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Copyright © 2024 Print ISSN: 2960-1541 Online ISSN: 2960-155X Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute D I S C L A I M E R Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. JANUARY 2024 by Dr Douglas Blackmur Abstract The events of the FeesMustFall (FMF) challenge to the South African government’s higher education policies, through its assault on individual universities and the higher education system during the period 2015 to 2017, have seen the emergence of a relatively extensive and varied academic literature. At the time of writing this article – January/February 2024 – the most recent addition is the book by Max Price, “Statues and Storms. Leading through change” (hereinafter Statues and Storms) (Price, 2023). Price was the Vice Chancellor of the University of Cape Town (UCT) from 2008 to 2018. Statues and Storms arguably contains much that is relevant to the quality and development of higher education public policy in South Africa, matters that, however, were not Price’s explicit purpose to address. This article, on the other hand, using Statues and Storms as the point of departure, explores the national public policy significance of certain of the issues and events it documents. Some of the discussion in this article is, at times, speculative and/or conjectural.  The article is a preliminary enquiry which raises certain public policy issues without always offering a final judgement on their significance. It is thus an invitation to scholars to conduct further research which will hopefully both assess the quality of the analysis in this article and unearth further matters not considered here at all. Introduction The events of the FeesMustFall challenge to the South African government’s higher education policies, through its assault on individual universities and the higher education system during the period 2015 to 2017, have seen the emergence of a relatively extensive and varied academic literature. A few examples include Habib (2019), Jansen (2017), Booysen (2016), Chikane (2018), and Benatar (2021). Some of this literature has been discussed previously (see, for example, Blackmur, 2019, 2021, 2023). At the time of writing this article – January/February 2024 – the most recent addition is the book by Max Price, “Statues and Storms. Leading through change” (hereinafter Statues and Storms) (Price, 2023). Price was the Vice Chancellor of the University of Cape Town (UCT) from 2008 to 2018. Both Habib and Jansen were former Vice Chancellors whose books, in common with Price’s, employ a participant observation and engagement method of analysis, as does the book by Chikane, a prominent leader in the FMF movement.  Statues and Storms arguably contains much that is relevant to the quality and development of higher education public policy in South Africa, matters that, however, were not Price’s explicit purpose to address. This article, on the other hand, using Statues and Storms as the point of departure, explores the national public policy significance of certain of the issues and events it documents. The waves of protests that erupted in 2015 constituted a national phenomenon not seen in universities since 1994. It contained a wide range of demands of which reduced fees – and ultimately free higher education to students – and fundamental changes to curricular were the most important. The years between 1994 and 2015 were, however, far from a haven of complete tranquility in South African universities. Concerns over several specific events, such as initiation ceremonies, were prominent in public debate. Any suggestions, however, that these tensions were clear portents of what ultimately became a serious and often violent national challenge to government higher education policy, through rendering the universities ungovernable (Price, 2023: 168), would be a paradigm case of hindsight bias. On the surface, despite these ongoing tensions in the period leading up to 2015, the atmosphere at universities such as UCT nevertheless seemed within the bounds of normality. This is captured in Price’s remarks about UCT graduation ceremonies: “…, I would meet three generations of family members - all of whom took enormous pride in having studied at and graduated from UCT. … more moving was the regular experience of being introduced by a first-generation graduate to her parents from a rural village, … They could not contain their emotions about graduation – their son or daughter now a doctor, accountant, lawyer or engineer. This was the visible evidence that UCT was playing a role in transforming … lives…” (Price, 2023: 9). By 2014, on the other hand, the South African Human Rights Commission (SAHRC) had concluded that progress in the higher education transformation project left a great deal to be desired. It decided that, on the basis of “a number of complaints on transformation issues in universities”, it would conduct “a holistic examination of transformation in institutions of higher learning in South Africa”. (SAHRC, 2017: vii). The final Report, issued on 9 December 2016, although overtaken by events in some respects, argued, on the basis of evidence belonging to the period before 2015, that transformation in higher education was unduly slow for a wide range of reasons. These included a lack of a shared understanding of what was meant by ‘transformation’ in the South African higher education context; a lack of institutional will to address transformation issues; lack of commitment to multilingualism; slow progress in changing student and staff demographics; inadequate accommodation, which hindered racial integration in university residences; governance failures; underfunding of universities by the state; ineffective complaints handling systems; subcultures of discrimination and domination within universities; and a lack of adequate oversight by the Department of Higher Education and Training (DHET) to ensure that institutions of higher learning did in fact transform (SAHRC, 2017: viii-ix). Max Price’s book exposes many policy issues that are not considered in this article. Had space permitted, government policy with respect to the outsourcing of various university services; the politisation of the university; the evolution of the ‘welfare university’; the massification of higher education; the ‘missing middle’ in fees’ policy; and labour law issues in universities would have been analysed in some detail. Three significant public policy areas arising out of Statues and Storms are discussed in this article: the quality of the information and analysis available to the government on the performance of the higher education system; FMF Mark 2 and the adequacy of current public higher education funding policy; and some public policy issues in the decolonisation of higher education curricular. Concluding remarks follow. The quality of the information and analysis available to the government regarding the state of the South African universities and the FMF challenge The evidence collected by the SAHRC in its 2014 enquiry (evidence had also been assembled in 2008, 2010, and 2012 by other public investigations) suggested that all was not well in the South African university system albeit not at or near boiling point. But presumably the full picture was more complex. Max Price later referred to the “colonial institutional landscape and culture of UCT” (Price, 2023: 197). Earlier critics had alleged a racist institutional culture at UCT and in other universities (Chikane, 2018: 25, 37, 39). Such a culture (this term also needs clear definition) does not, however, emerge overnight and was arguably present when Price conducted his due diligence before accepting the post of Vice Chancellor. It was still present eight years into his appointment. This suggests important research questions. Do the records reveal – in the years leading up to the FMF challenge to the university system and to the government – any individual students, any student body, alumni, convocation, staff association, and/or any trade union making submissions on matters that subsequently informed the demands of FMF, to the appropriate senior UCT university management, council, senate, institutional forum, and especially the UCT Ombud, a major source of information and advice to the UCT Council (Mpati et al, 2023)? Were, furthermore, such submissions made to state bodies such as the South African Qualifications Authority (SAQA), Council on Higher Education (CHE), Higher Education Quality Committee (HEQC), DHET, Minister and Ministry of Higher Education and Training, Parliamentary Portfolio Committee on Higher Education, Science and Innovation, opposition parties, and the media? Did the South African State Security Agency (SSA) offer assessments to the government of the levels of volatility of student politics – accusations were made during the FMF protests of security service, foreign and domestic, involvement (Price, 2023: 301-302)? Did ANC-affiliated student bodies provide similar intelligence? If even a reasonable amount of this communication on the state of the universities was managed and analysed effectively, the principal decision- makers seem not to have taken it seriously, or not to have converted it into concrete policy decisions including plans for timely implementation. Jansen argues that “the universities themselves were caught napping, unprepared for the sudden backlash for which they had neither the resources to meet student demands, the skill to negotiate the new politics, nor the security to protect campus lives and property” (Jansen, 2017: 1). Paradoxically, however, university vice chancellors were excused from this criticism. They, according to Jansen, had for several years warned the African National Congress (ANC) national government of the “dangers of the decline in government subsidies and the steady increase in student fees” (Jansen, 2017: 2; Habib, 2019: x, xii; Price, 2023: 96-105). Perhaps these warnings lacked sufficient credibility: maybe the government believed that they contained an element of crying wolf. And ‘dangers’ could refer to a wide variety of more or less likely financial possibilities. The reasons the government was apparently so poorly informed regarding the very wide range of pressures within the university system in the mid-2000s require identification, analysis and reform of some, perhaps all, of the means by which it develops and implements public higher education policy. A national enquiry into these matters, in order to effectively minimise the chances of being caught again by surprise, is indicated. There may, indeed, be a systemic proneness in government decision-making processes and structures to being “caught napping” across a range of policy matters, which needs to be addressed quickly. The literature on surprise attacks might be drawn upon in this regard. It discusses the risks of an “absence of a mechanism for aggregating, sifting, and analysing warning information flowing in from many sources and for pushing it up to the decision-making level of government” (Posner, 2009: 123). An enquiry arguably should commence with an examination of the quality of the work over the last 15 or so years of the higher education regulatory bodies, CHE and HEQC – its terms of reference must embrace examining the possibility that either or both bodies may have experienced regulatory capture. Surely such bodies ought to have kept, and keep, a watching brief on the changing environment and nature of South African universities, thereby to act as an early warning system to government of stresses in the system that may require a sometimes urgent policy response. At the individual university level, government might amend institutional statutes to require that ‘the skill to negotiate the new politics’ forms part of the selection criteria, and performance contracts, for senior university management including vice chancellors. A further provision consistent with improving public confidence in managerial integrity would be to require all university academics, at and above the position of Dean, and equivalent administrative staff, to display their up-to-date curricula vitae, and copies of their postgraduate thesis(es), on the appropriate website. The legislation governing the activities and responsibilities of the regulatory agencies, moreover, might be amended to endow them with defined, but wide, powers as an economic regulator, with an emphasis on higher education costs, revenues and fees (and any other higher education economic matters they select, or are referred to them by government or other stakeholders). FMF Mark 2? Will current public higher education funding policy survive? Assuming that there is a significant limit in the not-too-distant future to the resources taxpayers (Blackmur, 2023: 42) are prepared to see allocated to higher education, then the cost/revenue pressures that contributed to the massive disruption of the universities by FMF could again become of concern. A repeat performance of the FMF response is arguably thus within the realm of possibility. Even now there are straws in the wind such as a scathing report on the quality of governance and racial issues at UCT, investigations into accusations of inappropriate university initiation ceremonies, allegations of inadequate university student accommodation, and protests over the arguably appalling performance of the National Student Financial Aid Scheme (NSFAS) (Mpati et al, 2023; Hlati, 2024; Kahn, 2024). This helps make the case for major, and urgent, public enquiries into both the costs of the higher education system and its component universities, and the economics of non-taxpayer funding options. These enquiries arguably must, amongst other things, challenge several fallacious sacred cows such as the principle of the desirability of undiluted institutional autonomy, arguments that higher education must not be ‘commodified’, and also is a ‘public good’ – it isn’t (Blackmur, 2023: 43-44). The concept of a ‘public good’ originated in Economics (Backhouse, 2023: 354-355) and is associated with scholars such as Paul Samuelson. It has arguably been over-simplified by a wide variety of non-economists to justify a political position in favour of taxpayer funding of higher education. In this context, a public policy that permits all students to take loans that can cover all the costs of obtaining a qualification arguably ranks highly amongst the options for consideration by an enquiry (Blackmur, 2023). It would, amongst other things, dispose of the concept of the ‘missing middle’, an artifact of a certain specific financial plan, which has distorted public debate and policy thinking (Price, 2023: 108). The element of urgency in these proposals arises because of recent, current, and likely future significant upward pressures on the costs of providing higher education qualifications and other university functions. This is a huge field of analysis (essential reading includes: Moodie, 2016, especially chapters 1 and 2) and only a few issues can be explored even briefly in this article. General inflation is one of these pressures, exchange rate weakness is another. Jonathan Jansen has developed the concept of the ‘welfare university’ (Jansen, 2017: 9-10, 172-193). He has expanded earlier ideas advanced by Charles van Onselen that South African governments were “in danger of confusing … welfare and educational responsibilities to the detriment of both” (Jansen, 2017: 172). This has come to pass. Jansen concludes that “in recent years South African universities have gradually taken on more and more social welfare functions that stretch way beyond what was previously expected from a modern university” (Jansen, 2017: 177). The costs of managing these functions have included those associated with the often significant related expansion of university administrative systems, the costs of many of which are not accommodated in taxpayer subsidies to higher education (Jansen, 2017: 187; Price, 2023: 73, 87, 91). And the prospects for the future are for greater welfarisation in terms of cost and scope (Jansen, 2017: 180, 181, 189). A harbinger of this can be found in the United Kingdom where recent research has examined the “effects of the cost-of-living crisis on students” (Freeman, 2023: 1). This reveals that “universities are being forced to take steps which would have been unthinkable” just a few years ago: “university leaders and students’ union officers have pushed boundaries to get students more help” (Freeman, 2023: 2). The additional costs of such assistance is, however, unsustainable (Freeman, 2023: 3). The terms of reference of the enquiry into the costs and revenues of the university system that this article has advocated would arguably need to include the future of the welfare university in South Africa and the possible consequences of its failure. Thinking about the balance sheet issues facing South African universities would also need to embrace matters such as policies needed to improve staff and capital productivity. Structural issues are also relevant. Higher education debates in South Africa are conducted on the assumption that the vertically integrated structure of qualifications’ production is permanent (design, delivery, assessment, certification). At some point, however, public policy may well need to question the utility of this assumption. Costs may be reduced, and benefits increased, if, for example, the design and/or assessment stages were conducted in independent institutions. Several South African universities suffer certain major adverse pressures on their costs and income that can only possibly be alleviated and reversed through major public policy interventions – of types that do not offend against Rawlsian principles of social justice (Blackmur, 2023: p.42). The source of some of these pressures is to be found in serious corruption in these universities. The evidence for this state of affairs is analysed in Jonathan Jansen’s book “Corrupted. A study of chronic dysfunction in South African universities” (Jansen, 2023). He showed that in some universities there exists looting of “institutional resources on an industrial scale”, some of which is linked to the growth of the welfare university (Jansen, 2023: 5; Price, 2023: 73). Jansen drew attention to the consequent “high costs of institutional instability for staff and students, as well as for the disadvantaged communities surrounding the campus” (Jansen, 2023: 3). Put succinctly, corruption diverts financial and human resources from the academic project, inflates costs, and reduces income, which infusions of additional taxpayer funds can only make worse. A key public policy question is why, as it seems, the national government was unaware of the extent of this systemic malaise. This reinforces the major importance of the earlier proposal here for an urgent national enquiry (with judicial status?) into the methods and performance of the government’s key higher education regulators and advisers such as CHE, HEQC, SAQA, and DHET. Regulatory failure may be one of many possible egregious systemic failures in higher education. There have, to be sure, been ministerial and other interventions in some university activities – since 1998 at least (Jansen, 2023: 254-256). These have been piecemeal examinations on a case-by-case basis: systemic implications, and the extent to which South Africa’s higher education legislation has enabled (or not addressed) opportunities for corruption and other deviations from the purposes of higher education, have been underemphasised. The probable adverse impact of these circumstances on the reputation of the South African higher education system is unlikely to be trivial. Potential consequences are especially important for university revenues. Some university systems, such as that of Australia, for example, earn income from exports of higher education services, which is of national economic significance (Universities Australia, 2020, 2023; Rhodes University Business School, 2023). Such an opportunity will be denied to South Africa under current conditions. Even relatively high performing universities will suffer some collateral damage given that the system’s quality is compromised, and not only to their international activities but also to the acceptability of their qualifications globally. In addition to the problems already raised, seizing these opportunities requires that certain other issues be addressed by South African policymakers. They include ensuring that all South African higher education qualifications are internationally competitive in terms of scholarly and intellectual standards; removing any visa barriers; combatting xenophobia; resisting hostile attitudes in some university quarters to entrepreneurial activity; and insisting on regulation that is hospitable to international trade and investment in higher education. Objections will, of course, be raised to some of these policies. They can, however, be designed and implemented in ways sensitive to some alternative conceptions of the purposes of universities. The extent to which the South African higher education system might benefit from income generated by the export of qualifications will largely depend, however, on the nature of such compromises and whether they discourage international students. If sufficient numbers were deterred this would result in South Africa, perhaps inadvertently, pursuing a policy of autarky in higher education. The extent of any legislative and/or regulatory impediments to innovation in qualifications, and the marketing of higher education services more generally, needs to be identified by appropriate public enquiries. Intelligent removal of such impediments can enhance the flow of third-stream net income. Two examples are offered for consideration. Universities may offer a fee-for-service “walk in” assessment and certification of a person’s knowledge of, say, Strategic Management. Costs would be minimised by employing existing processes. There would be no entry rules, thereby eliminating costs on this account. This is a form of Recognition of Prior Learning (or of recognition of existing skills) without, however, the costs associated with the traditional rule-bound model. Consideration might also be given to allowing students to design some or all of their degree programmes. Such degrees would be issued by, say, the national higher education department, or an appropriate regulatory authority, or a university body such as Universities South Africa. This qualifications’ model could be built on the Massive Open Online Courses (MOOC) system. A major advantage of this system is the relatively low fees, which include the costs of existing, highly credible quality assurance and assessment processes. Appropriate regulation would nevertheless clearly be necessary, as would negotiations with international (and domestic) high reputation universities. This is not, however, the place to present a fully specified MOOC degree model. The important point is that South African higher education public policy, regulation and legislation would require significant amendment if this model were to be awarded a place in the higher education system. The key question is whether, if fully implemented, this model would allow significant numbers of South African tertiary students to obtain high quality degrees at a fraction of current costs. Given the vital importance of this, as demonstrated by the FMF protests and sometimes physically violent agitation, evaluation of a fully specified model is arguably an immediate priority for the national government. Serious opposition to these proposals, however, is predicable to the extent that the MOOC model might attract students away from existing universities. They may be tempted to protect their existing position and status by means that include political pressure, possibly in an informal alliance with HEC and HEQC. These bodies in the past have erected various barriers to entry against international universities attempting to operate in South Africa (Blackmur, 2004; Blackmur, 2006). This brief discussion of some of the cost and revenue pressures in the South African higher education system maintains that there is an element of urgency in conducting the various enquiries that have been recommended (Moodie, 2016). The durability of the 2016-17 settlement with FMF is not guaranteed, indeed it looks increasingly fragile. And there is a wider context in which the future of higher education will be determined. William Gumede has argued that the essential dimensions of this context are “corruption, incompetence and policy populism”, which together may precipitate an economic crisis in which “higher education subsidies, for institutions and students, will have to be scrapped” (Gumede, 2023). Should this come to pass, student reactions are unlikely to be mild or delicate. Decolonisation of higher education curricular: some public policy issues Statues and Storms addressed many aspects of FMF’s insistence that students receive ‘free, quality, decolonised’ higher education (Price, 2023: 69-86, 146, 201-202, 229, 265-6, 283). The notion of decolonised higher education embraces an extremely wide range of concepts and issues, much of which is disputed. Himonga and Diallo assert that “the definition of decolonisation is unsettled, if not contested” (Himonga & Diallo, 2017). They cite Price and Ally in this context as arguing that “decolonisation … should certainly not be reduced to some naïve … desire to return to a pristine, unblemished Africa before the arrival of the settlers” (Himonga & Diallo, 2017). Even this assessment, however, would be considered controversial in some quarters by its use of the word ‘settlers’: just who are the settlers in the long sweep of southern African history? A model of curriculum de-colonisation has been presented by Conrad Hughes, the Campus and Secondary Principal at the International School of Geneva (Hughes, 2021). It repays study as part of the process of getting to grips with some difficult definitional and content matters. It stimulates, amongst other things, certain questions (with few direct answers), for example, about the study of historical writing and analysis in a de-colonised curriculum. Would this deal with slavery in all societies and across all times including modern slavery; with empires and imperialism in similar vein; with the status of women everywhere; with religion; with racial prejudice; with monarchy; with exploitation in all its forms and in every society; and with ‘myths’ in all societies? In common with traditional social science and humanities disciplines, Hughes’s article contains extensive jargon and, particularly to the uninitiated, opaque concepts. What methods of enquiry, furthermore, would be approved? Will Critical Race Theory be adopted as paradigmatic? Does Hughes ask if concepts such as ‘whiteness’ and ‘blackness’ possess any epistemological integrity? ‘Great person’ approaches to historical writing are rejected by Hughes on a priori grounds. Michel Foucault, Jacques Derrida, Julia Kristeva, and Gilles Deleuze are embraced almost uncritically. A principal objection to the Hughes’ model, however, is that he rejects the concept of standards in intellectual and scholarly enquiry (and presumably everywhere else). If this were ultimately to inform the redesign of curricular in South African higher education, then fundamental questions about the value, relevance, credibility, reputation, and future of the universities would be at the top of the public policy agenda, and not only in South Africa. Claims that decolonisation of the curriculum in universities (variously and widely conceptualised) was a “good thing” were certainly a major component of the extensive higher education transformation agenda of FMF. A key question for this article is whether there is a role for government in a process of major curriculum change. Is the nature of university curricular a proper subject for public regulation? Assuming that it is for purposes of discussion, what matters would have to be taken into account if the South African government were contemplating using its powers in this regard? Issues to do with academic freedom (constitutionally protected in South Africa) and institutional autonomy would certainly be raised. These are two of the sacred cows in South African higher education, although arguably rarely respected in principle and/or practice by FMF and some academic staff. To the extent that the FMF assertions regarding, for example, the “toxic” nature of the “institutional culture” in many South African universities were accurate, it may be relevant to observe that such apartheid characteristics apparently continued post-1994 under circumstances ostensibly of academic freedom and institutional autonomy. Both of these thus may well be candidates for a comprehensive reassessment by the government and the regulators of their appropriateness to contemporary and future South African higher education. Given the complex issues associated with definitions of decolonisation, and the wide and often contentious nature of what decolonised curricular might look like, there is a case for government to require that regulators audit samples of redesigned, decolonised curricular against certain principles which, of course, will no doubt be questioned by some. Such curricular samples will, amongst other things, thus be expected to explain and justify their definitions, educational philosophies, and operational details together with analyses of their particular pros and cons. A range of exemplars might thereby be developed over time, from which decolonisation projects might benefit. Such regulation would necessarily have to be conducted in terms of the principles of efficient regulation, which may well require closer public evaluation and supervision of the performance of the regulators themselves. One further advantage of public regulation would be to add credibility to the decolonisation process without stultifying innovation in curriculum design. How do we know, for example, that ‘inappropriate’ colonial thought wouldn’t simply be replaced by, say,  “pseudo-Fanonist  political ideology” or ScienceMustFall nostrums (Price, 2023: 146, 265-266, 283), or by curricular consistent with universities operating more like party political schools than as specified in their legislated purposes (Habib, 2019: 201-204), if each university were to have final authority over the design of decolonised curricular? Matters of academic freedom and institutional autonomy come to the fore here, but as noted earlier, these values have not always commanded respect in the past in all parts of the South African higher education system. Just who might be involved in creating (and eventually revising) decolonised curricular is clearly an important policy matter for government. This decision arguably cannot be left to internal university processes alone: something as revolutionary as the curriculum decolonisation process must be conducted under the protection of a complex of safeguards of the global credibility of South African university qualifications. This discussion by no means exhausts the list of matters that a government considering forms of public intervention, or specific input into certain aspects of university curriculum decolonisation, needs to consider. Other matters include recognising the massive complexity of the decolonisation enterprise in that “good learning design aligns learning goals, learning activities, and assessment”, while culture, careers, and knowledge are “useful concepts for encapsulating three central aspects of university curriculum” (Moodie, 2016: 63-65, 68, 71, 73, 81). To what extent, moreover, are employers’ and students’ views concerning curriculum change to be accepted as dominant contributions; are current structures of subjects, courses, semesters, and assessments to be considered sacrosanct; is the internationalism of curricular an acceptable objective; is it lawful for academics to be assigned ‘decolonial scores’ by students (Price, 2023: 229); are ‘Western’ sports such as soccer to be banned from university campuses; and how are the inevitable conflicts over these, and a multitude of other issues, to be resolved? And unintended consequences and black swans will almost certainly complicate decision-making and execution, perhaps beyond any reasonable expectations. One conclusion is certain. A ‘revolutionary’ reform of higher education curricular, however desirable in itself, will not just be extremely complex. It is likely to be exceptionally costly as well. And perhaps more costly than it could be, given that it is politically impossible in South Africa to contract with private bodies, however well qualified, to participate in the curriculum re-design process. The analysis in this article is, in a sense, back where it started: what should be the sources of funding for the costs associated with the decolonisation of the curriculum? Universities are presumably unable to provide funding from internal sources. Should the taxpayer provide the necessary resources? Does government have the fiscal and political capacity to increase certain taxes, borrow the funds, or redirect public expenditures from other budgets for, say, social grants and/or expanding early childhood education? All of these, especially the latter, raise serious matters of equity and fairness (Blackmur, 2023: 41-43): why should taxpayer funds be devoted to financing curriculum change the benefits of which will accrue almost exclusively to university graduates? Curriculum reform pressures may, moreover, extend beyond issues of decolonisation. Demands may be made to, say, de-gender, or to de-ableist, the curriculum. Responding to these would clearly have major cost implications. Conclusion A paradox confronts researchers of the FMF movement (and all other fallist movements in South African higher education). On the one hand, UCT – and many other universities – was accused of being tainted by a long-standing toxic culture of institutional racism and an inappropriate colonial curriculum. On the other, it seems that more and more students from historically disadvantaged families were increasingly anxious to enrol in degree studies there, even though presumably more culturally appropriate alternatives such as the University of the Western Cape were available. Price’s accounts of proud parents and graduates invites the question as to why such students would wish to study under UCT’s allegedly toxic conditions. And, perhaps more to the point, why were national governments apparently relatively complacent with respect to this culture in what was often called Africa’s premier university? The accusations were not made in secret! The paradox, however, may be more apparent than real. It may well oversimplify extremely complex patterns of decisions and events. It nevertheless stimulates some useful questions and ideas. In addition to the public policy issues raised in this article, others of relevance emanating from the material in Statues and Storms include the nature of government attitudes and policies towards universities as corporate entities, and some of their staff, acting as partisan advocates of specific political, economic, social, religious, cultural, and other ideologies in ways inconsistent with liberal values such as those found in the South African Constitution. Another concerns the extent to which the government is prepared to tolerate the use of violence (physical and/or mental) in the determination of public policy in a democracy, and the proper role of the police on university campuses. If there is a significant possibility that a FMF Mark 2 will challenge the national government in the foreseeable future in ways reminiscent of 2015/17, then government arguably ought to be better prepared than previously. This article argues that such preparation requires, amongst other things, a public enquiry into the quality of the government’s methods of developing higher education public policy and especially into the efficiency of the relevant regulators in providing information and advice on changes in the functioning of the university system. The addition of a University Complaints Regulator to the institutional structure, either as a separate entity or as part of revising existing arrangements, might be the best way of creating an early warning system regarding emerging instabilities in the universities. Such a body might liaise closely with a University Economic Regulator. This would mean that individual university councils would be deprived of their final authority to determine student fees. Other public enquiries advocated in this article include major, and urgent, public examinations of both the costs of the higher education system and its component universities, and the economics of non-taxpayer funding options. This latter is important because it would necessarily expose the model of a full cost student loan system to public analysis and further review beyond that contained in the Heher report (The Presidency, 2017). An essential dimension of this model is typically ignored in public debate: a critical source of funding the current costs of obtaining university qualifications is the future income that graduates earn as a result of their university qualifications. This article has suggested that a review of higher education legislation is also warranted to determine if there are any statutory barriers to the proper functioning of the university system, especially to innovation in qualifications and the development of extra sources of third-stream income. The model for this could be the exhaustive analysis of state and national legislation in Australia in the 1990s as part of a National Competition Policy. There is arguably a place for government engagement in any process of curriculum reform in South African universities. Students, academics, and a host of other stakeholders clearly have vital roles to play. But control of the agenda and of who participates in the process, and especially the making of final decisions, cannot be left exclusively to them: there are risks of conflicts of interest, serious disputes over, say, ideological issues, as well as cost considerations all of which establish a vital public interest, and therefore the major role for government, in the outcomes of curriculum reform. Perhaps the most important of these is the effect of reformed curricular on the international reputation of South African higher education qualifications. A high reputation is an extremely significant national asset. Curriculum matters are, of course, not the only determinant of reputation. The nature and performance of the higher education system is the ultimate influence, and intelligent national higher education public policy, informed by an appropriate historical perspective, is a key to success. Acknowledgements I thank Professor Glyn Davis AC for comments on an earlier draft of this article. I also acknowledge the input of my partner, Ms Gina Verberne. All errors and interpretations are entirely my responsibility. References Backhouse, R. 2023. The Penguin History of Economics. London: Penguin Random House. Benatar, D. 2021. The Fall of the University of Cape Town. Cape Town: Politicsweb Publishing. Blackmur, D. 2004. One size can’t fit all. The CHE’s review of MBAs was ‘seriously flawed’. [Online] Available at: https://mg.co.za/article/2004-08-12-one-size-cant-fit-all/ [accessed: 5 March 2024]. Blackmur, D. 2006. The South African MBA Review and the Principles of Efficient Regulation, Quality in Higher Education, 12(1): 81-93. Blackmur, D. 2019. Adam Habib’s ‘Rebels and Rage. Reflecting on #FeesMustFall’: A Critical Appraisal, South African Journal of Higher Education, 33(4): 44-61. Blackmur, D. 2021. International Resonances of the #FeesMustFall Movement in South African universities: 2015-2017, Agenda: A Journal of Policy Analysis & Reform, 28(1): 29-45. Blackmur, D. 2023. A Social Justice Policy Framework for Funding the Acquisition of Higher Education Qualifications in South Africa, South African Journal of Higher Education, special edition, 37(6): 41-55. Booysen, S. 2016. Fees Must Fall. Student Revolt, Decolonisation and Governance in South Africa. Johannesburg: Wits University Press. Chikane, R. 2018. Breaking a Rainbow, Building a Nation. The Politics behind #MustFall Movements. Johannesburg: Picador Africa. Freeman, J. 2023. New report finds more than a quarter of universities have a food bank and one-in-ten distributes food vouchers. Oxford: Higher Education Policy Institute. Gumede, W. 2023. The triple evils pushing us towards doom. [Online] Available at: https://www.timeslive.co.za/sunday-times/opinion-and-analysis/opinion/2023-12-17-the-triple-evils-pushing-us-towards-doom/ [accessed: 5 March 2024]. Habib, A. 2019. Rebels and Rage. Reflecting on #FEESMUSTFALL. Johannesburg & Cape Town: Jonathan Ball. Himonga, C. & Diallo, F. 2017. Decolonisation and Teaching Law in Africa with Special Reference to Living Customary Law. Potchefstroom Electronic Law Journal, Potchefstroom: Southern African Legal Information Institute. Hlati, O. 2024. NSFAS’ ‘Flawed’ Planning Leaves MPs Outraged. [Online] Available at: https://www.iol.co.za/capetimes/news/nsfas-flawed-planning-leaves-mps-outraged-9cc66b95-cb7d-495f-a329-7a4525069333 [accessed: 5 March 2024]. Hughes, C. 2021. Decolonising the curriculum. Geneva: Council of International Schools. Jansen, J. 2017. As By Fire. The End of the South African University. Cape Town: Tafelberg. Jansen, J. 2023. Corrupted. A study of chronic dysfunction in South African universities. Johannesburg: Wits University Press. Kahn, T. Auditor-General gives NSFAS an F. [Online] Available at: https://www.businesslive.co.za/bd/national/education/2024-02-14-auditor-general-gives-nsfas-an-f/#:~:text=The%20office%20of%20the%20auditor,2021%2F22%2C%20its%20worst%20audit [accessed: 5 March 2024]. Mpati, L., Cachalia, A., Johnson, B., & Hanekom, P. 2023. Independent Investigation into UCT Governance. Final Report. Cape Town: UCT Council. Moodie, G. 2016. Universities, Disruptive Technologies, and Continuity in Higher Education. Toronto and New York: Palgrave Macmillan. Posner, R. 2009. A Failure of Capitalism. Cambridge, Mass: Harvard University Press. Price, M. 2023. Statues and Storms. Leading through change. Cape Town: Tafelberg. Rhodes University Business School. 