They believed that the law would protect them against each other. The “rule-of-law” approach has been central in Finland in how these parties that have had very little trust in each other have been able to build that trust and build coalitions and compromise moving forward. This has been one of the key elements. But, if the legislature and the laws do not promote these kinds of procedures or trust being built, it becomes highly problematic, when the law cannot be instrumentalised in this way. What is very important is that the parties formulate political programmes, that they discuss with the members and activists and clearly write down what their main objectives are, and that the programmes are also, in economic terms, somehow feasible. If the parties have programmes, they can participate in the negotiations, and the coalition can also make compromises and develop a programme that makes the parties and politicians accountable. If the parties are institutionally weak, they could become very elitist and all about their leaders. And that is the most dangerous setting for co-optation – the parties losing support among voters if they are then not able to fulfil a very populist programme of the political campaigning, for instance. That kind of professionalisation of the political parties is very important, at the local level too. Political parties need to have their own programmes and need to be democratic within the political party. For instance, local government coalitions need to write a joint programme that everyone is committed to. In Finland, the programme is usually very detailed, because then nothing is left unsaid or unsettled, which builds trust. An important part of the negotiation is what is left out of the programme. The programme is very detailed on policies that are going to be implemented, but the political parties can also agree on issues that they want to advance during the next four years, if they are very much in disagreement on certain policy issues. Sometimes it helps to start the collaboration between political parties on some subtheme. For example, in Finland, women’s organisations from the political parties working together. This makes it somewhat easier, because these women’s organisations and women politicians often share the same problems, despite which political party they come from. There have been some similar issues raised by the youth representatives from different political parties, that they all, for instance, can collaborate on youth participation in politics. So, perhaps beginning from somewhere that is shared common ground would be helpful. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The first question is: In South Africa, where there are 400-plus parties, how possible is it in as far as coalition is concerned, as compared to Finland, which has nine parties? The second is: Except where there are elections, or at the polling booth, where civic society comes to vote, as they continue with their programmes and engagement, how far do these parties go to continue to ensure that civic society is involved? Thirdly, on the economic front, given the type of coalition pattern in Finland, how is the country doing in terms of its GDP and economically? In South Africa, there are issues of unemployment, low levels of poverty, and so on to contend with. And lastly, a very interesting point was made that there is a collaborative aspect during election campaigns, meaning that these parties come together to do campaigning for the elections. How possible, different as the parties are, is it for them to go together into the civic society, even to the communities, and do “a common electioneering campaign”? How to combine the civil society aspect into the coalition government and the trust building, is very important. The Finnish system and the Finnish tradition of coalitions and coalition building is very much reliant on trust. All these methods and mechanisms on how to sustain coalitions or make them better or make them viable, all are aspects that are building trust between the political actors and among the civil society. Finland has long-held traditions regarding different types of civil society organisations, other than parties. That is something to build on. The parties themselves have been built on this from-the-ground-up mobilisation in many cases, which also builds trust in society. Continuing on the subject of civil society, the labour unions are very important, as are the employer organisations and interest groups from the various economic sectors, agriculture, forestry, etc. They have a strong say in the preparatory work for laws. And although the level of the organisation of labour has decreased, it is still very high, at least when compared to other European countries. But the tradition, the culture, is that unions and economic interest groups are very strong. The Social Democratic Party or the Left Alliance, are closer to the labour unions. The more right-wing parties are closer to the employers’ unions. And the Centre Party, which very much represents the rural areas, is close to the interest groups from the agricultural sector. In terms of the Finnish GDP, Finland is a rich country. It is currently about US$50,000 per capita. When it comes to the spending limits for the government negotiations, what allows room to manoeuvre and what is a political issue is the ability of the government to take on loans. And this is something that is very much debated in Finland: What is the level of its debt? In that regard, Finland is not doing as well as its neighbouring Nordic countries. Finally, about collaboration in elections. There are indeed electoral alliances, particularly for the smaller parties in the regional setting. It is sometimes critical that they build alliances with other parties. This can be a way for them to get representation to the municipalities, for instance. This is a good question, how complex is the South African situation compared to Finland? Finland has a population of 5.5 million people and has only nine political parties represented in the Parliament. The total number of political parties is currently approximately 20. To address the question of civic society, it is true that in Finland, the political parties are losing membership – they really have issues engaging people in party activities. There is an increasing need in Finland to know, how does one engage people, citizens, civil society between elections and outside of the representative democracy or, for instance, the Parliament and local governments? This is done in several ways. The government has a very strong mandate or role for civil society organisations. Firstly, the Finnish state funds several civic society organisations. For example, Demo Finland gets its funding from the government of Finland or the Foreign Ministry. Then, the government also has, for instance, working groups, where there are experts from the civil society as well as politicians and government officials. There is also the question of how to engage the ordinary citizens. For instance, on a local level, there have been several attempts at participatory budgeting, in other words, giving citizens the right to say where the budget is spent. An example would be giving them an amount of €3 million and then asking them to vote on what they want the local government to spend it on. In addition, for instance, youth councils on a local level could be brought in, to hear the voice of the local young people, and so on. In terms of electoral alliances, political parties work together to campaign for the votes. But they also try to gain the same votes, campaigning side by side in order to engage more people. They invite people to these election debates or marketplace events to meet them and then compete for the votes by offering them their own policies. This is a very interesting example of how Finnish political parties are able to collaborate in this kind of competing situation. Finland also has its own policy issues currently, as was raised, the debt issue. Another is the question of the war in Ukraine, and security policies in Finland, which have been a huge public debate in Finland. It changes, depending which policy issues are the most influential in which elections. A quick comment about the elections and how the parties collaborate. The parties do campaign side by side, but the rivalry is often more intense within the party than between parties, in a sense, because the Finnish electoral system is such that the vote is cast for a person. The person represents a party list, but it is not a list vote, it is a personal vote that is being cast. Therefore, the politicians on the party lists are often competing against each other more fiercely than the party lists are competing against another party list. This is something that is debated or discussed in Finland, whether this is the most effective or the best way. For example, in Sweden, they have the list vote, and that results in a less competitive campaign atmosphere among the party members, and the campaign is more driven between the parties than inside the parties. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This phenomenon of coalitions is very new in South Africa and in South African politics. To understand the unique and complex scenario in South Africa leading up to the elections in 2024, what is bound to be seen and experienced, the following must be considered. South Africa comes to this position from the fragmented past of apartheid, versus Finland, which adopted this approach primarily as a result of World Wars. The country has a population of over 60 million, versus Finland, which has a population of roughly 5 million. Finland has three official languages, whereas South Africa has 12 official languages. Hence, South Africa is trying to solicit as much expert knowledge as possible in order to make sure that there is a transition that is smooth, and also a quick understanding of each and every political party involved in those coalition discussions and agreements, ultimately. The idea of a government programme vis-à-vis the party programme or the party manifesto, is a good one. What ordinarily happens in South Africa, is that as the election approaches, each political party will come up with its own manifesto – a programme of action that expresses what the party’s priorities and implementation strategy will be once they are in power. The parties then sell that to the masses, the electorate, to secure their votes. The voters choose the one party that resonates with them, the one that represents their interests more than the others. In South Africa, there are currently three predominant political parties right at the top, with 406 parties in total, and 14 political parties in its national government, in Parliament. And there are bound to be more than that, come 2024, after elections, because of the many new parties that have been formed recently, which of course brings a huge debate, or rather, a huge headache. The smaller the number of parties, the better – having too many parties causes confusion, especially among the voters. Of the 14 political parties in the national Parliament, there are three big parties: the ANC, DA and EFF. Each one of them stands for something totally different; they are extremes, to a certain extent. And voters have to find themselves in these three. Come the 2024 elections, the likelihood is that none of them are going to have 50% plus 1%, which guarantees their creating a government, meaning that none of them will have a majority and they are bound to reach out to smaller parties, some of which represent a totally different view point, especially on policy formulation, because that is what drives the programme of action of every political party. Of course, South Africa is also dealing with three main challenges from its historical background: poverty, unemployment and inequality. In the current experience of the coalitions at a local government level, these three dominant parties have a tendency towards a bullying attitude. If that attitude persists, leading up to the 2024 elections, and permeates the process of forming a government – they are to a certain extent in the driver’s seat – and calling upon the smaller minority political parties, how will they understand that even though they have a higher percentage of votes than others, when it comes to sitting around a negotiation table, they are in fact equals with everyone? That kind of attitude will assist parties in being sober minded in their approach in negotiations and in how they agree upon a government programme of action vis-à-vis their own manifesto. With a bullying attitude, none of the parties will allow themselves to be imposed upon by another party’s manifesto. Therefore, there needs to be a new programme of action crafted as a coalition government. The question is: How does South Africa deal with the bullying attitude of these parties, where they want to impose their policies, principles and standpoint on certain issues? How does South Africa get them to reach a particular compromise on very key, fundamental issues that must drive the coalition and, ultimately, succeed? Is there not a delay in decision-making in Finland with regard to policy or even issues that deal with service delivery? Are coalitions not delaying decision-making because of too many protected negotiations of one kind or another? Secondly, what are the values that can hold the opposing parties together to the extent that they can work together? Looking at other old democracies, many have two dominant parties, and they name these parties on their value system – for example, in America, one is Democratic, the other is Republican, defining what participation is all about. In smaller democracies like South Africa, is the issue of coalition not one that is going to delay decision-making, leading to various challenges? What can be done about this? This could be a serious fallback issue, so it must be defined. The third issue is that the level of literacy in the country, which is one that is fuelled by populism, does not allow for people to make informed decisions on matters that affect them going forward. Democracy, in essence, without political education, does not guarantee stability at all, because people must make choices on the basis of informed, rational decisions. And in most cases, that does not happen. What assistance can be forwarded in terms of assisting this conversation? And finally, what are the levels of inequality, both social and economic, in Finland? South Africans are looking for a party that can deliver and close the gap between the rich and the poor, the haves and the have-nots, and access the economy and participation in the economy. All of these things are an amalgam of the challenges that the country faces. In terms of the problem in negotiations where it is probable or expected that some of the negotiating parties might have somewhat of an aggressive tactic, and how the other parties could counteract that, in Finnish government negotiations they bring in many experts from various fields, from civil society to the ministries or administration and NGOs. This could be one way to mediate the negotiations or help the parties to build on common ground. That was analysed in Finland recently during the very long government negotiations, with one party that technically had not participated in government ever before. One explanation of why the negotiations took so long and why they invited several hundred experts to take part in the negotiations, is that because this one party had very limited experience in the negotiations, the use of experts and advice was a way to get all the parties onto a more level playing field, so that everyone had the same level of knowledge and the same picture of what was being discussed. That could be one way of pointing the negotiations in a more amicable direction. With regards the delay in decision-making, in Finland, the main goal of the government programme is that what is negotiated must be executed during the four-year term. However, if there is a particular subject that is difficult and causes some disruption or disagreement between the government parties, then these are the issues that are often delayed. Despite having these very particular, meticulous programmes, there are issues that get pushed to the sidelines and that are delayed beyond the government term. The values that all Finnish political parties share includes rule of law – meaning trust and relying on the Constitution of Finland – and the principle of democracy. But there are other policy issues that the political parties disagree on. With regards the delaying of decision-making, this is certainly true, that in terms of more inclusive politics, it always takes more time. However, one trust-based practice that is in use in Finland is that each political party holds a cabinet minister seat, and the cabinet ministers or the government ministers have the right to prepare their own laws and policy proposals based on the government programme. They have the right to prepare, with their ministries and administration, these laws. Then, when these laws or policy proposals are brought to the Parliament, the government, the members of Parliament who represent government political parties, will vote for them. It is customary that then the government will not vote against its own laws. This is something that helps with the delaying of decision-making, that each