The Zuma Administration Critical Challenges

Edited by Kwandiwe Kondlo & Mashupye H Maserumule

DEMoCRACy AND GovERNANCE RESEARCH PRoGRAMME

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The Zuma Administration

Free download from www.hsrcpress.ac.za

The Zuma Administration Critical Challenges
Edited by Kwandiwe Kondlo & Mashupye H Maserumule

Free download from www.hsrcpress.ac.za

Free download from www.hsrcpress.ac.za

Published by HSRC Press Private Bag X9182, Cape Town, 8000, South Africa www.hsrcpress.ac.za First published 2010 ISBN (soft cover) 978-0-7969-2316-5 ISBN (pdf) 978-0-7969-2317-2 ISBN (epub) 978-0-7969-2318-9 © 2010 Human Sciences Research Council Copyedited by Jacquie Withers Typeset by Simon van Gend Printed by XXXXXXXXXXXXXXXXXXXXX Distributed in Africa by Blue Weaver Tel: +27 (0) 21 701 4477; Fax: +27 (0) 21 701 7302 www.oneworldbooks.com Distributed in Europe and the United Kingdom by Eurospan Distribution Services (EDS) Tel: +44 (0) 20 7240 0856; Fax: +44 (0) 20 7379 0609 www.eurospanbookstore.com Distributed in North America by Independent Publishers Group (IPG) Call toll-free: (800) 888 4741; Fax: +1 (312) 337 5985 www.ipgbook.com

Contents
Preface v Abbreviations and acronyms 1 2 3

vii 1 15

Introduction: political and governance challenges Kwandiwe Kondlo

Consolidating a developmental state agenda: a governance challenge Mashupye H Maserumule Rural development under a ‘developmental state’: analysing the policy shift on agrarian transformation in South Africa Gilingwe Mayende Public service delivery issues in question Modimowabarwa H Kanyane 77 95

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4
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Governmental relations in a maturing South African democracy David M Mello

Socio-economic development and poverty reduction in South Africa Polly Mashigo 145

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Contributors

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Preface
This book examines the challenges accompanying the transformation of the political economy and society of South Africa since 1994 – which now present challenges and prospects for the new administration that took office in May 2009 under the leadership of Jacob Zuma. The book provides interpretation, critique and fresh perspectives on political and administrative dynamics since the birth of democracy in 1994, to the era of the Mbeki administration (1999–2008), and then to the transition to the Zuma administration. That transition was led by the now deputy president, Kgalema Motlanthe, who provided ‘stop-gap’ presidency from September 2008 until the new president, Zuma, was sworn into office in May 2009. The Mbeki administration, which did not run its full term due to the ‘recalling’ of the president by the governing party, provides an important context for the debates on the developmental state, governance, service delivery and intergovernmental co-operation covered in the various chapters. Chapter 1 introduces and contextualises the analysis and discussions advanced in the other chapters of the volume. It begins by examining macro-political and governance challenges facing young democracies in the world and narrows down to an analysis of the situation in southern and South Africa. The challenges facing the Zuma administration are therefore located in a wider international and continental context. The challenges of building a developmental state in South Africa and delivering on the promise of land reform, agrarian transformation and rural development, are all located within the international and continental context of challenges facing democracy and state capacity to deliver public goods (the latter including, for example, safety and security, employment opportunities, housing, the rule of law, healthcare and so on). These challenges are amplified in the sections that deal with service delivery, intergovernmental relations and poverty reduction. The issue of incoherence between traditional, informal and formal institutions as well as the constraints presented by this to the overall nationbuilding project are carefully explored and examined. To write a book that deals with challenges and prospects for the Zuma administration is a difficult enterprise not only because of the vastness and complexity of the subject but also because of the difficulties in finding the right register with which to convey the complexity; there are diverse issues to cover, some of which may not yet be ripe for scholarly synopsis. The book necessarily leaves out many important topics, including the very important historical questions of nation state formation, and how the state has worked to define the meaning of being ‘South African’ and in so doing constructed an identity for itself. Nevertheless, the book focuses on a few selected topics, which are key to the mandate and agenda of the new administration. Prominent among them are the issues of the developmental state, rural development, socio-economic development, and service delivery. As captured by Mark Gevisser in an essay commissioned for the Mail & Guardian (19 December 2008–8 January 2009), some of the fundamental questions about the challenges of the Zuma administration that dominate in the public intellectual discourse, in this interesting era in the history of South Africa, are as follows: how will the Zuma administration ensure continuity while at the same time effecting ‘some sharp and much-needed changes’ in the country’s political, economic, social and public administration landscape? Will the Zuma administration be able to ‘steer economic policy through the straits of an international economic crisis while still meeting the needs of an increasingly expectant’

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populace? These questions necessitate rigorous intellectual engagement. It is in this context that it was deemed necessary to put together multidisciplinary perspectives – in the form of this volume – to deal with some of the questions raised as part of the public debate on the challenges facing the Zuma administration. The book projects views into the future and explores the nature and scope of both the challenges and the prospects for the Zuma administration, with the intention of enhancing the intellectual depth and value of the debates on the subject. This collection of different perspectives, seeks to stir up debate; it is not concerned with building consensus, but rather with stimulating thinking, challenging entrenched views and perceptions and breaking new ground.

A note on government departments
The advent of the Zuma administration ushered in new and renamed government ministries and departments, as follows:
Former Department of Agriculture Free download from www.hsrcpress.ac.za Department of Land Affairs Department of Provincial and Local Government Department of Housing Department of Water Affairs and Forestry New Department of Agriculture, Forestry and Fisheries Department of Rural Development and Land Reform Department of Cooperative Governance and Traditional Affairs Department of Human Settlement Department of Water and Environmental Affairs

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Abbreviations and acronyms
ANC ANCWL ANCYL ASD ASGISA BEE C10 CBO COPE COSATU DFI DLA DoA DPW DTI EPWP GDP GEAR GFOA IDP IMF ISRDP LRAD MDG MEC MINMEC MPCC NDR NEPAD NGO PALAMA PFMA PPP PSC RDP SACP SAMDI SMME SSDM UN US USA YCL African National Congress African National Congress Women’s League African National Congress Youth League alternative service delivery Accelerated and Shared Growth Initiative for South Africa black economic empowerment African Committee of 10 community-based organisation Congress of the People Congress of South African Trade Unions development funding institution Department of Land Affairs Department of Agriculture Department of Public Works Department of Trade and Industry Extended Public Works Programme gross domestic product Growth, Employment and Redistribution strategy Government Finance Officers Association Integrated Development Planning International Monetary Fund Integrated Sustainable Rural Development Programme Land Redistribution for Agricultural Development Millennium Development Goal Member of the Executive Council [Committee of] Ministers and Members of the Executive Council multi-purpose community centre national democratic revolution New Partnership for Africa’s Development non-governmental organisation Public Administration Leadership and Management Academy Public Finance Management Act public–private partnership Public Service Commission Reconstruction and Development Programme South African Communist Party South African Management Development Institute small, medium and micro enterprise shared service delivery model United Nations United States United States of America Young Communist League

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Chapter 1

Introduction: political and governance challenges
Kwandiwe Kondlo

Is the new administration in a catch-22 situation?
The administration of Jacob Zuma came to power in May 2009, following the victory of the African National Congress (ANC) in the fourth democratic elections in South Africa. It could be argued that something amounting to a catch-22 situation may soon face the Zuma administration in more direct ways than was the case for previous administrations. This will arise from the challenge of balancing legitimacy with effectiveness in the governance of the country. The popular expectations and demands for improved delivery on the part of the state are a demand for effectiveness; without effectiveness, the legitimacy of the Zuma administration stands to decline. With declining legitimacy, the new administration will further lose effectiveness; and so on in a downward spiral. The character of this challenge to the Zuma administration cannot be divorced from the political character of Zuma’s victory. From the ‘Polokwane moment’ (Fikeni 2009) to the 22 April 2009 elections and to the Union Buildings, the political character of Zuma’s victory and the long-term impact it is likely to have in the deepening of democracy in South Africa, continues to generate debate. It embodies an ‘uncertain hope’, as it both unsettles and inspires the will of a divided polity. The political victory of Zuma is what Critchley (2006), quoting Derrida, would term a messianic a priori; it is a promise to the masses of the poor, even if it never defined itself as such. The popular expectation that ‘a new transition and change’ is on the cards invokes the performative dimension of the ‘promise’ embedded in Zuma’s political victory, especially after 15 years of disappointed popular expectations. Change or transition, though, is usually invaded by that which it is not – in the same way that the invasion of ‘being’ by ‘non-being’ occurs in the coming into ‘being’ (Kierkegaard 2009). Yet there is hope even beyond the promise of utopia. At the heart of Zuma’s victory is the promise of and hope for improved service delivery to the masses of the poor; the hope to have the voices of ordinary people heard in more meaningful ways than before in the governance of the country; and the hope for pro-poor economic policy as implied by the idea of a developmental state. Added to this is the hope of getting the wheels of government to move faster, coherently and effectively. Yet the challenge of the institutional capacity of the state and what it will take to improve it so that it delivers on the electoral promises of the ANC, stands as an obstacle to the ‘delivery of public goods’; perhaps it is the necessary antidote to messianic expectations of revolutionary change engendered by the rhetoric of the ruling party. The catch-22 situation of the Zuma administration is typical of the situation in young democracies. ‘Lacking legitimacy they cannot become effective; lacking effectiveness they cannot develop legitimacy’ (Huntington 1993: 258; see also Kapstein & Converse 2008). In essence, this attests to the challenges of institutional capacity and organisation. Southall describes the challenges in the case of
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South Africa as an instance of deficit in ‘ideational capacity’ (Southall 2007: 19), that is, the degree to which the embeddedness and legitimacy of the state in state institutions, political practices and ideas of individual members of society are eroded or lacking. State institutional capacity and performance are critical to building and enhancing the credibility and legitimacy of the state. In South Africa the challenge arises, first, at policy level. The fact that the gap between the time of policy formulation and that of actual implementation is vast, and that the disjuncture between the ‘policy talk and policy action’ is of great magnitude, creates a state of ‘non-simultaneous simultaneity’ (Benhabib 1994: 129; Block 1973), where the policy superstructures and practices they engender are non-synchronous and thus constitute a failing transformative praxis. Policy pronouncements and formulations, though good on paper, do not find simultaneous expression in the real practices of governance. This is a key governance challenge for the Zuma administration. As the gap between ‘knowing and doing’ persists and becomes more difficult to bridge, corruption, which has now become so pervasive in the South African polity, grows into a permanent underworld of democracy. Corruption is the ‘antithesis of good governance’ and influences perceptions of the general citizenry about the legitimacy of the government (Camerer 1997). If these kinds of inadequacies continue, it is hard to see how rhetorical claims of a developmental state and the promises to deliver on land reform, agrarian transformation and rural development – issues that Chapters 2 and 3 examine in detail – will be realised in practice. Reconfiguring Cabinet and establishing a new planning ministry in the Presidency, as already done by the Zuma administration, are all good signs but they do not amount to ‘effective actions’. It is not enough to have good intentions; it only makes material difference to ‘mean well and also act well’. Sevice delivery is clearly the challenge of the Zuma administration. Getting government departments to function in an integrated and coherent way is going to be nothing less than a nightmare for the Zuma administration, because the problem is arguably not one of structures only but also of ethos and the integrity of state institutions. For this reason, the volume includes a focus on public service delivery issues for the Zuma administration (Chapter 4); governmental relations in a maturing South African democracy (Chapter 5); and socio-economic development and poverty reduction in South Africa (Chapter 6). Issues of perceptions and the appropriateness of institutional models, even though not adequately covered in the book, are very important. The questions in this regard are as follows: are existing state institutional models appropriate to deliver on their mandates and do they create room for meaningful citizen participation? Are the institutions of the state perceived to be serving all citizens, irrespective of party political stripes and orientation, or are they perceived as favouring, even if inadvertently, special interest groups and constituencies so as to help reinvent and reproduce the power and hegemonic project of the ruling party? The deficit in South Africa’s democracy, a persistent political and governance challenge of previous democratic administrations, is inadequate delivery of material improvements in the lives of the majority of citizens. This deficit is exacerbated by inadequacies in responding to the preferences of citizens at grassroots level, due to the gap that has developed between those who can make their voices heard and those who cannot (except under situations of noticeable mass protest). The degree of interaction between the government and citizens, the level of access to decisionmakers and decision-making by citizens at grassroots level, especially those outside urban centres, is a challenge to the Zuma administration. Perhaps there is a need, at this point, to frame the wider theoretical and political context. Among the key questions one needs to ask, as a starting point, is the following: what are the key political and governance challenges facing democracies in the world today? The question is pertinent to a

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2 | The Zuma administration: critical challenges

young democracy like South Africa in this day and age, as there are growing concerns, worldwide, about the fate of the world’s young democracies (Kapstein & Converse 2008). In the light of the macro-perspectives that responses to this question may yield, a follow-up question could be: what are the political and governance challenges facing democracy in Africa, and South Africa in particular? This will then provide a proper perspective and the necessary context for examining, debating and understanding the political and governance challenges facing the Zuma administration. The questions raised above are part philosophical, part socio-historical and part political, and therefore require an analysis that traverses international, continental and South African contexts. This is difficult to achieve in a comprehensive way, especially in one small volume such as this. As the title of the book indicates, the challenges examined in the book are on selected issues that are key to the ANC’s agenda as indicated in both its 2009 election manifesto (ANC 2009) and in the State of the Nation address by President Zuma on 4 June 2009 (Zuma 2009). The chapters cover selected but critically important issues such as the developmental state; land, agrarian reform and rural development; service delivery; governmental relations; and socio-economic development and poverty reduction. The present chapter broadly sketches the political and governance challenges faced by democracies in today’s world and shows how the challenges they imply touch on perennial questions running through the ‘veins’ of South Africa’s democracy.
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Democratic performance and state institutional capacity
State institutional capacity refers to the availability of ‘various necessary inputs and appropriate skills’ for operationalising state programmes (Chirawu 2004: 234), in order to deliver valuable ‘public goods’, which citizens have the right to expect from a legitimate state (Rotberg & Gisselquist 2008). State institutional capacity also means the manner in which ‘democratic institutions function’ as well as the extent to which effective citizen participation and ‘control over policy’ are constitutive of the institutional capacity of the state (Huntington 1993: 9). The issue of the credibility, legitimacy and performance of state institutions is one of the key challenges faced by democracies all over the world today. The challenge is manifested in different forms, depending on the particular time and context of the democracy in question, but is a common variable in the package of challenges in the entire democratic world. The challenge in our days is not so much opposition to multi-party liberal democracy but rather the creation of responsive democratic states whose institutions function well – both in the ‘normative’ and administrative senses – and conduct activities and deliver ‘public goods’ according to the wishes of the citizenry (Back & Hadenius 2008; Huntington 1993). Worldwide, opposition to multi-party democracy has been on the decline, especially after 1989, the period celebrated by political philosopher, Francis Fukuyama, as having marked the ‘end of history’ (Fukuyama 1992) and the establishment of Western liberal democracy as universal. Of course, Fukuyama was strongly criticised by scholars from the ‘Left’ who argued that what happened to the countries in Eastern Europe in the late 1980s, ‘owed more to their histories than to the ideology’ that they professed (Hill 1992: 8). A new configuration of global power at the beginning of the 21st century following the rise of China and India, and the return to power of Japan and Russia, ‘ended’ Fukuyama’s ‘end of history’. By all indications, we are now witnessing ‘the return of great power nationalism’ (Kagan 2008: 10). The incidence of the global economic ‘meltdown’ seems to give impetus to the idea of the ‘return of the state’. This is shown by the proliferation of state interventions in the economy, as is the case in ‘advanced’ democracies, including the USA. This situation has sparked new claims – about the ‘return of history’ and the ‘end of dreams’ (Kagan 2008). Yet the return of history and the end of dreams brings with it too the dashing of hopes. A new era of ‘global convergence’, which was signalled by the embracing of democracy in former communist

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states, was regarded as marking the birth of new hope and a renewal of the liberal democratic project. The ‘third wave’ of democracy (Huntington 1993), post-1990, confirmed this – it was dominated by insistence on the ‘minimalist state’, and less intervention in the free market. With the recent return of history, liberal democracy and free market fundamentalism seem to be going through a period of stress. By 2008, it was estimated that almost half of the world’s most recent democracies were either struggling to consolidate or reverting to authoritarianism (Kapstein & Converse 2008). This began in the form of ‘power grabs’ by leaders in such countries as Bolivia, Georgia, Russia and Venezuela and extended further to situations such as were found in Fiji (2006), Thailand (2006) and Bangladesh (2007), where coups d’état occurred (Kapstein & Converse 2008). In South Africa there is still hope for the survival of democracy. Yet South Africa seems to be looking ‘East’ for solutions; hence, in South Africa we hear debate about the developmental state and, lately, nationalisation of the mining sector of the economy, and the question is: why? In reality, history never ‘ended’, hence it has not ‘returned’. The concepts are only good as markers of the dynamics of political economy and historical change. Perhaps one important issue, now that democracy as a political system is hardly contested, is the disappointment of the hopes of the poor majority in many democratic states, an issue that raises questions about the correlation between democracy and the capacity of democratic states to deliver. Back and Hadenius (2008) argue convincingly that ‘the global tendency over recent decades has been towards a growing gap’ (2008: 1) between democratisation and the administrative capacity of the state. This is but one aspect of the institutional capacity of the state. By the state’s administrative capacity, Back and Hadenius are referring to the existence of a rational bureaucracy geared towards impartiality, professionalism and accountability (Back & Hadenius 2008; Brynard & De Coning 2007). Democratic institutions are fully established in many democratic states but a broad array of societal resources required to ensure control and participation from below are lacking. Paul Ginsborg (2008), in his pioneering work Democracy: Crisis and Renewal, demonstrates this point by examining democracies in the European Union, where institutions are established but float above the people whom they are meant to serve. In his critical assessment, he argues that: in 1989 liberal democracy triumphed unqualifiedly over its now unpresentable opponent. But at the moment of its global victory, many of its basic practices have been found wanting and many of its proudest boasts proved unfounded. Today liberal democracy is highly vulnerable. To protect it adequately, there is urgent need for theoretical discussion and practical innovation. (Ginsborg 2008: 12) De Sousa Santos and Avritzer (2007: ixii) describe the challenge as that of the ‘democratization of democracy’, which not only means widening the social basis of democracy and ensuring its resonance with the aspirations of the majority of citizens; but also, critically, how new complementarities or articulations between participatory democracy and representative democracy are identified and enhanced in democratic practice. The institutional capacity of the state is more than a matter of appropriate skills. It involves the orientation of governance; how governance comes across and is felt by ordinary citizens; citizen participation; and ‘a rational bureaucracy’, which is effective and efficient in the delivery of public goods. The institutional capacity of the democratic state is therefore crucial to democratic performance. In the context of neo-liberal democracy, the corresponding types of democratic institutions have only ensured the formalism of democratic processes without delivering the concrete, material dividends of democracy to the majority. This situation, according to Van Beek, in East Germany, Poland and South Africa, has led to the rising phenomenon of ‘dissatisfied democrats’; a situation where the support for

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4 | The Zuma administration: critical challenges

democracy as an ideal is countervailed by the negative evaluation of how it works on the ground (Van Beek 2006). There is an emerging view that in the case of the USA the institutional capacity of the state has been blunted and compromised by ‘big business’ (Reich 2009). This brings in another perspective about inhibitors and enablers to the institutional capacity of states. These are derived from their location in the international context. This is a factor that, according to Van Beek, makes ‘sound economic policies and policy implementation alone not enough to ensure satisfactory performance’ (2006: 29). The incentives provided by the existing structure of the global political economy are a crucial factor without which democracies may stand or fall; and hence Kapstein and Converse correctly argue that ‘the international environment plays a more important role than is commonly appreciated’ (2008: xvi). In other words, the institutional capacity of the state and the critical role played by institutions in a polity – something of the essence of governance – are products of both endogenous and exogenous factors, hence the importance of political leadership. In the case of emerging democracies the situation is even more challenging. Added to these factors are the different legacies bequeathed to emerging democracies by pre-transitional circumstances. The ‘initial conditions’ (Kapstein & Converse 2008) are critical to subsequent democratic performance (Van Beek 2006). Hence, the institutional capacity of the democratic state – enabled and augmented by a self-organising civil society, independent of the state and its political parties – is vital in addressing the challenges. Heller and Isaac, referring to the experience of India, also indicate that ‘a free and lively civil society makes the state and its agents more accountable by guaranteeing that consultation takes place not just through electoral representation (periodic mandates) but also through constant feedback and negotiations’ (2007: 408). They conclude that the institutional capacity of the state is central to the effectiveness of democracy. These issues also apply, though differently, to the situation in Africa. I say ‘differently’ in the African context because of the legacy of colonialism on the continent and its differential impact on the cultures of its people. Even today there is still reference to Francophone and Anglophone parts of Africa. Most importantly, there is the ‘unique’ southern African context. Former liberation movements such as Frelimo (Mozambique), SWAPO (Namibia), MPLA (Angola), ZANU (Zimbabwe) and the ANC (South Africa), even though still in power, seem to have come to preside over a gradually dying promise of what they were once thought to epitomise (Saul 2008). Olowu and Mukwena (2004) explain the southern African context – the immediate context of the South African democratisation project, in other words, the context closest to and most definitive of the Zuma administration – as not only one where the continent’s middle-income countries are concentrated, but also where ‘the project of permanent white settler communities’ has meant that ‘governance regimes’ legitimise the inequalities associated with the colonial system (Olowu & Mukwena 2004: 7). They argue that it is not surprising that in southern Africa there is serious debate on issues such as the redistribution of land. Chapter 3 of this volume, in which Mayende analyses the latest policy shift on agrarian transformation in South Africa, hits the very nerve of this issue to show the constraints and possibilities presented to the Zuma administration in the areas of land reform, agrarian transformation and rural development. At the heart of Africa’s challenges to democratic consolidation is the problem of fragmented institutions (Berman et al. 2004). In part due to the manner in which the post-colonial African state was formed, formal and informal institutions have not evolved in a coherent manner. Formal institutions (state sponsored, mostly inherited from colonialism), traditional institutions and informal institutions, based on societal norms and often varying according to religion, ethnic identity and mode of production, remain fragmented and incoherent despite over four decades of efforts at institution building (HSRC & PSU 2009). The problem exists not only in other parts of the African continent, but also in South Africa itself.

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In Chapter 5, on governmental relations in a maturing South African democracy, Mello emphasises the challenge for the Zuma administration represented by the distance – both geographical and other – between government and the more traditional, rural communities in South Africa. The chapter touches on the role of traditional leaders and argues that they are ‘a missing link in intergovernmental relations’. Mello argues: ‘Sidelining traditional leaders in rural areas has proved to be a problem in South Africa…Where traditional leaders are custodians of the land where communities live, there have been development challenges resulting from disputes between councillors and traditional leaders.’ Thus, a key challenge for the Zuma administration is to further outline the responsibilities and position of traditional leaders in the intergovernmental relations puzzle.

A ‘deformed’ realisation of the developmental state?
Is South Africa headed for a deformed realisation of the developmental state? This is one of the questions to think about, given the absence of a combination of conditions critical to the realisation of a developmental state including, among others, an efficient and effective bureaucracy that can deliver on its mandate. Besides that, thus far policy direction and implementation seem not to have found coherence and refinement under the new presidential leadership. It is, of course, still early, but all indications are that the landscape of policy remains characterised both by a tendency still to debate and discuss fundamental assumptions and by the resulting stalemate: a central tension is between conceptions of a developmental state as overtly pushing a pro-working-class agenda – as conceived by the Congress of South African Trade Unions – and conceptions of a developmental state premised on the ANC’s multi-class project, a project that inadvertently provides refuge for elite ambitions. So, I would argue, the realisation of the developmental state during the Zuma administration is likely to be a deformed one. Perhaps there will be useful lessons to learn. A developmental state cannot be built in a rush; you also do not simply promise it and it occurs. It is not a product of some obscure team of party pseudo-intellectuals, who know it all because they are accredited by only ‘one god’ – their own party. In a deeply divided society such as South Africa, the developmental state cannot be the outcome of the hegemonic project of a single party; it can only be the product of collective efforts of a united polity (rather than a fractured polity) – the collective will of a people united around a single purpose. The model and mechanics of the developmental state in South Africa seem at this stage perennially debatable within the ruling party itself, and it seems that the finalisation of the real micromechanics of the developmental state is likely to take a very long time. Five years, then, is not enough for President Zuma, the ‘son of Hope’, to deliver on his promises. Part of the problem is that there is not yet clarity and consensus on whether the notion of the developmental state in South Africa is meant to replace the Growth, Employment and Redistribution strategy (GEAR) ‘or whether the developmental state will formulate and implement policies that will co-exist with GEAR’ (Kagwanja 2009: xxxvi). In Chapter 2, Maserumule examines contending views in this regard within the Tripartite Alliance. Nonetheless, the idea of a developmental state stands very prominently in the list of promises that the ANC has made and continues to make to the majority of the poor in South Africa. This can be traced back to the time of the ANC congress in Stellenbosch in 2002 and it gained momentum in the ANC up to the time of the Polokwane national conference in December 2007 (ANC 2007a; 2007b). It also appeared as the cornerstone of the ANC’s election manifesto during the 2009 general elections (ANC 2009). When Zuma delivered his State of the Nation address on 3 June 2009, he also made reference to a developmental state and the creation of an economically inclusive society in South Africa (Zuma 2009). To transform the idea of a developmental state into reality, it is argued, the Zuma administration stands on the precipice of hope; it also looks down into the abyss of disappointed popular expectations,

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6 | The Zuma administration: critical challenges

given the possibility that it may deliver a deformed developmental state. A deformed realisation of the developmental state may occur despite the orientation and organisation of the state and its institutions. The effective capacity of the state institutions, the coherent functioning and organisation of state institutions, and their relationship with non-state institutions and actors, as well as the participatory nature of governance, when all added together serve as critical aspects of the realisation of the idea of a developmental state. Chapters 2 and 3 take the debate even further. They both start by engaging the conceptual foundations of the developmental state, to explore the various meanings attached to it. The question of the institutional capacity of the state, most importantly the nature of the interface between administrators and politicians, emerges in their discussions as key to the realisation of a developmental state. In an article entitled ‘Conflicts between Directors-General and Ministers in South Africa: A “Postulative” Approach’, Maserumule (2007) systematically examines this challenge during the Mbeki administration and observes that its frequent occurrence at the political–administrative interface impacted negatively on the state’s capacity to deliver services to the citizenry. Conflicts at the political–administrative interface pose a challenge to efforts aimed at building a developmental state. Maserumule (2007) argues that such conflicts are occasioned by contradictions in the policies formulated to serve as framework for the management of the public service.
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In the case of land reform, agrarian transformation and rural development, in Chapter 3 Mayende emphasises the importance of focused political leadership and championship of rural development and agrarian transformation to enhance coordination, ensure more efficient resource allocation, and sharpen management focus on key deliverables. Existing shortcomings relevant to the field of implementation – e.g. capacity within the cluster of government departments that have rural-related responsibilities, and the need for the state to allocate significant amounts of resources to training and capacity-building programmes – are some of the issues that Mayende examines in his chapter. He argues that the development of capacity in key areas such as project management, agricultural economics, extension, rural finance and marketing systems will help improve efficiencies in programme and project delivery. At a micro level, capacity building should also be applied to the crucial level of extension officers and community development workers, as the grassroots-level cadres who would interface closely with the producers.

The challenge of intergovernmental coordination and the crisis of service delivery
In South Africa, as in many post-colonial situations, the state after independence was as it was inherited from the colonial and apartheid regimes. Much of the functioning architecture of the previous state was kept intact and gradually amended, following the recommendations of public service review commissions that took place during the Mandela and Mbeki administrations. Despite such amendments, it can be argued that the culture and ethos in the day-to-day running of government business has hardly changed. Before one even talks of intergovernmental coordination (i.e. between governmental bodies), there must be intragovernmental integrity. In fact, the anthropology of the state, of professional cultures, of administrative conduits, and of the ethics of the public service is a whole area of research that could inform and strengthen policy during the Zuma administration (Blundo & Olivier de Sardan 2006). Recently, much of the architecture of the state has been reconfigured and a new orientation in the organisation of national and provincial departments has emerged with the Zuma administration. The Presidency now houses not only the deputy president, but also two new ministries: one for national

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planning and one for monitoring and evaluation. Yet the key question – and one that remains unanswered – is the extent to which the new reconfiguration of national government is designed to be responsive, accountable and participatory, so that it is informed by (rather than simply seeking to inform) the will of the people whom it serves. In addition to this, the calibre of the political elites who emerged subsequent to the 2007 ANC national conference in Polokwane, and the existing capacity to lead state institutions during the Zuma administration, to serve ordinary citizens effectively, are other questions. If each government department is saddled with what Mehta (2003) terms an almost ‘compulsive emphasis on endless formal procedures’, where layer upon layer of procedure provides oversight on various layers of decision-making, at what point does coordination take priority and the organic blending required for integrated delivery occur? These issues constitute another challenge for the Zuma administration. It does not matter how optimistic one may choose to be in the analysis of the Zuma administration, one cannot gloss over the fact that it is a seriously challenged one. It could be said to exist in a ‘triple temporality’. Barnard and Farred (2004), in their publication After the Thrill is Gone: A Decade of Postapartheid South Africa, invented the notion of ‘double temporality’ of the post-apartheid state to describe how the post-apartheid state continued to live in two historical realities at the same time; that is, the reality of Afrikaner domination and of the democratic state (Barnard & Farred 2004: 594). The concept refers to a situation where the present is dominated by continuities with the past. The same analogy can be used to describe the situation of post-1994 democratic administrations. It is argued here that the Zuma administration lives in three histories at the same time: the history of the Mandela administration, the subsequent realities created by the administration of former president Thabo Mbeki and, lastly, its own realities. The new administration obviously cannot escape the shadows of the two preceding eras; the realities created by the politics and governance strategies of those periods are a foundation for the new administration. In other words, the fact is that, for the Zuma administration, the past will always tend to weigh heavily on the present; and shifting the realities created by past administrations is going to be a formidable challenge. The dominance of the past in the present will pose challenges and opportunities; challenges that could indeed be overcome and opportunities that could indeed be lost. Zuma’s administration is perceived by the masses as the ‘delivery administration’. It came to power on the back of promises to the poor majority and on the ticket of improved service delivery to provide a ‘better future for all’. This follows the poor service delivery record of the Mbeki administration. There are at least three major challenges. The first is how to manage widespread and almost messianic expectations of revolutionary change – popular perceptions of Zuma as some kind of messiah, sent to save them; perceptions fed, incidentally, by the rhetoric of the ANC during the campaign for elections (which took place on 22 April 2009). The second challenge is the array of problems presented by the need to create a responsive government, that is, a government in which the voices of ordinary citizens, and their choices and aspirations, make it to policy decision-making. The third challenge is creating a government that has the administrative capacity to deliver faster and better. Chapter 4 by Kanyane examines in detail the public service delivery challenges of the Zuma administration and outlines how service delivery could be if it were underpinned by a social agenda – that is, commited to realising the power of public service delivery to sustain and improve the quality of life of communities. He also interrogates the governance framework for public service delivery and argues for the importance of ethical leadership, especially at the level of local government, in order to deal with pervasive corruption and inefficiency. Kanyane further proposes the need to consider alternative service delivery approaches, including public–private partnerships and the shared service delivery model, as part of the solution to service delivery improvement; and he argues for the value of monitoring and evaluation to be embedded in implementation. To support the interventions

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8 | The Zuma administration: critical challenges

proposed in Chapter 4, Mello in Chapter 5 examines the framework that has been introduced with the aim of improving intergovernmental relations. In line with Kanyane’s view on the importance of ethical leadership for service delivery improvement, Mello goes on to explore the importance of the ‘human factor’, which involves investment in human resource capacity in order to improve governmental relations (i.e. not only relations between governmental institutions but also with non-state actors), thus in turn improving service delivery. Mello argues that monitoring and oversight – and, where necessary, intervention – by national government are essential to ensuring that the lower spheres of government fulfil their constitutional mandates. In summary, the most important challenge of the Zuma administration is not only at the macroinstitutional level, that is, at national level and in the Office of the Presidency; it is also at the levels of intermediate and local institutions and forums of consultation located at the interstices of state and society, where day-to-day forms of democracy either flounder or flourish (Heller & Isaac 2007). Analysing the local government experiences of Kerala in India, Heller and Isaac correctly observe that as the state ‘radiates out from the geographic and functional core of its authority, its effectiveness fluctuates dramatically’ (2007: 407). Hence, problems of service delivery tend to occur at local government level. This is part of the challenge confronting developmental local government in South Africa. The effectiveness of the state outside the national core of its authority will need to be felt through robust delivery of services.
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Delivering on the promise of economic inclusivity and poverty reduction
After 1990, as the economy began to expand, there occurred a steady rise in the investment–output ratio. Simultaneously, there was a sharp decline in the share of wages in national outputs – in other words, income distribution worsened such that the rising investment–GDP ratio generated, instead, higher levels of inequality. The problem that arises from the Mbeki era and confronts the Zuma administration, as a key challenge, is what Malikane refers to as the ‘disconnect’ between ‘the then rising investment–output ratio’, which was a success, and ‘worsening distribution of income’ (2007: 67). This resulted in a situation in South Africa where, despite five years of uninterrupted economic growth, poverty and inequality continued to grow and the gap between rich and poor continued to widen. Besley and Cord argue that ‘growth is less efficient in lowering poverty levels in countries with high initial inequality or in which the distributional pattern of growth favours [the] non-poor’ (2007: 1). In other words, the core of the challenge is to make sure that distributional patterns of economic growth are oriented in such a way as to benefit the poor – to close the gap between the rich and the poor. Despite the immediate interventions that are required, perhaps a long-term view is the way to lasting solutions in this area. The problem with long-term strategies, however, is that they do not have immediate electoral pay-offs, which ruling parties normally want in order to sustain their political power. One hopes that the Zuma administration will be different in this regard – that it will not be limited to a partisan vision but will take a long-term view of strategic investment in education and skills development. Empowering ordinary citizens with the requisite skills to navigate the vicissitudes of the market economy on their own is perhaps part of the solution. The democratic state, post-1994, despite the radical pretensions of the ruling ANC, cannot deal effectively with the challenge of poverty, as this challenge has implications for the reordering of socioeconomic relations in South Africa. The reordering of socio-economic relations is necessary, according to Besley and Cord (2007), to deal with ‘high initial inequality’, which distorts the distributional effects of economic growth in favour of the non-poor. Kapstein and Converse (2008) argue that the character

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of initial conditions, i.e. pre-transformation conditions, affects – in fact determines – the performance of young democracies. To echo this point, Magubane (2004) casts the situation as ‘the dilemma the ANC is facing’. But how does fundamental reordering occur or how effective is gradual economic transformation? The change in socio-economic relations of power is the key project, which goes beyond the removal of institutionalised racial oppression. The politics of poverty is essentially about differences in socio-economic power between individuals or groups in society. ‘The battle against poverty is largely a question of creating the circumstances that enable an individual or group to gain power and emerge from poverty on a longer-term basis’ (Teunissen & Akkerman 2005: 2). Green (2008) adopts a new angle. He examines the notion that, in addition to these factors, the way markets operate exacerbates poverty and inequality. And he argues that poor people need to exert influence and have a voice over the way markets and ‘institutions which govern them’ operate (Green 2008: 108). In Chapter 6, Mashigo focuses on socio-economic development and poverty reduction in South Africa as a key challenge for the Zuma administration, and examines and debates these issues, including the ongoing – indeed increasing – marginalisation of those vast numbers of people in South Africa stuck in the so-called second economy. She offers exploratory ideas that could be useful in the design of policy solutions. The point of departure, according to Mashigo, has to be the consideration of international best practice, which adopts group lending mechanisms to deal with underdevelopment and poverty. International practices have shown that it is possible, through the relevant lending mechanisms, to provide credit to poor communities. For example, the legal and regulatory environment in countries such as Bangladesh, Ghana, Kenya and Indonesia has permitted the establishment of specialised lending mechanisms or banking and financial institutions that target poor communities. Examples are rural or community banks that are able to make sound savings and credit judgements because of their knowledge of the local community. This is done through the establishment of informal groups, which are linked to the village bank. Of course this suggestion can only work if the proposed new partnership between the public and private sectors is defined and implemented. As Mashigo argues, this involves government, in consultation with financial institutions, establishing prudent non-discriminatory lending criteria, especially in respect of creditworthiness and collateral, reforming laws on women and banking to ensure equality, developing simpler forms for contracts and applications, and creating an environment that reduces the risk profile of lending to poor (and low-income) communities. On another level, especially if one takes a longer-term view of the solution, the promotion of human capital accumulation through investment in education and health is crucial. Investment in education will empower the poor to navigate, on their own, the vicissitudes of the market economy. Education and health are on the list of priorities of the new ANC government, post-April 2009. The extent to which the investment in education and health will be made, and the outcomes monitored and oriented towards critical measures of socio-economic development, remains to be seen.

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Overarching messages
In discussing South Africa’s democratic experiment, this book aims to maintain a delicate balance between appreciation and critique, and also to provide useful insights which could serve as advice for policy-makers and as food for thought for researchers. In terms of the volume’s overarching messages, the first and key message involves the inherent institutional difficulties the state faces in translating aspirations of liberation on the part of the masses into effective socio-economic outcomes. The discussions in Chapters 2 and 3, on the developmental state, demonstrate this. Second, it is clear that the mundane modalities of implementing the transformation agenda to yield quality material dividends to the poor majority are still cause for concern.

10 | The Zuma administration: critical challenges

This, it is argued, manifests in endless – often seemingly directionless – drifts in policy debate within the ruling party (the ANC and its Alliance partners), numerous strikes over wages, and widespread service delivery protests. The issue, it seems, is that the transformation agenda, and the terms on which it is conducted, is still defined by the elites – it is not the agenda of the poor and marginalised that defines the character of change. Hence, the demands made by the poor majority are not merely for delivery of public goods but also for an effective voice in the governance of the country. Chapters 4, 5 and 6 convey the nature of the problems around service delivery, coordinated governance and poverty reduction. The development and role of traditional institutions in strengthening democratic governance in rural areas is touched on in Chapter 5; this is very important for the development of a collective will, which is important in the life of a nation.

Summary and structure of the book
The book consists of six chapters focusing on different but related topical issues identified by the authors as part of the challenge facing the Zuma administration. Chapter 2 by Maserumule examines the need to consolidate a developmental state agenda as a critical governance challenge for the Zuma administration. Maserumule offers various governance policy options that the Zuma administration could consider – in governing in a political context fraught with ideological contradictions and contestations – in defining a South African developmental state. On the one hand, the Left in the Tripartite Alliance, which constitutes an integral part of the coalition that secured Zuma’s victory as the president of the ANC at its national conference of December 2007 in Polokwane, and as president of the Republic of South Africa, propagates a more redistributive socioeconomic approach as part of the agenda for a South African developmental state. On the other hand, there are those within the ANC who argue for the continuation of the Mbeki administration’s neoliberal economic orthodoxy in repositioning South Africa as a developmental state. As a dominant figure in the contemporary political scene in South Africa who emerged out of the traditional African countryside as a well-rounded personality and who operates in a modern environment, Zuma may be able to successfully navigate the two ideological extremes that Maserumule’s contribution enunciates as being in contestation with each other. The notion of a developmental state is further considered in Chapter 3 on rural development in South Africa. In this chapter, Mayende presents a systematic analysis of the ANC’s ‘shift’ in paradigm on rural development and agrarian transformation, with specific reference to the question: to what extent does the new policy perspective provide a viable framework for accelerating the process of raising the living conditions of the rural masses and facilitating their integration into the national economy? The analysis explores the new policy positions in some detail, and then proceeds to identify and examine a range of potential shortcomings, inconsistencies and self-evident lacunae. Within this context, the chapter begins by analysing the concept of the developmental state and its role in driving rural development and agrarian transformation interventions, using as examples several East Asian countries that are generally considered as having succeeded in this regard. The chapter then provides an overview of the country’s rather chequered experience in rural development and agrarian transformation policy and practice since 1994. The chapter highlights the inherent weaknesses associated with two key programmes implemented during this period, namely the Integrated Sustainable Rural Development Programme and the Land Redistribution for Agricultural Development sub-programme of the land reform programme. The chapter explores the combination of factors that led to the failure of both programmes in making significant inroads into addressing the legacies of land dispossession, underdevelopment and economic stagnation, as well as widespread poverty and social marginalisation that continue to characterise South Africa’s rural areas. The lessons that have emerged from these programmes are also highlighted and analysed.

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Chapter 3 further analyses some of the assumptions that are made in the new policy perspective with regard to the efficacy of rural development and agrarian transformation strategies – assumptions based on subsistence and the promotion of ‘sustainable livelihoods’ versus surplus-oriented commercial production. The wisdom behind the optimism shown for the success of such interventions within what Mayende terms the communal areas is also subjected to critical scrutiny. In a discussion of the important issue of land acquisition, the chapter highlights a number of fundamental constraints, particularly the constitutional property clause and the willing-buyer, willing-seller policy, as well as major bottlenecks that could impede the shift towards an approach based on legal expropriation. The chapter examines the challenges that could confront planned attempts at institutional restructuring, and discusses the importance of support for the targeted beneficiaries, and the renewed push for the establishment of viable and vibrant co-operatives, as important elements in giving impetus to enhanced delivery. Due consideration is also given to key ‘cross-cutting issues’, such as the central position of infrastructural development, the role of indigenous knowledge, and gender, youth and disability, which are also deeply embedded within the rural socio-political and economic context within which the challenge of rural development and agrarian transformation has to be addressed. Any discourse on the governance challenges for the Zuma administration without reference to the issue of service delivery would be incomplete, for enhancing the quality of life of the citizens through improved service delivery is one of the strategic imperatives of a developmental state. This underscores the importance of service delivery, which is the focus of Chapter 4. Kanyane argues that the government, in the past decade and a half, focused too much on the physical infrastructure of public service delivery (i.e. tangible public service delivery), overlooking its social (i.e. intangible) impact in sustaining the quality of life of the citizenry. According to Kanyane, the challenge for the Zuma administration is, therefore, to focus seriously on both the physical and intangible developmental impact of service delivery – a challenge that has also been highlighted in the present chapter. Kanyane argues for a more humanised and humanising public service that has as its vision empowerment and consciousness raising of the communities it serves. In Chapter 5, Mello deals with questions of governmental and intergovernmental relations, which are among the key imperatives in improving service delivery and important for achieving an integrated system of governance. The issue of integrated planning and coherence in managing the affairs of government, as Maserumule points out in Chapter 2, was one of the fundamental challenges that beset the Mbeki administration. In discussing various structures and processes that have been devised with the aim of improving intergovernmental relations, Chapter 5 focuses on the Intergovernmental Relations Framework Act (No. 13 of 2005) and makes suggestions for further possible improvements. Reflecting on various governmental relations challenges, Mello advises the Zuma administration to take seriously the challenges from the previous administration and learn lessons from these, with a view to improving governmental relations for the benefit of the South African people. Chapter 6 by Mashigo argues that poverty reduction is the mainspring of economic development and that it is important to put greater emphasis on it if the desired levels of economic development are to be achieved. In this chapter the critical factors that contribute to the persistence of poverty and underdevelopment, and the related challenges, are examined with the objective of determining what interventions can be put in place by the Zuma administration. The chapter discusses the so-called first and second economies, particularly the second economy, what constitutes it and why it has become central in the discussions pertaining to underdevelopment and poverty alleviation. Chapter 6 focuses on the 2009 ANC election manifesto, which outlines the ANC’s commitment to transforming the country and/or society; the election manifesto emphasises nation building, support and respect for basic human and democratic rights, socio-economic rights, and the strengthening of

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12 | The Zuma administration: critical challenges

representative and participatory democracy (ANC 2009). The priority areas of the election manifesto, which include creation of decent work and sustainable livelihoods, education, promoting human health, the fight against crime, and rural development, are discussed. Another priority area of the election manifesto, social security, is also considered. Chapter 6 also looks at the global financial crisis and its impacts on South Africa. Of particular importance is the discussion of effective and sustainable rural development and poverty reduction strategies. Financing strategies in South Africa are closely analysed and it is shown how existing strategies hamper the provision of such finance, particularly to poor households. The chapter provides insight into how international financing practices have succeeded, through specialised financing/lending mechanisms, in financing poor households. Similar existing mechanisms in poor communities in South Africa are explored for possible lessons in this regard. The chapter concludes with a focus on small/survivalist enterprise development. It is hoped that this book will make a valuable contribution to contemporary discourse on the Zuma administration.

References
Free download from www.hsrcpress.ac.za ANC (African National Congress) (2007a) ANC 52nd national conference. Draft strategy and tactics (Vol.1). Marshalltown: Umrabulo ANC (2007b) ANC 52nd national conference 2007: Resolutions. Resolutions arising out of the ANC 52nd national conference in Polokwane, Limpopo Province (16–20 December). Accessed April 2008, www.anc.org.za/ancdocs/history/conf/conference52/resolutions.pdf ANC (2009) Election manifesto: Working together we can do more. Johannesburg: ANC Back H & Hadenius A (2008) Democracy and state capacity: Exploring a J-shaped relationship in governance. International Journal of Policy, Administration and Institutions 21: 1–24 Barnard R & Farred G (Eds) (2004) After the thrill is gone: A decade of post-apartheid South Africa. Durham, NC: Duke University Press Benhabib S (1994) Democracy and difference: Reflections on the Metapolitics of Lyotard and Derrida. Journal of Political Philosophy 2: 1 Berman B, Eyoh D & Kymlicka W (2004) Ethnicity and democracy in Africa. Oxford: James Currey Besley T & Cord LJ (2007) Delivering on the promise of pro-poor growth: Insights and lessons from country experiences. Washington, DC: World Bank Block E (1973) Erbschaft diesr Zeit. Frankfurt: Suhrkamp Blundo G & Olivier de Sardan JP (2006) Everyday corruption and the state: Citizens and public officials in Africa. Cape Town: David Philip Brynard P & De Coning C (2007) Policy implementation. In F Cloete, H Wissink & C de Coning (Eds) Improving public policy, from theory to practice. Pretoria: Van Schaik Camerer L (1997) Costly crimes: Commercial crime and corruption in South Africa. Institute for Security Studies, Monograph 15, Pretoria Chirawu TO (2004) Land ownership and sustainable development in Namibia. In D Olowu & R Mukwena (Eds) Governance in southern Africa and beyond: Experience of institutional and public policy reform in developing countries. Windhoek: Gamsberg Macmillan Critchley S (2006) Frankfurt impromptu: Remarks on Derrida and Habermas. In L Thomassen (Ed.) The Derrida– Habermas reader. Chicago: University of Chicago Press De Sousa Santos B & Avritzer L (2007) Democratizing democracy: Beyond the liberal democratic canon. New York: Verso Fikeni S (2009) The Polokwane moment and South Africa’s democracy at the crossroads. In P Kagwanja & K Kondlo (Eds) State of the nation: South Africa 2008. Cape Town: HSRC Press Fukuyama F (1992) The end of history and the last man. New York: Free Press

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Ginsborg P (2008) Democracy: Crisis and renewal. London: Profile Books Green D (2008) From poverty to power: How active citizens and effective states can change the world. Johannesburg: Jacana Media Heller P & Isaac TMT (2007) The politics and institutional design of participatory democracy: Lessons from Kerala, India. In B de Sousa Santos & L Avritzer (Eds) Democratizing democracy: Beyond the liberal democratic canon. London: Verso Hill C (1992) Premature obsequies? In A Ryan (Ed.) After the end of history. London: Collins & Brown HSRC (Human Sciences Research Council) & PSU (Pennsylvania State University) (2009) Reconciling Africa’s fragmented institutions of governance. Joint HSRC/PSU presentation to project definition workshop, Pretoria (November) Huntington SP (1993) The third wave: Democratization in the late twentieth century. Norman, OK: University of Oklahoma Press Kagan R (2008) The return of history and the end of dreams. London: Atlantic Books Kagwanja P (2009) Uncertain democracy: Elite fragmentation and the disintegration of the ‘nationalist consensus’ in South Africa. In P Kagwanja & K Kondlo (Eds) State of the nation: South Africa 2008. Cape Town: HSRC Press Kapstein B & Converse N (2008) The fate of young democracies. Cape Town: Cambridge University Press Kierkegaard S (2009) Repetition and philosophical crumbs. Oxford: Oxford University Press Magubane Z (2004) The revolution betrayed? Globalization, neoliberalism, and the post-apartheid state. In R Barnard & G Farred (Eds) After the thrill is gone: A decade of post-apartheid South Africa. Durham, NC: Duke University Press Malikane C (2007) Towards a comprehensive economic framework for South Africa. In O Edigheji (Ed.) Rethinking South Africa’s development path: Reflections on the ANC’s policy conference discussion documents. Special edition of Policy Issues and Actors 20. Johannesburg: Centre for Policy Studies Maserumule MH (2007) Conflicts between directors-general and ministers in South Africa: A ‘postulative’ approach. Politikon 32: 147–164 Mehta PB (2003) The burden of democracy. New Delhi: Thomson Press Reich RB (2009) Supercapitalism: The battle for democracy in an age of big business. Crows Nest, Australia: Icon Books Rotberg T & Gisselquist RM (2008) Strengthening African governance – Ibrahim Index of African governance: Results and rankings. Cambridge, MA: John F Kennedy School of Government Saul JS (2008) Decolonization and empire: Contesting the rhetoric and reality of resubordination in southern Africa and beyond. Monmouth, Wales: The Merlin Press Southall R (2007) The ANC state, more dysfunctional than developmental? In S Buhlungu, J Daniel, R Southall & J Lutchman (Eds) State of the nation: South Africa 2007. Cape Town: HSRC Press Teunissen JJ & Akkerman A (2005) Helping the poor? The IMF and low income countries. The Hague: Fondad Van Beek UJ (Ed.) (2006) Democracy under construction: Patterns from four continents. Pretoria: Van Schaik Zuma JG (2009) State of the Nation Address by His Excellency JG Zuma, President of the Republic of South Africa. Joint sitting of Parliament, Cape Town (3 June)

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Chapter 2

Consolidating a developmental state agenda: a governance challenge
Mashupye H Maserumule

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The notion of a developmental state dominates in the formulation and the manner of presentation of the African National Congress’s (ANC) 52nd national conference resolutions of 2007 (ANC 2007c), which set the political context for the Zuma administration’s strategic policy orientation and direction. In recalling the resolution of its 2002 national conference, the 2007 ANC national conference ‘highlighted the need for cadres to actively build a developmental state, capable of implementing the objectives of the national democratic revolution (NDR), including the creation of a better life for all, addressing the legacy of apartheid colonialism and patriarchy, and acting as the driving force for socio-economic transformation’ (ANC 2007c). The concept of a developmental state and the commitment to styling the country along its imperatives have long been part of the political lexicon and strategic agenda of the ANC on the transformation of state and governance. In the context of South Africa, the imperatives of a developmental state require that, on the one hand, the quality of life of the citizenry is enhanced through improved service delivery and, on the other hand, citizen participation in the mainstream economy is maximised, particularly for those previously marginalised by the apartheid system. These twin challenges preoccupied the Mbeki administration at the dawn of the second decade of democracy in South Africa, when its strategic transformation focus was on building a developmental state. Empirical evidence, as presented in this chapter, indicates that the ANC government, during the Mbeki administration, scored significant achievements in some areas while failing dismally in others in the pursuit of a developmental state agenda. The Zuma administration is expected to consolidate the achievements of the Mbeki administration and correct its failures, while at the same time effecting the much needed changes for which the South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU) – the more left-wing organisations within the Tripartite Alliance1 – argue with regard to the social and economic dimensions of a developmental state. The Alliance Left secured the installation of Jacob Zuma as the president of the ANC in the December 2007 Polokwane national conference. Its support for Zuma is premised on the conviction that in him, the Alliance Left has found a voice that Mbeki obscurantism had vehemently condemned as ultra-Leftist. So, to the Alliance Left, the rise of Zuma to the presidency of the ANC, coupled with ‘the dramatic events of September 2008 [that] saw Mbeki [recalled] and several key ministers resign’ and the victory of the ANC in the 2009 general elections, with Zuma assuming the presidential leadership of the country, means ‘a victory against [the] neoliberal orthodoxy’ of the Mbeki project (Pillay 2008: 12).
1 The Tripartite Alliance is the strategic political partnership of national liberation forces that comprises the ANC, SACP and COSATU, and which is led by the ANC (ANC 2007a; 2007c). In this chapter, the term ‘Alliance Left’ refers to the SACP and COSATU.