2023. SA should study how Australia exports degrees. Makhanda/Grahamstown: Rhodes University. South African Human Rights Commission (SAHRC). 2017. SAHRC Report. Transformation at Public Universities in South Africa. Pretoria: South African Government Printer. Universities Australia. 2020. The importance of universities to Australia's prosperity. Melbourne: Deloitte Access Economics. Universities Australia. 2023. International Education adds $29 Billion to the Economy. [Online] Available at: https://universitiesaustralia.edu.au/media-item/international-education-adds-29-billion-to-the-economy/ [accessed: 5 March 2024]. The Presidency. 2017. Report of Commission of Inquiry into the Feasibility of making Higher Education and Training Fee-free in South Africa (Heher Report). Pretoria: South African Government Printer. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2024 Print ISSN: 2960-1541 Online ISSN: 2960-155X Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute D I S C L A I M E R Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. JANUARY 2024 by Dr Klaus Kotzé Abstract “The Constitution belongs to all of us, not just the ruling party, or one section of South Africa. We all wrote this collectively with our blood, some with their lives, with our tears and with our sweat. We claim it as ours, it enshrines the rights that make us live as South Africans, and we will protect it because it belongs to us” (Ramaphosa, 2012). Introduction South African governance is coming under greater criticism for being poor and ineffective. Instead of expounding on its failures, this paper explores the concept of governance in South Africa and proposes preferential pathways whereby improvement can be found. When governance replaced government at the onset of democratic South Africa, it was a corrective measure responding to the preceding order. Thereby pursuing justice and democracy. Today, a similar, corrective approach is required to intervene and set the country on a better path. Unlike the turn to democracy, today the country is endowed with an instructive Constitution. This paper critically explores the concept and process of governance. It undertakes an exploratory dive into the conceptual meaning of governance in South Africa by looking at how contemporary governance has been shaped by local and global power. It also looks at how the enactment of Constitutional supremacy (rule of law) relates to the preceding system of government, or Parliamentary supremacy (rule by law). It then turns to explore the national loadstar, the Constitution, for perception and guidance as to the ideal processes and practices of governing. Of particular interest is the enactment of Constitutional supremacy through the relationships between the state and citizens. From Government to Governance To perceive contemporary governance, it is useful to contrast it to the previous order. Today, instead of living under the dictat of politicians or institutions, it is the Constitution that directs all subjects of the state (both officials and citizens) to be guided by and give expression to its principles and values. The Constitution provides foundational insight and direction as to the ways and ends of democracy. It guides the re-imagining of governance by strategically charging both leaders and citizens with the responsibility to forge constructive relationships. This interaction forms the pathway to successful, responsive and resolute democracy. For South African governance to succeed, this study highlights that the roles of and relationship between the state and its citizens are indispensable. While much can be and has been said about the failures of the state administration, the citizenry too has been inadequate in constructively discharging its Constitutional. It is, therefore, not only that a re-imagining of public leadership is needed, but a re-imagination of active citizenry; a republican ethos. Governance is not a universal concept that is independent of context and history. To discern South African governance, it must be conceptually located. Under the Parliamentary system in place before the non-racial, democratic era, the concept of ‘rule by law’ reigned. It saw to it that the governing authority and its institutions were able to create and execute laws as it saw fit. Rule by law is thus a “method that governments and people in power use to shape the behaviour of people…this usually has the end goal of psychologically or forcefully persuading people to agree with policy decisions they otherwise would not agree with” (Van Norman Law, 2017). The authority and the people are separated by law. Law is applied by power as tools. Power is imposed upon a people. The concept of power is the individual (or institution) wielding such power. Under the rule of law, the counterpart to rule by law, power is abstracted and resides in philosophical and moral concepts. It is not in institutions, but in concepts, captured in principles such as human dignity and equality, where power lies. These are not ineffable concepts but require people to instil and interpret meaning. The abstraction of power sees to it that it belongs to no-one, yet it prevails over everyone in the state – with the law being circumscribed by the physical borders of the state and its obligations under international law. Laws and ethics are thus captured in a public framework, a loadstar such as the national Constitution. Rule of law is thus the great equaliser. Every citizen is subject to the reign of Constitutional principles. Constitutional supremacy is thus where people pursue and enact the Constitutional ideas and values. These ends (human dignity, equality, etc.) determine and justify the ways they are pursued. As the subjects of the Constitutional state, the citizens are accordingly not ruled over by a prescriptive government. Instead, they have the primary (and note merely latent) responsibility to be the exponents of the Constitutional precepts. An effective and capable Constitutional state rests first on its citizens internalising and then executing its value-based arrangement. They have a secondary charge to ensure that the state representatives pursue the Constitutional ends. Under the rule of law, the role of the state is administrative and bureaucratic. Foucault’s use of governmentality to describe the change from order by law to administrative proceduralism is useful. The conduct of conduct, according to Foucault indicates how “the exercise of power consists in guiding the possibility of conduct and putting in order the possible outcomes” (Foucault, 1982: 789). Governmentality refers to the guidance of behaviour through productive and positive, rather than restrictive means. A more horizontal system whereby citizens engage each other and the institutions. Where citizens willingly give consent and where individuals participate in the process of governance. As such, “governing is an art involving the imaginative application of intuition, knowledge, and skills to administration and management” (Huff, n.d.). In such a system, it is not the administrative state that governs, but the raft of categories and realm of possibilities that citizens are delineated to and provided. We see that governance, from its Greek origin, ‘kybenan’, which means to steer or guide, is premised upon a clear understanding of ends and the pathways towards these ends. The governing role of global power Global power and norms influence the pursuit of the national order. The timing and context of South Africa’s progression to non-racial democracy have played a determining role in shaping domestic governance. A child of the liberal, democratic era, South Africa has been moulded by global power. Its progression to democracy occurred during what is often referred to as the third wave of democracy. During the 1980’s vast swathes of Latin America and the Asia-Pacific became democratic. After the Soviet Union imploded, Eastern Europe and much of sub-Saharan Africa departed from their Soviet-inspired approaches. With the collapse of a guiding alternative, most of the newly democratic states assumed a normative political framework as influenced by Western liberalism. Whereas the liberation movement led by the African National Congress preferred the redistributive mechanisms inspired by the Soviet Union, the globalised Western dogma persuaded it to follow suit. Together with most of the world, South Africa assumed the guiding norms and practices suggested by the Western-led world. It did so to benefit from the privileges of the international order, but also because of the persuasion of predominant norms. In so doing, democratic South Africa commenced from what can be termed: partial sovereignty. Whereas the Constitution has been central to framing procedural governance, the carrot and stick of global dogma played the central guiding role. Partial sovereignty means that South Africa has led by following the models and processes suggested to it (and the world). According to late Stellenbosch University scholar, Sampie Terreblanche, South Africa acquiesced to the “American economic model” of “anti-statism, deregulation, privatisation, fiscal austerity, market fundamentalism and free trade” (Terreblanche, 2018). The concern raised here is not about which policy is better (or worse). Instead, it is about policy independence and the lessons and maturities that stem from critically pursuing policy selection; what today is referred to as finding local solutions for local problems. Sovereignty has traditionally been understood as absolute. A state is either sovereign and thus steers its own polity and policy, or it is not. If true sovereignty cannot be partial, then partial sovereignty is not fully sovereign. Democratic South Africa has largely aligned its administration to the global orthodoxy of good governance. According to the World Bank, good governance refers to “predictable, open and enlightened policymaking” (World Bank, 1994). “Good governance refers to a prescribed set of international characteristics which guide public institutions to behave in a manner that advances (Western) human rights and a liberal, democratic rule of law” (Kotze, 2020). Such a detached, global perception is emblematic of the singular, hegemonic approach to governance. The political affairs of a time sans time, the ‘end of history’: a time when all alternatives collapse into the prevailing and superior (western liberal) model. Again, the purpose is not to criticise any indicator of good governance. It would be unjustifiable to criticise transparency, responsibility, accountability and responsiveness, the good governance attributes identified by the United Nations’ Human Rights Council. Instead, the concern is of an imposed set of perceptions that are normatively charged to be locally internalised. Instead, the basis of any type of ‘good’ governance is always first the local or national condition. The issues and prevalences on the ground. Not an arrogated proposition of (often elitist) perspectives that emerge from foreign realities. For state sovereignty to be full, not partial, the decisions must be guided by domestic realities, perceived through domestic intelligence and operationalised by local interpreters. This, as is slowly emerging, would resemble an enlightened perception. Instead of a preponderance of ideas that are en vogue, a rigorous approach must emerge as to how to strategically deal with domestic realities. When South Africa submitted to the standardised set of international norms it may have joined what was at that point the ‘right side of history’, but it failed the strategic task at hand. To develop an indigenous approach to governance, one which would assertively deal with the national condition as consigned by the separate development which preceded it. When the national strategy of Reconstruction and Development was shelved in favour of a growth-oriented approach, South Africa capitulated to the international zeitgeist. Partial sovereignty, which enacts an assumed or foisted upon guiding protocol, cannot see the forest for the trees. It denies fully exploring and developing a system fit for the national condition. As a plant will not mature when planted in alien territory, so a polity cannot mature when it is interpreting itself through the tools and views of another. Governance is an intimately spatial and operational practice. Not only are its ends determined by culture and history, but its pathways must also accord to domestic perceptions. Approaches emerge locally and must give expression to the local reality. Objectives are pursued within a specific (cultural and historic) realm. Successful governance is that which attends to the desires and needs of the people through actions that principally align to the Constitution. Here, both civil servants and citizens alike are the enabling agents tasked to operationalise the work processes and rules of governmentality. In doing so they implement the categories tasked to them. On the other hand, when either the governing administration or the citizens decline their agency. Or when either assumes external norms, governance fails. Governance: lessons from our COVID experience Understanding emerges when things change. If the transition from government to global-inspired governance presents the first turn from which to draw, the return to rule by law during the COVID-19 pandemic offers another. When President Ramaphosa invoked the Disaster Management Act on 15 March 2020, he paused the sovereignty of principles and claimed power in the Executive. While the Constitution provides for such an exception, the contradiction of both government and governance existing at the same time ensured an uneasy synthesis. One that recalls the concept of partial sovereignty. “The form of authority during South Africa’s Disaster presents a synthesis of both claiming and rejecting power. As the exception exists within the norm, an irreconcilability persists which to Schmitt’s (1996) critique of liberalism is captured as impotency. South Africa’s execution of the Act presents a case of both claiming contingent power while resigning to an overriding perception of authority” (Kotze, 2020). The former is expressed in the drafting and implementation of regulations, the latter arises from the external guidance from global institutions and specialists. Ramaphosa strategically seized upon the occasion to invoke the exception to the guiding ‘norm’ by rhetorically giving expression to the current reality and by inspiring the nation to play their part.  During the period under the Disaster Management Act, the Act became the temporary national loadstar. A mechanism “to guide”, “manage”, “facilitate disaster management capacity building, training and education”; and “to provide key performance indicators in respect of the various aspects of disaster management” (Government Gazette, 2003). Like the singular perceptions emergent after the Cold War prompted South Africa (and others) to follow their logics, the novel nature of the pandemic did the same. South Africa (and others) followed a containment protocol that was charted by (select) global authorities. It is not unexpected or even random that the approach that eventually cascaded ever more dramatically under the equally cascading dependence of data, proposed an approach that sought to contain and control. In China, the state where the virus was first detected, the guiding maxim of power and thus the very expression of culture is control. It is not unlikely, had the virus exploded in northern Europe, for example, that the initial and subsequent approaches and consequences would have been different. With a very long history and an independent cultural ethos, a state like China is sovereign. Its sovereignty comes from its own sense and expression of self. Sovereignty is claimed, never bestowed. It is enacted when a state and the people practice the values and principles of the political myths, usually captured in a loadstar such as the Constitution or in the national plans. In a partially sovereign state where national myths or political mores are not accepted or pursued, governance is equally circumscribed. While novel and epidemiological dimensions to the COVID pandemic did shape its response, the global reach of governance norms that were not emergent from societies that implemented them were apparent. Most states followed a similar pathway. One which was not intrinsic to its national mores. COVID governance illuminated the sovereign tension in South Africa. The government deployed the accompanying rule-by-law fiat afforded to it by the Disaster Management Act. The abnormal response to the abnormal situation saw to it that the South African government used a combat narrative and war-like response. It imposed curfews and limitations of movement. It deployed the South African Defence Force. Security measures were not taken against the virus but to protect the state from people not following the laws. Public and even private life was controlled and disciplined. Though government implemented norms from abroad, it did so by giving expression to the current reality and through the mechanisms that were provided for it in the Constitution. The end of the disaster-induced exception opened a new chapter to South African governance. While the experience of implementing the exception may not directly serve its counterpart, it is conceptually illustrative. As the regulations were created to respond to the situation at hand. As government pursued and prosecuted the regulations after providing the citizens with categories and the realms of possibility. And, as the citizens observed the regulations, becoming good followers of leadership. So too governance measures should be conceptualised and internalised. Responding to the everyday conditions threatening the nation. Re-imagining governance in South Africa To conclude this paper, it will focus on several approaches where governance can give greater expression to the Constitution. The Preamble of the Constitution ‘walks before’ the subsequent text. It guides the signification of the Constitution and how it should be read. The first thing the Preamble does is to nullify the previous order of differentiation. The first words state: “We, the people of South Africa”. Instead of simply being a cursory phrase, this is a powerful expression of being. It unites all in South Africa. Not only as equals under law, but in the responsibility of purpose. The second directive is the building of a transformative society. One where the past is recognised (“Honour those who suffered for justice and freedom in our land; Respect those who have worked to build and develop our country”) and a just and equal society is collectively built (“Heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights”) (The Constitution of the Republic of South Africa, 1996). The transformative nature of the Constitution is such that progress is built over time and through the relationship between citizens. One of the goals set in the Preamble is the improvement in the quality of life of citizens. The current administration has admitted that the state has failed in this regard. It has (rhetorically) committed to become effective, so as to improve the lives of citizens. “To achieve any progress”, said President Ramaphosa in his 2023 State of the Nation address, “we need a capable and effective State. Our greatest weaknesses are in state-owned enterprises and local government” (Ramaphosa, 2023). Mathebula (2023) points to state capability being both human and institutional. According to him, “the Constitution settles the duality of where state capability is located by providing that an organ of the state is any state department, administration, institution, or any other functionary in all spheres of government which exercises power or performs a public function in terms of the Constitution or legislation. In terms of this provision, all public servants are as much an organ of the state as the institutions…This means the most significant focus of any capacity-building interventions should be targeted at the bottom of the pyramid of state personnel” (Mathebula, 2023). Mathebula’s interpretation of the state official as the direct representation of government offers an interesting take on subsidiarity. Usually, subsidiarity, the principle that government should be active where it has maximum effect, is interpreted as the citizen’s engagement with local or municipal government. In South Africa subsidiarity is interpreted from Section 156(4) of the Constitution, that the national and provincial government must assign to the municipality the administration of any matter “that would most effectively be administered locally” (The Constitution of the Republic of South Africa, 1996).  According to De Visser, the “argument is that lower levels of government are closer to the citizen and can therefore make more intelligent decisions on what citizens want” (De Visser, 2010). The governing administration is, therefore, obliged to devolve governance as close as possible to the citizens. Subsidiarity is further “translated into the protection of lower levels of government against undue interference by national government…The argument is that lower levels of government are closer to the citizen and can therefore make more ‘intelligent’ decisions on what the citizens want” (De Visser, 2010). With trust at its core, the principle manifests in the relationship between the citizens and the civil service. If subsidiarity relates to the structure of power relations, servant leadership can be seen as a human and cultural counterpart. Servant leadership refers to a style of leadership (or governance) that builds faith and authority through positive interactions. It lends to a governance approach whereby the official does not only occupy their public office but instead takes responsibility and accountability as they are rooted in a specific community. As a community member, first, the official does not elevate themselves above the community as is often seen, but rather serves as a servant to the people. A return to and re-imagining of Constitutional governance will also allow for a lucid and new interpretation of the batho pele (people first) principles as first proposed in the 1997 White Paper on Transforming Public Service Delivery. Batho Pele is designed to give expression to the Constitutional ideals. It is described by then President Mandela as “the relentless search for increased efficiency” and the desire to “turn words into action”. It is through turning words into action that perceptions change and the state is experienced as capable. A central problem in governance is the perception of ineptitude, corruption and other ills. Whereas a style of leadership does not directly address faults that require intervention, what it does do is admit where faults are made and seek to return trust and rekindle the relationship between state and citizenry. Servant leadership presents a governance style that contrasts with a self-serving one. By seeking to take responsibility and accountability, the state, through its officials and institutions, addresses the breakdown of trust at its most immediate (and thus persuasive) point, the face-to-face interaction. Servant leadership displays an aspirational style of governance that is found in the desire to recognize and attend to the priorities of others. It is an approach to governance that supports Mathebula’s claim, that the Constitution “should be elevated to be the most crucial document and conceptualization of civic education” (Mathebula, 2023). By returning to the Constitution as the source of guidance, the state and its officials attend to their Constitutional mandate of service delivery. Preferred service delivery, as has previously been mentioned, is not a top-down, but a relational system. Chapter three of the Constitution lays out co-operative governance. Section 41(1) delineates the principles whereby all spheres of government must co-operate with the people. These principles are, therefore, the means and ways whereby government enter into a relationship with the citizenry to transform the society. In such a cooperative democracy, governance takes place by discussion. Deliberation remains a crucial modality of South African democracy. The orations of leaders such as Desmond Tutu played a central role in rejecting the structure of the state under Apartheid and in determining what kind of country South Africa would aspire to become. It was through the extensive inputs from various sectors of society that the Constitutional Assembly process and the final Constitution of 1996 gained legitimacy. To ensure stayed legitimacy, Section 152 requires the participation of citizens and civil society in the governance processes. These should not be mere tick-box exercises but allow for genuine engagement between the government and the people. It is through these exercises that a better understanding develops. So that services are rendered where they are most needed and in an appropriate manner. A cooperative democracy is thus one where the government can work with the people as there is a common understanding and where relations are cultivated through discourse. It is when the communication channels are open, the goals are common and synchronised, and where the state positions itself as an activator or a coordinator. It does so by doing its job. By mobilising society behind its long-term vision through efficient bureaucracy and effective administration. Whereas, the National Development Plan presents a vision, rather than a plan, it does offer a range of approaches towards achieving the Constitutional goals. It encourages South Africans to enact their belonging. To become active stakeholders in the national pursuit. To see their futures linked to the future of the state. To embrace its opportunities and to invest in their different forms of capital; the success of the state is their success. The dividends of such an approach are manifold. Such an entrepreneurial approach would lend to improved governance. The entrepreneurial state is not a foreign concept in South Africa. When South Africa transitioned to democracy in the early 1990s it undertook a largely entrepreneurial approach. Its leaders and citizens cooperatively proposed and then discussed the various means, ways and ends towards democracy. Whereas the novelty of the situation and the variety of actors ensured entrepreneurialism, the same spirit and approach can again be utilized in a goal-oriented pursuit of positive change. As before, dialogue, cooperation and compromise between different sectors of society is imperative. In toto, a new consensus must be brought about through the active engagement of all citizens. The entrepreneurial vision of the early 1990s advanced the Freedom Charter’s call: “the people shall govern”. For governance to be legitimate, the people expressing their will must be central. Through programmes (such as Reconstruction and Development) and visions (such as Batho Pele), the state has taken a people-centred approach. “While noble and just in their orientation, these programmes have centred power inwards into the administration. It has led to delivery dependency” (Kotze, 2022). The phrase, “the people shall govern”, recalls Abraham Lincoln’s famous line that democracy entails “government of the people, for the people, by the people”. The citizens must claim the state as their own. In his piece: “The problem in South Africa is not democracy but a lack of democrats”, Bailie (2022) draws our attention to the need to cultivate strong followership. In the absence of capable and inspirational government, the loadstar to the people, the Constitution must inspire society to be capable. Courageous followership is needed in the form of “the courage to assume responsibility, the courage to serve, the courage to challenge, the courage to participate in transformation and the courage to take moral action” (Bailie, 2022). Each of these dimensions directs citizens to exercise their responsibility as co-creators of a capable state. Through public reasoning, through engaging the public service and through putting the Constitution into action, a new consensus compounds and the nation is built. References Bailie, Craig. 2022. “The problem in South Africa is not democracy but a lack of democrats”. (Online) Available at Mail & Guardian, 25 November. https://mg.co.za/thought-leader/opinion/2022-11-25-the-problem-in-south-africa-is-not-democracy-but-a-lack-of-democrats/ De Visser, Jaap. 2010. “Subsidiarity in the Constitution”. Conference Workshop Cultural Initiative: European Programme for Reconstruction and Development. Foucault, Michel. 1982. “The Subject and Power”. Critical Inquiry 8(4): 777-795. Government Gazette, 2003. Disaster Management Act, Act 57 of 2002, No. 24252, 15 January. Huff, Richard. n.d. “Governmentality”, (Online) Available at Britanica, https://www.britannica.com/topic/governmentality). Kotzé, Klaus. 2020. “Responding to COVID-19: Emergency Laws and the Return to Government in South Africa”. Javnost: The Public. Kotzé, Klaus. 2022. “A people-driven state is required for national renewal”. (Online) Available at Mail & Guardian, 27 October. https://mg.co.za/thought-leader/opinion/2022-10-27-a-people-driven-state-is-required-for-national-renewal/ Mathebula, Lucky. 2023. “(Re)building a capable state is possible. Here’s what it will require”. Sunday Times, 8 October. Ramaphosa, Cyril. 2012. “Conversation on the Constitution”. Nelson Mandela Foundation. Ramaphosa, Cyril. 2023. “President Cyril Ramaphosa: 2023 State of the Nation Address”. (Online) Available at South African Government, 9 February. https://www.gov.za/speeches/president-cyril-ramaphosa-2023-state-nation-address-9-feb-2023-0000 Terreblanche, Sampie. 2018. “The Co-Optation of the African National Congress: South Africa’s Original ‘State Capture’”. (Online) Available at Pambazuka News, 25 January. https://www.pambazuka.org/node/98467 The World Bank. 1994. Governance: The World Bank’s Experience. Washington, DC: The World Bank. The Constitution of the Republic of South Africa, 1996. Van Norman Law. 2017. “Rule of Law vs Rule by Law”. Online at Van Norman Law. https://vannormanlaw.com/rule-law-vs-rule-law/#:~:text=The%20Rule%20of%20Law%20is,equal%20under%20the%20law%20itself - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

On the 8th of May 2024, Daryl Swanepoel, the CEO of the Inclusive Society Institute, spoke at an event hosted by the non-profit organization My Vote Counts. The event, titled "Democracy: Creating Accountable and Transparent Politics," brought together influential figures from across South African civil society to engage in a critical dialogue about the role of political funding in the country's electoral process. Swanepoel shed light on the pressing issues surrounding transparency and accountability in South African politics, drawing on his extensive expertise and experience in navigating the complex web of political financing. With a keen understanding of the challenges facing South African democracy, Swanepoel delved into the importance of establishing robust systems that ensure the integrity of the electoral system. He highlighted the need for stricter regulations and enhanced disclosure requirements, emphasizing that the public deserves to know the sources and allocation of funds that shape the political landscape. Swanepoel underscored the critical linkage between transparent political financing and the fundamental principles of a healthy democracy, where citizens can make informed decisions and hold their representatives accountable. He also emphasized the need for sufficient public funding, saying that international best practice shows that where there are high disclosure requirements, there tend to be higher public funding, and where there are lower disclosure requirements, there tend to be lower public funding. In South Africa, disclosure requirements were mad stricter, without concomitantly increasing public funding. Click here to read the speech by Daryl Swanepoel - - - - - - - - - - - - - - - - - - - - - - -

Copyright © 2022 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. 13 SEPTEMBER 2022 Prof Geo Quinot Department of Public Law, Stellenbosch University 1. In New Nation Movement NPC v President of the Republic of South Africa [2020] ZACC 11, (“New Nation Movement”), the Constitutional Court held that the Electoral Act 73 of 1998 (“the Act”) was unconstitutional to the extent that it did not provide for individuals to contest elections for membership of the National Assembly and Provincial Legislatures independently from political parties. The Court suspended the declaration of invalidity for 24 months to allow Parliament to remedy the defect (the Court subsequently extended the suspension until 10 December 2022). 2. In response to New Nation Movement, Parliament is currently considering the Electoral Amendment Bill (B1-2022) as the means to cure the defects in the Act. On 2 September 2022, the Portfolio Committee on Home Affairs called for further public comments on material revisions of the Bill (B1A-2022) (“the Bill”). 3. Several civil society organisations, including the Inclusive Society Institute, have raised concerns regarding the constitutionality of the Bill. This analysis is aimed at considering various aspects of the Bill, in the form put forward for public comment on 2 September 2022, from a constitutional perspective, focusing specifically on those aspects that may be constitutionally suspect. BARRIERS TO ENTRY 4. Section 31B of the Bill sets out the requirements for an independent candidate to contest elections. These include, in section 31B(3)(a), the requirement of nomination requiring an independent candidate to submit “the names, identity numbers and signatures of voters whose names appear on the segment of the voters’ roll for that region or province in which the candidate is standing for election and who support his or her candidature, totalling at least thirty percent of the quota for a seat that was required for a seat in the previous comparable election”. This requirement is analogous to (but not the same as) the requirement in the Electoral Commission Act 51 of 1996, section 15(3), read with section 26 of the Act. In terms of the latter, a party may only contest elections if it is registered as set out in section 15 of the Electoral Commission Act. This includes a requirement, in section 15(3)(a), that the application for registration be accompanied by “that party’s deed of foundation which … has been signed by the prescribed number of persons who are qualified voters”. 5. The Act and the Bill thus place a limitation on both independent candidates and parties to contest elections in the form of proof of support by a set number of voters. There are, however, important differences between this support limitation as applied to independent candidates and parties respectively. 5.1. In the case of independent candidates, such limitation on contesting elections is more direct in that a party only has to submit such proof of support once when registering as a party and not in each instance that it wishes to contest elections, whereas an independent candidate must submit such proof each and every time they intend to contest an election, regardless of whether the candidate has previously been elected to a seat in the chamber to which the election pertains. 5.2. There is a material difference in the number of voters that must indicate support for independent candidates and parties respectively. In terms of the Regulations for the Registration of Political Parties (GNR.13 of 7 January 2004, as amended), promulgated under the Electoral Commission Act, regulation 3, a party must submit a list of 1000 signatures for registration nationally, 500 signatures for registration in a particular province and 300 signatures for registration in a particular district or metropolitan municipality. In contrast, the Bill sets the number of signatures required by an independent candidate at 30% of the quota for a seat that was required for a seat in the previous comparable election, regardless of what chamber the candidate is contesting for. The exact number of signatures required by independent candidates will thus differ from time to time and between chambers, but will in most instances be significantly more than the set numbers required for parties. For example, in the 2019 national elections, the number of votes required to secure a seat in the National Assembly was approximately between 30 000 and 40 000. On a very basic calculation, this implies that, on the approach adopted in the Bill, an independent candidate will require upwards of 10 000 signatures in support to contest an election for the National Assembly. There is thus more than a tenfold difference in the support requirement as applied to parties and independent candidates respectively. 6. The support limitation raises multiple constitutional concerns. 6.1. Firstly, the limitation imposed by the support requirement is questionable in light of the Constitutional Court’s remarks in New Nation Movement regarding the wording of section 19(3)(b) of the Constitution. The Court interpreted the section as conferring a right on individuals to stand for public office, only limited by the requirement that such individuals must be adults and South African citizens. That is, any additional limitations on an adult citizen to stand for public office, would fall foul of section 19(3)(b) and will only be justifiable in terms of section 36 of the Constitution. Throughout his majority judgment in New Nation Movement, Jafta J emphasises the lack of further limitations on the section 19(3)(b) right, for example: “[154] The drafters of our Constitution were quite alive to the fact that one cannot vote unless there is someone she can vote for. In their wisdom they added to the mix the right to contest elections and the right to hold office. The latter right depends on winning the election contest. However, it is significant to note that in plain language, section 19(3) reserves the right to stand for public office which entails contesting elections for adult South Africans. It is them only, who are entitled to be voted into public office. And the words “every adult citizen” at the opening of section 19(3) demonstrate that each adult South African is the bearer of the right to stand for public office and if elected, to hold the office she stood for. This construction is consistent with the language of the provision, which is framed in inclusive terms to prevent the exclusion of some South Africans from exercising those rights as it happened during the apartheid era. This interpretation is also in alignment with international law. It will be recalled that the ICCPR provides that every citizen shall have the right to vote and be elected by secret ballot” (emphasis added). “[158] … Section 19(3)(b) entitles every adult South African who wishes to do so, to contest elections and if elected to hold public office.” “[160] … In unequivocal terms, section 19(3)(b) confers upon every adult South African the right ‘to stand for public office and, if elected, to hold office’. Whilst Parliament has the power to pass legislation that regulates the exercise of the right, it cannot enact legislation that prevents the exercise of the right.” “[171] … Without contesting elections, it is impossible for any adult citizen to exercise the right to stand for and hold public office if elected.” There can be little doubt that the support requirement for contesting elections imposes a significant limitation on adult citizen’s right under section 19(3)(b), which reminds one starkly of limitations of a bygone era, such as property-holding criteria that were still prevalent during the earlier parts of the previous century. 