cabinet minister has the right to prepare laws, and other political parties will not delay those if they are based on the government programme. However, usually, when the elections come closer, the political parties tend to skip this rule, which means that at the end of the election term, often more laws are not being passed in the Parliament, especially the kind of controversial laws that have been delayed until the end of the term. Then, the very difficult question of how to bring members of Parliament together, especially after heated discussions in elections. It is also the case in Finland, especially in social media, that the representatives might use, for instance, language that is hurtful. And the basis for collaboration is then quite difficult. In the Parliament, for instance, the Chairperson of the Parliament usually has authority over the rules for constructive dialogue, or a code of conduct in the Parliament. The kind of speech allowed in the Parliament is regulated by these non-formal rules. Also, new members of Parliament are trained by legal advisors on how to work in the Parliament. This training is organised by the clerks of the Parliament, so non-partisan workers in the Parliament. Lastly, what Demo Finland works on is to bring the political parties to the same table, not to try and work on policies but just to understand each other better, which is also a good result in these kinds of situations. But this is a very complex situation, and the Finnish model does not apply in all circumstances. What about making compromises or being in a coalition if the values of the parties are very different? In the Finnish political culture, because of this coalition-building, in addition to ideological commitments and strong political beliefs and values, there is also a certain kind of pragmatism. In the current government coalition, looking at the values of the parties and based on the views of the members of Parliament, for instance, the Swedish People’s Party and the populist nationalist Finns Party are very far from each other. It is a miracle, from the perspective of political values, that they can be in the same government. However, they have calculated it in a very pragmatic way, that for the smaller Swedish People’s Party, it would perhaps be more challenging to be outside of the government if, in the government, there is a strong party pushing for nationalist Finns Party’s values, which, for instance, include abandoning the status of the Swedish minority language in Finland’s schools. Consequently, perhaps the Swedish People’s Party calculates that it is better for them to be in the government coalition in spite of all the difficulties. And for the government coalition, it is an important member, because with that party, they get the majority in the Parliament. This kind of pragmatism is what then creates the compromises that make cooperation possible. The issue of delays in decision-making is also a very important one. For instance, Finland has extremely expensive and important reform of the social and health services system. This is the third, if not the fourth, government that is dealing with the reform, because it has been so difficult. And now, this government, representing different parties than the previous government, has to implement what was decided before it. It is challenging, as this reform programme is vital for the whole society. On the issue of political education, it is also so important in Finland, because of, for instance, the rapidly changing media environment. The country used to have a system where there was leading national media and big newspapers and a relatively homogeneous education system and population. But now, Finland is becoming more multicultural. There are more immigrants. There is much more media, social media, for instance. It is not known exactly what the most used sources of information for the young people are. During the last elections, TikTok was a key platform for political mobilisation. Some parties or candidates were very active on that medium, whereas other parties or candidates were not. The landscape is changing so quickly that this issue of political education or civic education is something that has to be thought about and worked very hard at. And indeed, in South Africa, where the challenges of literacy, for instance, are also huge, the issues of giving information and building trust are even more critical. Chapter 4 Summary of Lessons to be learnt and gained from the Finnish Model by Erwin Schwella Prof Erwin Schwella is currently working comparatively with a host of politicians in South Africa on co-creating a Leadership for Coalition Government course, through Free State University. On contextual sensitivity and comparability for relevance, reliability, and validity in comparative analysis and action Drawing comparative insights, applications and lessons when comparing political governance and public administration systems requires awareness of and relevantly allowing for contextual sensitivity. Contextual sensitivity is the awareness and appreciation of the different historical, cultural, social, economic, and political factors that shape and influence the political, governance and public administration systems of different countries. It is important to consider such contextual sensitivity sensibly when comparing political and governance systems such as coalitions across nation states, because it helps to avoid oversimplification, generalisation, and ethnocentrism. For relevance, validity and reliability when drawing out and learning the lessons there is an imperative to recognise the diversity, complexity, and uniqueness of each case. Some  aspects that need to be considered as contextual sensitivity when comparing political and governance systems are: The historical background and trajectory of the countries, such as their colonial and post-colonial experiences, their state formation and nation building processes, their regime changes and transitions, their conflicts and wars, and their regional and international relations. The cultural and social characteristics of the countries, such as their: ethnic, linguistic, religious, ideological, and demographic diversity, values and norms, their identities, and cleavages, levels and depth of social cohesion, levels in breadth and width of cross-cutting trust in societal institutions and each other, civil society and social movements, and their media and public opinion. The economic and developmental conditions of the countries, such as their: Income levels, inequality, poverty, and unemployment, growth and stability, their structure and diversification, trade and integration, innovation and competitiveness, and welfare and redistribution. The political and institutional features of the countries, such as their: constitutional and legal framework, electoral and party system, executive and legislative branches, legislative, judicial, executive, and public administration institutions , decentralised and devolution spheres of governance such as federal and local units, and oversight, responsibility, and accountability checks and balances, the incidence of bad governance and leadership, and prevalence, and prevalence and incidence of corruption and maladministration. These matters matter as they will and should have different impacts on the formation, functioning, and performance of coalitions across nation states, depending on the context of each country. As in the comparative  example in focus here, mature democracies such as Finland may have more stable and effective coalitions than less mature, or maturing  democracies such as South Africa, because they have more: consolidated and coherent party systems, consensual and proportional electoral systems, transparent and accountable institutions, and more developed and inclusive societies. This, however, does not mean that coalitions are always better or worse in one context than in another, as there may be trade-offs, variations, and exceptions in each case. Therefore, contextual sensitivity requires a careful and nuanced analysis of the similarities and differences, the strengths and weaknesses, and the opportunities and challenges of coalitions across nation states cases. On lessons to be shared and learnt A first key insight from the Finnish experience is that coalition governments are both a result of as well as a  precondition for inclusive political systems and inclusive political institutions – which feeds the stability and legitimacy of the democratic system. In order to form a coalition government and especially a majority coalition, a number of parties are required to cooperate. Secondly, even though it is a case of, the bigger the party, the more ministers and the more say they have in the government programme, it is still a negotiation, a coalition, so nobody gets to have it all. And the discussions taking place within spending limits means parties cannot come with outrageous promises, they have to work within that framework. Thirdly, from the Finnish example it was also concluded that the Finnish system of coalitions is very much reliant on the “rule-of-law” approach and mechanisms that sustain coalitions and make them viable, aspects that build trust between the political actors and among the civil society. This allows parties that have had very little trust in each other to make the necessary compromises in order to build healthy coalitions and move forward. Fourthly, Finland also has long-held traditions regarding different types of civil society organisations, other than parties. In Finnish government negotiations, experts from various fields – from civil society to the ministries or administration and NGOs – are brought in to mediate, to help build common ground and level the playing field. Coalitions are often thought of in terms of enabling a governing majority. However, coalitions might also be useful in diverse and fragmented societies, such as in South Africa, where it is not necessarily about forming a governing majority, but rather, it might be a way to increase social and political cohesiveness in the country – of course, always guarding against the danger of co-option. The Context, realities and lessons related to coalition success in Finland Finland for more than 100 years has had relatively successful coalition governments, as during these 100 years no party has ever been even close to securing a majority of the seats in the Parliament. This stability is in part due to the party system being able to accommodate several different societal conflicts. Radical ideas and those parties or actors willing to destabilise the status quo have been tamed through offering responsibility, and at the same time, willingness to take responsibility has been expected of them. Thus far this has worked quite well. In Finnish history the Finnish people also had to build a strong state to: Counter the consistent threat to their national state of the ever-looming expansionist Russian empire and its modern-day successors, and Build and sustain a successful welfare state to nurture the Finnish citizens. This combination of a serious external force challenge and the need to improve the lives of Finnish citizens increased Finnish cohesion and the Finnish sense of national sovereignty and unity. These combined dynamics also made it necessary to internally form successful coalitions in the face of threats as well as for good governance in the interests of the welfare of the Finnish population and their democratic state and governance system. The Finnish state was formed after a very divisive civil war, and in order to provide a strong institutional base for future stability and success the Finnish institutions are committed to the institutions of constitutional democracy based on the non- negotiable rule of law in central and local government spheres. There are also statutory requirements to enhance coalition cooperation in all spheres  of governance such as a majority requirement of 66 % of the vote to pass these budgets. The culture of compliance with the institution of the rule of law and the dynamics of legal requirements for compliance towards consensus combined strengthens incentives for responsible coalition governance by all parties concerned. In conclusion,  the Finnish pluralist multiparty system as well as political system have a long legacy, with parties and voters committed to preserving the stability and legitimacy of the democratic system. And a lot of this has to do with the fact that the long history of Finnish independence has put substantial emphasis on these inclusive political and economic institutions. Lessons for South African coalitions in the context of comparability for relevance A further set of lessons from a comparative context is to consider the contextual sensitivity and comparability for relevance, reliability `and validity in comparison sensibly and sensitively. The African context  is significantly different from the Finnish context. South Africa selected to not accept the consociationalism states of Arend Lijphart in crafting its Constitution to enhance the probability for fragmented societies to reach stable political systems. This then makes the experience of African states also the South African reality.  In the African context with fragmented societies in terms of ethnic, linguistic, and religious divisions, African experience therefore often is one of one-party states after independence, and also of a dominant one or one strong party legacy, strong presidents and presidential systems. This has made the distinction between the ruling party, or the dominant party, and the state a difficult one. Within this contextual setting,  power sharing in practice has often turned out to be at best co-option, if not direct repression, of the opposition. Nowadays, it is referred to as dominant party systems because most African states are now somewhat nominally, professing to be implementing multiparty systems. The factions and their behaviours within most of these dominant parties and state party systems are quite remarkably similar.  This similarity includes patterns of patrimonialism or clientelism which, in one way or another, can also be linked to corruption. Currently, the biggest threat to democracy and democratic competence in Africa, and also elsewhere in the world, is corruption. The lesson is then that coalitions are not useful for the corruption appetites of dominant parties in Africa, as they may put brakes on the corruption possibilities for those parties. In the Finland case parties are more or less medium-sized, and they are not dominant parties. It is seldom clear before the elections which party will be the biggest one. And although there are party loyalties among the supporters, there are also swing voters, so the parties are actually competing for power  with their policy  programmes rather than identity loyalty political choices. The lesson is that voter behaviour in South Africa, and South Africa not being a mature plural democracy (yet) make South African coalition success based on the competition for ideas less probable than in Finland. Coalitions will more likely be formed based on the necessity to achieve a working majority in Parliament. Finally, the success of coalitions in Finland is grounded in formal and non-formal practices of coalition governments and multiparty collaboration in Finland, as these two link to each other. Finland relies heavily both on legalist tradition, in other words, laws, and also a trust-based culture of working together between political parties. Examples of the way in which this combination supports successful Finnish coalitions are: Formally, the Constitution of Finland requires parliamentary stakeholder groups including the political parties to negotiate the government programme and composition before electing the Prime Minister. All parties in the Parliament join the initial talks, but the election winner and biggest party invites some parties to the final talks. The parties also choose their ministers, with more seats for bigger parties. The government must have the  majority support of Parliament, which is why Finland usually has a majority government. Of equal importance is central government spending limits, which is the ceiling budget expenditure for the four-year election term. Obviously, there is an impulse to create several different policies, but these central government spending limits then tie them to the actual decision-making. What political parties promise has to be linked to the budget.  In all of the above dynamics is the result of  negotiation, and as  it is a coalition, as well as negotiated coalition  compromises result into the reality nobody gets everything. The more informal dynamics that support coalition success in Finland are: Many of the politicians start their political and governance careers in local government, where they mutually experience and learn about the value of cooperation and consensus based on an increasing resultant trust relationships even under conditions of contestation. This is valuable learning for future success. When complex and contested legislation is prepared and implemented for success in Parliament parliamentary committees work together over party borders to find sufficient consensus. This creates opportunities to learn from the proves when there are successes, and the third alternative thinking and action creates trust and consensus spilling over into future work for success. During election campaigns there is non-formal collaboration between contesting political parties where national consensus and cohesion in the interest of Finland is necessary. This sets a foundation for consensus in later complex issues where the interests of the Finnish people prevail over narrow self-interest-based party political and personal political interests. Finally, the success of Finnish coalitions is enhanced by continuous deep learning, through in-practice and in-conversation learning experiences, which is also enhanced by continuous research and learning through real world experience as well as research and education for the whole society, including all political and governance stakeholders and the electorate as citizens. The last and very significant lesson directly above is of great importance to societal, educational institutions including the formal education system, as well as in this context of professional learning institutes such as the Inclusive Society Institute and CiviNovus as two  of many other role-players in this space in South Africa. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