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The intellectual influence of the Alliance Left within the ANC heralds a particular ideological paradigm as its philosophical disposition gravitates towards a socialist agenda. Such an ideological paradigm is increasingly assuming preponderance in defining a South African developmental state that emphasises a redistributive socio-economic approach. This is a variation on what most in the Alliance Left interpreted as the neo-liberal economic orthodoxy that characterised the governance orientation of the Mbeki administration. Generally, a sense of unanimity exists in the Tripartite Alliance about the need to reposition South Africa and configure it according to the imperatives of a developmental state. Jeremy Cronin (SACP) underscores this in the debate with Ryan Coetzee (Democratic Alliance), on whether a developmental state or a free market economy would be the right way forward for South Africa’s growth in the next 10 years.2 Cronin argues that in the mid-1990s a message that was drummed into the Alliance was that ‘for growth and development, markets should be liberated, the public sector downsized and contracted out’. This is a neo-liberal approach to building a developmental state that the Mbeki administration vigorously pursued, which contrasts with the Alliance Left’s propagation of a strongly state interventionist approach (Pillay 2008). The Mbeki administration envisaged an activist state that intervenes decisively in the economy with a generally progressive agenda. The ANC and its Alliance partners’ ideological divergence on the meaning of a developmental state centres around the extent of the state’s intervention in the economy.
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Because of competing ideological orientations accommodated within the Tripartite Alliance, there are fundamental differences of strategy relating to the realisation of a developmental state. The Alliance Left argues for a more radical approach to a developmental state. Further, what may be considered as the ‘achievements’ of the Mbeki administration, in the pursuit of a developmental state agenda in certain areas, may not necessarily be understood and accepted as such by the Alliance Left, which now exerts more influence within the ANC and, inevitably, within the Zuma administration. This presents a political and ideological conundrum for the Zuma administration: on the one hand, much of the thinking within the ANC emphasises continuity, whereas on the other the Alliance Left propagates changes whose tenor suggests a fundamental shift from the Mbeki administration’s strategic approach (neo-liberal in orientation) in the pursuit of a developmental state agenda. Against this background, the crucial governance question for the Zuma administration is obviously how it can navigate these two extremes. This chapter problematises this governance challenge, reflecting critically on the Mbeki and Zuma administrations with regard to the challenges of consolidating a developmental state agenda. At the outset, the notion of a developmental state is untangled. This is followed by reflection on the political philosophy behind, and the ideological antecedents of, the concept of a developmental state in South Africa. The theory undergirding the developmental state is used as a framework for analysing the ANC government’s development trajectory under the Mbeki administration, and to provide a context for reflection on the challenges facing the Zuma administration in consolidating a developmental state. The chapter highlights the challenge of governance in a political context fraught with ideological contradictions and contestations. Arising out of the analysis are recommendations for various policy options that the Zuma administration could consider in defining a South African developmental state agenda.

Untangling the meaning of a developmental state
The idea of a developmental state in contemporary political and economic discourse was introduced by Chalmers Johnson, following the 1982 publication MITI and the Japanese Miracle: The Growth of Industry
2 J Cronin, Right road for growth, Sunday Times (15 May 2009: 9).

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Policy 1925–1975. In this seminal work, Johnson analyses factors that undergird Japan’s successful postwar reconstruction and industrial renaissance, as a result of what Beeson (n.d.) describes as the efforts of a ‘plan rational state’ (i.e. a developmental state). Yet what is a developmental state? Johnson (1982) defines the developmental state as that type of state rationally planned in a manner that makes it possible and necessary for government to influence the direction and pace of economic and social development rather than leaving it to the dictates of the markets (see also Beeson n.d.; Castells 1992; Mkandawire 1998; and Sindzingre 2004). The Japanese prototype of state-led intervention, as explained in Johnson’s work, has been emulated in countries such as France, South Korea, Malaysia, Singapore and, lately, South Africa (see Beeson n.d.; Fourie & Ngqunguwana 2005; Manuel 2005). 3 In a developmental state, the government establishes social and economic goals. While the means of production are privately owned, the state intervenes to provide guidance, to ensure that utilisation of the means of production is aimed at realising national interests. A strong ‘state capacity’ is critically important as a distinguishing feature of a developmental state; it is achieved through the creation of an inexpensive, efficient and effective public service, staffed by the nation’s brightest and best servants functioning without constraints, and capable of being innovative in addressing the social and economic needs of the citizens (Beeson n.d.; Evans 1998; Johnson 1982; Palidano 2000). The Northeast Asian states and Singapore are perfect examples of how the capacity of the state could be built to meet the challenges of a developmental state. In a developmental state the government is always engaged in the perfection of market-conforming methods of state intervention in the economy to maximise business performance in the private sector. A developmental state encourages and shapes co-operation with the private sector (Beeson n.d.; Evans 1998; Johnson 1982; Palidano 2000). Mahabane states that a ‘key component of [the] developmental state is industrial policy’ (2005: 8). Mahabane further quotes Rodrik, a professor of international political economy at Harvard University, to explain that the purpose of the industrial policy ‘is as much about eliciting information from the private sector on significant externalities and their remedies as it is about implementing appropriate policies’.4 The idea of embedded autonomy or technocratic autonomy, which is one of the imperatives of a developmental state, is critically important in the implementation of industrial policy. Embedded or technocratic autonomy is about insulating the public service from political vagaries and allowing it to autonomously craft strategic relationships and establish networks with the private sector and civil society (Beeson n.d.; Evans 1998; Mahabane 2005; Mkandawire 1998; Palidano 2000; Sindzingre 2004). Such relationships and networks are important in forging a common understanding of the development vision of the state among the ‘democratic sectors’, which, according to Clift (2003), refers to governments, elected and appointed officials, media and major online portals, political parties, interest groups, civil society, the private sector, international governmental organisations and citizens/ voters. More than two decades after its conception, the idea of the developmental state still dominates in contemporary discourses and evokes continued intellectual interest. This is ostensibly because of the fact that it provides an epistemological framework to understand the stupendous economic growth performances of East Asian countries. Sindzingre (2004) emphasises that the concept of the developmental state is still relevant in the contemporary world and could be used to understand the economic failures of developing countries; she suggests the possible importation of the imperatives of the developmental state into countries grappling with socio-economic development challenges. South Africa is one of the developing countries experimenting with the concept of a developmental state to achieve social and economic goals set by government.

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3 4

See also, I Mahabane, Welcome to the national theatre; farce is our forté, Sunday Times (17 April 2005: 8). Rodrik cited in I Mahabane, Welcome to the national theatre; farce is our forté, Sunday Times (17 April 2005: 8).

Consolidating a developmental state agenda | 17

The notion of a South African developmental state: political and ideological context
The introduction of the concept of a developmental state in South Africa can be located politically and ideologically in the ANC’s political discourse on the democratic state, encapsulated particularly in its discussion document, The State and Social Transformation, which was issued in 1996, two years into the democratic dispensation. This discussion document is one of a plethora of policy position papers that the ANC, as the political party in power, has produced and uses as the basis for formulating government policy. To understand the nature and character of the political system of democracy in South Africa, an insight into the ANC’s strategic policy orientation is critically important. Following the ANC’s adoption of The Strategy and Tactics document in 1994 (ANC 1994b), The State and Social Transformation (ANC 1996) was penned to reflect the governing party’s thinking in terms of the type of state that should be constructed to achieve what, in contemporary political jargon in South Africa, is termed the NDR. Netshitenzhe (1996) explains NDR as ‘a process of struggle that seeks the transfer of power to the people’ by ‘removing the barriers that have been set by apartheid in terms of black people and Africans’ (in particular) access to the economy and services’. This has always been the ANC’s vision of the South African state, as expressed in the Freedom Charter of 1955 (ANC 1955), which was developed after wide consultation with the majority of people and documented their needs and aspirations. After assuming political power in 1994, the ANC explored various ways to achieve its strategic vision as encapsulated in the NDR. In 1994 the ANC came up with the Reconstruction and Development Programme (RDP), which was widely accepted, particularly within the Tripartite Alliance, as an important strategic milestone towards achieving the political vision of the NDR. The RDP was the democratic government’s integrated policy framework for ‘socio-economic renewal, transformation and empowerment, to establish a systematic approach to the democratisation and development of the South African society’ (ANC 1994a: 4). The RDP was a detailed crystallisation of the needs of the people that were initially expressed in the Freedom Charter (ANC 1955), which, as indicated, has always been a strategic nexus of the ANC’s NDR. The RDP envisaged the type of state that would play a leading role in creating a strong, dynamic and balanced economy to address the social, economic and political inequities bequeathed by the apartheid system of government. Its strategic approach gravitated towards welfarism, which is a political system where ‘government undertakes the main responsibility for providing for the social and economic security of the state’s population’ (McLean 1996: 526). In the context of the RDP, a semblance of ideological unanimity prevailed in the conceptualisation of the developmental nature of the state that South Africa should be, which had a redistributive socio-economic orientation. In his parliamentary speech of 10 May 1994, Nelson Mandela, the first democratically elected president of the Republic of South Africa, proclaimed that ‘the RDP is a centre piece of what government will seek to achieve, the focal point on which attention will be continuously focused’ (cited in Desai 2004). Habib observes that when ‘the ANC came into power in 1994 it inherited a nearly bankrupt state’ and was at the same time ‘confronted with an ambitious set of expectations from the previously disenfranchised and an investment strike by the business community’.5 The fundamental question then was whether the RDP was the appropriate policy approach to deal with the existing governance challenge, as its solution lay largely in substantial investment in the economy. Habib (in Ray 2009) further observes that ‘to get investment and growth going, the ANC felt it had to make a series of economic concessions,
5 Cited in M Ray, No middle road, Finweek (9 April 2009: 11–14).

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18 | The Zuma administration: critical challenges

most of which were captured in the GEAR [Growth, Employment and Redistribution] strategy’ (Ray 2009). In 1996 the ANC government introduced GEAR, which, when compared to the RDP, elicited much disapproval, mainly from the Alliance Left, civil society and activist intellectuals. GEAR was introduced and presented as a fait accompli, by the Mandela Cabinet, among the ‘motive forces’ – which, in ANC political parlance, refers to those ‘that benefit when a revolution is victorious, and often push for its success’ (ANC 2007a: 18). GEAR is a product of a technocratic rather than a democratic process. Habib explains that the Mandela Cabinet bypassed Parliament in the introduction of GEAR, ‘for they feared that their own comrades in the national legislature would defeat it’.6 In fact, the ANC’s highest decision-making body endorsed GEAR only after the government had already pronounced on its adoption. GEAR marked the inception of the so-called ‘1996 class project’, with Mbeki being referred to as its chief architect. In the context of contemporary political parlance in South Africa, and for the purposes of this chapter, the 1996 class project refers to a package of market-based policies, the ideological inclination of which was to seek to modernise and model the ANC and government along neo-liberal lines. To all intents and purposes, Mbeki, during the Mandela presidency, ran the administration of South Africa. GEAR engendered profound consternation in the Tripartite Alliance and enraged the Alliance Left. COSATU and the SACP viewed GEAR as a fundamental policy shift from the RDP. This view was shared by a myriad of civil society organisations and intellectual activists. GEAR was strongly rejected on the basis of being a neo-liberal conception replicating the structural adjustment programmes of the Bretton Woods Institutions (i.e. the IMF and the World Bank), which prescribed models of development for developing countries. Desai (2004) captures this in the contention that ‘in practice, GEAR operated as a home-grown structural adjustment programme’. GEAR heralded ‘a fundamental shift away from the statist service delivery models of the past where the state subsidised and delivered municipal services…towards a neo-liberal service delivery model where the private sector dominates’ (McDonald & Smith 2002: 1). In the latter model, where GEAR operates, ‘the state acts as a service ensurer rather than a service provider and [public] services are run more like business, with financial cost recovery becoming the most effective measure of performance’ (McDonald & Smith 2002: 1). GEAR gravitated more towards the system of market economy as, among other things, it advocated neo-liberal development initiatives and practices such as privatisation, reduction of public expenditure and trimming the size of the public service to tractable proportions. In a market economy, the role of government in shaping the national development agenda is minimal; ‘the wealth is owned privately and economic life is organised according to market principles’ (Heywood 1997: 402). Because of its ideological grounding in neo-liberalism, GEAR strained the strategic nexus that holds the Tripartite Alliance together. Mandela and Mbeki urged the Alliance Left to know its place and toe the line, suggesting that they were junior partners in the political marriage. The exchanges within the Alliance were so acrimonious that at one point Mbeki declared that the opponents of GEAR reminded him of white right-wingers. He labelled the SACP leadership as ‘fake revolutionaries’, ‘charlatans’, and ‘confidence tricksters’ determined to build themselves on the basis of ‘scavenging on the carcass of a savaged ANC’ (Southern Africa Report Archive 1998). Mandela also unwaveringly maintained that GEAR was the fundamental policy of the ANC and would not change because of pressure from the Alliance Left. He instructed SACP delegates to stop singing ‘Asifune GEAR’, loosely translated to mean ‘we do not want GEAR’. The ANC and the government slammed the perspectives that criticised GEAR with the contention that it was a strategic intervention aimed at accelerating the pace of realising the objectives of the RDP.

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6

Habib, cited in M Ray, No middle road, Finweek (9 April 2009: 11–14).

Consolidating a developmental state agenda | 19

At the 50th ANC national conference in 1997 in Mafikeng, which was the first political gathering of the organisation’s highest decision-making body since the adoption of GEAR in 1996, at a time when GEAR was the subject of fierce political contestations, the ANC unleashed its political and intellectual heavyweights, whose presentations in defence of GEAR led to its adoption without consideration of the perspectives of the Alliance Left. This, coupled with the type of ANC leadership that the 1997 Mafikeng conference produced, and wide-ranging powers on various political and governance issues assigned to its presidency, meant that the 1996 class project was consolidated. With Mbeki elected as its president, the ANC assumed ideological hegemony in defining and setting the agenda for a South African developmental state. The Alliance Left lost in Mafikeng, but it continued with its mobilisation against GEAR as a strategic trajectory towards a developmental state. It continued to unequivocally express its disapproval of GEAR, as a neo-liberal policy. Following the 1999 general elections and subsequent victory of the ANC at the polls, Mbeki became the president of South Africa. As probably the ‘principal architect of the ANC’s neo-liberal strategy of appeasement towards capitalism, both local and global, as the presumptive engine of South African economic transformation’ (Southern Africa Report Archive 1998), GEAR became a distinguishing feature of the Mbeki administration. As Desai (2004) observes, with GEAR as the policy of government, ‘markets were opened, taxes to the rich were cut, state assets were privatised, services were commodified, and social spending was reduced’. GEAR placated the markets and the international financial institutions, such as the World Bank and the IMF. Unsurprisingly, in reacting to GEAR, Pamela Cox, speaking in her capacity as head of the South African division of the World Bank, remarked that what the ANC government had done ‘to put South Africa on the right footing’ was ‘almost miraculous’ (in Desai 2004). In his own words in the SA–US Business and Finance Forum, Mbeki reaffirmed his administration’s commitment to GEAR by stating that it would ensure the following: Fiscal discipline through deficit reduction; continued liberalization of exchange controls; accelerated reductions on tariffs; tax incentives to fund training; accelerated delivery on the backlog of social infrastructure; maintenance of a stable and competitive exchange rate; labour market reform to increase the absorptive capacity of the economy; and the privatisation and restructuring of state assets…Fiscal discipline and curtailing inflation are necessary to restore confidence and create [the] basic environment within which growth can occur. (in Desai 2004) At most of the ANC national conferences that followed the Mafikeng one in 1997, the GEAR approach towards building a developmental state was consistently endorsed. Although the voices of criticism against the neo-liberal orientation of the ANC subsequently appeared to have toned down, the Alliance Left worked hard to reclaim its position within the Alliance as an influential factor in policy issues. The dismissal of Zuma as the deputy president of South Africa in 2005, following the conviction in court of his financial advisor, presented an opportunity for the Alliance Left to consolidate its efforts in the battle for the soul of the ANC. In Zuma, the Alliance Left saw an alternative to Mbeki, who was considered intolerant of views differed from his own. The Alliance Left aligned itself with Zuma and, together with the ANC Youth League (ANCYL), ANC Women’s League (ANCWL), Young Communist League (YCL) and established businesspeople within the ANC who felt marginalised by the Mbeki administration, provided enormous political support to Zuma; this helped secure his victory as the president of the ANC in the party’s December 2007 national conference in Polokwane. Zuma defeated Mbeki in a fiercely contested leadership battle for the top position in the ANC, with the position of deputy president of the party assigned to Kgalema Motlanthe and the secretary general

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20 | The Zuma administration: critical challenges

portfolio to Gwede Mantashe – all key former unionists and SACP members. Matthews Phosa who, like Tokyo Sexwale, was an established businessperson who conspicuously supported Zuma as a candidate for ANC president, was made treasurer general. Baleka Mbete became the national chairperson and Thandi Modise the deputy secretary general. With the recalling of Mbeki as the president of South Africa in September 2008 and the subsequent resignations of the deputy president and a host of other ministers, Motlanthe assumed the presidency of South Africa and Mbete became his deputy, replacing Phumzile Mlambo-Ngcuka. The Motlanthe administration did not attempt to introduce much fundamental policy change but rather continued with the developmental state agenda set by the Mbeki administration. This was not really surprising, given the interim status of Motlanthe’s presidency. The role that Motlanthe played after the ANC recalled Mbeki should, however, not be underestimated or trivialised as merely keeping the presidential seat warm for the arrival of Zuma. Gumede (2009) states that Motlanthe inspired public confidence during the difficult times of uncertainty after the recalling of Mbeki as the president of the country. The Motlanthe administration set up ‘emergency teams to cushion job losses’, proposed ‘international solutions to the global financial crisis’ and actively encouraged ‘racial and political reconciliation’ (Gumede 2009: 32). Motlanthe provided leadership in implementing some of the ANC’s Polokwane national conference resolutions, key among them being signing the legislation that dissolved the Scorpions, an elite investigation unit attached to the National Prosecuting Authority that built a case that led to the corruption charges against Zuma (which charges were eventually dropped). The ‘Motlanthe factor’ in the transformation of South Africa’s system of governance can be said to have had profound policy implications and should not be ignored; the Motlanthe administration played a critical role in ensuring a smooth transition from the Mbeki administration to the Zuma administration. It maintained stability in government at the time when the spectre of instability reared its menacing head, following the recalling of Mbeki and subsequent resignations of some ministers who preferred to leave with him. The contracts of some directors-general were also renewed as part of Motlanthe’s strategic approach to maintaining stability in the administration of government. To some, the leadership that emerged at the ANC Polokwane national conference of 2007, coupled with the recalling of Mbeki, signalled the end of the 1996 class project. As Pillay observes, the election of Motlanthe and Mantashe to key strategic positions in the ANC leadership because of their grounding in the Alliance Left, ‘strengthens the view that a space has been opened for a move away from the Mbeki Project, towards a more redistributive socio-economic policy trajectory’ (2008: 12). To other analysts, however, the Polokwane conference does not mean the end of the 1996 class project. Jara (2008) argues that ‘the Polokwane shift to a developmental state is within the underlying logic of creative capital accumulation’. In explaining Jara’s observation, Maseti writes that ‘the 1996 class project has not been entirely eliminated or defeated in Polokwane; it has been partially dislodged politically but still leaves behind a very firm and solid policy foundation that the current ANC leadership will find extremely difficult to disentangle’ (2008: 45). Much as there may be merit in both Jara’s (2008) and Maseti’s (2008) contentions, it would be naïve to underplay the Alliance Left factor and its influence in the Zuma administration, especially with influential communist personalities such as Blade Nzimande (general secretary of the SACP), and Zwelinzima Vavi (general secretary of COSATU). This is even more so following the formation of the Congress of the People (COPE), which comprises the political personalities who played key roles in the Mbeki administration’s pursuit of the 1996 class project. It would equally be naïve to conclude that Zuma’s victory in Polokwane automatically means that the Alliance Left has taken total control of the ANC. The coalition that secured Zuma’s triumph in Polokwane is not a homogeneous entity in terms

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Consolidating a developmental state agenda | 21

of the ideological inclination of its constituents. In fact, the only factor that brought together the class of forces that comprise the alliance that supported Zuma was, as Pillay puts it, ‘a common antipathy towards the relatively aloof leadership style of Mbeki’ (2008: 12). So, the SACP, YCL, COSATU, ANCWL and ANCYL, and a range of established businesspeople who felt marginalised by the Mbeki administration, represent divergent interests. Their expectations and policy preferences would inevitably vary in so far as the Zuma administration’s pursuit of a developmental state is concerned. As pointed out in the introductory part of this chapter, there are those within the ANC, especially those who were part of the 1996 class project, who prefer continuity with the Mbeki administration’s strategic approach to a developmental state and those, especially in the Alliance Left, who propagate a fundamental shift away from the previous system. The attempt to navigate these extremes is a fundamental challenge for the Zuma administration. And the fundamental question is whether it is possible to establish and consolidate a developmental state agenda premised on the imperative of the redistributive socio-economic approach to transformation, without changing the market-based stabilisation policies of the Mbeki administration.7 To provide a context for analysis of the challenge that the Zuma administration faces in consolidating a South African developmental state agenda, it is important that the ANC government’s strategic approach in building a developmental state under the Mbeki administration be reflected upon from a perspective informed by empirical data. Consolidation is about solidifying what already exists; and in the context of this chapter, this means what the Mbeki administration put in place. The purpose in this regard is to determine whether that which exists is worth consolidating (continuity), or whether it must be corrected or discarded by the Zuma administration.

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The ANC government under Mbeki and the developmental state agenda
As already mentioned, a country that seeks to assert itself as a developmental state must ensure that its developmental agenda is geared towards enhancing the quality of life of the citizenry and creating an appropriate environment to maximise the participation of citizens in the mainstream economy. A developmental state is premised on two dimensions that are fundamentally important in its conceptualisation, namely social and economic dimensions. The social dimension of a developmental state is about attempts to enhance the quality of life of the citizenry through the provision of social services, while the economic dimension is concerned with the maximisation of citizen participation in the mainstream economy. This understanding of a developmental state was emphasised at the conference of Senior Management Services (SMS)8 in 2004 and is used as a framework for analysis in this chapter. The purpose of the SMS conference was to engage with the concept of a developmental state, to ensure that the senior management of the public service clearly understood it so that they might align their roles with the developmental challenges facing South Africa, and effectively play their part in the socio-economic development trajectory that the Mbeki administration was pursuing (Fourie & Ngqunguwana 2005). In addressing the conference, Trevor Manuel (2004) indicated that the definition of a developmental state, as provided above, ‘applies to the South African government view of its role as a developmental state’, which prioritises ‘the removal of poverty and tyranny, the expansion of economic opportunities and extension of services to the poor’. The two dimensions – social and
7 8 M Ray, No middle road, Finweek (9 April 2009: 11–14). Building a developmental state: Bridging the gap between two economies: A public service response. Conference of Senior Management Services held at the International Convention Centre, Cape Town (20–22 September).

22 | The Zuma administration: critical challenges

economic – of a developmental state are used below as an analytical framework to help us understand how the Mbeki administration fared in the pursuit of a developmental state agenda, and to provide a context for reflection on the challenge facing the Zuma administration in this regard.

The social dimension of a developmental state
To realise the social imperative of a developmental state, which, in the context of South Africa, is about eradication of poverty and extension of basic services to the poor, it is important that the strategic capacity of the country’s system of government be enhanced. As one of the fundamental characteristics of a developmental state, a focus on strategic capacity is concerned with the democratic nature of, and people-centred and people-driven approach to, development and change. To enhance the quality of life of the citizens, it is important that government should, at all times, have a clear understanding of their needs and expectations. This can only be realised through engaging citizens in defining ‘a common national agenda and in mobilising all [of them] to take part in [its] implementation’ (ANC 2007a: 14). The social dimension of the developmental state agenda of the ANC government has always been about poverty alleviation and the provision of basic services to the poor. This is underscored in the RDP (ANC 1994a), which is generally considered a product of a people-driven approach to development and change. It could be argued that this approach to change and the relative consensus among the ‘motive forces’ was spoilt with the introduction of GEAR and the emergence of the 1996 class project which dominated the Mbeki administration. As noted earlier, GEAR was not the product of consensus. It was imposed, and therefore not built on popular legitimacy. Unlike the RDP, GEAR was rejected by the Alliance Left and much of civil society, on the basis of not being a people-centred and people-driven policy of government. Instead of addressing the needs of the people, GEAR’s neo-liberal orientation placates the markets. It is not biased towards the poor and failed to unite the ‘motive forces’ around the NDR and focus them in one direction. It was in the context of the contestations that GEAR engendered in the Tripartite Alliance that the Mbeki administration had to carve its strategic niche in the pursuit of a developmental state. The ANC’s preoccupation during the Mandela administration had been on putting in place the organisational and policy framework to address the legacy of apartheid. This was mainly about enhancing the organisational capacity of the state to ensure that the structures and systems of government were geared towards the realisation of the national agenda. When Mbeki took over in 1999 his administration continued with the task of building the organisational capacity of the state, and its strategic transformation focus was largely on building the state’s technical capacity to translate the broad objectives of government into implementable programmes and projects to achieve a developmental state agenda. The question is: how did the Mbeki administration fare in its pursuit of the social dimension of a developmental state? Attempting to answer this question is important in order to provide a contextual framework for reflection on the challenges faced by the Zuma administration in the pursuit of a developmental state.

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The Mbeki administration’s performance in social services provision
Paradoxically, with its GEAR approach to building a developmental state, the Mbeki administration appears to have scored significant achievements, which are, however, strongly contested in some quarters. After five years of being the president of the country (which is a reasonable period to allow for assessment of the performance of the ANC government during his administration), Mbeki elaborated on the successes of government in his State of the Nation address of 11 February 2005. He reported to the nation that 90 per cent of the citizens eligible for social grants were then receiving them (Mbeki 2005). Writing in Service Delivery Review, the deputy president at the time, Phumzile Mlambo-Ngcuka,

Consolidating a developmental state agenda | 23

corroborated that the ‘beneficiaries of social grants increased from 2,6 million in 1994 to 9,7 million in June 2005’ (2007: 14). The Public Service Commission’s (PSC 2007) State of the Public Service Report further attested that efforts such as social security and social assistance programmes had reached many beneficiaries. At the time when Mbeki was recalled as president of the country in September 2008, the beneficiaries of social grants had increased dramatically to 12.5 million people, of whom 8 million were children (ANC 2009). This appears to be among the positive consequences of the Mbeki administration’s decision to create the South African Social Security Agency (SASSA) to engender efficiency and effectiveness in the administration of social security services. SASSA was established in 2004, in terms of the South African Social Security Agency Act (No. 9 of 2004), as a public entity assigned the mandate of providing quality social security services, including payment of social grants to beneficiaries. Its establishment enhances the organisational capacity of the state in the pursuit of the social imperatives of a developmental state agenda. Gevisser writes that ‘Mbeki’s greatest victory, not often-enough hailed, is that his government significantly altered the profile of poverty in the country through the massive social-grant programme’ (2009: 17). The PSC’s State of the Public Service Report (2007) advises that social security and social assistance programmes need to be augmented by more sustainable efforts towards eliminating the second economy. The report contends that there is still a huge challenge facing the government to reduce poverty through productive employment; the reduction of poverty through social grants is not sustainable. This is an important aspect of developmentalism in which the Mbeki administration appeared not to have fared well. Although in Towards a Fifteen Year Review (ANC 2008) it is pointed out that ‘the rate of unemployment continues to decline, estimated at 23% in 2007 compared to almost 40% in the beginning of 2000’, the reliance on social security of 12.5 million people implies that the Mbeki administration’s attempt to reduce poverty through productive employment failed. In fact, Mbeki accepted this, as he expressed in an interview with Essop Pahad in The Thinker (Pahad 2009). The ANC also acknowledges the failure of its administration under Mbeki to deal with the challenge of unemployment. This is implied in its 2009 election manifesto, in its promise of ‘quality jobs rather than low-wage employment opportunities’.9 Further, in the State of the Nation address of 2005, Mbeki reported that more than 10 million South Africans had access to potable water (Mbeki 2005). Mlambo-Ngcuka expatiated that in March 2004 ‘42,7 million people out of an estimated 47,1 million population had access to basic water supply infrastructure or a higher level of service such as water in-house or in a yard’ (2007: 14). This is a remarkable achievement as the figure suggests that government had managed to provide water to 91 per cent of the population. Notwithstanding the foregoing, Ray and Lund, citing a study by the South African Cities Network chairman, Andrew Boraine, state that ‘although the proportion of people with water increased between 1996 and 2002, the number of households with water in-dwelling decreased by 121 565, partly due to the migration of 478 922 households out of backyard accommodation during that period’.10 In housing, according to the ANC election manifesto (ANC 2009), over 2 million subsidies were given to the poor during the period 1994–2005; the beneficiaries in this regard: increased from 325 086 between 1994 and 1998 to 1.6 million in 2005. This figure increased in 2008, with over 3.1 million subsidised houses having been built, including 2.7 million free

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9 10

M Ray, No middle road, Finweek (9 April 2009: 11–14). M Ray & T Lund, Mission impossible, Finweek (28 February 2008: 12–13).

24 | The Zuma administration: critical challenges

houses for the poor, giving shelter to an additional 14 million people. Between 1994 and 2005 3.5 million homes were electrified. (ANC 2009) This, according to Mlambo-Ngcuka, rates as ‘one of the most significant achievements by this country and unprecedented internationally’ as ‘by May 2005, access to electricity was estimated at 71%’ (2007: 14). Between 2007 and 2008, according to the ANC election manifesto, about 80 per cent of households acquired electricity (ANC 2009). Income inequities were also attended to as, according to Mbeki (2005), ‘a figure of 4.1 million households that lived on an income of R9 600 or less per annum in 2004 was decreased to 3.6 million households’. Consequently, the black middle strata, which is identified in the Strategy and Tactics document (ANC 1994b) adopted at the ANC’s 1994 congress as one of the strategic ‘motive forces’, ‘which possess the best political and ideological potential to lead and defend the process of transformation’ (ANC 1994b), emerged and assumed a conspicuous character. In the context of government’s performance as described in the above exposition, Mbeki (2005) concluded in his State of the Nation address that ‘51% of the goals that the ANC government set with specific timelines have been accomplished; 21% had been carried out with minor delays; and 28% had not been undertaken’ (see also ANC 2009 for more about the ANC government’s delivery track record). The other achievements of the ANC government during the Mbeki administration are that ‘free primary health care has expanded and 1,600 more clinics have been built’. Further, ‘about 248 out of 400 public hospitals have been revitalised and refurbished; in the fight against HIV and AIDS, the anti-retroviral therapy programme enrolled more than 600,000 people’ (ANC 2009). However, according to Ray and Lund, mainly in the provincial hospitals, evidence of a severe shortage of doctors, nurses and medical supplies still persisted, with scores of buildings declared unfit as public health facilities.11 The achievements of the Mbeki administration are underscored in Towards a Fifteen Year Review (ANC 2008), which is an assessment of the impact of the ANC programmes in an attempt to realise the targets set in the 2004 election manifesto and the 2004–09 medium term strategic framework. The review points out that ‘in the social sphere there has been substantial overall improvement in people’s lives through mainly well-targeted programmes to reduce poverty with regard to income, access to social services like housing and land’ (ANC 2008). However, the performance of the Mbeki administration in the pursuit of the social imperative of a developmental state is, as pointed out above, a subject of contestation, and the debates on the issue are polarised. In the Human Sciences Research Council’s (HSRC) State of the Nation: South Africa 2005–2006, Southall’s (2006b) contribution asks an appropriate question: can South Africa be a developmental state? In engaging this question, Southall cites President Mbeki’s 2005 State of the Nation address in its entirety and does not contest its empirical accuracy per se with regard to the performance of government. Hemson and O’Donovan’s (2006) contribution in the same HSRC publication raises an important point about the methodology used to gather information that is normally used as a basis for determining government performance. They state that over-reliance in the reporting of government performance on departmental statistics is inadequate and they suggest that national surveys should be considered as an alternative. The PSC’s State of the Public Service Report (2007) concurs with Hemson and O’Donovan’s (2006) perspective, and states that the public service performance reporting system should strike a balance between ‘quantitative achievements such as the number of beneficiaries and the value that the services provided generate for the beneficiaries’, which ‘requires among others sound planning and focused evaluative studies’ (PSC 2007).

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11

M Ray & T Lund, Mission impossible, Finweek (28 February 2008: 12–13).

Consolidating a developmental state agenda | 25

Many of the Mbeki administration’s achievements are expressed in quantitative terms. This approach in assessing the performance of government is typical in countries whose policy orientation is embedded in neo-liberalism. Their preoccupation in terms of measuring the performance of government is more with the ‘outputs’ than with focusing on the ‘outcomes’, which is about the impact of government action in enhancing the quality of life of the citizens. Government performance cannot merely be understood on the basis of the number of things done. Ganley and Cubbin (1992) explain that government performance for the most part does not have the characteristics of ‘countability’. Unlike in the case of pure commercial business, where the production of tangible outputs can be measured, it may sometimes not be possible to observe distinct units of government performance, which also cannot meaningfully be measured ‘on ordinary cardinal number scales’ (Ganley & Cubbin 1992: 32). Amassing statistics, and adding and raising them to the nth power to understand government performance, may be a flawed approach. In the literature that is critical of the Mbeki administration – the framework of which literature is embedded in socialist thinking – the Mbeki administration’s achievements in realising the social imperatives of a developmental state are highly contested. In fact, it is contended in South Africa’s ‘new progressive magazine standing for social justice’, Amandla!, that the Mbeki administration bequeathed social crisis to the country. It states that: Under Mbeki’s watch South Africa has become the most unequal middle income country in the world. Obscene opulent wealth produces grinding poverty. Since 1994 unemployment has more than doubled and poverty has worsened. In this mix and partly as a failure of AIDS and health policy generally, SA has one of the highest infection rates in the world. The depth of the social crisis is made worse by the difficulty of overcoming apartheid geography that locks inequality and poverty into racially bound communities. Deprivation of basic services such as housing, water, electricity and sanitation fosters feelings of disillusionment and political alienation. The breeding grounds of violent crime are invested [sic] with young people whose dreams have been crushed by the violence of failed service delivery. Add to this the failure of the postapartheid education and schooling system that produces functional illiteracy on a mass level and the scale of the crisis becomes apparent.12 Since 1994 there have been many service delivery protests countrywide with most municipalities being unable to spend two-thirds of their capital budgets for service delivery. Van Dijk and Croucamp (2007: 665) put the number of protests against municipalities at 51 between 1994 and 2004/05. They further state that the figure increased exponentially from 2005, with the former provincial and local government minister, Sydney Mufamadi, indicating that 90 per cent of the 136 municipalities in need of financial assistance had experienced service delivery protests (Van Dijk & Croucamp 2007: 665). Mbeki (cited in Pahad 2009) accepted this as a consequence of his administration’s failure to build ‘an efficient and effective system of local government’ (Pahad 2009: 10). Ray (2009) estimates that 2 000 civic protests, some violent, about lack of service delivery occurred between 2007 and 2008.13 Notwithstanding statistical variations in the sources referred to above, service delivery protests that occurred during the Mbeki administration suggest fundamental flaws in certain areas of governance. Many of these governance challenges are attributed to GEAR, which, through its approach on issues of social services, emphasises neo-liberal variables such as privatisation and corporatisation of basic services (e.g. transportation, water, electricity; and management of schools, healthcare and other services) on a user-fee and cost-recovery basis (see Desai 2004). In exposing the fundamental flaws in the commodification of basic services, McDonald & Smith illustrate that:
12 President Motlanthe: Few easy steps to restore confidence. Amandla (Oct/Nov 2008: 17) 13 M Ray, No middle road, Finweek (9 April 2009: 11–14).

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26 | The Zuma administration: critical challenges

If 18 percent of the seven million people who are reported to have been given access to water since 1994 are unable to pay their water bills no matter how hard they try, then 1.26 million of these new recipients are unable to afford this water and an additional 1.2 million have to choose between paying for water and buying other essentials like food. A similar percentage applies to the 3.5 million South Africans who have been given access to electricity. (McDonald & Smith 2002: 11) Some of the examples cited as the negative consequences of GEAR cannot, however, be attributed solely to the ANC government’s policy approach in advancing the developmental state agenda. When the ANC democratically assumed power to govern the country in 1994, it inherited a huge backlog of service delivery created by the apartheid system. So, any analysis of the performance of the ANC government that factors in the empirical data pertaining to the years when the ANC was not yet in power, without disaggregating and locating the discourse within the correct historical context, is scientifically flawed. This should not, however, be misunderstood as the rationalisation of the ANC government’s failure under the Mbeki administration in certain areas that are critically important in advancing the social agenda of a developmental state. The achievements of the Mbeki administration in the pursuit of the social imperative of a developmental state within the neo-liberal context of GEAR seem to be unsustainable and to impact negatively on social cohesion, which is about ‘a feeling of being together as one’ (ANC 2007a: 19). The achievements perpetuate the stratification of society into the ‘haves’ and ‘have nots’. The rich and, to a very great extent, the middle strata of the South African population, are the ones who seem to have benefited from the proceeds of the GEAR approach to building a developmental state. Gevisser writes that Zuma exploited this anomaly in the Mbeki administration, strategically positioning ‘himself as the representative of all those who feel excluded from the banquet of victory’ (2009: 17). Those with financial means are in a position of affluence and can afford commodified basic services, which are provided reliably to them solely because of their ‘rand power’ or ability to purchase. This is in contrast to poor-quality social services provided mainly in black townships and rural areas, where the majority of the people are poor. This section of the South African population feels marginalised and is growing impatient with the neo-liberal approach to the development of the country, which creates ‘social distance’ in the citizenry.14 This Mbeki accepted in his statement that inequalities in wealth, income and opportunity continue to characterise the profile of South African society. In his interview with Pahad, Mbeki said that ‘these inequalities increased rather than the opposite’ during his administration (Pahad 2009: 10). The incidents of service delivery protests referred to above, which occurred largely in black communities, bear testimony to rising inequality. Zuma, whose campaigning for the ANC displayed empathy for the plight of the poor seems to have ignited new hope in this community. In the article Jacob Zuma, the Social Body and the Unruly Power of Song, Gunner (2009) explores the wider political implications of the song ‘Umshini Wami’ (‘My Machine Gun’), which Zuma has used in his campaigns since early 2005, and explains how it helped him to prominence and ‘demonstrated a longing in the body politic for a political language other than that of a distancing and alienating technocracy’ (2009: 27). Gunner finds that this song, in the contemporary political context, reverberates with the poorer section of the population, ‘who have yet to taste the honey of a South African democracy’ under the Mbeki administration (2009: 27). According to Ray, ‘Zuma rose to power because of angry reactions by the ANC’s grassroots constituency against a black elite Mbeki had assiduously propped up’.15
14 In the context of this discourse, ‘social distance’ refers to a real and imagined distance in lifestyle, interaction and even geography between the rich and poor. 15 M Ray, No middle road, Finweek (9 April 2009: 11–14).

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Consolidating a developmental state agenda | 27

Many of the challenges of the ANC government under the Mbeki administration, as reflected upon in this chapter, are acknowledged in the document Towards a Fifteen Year Review (ANC 2008), and include, among other things, a weakening value system, increasing inequalities, high youth unemployment, poor quality of social services and economic exclusion. And as already mentioned, Mbeki accepted the failure of his administration with regard to these aspects. The Mbeki administration’s failures constitute a challenge for the Zuma administration, which must correct them. In addition to the aspects already mentioned, Mbeki further pointed out that his administration had failed with regard to the following: empowering the people with disabilities and in ensuring their respect by the society as a whole; mobilising people in the localities they live in to ensure that they work especially with the police services to radically reduce such contact crimes as rape, abuse of women and children, murder, assault causing grievous bodily harm; as well as other crimes, such as house-breaking and theft; ensuring the effectiveness of the Moral Regeneration Campaign; and inspiring the majority of the people in South Africa to adhere to a common patriotism in a meaningful manner consciously sharing a common national identity, with the country enjoying ever growing social and national cohesion. (cited in Pahad 2009: 10)

The technical and organisational capacity of the state during the Mbeki administration
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The social imperative of a developmental state necessitates a strong public service system, which is contingent upon establishing appropriate intellectual capital and organisational capacity to advance its agenda. Intellectual capital is about the quality and relevance of knowledge in people. In building the technical capacity of the state or establishing its intellectual capital, the role of the higher education institutions becomes critically important. The fundamental question that ought to be asked is whether the quality of higher education in South Africa befits the imperatives of a developmental state. Does it generate a contextually relevant knowledge and produce the required calibre of graduates armed with the necessary knowledge to drive a developmental state agenda? Answering these questions would be the subject of a separate research endeavour. Suffice it to say that the debate on the higher education system in South Africa often indicates that it produces functionally illiterate graduates whose knowledge is incongruent with the imperatives of a developmental state (Maserumule 2005; Vil-Nkomo 2009). The issue of building the technical and organisational capacity of the state was given substantial consideration during the Mbeki administration. In his 2007 State of the Nation address, Mbeki said: …in the period leading up to 2009, the issue of the organisation and capacity of the state will remain high on our agenda; and what has emerged, among others, as a critical area for strategic intervention is the content of training that public servants receive in various institutions and the role of the South African Management Development Institute (SAMDI). (Mbeki 2007) This state of affairs necessitated the reconstitution of SAMDI – an organisation assigned the mandate of building human capacity in the public service through training and development interventions – into the Public Administration Leadership and Management Academy (PALAMA). This move is said to have been among the attempts to enhance efforts to establish the intellectual capital appropriate for building a strong public service system. To advance a developmental state agenda the public service should be staffed by the brightest and best servants, with development-oriented knowledge, skills and attitudes. In this regard, Orkin explains that PALAMA’s main deliverables are to ‘heighten, and improve the quality of, management

28 | The Zuma administration: critical challenges

development for senior executives in the public service; and to massify the provision to junior and middle managers, towards better meeting the service delivery challenges of a developmental state’ (2007: 4). With the PALAMA approach to enhancing state capacity, the strategy is to move from the SAMDI approach of provision of training to facilitation of training; from competition with other training providers to collaboration with them; and from selective coverage in terms of training offerings to massified coverage (Orkin 2007). Only time will tell whether PALAMA’s strategic approach to training and development will enhance the technical capacity of the state through the production of the required calibre of public servants, imbued with the necessary knowledge, skills and attitudes, and able to intervene more strategically in the economy and produce the intended developmental state. This is given that there are serious skills shortages in the public sector, which seem to have assumed intractable proportions, according to Ray and Lund.16 The statistical data from the Department of Public Service and Administration (2007/08) suggests that the country needs 42 300 skilled and highly skilled state employees. Coupled with the vacancy rate for largely professional and managerial positions, which the Institute of Justice and Reconciliation’s recent study puts at 30 per cent in the provincial administrations, the foregoing appears to be a serious challenge in enhancing state capacity. Renowned economist Iraj Abedian is cited by Ray and Lund as having observed that ‘the total vacancy rate across all departments and levels of government could be perilously close to 300 000’. Further, as Ray and Lund argue, this means that during the Mbeki administration state capacity ‘remained tight, resulting in [a] cumulative backlog of social and capital expenditure’.17 This Mbeki acknowledged in his 2007 State of the Nation address (Mbeki 2007). In response to the PSC’s State of the Public Service Report (2007), Mbeki stated that ‘…we still have a lot of work to do to build a stable and a highly motivated public service. We need to achieve the deeply transformative objectives of the national democratic revolution’ (Mbeki 2007). Quoting Manuel (finance minister at the time), SAMDI argued that in a developmental state public servants are: the servants of the people and the champions of the poor and the downtrodden; their sense of service delivery is always focused on eradicating poverty and social deprivation and they look at their careers in the public service as a calling and not an opportunity to accumulate wealth or self-serving elitism. (SAMDI 2006: 10–11) Given the concessions that the ANC made in the interests of national reconciliation, particularly when the new constitutional order was negotiated, it is not necessarily easy to have the calibre of public servants with the attitudinal inclination that Manuel describes above. When the new constitutional order was negotiated in the early 1990s, the National Party managed to successfully negotiate for the insertion of a clause in the Interim Constitution of the Republic of South Africa (Act No. 2000 of 1993) to ‘safeguard the jobs of the white civil servants’ who were in the employ of government before the ANC took over power in 1994, and to ‘allow for a coalition of government between the Afrikaner Nationalists and the ANC ministers’ (Sampson 1999: 467–468). The integration of a racially defined administration without, on the one hand, any retrenchments and with, on the other hand, employment of previously disadvantaged people who had been discriminated against by the apartheid policies, bloated the public service sector. Efforts to rationalise it could not yield any anticipated results for a leaner public service because of the ‘protectionist clause’ in the Interim Constitution (1993) and the fact that government in South Africa is the biggest employer. Given the socio-economic and political history of the country, it is not easy to trim the public service, which is
16 M Ray & T Lund, Mission impossible, Finweek (28 February 2008: 12–13). 17 M Ray & T Lund, Mission impossible, Finweek (28 February 2008: 12–13).

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Consolidating a developmental state agenda | 29

highly unionised, with COSATU wielding great ‘worker power’ and in partnership with the ANC within the Tripartite Alliance. As Pillay observes, ‘COSATU has approximately 1.8 million members, and is by far the largest union federation in the country’ (2008: 13). As the ruling party, the ANC treads carefully in taking policy decisions that may be perceived as being inconsistent with the interests of workers. These dynamics pose a serious challenge to the ANC government in creating an inexpensive, efficient and effective public service staffed by, as already argued, the nation’s brightest and best servants capable of being innovative in addressing the social and economic needs of the citizens. Another related challenge pertains to the reorientation and reskilling of the public service (especially those who were part of the apartheid system), in line with the imperatives of a developmental state and the tenets of democracy, and the conflicts encountered at the political–administrative interface. There are still those in the public service with the attitudinal inclination that suggests a refusal to embrace the new basic values and principles of public administration – values and principles whose paradigmatic antecedents are ingrained in the African philosophy of humanism, which is ubuntu. Incidents of racism around issues that pertain to service delivery are regularly reported in the media, which clearly shows that some in the public service still attempt to live in the past. For some, a sense of Batho Pele in the service delivery interaction with citizens is non-existent. At the political–administrative interface, incidents of conflict between ministers and directors-general abounded during the Mbeki administration; some of the conflicts were even systemic and often culminated in the loss of excellent administrators or managers as a result of fallings-out with their political heads. In an article entitled Conflicts between Directors-general and Ministers in South Africa: A ‘Postulative’ Approach, Maserumule (2007) systematically examines this phenomenon and observes that it is becoming a frequent occurrence at the political–administrative interface, and impacts negatively on the state’s capacity to deliver services to the citizenry. Conflicts at the political–administrative interface pose a challenge to efforts aimed at building a developmental state. Maserumule (2007) further argues that these conflicts are occasioned by contradictions in policy formulated to serve as framework for the management of the public service. The following explanation and discussion may be necessary. In 1999 the Department of Public Service and Administration published Public Service Regulations that came into effect on 1 July of the same year. These Public Service Regulations empowered ministers to create and abolish posts, and recruit, appoint, transfer and discharge employees. The rationale behind the introduction of these regulations was to ensure that the departments would have more flexibility in managing their staff. According to Mpumi Skosana, then Deputy-Director-General in the DPSA, ‘the new regulations [then] were aimed at improving public service delivery by eliminating unnecessary bureaucratic red tape’.18 However, a closer look at these Public Service Regulations indicates contradictions with the Public Finance Management Act (No. 1 of 1999 as amended). The Act put greater emphasis on the responsibility of managers – directors-general in particular, as the heads of administration – to manage in a manner intended to achieve efficiencies and effectiveness in the operational performances of government departments. It gave the directors-general increased power and authority in terms of the management of their departments. This resulted in a situation where, on the one hand, the Public Service Regulations of 1999 empower ministers with the authority to manage their departments while, on the other hand, the Public Finance Management Act empowers directors-general. Ramaite, the former director-general of the Department of Public Service and Administration, cautioned that these contradictions in the policy initiatives would without a doubt herald ‘more conflicts at the level of political administrative intervention’ (1999: 289). This much plays itself out frequently in government and compromises effective governance, particularly in this critical

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18

Cited by SAPA, Ministers to get new powers, Sowetan (23 June 1999).

30 | The Zuma administration: critical challenges

era when the strategic transformation focus of government is on improving service delivery to achieve the social imperatives of a developmental state. Mahabane, too, argues that a high turnover of directors-general in the public service during the Mbeki administration, often occasioned by conflicts between them and their ministers, imperiled the prospects of establishing the solid state capacity necessary to effectively drive a developmental state agenda.19 It is thus suggested that the issue of managing the political–administrative interface should be addressed, to ensure insulation of the public service from political manipulation. This is necessary to achieve technocratic autonomy, which is one of the fundamental imperatives of a developmental state and critically important for establishing and maintaining state capacity for sustainable delivery of social services that enhance the quality of life of the citizens. Coupled with this is the question of the reorganisation of the public service, which had not been fundamentally changed since the inception of the new constitutional dispensation in 1994. The Mbeki administration seriously considered the importance of consolidating the organisational capacity of the state by reorganising the public service in a manner that would advance a developmental state agenda. The mandate for reconfiguration of the machinery of government is derived largely from the resolutions of the 2002 ANC national conference, particularly where an emphasis in the political discourse was on the ‘consolidation of the democratic order through the transformation of institutions of governance to facilitate the pursuit of the goal of creating a better life for all, culture of democracy and human rights, non-racism and a new patriotism and African unity for reconstruction and development’ (ANC 2002). The need to build the organisational capacity of the state and its ‘role as the key instrument for the delivery of basic services to develop appropriate systems and structures in order to facilitate capable and sustainable service delivery machinery’ was emphasised (ANC 2007a: 29–30). In line with the Constitution of the Republic of South Africa (1996), the ANC made a commitment in its 2004 election manifesto to forge better co-operation among national, provincial and local government to ensure ‘integrated planning, monitoring and evaluation, and a common system of public service’ (ANC 2007c). To this end, the Mbeki administration came up with the concept of a single public service to: • nable administration in all three spheres of government to be organised and e to operate in ways that ensure efficient, quality, collaborative and accountable service delivery to promote social and economic development for the people of the Republic; • nhance service delivery through flexible structures that enable and promote e operational and front-line integration, innovation by means of among others electronic government, human capital and talent management, managerial accountability, performance and people-orientated service culture; and • urther enhance service delivery through systematic information and knowledge f management and collaboration between institutions within and across spheres of government as well as between those spheres and private and development sectors. (ANC 2007c) The 2007 ANC national conference endorsed the notion of a single public service approach to building the organisational capacity of the state in the resolution that the ‘ANC should…lead and drive the process of the unification of the administration in the three spheres of government’ (ANC 2007c). Since the inception of the new constitutional dispensation in 1994, the municipal administration in

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19

I Mahabane, Welcome to the national theatre; farce is our forté, Sunday Times (17 April 2005: 8).