6.2. The second problem with the support requirement is the differentiated manner in which it is applied to parties compared to independent candidates. This differentiation, as noted in para 5 above, lies both in the repeated nature of the requirement resting on independent candidates versus the once-off requirement for parties and the material difference in the number of signatures required. This differentiation can be viewed as denying independent candidates equal enjoyment of the political rights in section 19 of the Constitution. Since the choice to contest an election, i.e. exercise the section 19(3)(b) right, as an independent candidate, rather than through a political party, is closely linked to freedom of association in section 18 and freedom of conscience in section 15 of the Constitution as well as a person’s dignity, as set out by Madlanga J in his majority judgment in New Nation Movement, the differentiation imposed by the support requirement can be viewed as unfair discrimination under section 9 of the Constitution given that the grounds of differentiation are conscience, which is a listed ground in section 9(3) causing differentiation on that ground to be presumed unfair discrimination, political association and that the differentiation impedes a person’s dignity. The Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 supports the latter point in that it defines discrimination as “any act … including a … law, rule, practice, condition … which … imposes burdens … on, or withholds benefits, opportunities or advantages from any person on one or more of the prohibited grounds” and defines “prohibited grounds” as including any “ground … where discrimination based on that … ground … undermines human dignity”. 7. In its current form in the Bill, it is highly questionable whether the requirement that independent candidates must submit a list of signatures from voters equalling 30% of the quota required to fill the contested seat in the previous election, prior to them being allowed to contest the election, will pass constitutional muster. 8. It is proposed that the provision in section 31B(3)(a) pertaining to the list of signatures to be submitted by independent candidates, either be, 8.1. removed in its entirety; or 8.2. replaced by a requirement identical to that placed on political parties in section 15(3)(a) of the Electoral Commission Act, read with regulation 3 of the Regulations for the Registration of Political Parties (GNR.13 of 7 January 2004, as amended), namely that an independent candidate should only be required to submit a list of supporting voter signatures once and in the same number as that applied to parties. ALLOCATION OF SEATS 9. Schedule 1A in the Bill sets out how seats will be allocated to independent candidates and parties contesting elections for the National Assembly respectively. A fundamental difference between independent candidates and parties in the way that National Assembly seats are allocated is that independent candidates only compete for half of the seats (so-called “regional seats”). A region, in effect, refers to a province. Political parties, in contrast, compete for regional seats as well as the other half of the seats (so-called “compensatory seats”). Compensatory seats are thus filled exclusively by political parties. Parties must submit fixed lists of nominated candidates for both regional and compensatory seats. A candidate may be nominated by a political party on both regional and compensatory seat lists, but the combined total of candidates on the regional and compensatory seat lists may not exceed the total number of seats. 10. Another material difference between allocation of seats to parties and independent candidates relates to calculation of votes across regions (provinces). An independent candidate can only win a seat within a particular region/province, based on the total number of votes cast in favour of that candidate within that region/province. Any votes cast for the candidate in another region/province is in effect forfeited by that candidate. That is, such votes are not taken into account in determining whether the candidate is allocated a seat. In contrast, when the total number of seats allocated to a political party is calculated, the aggregate of all votes cast for that party across all regions/provinces is used to determine the party’s total number of allocated seats, in the form of the combined regional and compensatory seats. Political parties thus benefit from votes cast across regions/provinces, whereas independent candidates do not. 11. Viewed from an individual candidate’s perspective, there is accordingly a material difference between the exercise of their section 19(3)(b) right based on whether they contest the election as an independent candidate rather than a nominee of a political party. That is, the right to hold office, if elected, differs in content materially in a given election between independent and party nominated candidates. That difference lies in the content of the phrase ‘if elected’ as set out in the Bill and discussed in paras 9 and 10 above. Simply put, the number of votes required to be elected differs materially between the two categories of candidates. 12. While viewed separately, it can probably be argued that the manner of allocating seats to independent candidates and political parties respectively in the Bill will not fall foul of section 19(3)(b) of the Constitution, the differentiation between the two categories raises constitutional concerns. Along the same lines as argued in para 6.2 above in respect of the support requirement, the differentiation between types of candidates in how seats are allocated will quite likely fall foul of section 9 of the Constitution. An aggravating factor is the fact that the Bill does not adopt a similar approach in the allocation of seats in provincial legislatures. For those seats, the different types of candidates are treated the same in the allocation calculation. That raises serious doubts as to the justifiability of the differentiation in allocating seats in the National Assembly. 13. It is recommended that the division of National Assembly seats in regional seats and compensatory seats be removed from the Bill and that the allocation of all seats in the National Assembly be done on an equal basis between independent candidates and political parties, along the same lines as that for provincial legislatures. 14. The combined effect of the proposed rules in the Bill that an independent candidate may contest an election for a seat in the National Assembly in more than one region, but may not aggregate the votes received across regions in order to be allocated a seat, calls into question whether the system created in the Bill amounts to an electoral system that “results, in general, in proportional representation” as required by section 46(1)(d) of the Constitution. The effect of these two rules in the Bill, read together, is that there may be significant distortion between the votes cast nationally and the allocation of seats. The representation in the National Assembly may thus not be, in general, proportional to the votes cast, given the potentially large number of votes that are discarded in the process of seat allocation. 15. This problem may be addressed by either restricting the participation of independent candidates to one region, as is the case for party nominated candidates, or allowing independent candidates to aggregate votes across regions in the allocation of seats. END - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Click here to go back Chapter 5: Findings This Chapter is dedicated to the findings of the interviews conducted with party-funding experts from political parties, party-aligned foundations and/or electoral commissions in the countries evaluated in this study. The findings are in relation to the answers provided to the questions posed in terms of the questionnaire as outlined in the preceding Chapter, which is aimed at gaining an understanding of the various dimensions of party funding in said jurisdictions. 5.1 The public party-funding regime of Germany Party funding from the public purse in Germany has two dimensions. On the one hand, public funds are transferred directly to parties, be it to the party entities themselves or to support their representatives in the legislatures. On the other hand, significant public funds are transferred to party-aligned foundations. 5.1.1 Public funding of German political parties 5.1.1.1 Restrictions of private donations to political parties Whilst there is no upper limit as to what an individual or entity may donate to a political party, the donation has to be declared to the President of the Bundestag if it exceeds €50,000 in a particular year, and if it exceeds €10,000 in a particular year, it needs to be published in the party’s financial statements (Nietan, 2022). The limits are aggregated from across the whole country, all levels of government and all structures of the party (Öhm, 2022). That said, there are a number of legal restrictions conclusively articulated in Article 25 of the Political Parties Act. The restrictions are that: Donations of more than €1,000 in cash may not be accepted. The acceptance of donations from political foundations, corporations, associations of persons and estates which, according to the statutes, the foundation business or the other constitution and according to the actual management, exclusively and directly serve charitable, benevolent or ecclesiastical purposes (sections 51 to 68 of the Tax Code) is inadmissible. Excluded from the right of political parties to accept donations are also donations from parliamentary parties and groups and from parliamentary groups of municipal councils (local assemblies). The acceptance of donations from outside the area of application of this law, that is, outside the Federal Republic, is also inadmissible unless: the donations are from the assets of a German within the meaning of the Basic Law, of a citizen of the European Union or of a business enterprise, of which more than 50 per cent of the shares are owned by Germans within the meaning of the Basic Law, or by a citizen of the European Union, or whose head office is in a member state of the European Union the donation is from a person from national minorities in their ancestral homeland, which are made to them from states bordering the Federal Republic of Germany and in which members of their ethnicity live the donation made by a foreigner does not exceed €1,000. (Nietan, 2022) Furthermore, donations from the following sources are inadmissible: Donations made to professional associations with the understanding that they will be passed on to a political party Donations from companies that are wholly or partly owned, managed or operated by the public sector, if the direct participation of the public sector exceeds 25 per cent Individual donations exceeding €500 where the donors cannot be identified, or if it is recognisable that the donation is being forwarded from an unnamed third party Donations granted to the party in expectation of, or in return for, a certain economic or political advantage Donations raised by a third party in return for a fee to be paid by the party which exceeds 25 per cent of the value of the raised donation. (Nietan, 2022) 5.1.1.2 The various forms of public funding that German parties are entitled to Direct party funding The party is entitled to partial state funding. This is governed by Article 18, Part G. According to this provision, parties receive funds as partial financing of the activities generally incumbent upon them under the Basic Law. The benchmarks for the distribution of state funds are the success a party achieves with voters in European, federal (Bundestag) and state (Landtag) elections, the total amount of its membership dues and mandate holder contributions, and the volume of donations from individuals it received. In 2020, all parties together received a total amount of €197,482,200 (Nietan, 2022). Directly to elected representatives in addition to salaries The elected representative, for example, a member of the Bundestag, is entitled to "compensation”. This is governed by Section 48(3) of the Law on the Legal Relationships of Members of the German Bundestag (Members of Parliament – AbgG). According to this, members of Parliament are entitled to appropriate compensation that guarantees their independence. The amount of the compensation must correspond to the significance of the MP's special office and the responsibility and burden associated with it. In addition, it must also take into account the rank accorded to the mandate in the constitutional structure (Nietan, 2022). The compensation paid to members of Parliament amounts to €10,323.29 per month. A tax-free expense allowance is added to the compensation as part of the so-called official allowance. This lump sum is adjusted annually on 1 January to the cost of living and is currently €4,583.39 per month. They can also claim business travel expenses as well as associated expenses (Nietan, 2022). Furthermore, members of the Bundestag receive employee allowances amounting to €23,205 per month (Nietan, 2022). In 2020, all members of the Bundestag together received a total amount of €475,026,000, inclusive of their salaries and personal allowances. The amount in addition to their salaries and allowances – that is, the allowance to enable them to employ staff to assist them – amounted to €166,519,080 for 2022. This is calculated by taking the number of members of Parliament, which is currently 598 (Deutscher Bundestag, N.d.), multiplied by the monthly allowance (€23,205), multiplied by twelve to calculate the annual total. To the parliamentary groups in the Parliament The parliamentary groups in Parliament are entitled to cash and non-cash benefits. This is governed by Section 50 of the Parliamentary Groups Act (AbgG). According to this Act, parliamentary groups are entitled to cash and non-cash benefits from the federal budget in order to fulfil their duties. The specific amount of money made available for the financing of parliamentary groups in the federal budget thus results exclusively from the federal budget. In 2020, all parliamentary groups in the Bundestag together received a total amount of €119,369,000 (Nietan, 2022). Reimbursement for election expenses There is no direct claim for reimbursement of election expenses (Nietan, 2022). Other public funding Apart from partial state funding according to Section 18 of Part G, parties are generally not directly entitled to other forms of public funding (Nietan, 2022). 5.1.1.3 Incentives to encourage individuals/corporates to make donations to political parties In terms of Article 34(g) of the Income Tax Act, donations to political parties are deductible from taxable income up to a total of €3,300 for singles, and up to €6,600 for married couples (Nietan, 2022). Furthermore, individuals may deduct fifty percent of their party membership contributions from their taxable income (Öhm, 2022). 5.1.1.4 Indirect public funding During election campaigns, political parties may run election advertising on public television and radio, free of charge. Private stations may only charge parties at cost price (Nietan, 2022). In terms of Section 68 of the Interstate Media Treaty, parties must be granted appropriate broadcasting time during elections for the German Bundestag. In return, they are reimbursed for their prime costs when at least one state list has been approved for them. Furthermore, parties and other political associations shall be entitled to appropriate broadcasting time during their participation in the elections of members from the Federal Republic of Germany for the European Parliament, in return for reimbursement of the cost price, if at least one election proposal has been approved for them (Nietan, 2022). Section 11 of the Zweites Deutsches Fernsehen (ZDF) State Treaty (ZDF-StV) stipulates that parties may run election advertising free of charge on the stations of ZDF during election campaigns. The same is regulated for the stations of the First German Television (ARD) in the state broadcasting laws (Nietan, 2022). It is difficult to objectively determine the value of such free and subsidised media (Nietan, 2022). 5.1.1.5 Private versus public funding of political parties ratio According to Nietan (2022), private funding, which includes membership fees and contributions from trade unions, forms the bulk of the parties’ funding, but public funding is also a significant portion of funding for the parties. 5.1.1.6 Quantifiable public funding to support political parties The public funding for the political parties at a national level in Germany for 2022 amounted to at least €483,4 million, made up as follows: (Nietan, 2022) The above calculation is conservative, in that, in addition to the aforementioned, needs to be added the indirect support to parties, for example, the free and subsidised media advertising during campaigns, which is significant, but difficult to objectively estimate. 5.1.2 Funding to party-aligned political foundations In addition to the public funding of political parties, the democratic dispensation of Germany is strengthened through the public funding of party-aligned political foundations. The purpose of the funding is to promote the development of plurality of political participation in the democratic dispensation (Öhm, 2022). At the federal level, each party that has been represented in the Bundestag for at least two periods, is entitled to nominate a political foundation to receive public funding, which is determined and administered by the Bundestag. It forms part of the national budget and appears as line items in various ministries. Funds are allocated to the various foundations on the basis of the proportional strength in the Bundestag of their ideologically aligned political parties. The core funding of the politically aligned foundations is included in the budget of the Ministry of the Interior, whilst further project funding is included in the budgets of the Ministries of Economic Cooperation and Development, Education and Research, and Foreign Affairs (Öhm, 2022). Political foundations may use the funding for: Civic education Scholarships Hosting of party archives Research International cooperation Whilst the use of the funds is quite flexible, it must fit within the parameters of the Bundestag’s special provisions for the funding of political foundations and may not be used for party campaigning. Furthermore, whilst political representatives may not participate in their political party capacity, they may do so as experts in the activities of the foundations, but they need to maintain a strict arm’s length three months prior to an election, during which period they may not cooperate with political parties in any form or manner. Furthermore, they may not directly fund any foreign political party or trade union (Öhm, 2022). That said, there are significant benefits for political parties and the democratic dispensation as a whole. Parties benefit in that the foundations serve as think-tanks that develop ideas, policies and legislative proposals from their own ideological point of view, provide civic education and training in which party members and public representatives may participate as active citizens, and they create ideology-linked international networks, all of which would have fallen to the parties in the absence of such foundations. And as already stated, the democratic dispensation is strengthened through the promotion of democratic pluralism (Öhm, 2022). The public funding for the political foundations in Germany for 2022 amounted to €451 million, made up as follows: *Conservative estimate. Allocation is in fact higher, but also includes allocations to non-political organisations. (Öhm, 2022) 5.1.3 Germany–South Africa Purchasing Power Parity (PPP) 5.1.3.1 PPP in relation to direct public funding to political parties The equivalent purchasing power of €483,400,000 allocated to the German political parties at a USD 2021 PPP factor of 0.741488 (OECD, N.d.) equates to USD 651,932,331. In turn, at a USD:ZAR 2021 purchasing power parity factor of 7.168097 (OECD, N.d.) it equates to R4,673,114,184. (Allocation in German euro ÷ DEU:USD PPP factor) x USD:ZAR PPP factor That is: (€483,400,000 ÷ 0.741488) x 7.168097 651,932,331 x 7.168097 = ZAR 4,673,114,184 5.1.3.2 PPP in relation to funding to politically aligned foundations The equivalent purchasing power of €451 million allocated to the German political party aligned foundations at a USD 2021 PPP factor of 0.741488 equates to USD 608,236,411. In turn, at a USD:ZAR 2021 purchasing power parity factor of 7.168097 (OECD, N.d.) it equates to R4,359,897,594. (Allocation in German euro ÷ DEU:USD PPP factor) x USD:ZAR PPP factor That is: (€451,000,000 ÷ 0.741488) x 7.168097 608,236,411 x 7.168097 = ZAR 4,359,897,594 5.1.3.3 PPP in relation to the funding of the German party-political dispensation as a whole The combined value of public funds allocated directly to political parties and to politically aligned foundations in Germany currently amounts to €934,4 million per annum. At South African PPP, it amounts to around R9,033,011,778. 5.1.3.4 Public annual-spend per person on political parties and foundations Given that the German population older than 15 years – the age at which political awareness starts manifesting – as of 2021 was around 72,390,000 million people, (Statista, 2022b), it means that the public purse funds political parties at the national level and their politically aligned foundations to an amount of around R125 per person per annum. That is around R65 per person to the political parties and around R60 per person per annum to the political foundations. These figures are derived through the simple calculation of dividing the total spends from the public purse at South African PPP by the total population of Germany. 5.2 The public party-funding regime of Sweden Party funding in Sweden also has two dimensions. The first being funding directly to the party, and the second to party-aligned foundations. 5.2.1 Public funding of Swedish political parties 5.2.1.1 Restrictions of donations to political parties There are no restrictions on private funding to political parties in Sweden, except for the fact that donations may not be made anonymously. Any donation to a political party needs to be declared and the party, in turn, has to declare such donation to the authorities (Jonsson, 2022). 5.2.1.2 The various forms of public funding that Swedish political parties are entitled to In terms of public funding, all monies go directly to the party, either to the party headquarters or to the party groups within the Parliament. The total amount of this direct public funding contribution to the political parties in Sweden amounts to around SEK 400 million (Jonsson, 2022). In terms of determining the allocations to the various parties, around twenty-five percent of the total allocation is allocated equally to the parties represented in the national Parliament, whilst the remaining seventy-five percent is allocated proportionally based on the parties’ percentage share of the total number of MPs in the national Parliament (Jonsson, 2022). No public funding is made available to Members of Parliament (MPs) to, for example, assist them in running constituency offices, or to support their constituency work. The rationale for this, is that in Sweden voters vote for parties on a proportional representation basis and not on a constituency basis. Of course, parties are free to make allocations to MPs to set up offices and organise constituency activities. In such event, however, the allocation is made out of the party resources and does not constitute an additional allocation from the state (Jonsson, 2022). The only other source of public funding to the political parties is a limited contribution towards defraying election expenses, which elections are normally held every four years. In total, this amounts to around only SEK10 million (Jonsson, 2022). The Swedish public funding of political parties is therefore a very simple system, which they consider important to ensure transparency as to the amount of public funds being channelled to political parties. Since there is a single identifiable source, there is no ambiguity or need to research and compile a list of contributions from a multitude of state entities (Jonsson, 2022). 5.2.1.3 Incentives to encourage individuals/corporations to make donations to political parties Entities making donations to political parties in Sweden may, in terms of the party-funding legislation, make the donations without being subjected to paying donations tax. On the flipside, political parties need also not pay donations tax on donations received from any entity (Jonsson, 2022). 5.2.1.4 Indirect public funding Given the simplicity of the Swedish public funding system, there are no sources of indirect public funding. For example, no free time is given on the public broadcaster platforms. If parties wish to advertise, they will pay normal commercial rates. This does, however, not preclude broadcasters to host normal actuality and news programmes in which political parties are free to participate (Jonsson, 2022). 5.2.1.5 Private funding versus public funding of political parties ratio Generally speaking, ninety percent of party funding comprises public funding, and only ten percent comprises private funding. There are two exceptions, namely the Social Democratic Party (SDP) and the Centre Party. The SDP receives considerable funding from dividends they receive from companies that they own, including a major lottery company. And the Centre Party receives income from their capital investments. Some years ago, they sold newspaper companies that they owned, from which sale they generated considerable income, which they converted into capital investments (Jonsson, 2022). The SDP receives around twenty-nine percent of their income from their company investments and around only one percent from private individuals and/or entities, and seventy percent from public funding. The Centre Party also receives around seventy percent from public funding and around thirty percent from their capital investments (Jonsson, 2022). The SDP also receives some contributions from the trade unions, which in the last year amounted to some SEK 8 million (Jonsson, 2022). Thus, in summary, the bulk of party funding to political parties in Sweden is public funding, without which, parties would not be able to function effectively. 5.2.1.6 Quantifiable funding to support political parties The public funding for the political parties at a national level in Sweden for 2022 amounted to at least SEK 400 million. In addition to the aforementioned, is a limited amount of around SEK 10 million as a contribution towards off-setting election expenses, held every four years. Thus, over a four-year period it would amount to around SEK 2,5 million. For the purposes of this study, given the limited nature of the income, it is not taken into consideration when undertaking the comparative study. 5.2.2 Funding to party-aligned political foundations As in Germany, Sweden also has politically aligned foundations. But in contrast to the German foundations, who have both a domestic and international focus, in Sweden they are tasked with mainly international solidarity and advocacy. They play a very limited role in Swedish politics and policy development. They work globally for democracy, human rights, peace and social justice, and support sister parties and organisations in official development assistance (ODA) countries (Sundström, 2022). Unlike Germany, there is no annual funding mechanism for the foundations. The Swedish foundations apply to the Swedish International Development Cooperation Agency (Sida) for project funding and for the funding of communication activities (Sundström, 2022). 5.2.2.1 Quantifiable funding to support political foundations Whilst funding varies from year to year, the total amount of funding is in the region of SEK 100 million (Sundström, 2022). 5.2.3 Sweden–South Africa Purchasing Power Parity (PPP) 5.2.3.1 PPP in relation to direct public funding to political parties The equivalent purchasing power of SEK 400 million allocated to the Swedish political parties at a USD 2021 PPP factor of 8.708853 (OECD, N.d.) equates to USD 45,930,273. In turn, at a USD:ZAR 2021 purchasing power parity factor of 7.168097 (OECD, N.d.) it equates to R329,232,656. (Allocation in Swedish krona ÷ SEK:USD PPP factor) x USD:ZAR PPP factor That is: (SEK 400,000,000 ÷ 8.708853) x 7.168097 45,930,273 x 7.168097 = ZAR 329,232,656 5.2.3.2 PPP in relation to funding to politically aligned foundations The equivalent purchasing power of SEK 100 million allocated to the Swedish political party aligned foundations at a USD 2021 PPP factor of 8.708853 equates to USD 11,482,568. In turn, at a USD:ZAR 2021 purchasing power parity factor of 7.168097 (OECD, N.d.) it equates to R82,308,164. (Allocation in Swedish krona ÷ SEK:USD PPP factor) x USD:ZAR PPP factor That is: (SEK 100,000,000 ÷ 8.708853) x 7.168097 11,482,568 x 7.168097 = ZAR 82,308,164 5.2.3.3 PPP in relation to the funding of the Swedish party-political dispensation as a whole The combined value of public funds allocated directly to political parties and to politically aligned foundations in Sweden currently amounts to SEK 500 million per annum. At South African PPP it amounts to around R411,540,820. 5.2.3.4 Public annual-spend per person on political parties and foundations Given that the Swedish population as of 2021 was 10,517,669 (Statista, 2022c), of which 8,589,000 are older than fifteen (Statista, 2022c), it means that the public purse funds political parties at the national level and their politically aligned foundations to an amount of around R48 per person per annum. That is, around R38 per person to the political parties and around R10 per person per annum to the political foundations. These figures are derived through the simple calculation of dividing the total spends from the public purse at South African PPP by the total population of Sweden. 5.3 The public party-funding regime of the Netherlands 5.3.1 Public funding of Swedish political parties 5.3.1.1 Restrictions of donations to political parties A new law called the “Financing of Political Parties Act” processed by the Ministry of the Interior came into effect on 1 January 2023. The new law has stricter provisions in terms of transparency measures but will not impact the quantum of public funding to the political parties materially (Bartelsman, 2022). In the Netherlands system there is a lot of focus on transparency. Any private donation exceeding €4,500 has to be registered with the Kiesraad. As from 1 January 2023 this has been reduced to €1000. The Kiesraad then publish the list of donations annually online. For natural persons the name and city and amount are published, but for entities the name of the entity, the full address and amount is published (Bartelsman, 2022). There is a limit with regard to anonymous donations. Currently, no anonymous donation exceeding €1,000 may be accepted. Should an anonymous donation be received that exceeds €1000, the amount exceeding €1000 has to be transferred by the party to the Ministry of the Interior. This has been reduced to €250 as from 1 January 2023 (Bartelsman, 2022). With effect from 1 January 2023, the upper threshold limit for donations from any person or entity is €100,000 per annum (Bartelsman, 2022). Any donation above €10,000 has to be registered with the Ministry of the Interior within three working days of its receipt (Bartelsman, 2022). And as from 1 January 2023 no donation may be received from outside of the Netherlands, except from Dutch citizens living abroad. In other words, only Dutch citizens and/or entities may make donations to the political parties registered in the Netherlands (Bartelsman, 2022). 5.3.1.2 The various forms of public funding that the Netherlands political parties are entitled to An annual subsidy, adjusted annually for inflation, is made available to political parties that have at least one member elected to either the Upper or Lower House of Parliament; and the party needs to have a registered party membership of at least 1000. The quantum per party is determined based on three criteria: There is a base amount that is divided equally between qualifying parties. The current basic grant is €316,823 per annum per party, with one or more seats in either the House of Representatives or the Senate. An additional amount is divided pro rata amongst the parties based on the number of representatives in Parliament. They receive €93,574 per annum per seat that a political party has. And yet a further amount that is divided pro rata based on the number of registered party members – “For each member a political party has, they receive an amount that equals €3,412,190 divided by the total number of members of all parties”. With the new law that has come into effect in January 2023, the aforementioned amounts have been reduced to €263,823 for the basic grant, €80,694 per seat and €2,966,317 for the membership subsidy (Bartelsman, 2022). The total quantum of the subsidy, inclusive of the core funding and the funding to the institutes/youth formations, currently amounts to €27,646,000 million per annum in total (Bartelsman, 2022). The aforementioned funding is paid over directly to the political parties. In addition, there is funding made available to the groups within Parliament, for which an amount of €41,649,000 is set aside by the Parliament. This is intended to fund the work of the parties’ elected representatives to carry out their parliamentary duties in Parliament (Bartelsman, 2022). There are no election spending caps for political parties in the Netherlands (Bartelsman, 2022). 5.3.1.3 Incentives to encourage individuals/corporations to make donations to political parties There are incentives made available to individuals and entities, provided that the parties are registered as public benefit foundations. Parties are free to decide if they want this status or not. In such case, donations may be deducted from one’s income taxes (Bartelsman, 2022). 5.3.1.4 Indirect public funding Free advertising slots are made available on the public broadcasters, not only during election periods, but throughout the political parties’ term of office. The number of slots is divided equally amongst all parties, but the order of running the adverts is determined through the drawing of lots (Bartelsman, 2022). The Ministry of Education, Culture and Science decides on what the total amount of hours to be dedicated for these purposes will be. Additional hours are made available during election campaigns for the House of Representatives and the European Union. For 2022, 53 hours and 50 minutes were made available for radio broadcasts and 12 hours and 45 minutes for television broadcasts. In addition to the 12 hours and 45 minutes on television, there is a further 12 hours and 45 minutes set aside for recurring broadcasts. During elections, each participating party is assigned 20 minutes of radio broadcasts and 18 minutes of television broadcasts. There is no reimbursement for election expenses (Bartelsman, 2022). 5.3.1.5 Private funding versus public funding of political parties ratio The exact split is not readily available, but in a 2014 exercise conducted by the Kiesraad to determine the dependency of political parties on public funding, the ratio was found to be around 35:65 percent public to private funding. This has changed over time. It is now estimated that the ratio is around 50:50, and with the rules becoming more stringent, it is anticipated that the parties will trend towards a higher reliance on public funding (Bartelsman, 2022). 5.3.1.6 Quantifiable funding to support political parties The public funding for the political parties at a national level in the Netherlands for 2022 amounted to at least €69,295 million, made up as follows: 5.3.2 Public funding to political foundations The Netherlands believe that in a democracy it is important for political parties to gain new members (through their youth organisations), and to develop their policies (through their political science institutes). It is also deemed important, due to globalisation, to maintain and build connections with likeminded political parties in other countries. Thus, public funds are allocated to institutes established by the parties for these purposes (Bartelsman, 2022). The political party itself submits a request for public funding to the Democracy Department of the Ministry of the Interior. As part of their application, they would have to indicate whether or not they have a youth organisation, political science institute and/or an institute for international activities. Should they fulfil the admissibility criteria for these institutions, the money will be given to the political party itself, which then has to give it to respective institutions. This money cannot be used by the political party for other means. These funds are included in the €27,646,000 alluded to in paragraph 5.3.1.2. above. The following amounts are currently allocated: Each party with a political science institute receives a basic grant of €136,262 and an additional amount of €14,006 per seat. Each party with a youth organisation receives an amount per seat that equals €546,224 divided by the total number of seats of the parties with a youth organisation. They also receive an amount for each member of the youth organisation that equals €546,224 divided by the total amount of members of youth organisations. But a youth organisation needs to have at least 100 members between the ages of 14 and 27 years who pay a yearly contribution. Each party with an institute for international activities receives an amount that equals €698,628 divided by the total number of parties that have an institute for international activities. Additionally, they receive an amount per seat that equals €1,005,343 divided by the total number of seats of political parties with an institute for international activities. As from January 2023, the new division is: Youth organisations will receive a basic grant of €214,344 divided by the number of youth organisations. They will receive an amount per seat that equals €696,618 divided by the total number of seats of political parties with a youth organisation. For each member, the youth organisations receive an amount that equals €160,758 divided by the total number of members of the youth organisations. For the political science institutes the basic grant will change to €195,849, and the amount per seat will change to €20,372. (Bartelsman, 2022) 5.3.3 The Netherlands–South Africa Purchasing Power Parity (PPP) 5.3.3.1 PPP in relation to direct public funding to political parties The equivalent purchasing power of €69,295,000 allocated to the Netherlands political parties at a USD 2021 PPP factor of 0.770 (OECD, N.d.) equates to USD 89,993,506. In turn, at a USD:ZAR 2021 purchasing power parity factor of 7.168097 (OECD, N.d.) it equates to R645,082,184. (Allocation in euro ÷ Netherlands euro:USD PPP factor) x USD:ZAR PPP factor That is: (€69,295,000 ÷ 0.770) x 7.168097 89,993,506 x 7.168097 = ZAR 645,082,184 5.3.3.2 Public annual-spend per person on political parties and foundations Given that the Netherlands population as of 2021 was 17,48 million (Statista, 2022d), of which 84,45 percent – that is, 14,761,860 – are older than fifteen (Statista, 2022d), it means that the public purse funds political parties at the national level and their politically aligned foundations to an amount of around R43,70 per person per annum. 