22 January 2024 Mr E Mathonsi Committee Secretary Portfolio Committee on Home Affairs National Assembly Parliament of South Africa CAPE TOWN By email: Electoralmattersbill@parliament.gov.za Dear Mr Mathonsi, PUBLIC SUBMISSIONS: ELECTORAL MATTERS AMENDMENT BILL [B 42-2023] The Inclusive Society Institute (ISI) is a Non-Profit Organisation that has as one of its objectives the promotion of democracy. The ISI therefore feels obliged to scrutinise legislation that impacts the proper functioning of the South African democratic dispensation. It does so by balancing the necessities of the political parties against the public interest. Background The Institute’s departure point is that political parties need to be properly resourced and equipped in order for them to carry out their constitutional mandate. Ill-equipped and under-resourced political office-bearers will merely result in the semblance of democracy, whilst in effect allowing for a well-resourced Executive to act with impunity, and is inherently biased in favour of parties in government. Thus the ISI promotes meaningful public funding of political parties. With regard to the public funding of parties, our studies have shown that where jurisdictions have high disclosure regimes, public funding is far more generous than in those that do not have high disclosures regimes. Thus a consequence of high disclosure requirements is the need for meaningful public funding lest the effective functioning of political parties be compromised. Recent research by the Inclusive Society Institute suggests that the current funding levels in South Africa is not entirely adequate. That said, it is never a good idea for one to determine one’s own remuneration. This is the effect of the proposed amendment of Section 24 of the Political Party Funding Act, 2018 (PPFA). The President – the leader of a political party – and the Parliamentary Portfolio Committee, which is comprised of representatives of political parties, are to decide adjustments to the donation disclosure thresholds and the maximum annual limits that any one donor may make to a party. In other words, parties determine what the thresholds and limitations are to be. This in the knowledge that the likelihood of a higher number of donations increases the higher the disclosure threshold,  since donors will not have to disclose. Similarly, should the maximum level of annual contributions by a single donor be set at too high a level, the original objectives of the PPFA will be undermined. And whilst the President needs to take a number of factors – as stipulated in Section 26 of the Electoral Matters Amendment Bill -  into account in determining the adjustments, there is a very real danger of falling prey to subjective decisions. It unquestionably constitutes a conflict of interest. Should the conflict of interest not be eliminated from the Bill, it will open the prospects for a legal challenge. Proposal The Institute therefore proposes that the Independent Commission for the Remuneration of Public Office-bearers mandate be extended to include the provisions contemplated by Section 26 of the Electoral Matters Amendment Bill. Should the aforementioned proposal not find favour with the Portfolio Committee, then the Institute is compelled to insist that the following minimum amendments be made: That Section 26 of the Electoral Amendment Act be amended to include the Minister of Finance as a party to be consulted by the President when making the regulations for matters contemplated in section 8(2) and (5) of the Political Party Funding Act of 2018. This is necessary since, as previously alluded to, disclosure requirements impacts the level of public funding needed, and the Minister of Finance is best placed to weigh up the required funding of political parties against the fiscal affordability for the state. That an additional factor that the President should take into account be objectively measurable norms and standards with regard to the public funding of political parties in other peer democratic jurisdictions. This will ensure that South Africa does not become an outlier, as it will introduce a measure of rationality into the decision-making process. Conclusion The Inclusive Society Institute understands the need for the Electoral Matters Amendment Bill and, in the main, supports the provisions thereof. In particular, it also understands the need for the Section 26 amendment. The Institute, however, is of the view that the current formulation has an in-built conflict of interest. The proposals put forward by the Institute aim to eliminate the conflict of interest, without compromising the substantive need for the amendment. Sincerely yours, DW SWANEPOEL CHIEF EXECUTIVE OFFICER ________________________________________________________________________ PO Box 12609, Mill Street, Cape Town, South Africa, 8010 Spaces ▪ 1006 One Thibault, 1 Thibault Square, Cape Town, South Africa, 8001 Tel: +27 (0) 21 201 1589, Email: admin@inclusivesociety.org.za, Website: www.inclusivesociety.org.za, 235-515 NPO PBO 930069173 VP Khanyile (Chairperson), Z Ndevu (Deputy Chairperson), K Millard, K Khoza, S Muller, D Swanepoel (CEO)

17 January 2023 Hon. MS Chabane Chairperson: Portfolio Committee on Home Affairs Parliament of South Africa CAPE TOWN For attention: Mr Eddy Mathonsi Email: electoralact1@parliament.gov.za Dear Hon. Chabane, SUBMISSION AND COMMENTS ON THE ELECTORAL AMENDMENT BILL [B1B-2022] Your call for written submissions and comments on the proposed amendments from the National Council of Provinces (NCOP) to the Electoral Amendment Bill (B1B-2022], refers. The Inclusive Society Institute (ISI) would like to take this opportunity to comment on the amendment to clause three and the inclusion of the new clause 23. Clause 3.1 We are pleased that the NCOP, at least in this instance, has acknowledged the importance of ensuring the constitutional requirement for the equal treatment of independent candidates and political parties. That said, we are of the opinion that the threshold remains challenging for independents to achieve, as motivated hereunder: Although it is correct to institute qualifying criteria for independent candidates (and indeed parties as well) to participate in the elections, in that some level of support needs to be demonstrated prior to the IEC incurring logistical costs attached to such participation, the test of reasonableness needs to be satisfied. Should the qualifying criteria be of such a nature that it will be difficult for candidates to achieve, it could very well be interpreted as a scheme to keep independent candidates out of the race. Whilst the Bill may technically provide for independent candidates to participate, in reality (practice) it may very well prove unachievable. Therefore a more reasonable number of seconding votes should be considered. The situation, the Institute believes, will be exacerbated through the tight timelines that will by necessity be set for candidates to secure the seconding signatures. The election already takes place mid-2024, whilst, the Electoral Amendment Bill is still under consideration. This process must be followed by IEC planning, the drafting of rules and regulations, the design of the seconding forms and templates, etcetera. Candidates cannot start collecting signatures until all the uncertainties have been cleared up, which will not leave much time for them to secure the extremely high number of seconding signatures as currently provided for. If anything, independent candidates should require less signatures than political parties, in that parties have more people and infrastructure to gather signatures than would be expected from an independent candidate who is participating as a single person on his/her own. Thus, we reiterate our previously proposed remedy, namely that independent candidates be required to secure the same number of verifiable seconding signatures that new political parties currently need to register, that is 1000. New clause 23 The ISI welcomes the introduction of this new clause that has as its objective the establishment of an Electoral Reform Consultation Panel. The inclusion of this provision provides some comfort that there is an acknowledgment by the Legislature that broader electoral reform is necessary, and that the public requires such reform on an urgent basis. We are of the view that society will not accept a delay in such reform beyond 2029. The ISI wishes to make a few proposals to strengthen the work of the Panel. 23(3)(b): Whilst we are in agreement with the public participation programme proposed, such participation should not be limited to responding to proposed models by the panel only, but should also allow for the public to also proactively make their own proposals with regard to electoral models for the Panel to consider. 23(9)(a) provides for only South African citizens to become members of the panel. It may be prudent to allow for a limited number of international experts (one or two), to become members. This may help ensure that the model ultimately proposed by the panel meets the highest international norms and standards. 23(9)(b) provides for the Minister to consult the Commission in the appointment of members to the panel. The ISI proposes the insertion of Parliament in the place of, or in addition to, the Commission. This is to ensure free-thinking by the panel, unhindered by the potential bias and/or preferences that the Commission may have. This amendment would help remove any perceived or real conflict of interest and preference of candidate to achieve the Commission’s preferred outcome. In closing, the Inclusive Society Institute wishes to place on record, that whilst it is appreciative of some of the amendments made by both the Portfolio and Select Committees, there remains areas of contention, as can be gleaned from our previous submissions (attached as Annexure A), that the Institute will continue to challenge. Once again, thank you for the opportunity to make this submission. Sincerely yours, DW SWANEPOEL CHIEF EXECUTIVE OFFICER ________________________________________________________________________ PO Box 12609, Mill Street, Cape Town, South Africa, 8010 Spaces ▪ 1006 One Thibault, 1 Thibault Square, Cape Town, South Africa, 8001 Tel: +27 (0) 21 201 1589, Email: admin@inclusivesociety.org.za, Website: www.inclusivesociety.org.za, 235-515 NPO PBO 930069173 VP Khanyile (Chairperson), Z Ndevu (Deputy Chairperson), K Millard, K Khoza, S Muller, D Swanepoel (CEO)

1 November 2022 Hon. Ms. S Shaikh MP Chairperson: Select Committee on Security and Justice Parliament of South Africa CAPE TOWN By email: ElectoralAmendB1B2022@parliament.gov.za Dear Hon. Shaikh, SUBMISSION ON ELECTORAL AMENDMENT BILL [B1B-2022] Thank you for the opportunity to make this submission in response to your call for public submissions and comments on the aforementioned bill. The Inclusive Society Institute has actively participated in the National Assembly Portfolio Committee on Home Affairs’ deliberation on the aforementioned bill. Whilst progress has been made on a number of fronts, the Institute remains concerned with regard to a number of clauses in the bill that we are of the view will not pass constitutional muster. This submission to the select committee (SC) repeats the concerns we raised with the portfolio committee. It comprises two parts, the first being the Inclusive Society Institute’s (ISI) overall assessment of the bill under consideration, and in the second, we make specific comments on the clauses we believe requires amendment. Part 1: General comments The Institute is of the view that a golden opportunity was missed, namely that Parliament should, in our opinion, have been more responsive to the broader public’s insistence on wider electoral reform, that would offer a greater degree of accountability and representivity than the current system does. To this end, the ISI again attaches (as Annexure A) our electoral proposals for consideration. We do so in light of the overwhelming view by civil society that the current proposals are neither responsive to the will of the people, nor constitutional, and not workable. To this end, the ISI would, in the event of a further extension being granted by the Constitutional Court, support the withdrawal of the current bill in favour of introducing legislation that responds more adequately to public opinion and the 2020 Constitutional Court judgement, as represented by the vast majority of civil society organisations engaged with electoral reform. It does so against the backdrop of most, if not all, submissions made in response to the portfolio committee’s (PC) call for comment; and the majority view of the Ministerial Advisory Committee (MAC). We are also aware of the correspondence addressed to the PC by the Chairperson of the MAC, cautioning against the feasibility of the existing bill under consideration. The Institute is also cognisant of the Independent Electoral Commission’s (IEC) anxiety with regard to having sufficient time to properly prepare for the 2024 general election, and that a constituency-based election requiring the establishment of a Demarcation Board would not allow for sufficient time to prepare for the elections. However, it may be possible, as a transitional arrangement, to introduce a Multi-Member Constituency (MMC) system that is based on the already demarcated district and metropolitan boundaries already in place. In such instance, the ISI is of the view, that there will be sufficient time for the IEC to prepare for the 2024 election. At the very least, should the aforementioned proposal not be feasible, a legally-binding commitment to broader electoral reform in time for the 2029 general election needs to be made. The President has in any event, in his response to the Zondo-Commission report, alluded to this need, and thus it simply requires a codification thereof in the bill before the select committee. The ISI is therefore, in the absence of a will to effect broader reform at this juncture, proposing a two-step approach: Firstly, the passage of the existing before the SC in preparation for the 2024 general election, and secondly, the introduction bill of broader electoral reform in time for the 2029 general election. This, of course, with the proviso that the current bill before Parliament is able to pass constitutional muster; and it is in this regard that we have some concerns. It is the ISI’s considered opinion that the current bill is fatally flawed, the main contention being that it, amongst others, goes against the first founding principle of the Constitution of the Republic of South Africa, namely that our democratic dispensation requires equality in the advancement of human rights and freedoms. In the legislation before the National Assembly, parties and independent candidates are not treated equally. This is because independent candidates are juxtaposed against political parties, and not candidates representing political parties. To achieve an outcome which is proportional, in general, under the proposed system, is not possible. We attach hereto, as Annexure B, our own legal opinion, as it relates to specific clauses, for your consideration. (Please note that the legal opinion is drafted in response to the PC B1-2022 version of the bill). Part 2: Specific comments in response to the SC’s call In this part, the ISI highlights some of its concerns that emanates from the legal opinion contained in Annexure B. The SC is urged to take note of the various other nuances contained in the opinion. Amendment to 31A The Institute would like to acknowledge the constructive proposed changes to section 31A, as well as the other positive proposals by the PC, not least those related to Schedule 1A. Even though we must again express our concerns regarding the distance between independent candidates and the electorate resulting from the system being proposed by the PC - due to the large regional electoral battlefields – which is in in contrast to the ISI’s MMC-based system that will result in greater accountability and representivity due to the elected representative being closer to the voters, and therefore more responsive to them, given the constitutional need for equality, the idea of permitting independent candidates to be nominated in as many regions as they like, is supported. That