Consolidating a developmental state agenda | 31

the local sphere of government had not been part of the public service. It was regulated according to its own separate legislative regime, different from that regulating the national and provincial administrations. This policy arrangement constituted a fundamental faux pas in the transformation of the administration of the state. It resulted in a kind of parallelism, and silo approaches to matters of governance, the consequence of which is that serious service delivery logjams abound, largely in the local sphere of government. In the research paper Municipal Skills Challenges for Accelerated Service Delivery in South Africa, Kanyane (2006) makes the observation that the municipalities in South Africa are generally in crisis. This is, both implicitly and explicitly, supported in the discourses of other scholars such as Atkison (2007), Jolobe (2007) and Makgetla (2007). In South Africa the local sphere of government is the ‘centre that must hold’, in that it is strategically located in the organisation of government to play a catalyst role in realising the objective of enhancing the quality of life of the citizens through the provision of basic services. So, it can be strongly argued that the ANC’s decision to incorporate the municipal administrations into the broader administration of the state and place them under the same legislative framework is a correct move towards consolidating the organisational capacity of the state. In 2008 the Public Administration Management Bill, seeking to merge the administrations of the three spheres of government, had already been formulated and subjected to parliamentary processes for approval into law. It was, however, temporarily withdrawn to allow extensive consultation within the Tripartite Alliance and through the National Economic Development and Labour Council processes. At the ANC 2007 national conference in Polokwane it had been resolved that ‘a structure [should] be established within the legislature and governance sub-committee of the NEC [National Executive Committee] to support the implementation of the Single Public Service by facilitating engagements within the Alliance structures and the ANC Caucuses across the different spheres of government’ (ANC 2007c).

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The economic dimension of a developmental state
The Freedom Charter (ANC 1955) states that the wealth of this country shall be shared among all who live in it. This is the antithesis of the system of apartheid, which systematically concentrated power in terms of control of the economy in the hands of the white minority. The RDP (ANC 1994a) is, as already mentioned, an integrated, coherent socio-economic policy framework; it was created by the ANC when it assumed power in 1994 to give practical expression to the Freedom Charter, and it states that: For decades forces within the white minority have used their exclusive access to political and economic power to promote their own sectional interests at the expense of black people. Black people have been systematically exploited and oppressed economically and South Africa now has one of the world’s most unequal patterns of distribution of income and wealth. (ANC 1994a: 75) The ANC government thus faced the enormous challenge: of maximising citizen participation in the mainstream economy. This is, as pointed out above, one of the fundamental objectives of the NDR, and was the preoccupation of the Mbeki administration in the pursuit of the economic imperative of a developmental state. The central goal of the RDP (ANC 1994a) in this regard is to create a strong, dynamic and balanced economy which will: 4.2.2.1 eliminate the poverty, low wages and extreme inequalities in wages and wealth generated by the apartheid system…; 4.2.2.2 address economic imbalances and structural problems in industry, trade, commerce, mining, agriculture, finance and labour markets;

32 | The Zuma administration: critical challenges

4.2.2.3 address economic imbalances and even development within and between South Africa’s regions; 4.2.2.4 ensure that no one suffers discrimination in hiring, promotion or training on the basis of race or gender; 4.2.2.5 develop the human resource capacity of all South Africans so the economy achieves high skills and wages; 4.2.2.6 democratise the economy and empower the historically oppressed, particularly the workers and women and their organisations, by encouraging broader participation in decisions about the economy in both the private and public sectors; 4.2.2.7 create productive employment opportunities at a living wage for all South Africans; 4.2.2.8 develop a prosperous and balanced regional economy in Southern Africa based on the principles of equity and mutual benefit; and 4.2.2.9 integrate into the world economy in a manner that sustains a viable and efficient domestic manufacturing capacity and increases our potential to export manufactured products. (ANC 1994a: 79) Given the limited scope of this chapter and the wide-ranging nature of these objectives, it is not possible to discuss all of them. Rather, the focus here is limited to the objectives that pertain to the maximisation of citizen participation in the mainstream economy (the economic imperative of a developmental state agenda). The Constitution guarantees a right to freely and equally engage in any economic activity. A clearly articulated policy framework to expand economic opportunities for broad-based participation in the mainstream economy is in place. The Broad Based Black Economic Empowerment Act (No. 53 of 2003) was passed into law on 6 January 2004 to provide a legislative framework for the attainment of economic equity in South Africa. This Act supports the Preferential Procurement Policy Framework Act (No. 5 of 2000), on the issue of black economic empowerment (BEE) in South Africa. Before the promulgation of the BEE Act, BEE charters, in various sectors of the economy, were developed and their effects are clear in the BEE deals that are being clinched. As explained in Mbele (2007), the Department of Trade and Industry (DTI) uses Codes of Good Practice to monitor BEE, which it developed with the Department of Labour (DoL). The DoL monitors employment equity and skills development, which are also critical imperatives of BEE. Using employment equity plans, the DoL monitors compliance with regard to the following critical areas in the economy: black management, employment equity and skills development. These are among the critical aspects of the Codes of Good Practice the DTI uses to assess companies’ compliance with the principles of BEE when tendering for business with government. Companies are scored against seven imperatives of the Codes of Good Practice: ownership, black management, employment equity, skills development, preferential procurement, supporting small businesses, and meeting industry-specific skills development needs. These imperatives are often considered with other variables that influence the BEE rating, such as the number of women, youth and disabled people who are part of the companies’ staff complement (Mbele 2007). The Black Economic Empowerment Commission explains that BEE: is an integrated and coherent socio-economic process, located in the context of the country’s national transformation programme, the RDP; it is aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer the ownership, management and control of South Africa’s financial and economic resources to the majority of its citizens; it seeks to ensure broader and meaningful

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Consolidating a developmental state agenda | 33

participation in the economy by black people to achieve sustainable development and prosperity. (Maseti 2005: 2) This conceptualisation of BEE was adopted by the ANC’s Economic and Transformation Committee at a workshop held on 3 March 2001. In the same workshop COSATU made an important contribution to the definition of BEE, arguing that it should not be considered narrowly as the enrichment of a few individuals, but as a mechanism to maximise the participation of black people in the mainstream economy (Maseti 2005). Against this background, the question then becomes: how did the Mbeki administration fare in realising the economic developmental state imperative of maximising citizen participation in the mainstream economy? In engaging this question, selected BEE case studies are used to contextualise the challenges of the Zuma administration in dealing with the economic imperative of a South African developmental state.

The Mbeki administration and BEE
BEE generated much debate, which, according to Maseti, ‘reached the highest point in 2004 immediately after Standard Bank sold equity shares to one of the major BEE consortiums’ (2005: 1). In a 2006 HSRC publication, Southall (2006a) chronicles BEE deals, provides incisive analysis of them, and ingeniously captures the essence of the debate on BEE as a strategic trajectory in the transformation of the South African economy. It seems that Southall’s engagement with the notion of BEE to determine whether it presents limits to a more democratic capitalism was prompted largely by Turok’s assertion that South African capitalism appears to be ‘in the grip of a new drive for greed and unbridled acquisitiveness’ (2002: 6). The Standard Bank BEE deal to which Maseti (2005) refers made headlines in 2004 and fuelled the perception of black crony capitalism. This BEE deal involved the ANC luminaries Saki Macozoma and Cyril Ramaphosa. Dubbed the largest BEE deal concluded in 2004, it involved the Standard Bank agreeing to sell a 10 per cent stake of its South African operation to BEE partners. The structure of the transaction was that 40 per cent of the stake would go to black management and staff; 20 per cent to regional business, community and educational groups; and 40 per cent to Macozoma and Ramaphosa. It is the latter part of the transaction that evoked much criticism. It was argued that Macozoma and Ramaphosa are already empowered. The Standard Bank deal was followed by that of Britain’s Barclays Bank, which offered R20 billion to purchase 50.1 per cent of shares in Absa to the benefit of consortia led by Tokyo Sexwale and Patrice Motsepe respectively. Although the Barclays BEE transaction appeared to have been structured to provide a model for broad-based empowerment, it did not elude criticism that it was configured in a manner that unduly favoured a few individuals with political connections in the ANC (Southall 2006a). The other BEE deal that perhaps engendered equal intensity in the BEE discourse is that relating to Smuts Ngonyama’s Elephant Consortium, Telkom and Vodacom, to which Mbeki referred – in response to criticisms against BEE transactions – to justify his administration’s approach to the transformation of the South African economy. It was widely reported in the media that Ngonyama emerged from this business deal obscenely wealthy. This engendered an outcry in the public intellectual space that reiterated criticism that BEE only benefits those who are politically connected. In responding to this contention by retorting that he had not struggled in order to be poor, it could be said that Ngonyama severely compromised the ANC’s pro-poor liberationist credentials. Ngonyama was the head of the Presidency during Mbeki’s tenure and one of the ANC luminaries who, in 2009, together with Macozoma (also a key political personality in the ANC), defected to COPE. Ramaphosa and Sexwale are among the established businesspeople and ANC icons who, together with the Alliance Left, supported Zuma’s presidency of the ANC and that of South Africa; and Motsepe

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34 | The Zuma administration: critical challenges

is a top black businessman in South Africa closely associated with the ANC. Looking at the associations of these business personalities with the ANC at the time of clinching their BEE deals – and bearing in mind that those discussed here were just a few among a number of similar deals being made at the time – the argument that BEE creates black capitalism and concentrates wealth in the hands of a few individuals with strong political grounding in the ANC appears to have merit. Yet, is there a problem when people get rich? The answer to this question is: not necessarily. It is only a problem when the pursuit of such wealth is driven by greed and deviates from the developmental state imperative of maximising citizen participation in the mainstream economy. And it seems that the latter is the case in the South African context. Mbeki sensed the emergence of this phenomenon of elitism as early as 1998 and strongly condemned it as it ‘seeks to hijack the sacrifices which millions of ordinary people made to liberate South Africa for noble purposes, in order to satisfy a seemingly insatiable and morally unbound greed and personal thirst for wealth and comfort, regardless of the cost to society’.20 Much of what Mbeki spoke out against happened under the pretext of BEE during his administration, which, in some instances, he vigorously defended. This begs the question whether Mbeki’s engagement with the BEE practices was based on ‘principle’ or merely oscillated with the context of time and lost consistency in the process. Moeletsi Mbeki argues that the objective of BEE ‘was not to restructure the economy but to create a black elite buffer entrusted with protecting the interests of big businesses and to ensure the status quo under which conglomerates operate stays firmly in place’.21 This seems to be underscored by the woefully low number of black managers in companies listed on the stock exchange (JSE). This much Mbeki acknowledged in his 2007 State of the Nation address (Mbeki 2007; Mbabane 2007). In a presentation made to the annual Black Management Forum Conference in October 2008, at the Sandton Convention Centre, Jimmy Manyi, in his capacity as president of the Black Management Forum, illustrated that between 2003 and 2007 the representation of African people at top management level in the private sector grew by only 3 per cent to 18.8 per cent, whereas that of Indian people increased by 1.2 per cent to 6.2 per cent. The representation of coloured people in the same period declined by 0.1 per cent to 3.9 per cent, whereas that of white people remained high at 68 per cent (in Radebe 2009: 19). These figures show a high degree of incongruence with the actual demographic profile of South African society. African people comprise 74.8 per cent of the economically active population, whereas the percentages of coloured and Indian people are 10.3 per cent and 2.8 per cent respectively. White people make up 12.1 per cent yet, as Manyi points out, their representation in top management of JSE listed companies stands at 68 per cent (in Radebe 2009: 14). This indicates that the Mbeki administration’s intervention through, among other mechanisms, the Employment Equity Act (No. 55 of 1998), failed to redress the imbalances of the past in substantially and equitably transferring and conferring the management of South Africa’s financial and economic resources to the majority of its citizens. This seems to be further confirmed by the BEE imperatives pertaining to ownership and control of the economy. In his assessment of BEE over a period of 10 years, Nzimande (2004) argues that the dominant approach to implementing BEE was narrow, ‘focusing on the advancement of a black minority through equity acquisitions and individual promotions into the senior management ranks’. Perhaps the most highly publicised criticism of BEE is that by Archbishop Emeritus Desmond Tutu during his Nelson Mandela Lecture of 23 November 2004. Tutu reiterated, in a rather more emphatic and passionate fashion, the criticisms that BEE in South Africa is not as broad-based as it should be; it benefits only the few elite who are politically connected as its ‘…focus over and over again is on a
20 21 Mbeki champions poor against black and white elites, Southscan (12 June 1998). cited in M Ray, No middle road, Finweek (9 April 2009: 11–14).

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Consolidating a developmental state agenda | 35

few names who appear to be the beneficiaries of an inordinate number of deals’ (Tutu 2004). Instead of transforming the economy, as envisaged in the Freedom Charter (ANC 1955) and the RDP (ANC 1994a), the Mbeki administration’s neo-liberal trajectory which found expression in GEAR created black capitalism and a parasitic bourgeoisie (see Mbalula as cited by Christianson 2005; see also Nzimande 2004). The BEE debate pitted comrades against each other. Motlanthe, then secretary general of the ANC and subsequently its deputy president, also raised serious concerns that BEE appears to benefit only a small elite of black businesspeople, in that deals are recycled among the same people. Cronin, in his capacity as deputy general secretary of the SACP, labelled this phenomenon ‘BEE-llionaires’, which Manuel, then finance minister, and Vavi, general secretary of COSATU, strongly criticised (Southall 2006a). Writing in ANC Today of 26 November 2004, Mbeki vehemently rejected the contention – that BEE deals benefit only a few people with political connections to the ruling party – by providing empirical data on what the government and the public sector as a whole were doing in maximising citizen participation in the mainstream economy. In the following excerpt, Mbeki provides empirical evidence to challenge the critics (including Tutu) of his administration’s BEE track record: In the period 1998 to the end of 2004, the state electricity company, Eskom, will have spent R26.6 billion on BEE. This expenditure includes areas of procurement, community development and rural development. This BEE programme has included all the elements of our government’s broad based black economic empowerment…In this regard Eskom has given support to many black entrepreneurs outside the well known ‘black elite’, which in any case, is not part of Eskom’s BEE programme. Eskom has also vigorously taken up the challenge to increase the number of highly skilled black people especially in mathematics and engineering. Since April 1997, Telkom has spent nearly R24 billion on BEE. During the 2004 financial year, the company procured 57.8% of its supplies from BEE suppliers, none of them being necessarily part of the ‘black elite’. The equivalent figure for Vodacom is 60%, amounting to R1.3 billion. When Telkom was listed, over 100,000 individuals bought shares, the overwhelming majority being black. The company’s Enterprise Development Programme has trained 90 small companies in business management, many of them being black, to enable them to do business with Telkom. Transnet set itself the objective to spend at least 50% of its discretionary funds on BEE before 2005. This objective was achieved during the 2003 financial year. As an example, during 2003, Transnet announced that it would secure 60% of its fuel from BEE enterprises. The contract was worth R2.4 billion. As at the end of September 2004, Isibaya Fund Investments, fully funded by the Public Investment Commissioners, had subscribed about R180 million to funds established to finance small black business groups. Altogether Isibaya has R6 billion invested in venture related BEE. These are not necessarily linked to the so-called ‘black elite’. (Mbeki 2004) Christianson, in a sense supporting Mbeki’s contentions, argues that the criticisms of the government’s black economic policy are often intractably without context, taken out of proportion and ignore other critical activities under the rubric of BEE in which the government is engaged, namely: ‘public work programmes, outsourcing and linkage programmes, affirmative procurement, education and skills training, small business development and much else’ (2005: 54). These initiatives constitute an economic dimension to the developmental state and are aimed at addressing the challenge of two parallel economies, which continues to characterise the geo-economic landscape of South Africa (Fourie & Ngqunguwana 2005; Manuel 2005). However, as Mashigo points out in Chapter 6 (this volume), the public works programmes (to which Christianson [2005] refers) are not sustainable and do not provide a long-term solution to the problems of unemployment. In Towards a Fifteen Year Review

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(ANC 2008), it is pointed out that from 1994–2008 the number of unemployed roughly doubled to 23 per cent. Coupled with public works programmes is the question of skills development, education and training, also mentioned by Christianson (2005). The attempt to develop skills and unlock economic growth was a key strategic intervention of the Mbeki administration’s National Skills Development Strategy in pursuing the economic imperative of a South African developmental state agenda. The Mbeki administration sought to achieve skills development through the Sector Education and Training Authority (SETA) system. Sandile Zungu, a member of the panel appointed by Zuma to examine BEE, reiterates that skills development, education and training are the fundamental pillars of BEE (in Graham 2009). As Burnett explains, ‘the SETAs are charged with helping unemployed people to enter learning programmes, assisting people already employed to enter learnerships, and ensuring that learners in critical skills programmes gain work experience’ (2009: 37). The performance of the SETAs in respect of this mandate has, however, not necessarily been good. Mathews Phosa, speaking in his capacity as ANC treasurer general, has said that most of the 23 SETAs are a disaster; politics bedevils their administration and, as a result, they are not focusing on delivering on their mandate (in Burnett 2009). Mncane Mthunzi shares Phosa’s sentiment in the statement that ‘while some SETAs have performed exceptionally well, the overall track record is not impressive and not something to be proud of’ (in Burnett 2009: 37). However, it seems that Christianson’s (2005) support of the Mbeki administration’s BEE performance, as quoted above, has not factored in these empirical data. As noted earlier, another issue that Christianson (2005) raises relates to outsourcing – and to this, one could add the neo-liberal notions of corporatisation and privatisation, as they are concepts of the same ideological parlance which dominated the Mbeki administration’s strategic trajectory towards transforming the South African economy. As Desai (2004) explains, outsourcing and corporatisation are preludes to privatisation, coupled with affirmative procurement, which is also mentioned by Christianson as a critical activity under the rubric of BEE. Desai (2004) observes that the economic opportunities that emerged out of outsourcing and corporatisation for the most part enriched people whose political connections got them onto the boards of various state entities. In line with the Mbeki administration’s neo-liberal agenda, when, for example, basic services such as water and electricity are privatised, local elites become very rich as the multinational companies are required to partner with the aspirant black capitalists to qualify for state tenders. In some instances this assumes a form of ‘fronting’, which is an illegal business practice where ‘black faces’ are rented by white-dominated conglomerates to secure state tenders under the pretext of compliance with BEE policies. The monitoring capacity of government in this regard is very weak. This is another factor that Christianson did not take into consideration in engaging the critiques of BEE. The development of the small business sector, to which Christianson (2005) also refers in defence of the Mbeki administration’s approach to economic transformation, was also a huge challenge for that administration. This sector could not effectively participate in the mainstream economy because of a lack of capital capacity. South Africa’s main development funding institutions (DFIs), the Industrial Development Corporation and the National Empowerment Fund, are not playing an effective role in assisting the small business sector. On the one hand, it is argued in some circles within the ANC that the DFIs are ‘run by the acolytes of Mbeki; had hindered real growth within the small business sector and behaved like Standard Bank by dishing out loans and sureties for empowerment deals for friends’.22 De Ionno (2009), on the other hand, observes that dealing with the DFIs is too arduous, even more than is the case with commercial banks. Manyi remarked that the turnaround times of these DFIs need to improve urgently as currently it takes as long as six months to finalise a funding package for a

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22

B Naidu & M Klein, Meet the new pariahs. Zuma loyalists can now cash in, Business Times (12 April 2009: 1).

Consolidating a developmental state agenda | 37

business transaction. ‘In that time opportunities are lost and business plans become outdated’ (Manyi in De Ionno 2009: 21). It seems that government has been complacent about encouraging the small business sector as a significant participant in the economy. This has perpetuated the notion of the two parallel economies, which Mbeki used as analytical template to explain the character of the South African economy. Mbeki (2003) explains economic parallelism in South Africa in terms of the first and second economies. He explains that the ‘first economy is modern, produces the bulk of South Africa’s wealth, and is integrated within the global economy’, whereas: the second economy is characterised by underdevelopment, contributes little to the Gross Domestic Product (GDP), contains a big percentage of the South African population, incorporates the poorest of the rural and urban poor, is structurally disconnected from both the first and global economy, and is incapable of self-generated growth and development. (Mbeki 2003) Mashigo’s contribution in this volume (Chapter 6) is more detailed on the theory of the first and second economies that dominated in the public intellectual space during the Mbeki administration.
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In the context of the above, it seems rather simple to answer the question about how the Mbeki administration fared in transforming the South African economy; the answer is that it did not fare well. To avoid such an answer seeming simplistic, however, and to provide further empirical data to clarify the nature of the Zuma administration’s challenge of pursuing the economic imperative of a South African developmental state, it is important to contextualise the question further.

Critical contextual aspects for consideration in the discourse on BEE
A closer look at the debate on government’s strategy to maximise citizen participation in the mainstream economy through BEE indicates that many of the criticisms border on ideological rhetoric and perceptions devoid of any empirical substantiation and often degenerate into characterisation of personalities in business rather than engaging with real issues as they pertain to BEE. By 2009, there still seemed to be little authoritative, scholarly study based on primary data to determine the impact of BEE – either in bridging the gap between the first and second economies or in maximising citizen participation in the mainstream economy. Much of what is in the public intellectual space on the subject is not based on original empirical research studies, which are very important and should therefore be undertaken to provide an appropriately rigorous context for engaging in debate about the progress South Africa is or is not making in maximising citizen participation in the mainstream economy. This, however, does not mean that there may not be truth in some of what the critics of BEE are propounding; rather, the suggestion is that for such arguments to be accepted as empirically valid – as part of the body of knowledge that can be used as a reliable context for policy analysis – they must be subjected to rigorous scrutiny and the use of scientific methods to collect, analyse and triangulate data from multiple sources to establish their epistemic value. Southall (2006a) provides an incisive analysis of BEE practices, but it is based largely on what the newspapers have reported on the subject; in other words, it is based on secondary data. Shubane and Reddy wrote a document, Empowerment and its Critics, also based on media reports of the public’s perspectives of the members of the public on BEE (see Mushwana 2007); this document also does not provide an empirical analysis of BEE based on primary data. To some extent Glaser’s (2007) essay, Should an Egalitarian Support Black Economic Empowerment? has a similar character to these works

38 | The Zuma administration: critical challenges

by Southall and Shubane and Reddy, and in some instances even refers to anonymous sources of information. Glaser’s contribution is, however, an interesting analytical piece on BEE in South Africa. Hirsch’s (2005) section on BEE in his book Season of Hope relies on personal observation, official data, media reports and scholarly literature. The value of personal observations in as far as their commitment to reliable data is concerned depends largely on which side of the debate you are on. If you are an actor in the subject about which you write, then the chances of your being biased seem almost inevitable. This may also be the case as far as official data are concerned. The official data are mostly presented in the public intellectual space to project the image of government in a positive light. For these reasons, data obtained through personal observation and from the official literature ought to be objectively authenticated through rigorous scientific, analytical methods. In this regard, the usage of scholarly literature in Hirsch (2005) was mainly to enhance the theoretical context of the discourse on the subject rather than necessarily authenticating or contradicting the perspectives of the critiques of BEE. Compared to the critics of BEE, Hirsch assumes a somewhat ‘middle of the road’ position in the assertion that BEE is ‘riddled with temptations for enrichment, which may be legal, but not entirely ethical’ (2005: 217–218). His book, however, provides interesting insight into the evolution of the concept of BEE in the ANC and how it subsequently plays itself out as the programme of government for the transformation of the economy. (The book seems to have been outpaced, though, by significant developments in BEE that evolved after its publication.) Polo Radebe, chief director for BEE in the DTI, as cited by Mbabane, observes that ‘anecdotal information and study are being undertaken to measure the progress or egression of BEE, and there is no proper scientific evidence that backs the findings on BEE that are released in the media’ (2007: 23). In 2008, the former president, Mbeki, mandated a team headed by the Office of the Presidency, the DTI and the Presidential Black Business Working Group to engage in what would be the first comprehensive baseline study of broad-based BEE in South Africa since the publication of BEE legislation and the Codes of Good Practice. The intention was to look at all pillars of BEE. This is, however, mainly a government-driven research undertaking. It should therefore be balanced with studies by other, independent research bodies or individuals. In spite of a lack of scientific basis for the discourse on BEE to authoritatively demonstrate how the Mbeki administration fared in the attempt to realise the economic imperative of a developmental state, much of what is said in the public intellectual space caught the attention of the ANC and to a very great extent seems to agree with the critiques of this policy trajectory to transform the South African economy. At the launch of the Confederation of Black Business Organisations in 2009, ANC president, Zuma (who was accompanied by ANC treasurer general Phosa and ANC head of policy Jeff Radebe) said that BEE policy should be reviewed with the intention to ‘identify where the current bottlenecks are in implementation, and implement [it] in such a manner that it becomes genuinely broad-based and promotes the ownership and control of productive assets by black people, women and youth’ (Zuma 2009). In the context of this development – i.e. the possible review of BEE policy – it is suggested that the following critically important issues also be considered, in helping us to arrive at an answer to the question of how the Mbeki administration fared in realising the economic imperative of a South African developmental state: much of the debate on BEE in the public intellectual space gives prominence to only one aspect of its shortcomings, which is a concern that it benefits only the few who are politically connected; the disproportionate preoccupation with this aspect of the debate often obscures other critical BEE-related issues – namely, black ownership and control of the economy, which merit equal critical consideration and analysis.

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Consolidating a developmental state agenda | 39

The acquisition by black people of stakes or shares in established white-dominated businesses, or perhaps even acquisition of ownership of such businesses, does not necessarily translate into black control of the economy. Control of the economy, in the definition of BEE, and as one of its key imperatives, has more to do with the expertise to run a business, or at least to have a clear understanding of its operations, which, unfortunately, the majority of black people with stakes and shares in white-dominated business establishments do not have. This is also the case with regard to the BEE deals structured by Barloworld, Imperial, MTN, Old Mutual, Sasol and Vodacom, which, compared to some of the other BEE deals referred to above, were more open to the public, with many black people displaying interest in buying shares. Most BEE beneficiaries who have bought shares in business deals do not have the slightest idea of the business dynamics involved in running a company, yet, as shareholders, are often expected to vote on a range of business decisions. Nzimande (2004) takes the argument further and brings in another critical aspect in the BEE debate, which is also not often accorded the prominence it deserves in the public intellectual space. He argues that ‘equity acquisition and similar financing arrangements in most of these deals amounts, in practice, to diverting surplus into debt, instead of investing it productively, let alone developmentally’ (Nzimande 2004). In terms of Nzimande’s explanation, the financiers of BEE transactions ‘cash in’ substantially, as the financing packages are largely debt based with accumulation of huge interests and other associated transactional costs. Does this not create the illusion of what Mathole calls ‘a false economy’?23 Does it not make BEE a mockery of meaningful black economic empowerment? Until debts incurred in stake acquisitions are settled, it appears to be wishful thinking to talk about transformation of the South African economy in terms of the dictates of the Freedom Charter (ANC 1955). Given the perspectives on BEE provided above, the possibility is that those said to be economically empowered might actually be economically disempowered, in that they owe the financiers so much that, given the global credit crunch, they may be trapped in huge debts for a very long time to come, with the threat that the BEE deals themselves may flounder as a result of defaulting on regular loan payments. Rumney (in Graham 2009) explains that ‘most of the BEE deals rely on a rising share price in order for the complex financial engineering of the deal to work’; and ‘if shares continue to remain in the doldrums, that could pose a serious threat…’ (2009: 25). As Graham aptly puts it, ‘…in the wake of the sub-prime crisis in the US and the resulting global credit crunch, stock markets around the world have taken serious beating’ (2009: 25). Consequently, the shares ‘bought might now be worth considerably less than paid for’ and the trouble is, the BEE beneficiaries ‘still need to repay the debt at the original price’ (Graham 2009: 25). In this regard, Kekana argues that BEE funding needs to be fundamentally overhauled to address some of these anomalies.24 It is argued in Amandla! (2008) that the vulnerability of the South African economy to global financial turmoil is largely because of the Mbeki administration’s liberalisation of the economy ‘through the gradual removal of exchange controls that assisted the big corporations in shifting huge amounts of capital out of the country [South Africa]’ (2008: 17). It is in this context that the governance challenge of consolidating a developmental state agenda becomes even more of a conundrum for the Zuma administration. The Alliance Left calls for a shift in the economic policy of South Africa. This includes an overhaul of monetary, fiscal and trade policies. As argued in Amandla! these policies are responsible ‘for the highest current account deficit in recent history’ (2008: 6). It appears, however, that the ANC is not unanimous on whether the economic policy of South Africa should change during the Zuma administration. Zuma is reported to have said that ‘continuity with some changes’ will define his administration’s policy positions.25 This is rather a philosophical answer, certainly susceptible to
23 24 25 MB Mathole, Pretoria-based social and political activist, personal communication, April 2009 (Pretoria). M Kekana, BEE funding instruments in need of major overhaul, City Press Business (5 April 2009: 5). M Ray, No middle road, Finweek (9 April 2009: 11–14).

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different interpretations, particularly given the existence of the thinking in some circles within the ANC that the Mbeki administration heralded unprecedented economic growth and therefore there is no need for an economic policy shift (see Gevisser 2009). Tito Mboweni, while he was still governor of the South African Reserve Bank, is reported to have urged the Zuma administration, particularly in the light of the global financial crisis, to rule out any shifts in economic policy.26 Hirsch (2005) describes Mboweni, before the ANC came into power, as being instrumental, together with Max Sisulu and Trevor Manuel, in formulating, finalising and formalising the economic policy of the ANC for the real world of power. So, as is the case with Manuel (formerly finance minister), so too with Mboweni: what he says cannot simply be wished away, as he is an influential factor in economic policy matters. This is why differences in reaction to, and opinion on, the global financial crisis, and whether South Africa had or had not entered a recession phase, engendered some degree of confusion for the Zuma administration on how to respond in monetary and fiscal policy terms. In response to Zuma’s assertion that there is no need to review monetary policy, the general secretary of COSATU, Vavi, argues that the comment contradicts the ANC Polokwane national conference resolution on economic transformation. Reading the ANC 2009 election manifesto, however, there is no indication of substantial deviation from the Mbeki administration’s policy approach to monetary and fiscal matters. This assuaged the business community’s concerns that the Zuma administration might tilt towards the Left. Jerry Vilakazi of Business Unity SA is reported to have said that ‘business did not expect major policy deviations, especially in the light of the current economic downturn’.27 Ray observes that ‘there is a giddy sense of caution among the ANC’s rank and file members against subordinating their interests to a growth agenda that has not seen adequate returns’.28 Zuma’s stance of ‘continuity with some changes’ ought to be clearly unpacked as it may put his administration in a position of ambivalence on the policy direction that South Africa should take. This may expose it to attacks, especially from within the Alliance Left and the broader civil society. The public statement by COSATU’s Patrick Craven that ‘if by continuity we mean much of the same, with some cosmetic changes, then we would reject it’,29 is an early sign of policy contestations that might characterise the Zuma administration. In spite of the ‘language of continuity’ (which indeed appears to be easier said than done), public statements of some key and influential ANC leaders in the public intellectual space have communicated a clear message that suggests deviation from the Mbeki administration’s economic policy approach – specifically on monetary and fiscal matters; while the preference of others within the ANC seems to be that it should be continued. Phosa is reported to have said, in his capacity as ANC treasurer general, that the mandate of the Treasury should be fundamentally changed. Phosa elaborated that it should be brought ‘into line with other departments and harmonised’.30 This is consistent with COSATU’s position on the economic policy direction that the Zuma administration should pursue. In addition to remarks that the Treasury ‘did wrong things’, Vavi is quoted as saying that, ‘The Finance Minister can no longer give economic direction. No more single bull in the house. The direction should come from a committee of ministers or from the planning commission within the presidency.’31

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26 27 28 29 30 31

M Isa, Recession rules out policy shift after poll – Mboweni, Business Day (8 April 2009: 1). M Klein & B Naidu, Business upbeat on a Zuma presidency, Business Times (12 April 2009: 1). M Ray, No middle road, Finweek. In M Ray, No middle road, Finweek. K Maier, ANC will clip Treasury wings, promises Phosa, Business Report (9 April 2009: 4). M Letsoalo, Zuma wrong, says Vavi, Mail & Guardian (3–9 April 2009: 6).

Consolidating a developmental state agenda | 41

The National Planning Commission, as referred to by Vavi, is a key institutional innovation of the Zuma administration to enhance the organisational capacity of the state, in order to, according to Phosa, ‘co-ordinate the implementation of government programmes, as well as spending, budgets and how they are being handled from top to bottom’.32 In reaction to these developments with profound fiscal policy implications, a London-based economic analyst at Eurasia Group, Mike Davies, is reported (in the same Business Report piece) to have said that ‘given the perception that the new administration will tilt Left, investors could be concerned that the move will reduce the power of the Treasury and lead to more profligate spending’. Coupled with the challenges pertaining to the social imperative of a developmental state as already discussed, the possibility of a confluence of opposite influences to the Zuma administration constitutes a serious governance challenge, necessitating reiteration of the question: how can the Zuma administration consolidate a developmental state agenda in an environment fraught with so many contradictions and contestations on the political, social and economic policy direction that South Africa should pursue?

Disentangling the governance challenge, and policy suggestions
Looking at the 2007 resolutions of the ANC Polokwane conference (ANC 2007c) and its 2009 election manifesto (ANC 2009), the mandate for the Zuma administration is very clear: to consolidate a South African developmental state agenda. The clarity of the mandate does not, however, imply that its achievement is simple and straightforward. As discussed, consolidation is about solidifying what already exists; and, as has been seen in this chapter, what exists is what the Mbeki administration put in place in the pursuit of a developmental state agenda. However, as has also been discussed, the strategic trajectory of the Mbeki administration in building a developmental state, through the GEAR approach, gravitated towards neo-liberalism, which the Alliance Left violently opposed. The Alliance Left propagated the notion of a strong, interventionist developmental state with a socialist slant, characterised by a more redistributive socio-economic approach to development; and this is in fact in stark contrast to the Mbeki administration’s conceptualisation of a developmental state. Because of competing ideological orientations accommodated within the Tripartite Alliance, fundamental variations abound on issues pertaining to the strategic approach to realising a South African developmental state agenda. As has also been discussed, what may be considered by some to be the achievements of the Mbeki administration may not necessarily be understood and accepted as such by the Alliance Left, which now exerts more influence in the ruling party. A close reading of the contemporary official literature and the empirical data, as referred to in the course of this chapter, seems to indicate that the Mbeki administration, with the GEAR approach, scored significant achievements in the pursuit of the imperatives of a developmental state. As seen, however, this is contested, mainly in the political literature of the Alliance Left and that of activist intellectuals (see Amandla! 2008; Desai 2004; McDonald & Smith 2002; Nzimande 2004; Tutu 2004).33 The discourse on the performance of the Mbeki administration, and the consequences of its GEAR approach in building a developmental state, is polarised. This, coupled with the ideological contestations within the Tripartite Alliance on the meaning of a South African developmental state, creates a challenge for the Zuma administration in terms of having a reliable repository of knowledge as a frame of reference from which important insights and lessons can be drawn and used as a basis for moving forward. Looking critically at the two contrasting and contradictory theses on the performance of the Mbeki administration, a synthesis could, perhaps be developed as follows: that the ANC government
32 33 K Maier, ANC will clip Treasury wings, promises Phosa, Business Report. See also, M Ray & T Lund, Mission impossible, Finweek (28 February 2008: 12–13).

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during the Mbeki administration scored significant achievements in certain areas but failed dismally in others. Following this logic, it may appear relatively easy to untangle the challenge of governance for the Zuma administration: to the unwary, it seems easy to argue that the Zuma administration should simply consolidate the achievements of the Mbeki administration, while intervening decisively in areas where it failed. This appears to be the premise upon which the 2007 ANC Polokwane resolutions (ANC 2007c) and the 2009 ANC election manifesto (ANC 2009) were based. Unfortunately, the governance challenge for the Zuma administration is not as easy as it is often trivialised to be. Its complexity, using Hospers’s phraseology, ‘leads into very intricate pathways of argument, with many traps for the unwary’ (1992: 28). It needs intellectual reflection and penetrating analysis. As argued in this chapter, the achievements of the Mbeki administration in the pursuit of a developmental state agenda within the neo-liberal context of GEAR appear unsustainable, and impacted negatively on social cohesion. They perpetuated the division of society into ‘haves’ and ‘have-nots’. The rich and, to a very great extent, the middle strata of the South African population benefited substantially from the proceeds of the GEAR approach to building a developmental state. In this neo-liberal setting, though, the poor grew poorer while the rich grew richer. It is rather ironic, then, that Mbeki talked so eloquently against this societal anomaly in his theory of the first and second economies. The poorer section of the South African population feels marginalised and is growing increasingly impatient. In Zuma the poor see the prospect of fundamental change in the quality of life. Given all this, then, it is dangerous to expect the Zuma administration to consolidate the Mbeki administration’s trajectory in the pursuit of a developmental state agenda. This would mean that the poor would continue buckling under the burden of poverty whereas the rich and the middle-class beneficiaries of neo-liberalism would continue to live in disproportionate affluence. This stratification of society may engender ‘social hatred’. The phenomenon of ‘social hatred’ manifested itself in the service delivery protests and labour strikes that engulfed the country immediately after Zuma took over as president of South Africa. The Wretched of the Earth, Frantz Fanon (1966) warns that true revolution can only be brought about by the peasants, not by what he terms the ‘comprador and parasitic bourgeoisie’. And it can be argued that it is to this very bourgeoisie that the neo-liberal policies of the Mbeki administration bequeathed obscene wealth at the expense of the imperative of social justice, which is the basis of South Africa’s constitutional democracy. It is suggested that the Zuma administration needs seriously to heed Fanon’s warning, expeditiously moving away from the Mbeki administration’s neo-liberal orthodoxy towards a more redistributive socio-economic approach in repositioning South Africa as a developmental state. This means that another challenge for the Zuma administration will be to carve a new strategic niche within which to embed such a policy orientation. Taking up these challenges is not going to be easy, given that within the coalition that secured Zuma’s victory in Polokwane there are, on the one hand, members of the very bourgeoisie to which Fanon refers (who, having benefited from the GEAR approach to building a developmental state, would naturally argue for continuity), and, on the other, there is the Alliance Left, vociferously advocating a more redistributive socio-economic approach. To contend with such a challenge, the Zuma administration needs leadership of epic proportions, at all levels of government, to drive a strong and interventionist developmental state agenda. For it is argued that leading in such a political environment – fraught with ideological contestations and competing interests – and in the process defining a South African developmental state agenda, is more difficult now than it has ever been since the advent of the new constitutional dispensation in 1994. Inevitably, then, this will necessitate fundamental changes, especially at the political, executive and administrative levels of government.

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Consolidating a developmental state agenda | 43

What this suggests is that the ministers and directors-general who were part of the 1996 class project ought to be considered very carefully and critically for inclusion in the Zuma administration. After all, their leadership orientation now is expected to be such that it gives power to the poor; if need be, then, they should be replaced. This may sound radical, but the Zuma administration is entering uncharted terrain; to provide leadership that challenges the neo-liberal economic orthodoxy that has been in the bloodstream of government for over 10 years ‘requires imagination, enormous energy, courage and a certain degree of recklessness’ (Faulkner 2008: 16). This should be pursued in a manner that heals the hostility between the factions that contested for the leadership of the ANC in Polokwane. It should also not scare the market, for the private sector is an important factor in the pursuit of a developmental state. The type of leadership that the Zuma administration requires should be able to build the strategic capacity of the state, which, within the context of a developmental state, refers to ‘the ability to lead in the definition of a common national agenda; mobilise all of society to take part in the implementation of this agenda and direct society’s resources – including those of the state and private sector and social capital’– in advancing the objectives of the NDR (ANC 2007b: 9). The Mbeki administration was criticised for being aloof and intolerant of differences. It has often been argued that it did not listen much to the citizens. In building the strategic capacity of a developmental state, it is thus suggested that the Zuma administration needs to strengthen the existing information system and give new meaning to citizen– government initiatives such as the imbizos, which, during the Mbeki administration, were criticised as being more of a public relations exercise than effective forums to encourage popular participation. Citing Tony Benn, a left-wing British politician, Faulkner counsels that ‘the best leaders are those who strive to make themselves redundant by making sure that everyone becomes a leader’ (2008: 16). This message is instructive to the leadership of the Zuma administration at all levels of government. In building the organisational capacity of the state, the Zuma administration should reintroduce the Public Administration Management Bill in the legislative process to ensure finality on this important initiative, which seeks to change the structure of the machinery of government fundamentally by creating a single public service. The organisation of the state ought to be remodelled to enhance the planning capacity of government, which was often a challenge during the Mbeki administration. As noted in the City Press: until now the planning approach in the state has been essentially a planning system rather than a planning centre. In practice, government departments produced plans largely as they saw fit and submitted these plans of variable quality into a rather loose peer review process. The guidance that departments received pertained mostly to budgeting processes or submission deadlines. The overall planning has been more about form than substance. A further weakness of budget-driven planning is that it is necessarily focused on not wasting resources and hence is inherently risk-averse. Yet development is about taking positive risks.34 Taking advantage of the wide-ranging powers that the ANC’s 1997 Mafikeng national conference assigned to its presidency on various political and governance issues, Mbeki, after being made president of South Africa in 1999, concentrated political and state power in his office rather than enhancing its coordination and planning capacity as the strategic ‘nerve’ of government. Not surprisingly, many complained about what they considered the abuse of political and state power.

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34

R Naidoo, South Africa needs better planning, focused service delivery, City Press (1 February 2009: 25).

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Now, coupled with the ANC’s decision to reconfigure the Cabinet, with some government departments split in two and some new ones created, the establishment of the National Planning Commission appears to be an appropriate approach in enhancing the coordination and planning capacity of the Zuma presidency as the ‘strategic centre’ to direct the agenda of a developmental state. Sound planning and a strong evaluative capacity on the part of the state are critically important in the pursuit of a developmental state. However, much as the National Planning Commission might help in institutionalising an integrated approach to state planning or what in developmental state parlance is called ‘plan rational state’ (something that proved a challenge for the Mbeki administration), the Zuma administration ought to be extremely wary in this regard, taking care to avoid creating a political bureaucracy which would tend to stifle efficiency in government. Care needs to be taken that this new institutional arrangement avoids creating a problem of political–political conflicts analogous to that of political–administrative conflicts at the National Planning Commission and ministerial or Cabinet interface. The relationship between the political executive authority and the National Planning Commission would need to be clearly defined to avoid possible conflicts at the political executive level. The effectiveness of the National Planning Commission in realising the strategic objective of fostering an integrated approach to development also depends, more importantly, on the extent and nature of co-operation with other key departments in the economic cluster, such as Treasury, Economic Development, and Trade and Industry. As argued above, a developmental state needs a strong public service, properly organised and staffed by the nation’s brightest and best servants functioning without constraints and capable of being innovative in addressing the social and economic needs of the citizens. This means that the Zuma administration should root out political patronage when it comes to appointments in the public sector. Its approach in building the technical capacity of the state should be based on the principles of a meritocracy. Especially for appointments to strategic positions in the public sector, merit should be at the centre of the ANC’s cadre deployment policy. It is in this context that Zuma’s consistent message – that the business of his administration is to serve the people and that underperforming ministers and public servants will be fired – is expected to contribute to the moral fibre of the ANC as the custodian of the NDR in the pursuit of a developmental state. The issue of training and development is also critical in enhancing the technical capacity of a developmental state. In this regard PALAMA is assigned the mandate to play a central role. However, its current strategic positioning as the training and development arm of government minimises its role to that of some kind of ‘broker’ between training providers and government. It is suggested that the Zuma administration reconsider the role of PALAMA in building the technical capacity of the state to advance the developmental state agenda. The higher education institutions should also be engaged with, especially on the appropriateness of their teachings and the type of knowledge they create, which must befit the imperatives of a developmental state. In fact, one of the fundamental questions that the Zuma administration needs to consider in this regard is whether the transformations that have taken place in higher education are contributing towards the establishment of the intellectual capital necessary to the success of a developmental state. On the economic front, it is suggested that BEE, as a policy intervention to transform the South African economy, ought to be reconsidered. The basis of such reconsideration should not be confined to the criticism that BEE policies have benefited only the few who are politically connected, much as empirical data might seem to support this criticism. Being rich is not necessarily wrong; what is wrong, however, is a parasitic bourgeoisie, and greed, corruption and black crony capitalism with an ‘inhuman face’; the opposite of what Cyril Ramaphosa defines as capitalism that ‘is more responsive to the needs of the

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Consolidating a developmental state agenda | 45

people – a human face with compassion not underpinned by greed’ (in Southall 2006a: 176). Southall (2006a) calls it ‘democratic capitalism’. The review of BEE should also rigorously interrogate the extent to which black people really own and control the economy. This, in fact, should be the premise for the review of BEE policy. A further suggestion is that the BEE funding model also be reconsidered and given adequate consideration. This should be coupled with a review of the mandates of DFIs, which should also play a pivotal role in promoting the small business sector. The employment equity legislation is key in realising the objectives of BEE and needs to be effectively implemented. Perhaps Manyi’s suggestion (in Radebe 2009), that the employment equity legislation should be amended to make provision for an equity inspectorate and introduction of fines for non-compliance of up to 10 per cent of the company’s turnover, should be considered. Further, Zuma’s panel of economists and experts set up to examine BEE policy and practices should consider the feasibility of synchronising their efforts with the team set up by Mbeki to engage in what was then dubbed the first comprehensive baseline study of broad-based BEE in South Africa. Such synchronising is important to engender synergy of efforts, rather than duplication of activities, in the pursuit of a developmental state agenda. As argued, party political or government research often runs the risk of being biased. Thus it is important that other, independent research organisations or individuals engage in similar research and review endeavours, to create the opportunity for benchmarking and triangulating the validity of such research findings.

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Conclusion
This chapter has examined the challenge of consolidating a developmental state agenda as the key governance challenge for the Zuma administration. It is argued that a developmental state is premised on two dimensions – social and economic. For the purposes of this chapter, the social dimension entails attempts to enhance the quality of life of the citizenry through the provision of social services, while the economic dimension is concerned with maximising citizen participation in the mainstream economy. These two dimensions, then, have been used as the analytical framework for disaggregating the discourse on consolidating a developmental state agenda. As consolidation is about solidifying what already exists, the chapter has reflected on the track record of the Mbeki administration, in the interests of determining whether that which exists – as put in place by the Mbeki administration – is worth consolidating or should rather be discarded by the Zuma administration. As observed in this chapter, competing ideological orientations accommodated within the Tripartite Alliance and a confluence of opposing influences from different sectors, mean that fundamental variations abound on the meaning of a South African developmental state agenda. Consequently, what are considered in some quarters to be the achievements of the Mbeki administration are not necessarily understood and accepted as such by the Alliance Left, which now appears to exert renewed influence in the ruling party. The literature on the performance of the Mbeki administration is also polarised. Having synthesised the different perspectives and debates on the subject, this chapter contends that the achievements of the Mbeki administration in the pursuit of a developmental state agenda within the neo-liberal context of GEAR appear unsustainable and have impacted negatively on social cohesion. Therefore, it would be dangerous for the Zuma administration to consolidate the Mbeki administration’s strategic trajectory in the pursuit of a South African developmental state agenda. The Zuma administration, it is suggested, should carve a strategic governance niche within which to embed its new policy orientation; more importantly, it should extricate itself from its grounding in the neo-liberalism of the Mbeki administration’s GEAR approach to building a developmental state.

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Orkin M (2007) Introduction. In South African Management Development Institute (SAMDI). SAMDI Annual Report 2006/07. Pretoria: SAMDI Pahad E (2009) Thabo Mbeki. Interview with ‘The Thinker’. The Thinker (March): 7–13 Palidano C (2000) Measuring public sector capacity. World Development 28: 805–822 Pillay D (2008) Working class or populism: The meaning of Zuma for the Left in South Africa. Amandla! 4: 12–13 PSC (Public Service Commission) (2007) State of the public service report: Promoting growth and development through effective public service. Accessed June 2008, www. psc.gov.za Radebe S (2009) Long live BEE. Developing Managerial Leadership – African Leader (First Quarter): 16–19 Ramaite R (1999) Keynote address. Journal of Public Administration 34: 286–292 SAMDI (South African Management Development Institute) (2006) Building the service delivery culture. Re-orientation for senior public service managers. A training manual for all existing members of senior management service. Pretoria: SAMDI Sampson A (1999) Mandela: The authorised biography. London: Harper & Collins Sindzingre AN (2004) Bringing the developmental state back in: Contrasting development trajectories in subSaharan Africa and East Asia. Paper presented at the Society for the Advancement of Socio-Economics (SASE) 16th annual meeting, George Washington University, Washington, DC (9–11 July) Southall R (2006a) Black empowerment and present limits to a more democratic capitalism in South Africa. In S Buhlungu, J Daniel, R Southall & J Lutchman (Eds) State of the nation: South Africa 2005–2006. Cape Town: HSRC Press Free download from www.hsrcpress.ac.za Southall R (2006b) Introduction: Can South Africa be a developmental state? In S Buhlungu, J Daniel, R Southall & J Lutchman (Eds) State of the nation: South Africa 2005–2006. Cape Town: HSRC Press Southern Africa Report Archive (1998) Editorial: Mbeki’s blues. Southern Africa Report 13. Accessed March 2009, www.africafiles.org/article.asp?ID=3788 Turok B (2002) Strange silence from the left. New Agenda – South African Journal of Social and Economic Policy 4: 6–12 Tutu D (2004) Look to the rock from which you were hewn. The 2nd Nelson Mandela Foundation Lecture, Johannesburg (23 November). Accessed July 2005, http://nelsonmandela.org/index.php/dialoque/annual lectures Van Dijk HG & Croucamp PA (2007) The social origins of the developmental state: Reflections on South Africa and its local sphere of government. Journal of Public Administration 42: 664–675 Vil-Nkomo S (2009) Universities and an emerging nation state. The Thinker 7: 50–52 Zuma J (2009) Address by ANC president Jacob Zuma at the launch of the Confederation of Black Business Organisations (CBBO), Sandton, Johannesburg (10 March)

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Chapter 3

Rural development under a ‘developmental state’: analysing the policy shift on agrarian transformation in South Africa
Gilingwe Mayende

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As one of the key immediate outcomes of the general elections of 2009, rural development and agrarian transformation, marginalised in both policy and debate for the larger part of the first 15 years of South Africa’s democracy, were thrust to the centre of the social and economic transformation process in the country. This change had been heralded by a series of policy pronouncements made by the ruling African National Congress (ANC), beginning with the work of its policy conference in June 2007 (ANC 2007a) and crystallised in the resolutions of its watershed national conference held in Polokwane in December of that year (ANC 2007b). Central to the shift is an abiding concern over deepening rural poverty and inequality, and the continued marginalisation of rural populations from the mainstream of the country’s national economy. Although not acknowledged officially as such, another key factor is the long-term unsustainability of the present system of relying almost solely on social grant-driven welfare interventions. With specific reference to rural development and agrarian transformation, the neo-liberal ‘development’ and macroeconomic agenda pursued by the government since 1996, under the aegis of the Growth, Employment and Redistribution (GEAR) strategy – whose much-vaunted ‘trickle-down effect’ has patently failed to materialise for the entire period to date – seems set to be replaced by a new policy perspective that seeks to locate the ‘developmental state’ at the centre of efforts aimed at transforming the rural economy and society. The convincing manner in which the ANC won the 2009 elections is indicative of a resounding mandate to deliver on what the electorate perceives to be correct policies, among which rural development and agrarian transformation have emerged to occupy an important position. To cap these developments the newly elected government, led by Jacob Zuma, moved quickly to establish a Department of Rural Development and Land Reform. The main aim of this chapter is to present a systematic analysis of the ANC’s ‘shift’ in paradigm on rural development and agrarian transformation, with specific reference to the question: to what extent does the new policy perspective provide a viable framework for accelerating the process of raising the living conditions of the rural masses and facilitating their integration into the national economy? The analysis provided explores the new policy positions in some detail, and then proceeds to identify and examine a range of potential shortcomings, inconsistencies and self-evident lacunae. Within this context, the chapter begins by analysing the concept of the developmental state and its role in driving rural development and agrarian transformation interventions, using as examples several East Asian countries that are generally considered as having succeeded in this respect. It then provides an overview of the country’s rather chequered experience in rural development and agrarian transformation policy and practice since 1994. In this regard, the chapter highlights the inherent weaknesses associated with two key programmes that have been implemented during this period, namely the Integrated Sustainable Rural Development Programme (ISRDP) and the Land

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Redistribution for Agricultural Development (LRAD) sub-programme of the land reform programme. Specifically, the chapter explores the combination of factors that led to the failure of both programmes to make significant progress in addressing the legacies of land dispossession, underdevelopment and economic stagnation as well as widespread poverty and social marginalisation, which continue to characterise South Africa’s rural areas. The lessons that have emerged from these programmes are also highlighted and analysed. The chapter further analyses some of the assumptions that are made in the new policy perspective with regard to the efficacy of rural development and agrarian transformation strategies based on subsistence and the promotion of ‘sustainable livelihoods’, against surplus-oriented commercial production. The wisdom behind the optimism shown for the success of such interventions within the communal areas35 is also subjected to critical scrutiny. In a discussion of the important issue of land acquisition, the chapter highlights a number of significant fundamental constraints, particularly the constitutional property clause and the willing-buyer, willing-seller policy, as well as major bottlenecks that could impede a shift towards an approach based on legal expropriation. The chapter then proceeds to examine pertinent challenges that could confront planned attempts at institutional restructuring, the importance of support for the targeted beneficiaries, and the renewed push for the establishment of viable and vibrant co-operatives as an important element in giving impetus to enhanced delivery. Due consideration is also given to key ‘cross-cutting issues’, such as the central position of infrastructural development and the role of indigenous knowledge, as well as gender, youth and disability, which are also deeply embedded within the rural socio-political and economic context within which the challenge of the rural development and agrarian transformation has to be addressed.