5.4 The public party-funding regime of South Africa Party funding to political parties in South Africa is made via the Independent Electoral Commission and from the budget of Parliament. There is no public funding made available to party-aligned political foundations. 5.4.1 Public funding of South African political parties The restrictions and conditions attached to both private and public funding to political parties in South Africa has been fully covered in the Legislative Review (Chapter 3) of this paper. In terms of the public funding, all monies go directly to the party, either to the party headquarters via the Independent Electoral Commission or to the party groups within the Parliament. The total amount of this direct public funding to the political parties as administered by the Independent Electoral Commission amounts to R342,077 million (RSA, 2022). No public funding is made available directly to Members of Parliament (MPs) to, for example, assist them in running constituency offices, or to support their constituency work. But funds are made available to parties represented in Parliament in three forms: To fund constituency offices and constituency work, an amount of R372,131,088 To assist party leaders in Parliament to run their offices, an amount of R12,425,832 To the party groups represented in Parliament for them to carry out their parliamentary work, an amount of R127, 312,728. That is a total amount of R511,869,648 (Parliament, 2022). There are no provisions in South African law for the state to make a contribution towards the defraying of party election expenses (Anonymous, 2022). 5.4.2 Indirect public funding Political parties participating in national and/or municipal elections benefit from free public election broadcasts (PEBs). The public broadcasters are compelled to offer parties free advertising time on their programmes during the official election period. Private and community broadcasters may also offer PEBs, but must then comply with the regulations as set out by the Independent Communications Authority of South Africa (ICASA). The benefit only extends to the time slots and not to the production costs of the advertisements (RSA, 2014). Broadcast Service Licensees (BSLs) that broadcast PEBs must make available, “every day, throughout the election broadcast period, ten (10) time-slots of fifty (50) seconds each” for the broadcast of PEBs (RSA, 2019b). The formula for airtime allocation in respect of PEBs is: There is a basic allocation (25%) of slots allocated to all parties contesting seats in the National Assembly. Fifteen percent (15%) of slots to be allocated to all parties based on the current seats in the National Assembly. A further fifteen percent (15%) of slots allocated to all parties based on current seats in the Provincial Legislature pro rata. Fifteen percent (15%) of slots to be allocated according to the number of candidates fielded by parties in the National Assembly list. Fifteen percent (15%) of slots to be allocated according to the number of candidates fielded by parties in the National Assembly regional list. Fifteen percent (15%) of slots to be allocated according to the number of provincial legislature candidates fielded by parties throughout the country. (RSA, 2014) 5.4.3 Private funding versus public funding of political parties ratio In an interview with a political party financing expert, the expert suggested that South African political parties are still largely dependent on private sources of funding. The ratio of private to public funding has, however, materially declined post the introduction of the PFPP Act. Whilst the ratio used to be around two-thirds to one-third, it has narrowed to around sixty percent to forty percent (Anonymous, 2022). 5.4.4 Quantifiable funding to support political parties The public funding for the political parties at a national level in South Africa for 2022 amounted to R853,946,648 million, made up as follows: 5.4.5 Public annual-spend per person on political parties Given that the South African population as of 2022 was around 60,6 million (Statista, 2022a), of which 43,587,000 are older than fifteen (Statista, 2022a), it means that the public purse funds political parties at the national level to an amount of around R19,59 per person per annum. Chapter 6: Discussion of findings The findings of this study suggest that the South African democracy, as it pertains to the funding of political parties, is substantially inadequate for them to perform their constitutional obligations. In reaching this conclusion, three factors were considered: The amount of public funds allocated to the political parties The interplay between political parties and politically aligned foundations The impact of the private funding of political parties’ transparency regulations on the funding of political parties. But first, a note on why it is important to ensure that political parties are enabled and capacitated to function effectively. It is recognised that public trust in political parties around the world has declined. On average, in 2021, only four out of ten citizens trust their governments (OECD, N.d.). For South Africa, it is equally bleak. In an IPSOS survey undertaken on behalf of the Inclusive Society Institute in 2022 (ISI, 2022), it was found that there was extremely low trust in South African political parties. The indexed trust score, for example, was only 8 for the ANC, -28 for the DA and -23 for the EFF. This is in large measure due to citizens not experiencing democratic dividends that have sufficiently improved their lives, and government ineptness and corruption that have undermined development and progress. To generalise their view, democracy serves only the political elite. Given these sentiments, it is safe to assume that taxpayers are reluctant to throw public money to political parties and will be even more reluctant to usher in a more favourable dispensation. Which makes the findings of this study particularly difficult to promote. But public distrust and reluctance needs to be weighed against the greater damage that will be caused to democracy and societal progress, should the political parties not be able to effectively carry out their constitutional functions. Consider: The quality of legislation when political parties do not have the means to properly evaluate their impact on society, their constitutionality, and even whether it is fiscally affordable. This often leads to bad legislation, poor governance, and fiscal stress. The effectiveness of political parties to hold government leaders to account, because they do not have the means to investigate, and test decisions, or to legally challenge unlawful and unconstitutional measures. There are ample examples around the world where democracies have slid into totalitarianism because parties have, due to insufficient means, been incapable of mounting effective challenges. The widening gap between public representatives and their voters due to them not being able to properly service their constituents. For them to do so requires offices, staff, and administrative and logistical support, all of which require means. The feeding of populist rhetoric and the promotion of ‘pie-in-the-sky’ policy proposals emerging from party policy development processes, when parties do not have the means to empirically research, interrogate, cost and consult their proposals. This is most probably the single most important contributor to the notion of politicians making empty promises, which, in turn, feeds distrust in democracy and the political dispensation. The difficulty to effectively participate in the ‘battle of ideas’ when parties do not have the means to communicate the policy proposals and views. To do so requires a media presence, advertising and effective campaigning, all of which will come to nought in the absence of funds. And then the electorate ask why there are no credible alternatives, whilst viable alternatives could very well be available, but not communicated. It is with these considerations in mind, that the public policymakers need to, in the author’s view, be bold and withstand any public critique of improvements to the South African public funding of political parties’ dispensation. Any reasonable and informed citizen should understand the difficulties for the range of political parties to deliver an effective political programme on a combined mere R19,59 per person per annum budget, which is the current reality. And then there is the question of corruption and political trickery through the misappropriation of state resources, and the use of sometimes dubious private funding. The popular argument goes somewhere along the lines of ‘private money and politics should not mix’. But how is politics practiced when there is no money. This study has again underlined, in the interest of clean governance, the need for transparency in the private funding of political parties. But the reality is that transparency comes at a cost, since it leads to less private funding in the democratic dispensation. And thus, to avoid the collapse of parties and the democratic dispensation, the resultant vacuum of private funding needs to be offset with public funding. The general rule is that when transparency regulations are low, it can be expected that private donations will be easier to obtain, and therefore public funding can be less generous. But the inverse also holds true. When transparency regulations are strict, private donations to the political parties will dry up, and therefore, in order to ensure effective party participation in the political order, equitable public funding needs to be made available. In South Africa, this study reveals, the introduction of welcome strict rules related to the public declaration of private funding of political parties, was not accompanied by the requisite compensatory fiscal adjustment to the public funds to be made available to the political parties, to enable them to effectively perform their duties. 6.1 Comparative analysis: The amount of public funds allocated to the political parties in selected jurisdictions In this section, a comparison is made as to the public funds that are made available to fund the democratic dispensation in the four jurisdictions that form part of this study. In the first table hereunder, the amounts budgeted from the public purse in 2022 are shown, and in the second table, what it equates to per person per annum. All currencies have been converted from their local denomination to South African rand and are reflected at purchasing power parity. From the above breakdowns, one can draw a clear conclusion that the South African political party public funding regime is inadequate when compared to the other jurisdictions. This statement is made against the backdrop of all the jurisdictions being, in the main, dependent on public funding. Whilst it could have been argued that South Africa prior to the introduction of the PFPP Act could endure minimum public funding, in that they were receiving generous private funding, the introduction of the Act has changed the playing field. South African parties are currently heavily dependent on public funding, which funding is, unquestionably, insufficient. When considering the amounts allocated directly to the parties (not including the independent foundations), South African parties receive a mere third of those in Germany, and around half of those in Sweden and the Netherlands. This is reflected at purchasing power parity, therefore comparing apples with apples. In addition to the public funds made available to the political parties, it is a well-established convention to fund politically aligned foundations as well. In Germany and Sweden these foundations, whilst politically aligned, are independent and autonomous, and thus the public funding is made to them directly. In the Netherlands there is a symbiotic relationship between the party and the foundations, and thus their funding is made through the parties. Germany has a particularly generous public funding regime for the political foundations. For South Africa to follow suit would be acutely aspirational and, in the author’s view, not realistic within the current environment. That said, the functioning of the politically aligned foundations seems to be an intricate part of the holistic operation of the party-political environment, since they play an enormously important role in the development of public policy and facilitate, in large measure, the ‘battle of ideas’, so important in any well-functioning modern democracy. It appears to be a glaring omission within the South African political scene. Furthermore, the foundations play an crucial role in establishing and maintaining inter-party liaison and cooperation between themselves and likeminded parties internationally. This is important given globalisation and the pivotal role of multilateral institutions. For parties to promulgate and explain their policy positions within the international community, requires from them to connect and coordinate globally. This too, is a glaring omission within the South African party-political environment. Chapter 7: Conclusions and recommendations This study into whether the South African political parties are adequately funded to carry out their constitutional mandate has revealed that there is indeed an urgent need for the policymakers to re-assess the funding of democracy in South Africa. One cannot expect quality participation within the democratic machinery, if the resources to enable and capacitate such is insufficient. The author also suggests that it is fair to conclude that the introduction of the PFPP Act has materially impacted the parties’ ability to attract funding. Coupled with an inadequate response by Treasury to significantly increase the public funding of political parties, the vibrancy and efficiency of South Africa’s democratic dispensation is threatened. Political parties form the bedrock of any democracy, and if they are not able to function effectively, society must accept that the quality of democracy will be undermined. What has become clear through this study is that when transparency rules relating to the disclosure of funders of political parties is increased, a decline in such donations to parties is inevitable. There is a clear linkage between transparency rules on the one hand, and the private funding of political parties on the other. It is apparent from the country studies contained in this research, that the common truth appears to be that when transparency rules are increased, they should be accompanied by a concomitant increase in public funding. This has not been the case in South Africa. The legislature has introduced stringent disclosure rules that rank amongst the strictest in the world, yet the public funding of parties has not significantly changed since pre-introduction of the PFPP Act. This is an obvious deficiency that requires urgent attention by the policymakers. 7.1 Conclusions Five general conclusions are drawn from the study: Democracy comes with a price tag, and it is not cheap. As with anything, if it is not properly funded, society will have to lower its expectations as to what their democracy will deliver. The carrying out of electoral and civic awareness campaigns, proper policy research, international cooperation, connectivity with the electorate, etcetera, are all crucial for a well-functioning and people-orientated democratic dispensation. If parties are underfunded, they will not be able to meet the legitimate expectation of the citizenry. There is a trade-off to be made between competing budget interests. For example, between public services, such as social benefits, and the funding of democracy. But both are equally important. The quality of public services depends on the quality of public representation, and the quality of public representation depends on a fair share of the budget. An underfunded democracy will inevitably result in mediocre party performance within the democratic dispensation. The tension between the executive arm of government and the legislature is deepened when political parties are not adequately equipped to carry out their oversight role, since under-capacitated political parties cannot be expected to compete on an equal footing to the executive, who have considerable means at their disposal. When examining the adequacy of public funding, it needs to be considered in a holistic fashion. One has to weigh the total contribution to parties, direct and indirect, from the public purse. That is, both to parties as institutions, and to empower parties within the legislature. But also, to external structures, such as think-tanks and foundations that feed the democratic policy contestation. This is an important feature of the European dispensation considered in this study, but which is blatantly absent within the South African dispensation. Benchmarking against the jurisdictions that form the baseline study of this research would suggest that the South African democracy, insofar as it relates to the public financing of political parties, is materially underfunded. 7.2 Recommendations The author ventures three recommendations for public policymakers to ponder: Treasury should materially increase its contribution to the Represented Political Party Fund (RPPF) administered by the Independent Electoral Commission, to more realistic levels. Failure to do so will undoubtedly result in the weakening of political parties at the expense of a well-functioning democracy. It is common cause that the policy development processes of political parties and their international work, amongst others, are not adequately catered for in the South African dispensation. Policymakers should consider the introduction of such politically aligned think-tanks/foundations in order to strengthen the empirical underpinning of the policy discourse in the country. This is a crucial deficiency in the South African system. The promotion and introduction of ill-informed national policy can prove disastrous for socio-economic stability and fiscal sustainability. These dangers are heightened when political role-players propagate irrational and untested policy ideas. Political think-tanks can play an important role to moderate the national policy dialogue. Whilst it is apparent that South Africa cannot afford as generous a dispensation as that of Germany, funding along similar lines to that in the Netherlands and Sweden is achievable. The PFPP Act should not serve to discourage private funding to political parties. Political parties are important to democracy and a culture of contributing to the political dispensation should be encouraged. 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The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. 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Copyright © 2022 Inclusive Society Institute 50 Long Street Cape Town, 8001 South Africa All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of the their respective Board or Council members. Efficacy of the National Housing Policy in the provision of low-cost housing in the Metropolitan Municipalities of South Africa by Moloto Johannes Sekhobela [M.Sc (Public Finance Management), M.Com (Economics)] Abstract The primary aim of the national housing policy is to create sustainable communities and to improve the quality of life for the people of South Africa through the provision of housing. This paper will examine the efficacy of the national housing policy in the provision of low-cost housing in the metropolitan municipalities of South Africa, by using the Shift-Share Analysis of informal settlements and the housing backlog, based on information obtained from Rex-Data of Global Insight (2021). An increase in informal settlements and the housing backlog signify policy ineffectiveness while a decrease in informal settlements and the housing backlog indicate policy effectiveness. The Shift-Share Analysis is a technique used to understand regional contributions to the development of a national economy, in terms of the regional economy, political economy, urban studies, geography and marketing. South Africa has eight metropolitan municipalities spread across five of the nine provinces: City of Cape Town (Western Cape Province); eThekwini (Kwa-Zulu Natal Province); Mangaung (Free State Province); Nelson Mandela Bay and Buffalo City (Eastern Cape Province); and Ekurhuleni , City of Johannesburg , and City of Tshwane (Gauteng Province). The national housing policy was found, on average, to be effective. However, the individual metros indicate otherwise. In six of the eight metros i.e. City of Cape Town (CPT), eThekwini (ETH), Ekurhuleni (EKU), Nelson Mandela Bay (NMA), City of Tshwane (TSH) and Buffalo City (BUF) the policy was effective while in the remaining two, City of Johannesburg (JHB) and Mangaung (MAN), the policy was ineffective. Key words - National housing policy, shift-share analysis, metropolitan municipalities, informal settlements and housing backlog Introduction The objective of this study is to examine the efficacy of the national housing policy in delivering low-cost housing in the Metropolitan Municipalities of South Africa, that is, City of Cape Town (CPT), eThekwini (ETH), Mangaung (MAN), Nelson Mandela Bay (NMA), Buffalo City (BUF), Ekurhuleni (EKU), City of Johannesburg (JHB), and City of Tshwane (TSH). ( RSA, 2019). Increased urbanisation, population growth and migration to big cities led to high rates of unemployment, poverty, homelessness and an increase in informal settlements, (Govender & Reddy, 2019). Levenson (2019) estimated the proportion of urban to rural population in South Africa to be 69% / 31% in 2020, 70% / 30% in 2030, 72% / 28% in 2040 and 80% / 20% in 2050. The African National Congress (ANC) government introduced a White Paper on Housing as a response to the housing challenges faced by the majority of black South Africans. The provision of low-cost housing is intended to afford poor communities access to the property market, wealth creation, address market failures and reduce asset poverty. A fixed-amount capital subsidy of R1500 is provided to households earning R3500 per month and below, to build a (15x20) m2 house, as a way of offering a sustainable human settlement, healthy environment and sustainable livelihoods (Amisi, Marais & Cloete, 2018; Ojo-Aromokudu & Loggia, 2017) Housing is not only a basic, fundamental human right but it adds to people’s sense of belonging, ownership, identity, citizenship and self-sufficiency. Adequate housing includes the need for privacy and personal space, security and protection from harsh environmental elements, social development and integration. The number of people living in informal settlements and the size of the housing backlog reflects the challenges in housing provision for the poor (Marutlulle, 2021). Overview of housing in South Africa Housing Mandate The Department of Human Settlements (DHS) derives its mandate from the Constitution of the Republic of South Africa, 1996 (Act 108 of 1996). Section 26 of the Constitution deals with housing and states that everyone must enjoy the right to adequate housing and the state must ensure the progressive realisation of this right and that no one must be evicted or have their homes demolished without an order of court (RSA, 1996). Policy, legislative framework and strategic objectives The policy and legislative framework of the DHS (RSA, 2020) includes, but is not limited to the: White Paper on Housing (1994), Comprehensive Plan for the Development of Sustainable Human Settlements (2004), Housing Consumer Protection Measures Act (1998), Rental Housing Act (1999), Home Loan and Mortgage Disclosure Act (2000), Housing Code (2000), Social Housing Policy (2005), Social Housing Act (2008), Property Practitioners Act (2019), Housing Development Agency Act (2008), Community Schemes Ombudsman Services Act (2011) and Spatial Planning and Land Use Management Act (2013). Housing challenges Misuse of low-cost houses Low-cost houses are intended to improve the living conditions of the poor by providing a safe and stable place of abode that may enhance their prosperity, health and education. However, some homeowners misuse these low-cost houses by selling them without following proper procedures, renting them out unlawfully, turning them into business dwellings without permission and making additions and/or alterations that violate the municipal by-laws and regulations (Charlton, 2018). State capacity to provide low-cost housing The municipalities are unable to deliver housing to low-income households due to the lack of human and financial capacity, contradictory national policies, mandate creep and poor inter-governmental coordination (Gumede, 2021). Poor delivery of low-cost houses stems from lack of accountability, absence of performance and consequence management and lack of consultation with beneficiary communities. The above failures lead to corruption in granting of housing subsidies, selection of building contractors and allocation of houses to the rightful beneficiaries resulting in duplication, wastage, unfinished infrastructure projects such as schools, roads, bridges and dams (Marutlulle, 2021; Gumede, 2021). Gumede (2021) posits firstly, that reciprocal cooperation between the state, communities, business, organised labour and non-governmental organisations determines the capacity of the state to deliver basic services including housing. Secondly, a zero-tolerance policy against corruption, high levels of policy coordination, planning, implementation, and a functional monitoring and evaluation system. Availability of land Acquisition of land and housing delivery is hampered by the slow, complex identification and allocation of developed land, the government’s reluctance to deal decisively with private land ownership and land speculation. The lack of urban development strategies and the failure of the national government to regulate land markets exacerbates the problem (Marutlulle, 2021). Housing policies post-1994 increased spatial inequalities by building houses for the poor on the outskirts of cities, increasing their transport costs and the cost of accessing public and social services such as education, health and employment (Knipe, 2019). As a result, the housing backlog grows bigger than delivery in every major city, because of the growing gap between housing provision and the demand, fiscal constraints, and over-reliance on private consultants (Levenson, 2019). Literature review Pre-neoliberalism Before neoliberalism, good housing consisted of government regulated land and housing policies, subsidised construction, strong tenant protections and high-quality housing standards (Listerborn, Molina & Richard, 2020). Governments provided land, housing and finance directly to beneficiaries for servicing of sites and upgrading of informal settlements. The World Bank, International Monetary Fund (IMF) and the United Nations Habitat influenced housing policies in developing countries in the 1970s because they were struggling with the provision of housing for low-income groups. (Taruvinga & Mooya, 2018). However, these housing programmes became unsuccessful due to land acquisition problems, lack of financial sustainability, poor cost recovery and replicability problems for the infrastructure (Taruvinga & Mooya, 2018). In order to overcome the housing challenges, low-income households resorted to self-organised buildings because of their lack of income or access to mortgage finance and credit (Grubbaer, 2019). Neoliberal housing policies Governments moved from direct provision of housing to policies that are market-oriented because of cost over-runs, failed subsidy allocation and designs that compromised adequate housing for the poor. The state became an enabler rather than a provider by creating a legal and institutional framework conducive for private- sector home building for low-income households (Taruvinga & Mooya, 2018). According to Beswick, Imilan & Olivera (2019), neoliberalism entails the interaction of the state, private sector, and financial institutions in providing a market-based housing solution to the poor. The state provides a regulatory and institutional framework that creates conditions that are conducive for the private sector to participate. During the 1990s and 2000s, Latin American countries moved away from direct state provision of public housing towards market provision where the emphasis is on home-ownership and the housing finance system. Taruvinga & Mooya (2018) argue that neoliberal housing policy favours minimum government intervention in the housing market, promotes home-ownership, private property rights and binding financial commitments. Governments provide instruments that address constraints in property rights development, access to mortgage finance, subsidy rationalisation and infrastructure for residential land development, land regulations and organisation of the building industry. Neoliberalism stimulates economic growth by promoting homeownership, subsiding developers and agencies, driving use-value (basic need) and exchange value (asset). The state acts as a private company, which uses economic growth as its social policy to solve social and housing crises (Di Feliciantonio & Aalbers, 2017; Listerborn et al., 2020). Neoliberalism: challenges faced by developing countries Access to mortgage finance and credit by the poor The World Bank, IMF and the UN-Habitat use neoliberalism to target struggling developing countries with huge public debts, decreasing public finance and increasing welfare burden. Neoliberalism promotes the building of houses for middle and high-income groups as a way of capital accumulation to the exclusion of the poor through high house prices and the inability of the low-income households to access mortgage finance and credit (Sengupta, 2019). Socio-spatial practices Neoliberal social housing models result in unequal socio-spatial practices in the provision of social housing. The poor are displaced to the periphery of cities where land is cheap resulting in gentrification, social exclusion and uneven socio-spatial segregation, leading to a compromise in human sustainable development, community empowerment and environmental quality. The vulnerable groups’ cost of accessing public and social amenities such as public transport, health, education and employment increases as result (Dattwyler, Rivas & Link, 2019; Stiphany & Ward, 2019). In instances where low-income communities have a perception that their constitutional rights to adequate housing are denied and their sense of belonging is diminished, they may resort to informal settlements and slums as a solution to their housing problems (Lata, 2020). Public housing: a social or economic concept? Housing policies should have a social rather than an economic character. The capitalist approach to maximise the exchange value of housing at the expense of use-value undermines governments’ objective of providing affordable or social housing to low-income groups. Markets reduce housing to an economic rather than a social one, because of the profit motive (Shimbo, 2019; Santoro, 2019). Economic stability Taruvinga & Mooya (2018) contend that market stability and by extension economic stability is a prerequisite for long-term, low-cost housing finance by the private sector. The inability of developing countries to effectively and efficiently implement neoliberal housing policy in the low-income segment may be due to, inter alia, macroeconomic instability, fluctuating inflation, foreign exchange risk, and short-term investment horizons. Methodology The traditional and static shift-share analysis method and the Rex-Database of Global Insight (2021) are used in this study to conduct an empirical investigation into the efficacy of South Africa’s National housing policy in the provision of low-cost housing in the metropolitan municipalities of South Africa. The shift-share analysis method seeks to determine the change in a system by comparing the change in an area of interest with a relevant reference region. Change is sub-divided into three components, that is, National Growth or Share, Industry Mix or Structural Effect, and Competitive Share or Regional Shift (Lingzhi, 2021; Tissot-Daguette & Grether, 2021). According to Melchor-Ferrer (2020) and Li and Fang (2019), shift-share is a method that was originally designed to analyse changes in regional employment mapped against national or provincial growth but was later applied to various other fields of the economy. This method can also be used to quantify the development of an industry in a region and comparatively analyse it against the regional average. The shift-share analysis method has been criticised by Firgo and Fritz (2016) for its failure to determine a region’s performance independent of its sectoral structure. Thus, the dynamic regression shift-share analysis is recommended as a remedy. Empirical results Equation (1) defines Total Change in Regional informal settlements (R) as the sum of National Share Effect (N), Industry Mix Effect (M) and Regional Competitive Effect (S). R = N + M + S (1) Total National Informal Settlements change is defined as: IS (v) = IS (f) –IS (i) (2) Where IS (v) is the change in absolute terms, IS (f) is the total in the final period and IS (i) is the total in the initial period. % change in National share: IS (%) = [(IS (f) – IS (i)/ IS (i))*100] (3) The total change in Regional (metropolitan) informal settlements (Rm) is the difference between informal settlements in the final and initial periods Rm = Mf – Mi (4) Where R is the total change, Mf is the informal settlements in the final period while Mi is informal settlements in the initial period. The percentage of total regional change growth is represented by: Rm (%) = [(Mf - Mi)/Mi)*100] (5) The national share effect (N) is determined by: N = Mi1[ IS %] + Mi2[IS %] + . . . . + Min[IS %] (6) Where N is the total national effect of informal settlements, M is informal settlements in metropolitans 1, 2 . . ., up to n, in the initial period i and IS (%) is the national average informal settlements growth rate. Thus, the industry mix effect (M), is defined as: M = MR1 (Mi1) + MR2 (Mi2) + . . . . + MRn (Min) (7) Where M is the industry mix, MR is the marginal rate of growth in metropolitans 1, 2, 3…up to n and Mi is the metropolitans’ informal settlement in the initial year. Informal Settlements Table 5.1.1 below, summarises the changes in national informal settlements for the period from 2009 to 2018. Table 5.1.1 Changes in National Informal Settlements, 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) IS (%) is equal to -10% according to Table 5.1.1. above. This means that the national average growth in informal settlements decreased by 10%. Four provinces had growths, EC (46%), KZN (16%), NC (10%) and LIM (9%) while five provinces declined, FS (-31%), GP (-22%), MP (-21%), NW (-19%) and WC (-8%). The changes in the metros’ informal settlements for the period from 2009 to 2018 are summarised in Table 5.1.2 below. The total informal settlements R (%) decline is -28%. This means that informal settlements in the metros are declining at approximately two and half times more than the national average of -10%. Informal settlements are declining in all metros in the following order, with the highest being NMA (-69%), and the lowest CPT (-9%). The decline in eight Metros is high with double digits and CPT is the only one with a single digit. Of note is the decline in the EC metros, NMA and BUF that are above 60%, followed by ETH in KZN that is above 50%. Table 5.1.2 Changes in Regional Informal Settlements, 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) The national effect (N) indicates the extent to which metros’ informal settlements would have grown if each grew at the same rate as the national average. Table 5.1.3 below, is the summary of the national effect in the metros between 2009 and 2018. From Table 5.1.3 below, Informal settlements in the metros would have decreased by this number if they declined at the national average rate of -10%.The decline in the metros is approximately two and half times more than the national effect. This is because eight metros, except CPT, are declining at faster rates than the national average. CPT is the only metro that is declining slower, -9%, than the national average, -10%. The last column of Table 5.1.3 below, captures the difference in the totals of national effect and regional effect, R-N, -196 551, which is a decline. Growth is found only in CPT. The rest are declining with the highest being ETH (-69 272) and the lowest being MAN (-6 694). Table 5.1.3 National Share Effect (N), Informal Settlements, 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) Industry mix effect (M) shows how change in the metros’ structures factor into the overall growth of the national informal settlements. The industry mix effect (M) for the metros for the period from 2009 to 2018 is summarised in Table 5.1.4 below. The marginal rate of growth (MR%) is the difference between the provincial growth and the national average growth. It appears in the third column of Table 5.1.4 The total industry mix effect (M) is, according to Table 5.1.4, equal to 9398, which is an increase, because it is positive. The metros’ structure makes a positive contribution to national, however, that is not sufficient to reduce the national effect decline of -109 648. The industry mix grows positively in four metros, ETH (38 529), BUF (28 690), NMA (22 648) and CPT (3 625). Four metros experienced a decline, JHB (-29 718), EKU (-26 498), TSH (-20 761) and MAN (-7 116). Table 5.1.4 Industry Mix Effect (M), Informal Settlements, 1996-2018 Source: Rex Data, 2021 (Author’s own calculations) Regional competitive share effect (S) is the degree to which the metropolitans’ performance is better or worse than the national. R = N + M + S (14) Therefore S = R-N-M = -306 199-(-109 648)-(9 398) = -306 199+109 648-9 398 = -205 949 Table 5.1.5 Regional Competitive Share Effect (S=R-N-M), 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) The negative total regional competitive share effect suggests that the metros’ informal settlements declined by 205 949. However, not all metros are declining. JHB (15 026) and MAN (422) show growth. The highest decline is found in ETH (-107 801) and the lowest is in CPT (- 1 298). Housing Backlog Table 5.2.1 below is a summary of the changes in national housing backlog, for the period from 2009-2018. Table 5.2.1 Changes in National Housing Backlog, 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) Total change in housing backlog, the third column of Table 5.2.1 is defined as: B (v) = B (f) – B (i) (8) Where B (v) is the change in absolute terms, B (f) is the total in the final period and B (i) is the total in the initial period. The last column, B (%) is defined by: B (%) = [(B (f) – B (i)/ B (i))*100] (9) B (%) is equal to 9% according to Table 5.2.1 above. A positive total means that the national average growth in housing backlog is increasing. Six provinces recorded growth with the highest in NC (32%) and the lowest in EC (4%). Kwa-Zulu Natal (0%) showed neither growth nor decline. FS (-7%) and LIM (-3%) are the only two provinces that recorded decline. The changes in metros’ housing backlog for the period from 2009 to 2018 are summarised in Table 5.2.2 below. Table 5.2.2 Changes in Regional Housing Backlog, 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) The total change in metros’ housing backlog (R) is the difference between the housing backlog in the final and initial periods. R = Bf – Bi (10) Where R is the total change, Bf is the housing backlog in the final period while Bi is housing backlog in the initial period. The last column in Table 5.2.2 is the percentage growth in housing backlog represented by: R (%) = [(Bf - Bi)/Bi)*100] (11) Total average growth percentage, 12%, is the average percentage growth of housing backlog in the metros. This means that the housing backlog in the metros is growing faster than the national average of 9%. Housing backlog is growing in five metros, with the highest in CPT (31%) and the lowest in BUF (1%). There is a decline in three metros, NMA (-37%), ETH (-13%) and MAN (-4%). The national share effect (N) indicates the extent to which the metros’ backlog would have grown if each metro grew at the same rate as the national average. Table 5.2.3 is the summary of the national share effect in housing backlog in the metros between 2009 and 2018. Table 5.2.3 National Share Effect (N) Housing Backlog, 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) The national effect (N) is determined by: N = Bi1[ B(%)] + Bi2[B(%)] + . . . . + Bin[B(%)] (12) Where N is the total national effect of informal settlements, B is the backlog in metropolitans 1, 2 . . ., up to n, in the initial period i and B (%) is the national average growth rate in the housing backlog. From Table 5.2.3 above, the total national effect is 110 613. The housing backlog in the metros would have increased by this number if it grew at the national average growth rate of 9%.The actual average growth rate of 12% in the metros resulted in the actual average growth of 143 299 which is greater than the actual average national growth of 110 613. The last column of Table 5.2.3 above captures the difference in national effect and the regional effect, R-N. The difference is positive, 32 686, indicative of growth. Four metros show growth, the highest is JHB (51 785) and the lowest is TSH (4 996). The remaining four metros recorded a negative difference indicative of a decline in the housing backlog. The highest decline is ETH (-43 794) and the lowest is MAN (-5 180). 