said, the proposal, read with the provision in Schedule 1A that independent candidates contesting in more than one region cannot aggregate their vote, results in independent candidates not being treated equally to parties, and is thus, in our view, unconstitutional. It does not allow for an independent candidate that may have sufficient national support to reach the quota, but not so in in particular region, to gain a seat in Parliament, whilst, a small political party with an equal distribution of votes, could be elected via the compensatory list. The remedy, the Institute suggests, lies in allowing for independent candidate votes across the country to be aggregated and by removing the division of National Assembly seats in regional seats and national compensatory seats. See the Institute’s comment below on the amendment to Schedule 1A. The Institute would also wish to ask the SC to give sufficient consideration to the practicalities with regard to the ballot papers. Already, given the large number of political parties that contest elections, South Africa has unwieldly ballot papers. Add to this the additional independent candidates, which could quite easily far exceed 50 nationally, the length of ballot paper will undoubtedly be extremely daunting to most voters. Amendment to 31B(3)(a) Once again, the principle of equality is breached, in that independent candidates will require in excess of between 13,000 and 18,000 supporting signatures, whilst a party, at its formation, only requires 1,000 signatures, should it contest a national election, and less, when contesting provincial or municipal elections. Cognisance needs also to be taken of section 19(3)(b) of the Constitution, which posits that any additional limitations on an adult citizen to stand for public office is not permissible, suffice for it being justifiable in terms of section 36 of the Constitution. The ISI’s legal opinion suggests that the support requirement for contesting elections imposes a significant limitation on adult citizens’ rights under section 19(3)(b). The remedy, the Institute believes, is to either remove it in its entirety; or replace it by a requirement identical to that placed on political parties in section 15(3)(a) of the Electoral Commission Act, read with regulation 3 of the Regulations for the Registration of Political Parties (GNR.13 of 7 January 2004, as amended), namely that an independent candidate should only be required to submit a list of supporting voter signatures once and in the same number as that applied to parties. Furthermore, the number of signatures should not be that high that it could be viewed as a scheme to eliminate independent candidates from participating. Thus, the current signature required for parties to register, should not be significantly adjusted. Allocation system as provided for in Schedule 1A In that independent candidates can only compete for half the available seats in parliament, that is 200 seats, and political parties may compete for the same 200 regional seats and a further 200 compensatory seats, it means a mathematical improbability that the constitutional requirement for the election outcome to result in general proportionality can be achieved. As per the ISI’s legal opinion, “while viewed separately, it can probably be argued that the manner of allocating seats to independent candidates and political parties respectively in the bill will not fall foul of section 19(3)(b) of the Constitution, the differentiation between the two categories raises constitutional concerns…the differentiation between types of candidates in how seats are allocated will quite likely fall foul of section 9 of the Constitution” and the in general proportionality provision. An aggravating factor is the fact that the bill does not adopt a similar approach in the allocation of seats in provincial legislatures. For those seats, the different types of candidates are treated the same in the allocation calculation. That raises serious doubts as to the justifiability of the differentiation in allocating seats in the National Assembly. To this end the Institute offers two possible remedies: But first, there are two aspects to consider. In the first instance, in addition to Froneman’s assertion that the system should not fail the proportionality test, Judge Jafta, in the same Constitutional Court ruling, noted that it was not only about disenfranchising citizens, but it cannot be that some people’s voices “count more than others in our representative democracy”. He states that the rationale goes beyond disenfranchisement, but also to the distortion of equality in political voice, that is the voters’. Therefore, the Institute’s conclusion is that a vote for an independent candidate must be of equal value to that of a party, at least insofar as it will not distort proportionality, in general. The discarding of non-aggregated votes goes against this principle. The second aspect relates to the problem of independent candidates’ votes being discarded in provinces due to them not being aggregated, which could distort general proportionality in a particular region. To overcome this, the Institute puts forward two possible remedies: Remedy 1 In the event of the SC not accepting our recommendation to aggregate the votes of independent candidates across the whole country, then it is recommended that independent candidates be restricted to participating in only one region, as is the case for party-nominated candidates. But in addition, that the division of National Assembly seats in the regions and national compensatory seats be done on a more equitable 300/100 split, that is 300 seats allocated to independent candidates and parties competing in the regions and 100 seats to parties competing for seats on a compensatory list. This will move the electoral system closer to the ideal of achieving proportionality, in general. It will also improve equality in the handling of independent candidate votes on the one hand, and party candidates on the other. Whilst this remedy does not result in full equality, it substantially improves the position from that proposed in the SC’s version of the bill. We are of the opinion that the improvement should be sufficient to satisfy the notion of proportionality, in general, as the availability of 25 per cent compensatory seats is generally considered sufficient to ensure a reasonable level of proportionality, despite deviations from proportionality in the multi-member constituencies in South African under the current dispensation in the provinces. However, a greater level of equity is achieved in remedy 2 below. Remedy 2 As a remedy it is recommended that the division of National Assembly seats in regional seats and national compensatory seats be removed from the bill and that the allocation of all seats in the National Assembly be done on an equal basis between independent candidates and political parties, along the same lines as that for provincial legislatures. Whilst the total number of seats is calculated for the single national constituency, the IEC will still distribute elected representatives in accordance with provincial-to-national and national-to-national party lists as is the current position. Then the only difference between the way in which the allocation of seats are made between parties and independent candidates are that the excess votes – that is more votes than needed to be elected – are discarded. This, the Institute believes justifiable, in that an independent candidate can by definition be no more than one person. The Institute cannot refrain from pointing out that political parties also have excess votes, that is, votes beyond the number of votes exactly required to obtain the number of seats they are allocated, and that is never seen as a particular problem under any electoral system. Should an independent candidate be of the view that the excess votes cast for him- or herself should not be discarded, or is of the belief that he or she has broad public appeal that will result in many more votes than required to be elected, then there is a remedy: He or she needs to take a personal decision as to whether he or she wishes to be an independent candidate or part of a broader movement. Should it be the latter, he or she retains the right to form a party in order to benefit from any excess votes. Three ballot papers: 6(1) of Schedule 1A In the Institute’s view, the introduction of three ballot papers for the national and provincial elections, as it relates to the question of equality, creates a number of problems: The effect is that parties are being compensated for the share of votes “lost” to independent candidates when the PR (compensatory) element is calculated. For reasons already explained, and as pointed to in the Institute’s legal opinion, this undermines the constitutional requirement for equality in treatment between independent candidates and political parties. One can speculate about the problems for voters – a voter voting for an independent at the regional ballot and the DA for the compensatory ballot is one thing. But another voter will maybe vote ANC on the regional ballot and EFF on the compensatory – it will be very confusing for many voters and for the IEC staff. This will further compromise the achievement of overall proportionality. The remedy is to maintain the two-ballot system for national and provincial elections. This becomes feasible given the proposed equality of treatment proposals above, since there is no change from previous elections in the manner seats are calculated. The Institute is also of the view that the voting system needs to be simple for the voter to understand and for the IEC to execute. Conclusion The ISI wishes to thank the SC for the opportunity to make this submission. It is our humble submission, however, that what is trying to be achieved is to amend a system that is not amendable. What is required is a completely new system. To this end we once again propose an urgent electoral reform dialogue between the public policymakers and civil society to, given the tight timeframes running up to the 2024 general election, chart a practical way forward that satisfies both the broader public sentiment and the practical considerations for delivering an on-time, free and fair election in 2024. Sincerely yours, DW SWANEPOEL CHIEF EXECUTIVE OFFICER ________________________________________________________________________ PO Box 12609, Mill Street, Cape Town, South Africa, 8010 Spaces ▪ 1006 One Thibault, 1 Thibault Square, Cape Town, South Africa, 8001 Tel: +27 (0) 21 201 1589, Email: admin@inclusivesociety.org.za, Website: www.inclusivesociety.org.za, 235-515 NPO PBO 930069173 VP Khanyile (Chairperson), Z Ndevu (Deputy Chairperson), K Millard, K Khoza, S Muller, D Swanepoel (CEO)

15 September 2022 Hon. MS Chabane MP Chairperson: Portfolio Committee on Home Affairs Parliament of South Africa CAPE TOWN By email: electoralact1@parliament.gov.za For attention: Mr E Mathonsi Dear Hon. Chabane, SUBMISSION ON ELECTORAL AMENDMENT BILL [B1-2022] Thank you for the opportunity to make this submission in response to your email dated 2 September 2022 in which you have called for public submissions and comments on the aforementioned Bill. Our submission is made in two parts, the first being the Inclusive Society Institute’s (ISI) overall assessment of the Bill under consideration, and in the second, we make specific comments on the provisions highlighted in your 2 September 2022 call. Part 1: General comments The Institute is of the view that a golden opportunity was missed, namely that Parliament should, in our opinion, have been more responsive to the broader public’s insistence on wider electoral reform, that would offer a greater degree of accountability and representivity than the current system does. To this end, the ISI again attaches (as Annexure A) our electoral proposals for consideration. We do so in light of the overwhelming view by civil society that the current proposals are neither responsive to the will of the people, nor constitutional, and not workable. To this end, the ISI would, in the event of a further extension being granted by the Constitutional Court, support the withdrawal of the current Bill in favour of introducing legislation that responds more adequately to public opinion and the 2020 Constitutional Court judgement, as represented by the vast majority of civil society organisations engaged with electoral reform. It does so against the backdrop of most, if not all, submissions made in response to the Portfolio Committee’s (PC) call for comment; and the majority view of the Ministerial Advisory Committee (MAC). We are also aware of the correspondence addressed to the PC by the Chairperson of the MAC, cautioning against the feasibility of the existing Bill under consideration. The Institute is also cognisant of the Independent Electoral Commission’s (IEC) anxiety with regard to having sufficient time to properly prepare for the 2024 general election, and that a constituency-based election requiring the establishment of a Demarcation Board would not allow for sufficient time to prepare for the elections. However, it may be possible, as a transitional arrangement, to introduce a Multi-Member Constituency (MMC) system that is based on the already demarcated District and Metropolitan boundaries already in place. In such instance, the ISI is of the view, that there will be sufficient time for the IEC to prepare for the 2024 election. At the very least, should the aforementioned proposal not be feasible, a legally-binding commitment to broader electoral reform in time for the 2029 general election needs to be made. That is, what the ISI has termed a two-step approach: Firstly, the passage of the existing Bill before the PC in preparation for the 2024 general election, and secondly, the introduction of broader electoral reform in time for the 2029 general election. This, of course, with the proviso that the current bill before Parliament is able to pass constitutional muster. It is the ISI’s considered opinion that the current bill is fatally flawed, the main contention being that it, amongst others, goes against the first founding principle of the Constitution of the Republic of South Africa, namely that our democratic dispensation requires equality in the advancement of human rights and freedoms. In the legislation before the National Assembly, parties and independent candidates are not treated equally. This is because independent candidates are juxtaposed against political parties, and not candidates representing political parties. To achieve an outcome which is proportional, in general, under the proposed system, is not possible. We attach hereto, as Annexure B, our own legal opinion, as it relates to specific clauses, for your consideration. Part 2: Specific comments in response to the PC’s 2 September 2022 call In this part, the ISI highlights some of its concerns that emanates from the legal opinion contained in Annexure B. The PC is urged to take note of the various other nuances contained in the opinion. Amendment to 31A The Institute would like to acknowledge the constructive proposed changes to section 31A, as well as the other positive proposals by the PC, not least those related to Schedule 1A. Even though we must again express our concerns regarding the distance between independent candidates and the electorate resulting from the system being proposed by the PC - due to the large regional electoral battlefields – which is in in contrast to the ISI’s MMC-based system that will result in greater accountability and representivity due to the elected representative being closer to the voters, and therefore more responsive to them, given the constitutional need for equality, the idea of permitting independent candidates to be nominated in as many regions as they like, is supported. That said, the proposal, read with the provision in Schedule 1A that independent candidates contesting in more than one region cannot aggregate their vote, results in independent candidates not being treated equally to parties, and is thus, in our view, unconstitutional. It does not allow for an independent candidate that may have sufficient national support to reach the quota, but not so in in particular region, to gain a seat in Parliament, whilst, a small political party with an equal distribution of votes, could be elected via the compensatory list. The remedy, the Institute suggests, lies in allowing for independent candidate votes across the country to be aggregated and by removing the division of National Assembly seats in regional seats and national compensatory seats. Thus, we suggest that section 7(2)(c) in the PC’s proposed amendments be changed accordingly and in line with the Institute’s comment below on the amendment to Schedule 1A. The Institute would also wish to ask the PC whether they have given sufficient consideration to the practicalities with regard to the ballot papers. Already, given the large number of political parties that contest elections, South Africa has unwieldly ballot papers. Add to this the additional independent candidates, which could quite easily far exceed 50 nationally, the length of ballot paper will undoubtedly be extremely daunting to most voters. Amendment to 31B(3)(a) Once again, the principle of equality is breached, in that independent candidates will require in excess of 10,000 supporting signatures, whilst a party, at its formation, only requires 1,000 