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Problematising the developmental state and the rural sphere
The role of a ‘developmental state’ has been an important topic in a significant and highly influential portion of the development literature for at least the past three decades. The term itself was coined in an effort to explain the phenomenon of the rise of Japan in the 1960s as a major economic power (and a decade later the ‘Asian Tigers’ of Taiwan, South Korea, Singapore, Hong Kong and, later, Malaysia) despite the fact that it had followed an ‘unorthodox’ growth and developmental trajectory, which differed markedly from the experience of western European and North American capitalist states (Johnson 1982). As a clear illustration of the fact that ‘developmental state’ is neither a capitalist nor a socialist concept, relatively late entrants to the category of developmental states, such as China and Vietnam, have brought the distinctiveness of being ideologically socialist inclined but using the same approaches and methods as their overtly capitalist counterparts. As Johnson (1982) correctly asserts, the definition of a developmental state should not be restricted to its intervention in the economy, as all states do so for various reasons and to varying degrees. It may be added that recent events in the USA and several western European countries have brought this fact into sharp focus, as these countries seek solutions to the worst global economic crisis in more than half a century. Most of the formulations on the developmental state that eventually emerged from early debates centred on the concept of ‘state autonomy’, which was introduced in an effort to move beyond the instrumentalism and structural determinism of some orthodox Marxist approaches (Miliband 1983; Mouzelis 1986; Poulantzas 1973, 1975; Skocpol 1979). According to Poulantzas (1973), ‘the capitalist type of state’ should be seen as being relatively autonomous and as having the ability to intervene in

35 There is a need to find suitable alternatives to the commonly used terms in identifying these areas – such as ‘former bantustans’, ‘former Transkei’, ‘former Venda’, and so on, which designate them and their inhabitants in a negative way. Admittedly, there is room for improvement on ‘communal areas’, which was first adopted in Zimbabwe immediately after it gained its independence in 1980.

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the economy and pursue policies that promote the interests of subordinated classes, in some instances against those of economically dominant classes.36 A related and equally important concept is that of state capacity, which refers specifically to the ability of the state bureaucracy to influence and effectively implement policies aimed at promoting the interests of subordinate classes (Poulantzas 1973; Skocpol 1979). Using its planning systems and bureaucratic capacity, a developmental state pushes through policies and programmes that are aimed at ensuring high levels of economic growth, equitable distribution of wealth, reduction in levels of poverty and inequality, and development in general, for the benefit of all citizens. Two leading examples of the pivotal role of planning institutions are the Japanese Ministry for Economy, Trade and Industry and the Malaysian government’s Economic Planning Unit, both of which serve as repositories of cutting-edge intellectual, technocratic and bureaucratic capacity, whose work permeates all other structures of the government. A disciplined and patriotic bureaucracy, characterised by high levels of technical, managerial and programme implementation capacity, as well as esprit de corps, is a fundamental requirement for an effective developmental state. Although the East Asian developmental states are generally better known for the success of the interventionist and redistributive policies that they pursued in the industrial and financial sectors, which were based on outward-oriented strategies that targeted international markets, South Korea and Taiwan in particular also implemented rural and agrarian transformation strategies successfully. The practical measures that were undertaken in these two countries included the expropriation of the land of a relatively small group of large landowners, who dominated an inefficient agricultural sector, and the redistribution of that land to larger groups of smallholder producers, who were provided with training and inputs and were also assisted to gain access to local and international markets. The result was that within a decade (i.e. from the 1960s to the 1970s) these countries were transformed from net importers to net exporters of food. These interventions, coupled with increased investment in infrastructure within the rural areas, as well as the proliferation of downstream industries spurred on by the agrarian reforms and strong government support, resulted in the rural populations in general enjoying a standard of living that compared favourably with that of their urban-based counterparts. The redistributive policies also resulted in the rise in the productivity of different sectors of the economy, and the maintenance of relatively low levels of income inequality (Chang 2003; Evans 1995; Haggard & Moon 1983; Rueschemeyer & Evans 1985; Ruggie 1983; Wade 1985, 1992; Woo-Cummings 1999). Incredibly, in spite of this evidence, the structural adjustment and stabilisation policies implemented by the World Bank and IMF since the 1980s called for the ‘withdrawal’ of the state in sub-Saharan Africa from the economy to allow market forces to determine growth and to mediate social relations. China and Vietnam provide good examples of how state intervention in the agrarian sector brought about the systematic dismantling of collective farming and subsequently unleashed high levels of growth and productivity through smallholder-based agricultural production. In China’s case, collective farming, which had been a central platform of the Maoist strategy for transforming the rural areas, was replaced by an individual ‘household contracting’ system. These reforms were also accompanied by the introduction of ‘green revolution’ strategies, such as the provision of high-yielding varieties of seed, fertiliser, irrigation systems, appropriate mechanical technology, encouragement of crop rotation systems, and the reorganisation of rural land markets, all of which were underpinned by
36 Notwithstanding the fact that Poulantzas (1973) insisted that such autonomy ultimately serves to defend the fundamental interests of the capitalist class and the capitalist system in general, hence its qualification with the appellation ‘relative’, his contribution to the debate presented a new perspective, which effectively set a course away from the sterility of the instrumentalist viewpoint.

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well-resourced and focused scientific research (Naughton 2007). Today China, which is the largest agricultural producer in the world, is not only self-sufficient in food production, as demonstrated by its ability to feed its population of about 1.5 billion, but is also beginning to establish itself as a meaningful exporter of food crops. It is important, however, to caution against the tendency to overplay the potential role of the state, and in the process lose sight of the fact that the state is itself also a contradictory constellation of competing interests. This is demonstrated by the fact that in different historical periods, development programmes will reflect the dominant position of a particular coalition of interests and binding constraints. This point is captured succinctly by Kohli (1999), who posits that arguments about developmental states: often focus more on explaining a state’s capacity to implement goals and less on where these goals come from. The latter issue requires an explicit focus on the political process of a society. Policy goals of any society reflect complex processes involving how the highest authorities balance their own preferences against national and international pressures. (Kohli 1999: 132) An additional requirement for a developmental state is therefore its ability to use its transcendental power to manage and mediate these competing interests effectively, while pursuing social and economic development programmes that benefit different interests to an acceptable extent. There is therefore an ever looming danger of the use of such power leading to the state becoming an instrument of an elitist coalition – made up of senior bureaucrats, businesspeople and some sections of the intelligentsia – that listens only to itself, and then ends up being isolated from the majority of the people. Contemporary Africa abounds with examples of such predatory states, whose chief characteristics are that, after coming into power, they govern first with the help of the people, but soon against them (Fanon 1990), and increasingly use their ‘control of the forces of coercion’ to violently repress their own people (Mbembe 2001). With the exception of Japan, the fact that the East Asian developmental states, which are often referred to as ‘strong states’, also tended to be authoritarian, adds the element of controversy to the concept. Within the South African debate this concern has been expressed by senior ANC political leaders such as Godongwana and Turok, who, writing in the party’s journal Umrabulo, have respectively called for a ‘social democratic developmental state’ (Godongwana 2007) and for a ‘developmental state with South African characteristics’ (Turok 2007). These positions, which have been influenced by South Africa’s status as a constitutional democracy and by the tradition of militant struggle that is embedded within its society, are interesting and could perhaps become an important part of the debate as it progresses. However, it should be pointed out that the issue of whether a state is or can become a developmental state is not necessarily a function of democracy or its absence but one of policy orientation and strategic positioning. What are the strategic imperatives for a developmental state seeking to lead the implementation of genuine rural development and agrarian transformation in South Africa? The implementation of the neo-liberal GEAR macroeconomic framework and economic development strategy, which was adopted in 1996 in the wake of the unceremonious discarding of the more redistributive Reconstruction and Development Programme, provides some important lessons on the dangers that are inherent in a minimalist approach where the state seeks to eschew direct redistributive intervention. Informed by the ‘Washington Consensus’ on economic policy, GEAR sought to achieve economic growth, job creation and development through strict monetary policies, including targeting a low inflation rate, reduction of expenditure by the state (euphemistically referred to as greater fiscal discipline), sale of state assets, and restriction of wage and salary increases. Other elements of this strategy included

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54 | The Zuma administration: critical challenges

the establishment of an ‘outward-oriented’ (i.e. export-led) industrial economy, maintenance of a low budget deficit, introduction of tax reforms to enhance the country’s global competitiveness, attraction of foreign direct investment, reduction of the government’s debt in relation to GDP, and provision of training to increase the economy’s productivity. Contrary to expectations, although the rate of economic growth did reach 5 per cent between 2004 and 2008, this ‘did not, however, translate into meaningful lower poverty rates as government policies and their implementation were unable to resolve the unemployment and associated socio-economic problems in the country’ (Du Toit & Van Tonder 2009: 15). This situation, which some analysts have referred to as ‘jobless low growth’, has taken place in spite of ever increasing poverty, deepening inequality, deteriorating livelihoods, escalating crime, the breakdown of social norms and values, the alarming widening of the gulf between the haves and the have-nots, and a not insignificant increase in the ranks of those living below the poverty line, which currently stands at just over half of the total population. While it is commendable that a significant proportion of the African population have gained access to some benefits that were denied them under apartheid, such as clean water and electricity, it is also unacceptable that the majority, who are poor, are being further marginalised and impoverished. However, GEAR’s singular success was largely the so-called ‘class project of 1996’, which presaged an almost exclusive focus on promoting the emergence of a black middle class, as well as a small comprador, ‘paper-monied’ bourgeoisie, which emerged by benefiting from black economic empowerment deals. GEAR thus effectively engendered a situation where the masses were increasingly becoming alienated from the state; and had it not been for the social grants, which in 2009 were being provided to about 13.3 million individuals and cost the national fiscus a total of R71.1 billion in 2008/09 (National Treasury 2009: 90), the country would have faced a poverty and hunger crisis of unimaginable proportions. Food handouts, which have been distributed in extreme cases, have played a particularly important role in this regard. The marginalisation of rural development and agrarian transformation should thus be understood as a logical consequence of the implementation of a development strategy influenced by neo-liberalism, as GEAR was. For the South African state to position itself effectively to perform an increasingly interventionist developmental role, it will have to insulate itself from the narrow, particularistic and often parochial interests of those social classes whose agenda stands in direct conflict with that of a redistributive social and economic development programme. Dialectically, the major issue, emerging within the specific context of agrarian transformation, facing a developmental state in South Africa is how to deal with the vexed question of, and the contradiction reflected in, the situation where a minority of about 45 000 white farmers own and control over 80 per cent of the agricultural land in the country, some 81 million hectares, which they hold under colonially determined conditions.37 Members of this group, whose landholdings measure about 1 300 hectares on average, are affiliated to an organisation called Agri-SA (formerly known as the South African Agricultural Union) and the smaller Transvaal Agricultural Union. The richer and more influential sections of this group actually constitute an oligopoly that uses its proximity to the high levels of government, as members of the Presidential Working Group on Commercial Agriculture, to lobby for their own narrow interests, such as gaining access to the world markets of agricultural products. Despite its protestations to the contrary, this group is vehemently opposed to land reform and agrarian transformation, going to the extent of falsely putting blame on

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37 This view stands in opposition to Laclau’s (2007) assertion, that radically addressing a dichotomy emanating from a system of oppression preponderantly in favour of the oppressed may result in the inversion in the relation of oppression, ‘as the identity of the newly emancipated groups has been constituted through the rejection of the old dominant ones’ (2007: 31). Such a situation, in my view, would obtain under circumstances where a ‘winner takes all’ approach is pursued, which is not the basic argument of this chapter.

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the land reform programme for the current decline in the productivity of the commercial agricultural sector, which is threatening to seriously lower food production.38 As demonstrated below, in a section devoted to an analysis of some of the opportunities and threats associated with land reform and agrarian transformation, in reality this decline in productivity is due to other, unrelated factors. In that section it is shown that major structural inefficiencies within the largescale commercial agricultural sector in South Africa, particularly the utilisation of land below its true productive potential, actually undermine the country’s food production capacity and future prospects. In stark contrast, approximately 5 million households in the communal areas have access to only 15 million hectares on 13 per cent of the country’s land area,39 and cultivate plots averaging 1.5 hectares in size. Most often, they have to conduct their ‘farming operations’ under precarious, rain-dependent and environmentally degraded conditions. These, as well as other related issues, are discussed further in the section that deals with land acquisition and agrarian transformation strategy.

Rural development and agrarian transformation policy in context, 1994–2008
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The following major question then arises: to what extent have the policies and programmes of the post-apartheid state on rural development and agrarian transformation addressed the negative historical economic and social legacies? To answer this question adequately, it is necessary to reflect briefly upon the two major policies and programmes, implemented over the 15 years since the advent of democracy, that were designed as major interventions aimed at improving the living conditions of poor and/or landless rural communities. These are the Integrated Sustainable Rural Development Programme (ISRDP) of the Department of Provincial and Local Government (DPLG n.d.) and the Land Redistribution for Agricultural Development (LRAD) sub-programme of the land reform programme (Ministry of Agriculture and Land Affairs 2001). The Extended Public Works Programme (EPWP), which focuses on infrastructure, is also discussed, albeit briefly and only in so far as it is of direct relevance to the ISRDP. The emergence of the ISRDP has an interesting history, in which Zuma, the current president of the ruling ANC and the president of South Africa, played a key role. In 1999, as the then new government of Thabo Mbeki debated aspects of its programme for its second term, Zuma, the deputy president of the country at the time, insistently and passionately highlighted the issue of rural people, who were continuing to be left behind living under unacceptable conditions of poverty. He bemoaned the fact that there was hardly any significant programme for rural development and that debates about macroeconomic strategy that were raging at the time apparently had only cursory concern for the ‘millions of people’ living in these areas. What he did not say, but which he knew his colleagues understood clearly, was that failure to address the disturbing trend of continuing poor service delivery to rural populations raised the spectre of these multitudes turning against the ruling party at the polls. 40

38 On 1 March 2009 the Sunday Times and City Press newspapers gave extensive coverage to stories in which the ridiculous claim was made that land reform was ‘threatening’ the country’s food production capacity because of the failure of the projects implemented under this programme within the 5.2 per cent of the land that had thus far been redistributed. 39 In spite of the fact that some 10 per cent has been added to the notorious 13 per cent as the result of the transfer of 5.2 per cent of the land through the land reform programme, as well as opening up of access to social amenities such as recreational parks, and the relatively small but not insignificant acquisitions of suburban and agricultural properties by the new black middle class, the structure of landownership remains as lopsided today as it was before 1994. 40 It is also quite interesting that Zuma’s efforts and energy in driving the process of change towards putting rural development onto the agenda of the ANC government have not been adequately acknowledged.

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The ISRDP was then adopted in 2000 and was subsequently announced by Mbeki in his State of the Nation address to Parliament in February 2001. The programme would be implemented in 21 rural nodal areas, while the Urban Renewal Programme, announced by Mbeki in the same speech, would have 8 nodes. During his speech Mbeki (2001) said: ‘Our central aim is to conduct a sustained campaign against rural and urban poverty and underdevelopment, bringing in the resources of all three spheres of government in a co-ordinated manner’. Beneath this façade of unity of purpose around rural development policy there was, in actual fact, a great deal of reluctance to accept it by the policy gurus and technocrats in the neo-liberal Mbeki-led government. These officials articulated a range of formidable excuses, including lack of funds; but in actual fact the main point of contention was that the proposal for a programme that would focus on rural areas and populations ran counter to then existing policy orthodoxies on macroeconomic strategy and spatial development. Critically, around the same time as the ISRDP was being formulated, the Presidency was in the process of ramming through the new Spatial Development Initiative (SDI), which later became official policy. With rigidly set parameters based on the caveat of ‘people and not places’, the SDI’s drafters put forward the notion that the major driving force behind spatial development in South Africa would be the urban areas, where most of the population reside. The populations presently resident in the rural areas would apparently benefit from trickle-down and ramifying effects of the urban-based developmental efforts. The SDI thus essentially had a distinctly urban-biased character.
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In practice, however, the ISRDP turned out to be neither integrated nor sustainable, nor was it in any real sense a rural development programme. First, it had no proper home within the government apparatus, with the DPLG taking up the task of ‘co-ordinating’ the programme’s formulation and implementation rather reluctantly. Since it lacked the necessary technical expertise, this department commissioned the Independent Development Trust (IDT), a parastatal agency, to drive the technical and logistical aspects of setting up the programme. Indicative of the severe financial constraints that faced the ISRDP from the very beginning is the fact that the IDT went around the various departments requesting them to indicate amounts within their budgets that they could set aside for ‘ISRDP activities’. Since hardly any of the departments had any such surplus funds, given the fact that they had already been allocated their budgets for the three-year medium-term expenditure framework period, the programme lacked the necessary funding from the outset. This continued to be the case for the next eight years of its existence before the current Zuma-led government took office. Lacking a clear definition of what it understood rural development to mean, the ISRDP became a programme for any activity that occurred in the rural areas. Thus, there was no clarity as to whether the programme sought to promote the development of a vibrant rural economy characterised by productive agricultural and small business enterprises, or if it was simply aimed at promoting subsistence activities. Curiously, government departments at national and provincial levels, as well as municipalities, got into the practice of claiming for the ISRDP virtually every rural-based project, while the majority of government departments found themselves with hardly any scope, let alone capacity, to incorporate it into their existing programmes. Thus, while the ISRDP featured in most plans of the relevant departments for compliance purposes, in actual fact very few of these were translated from paper to practice. Another serious shortcoming of the ISRDP emanated from its beneficiation model, if it could be referred to as such, whereby it utilised the system of bringing together groups of beneficiaries and ‘encouraging’ them to pool their government grants and production activities and resources, mainly their own labour. To illustrate its lack of detailed formulation and absence of a research basis, many ISRDP projects lacked integration. This was demonstrated in many instances where, for example, a large number of agricultural projects had no reliable water supply, veterinary support, or access to

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markets. Moreover, its group-based approach failed as, in many instances, the groups disbanded, with individual members withdrawing because of a lack of concrete material benefit. To further illustrate the programme’s lack of success, the then provincial and local government minister, Sydney Mufamadi, under whose responsibility the ISRDP fell, in a press release sent out on 20 March 2003, could only mention projects, mostly infrastructural, that had been identified but not implemented in the various nodes. Most of these projects were actually part of the EPWP, which is led by the Department of Public Works (DPW) and is a flagship of the government’s programme of delivering infrastructure to rural areas. Some of these projects were to be implemented through the Municipal Infrastructure Grant, which is a conditional grant made available by the DPLG largely to rural municipalities that meet specific criteria. The rural infrastructure programmes, which had been allocated about R15 billion for the period 2006–10, were also aimed at creating ‘1 million work opportunities for the unskilled, marginalised and unemployed over 5 years’ (National Treasury 2006: 108) and alleviating poverty through their emphasis on labour-intensive methods in the construction of roads and other aspects of infrastructure. From its inception in 2000, the ISRDP was therefore a vaguely defined, inadequately financed, poorly implemented and weakly coordinated programme. Not surprisingly, it fairly quickly degenerated into unevenly implemented, scattered and isolated small projects such as piggeries and poultry farms. In terms of structure, strategy, funding and institutional delivery mechanisms, the programme was therefore unsustainable, and it thus failed to impact positively on the lives of a critical mass of the rural poor, and also failed to generate any momentum. An in-depth analysis of the trends with regard to the quantity and quality of delivery on land reform and agrarian transformation reveals a picture that is not much different from the experience with the ISRDP. In order to place in its proper context the analysis that follows of the country’s experience in agrarian transformation, it is important to begin by distinguishing between the two concepts. Land reform essentially refers to state-led interventions whose major aim is to secure rights and promote equity in terms of access to land and patterns of ownership, and to ensure tenure security for vulnerable groups who, in the South African case, are labour tenants, farm workers and many residents of the communal areas. Land reform also provides the legal and procedural instruments that are necessary for the regulation of the conditions under which land should be held. Agrarian transformation, on the other hand, refers to measures aimed at achieving equity through the redistribution of land for the primary purpose of transforming, reorganising and enhancing the agricultural production process. It also refers to a process of changing the relations of production and class configurations in the countryside, and engendering a more comprehensive and demographically representative spread in the distribution of benefits from the agrarian economy. It is therefore erroneous to restrict the conceptualisation and operationalisation of agrarian transformation to poverty alleviation – which it does address in any event – as this has the effect of truncating its potency. This is because agrarian transformation is primarily a vehicle for creating a new rural economy and for comprehensively transforming rural social relations, and not merely for keeping hunger at bay. It is not a matter of dispute that the implementation of the land reform programme has, since 1994, fallen far short of established targets. At present, land transferred to beneficiaries (including those whose land has been restored to them under the restitution programme) amounts to 5.2 million hectares against a target of 24.6 million by 2015. It is difficult to understand how the government will be able to deliver a total of 19.4 million hectares over the remaining period leading up to 2014,41 which
41 The ANC’s Polokwane conference resolutions (ANC 2007b) on land reform and agrarian transformation bring this target forward to 2014, apparently to place it in sync with both the change of term to the next government and the UN Millennium Development Goals.

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is the amount that would be required over four years, given that the same constraints and challenges persist, particularly with regard to funding and capacity, which resulted in only 5.2 million hectares being delivered in the period 1994–2009. This target, which translates to delivery between 2009 and 2014 at the rate of 3.9 million hectares per year, can only be achieved through a massive injection of funding, capacity and skills. It is no exaggeration to state that the required funding would amount to more than a quadrupling of existing allocations which, given current fiscal limitations, would be extremely difficult, if not impossible, to secure. A simple calculation based on existing figures, which shows that between 2001/02 and 2008/09 a total of 2.98 million hectares were purchased for the sum of R7.9 billion,42 means that at 2009 prices of R7 000 per hectare on average, at least R15 billion would be required for each financial year over the five year period. When taking, as an example, the R3 billion allocated to the land reform programme by National Treasury for the 2008/09 financial year, it becomes clear that the allocation falls far short of this target, and reflects the continuation of a trend that began in 1994, of allocating the land reform programme less than 1 per cent of the national Budget. During the first five years of democracy (1994–99), land redistribution was characterised by a system whereby landless communities would be required to apply as a group for a Settlement and Land Acquisition Grant (SLAG) of R15 000 per participating household (which was the amount calculated for housing subsidies for poor households at the time and which was later increased to R16 500), and then they would be resettled on a piece of farmland as a group. The SLAG-based programme failed primarily because it was unsustainable, as relatively large numbers of people (in some cases up to 5 000) would be resettled as a group on relatively small, mostly marginal and poorly watered pieces of land. With the ‘equitable share’ of a participating household in the project being around two hectares on average, this meant that any financial returns from productive activities on this land would be minimal. This led to some of the programme’s severest critics deriding it as the so-called ‘rent a crowd’ approach. In changing course, the government formulated and implemented LRAD, a sub-programme of the redistribution programme. This change represented the government’s first major attempt at agrarian transformation. Following a high-intensity planning process that spanned almost two years from mid1999, by the time LRAD was launched in 2001 (Ministry of Agriculture and Land Affairs 2001), it had the following central features: • Land would be redistributed specifically for the purpose of agricultural development. • Those who obtained agricultural land would be capacitated to engage in sustainable and economically rewarding productive activity on that land. • The sizes of the plots of land to be redistributed would be determined in such a way as to enable the beneficiaries to undertake agricultural production at various levels, ranging from smallholdings to large-scale units. • Land redistribution would be used deliberately as a vehicle for promoting the entry into meaningful agricultural production of Africans, including entrepreneurs wishing to take part in large-scale farming. • The scale of the grants that would be made available for the different levels and categories of beneficiaries would be increased significantly. • The land that would be targeted for redistribution under the sub-programme would be the best agricultural land situated in the heartland of white commercial agriculture. An overriding principle that came with the introduction of LRAD was that all beneficiaries would have to make an ‘own contribution’, which, for the poorest beneficiary households, would be in the form
42 These figures were calculated from data contained in the annual reports of the Department of Land Affairs for the years 2002/03 and 2008/09.

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of ‘sweat equity’ (i.e. labour), while others would be required to make a cash down payment of at least 10 per cent of the total price of the land. The reasoning behind the ‘own contribution’ is based on worldwide experience, through which it has been established that participants in state-supported projects who make a personal contribution tend to take their projects seriously as they develop a sense of ownership. The grants were thus offered on a sliding scale ranging from R20 000 up to R100 000. Applicants seeking relatively larger plots of land could also qualify for a loan that would cover the rest of the value of the project up to R400 000. The loan applications were to be processed by the Land Bank, a parastatal entity, which was brought in to assist by managing funds transferred to it by the Department of Land Affairs (DLA). Significantly, LRAD was conceived of as a ‘joint programme’ to be implemented by both the Department of Agriculture (DoA) and the DLA, with the former being responsible for providing the necessary training, inputs and extension support, while the DLA would focus on the acquisition of land. For the entire eight years of its implementation, the all too familiar ‘challenge’ of an insufficient budget, discussed above, represented the most fundamental bottleneck that LRAD faced in relation to both land acquisition and support for the beneficiaries. This has been the case in spite of the introduction in 2003 of a scheme called the Comprehensive Agricultural Support Programme (CASP), to which amounts averaging R450 million were allocated between 2004 and 2008. Because CASP was also designed to provide broader agricultural extension and training requirements to non-land reform producers serviced by the nine provincial departments of agriculture, land reform beneficiaries have consistently received little support from the scheme. As a result, the majority of LRAD beneficiaries did not receive the necessary training and mentoring, and many continued to struggle to obtain basic inputs, while extension services were erratic at best. These were the major factors that led to the collapse of many LRAD projects – a phenomenon that since March 2009 has become a topical issue in current discourse on land and agrarian questions in South Africa. With regard to land acquisition, the greatest stumbling block with which LRAD and the land reform programme in its totality had to contend on an ongoing basis was presented by the market-based willing-buyer, willing-seller policy. Central to this problem is the tendency for the sellers to demand exorbitant prices for their properties, as they perceive a bonanza opportunity from a government under pressure to deliver. Thus, the willing-buyer, willing-seller policy also generates inflationary pressures on the land market and contributes to slowing down the pace of land delivery. Hence, this policy became the focal point of a concerted campaign for its abandonment led by land activists and a range of civil society organisations. With the Landless People’s Movement, a social movement made up mainly of labour tenants and farm workers at its head, this campaign eventually resulted in the convening of a National Land Summit on 23 July 2005. The summit was attended by various stakeholders including land activists, small-scale African farmers represented by the National African Farmers Union, large-scale farmers represented by Agri-SA, traditional leaders, NGOs and government officials. Also highlighted at this gathering were the vexed issues of continuing illegal evictions on commercial farms, and generally slow land delivery. In the immediate aftermath of the summit the government and the ANC made positive utterances indicating the possible abandonment of the willing-buyer, willing-seller policy, as they both acknowledged its inherent limitations and disruptive features. This commitment to a change in direction was also accompanied by particularly strong indications that expropriation was to be pursued as the alternative approach. However, given existing constitutional constraints (discussed below) as well as political realities, a shift from the willing-buyer, willing-seller policy to one based on expropriation is easier said than done. In 2008, this situation was demonstrated clearly by the relentless pressure placed on the government by

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organised white commercial farmers, with their main political sponsors, particularly the Democratic Alliance and the right-wing Freedom Front, accusing the ruling ANC of attempting to renege upon the commitment to ‘win–win’ solutions made during the constitutional negotiations that ushered in the country’s democracy. As a clear indication of the government’s invidious position, towards the end of 2008 it ‘suspended’ draft legislation that sought to ‘align’ the existing Expropriation Act (No. 63 of 1975) to the requirements of sections 25(2)(a) and 25(4)(a) of the Constitution of the Republic of South Africa (1996). These two constitutional provisions respectively provide for expropriation ‘in the public interest’ and recognise the public interest to ‘include the nation’s commitment to land reform’. It is also important to highlight the fact that expropriation is itself not necessarily a speedy process, especially if it is based on purely legal mechanisms. An expropriation policy that relies heavily on courtdriven processes will inevitably be bedevilled by inordinate delays, perhaps to an even larger extent than what has been experienced under the willing-buyer, willing-seller system. The case of Zimbabwe presents important lessons in this regard, where those whose land was targeted for expropriation could challenge the government’s actions successfully in court. In that country in the majority of cases, after protracted litigation that could take up to two years for each case, the courts invariably ruled against the government. It should be noted that delays would still be a major problem even if a special court were to be created for the purpose of adjudicating expropriation matters. A case in point in this regard is the Land Claims Court (LCC), which settled only 41 claims over the five years between 1995 and 2000 out of 79 996 claims lodged by the cut-off date of December 1998 (CRLR 2000). As a result, the strategy had to be changed in 1999 when the Restitution of Land Rights Act (No. 22 of 1994) was amended through the insertion of a clause (section 42B) to enable the land affairs minister to settle administratively all those restitution claims not requiring adjudication by the LCC. This change led to a major turnaround in the pace of delivery on the restitution programme from 1999 onwards. Needless to say, it should be borne in mind that in a constitutional democracy every citizen has the right to recourse in the courts of the land, and where such a right is accompanied by a constitutional right to property, the amount of room for manoeuvre available for the government in implementing expropriation becomes extremely limited. Thus, any serious consideration of the question of how to speed up and execute land acquisition in a cost-effective manner should inevitably bring attention squarely to the property clause as set out under section 25 of the Constitution. Section 25(1) states: ‘No one may be deprived of property except in terms of law of general application and no law may permit the arbitrary deprivation of property.’ Put in simple terms, this means that ownership of property is protected as a fundamental constitutional right. Hamilton provides a cogent summary of the limitations of land reform within the present constitutional context when he writes: In the light of South Africa’s history, the property clause obviously aims to safeguard the right of access to property, and to aid equal access by providing directives for land reform, rather than safeguard extant property rights and their exercise. However, it in fact achieves the opposite: rather than establishing a means of changing the existing property arrangements it entrenches them. This is the case because, however many sub-clauses and limitations follow the right, the property right, by virtue of it being a right, has a default priority. (2006: 136) In even stronger language, Hendricks states: ‘White privilege, borne out of colonial land theft, has become firmly entrenched and now enjoys the sanction of the new constitution’ (2004: 23). In other words, notwithstanding the fact that the property clause also contains provisions – in sections 25(5), 25(6) and 25(7) – that apparently foster conditions that are favourable for land redistribution, tenure reform and restitution, in effect the protection of private property ultimately closes off any room for

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manoeuvre for meaningful land redistribution and agrarian transformation. Put slightly differently, the property clause effectively perpetuates the system of holding of land as the spoils of colonial conquest by securing them as rights, which in the process also gives the constitutional provision a distinctly neo-colonial character. The property clause is therefore the proverbial albatross around the neck of the South African post-apartheid state – an effective barrier to meaningful agrarian transformation, which effectively places South Africa’s land reform and agrarian transformation efforts in a virtual cul-de-sac. Another major constraint that LRAD has faced relates to constitutional provisions which, at face value, give the impression of facilitating expropriation while in actual fact making its implementation extremely complicated and virtually unattainable. For example, section 25(3) states that when the issue of just and equitable compensation has to be considered, the following circumstances must be taken into account, which supposedly reflect ‘the balance between the public interest and the interests of those affected’: the current use of the property; the history of its acquisition and use; its market value; ‘the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property’; and the purpose of the expropriation. Under normal circumstances these provisions would make the implementation of an approach to land acquisition based on expropriation fairly straightforward. Notwithstanding these seemingly positive provisions, the guarantee and protection of private property as a fundamental right looms large and outweighs any other provision.
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The assumption that the Constitution facilitates non-market-based land reform as well as speedy expropriation is therefore erroneous. Payment of market value is thus very likely to continue to be the central feature of land acquisition, and what is most likely to be seen is a rather cosmetic change from the willing-buyer, willing-seller policy to expropriation at market value, with the result that the net effect will be the same for both approaches. Given the constitutional constraints discussed above, the discarding of market-based land reform and the willing-buyer, willing-seller policy is therefore not going to be a simple and straightforward exercise. Unless the property clause is repealed, land redistribution is likely to continue to be bedevilled by the problem of slow delivery for the foreseeable future. It goes without saying that this situation will heighten the possibility of social instability and protest actions, which may take the form of more widespread land occupations than have been seen in the country to date. As some writers have indicated, illegal land occupations have the potential of being used by the country’s emergent social movements in the future if delivery trends continue to be relatively slow (Cousins 2001; Goebel 2005; Sihlongonyane 2005). All in all, the record of the 15 years since 1994 shows that within the context of the South African state’s policies and programmes, ‘rural development’ assumed the appearance of an add-on or afterthought, rather than being a central feature of development and macroeconomic strategy. With about 50 per cent of Africans continuing to live below the poverty line, and with an ever widening gap between rich and poor, it is not surprising that the Gini co-efficient for South Africa was adjusted upwards from 60 to 68 per cent between 1995 and 2008.43 Rural formal and informal unemployment continues to be in excess of 40 per cent. While the ISRDP showed much promise from a rural development perspective, and LRAD from an agrarian transformation viewpoint, they were both rendered unsustainable through the interplay between the complex nexus of factors and circumstances discussed above. Nevertheless, in spite of these setbacks, both programmes should serve as useful reference points from which the new Zuma-led government could draw important lessons on the best way to proceed, as it formulates new or refines existing policies on rural development and agrarian transformation.

43 A Gini co-efficient of anything over 60 per cent demonstrates extreme inequality. The UN’s Human Development Report for 2008 placed South Africa ‘among the ranks of the most unequal societies in the world’ (UNDP 2008: 43).

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Raising the bar only halfway? Analysing the policy shift
To what extent then do the ANC’s new policy undertakings on agrarian transformation provide a useful framework for plugging the existing policy lacunae and effectively addressing the socio-economic deficits that continue to characterise rural populations? To what extent do they create what Paulo Freire, writing in a different context, refers to as the conditions that make it possible for the poor, whose ‘ontological vocation is to become fully human’ (1993: 44), to realise their long-awaited dream? Although the ANC’s Polokwane resolutions (ANC 2007b)44 are understandably scant on facts, figures and other detail, pending their translation into detailed government policy and programme provisions, they are nevertheless largely clear, comprehensive and unambiguous. A central platform of the Polokwane shift is to locate the ‘developmental state’ as the strategic centre for driving the envisaged interventions and, as the party asserts in its conference resolutions, this type of state ‘has a central role to play in leading and sustaining rural development’. The significance of the ‘renewed’ push for more meaningful developmental activity within the rural areas is that it may be an acknowledgement of the fact that, beyond the rhetorical level, to a large extent rural development, agrarian transformation and rural poverty eradication in South Africa have, in the 15 years since 1994, remained peripheral issues in the government’s national development and macroeconomic policies. It is also a ringing indictment of the policy and implementation inconsistencies associated with policies such as the ISRDP and LRAD, which, from the very outset, were allocated a marginal position and were treated as ancillary to the narrowly focused GEAR-inspired prioritisation process. Social grants, which are recognised in the ANC’s Polokwane resolutions as having made ‘a huge contribution to pushing back the frontiers of poverty’, are also seen, by implication, as an unsustainable alternative, as they ‘are no substitute for a broader strategy of rural development and employment creation’ (ANC 2007b: 24). The ‘new’ positions on agrarian transformation have three distinctive features, namely: emphasis on the promotion of productive activity under a smallholder-based system; the need to change the land acquisition strategy; and a commitment to provide more meaningful support to programme beneficiaries. In relation to the sphere of production, the resolutions call for the implementation of ‘large-scale programmes to establish new smallholders and improve the productivity of existing small-scale and subsistence farmers, as well as to integrate smallholders into formal value chains and link them with markets’ (ANC 2007b: 27). On land acquisition, the resolutions include a proposal to ‘discard the market-driven land reform and immediately review the principle of willing-seller, willingbuyer’ (ANC 2007b: 15). In this regard, the state is called upon to exercise its ‘legal right to expropriate property in the public interest for public purpose’ and award compensation in accordance with the Constitution to achieve ‘equity, redress and social justice’ (ANC 2007b: 15). The resolutions also reiterate the call for ‘fundamental changes in the patterns of land ownership through the redistribution of 30% of agricultural land before 2014’ (ANC 2007b: 26). The adequacy of post-settlement support in all land reform programmes is also to be reviewed, because ‘land reform beneficiaries, as well as new and existing producers in the former bantustans, have often failed because of the inadequate provision of extension services, capital, infrastructure and market access’ (ANC 2007b: 25). It is also noted that the tendency to encourage beneficiaries ‘not only to hold the land under common ownership, but also to organise themselves into collective production arrangements has constrained the success of land reform programmes’ (ANC 2007b: 25). The proposal is then made for a change to a system that

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44 This part of the analysis focuses on the resolutions of the ANC 52nd national conference held in Polokwane in South Africa’s Limpopo Province from 16–20 December 2007. The analysis focuses specifically upon the resolutions on rural development and ‘agrarian change’ contained in the ANC’s resolutions document (ANC 2007b). Because of their obvious importance, these resolutions are covered extensively in this section of the chapter.

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will lay emphasis on landholding based on ‘family farms in particular’ (ANC 2007b: 27), which in some instances might require subdivision of larger plots. An important point of departure of the new policy perspective is recognition of potential for agrarian transformation and rural development that might lie in the communal areas. This is captured succinctly in the statement: ‘Millions of our people farm on small agricultural plots in the former Bantustan areas and make a substantial contribution to poverty reduction and the creation of sustainable livelihoods in the most adverse conditions’ (ANC 2007b: 24). And further, ‘part-time and full-time agriculture in these areas remains a critical opportunity in our people’s efforts to combat poverty, provide social security for themselves and build sustainable livelihoods’ (ANC 2007b: 24–25). It is also noted that ‘land reform has not been located within a broader strategy of rural development or a commitment to supporting smallholder farming on a scale that is able to improve rural livelihoods’ (ANC 2007b: 25). ‘Agrarian change’ will therefore be approached ‘with a view to supporting subsistence food production, expanding the role and productivity of modern smallholder farming and maintaining a vibrant and competitive agricultural sector’, as well as ‘defending and advancing the rights and economic position of farm workers and farm-dwellers’ (ANC 2007b: 26). Further: Our programmes of rural development, land reform and agrarian change must be integrated into a clear strategy to empower the poor, particularly those who already derive all or part of their livelihoods from the exploitation of productive land… the critical beneficiaries of change must be rural women, farm-dwellers, household producers in former bantustans, small businesses and rural entrepreneurs and residents of urban and peri-urban areas that wish to engage in agricultural livelihoods. (ANC 2007b: 25–26) To demonstrate the integrated character of rural development, land reform and ‘agrarian change’, the resolutions further note that the ‘provision of social and economic infrastructure, such as roads’, and the ‘extension of quality government services, particularly health and education, to rural areas… remain key features of rural development’ (ANC 2007b: 26). Other priority areas of infrastructure delivery and provision of basic services include potable water, sanitation, electricity and irrigation, ‘ensuring in particular that the former bantustan areas are properly provisioned with an infrastructural base for economic and social development, and that farm dwellers, like all South Africans benefit from universal access to free basic services’ (ANC 2007b: 28). The resolutions also call for ‘comprehensive support programmes with proper monitoring mechanisms to ensure sustainable improvements in livelihoods for the rural poor, farm workers, farm-dwellers and small farmers, especially women’ (ANC 2007b: 26). Specifically, effective and directed support to land reform beneficiaries, in general, and smallholder agriculture and family farms, in particular, will include ‘financial support, research and extension, the provision of tools and equipment and the facilitation of market access and co-operation’ (ANC 2007b: 27). Thus, contrary to LRAD’s quest to deliver land to different categories ranging from smallholders to large-scale producers, the ANC’s Polokwane resolutions place emphasis exclusively on the smallholder option. Although not offering any definition, nor an indication of optimum land sizes that would be required for meaningful smallholder production, it can be gleaned from the resolutions dealing with the communal areas that a smallholder is regarded as a producer cultivating at the level of current communal ‘producers’, which is 1–3 hectares. The resolutions further make a commitment to ‘build stronger state capacity and devote greater resources to the challenges of rural development, land reform and agrarian change’ (ANC 2007b: 26). In particular, this will entail creating ‘an over-arching authority with the resources and authority to drive and co-ordinate an integrated programme of rural development, land reform and agrarian change’ (ANC 2007b: 26). The capacity of rural local government will also be built,

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so as to enhance its ability to lead the process of rural development under a decentralised system that links with broader locally based development programmes as reflected in the Integrated Development Plans of local municipalities. The party’s 2009 election manifesto also calls for the strengthening of the ‘partnership between government and the institution of traditional leadership on rural development and fighting poverty’ (ANC 2009: 8). The resolutions also come out strongly in favour of co-operatives, which are the subject of a detailed discussion later in this chapter. In essence, the ANC’s new policy proposals place emphasis on rural livelihoods, subsistence, and promotion of smallholder production. These positions warrant some detailed analysis. For example, the assumption that anyone can derive a decent livelihood from a 1.5 hectare plot of land, which is what most families have access to in the communal areas, is over-optimistic, to say the least. It is quite true that there was a period in the past, prior to the implementation of the land alienation and livestock culling processes that were the central features of the ‘betterment’ programme, when the majority of peasant households enjoyed a degree of self-sufficiency in food production, particularly grain crops. Indeed, a significant proportion of these households were in a position to sell some of their produce to local traders. It should be borne in mind, however, that this occurred under conditions where demographic factors worked in favour of successful peasant production, as they had a reliable supply of family labour, which made subsistence production possible. However, as demonstrated in the discussion that follows, a self-sufficient peasantry is a romantic and nostalgic notion that belongs to the past, and for that matter a past in which options were nonetheless extremely limited and the scope for growth virtually non-existent. Today, however, this is no longer the case, as the amount of land available has actually decreased, as a result of a combination of factors. To start with, the effect of patriarchal inheritance norms, which are practised widely as an important element of culture and tradition within these areas, has over time swelled the ever increasing number of the landless, as those siblings who lose out on inheritance have found themselves in a situation where hardly any alternative agricultural land is available. Women have been particularly adversely affected by these developments. It should also be noted that in spite of consistent rural–urban migration for over a century from around 1900, the population of the communal areas has more than doubled from what it was during the days of self-sufficiency in the 1950s. These sociological issues should be subjected to thorough research as they are of critical importance to a clear understanding of the present socio-economic configuration and developmental potential of the communal areas. Up-to-date data are needed on issues such as the current age structure within the communal areas, female- and child-headed households, the scale of landlessness, and so forth. For its part, the ‘betterment’ policy, which was implemented in the communal areas in response to a major recommendation of the Tomlinson Commission of 1954, was ostensibly presented as an effort to reverse environmental damage caused by overcrowding and overgrazing, which itself was a direct outcome of land dispossession. In actual fact, the policy instead deepened the damage as those affected by the scheme lost much of the land to which they had hitherto had access, as well as large numbers of their livestock through enforced culling. Thus, where on average a peasant household had access to about three hectares of land in the 1950s, this amount has shrunk by about half at present (2009). Moreover, a not insignificant amount of this land consists of arable fields that have been permanently abandoned,45 mainly because of migration to the towns. Another common reason for abandonment is to be found in situations where parents may be deceased or too old to work in the fields, and their children may be engaged in occupations in the formal economy or public service, which keeps them away from their rural homes for long periods during a year. Hence, in some cases

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45 This excludes those lands that have been abandoned due to their owners’ lack of means with which to work them, such as lack of implements and draught power, and inputs such as seeds and fertiliser.

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new homesteads have been built on permanently abandoned arable fields, and to some extent on commonage grazing lands. The Polokwane resolutions (ANC 2007b) thus speak to no more than 50 per cent of the population of the communal areas, and the party’s silence about what is to be done with the landless households should be a matter of concern. Similarly, the view that ‘millions’ of the residents of the communal areas ‘make a substantial contribution to poverty reduction and the creation of sustainable livelihoods’ through their activities in agriculture is clearly erroneous and betrays a failure to base policy formulation on scientific research. The reality, however, is that production has virtually collapsed in these areas and the livelihoods of the majority of households are being ‘sustained’ largely by social grants. The combination of betterment, population growth, rural–urban migration and neglect of the communal areas throughout the colonial and apartheid periods thus poses the greatest dilemma to any effort that seeks to ‘revive’ meaningful production within these areas. It is important to confront the serious constraints to meaningful production posed by the extremely small land sizes that are a common feature of the overwhelming majority of arable plots within the communal areas. It should also be borne in mind that dry-land and rain-dependent arable production, which is the dominant and widespread type being practised in the communal areas, effectively restricts production to a single cropping season in a year, which begins around the time of the spring and summer rains. This effectively rules out crop rotation, which could provide the producers with opportunities to increase their scale of production and levels of income. This situation is exacerbated by the fact that large sub-regions experience erratic rainfall patterns, and as a result are prone to the devastation of drought and other natural disasters. The amount of income that a producer working, say, a two-hectare plot would derive, would thus be extremely low under dry-land farming conditions. When taking the example of maize, and assuming that the producer would not consume any part of the harvest, on the basis of the average of two tons per hectare that could be produced on a well-prepared field in a good rainfall year, at 2009 prices of R2 480 per ton, a producer cultivating a two-hectare plot would make gross earnings of R9 920 a year. This figure drops dramatically after deducting the price of inputs such as seeds and fertiliser, as well as the costs of transportation to the market; as such, a producer would be left with a net income of no more than R6 000. Under these circumstances, it is inconceivable how subsistence agricultural production could become a form of decent employment and could serve as a deterrent to those contemplating migration to urban areas. Even more improbable would be to expect any able-bodied person to return from an informal settlement in an urban area, to work under the blazing sun for ‘income’ or production that at best is sufficient only to fill their stomach. Notwithstanding the points highlighted above, the situation would improve significantly if the interventions proposed for the communal areas in the Polokwane resolutions were to be underpinned by a major drive to introduce irrigated agriculture. Irrigation would improve the productivity of relatively small plots as it would make it possible for the producers to practise crop rotation. This is where the government should invest massively for its plans to succeed in transforming those households within the communal areas which have some land into significant producers. The producers would also be in a position to alternate between food and cash crops within a single year, which would secure their food needs while at the same time enabling them to raise a decent income from the sale of the cash crops. The introduction of high-yielding seed varieties, chemical fertiliser and other important inputs would also go a long way towards enhancing the quantity and quality of production. While the suitability of different kinds of crops in various areas would be determined through research, it is already a wellknown fact that the sub-regions that straddle the Eastern Cape Wild Coast and the northern highlands of Limpopo Province are suitable for crops such as tea, sugar and various varieties of tropical fruit. It is

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argued here, therefore, that irrigation would be a key factor in driving the revival of agriculture within the communal areas, as it has done in many other developing countries that have implemented green revolution strategies. Another glaring lacuna in the ANC’s Polokwane resolutions (ANC 2007b) on rural development and agrarian transformation is the absence of any reference to livestock production. Yet livestock is an important element of the socio-cultural and economic system of Africans and can become a significant source of income for many households within the communal areas. Obviously, since it requires significantly extensive tracts of land, livestock production at any scale does not appear to be a feasible option under the conditions of overcrowding and environmental degradation that are a common feature of the communal areas. Clearly, then, a serious programme of promoting livestock production among Africans would have to target land situated outside these areas. Having highlighted the above, the question then arises: should agrarian transformation be limited to subsistence, poverty eradication and the promotion of rural livelihoods, and should it be confined to the communal areas? The notion of promotion of sustainable rural livelihoods originated from the work of some Western liberal academics (and, strangely, mostly from Britain), who sought an effective response to the gap in social development left in the wake of the negative impact of the World Bankled structural adjustment programmes. Of particular concern to these academics was the fact that the discouragement of expenditure on social services had resulted in the deepening of poverty in many countries of sub-Saharan Africa. The early 1990s thus saw the emergence of a plethora of publications articulating and substantiating the sustainable livelihoods argument, most of which were based on research funded by international donor agencies such as the British Department for International Development, Oxfam and the European Union. An empirically grounded articulation of the livelihoods argument is provided by Ellis, who states that most rural households in Africa ‘depend on a diverse portfolio of activities and income sources amongst which crop and livestock production feature alongside many other contributions to family well-being’ (2000: 3). Rural dwellers thus diversify their coping and adaptation strategies, and therefore a central element of the argument is that agriculture should not be seen as the only area of focus in rural poverty eradication strategies (Ellis 2000; Ellis & Bahiigwa 2003; Ellis & Mdoe 2003). Tenure security, availability of land, access to finance and social capital are among the critical elements of sustainable livelihoods (Adams et al. 2000; Carney 1998; Cousins 2000). The sustainable livelihoods approach thus basically calls for assistance to be provided to the rural poor to enable them to utilise various means of survival. It is therefore essentially an anti-poverty, welfarist and survivalist approach, and is not a radical alternative that seeks to fundamentally alter the structural factors that perpetuate poverty and underdevelopment by fostering the creation of vibrant rural economies and markets. While the livelihoods perspective makes a useful contribution to the debate on how to eradicate rural poverty, it should therefore not be regarded as a substitute for sustainable agrarian transformation and rural development. Contrary to the sustainable rural livelihoods argument, the argument posited here is that the aim of rural development with land and agrarian transformation at its centre must ultimately be to transform the poor into a surplus-producing class of farmers, mostly smallholders, cultivating a variety of food, commercial and ‘niche’ crops and rearing livestock for the market. At another level, rural development should support the entrepreneurial efforts of other rural classes and strata to engage in a variety of economic activities from which they can derive significant financial rewards. The rural economy should thus also undergo an overarching process of transformation, aimed at ultimately eliminating the ‘labour reserves’ as pockets of poverty and ‘breaking the seams’ that divide them from the heartland

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of commercial agriculture and the national economy. Agrarian transformation must be the main driver of rural development and the development of manufacturing and service industries in the rural areas, including tourism, which is being implemented in isolation at present. It is inconceivable how these levels of development could be achieved by focusing on ‘existing producers’ in the communal areas. For agrarian transformation to be implemented in a meaningful manner and for it to attain its fundamental objectives within the South African conjuncture, it should be driven by land acquisition within the commercial farming districts, where the 19.4 hectares targeted for delivery by 2014 are situated. It is thus proposed that agrarian transformation should have four fundamental and incremental levels of impact at the individual household, regional and national levels, namely: • to create employment and provide suitable conditions for raising an adequate income; • moving from this platform to enable the beneficiaries to produce a surplus and make a profit; • to integrate the beneficiaries into the wider national economy as producers of goods and services, and as contributors to the national fiscus as taxpayers; and • to deepen and broaden the benefits of this development process through agrarian transformation, laying the foundation for the development of downstream industries in agro-processing, manufacturing, transportation, equipment maintenance, and more effective promotion of service industries such as tourism.
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These levels of impact correspond to decent employment, food and income self-sufficiency, prosperity and development, and not merely to subsistence. The broadening of the social and economic benefits to the general rural population, such as adequate healthcare, decent housing, education and recreational facilities, should take place simultaneously with the four developmental levels. In short, for rural development and agrarian transformation to have any meaningful impact, they must be underpinned by a set of clear economic drivers. A necessary starting point in this regard must be the precise calculation of the amounts of surplus and income that individual farmers could derive from particular sizes of land. The modelling of an employment creation, income-generating and surplus-producing environment for agrarian transformation should thus have the following features: targeting for acquisition of land situated in the commercial farming districts; determination of income per hectare on the basis of optimum land sizes and requirements for specific productive operations; determination of the required minimum hectarage on the basis of agro-ecological and land quality issues; determination of production costs as well as costs associated with transportation and related activities; mobilisation and progressive improvement of the quality of social capital, particularly labour; factoring in of a support model for credit, skills, inputs, information and local and international markets; mainstreaming of gender, youth and disability in the beneficiation model; and factoring in of environmental protection mechanisms. Scientific research is of crucial importance and should feature in both planning and implementation processes. All in all, agrarian transformation must make economic sense, and must create employment, foster food self-sufficiency, promote economic growth, address current social deficits, and generally raise standards of living for people living in rural areas. The case of Zimbabwe provides a good example that illustrates the success of well-supported smallholder producers who benefited from land redistribution. These smallholder producers, who were beneficiaries of what has been referred to as the ‘liberal market-based land reform strategy’ implemented between 1980 and 1985 in terms of the Lancaster House agreement, by 1986 numbered about 70 000 households (Moyo 2009: 55). They enjoyed relatively high levels of production, and in some instances even surpassed their established large commercial counterparts in terms of yields of grain per hectare. What is important about this experience is that these high levels of production

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occurred not within the communal areas, which are more or less similar to those in South Africa, but because these peasants were allocated amounts of land within the commercial farming areas that were larger than those to which they had access in the communal areas. Given the fact that the ANC’s new policy positions seek to empower a new group of smallholders, what, then, is the precise meaning of this concept in the South African context? First, a definition of ‘smallholder’ should be based on the minimum hectarage deemed adequate for meaningful and successful commercial agricultural production. This means that in the South African context a calculation should be made to determine this minimum amount, taking into account a range of factors, particularly agro-ecological and agronomic conditions. A preliminary exercise in this regard suggests a minimum of 60 hectares for the production of staple crops such as maize and 70 to 100 hectares for livestock production (based on livestock unit carrying capacity per hectare). The land sizes would be lower in well-watered or irrigated areas, and even smaller amounts of land in the region of 5–20 hectares would be required for less land-intensive operations or activities such as keeping piggeries, poultry farming, aquaculture and the production of ‘niche’ crops such as flowers, as well as a range of vegetable crops. It is proposed that, instead of the rather fuzzy and, as argued above, virtually unattainable target of redistributing 30 per cent of the agricultural land by 2014, which the ANC resolutions regurgitate, perhaps an approach that seeks to attain a critical mass of producers of around 300 000 could be a useful starting point. With regard to the question of selection of the beneficiaries, it is important to ensure that the people who are selected are those who demonstrate the potential to succeed as surplus-producing smallholders, which includes capacity for learning as well as interest in farming. It is important to emphasise that not everyone who lives in a rural area is a potential farmer; nor for that matter should anyone be forced to take up farming. Another critical area about which the ANC’s Polokwane resolutions are silent is the system of tenure under which the beneficiaries of agrarian transformation would hold their land. Tenure insecurity is a particularly serious and complex challenge in the communal areas; hence, in recognition of this fact the government promulgated the Communal Land Rights Act (No. 11 of 2004) with the express aim of strengthening the rights of landholders and democratising the administration of land matters within these territories. As a caution, one of the critical lessons that should be drawn from the challenges associated with the policy implemented since 1994 is that of allocating land reform beneficiaries freehold tenure. A particularly important lesson in this regard relates to the question of how to deal with producers who fail to reach the required levels of productivity for reasons of lack of commitment. It is therefore proposed that a long-term leasehold system should be explored as an alternative. Although the leases would constitute strong rights, which cannot be revoked arbitrarily, a long-term leasehold system would make it possible to cancel the leases of holders who continued to leave their land lying fallow or refused to comply with prescribed requirements. This is where the ‘use it or lose it’ notion would be relevant.46 Ownership of all the land involved in the agrarian transformation programme should therefore ultimately reside with the state, not only as this eliminates the need for the beneficiaries to buy the land, but also because the state would be placed in a position to re-allocate it in cases of genuine failure to perform. Over and above the quest for reversing the legacy of dispossession and underdevelopment of the vast majority of Africans, agrarian transformation should also be aimed at restructuring the country’s underperforming agricultural sector. To start with, persuasive evidence exists that demonstrates that the large-scale commercial farmers are nowhere near as productive as they are often touted to be. In
46 The ‘use it or lose it’ notion was attributed in the media in March 2009 to the former agriculture and land affairs minister, Lulu Xingwana, who admonished land reform beneficiaries whose projects had collapsed, blaming them for this state of affairs, and ignoring the fact that in many cases this collapse had occurred because of poor support from the government, including her own department.