5.2.4 Industry Mix Effect (M) shows how the metropolitans’ structures factor into the overall growth of the national housing backlog. The industry mix effect (M) for the metros for the period from 2009 to 2018 is summarised in Table 5.2.4 below. Table 5.2.4 Industry mix effect (M), housing backlog, 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) The industry mix effect (M) is the product of the metros’ housing backlog in the initial year and the marginal rate of growth. The marginal rate of growth (MR %) is the difference between the provincial growth and the national average growth, the third column of Table 6.2.4. Thus, the industry mix effect (M), is defined as: M = MR1 (Bi1) + MR2 (Bi2 ) + . . . . + MRn (Bin) (13) Where M is the industry mix, MR is the marginal rate of growth in metropolitans 1, 2, 3…up to n and Mi is the metropolitans’ housing backlog in the initial year. The total industry mix (M), is according to Table 5.2.4, equal to 60 546, which is a growth. Four metros show growth with the highest being CPT (42 840) and the lowest being TSH (13 055). Decline is recorded in the remaining four, the highest is ETH (-18 220) and the lowest is NMA (-2 144). Regional competitive effect (S) is the degree to which the metros’ performance is better or worse than the national growth. Equation (14) defines Total Change in Regional housing backlog (R) as the sum of National Share Effect (N), Industry Mix Effect (M) and Regional Share Effect (S). Table 5.2.5 below is a summary of the Regional Competitive Effect. R = N + M + S (14) Therefore, S = R-N-M = 143 299-(110 613)-(60 546) = -27 860 Table 5.2.5 Regional competitive share Effect (S=R-N-M), 2009-2018 Source: Rex Data, 2021 (Author’s own calculations) The total regional competitive share effect suggests that the metros’ housing backlog declined by -27 860. The following two metros show growth, JHB (33 281) and MAN (1 284). Six metros indicated a decline, ETH (-25 574), NMA (-17 501), EKU (-8 795), TSH (-8 509), BUF (-2 013) and CPT (-48). Comparison of Regional Competitive Effects (RCEs): Informal Settlements & Housing backlog Table 5.3.1 below is the comparison of regional competitive effects for informal settlements and housing backlog. Table 5.3.1 Regional competitive effects: Informal settlements & housing backlog Source: Rex Data, 2021 (Author’s own calculations) The totals of regional competitive effects for both informal settlements and housing backlog in Table 5.3.1 above, are declining, -205 949 and -27 860, respectively. Informal settlements are, on average, declining faster that the housing backlog. A decline in informal settlements and housing backlog is indicative that the housing policy is, on average, effective. However, the picture in individual metropolitan municipalities is different. There is a decline in informal settlements and housing backlog in the CPT, ETH, EKU, NMA, TSH and BUF metros. The housing policy is therefore effective in these metros. In JHB and MAN informal settlements and housing backlog are increasing. An increase in both is indicative of housing policy being ineffective in these metros. Recommendations Policy makers should focus their attention, without neglecting the other metropolitans, on JHB and Mangaung, and mechanisms that will accelerate the reduction in the housing backlog. Expedite the accreditation of municipalities on all three levels to enable them to manage the resources and processes related to the upgrading and resettlement of informal settlements in full. The Department of Human Settlements must prioritise in-situ upgrading, resettlement and a phased funding mechanism for informal settlements in JHB and MAN. Shortcomings of the study and scope for further research Due to the unavailability of reliable and accurate data for housing delivery in municipalities, data relating to informal settlements and housing backlog was used to examine the efficacy of the National Housing Policy in the Metropolitan Municipalities of South Africa. Unfortunately, the Shift-Share Analysis (SSA) used in this regard is a static method and does not capture the dynamism and interaction between the metros in the periods under review. In addition, SSA does not show causality and it is, therefore, difficult to pinpoint the causes of trends and deviations. Further research into policy options and policy improvements aimed at providing municipalities autonomy to implement housing delivery effectively and efficiently, based on the merits of each municipality, is needed. The outcomes could assist policy-makers and stakeholders in planning and implementing differentiated policies that would benefit the poor. Conclusion The primary aim of the National Housing Policy is to create sustainable communities and to improve the quality of life of the people of South Africa, through the provision of low-cost housing. The study examined the effectiveness of the National Housing Policy using informal settlements and housing backlog data for the period 2009-2018. Increased urbanisation, population growth and migration to the cities has led to an increase in informal settlements and a housing backlog. Post 1994, the African National Congress (ANC) introduced a White Paper on housing in order to address housing for the poor. They provided a subsidy of R1500 for households earning R3500 per month and less to build a (15x20) m2 house. Housing challenges in South African include misuse of low-cost housing and lack of capacity by the municipalities to deliver low-cost houses effectively and efficiently. Compounding this problem is a lack of accountability by all levels of government, failure to consult stakeholders and corruption. Neoliberalism is a market-oriented policy involving the state and the private sector that is intended to provide housing for the poor. However, this policy has unintended consequences that actually result in the exclusion of the poor in favour of middle and high-income groups. Low-income households have limited or even no access to mortgage finance or credit. Developing countries find it difficult to implement neoliberalism to the advantage of the poor because of their ailing economies. The Shift-Share Analysis method, which subdivides regional employment into three components, that is, National Share Effect, Industrial Mix Effect and Regional Competitive Effect, was used to examine the changes in informal settlements and the housing backlog in South Africa. The national housing policy was, on average, found to be effective because the totals of the Regional Competitive Effects for Informal Settlements and Housing Backlog are negative, -205949 and -27860 respectively. Individually, six of the eight metros, that is, CPT, ETH, EKU, NMA, TSH and BUF have negative Regional Competitive Effects for Informal Settlements and Housing Backlog, an indication that the national housing policy is effective in these metros. The national housing policy was, however, found to be ineffective in JHB and MAN because their Regional Competitive Effects for Informal Settlements and Housing Backlog are positive. Recommendations to expedite low-cost housing through policy and mechanisms designed to reduce informal settlements and the housing backlog, are proposed. References Amisi, M., Marais, L. & Cloete, J.S. 2018. The appropriateness of a realist review for evaluating the South African Housing Subsidy Programme. 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University of Neuchâtel, Switzerland. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This article has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2022 Inclusive Society Institute 50 Long Street Cape Town, 8001 South Africa All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of the their respective Board or Council members. Ubuntu and the State by Dr Motsamai Molefe [MA (Developmental Studies), Phd (Philosophy)] Introduction This article explores the question of what constitutes a good society in light of African thought. Two important considerations relate to my raising and framing the question of a what constitutes a good society. Firstly, when I talk of a good society, I imagine the question to be relevant within the context of normative political philosophy, or simply put, political theory. In this light, this talk of a good society is not an empirical one, where I look into this or that society as a basis for determining what counts as a good or a bad one. Rather, I will be creating a theoretical construction or exposition of a good society, which can then be used to evaluate our various political realities concerning the state or status of our societies in terms of whether they are good or bad. Secondly, by talk of a good society, my focus is on our collective lives as regulated by the state and its subsidiaries (social institutions) through which it effects its policies and goals. In other words, when I talk of a good society I am, in this instance, limiting my focus to the state and its duties towards its citizens. Since the focus is on the construction of a good society I will then need to specify the axiological basis of determining a good state and its role. In this article, I will invoke or deploy ubuntu ethics as the axiological basis for judging what counts as a good society (qua evaluating the state and its duties towards its citizens). Ubuntu ethics is a salient African axiological system that has for centuries informed African thought and practice. Ubuntu ethics, as a moral system, is captured by the aphorism ‘A person is a person through other persons’. Though this terse expression does have metaphysical implications about personal or social identity – that it is possible only in social relationships with others - it is its normative package that will be useful in grounding an account of a good society (Ramose, 1999; Metz, 2007). One of the important dimensions of ubuntu that I will rely on to account for a good society is its under-explored aspect of the dignity of human beings. My exposition of ubuntu as a moral-political system will reveal that it embodies ethics of dignity, where it imagines a good society as one that respects the dignity of its citizens. The respect associated with human dignity requires that a society ought to have three features, namely, it should regard citizens (1) as inviolable; (2) empower them and (3) create equal conditions of social, political and economic existence for them. Three considerations motivate this exposition of ubuntu ethics to account for a good society. Firstly, empirical conditions in many parts of Africa suggest that we are still far from having what we might consider to be good societies. Social, political and economic conditions in many parts of Africa do not even begin to approximate a plausible vision of a good society. This article emerges to offer a theoretical lens to evaluate the empirical conditions of Africa. What is interesting about this article is that the lens it offers us is an African one. Secondly, related to the above, the literature in general that has reflected on the condition of African societies has tended to rely on foreign theoretical frameworks and concepts to reflect and evaluate social conditions in Africa. For example, post-independence leaders were fixated on Marxism or socialism as the proper theoretical and practical remedy for the ills of our societies, and they believed that it offered plausible accounts of a good society (Nkrumah, 1967; Gyekye, 1997). Recently, scholars of African thought have been fixated on the concept and theory of human rights as necessary and satisfactory to conceptualize a good society (Gyekye, 1997; Metz, 2011; Oyowe, 2014; Matolino, 2014). I am not convinced that socialism can offer us a satisfactory account of a good society or that it is most compatible with African ideals as some of its proponents tend to believe (see Gyekye, 1995). In my published work, I have offered arguments as to why rights are not only foreign to African ethical thought, but I have also suggested reasons why we should not take them seriously (Molefe, 2019). The third consideration revolves around my dissatisfaction with the literature that has attempted to deploy ubuntu to construct a good society. In relation to the above, some scholars have sought to interpret Ubuntu as a rights-based ethical and political system (Metz, 2011; Matolino, 2014; Oyowe, 2014). I find rights-based approaches to be at odds with the kind of philosophical anthropology and moral psychology characteristic of ubuntu ethics. Whereas rights tend to construe the agent and her relation to society in ways that take ontological and moral individualism as a point of departure, ubuntu ethics tends to imagine an agent as already and always connected and implicated with others in social and political issues, where they ought to understand themselves as sharing a common destiny – I am because we are (Menkiti, 1984). Ubuntu ethics tend to imagine an agent not as a maker of claims against others in society, rather it imagines him to be operating on the logic of other -or in terms ofrelational duties that create a positive and productive community of sharing and participating in life (Fineberg, 1970; Tutu, 1999). Here, I will propose my own moral-political interpretation of ubuntu ethics, which does appeal to human rights, [S1] [MM2] although it is considers human dignity to be a foundational category in African thought. I must be the first to admit that the above outline of issues in African political thought is very rough. However, I believe it is sufficient to justify a sketch of an alternative ubuntu-based account of a good society. To pursue this end, I will structure this article as follows. I will divide it into two major sections, the first of which focuses on moral theory. In this section, I will elaborate on ubuntu as a moral philosophy. I will highlight its three crucial features, namely ethical humanism, human dignity, and the telos or goal of morality that involves that acquisition of virtue or excellence[S3] [MM4] . The second section focuses on political theory. Here, I will appeal to the concept of human dignity as a macro-ethical concept that specifies three crucial duties of a state in creating a good society, namely the creation of non-humiliation, empowerment and equalizing conditions for citizens. In what follows, I offer an exposition of ubuntu as an ethical theory. Ubuntu ethics It is my view that ubuntu is characterized by four features (here, I will only focus on three). These features can be extracted or read from the aphorism definitive of it – ‘A person is a person through other persons’. This phrase has three segments that revolve around the concept of a person. Notice that the concept of a person occurs three times in the saying: (1) a person, (2) is a person and (3) through other persons. These three instances of the word person involve different concepts of aperson which, when carefully analyzed, are ethically informative. The first instance of the word ‘person’ is a reference to the ontological notion of a person, which merely refers to a human being – you and I. . The starting point and building block of ubuntu ethics is the fact that there are beings like you and I. This ontological notion of a human being grounds two ethical insights of ubuntu ethics, namely: (a) ethical humanism and (b) human dignity. The second instance of the concept of a person refers to the final good prescribed by ubuntu ethics, which requires the agent to achieve (c) personhood, which is a status term that denotes virtue or moral excellence. The last instance of the concept of a person, in the phrase ‘through other persons’ signals the importance of robust and productive (d) social relationships as an indispensable feature of moral growth and perfection. In what follows next, I offer an exposition of ethical humanism associated with ubuntu ethics. Ethical humanism The concept of a person in African thought, or, at least, its first instance in the aphorism of ubuntu ethics, refers to the fact of being human. It occurs, first, precisely because it serves as the moral foundation of ubuntu ethics. In other words, ubuntu ethics takes ethical naturalism as a point of departure. In other words, it grounds the entire enterprise of morality in some facts of nature. The kind of moral foundationalism associated with ubuntu ethics may be construed in terms of ethical humanism because it accounts for the essence of morality by appealing to some aspect of human nature (be it human needs, interests, dignity and so on). This should not come as a surprise given that the dominant metaphysical picture of African cosmology places human beings at a central spot in the hierarchy of being (Mbiti, 1971). In this metaphysical scheme, human beings are below God and other supersensible beings (ancestors) but they are above the animal and vegetable kingdoms (see Magesa, 1997; Shutte, 2001). The theatre of morality plays itself out largely in the human, natural and social sphere (Magesa, 1997). This is the case because it is human agents that ultimately have the duty to connect the spiritual, human and environmental communities (Imafidon, 2013). It is in this light that this comment by Steve Biko (1978) is informative about ethical humanism as a characteristic of ubuntu ethics – One of the most fundamental aspects of our culture is the importance we attach to (hu)man beings. Ours has always been a (hu)man-centred society. We believe in the inherent goodness of (hu)man(ity). We enjoy (hu)man for himself … Hence in all we do we always place (hu)man first.” (Biko, 1978). For another, consider this comment by Kwasi Wiredu, one of the leading African philosophers, where he states that “… the first axiom of all Akan axiological thinking is that man or woman is the measure of all value” (Wiredu, 1996: 65). The idea that emerges here is that ubuntu ethics understand human beings to be the very defining standard or measure of morality. In other words, the insight that emerges is that morality is intrinsically connected with the reality and presence of human beings. The importance attached to human beings, in this instance, relates directly to the claim that to engage on morality is to be engaged in relation to n a human affair, which has as its essence, human interests and issues. The implication of this view is that African moral thought is opposed to ethical supernaturalism – the claim that morality derives from some spiritual or divine feature[S5] [MM6] . I am aware that some might object to ethical humanism for its failure to include animals in the moral community. The essence of the objection against ethical humanism is that it is anthropocentric. I have elsewhere proposed that the kind of anthropocentrism associated with ubuntu ethics is a robust one insofar as it is a weak kind of it rather than the strong one (Molefe, 2020). Now that we have a sense that some aspect of human nature grounds the entire project of morality, we ought to inquire about this feature and its nature. The feature that does the best job in explaining the central place that human beings occupy in the African metaphysical system is human dignity. Human dignity Note that above Biko makes three claims about the status of human beings in African cultures. He notes that we attach importance to them; human beings are believed to be inherently good; and that human beings come first. Why do human beings come first? Why believe that they are inherently good? And, why attach importance to them? The reason for this is not hard to find. It is encapsulated by the notion that human beings are understood to be bearers of dignity. The notion of dignity is used in moral philosophy to capture the moral preciousness or worth of human beings (Donnelly, 2015). This moral worth captured by the concept of human dignity is understood to be inherent or intrinsic insofar as it is a function of our human nature, or of our metaphysical make-up. That is, the view that there is a distinctive aspect of our nature, which makes us intrinsically valuable (Rosen, 2012). I think Biko has the idea of human dignity in mind when he attaches inherent goodness to human beings. I say so because the inherent goodness in question is not one that involves our actions and characters, it is one that considers our status as human beings as one that is naturally attended by inherent goodness – the kind that we do not achieve or cannot lose. The idea that human beings have dignity is pervasive in African thought. Gyekye (1992) grounds his political theory of moderate communitarianism by appealing to the idea of human dignity. Jack Donnely (1982), though he argues that the idea of human rights is absent - at least historically - in African institutions, goes on to observe that the notion of human dignity is present and central in their institutions. Scholars that take human rights seriously in African thought tend to take the idea of human dignity to be present and important in African thought (Metz, 2011; Oyowe, 2014). Mogobe Ramose (2010: 302), a leading scholar of ubuntu ethics, explains the importance of human dignity in this fashion – The practice of feta kgomo o tsware motho … requires moral education based upon the principles of sharing, concern for another and the subordination of wealth to the dignity of the human person as motho. The saying fetamotho o tsware motho, roughly interpreted, attaches the status of dignity to motho (a human being or a person) relative to a cow (which in this instance represents both nature and economic value). In other words, in all of the natural sphere and all economic standards, the value of a human being is incomparable and superlative. The question still stands, however, concerning what, according to ubuntu ethics, accounts for the intrinsic value of human beings. The answer that emerges in the literature finds expression in the writings of Ifeanyi Menkiti (1982) and Kwame Gyekye (1982). Both these thinkers express the idea that human beings are intrinsically valuable because they possess the capacity to pursue personhood or virtue (or, ubuntu). They talk of “the capacity for moral sense” or even “the innate capacity for virtue” (Menkiti, 1984: 177; Gyekye, 1992: 111). It is this capacity that explains the inherent goodness of human beings – their intrinsic worth. It also explains why human beings can be held morally responsible because they are essentially defined by the capacity to participate and grow morally. In short, human beings, according to ubuntu ethics, have dignity because they possess the capacity for virtue. It is only human beings that have this capacity, or that at least have to the extent that they do. In what follows, I turn to the third aspect ubuntu ethics. The Final good Ubuntu ethics prescribes the achievement of ubuntu as the chief goal of our moral existence. Here, I draw a distinction between ubuntu ethics, as a moral system, from ubuntu as the goal that the agent ought to achieve. The reader will notice that sometimes to have ubuntu is just the same as being called a person, in the normative sense. Notice, for example, Tutu (1999: 35) speaks in this fashion regarding what it means to have ubuntu – When we want to give high praise to someone we say, “Yu, u nobuntu”; “Hey, so-and-so has ubuntu.” Then you are generous, you are hospitable, you are friendly and caring and compassionate. You share what you have. It is to say, “My humanity is caught up, is inextricably bound up in yours.” Notice that the possession or achievement of personhood, which signals the status of excellence, is attended by more or less similar virtues – …norms, ideals, and moral virtues can be said to include generosity, kindness, compassion, benevolence, respect, and concern for others; in fine, any action or behaviour that conduces to the promotion of the welfare of others (Gyekye, 1992: 113). To achieve personhood or ubuntu is a function of nurturing a good character. That is, a character that is exuberant with virtues or excellences. It is important to notice that the virtues associated with ubuntu are relational ones. That is, these are the kinds of virtues that require and emerge in social relationships. You cannot have these virtues all by yourself. Or, to use the language employed by Gyekye, these are virtues premised in the human ability to demonstrate concern for others. Hence, another way to make sense of the virtues that are characteristic of ubuntu ethics is that they are generally other-regarding. In other words, I will achieve ubuntu to the extent that I relate positively and productively with others by way of learning and expressing other-regarding duties. Hence, the expression ‘I am because we are’ captures African moral thought appositely. It is a moral system that essentially imagines agents in terms of their connectedness and their flourishing as individuals requires this connectedness. One might here object to ubuntu ethics for its failure to accommodate self-regarding duties. This objection arises because ubuntu ethics places emphasis on social relationships and other-regarding duties. In my view, a careful reading of ubuntu ethics will show that it can be understood in terms of the analogy of the two sides of the coin. The one side of the moral coin of ubuntu ethics captures self-regarding duties and the other one concerns other-regarding duties. These are two sides of the same coin. It is by positively relating with others (other-regarding duties) that I realize or nurture my own character (self-regarding). My good as an agent is not divorced or opposed to social relationships and my other-regarding duties (see Lutz, 2009). We can now summarize ubuntu ethics. Ubuntu ethics is grounded on the ontological status of our humanity. Ubuntu is grounded in humanity because human beings, metaphyiscally speaking, occupy a central position in the hierarchy of being, and, morally speaking, human beings are the standard of all moral values. The value associated with human beings is explained[S7] [MM8] in terms of human dignity, which captures the intrinsic and superlative status of human beings. We theoretically explained the intrinsic worth associated with human beings with reference to their capacity for virtue. It is this capacity that explains why we expect human beings to be morally responsible and that accounts for the general expectation that human beings ought to pursue personhood or ubuntu. Finally, we explained the moral goal of agents in ubuntu ethics as the pursuit and acquisition of ubuntu (virtue). The virtues characteristic of an agent that has ubuntu tend to be other-regarding ones. With this sketch of ubuntu as a moral theory, we can turn to the question of what is to count as a good society. Ubuntu, Human Dignity and the State Above, we explained that ubuntu ethics is both an ethics of dignity and of virtue. The ethics of dignity is primary and explains why we expect human beings to be able to pursue and achieve virtue. It is because human beings have the capacity for virtue that we consider them to have intrinsic worth and it is because of the self-same capacity that we do expect them to be able to achieve virtue. It is this aspect of ubuntu ethics as an ethics of dignity that grounds our attempt to construct an ubuntu-inspired conception of a good society. To articulate such an ubuntu-based account of a good society, I will use the idea of human dignity as a macro-ethical concept. ‘Macro-ethical concepts’ are those that deal with[S9] [MM10] social institutions, or, in our case, the entire arrangement of society. This is contrasted with ‘Micro-ethical concepts’, which are those ethical concepts that regulate moral relationships in a private or personal and/or small-scale interpersonal relationships among individuals. I am appealing to the idea of human dignity as a macro-ethical concept because we have seen the tendency in the literature and practice to use it as such. One prominent example where this is the case is in relation to the discourse and practice of human rights. In this literature, the concept of human dignity is deployed, at least in the dominant interpretation, as a grounding or foundational term (Harbemas, 2010; Hughes, 2011). It serves as the normative basis for imagining a good society. A good society is one that is organized around the recognition of the human dignity of individuals. The device or instrument of human rights emerges precisely in the recognition, protection and promotion of human dignity (Donnelly, 2009). The state, through Constitutions and their Bill of Rights, aim to respect and protect human dignity. In this light, the idea of human dignity is the concept that normatively informs the character of our modern civilization. The same ought to be the case in relation to ubuntu ethics. I say so precisely because ubuntu is premised on the inherent goodness of human beings and their moral priority status in the natural world over other naturally existing things. In ubuntu ethics, a good society is one whose social institutions (in terms of their rules, policies and as agents) act from the position of being cognizant of the dignity of human agents. The aim of the state, according to ubuntu ethics, is to be responsive to the moral preciousness of human beings. But what does it mean to claim that a good society is one where the state, in terms of its rules, policies and conduct towards its citizens, is regulated by the grounding value of human dignity? The literature in moral-political philosophy associates the notion of human dignity with three functions. It is these functions that we can rightly ascribe to the state. Some scholars associate the notion of human dignity, as a micro-and-macro-ethical concept, with constraints and empowerment (Beyleveld and Brownsword, 2001). Other scholars associate it with stringent constraints, strong duties to aid others and equality (Jaworska & Tannenbaum, 2013). I will deal with the three functions associated with human dignity as the basis to outline the role of the state, starting with constraints or agent-centred-restriction (Hurley, 2005). Constraints and the Role of the State The idea of constraints denotes deontological restrictions. By ‘deontological restrictions’ I mean the imposition of limits over means we could employ to achieve important social goals. At the heart of the idea of constraints is the idea that certain ways of treating human beings are wrong, wronging (harming) and are almost absolutely forbidden (Kittay, 2005). A common example of how this idea of constraints work is by refusing to kill one healthy person for the sake of saving five other sick people – it is anti-maximizing[S11] [MM12] , all things being equal (Metz, 2007). It is wrong to kill an innocent and healthy person for the sake of helping other sick and dying persons – no human being ought to be used as a means to an end. The basic idea is that the idea of human dignity sets a very high protective parameter around beings of dignity (Toscano, 2011). It regards their status of dignity as both inalienable and inviolable. In other words, because human beings have dignity, we have a duty to treat them with the utmost respect. Part of what is involved in treating persons with utmost respect involves not violating them. The insight that emerges here is that the idea of human dignity captures the universal negative duties we have not to harm other beings of dignity. In this light, we can note that according to ubuntu ethics the state has a duty to recognize and protect human inviolability. The kind of violation we have in mind is deeper than a mere offence (that one might take when someone says you are ugly). It is the kind that undermines one in terms of their status as a person – it causes injury to one’s sense of self-respect as a human being. It is a radical or fundamental kind of harm that goes to the extent of stripping one of their humanity (Kaufmann et al, 2010). Personal and social practices like those of racism, xenophobia, sexism and chauvinism are injuring in this fundamental sense. They dehumanize people on the basis of arbitrary or biological features and strip them of their humanity.. Colonization, slavery and apartheid are all perfect instances of states organized on the basis of the violation and dehumanization of human beings. They were premised, in their nature and function, precisely on denuding fellow human beings of their dignity and sense of self-respect as human beings. The positive role of the state as imagined in ubuntu ethics involves the removal of dehumanizing human conditions. Things like the social evil of white supremacy and racism, tribalism and xenophobia, gender-based violence and femicide, genocides and so on. The state, on this moral-political view, has a duty to create conditions that recognize and respect the inviolability of human beings and create social conditions that ensure its protection. The state also has a duty to advance the interests of the vulnerable in society like children, minority groups, disabled individuals, women, foreigners and so on. In this light, the very first role of the state, according to ubuntu ethics, is the removal of conditions that undermine the human beings’ status as persons. The state is also required to create conditions conducive for human flourishing. This leads us to the aspect of empowerment. Empowerment and the Role of the State The idea of empowerment refers to the creation of personal and social conditions that enables the development and expression of human capabilities. According to ubuntu ethics, the most important capacity to be developed is the capacity for virtue. It is not enough that we have removed social conditions that harm our humanity. More is required. The state has a duty to create social conditions that enable human beings to flourish. This is where the state ought to set up proper, sustainable public goods for human functioning and flourishing. By ‘public goods’ I have in mind things such as access to efficient and effective public health, the availability of decent and meaningful public education, access to decent conditions of existence in terms of human settlement, with sanitation, roads and important amenities like gyms, shops, safety; the availability of economic opportunities, be it in terms of entrepreneurship or employment. In this light, the state has a duty to develop policies and their accompanying social institutions that will enable human flourishing. It is said, both in public discourse and even in literature that ubuntu no longer exists in our societies. Such claims, though they have rhetorical push, fail to properly understand the issue, at least this is my view. The issue, in many societies, is not the death of ubuntu per se. What is actually happening is that we have not removed conditions that dehumanize human beings and we have not further created socio-conditions that enables the human person to develop their capacity for virtue. Ubuntu will remain, or seem, to be dead when we do not have a state that creatively creates conditions that will enable its emergence in our midst as a reality. This duty rests with the state - to create public conditions that enable individuals to flourish. We cannot and should not expect much - in terms of ubuntu - from human agents when we have left them in conditions of squalor, marginality, exclusion and penury. In this light, the state has a duty to create and expand social opportunity structures for all human beings in society. In ubuntu ethics, the creation and expansion of these structures, is captured in terms of the idea of the common good (see Wiredu, 1992). By the ‘common good’, scholars of African thought have in mind the meeting of basic human needs so that each and every human being may lead a satisfactory human existence. Henry Odera Oruka (1989) conceptualizes these basic needs in terms of what he calls the human minimum, which he understands to involve the state proving subsistence, public health and proper education (Oruka, 1991). It is the provision of these basic three public goods that enables the development of robust agents that can live full and fulfilling lives. These goods must be made available to every person. Why each person? Equality and Role of the State The answer to the above question is encapsulated by the idea of equality – the basic claim that each person counts and counts equally. How do we account for the equality of human beings? We account for it by refencing the notion of human dignity. One of the fundamental functions associated with the modern notion of human dignity is that it is characterized by social egalitarianism (Rosen, 2012). The basic idea is that if all human beings have dignity, none have it more than others, and, therefore, we owe them equal moral regard. Our dignity, remember, is a function of us merely possessing the capacity for virtue. Anyone that possesses this capacity, all things being equal, is equal to every other person with the same capacity. If this claim of social egalitarianism is true, it follows that the state has a duty to equally protect all its citizens from harm and to create empowering conditions for all of them. In this light, ubuntu ethics recognizes all human beings as equal and deserving of our utmost moral regard. We must therefore come to the conclusion that the role of the state, in light of ubuntu ethics, is to create a society that pivots on the recognition of the human dignity of all human beings. This status of human dignity associated with human beings creates three duties for the state. The state must create non-humiliating human conditions, to enable conditions for the development of the capacities and talents of individuals, and to do so in a social context characterized by egalitarianism. Conclusion This article explored the question of a good society in light of ubuntu ethics. It construed ubuntu ethics in terms of ethical humanism, the primacy of human dignity and the agent’s chief goal of moral excellence. It deployed the primacy of human dignity as the basis for imagining a good society. It associated the idea of human dignity with three crucial functions – non-humiliation, empowerment and egalitarianism. It conceptualized the role of the state in light of ubuntu ethics as one that systematically extirpates humiliating conditions, creates empowering conditions, and constructs a society where all human beings are equal and are so treated. The aim of this article was to give the reader a rough sense of the role that ubuntu ethics attaches to the state. I am aware that this article leaves many important questions hanging. There is the question of why we must accept the account of dignity in terms of the capacity for virtue. Or, even if we accept the view that human dignity is a function of the capacity for virtue, what is the nature of this capacity, how does it differ from other accounts of human dignity, and why must we take it seriously? We can also ask questions about the kind of state characteristic of ubuntu – is it a perfect or imperfect state. These are the questions I will turn to in future research. It suffices, for now, to merely give a sketch of an account of ubuntu and the roles it attaches to the state in accounting for a good society. References Beyleveld, Deryck and Roger Brownsword (2001). Human Dignity in Bio-ethics and Biolaw. Oxford: Oxford University Press. Donnelly, J. (1982). Human Rights and Human Dignity: An Analytic Critique of Non-Western Conceptions of Human Rights. The American Political Science Review, 76, 303–316. Donnelly, J. (2009). Human Dignity and Human Rights. Denver: Josef Korbel School of International Studies. Gyekye, K. (1992). Person and Community in African Thought. Person and Community: Ghanaian Philosophical Studies (Vol. 1, pp. 101–122). Washington, DC: Council for Research in Values and Philosophy. Hurley, P. (1995). Getting Our Options Clear: A Closer Look at Agent-Centered Options. Philosophical Studies, 78, 163–188. Kittay, Eva. 2005. Equality, Dignity and Disability. In Perspectives on Equality: The Second Seamus Heaney Lectures. Ed. M. A. Waldron and F. Lyons, 95–122. Dublin: Liffey. Lutz, D. (2009). African Ubuntu Philosophy and Global Management. Journal of Business Ethics, 84, 313–328. Magesa, L. (1997). African Religion: The Moral Traditions of Abundant Life. New York: Orbis Books. Matolino, B. (2014). Personhood in African Philosophy. Pietermaritzburg: Cluster Publications. Menkiti, I. (1984). Person and Community in African Traditional Thought. In R. A. Wright (Ed.), African Philosophy: An Introduction (pp. 171–181). Lanham: University Press of America. Metz, T. (2007). Toward an African Moral Theory. The Journal of Political Philosophy, 15, 321–341. Metz, T. (2010). Human Dignity, Capital Punishment and an African Moral Theory: Toward a New Philosophy of Human Rights. Journal of Human Rights, 9, 81–99. Metz, T. (2011). Ubuntu as a Moral Theory and Human Rights in South Africa. African Human Rights Law Journal, 11, 532–559. Molefe, M. (2019). An African Philosophy of Personhood, Morality and Politics. New York: Palgrave Macmillan. Molefe, M. (2020). African Personhood and Applied Ethics. Grahamstown: NISC PTY.(LTD) Odera Oruka, H. 1989. “The Philosophy of Foreign Aid: A Question of the Right to a Human Minimum.” In A. Graness and K. Kresse 1997, 47–59. Frankfurt am Main: Peter Lang. Odera Oruka, H. 1991. The Philosophy of Liberty: An Essay on Political Philosophy. Nairobi: Standard Textbooks Graphics and Publishers. Wiredu, K. (1996). Cultural Universals and Particulars: An African Perspective. Indianapolis: Indiana University Press. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This article has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