signatures, should it contest a national election, and less, when contesting provincial or municipal elections. Cognisance needs also to be taken of section 19(3)(b) of the Constitution, which posits that any additional limitations on an adult citizen to stand for public office is not permissible, suffice for it being justifiable in terms of section 36 of the Constitution. The ISI’s legal opinion suggests that the support requirement for contesting elections imposes a significant limitation on adult citizens’ rights under section 19(3)(b). The remedy, the Institute believes, is to either remove it in its entirety; or replace it by a requirement identical to that placed on political parties in section 15(3)(a) of the Electoral Commission Act, read with regulation 3 of the Regulations for the Registration of Political Parties (GNR.13 of 7 January 2004, as amended), namely that an independent candidate should only be required to submit a list of supporting voter signatures once and in the same number as that applied to parties. Furthermore, the number of signatures should not be that high that it could be viewed as a scheme to eliminate independent candidates from participating. Thus, the current signature required for parties to register, should not be significantly adjusted. Allocation system as provided for in Schedule 1A In that independent candidates can only compete for half the available seats in parliament, that is 200 seats, and political parties may compete for the same 200 regional seats and a further 200 compensatory seats, it means a mathematical improbability that the constitutional requirement for the election outcome to result in general proportionality can be achieved. As per the ISI’s legal opinion, “while viewed separately, it can probably be argued that the manner of allocating seats to independent candidates and political parties respectively in the Bill will not fall foul of section 19(3)(b) of the Constitution, the differentiation between the two categories raises constitutional concerns…the differentiation between types of candidates in how seats are allocated will quite likely fall foul of section 9 of the Constitution” and the in general proportionality provision. An aggravating factor is the fact that the Bill does not adopt a similar approach in the allocation of seats in provincial legislatures. For those seats, the different types of candidates are treated the same in the allocation calculation. That raises serious doubts as to the justifiability of the differentiation in allocating seats in the National Assembly. To this end the Institute offers two possible remedies: But first, there are two aspects to consider. In the first instance, in addition to Froneman’s assertion that the system should not fail the proportionality test, Judge Jafta, in the same Constitutional Court ruling, noted that it was not only about disenfranchising citizens, but it cannot be that some people’s voices “count more than others in our representative democracy”. He states that the rationale goes beyond disenfranchisement, but also to the distortion of equality in political voice, that is the voters’. Therefore, the Institute’s conclusion is that a vote for an independent candidate must be of equal value to that of a party, at least insofar as it will not distort proportionality, in general. The discarding of non-aggregated votes goes against this principle. The second aspect relates to the problem of independent candidates’ votes being discarded in provinces due to them not being aggregated, which could distort general proportionality in a particular region. To overcome this, the Institute puts forward two possible remedies: Remedy 1 In the event of the PC not accepting our recommendation to aggregate the votes of independent candidates across the whole country, then it is recommended that independent candidates be restricted to participating in only one region, as is the case for party-nominated candidates. But in addition, that the division of National Assembly seats in the regions and national compensatory seats be done on a more equitable 300/100 split, that is 300 seats allocated to independent candidates and parties competing in the regions and 100 seats to parties competing for seats on a compensatory list. This will move the electoral system closer to the ideal of achieving proportionality, in general. It will also improve equality in the handling of independent candidate votes on the one hand, and party candidates on the other. Whilst this remedy does not result in full equality, it substantially improves the position from that proposed in the PC’s version of the Bill. We are of the opinion that the improvement should be sufficient to satisfy the notion of proportionality, in general, as the availability of 25 per cent compensatory seats is generally considered sufficient to ensure a reasonable level of proportionality, despite deviations from proportionality in the multi-member constituencies in South African under the current dispensation in the provinces. However, a greater level of equity is achieved in remedy 2 below. Remedy 2 As a remedy it is recommended that the division of National Assembly seats in regional seats and national compensatory seats be removed from the Bill and that the allocation of all seats in the National Assembly be done on an equal basis between independent candidates and political parties, along the same lines as that for provincial legislatures. Whilst the total number of seats is calculated for the single national constituency, the IEC will still distribute elected representatives in accordance with provincial-to-national and national-to-national party lists as is the current position. Then the only difference between the way in which the allocation of seats are made between parties and independent candidates are that the excess votes – that is more votes than needed to be elected – are discarded. This, the Institute believes justifiable, in that an independent candidate can by definition be no more than one person. The Institute cannot refrain from pointing out that political parties also have excess votes, that is, votes beyond the number of votes exactly required to obtain the number of seats they are allocated, and that is never seen as a particular problem under any electoral system. Should an independent candidate be of the view that the excess votes cast for him- or herself should not be discarded, or is of the belief that he or she has broad public appeal that will result in many more votes than required to be elected, then there is a remedy: He or she needs to take a personal decision as to whether he or she wishes to be an independent candidate or part of a broader movement. Should it be the latter, he or she retains the right to form a party in order to benefit from any excess votes. Three ballot papers: 6(a) and 6(b) of Schedule 1A In the Institute’s view, the introduction of three ballot papers for the national and provincial elections, as it relates to the question of equality, creates a number of problems: The effect is that parties are being compensated for the share of votes “lost” to independent candidates when the PR (compensatory) element is calculated. For reasons already explained, and as pointed to in the Institute’s legal opinion, this undermines the constitutional requirement for equality in treatment between independent candidates and political parties. One can speculate about the problems for voters – a voter voting for an independent at the regional ballot and the DA for the compensatory ballot is one thing. But another voter will maybe vote ANC on the regional ballot and EFF on the compensatory – it will be very confusing for many voters and for the IEC staff. This will further compromise the achievement of overall proportionality. The remedy is to maintain the two-ballot system for national and provincial elections. This becomes feasible given the proposed equality of treatment proposals above, since there is no change from previous elections in the manner seats are calculated. The Institute is also of the view that the voting system needs to be simple for the voter to understand and for the IEC to execute. Conclusion The ISI wishes to thank the PC for the opportunity to make this submission. It is our humble submission, however, that what is trying to be achieved is to amend a system that is not amendable. What is required is a completely new system. To this end we propose an urgent electoral reform dialogue between the public policymakers and civil society to, given the tight timeframes running up to the 2024 general election, chart a practical way forward that satisfies both the broader public sentiment and the practical considerations for delivering an on-time, free and fair election in 2024. Sincerely yours, DW SWANEPOEL CHIEF EXECUTIVE OFFICER ________________________________________________________________________ PO Box 12609, Mill Street, Cape Town, South Africa, 8010 Spaces ▪ 1006 One Thibault, 1 Thibault Square, Cape Town, South Africa, 8001 Tel: +27 (0) 21 201 1589, Email: admin@inclusivesociety.org.za, Website: www.inclusivesociety.org.za, 235-515 NPO PBO 930069173 VP Khanyile (Chairperson), Z Ndevu (Deputy Chairperson), K Millard, K Khoza, S Muller, D Swanepoel (CEO)

Copyright © 2023 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 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 permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place in August 2022 December 2023 Author: Mariaan Webb, Creamer Media Writer Editor: Daryl Swanepoel Content Abbreviations & acronyms Overview Construction mafia tactics Root causes & perspectives Law enforcement initiatives Recommended interventions & actions Conclusion References Abbreviations & acronyms DPP: Director of Public Prosecutions HDI: historically disadvantaged person ISI: Inclusive Society Institute PPPFA: Preferential Procurement Policy Framework Act SAPS: South African Police Services Overview South Africa’s construction industry, traditionally a key driver of economic growth and development, has been grappling with a significant challenge in recent years – the encroachment of criminal elements. Known as construction mafias, these illicit networks initially surfaced in KwaZulu-Natal about a decade ago. Their influence has since expanded across all provinces, resulting in significant losses to the economy. Construction sites, ranging from small-business driven to large-scale projects, serve as prime targets for these decentralised syndicates. Leveraging local connections, they employ tactics such as extortion, violence, intimidation and disruption to advance their objectives. Extortion has seeped into the fabric of the business landscape and is now considered an unfortunate cost of doing business (Venter, 2023). This report encapsulates key insights from a seminar conducted by Inclusive Society Institute (ISI), centred on the repercussions of construction mafias on the construction industry. The seminar served as a follow-up to a previous construction summit, during which the profound impact of these illegal activities on the industry was highlighted as a major concern. Addressing the challenges posed by construction mafias is imperative to revitalise this vital sector of the economy. Over the past 15 years, the once-thriving construction industry has experienced a sharp decline, in large part owing to the government’s failure to deliver on promised infrastructure projects. Re-establishing the industry on a solid foundation is crucial, given the powerful role that construction can play in poverty reduction. Construction has an inherent capacity to generate additional economic output and jobs, particularly for low-skilled and semi-skilled workers. Construction mafia tactics Construction mafias, often labelled ‘business forums’, are networks that employ violence and other illegal means of controlling access to public sector procurement opportunities. These groups typically invade construction sites, demanding money or a stake in development projects. In 2019, at least 183 infrastructure and construction projects worth more than R63-billion had been affected by the construction mafia. Since then, invasions have continued at construction sites across South Africa (Organised Crime and Corruption Reporting Project, 2022). The interpretation of the Preferential Procurement Policy Framework Act (PPPFA) plays a key role in the activities of construction mafias. The PPPFA, aimed at promoting economic transformation and empowering historically disadvantaged individuals (HDIs), designates that 30% of public procurement contracts should be allocated to designated groups. Construction mafias misuse this provision, demanding that 30% share of the contract value accrue directly to forum members or the forum itself. Despite portraying their actions as aligned with transformation goals, the National Treasury condemned this practice as illegal. Such exploitation undermines the intended objectives of the PPPFA, hindering uplifting of HDIs and small businesses (National Treasury, 2018). Often intertwined with this deliberate misinterpretation of the PPPFA are other causes that escalate violence on construction sites, including unreasonable community expectations, gangsterism, and the exploitation of high unemployment levels during community protests against infrastructure projects. According to the South African Police Services (SAPS), construction mafias employ a range of tactics, including threatening projects with violence and heavy weaponry, demanding a share without genuine interest in the job itself. Their criminal activities extend to terrorising, intimidating, assaulting, and in some cases, even killing employees or managers on site. The use of such disruptive tactics aimed at hindering progress on construction projects is also often accompanied by theft. In gang-infested areas, like Cape Town, in the Western Cape, gang leaders go further by registering companies. If their demands for the 30% share are not met, they employ mafia tactics to intimidate construction projects. Additionally, they may coerce constructors into paying protection fees to avoid rival gang interference. This tactic further underscores the complex intertwining of criminal elements with legitimate business activities in these regions. The construction mafia has progressively established political connections, aligning with specific factions within the governing party. This association provides protection and facilitates access to state procurement opportunities. The external interference has led to increased uncertainty in fulfilling contract obligation. Contractors must now navigate not only legal and contractual requirements, but also an environment fraught with demands and threats imposed by criminal elements. This interference has created a challenging environment for contractors, impacting their ability to meet project milestones and completion deadlines. Moreover, the interest in heading off the activity of such mafias has seen the selection of subcontractors and suppliers becoming a precarious process, resulting in compromised quality and delayed project timelines. Contractors are caught between honouring legitimate contractual commitments and addressing illicit pressures from the construction mafia. The criminal justice cluster is tasked with addressing this issue as per the National Development Plan Vision 2030. Root causes & perspectives Keynote speakers at the ISI’s Construction Mafia Summit shared their insights on the factors contributing to the emergence of the construction mafia, shedding light on the dynamics that fuelled its rise. Construction sites as symbols of economic freedom The discussion highlighted the symbolic importance of construction sites as potential catalysts for economic freedom. Unemployed youth and disenfranchised communities see these sites as avenues for brighter prospects. Emphasising the democratic route, this discourse rejected violence as a means to attain economic freedom and stressed adherence to democratic principles. Blurring public and private project lines The conventional distinction between public and private projects based on where the funding for projects is coming from, was challenged. Participants highlighted a shift in perceiving both public and private endeavours as entities to further broader public interest. This departure from the traditional dichotomy necessitates a renewed emphasis on transparency and accountability within the private sector. Communities are expressing a growing demand for active involvement in decision-making processes related to construction projects. This involvement extends to critical aspects such as land acquisition and the issuance of development permits. The call for transparency and accountability resonated as a means to ensure that both public and private initiatives align with the needs and aspirations of the communities they impact. Addressing economic inequality Persistent economic inequality in South Africa took centre stage in the discussions. According to World Bank statistics, the top 10% in South Africa earn more than 65% of the total national income and the bottom 50% just 5.3% of the total (Chancer et al, 2022). Historical legacies and insufficient addressing of social justice were identified as root causes. Businesses, especially within the construction sector, have been urged to embrace transparency, accountability and inclusive practices as means to