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reality, 85 per cent of the contribution of the agricultural sector to GDP is accounted for by only 25 per cent of the white-owned commercial farms, which shows that the white-dominated agricultural sector is in fact highly distorted.47 Further, 30 per cent are deficit producers, many of whom do not use their land optimally and have debt burdens beyond the critical level. The remaining 45 per cent produce average yields, while at least 20 per cent of the land is unutilised. True, South Africa’s agricultural sector consistently produces surpluses, but these are well below what they could be were the agricultural sector more efficient. As part of the colonial and apartheid legacies, much of the sector has remained undercapitalised since the last century and it continues to cling to outdated production methods characterised by an over-reliance on cheap labour, which undermines its productivity and competitiveness. The colonially determined system of ownership is characterised by excessively large holdings, which are often not congruent with the scale and intensity of their utilisation. In other words, the system of landholding based on the consolidation and hoarding of the spoils of colonial conquest has produced an agricultural sector that is structurally and economically inefficient and performing below its optimal capacity; which is an important reason why it should be transformed into a more equitable and vibrant commercial agrarian sector, undergirded by agrarian transformation driven by a more widespread process of land redistribution.
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Pre-settlement support
Past experience with attempts at implementing post-settlement support activities indicates that this is perhaps the wrong way to approach the issue of providing support to beneficiaries of agrarian reform programmes. The reasons for this situation are several and complex, and include inadequate budget provision; extremely small time windows between the settlement of beneficiaries and commencement of productive activities; lack of timely and adequate deployment of extension officers; lack of support with credit, inputs, water and transportation; rather brief and therefore meaningless training; and lopsided mentoring partnerships, which have invariably benefited mostly the established farmers. These challenges place the beneficiaries at a disadvantage and hinder their ability to emerge as meaningful producers. As an alternative approach to post-settlement support, it is proposed that the supportive interventions should take place before, rather than after, beneficiaries are settled on their new farms. This pre-settlement support approach thus moves from the premise that land acquisition should proceed simultaneously with the identification of beneficiaries, with the actual process of resettlement of the beneficiaries being carried out after all the necessary supportive processes have been implemented. With regard to training, an approach based on pre-settlement support should ensure that it is systematic and in-depth, and covers all relevant subjects such as management of farming enterprises, working with different crops and livestock categories and breeds, practical production techniques, and labour relations. Training in this context should take no less than a continuous period of three months, and should then be followed by the deployment of extension officers, who would stay on site for at least one year after the new farmer had been resettled. A system of institutionalising follow-up and ongoing monitoring to track progress on each farm should also be put in place. As the resolutions correctly state, the role of agricultural colleges in spurring on the process of agrarian transformation is going to be critical and pivotal. Harnessing the agricultural colleges – which should not be restricted to their support through scientific research, but should also include the recruitment of unemployed graduates of these institutions – will add much value to efforts in agrarian transformation, an area in which the post-apartheid government has failed in the 15 years since 1994.
47 These figures have appeared in many publications, including the World Bank’s authoritative (but not uncontroversial) study of South Africa’s agricultural economy published in 1994 (World Bank/IBRD, Southern Africa Department 1994).

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Another critical area of support concerns the provision of affordable credit to the beneficiaries. The presettlement support approach is informed by overwhelming international and national evidence, which demonstrates that a system based on handouts is counter-productive because it removes the need for the beneficiaries to develop a sense of ownership and commitment and to take full responsibility for the consequences of their actions. In order to ensure fairness, considering the low base from which the beneficiaries would be moving, credit should be provided on favourable repayment terms, as a form of subsidisation. Additional subsidies for the new smallholders, especially in respect of costs on inputs, transportation and market access, will also be necessary to give impetus to their establishment in commercial agriculture.

Co-operatives
The emphasis placed in the Polokwane resolutions on co-operatives is significant in a number of ways. In this regard, the resolutions document states: Support the growth of rural market institutions including through the provision of infrastructure and by helping rural communities and small farmers to build organisations which help them to access markets, build links with formal sector value chains and co-ordinate their activities to realise economies of scale. Such organisations may include producer co-ops, small holder associations, input supply co-operatives, marketing co-ops and/or state regulated institutions designed to support and promote market access and collective action amongst small rural producers. Special attention will be given to the empowerment of women in co-operatives. (ANC 2007b: 27) There is a degree of consensus across all shades of opinion within the country about the positive role that co-operatives could play in enhancing production and spreading its socio-economic benefits equitably among participating households and the broader rural population. The positive steps undertaken by the government over the past five years towards creating the necessary enabling environment for the establishment, regulation and support of co-operatives should be seen in this context. As a direct outcome of the Presidential Growth and Development Summit held in July 2003, the responsibility for managing matters related to co-operatives was transferred in 2005 from the DoA to the Department of Trade and Industry, which administers these institutions in terms of the Co-operatives Act (No. 14 of 2005), and through a public entity known as the Small Enterprise Development Agency (DTI 2007). The government sees its role, which it describes as developmental rather than administrative, as primarily that of facilitator, and of ensuring that co-operatives are properly registered and are accessible to the poor, particularly women and youth. It has also emphasised its commitment to ensuring that co-operatives operate in accordance with the key principles of autonomy, independence and selfhelp (DTI 2007). Given its low starting point, South Africa could draw some useful lessons from the success of a number of African countries with co-operatives, mainly in East and West Africa. In Uganda, around 8 000 co-operatives, operating in the agriculture, transport, financial and consumer services sectors, have played a major positive role in transforming agricultural production in that country in the 15 years since 1994, by increasing the quantity and enhancing the quality of the production of food and ‘cash crops’. In an assessment of the success story of Uganda, Mwesigye (2008) highlights, inter alia, the following seven areas in which co-operatives have had a positive impact: • They enable their members to become active and meaningful participants in local and national economies, and they promote socio-economic development. • They help create employment and the development of human resources as they provide training opportunities for both non-skilled and skilled members.

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• They provide an organisational framework to deliver, cheaply, interventions aimed at assisting members to access services such as extension and input supply, and facilitate access to financial services. • They smooth income flow to members through bulk marketing and collective negotiation and collective investment in machinery, and also promote economies of scale. • They facilitate expansion of productive activity and diversification to agro-processing and other forms of value addition, and enable the producers to sell, in processed form, commodities previously sold in raw form very near to the farm gate, which in turn promotes entrepreneurship. • They ease pressure and over-dependency on the government with regard to provision of housing, healthcare and rural electrification. • They enhance family and social values, and promote peace and security within communities by lessening social tensions and discouraging deviant behaviour. In South Africa at present, agricultural co-operatives among Africans are at best struggling to survive; and more often than not such institutions are non-existent. This is explained by the fact that there is currently no real and significant commercial agricultural production on any scale among Africans. Therefore, the first major issue that needs to be explored in establishing viable co-operatives in South Africa is the need to ensure that co-operatives are linked dynamically to the implementation of rural development and agrarian transformation initiatives and programmes. For co-operatives to be transformed from an initiative into a vibrant co-operative movement located at the centre of developmental processes among the masses of those who are presently poor and marginalised, a dynamic relationship needs to be fostered between the developmental state and the producers. A major threat to the success of such a co-operative movement lies in co-operatives being contemplated within the context of interventions that are aimed at promoting subsistence, as against surplus-oriented productive activity. In other words, initiatives based on subsistence and co-operative organisation are a contradiction in terms, and thus pursuing the subsistence path will undermine the sustainability of the whole initiative of locating co-operatives at the centre of agrarian transformation. This is for the simple reason that co-operatives are, first and foremost, organisations that should exist for the purpose of providing opportunities for their members to maximise benefits that they derive from the markets of goods and services. Over and above its facilitative and supportive role, the state should therefore focus its interaction with the new co-operatives to create an environment conducive to their effective functioning, and assist them with credit, inputs and other forms of practical production, as well as providing marketing-related assistance.

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Institutional restructuring for effective delivery
As a positive recent development, the overarching authority that the ANC called for in its Polokwane resolutions (ANC 2007b) has been established as the Department of Rural Development and Land Reform. The need for a dedicated ministry and department that would focus on rural development and agrarian transformation cannot be overemphasised as, all things being equal, such a structure would enhance coordination, ensure more efficient resource allocation, and sharpen management focus on key deliverables. Most importantly, such a structure would ensure focused political leadership and championship of rural development and agrarian transformation. Given existing shortcomings in terms of capacity within the cluster of government departments with rural-related responsibilities, such as the Department of Rural Development and Land Reform, the Department of Agriculture, Forestry and Fisheries (formerly DoA), the DPW, the Department of Water and Environmental Affairs (formerly Water Affairs and Forestry) and the Department of Cooperative Governance and Traditional Affairs (formerly DPLG), it is important that the state allocates a significant amount of resources to training and capacity-building programmes that are relevant to the field of implementation. This will help improve

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efficiencies in programme and project delivery, through the development of capacity in key areas such as project management, agricultural economics, extension, rural finance and marketing systems. Capacity building should also be applied to the crucial level of extension officers and community development workers, as the grassroots-level cadres who would interface closely with the producers. As the ANC’s resolutions (ANC 2007b) correctly emphasise, another level of restructuring relates to strengthening local government institutions and harnessing specialised inputs that can be made by a range of players from within civil society. Given existing long-term capacity constraints within the locallevel bureaucracy, an important role could be played by strong and sustainable partnerships between local government institutions and a range of civil society formations. The work being done currently under the auspices of a partnership between the Mhlontlo Local Municipality and Walter Sisulu University (WSU) in the Eastern Cape Province around the design of an appropriate rural development model for this economically underdeveloped and depressed rural area is instructive in this regard.48 This partnership is also crucially aimed at assisting in the effort to build the capacity of local government by supporting the Mhlontlo Local Municipality in its efforts to ensure that development takes place within its overwhelmingly rural area, through the leveraging of research and related expertise in such fields as agricultural economics, agronomics and rural sociology (utilising the expertise based at the local Tsolo Institute of Rural Development and Agriculture, the Centre for Scientific and Industrial Research, and the Agricultural Research Council) that an academic institution like WSU could marshal and bring to bear positively on the partnership.49 Also of crucial importance to this partnership is the role of indigenous knowledge in the form of the views and practices of the communities on issues such as cropping cycles, choice of suitable crops, animal breeding techniques, and methods of fighting pests as well as plant and animal diseases.

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Conclusion
The trajectory and character of the implementation of rural development and agrarian transformation in South Africa over the five years from 2009–14 will provide the greatest litmus test to the Zuma-led government with regard to its stated intentions to move away from neo-liberalism and to implement an alternative, more redistributive approach under the aegis of an interventionist developmental state. The new government has definitely set itself a considerably high standard as it seeks to pursue a more aggressive approach to the delivery of much needed services to the majority of the country’s population. Its undertaking to become a ‘hands-on’ developmental state has fairly quickly been signalled by the introduction of new institutions such as the National Planning Commission and the Department of Monitoring and Evaluation, both of which are located in the Presidency. The establishment of the Department of Rural Development and Land Reform is another positive development in this regard, as it represents the first step towards concretising its expressed intention to tackle rural underdevelopment and landlessness more decisively. The severest test will be the extent to which the new government is able to act autonomously and mediate competing interests around agrarian issues effectively, while pushing through its redistributive programmes within the rural areas.

48 This partnership is based on the model followed by the Indian state of Punjab, where the various stakeholders, such as communities, government agencies, researchers, technical experts, project officials, co-operatives and banks, were mobilised, with an academic institution, the University of Punjab, being the central locus in a well-canvassed and co-operative structure. The result was an unprecedented increase in productivity, increases in the income levels of the participating households, and a generalised reduction of levels of poverty within the entire area in which the programme was implemented. 49 Another good example of incipient progress in this regard is the Nguni Cattle Project being implemented by the University of Fort Hare, through which beneficiary households are provided with a small number of Nguni heifers.

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As this chapter has shown, however, the incipient policy perspective on rural development and agrarian transformation is characterised by a number of positive pronouncements, but also a range of shortcomings, inconsistencies and lacunae, which are manifested at various levels. In particular, the notion that agrarian transformation is synonymous with subsistence production and promotion of sustainable rural livelihoods, with the focal point for its implementation being the communal areas, reveals a reductionist approach that eschews the recognition of land redistribution as the primary driver of agrarian transformation. As argued in this chapter, a basic imperative of agrarian transformation is that land redistribution efforts should focus upon the expropriation of a significant proportion of the large landowning class of white farmers, within whose ranks are elements that constitute an oligopoly of particularistic interests. Thus, another major challenge to the aspirant developmental state over the next five years relates to its ability or preparedness to face the reality that equitable land redistribution at an acceptable pace will be impossible under the present constitutional dispensation, which guarantees the rights to land originally acquired through the process of colonial dispossession and effectively protects the land from redistributive initiatives. While the option will always exist of continuing to tinker with laws and policies, within limited room for manoeuvre, such efforts are bound to falter and ultimately fail, because they can never be a sustainable substitute for an approach that confronts this fundamental contradiction. The removal of the property clause, the proverbial albatross around the South African government’s neck, is therefore a sine qua non for addressing the land question decisively. Evidence that demonstrates inefficiencies in the country’s existing large-scale agricultural sector should serve to amplify the need for a thoroughgoing restructuring of that sector, with the express aim of creating a broader-based class of surplus-producing and profit-making smallholders. This evidence, which shows that as much as 45 per cent of agricultural land in the country is either unutilised or underutilised, with many of the deficit producers mired in debt almost to the point of no return, also underlines the need to tap into this latent potential for agricultural production to be increased significantly. As a process that should link dynamically to other interventions aimed at rural development, agrarian transformation should serve as a spur to wider developmental processes in the form of downstream industries and the fostering of greater integration into the national economy of the producers and rural populations as a whole. Hopefully, the bitter lessons on poor delivery learned in the sphere of provision of support to the beneficiaries of agrarian transformation will inform a shift towards a proactive approach in this regard that would be characterised by better planning and more timely delivery of the much needed assistance. Additionally, while the emphasis that has been placed on the introduction of co-operatives as major vehicles for the promotion of socio-economic development among beneficiaries of agrarian transformation – and by extension the wider rural populations – is another positive development that should be welcomed, for it to be translated into concrete benefits it should be undergirded by leveraging of state support, linked to those programmes that lay emphasis on surplus rather than subsistence production. Otherwise, a contradictory and anomalous situation could arise where co-operatives are created within an environment where hardly any surplus production takes place. Finally, the process of stakeholder mobilisation, which is another critical feature of successful agrarian transformation, should be broad based, in the sense that it should not be confined to formal government structures but should also harness the inputs that can be made by a range of participants, such as academic institutions, while indigenous knowledge of communities should be tapped into. All in all, on the question of whether South Africa is about to witness a sustained and successful programme of rural development and agrarian transformation, the proverbial jury is still out.

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Mouzelis N (1986) Politics in the semi-periphery: Early parliamentarianism and late industrialisation in the Balkans and Latin America. London: Macmillan Moyo S (2009) The land and agrarian question in Zimbabwe. In S Buthelezi (Ed.) The land belongs to us: The land and agrarian question in South Africa. Alice: University of Fort Hare Press Mwesigye FE (2008) The role of co-operatives in development in East Africa: The case of Uganda. Paper presented at the 4th Annual Rural Development Conference, Walter Sisulu University, Mthatha (2–5 September) National Treasury, South Africa (2006) National Budget: 2006. Pretoria: National Treasury National Treasury, South Africa (2009) National Budget: 2009. Pretoria: National Treasury Naughton B (2007) The Chinese economy: Transition and growth. Cambridge, MA: MIT Press Poulantzas N (1973) Political power and social classes. London: New Left Books Poulantzas N (1975) Classes in contemporary capitalism. London: New Left Books Rueschemeyer D & Evans PB (1985) The state and economic transformation: Toward an analysis of the conditions underlying effective intervention. In P Evans, D Rueschemeyer & T Skocpol (Eds) Bringing the state back in. Cambridge: Cambridge University Press Ruggie JG (Ed.) (1983) The antimonies of interdependence: National welfare and the international division of labour. New York: Columbia University Press Sihlongonyane M (2005) Land occupations in South Africa. In S Moyo & P Yeros (Eds) Reclaiming the land: The resurgence of rural movements in Africa, Asia and Latin America. London: Zed Books Skocpol T (1979) States and social revolutions. New York: Cambridge University Press Free download from www.hsrcpress.ac.za Turok B (2007) The developmental state and monopoly power. Umrabulo 30. Accessed August 2009, www.anc.org.za/show.ancdocs/pubs/umrabulo UNDP (United Nations Development Programme) (2008) South Africa: Human development report, 2008. Cape Town: Oxford University Press Wade R (1985) State intervention in outward-looking development: Neo-classical theory and Taiwanese practice. In G White & R Wade (Eds) Developmental states in East Asia. IDS Research Report No. 16, Brighton Woo-Cummings M (1999) Chalmers Johnson and the politics of nationalism and development. In M WooCummings (Ed.) The developmental state. Ithaca, NY: Cornell University Press World Bank/IBRD, Southern Africa Department (1994) South African agriculture: Structure, performance and options for the future. Washington: World Bank

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Chapter 4

Public service delivery issues in question
Modimowabarwa H Kanyane

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South Africa is an emerging democracy, born out of the political struggle for freedom against the apartheid regime, which exploited African resources – human and natural – for many decades, while denying black people their rights. Steyn-Kotze (2009) argues that the struggle for freedom sought to bring about revolutionary and far-reaching changes to the South African political environment – to effectively restructure the political landscape. This objective of course was achieved in 1994, with the founding election that ushered in a democratic system of government. Like any African government after independence, South Africa was not immune to corruption. And, I argue, corruption has disoriented the ambitions of the democratic government to reconstruct and develop the country for a better life for all. Instead of being able to focus on delivering quality services to people on the ground, the government has had to spend time combating corruption – through creating a new democratic organisational ethos, and establishing a new work ethic and a shared vision in all spheres of government. Kanyane (2004) argues that since 1994, while there has been transformation, this has also created opportunities for corruption and other social ills, which deprive the South African people of their rightful basic public services and benefits. The Zuma administration, it is argued, needs to aggressively address the issue of corruption; in fact, it should go further than that by making public service delivery meaningful and impactful. The emphasis should no longer be solely on tangible but also on intangible public service delivery in the form of a more humanised and humanising public service (as discussed later in this chapter). That said, it is evident that despite the achievements of the first decade and a half of democratic government in South Africa, led by four presidents (Nelson Mandela, Thabo Mbeki, Kgalema Motlanthe and now Jacob Zuma), there remain many politico-administrative challenges. In this fourth term of democracy, the fundamental question to be posed and addressed is how best the new government, sworn in after the April 2009 national elections, could transform and turn around public service delivery into real tangible and intangible outcomes. In order words, will levels of service delivery – for example, housing, social grants or health – improve the lives of the people, contributing to building dignity and mutual respect, or will service delivery continue to effectively undermine human dignity and the capacity to live decent lives? What matters more than the quantum leap required in terms of quantity of service delivery is its quality imperatives; how the service is delivered is of major concern. The protests, strikes and riots within the first 100 days of Zuma’s leadership showcased the impatience of the citizenry and this impatience, in turn, continues to frustrate the efforts of the new government to act responsibly.

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South Africa, as a developing country, needs a public administration that is strong and committed to the execution of its responsibilities; one that is people focused, has the necessary array of skills and expertise pulled together, and is always prepared to accept the dynamic challenges and opportunities posed by the deepening democracy. It is also imperative that for public administration to achieve the objectives set, it be transparent, honest, flexible, collaborative, innovative, creative and – crucially – willing to work in partnership with business and social partners alike. As things currently stand, by contrast, the framework of public administration is for the most part highly politically motivated and skewed; as a result, the future of the experts in the public service lies in the hands of the political powers that be. This is highly problematic. This chapter takes as its point of departure a general discussion of public service delivery, including its theoretical underpinnings, and concludes with the shared service delivery model. The chapter highlights the public service delivery challenges of the previous post-apartheid regimes – challenges that show up serious weaknesses in public service delivery as things stand, which thus have the potential to undermine and frustrate the Zuma administration if not prioritised and addressed without further delay.

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What public service delivery could be if underpinned by a social agenda
The concept of public service delivery is associated with the discipline of political science and, more specifically, its public administration component. Classical and contemporary scholars assert that public administration is an offshoot of political science as a discipline and phenomenon and is as old as humankind itself. The Karl Marxian and Max Weberian schools of thought argue that human beings would cease to exist if the basic public services – such as food, water and sanitation – were not available to them. This is clearly articulated in Weber’s hierarchy of needs (Sexton 2008). Importantly, public service delivery is of late underpinned by public administration theory and the contemporary public management school of thought, commonly referred to as new public management. The recipients or beneficiaries of public service delivery, in the context of the discipline of public administration, are usually termed clientele or citizenry, while the concept of ‘customers’ is associated with the new public management domain; the term ‘new public management’ appeared in the early 1990s and includes very strongly the idea of providing service to customers (Kemoni & Ngulube 2008). Whether one emphasises a public administration or a new public management approach, the fact is that the White Paper on Transforming Public Service Delivery (DPSA 1997) and the Municipal Systems Act (No. 32 of 2000) both devote chapters to issues of public service delivery. The concept of public service delivery embraces programmes and activities in relation to powers and functions that spheres of government are to perform. Public service delivery is concerned with the provision of services by government and public entities. This includes both physical infrastructure and social initiatives that will enable communities to improve their standard of living, to build sustainable livelihoods and even to prosper. Fox and Meyer (1996) define public service delivery as the provision of public activities, benefits or satisfactions; the range of public services provided relates both to public goods, which are ‘tangible’, and to services, which are ‘intangible’. The bone of contention for this chapter is that government in the past decade and a half focused too heavily on physical infrastructure of public service delivery – i.e. tangible aspects of public service delivery, such as Reconstruction and Development Programme houses, water and electricity, while overlooking the more intangible but equally vital impact of public service delivery – the social aspects such as building and sustaining quality of life, and restoration of human dignity and respect in

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delivering such services. For this reason, it seems clear that the present administration should focus seriously on both the tangible/physical and intangible developmental impact of public service delivery. I argue that public service delivery will continue to perpetuate dependency syndrome in the minds and lives of recipients or customers unless emphasis is placed equally on tangibility and intangibility. The Department of Human Settlement bodes well in this regard: the department was previously the Department of Housing but under the Zuma administration, to establish its relevance to both tangible and intangible aspects of delivering this public service, it has been renamed. This communicates a clear understanding that human settlement is not only about the quantity of houses delivered, but also about the quality of the service, encapsulating a range of socio-psychological, anthropological and economic factors for total emancipation, through affirming human dignity and strengthening mutual respect. In short, there is a new and stronger emphasis on the intangible aspects of public service delivery – a more humanised and humanising public service than before. Public services must be delivered where the communities need them most, and delivery must be underpinned by a social agenda. Public institutions, in short, need to be transformed to deliver public services within the framework of a loftier vision: of restoring human dignity and ultimately promoting emancipation of the human mind and soul. Liebenberg and Stewart (1997) propound that development, in pursuit of such a social agenda, should be participatory, empowering and sustainable. Further, ‘development intervention should therefore be the scientific knowledge of the external change agents with the unique blend of internal social knowledge, or people’s knowledge, in order to deepen people’s understanding of their situation’ (Liebenberg & Stewart 1997: 125). Swanepoel and De Beer (1996) also argue strongly for development that is humanistic. Their argument is based on the assumption that there can be no concrete development and delivery if the society’s happiness and human dignity are not also fulfilled. It is for this reason that Max-Neef (in Matshabaphala 2007) argues that people need to have a sense of identity and belonging and also a sense of being respected. In this concept of development, it is asserted that development is a process of enhancing people’s quality of life through needs satisfaction and structural transformation. Applied to the South African context, this would mean, for example, that there is no use in building houses for communities if those communities are still not happy to live in those houses. By the same token, people will not be fulfilled if they have their community electrified, but still draw unsanitary water from ponds and rivers, thus exposing them to health hazards. In such an anomalous situation, one could argue that public service delivery was not yet integrated and realigned to Batho Pele principles; as a result, one could further argue that the latter turned out to be simply buzzwords. Batho Pele is a Sotho phrase literally translated to mean ‘people first’; the concept is manifested in key policy and legal documents, including the Constitution of the Republic of South Africa (1996) and the White Paper on Transforming Public Service Delivery (DPSA 1997), among others. There are eight Batho Pele principles, which were devised to guide the implementation of public service delivery, and these are: consultation; setting service standards; increasing access; ensuring courtesy; providing information; openness and transparency; redress; and value for money (DPSA n.d.). However, it is argued that the Batho Pele principles are for the most part only locally enforced, if at all, and as such do not assist in ensuring public service delivery that is humanising and developmental, as is the intention. Chaudhury and Devarajan (2006) confirm that the same situation is prevalent in Asian countries; for example, the health minister is concerned with building clinics, yet there is no system in place to allow the minister to monitor whether or not a doctor is present in clinics that are rural and far-flung – and the doctor in question gets paid, whether turning up for work or not. That is to say, the focus once again is erroneously on quantity of schools or clinics built, while overlooking the intangible

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public services such as the quality of education and health provision, which is what makes public service delivery both effective and humanising. Critical to such an approach is the clustering of public services with a wide range of public services rendered by other agencies and government departments. The introduction and establishment of multi-purpose community centres (MPCCs) and call centres throughout the country forms a strong basis for a shared service model to thrive. The shared service model would certainly seem the correct approach to pursue but, as discussed later in this chapter, it needs to be strengthened and sustained by the Zuma administration. Another aspect of the service delivery challenge is that municipalities need to make communities aware of contradictions in their lives; that is to say, part of the Zuma administration’s social agenda should be the transformation of people’s consciousness, leading to a process of collectivism. The impact of public service delivery should enhance the quality of lives of communities by increasing their social and economic opportunities, thereby improving lives and livelihoods, and this should all be oriented towards human consciousness raising. Reddy (1999) argues that the Namibian central government empowers people to be co-owners of the state, co-decision-makers and executors of the state will. This Namibian perspective suggests that South Africa should put more effort into fostering community participation in terms of harnessing drive and goodwill. Compared to the Namibian system of governance, it could be said, in South Africa more is said than done; and if done, community participation often turns out to be compliance driven rather than ingenuity focused. This compliance-driven approach is experienced particularly during the Integrated Development Planning (IDP) process as required by local government legislation. In most municipalities, ‘community participation’ in drafting, implementing and evaluating the IDP process turns out to be mere lip service to legislative requirements. According to Valeta and Walton (2008), the general perception is that consultation and participation exist. After all, there are public participation platforms: the IDP Representative Forum meetings, community IDP hearings, imbizos and ward committees, to name but a few. However, general observations indicate that the consultation process is often followed more for the sake of compliance than for its intended purpose, hence poor planning and results. Another example is the Bus Rapid Transit (BRT) system, now known as the Rea Vaya BRT system, which caused a widespread public furore from the very point of initial roll-out. In this situation, it seems that the stakeholders in the form of the taxi associations had not been fully active participants in decision-making, and if they were they were not reporting back to their constituencies; the result was communication fallout, which resulted in pandemonium and violence during the launch of the BRT system. Towards achieving genuine community participation, the following questions would be invaluable to ask of public service delivery in general and specific initiatives in particular: • Are communities involved in the complete policy and project cycle, or only in part of it? • Are officials and political principals engaging the community in question? If not, how do they know community needs? • Are policy prescripts and proposed project designs fed back to the community for endorsement before being implemented? • Are communities in a position to contribute their opinions and inputs without fear of intimidation, and will their inputs be taken seriously? These are the fundamental questions that need to be asked and answered; if they are not, it is suggested that this would be a recipe for disaster, in the form of a recurrence of the kind of impromptu fireworks – protests, strikes and riots – that were evident countrywide during the early days of the Zuma administration.

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A governance framework
It should be borne in mind that public service delivery is provided satisfactorily if the governance system in place is responsive to the needs of the people. Quality public service delivery will be achieved provided that technical governance mechanisms, such as accountability, administrative capacity and internal operations, are well structured and in place to meet the challenges. Accountability, effectiveness, responsibility and efficiency are regarded as the cornerstones of the promotion of public service delivery. According to Kuye and Mafunisa, internal accountability is a process that holds public officials ‘answerable to their line supervisors for their own actions and the actions of their subordinates’, while ‘external accountability, by implication, holds public officials answerable to the public as well’ (2003: 26). For a high standard of public service delivery to be achieved and sustained, public officials are required to display honesty, transparency and both internal accountability (i.e. within their respective institutions) and external accountability (i.e. with regard to the general public). Although public officials are indeed directly accountable to their executive authority and administrative authorities for their actions and activities, it is incumbent upon them to ensure that they are also accountable to the consumers of the public services that they render; this is even more the case with regard to those consumers in the poorest and most peripheral parts of this country.
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It becomes apparent then that governance in South Africa is the primary issue in public administration, and that levels of governance leave much to be desired. Paul Appleby, a leading thinker in public administration, calls for institutional arrangements in government that will ensure what, in modern terms, are referred to as high levels of corporate governance. Governance, according to Appleby, should provide the most effective safeguard for demonstrating and ensuring ethical administrative behaviour in response to public service delivery (in Stillman 1960). Kemoni and Ngulube (2008) assert that to be an effective instrument of development, the public service needs to be guided by certain principles and values, including accountability, honesty, impartiality, service quality, professionalism and motivation. Laking et al. (in Kanyane 2008) emphasise that focus on the following principles will ensure clean and strong governance structures: legitimisation and the rule of law; public accountability; openness, information and transparency; citizen participation; and checks and balances. Certainly, the Constitution enshrines these principles and values, but the challenge is to make sure that they are well implemented in all spheres of government and administration. After all, if these principles were well implemented, politicians and public officials would not be involved in so many scandals of fraud and corruption. For where there are numerous cases of fraud and corruption, this would suggest rather that governance in the entire public service is weak. The Constitution provides for the promotion and maintenance of a high standard of professional ethics in the public service. Public resources are vulnerable to abuse by unscrupulous elements, both inside and outside the government, and require careful monitoring and control. Addressing this problem requires a well-developed ethical culture. According to Chapman (1995), this point was aptly made in the UK House of Commons’ ethics debate: that those in public life should be guided by certain standards which, when considered together, put the public good before private advantage. It was argued that it is not always as easy to do this as it might first appear. Therefore, argues Chapman (1995), the ability to exercise judgement when making difficult decisions is an important quality to be sought in every politician in government and in all public officials. Further, it is important to use all possible means available to develop awareness and to improve judgement. The assumption is that consistently paying attention to issues of ethics and judgement will cause the quality of public service delivery to improve over time. To achieve this, government requires governance that is developmental

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in nature. Thus, there is the need to try to find a balance between mechanistic and organic structures; governance should be able to take control of the organisation’s systems and at the same time be adaptable to the environment in a way that strengthens the capacity to achieve goals (FitzGerald et al. 1995). There are critical challenges that suggest that a new approach is needed to modernise public service delivery. The contemporary and globalised world is hugely influenced by the rapid development of information technology, which has created a digital divide. Somewhat ironically, perhaps, technology itself can serve as an effective tool for closing this digital divide; further, it can increase productivity and, in many cases, assist in applying new solutions for re-engineering government to respond with efficient and effective public service delivery. It is for this reason that Fourie and De Jager (2005) are concerned that there has not been widespread acceptance of the fact that existing public service delivery mechanisms and methodologies need to be modernised to take fuller advantage of technological innovations and best practices in today’s world. The digitisation of service delivery systems, such as banking systems, internet services, and TV, among others, should be set up without delay, and this includes in rural communities. These initiatives will of course need to be subsidised to ensure that such services are equally enjoyed by all members of society, irrespective of location.

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An ethical leadership approach to public service delivery
Is the Zuma administration capable of combating and preventing fraud and corruption? The effect of fraud and corruption is to eat away at the tax collected from the public, in the process eating away at the moral fabric of society. In turn, corrupt practices result in non-delivery of essential public services, thus denying communities their right to a better life. Apart from anything else, emphasising an ethical public service is a more responsible use of public funds than conducting corruption investigations and lengthy and costly legal processes, such as those that cost the government huge sums of money during the Mbeki administration. According to Wessels and Pauw (1999), public officials without personal morality and the necessary sense of public duty will either themselves be prone to abusing their positions or will fall prey to being abused by corrupt elements. Either way, however, the corruptor and the corrupted must be viewed in an equally serious light and brought to book. Within the context of the public service, leaders and managers need to possess high standards of ethics and professionalism, two convergent qualities that could be considered non-negotiable requirements in any politician or public official. Kuye and Mafunisa (2003) suggest that leaders today are confronted with many challenges, and a need exists to develop new cohorts of leadership skills altogether; technical skills are insufficient and need to be blended with leadership ethics and professionalism. Leaders are required to be strategic, to lead beyond boundaries and, more importantly, to keep sight of the vision ahead while still achieving practical implementation. Robson (in Wessels & Pauw 1999) goes so far as to suggest that a good leader – be they a political leader or a public administrator – must accept that ethical considerations lie at the very heart of the practice of public administration, and that success as a politician in government and as a public administrator will in great measure be determined by how and how fully consistently one responds to the ethical imperatives inherent in the clarion call of duty and occupation. Otherwise, as Mayson (2004)50 warns, the new generation is discouraged from pursuing a political career lest they might later, once they have become leaders, be trapped and embroiled in controversies, as the current situation seems to predict for political leaders. The imperative to lead by example is needed
50 From a televised debate between Cedric Mayson and students from the University of the Witwatersrand, on SABC 2 (7 June 2004).

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now and not tomorrow. Tait (1997) argues that people learn to hold and to live values not by reading a handbook of rules but by seeing how others conduct their lives, and also which behaviours are rewarded or punished. In order words, the law and values should not conflict, but should complement each other to exemplify acceptable behaviours. I argue that, unlike in Canada, the bureaucratic system in South Africa is too stringent and legalistic. It seems clear, after all, that in South Africa the legal solution is not enough to eliminate fraud and corruption, as the perpetrators often seem to get off on legal technicalities. The Canadian system, by contrast, is principle driven. The purpose of this type of framework is to enhance and instil public confidence in the integrity of politicians in government and public officials and in the decision-making process. The suggestion being made is that there is a need to integrate the legal imperative with a good sense of ethics, underpinned by sound values and a sense of patriotism. Fraud and corruption are ethical pathologies, and we cannot always succeed in using legal instruments to solve ethical problems. Rather, we should use ethical instruments to address ethical problems. In fact, the blend of the two, legal and ethical instruments, will go a long way, it is suggested, towards strengthening ethical leadership in response to the need for effective and efficient public service delivery on the part of the Zuma administration. To sum up, leaders and managers must lead and manage by example. Their conduct and attitude must be beyond reproach and above suspicion of selfishness in their service to the public. Everyone in government must pass this test, to champion public service delivery. The public interest must supersede the private interest if the government is serious about turning service delivery around for the good of the public.

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Politico-administrative reforms
There are two types of reform to be taken into consideration with regard to good governance and public service delivery: political reforms and administrative reforms. Politics and administration are important interfaces in all spheres of government with regard to delivering reliable and quality services to the people. At the same time, politics and administration are elusive and have the potential to implode or explode if they are not handled circumspectly.

Political reforms
Kuye and Ile (2008) contextualise and capture the essence of the governance challenge associated with political reforms as follows: South Africa was a country torn apart by racial divisions as a result of the Apartheid system of government that promoted the interests of a few at the expense of the majority of its people. With the first democratic government being formed after the 1994 elections and with the establishment of a democratic system of government through a peaceful process, transitional mechanisms were put in place through the drafting of the South African constitution that enabled a truly democratic government. The constitution has been hailed as a masterpiece and seeks to enable the achievement of governmental developmental goals. The challenge, therefore, of building democracy in South Africa fifteen years after independence still includes how best to manage institutional processes and interactions within [the] governmental framework in a manner that promotes the delivery of quality public service for millions of South Africans that were previously not serviced. (Kuye & Ile 2008: 126) On 22 April 2009 South Africa embarked on its fourth democratic elections, which again were successful. The African National Congress (ANC) has remained the ruling party, overwhelmingly winning the

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elections without interruption for the past 15 years (1994–99, 1999–2004, 2004–09 and now 2009–14). By the same token, the government after each election was led by an ANC president: Mandela, Mbeki (two terms), Motlanthe (relieving the resigned/recalled Thabo Mbeki), and now Zuma. Presumably, given the nature and dynamics of politics in South Africa, one-party dominance has strengthened and deepened democracy since 1994. The fact of one-party dominance for the past 15 years has meant the power to drive government and to implement the party policies consistently. This is analogous to the Indian Congress dominance in India after independence, which was in fact seen as a source of stability. India and South Africa also share similar challenges with regard to inequality and widespread poverty. In contrast, though, as in Zimbabwe, persistent one-party dominance could also be seen as hampering democratic consolidation and could lead to political intolerance and weak government performance. This view would argue for the value of a negotiated and inclusive government. With time, it could be said, one-party dominance in South Africa is in danger of developing into a political time bomb. The pre-election period (prior to the Zuma administration) could be cited as a case in point: it was a very volatile time, with divisions and conflicts within the ruling party culminating in the resignation/recalling of President Mbeki and the formation of a new party, the Congress of the People (Steyn-Kotze 2009). It seems clear that there is a need for multiparty democracy to trickle down and gel in South Africa, but the political landscape will still need to be reformed to accommodate the maturing of democracy from one party-dominance to a multiparty approach. This will be critical in order to create a strong opposition that could ensure regime change, rigorous democracy and the need for alternative policies to ensure effective service delivery. It is suggested that the reforms should include revisiting the electoral process and also integrating national and local elections to take place together in order to restore harmony and political stability with a view to ensuring sustainable service delivery. Sangweni (2003) argues that the South African public service has effected reforms to improve performance and service delivery. The need to improve was underpinned by the government’s acceptance of the challenge that access to and delivery of decent public services were no longer privileges to be enjoyed by the few, but rather the rightful expectation of all the people, especially those previously disadvantaged. On this basis, South Africa entered what could be termed an epoch of policy development, undergoing rigorous policy shifts and an intensive policy development process (largely from 1993–2000). Through this process the citizens of the country were included in policy formulation. The process culminated in a plethora of policy prescripts such as Acts of law, proclamations, white papers and by-laws. At the same time, many concerned stakeholders, such as organised local government and CBOs, felt that there was public service policy overload and too little actual delivery. It could be argued, though, that these stakeholders were too hasty in their criticism, expecting a young democracy to both reform and yield results at the same time. After all, it could be pointed out that it takes time to translate public policy into tangible technical results, for a number of reasons, including the challenge of mismatch between policy development and resource capacity. Yet it could also be said that the government paid mere lip service to service delivery and more attention to administrative reforms at this time. The second term of democratic government (1999–2004) was, not surprisingly, under pressure to shift from policy development to policy implementation. With this in mind, public administration at national and provincial levels of government reformed at the same pace, and the local government sphere was formed. Between 1998 and 2003, a fully fledged local government was formed, completing the envisaged three spheres or levels of government (national, provincial and local). It could be argued that local government was ushered in at the right time to assume its well-defined responsibilities; others

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might argue to the contrary, though, that transformation and policy development at national and provincial government levels overtook local government. It certainly could be argued that the policy development process is very critical, and that if local government could have participated in this process from the beginning, during the ushering in of democracy in 1994, it would most likely have owned the reformation process and spearheaded and helped speed up the policy development of the ruling party. As already indicated, the period 1998–2003 saw the introduction of pieces of legislation for local government. For example, the White Paper on Local Government (Department of Provincial Affairs and Constitutional Development 1998) contains measures for the transformation of local government to ensure that everyone at least has access to minimum basic public services such as water, electricity and housing, among others. Reddy (1999) argues that the White Paper was used to spell out a vision for a local government system that would move beyond the transitional phase to focus on transformation for effective public service delivery. As might be evident from the above account of political reforms, the ANC-led government during previous terms of office was challenged by attempting to introduce many changes at the same time. For example, in the first term (1994–99), the government was mainly involved in politico-administrative reforms, side by side with policy development. From 1998 onwards, local government underwent policy shifts and reform while public service delivery was still at stake. These multiple activities on the same stage could be said to account for the slow pace of public service delivery. In the current era (2009–13) and even beyond, the newly elected fourth government, it is suggested, should focus solely on restoring human dignity and public trust in government through public service delivery. In other words, public service delivery should not be an end in itself but rather a means to an end: the end being upholding and strengthening human dignity. From the advent of the new democratic dispensation in 1994, it could be said that national government did not pay enough attention to capacitating local government, especially rural municipalities, but rather rewarded political activists with technical appointments. It seems that local government is now paying a heavy price, called upon to account for poor service delivery as a result of political appointments.

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Accountability and administration
As already highlighted, Kemoni and Ngulube (2008) assert that to be an effective instrument of development, the public service needs to be guided by the principles and values of accountability, honesty, impartiality, service quality and professionalism. Laking et al. (in Kanyane 2008) suggest that achieving clean and strong governance structures requires legitimisation and the rule of law, public accountability, openness, information and transparency, citizen participation and checks and balances. Further, these principles are enshrined in the Constitution. The challenge, of course, lies in making sure that such principles are manifested in all spheres of government and in all administrations. If they were, though, surely we would not find politicians and public officials involved in fraud and corruption scandals? For, as noted, where there are numerous cases of fraud and corruption, inevitably the impression created is that governance in the entire public service is compromised.51 It can be argued that service delivery failures arise out of a fundamental problem of avoiding taking tough decisions, and can come down to a simple chain of accountability. According to Chaudhury and Devarajan:

51 One well-known case was the arms deal corruption allegations levelled against Jacob Zuma, where charges were subsequently dropped. The way in which the case was handled called into question the integrity of both the judicial system and Zuma himself.

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When the service is the responsibility of the government, the accountability between the client and the provider is an indirect one, mediated by the state. The client as citizenry influences policy-makers or politicians, usually through the ballot box. Since the policy-maker is not the one providing the service, he or she in turn has to influence the service provider in order for the service to be done. (2006: 81) The accountability chain in South Africa needs to be strengthened to safeguard service delivery standards, for the country cannot afford to fail at service delivery due to politicians who do not have the interests of the electorate at heart. In this regard, Chaudhury and Devarajan’s perspective on the politics of service delivery is instructive: Why is it that, even in democracies where poor people are a majority, politicians still fail them? The answer lies in the electoral process, the way in which the citizenry holds politicians accountable. In principle, if the majority of the public are receiving poor quality public services, they should vote the incumbent politicians out. In practice, there are so many imperfections in the electoral system that some politicians who consistently provide poor public services continue to get re-elected. Two of the more common imperfections are that voters are not fully informed, and that they may vote along caste or ethnic rather than service-quality lines. Voters may not be fully informed in the sense that they are not able to attribute poor-quality public service delivery to the performance of a particular politician. Politicians exploit this fact by taking credit for the things that voters do attribute to them, and neglecting those that voters do not. So politicians open new school buildings and health clinics to much fanfare, but pay no attention to whether the teacher or doctor is present or whether the clinic has medicines. Worse still, some politicians offer no show jobs to teachers and doctors in return for canvassing during election time. The net result is low-quality public services, with the incumbent politician re-elected. (2006: 91) Another source of challenge is that politicians are positioned in government to serve the public by their political parties based on the number of seats they have won during elections, rather than being positioned directly by the electorate. So it is difficult directly to hold any particular politician accountable. While such a politician accounts to the public, it is the ruling party that determines their fate. A multi-party system – as opposed to the current situation of one-party dominance – could help to resolve this problem. Perhaps, too, a change in the electoral system could tighten up the accountability mechanism; in this regard, a review of the electoral process would seem necessary.

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Public service delivery challenges and possible solutions
This chapter has discussed both political and administrative challenges of public service delivery, and has highlighted the importance – for delivery of quality service – of accountability, administrative capacity and well-structured internal operations, as well as a culture of internal and external accountability among public servants. It has also emphasised the value of leaders and managers with high levels of personal and professional ethics. The focus in this section is on the challenge presented to the Zuma administration by ongoing poverty and unemployment. Despite attempts to accelerate public service delivery, especially in basic public services such as water, electricity and housing, rural communities in particular continue to be afflicted by poverty and unemployment. Public service delivery is incongruent with the pace of development needed. In other words, while there is public service delivery, at the same time poverty and unemployment are at work

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to reverse any gains achieved during the administrations of Mandela, Mbeki and Motlanthe – and now challenge the Zuma administration. The fundamental question in this regard is: why? Certainly, the global financial crisis to a large extent worsened the situation on the ground, as those at grassroots level were hardest hit (hence widespread uprisings around South Africa calling for wage increases). Further, despite its relative wealth and a developed modern economy, South Africa remains plagued by high levels of inequality. In fact, South Africa remains one of the most socially unequal countries in the world. It seems that over the last 15 years of democracy, economic growth has nevertheless been associated with growing poverty and increasing exclusion of the poor from the mainstream market economy (Hologram 2003). The poor still do not have access to the capital necessary for socio-economic gains. Instead, capital flows easily and accessibly among those who already have resources, remaining trapped among the rich. The gap between rich and poor is not diminishing but rather increasing, and this is cause for concern. The polarisation between rich and poor is a sign of the two worlds in South Africa: the first and the second economies. The gap between rich and poor also tends to polarise opinion between capitalist and socialist, between neo-liberal approaches and those on the Left. Such divides represent a threat to public service delivery and a recipe for deepening poverty. In this regard, Hologram expatiates that: Since 1994, [the] South African government has been ceaselessly striving to address the injustices of the past and to meet the basic needs of all South Africans. Rhetorically, most of its efforts were focused on reducing the physical infrastructure backlogs and establishing a social security system and other safety nets such as co-operatives as part of the idea of a caring society. It also tried to implement poverty alleviation measures directly in a way that did not place too great a burden on the national fiscus while ensuring that the economy was following a growth path. Despite such efforts, and a number of achievements, the formulation of an adequate strategy to reduce poverty remains one of the biggest challenges, especially in the context of slow economic growth and low employment. (2003: 156) This chapter now turns to suggesting possible solutions to the challenges faced by the Zuma administration. The Constitution requires local government on the one hand to be ‘developmental’, whereas on the other hand it also provides that public administration must be development oriented. This seemingly simple assertion has far-reaching implications for the organisation and operation of government structures in all its spheres. According to the Development Bank of Southern Africa, government in South Africa has developmental duties, i.e. a responsibility to structure and manage administration, budgeting and planning processes, to give priority to the basic needs of communities, and to promote their socio-economic development (DBSA 2000). Understanding and grappling with the concepts of a developmental orientation towards public administration, the developmental state or ‘developmental local government’ is not easy. Different individuals and groups in support of varying objectives have used these phrases in different ways. The notions of a developmental state and a developmental orientation on the part of public administration are discussed in Chapters 3 and 6 respectively (this volume) and are not therefore dealt with in more detail in this chapter. Instead, the focus here is on the idea of a developmental local government, which is being considered as a vision for the future form of local government in South Africa; the vision points to a system of democratic local government in which the needs of all, but especially those of poor and vulnerable communities, are met by efficient and effective municipalities (DBSA 2000). The White Paper on Local Government (Department of Provincial Affairs and Constitutional Development 1998) defines developmental local government as local government committed to working with citizens and groups within the community to find sustainable ways to meet their social,

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economic and material needs, and eventually improve their quality of life. The implication of this is that local government, particularly municipalities, should co-operate with community stakeholders to further democracy and participation in issues of local concern, so as to ensure that the community’s needs are addressed and effectively met (Ceasar & Theron 1999). The creation of developmental local government in South Africa requires the restructuring of municipal councils, institutional reforms, changes in leadership, a strong focus on poverty alleviation, economic growth, and management of development in an integrated and sustainable manner. It also requires the entrenched gap between the rich and the poor to be addressed. The clearest manifestation of local government’s problems is provided by the financial vulnerability exhibited by numerous municipalities. Approximately two-thirds of all municipalities are highly stressed, with one-third financially non-viable (Bernstein 1998: 298). This assessment is confirmed by Project Consolidate, the national barometer for municipal financial viability (Pycroft 1999). Some municipalities have inadequate financial management capacity, the result being that budgeting, accounting, credit control and financial reporting systems are weak and have loopholes, which continues to deplete the revenue base of the municipality in question. The budgeting process is often not properly linked to municipal IDP and service delivery improvement plans, and is not always open to community participation. In some cases revenue is overstated or understated, resulting in unrealistic budgets, as highlighted in the White Paper on Local Government (Department of Provincial Affairs and Constitutional Development 1998). In the local sphere of government, it is suggested that the Zuma administration pay attention to the implementation of the new Local Government Municipal Finance Management Act (No. 56 of 2003) – commonly known by its acronym MFMA – to help create financially viable municipalities, ensure efficient and effective financial management practices, and appropriate capacity building in areas such as budgeting, financial reporting and credit control. This is a daunting task on the part of municipalities, yet it is achievable; it is surely a matter of holding to the rule of law, introducing checks and balances, and recruiting the necessary expertise. It is a pity that this piece of legislation was passed only relatively recently; had it been passed in tandem with the Public Finance Management Act (PFMA) in 1999, it would have had a major impact on financial governance and accountability frameworks. However, all is not lost; there is room to strengthen controls through this legislation, in fact, to marry the two pieces of legislation (the PFMA and the MFMA) in an attempt to respond speedily to proposals for a single public service. The government’s role in development is derived from its constitutional mandate to promote the welfare of its citizens. Makhubedu-Mametja and Bauer (2003) argue that the new local government system is striving towards the delivery of public services in an efficient and effective way as well as ensuring good governance. Van der Waldt (2006) confirms that local government is at the coalface of public service delivery. At the same time, the national sphere of government in South Africa wants to see vibrant, innovative and responsive developmental local governments, delivering the quality of strong local leadership and government that their communities need. There is a challenge here: that local government should be seen as a sphere that is domiciled with the people. In his State of the Nation address in February 2006, Mbeki, the president at the time, indicated that he was ‘committed to pay special attention to the critical task of strengthening local government’. He further mentioned that ‘we must in practice respect the system of co-operative governance, and within this context ensure that we empower local government to discharge its public service delivery obligations drawing on the lessons provided by Project Consolidate’ (Mbeki 2006); and this is a commitment that must be sustained by the Zuma administration.