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Updated results from the Inclusive Society’s 2022 GovDem survey Click here to go back Figure 3.10.: Comparison with regard to in-group trust 3.2.6. Conclusion Trusting one’s fellow compatriots is crucial for the establishment of social cohesion in a country. Social cohesion is also hugely important for economic development. Sadly, there are worrying trust-deficit trends within South African society. But for high levels of trust within families, disquieting trends endure across all other dimensions. Whilst people have reasonable trust in their neighbours, and whilst they grow to trust people that they have gotten to know, they highly distrust people they do not know. There are also disturbingly high levels of distrust amongst people from different religions and races, also with high levels of in-group distrust with regard to the latter. The current South African society and its economy is rather fragile. It requires a national effort to unite the nation and rebuild the shattered economy. The part that social cohesion is to play in this must not be underestimated. Leaders of society should refrain from divisive narratives and other actions that undermine trust. Its replacement with language and deeds that creates unity and confidence, will help. 3.3. Emigration could reduce South Africa’s skilled workers by more than 9 percent The third principal finding of the survey was that emigration continues to pose a tangible threat to the South African economy. Whilst there is some cause for optimism, as the survey shows a decrease in the number of South Africans seriously contemplating emigration compared to the previous year, it remains concerning that 9.25 percent (down from 11.13 percent) of those with higher education expressed a serious intention to emigrate within the next two years. This is particularly alarming given the existing skills shortage in the country, as losing more than nine percent of highly educated individuals would deal a significant blow to the economy. The trend is confirmed when cross correlating the results of South African incomes, where 9,01 percent (previous poll: 10,35 percent) of the top earners indicated that they were seriously considering emigrating in the next year or two. Apart from the impact that a loss of skills will have on the economy, the potential loss of tax to the fiscus resulting from the high-income earners’ departure needs to be borne in mind. 3.3.1. Similar trends across race groups It appears that race is not a material driving force behind the motivation to emigrate, since similar trends are found amongst white and black South Africans. Whilst white South Africans still registered the highest interest in emigrating, namely 7,82 percent (previous poll: 11,72 percent), black South Africans at 6,72 percent (previous poll: 9,73 percent) were not far behind. Indian and coloured South Africans lagged somewhat behind their white and black compatriots. 5,48 percent (previous poll: 9,69 percent) of Indians and 5,25 percent (previous poll: 8,96 percent) of coloureds suggested that they wanted to emigrate. Figure 3.11.: Percentage of population considering emigration – by race 3.3.2. Opportunity: the driving force South Africans indicating their intention to emigrate were mainly driven by economic and personal well-being considerations. Three of the top five reasons for emigration suggested this. 23,18 percent (previous poll: 24,26 percent) of South Africans that indicated that they were considering emigration (22,86 percent of those with higher education and 16,90 percent of higher income earners) cited better job opportunities as the rationale for their consideration, whilst 9,79 percent (previous poll: 8,36 percent) suggested overall better opportunity and 9,69 percent (previous poll: 5,42 percent) cited a better life / standard of living as the reason. A failing South African state and bad governance were the other contenders in the top five. Figure 3.12.: Top 5 reasons for emigrating 3.3.3. Younger people are the most vulnerable group As may be expected, given the high youth unemployment statistics and greater flexibility of younger people to emigrate (e.g., single, early stage of career, still building asset base), the aspiration to emigrate seems to reduce the older people become. In this poll, as in the last poll, it still proves to be significantly so. More than two and a half times the South Africans in the 18–24-year-old category, considered emigrating than those South Africans over the age of 50. The results of the poll show that as people get older, their intention to emigrate declines. In the category 18-24 years, 8,61 percent (previous poll: 15,91 percent) were considering emigration. In the category 25-34 years, it reduced to 7,98 percent (previous poll: 11,25 percent). In the category 35-49 years this went down to 6,27 percent (previous poll: 8,06 percent). And in the category 50 years and older it was only 3,46 percent (previous poll: 4,76 percent). Figure 3.13.: Percentage of population considering emigrating – by age 3.3.4. Top five emigration destinations It is mainly developed economies, and English-speaking countries, that seem to appeal to those considering emigration. The previous year’s outlier, Germany, which then came in third, was this year pipped by another outlier, Botswana. Germany still registered amongst the top five preferred destinations, whilst Canada fell out of the top five preferred destinations. The top five emigration destinations are: Table 3.4.: Top five emigration destinations 3.3.5. Conclusion It appears that the number of South Africans considering emigration is on the decline. Nevertheless, the country is still at risk of losing more than nine percent of its working-age population. Of even greater concern is the number of educated and high-income earners considering emigration. For any economy to lose so many of its qualified workforce is problematic, more so in an economy such as ours, which lacks skills and expertise. The risk is real. The South African economy is not providing enough job opportunities for the educated and high-income earners to grow. This against a backdrop of developed economies – including those favoured most by South Africans – that have a qualified jobs deficit and are actively seeking especially qualified individuals to relocate to their shores. The driving motivation behind emigration from South Africa appears, in the main, economic and well-being opportunity. There is little evidence in the poll to suggest that politics, race and/or cultural assimilation play much of a role in emigration decisions. But the perception of South Africa being a failed state and bad governance are issues that drive emigration. The inherent danger that emigration holds for the current stagnant and job-losing South African economy, is that it is also driving too many qualified people abroad, which, in turn, because of the skills deficit in the economy, further reduces its ability to perform optimally. And optimal performance is needed to expand GDP and employment growth. 3.4. South Africans don’t sufficiently trust immigrants As unemployment increases and the anti-immigrant narrative is heightened, mistrust between South Africans and immigrants from Africa has deepened in five of the country’s provinces. Nationally, just under two-thirds of South Africans indicated that they did not trust immigrants from Africa very much or at all. In general, there is not enough trust in South Africa to sufficiently underpin social cohesion. But when it comes to the alarmingly high level of mistrust in immigrants from Africa, the country should tread carefully. The early signs of xenophobic instability show in the sporadic incidents of xenophobia in the country. The lack of trust runs across most dimensions, be it race, gender, age, education, income, or political party. The poll shows that no progress has been made since the previous year in improving the relationship between South Africans and foreigners, be they from Africa or other overseas countries. 3.4.1. Immigrants from Africa Overall, only 31,21 percent (previous poll: 31,23 percent) of South Africans said they completely trusted or somewhat trusted immigrants from African countries, with only a slight differentiation between men and women. 62,72 percent (previous poll: 62,62 percent) of male and 62,37 percent (previous poll: 62,63 percent) of female South Africans either did not trust immigrants very much or at all. 6,07 percent did not indicate either way. Figure 3.14.: Percentage of South Africans not trusting African immigrants – based on gender - Based on race Mistrust in immigrants from Africa deepened amongst South Africans from the Indian and coloured communities. 79,82 percent (previous poll: 57,9 percent) of Indian South Africans and 61,67 percent (previous poll: 54,87 percent) of coloured South Africans indicated that they did not trust immigrants from Africa very much or at all. The poll suggests that level of trust in immigrants from Africa remained more or less in line with the results from the previous poll. This was 60,29 percent (previous poll: 62,61 percent) and 62,57 percent (previous poll: 63,76) percent of white and black South Africans respectively. - Based on education The survey results suggest, however, albeit on the margins, that the more educated South Africans are, the more they are willing to trust African immigrants. 65,81 percent (previous poll: 68,27 percent) of South Africans with some high schooling either did not trust immigrants very much or at all. For those that had matric it improved to 61,66 percent (previous poll: 62,24 percent), and for those with higher education it was 61,18 percent (previous poll: 59,71 percent). - Based on age and earnings There is little differentiation to be made based on age, with all age bands recording a distrust (not very much or no trust) in the lower 60 percent range. Similarly, earnings did not appear to make much of a difference in South Africans’ attitudes, although there was a slight reduction as people’s earnings increased. The outlier was those with no earnings, who were far more trusting of immigrants from Africa than those with earnings. - Based on political party support Amongst supporters from the various political parties, South Africans from the FF+ in this poll once again emerged as the most trusting (with 53,97 percent – previous poll: 45,34 percent – either not trusting very much or at all), and from the IFP, whilst reducing, again the least trusting (75,98 percent – previous poll: 88,95 percent). Amongst the three largest parties, although still alarmingly high, the ANC was the most trusting, whilst the EFF was the least. 59,89 percent (previous poll: 59,57 percent) of ANC supporters, 62,5 percent (previous poll: 67,15 percent) of DA supporters and 67,43 percent (previous poll: 68,67 percent) of EFF supporters either did not trust immigrants from Africa very much or at all. Figure 3.15.: Percentage of South Africans not trusting African immigrants – based on party affiliation - Based on provinces As was the case in the previous poll, in all but one province, the Free State, a majority of South Africans indicated that they do not trust immigrants from Africa very much or at all. The Northern Cape reflected a dramatic decline in trust in immigrants from Africa when compared to their attitudes in the previous poll. Figure 3.16.: Percentage of South Africans not trusting African immigrants – based on provinces 3.4.2. Immigrants from outside of the African continent Overall, only 32,41 percent (previous poll: 32,29 percent) of South Africans said they completely trusted or somewhat trusted immigrants from countries other than those from Africa, with only a slight differentiation between men and women. 62,05 percent (previous poll: 61,03 percent) of male and 61,46 percent (previous poll: 61,13 percent) of female South Africans either did not trust immigrants very much or at all. - Based on race Although still the majority of South Africans from the minority communities, they were significantly more trusting of immigrants from outside of Africa, than were their black compatriots. 56,7 percent (previous poll: 54,23 percent) of white South Africans, 68,68 percent (previous poll: 55,41 percent) of Indian South Africans and 61,76 percent (previous poll: 51,61 percent) of coloured South Africans indicated that they did not trust immigrants from countries outside of Africa very much or at all. This increased to 62,13 percent (previous poll: 63,37 percent) of black South Africans. - Based on education Once again, the survey results suggest that the more educated South Africans are, the more they are willing to trust immigrants. 65,51 percent (previous poll: 66,64 percent) of South Africans with some high schooling either did not trust immigrants from countries outside of Africa very much or at all. For those that had matric it improved to 61,39 percent (previous poll: 60,32 percent), and for those with higher education it was 57,87 percent (previous poll: 57,97 percent). - Based on age and earnings The lower the earnings the less the trust for immigrants from outside of Africa. In fact, the differentiation between the lowest earning band and the highest earning band is quite stark. For the lowest earning band, 69,77 percent of South Africans indicated that they did not trust immigrants from outside of Africa, whereas for the highest income band it improved to 58,83 percent. Figure 3.17.: Percentage of South Africans not trusting immigrants from outside of Africa – based on earnings - Based on political party support Amongst supporters from the various political parties, South Africans from the FF+ again emerged as the most trusting (with 39,07 percent – previous poll: 47,79 percent) either not trusting very much or at all and the IFP still the least trusting (73,10 percent – previous poll: 90,37 percent). Amongst the three largest parties, although still very high, the ANC and DA were neck and neck as the most trusting, whilst the EFF was the least. 58,46 percent (previous poll: 59,84 percent) of ANC supporters, 58,33 percent (previous poll: 59,37 percent) DA and 65,06 percent (previous poll: 67,36 percent) of EFF supporters either did not trust immigrants from countries outside of Africa very much or at all. Figure 3.18.: Percentage of South Africans not trusting non-African immigrants – based on party Whilst South Africans from all parties other than the DA appear not to make much of a differentiation between immigrants from within or outside of Africa, the DA supporters were, by quite a large margin, more favourably disposed towards immigrants from outside of Africa, than they were for those from within Africa. In this regard, 67,43 percent (previous poll: 68,24 percent) of DA supporters indicated not very much or no trust in immigrants from Africa, whilst such sentiment improved to 58,33 percent (previous poll: 59,39 percent) distrust for those immigrants from outside of Africa. - Based on provinces Provincial responses are indicated in the figure below. As was the case in the last survey, the Free State remains the only province where under half of South Africans indicate that they trusted immigrants from outside of Africa. From a provincial perspective, the same trends remain, more or less, true for immigrants from outside of Africa as they do for those from within Africa. Figure 3.19.: Percentage of South Africans not trusting non-African immigrants – based on provinces 3.4.3. Conclusion There is a disquieting low level of trust between South Africans in all demographic groups, be it race, gender, age, education, income, political party or province, and immigrants from Africa. This does not bode well for social cohesion and presents a socio-political risk within an environment which is prone to xenophobic confrontation. The authorities would do well to heed these warning signs and to ensure that social interventions are undertaken to improve relationships between the local and immigrant communities. This should be particularly high on the KwaZulu-Natal and Northern Cape agenda, although there are other provinces such as Gauteng, the Western Cape and Eastern Cape, where the levels of distrust are also disturbingly high. It is in the interest of national stability that urgent attention be given to this predisposition of our society. For starters, the opportunistic negative political narrative needs to be reversed. Whilst the general trend holds true for all South Africans not having a strong level of trust in immigrants, be they from Africa or outside of Africa, the notable differences are: South Africans from the minority race groups are significantly better disposed towards immigrants from outside of Africa, than those from within Africa. Whilst South African supporters from all political parties, bar the DA, have a similar disposition towards immigrants from both within and outside of Africa, the DA supporters are significantly better disposed towards immigrants that are from outside of Africa, than those from within Africa. 3.5. South Africans deeply distrust their compatriots from other parties South Africans deeply distrust their fellow compatriots that do not belong to the same party as their own. This undermines social cohesion, and points to a high level of political naïveté, in that in a mature democracy people should be able to associate at the personal, workplace and societal level without overt hostility toward those who differ politically. This is particularly unsettling given the country’s past racial divisions, and party support that remains largely divided along racial lines. This needs to be overcome in order to achieve social cohesion and to build a united nation. 3.5.1. No party instils trust amongst a majority of South Africans Evidence suggests that South Africans do not trust their fellow compatriots that do not share the same political conviction as themselves. This appears to hold true across all demographics, be it gender, age, income, or race. In examining the attitudes of South Africans drawn from the three largest political parties in Parliament, it was found that, across all parties, the majority of South Africans did not trust their fellow compatriots who did not share their own political convictions. Only 42,50 percent (previous poll: 43,26 percent) said that they could completely or somewhat trust people that supported the ANC, whilst this dropped to 33,54 percent (previous poll: 33,2 percent) for the DA and 35,40 percent (previous poll: 32,39 percent) for the EFF. - Based on gender In all instances, as is indicated in the table below, generally speaking, there was little differentiation to be drawn between the attitudes of men and women in this regard. Slightly more of those that could completely trust or somewhat trust supporters of the EFF, were men. Table 3.5.: Trust in people from other parties – based on gender - Based on age, education, race, and income In terms of age, whilst the older South Africans were marginally more inclined to completely or somewhat trust their fellow South Africans from the ANC, the willingness to completely or somewhat trust people from the DA and EFF dropped significantly amongst the older South Africans. Figure 3.20.: Percentage of people willing to trust compatriots from other parties – based on age The more educated they were, the less they completely or somewhat trusted their fellow South Africans from the ANC. On the other hand, the more educated, the more they were prepared to completely or somewhat trust people from the DA, and to a certain extent that held true for the EFF as well. Figure 3.21.: Percentage of people willing to trust compatriots from other parties – based on education In terms of race, the ANC and EFF continue to suffer a material trust-deficit amongst the minority communities, whilst the DA continues to enjoy high trust amongst them. Whilst an outright majority of white and coloured South Africans indicated that they completely or somewhat trusted people that supported the DA, they do not trust supporters of the ANC or EFF in any significant numbers. Indian South Africans nudge towards a majority trusting their fellow DA compatriots, but not to the same extent as their white and coloured compatriots. However, most black South Africans indicated that they did not completely or somewhat trust their fellow South Africans that supported any of the parties. 46,70 percent (previous poll: 48,35 percent) of blacks indicated that they completely or somewhat trusted people that support the ANC. The DA and EFF were way off the mark with only 27,09 percent (previous poll: 26,71 percent) of blacks indicating that they completely or somewhat trusted people that supported the DA, whilst for the EFF it was 39 percent (previous poll: 36,63 percent) of blacks. Figure 3.22.: Percentage of people willing to trust compatriots from other parties – based on race 3.5.2. All parties enjoy a high percentage of trust amongst their own supporters All three parties can take solace from the fact that they enjoy high trust (that is complete or somewhat trust) amongst those that support them. More so in this survey compared with the last survey. More than two-thirds of those South Africans that indicated that they support either of the parties indicated that they completely or somewhat trust their fellow party supporters. Figure 3.23.: Percentage of people trusting supporters of the same party 3.5.3. But inter-party trust is completely lacking From the responses recorded, it would appear that across the board South Africans who indicated that they support a particular party, completely or somewhat trust other people from that same party, but they completely distrust people from either of the other two parties. Trusting people from a party other than one’s own continues not to be a feature of the South African political environment. Figure 3.24.: Percentage of South Africans willing to trust those from other parties 3.5.4. Conclusion There appears to be a high level of distrust between the supporters of the various political parties, with the majority of supporters from all parties not being able to completely or somewhat trust their fellow compatriots based on their support for the other political parties. Social cohesion requires citizens to work together and live contently and peacefully amongst their fellow citizens, regardless of their political, religious, or other differences. To this end, a high level of community trust in one’s fellow citizens is required. The survey results suggest material distrust amongst the supporters of the various political parties in South Africa. This poses a risk to social cohesion which political and civil society leaders should take note of and factor into a more reconciling national narrative; and on which they should urgently act. 3.6. High sense of community provides solid foundation on which to build social cohesion A strong sense of community is essential for social cohesion. When individuals within a community are invested in each other, they are more likely to come to the aid of their fellow citizens, protect their institutions, and support infrastructure during times of crisis. Additionally, economists have discovered a positive correlation between social cohesion and economic growth. This is due to the fact that social cohesion enhances both formal and informal institutions, which in turn stimulates economic growth (DIE, 2019). In the survey, it was found that there is a strong sense of community in South African society. Whilst there are a number of disturbing indicators when it comes to the question of social cohesion in South Africa, this positive finding provides a solid foundation on which to build social cohesion in individual communities and the country as a whole. 3.6.1. People are involved in the communities 71,82 percent (previous poll: 75,07 percent) of South Africans agreed that it is important to get involved in the community where one lives. This sentiment was shared across all demographics – that is, gender, age, education, income, political party support and race. - Gender Male and female South Africans remained within one percentage point from each other, with 71,77 percent (previous poll: 75,49 percent) of males and 71,88 percent (previous poll: 74,68 percent) of females agreeing that it is important to get involved in one’s own community. - Age Across all age groups, there was a high degree of agreement that it was important to get involved in one’s own community. The commitment to get involved increased as people got older. In the age group 18-24, 71,92 percent (previous poll: 72,29 percent) of South Africans agreed, for the 25-34 age group it dropped slightly to 69,51 percent (previous poll: 74,66 percent) but rising again to 73,01 percent (previous poll: 75,88 percent) for the age group 35-49 and peaking at 73,17 percent (previous poll: 77,13 percent) for the 50 years and older group. Figure 3.25.: Percentage of South Africans getting involved in the community – based on age - Education 73,34 percent (previous poll: 68,69 percent) of those South Africans with a higher education agreed that it was important for people to get involved in their local communities. For those South Africans with no schooling, 61,52 percent (previous poll: 77,44 percent) were of the opinion that it is important to get involved in one’s community. For those with some high schooling, it was 71,58 percent (previous poll: 78,35 percent), and for those with matric, it was 71,59 percent (previous poll: 77,48 percent). Figure 3.26.: Percentage of South Africans getting involved in the community – based on education - Income As income increased, the idea of getting involved in one’s community grew. For those South Africans in the low-income band, 66,44 percent (previous poll: 79,93 percent) were in agreement; for those in the middle-income band, it was 73,42 percent (previous poll: 77,83 percent), which peaked at 74,96 percent (previous poll: 73,32 percent) within the high-income band. Figure 3.27.: Percentage of South Africans getting involved in the community – based on income - Race Whilst whites and blacks were neck and neck at 70,94 percent (previous poll: 74,14 percent) and 71,26 percent (previous poll: 74,04 percent), respectively, Indian and coloured South Africans in turn were neck and neck, but to a significantly higher degree. Indians recorded 78,62 percent (previous poll: 82,92 percent) agreement and coloureds 75,76 percent (previous poll: 82,16 percent) agreement with the belief that they should get involved in their communities. Figure 3.28.: Percentage of South Africans getting involved in the community – based on race - Political party South Africans of all parties recorded a high level of agreement with the notion of getting involved in their communities. 79,49 percent (previous poll: 90,38 percent) of IFP supporters, the highest percentage, agreed therewith; whereas 76,48 percent (previous poll: 80,69 percent) of ANC supporters and 78,16 percent (previous poll: 81,31 percent) of DA supporters also agreed. Those from the EFF came in at 74,88 percent (previous poll: 75,38 percent), and from the FF+ it was 76,97 percent (previous poll: 71,22 percent). Figure 3.29.: Percentage of South Africans getting involved in the community – based on party support 3.6.2. Money or active involvement? 45,70 percent (previous poll: 50,22 percent) of South Africans said they donated money to welfare and/or community organisations, whilst 46,84 percent (previous poll: 44,69 percent) opted for active work within these welfare and/or community organisations. - Gender, income, and education There was little differentiation to be made between the giving patterns of the various gender, income and education groups. - Race The pattern of donating money to local welfare and/or community organisations has changed. Whereas the minority communities previously gave money to a significantly greater extent than their black compatriots, they were now within reach of one another (with the coloured community being the most generous givers). In terms of working actively for the welfare and/or community organisations, the white, black and coloured South Africans tracked each other at a significantly higher level than their Indian compatriots, a reversal from the previous poll where the Indian community gave most in terms of active involvement. This is illustrated in the table below: Table 3.6.: Comparative chart on giving patterns of the different race groups 3.6.3. Community organisations should get more support from local government 64,66 percent (previous poll: 67,38 percent) of South Africans indicated their belief that community organisations should get more support from local government. There was little differentiation between all demographic groups. 3.6.4. Conclusion A high sense of community is as important for the economy as it is for social cohesion. The result of this survey suggests that this is indeed a feature of South African society. Communities across the country are highly involved in their local welfare and/or community organisations. The trend also holds true across all demographic groups, be they based on gender, age, education, income, race and/or political party support. Given the far-reaching imbedded potential of government working with community organisations in the delivery of services, public policymakers will be well advised to explore deeper ways of partnering with local community organisations in the execution of its social programmes. In the community, there is a strong sense that in this regard, more can be done. Chapter 4 Further discussion, assessment and recommendations In this section we discuss in a summarised manner the findings of both the literature review into the elements, determinants and obstacles of social cohesion from the desktop study and that of the extensive GovDem Survey undertaken by the Inclusive Society Institute towards the end of 2022. In Table 4.1. below, we evaluate social cohesion mainly from the perspective of the characteristics of social cohesion as discovered in the literature review. In certain respects, we have added the findings of the survey as further motivation for our interpretation. Where the evidence, in our view, points to conditions that are conducive to promoting social cohesion, it has been recorded as a positive (+). And where the evidence, in our view, points to conditions that are not conducive to promoting social cohesion, it has been recorded as a negative (-). The interpretation may be somewhat subjective in nature but is adequately corroborated within the detailed findings reported on in section 2 and 3 of this report. None of the elements or determinants required for social cohesion are being adequately met, and only one of the eight obstacles to social cohesion is being met (albeit that the detailed findings suggest room for improvement). Table 4.1.: Assessment of conditions that promote social cohesion In Table 4.2. below, we evaluate social cohesion from the perspective of the three foundational requirements for social cohesion as identified by the Institute: demographic integration, a sense of connectedness to the country, and a sense of community. The basis for the interpretation is the findings from the aforementioned GovDem Poll. Once again, where the results of the survey, as it relates to demographic integration and sense of community, where the majority sentiment was positive, it was recorded as a positive (+). And where the majority sentiment was negative, it was recorded as a negative (-). In terms of a sense of connectedness, the only test was that of emigration. In this regard any loss of skills and capital should be avoided. Whilst single digit percentages may be argued one way or the other, double-digit percentages in an environment lacking skills and capital, will certainly be an indication of a problem. In terms of demographic integration, two of the four criteria tested were recorded as positive. In terms of a sense of connectedness to the country, 9 percent of skilled and high-income workers indicated that they were considering emigrating, thereby attracting a negative score. And in terms of a sense of community, two out of the six trust tests secured a positive finding, one was borderline and three were negative. Table 4.2.: Evaluating social cohesion in terms of demographic integration, connectedness and community The empirical evidence provided through the GovDem survey illustrates a disturbing trend within South African society of mistrust – in government and in each other – and a lack of solidarity and confidence in the country’s future. However, this survey also shows that the people in South Africa agree that the country should cohere. Through the establishment and pursuit of social cohesion by all spheres of government, business and civil society, trust can be re-established. Plagues such as inequality can then be confronted multi-dimensionally, backed by a social compact. Strong social cohesion will achieve more than just ‘moral regeneration’; in the face of harsh global economic challenges, it will also create space for the government to manoeuvre. There is hope that South Africa’s trajectory of ballooning inequality and shrivelling economic growth can be about-faced, but only if we can re-establish trust in our institutions and political leaders – and in each other. Public policymakers and civil society would do well to anchor their strategies in social cohesion, as it remains the foundation of a united and prosperous nation. In fact, the National Development Plan 2030 situates social cohesion at the centre of South Africa’s socio-economic transformation agenda. It is hoped that this report will offer those tasked with reconciling and building our nation a timeous tool for evaluating the state of the transformation towards a cohesive and economically viable country. The report is meant to function as a bridge to creating a more meaningful, growthful and inclusive society, a route from a divided past to a shared future. The Inclusive Society Institute is committed to further developing this route, in the form of a Social Cohesion Index, or Radar, which will assist public policymakers in assessing, monitoring, and furthering social cohesion more effectively. 