address the widening wealth gap. The construction industry is consequently perceived as a battleground for economic inclusion and the addressing of racial discrimination, amid what is felt, by many, historically, to be a corruption-prone sector. A unified stance against economic disenfranchisement is needed, emphasising the need for the private sector to recognise transparency and accountability principles. Organised crime on the rise Organised crime, specifically within the construction sector, has witnessed a noticeable upswing since 2014/15. The rise in crime in general is attributed to a broader decline in State capacity, notably during a period of State capture. This era witnessed compromised integrity and capabilities in key State-owned enterprises, fostering corruption and diminishing law enforcement effectiveness. The decline in State capacity and inefficiencies within the law enforcement sector created an environment conducive to the flourishing of organised crime. Weak governance structures, including oversight mechanisms, contribute to a lack of accountability within law enforcement agencies. Criminal networks exploit this vulnerability in accountability and law enforcement, strategically targeting construction sites for financial gain. This trend has permeated throughout the country, resulting in significant economic repercussions. Organised crime is now an existential threat to South Africa’s democratic institutions, states the Global Initiative Against Transnational Organised Crime. It argues in a September 2022 report that a more strategic response is needed to organised crime to ensure a more stable future for South Africa. Left unchecked, organised crime and its associated illicit markets will continue to inflict serious harms (Global Initiative Against Transnational Organised Crime, 2022). Solutions to address the crisis in the SAPS, as identified in government policies and documents, are not being implemented, which cannot be blamed on a lack of resources as is often cited as the reason for the country’s crime crisis. The police budget has increased substantially over the last decade, yet its ability to solve crimes has significantly diminished. The Institute for Security Studies states that, over the last 11 years, the police budget has increased by 86%, but that its ability to solve murders has decreased by 55% and the ability to solve armed robbery has dropped by 53%. Addressing the crisis requires leadership reform within the police, reinforced governance structures, and the establishment of robust independent oversight mechanisms. A failure to share information and resources among government, civil society and the private sector also hinders efforts to combat organised crime. Law enforcement initiatives Law enforcement agencies have implemented targeted plans to combat the pervasive influence of the construction mafia. This operational approach is aligned with the national competence strategy, which is under the guidance of the national commissioner. This strategy is divided into two key components: the geographical approach and the organised crime approach. Under the geographical approach, intelligence operations are strategically positioned to gather information, identify hotspots and pinpoint problematic provinces. Police teams are deployed to these hotspots, with a clear mission to stabilise and normalise affected areas. Essential infrastructure teams are mobilised to address challenges in specific regions. The organised crime approach focuses on identifying individuals, syndicates and criminal entities involved in extortion within the construction mafia. Employing unconventional methods, law enforcement collaborates with the National Prosecuting Authority, engaging in prosecutor tutorial guided investigations. This collaborative effort extends to institutions like asset forfeiture and financial investigations, differentiating between major and project investigations. Cases are categorised as criminal groupings when individuals are not linked as syndicates. Since 2019, 712 cases have been reported, with 93 currently in court. A total of 722 suspects have been arrested and 96 cases are fully completed and referred to the Director of Public Prosecutions (DPP) for decision. The DPP has issued nonprosecution certificates in 34 cases. Moreover, 165 case dockets were closed due to a lack of further information. Of the completed cases, 50 were finalised after being received from court, leading to 52 convictions with a combined sentence of 89 years and seven months. The police’s multi-dimensional and multi-operational approach includes monthly stakeholder engagements in all provinces. These forums are co-chaired by the SAPS and the business sector. Recommended interventions & actions Conclusion The challenges presented by construction mafias constitute a complex and multifaceted issue, carrying far-reaching implications for South Africa. The urgent task of dismantling the construction extortion economy, especially in regions where it has entrenched itself, is formidable. Yet, overlooking the issue will have repercussions for both the construction sector and the nation at large. The repercussions transcend projects delays and associated costs. The overall toll includes lost investment, as the high-risk environment acts as a deterrent for foreign companies considering large-scale projects in the country. This, in turn, hinders economic growth and development. The emigration of skilled technical personnel further exacerbates the issue, depleting the pool of expertise available for crucial infrastructure projects. The South African Forum of Civil Engineering Contractors of South Africa made a plea for urgent government action in 2019. Directed to then Finance Minister Tito Mboweni, the plea highlighted the urgency in addressing the construction mafia. It specifically noted that 110 engineers and other highly skilled technical personnel had either left the country, or were on the verge of doing so, owing to personal risk to their lives and the lack of work because of projects being disrupted at gunpoint (Mfebe, 2019). In summary, the construction mafia is not merely a challenge of criminality; it is a complex issue which increasingly overshadows legitimate concerns about inequality and significantly impacts on the country’s economic landscape. Urgent and comprehensive collaboration is imperative to mitigate the immediate and long-term consequences of this phenomenon, ensuring the stability and growth of the construction sector, and by extension, the economy. References Chancel et al. 2022. World Inequality Report 2022. [Online]. Available at: https://wir2022.wid.world/www-site/uploads/2021/12/WorldInequalityReport2022_Full_Report.pdf [accessed November 22, 2023]. Global Initiative Against Transnational Organised Crime. 2022. Strategic Organised Crime Risk Assessment: South Africa. [Online]. Available at: https://globalinitiative.net/wp-content/uploads/2022/09/GI-TOC-Strategic-Organized-Crime-Risk-Assessment-South-Africa.pdf [accessed November 22, 2023]. Mfebe W. 2019. Construction industry up in flames: Urgent action required. [Online]. Available at: https://cdn.ymaws.com/www.safcec.org.za/resource/resmgr/press_releases/SAFCEC_Letter_to_Minister_of.pdf [accessed November 22, 2023]. National Treasury. 2018. Media statement: Alleged abuse of the 30% subcontracting requirements provided for the Preferential Procurement Regulations, 2017. [Online]. Available at: https://www.treasury.gov.za/comm_media/press/2018/2018080701%20Alleged%20abuse%20of%20preferential%20procurement%20regulations.pdf [accessed November 22,2023]. Organised Crime and Corruption Reporting Project. 2022. Extortion or transformation: The construction mafia in South Africa. [Online]. Available at: https://globalinitiative.net/analysis/extortion-construction-mafia-south-africa/ [accessed November 22,2023]. Venter, I. 2023. Is SA Inc fighting the construction mafia, or adapting to incorporate it?, Engineering News, June 27, 2023. [Online]. Available at: https://www.engineeringnews.co.za/article/is-sa-inc-fighting-the-construction-mafia-or-adapting-to-incorporate-it-2023-06-27#:~:text=The%20construction%20mafia%2C%20or%20so,employ%20specific%20people%20or%20subcontractors [accessed November 22, 2023]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 10/2023 Copyright © 2023 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 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. DECEMBER 2023 by Prof William Gumede Former Programme Director, Africa Asia Centre, School of Oriental and African Studies (SOAS), University of London; former Senior Associate Member and Oppenheimer Fellow, St Antony’s College, Oxford University; and author of South Africa in BRICS (Tafelberg). Introduction Special economic zones (SEZs) can still play a critical role in developing new industries, beneficiating raw materials, and diversifying South Africa’s exports. That is, if they are linked to the overall national development strategy, done in full partnership with business, and freed from the public sector’s governance problems – such as incompetence, corruption, and inefficiency – which have stymied SEZs up to now. SEZs, which are also termed export processing zones, free trade zones and free ports, are geographically demarcated areas which governments dedicate to specific industrial development by giving fiscal incentives, regulatory exemptions, and public infrastructure support (Aggarwal, 2008; Asian Development Bank, 2007; Cirera & Lakshman, 2014; Farole & Akinci, 2011; Fruman & Zeng, 2015). It is a key policy tool many high-growth economies in Asia have used to build manufacturing, export capacity, and lift economic growth (IFC, 2016; ILO, 1988; Ishida, 2009; Jayanthakumaran, 2003). The South African government has adopted as a policy objective the establishment of regional industrial zones – Special Economic Zones and Industrial Parks (IPs) – and corridors (Gumede, 2022a; Gumede, 2022b). The SEZs and IPs are recognised amongst the tools that are catalytic economic drivers in regional economy ecosystems. They drive continuous attraction, promotion and retention of direct domestic and foreign investment to achieve transformative industrialisation and sustainable economic growth in South Africa, especially in underperforming regions (Jayanthakumaran, 2003; Johansson & Nilsson, 1997; Cirera & Lakshman, 2014; Litwack & Qian, 1998; Rhee et al, 1990; Rodrik, 2004; Zeng, 2017; UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). The first industrial SEZ was established in 1959 in Shannon, Ireland. The country established the Shannon Free Airport Development Company, a development agency, to establish an industrial free zone, to generate alternative sources of traffic, business and tourism at the Shannon airport and adjacent area. Investors were given special tax concessions, simplified custom operations, and cheap investment attractions. The area was transformed into an air training base, maintenance and repair centre, and a tourist attraction. Global impact of SEZs According to the International Labour Organisation (ILO), by 2007, SEZs accounted for US$851 billion-worth of exports – which is around 41% of global exports – and for 68 million direct jobs created (ILO, 1988). Clustering infrastructure, industries, and public goods in one specific region, means that a country can leverage scale to build a critical mass of related, complementary, and synergetic value chain components that need similar skills, technologies, and market links. This forms an ecosystem that boosts economic development, attracts investment, and fosters an environment for innovation. Companies share resources, costs, and infrastructure. The overriding idea is to concentrate limited public funds, resources, and infrastructure on developing or establishing new industries with the help of private sector investment, skills, and technology. Importantly, as Douglas Zhihua Zeng (2017) argues, SEZs “should only be used to address market failures or binding constraints that cannot be addressed through other options. If the constraints can be addressed through countrywide reforms, sector-wide incentives, or universal approaches, then zones might not be necessary”. If successful, SEZs could provide positive spillovers to the rest of the economy. These spillovers can be direct or indirect. The direct impacts are rising economic growth, new manufacturing industries, and beneficiation (Jayanthakumaran, 2003; Johansson & Nilsson, 1997; Cirera & Lakshman, 2014; Litwack & Qian, 1998; Rhee et al, 1990; Rodrik, 2004; Zeng, 2017; UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). It boosts employment, increases local and foreign exchange income. It brings new technology, innovation and skills, and diversifies the economy. It increases the productivity, efficiency and competitiveness of local companies, the productivity of local labour, and the income of local citizens. Figure 1: The growth of SEZs around the world since 1975 (UNCTAD, 2019 SEZs Report) Why do countries establish SEZs SEZs are established because governments lack the skills, resources, and capacity to introduce nationwide reforms to establish conducive environments for investment attraction, industrial upgrading, and infrastructure development. Furthermore, as Douglas Zhihua Zeng argues, governments also established SEZs because they lack the capacity to tackle vested interests, capture, and political opposition to country industrialisation reforms, and then implement it on a smaller, more protected and ring-fenced scale, through SEZs. If a country lacks effective state capacity, public services, and infrastructure such as power, water and transport, SEZs – located in a smaller geographical area – could offer an opportunity to use the limited state capacity, public services and infrastructure to potentially great impact, which could catalyse other parts of the economy. However, if investments can be attracted, industrialisation fostered and technology, knowledge and skills acquired through normal policy avenues, incentives, and state-business partnerships, SEZs are not necessary. SEZs must only be established if constraints such as government corruption, incompetency and red tape cannot be addressed speedily in the broader economy, and SEZs then are established as smaller protective zones where these governance failures are absent. A critical part of the success of SEZs is that they need to be part of the overall national industrial strategy of a country – they must be exempt from the inefficiencies, corruption and mismanagement normally associated with developing country governments and must respond to real market demands (Warr, 1989; Watson, 2001; White, 2011; Wolman, 2014; Zeng, 2017). Some of the purposes of SEZs are to create new industries that do not exist at the time, beneficiate raw materials and so create new value-add industries, attract foreign investment when it is difficult to do so under normal circumstances, and to develop an export economy. SEZs can also be specifically established to transfer new technology, knowledge, and skills that the country lacks, but are critical to industrialisation. The SEZ is almost an incubator, where experimenting, manufacturing, innovation, and learning can happen behind protective barriers – and the final product then exported to global markets. SEZs have been crucial in skills, technology and knowledge transfer and industrial upgrading from basic to value added industries in South Korea, Taiwan, and Singapore. Dubai created a successful Dubai Internet City SEZ, which attracted the world’s largest technology companies, such as Microsoft, Oracle, and IBM. Dubai also created universities as special economic zones, bringing in foreign universities, teachers, and technology to accelerate skills transfer, technology upgrading and innovation (Khaleej Times, 2019). Africa, Morocco, and Nigeria set up SEZs to penetrate the European Union market (Bräutigam & Tang, 2010; Farole, 2011; Fruman & Zeng 2015). Rwanda set up SEZs to manufacture new products for exports. Within three years, 3% of Rwanda’s workforce were employed in its new SEZ. Mauritius set up SEZs to produce processed sugar for export. Such was the Mauritian success, that when the sugar industry was at its peak, the country dominated 50% of the EU market for processed brown sugar (Bräutigam & Tang, 2010; Serlet, 2022). The SEZs must be a zone of competent management, corruption-free, devoid of public sector red tape, and effectively integrated within local and global markets. SEZs must have a specific industrialisation purpose and must not become a collection of subsidised warehouses that create jobs artificially at great cost, as has been the case in many failed SEZs in Africa and South Africa. Many researchers worry that SEZs may only develop certain parts of a country, creating “enclaves”, and the impact will not be transferred to the wider economy. The rise of SEZs Taiwan in 1966, Singapore in 1969, and South Korea in 1970 were amongst the first to create SEZs (Asian Development Bank, 2007). Both Singapore and South Korea established SEZs to use their cheap and available labour, to foster labour-intensive, export manufacturing industries and attract foreign investment – based on giving investors incentives for setting up these industries (Lall, 2000). Singapore established SEZs to build a transhipment trade hub, removing goods and service taxes on products. By the 