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Hitherto, local government structures have found it extremely challenging to demonstrate beyond reasonable doubt that public money and other resources are spent in accordance with legal mandates, and that high-quality public services representing value for money are rendered to clients and the community in general. It is clear that apart from effective performance management systems to be employed in municipalities, as raised by Van der Waldt (2006), capacity building is critical and should be prioritised as an ongoing activity.

The role of the education sector
Higher education institutions (HEIs), and most importantly universities (as opposed to universities of technology), can be assigned various responsibilities with regard to public service delivery. In some cases in the history and development of higher education, HEIs were considered to be mainly repositories of knowledge. In short, they were seen as having three key duties to perform: to generate knowledge, to conserve it and to impart it (Thornhill 2008). In this regard, though, Kuye argues that: HEIs should not be viewed as a separate or isolated sector. It [sic] is an integral part of the comprehensive public services sector in which government plays a major role. It can never be static and has to adapt its policies and practices continuously to meet the ever changing needs of society, technology and of the global village of which South Africa is now part. (2007: 2) Kuye continues as follows: The emphasis on teaching and learning [has] shifted to steer South Africa along a high skills, high growth path of economic development; to bring academic and vocational education into closer alignment with one another; to modularise curriculums to facilitate the acquisition of skills within flexible time frames; to erode disciplinary boundaries in favour of interdisciplinarity; and to follow an outcomes-based approach to allow [critical] cross-field outcomes. (2007: 5–6) The Zuma administration should be proactive and engage HEIs to design specialised, tailor-made courses for public officials. Formalised bilateral or multilateral agreements with HEIs should be forged with regard to the specialised courses (Maserumule 2007). It also perhaps goes without saying that the government should desist from awarding tenders to service providers that are not appropriately and legally accredited. The Public Administration Leadership and Management Academy (PALAMA) model launched in 2008 needs to take root and coordinate capacity building in a coherent manner, unlike the previous South African Management Development Institute model, which was not helpful in guaranteeing coherence and quality assurance. It seems that the PALAMA massification model could go a long way towards achieving the levels of training and development required. The PALAMA model for training and capacity building in the public sector is considered in Chapter 2 of this volume, in the section on the technical and organisational capacity of the state during the Mbeki administration.

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Alternative service delivery approaches
There has been a worldwide shift in focus from the traditional public service delivery approaches to various alternative means, which may be more effective, cost-efficient, customer oriented, flexible and innovative. These alternative service delivery (ASD) approaches embrace a shared service delivery model (SSDM) and manifest in numerous forms, such as outsourcing; establishing more service-oriented public entities operating under commercial business principles; and entering into

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partnerships or sharing public service delivery arrangements with other institutions, such as the private sector or CBOs (Fourie & De Jager 2005). The need to accelerate public service delivery was proposed by the Mbeki administration, and it is suggested that the Zuma administration put in place delivery mechanisms and measures to achieve this acceleration, underpinned by a philosophy of value for money and customer satisfaction. South Africa has identified two main ASD models: the public–private partnership (PPP) model, and the SSDM. The two models have proven to be effective, although both present challenges.

The public–private partnership model
South Africa is proudly among the leading countries in the world in the law, policy and systems established for PPPs. Regulation 16 of the PFMA (1999 as amended) is the regulation governing PPPs in South Africa. It sets three value tests for PPP: • There must be sufficient funds in current and projected budgets to cover the costs of the PPP. • There must be a net benefit derived from involvement with the private party in delivery of services – referred to as value for money. • The PPP must be attested to by substantial transfer of financial, operational and technical risks to the private party in question.
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The PPP manual launched by the then finance minister, Trevor Manuel (currently heading the National Planning Commission in the Presidency), is the cornerstone of this model, underpinned by international best practices. PPPs are integral to building and strengthening effective, efficient and prompt service delivery. If properly managed and monitored, PPPs could serve to resolve major service delivery hurdles. However, they do present opportunities for corruption. There is thus an urgent need to strengthen these partnerships against corruption, in order to address service delivery backlogs, financial constraints and other major problems of a technical nature. Further, although PPPs are effective in addressing service delivery problems, they should not be haphazardly implemented, and particularly not where core services such as housing, water, electricity and waste disposal are concerned. At local government level, PPPs would be municipal service partnerships and would be developed within the broader framework of IDPs and the mainstream of local economic development by involving community stakeholders including, among others, CBOs, NGOs and traditional leaders. It is for this reason that the idea of PPP does not exclude public–public partnerships to strengthen effective service delivery.

The shared service delivery model
The other main ASD is the SSDM, which the US-based Government Finance Officers Association (GFOA) defines as follows: a collaborative strategy in which common business functionalities are consolidated and standardized in a single organizational unit that can deliver the same public services to different agencies within a government enterprise – promoting efficiency and cost savings, and improving service for stakeholders. The public services most often provided collaboratively include health and human public services, transit systems,

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airports, sewage collection, disposal of hazardous wastes, libraries, tax assessing, and title records. (GFOA 2007)52 The shared service approach is an international best practice model. The Scottish shared service model serves as a good example and is understood in context as ‘the provision of public services from one public body to one or more others either directly through a lead authority or via a delivery vehicle’ (APSE 2007: 3). Scotland’s Association for Public Service Excellence goes on to explain that: Local authorities and public bodies can collaborate in the provision of shared public services in many innovative ways utilising existing powers without recourse to potentially expensive and protracted procurement processes utilising the European Union directive. The Local Government in Scotland Act 2003 has already enabled local authorities to consider alternate forms of structuring service provision. Joint boards, joint committees, or the nomination of a lead authority are some ways for public authorities to cooperate with one another, and enable them to focus on delivering on outcomes. (APSE 2007: 5) The most tried, piloted and tested ASD is SSDM. The alternative shared service delivery model (ASSDM) has been tested in parts of South Africa and proved to work despite some challenges. Typical examples of functional shared service centres (SSCs) are multi-purpose community centres (MPCCs), which accommodate mobile shared public services, be it mobile home affairs services, mobile social security services or mobile clinic services. The SSC in general, and MPCC in particular, are good examples of one-stop shops. MPCCs are spread across South Africa, in all the provinces. In municipalities, there are also attempts being made to provide shared public services. These one-stop shops, and SSCs in the form of MPCCs, are the necessary channels through which public services could be delivered in a coordinated manner. This clearly necessitates intergovernmental relations with a view to sharing technical expertise, equipment and material resources to avoid duplication and excessive expenditure in the national, provincial and local spheres of government. Good examples of functional MPCCs are the Limpopo MPCC in Mokopane and the Northern Cape MPCC initiative. The US-based GFOA recommends that governments should examine the benefits of alternative public service delivery that involves shared service efforts. To this end, existing mechanisms for ASD, such as PPPs and shared service delivery, are critical. The establishment of the Public–Private Partnership and Supply Chain Management units in the Office of the National Treasury, and the establishment of SSCs and MPCCs, are among the developments needed to ensure that ASD succeeds. However, the missing link is monitoring and evaluation of the impact of the outcomes – both tangible and intangible – of ASSDM. Currently, the monitoring and evaluation of ASSDM sites and initiatives leaves much to be desired.

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Monitoring and evaluation
What can be done in the context of PPPs and ASSDM to improve the delivery of public services? Chaudhury and Devarajan share lessons from India: The Public Affairs Centre (PAC) in Bangalore, India, has recently attracted a lot of national and international attention after it undertook a survey of local services and effectively communicated its findings to politicians and the public. While it remains to be seen whether this has brought about any real improvements in the quality of public services,
52 GFOA (Government Finance Officers Association) (2007). Accessed February 2009, www.gfoa.org

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the PAC’s efforts have definitely invigorated the public debate and focused attention on quality and accountability issues. Improvements in public service delivery will come about only if there is a focus on outcomes. Whether or not the service is delivered by a private or public provider, within a centralised or decentralised system, financed by a project or budget support, it is imperative that we focus on actual outcomes, such as student learning or nutritional status. Given the vast amount of resources that go into implementing a myriad of service-delivery interventions worldwide, it is striking that so little analytical effort is devoted towards establishing any causal link between these interventions and actual human-development outcomes. (2006: 91) Chaudhury and Devarajan further state that: since we know so little about which interventions contribute to outcomes, we need rigorous impact evaluations of service-delivery arrangements. Why is there this paucity of impact evaluations? First, there is a severe global shortage of people with the necessary econometric skills to undertake a proper evaluation. The modern science of impact evaluation (or at least the ‘cutting edge’) is essentially dominated by academics based in the United States and Britain. The problem is not only that there are so few rigorous evaluations, but that there are so many poor-quality evaluations (including many carried out by the World Bank). Most developing-country policy-makers do not have the technical capacity to separate the wheat from the chaff. There are exceptions though, particularly in Latin America where policy-makers have devoted considerable attention to learning from rigorous impact evaluations. (2006: 94–95) The Zuma administration’s decision to locate the monitoring and evaluation aspect of public service delivery in the Office of the Presidency is an experiment, still to be scientifically tested to see if it can yield positive results. However, critics are quick to point out that this location is highly politicised and centralised, and thus doomed to fail, also carrying the danger of creating super-ministries over the others. Perhaps the monitoring and evaluation function should rather be decentralised to provinces and municipalities, located in the offices of the premier and the mayor respectively. It is for this reason that rigorous impact evaluations of PPPs and the SSDM should be undertaken on a regular basis by international technical experts, to measure the social impact of public service delivery. This would be more effective than baseline studies alone, which can be misleading, resulting in decision-makers taking decisions on tangible service delivery while overlooking the equally valid and vital intangible outcomes. The question of monitoring and evaluation to determine the impact of service delivery ought to be taken seriously by the Zuma administration. Monitoring and evaluation should not be seen as some kind of ivory tower activity, but rather should be embedded in implementation to ensure performance according to the legal frameworks and policies. Further, as the body constitutionally assigned the mandate of monitoring and evaluating the performance of the public service, the role, position and practices of the Public Service Commission should be reviewed, given that it is now widely considered to be a duplicate of the monitoring and evaluation function newly domiciled in the Office of the Presidency.

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Conclusion
In this chapter, critical issues with regard to service delivery for the Zuma administration have been suggested for contemplation. The issues raised emanate from diverse dimensions – including governance, ethical leadership, politico-administrative reforms, and monitoring and evaluation. The suggestion is that service delivery needs to undertake a radical shift from its current form, from

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being some kind of ‘handout’ – which has the potential to entrench dependency among recipients or customers – to emphasising a more humanised and humanising, empowering and consciousnessraising approach to serving communities. The Zuma administration needs to take seriously issues of fraud and corruption, which bedevil aspects of public service delivery and bring the entire system into disrepute. The chapter underscores that there are some issues that could be resolved immediately while others need long-term solutions; action must be taken without delay where possible, and challenges requiring long-term solutions must be tackled head-on. Issues of governance, ethical leadership and politico-administrative reform are urgent and call for long-term thinking and strategising. Finally, while there is no best and uniform model in the world to address public service delivery challenges, this chapter insists that the integration of public service delivery – especially at local government level – through PPPs/municipal service partnerships and the SSDM should be strengthened and sustained to address the challenges identified. To this end, monitoring and evaluation impact analyses making use of appropriate expertise with international standing should be conducted on a regular basis, in the interests of learning from the successes and failures of public service delivery; in this way, government can identify innovative interventions towards ongoing and sustained quality service delivery to South Africa’s people.

References
Free download from www.hsrcpress.ac.za APSE (Association for Public Service Excellence) (2007) Shared public services in the Scottish public sector: Impact of the EU public procurement rules, Briefing 07/50. Accessed March 2009, www.apse.org.uk/briefings/07-50%20Shared%20 Bernstein A (1998) Response to the White Paper by the Centre for Development and Enterprise. Development Southern Africa 15: 297–306 Ceasar N & Theron F (1999) Assessing attitudes and perceptions on Integrated Development Planning: The case study of Stellenbosch. Administratio Publica 9: 58–86 Chapman RA (1995) The first Nolan report on standards in public life. Teaching Public Administration XV: 1–14 Chaudhury N & Devarajan S (2006) Human development and public service delivery in Asia. Development Policy Review 24: S81–S97 DBSA (Development Bank of Southern Africa) (2000) Building developmental local government: Development report. Halfway House: DBSA Department of Provincial Affairs and Constitutional Development (1998) White Paper on Local Government. Pretoria: Department of Provincial Affairs and Constitutional Development DPSA (Department of Public Service and Administration) (1997) Batho Pele – ‘People first’. White Paper on Transforming Public Service Delivery. Pretoria: DPSA DPSA (n.d.) Batho Pele: Together beating the drum for better service delivery. Accessed September 2009, www.dpsa.gov.za/batho-pele/principles.asp FitzGerald P, McLennan A & Munslow B (1995) Managing sustainable development in South Africa. Cape Town: Oxford University Press Fourie LW & De Jager J (2005) Increasing customer satisfaction through enhancing public service delivery: An internal marketing approach. Journal of Public Administration 40: 229–246 Fox W & Meyer IH (1996) Public administration dictionary. Kenwyn: Juta & Co. Hologram (2003) Issues and practice in South African local government. Cape Town: Nolwazi Publishers Kanyane MH (2004) Performance management. In MJ Mafunisa & MH Maserumule (Eds) Cases in public administration and management: A South African perspective. Sandown: Heinemann Kanyane MH (2008) Exploring and developing a culture of good governance. In M Olivier & S Kuhnle (Eds) Norms and institutional design: Social security in Norway and South Africa. Stellenbosch: Sun Press Kemoni H & Ngulube P (2008) Relationship between records management, public service delivery and the attainment of the United Nations Millennium Development Goals in Kenya. Information Development 24: 296–306 Kuye JO (2007) A decade review of higher education in South Africa. African Journal of Public Affairs 1: 2–13

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Kuye JO & Ile IU (2008) Public service reform philosophies: A re-think of Nigeria’s ’Servicom’ and South Africa’s ‘Batho Pele’ principles in an era of global restructuring and reform. African Journal of Public Affairs 2: 122–130 Kuye JO & Mafunisa MJ (2003) Responsibility, accountability and ethics: The case for public service leadership. Journal of Public Administration 38: 421–437 Liebenberg S & Stewart P (Eds) (1997) Participatory development management and the RDP. Kenwyn: Juta & Co. Makhubedu-Mametja C & Bauer C (2003) Training of municipal councillors to promote effective public service delivery. Journal of Public Administration 38: 370–385 Maserumule MH (2007) Enhancing the capacity of municipal councillors in South Africa: A guideline for strategic policy intervention. Journal of Local Government 1: 79–93 Matshabaphala MDJ (2007) Strategic leadership challenges for public service delivery in South Africa. Journal of Public Administration 42: 241–249 Mbeki TM (2006) State of the nation address of the president of South Africa, Thabo Mbeki: Joint sitting of Parliament. South African Government Information. Accessed October 2009, www.info.gov.za/speeches/2006/06020310531001.htm Pycroft C (1999) Restructuring non-metropolitan local government in South Africa. Public Administration and Development 19: 179–192 Reddy PS (Ed.) (1999) Local government democratisation and decentralisation: A review of the southern African region. Kenwyn: Juta & Co. Sangweni SS (2003) Performance management as a leadership and management tool. Paper presented at the Second Senior Management Service Conference, Port Elizabeth (15–17 September) Free download from www.hsrcpress.ac.za Sexton T (2008) Karl Marx, Max Weber and social class theory. Accessed April 2009, www.associatedcontent.com/article/566269/karl_max_weber_and_social Steyn-Kotze J (2009) Debating substantive democracy: Post-Polokwane political rhetoric. Journal of Public Administration 44: 222–233 Stillman RJ (1960) Public administration concepts and cases. Boston: Houghton Mifflin Company Swanepoel H & De Beer F (1996) Community capacity building: A guide for fieldworkers and community leaders. Andover, UK: International Thomson Publishing Services Tait J (1997) A strong foundation: Report of the task force on public service values and ethics (the summary). Journal of the Institute of Public Administration of Canada – Canadian Public Administration 40: 1–22 Thornhill C (2008) Research in public administration: Some South African developments. Administratio Publica 15: 1–18 Valeta L & Walton GK (2008) Integrated development planning and budgeting at local government. Journal of Public Administration 43: 373–384 Van der Waldt G (2006) Managing local government performance: Key considerations and challenges. Journal of Public Administration 41: 144–160 Wessels JS & Pauw PC (Eds) (1999) Reflective public administration: Views from the south. Cape Town: Oxford University Press

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Chapter 5

Governmental relations in a maturing South African democracy
David M Mello

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The Republic of South Africa is made up of 9 provinces, 283 municipalities and other public institutions, which must work together for development and the satisfaction of the ever increasing needs of all South Africans. Regular elections are held in South Africa and universal suffrage is enjoyed by everyone over the age of 18 years. The ruling political party, the African National Congress (ANC), has been in power since the advent of democracy in 1994; and the new leadership under the president of the ANC and of South Africa, Jacob Zuma, is widely expected to deliver more than the previous ANC administration of Thabo Mbeki. Inevitably, with a new administration will come fresh perspectives on the running of the state. The number and size of various state institutions may change, for example, and the decisions in this regard will be based on the Zuma administration’s understanding of the needs of the citizens and its evaluation of the nature and role of existing institutions. Whatever changes are ushered in, the relations between public institutions cannot be ignored, as different institutions in the three spheres of government – national, provincial and local – have to function as constituent parts of a whole. This chapter argues that the best approach for the Zuma administration, in so far as making changes is concerned, is to learn from the challenges faced by the Mbeki administration. These challenges are further elaborated on in this chapter. It is assumed that if the Zuma administration can take seriously the challenges experienced by the previous administration and learn lessons from these, this will ensure that governmental relations are improved for the benefit of South Africa’s people. As democracy has matured and deepened in South Africa, this has been coupled with development among members of the public in terms of democracy literacy. As more people are educated about their rights, the expectations and demands placed on government increase rapidly. This chapter focuses on the definition of the concept of governmental relations, the constitutional principles that serve as a foundation for governmental relations, the number and size of the South African provinces and the challenges related to these, the structures and practices within intergovernmental relations, issues of monitoring and oversight, the relations between government and citizens, the human factor in governmental relations, and traditional leadership as a mostly invisible part of the intergovernmental relations puzzle.

The concept of governmental relations
‘Governmental relations’ is a general term that refers to relationships involving governmental institutions, and can include the idea of relations with non-state actors. Section 1 of the Intergovernmental Relations Framework Act (No. 13 of 2005) defines ‘government’ to mean ‘the national government; a provincial government; or a local government’ and ‘intergovernmental relations’ thus to mean ‘the

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relationships that arise between different governments or between organs of state from different governments in the conduct of their affairs’. Cameron in Makhanya (1999) defines intergovernmental relations as the geographical division of power among the various spheres of government. Adlem and Du Pisani (as quoted in Hattingh 1998) use a slightly different approach, classifying governmental relations into three categories, namely: intergovernmental relations (or relations between governmental structures); intragovernmental relations (or relations within or internal to government structures, in any of the three spheres of government); and extra-governmental relations (or relations between a government structure and the community/non-state actors). Thornhill et al. (2002) use intergovernmental relations to encompass the idea of all of the interdependent relations between the different spheres of government. In terms of their thinking, these relations further include the coordination of public policies determined by the different legislative and executive institutions of the different governmental structures, and take place at both political and administrative levels. Using the approach of Thornhill et al. (2002), it can be argued, then, that the effectiveness and the efficiency of service delivery by public and parastatal institutions depend on the relationships between the different institutions involved in related activities constituting public administration; that is, they depend on the state of health of intergovernmental relations.
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The definitions of Cameron (in Makhanya 1999) and Thornhill et al. (2002) of intergovernmental relations confine this concept and its application to the relations between state institutions in the three spheres of government in South Africa; and this is how the term ‘intergovernmental relations’ is used in this chapter. Although it is not the intention here to venture into the sphere of interstate governmental relations, a question that can be posed is: where then does the concept of the relations between independent nation states fit into the concept of intergovernmental relations? I suggest that the term ‘intergovernmental relations’ could also be used to denote relations between governments of independent nation states. This view is supported by Gildenhuys and Knipe (2000), although this is not how the term is used in the chapter. For the purposes of this chapter, ‘governmental relations’ refers to all forms of relations involving governmental institutions (and can include relations with non-state actors), while the concept of intergovernmental relations focuses specifically on relations between government institutions. There seems to be agreement among public administration scholars (Gildenhuys & Knipe 2000; Hattingh 1998; Roux et al. 1997) that the study of governmental relations should adopt one of the following approaches: constitutional approach, democratic approach, financial approach or normative approach. The constitutional approach departs from the premise that the Constitution of the Republic of South Africa (1996), as the supreme law, is the basis for the analysis of governmental relations. The democratic approach to studying governmental relations not surprisingly emphasises the theme of democracy; it also tends to promote the principle that provincial and local governments should be given increased powers to govern themselves to the extent of making the two spheres of government independent entities (Hattingh 1998). Although I would strongly advocate democracy in the provincial and local spheres in the form of elected representatives, it is suggested that giving the two lower spheres of government absolute rights to self-determination, with the upper sphere not having the right to monitor and intervene, would be likely to lead to chaos and the collapse of the delivery of essential services. It could be argued that a democratic approach, in its extreme form (absolute independence), would not be feasible for South Africa as it would contradict the provisions of sections 100 and 139 of the Constitution, which pertain to provinces and provincial government, and local government respectively.

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The third possible approach to studying governmental relations adopts an exclusively financial focus, studying the financial relations between state institutions. Although the financial approach to studying governmental relations is a narrow one, it is capable of providing in-depth data on financial relations for purposes of subjects such as public finance and municipal finance within the broader academic field of public administration. Due to its narrow focus, though, the financial approach cannot be used as a diagnostic tool for investigating challenges (other than finance-related ones) experienced in governmental relations. Although these approaches are not necessarily mutually exclusive, the normative approach to studying governmental relations carries more weight as it does not focus on any specific aspect of governmental relations. The search for answers to current governmental relations challenges will yield more results if a normative approach is followed, because this approach enables scholars and practitioners alike to ask critical questions regarding the status quo and ponder practical alternatives to situations where the existing governmental relations are not ideal. In this chapter, the normative approach is used as a diagnostic framework for finding answers to the questions posed. Further, although the constitutional approach alone is not recommended for studying governmental relations, the provisions of the Constitution regarding governmental relations cannot be ignored in adopting a normative approach.
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Constitutional principles
The Preamble to the Constitution states that the supreme law is adopted to lay the foundation for a democratic and open society in which government is based on the will of the people. This statement suggests that government should be democratic and inclusive of all people. Apart from democracy being a basic tenet of the South African government, the Constitution determines the nature, form and relations between the three spheres of government. Chapter 3 of the Constitution prescribes the nature and form of government and of intergovernmental relations in South Africa. Section 40 establishes the national, provincial and local spheres, which are distinctive yet interdependent and interrelated in executing their duties. Section 40(1) prescribes as follows: 1. All spheres of government and all organs of state within each sphere must– a. preserve the peace, national unity and the indivisibility of the Republic; b. secure the well-being of the people of the Republic; c. provide effective, transparent, accountable and coherent government for the Republic as a whole; d. be loyal to the Constitution, the Republic and its people; e. respect the constitutional status, institutions, powers and functions of government in the other spheres; f. not assume any power or function except those conferred on them in terms of the Constitution; g. exercise their powers and perform their functions in a manner that does not encroach on the geographical, functional or institutional integrity of government in another sphere; and h. co-operate with one another in mutual trust and good faith by– i. fostering friendly relations; ii. assisting and supporting one another; iii. informing one another of, and consulting one another on, matters of common interest;

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iv. co-ordinating their actions and legislation with one another; v. adhering to agreed procedures; and vi. avoiding legal proceedings against one another.

The number and size of the provinces, and related challenges
South Africa had four provinces prior to the democratic elections in 1994. The number of provinces was changed to nine after the elections; and the creation of nine provinces can be traced back to the constitutional negotiations that took place prior to 1994. According to Besdziek (2006), the Development Bank of Southern Africa (DBSA) had been developing the nine-region model of political geography since 1982. The DBSA’s support for this model was informed by the definition of socioeconomic development regions within the subsequently defunct four provinces in South Africa. The DBSA’s model identified the Eastern Cape, the Western Cape, the Northern Cape, the PWV (Pretoria– Witwatersrand–Vaal Triangle) area, the Western Transvaal, the Northern Transvaal, the Eastern Transvaal, the Orange Free State, and KwaZulu-Natal as viable geographical regions for development purposes. Other factors that necessitated the demarcation of South Africa into nine provinces included geography and the nature and extent of government services. South Africa’s land area is 1.1 million km2. It would be inconceivable and impractical for a single, centralised government to govern effectively from a centralised point (Du Toit & Van der Waldt 1997). The DBSA model and the federal model of Germany were used as a basis for consensus on provinces during constitutional negotiations in South Africa. The creation of the nine provinces was an attempt to overcome the racial and ethnic divisions of the apartheid order as well as the dysfunctional administrative and political boundaries of that system. A consequence of this decision was the abolishing of administrative and political boundaries and the reintegration of ‘self-governing’ territories and ‘independent states’ into one state. Another reason for the establishment of the nine provinces was an attempt to decentralise government and administration. It can be argued that a decentralised government is closer to the public and would be more responsive to the needs of the citizenry. Besdziek (2006) argues that international comparative experience suggests that strong provinces could facilitate the national and equitable distribution of development resources and ensure a greater participation in the democratic process from below. Levy and Tapscott (2001) argue that despite there being good reasons for the creation of the nine provinces, the decision presented considerable challenges to the future of intergovernmental relations. South Africans have, in the brief 15 years since the advent of democracy in 1994, learned a range of strategies for coercing the government to agree to their demands – whether through democratic processes or violent protests. One such strategy is to make demands before elections and threaten to abstain from voting if demands are not met. Different communities have, in recent years, demanded to be incorporated into provinces of their choice. The demands for incorporation are, in all instances, based on a quest for the better life promised to all citizens. Communities often argue that their incorporation into specific provinces, which are perceived to be well endowed with resources and better in terms of service delivery, will improve their quality of life. The incorporation into a province affects the geographical nature of the two provinces involved. Further, giving in to the demands for incorporation may create an untenable precedent; other communities may also make the same demands and expect to be given the same treatment. In this regard, the fundamental question is: how will the Zuma administration deal with the governmental relations and precedents such as those described above?

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Merafong and Moutse can be used as points of reference for the purposes of this discussion. Merafong is situated east of the Gauteng Province near the small mining town of Carltonville. The Moutse area is situated in the northern part of the Mpumalanga Province. Merafong and Moutse are part of the 17 cross-border districts that the government decided to merge into single municipalities and incorporate into other provinces such as North West and Limpopo, as a result of the approval of the 12th Constitutional Amendment Act (2005) and the Cross-boundary Municipalities Laws Repeal and Related Matters Act (No. 23 of 2005) during the Mbeki administration. The consequent redrawing of provincial borders was aimed at eliminating cross-border municipalities and improving service delivery (IRIN 2007). The primary objective of eliminating cross-border municipalities was achieved. However, the secondary objective was not realised, as subsequent service delivery protests and demands for reincorporation bear testimony to ineffective service delivery. The Merafong Municipality’s reincorporation into the Gauteng Province, after a long and bitter struggle characterised by violent protests, gained momentum during the ‘interim’ administration of Kgalema Motlanthe. In 2009, the residents of the Moutse region demanded to be reincorporated into the Mpumalanga Province. In both cases ANC party officials have played a significant role and made promises followed by action on the part of government. The Mbeki administration, by contrast, seems to have been complacent with regard to taking action, despite protests that were often violent and disrupted service delivery and schooling. The challenge then for the Zuma administration is to be more proactive and make the constitutional principles relating to democracy and citizen participation a reality by consulting citizens and listening to reasonable demands and wishes. Despite Merafong’s reincorporation having the potential to create a precedent, a fundamental question regarding this trend needs to be asked. Does reincorporation of a municipality or a region provide an answer to the root cause of the problem, or does it merely treat the symptoms of the problem? It seems that exploring the problem in more depth, going beyond the symptoms to get to the root of the problem, may provide answers that lead to a more sustainable solution. The underlying problem, in the quest to be incorporated into a specific province, is not simply the desire to be associated with a particular province. Residents in both of the cases complained about service delivery problems, and lack of effective consultation and rational decision-making in the re-determination of the borders of the provinces concerned. Concerns of members of the public in these areas point to another challenge in the development: namely the capacity of provinces and municipalities as well as the availability of resources in some provinces. The constitutional provision regarding the equitable distribution of resources and the need to make more money available for the development of provinces such as Limpopo and North West must be given serious attention by Parliament, the Financial and Fiscal Commission, and the Budget Council as well as the Budget Forum. Although one cannot expect developmental challenges of the apartheid political dispensation to be addressed overnight, the patience of ordinary men and women in the street seems to be wearing thin, hence the plethora of protests. The quelling of these protests through effective consultation and accelerated service delivery is a daunting challenge for the Zuma administration. Another question that is pertinent to this discussion of the size and the number of provinces, which the ANC and the Zuma administration should consider and attempt to address, is: what is meant by the popular slogan ‘the people shall govern’? Does it mean that people can dictate to government at any given time? If the answer to this question is affirmative, the running of the state is likely to be chaotic due to the opposing interests of different groups among voters. Rather, I argue that the meaning of this slogan is that the people shall govern through their duly elected leaders, who have an obligation to consult and reconcile differences between opposing interests. The decision of the elected representatives will inevitably cause discontent among some interest groups, as the main objective

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of any political administrative decision is to promote the general welfare instead of promoting the interests of a particular community or interest group. This debate is further explored in the section below dealing with the relationship between government and the public. The suggestion is that the demarcation of borders should, as far as possible, be stabilised, and that development in less developed provinces should be prioritised. The debate on the number of provinces has reared its head in the recent past. This is a healthy debate, which seeks to challenge and evaluate the status quo. However, in the interests of democracy and equitable development, the current nine provinces need to be retained for the next three decades, while municipalities are developed and capacitated to address service delivery challenges. The creation of nine provinces made the South African government more dynamic and necessitated the creation of structures to improve relations between the three spheres of government.

The structures and practices within intergovernmental relations
Parliament, and in particular the National Council of Provinces (NCOP), Cabinet, and the Department of Cooperative Governance and Traditional Affairs (and its predecessor, the Department of Provincial and Local government), are institutions that are ideal for the promotion of intergovernmental relations in South Africa. However, these institutions were not established for the sole purpose of promoting intergovernmental relations. The 1998 Presidential Review Commission on the reform of the public service noted that the relationship between and within different spheres of government was of grave concern and that the weaknesses in the structures and practices of intergovernmental relations led to poor coordination within and between different departments and spheres of government (Levy & Tapscott 2001). The provincial Members of Executive Councils (MECs) were not keen to participate in the delegations to the NCOP. This left the design of voting mandates as the exclusive preserve of provincial legislature, in contrast to the constitutional objective that provinces develop a real provincial position that bridges the executive/legislative divide in the vertical application of intergovernmental relations. This resulted in the untenable situation of positions taken by delegations to the NCOP contradicting positions taken by MECs. It was necessary to create other institutions that could coordinate the activities of the three spheres of government on a vertical and horizontal basis. The initial response to this need was an upsurge in the formation of informal intergovernmental structures. The now defunct Intergovernmental Forum was the first intergovernmental structure to be established (in August 1994); it comprised nine premiers, key national ministers, and the director-general of the Office of the President. The Intergovernmental Forum was supported by a technical committee made up of directors-general of the nine provinces and directors-general of selected national departments. The Intergovernmental Forum meetings led to the establishment of ministerial forums or committees of ministers and MECs (Besdziek 2006). The response to the recommendations of the 1998 Presidential Review Commission on the reform of the public service led to a huge increase in the number of structures attempting to coordinate intergovernmental relations; in 2002, Thornhill et al. documented 37 active intergovernmental relations structures in the three spheres of government. The promulgation of the Intergovernmental Relations Framework Act (No. 13 of 2005) brought some much needed formalisation with regard to coordination, and the hope that the framework would put a stop to the proliferation of informal structures aimed at coordinating intergovernmental relations.

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All Committees of Ministers and Members of the Executive Councils (MINMECs) continued to exist and were formalised in terms of section 9 of the Act. A MINMEC comprises the minister, deputy minister, MECs responsible for the relevant functional areas, and a municipal councillor designated by the national organisation representing organised local government (if a functional area for which the MINMEC is established includes a matter assigned to local government in terms of Part B of Schedule 4 or part B of Schedule 5 of the Constitution, or any national legislation). The minister is the chairperson and has the right to invite any knowledgeable person to the meeting of the MINMEC. To facilitate better coordination, representatives of the South African Local Government Association need to be represented on MINMECS. According to Cloete and Thornhill (2005), MINMECs are established for functional areas of concurrent national and provincial legislative competence, as outlined in Schedule 4 of the Constitution. The main functions of MINMECs are to provide advice on policy issues; identify problems and potential problems in policy formulation, coordination and implementation; comment on proposed national and provincial policies and legislation regarding concurrent competencies; and determine short-term and long-term priorities regarding matters of concurrent competencies (Cloete & Thornhill 2005). The interface between the different sectoral role-players within the MINMECs makes them important instruments for intergovernmental co-operation and coordination. MINMECs allow provinces to explain the peculiarities of their institutions to one another and provide them with an opportunity to interact with the national minister. Section 12 of the Intergovernmental Relations Framework Act provides that a MINMEC must report back to the President’s Coordinating Council on any matter referred to it by the Council. The minister may, in consultation with the president, refer any matter discussed in the MINMEC to the President’s Coordinating Council. The referral of the President’s Coordinating Council and MINMECs ensures that specific issues and functional areas are dealt with by appropriate structures with the necessary authority and knowledge. The Centre for Development and Enterprise (1999) report highlights the dominance of national ministers as a major challenge inherent in MINMECs. Dominance is a direct consequence of the structure and administrative support for MINMECs. As mentioned above, the minister acts as the chairperson, and staff in the minister’s department act as the secretariat. This gives the minister and the secretariat more leverage than other participants to influence the agenda and the direction taken in meetings. It is suggested that the success of MINMECs in their current form will depend to a large extent on the character of the minister in question and on whether the minister adopts a democratic or autocratic approach. Not surprisingly, an autocratic approach is likely to stifle the generation of new ideas, while a democratic approach will tend to encourage the free flow of ideas. As the democratic approach is closely related to an individual minister’s personality traits and would be difficult to prescribe in any form of legislation, an alternative to the current structure of the MINMECs has to be considered. One such alternative could be the rotation of the chairpersonship of MINMECs. A consequence of this suggestion would be amendments to the Intergovernmental Relations Framework Act.

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Monitoring and oversight
The Constitution has a built-in system of checks and balances for the lower spheres of government. Monitoring, oversight and evaluation are control measures aimed at ensuring that the lower spheres of government fulfil their constitutional mandates. The purpose of the monitoring process is to determine to what extent the objectives and activities within provinces and municipalities are achieved, and to ensure that timely action can be taken to deal with deficiencies detected during the process of monitoring. The system should, with proper evaluation, be able to sound early warning bells whenever provinces and municipalities veer off course financially and in terms of policy implementation.

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Monitoring could, according to Thornhill et al. (2002), be in the form of requests for information and regular reports; enquiries sanctioned by the MEC for local government in specific provinces; and right of access to information regarding sources, places and persons. The monitoring role should always be coupled with the obligation, on the part of the upper sphere of government, to support and build capacity in instances where a sphere of government is found – during the monitoring process – to lack capacity. Capacity building includes but is not limited to leadership, management, finance, fundraising and effective policy implementation. Monitoring is a process to assist institutions and individuals to address issues and gain insight, knowledge and the experience required to solve problems and implement changes (Thornhill et al. 2002). The financial consequences of oversight and intervention are, however, limited in terms of section 139 of the Constitution, which proves an obstacle to taking appropriate action. The national government has limited power to stop payment of funds to municipalities in cases of a serious breach of sound financial management. The lower spheres of government do not, according to Levy and Tapscott (2001), welcome extensive or intrusive monitoring. There could be underlying reasons for provinces and municipalities resisting extensive or intrusive monitoring. Where data are collected from provinces and municipalities without clear indication of the use of such data and without proper feedback, provincial and municipal officials could resist when the same set of data is requested in the next financial year without any feedback forthcoming from the previous round. Although this may not always be the sole reason for such resistance, more effective communication is likely to improve relations. The provisions of sections 100 and 139 of the Constitution are based on the assumption that the higher authorities, namely national government and provincial government, have the capacity to intervene where the province cannot deliver. This assumption may not always be true. National government may also experience capacity challenges caused by, among other things, high vacancy rates in strategic positions or lack of skills on the part of incumbents of such positions. Interventions on the part of national government when a province or municipality cannot deliver should not be seen as a witch-hunt, but rather as action that has to be taken when all other avenues have been explored and exhausted.

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The relationship between government and the public
Brynard (1996) argues that the idea of public participation arises from the classical theory of democracy, but that the structure of modern government is not that of a pure democracy but rather of a republic. McLaverty (2002) argues that public participation is desirable because no one is able to express the views of another. McLaverty quotes political philosopher Jean-Jacques Rousseau as saying that as a result of participating in decision-making, the individual is educated to distinguish between his or her own impulses and desires; the individual learns to be a public as well as a private citizen. Through this educative process the individual eventually feels little or no conflict between the demands of the public and private spheres. The clash between and need for reconciliation of the individual interest and public interest is often the cause of conflict in public decision-making. It could be argued, though, that some of the ideals expressed by McLaverty (2002) are difficult to achieve due to the nature of South African communities. The size and complexity of South African communities in the 21st century make it impossible for all individuals in communities to be involved in the process of decision-making. Representative democracy is, therefore, practised in South Africa and in other democracies of the world. Citizen participation is the result of the existence of a social contract

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between elected politicians and members of the public (voters, those not eligible to vote, and those who choose not to vote). Freysen (1999) argues that the government is created by a social contract between the ruler and the ruled, after the ruler has been identified directly or indirectly from among individuals. The essence of a social contract is that people born free with exactly the same inherent and inalienable rights and therefore being equal, consent freely to the creation of government. This free consent of all constitutes the legitimacy of government as well as its limits. The existence of a contract implies that the ultimate power in the state is vested in the people; the people are therefore the source of power and government is subservient to the people. Clapper (1996b) identifies popular sovereignty, political equality, popular consultation and majority rule as fundamental principles of citizen participation. These four principles of citizen participation support the notion that the democratic government is subservient to the people and, therefore, that people have a legitimate right to participate in decision-making processes. Citizen participation is a process whereby ordinary members of the public exercise power over decisions related to the general affairs of the community (Brynard 1996); it is both formal and informal. The advantages of citizen participation according to Clapper (1996a) are: reduction of apathy; positive application of citizen powers; converting opponents; information dissemination; and restraining the abuse of authority. Although one cannot dispute the validity of such advantages, it is necessary to point out a few disadvantages of citizen participation. First, consulting members of the public is time consuming as officials are expected to arrange meetings with all stakeholders or their representatives. The involvement of stakeholders with different backgrounds will inevitably lead to conflict, which could take time to resolve. Low citizen participation levels and low citizen competence are mentioned by Clapper (1996a) as challenges that nevertheless can be overcome. Most citizens are not keen on attending meetings and when they do attend they often lack competence in areas such as reading, writing and basic analytical skills. Illiteracy requires public officials to translate and interpret the content of a policy document before individuals can make any meaningful contributions. Translation and interpretation increase the costs of citizen involvement, but should not be reasons for its avoidance. Government exists for purposes of satisfying the needs of citizens. Citizens, as the main beneficiaries of the outcome of government decisions and policies, should always be consulted on matters pertaining to public administration and management. The Constitution provides a firm basis for citizen participation in South Africa. The Preamble to the Constitution states that its purpose is to lay the foundations for a democratic and open society in which government is based on the will of the people and every citizen is equally protected by law. By implication, this provision of the Constitution mandates public institutions to devise methods whereby citizens can be consulted. Section 32 of the Constitution makes provision for citizens to have the right to access any information held by the state or any person. Access to information is further echoed by the Promotion of Access to Information Act (No. 2 of 2000). Although the purpose of the latter Act is to facilitate access to information held by the state, there are numerous grounds on which access to information can be denied. These grounds include, among others, defence, security and international relations of the Republic of South Africa as well as the operations of public bodies. The promotion of access to information and grounds for refusal may sound contradictory; however, it is necessary for the state to refrain from making sensitive information available should such information have the potential to affect the interests of its citizens in a negative fashion. Access to information is meaningless if not coupled with the right to freedom of expression, including the right to criticise government without fear of reprisal. In terms of section 16 of the Constitution, South Africans have the right to freedom of expression, which includes – but is not limited to – freedom

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of the press and other news media to receive or impart information or ideas. The press and other media play a significant role in providing citizens with a platform for expressing their views. The press serves as a mirror for government successes and failures. However, press freedom should not only be used to criticise government. Through the press, citizens can make valuable suggestions that could shape policies and all forms of governmental relations. Section 195 of the Constitution echoes the sentiments expressed in the Bill of Rights. Section 195(1) (e) of the Constitution provides that the people’s needs must be responded to and the public must be encouraged to participate in policy-making. Further, sections 195(1), (f) and (g) emphasise accountability and transparency. Accountability and transparency are essential tenets of democracy. These tenets ensure that citizens are continually updated about the manner in which the state is managed. Annual reports by all national and provincial departments can be accessed by members of the public who have an interest in governance matters. The internet has further enhanced transparency as some members of the public can now access information from their homes and offices. Although legislation in South Africa lays a solid foundation for citizen participation, in practice, citizen participation often appears to be seen as a waste of time by government officials.

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The human factor in governmental relations
At the centre of any form of governmental relations is a group of officials and/or politicians who have a responsibility to ensure that there is proper communication and coordination. This view is supported by Hattingh (1998), who argues that human actions and behaviour have a substantial influence on governmental relations, as men and women in authority act as catalysts to establish communication between different governmental bodies, and between governmental bodies and non-state actors. If officials and politicians see the department or organisation within which they are working or for which they are responsible as independent entities, their perceptions of and attitudes towards interdepartmental and inter-sphere – i.e. intergovernmental – co-operation and coordination may be negative. It is the Zuma administration’s challenge to make sure that every official and politician sees himself or herself as part of both the micro- and macro-organisational structure of government in South Africa. Effective orientation of officials and politicians regarding governmental relations is likely to improve governmental relations in all spheres of government.

Traditional leaders: the missing link in intergovernmental relations
Traditional leaders in South Africa represent a unique and African way of governing communities, and have existed in South Africa for as long as African people have lived in communities needing guidance, leadership and administration. The administrative processes constituting African traditional leadership have regrettably not been well documented. The result of the lack of sufficient documented evidence on the administrative processes followed by chiefs and headmen shows a misunderstanding of the significance of traditional leadership, leading to its relegation to the periphery in modern public administration. The existence of traditional leaders is acknowledged by law in South Africa, hence the establishment of the National House of Traditional Leaders and provincial houses of traditional leaders, and their active role in municipalities where there are chiefs and headmen. Sidelining traditional leaders in rural areas has proved to be a problem in South Africa under previous administrations. Where traditional leaders are custodians of the land where communities live,

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development challenges have resulted from disputes between councillors and traditional leaders. Such disputes have predominantly arisen as a result of a lack of consultation with and acknowledgement of the status of the traditional leader. Trust land is the sole responsibility of the traditional leader and any development on such land has to occur with the express consent of the traditional leader. A traditional leader who has not been sufficiently consulted and involved in the initiation of developmental projects may oppose their implementation and inadvertently become a stumbling block in infrastructural and social development. Traditional leaders are after all the custodians of customs and morality within the rural communities. Modernisation of administration and ignoring of traditional values and customs can only be a recipe for conflict in the rural areas. While the Intergovernmental Relations Framework Act does not even acknowledge the existence of traditional leaders, since the advent of the Zuma administration we have seen the Department of Local and Provincial Government renamed and repositioned as the Department of Cooperative Governance and Traditional Affairs. The new government and the department need to prove to both the public and traditional leaders that the name change is not simply a cosmetic change to the department but is coupled with a fundamental shift in policy and approach, to strengthen the involvement of traditional leaders in governance processes, particularly in those provinces that have houses of traditional leaders. A challenge for the Zuma administration is to further outline the responsibilities and position of traditional leaders in the intergovernmental relations puzzle.
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Conclusion
Changes can always be expected to take place whenever a new administration takes over the running of the state. South Africa is no exception as a maturing democracy. It can be expected that different approaches of bringing harmony to the relations between state institutions will be tried with a view to finding an ideal model that is unique to South Africa’s circumstances and its Constitution. The number and size of the provinces and the intergovernmental relations in this regard are prescribed by the Constitution and the applicable subordinate legislation. The provisions of the Constitution and legislation are effective to the extent that they are able to satisfy the primary objectives for which they were established. It is argued, however, that as soon as the provisions of applicable laws cease to have the desired effect, due to changes in the nature and structure of government, revision of constitutional principles and legislation becomes an unavoidable necessity. Monitoring and evaluation are ‘necessary evils’; while provinces and municipalities might wish to avoid or resist them, this is not possible, as they are provided for in terms of the law. This is because control is an essential element of accountability. The central government has an obligation and a moral duty to ensure that devolved powers are exercised with caution and that resources are used effectively for the benefit of the public. Members of the public are an integral part of governmental relations in South Africa, as government revolves around the citizens and voters. Despite being provided for by legislation, the participation of members of the public in governmental processes is beset with problems due to the nature and complexities of the South African population. Further, as we have seen, the human factor may either complicate or simplify governmental relations depending on whether government has the right people in the right positions.

References
Besdziek D (2006) Provincial government in South Africa. In A Venter & C Landsberg (Eds) Government and politics in the new South Africa (3rd ed.). Pretoria: Van Schaik Brynard PA (1996) Realities of citizen participation. In K Bekker (Ed.) Citizen participation in local government. Pretoria: Van Schaik

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Centre for Development and Enterprise (CDE) (1999) Policy-making in a new democracy: South Africa’s challenges for the 21st century. Johannesburg: CDE Clapper VA (1996a) Advantages and disadvantages of citizen participation. In K Bekker (Ed.) Citizen participation in local government. Pretoria: Van Schaik Clapper VA (1996b) Positioning citizen participation in democratic government. In K Bekker (Ed.) Citizen participation in local government. Pretoria: Van Schaik Cloete JJN & Thornhill C (2005) South African municipal government and administration: A new dispensation. Pretoria: Dotsquare Du Toit DFP & Van der Waldt G (1997) Public management: The grassroots. Cape Town: Juta & Co. Freysen C (1999) The state: The locus of rights, social contract and justice. In JS Wessels & JC Pauw (Eds) Reflective public administration: Views from the south. Cape Town: Oxford University Press Gildenhuys JSH & Knipe A (2000) The organisation of government: An introduction. Pretoria: Van Schaik Hattingh JJ (1998) Governmental relations: A South African perspective. Pretoria: UNISA Press IRIN (2007) South Africa: Provincial border dispute threatens school for challenged children. Accessed April 2009, www.irinnews.org/Report.aspx?ReportId=72585 Levy N & Tapscott C (Eds) (2001) Intergovernmental relations in South Africa: The challenges of cooperative government. Bellville: IDASA and School of Government, University of the Western Cape Makhanya D (1999) Intergovernmental relations: Antidote for fragmentation. Journal of Public Administration 34: 348–358 Free download from www.hsrcpress.ac.za McLaverty P (2002) Is public participation a good thing? In P McLaverty (Ed.) Public participation and innovations in community governance. Burlington, VA: Ashgate Roux N, Brynard P, Botes P & Fourie D (1997) Critical issues in public management and administration in South Africa. Pretoria: Kagiso Thornhill C, Odendaal MJ, Malan LP, Mathebula FM, Van Dijk HG & Mello DM (2002) An overview of intergovernmental relations in Africa: Southern African Development Community. Pretoria: PAIR Institute

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Chapter 6

Socio-economic development and poverty reduction in South Africa
Polly Mashigo

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Fifteen years on from South Africa’s transition to democracy, substantial progress has been made in socio-economic development and poverty reduction through strategies that were put in place in 1994. While much has been achieved, however, poverty and underdevelopment remain realities, particularly in many black and rural communities. This offers an important opportunity for the Zuma administration to identify and deal with the problems and improve the operations of government. The current dualistic nature of the economy means that South African society, like that of many African countries, is highly unequal: it is estimated that more than half of Africa’s economic activity takes place outside the formal economy, in what is usually referred to as the second economy or informal sector. And nearly half of all South Africans live below the poverty line (Bernier et al. 2005: 6); they are excluded from social and economic opportunities and are vulnerable to downward fluctuations in their income and to financial shocks. This chapter argues that poverty reduction is the mainspring of economic development and thus that it is necessary to put greater emphasis on it if desired levels of economic development are to be achieved. South Africa is one of the 189 states around the world committed to achieving the Millennium Development Goals (MDGs) set in 2000 with measurable targets for progress on sustainable development. Eradicating poverty is one of the MDGs and includes halving the number of people living on less than US$1 a day as well as halving the number of those who suffer from hunger by 2015 (Bernier et al. 2005). The MDGs also call for improvements in, for example, healthcare, education, the rights of women, children and youth, local authorities, participation by local communities, democratic processes, and governance. There are still large gaps in the attainment of these goals in South Africa and strategies are needed to fill these gaps. The New Partnership for Africa’s Development (NEPAD), a pledge by African leaders, calls for a new relationship of partnership between Africa and the international community to eradicate poverty and sustain growth and development. However, the continued marginalisation and social exclusion of the vast majority of the people of South Africa constitute a serious threat to economic development and poverty reduction. The African National Congress (ANC) government has yet to deal effectively with the social and economic challenges of high levels of unemployment, poverty and underdevelopment, deepening inequality and rural marginalisation. These challenges call for sustained economic development based on good and effective policies and institutions. Taking these challenges seriously, the ruling party (ANC) drew up its 2009 election manifesto for the period 2009–14, in which priority areas for development in South Africa are identified (ANC 2009).