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[Online] Available at: https://www.g20-insights.org/policy_briefs/understanding-and-fostering-social-cohesion/ [accessed: 5 January 2022]. The Presidency. N.d. History and Political Context. [Online] Available at: https://www.thepresidency.gov.za/content/historical-and-political-context [accessed: 4 January 2022]. Trading Economics. N.d. South Africa youth unemployment rate. [Online] Available at: https://tradingeconomics.com/south-africa/youth-unemployment-rate [accessed: 12 April 2023]. Warah, R. 2021. COVID-19 has exposed South Africa’s glaring and enduring inequalities. [Online] Available at: https://www.one.org/africa/blog/covid19-exposed-south-africa-inequalities/ [accessed: 5 January 2022]. World Bank. 2020. Poverty & Equity Brief, South Africa, Sub-Saharan Africa. [Online] Available at: https://databankfiles.worldbank.org/public/ddpext_download/poverty/33EF03BB-9722-4AE2-ABC7-AA2972D68AFE/Global_POVEQ_ZAF.pdf [accessed: 12 April 2023]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Click here to go back Chapter 8: Economic Impact studies on South Africa’s welfare system Over the past two decades, comprehensive research has been conducted on the impact of social assistance programmes in South Africa. The bulk of this research has concentrated on the impact of specific programmes on social development indicators, especially poverty and inequality. A literature study of the scholarly impact assessments reveals a large measure of consensus on the positive developmental impact of the South African grant system (as is the case with similar assessments conducted in other developing countries). Notable research studies include those by the World Bank ( including the other countries in the Southern African Customs Union - 2022); Bhorat & Cassim (2014); Woolard & Leibbrandt (2013); the Economic Policy Research Institute (2012); Klasen et al (2011); Van der Berg et al (2010); and Armstrong & Burger (2009). A concise overview of a selection of authoritative research on this topic is provided below. World Bank impact study in SACU countries An assessment of inequality in the countries comprising the Southern African Customs Union (SACU) was conducted by the World Bank in 2022. The SACU countries comprise South Africa, Botswana, Lesotho, Namibia and Eswatini. One of the key findings of this comprehensive research relates to the remarkable positive impact on poverty of social assistance programmes, especially in South Africa. Relative to countries with similar income levels, the reduction in the poverty headcount from social assistance is high (see table 8.1 and figure 8.1) Even the SACU country with the lowest impact, Eswatini (11% of the poverty rate without transfers), is well above the average for lower- and upper-middle-income countries (6 percent and 9 percent, respectively). The World Bank study describes the poverty impact in South Africa as noteworthy (46%). This is equivalent to the overall impact of social protection and labour market programmes in high-income countries (which differ substantially from social assistance, due to funding that mainly emanates from contributions by beneficiaries). In sharp contrast to high income countries, social insurance and labour market programmes in the SACU countries are very limited and therefore do not exert a meaningful impact on poverty reduction. According to the World Bank (2022), the absence of social insurance and labour market programmes would only raise the poverty headcount rate by one per cent. Other findings of the World Bank study on inequality in the SACU countries are: The impact of social assistance on poverty and inequality is correlated, but its impact on inequality is broader. Even when the benefits are not sufficient for people to reach an income or consumption level above the poverty line, social assistance still improves the overall income distribution. Social assistance significantly contains inequality in SACU countries via a larger impact on the Gini-coefficient than in other upper-middle income countries. In the latter group, social assistance reduces inequality by an average of 1.3%, whereas in SACU, the reduction ranges from 1.9% in Eswatini to 10.5% in South Africa. Without social assistance, South Africa’s Gini coefficient would increase from 63 to a 70.4. Combining high coverage and benefit levels significantly reduces poverty, as in South Africa, which sees the largest poverty impact among lower- and upper-middle-income countries. Although most SACU countries perform relatively well on both coverage and benefit levels, the impact on inequality is particularly low for Eswatini, a country with high social assistance coverage but unusually low benefits. It is also low in Namibia for the opposite reason, namely a relatively high level of benefits, but low coverage. South Africa, with both high coverage and high benefits, achieves the largest impact on inequality. Programmes vary in terms of coverage and adequacy across countries. South Africa’s child support grant, the programme with the largest impact on inequality, also has the widest coverage of the poor (82%). However, coverage is not a sufficient condition for reducing inequality. For example, school feeding in Lesotho also has high coverage (76.4% of the bottom quintile), but its impact is much lower, due to the relatively low level of fiscal commitment. The impact of social assistance on inequality is driven by specific programmes, primarily social pensions. The most effective programmes for reducing inequality in SACU are the child support grant in South Africa, the school feeding programme in Lesotho and the old-age social pensions in Eswatini and South Africa. The school feeding programme in Lesotho, the disability grant in South Africa, and food transfers in Botswana also contribute (see table 8.2). The efficiency of social assistance in reducing poverty and inequality across the SACU countries can be improved. The benefit-cost ratio for the region is below 40% (which means that each $1 spent on social assistance reduces the poverty gap by less than $0.40). The benefit-cost ratio is highest in South Africa (34%). According to the he World Bank research, this is to be expected result for a country that means-tests two of its largest programmes, as benefit ratios for means-tested programmes are usually relatively higher, due to less inclusion errors and improved cost-efficiency. In its concluding notes on the section dealing with quantifying the impacts of social assistance on poverty and inequality, the World Bank found that, without social assistance programmes, poverty in SACU would have been much higher and that all direct transfers are pro-poor. South Africa stands out for the progressivity of its transfers. Economic Policy Research Institute (EPRI) A study was carried out by the EPRI in 2012 to determine the developmental impact of the South African Child Support Grant (CSG), based on evidence from a survey of children, adolescents and their households. The study was commissioned jointly by the Department of Social Development (DSD), the South African Social Security Agency (SASSA) and the United Nations Children’s Fund (UNICEF). The methodology was based on the measurement of causal programme impacts as the difference between observed outcomes for the beneficiaries and what would have been the outcomes if this group had not received the CSG or received it later versus earlier. The research team compared the results of the survey to other national household surveys, including the 2008 National Income Dynamics Survey (NIDS) and the 2010 General Household Survey (GHS), and found their sample largely representative of the corresponding national populations. The key finding of the study was that the CSG generates positive developmental impacts by directly reducing poverty and vulnerability amongst children in poor households. The study provides evidence of the positive impact of the CSG in promoting nutritional, educational and health outcomes and found, inter alia, that receipt of the grant at an early stage significantly strengthens a number of these outcomes, providing an investment in people that ultimately reduces indicators of poverty and inequality. The study also found that adolescents receiving the CSG were more likely to have some positive educational outcomes and were significantly less likely to engage in behaviours that put their health and well-being at serious risk. Van der Berg (et al) – 2010 The 2010 study by Van der Berg et al pointed out one of the difficulties in analysing the effects of social welfare in South Africa, namely the complex structure of many households. One example is the fact that many mothers who receive the child grant are not the primary caregivers of the children. Another problem may be encountered with the definition of household membership. In South Africa, the conventional view of a nuclear family is turned on its head, as many cases exist where three to four generations live in the same household. Definitions of households vary, depending on whether membership is determined by physical presence in a household or by resource sharing which may include members who live in different places. Double counting during surveys will occur in the absence of the strict residency rule, which stipulates that a person must be a resident of the household for most of the year. Regarding the impact of grants on social security and poverty in South Africa, Van der Berg et al (2008 & 2010) and Armstrong et al (2008) found that the various social grants are well targeted at the poor and that they have a significant mitigating impact on poverty. These studies included a caveat in terms of the assumption that the availability or otherwise of social grants has no impact on the behaviour of households in terms of labour supply, household formation patterns, etc. The results nonetheless suggest that social grants markedly reduce poverty by augmenting the incomes of poor households. A summary of these effects, which also includes data from the All Media & Products Survey (AMPS) and research by Leibbrandt et al (2004) - as determined at the time of the research - is provided in table 8.3. Armstrong & Burger (2009) This study contributes to the literature on social grants and their role in poverty alleviation and the reduction of inequality in South Africa by making use of decomposition techniques, based on the normalised Foster-Greer-Thorbecke index and data requirements from the 2005 Income and Expenditure Survey. According to the results of the analysis, social grants were found to be highly effective in alleviating poverty and should be seen as a tool with which government may remedy the extent of economic hardship in society. Furthermore, as the emphasis placed on the most impoverished in society increased, so too did the measure of the effectiveness of social grants in reducing poverty, indicating that South African social grants were well-targeted. Quoting research by Klasen & Woolard (2002) and Vander Berg, et al 2008) the study pointed out that the impact of social grants extends further than its direct beneficiaries, specifically on household formation. A phenomenon has been observed of people moving into households in which grants are received, which spreads the benefit of the grant to other household members. This formation of households around social grant income has kept older people in their communities, empowered them and contributed to the reduction in their dependence on their children. Chapter 9: Some caveats to the design of social welfare systems One of the most succinct explanations of the positive net welfare effect that a measure of income redistribution can exert on society was provided almost a century ago by Prof Lionel Robbins of the University of London by stating that “The loss of a pound is more significant to a poor man than to a rich man” (Robbins 1932). Although this simple rationale for a system of public welfare has been proven to bestow positive effects on the lowering of poverty and inequality without necessarily compromising economic growth, a number of caveats should be taken into consideration with the design of social welfare policies. When there is consideration for the expansion of an existing welfare grant system to incorporate a basic income grant (as is currently the case in South Africa), it is imperative for a government to conduct an appropriate macroeconomic impact assessment of such envisaged changes, including a cost-benefit analysis. In particular, any changes to the existing system of cash grants should consider the likely fiscal implications of targeted vs general assistance and also whether grants should be conditional or not. Some caveats to be considered in any amendments to the South African grant system are briefly discussed in this section. Fiscal stability - lessons from Argentina Argentina is South America’s second-largest country, but has a lowly ranking of 27th among the 32 countries in the Americas region, with an overall score well below the world average. Modern history has not been kind to Argentina. During the early stages of the 20th century, Argentina was one of the wealthiest countries in the world, with GDP per capita exceeding that of several European countries, including France and Germany. In 2020, Argentina’s GDP per capita was 81% lower than that of Germany and also 21% lower than the world average. Argentina’s vast agricultural and mineral resources are well documented and the country also boasts a highly educated population. In terms of basic macroeconomic supply-side theory, the country is exceptionally well-positioned to record sustained positive economic growth and increase the welfare of its citizens. Unfortunately, however, Argentina has a long history of political and economic instability, fuelled, inter alia, by over-regulation and a lack of fiscal discipline, especially with regard to high budget deficits. Ever since the end of World War I, Argentina entered successive phases of slow economic growth, mainly as a result of populist policies, including price controls, state ownership of financial institutions and excessive holdings of foreign currency-denominated public debt. The country holds the unenviable record amongst emerging market economies of nine public debt defaults. Inadequate investment in infrastructure and private sector production structure have contributed to the regular occurrence of adverse terms of trade, resulting in balance of payments instability. In addition, government spending has exceeded the limits imposed by taxation revenue receipts, whilst financial market borrowing remains constrained and virtually unaffordable. The crucial role that productive public expenditure in the area of infrastructure (such as roads, transportation, and housing) can play in promoting economic growth and employment creation is discussed in some detail in Annexure 1. A nutshell overview of the causalities at play is informative for the debate on welfare grants, as presented in diagram 1. When government spending exceeds the sum of taxation revenue and capital market borrowing, rising deficits create macroeconomic instability, mostly in the form of higher inflation, increased borrowing costs, an erosion of the purchasing power of salaries and wages, lower growth and increased unemployment. More often than not, this sad state of affairs also leads to civil discontent and socio-economic unrest in Argentina has on occasion resulted in violence, looting and fatalities. In an attempt to curb inflation until after the November 2021 elections, the government defied the fundamental principles of a free market economy by imposing economically harmful price controls on a large variety of products. According to the 2022 Index of Economic Freedom, compiled by the Heritage Foundation, Argentina has recorded a 0.3-point overall loss of economic freedom since 2017 and has fallen to the very bottom of the “mostly unfree” category. This is a precarious position, as the next category is populated by repressed countries. The border between the latter group and “mostly unfree” countries is an index score of 50, with Argentina sitting at 50.1 (see figure 9.1). Argentina’s ranking of economic freedom has been dragged down by the following: A substantial decline in fiscal health. Government spending has amounted to almost 40 percent of total output (GDP) over the past three years, and budget deficits have averaged more than 6 percent of GDP. As at the beginning of 2022, public debt was equivalent to 103.0 percent of GDP. Weakness for the monetary freedom indicator (state-owned banks account for more than 40 percent of total assets and government exercises considerable control over financial activities) Popular disillusionment is widespread because of a consistently poor economic performance and the country’s ninth sovereign debt default A judicial system that is plagued by inefficiencies and delays, as well as being susceptible to political manipulation, particularly at lower levels. Allegations of corruption in provincial and federal courts remain frequent and continue to undermine confidence in the judiciary. Rigid labour laws Foreign investment in various sectors remains heavily regulated The message that emanates from the above concise analysis of key macroeconomic trends in a country that is widely regarded to be in the same peer group as South Africa is clear, namely fiscal policy can make or break a country’s best intentions to improve the welfare of society. Sound fiscal policies, including relatively low and stable public debt/GDP ratios are usually associated with sustained economic growth, employment creation and the taxation revenues that automatically flow from such a policy stance. Society at large and vulnerable members in particular pay a heavy price for inappropriate and unaffordable government expenditure plans and policies. Rising budget deficits and ill-conceived borrowing on international capital markets ultimately result in a combination of higher inflation, lower levels of business and investor confidence, currency depreciation and higher interest rates – all of which serve to hamper the quest for economic and socio-political stability. It is therefore regarded as a sine qua non for a developing country to maintain discipline with public spending programmes. Even a relatively short period of low growth can cause havoc with a country’s public finances and can impede the ability to maintain welfare payments that have been constitutionally enshrined or guaranteed by parliament. Consensus exists amongst researchers in free enterprise democracies that the best alternative to avoid the serious problems associated with defaults is for sensible macroeconomic policies. These include disciplined budgets, appropriate monetary policy aimed at containing inflation, and the pursuance of a growth agenda via deregulation, trade openness, the protection of private property rights and a tax system that does act as a disincentive for investment in new productive capacity (Sturzenegger 2002; Botha 2005). The dangers of universality At face value, a universal basic income grant (UBIG) may seem alluring to policy makers, as it provides social assistance in cash, without any conditionality, which obviates the need for that administrative and monitoring systems required for targeted programmes. On closer scrutiny, however, the implications of universality in unconditional cash transfers are fraught with several potential problems, including the following: As alluded to in the discussion of the economic woes of Argentina, a country that holds the record for the most government debt defaults (nine, and counting), periods of low or negative economic growth are always associated with lower taxation revenues. When a country also has labour regulations that are biased towards trade unions, the scope for containing government expenditure is considerably narrowed, as public sector salaries command the bulk of the national budget. In such a scenario, a universal grant system could create havoc with a country’s public debt in a very short space of time, with grave implications for the exchange rate, higher inflation, higher interest rates, leading to a downward economic spiral. As pointed out by Gentilini et al (2020), the scale of a UBIG is, by definition, enormous and would involve a system-wide intervention, not just a programme. It is therefore complex and may involve structural amendments of labour market policies & regulations, including unemployment insurance, severance pay, unionisation, contributory pensions, and minimum wages. Nowhere in the world does a UBIG programme of national scale exist, which means that there are no case studies to assist the determination of such a welfare policy on a country’s socio-economic well-being. Depending on how it is financed, the net effects of benefits and financing could effectively turn a UBIG into a targeted programme, via taxes (Gentilini et al – 2020). Due to the lack of any evidence-based knowledge of the likely socio-economic impact of a UBIG, it is impossible to gauge its effect on other social assistance instruments that are targeted by income (e.g. guaranteed minimum income programmes) or categorical parameters such as age (like child support grants and social pensions). Apart from the fairly obvious inherent dangers to maintaining fiscal stability, a UBIG will, by its very definition, impact negatively on the quest to reduce income inequality. Idealistic notions surrounding the contribution that a UBIG could make towards poverty relief may also divert the attention of policy makers from the causes of inequities in societies, including uneven access to education and health systems, poorly functioning markets and corruption. The case against universality rests principally on the high cost of transfers that are significant enough to make a meaningful difference to the well-being of the poor (Gentilini et al 2020). In the event of a UBIG being financed, inter alia, by a reduction in existing social protection spending and increased taxes, important changes will occur in distributional outcomes among income and age groups that may or may not be desirable. A UBIG is inherently regressive and can never replicate the effectiveness of targeted (and inherently progressive) grant systems in alleviating poverty and inequality. It is important to note that, despite the huge global expansion of social protection schemes during the past three decades, no country has opted to seriously consider a UBIG, but rather to maintain a combination of transfer modalities, based on a society’s particular economic and socio-political characteristics (Alderman et al 2018). Well-functioning targeted UCTs and CCTs, large-scale programmes related to in-kind and food-based assistance and public works that create substantial employment are present in virtually every developing country. These interventions have succeeded in lowering poverty and income inequality and continue to do so. The inherent fiscal and economic dangers of a universal basic income grant (UBIG) should be fairly obvious, especially in times of low growth. This constitutes one of the key reasons why such an approach towards social protection has not been implemented by any country in the world. Poverty relief vs lower inequality – an inherent paradox In the search for the most appropriate welfare policy for South Africa, it is important to point out the inherent conflict between development objectives of poverty alleviation and greater income equality. One of the well-worn traditional arguments supporting caution with the financing of welfare transfers to the poor, is not to lose sight of the importance of a stable, diversified and expanding taxation system. High income earners are the mainstay of the fiscal resources required for the payment of welfare grants, firstly by their considerable tax contributions (especially income tax, which is highly progressive) and also via indirect taxes and their ability to assist new capital formation through savings (contractual or otherwise). In a forever globalising world economy, highly skilled and experienced workers will always be in demand and are internationally mobile. Any effort to increase the level of progressivity of taxes or to introduce a wealth tax, may have serious detrimental effects on fiscal stability, which will undermine the quest for poverty alleviation. A second and ideologically neutral argument is related to simple mathematics, which relates to the inherent trade-off between these two development objectives when, for instance, the amount of a particular grant is increased or when a new type of grant is implemented. This issue is highly relevant in the current South African debate, as an expert panel has recently recommended the implementation of a basic income grant in South Africa (RSA 2021). The panel was appointed by the Department of Social Development, the International Labour Organisation and the UN-backed Joint Sustainable Development Goals Fund. The purpose of social grants are to contribute to lifting poor people out of poverty. Lowering income inequality places differential emphasis on the income quintiles. Therefore, when the value of a grant, such as a basic income grant, is increased to keep track of a rising poverty line, it will undoubtedly have a positive effect on this key development objective, but not on lowering inequality, as the difference between the poorest income quintiles and those above them would have increased. This co-existence of a positive welfare effect with a negative distribution effect has been well-documented by various researchers, most notably Armstrong & Burger (2019), Van der Berg et al (2008) and Leibbrandt, et al 2010 & 1996). It is contended, therefore, that the development debate in South Africa should focus on the relief of poverty. Together with an income grant targeted at unemployed persons, a combination of other policies, such as improved education and health programmes, and pro-growth measures, including incentives for investment in new productive capacity, should be allowed to address the issue of income redistribution in an evolutionary manner, thereby broadening and deepening the country’s taxation base. Chapter 10: Modelling the impact of the basic income grant (BIG) on the economy Introductory remarks According to a working paper published by Janse van Rensburg et al (2021), the fiscal multiplier declined from 1.5 in 2010 to zero in 2019. This was mainly due to high debt levels and large tax increases hampering the aggregate demand effect from higher government spending. Literature shows that positive government spending shocks have a positive impact on growth and positive tax shocks have a negative effect on growth (Lehmus 2014; Blanchard & Perotti 2002; Stevans & Sessions 2010; Ramey and Zubairy 2018; and Kronberg 2021). The two graphs below present impulse response of GDP from government spending and tax shocks. The popular approach by Blanchard & Perotti (2002) was used to model the dynamic effects of shocks in government spending and taxes on economic activity. A vector auto-regressive (VAR) model was fitted to establish the interrelationship between government spending, government tax revenue and GDP. Cholesky ordering was used to structure the VAR and the spending and tax variable was ordered first alternately. There was no difference between the responses of GDP. The impulse responses are shown below. GDP responds negatively to a tax shock and positively to a spending shock. Stability returns after five to seven quarters, but at a higher level of GDP in the case of a spending shock and vice versa. This is in line with the vast amount of literature available on this topic. A study of Brazil by Sanches and Carvalho (2022) also followed this approach in order to investigate how the expansion of social protection can assist a post-pandemic economic recovery. One of the findings in this paper is that household consumption responds favourably to social expenditure shocks. The purpose of the analysis that follows is therefore to determine the causal relationship between household consumption and aggregate output (GDP) via a basic income grant (BIG) paid to unemployed persons. Data and sample The data sources are from the South African Reserve Bank database (obtained from Quantec EasyData 2022). The sample datasets are from the first quarter of 1990 up to the first quarter of 2022. The forecast period is from the second quarter of 2022 to the first quarter 2024. The dependent variable is the GDP at current prices (seasonally adjusted and annualised) and the independent variable is final consumption expenditure by households (FCEH) at current prices (seasonally adjusted and annualised) in R millions – both in logarithmic form. The control variables are Government expenditure to GDP (GOV_GDP_, terms of trade (TOT), inflation (INF) and the prime rate (PRIME). A dummy variable (DUM) was added to account for the structural break in the data due to COVID-19. These specifications of the model are based on previous research by Chirwa and Odhiambo (2016); Fashina et al (2018); Hajamini and Falahi (2018); Özcan, C C and Uçak; and Ristanović et al (2018). Assumptions It is assumed that the BIG paid by the government will be spent by consumers who are characterised by a marginal consumption propensity of 100%, with the grants then being circulated back into the economy. The national food poverty line of R624 (as at July 2022) is used as a proxy for the BIG. According to the latest Quarterly Labour Force Survey there are 7,862,000 unemployed people in South Africa. If each receives a BIG of R624 it will amount to R4.9 billion a month and R14.7 billion per quarter. The purpose of this analysis is to determine the impact of this BIG via consumer spending on the GDP. There are two scenarios: Scenario 0: Baseline forecast of GDP with similar trends as 2021 for consumer spending Scenario 1: An increase in consumer spending by 0.4% (quarterly BIG payments of R14bn are 0.4% of FCEH) Method and analysis The autoregressive distributed lag model (ARDL) was fitted as indicated below: Where [Et]are the innovations, [ao] is a constant term, and [a1], [Bi] and [Bj] are (respectively) the linear trend, coefficients associated with lags of [Yt], and lags of the regressors [Xj,t-1] for j = 1….,k. GDP is the dependent variable ([Yt]) and the regressors ([Xj,t-1]) are FCEH, GOV_GDP, TOT, INF, PRIME and DUM as a fixed regressor. The variables have different orders of integration and hence the ARDL model is deemed an appropriate model taking this into account. Second order diagnostic testing indicated autocorrelation and heteroscedasticity which was corrected with the Newey West estimation. The final model was: ARDL (4, 1, 1, 0, 0, 1). This indicates the dynamic structure of the specification of the model. The Variance inflation factor to detect multicollinearity was below 6 for all variables which indicates that multi-collinearity is not a problem in the function. ARDL model results Dependent Variable: LOG(GDP_SA) Method: ARDL Sample (adjusted): 1991Q1 2021Q4 Included observations: 124 after adjustments Maximum dependent lags: 4 (Automatic selection) Model selection method: Akaike info criterion (AIC) Dynamic regressors (4 lags, automatic): LOG(HH_SA) GOV_GDP_SA TO_SA INF REPO Fixed regressors: DUM C Number of models evaluated: 12500 Selected Model: ARDL(4, 1, 1, 0, 0, 1) Note: final equation sample is larger than selection sample HAC standard errors & covariance (Bartlett kernel, Newey-West fixed bandwidth = 5.0000) All variables are significant except for the TO variable, but it will be included in the model. The dummy variable is significant with a negative sign, indicating the negative effect of Covid-19 on the economy. The adjusted R2 is very good (0.99), indicating a good fit and the probability of the F-stat is significant which means that jointly the explanatory variables explain 99% of the variation in the GDP. Forecast evaluation The static and dynamic forecast evaluation indicate a mean absolute percentage error (MAPE) of 0.57 and 0.94, respectively and a Theil inequality coefficient which is close to 0. This means the model is stable and forecasts will have a marginal error. Forecasts The difference between Scenario 0 and Scenario 1 in table 10.1 and Figure 10.1 indicates the impact that the consumer spending translating from a BIG will have on the GDP. The difference between the two scenarios is a 0.98% higher GDP growth rate, on average (in nominal terms) for the forecast period. Table 10.2 depicts the calculation of the positive GDP effect emanating from a BIG, as determined by the model results. The average annual impact of the BIG on GDP amounts to R105.3 billion, translating into a multiplier of 1.79, which is conservative when compared to the output multiplier for the economy as a whole, namely 2.71 (Quantec, 2022). Based on the most recent taxation multiplier, the average annual fiscal backflow effect arising from the BIG is R35,512 million. Based on the number of unemployment people as at the end of the first quarter of 2022, the annual cost of a BIG (at the July 2022 minimum food poverty level of R624) amounts to R58,871 million. However, this cost needs to be reduced by the value of the Social Relief of Distress Grant – SRDG, which will be subsumed by the BIG, resulting in a shortfall of R25,850 million. In the event of a financing model based on raising an international bond valued at the amount required for the BIG during the first year of implementation, it would not be necessary to tamper with existing rates or levels of taxation, as the additional annual tax revenues flowing from the positive GDP effect will be more than ten times higher than the annual interest cost, as depicted in table 10.3 (under the assumption of a stable bond yield). It should be noted that the calculation contained in table 10.3 is based on the 2022 food poverty line of R663 per month. This funding option is quite attractive, as it represents less than one per cent of the total gross marketable loan debt of the national government. Due to National Treasury’s commitment to continue reducing the country’s ratio of fiscal debt to GDP, consideration should be given to a more prudent option of financing the BIG via an amendment to the child support grant (CSG), whereby only unemployed primary caregivers receive the CSG (in addition to the BIG). The financing implications of this option, based on two different estimates of the amended number of beneficiaries, is provided in table 10.4. The rationale behind this funding option is related to the positive impact on both poverty alleviation and income inequality that will arise from excluding employed primary caregivers from accessing the CSG. For married couples, the current CSG represents merely 5.5% of the qualification benchmark of R105,000 per annum (per child) and it is fairly obvious that significantly more can be done to combat poverty by shifting the CSG received by employed persons to those that are unemployed and whose income is, by definition, zero. It is clear from the calculation in table 1.4 that a BIG is affordable. The cost of the amended CSG will either be negligible or result in substantial savings to the Exchequer, depending on the final number of unemployed primary caregivers and children that qualify for the BIG and the CSG, respectively. Table 10.5 illustrates the beneficial impact on poverty alleviation and income inequality of the BIG being implemented together with only paying the CSG to unemployed caregivers. Chapter 11: Conclusions The debate on the feasibility of a basic income grant (BIG) has received new impetus, especially in the wake the detrimental economic effects induced by the Covid pandemic and the South African government’s decision to implement a social relief of distress grant (SRDG), commonly known as the Covid-grant. When viewed against the backdrop of the stabilisation of South Africa’s fiscal debt (as percentage of GDP) and the impressive growth of total taxation revenue, this grant has proven to be fiscally affordable. A vigilant eye nevertheless needs to be kept on the stability of the country’s public finances, especially in the current environment of slower world growth and rising interest rates, both in the money market and the capital market. This study is based on a comprehensive analysis of global social support programmes (SPPs) implemented by governments around the globe, with emphasis on the upper-middle income countries (South Africa’s peer group). Two sets of outcomes regarded as relevant to the current debate on the feasibility of implementing a basic income grant in South Africa are reviewed and summarised, namely the impact on SPPs on the alleviation of poverty and their impact on the key macroeconomic indicators of total output (gross domestic product – GDP), employment and taxation revenues. Key conclusions drawn from the study are: In the absence of social welfare policies such as various grants and employment creation via public works, many more people would have fallen into poverty, whilst SPPs have prevented others from falling into deeper poverty, often being forced to sell their assets or borrow more. Social welfare programmes also tend to lower inequality. Conditional Cash Transfers (CCTs) are more effective in poverty alleviation than most other SPP types. CCTs were pioneered by Brazil and Mexico towards the end of the 2nd millennium and have become popular in most other developing countries. These programmes aim to reduce poverty in a multi-dimensional manner by requiring beneficiaries to comply with conditions aligned to enhancing human capital, usually linked to school attendance and health check-ups. The reasons for the widely acclaimed success of Brazil’s CCT programme, previously known as the Bolsa Família, are related, inter alia, to the following characteristics: A partnership approach between civil society and the state; a decentralised system that avoided undue political influence; sound governance standards; a registry of beneficiaries, based on reliable and accurate data; and political appeal (due to its significant impact on poverty). Government-funded welfare policy, which effectively means the transfer of productive income from employed persons to people in need has been at the centre of public debate for more than a century. From an international legal perspective, the recognition of the right to social security has been enshrined in the United Nations’ Universal Declaration of Human Rights. Although near-universal support exists for state-organised welfare institutions and programmes, a new approach towards the state’s role in welfare has developed over the past three decades, the essence of which is that beneficiaries now have obligations as well as rights. In return for benefits, beneficiaries must seek work or participate in work-related activities, including education and training. The principle underpinning the new-found emphasis on benefit conditionality is that paid work continues to represent the most legitimising basis for entitlement. From a political perspective, the aims of a shift towards workfare programmes are tantalising and include prospects for greater fiscal stability, increased self-sufficiency of beneficiaries, the prevention of social exclusion and an increase in employment. India has achieved significant progress with the implementation of workfare programmes, especially in the areas of part-time employment to unskilled rural dwellers via the National Rural Employment Guarantee Act. Its emphasis is on water harvesting initiatives, supplemented by other infrastructure-related projects closely linked to water management and agricultural production. Another flagship SPP is the subsidisation of rural housing, with the requirement that the beneficiaries have to build their own houses. Governments invest significant resources in the implementation of SPPs, which necessitates constant monitoring of key indicators that measure progress with the development objective of poverty alleviation. As is evident from the datasets included in the Atlas of Social Protection: Indicators of Resilience and Equity (ASPIRE) and duly acknowledge by various research studies, the South African system of SPPs is extensive in terms of both the number of people it covers, directly and indirectly, and the amount of fiscal resources required for its funding. South Africa is the standout performer amongst its peers for virtually all of the SPP indicators, enjoying the number one ranking for the following: Coverage of SSPs; poverty headcount reduction; and adequacy. South Africa is ranked second amongst upper-middle income countries for the ratio of government expenditure on SPPs and second amongst all developing countries for the percentage of the population that receives social grants. Due to the significant dilution of the value of a universal income grant posed by fiscal affordability, a UBIG will not remotely be able to match the poverty reducing impact of a BIG that is targeted at unemployed persons. Due to the magnitude of the difference between the numbers of beneficiaries involved, a UBIG may also result in fiscal instability during periods of slow economic growth. Furthermore, a targeted BIG will, by definition, have a progressive impact on reducing income inequality, whilst a UBIG will have the opposite effect. It is clear that devoting progressively higher proportions of government revenues to social protection transfers will not, by itself, succeed in reducing poverty unless it is accompanied by a broadly supportive environment in which the rate of growth in real GDP exceeds the rate of increase in the population by a healthy margin. It is therefore difficult to divorce the debate over the extent and structure of South Africa’s social protection system from the trade-offs that arise from alternative uses of those fiscal resources. To the extent that well-considered and efficiently-implemented public sector programmes succeed in supporting an increase in the capacity of the economy to grow at higher rates, the pressure on the social protection system will be reduced – allowing it to be targeted more effectively at those most in need. In the event of limiting the payment of the child support grant (CSG) to unemployed primary caregivers, the implementation of a BIG at the food poverty line (currently R663 per month) can comfortably be afforded by National Treasury, whilst simultaneously lowering the extent of income inequality and poverty. Such an initiative, which will eliminate food poverty in South Africa, will also serve to significantly reduce socio-economic unrest in the country. Chapter 12: Recommendations Based on the conclusions arrived at in this study, it is recommended that government implements a basic income grant (BIG) at the level of the national food poverty line. Based on conclusive evidence of the inherent superiority of a welfare grant that is targeted at the poorest members, it is recommended that the BIG be paid to registered unemployed persons, which will further enhance the coverage of South Africa’s social protection system. The main advantage of a BIG will be to expand the country’s social protection system, which is already exemplary, into one that is likely to be the most comprehensive non-contributory system in the world. By providing the means with which food poverty is eliminated amongst millions of unemployed people, South Africa would have achieved the single most important millennium goal. Due to the existence of empirical evidence supporting a positive causal effect between welfare grant payments and economic output, including the fiscal backflow (in terms of a broadening of the taxation base), it is not anticipated that a targeted BIG will place undue pressure on the public finances. This is especially the case in the event of the BIG being financed by an international bond issue, which boasts a lower interest burden than domestic bonds. The fiscal backflow emanating from the increased consumption expenditure of BIG beneficiaries is estimated to exceed the debt servicing cost by a significant margin. A more attractive and fiscally prudent financing option for a BIG exists, however, namely via an amendment to the child support grant (CSG), which is the most costly of all the grants. In the event of a BIG being targeted at unemployed primary caregivers, its implementation is clearly affordable. Depending on the final number of primary caregivers and children that would qualify for the amended CSG, the cost of a BIG is either negligible or results in a substantial net fiscal saving. It is important to note that such an option will also provide the unemployed primary caregivers with access to the BIG (in addition to the CSG) and thereby lower the poverty headcount. It is neither in the interests of fiscal prudence nor of the quest for poverty relief to pay the CSG to people who are earning salaries well above the food poverty line. The Department of Labour (DoL) should be tasked with establishing a comprehensive registry of unemployed persons, which should also include data on their permanent addresses, contact information, skills levels and whether they are currently beneficiaries of a welfare grant. In order to assist with accurate targeting and means testing, employers, including households, should be compelled to provide the DoL with similar information on their employees, including temporary workers. The DoL should cooperate with the Department of Home Affairs, the Department of Social Development and the relevant municipalities in the establishment and updating of the registry of unemployed persons. It is also recommended that guidance be sought from Brazil’s Bolsa Família registry of grant beneficiaries (the Cadastro Único) and the World Bank project to enhance the administration and governance of the registry. Regarding the evidence of the positive employment and welfare effects of public works programme, it is recommended that government pro-actively advances such programmes, especially in the area of low-cost housing. The RDP housing programme was one of the mainstays of the high and sustained period of economic growth between 2003 and 2007 and led to the construction of more than three million houses. Projects such as these create an opportunity for government to demonstrate its new-found commitment towards public-private partnerships and the expansion of the country’s infrastructure. It also provides an opportunity to assist with the restoration of functionality at many municipalities, where the ultimate responsibility rests for service provision to households who will benefit from a housing programme. Infrastructure South Africa (ISA) and the Department of Human Settlements should cooperate with each other and with the private sector in establishing an office to coordinate a low-cost housing drive and to ensure that sound corporate governance standards are adhered to. Consideration should be given to elements of similar projects in other developing countries, especially the rural housing programme in India. It stands to reason that the most effective way to combat poverty is by creating jobs at remuneration levels above the national poverty line. Every job thus created obviates the need for a welfare payment to the relevant person. It is therefore recommended that a dedicated office be established to pursue job creation on a comprehensive scale, as an ancillary component to welfare policies. Such an office should be established via a public-private partnership (PPP), with due representation of employer organisations such as the National Employers’ Association of South Africa (NEASA) and GrowSA. A suggested institutional implementing agency for this employment activation initiative is the Industrial Development Corporation, which is financially sound and has staff with knowledge of industry supply-chains. 