1970s Singapore created specialised SEZs, particularly to build the petroleum refinery-related industry (Koh, 2006). Singapore has established more than 400 companies trading in petroleum and related products since it established its first SEZ in 1969. For another, the creation of the petroleum refinery-related industry has spurred associated and related petroleum business, including professional services, research and development, and marketing and sales. After the Asian financial crisis, these East Asian states changed the focus of their SEZs, as economic circumstances changed, to industrial upgrading, productivity increases and innovation (UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). They moved their SEZs from low-skilled, low-cost labour to value added activities and technology – these economies now had developed high-skilled workforces, for high-skilled labour. For example, these countries introduced technology, biotechnology, science, and software SEZs. China successfully used SEZs as zones of experimenting to develop the market system, while building new industries the country did not have and learning new technologies it lacked. China launched its “Open Door” reforms in 1978 to introduce market reforms in selected regions, in what former Chinese leader Deng Xiaoping called “crossing the river by touching the stones” (Shen & Xu, 2011; Sklair, 1991). The Chinese SEZs were zones where the usual government red tape, corruption and ideology were set aside, focusing on securing foreign investment by giving incentives, attracting new technology and knowledge. The Chinese SEZs built new industries, created new jobs and new export industries (Shen & Xu, 2011; Sklair, 1991). It fostered positive spillovers to the economy – new knowledge, new technology, and new management techniques were transferred to other parts of the economy, which lifted economic growth, development, and the country’s competitiveness (Shen & Xu, 2011; Sklair, 1991). It is estimated that SEZs have contributed to 22% of China’s GDP, 41% of the country’s foreign direct investment, and 60% of its exports. China’s technology commercialisation rate is around 10%. However, in SEZs the technology commercialisation rate is around 60%. SEZs in Africa There are an estimated 237 SEZs in Africa, found in 38 countries (Farole, 2011; Fruman & Zeng, 2015). Mauritius introduced Africa’s most successful SEZs. In 1970, the country established its first SEZ to manufacture textiles and garments, food and beverages, and batteries for export. In the Mauritius export processing zone, companies are free to locate anywhere on the island. Mauritius’ 1970 Export Processing Act broke from the typical post-colonial African import substitution strategy to one of an export-led industrialisation strategy. Mauritius was more successful than many African countries in that it focused on export-led growth, and the SEZ was part of its export-led industrialisation strategy, not a standalone policy like in many African countries where SEZs have had pedestrian results (Bräutigam & Tang, 2010). Mauritius allowed duty-free imports of inputs meant to be used to make products for export. The country gave tax holidays to exporters. Exporters were given reduced rates on power, water and building materials – charging rates similar to international competitors. Domestic companies who were exporters received credit from banks at lower interest rates. The Mauritian government was careful to push labour-intensive production, to soak low-skilled unemployment. Cheaper credit was calibrated in such a way that companies did not shirk labour-intensive for capital-intensive production, because of the cheaper capital available. Mauritius’ priority was to get manufacturing going in the country – whether it was foreign owned or not – transferring knowledge, technology, and skills, and so, fostering positive spillovers to the rest of the economy. Mauritius placed no restrictions on foreign ownership of manufacturing companies – unlike many countries in post-colonial Africa. The country has been governed more pragmatically than almost all African countries, by spending more attention on building and maintaining reliable infrastructure. Mauritius, governed for most of its postcolonial history by coalitions, has been Africa’s most stable country – it has managed its public finances prudently and is amongst the least corrupt – which is an immediate attraction for investors (Gumede, 2022a). The country also prioritised making its public service competent. The SEZs were governed competently, honestly, and pragmatically. By 1988, employment in Mauritius’ SEZs was 85% of total manufacturing employment and 31% of total country employment. By the late 1980s, value add produced in SEZs made up 12% of GDP. More recently, Ghana, Ivory Coast, and Nigeria were successful in processing cocoa through SEZs, by partnering with Western companies to co-produce chocolate, the value-add of cocoa, for export, rather than exporting raw, unprocessed cocoa (Gumede, 2022a; Gumede, 2022b). The value-add chocolate creates more jobs, and earns more money, than the raw commodity cocoa. Morocco and Nigeria have also recently established successful SEZs in partnership with foreign investors to penetrate the European Union market. Rwanda has successfully established SEZs in partnership with industrial country companies to manufacture new products for exports. SEZs in South Africa: The Tshwane Automotive SEZ The ANC government has adopted the policy of SEZs as one of its pillar strategies to lift growth, boost investment, and increase job creation (Majola, 2023). The South African SEZ programme started with the Industrial Development Zone policy review in 2007 by the Department of Trade, Industry and Competition (the dtic). The SEZ Act stipulates that SEZs should have a feasibility study and business case. Most of South Africa’s SEZs are state operated. There are 11 designated SEZs, with nine fully operational. They have attracted 167 operational investors, with total private investment of R21,9 billion, and created almost 20 000 operational jobs. The SEZs include Saldanha Bay in the Western Cape, Dube Trade Port and Richards Bay in KwaZulu-Natal, East London and Coega in the Eastern Cape, Maluti-A-Phofung in the Free State, Musina Makhado in Limpopo, and Tshwane Automotive in Gauteng. The Tshwane Automotive SEZ launched in South Africa in 2019 appears to offer the prospect of being a model SEZ. It secured and was driven by a private sector anchor, Ford Motor Company. The company invested over R15 billion to produce the next generation of Ford Rangers. Ford, the national and provincial governments, and the City of Tshwane are co-governing the SEZ in a public-private partnership. Ford is represented on the management board of the entity, which includes representatives of the dtic, Gauteng Department of Economic Development, and the City of Tshwane. Staff from the Eastern Cape SEZ, Coega, were deployed to assist in the establishment of the Tshwane Automotive SEZ. This is one of the rare occasions where all spheres of government are involved in a governing partnership with the private sector. The Tshwane Automotive SEZ was co-designed from the start with Ford and has been given clean audits since its inception. The government has spent R2 billion on the project, with material inputs for the production aimed at 45%. The SEZ will, in cooperation with Transnet, develop a rail-to-port corridor for vehicle and components exports – which will include Tshwane and Gqeberha, in the Eastern Cape – the completion of which is a critical component that will determine the success of the SEZ. Figure 2: Special Economic Zones in South Africa Critical success factors for SEZs Before a country establishes SEZs it must put together a national industrialisation, economic growth, or long-term development plan (Aggarwal, 2008; IFC, 2016; ILO, 1988; Ishida, 2009; Jayanthakumaran, 2003). Such a plan must be based on an analysis of the state of the country’s economy, its development needs, and its human capital. There must be an assessment of the comparative advantages – the resources – the country has, what it can do with domestic resources, capital, and skills, and what will need to be built with outside help. Related to this, there must be a comprehensive analysis of the country’s comparative position in the global economy, trade, and supply chains. A central pillar of any country’s industrialisation, growth and long-term development strategy is how to build local production capacity (Aggarwal, 2008; IFC, 2016; ILO, 1988; Ishida, 2009; Jayanthakumaran, 2003). Establishing SEZs, for example, could be a mechanism to build local production capacity through attracting foreign investors to the SEZs and then getting them to upgrade local production capacity, by partnering, transferring technology, skills and knowledge, and sourcing inputs from local firms. There must be clear reasons for the establishment of SEZs, including how they fit into the national industrialisation, development, or long-term country economic growth plan (Gumede, 2022a; Gumede, 2022b). For example, if the intention is to attract foreign direct investment – which the country cannot do through traditional methods – the objective of attracting investment through the SEZs must be integrated into the country’s economic growth plan. There must be a business case for SEZs (Zeng, 2017), meaning there needs to be a global demand and a market for the products manufactured in the SEZs. SEZs must be embedded in the comparative advantage of the country. They cannot be established based on political, ideological, and interest-group considerations. It is crucial that SEZs form part of a country’s national long-term development or industrialisation plan, rather than operating as standalone job creation exercises. Once the business case for SEZs has been made, there must be an assessment of the implications of establishing them for existing businesses, institutions, and policies. After this, SEZ laws, policies, and supporting and governing institutions will have to be created. Well-thought out, pragmatic and credible laws, regulations, and institutional frameworks are crucial to govern SEZs. Governments must implement these consistently, honestly, and competently to foster investor, market, and society confidence that SEZs are not simply going to be another avenue for corruption, self-enrichment, and failure (Gumede 2022a; Gumede 2022b). The business environment must be conducive, efficient, and friendly. The costs of doing business – registration, logistics and customs – should be conducive to companies setting up. The public infrastructure – power, rail, and water – for SEZs must be working, reliable, and cost effective. Poor, unreliable or lack of infrastructure is a significant factor increasing the costs of doing business, global pricing competitiveness of products manufactured and of labour utilisation. Sound infrastructure is a vital competitive advantage for investors to set up shop in an SEZ – without it, it makes no sense. SEZs must also be linked to the supply chains of local industry (Jayanthakumaran, 2003; Johansson & Nilsson, 1997; Cirera & Lakshman, 2014; Litwack & Qian, 1998; Rhee et al, 1990; Rodrik, 2004; Zeng, 2017; UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). Local firms must provide the inputs, material, and services to the companies in the SEZs. If local firms do not have the capacity to do so, it will be crucial for governments to also provide them with assistance, incentives, and rebates to enable them to link into the supply chains of the SEZ firms. Doing this considerably maximises the positive spillover effect of SEZs. South Korea, Taiwan, and Singapore, for example, provide tax rebates, technical assistance, and infrastructure subsidies for local companies to their SEZs, to foster backwards linkages between SEZ companies and local ones. In addition, there must be a clear strategy of how local firms will be linked to the supply chains of the global firms in the SEZs (UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). Many global firms buy more than half of their inputs from other firms and outsource their manufacturing to other smaller firms. In such cases they only retain design, marketing, and research and development functions. It is important that, as part of the industrialisation strategy, a country encourages global firms attracted to the SEZs to source their inputs locally. And if local companies do not have the capacity to produce inputs for global companies, the SEZ strategy must outline how the capacity of local firms could be built up with the support of foreign investors. This would usually involve incentives being given to foreign players to build the capacity of local suppliers through transferring skills, technology, and providing financial support, where necessary. Governments must actively intervene to overcome market failures in the value chains linking local suppliers to that of international investors (Jayanthakumaran, 2003). For example, local suppliers may not know about the opportunities available to produce inputs for international companies. At the same time, the international companies may not know of the existence of local companies with the capacity to provide inputs for their products. In some cases, the inputs of local companies may be of too poor a standard or too costly for global firms. Government SEZ policy must then provide tools to help local firms to produce quality inputs at affordable prices for global investors. Also, in many cases developing country hosts of SEZs employ predominantly unskilled citizens because educational institutions are weak, ineffective, and under-resourced. The SEZs can be a catalyst to establish new training institutions, research, and development centres, and to upgrade existing ones. There must be clear monitoring, evaluation, and assessment mechanisms to ensure that SEZs are on track to meet their stated objectives (Gumede 2022a; Gumede 2022b). There must be benchmarking of SEZs against comparable successful ones elsewhere, and mechanisms need to be in place to intervene if they are in danger of veering off course. Those managing SEZs must be held accountable for delivering on the stated objectives of the entities. China, for example, in 1996 issued an official administrative decree for the compulsory regular evaluation of SEZ performance: SEZs that are poorly managed, not meeting their development targets, and growing too slowly lose their SEZ status. Chinese SEZs are evaluated based on several performance indicators, including knowledge creation and technological innovation – which are measured based on how much the education level of employees has been uplifted – R&D expenditure, the number of R&D institutions and technology innovation incubators established. Another performance indicator is the level of industrial upgrading and how structural optimisation capabilities have been boosted, which are measured by the number of new high-tech companies created, the number of services firms established, the number of intellectual property registrations, and the number of listed companies attracted to the SEZ. The SEZ performance in China is also measured based on how local companies developed in the SEZs penetrate international markets and fare in global competition, by the ratio of their employees who have received education abroad, and the number of intellectual property registrations lodged abroad (Asian Development Bank, 2007). The Chinese SEZ performance is also measured in relation to companies’ sustainable development capacity increases, by way of looking at the number of employees with master’s and doctoral degrees, the increases in taxable revenues, the growth rate of the companies, and the amount of new investment undertaken. SEZs could be fully government or business owned or could be public-private arrangements. In developing countries, the SEZs that have been fully government owned have mostly failed – as all the governance failures of the public sector, such as corruption, incompetence and red tape are also repeated in the SEZs, making them unviable. Public-private arrangements, in which the private sector co-govern and co-manage, have generally been the most successful. An effective, competent, and pragmatic management structure is crucial in managing an SEZ, and sound operational management skills are vital to its success. Many SEZs in African countries and in South Africa fail from the same lack of implementation and execution management capacity found in their public sectors – especially if the same incompetent public sector managers are operating the SEZs. It is also important that the SEZs’ good infrastructure development is from time to time transplanted to the wider region in which they are situated. This means that the infrastructure built for the SEZs must be part of an integrated public infrastructure development programme, whereby the SEZs’ public infrastructure investment would be the anchor of broader infrastructure expansion. Another point is that SEZs are often giant industrial structures that could damage the environment significantly. Therefore, the construction and management of SEZs must be done in such a way that it protects the environment, which many first generation SEZs neglected. Many are now trying to clawback environmental destruction in the wake of mass industrialisation that took place without