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In this chapter the critical factors that contribute to the persistence of poverty, underdevelopment and related challenges are examined, with the objective of determining what interventions can be put in place by the Zuma administration. The chapter analyses the first and second economies, with particular focus on the second economy; it seeks to establish what constitutes it and why it has become central in discussions pertaining to underdevelopment and poverty alleviation. The chapter also discusses the 2009 ANC election manifesto, which outlines the ANC’s commitment to transforming the country and society through nation building, support and respect for basic human and democratic rights, socio-economic rights, and the strengthening of representative and participatory democracy. Priority areas of the election manifesto, which include creation of decent work and sustainable livelihoods, education, promoting human health, and the fight against crime, are discussed. Another priority of the election manifesto, social security, is also considered. The chapter analyses financing strategies in South Africa and shows how these strategies hamper the provision of such finance, particularly to poor households. The chapter also considers the global financial crisis and how it has impacted and is likely to continue to impact on South Africa’s development and poverty reduction strategies (as presented in the ANC election manifesto). Finally, the chapter discusses international lending practices that have succeeded, through specialised financing/lending mechanisms, in financing poor households. Similar mechanisms in the poor communities of South Africa are explored to determine how they improve access to finance and thus also standards of living, and what lessons they might provide for the Zuma administration.
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Analysing the first and second economies
The current dualistic nature of the economy – marked as it is by disenfranchisement, massive inequalities and impoverishment – means that South African society is highly unequal. Since the advent of democracy in 1994, South Africa has seen remarkable social and economic stability, with a strong influence on the African continent as well as internationally. Despite its successes, though, South Africa is still characterised by a dual economy and experiences what former president Thabo Mbeki referred to as ‘two economies’: a vibrant first world economy, which is a globally integrated world of production, exchange and consumption; and a second and disconnected economy characterised by severe underdevelopment.53 The first economy is characterised by modern technologies and legalised economic relationships. The first economy is very important because it produces the wealth needed to address the many challenges the country faces and provides the possibility of confronting the task of reducing the racial and gender inequalities in standards of living and quality of life. The second economy, by contrast, is characterised by underdevelopment, contributes little to the GDP, incorporates the poorest of the rural poor, and is structurally disconnected from both the first economy and the global economy. The second economy is incapable of self-generated growth and development. Du Toit and Neves (2007) elaborate on underdevelopment and poverty by providing the example of those who are marginalised, trapped in poverty and effectively stuck in the second economy. They argue that an informal business that performs well would no longer be assumed to be trapped in the second economy, whereas other survivalist businesses would. Being structurally disconnected from the mainstream of the economy and characterised by underdevelopment, the second economy incorporates the poorest of the rural and urban people who are unskilled, unemployed and unemployable.

53

Address to the National Council of Provinces, Cape Town, 11 November 2003.

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Statistics South Africa’s deputy director-general, Elizabeth Gavin, mentioned that the second (or informal) economy is difficult to measure because the sector’s large number of small and informal businesses are not listed on the official business register.54 This makes it difficult to assess the impact of the informal economy on GDP. The second economy is a crucial theme in interventions that seek to overcome underdevelopment and poverty. Underdevelopment, like poverty, has been subject to changing definitions. The countries that are referred to as less developed tend to have a relatively high proportion of output and employment related to agriculture, and low per capita incomes. Underdevelopment refers to unequal access to resources, which produces structural poverty; lacking the technology and capital to make efficient use of available resources (i.e. lacking the means for economic growth); and/or having a low level of economic productivity and technological sophistication within the contemporary range of possibility (Free Dictionary 2003). A number of countries – such as Bangladesh, China, Ghana, India, Indonesia and Uganda – have, with effective policies and institutions, succeeded in growing their economies and reducing poverty through specialised mechanisms and strategies directed specifically at developing the poor and improving their standard of living. It would make sense for the Zuma administration to look to such countries for inspiration and examples of effectively fighting underdevelopment and poverty.
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South Africa, in attempting to transform the second economy, introduced programmes such as the Reconstruction and Development Programme (RDP), and the Growth, Employment and Redistribution (GEAR) strategy, in 1993 and 1996 respectively, with the aims of stimulating economic growth and development, creating employment opportunities, redistributing resources, reducing the poverty experienced by the majority of South Africans, and making services of an economic nature accessible to all. However, these initiatives have proved ineffective, failing to achieve their intended objectives. It seems that South Africa lacks a coherent and comprehensive strategy for reducing poverty and underdevelopment and achieving economic development. The Development Report (DBSA 2005) suggests that even the various public works programmes introduced – for example, the Community Based Public Works Programme introduced by the Department of Public Works, and the Working for Water Programme introduced by the Department of Water Affairs and Forestry – were unsuccessful in addressing poverty because they benefited only a few thousand out of millions of people. In these as in many other government departments there seems to be a lack of the expertise needed to spend the budgets allocated to addressing challenges in the second economy, and this exacerbates the problem. Schwabe (2004: 1) reports that people living in poverty in South Africa sank deeper into poverty over the period 1996–2001. Poverty may be seen as the collective condition of poor people or groups. The World Bank defines poverty in more specific terms, making a distinction between moderate and extreme poverty. Moderate poverty is defined as being when people live on less than US$2 per day, and extreme poverty as being when people live on less than US$1 per day. The majority of poor people survive below the minimum living level or poverty line, which is usually the equivalent of US$1 per day (Johnson & Rogaly 1997: 10). Such people were estimated at 57 per cent globally in 2001 (Schwabe 2004: 1), and 8 million of the total 44 million South Africans (SARPN 2008: 1). However, given that developed and developing countries use different poverty lines to measure poverty, debates around the world suggest that for poverty data to be meaningful there have to be indications of the degree of poverty of households in terms of lack of income. Hence poverty, according to Whiteford and McGrath (2000), means low (for that context) levels of annual income, or lack of income, and vulnerability to

54 Quoted in, S Benton, Measuring SA’s second economy, BuaNews (Vol. 1: 2005).

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downward fluctuations in such income. Such fluctuations can be relatively predictable (e.g. caused by a marriage) but may also result from unexpected shocks such as illness, funeral expenses, theft and fire. Whiteford and McGrath (2000) further point out that it is not possible for these households to survive in the long run. Therefore, the US$1 a day norm should take into account an income threshold set for that context, and consider actual living standards in the specific country being discussed. Whiteford and McGrath (2000) and Aliber (2001) explain the minimum living level or poverty line as denoting the financial requirements of members of a family if they are to maintain their health and have acceptable standards of hygiene and sufficient clothing for their needs. Alternatively, people can be considered poor even if they live above the minimum subsistence level, in the sense that they might still fall below what is regarded by the society in which they live as the minimum level of command over goods and services needed in order to be fully integrated members of society. People are also considered to be poor when their condition of poverty endures over a period of time; that is, their lives are characterised by the inability or lack of opportunity to better their circumstances over time, or to sustain themselves through difficult times. Further, the probability or risk today of being in poverty or falling into deeper poverty in the future is an important dimension in measuring poverty; vulnerability refers to the inability of a household to control their situation in any meaningful way. If, for example, the primary wage earner or breadwinner were to fall sick or a drought were to destroy their crops, they would have no safety net to catch them and would be driven deeper into poverty.
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Poor people are further categorised by the South African Advertising Research Foundation (2003: 14) as those in and below the Living Standard Measure (LSM) 5; that is, those having an estimated average monthly income of between R748 and R2 289. There are 10 LSM categories, ranging from R748 to R13 406. People at or below LSM 5 are usually unemployed or, if employed, are on a temporary or part-time basis. According to the International Labour Organisation, women are most vulnerable to poverty, and engage in the informal economy such as domestic work, often characterised by excessive hours of work with no extra payment, overwork, lack of benefits or social security, unfair termination of employment and abuse by employers (ILO 2003). Further, poor people are marginalised and excluded from the mainstream economy, and they are vulnerable because they are for the most part not unionised, and thus lack networks or any organisational basis for bargaining or comparing current wage rates. Most do not have proper accommodation, living in rural areas or urban informal settlements and in cramped and inferior accommodation such as shacks.

The challenge of the second economy
The problem of the persistence of the dual economy in South Africa, particularly the second economy, merits renewed focus by the Zuma administration and policy-makers. The Zuma administration has to aggressively address the challenges of the second economy in order to help as many people as possible to further realise their economic potential. Given the sheer size of the second economy, interventions there are crucial to reducing poverty and stimulating economic development. Such interventions include developing effective government programmes to address the challenges of poverty and underdevelopment. The biggest challenge facing South Africa could be said to be halving – or at least reducing – the number of people without sustainable access to resources by 2015, and building a social security net to meet the objectives of poverty reduction. This has to inform much of the policy focus of the Zuma administration. While improving job growth and development in the first economy is important in order to ensure the creation of sustainable livelihoods (as promised in the ANC’s 2009 election manifesto), the really successful policies and programmes will be those that are able to close or at least minimise the gap between the first and second economies. There is a need to enhance people’s productive capacities, to enable those who are currently marginalised to become part of the national economy on a sustainable

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basis. This calls for policy-makers to consider various key interventions, including financing options, according to the needs of the country, its priorities and the available funds.

The 2009 ANC election manifesto
Despite progress in the 15 years since 1994 in socio-economic development and poverty reduction, South Africa still faces high levels of unemployment, poverty and underdevelopment, deepening inequality and rural marginalisation. In an effort to transform South Africa and deal with the challenges of poverty and underdevelopment, the ruling party drew up its election manifesto for the period 2009–14 (ANC 2009). Poor households tend to have larger families, lower educational levels, high unemployment, low income and low participation in the labour market. ANC president Jacob Zuma (2009), in his address on the launch of the election manifesto in January 2009, mentioned that the manifesto identifies five priority areas of development in South Africa, namely: creation of decent work and sustainable livelihoods; education; health; the fight against crime and corruption; and rural development, food security and land reform. With the exception of rural development and land reform (the focus of Chapter 3 of this volume), these priority areas and the challenges they present for the Zuma administration are discussed below.

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Employment creation and sustainable livelihoods
Unemployment is a critical contributor to poverty in South Africa. Many of the poor in South Africa are unemployed and cannot find work to earn an income. They lack the skills that would render them employable in the first economy. One of the priority areas of the 2009 ANC election manifesto is to create decent work and sustainable livelihoods for the South African people (ANC 2009). The argument is that poverty can only be reduced (or eradicated) in a sustainable way if people have access to decent work. Decent work is work that provides for the rights of workers and their adequate protection, better quality jobs, access to social security, and fights against poverty and inequality (Zuma 2009). Sustainable livelihoods, according to AfricaFocus Bulletin,55 comprise both material and social resources, the latter being the capabilities and activities required to secure a means of living. A livelihood is considered to be sustainable when it can cope with and recover from stresses and shocks and maintain its capacities and assets now and in the future. A sustainable livelihood enables a poor household to build assets and reduce their vulnerability to economic and financial shocks, and improve household conditions in general. According to Zuma (2009: 4), South Africa has succeeded, in the past 15 years, in creating 500 000 jobs annually, especially since 2004. The trade and industry minister, Mandisi Mpahlwa (2008: 1), and Zuma (2009: 5) report that unemployment fell from 31.2 per cent in March 2003 to 23 per cent in September 2007. However, the level of unemployment remains high and the majority of the poor still experience unemployment. According to the Department of Public Works (2004: 13), around 25 per cent of South Africans are unemployed and a very high proportion of the unemployed have never worked – 70 per cent of youth aged 16–34 and 59 per cent of the total number of unemployed. As already mentioned, poor households show a very low participation rate in the labour market. The unemployment problem in South Africa is chronic and structural because the number of people who enter the labour market exceeds the number of available jobs. This means that supply-side interventions have only limited potential to address the unemployment problem.
55 South Africa: Poverty debate, AfricaFocus Bulletin (29 November 2004).

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An analysis of poverty and marginalisation has to consider the local contexts that shape the ways in which some of the poor households use their assets to mediate or bridge the impact of shocks. In many cases, the unemployed turn to self-employment, where they engage in informal and survivalist activities, including hawking and vending, tailoring, hairdressing, running spaza shops, and other similar activities. Self-employment, according to Lazaridis and Koumandraki (2004), is a strategy towards inclusion, a feasible survival strategy for escaping discrimination and exclusion given the lack of other employment options. Such enterprises are normally referred to as survivalist enterprises; usually with no paid employees and minimal asset value, survivalist enterprises are activities undertaken by people unable to find a paid job or get into an economic sector of their choice (Department of Trade and Industry 1998). They generate income below the poverty line and their main aim is to provide minimal subsistence means for their families. These activities, although seeming barely sustaining or profitable, would be the households only means of survival. Survivalist enterprises lack access to credit, information about markets, and business and negotiating experience, and are characterised by social distance from and discrimination by the formal financial institutions. This deprives them of the power needed to interact with others (Department of Trade and Industry 1998). (‘Access’ is defined as providing financial services or credit within 20 km of 80 per cent of people in the rural areas.)56 These characteristics of survivalist enterprises further contribute to increasing their poverty and lowering their standard of living due to the inability to finance their businesses. Poverty can be reduced through, among other things, access to finance, which can enable poor households to build assets and reduce their vulnerability to economic and financial shocks, thus contributing to building sustainable livelihoods. Du Toit and Neves (2007) argue that some of the hindrances experienced by poor households result from the very difficult nature of their relationship with the mainstream economy, and this contributes to their marginalisation. While the strategy for supporting small, medium and micro enterprises (SMMEs) in South Africa has to prioritise small enterprises and focuses on delivering sustainable jobs as well as on the sustainability of such enterprises, it is strongly argued that the distinction must first be made between entrepreneurs (small businesses) and survivalists (self-employed people) who operate in the second economy; this will then inform policy on support interventions. Not all SMMEs are survivalist enterprises and some have the potential to grow and employ people, thus contributing to economic growth and development. Under previous ANC administrations, institutions and strategies were established to support SMMEs, yet micro-credit instruments focus only on urban areas and are inadequate vehicles for delivering such credit to survivalist entrepreneurs in informal settlements and/ or rural areas of the second economy. The concern raised here regarding the continued establishment of financial support institutions or strategies, in particular, is that none of these are targeted at survivalist enterprises operating in the poor communities in South Africa. The mechanisms of credit exclusion are determined by high transaction costs and unavailability of collateral; these constraints hinder survivalist entrepreneurs from accessing credit. They therefore resort to informal sources or schemes, which are able to deal with and remove the need for collateral and to lower the transaction costs of lending and borrowing. However, survivalist entrepreneurs are often exposed to exploitation by informal moneylenders who charge exorbitant interest rates and lead the entrepreneurs into debt. It is in this context that new, effective and appropriate strategies are needed to support survivalist entrepreneurs and improve their standard of living. In an attempt to address poverty, underdevelopment and unemployment, South Africa increased its programmes through the Expanded Public Works Programme (EPWP) in 2004 (EPWP 2004). The EPWP

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56

Mzansi national bank account, Enterprise Magazine (February 2005).

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was established as one of a range of government strategies to reduce unemployment using labourintensive methods, with the purpose of imparting skills to people who have none and creating more than a million temporary (and part-time) job opportunities by 2010. Of the million employed in this way (2005–09), at least 40 per cent are said to be women, 30 per cent youth, and 20 per cent disabled (EPWP 2004). The job opportunities were created in government-funded infrastructure projects and public environmental and social programmes, to equip unemployed people with work experience, education and skills, and help them with exit opportunities. Labour-intensive government projects include, for example, building houses, clinics and schools, and maintenance of roads, water supply and sanitation.

Employment creation and poverty reduction challenges
As already stated, the question of employment (or lack thereof) is at the heart of extreme poverty and social exclusion. However, the EPWP is unlikely to meet the wider set of sustainable social development goals and to reduce poverty and underdevelopment. This is because the jobs provided are only temporary or part-time and many people continue to be unemployed thereafter. Although the strategy aimed at making it possible for people to earn an income after leaving the EPWP – either through finding a job or starting a business (EPWP 2004) – the EPWP offers income in the short to medium term. This is, however, invariably used for consumption purposes rather than sustaining livelihoods (McCord 2003). The EPWP is also characterised by limited project management and social development capacity in the public sector. There is a need to develop new training modules, set up new learnerships and produce new materials. According to the Department of Public Works, lack of capacity constrains the success of the EPWP. It relies heavily on private sector corporations for infrastructural development; the Department of Public Works (2004) mentions that the huge risk in the EPWP is the potential for corruption, and emphasises that mitigating the risk requires good systems and auditing capacity within each of the project management units. Given these challenges, and the fact that the required systems and capacity are not in place, the EPWP is unlikely to impact positively on the problems of poverty and unemployment in South Africa. The Zuma administration is faced with the challenge of creating more job opportunities, improving conditions of employment, and minimising job losses experienced in the economy (particularly as a result of the global financial crisis). An additional urgent challenge for the Zuma administration is providing support for and developing survivalist enterprises, to enable them to improve their standard of living; in so doing, it is necessary to make the distinction between entrepreneurs or small enterprises, and self-employed survivalist enterprises that operate in the second economy.

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Education
Education has a significant role to play in the transformation of contemporary South African society. Illiteracy and low levels of schooling make any reform or economic programme challenging. Lack of education condemns poor households to very low-skill jobs, where remuneration or income is insufficient for survival. One of the MDG targets is to ensure that, by 2015, children everywhere will be able to complete a full course of primary schooling (Bernier et al. 2005). Stephen (2006: 2) points out that 42 million children in sub-Saharan Africa are not enrolled in school, and that even those who have access to school receive poor quality education and are unable to acquire the basic skills of writing and reading. NEPAD has called for the reversal of such situations, and the South African Embassy (2003) emphasises that what is required is to mobilise resources such as capital, technology and human skills to launch a global war on poverty and underdevelopment.

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Bernier et al. (2005: 31) report that about 15 per cent of adults in South Africa are illiterate, and that the primary education rate fell nearly 10 per cent in the period 1990–2002. This calls for a renewal of the education system to make education a priority for all. According to both Zuma (2009: 5) and Statistics South Africa, as cited by the Southern African Regional Poverty Network (Government of South Africa 2007), there have been achievements in terms of improving the level and quality of education and eliminating disparities in education. Zuma mentions that access to primary and secondary schooling has increased, with the highest level of participation by girls, and with an estimated 98 per cent of South African children aged 7–15 years enrolled in school (of which 88 per cent are six-year-olds). According to the General Household Survey conducted by Statistics South Africa, the number of 15- to 24-year-olds who are not functionally literate has been decreasing steadily, from 14 per cent in 2002 to 10 per cent in 2006. The participation rate of 4- to 5-year-olds in early childhood development programmes had increased to 70 per cent by 2007 (Government of South Africa 2007: 2). The 2009 ANC election manifesto is committed to, among other things, a free and compulsory education for all children, and makes provision for at least 60 per cent (from 40 per cent) of schools to be no-fee schools. The government introduced a no-fee school plan in 2006 to end the marginalisation of poor learners and the plan saw an increasing number of children (60 per cent) remaining in school; access to school has been strengthened by the plan. Zuma (2009: 2) reported that in 2007 around 5 million children who could not afford school fees were benefiting from the no-fee school plan.
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For the 2007 academic year, a total of 5 001 874 learners from 13 856 schools across the country are reported to have been listed by the provincial education departments as beneficiaries of the no-fee school plan. During 2008, 40 per cent of primary and secondary schools were declared no-fee schools. The government determines which schools qualify to be no-fee schools, using data from the Poverty Index supplied by Statistics South Africa. Up to R530 per learner is allocated for each designated school. Schools that enrol non-fee learners are allowed, through a framework that government has developed, to receive subsidies. In this case, parents no longer need to apply for exemption from paying school fees at the no-fee schools, but it remains the duty of the principal to inform parents of this. Despite this strategy and despite the vast need, many children who live in poverty-stricken and rural areas do not have access to no-fee education. Further, the process of identifying poor schools that should benefit from the no-fee education seems to be fraught with problems, given the existing system of classifying schools according to socio-economic quintiles, coupled with the poor quality of data available about schools; the system seems to be far from functional or equitable. Higher education institutions also play a major role in achieving socio-economic transformation along democratic and equitable lines, and in steering South Africa into a competitive global economy. Education White Paper 3 (promulgated in August 1997) and the Higher Education Act (No. 101 of 1997) call for the state to coordinate the higher education system and to make it more responsive to the real challenges posed by globalisation, by creating a knowledge society with the relevant and necessary skills (Reddy 2004). Both the White Paper and the Act acknowledge the need for a single, coordinated higher education system applicable to all higher education institutions, to provide guidance in the development of programmes and qualifications. Another important and major policy intervention as a result of the 1997 Higher Education Act was the government’s introduction of the National Student Financial Aid Scheme, to assist needy but capable students to access higher education. The number of students who accessed higher education increased from 495 000 in 1994 to 734 000 in 2005 and, according to the deputy minister of education, Enver Surty (2007: 2), the figure is set to increase to over 800 000 by 2010. According to Surty (2007), the White Paper contributes to the creation, sharing and evaluation of knowledge. Higher education institutions have the responsibility of redistributing existing resources

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and capacities in the best possible way, by producing graduates who are equipped with a wellrounded education, to play an important role in furthering the developmental agenda of the country. While there have been significant increases in the number of black students from poor communities (both rural and urban) entering higher education, particularly historically black universities,57 a fairly large number enter historically white universities (Reddy 2004: 3). However, there is still a need for historically white universities to undergo social change, particularly with regard to the skewed racial composition of staff and academic curricula. The process of socio-economic development must include human resource development, which includes skills development. In terms of the latter, the issue that consistently surfaces in South Africa (and around the world) is finding ways to attract more young people into government service. There needs to be more emphasis on who will be the next generation of public servants, who can make a difference in the Zuma administration, what will appeal to them and how to attract and retain the talent required for excellence in government. According to the Department of Public Works (2004), all work opportunities in South Africa are combined with skills training or education, which aims to increase the ability of participants to earn an income. Effective and efficient service delivery needs investment in training and skills development. The Department of Labour together with the Sector Education and Training Authorities (SETAs) coordinates training and skills development to ensure relevance to the needs of the economy. While many SETAs have not functioned optimally, skills development is a way of improving capacity for government employees and strengthens their roles and responsibilities in the developmental state. South Africa has put in place the Human Resource Development Strategy (HRDS), which aims at addressing major human resource capacity constraints hampering the effective and equitable delivery of public services (Department of Public Service and Administration 2002). The HRDS supports a holistic approach to human resource training and development, and aims to ensure better coordination and alignment of the development initiatives that already exist in the public service. The strategy aims to improve the supply of high quality skills responsive to societal and economic needs, increase employer participation in lifelong learning, improve the foundation for human development, and support employment growth (Department of Public Service and Administration 2002). Former Northern Cape premier Dipuo Peters (2007), during her speech at the launch of the Northern Cape HRDS, mentioned that being able to fight socio-economic challenges like poverty and underdevelopment requires human resource development programmes that ensure that people participate fully at all levels of the economy. Peters emphasised that the structure of the economy in the past pushed the majority of poor unemployed and unskilled people into the second economy. Although education and training may not immediately remedy underdevelopment, they can serve as a catalyst for growth and development, by serving the causes of redress and equity, capacity building and empowerment. The education and training system has to be responsive to the needs of the economy by producing graduates with the relevant qualifications needed by the labour market. Supporting initiatives with the potential to create and develop sustainable income-generating activities is crucial to developing human resource capacity, increasing savings and investment, and improving the social and economic well-being of all South Africans. In line with the aims of the MDGs, the United Nations Development Programme (UNDP) in South Africa focuses on supporting and providing pro-poor capacity development initiatives aimed at helping to achieve service delivery commitments, policy framework implementation, monitoring and evaluation, municipal governance,

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57

By ‘universities’ is also meant universities of technology and comprehensive universities.

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and performance and accountability within provincial and local government structures (UNDP 2007). The HRDS (Department of Public Service and Administration 2002) should provide for better monitoring and evaluation of the development efforts.

Education-related challenges
If it is to improve the quality of education in schools in South Africa, one of the challenges that the Zuma administration faces is overcrowding; this is the case in schools in poor areas, particularly rural schools. Pupil : teacher ratios are reported to have improved from 43 : 1 in 1996 to 32 : 1 in 2006 (Zuma 2009: 6) but this does not apply to most poorer schools. The MDGs emphasise achieving universal primary education for boys and girls by 2015 (Bernier et al. 2005). The ANC election manifesto (ANC 2009) targets 2014 for achieving this and dealing with and removing illiteracy (especially of 15- to 24-year-olds) but this will be difficult to achieve given the current challenges of schooling, particularly in rural areas. These will hinder progress in terms of improving education and eliminating disparities. It seems that more teachers have to be appointed, to deal with the increasing number of children, and that more schools need to be built to accommodate them. Most important, it seems, is to appoint qualified teachers, especially in maths, science and technology or to retrain and redeploy teachers to improve performance in these learning areas. In addition, it is suggested that stringent measures be implemented to ensure the attendance of school and classes by teachers and learners alike, especially in township and rural schools. For many schools in poor areas, infrastructure remains a serious challenge. Despite the huge budget the government provides for education annually, schools still need, among other things, sanitation, running water, electricity, libraries and computers, which are the basic requirements for effective education. It is suggested that the Zuma administration needs to develop plans to upgrade school infrastructure in order to improve service delivery. As already mentioned, the no-fee school and compulsory education plan only makes provision for 60 per cent of schools; the remaining 40 per cent are thus excluded, to the detriment of great numbers of poor people. More effective strategies are needed to ensure that the entire schooling system benefits all children, whether urban or rural. It is suggested that the Zuma administration needs to address existing social inequality by focusing on creating a supportive schooling environment that provides the leadership and resources that all children need to benefit from their schooling. A potential stumbling block is that the introduction of the no-fee school plan does not make provision for how the plan will be financed. Free education could obviously significantly impact on a school’s ability to raise finances, because free education includes not only freedom from paying fees, but also the provision of books, transport and a daily meal for free. These naturally incur additional costs, which means that government will in fact have to make provision to compensate the school for the financial loss of the school fee as well as catering for these additional expenses, and this may well put financial strain on government. With regard to higher education, while there has been a significant increase over the years since 1994, in the number of students entering university, Department of Education statistics show very low graduation rates, and the concern is that very few students graduate after five years and many drop out of their studies. Given these challenges, it seems that the Zuma administration will have to consider new mechanisms and develop new strategies for improving graduation rates. The financial allocation to higher education institutions needs to be reviewed, for an increased number of students to be able to have access to finance. Zuma (2009) has also emphasised the need to address the tendency of students leaving university with huge debts; he points out that the problem is exacerbated if such students do not find work in order to repay their debts. Further, existing student: lecturer ratios impact negatively on the graduation/output rates in many higher education institutions. This hinders effective

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teaching and learning in that it becomes difficult to focus on individual students or conduct group discussions – approaches that might contribute to an improvement in success/graduation rates. Other education-related challenges for the Zuma administration include the development of relevant strategies to make excellence in government a reality and shape the future for all South Africans through quality education. Support for education and skills development that foregrounds economic growth, sustainable development and poverty reduction needs leadership that is genuinely committed to these goals, as well as a new global partnership based on shared responsibility and mutual interest. Challenges in the higher education system are complicated by macroeconomic policies associated with globalisation that impact on university curricula and priorities, the changes brought about by the mergers of the past few years and cultures within higher education institutions that resist transformation.

Health
Social indicators are worsening in poor communities, and low levels of social and physical infrastructure in such communities increase vulnerability to disease. One of the most important issues related to poverty is the HIV/AIDS pandemic. The MDGs include halving poverty and stemming the AIDS pandemic by 2015 (Stephen 2006: 2). The fourth to sixth goals are reducing child mortality; improving maternal health; and combating HIV/AIDS, malaria and other communicable diseases. Stephen (2006: 2) argues that in Africa 25.4 million people are living with HIV, with over 3 million new infections occurring each year. In addition to other infectious diseases, many children die from measles, malaria, diarrhoea and pneumonia. Measles alone kills over half a million African children each year, and 11 million die before their fifth birthday as a result of mostly preventable diseases like those mentioned above (Stephen 2006: 2). The World Bank (2002: 25) emphasises that HIV/AIDS is a principal cause of death among adults aged 20 to 50 in many countries. HIV/AIDS poses a serious threat to the South African economy. While Bond (2001: 154) reports that South Africa records the world’s fastest growing HIV infection rates, AIDS Foundation South Africa (2005: 1) reports that South Africa has the sixth highest prevalence of HIV in the world, estimated at 18.8 per cent of the population, and AIDS-related deaths were estimated at 320 000 in 2005. Bond (2001: 154) reports that at least 16 per cent of adults, 20 per cent of pregnant women and 45 per cent of the armed forces tested HIV-positive in 2001. According to ANC president Zuma (2009: 5), significant progress has been made in expanding free primary healthcare, for example, building and upgrading 1 600 clinics and 18 new hospitals as well as refurbishing many others. Zuma mentioned the expansion of HIV/AIDS treatment to more than 480 000 people. While it is widely acknowledged that efforts have been made by government to reduce HIV infection rates – by implementing programmes that include the allocation of financial resources – many patients still have little or no access at all to treatment, and as a result full-blown AIDS develops. Evidence from recent research indicates that levels of the pandemic still remain unacceptably high. The Southern African Regional Poverty Network, for example, estimates that 13 per cent of the South African population and 25 per cent of adults are HIV-positive, the maternal mortality rate is 230 per 100 000 live births, and the infant mortality rate is 45 per 1 000 live births (SARPN 2008: 1).

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The impact of HIV/AIDS on the South African economy
The HIV/AIDS pandemic impacts on households, reducing life expectancy and worsening poverty, as it leaves children and elders to cope with the demands of survival and the escalating care burden of looking after orphans and dying relatives (SARPN 2008). This phenomenon in turn threatens the 2009 ANC election manifesto goals of free and compulsory education for all. HIV-infected adult family

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members contribute to a reduction in family income due to the inability to participate in production or domestic work. The household’s expenditure on medical costs increases. The cost of the drugs necessary for treatment further contributes to the problem of poverty, given that many of the poor in South Africa, and particularly black people, cannot afford medical aid cover and as such are vulnerable to the disease. Bond (2001) found that many HIV-positive people were unable to afford treatment due to the expense of the drugs – a problem caused by international pharmaceutical pricing; as a result, the death rate from HIV/AIDs increases. The Budget shortfalls of 1999 were also a factor that prevented South Africa (in particular, the Department of Health) from providing many HIV-positive pregnant women with the required treatment. When free primary healthcare was offered nationally in 1994 to pregnant women and to children under six, which also included, in 1996, all personal consultation services and non-personal services, these free services were limited by some provinces, particularly in 1999 due to fiscal constraints (Bond 2001). Although Bond’s (2001) research found that the policy on free healthcare had achieved some successes in terms of preventing illness and death, access to pharmaceuticals continued to be a stumbling block. In order to establish health rights and health equity, South Africa’s National HIV Strategy (2007–2011) was introduced and approved in 2007, with the purpose of overcoming inequalities in healthcare and restoring human rights (Haywood 2007). The National Strategic Plan (NSP) on HIV and AIDS and sexually transmitted infections seeks to reduce the rate of HIV infections by 50 per cent and to minimise the impact of the disease on society, as well as expand access to appropriate treatment, care and support to 80 per cent of all HIV-positive individuals by 2011. As one of the poverty alleviation strategies, the NSP further seeks to introduce a chronic disease grant. However, it has, to be emphasised that activities should be carefully prioritised for such a plan to be effectively implemented. In respect of the government departmental spending problems and budget shortfalls alluded to above, people who have skills and capacity in project management must be drawn in to implement the NSP and ensure that the chronic disease grant benefits those targeted. AIDS Foundation South Africa (2005) is of the view that the most effective way of supporting successful prevention is to identify and partner with local community organisations or schemes that possess inside knowledge about those affected. For this to be successful requires technical and financial support by the government for the foreseeable future. To further improve access to and quality of healthcare services and to end inequalities in healthcare provision, the ANC will introduce the National Health Insurance (NHI) system for the period 2009–13, as set out in its election manifesto (ANC 2009). This will give all South Africans the right to access quality health care (Zuma 2009). The system will be publicly funded and free healthcare will be provided. A major focus will be on improving the quality of health professionals, management and leadership skills; strengthening accountability; and upgrading national standards of healthcare, as well as training and appointing qualified health professionals. Public hospitals and clinics will also be upgraded.

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HIV/AIDS-related challenges
HIV/AIDS causes a decline in life expectancy rates, increases infant and child mortality rates, threatens social stability and worsens poverty. Given the interrelationship between HIV/AIDS and poverty, it would seem clear that they are the most immediate and urgent challenges facing the Zuma administration; it has to look seriously at implementing effective policies to deal with HIV/AIDS. It will become difficult to achieve the MDGs of halving poverty and stemming the AIDS pandemic by 2015 given the problems alluded to above. In addition to the challenges already discussed of providing treatment, reducing infections in South Africa is made more difficult by the growing population of people from other countries, such as Zimbabwe and Nigeria.

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The divisions between the ANC leadership on matters pertaining to HIV/AIDS intensify the Zuma administration’s challenges. Public disagreement between senior ANC politicians and other nongovernmental actors in South Africa marked the HIV/AIDS policy development process. The ANC leadership and top officials (e.g. ministers, deputy ministers, members of the Presidency, premiers, members of parliament, MECs, National Executive members and unions) have been generally accused of ignorance in the handling of the pandemic. PlusNews points out that the different views among the ANC officials harm public healthcare in general and stand in the way of an effective response to the HIV/AIDS pandemic in particular.58 Schneider (2002) points out that presidential and ministerial (i.e. state) interventions on HIV/AIDS may be viewed as countering the attempts by activists to influence the policy process; and the official government response can be seen as denying the enormity of the problem of HIV/AIDS. The different views regarding the causes and treatment of AIDS and the government’s denial that HIV causes AIDS subjected South Africa to worldwide criticism. Not only that, but poor judgement and lack of awareness regarding HIV/AIDS by the ANC leadership hindered the provision of life-saving antiretroviral drugs until 2004, and resulted in thousands of people dying from the pandemic. An estimated 365 000 people died between 2002 and November 2008 (see Note 58 for source) due to government’s denialism and its rejection of scientific consensus on the cause of AIDS. This has undermined and continues to undermine efforts to ensure that the country is able to realise its social and economic potential, and poses a political challenge to the Zuma administration regarding the implementation of good and effective policies to deal with the HIV/AIDS pandemic.
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The disagreement and contradictory stances of political leaders on HIV/AIDS interventions undermine the government’s power to implement major policy initiatives like the RDP, GEAR and the Accelerated and Shared Growth Initiative for South Africa (ASGISA). In this context, it is suggested, effective leadership should be exercised to deal decisively with the HIV/AIDS challenge. The Zuma administration should mobilise and lead a united response to HIV/AIDS. Political leadership needs to play a significant role in addressing the challenges of the pandemic. For South Africa to succeed in addressing HIV/AIDS, extensive research has to be conducted by qualified and skilled researchers, to gather adequate data on the incidence and prevalence of HIV/AIDS. This should include revisiting the findings of qualified researchers who have already conducted such research. The research findings will then inform the government, policy-makers and other stakeholders and actors as to the development of effective strategies and policies, to ensure that South Africa realises its socio-economic potential. This rests on the willingness of the ANC leadership to engage with activists in addressing the pandemic. The ANC (2009) election manifesto is silent on how it will coordinate the NSP (2007–11) and the new NHI, to be phased in over the next five years (i.e. around 2009–13). The two plans overlap and serve the same purposes – of overcoming inequalities in healthcare and restoring human rights. It is suggested that the Zuma administration synchronise these plans and come up with a single comprehensive plan to deal with the challenge of HIV/AIDS.

Crime
Many researchers report that South Africa has high levels of crime as compared to other developing countries, particularly those in sub-Saharan Africa. Violent crime is outstandingly high. Women and children are victims in a significant number of reported cases. Women and children are assaulted, killed and raped in their homes and neighbourhoods. Crimes include, among others, murder, rape, car hijackings, robbery, assault, sexual offences and burglary. UNICEF South Africa (2005–2006: 2) reports that, according to the South African Police Services, rape, assault, aggravated robbery and other people-to-people crimes account for more than a third of the country’s recorded serious crimes.

58 Global HIV/AIDS news and analysis PlusNews. Accessed April 2009, www.plusnews.org

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In 2006/07, for every 100 000 people, 443 were assaulted, 111 murdered and 41 raped (UNICEF South Africa 2005–2006: 2). According to McDonald (2008: 4), in 2007/08 over 2 million crimes were reported to the police, of which 52 per cent were theft, commercial crime and property crime, 24 per cent interpersonal violence, 9 per cent robberies, 8 per cent theft of firearms, alcohol and drugs, and 7 per cent arson and damage to property. These statistics show an increase in criminal targeting of businesses, with an 8 per cent increase in burglaries of business premises, a 6 per cent increase in commercial crimes, and a 2 per cent increase in shoplifting. About 19 000 people were murdered in 2008. These statistics exclude unreported crimes, which tend to involve family members, friends – cases where victims and perpetrators know each other. Other factors exacerbate crime, namely, gangs and syndicates, mob violence and the absence of an effective criminal justice system. The high levels of crime in South Africa are certainly cause for concern, and intervention measures are undoubtedly needed. One possible option would be the recruitment of increased numbers of police officers, both in a bid to prevent crimes from being committed and to deal efficiently and effectively with the crimes that are committed. President Mbeki, in his 2008 State of the Nation address, acknowledged the ongoing failure of the government to fight crime in the past and stated that this had become a national concern. The 2009 ANC election manifesto stipulates the aim of drastically reducing crime levels by overhauling the criminal justice system (ANC 2009).

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Crime-related challenges
It seems likely that crime has a range of negative effects on the South African economy. For example, crime-related injuries place added strain on emergency health services, while associated mental and emotional stresses are likely to manifest in increased incidence of stress-related illnesses and in higher than normal rates of absenteeism from work. This, in turn, affects productivity rates. According to Campbell and Meer (n.d.: 2), the high incidence of violent crime being extensively covered by the media results in most of civil society living in a state of fear and insecurity, and this provides potential for political instability. Further, victims of crime, especially the poor, lose their assets because they are unable to afford security devices or to pay for private security patrols. They are, therefore, unsafe and exposed to victimisation and threat of death. Crime increases unemployment and poverty levels in other ways too: the families, particularly women and children, of those convicted of crimes lose support as they are separated from their breadwinner, who becomes subject to a jail term. In such cases, when the breadwinner is released from jail, they often find it difficult to get and keep an adequately paid job. In cases where the breadwinner dies, the family gets deeper into poverty. Further impacts of crime are felt on access to infrastructure and/or rural development: poor communities become entrapped in a deprived environment when infrastructure is destroyed or stolen – for example, theft of electricity cables or pumps that supply water to communities, and damage to public telephone units are disincentives to infrastructural development. Further, crime impacts on small business development. Promoting small businesses is an important priority of the government in South Africa, as it has the potential to create decent jobs and bring people out of poverty. However, crime serves to hamper the development of small and survivalist businesses. Businesses operating in townships and/or informal settlements are more at risk due to the inability to install security devices. Those operating businesses in inner-city environments are also exposed to risks

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such as shoplifting, credit card fraud and the use of counterfeit money. Crime therefore impacts on the profitability and viability of businesses because of the goods that are stolen and the damage that is done to property and equipment. Crime increases business spending on security measures such as armed guards, surveillance systems, electric fencing and alarm systems. In short, crime affects different areas (urban and rural) of South Africa in different ways, and thus appropriate strategies need to be devised to prevent it.

Macroeconomic strategies for reducing poverty and underdevelopment
With the advent of democracy in South Africa in 1994, the ANC government embarked on drafting its vision of how it would transform the country. The developmental framework focuses on achieving macroeconomic objectives, including reducing poverty and underdevelopment, through various social and economic policies. These macroeconomic strategies were the RDP (introduced in 1994) and GEAR (introduced in 1996). The central theme was to reduce the poverty experienced by the majority of South Africans and make services of an economic nature accessible to all. South Africa has committed itself to correcting structural injustices and improving the living standards of the people, and recognises socio-economic rights (access to basic services such as housing, health and education) enshrined in the Constitution of the Republic of South Africa (1996) as an integral component of developing the country. The RDP was a socio-economic policy and development planning framework intended to transform the country. The RDP provides an integral vision for meeting basic needs and developing human resources and is a programme for orienting the activities of government fully and effectively towards reconstruction and development, especially in the most neglected and impoverished areas of the country (Department of Finance 1997). The government, in consultation with financial institutions, wanted to establish prudent and nondiscriminatory financial lending criteria, especially in respect of creditworthiness and collateral; reform laws on women and banking to ensure equality; develop simpler forms for contracts and applications; and create an environment that would reduce the risk profile of lending to poor (and low-income) communities. Where anti-discrimination measures do not generate enough credit, the government must provide appropriate kinds of financial support. The government therefore introduced the RDP White Paper in November 1994, which took cognisance of the fact that wealth distribution was skewed, probably partly as a consequence of the uneven access to financial services in general and credit in particular. In 1996, the government, through the Department of Finance, introduced GEAR, which was a conventional macroeconomic framework for economic growth intended to give rise to ample employment opportunities and redistribution of resources. The main objective of GEAR, according to the Development Report (DBSA 2005), was to rebuild and restructure the economy in keeping with the goals of the RDP, and to attract investors by increasing stability, integrating the unemployed, and providing a boost to growth. It involved the analysis of patterns of development with regard to trends in the gross national product. The assumption was that people can be better off if they have reasonable access to job opportunities and lending facilities. Alarmed by the increase in unemployment (from 26 per cent in 1994 to 30.5 per cent in 2002), the 2004 government committed South Africa to achieving the MDG of halving poverty and unemployment by 2014 (DBSA 2005).

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ASGISA, introduced in 2006, focuses on fast, job-creating growth, ensuring availability of the needed skills, creating opportunities for those marginalised in the second economy, and maintaining policies that will bring macroeconomic stability. ASGISA aims to increase growth by at least 6 per cent a year from 2010 onwards, and sees increased exports as fundamental to achieving this. According to Green Left Weekly, in 2006 the country managed to increase output growth (exports) significantly, although employment in major sectors such as manufacturing, mining and agriculture decreased.59

Strategic policy challenges on poverty and underdevelopment
The strategies that South Africa has up to now used to extend credit to poor households and to alleviate poverty and reduce unemployment have proved ineffective (Gillis et al. 1992; Van de Ruit 2001). The RDP and GEAR could not spell out clearly what the new economic strategy would entail in terms of mobilising all the country’s resources towards alleviating poverty and what it meant for economic policy. They lacked transparency and have proved inappropriate approaches to solving the country’s most pressing economic problems, namely, poverty and unemployment, as well as uneven access to credit. The Development Report (DBSA 2005) points out that the macroeconomic growth that has been achieved has benefited only the first economy, with the poorer population in the second economy being excluded from such benefits.
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Further, although government policies are geared towards ensuring that smaller enterprises increase job opportunities, only established smaller enterprises benefited, rather than the emerging and/ or survivalist enterprises. ASGISA itself focuses only on micro initiatives and poses challenges with regard to macroeconomic stability, like maintaining and strengthening the value of the rand; it lacks integrated planning and does not indicate how public funds will be allocated to various government departments. For these reasons, it is suggested that the Zuma administration revise its macroeconomic strategies aimed at tackling poverty and underdevelopment, and develop more effective strategies that would benefit the great number of poor citizens.

Social security
As already argued, South Africa still experiences extreme disparities in income and wealth, evident in the yawning gap between the first and second economies. Inequality has been and still is largely defined along racial lines and within population groups, and the gap between rich and poor has widened. The poverty line varies according to household size; the larger the household, the larger the income required to deal with poverty. If a particular level of annual income per head is used as a poverty line, poverty reduction could thus be measured by counting the number or proportion of people who cross that line and who are promoted out of poverty (Johnson & Rogaly 1997). Their relatively low per capita income means that those in the second economy have minimal ability to save, with most money being spent on necessities. The availability of income determines the spending behaviour of poor households (i.e. how such income is utilised to provide for themselves and their families). They must find resources to pay for basic services while they fight to survive in hostile social and environmental conditions. Additionally, most have never had access to formal financial institutions and their main sources of finance to survive are relatives, friends or neighbours. Lack of skills to secure jobs and the absence of appropriate credit instruments leave those in the second economy with no choice but to fall into the financial traps set by unscrupulous moneylenders, who exploit them by charging exorbitant interest rates. The social security assistance programme (i.e. the system of grants) introduced by the government as the most significant pillar of the anti-poverty strategy has had a positive impact on the majority of poor households.
59 South Africa: The real state of the nation, Green Left Weekly (No. 656, 2006).

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Some households are recipients of and depend on government social grants or transfer payments such as disability, child support and foster care grants, old age pension grants, grants in aid for orphans and the terminally ill, and donations. Zuma (2009: 5), speaking in his capacity as ANC president, pointed out that access to social grants increased tremendously from 3 million people in 1997 to 12.5 million in 2008, with 8 million of these being children under the age of 14 years. The challenge is, however, that this social safety net has limitations, presents a strain on government and provides only partial assistance to certain categories of people. While the Development Report (DBSA 2005: 38) mentions that only 30 per cent of households receive social grants, AfricaFocus Bulletin emphasises that 11.8 million of the poorest 23.8 million South Africans live in households that receive no social assistance.60 The Southern African Regional Poverty Network estimates the number of households without social assistance at 60 per cent (SARPN 2008: 1). While the emphasis is on eradicating poverty and encouraging sustainable development, the Development Report (DBSA 2005) concludes that these grants, being only developmental and not actually reducing the symptoms of poverty, are therefore not in fact sustainable.

Financing strategies in South Africa
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The financial services system plays a pivotal role in financial services delivery and in community and individual development. Financial services include a broad range of financial products like credit and savings (Fourie et al. 1999). In addition, micro finance, the vital components of which include access to credit, savings, and insurance schemes as well as other financial products, involves the distribution of small-scale loans to poor households. Access to financial products is a vital component of poverty alleviation, employment creation, enterprise promotion or business development, and the opening of new avenues for organising the poor – especially women – and harnessing their potential (Greene & Berroth 2002). Financial services providers who aim to enable people to cross a poverty line have to focus on credit and savings facilities. Although there is a strong need for financial services, especially credit, on the part of poor households, and although the emphasis of the Banking Council of South Africa (1999) is on the need for banks to expand financial services delivery to the poor and to reduce operating costs, in fact financial institutions such as banks and micro-lending institutions in South Africa are dominated by the provision of credit with high transaction costs and the need for collateral to secure credit. Asymmetric information also hampers decision-making in financial contracts; that is to say, it becomes difficult and costly for financial institutions, particularly banks, to acquire information about borrowers. The lack of information and the need for collateral therefore lead to high transaction costs of extending credit. According to the Sunday Times, in 2004, 13.2 million of South Africa’s population did not have access to banking or financial services, especially credit.61 In 2006, the Mail & Guardian, in collaboration with FinScope, a national household survey of financial services, pointed out that 16.5 million South Africans were ‘unbanked’ and needed to be brought into the official banking system.62 The Micro Credit Summit, held in 2005, emphasised the need for development of new financial products, strategies and methods to provide financial services, especially credit, to poor households around the world. The purpose was for the micro-lending industry to combat poverty by improving access to credit for 100 million of the world’s poor households and 500 million of all the unbanked people (Mathie 2001: 1).

60 61 62

South Africa: Poverty debate, AfricaFocus Bulletin (29 November 2004). Banks chase 13 million new clients, Sunday Times, Business Times (12 November 2004). Room for growth in microfinance in South Africa, Mail & Guardian Online (28 June 2006).

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The target market for financial institutions is clients who possess pay slips as proof of employment, and collateral as security for loans which many poor households do not have. Most poor households have never had access to formal financial institutions, for reasons that include the terms and conditions governing the available financial services that are offered, geographical distance from the financial institutions, complexity of the paperwork and the difficult process necessary to make a transaction. This makes most banking products and most bank distribution channels unsuited to the needs of the majority of poor households. Despite the expansion of formal credit provision in South Africa, it has not been able to cover adequately the financial needs of poor households. According to Meagher and Wilkinson (2001), the strict financial legislation also limits the provision of credit to poor households, which are viewed as entailing relatively great risk. South Africa started its micro-lending activity in the 1980s, with an emphasis on NGO-type micro lending and funding of mostly micro entrepreneurs. After 1992, the sector experienced exponential growth, but with a focus on consumer credit provided by private sector firms to the employed. In the 1990s, the micro-lending sector attracted unprecedented donor, government and private sector attention and funding. This was showcased at the Micro Credit Summit of 1997, where more than 130 countries signed a declaration to promote credit globally. The World Bank (2002) emphasises that NGOs and CBOs are essential partners for sustainable service development with regard to poor households. They can help identify areas of common interest and build coalitions that link the interests of these groups of households and other communities. Their participation brings valuable knowledge and experience to the formulation and monitoring of the development policies, programmes and projects, and to implementation, and broadens the stakeholder base. The World Bank (2002) further highlights that NGOs and CBOs are actively involved in savings and credit as vehicles for social mobilisation, and try to provide access to small-scale credit for business, emergencies and consumption. In the main, the key to their effectiveness is found in the development of social capital in savings and credit groups and in their larger networks, which have been strikingly successful. Several key institutions were created in the 1980s and early 1990s, and most of them are still around in some form today. State-supported development corporations and a joint government and private sector small business financing institution were the most active in the market. With the advent of the new political dispensation in the country in 1994, and a relaxation of controls combined with increasing lack of employment and the inability of the formal economy to create new jobs, small- and medium-sized enterprises flourished all over the country. The increase in the number of enterprises resulted in an increasing demand for appropriate credit. In the poorer segment of the market, only a few intermediaries have been established to act as retailers of the credit required. Some of these early NGOs were the Rural Finance Facility (RFF), the Get Ahead Foundation (GAF), established in 1983, and the Small Enterprise Foundation (SEF), established in 1991. For some, such as the GAF, a taste of growing international excitement over micro lending, especially from the example of the Grameen Bank in Bangladesh, led to a desire to try the new approach in South Africa – but unfortunately with little success. This was an effort to promote alternative housing or shelter credit for those who could not access conventional credit. The GAF was the first intermediary of its kind to lend money to people operating rotating credit and savings associations like stokvels (Tomlinson 2002). The SEF worked towards the elimination of poverty and unemployment through the Micro Credit Programme (MCP) and the Tshomisano Credit Programme (TCP). While the MCP focused on existing, but generally marginal, micro enterprises and provided them with micro loans, the TCP strictly targeted only women who lived below the poverty

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line and provided them with smaller-than-usual micro loans. The SEF used a slightly modified group lending methodology pioneered by the Grameen Bank of Bangladesh, in terms of which groups (rather than individuals) applied for loans, and individuals were also screened in terms of character (i.e. how they had managed debt obligations in the past), capacity (i.e. how much debt they could comfortably manage), and capital (i.e. the borrower’s available assets, which could be used to repay the debt if income were to cease). The SEF did not provide a regular savings service but required members of both programmes (TCP and MCP) to accumulate regular savings through a post office savings account, in order to build up a fund on which they could fall back when faced with mishaps. Many of these institutions had an activist base and incorporated credit into their profile of activities, and were funded by donors such as the United States Agency for International Development (USAID). Ebony Consulting International (2002: vi) reviewed international experience in respect of rural credit and highlighted that after legislative changes to the Usury Act (No. 73 of 1968) in the form of an exemption for a loan below R6 000 in 1992, which was lifted to R10 000 in 1999, the sector experienced exponential growth, but with a focus on consumer credit provided by private sector firms to only the employed people of the country. For loans greater than R10 000, service providers have to lend at the prime lending rate, which is determined by the South African Reserve Bank. The exemption of the interest ceilings thus opened the sector to commercial (often unscrupulous) cash lending businesses, largely concerned with consumption lending. These early lenders generally functioned outside the law, charging interest rates in excess of the ceiling prescribed in the Usury Act. They were, in general, too small to attract any official attention, even though the Usury Act was meant to protect borrowers from usurious interest rates.63 However, even micro lending has tended to focus on wage and salary earners in urban areas, and the inaccessibility of credit for poor households in townships and/or rural communities continues to be cause for concern. It can, therefore, be concluded that in spite of the tremendous growth in micro credit, there is little innovation or variety in terms of the abovementioned programmes or models being adopted, and the types of credit products being offered. There is insufficient consideration of different needs among the diversity of clients in poor communities. The services offered by the NGO-type intermediaries (e.g. the RFF, the GAF and the SEF), which have acted as retailers to extend credit to poor populations, could not be sustained because they required collateral or assets that could be used to repay the debt in cases where income ceased. In addition, they did not themselves provide savings services to their clients that they could control and use as collateral to secure credit (as is the case with the Grameen Bank). Importantly, this pioneering era (1980s and early 1990s) piloted and established the two collection methodologies that were to be at the heart of micro-lending development in the following decade. These collection methodologies were card-and-pin lending and salary deductions. The card-and-pin lending and salary deduction methodologies initially started operating in 1989 and 1993 respectively (Visser & McIntosh 1998). An increasing number of employees had debit card-based bank accounts, into which their salaries were paid to reduce the risk of cash payment; but these same employees were not considered sufficiently creditworthy for other bank credit products. Retaining a borrower’s card and pin number enabled cash lenders to take a form of primitive cession of the borrower’s account, enabling them to withdraw the instalment due as early as possible on pay day. For poor households, the micro lender was often the only source of credit available to meet their survival needs. Because there was no regulatory body at that time to govern the micro-lending industry, micro lenders made their own rules for conducting business, which led to the abuse of many people; for example, they took their clients’ bank cards, pay slips, personal identification numbers
63 Usury is defined as lending at interest or excessive interest or interest in excess of the principle amount of a loan (Visser & McIntosh 1998).