taking the environment into account. It is very important that SEZ investors be required to report on environmental, sustainability and governance (ESG) performance. Many of the first generation SEZs’ construction also rarely consulted with local communities, civil society, and interest groups. It is essential that new SEZs do not repeat this mistake. If a site chosen to construct the SEZ involves uprooting local communities, acquiring their land and property, the process must be done in consultation with them, fairly and compassionately. Consultations of local communities, civil groups and interest groups are also essential in identifying the local comparative advantages and to link the SEZ investor activities with local input, material, and services – and so, crucial to maximising the positive spillover effect of the SEZs. Why SEZs have failed in many African countries Some SEZs in African countries have failed for the same reasons that development has failed in these countries (Farole, 2011; Fruman & Zeng, 2015). These reasons include SEZs not being integrated as part of a national growth, industrialisation, or long-term development strategy. SEZs are often set up for ad hoc policy objectives, such as only job creation or only attracting foreign investment. In Africa, only Mauritius, Rwanda, and Morocco made SEZs part of their national development strategies. In many African countries, SEZs are often set up for ideological, patronage, and corrupt reasons – and without making a business case. In many cases African governments established SEZs without having anchor private sector investors, with the exception of Mauritius, who was successful with its SEZs in developing a processed sugar export industry because the government partnered with European processing companies. African SEZs have not prioritised linking industries to global value chains (Jayanthakumaran, 2003). They also have not prioritised using SEZs to develop new industries for export. Neither have African countries used SEZs to add value to the primary commodities they export, or to upgrade their countries’ skills, industrial and technology bases. Projects are often not decided based on a business case, but rather on which company gives the largest kickback. A case in point, the CEO of South Africa’s Dube Port SEZ was suspended because of alleged corruption. Many African and South African SEZs are not internationally competitive – and are economically non-viable. To add insult to injury, the public sector governance failures – such as incompetence, corruption, and inefficiency – that often undermine development, delivery and efficiency in South Africa and African countries, are often replicated in SEZs. These problems have stymied SEZs and continue to do so. The legal, regulatory, and institutional structures of SEZs are often lacking or poorly defined – open to different interpretations or not consistently implemented. Furthermore, in some cases, although national governments decree SEZs, they in many instances do not give them the financial, infrastructure or political support they need. New governments, whether national or provincial, often withdraw support for SEZs established by their predecessors. Furthermore, SEZs in African countries often take a long time to put legal, regulatory, and institutional structures in place – and sometimes even longer to operationalise. Incentives are regularly either uncompetitive or overgenerous, undermining local industry outside the SEZs. Business procedures are slowed down by red tape, and special customs and tax are incoherently applied. Governments often do not have an adequate understanding of the requirements of businesses they want to invest in the SEZs. Many African and South African SEZs start without any anchor business investor, which means that the state is the anchor or biggest investor. In South Africa, the most successful SEZ is the Tshwane SEZ, which started with an anchor investor, the Ford company. Public infrastructure in African and South African SEZs is often as bad as in other parts of South Africa, with the supply of power, water, rail, roads, ports, and internet frequently not consistent. This makes it unproductive for investors to set up in SEZs – as the cost of infrastructure is a determining factor. In South Africa, and in many African countries, the governance management structures of SEZs are in many instances run solely by the state – and the corruption, incompetence, and mismanagement that is found there is oftentimes replicated in the SEZs. One of the reasons for the success of the Tshwane SEZ has been the partnership between the government and the private sector, where both co-govern the management structure. Many African and South African SEZs are not linked to their domestic economies, but operate largely as enclaves, disconnected from the national economy and local businesses (Litwack & Qian, 1998). Investors in SEZs are also insufficiently linked to local suppliers. And there are for the most part no special efforts to strengthen the capacity of local suppliers who may not have the capacity to deliver inputs to foreign companies in the SEZs. For another, SEZs also often do not integrate primary, secondary, and tertiary industries into the investor supply chain. Unlike in China, Singapore, or Taiwan, African and South African SEZs regularly do not integrate the boosting of research and development into the industrial value chains of companies in the SEZs (Zeng, 2017). The technical learning, knowledge transfer, and industrial upgrading is therefore not as effective as it has been in many Chinese, South Korean, or Singaporean SEZs. This means that the positive spillover effects of SEZs are absent or minimised. Many African and South African SEZs have faced opposition because they were constructed on sites where local residents had to be forced off their land, moved out of their homes, and their ancestral and historical sites disturbed. This has led to local communities often being hostile to SEZs in their areas. For example, communities opposed the construction of the Makhado, in Limpopo, and Dube Port, in KwaZulu-Natal, SEZs over allegations that their land rights had been trampled on. It is therefore crucial that land, property, and historically sensitive site disputes with local communities over the location of SEZs are resolved in a participatory manner. More importantly, SEZs must not be located on sites where it involves displacing communities, expropriating their property, and desecrating their historical sites. SEZs: Policy lessons for South Africa There has to be a solid business case for creating an SEZ. However, many of South Africa’s SEZs have been established without a credible business case. In 2001, the government established the Coega Industrial Development Zone in Gqeberha to create an integrated steel producing hub. The steel hub was not based on a business case that looked at global demand over the coming years. Not surprisingly, the government struggled to attract initial anchor business investors. The business case for the Musina Makhado SEZ in Limpopo is also not clear. The Musina Makhado SEZ is supposed to be an energy metallurgical cluster centred around a coal cluster, which consists of 20 interdependent industrial plants, including ferrochrome, ferromanganese, stainless steel, high manganese steel and vanadium steel, thermal, coking, coal washery and lime, and cement plants. The Limpopo provincial government said 11 memorandums of understanding have been signed with the Chinese government for investment of around US$1.1 billion. The government said 70% of what would be produced will be exported to China. But there is a real danger that the Musina Makhado SEZ may not align to global demand, so crucial to the success of any SEZ. In September 2021, China’s President Xi Jinping (Volcovici, Brunnstrom & Nichols, 2021) told the United Nations General Assembly that China will not build any new coal-fired power projects overseas, in support of increasing its green and low-carbon energy footprint in developing countries – which raised questions around building a coal cluster SEZ in Limpopo based on exports to China. The South African government often takes a long time to put legal, regulatory, and institutional structures in place for SEZs – and sometimes even longer to operationalise. When finally in operation, business procedures are slowed down by red tape, and special customs and tax are incoherently applied. In comparison, the Hamriyah Free Zone in Sharjah, in the United Arab Emirates could grant a license to establish a business within 24 hours of submitting all the required documents. The problem is that South African national, provincial or city governments often do not have an adequate understanding of the requirements of businesses they want to invest in the SEZ. The government services provided for SEZs are also frequently not tailored for the investors they want to attract. Then Trade and Industry Minister Rob Davies announced the formation of the Musina Makhado SEZ in 2017. However, the project has yet to get off the ground. In March 2021, the Limpopo Economic Development and Tourism Department temporarily stopped the project, saying its environmental impact assessment was “insufficient”. The project was also deemed not to have widely consulted with local communities, traditional authorities, and farmers. Countries face heavy competition for foreign investment, which can go anywhere in the world. This means countries cannot afford to give the same or a lesser value proposition to competitor countries. Despite this, incentives to attract private sector investors in South Africa are often uncompetitive. South Africa’s special economic zone tax incentive was introduced into the Income Tax Act, but it is overly bureaucratic compared to other countries’ SEZ tax incentives – for example, to qualify, the Minister of Trade and Industry and Minister of Finance must approve. Qualified companies can get a reduced corporate tax rate of 15% instead of the current 28% rate (SARS, 2018). Furthermore, companies could get an accelerated depreciation allowance of 10% on cost of any new and unused buildings or improvement owned by the qualifying company (SARS, 2018). Morocco, in comparison, has seven Special Economic Zones, with no corporate taxes for the first five years and significantly reduced rates thereafter (Böhmer, 2011). In Morocco, companies have exemption from building and equipment tax for the first 15 years, and goods entering or leaving the SEZ are not subject to laws on foreign exchange. Companies are also exempted from dividends and share taxes when paid to non-residents and a low tax rate of 7.5% if they are paid to locals. Morocco has built a successful aeronautics industry through attracting global aeronautics players to manufacture for export in the country – with the export industry now accounting for US$2 billion in export revenues. It is critical that SEZ industries are linked to the local enterprises – through market opportunities, access to finance, technology, and training (Rifaoui, 2021). Morocco has focused on building full industry ecosystems in the SEZs, using the SEZs to develop an export manufacturing sector in very specific areas. The country has, importantly, ensured that all the firms in the SEZs are industrially interconnected, linked to local players, and the products linked to global supply chains. In South Africa, Coega, after a slow start, has increasingly fostered linkages with local SMMEs. During the 2015-2020 period, there was a 35% SMME procurement participation rate (Coega, 2020). The Hamriyah Free Zone in Sharjah, in the United Arab Emirates, incorporates fiscal incentives, which include complete exemption from taxes, customs and commercial levies; and financial incentives, which include low rents and subsidised energy (Böhmer, 2011). Many global firms want infrastructure incentives to invest in SEZs (Rodríguez-Pose et al, 2022). South Africa not only generally does not offer generous infrastructure incentives, but the country’s infrastructure – power, rail, and ports – is also deteriorating, which is actually a disincentive to attract investors for local SEZs. The success so far of the Tshwane SEZ is instructive for other SEZs in South Africa. The Tshwane Automotive SEZ launched in 2019 was initiated by government securing a private sector anchor investor first – the Ford Motor Company – rather than government being the anchor investor. The Tshwane SEZ is co-governed in a genuine public-private partnership. Most SEZs in South Africa have been state-led and started without a private sector anchor investor. In the Tshwane SEZ, Ford, the national and provincial governments, and the City of Tshwane have been co-governing the SEZ in a public-private partnership from the start. Ford is represented on the management board of the entity, which includes representatives of the dtic, Gauteng Department of Economic Development, and the City of Tshwane. The SEZ has been given clean audits since its inception, and the government has spent R2 billion on the project. In South Africa, SEZs have not been integrated into a long-term development plan, industrialisation, or growth plan. Such a plan must be based on an analysis of the state of the country’s economy, its development needs, and its human capital. Related to this, there has to be a comprehensive analysis of the country’s comparative position in the global economy, trade, and supply chains. In fact, most of the SEZs in South Africa have been set up for ad hoc policy objectives, either by national or provincial governments, such as only job creation or only attracting foreign investment. Many of South Africa’s SEZs operate largely as enclaves, disconnected from the national economy and local businesses. Investors in SEZs are insufficiently linked to local suppliers. There are often no special efforts to strengthen the capacity of local suppliers who may not have the capacity to deliver inputs to foreign companies in the SEZs. For another, SEZs also often do not integrate primary, secondary, and tertiary industries into the investor supply chain. SEZs have also not been able to effectively upgrade South Africa’s skills, industrial and technology bases. Unlike in China, Singapore, or Taiwan, African SEZs also often do not integrate the boosting of research and development into the industrial value chains of companies in the SEZs. The technical learning, knowledge transfer and industrial upgrading in South African SEZs has therefore not been as effective as it has been in many Chinese, South Korean or Singaporean SEZs. This means that the positive spillover effects of SEZs are absent. The problem for South Africa is that SEZs have not delivered the volume of export manufacturing, value add production or employment as expected. Neva Makgetla writes that national government transfers to SEZs amounted to R1.1 billion in 2020-2021, from R600 million in 2013-2014, and after a peak of R1.7 billion in 2017-2018. However, Makgetla rightly says that these figures excluded provincial transfers, which for example in the Eastern Cape ran up to R500 million a year (Makgetla, 2021). According to the dtic figures, in 2021, Coega accounted for half of the private investment to SEZs, the East London IDZ accounted for 20% and the Dube Trade Port for 10% (dtic, 2021; Makgetla, 2021). Over the 2013 to 2019 period, manufacturing employment dropped by 3.7% and valued added manufacturing only rose 0.7% (Makgetla, 2021). Many of South Africa’s SEZs have frequently faced opposition because they were constructed on sites where local residents were forced off their land; or they were constructed without being sensitive to the environment (Buthelezi, 2022). This has often caused the SEZs to face community, court, and civil society challenges – making it difficult for them to get off the ground. There really needs to be greater consultation and involvement of local communities and environmental safeguards when sites for SEZs are identified. Conclusion The location of SEZs is no longer a comparative advantage, which means that SEZs will have to be internationally competitive. SEZs can only be successful and competitive if they are a well-thought-out part of a national development, growth, and industrial plan. There must be a business case for SEZs, based on the country’s comparative advantages, and they must be internationally and locally competitive. They have to be governed competently, honestly, and according to consistently implemented laws. SEZs have to be closely monitored, benchmarked, and have clear goals. They must be held accountable for their performance, and if they fail, they may have to in some cases be reduced as SEZs. They must also operate in ways that safeguard the environment, use green technology, and uphold human rights. SEZs must resolve Africa’s industrialisation challenges, including the inability since colonialism and apartheid to link African products to global value chains. In addition, Africa has not only struggled to add value to its primary commodities, but has also struggled to build manufacturing, diversify product offerings, and produce export industries. Africa has been unable to secure new technology, knowledge, and skills. The reality is that unless SEZs can help African countries accomplish all these important tasks, there is no business case to establish them. 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