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and identity documents as prerequisites for obtaining a loan, and so that they could draw interest and redeem payments from the cash dispenser after payment had been remitted to the borrower’s account. This often resulted in micro lenders engaging in fraudulent activities until legislation, in the form of the Usury Act, put an end to the practice. The upshot, though, is that poor households remain deprived of much needed credit services. The majority of people in the second economy depend in part or completely on the income that they earn as small-scale (or very small-scale) entrepreneurs; most depend significantly for cash income on relatives and friends, while others depend on transfer payments such as pensions and social grants. In addition, some resort to informal sources of finance such as rotating credit and savings associations in order to survive. Credit may also be obtained through moneylenders, although they are often associated with high interest rates that may make it difficult for the borrower to repay the debt. Realising that policies and institutions developed in the past have been inappropriate to the challenges of development, particularly with regard to small business development, South Africa, in support of micro entrepreneurs and self-employed entrepreneurs, created new institutions in 1996 through the Department of Trade and Industry. Ntsika Enterprise Development Agency was to implement the strategy for SMMEs through retail service providers. Khula Enterprise Finance was to increase access to finance for SMMEs through financial intermediaries. Towards the end of 2004, the Small Enterprise Development Agency was created to drive small business development through development support programmes. The concern raised regarding this continued establishment of financial support institutions or strategies, however, remains the same: none of them are targeted at the survivalist enterprises operating in the poor communities or second economy in South Africa.

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The challenge of effective financing strategies
It is evident that the string of intermediaries that have been established in the past to act as retailers for the provision of finance to poor households were unsuccessful, in that the type of financial products or credit instruments developed were not accessible to those households. The majority of poor households do not possess collateral to secure finance; they are marginalised and continue to be deprived of much needed finance. The challenge facing the Zuma administration is therefore to establish effective financial support institutions and products, and develop effective policies and strategies, targeted at poor households – and particularly those in rural areas. It is once again reiterated that the distinction between entrepreneurs (small business) and survivalists (self-employed) who operate in the second economy needs to be made, which will then inform policy on support interventions. With regard to effective financing strategies, the most important challenge facing the Zuma administration is to establish viable institutions that impact positively on sustainable development and poverty reduction by ensuring wide access to credit and savings. Also important is achieving coordination between government departments and a host of institutions to achieve a positive development impact. Further, political commitment to meeting these challenges is a crucial requirement and significant challenge.

The global financial crisis
The US housing slump has cascaded into a worldwide crisis, causing uncertainty and economic insecurities. The US has been declared by the National Bureau of Economic Research to be in recession since December 2007, and uncertainty abounds around the world that could shake up global markets. The US sub-prime mortgage crisis and the Federal Reserve Bank’s decision to drop interest rates were at the forefront of the global issues. America’s big names – Merrill Lynch, Lehman Brothers and American International Group – added to the huge drop in US and worldwide stocks as they were either on the brink of collapse or looking for bankruptcy protection. They also had large sub-prime exposures.

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The period 2002–06 was marked by extremely low US interest rates and led to growth in the housing market and construction industry, which further led to escalating house prices. People who were unable to secure conventional loans could then secure a cheap loan and buy property or houses, which, it was believed, would immediately increase in value as a result of the escalating house prices (Parker 2008), and buyers would then be able to meet the higher payments during the tough times ahead and maximise quick profit if they decided to sell the property. These sub-prime mortgages and an overinflated US housing market triggered the debt problem. Outstanding debt amounted to US$33 trillion in the US economy at the end of 2005 and the amount is growing by US$800 billion a year (2009 rates). This resulted in job losses of about 63 000 in February 2008, and 159 000 in September 2008, bringing the average to 84 000 per month from January– September 2008, and amounting to 605 000 since January 2008. The US Department of Labour reported a 6.1 per cent increase in the unemployment rate in September 2008, which was the highest in five years. The GDP growth that was reported in May 2008 was negative due to inflation. The GDP showed a contraction from 0.6–0.2 per cent in the fourth quarter of 2007, and from 1–0.9 per cent in the first quarter of 2008. In the second quarter of 2008, GDP was 1.9 per cent, which was below an expected 2 per cent (Parker 2008). The refusal of the proposed US$700 billion by the US Congress to bail out banks led to the biggest ever single day’s fall in US stock/equity prices. According to the US National Bureau of Economic Research, the US recession might last longer than expected.
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Other countries, such as Canada and Mexico, and European countries such as Denmark, Germany, Hungary, Iceland, Russia and the UK, as well as the Middle East, were negatively impacted by the US financial crisis, which hindered trade relationships and caused economic contractions and recession. Among the sectors to be severely affected by the crisis, particularly in 2009, has been the car industry, which is a concern in many countries and contributes to the world’s high unemployment rate; for these reasons the countries concerned launched immediate help packages involving billions of dollars, euros or pounds. The global financial crisis obviously impacts negatively on development and poverty reduction, increasing poverty, social instability and developmental stagnation and inflicting huge damage on economies. Many countries suffered full-blown financial crises in the 1980s and 1990s. The 1980 international debt crisis affected South Africa (but only in 1985), and the reasons for the debt crisis were explained in terms of the inexperience of the banks to handle increasing numbers of short-term foreign bank loans from abroad. South Africa’s capital outflow increased, negatively affecting the balance of payment.64 The year 1990 marked the Asian economic crisis, with reversal of huge capital flows to developing countries being the main cause of the crisis; these countries, especially those that did not have relations with developed ones, had to independently revisit their economic development and poverty reduction strategies, which drastically increased the number of people living below the poverty line. Mohamed reports that the crisis had minimal impact on South Africa, which has had currency crises but only suffered short periods of economic decline.65 Since October 2008, the global financial crisis has led to the bankruptcy of many financial institutions around the world, threatening the global financial system. Contributors to the crisis include changes in the global economy such as reduced demand and lower prices for export products, a liquidity crisis, high oil and food prices, low production levels, and a substantial credit crisis, which led to increased unemployment (Mohamed 2006). Rapid inflation causes governments to spend more than their revenue and it becomes difficult for them to borrow money from foreign lenders; as a result, foreign
64 Mohamed S, Avoiding financial crises. Engineering News (29 September 2006). Accessed August 2009, www.engineeringnews.co.za/article/avoiding-financial-crises-2006-09-29 65 Mohamed S, Avoiding financial crises. Engineering News (29 September 2006).

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investment declines and governments cannot fund activities like public services and employment, debt repayment and infrastructure development. In 2008, the prices of many commodities like food and oil increased drastically and caused economic damage. Oil prices for the first time peaked at US$100 a barrel in January 2008, and US$147.30 in July. The demand for oil dropped and prices also dropped to US$35 a barrel at the end of 2008. Expectations of declining demand in the context of a world recession led to a drop in the prices of most commodities in the second half of 2008. Agricultural failure, speculation in commodities, increased import costs, and rising demand for food and commodities led to inflation. Global inflation was reported to be at historic levels in February 2008 and domestic inflation was at 10–20 year highs for many countries. The crisis was expected to cause 20 million job losses by the end of 2009, according to the International Labour Organisation (ILO 2003), bringing world unemployment above 200 million.

The impact of global financial crisis on South Africa
South Africa has a sound and strong financial sector and macroeconomic policies, which ensured that the economy grew at unprecedented levels over the past 15 years of democracy. Many economists, researchers and others have expressed mixed feelings about the impact the crisis has had and/or will have on South Africa. Some (e.g. Abedian 2008)66 maintain that South African banks are safe for now from the global financial crisis, due to healthy balance sheets with limited exposure to troubled markets and the regulatory environment. Others, however, maintain that even though the crisis has not thus far significantly affected the economy, there are worrying signs of its impact; the situation has been called the deepest crisis since the Great Depression of 1929. First National Bank, for example, points out that the uncertainty in the US economy that is likely to continue might have a significant impact on policies, plans and prospects;67 and according to Parker (2008), the world financial crisis is clearly having a political impact on South Africa. Zuma (2009), during his address at the launch of the ANC election manifesto, acknowledged that the crisis could not be ignored as it had already had an impact on the domestic economy through a reduction in production, declining demand for exports, rising prices, potential job losses, and rapidly falling commodity prices such as platinum and gold. Speaking in his capacity as finance minister, Trevor Manuel, at the first meeting of the African Committee of 10 (C10), attended by African finance ministers and governors, sounded a warning about the intense liquidity pressure as the domestic banking sector battled to secure the finance to on-lend.68 He called for significant changes to financial regulations due to the drying up of remittance flows and mentioned that South Africa could fall into a recession by the end of 2009, citing electricity shortages, soaring inflation, high interest rates, substantially declining housing and vehicle markets, and lower business and consumer confidence. The South African Reserve Bank carries the responsibility of dealing with the financial crisis through increasing foreign exchange reserves and interest rates and keeping consumption low. However, this is hampered by an increasing trade deficit and private credit, which increase consumption debt. The electricity crisis in 2007 impacted on South Africa’s economic growth and led to a decline in foreign investor confidence. The electricity crisis negatively affects productivity; for example, it hinders farmers from harvesting their crops and prevents new building projects from being electrified. Members of society, especially the vulnerable, will continue to struggle to access basic energy services (Abedian
66 See also Trevor Manual, quoted in, Aid, investments drying up, City Press (18 January 2009). 67 Economic prospects for 2008. South Africa: The Good News. Accessed April 2009, www.sagoodnews.co.za/newsletter_archive/economic_prospects_for_2008.html 68 Cape Town, 16 January 2009

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2008). The shortage of electricity due to rising demand has forced producers to partially close mines and puts jobs at risk. The continuing unpredictability of electricity has the potential to cause major disruptions to the economy. The global financial crisis is further expected to impact on the exchange rate and unstable commodity prices because of the large current account deficit. In October 2008 the trade deficit widened to R7.1 billion, largely as a result of a R2.2 billion increase in imports of machinery and electrical appliances. Sinking commodity prices led to massive job losses in mining companies, for example (including Anglo American, De Beers, Lonmin and Xstrata). South Africa relied on inflows of short-term foreign capital to fund the deficit on the current account. This means that the global financial crisis will reduce the demand for exports, resulting in importing more goods and services than are being exported. This will contribute to slower South African economic growth and lower earnings for some companies.69 The volatility of the rand is also a concern as it could continue to come under pressure as offshore investors sell South African stocks and remain cautious about emerging markets in general. Risks remain in the form of a depreciating currency on the back of high capital imports. A foreign exchange income slump has already been experienced due to reduced demand for exports and lower commodity prices. Foreign capital such as direct investment and other flows are reduced. It becomes crucial in such circumstances to maintain foreign investor confidence, especially when interest rates are high; domestic demand is kept as low as possible, including avoiding global conditions that negatively impact on the export market. South Africa experienced successive economic growth between 1994 and 2003, and averaged growth of between 3 and 5.1 per cent between 2004 and 2007. Growth in the GDP slowed from 5.1 per cent to 2.1 per cent in the first quarter of 2008, and to 0.2 per cent in the third quarter.70 Inflation remains a critical problem at more than double the South African Reserve Bank’s 6 per cent target ceiling. CPIX (consumer price index excluding mortgage costs) inflation rose from 7.9 per cent on a year-on-year (y/y) basis in November 2007 to 8.6 per cent in December 2007, with an average of 6.5 per cent for 2007.71 The increase was a result of high food and oil prices, which led to an increase in interest rates. In May 2008, CPIX inflation rose to 10.9 per cent y/y, its highest level since November 2002, and reached 13.6 per cent in August 2008 but moderated to 13 per cent the following month (September 2008). It further fell to 12.1 per cent in November and 10.3 per cent in December 2008, pressurising the South African Reserve Bank to cut interest rates by half a percentage point to 11.5 per cent. Food and oil prices increased by 50 per cent between 2007 and 2008. CPIX fuel and power rose from 28.2 per cent to 29.9 per cent y/y in August 2008 as municipalities continued to implement electricity tariff increases (Seria 2009: 1). The good news was that as inflation peaked, interest rates were reduced (in December 2008), resulting in a fall in the price of petrol (also in January 2009), while a slowing down of consumer spending eased demand pressure. However, these falls in international oil prices in 2008 were offset by the weakening of the rand, which will continue to be upset by the uncertainty resulting from the US crisis. Manuel indicated at the C10 meeting in January 2009 that South Africa had not recovered from the severe impact of high food and fuel prices over the previous 15 months, and food and oil price increases would further negatively affect the economy, especially poor households, which already experience food insecurity. He warned the Reserve Bank to guard against further inflation pressures but at the same time consider slower economic growth.
69 Seria N, ‘South African inflation rate drops to a nine-month low’. Bloomberg.com (28 Jan 2009) 70 Seria N, ‘South African inflation rate drops to a nine-month low’. 71 R Oberholzer, Inflation still up but nearing peak in South Africa, Global Insight Southern Africa (31 Jan 2008).

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On the positive side, exports will be boosted by a weaker rand but only in the medium term, and the drop in oil/petrol prices and interest rates due to slower global growth prospects will help to lower inflation. The commitment of the South African government to infrastructural improvement and the preparations for the 2010 Soccer World Cup, though a short-term advantage, will create a favourable environment for investment and provide economic opportunities for development. This will assist, in the short term, to avoid a recession. Irrespective of the expected decline in inflation and interest rates in 2009, it was still a difficult year for South Africa, given the situation of household over-indebtedness and financial stress as well as the possibility of a sharply weaker rand or further shocks in the oil price. The financial/banking system’s bad debt was the other concern raised. Although the South African banking system remains sound at the moment and has not been exposed to the US financial crisis, this can be eroded by both the domestic financial and banking sectors, responsible for accelerating access to credit and consumers through their consumption and debt-creation behaviour. Heavily indebted households suffer from severe financial constraints. Nzimande and Cronin (2008) report that housing debt increased dramatically to more than R1.1 trillion in the years 2003–08, with over 6 million people unable to pay their debts. Further, the problem is exacerbated by the fact that South Africans use 82 per cent of their income to service household debt. Hence, 2009 saw repossession of thousands of houses and vehicles due to repayment default by individuals.
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The current debt consolidation initiatives, which assist debtors to repay their debts, might take longer than expected to have an effect, which will further impact negatively on economic growth and development. In an attempt to deal with this reckless lending and borrowing, South Africa introduced the National Credit Act (No. 34 of 2005), which came into force on 1 June 2007, with the aim of promoting responsibility in the credit market by encouraging responsible borrowing, avoiding over-indebtedness and discouraging reckless credit granting by credit providers. The impact of the Act still needs to be evaluated to determine its effectiveness. However, those who are already heavily indebted might take a long time to recover from their debts. Signs of the impact of the global financial crisis were already, in 2009, being witnessed in South Africa as unemployment was on the rise. The employment creation over the past years will be negatively affected due to lack of expansion opportunities, which leads to the closure of factories and job losses. The crisis has affected the motor industry in South Africa, which is a clear indication that the economy is in turmoil. Although many claim that South Africa will avoid recession, conditions on the ground do indicate the presence of recession, as in 2009 the economy was contracting. Over 200 000 jobs were lost during the last quarter of 2008. Higher interest rates resulted in an annual drop of 22 per cent in car sales in June 2008 and 27 per cent in December 2008. In an announcement in Engineering News, Volkswagen South Africa72 reported a drastic decline of 4.5 per cent in the sale of new passenger cars between November and December 2008. The decline in car sales is likely to continue due to the global financial crisis and this threatens employment, as many people have already lost their jobs and thousands more might lose their jobs as the economy continues to struggle. The mining industry will suffer widespread job losses due to weaker demand and lower prices of resources. The industry has sought ways to preserve jobs; these include transfers and redeployment, shorter working hours, and temporary lay-offs. If these strategies do not work then the mining industry will have to resort to retrenchments, where around 9 000 employees could lose their jobs due to the crisis. Manuel stated at the C10 meeting that it will no longer be possible to contemplate serious state-led job creation programmes because of the crisis in the global economy.73
72 Engineering News (9 January 2009). Accessed August 2009, www.engineeringnews.co.za/topic/passenger-car-sales 73 Cape Town, 16 January 2009.

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The challenges of the global economic crisis
The implementation of the ANC election manifesto (ANC 2009) will face challenges brought about by the global economic crisis and the probability of a worse-than-expected recession. This could impact negatively on spending in social services like education, health, welfare and infrastructure as well as poverty and unemployment reduction. Economic rescue measures are needed in order to protect South Africa from getting into recession. Poverty and unemployment reduction strategies will be threatened by the crisis and poor people are likely to be pushed deeper into poverty. The Zuma administration is faced with the challenges of achieving the MDGs of halving poverty and unemployment by 2015. It is argued that a more effective anti-poverty strategy than hitherto in place will be needed to reduce the impact of the global crisis on the poor and on job creation. The current account deficit, which has been increasing, is a cause for concern. Any anti-poverty strategy adopted will need to emphasise increasing production and thus exports, and reducing imports. Sectors such as agriculture, mining and manufacturing, which are major sources of employment, have to be strengthened to increase exports and reduce imports. Agriculture already generates an export surplus (including maize, sugar, livestock and fruit), and the manufacturing sector, which has been developed within import substitution policies, also becomes increasingly significant.
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Electricity shortages pose a threat to the country and hinder development. The Zuma administration has to ensure that sufficient sustainable energy is provided. It is proposed that electricity reserves be increased. The Zuma administration should also introduce and fund an effective energy saving plan, which should avoid escalating electricity tariffs, which would impact negatively on consumers and economic growth. Another challenge, also cited by Trevor Manuel, is a cumulative shortfall of donor aid to African countries by wealthy nations. Nations such as the US, UK, Japan and Germany made a commitment in 2005 at the Group of Eight (G8) to increase annual aid to poor countries by US$50 billion (about R508 billion)74 by 2010. Given their domestic economic conditions due to the global financial crisis, the G8 nations now struggle to meet the commitment and the shortfall amounts to US$240 billion. The result is that developing countries will sink deeper into poverty, and thus a financing strategy is needed to cushion the impact of the crisis. A significant general capital increase for the African Development Bank, for example, is crucial to help steer African countries through the crisis. While elsewhere in this chapter it is argued that helping people out of the second economy requires lending institutions to provide affordable credit to survivalist enterprises, which have hitherto been denied access to financing products and services, effective control is also important with regard to existing credit customers, to control access to credit and reckless lending. Although the National Credit Act (No. 34 of 2005) reduces the availability of credit in South Africa, its impact needs to be evaluated to determine whether it is dealing effectively with reckless lending and borrowing and protecting borrowers from over-indebtedness. Effective policy mechanisms that penalise risky borrowing and lending behaviour by all sectors are needed to encourage development. It is further proposed that partnership strategies be strengthened and expanded to counteract the impact of the global financial crisis. Domestic policies should be meshed with international support, for example to strengthen support for NEPAD, which is based on common values and shared responsibility for a common future. It also provides mechanisms for developing nations to share best practices. The UN General Assembly (2008) emphasised the value of partnerships and pointed to the adoption of the
74 Aid, investments drying up, City Press (18 January 2009); Exchange rate figures are as at September 2009.

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December 2007 common European Union/Africa strategy for developing Africa. Other partnership strategies have to be sought in South Africa in order to mitigate the impact of the global crisis. Domestic and regional markets have to be strengthened, to boost intra-African trade and promote domestic tourism. Ravi Naidoo, group executive for research and information at the Development Bank of Southern Africa, proposed the establishment of a strategy similar to that in Brazil and India, which has a planning commission to counteract the global economic recession.75 The effectiveness of such a body lies in ensuring long-term integrated planning between government departments, and in prioritising interventions. This will assist in dealing with the poor sequencing of reforms, the wrong choice of and uncoordinated economic policies, and the implementation of economic policies. For better planning and focused delivery and to avoid the over-centralisation of power, it is suggested that such a commission be constituted by non-government experts, as in India. The C10 reached agreement on the establishment of the committee to develop an African response to the global financial crisis. Such a committee should go some way towards helping participating countries protect themselves from economic recession. Sustainable economic development requires internally integrated economies, which in turn require strengthening of linkages between urban and rural communities/business activities and between the first and second economies. It is argued that new approaches to development – such as communitydriven development, in which CBOs and/or community-based schemes maintain authority and control over the management of resources – are fundamental to dealing with underdevelopment, reducing poverty and improving the standard of living of the poor. To this end, it is suggested that government drive and guide development through a long-term strategy of identifying needs and solutions and building on partnership with relevant stakeholders. The Zuma administration must ensure that the dependence on international donors (e.g. the G8), which does not benefit the poor, is reduced and must focus rather on strengthening domestic participation that increases ownership and accountability. This includes acknowledging and strengthening activities in which poor communities in the second economy are engaged and which help to reduce their poverty levels and improve their standards of living.

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International practices: successful lending mechanisms
In view of the problems of inaccessibility of finance already discussed, poor households in many developing countries resort to group lending, which seems a workable solution to the problem of improving access to credit. This section considers whether group lending mechanisms can improve the situation with regard to poor households, and provides insights into how group lending can be used as a point of departure to overcome the problems of high transaction costs and the need for physical collateral. Bosch (2002) and Mashigo (2007) define group lending as a process whereby individual loans are disbursed to a small group of borrowers, who are collectively responsible for loan repayment. Group dynamics provide insurance against default at a relatively low cost. Today some leading developing countries have created financial mechanisms and systems that serve the increasing number of poor people. According to Bosch (2002), they generate repayment rates that compare favourably with the loan performance of many banks or credit markets. Countries such as Bangladesh, Ghana, Indonesia and Kenya use innovations like group lending and savings-first approaches (or compulsory savings) aimed at reducing poverty through credit granted to borrowers, who comprise small groups using joint guarantees (Wilson 1996).
75 South Africa needs better planning, focused delivery, City Press (1 February 2009).

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Bangladesh, through its Grameen Bank, popularised a group lending model where community members voluntarily form small groups (Johnson & Rogaly 1997; Rahman 1997). This initiative was taken due to the inability of most villagers to obtain credit from credit markets and at reasonable rates. The bank was established from the lessons drawn from informal financial institutions that lend money to poorer groups. The Grameen Bank has reversed conventional banking practice by removing the need for collateral, thus creating a specialised banking system based on mutual trust, accountability, participation and creativity. In this case, while loans are granted to individuals, all members of the group are held responsible for repaying the loans. If one member defaults, all in a group are denied subsequent loans (Rahman 1997). The enforcement problem is solved by strict screening of members because of the comprehensive knowledge they possess about one another, as well as peer pressure exerted on one another to repay loans. In addition to these informal relationships that serve as insurance, there are also threats for defaulting, such as social sanction. The Grameen Bank programmes require borrowers to contribute to an emergency fund (as forced saving), which serves as insurance in case of default. The emergency/savings fund serves as a substitute for or becomes collateral for the bank for taking the risk, in case the loan is not repaid. This addresses the problem of asymmetric information and eliminates the transaction costs normally required for acquiring information about borrowers.
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The successes of the Grameen Bank have been emulated in Ghana, Kenya and Indonesia. Kenya fashioned its financial system according to a group lending method, where groups improve social ties by holding compulsory weekly meetings regarding savings and credit. While credit is disbursed to groups, as in Bangladesh, the emphasis is on savings, which are mobilised weekly into a pool. The savings then serve as collateral for credit. Additionally, Kenya supports community credit programmes by providing training to group members on loan management and financial discipline. In addition to group lending as the mechanism that enables the provision of credit to the poor, Indonesia uses the savings-first approach. In these examples of successful adaptation of the Grameen Bank model, emphasis is placed on development programmes for the poor, with credit market operating procedures being simplified and strict lending rules amended. This provides the opportunity for even the poorest households to access credit. For financial viability, and in response to the risk of loan default, village authorities are made to share responsibility for compliance with the terms of loan contracts. Credit markets encourage compulsory savings from individual borrowers by requiring that 10 per cent of loan amounts be pledged (Embassy of Ghana 1997). Without savings, no credit is disbursed. Ghana, in dealing with perceptions of high risk, high transaction costs, low returns, the challenge of asymmetric information and the challenge of improving access to credit by poor households, created semi-informal or rural banks to manage the high proportion of rural credit and savings. The rural banks are owned and managed by communities and each operates only in a clearly defined rural area (Embassy of Ghana 1997).

Micro-credit mechanisms for poor households in South Africa
It is suggested that mobilising and making greater use of domestic financial resources could help South Africa to achieve sustained and higher levels of economic growth and development and reduce poverty; over the long term this would reduce overdependence on government grants or handouts.

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Rotating credit and savings associations
Given high transaction costs, the need for collateral, and the problem of asymmetric information in the provision of credit, as already discussed, rotating credit and savings associations have become popular means of maintaining financial independence (i.e. saving and borrowing) among poor households. This is the case in many developing countries. The incomes of the households in question are usually uncertain as a result of informal and/or self-employment, and thus repayment of loans becomes difficult (and costly to enforce). Most banks continue to view these households as high risk and they are, therefore, ignored when providing credit. As elsewhere in the world, rotating credit and savings associations are very popular in black communities and in many rural areas in South Africa, where they are known as stokvels. Rotating credit and savings associations offer a range of informal financial services, such as savings and credit, to poor households, assist them to provide for their basic and emergency needs and contribute to their survival. The development of these savings and lending methods has achieved significant scale and sustainability in many developing countries.

Stokvels and poverty reduction in South Africa
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It is suggested that improving its information on, and communication with, the second economy, where informal financial activities take place, could enable the Zuma administration to gain a clear picture of the sector in which existing livelihood strategies might be supported and enhanced in the interests of reducing poverty and improving living standards. Central to these initiatives will be investigation of strategies to improve access to finance by the poor. Strong and tailor-made policies and institutions will need to be in place for money to play a significant role in poor communities. The challenge will be to attract financial resources and channel them to sustainable development outcomes, in order to address poverty levels and vulnerability to shocks. The questions asked and answered in this section are as follows: • What lessons can South Africa learn from examples of lending mechanisms adopted in other developing countries? • How do poor people in South Africa deal with unpredictable expenses or shocks (e.g. illness and funerals) and predictable ones (e.g. marriages)? • What convenient arrangements are made to effectively access savings and credit? • Can stokvels improve the standard of living and opportunities to build sustainable livelihoods of poor households in the second economy? • What role can the government play to strengthen informal financial activities that would foster individual and economic development in South Africa? As already mentioned, in many developing countries financial mechanisms in the form of group lending driven by informal groups and banks, have enabled the countries to make a significant impact on underdevelopment and poverty. South Africa may consider the same mechanisms to create social capital that can be used to address the needs of poor households in a variety of ways. Similar informal groups in poor communities in South Africa exist in the form of stokvels, which seem to be effectively structured to improve access to credit and savings and reduce poverty, thereby improving the standard of living of poor households. Stokvels are savings, credit, capital-generating clubs and funeral associations, operating mainly in poor areas for purposes of survival. They are associations made up of a group of people who agree to contribute a specific amount of money, which may be awarded on a rotational basis to one member every week or month depending on the type of stokvel (Verhoef 2000; see also Johnson & Rogaly 1997).

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The stokvels are regarded as the primary sources of credit (and savings) available to poor households that have been marginalised by the formal financial sector. Individuals establish stokvels by forming small groups and selecting creditworthy peers, who act as guarantors for one another by assuming joint liability for the loans. The selection is based on the knowledge the individuals have about one another – for example, according to geographical location (i.e. people from the same neighbourhood or attending the same church can join groups together). This screening mechanism can lead to strengthening of the joint liability. In their informal financial arrangements, the households use approaches that rely on informal or traditional knowledge systems for their survival. These traditions include the extension of credit, where mutual understanding and an environment of trust, loyalty and respect (as in Bangladesh) between people involved in the borrowing and lending activities exist. Social norms and customs play a significant role in financial relationships. The main aim of stokvels is to fulfil economic, entertainment and social functions for the members, who pledge mutual support to one another towards the attainment of specific objectives over an agreed time frame. Most importantly, stokvels serve as insurance for financial shocks; that is, the members pay a fair premium to cover insurance claims made by the proportion of the group incurring random losses. The strength of the stokvels is based on the communal bond of the group. The effectiveness of the stokvels is that they provide both savings and credit facilities, where members are encouraged to develop their solidarity or social capital for sustainability purposes and are motivated to save money, which is also made available in the form of credit or loans. Social capital is a network of trust, respect, reputation and reciprocity for improving a neighbourhood, or investments in social relations by individuals to gain access to financial and other resources (Seibel & Torres 1999). The concept of social capital has proved to be a popular innovation for dealing with the challenges of information asymmetries such as adverse selection (where banks cannot screen the risky borrowers from the non-risky) and moral hazard (where the banks cannot monitor the behaviour of borrowers). The repayment is enforced by harnessing the social capital in groups. Social capital binds groups together and improves social ties. It allows borrowers and lenders to know one another very well through the long-term relationships that exist between them and the regular meetings that are held to discuss financial matters. As already alluded to, it is normally costly for the banking and micro-lending sectors to acquire information about borrowers. The situation of stokvels is very different, however, and the problem of asymmetric information does not exist because of the local ‘inside knowledge’ that exists between the group members. Further, stokvels do not rely on formal collateral to guarantee loans because credit is provided on the basis of social collateral, through which borrowers’ reputations or the social networks to which they belong take the place of traditional physical or financial collateral. In the case of default on the loan, the group’s savings are used to repay the loan. Stokvels are relatively self-reliant and do not receive financial support from the government, NGOs or external donors. They rely on monthly subscription payments from their members to build collective funds. The types of stokvels that are found in South Africa, particularly in informal settlements in black communities, include those that provide credit as well as savings to the participating households, in order to bridge the effects of financial shocks like funerals, deal with food insecurity or hunger, and handle unusual, expensive events as well as day-today expenses. These stokvels are discussed below. The research conducted by Mashigo (2007: 96), on extending credit to low-income households in South Africa, found that the majority of poor households in black communities are members of a funeral or burial stokvel, and that the monthly contribution made by the stokvel member amounts to R50 (US$5.05); in the case of death of a member or family member, a lump sum of money is made available

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to the bereaved family to cover funeral expenses. Funeral stokvels are sustainable and self-reliant and rely on contributions from their members to build collective funds. Other costs that are incurred in the case of death include, for example, purchasing a coffin, food and refreshments, and hiring of buses for transporting people to the cemetery. These costs vary according to different arrangements and depend on the monthly or weekly contributions made by the stokvel members and on the amount they agreed upon. Apart from financial support, the bereaved family gets emotional support and in-kind donations such as blankets and other gifts. Money is released quickly whenever there is an announcement of death and there are no complicated procedures for accessing funds, as happens in the formal financial sector. These stokvels are effective in reducing the burden of funerals costs. The participating households do not qualify for formal insurance schemes and as such the funeral stokvel serves as an insurance scheme in case of death in the family. Poverty and hunger continue to characterise life for most of the people who are denied agency over many aspects of their lives, as a result of a complex mix of mutually reinforcing structural, political and environmental factors. Improving food security and reducing hunger in poor and vulnerable communities presents another challenge to the Zuma administration. One of the objectives of the MDGs is to halve the number of people who suffer from hunger by 2015 in an effort to eradicate poverty and hunger (Bernier et al. 2005). The US Department of State (2002) argues that the poor performance in reducing food insecurity by governments in developing countries is due to the neglect of agricultural development as an important component of economic development. The food or kitchen stokvel is used by poor people in South Africa to counter food insecurity and reduce hunger. The provision of food in many poor or rural communities is a problem as most of the people are unemployed (or self-employed) and lack collateral to secure loans from the formal financial sector to deal with hunger. As a result, these households – mostly constituting women – make informal arrangements in the form of kitchen or food stokvels in order to cushion themselves against uneven cash flows and accumulate enough money to counter food insecurity or buy food or groceries and household utensils. Most members of such stokvels are single female parents who support and raise their children. Members contribute a certain amount of money (e.g. R30 or US$3.03) (Mashigo 2007: 93) on a weekly, fortnightly or monthly basis, with the objective of purchasing food or kitchen utensils for their households at an agreed time. The importance of these stokvels is that purchases made are cheaper when food is bought in bulk. Further, each member is entitled to kitchen utensils (e.g. tea set, plates or cutlery) and/or groceries of a certain amount as stipulated by members. This is also done on a rotational basis – either weekly, fortnightly or monthly – depending on the arrangements made. Each member indicates the type of food or groceries or the type of kitchen utensils needed. Kitchen or food stokvels are characterised by close relationships between members. They know one another very well, and loyalty and trust play an important role; further, members gain respect as they commit themselves to contributing money in order to meet the most important basic needs of the group. Some poor households establish small food gardens, typically growing crops such as potatoes, cabbages, tomatoes, spinach, onions, green beans and pumpkins. These gardens are carefully tended for sustainability purposes. Some households are members of entertainment stokvels, which help them to cope with predictable but expensive events that they cannot avoid, such as weddings and birthday parties. Members mutually agree to make a monthly contribution of about R30 (US$3.03) and when a member or family member is getting married or it is their birthday, a lump sum of the contribution is used to buy food and refreshments for those who will be attending the event. The households also use entertainment

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stokvels for other purposes, such as providing for education expenses for some parents who cannot afford to pay school fees and other related expenses for their children. If there is a pressing need for money, members agree among themselves to make money available urgently to the member in question. The accumulated amount that was not spent during the year helps the members to cater for end-of-year festive season expenses that they would otherwise not have been able to afford (Mashigo 2007). Other people are members of money stokvels where, for example, a R40 (US$4.04) monthly contribution is made, and a lump sum is shared between members numbering less than 10 on a rotational basis, so that each can receive a total amount at least twice a year. Alternatively, the lump sum may be accumulated in a savings account and shared between members at the end of the year. This is decided and agreed upon by the members. The importance of this kind of stokvel is that when a member experiences financial problems, they approach the money stokvel for a loan and indicate when they will pay it back. Credit is available to the members without interest because they are close to and know one another very well. This reduces the transaction costs of extending credit. Defaulting is very rare because members normally repay the loans to maintain reputation, trust and respect; none of them would want to be seen by others as irresponsible or to be banned from the stokvel, and they therefore adhere to the loan agreements. Collateral problems are absent because both the long-term relationship that exists between members and the peer pressure serve as a substitute for physical collateral.

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The constitutions or rules governing stokvels
Providing financial services generally necessitates rules or specific legislation, with the primary objective of protecting both borrowers and lenders. Mashigo (2007) found that it is a norm in poor black communities in South Africa that stokvel members socialise through weekly, fortnightly or monthly meetings (as in Kenya), as stipulated in their stokvel constitution or rules, to discuss financial matters and other related issues. Because of the members’ low levels of formal education, the constitution is kept deliberately simple. The constitution, which is also flexible, is formulated by the stokvel members themselves, and stipulates how much and when to contribute, for whom, and when the benefits will be realised. This implies member control and mutual monitoring over the activities of the stokvel, as is the case in Ghana where rural banks are owned and managed by communities. The constitution encourages members not to skip any financial contribution as this will result in, for example, non-payment in the case of death in the family. However, generally violation of the rules does not happen because of personal relationships, trust, loyalty and reputation among members. Any member who is found to be violating the rules is banned from the stokvel. The members know that they depend entirely on the stokvels in cases of financial distress and, therefore, they tend to adhere to the constitution. This helps to address the challenge of asymmetric information in the provision of credit (and savings) because it improves the flow of information among member borrowers and lenders, ultimately improving standards of living of the households and reducing their poverty levels. The stokvels do not rely on collateral to guarantee loans because social pressure and monitoring, as well as compulsory monthly savings, substitute for collateral. This effectively reduces the transaction costs of borrowing and lending. It was found (Mashigo 2007) that some stokvels have written constitutions, while most of those in rural areas do not, but in such cases members know the rules by heart. Given the low levels of formal education in poor communities, and because many of the members are functionally illiterate, the terms and conditions of the constitution are written in the vernacular, and the choice of a written language depends on the location of the stokvel, which is mostly where they reside. Constitutions vary and depend on the type of stokvel in question. In some stokvels, the constitution stipulates that

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before a new member can be accepted into the stokvel, their reliability, trust and loyalty must be established; for example, if a person is known to have a drinking problem or a bad payment record, they will not be accepted as that would endanger their ability to keep up with contributions and adhere to the constitution (Mashigo 2007). There is normally no written contract for members when joining or leaving the stokvel, as long as the member is up to date with their contribution before leaving. Members are free to leave the stokvel. It is suggested that stokvels, given their significance in dealing with the problems associated with the inaccessibility of formal finance as well as improving the standard of living of poor households, can be used by the Zuma administration as a first point of reference when developing strategies to deal with underdevelopment and poverty. The stokvels can also be considered when designing credit instruments for poor households in South Africa.

The advantages of group lending mechanisms
When faced with collateral constraints, high transaction costs, and asymmetric information in selecting borrowers, financial institutions may be said to be dominated by risky and non-risky borrowers. Borrowers vary in terms of the likelihood of their defaulting and it is costly to determine the extent of the risk. Borrowers who are high risk or potential bad credit risks are more likely to take loans and most likely to produce an undesirable or adverse outcome. As the interest rate increases, there is a high probability of default; the risky borrowers tend to drive the non-risky ones out of the market. A lender is, therefore, unable to discern the extent of risk of a particular loan and applicants will consist of borrowers with projects in different risk categories (Hoff & Stiglitz 1990). Group lending may therefore enhance the likelihood that borrowers undertake the actions desired by lenders, and potentially limits the consequences of risks. In forming groups, enforcement costs are low because of peer social sanction. An incentive of group lending is that social selection homogenises the group; that is to say, similar types (for example, nonrisky members) group together to ensure loyalty and trust. Their selection is based on creditworthiness and commitment of members. Their probability of default will be low as they will be jointly liable to repay the loans that result in expected gain. Peer monitoring and enforcement is an important mechanism used by groups to reduce default because it allows a group to know who can or cannot repay the loans. This cannot be done by banks. Groups know that when an investment project fails, there is zero return. It is argued that the potential power of peer monitoring and enforcement must be recognised by theoretical models of lending contracts, as a solution to the challenges of non-payment of loans by members, risky lending, and high transaction costs. Compulsory saving is an important mechanism that improves access to credit and reduces default rates. The Indonesian and Grameen Bank models use this as a substitute for collateral, where groups are forced to save money before loans are disbursed. Should the group default, the savings serve as compensation to the lender. A mechanism for securing high repayment rates in the South African financial sector is to begin by lending small amounts and, upon satisfactory repayments, increase the loan size irrespective of whether lending to individuals or groups. When loans are not repaid then no further lending will be made. The stokvels in South Africa operate more or less in the same fashion as in Bangladesh, Indonesia and Kenya, as discussed above. The financial contributions that the stokvel members (group) make weekly, fortnightly or monthly are a form of savings mobilisation that can play a significant role in accessing credit from the financial institutions, particularly banks and the micro-lending sector. It is strongly advised that the evidence provided in this chapter be carefully studied by the South African

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government, financial authorities and policy-makers, in order to address underdevelopment and fight poverty, by developing special lending mechanisms or credit instruments to minimise transaction costs and expand the scale of credit portfolios and loans to the majority of poor households.

The challenge of micro-credit provision
The previous government administration undertook efforts to address poverty and underdevelopment, including provision of food parcels. Providing poor people with food parcels is a short-term strategy but it is not sustainable; in addition, not all of the poor receive this form of support. A significant challenge faced by the Zuma administration is to develop effective and sustainable programmes to address food insecurity and hunger. Adopting a fresh resolve to tackle food insecurity and hunger would be a promising start. Further, it is recommended that the point of departure for the Zuma administration in addressing food insecurity may be to consider the existing food stokvels and the ways in which poor households make their own financial arrangements to counter food insecurity. Their weekly, fortnightly or monthly financial contributions are an indication that poor people have both the discipline and ability to manage their money and survive hunger. This can be taken into consideration when developing financing strategies for improving food security and can reduce the financial burden carried solely by the government in providing food. Further, in achieving the MDG of halving the number of people suffering from hunger by 2015, it is argued that the Zuma administration must build on existing efforts of the poor, including considering providing financial support for further developing food gardens as well as helping others to establish new food gardens. Many countries maintain that food security improves levels of education. One country that has built directly on the food–education connection is Bangladesh, which established the Food for Education Programme, providing food to poor families when they send children to school (rather than to work) (US Department of State 2002). This programme is said to increase overall educational levels, while decreasing child labour and providing food for poor families. The success of the programme is as a result of a global partnership between Bangladesh, USAID and the US Department of Agriculture, which provides wheat to be sold on the Bangladesh market for local currency. Bangladesh allocates the funds raised from the sale of grain to local development and safety net activities. What is important and to be noted by the Zuma administration is that the poor in Bangladesh are involved and participate in the local development programmes, where they are given the opportunity to work for a wage and/or food; that is to say, they are not merely ‘recipients’. Participants also plant trees to prevent soil erosion and women from poor households are employed to care for the trees. This programme has achieved a high level of success in improving rural infrastructure and increasing community assets. In the South African context it is thus recommended that, in addition to government nutrition programmes and food parcels provided to the poor, in developing strategies for food security and safety, the Zuma administration should make room for the active involvement and participation of the poor themselves. Poverty eradication policies need to address the totality of the impact of poverty and be developed in consultation with people living in poverty, whose voice will inform the development of effective poverty reduction programmes. Involving the poor is one of the objectives of integrating the first and second economies and dealing with poverty and underdevelopment. It is suggested that the Zuma administration take seriously the role and value of stokvels as tools in the fight against poverty and underdevelopment. Close analysis shows that a stokvel, in its aims, tradition and functioning, acts more like an insurance instrument than a savings or primitive financial institution. Stokvels aim to insure certain outcomes or prospects and a weekly, fortnightly or monthly contribution is a fair premium to insure against specific contingencies and shocks. To contribute to

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a stokvel only makes economic sense when viewed in the context of desired or positive prospects that will flow from an ‘expensive’ relationship. With the payment obligation or regular premium, the buyer gets the conditional right to or claim on future cash. The organic nature of a stokvel, through its informal constitution, rules or contract, insures, by different mechanisms (reputation, trust, norms and interpersonal networks), liable behaviour that to a large extent eliminates the probability of social default, that is, insures against social default. The objective here is thus to argue strongly for the realignment of stokvels so that they can act as a conduit of much needed cash to the poor, while still performing their traditional role of improving the standard of living of poor households. Thus, it is suggested, stokvels can be used as a conduit to supply credit when needed, to overcome the consequence of a financial shock in exchange for the payment of a regular fair premium. This will not only give relief to the poor but will also encourage them to self-insure at low or no cost, while at the same time motivating more liable behaviour. Further, banks will not have any increased risk or extra administrative costs or costs associated with introducing new systems.

The challenge of supporting small enterprise development
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It is argued that support to SMMEs has to be intensified as a strategy for sustainable job creation. At the same time, support interventions for survivalist enterprises have to be seriously considered. The very difficult nature of their relationship with the mainstream economy contributes to their marginalisation. The suggestion is that the Zuma administration should first distinguish between small and survivalist enterprises that operate in the poor communities in the second economy; this distinction will then inform policy on support interventions. The current support strategies that generalise the SMMEs and focus only on small enterprises cannot be effective, it is argued, because not all the SMMEs are the same; some have the potential to grow and employ people, thus contributing to economic growth and development, and others do not. Institutions and strategies that were established to support SMMEs focus only on small enterprises and are inappropriate for supporting survivalist enterprises operating in informal settlements or rural areas in the second economy. The concern raised is that if South Africa continues to establish financial support institutions or strategies that do not distinguish between different types of SMMEs, it will be fighting a losing battle in terms of dealing with underdevelopment and poverty.

Conclusion
This chapter has discussed economic development and poverty reduction in South Africa and the related challenges facing the Zuma administration. Despite progress made in achieving sustainable development and reducing poverty, poverty and underdevelopment still exist and are key characteristics of the second economy, in which the majority of poor households are situated. Levels of unemployment remain high and current job losses and health challenges are cause for concern. The global financial crisis threatens implementation and achievement of the 2009 ANC election manifesto, and seems likely to impact negatively on poverty reduction and job creation efforts as well as on health, education, welfare and infrastructure initiatives. The ongoing HIV/AIDS pandemic also impacts negatively on the development of the South African economy and threatens social stability. This chapter has argued that a framework for effective management in the new administration is needed. A renewed focus on sustainable development and poverty reduction strategies is essential. This requires a move from isolated efforts towards stronger partnerships with coordinated policies, projects and programmes. To understand and tackle poverty, the starting point is for government and other stakeholders to know and understand what is happening in poor communities that are engaged

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in informal and survivalist activities in the second economy, and how such activities are carried out. Strategies that help poor households bridge the effects of shocks such as hunger, disease and/or illness and death, as well as deal with unemployment, low levels of education and health challenges, and improve household conditions in general, need to be developed. The increasing need for finance by the poor is coupled with a limited supply of such finance by the formal financial sector, due to relatively high transaction costs and the absence of collateral on the side of poor households and/or survivalist enterprises. The households are, therefore, further marginalised. The Zuma administration has to seriously consider initiatives to improve access to finance by poor households, taking into consideration the negative impact of the global financial crisis. The initiatives in this regard have to include reducing transaction costs and the need for collateral, and diversifying financial products to suit the credit needs of poor households. The point of departure, it is argued, should be a consideration of a range of successful international practices, which have successfully adopted group lending mechanisms to deal with underdevelopment and poverty. International practices have shown that it is possible, through the relevant lending mechanisms, to provide credit to poor communities. For example, the legal and regulatory environments in countries such as Bangladesh, Ghana, Indonesia and Kenya have permitted the establishment of specialised lending mechanisms, or banking and financial institutions that specifically target poor communities. Examples include rural or community banks that are able to make savings and credit judgements because of their knowledge of the local community; this is done through the establishment of informal groups, which are linked to the village bank. Groups decrease the intermediation costs and help to cut out the use of collateral through peer group lending. It has also been indicated that most of the countries involved (such as Indonesia) use high interest rates for both savings and lending in order to cover financial costs, thus dispelling the myth that poor households cannot save or pay high interest rates. Similar mechanisms already exist in South Africa in the form of stokvels which, although informal, appear to be well equipped and structured to improve access to finance. These stokvels have become popular means of maintaining financial independence among poor households in South Africa. The significance of these stokvels is that they generally incur very low transaction costs, given that credit is available without interest, and reduce the need for collateral, given that peer pressure and monitoring, social ties and savings substitute for such collateral. The formal financial sector in South Africa has to consider compulsory savings, which poor households mobilise through stokvels; this can serve as collateral to secure credit. Further, the informal rules or constitutions that stokvel members formulate and according to which the stokvels operate can be taken into account when creating by-laws or reforming banking laws in South Africa.

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Contributors
Modimowabarwa Hendrick Kanyane is an associate professor and head of the Department of Public Administration at the University of Fort Hare. He holds a BAdmin (1988–91), BAdmin (Hons) (1992–93), MAdmin (1995–96) and DAdmin (2003–06). He held the positions of lecturer and head of the Master of Public Administration programme at the University of Limpopo for more than 10 years. Kanyane is a reputable scholar in the field of public administration and management and has published extensively in the areas of ethics, performance management, public service delivery and development; he has also travelled widely in the pursuit of academic excellence and best practices. Kwandiwe Kondlo is executive director of the Democracy and Governance Programme at the Human Sciences Research Council (HSRC) and a visiting adjunct professor at the School for Public and Development Management at the University of the Witwatersrand. He holds an MA in economic history from the University of Cape Town, and obtained his doctoral degree from the University of Johannesburg. Kondlo’s publication record spans the authoring of several conference papers, newspaper commentaries and journal articles. He has written a book, In the Twilight of the Revolution – The Pan Africanist Congress of Azania (South Africa), 1959–1994, published by Basler Afrika Bibliografen in Switzerland in 2009, and he co-edited (with Dr Peter Kagwanja) State of the Nation: South Africa 2008, published in 2009 by the HSRC Press. He also holds research associations with several universities, including the University of Cape Town and Basle University (Switzerland). Mashupye Herbet Maserumule is a senior lecturer at the Tshwane University of Technology. He holds BA, honours and MA degrees in public administration from the University of South Africa and is currently reading towards a doctoral degree. Maserumule has more than 45 publications to his name, comprising articles in scholarly, professional and political journals, chapters in books and papers in conference proceedings. He has presented more than 30 papers – some of them at international conferences – on different issues of governance. Maserumule is co-editor of the book Cases in Public Administration and Management: A South African Perspective, published by Heinemann in 2004, and managing editor of the Journal for Local Government Management. He is chairperson of the Gauteng chapter of the South African Association of Public Administration and Management and a member of the Audit Committee of Kungwini Municipality in Gauteng. Polly Mashigo is a senior lecturer and head of the Economics Department at the Tshwane University of Technology. She obtained her BA (Ed) from Vista University in 1991, honours and master’s degrees in economics from the University of Pretoria in 1994 and 1999 respectively, and a doctoral degree in economics from the University of Johannesburg. Mashigo has presented papers at local, national and international workshops and conferences, and published articles in scholarly journals, largely in the field of economics. Gilingwe Mayende is adjunct professor in the School of Public Management and Development at the University of Fort Hare and a private consultant specialising in the land question, rural development and public sector management. Having obtained his PhD in sociology and social anthropology from the University of Hull in the UK in 1990 while in exile, he subsequently taught rural sociology at the University of Transkei, now known as Walter Sisulu University, from 1992–94. Between 1995 and 2005 he served as a senior public servant in the democratic South African government, a career which included a five-year stint as director general of the Department of Land Affairs (2000–05). He has

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published extensively on the subject of land reform and agrarian transformation, and has presented papers at numerous conferences. David Mbati Mello is attached to the Tshwane University of Technology as an associate professor. He spent several years of his career in the public service before joining academia. He has served at two universities in the past 13 years, as a lecturer and associate professor respectively. He has presented papers at national and international conferences, and been published in conference proceedings and accredited journals, mainly in the field of public administration. He serves on the editorial boards of the Journal of Public Administration and the Journal for Local Government Management.

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