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It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Click here to go back Chapter 4: The performance of social protection programmes (SPPs) Performance indicators serve as important guidelines for determining progress with development objectives in the domain of combating poverty via public welfare initiatives. Governments invest significant resources in the implementation of social protection programmes (SPPs), which necessitates the continuous monitoring of the effectiveness of these programmes and to also inform the future direction of social policies. Two mainstream methodologies are utilised to assess the performances of the variety of SPPs that are implemented in virtually all of the world’s developing countries. Performance indicators derived from household surveys assess the distributional effects of the social transfers on the welfare of beneficiaries, as well as their effect on disposable incomes and the combating of poverty. A second method relates to macroeconomic impact assessments, which are usually designed to measure a broader set of economic outcomes, such as the effects on the level of consumption, production, labour supply, human capital formation, and the stability of the public finances (especially taxation revenues, government debt and capital market interest rates). The focus of this section is on the impact of SPPs in the quest to alleviate poverty and income inequality. It commences with an overview of comprehensive global research on social protection in developing countries conducted by the Universal Social Protection (USP) initiative. This is followed by concise overviews of SPP impact assessments in the Southern African Customs Union (SACU) countries and two studies on South Africa by local researchers. Progress with combating poverty in developing countries In 2016, the World Bank Group, the International Labour Organisation (ILO) and various bilateral and multilateral partners launched the USP initiative with the objective to support the Sustainable Development Goal (SDG) agenda for social protection. The USP partners have subsequently expanded and refined the research and analysis required for monitoring progress with combating poverty and inequality in developing countries around the globe, using a variety of performance indicators. Key indicators and data sets A selection of key indicators that are commonly used to measure progress with SPPs provides the basis for this analysis, which draws heavily on World Bank research conducted under the USP initiative. The indicators selected are: coverage, the reduction of the poverty headcount, benefit incidence and adequacy. They are defined as follows: Coverage The percentage of the population participating in social protection programmes - SPPs (includes direct and indirect beneficiaries). This indicator is reported for the poorest quintile of the post-transfer welfare distribution. Specifically the indicator is computed as: The number of individuals in the bottom quintile who live in a household where at least one member receives the transfer divided by the number of individuals in that quintile. Poverty headcount reduction Poverty headcount reduction is estimated as: Poverty headcount pre-transfer minus poverty headcount post-transfer, divided by poverty headcount pre-transfer Benefit incidence Percentage of benefits received by the poorest quintile of the post-transfer welfare distribution, relative to the total benefits going to the population. Specifically, benefit incidence is computed as: The sum of all transfers received by all individuals in the bottom quintile divided by the sum of all transfers received by all individuals in the population. The indicator includes both direct and indirect beneficiaries. Adequacy The total transfer amount received by all beneficiaries in the bottom quintile as a share of the total welfare of beneficiaries in that quintile (includes both direct and indirect beneficiaries). Public spending The total value of government spending on SPPs (excluding administrative costs0, expressed as a percentage of GDP Household surveys play a crucial role in monitoring programmes, given that they are systematically conducted on a time-series basis and the performance indicators gleaned from them complement the results of impact assessments in determining the achievements of social protection programmes. The analysis is based on subsets of household surveys (2008–20) from the Atlas of Social Protection: Indicators of Resilience and Equity (ASPIRE) database, corresponding to 96 countries with information about SSPs, supplemented by demographic data from the United Nations and the South African National Treasury. Voluminous research has been conducted on the impact of an array of programmes aimed at poverty reduction, especially via social safety nets. Programmes aimed at enhancing social security may include cash transfers, in-kind transfers, social pensions, public works, and school feeding programs. A key finding of the latest State of Social Safety Nets Report (World Bank: 2018) is that even if many do not emerge from poverty, the absence of these programs would have caused many people to fall in to poverty and others to fall into deeper poverty, often being forced to sell their assets or borrow more. Another key finding that is relevant to the South African discourse on welfare policy, is that social welfare programmes also tend to lower inequality. According to the World Bank’s ASPIRE household survey database, a total of 144 developing countries have social safety programmes in place. Table 4.1.depicts the numbers of developing countries that are implementing some form of social protection programmes (the administrative totals) and the numbers of countries for which more detailed datasets are available through household surveys. In order to facilitate analysis, the Aspire database groups SSPs into standard categories, which aggregate different programme types. This means that the coverage indicator corresponds to the aggregated programme category and not necessarily to an individual program. For example, Latvia includes 10 programmes under unconditional cash transfers (UCTs), whilst Belize includes only one programme (the social welfare transfer). It is clear from the list contained in tables 4.2 and 4.3 that a large variety of individual categories of SPPs are being employed by developing countries, although they share the characteristic of being non-contributory. The social policy objectives of each country determines the choice of particular programmes within the broad classification identified earlier in section 2. General observations from the performance of seven key categories of SPPs analysed in the World Bank’s 2018 report on the state of social safety nets are: The average beneficiary incidence of the 19 CCT programmes included in the ASPIRE database was 45% for the poorest quintile. In general, Conditional Cash Transfers (CCTs) are more effective in poverty alleviation than other SPP types. CCTs were pioneered by Brazil and Mexico towards the end of the 2nd millennium and have become popular in most other developing countries. These programmes aim to reduce poverty in a multi-dimensional manner by requiring beneficiaries to comply with conditions aligned to enhancing human capital, usually linked to school attendance and health check-ups. Although UCTs are characterised by a wide range of beneficiary incidence across countries, 37 percent of UCT beneficiaries, on average, belong to the poorest quintile. One reason for this large variation is related to the aggregation of many types of UCTs in the World Bank database, as well as different objectives and eligibility criteria in the respective country programmes. It is important to note that universal programs tend to exhibit an even distribution. An example is the Child Money Programme in Mongolia, where the participation of all five quintiles is close to 20 percent. In contrast, the programmes in Kosovo and Montenegro are much more focused on the poorest quintile, which accounts for more than 70 percent of the total UCT beneficiaries. Social pensions also have a substantial pro-poor distribution of beneficiaries with an average of 35 percent of beneficiaries belonging to the poorest quintile. There are, however, large variances in the performances amongst different countries, depending largely on the manner in which the pre-transfer indicator is constructed. For example, it social pensions have a high coverage and high benefit level of the poor, beneficiaries may tend to depend on them and hence group in the lowest quintile of the pre-transfer welfare distribution. Beneficiary incidence of school feeding programs are in the same range as the remaining three indicators (in-kind transfers, public works and targeted subsidies), namely 34% for the bottom quintile. A large degree of variation exists between countries, with the most pro-poor programmes found in the Slovak Republic and Latvia, where 82 and 73 percent of the beneficiaries are from the poorest quintile, respectively. In-kind transfers generally also benefit poorer households quite pro-poor. In the World Bank’s sample of observed programs, 34 percent of beneficiaries of in-kind transfers belong to the poorest quintile, with food aid in Djibouti and Uruguay both having a beneficiary incidence of above 70%. The beneficiary incidence of public works programmes for the poorest quintile is 33%, on average. When the second poorest income quintile is added, the beneficiary incidence rate remains at higher than parity, which still classifies public works as a pro-poor instrument. The reasons for this category trailing CCTs is related to the fact that most public works are limited to people who are able-bodied, unemployed and willing to work. Because these programmes are usually over-subscribed (the demand for employment positions exceeds the supply), people in higher income quintiles may also benefit from them. On average, fee waivers and targeted subsidies have a similar beneficiary incidence than for public works, with 33 percent of their beneficiaries belonging to the poorest quintile. Examples of these types of SPPs include food supplements, tuition fee waivers and the subsidisation of housing, petroleum, kerosene and agricultural inputs. The beneficiary incidence analysis conducted by the different types of social protection instruments reveals that, on average, all types of programmes tend to be pro-poor (in terms of a higher percentage of beneficiaries belong to the first and second poorest quintiles). This conclusion also holds for the analysis across countries, which shows the presence of highly pro-poor programs in each program category, despite variations in beneficiary distribution across countries. Performance indicators for upper-middle income countries Although SPP transfer levels vary greatly across the different types and across countries, World Bank research indicates that such transfers account for 19 percent of the welfare of the poorest quintile, which confirms their meaningful impact on poverty reduction. Differences in impacts reflect, in part, different program objectives and the degree of transfer values captured in household surveys. For the total population, SPP benefits as share of beneficiary welfare is 7 percent for high-income countries, whereas for low-income countries and upper-middle-income countries it is 11 percent and for lower-middle income countries it is 9%. Due to this relatively small variance in the shares of SPP impacts on beneficiary welfare in the different country income groups and the relevance of like-for-like comparison, the focus of the following analysis will be on the upper-middle income group of developing countries, of which South Africa is a member. A total of 30 countries for which sufficient and recent data are available have been included. It should be noted that the averages have been determined by a weighting exercise, based on the size of the populations. These 30 countries are ranked in terms of their performances against the four key indicators identified earlier, namely coverage, the reduction of the poverty headcount, benefit incidence and adequacy, as well as a fifth indicator, namely government expenditure on SPPs as a percentage of GDP. i) Coverage It is clear from the data in table 4.4 that South Africa is the standout performer amongst its peers for the coverage of SSPs. It should be noted that World Bank data for South Africa has been updated with the addition of the Social Relief of Distress (SRD) grant, commonly referred to as the Covid grant, which has raised the coverage level, but only marginally so. When comparing the most recent data in table 4.4 with the earlier World Bank report on social security nets (2018), it is also clear that most countries have been able to expand their coverage between 2014 and 2018. Reasons for the coverage indicators being particularly high include the following: The figures are based on the full spectrum of social protection measures, not merely safety nets. They include old-age pensions, labour market interventions, cash transfers, public works, school feeding schemes and targeted subsidies. The calculation includes direct and indirect beneficiaries Pre-transfer welfare is utilised in the estimation of the poorest quintile. South Africa’s sterling performance with regard to the coverage of SPPs is particularly impressive when juxtaposed with the global average for developing countries of 56% (as determined in the 2018 World Bank study). It is also worth noting that even if the high-income group was included in the above analysis, South Africa would still be ranked first. This performance proves that South Africa’s social welfare policies are exceptionally comprehensive and suggests that further refinements to social protection should concentrate on the level of the benefits and also the introduction of conditionality, especially in the area of human capital development and consideration of an income grant for unemployed people. Another indicator associated with coverage of SPPs (and the prevalence of poverty) is the percentage of the population that receives cash grants, where South Africa is ranked second best amongst developing countries (illustrated by Table 4.5) ii) Poverty headcount reduction Over the past quarter of a century, the ability of social assistance to reduce poverty and inequality has been subjected to substantial research, most notably by the World Bank Group and its partners. The methodology employed in such exercises includes a comparison of the welfare position of beneficiaries before and after SPP transfers. On the basis of the information observed in household surveys, the most recent comprehensive analysis by the World Bank (2018) shows that SPP transfers are making a substantial contribution in combating poverty. This finding holds for both an absolute poverty line as benchmark and a relative poverty line (measured in terms of the poorest quintile of the population). It is encouraging that individuals are escaping poverty or decreasing their depth of poverty because of social welfare policies. For the 79 countries with sufficient monetary information that were surveyed in the 2018 World Bank study, transfers reduced the incidence of absolute poverty (US$1.90 at PPP per day) by 36%, whereas relative poverty (the bottom 20 percent) was reduced by 8% (on average). On average, SPP transfers have reducing the poverty gap more than the poverty headcount. According to the analysis in the 2018 World Bank study, transfers reduced the absolute poverty gap by 45% and the relative poverty gap by 16%. At the time, these results were described by the authors of the study as “remarkable”, considering that these figures were underestimated because household surveys (upon which the study was based) do not capture the whole universe of SPPs implemented in developing countries. Therefore, it can be inferred that the real impacts were likely to be even larger. These comments turned out to rather prophetic, as subsequent updating of the World Bank’s ASPIRE database has confirmed a fairly dramatic improvement in the reduction of the poverty headcount amongst all countries surveyed. In the 2018 study, the average reduction in relative poverty headcount was only 2% in low-income countries, 7% in lower-middle-income countries, 11% in upper-middle-income countries (South Africa’s group), and 15% in high-income countries. Table 4.6 depicts the results of an updated analysis conducted for the purposes of this impact assessment, utilising the ASPIRE database. It should be noted that the 2020 figure for South Africa has been estimated by applying the average increase in the poverty headcount reduction between the 2018 World Bank study and the updated data, as at July 2022. The average elapsed period between these two data sets was 4.6 years. As was the case in the previous analysis, South Africa is ranked first amongst its peers in the upper-middle income countries. The pace of progress with reducing poverty over the past decade provides a measure of credence to the ambitious ideals of the very first of the Sustainable Development Goals adopted by the United Nations in September 2015, namely to: “End poverty in all its forms everywhere”. Viewed from the perspective of the slow progress with reducing the poverty headcount in low-income countries, it is clear that this group will require special attention, especially with regard to the lack of the fiscal resources required for cash transfers to the poor and vulnerable. Caveats do exist, however, that serve to explain, to some extent, the lower reduction in poverty and inequality observed for low-income countries. According to the World Bank (2018), this trend is likely driven by the following factors: Fewer low-income countries have recent household survey data available compared with other country income groups. Of the 22 low-income country surveys included in ASPIRE, only 14 surveys include monetary variables for SPPs. Many low-income country surveys neither capture SPP-specific information nor include the universe of programmes that exist in the country. Less than 10 percent of the global population live in low-income countries; therefore, the number of individuals moving out of poverty (in percentage terms) is lower than in other country income groups. iii) Benefit incidence Benefit incidence represents one of a group of metrics widely used to determine the extent to which SPP transfers are distributed amongst different income groups. The denominator of the relevant calculation is based on the sum of all transfers received by all individuals in the population, which introduces an element of bias in this indicator’s accuracy for determining progress with poverty alleviation. If social assistance transfers are adequate enough to lift a significant proportion of people out of the bottom quintile, a relatively low reading for the benefit incidence should not be a cause for undue concern. As long as the benefit incidence is above the 20% neutral level, it still reflects a pro-poor outcome. It is not always possible to draw general conclusions about the distribution of beneficiaries and benefits of a specific program without knowing detailed information on the program’s design, eligibility criteria, and implementation. Drawing on research by Seldon & Wasylenko (1992) and the World Bank (2018), specific caveats to be considered in the analysis of benefit incidence include the following: Some programs may not be pro-poor by design; for example, they may not be targeted specifically to the poor but to the general population, especially in the case of universal programs. The eligibility criteria of some programmes may be categorical (for example, in terms of disability) and not means-tested. In such cases, beneficiaries meeting the categorical requirements may not belong to the poor. The pro-poor performance based on benefit incidence is influenced by the way in which the pre-transfer indicator is constructed. If social pensions cover a sizable part of the poor and their benefit and dependency levels are high, there will be a trend for most beneficiaries to group in the lowest quintile of the welfare distribution once such transfers are removed, and vice versa. The methodology for measuring household benefits does not fully consider important issues such as the possibility of benefits being shifted and marginal benefits differing from average benefits. Some benefits from physical capital expenditure and human capital investment may accrue to households over more than one time period In the final instance, data on benefit incidence need to be considered in conjunction with other key performance indicators, especially coverage, adequacy and whether the absolute value of welfare benefits is reducing the poverty gap. Table 4.7: Indicates that South Africa’s ranking for benefit incidence amongst its peers in the upper-middle income countries is lower than for the other performance indicators reviewed, but remains classified as pro-poor (above 20%, according to the World Bank norm). iv) Adequacy South Africa’s exceptionally high ranking for most of the key indicators that determine a country’s performance in the area of social assistance is also prevalent for adequacy, which is calculated as follows: The amount of transfers receives by a quintile divided by the total income or consumption of beneficiaries in that quintile. In terms of the latest reference year documented in the ASPIRE database, South Africa enjoys a score of above parity, which could be explained by an under-estimation of the income/expenditure of the bottom quintile (the divisor), as the data on the transfer amounts are verifiable (the dividend). According to the World Bank’s most recent detailed report on social protection in South Africa, the country’s adequacy ratio is marginally less than parity (100% - see table 4.8), which secures the number one ranking within the peer group of middle-income developing countries and also within all developing countries. The World Bank’s reference (2021) to the “small value” of grants in South Africa is not consistent with the evidence, as confirmed by the fact that in the earlier World Bank study on social safety nets (2018) South Africa’s disability grant was ranked the fourth highest out of a selection of different types of grant transfers from 36 countries. Whilst the SRD grant and child support grant are substantially lower than the social pension and the disability grant, South Africa still has one of the highest levels of annual per capita spending on SPPs, as depicted by table 4.9. At a level of $575 (2020 purchasing power parity – PPP, South Africa’s annual per capita public spending on SPPs is 52.6% higher than the average for the countries listed in the table. Although the comparison should take cognisance of the differences in reference years, it is clear that South Africa passes the adequacy test with flying colours. It is nevertheless clear from the definition of the adequacy indicator that the prevalence of a significant degree of poverty will tend to be correlated with a relatively high adequacy level. The average annual transfer per capita for beneficiaries of the South African grant system in 2020/21 is estimated to have been R7,837 for all grants, and R10,814 without the SRD grant (which remains a temporary arrangement). Compared to the per capita household expenditure of beneficiaries, this amount is highly significant. Averaged across all beneficiary households, the World Bank (2021) estimates grant income to be equivalent to roughly 25% of per capita household expenditure. This is aligned to the 2021 General Household Survey conducted by Statistics South Africa, which found that grants constitute 24.4% of total household income – a high percentage by international standards. For Sub-Saharan Africa, the ratio of social assistance transfers to the household expenditures of beneficiaries is 19.4 percent and for all the upper-middle income countries it is only 5.6 percent. Although this figure is as high as two-thirds for beneficiary households in quintile 1 and 40 percent for beneficiary households in quintile 2, overall, per capita social assistance transfers in South Africa are higher than most other developing economies. v) Government spending As is the case with all of the above SPP performance indicators, the data in table 4.10 confirms that South Africa also enjoys an exceptionally high ranking for the total fiscal value of social welfare programmes. The South African government spends 4.3% of GDP on social protection, which is the second highest for the group of middle-income developing countries and three time more than the population-weighted average. When the total government expenditure on social protection for the 2020 calendar year (as per the National Treasury’s 2022 Budget Review) is used as the basis for the SPP spending as percentage of GDP, the per capita spend determined in table 4.9 rises to $893 and the figure in table 4.10 Rises to 6.6%, both of which would propel South Africa to the highest ranked country for these two performance indicators. Due to the inclusion of administrative expenditure in the national budget figures, however, only the cash value of grants has been included in the above analysis (grants constitute 89% of government expenditure on social protection). The overriding importance afforded to social protection in South Africa is also reflected in its dominant position vis-à-vis other budget votes, as illustrated by figure 4.1. In the 2020/21 National Budget, social protection commanded 21.8% of total non-interest expenditure of the country’s public expenditure (consolidated national and provincial government and social security funds). By any relevant metric, as amply illustrated by the results of these key performance indicators, South Africa’s social assistance system represents a major intervention by government in addressing poverty. As duly acknowledge by various research studies, including those of the World Bank (2018 & 2021), the South African system of SPPs is extensive in terms of both the number of people it covers, directly and indirectly, and the amount of fiscal resources required for its funding. After the introduction of the SRD grant in 2020, almost half of South Africa’s population are direct beneficiaries of a social grant, while an estimated 77% of the population are either direct or indirect beneficiaries of the system. Comparison – global regions and income groups The data presented in this study clearly demonstrates the exemplary performance of South Africa in addressing poverty and inequality with appropriate social protection measures. Social transfers have been at the forefront of these policies, having reduced the poverty gap by more than 73% (World Bank 2021). This is a substantially larger impact than is observed for any of the country groupings (see figure 4.2). South Africa’s social assistance system has proven to be highly effective in providing support to the poorest segments of the population, especially via social grants that provide financial resources to poor households which reduces the depth of poverty and inequality. Vulnerability is also reduced via the provision of regular and dependable income. Apart from the grant system, poverty reduction is also facilitated by the positive effects of other public expenditures in the areas of health, education, school feeding, public works and fee waivers. The World Bank has commended South Africa for the existence of modern administrative delivery systems used for administering social grants. All social grants (except the foster child grant) are means tested in different ways using the national ID number and income or assets as a basis and comparing the documentation of applicants against national databases. As is the case in most developing countries, all direct transfers in South Africa are classified as pro-poor and the country stands out for the progressivity of its transfers—it has the most progressive grants for foster care, people with disabilities and old age pensions, whilst the World Bank (2022) has commended South Africa for the significant impact of the child support grant on reducing inequality. Some concerns Various studies on the state of social safety nets in South Africa, including evaluations of the criteria for the approval of grant applications by the Department of Social Development (DSD), have nevertheless pointed out a number of shortcomings of the social protection system, as well as suggestions for improving the design of SPPs. These include the following: The absence of a social grant that is accessible to working-age adults and which is not predicated on disability. Although the SRD grant has filled this void, its level of support is only 56.1% of the 2021 Food Poverty Level (FPL) and its remains a temporary policy measure introduced as a result of the additional hardship inflicted by the Covid pandemic on many poor people. Due to a large degree of fiscal leeway that occurred in the wake of a strong upward phase of the commodity cycle for metals and minerals during 2021, South Africa’s National Treasury was in the fortuitous position to extend the SRD grant for the fiscal cycle ending on 31 March 2023, but uncertainty prevails over the future of this grant. If the SRD grant is removed without a suitable alternative to cater for the millions of unemployed people who have received this benefit, much of the gains from the social protection system will have been lost Insufficient conditionality exists in the grant system, especially with regard to requiring beneficiaries to become involved with public works programmes and the enhancement of human capital. Many examples exist in other developing countries of SPPs that have been successful in raising school attendance levels, health check-ups at clinics and skills development via workfare programmes. In July 2022, the DSD announced its concern over the low number of approvals for the SRD grant. Out of 11.4 million applicants for the month of June, only 5.2 million beneficiaries were approved, representing only 45.6% of the applications. As a result, the DSD intends to increase the allowable income threshold from R350 to the food poverty line of R624, meaning that the South African Social Security Agency (SASSA) will decline any applicant who receives more than R624 into their bank account for each relevant month. The value of the grant itself remains R350 per person per month for the period 1 April 2022 to 31 March 2023. Although South Africa’s performance in terms of the poverty-reducing impact of social assistance is outstanding, the value-for-money performance is disappointing and suggests that the costs of South Africa’s system are relatively high compared to other countries. Estimates of the benefit-cost ratio for social assistance in South Africa reveal that, while the country is on par with the average for upper-middle income countries, its performance is 17% weaker than the average for countries in Latin America and the Caribbean. In conclusion, it should be noted that the World Bank has identified an improved understanding and assessment of the cost structures and cost drivers associated with administering social assistance in South Africa as an area for future research (2021). Chapter 5: Country case study no. 1: Brazil Introduction Brazil’s social welfare programme has proven to be successful to the point of widely being regarded as a role model for the combating of poverty in developing countries and emerging markets alike. In the context of the current debate on establishing a permanent income grant in South Africa, it is regarded as highly relevant to consider salient aspects of Brazil’s Bolsa Família cash transfer programme (BFP), which was amended in December 2021 and renamed Auxilio Brasil. Origins The conditions for implementing fiscally sustainable welfare policies in Brazil started to fall into place after the peaceful transition from 20 years of military rule to the so-called re-democratisation of Brazil in 1985 and the writing of a new constitution, adopted in 1988. Fernando Henrique Cardoso, a former Secretary of the Treasury, became president in 1994, winning the election by a very comfortable margin against his eventual successor, Luis Inácio "Lula" da Silva, leader of the Workers’ Party. Four years later, he won a second term almost as easily, taking 53% of the vote to Lula da Silva's 31.7%. To date, he is the only president to win an outright majority of the popular vote since democratic elections were reinstated in 1989. Cardoso’s presidency saw institutional advancements in human rights and he was the first Brazilian President to address the large measure of inequality in the country. Under his leadership, four comprehensive welfare programmes were established that were ultimately consolidated into the Bolsa Família by Lula da Silva. Several authoritative historians and political economists, including Timothy Power, Marcus Melo and Carlos Pereira, primarily credit Mr Cardoso for getting the necessary sequencing right in the design of welfare policies: economic stabilisation and state reform had to come first, followed by an attack on poverty and inequality, which was ultimately refined and consolidated by the Lula government. The roots of the CCT model in Brazil were established in 1995, as an innovative anti-poverty intervention by a number of municipalities in low-income regions that required education-related conditions to be met by the beneficiaries. In 1997, Cardoso convinced the Federal government to assist with the funding of these social programs. In 2001 it was expanded and renamed “Bolsa Escola” and soon after, the government initiated a program named “Bolsa Alimentação” which was a cash transfer program that required health conditions to be met by the beneficiaries. Another programme followed in the same year, namely Auxílio Gás. The latter was an unconditional cash transfer (UCT) involving a subsidy for the purchase of cooking gas by poor households. Amalgamation In 2003, under the new presidency of Lula da Silva, Bolsa Família was created to overcome the conceptual and operational fragmentation of numerous federal cash transfer programmes. It is estimated to have reached over 20 per cent of the Brazilian population and has achieved significant positive results in the quest to alleviate poverty, as detailed in the following sub-section. The BFP was not an immediate success, however, due to perceived shortcomings in its implementation, which led to fierce criticism from all quarters. Within a year of its adoption as an amalgamation of existing cash transfer programmes, the BFP was facing a crisis of legitimacy threatening to turn it into a political liability for the federal government. The programme’s administration was improved post haste (inter alia with the assistance of the World Bank) and, together with various positive assessments from independent impact studies turned the tide of public opinion around fairly quickly. Over the past two decades, Brazil’s Bolsa Família programme (BFP) has become synonymous with Latin America’s progress in combating poverty via conditional cash transfers (CCTs). The Economist has described the BFP as an “anti-poverty scheme invented in Latin America [which] is winning converts worldwide”. In 2020, the program covered 13.8 million families, and paid an average of R$34 per month, in a country where the minimum wage is R$190 per month. It was a key element of former President Luiz Inácio (“Lula”) da Silva's social policies and is reputed to have played a role in his second electoral victory of 2006. According to Robles & Mirosevic (2013), two main landmarks for the eventual success of non-contributory social protection in Brazil were, on the one hand, the fact that legislation was introduced in order to support social programmes and their articulation; and, on the other hand, the creation of an entity in charge of organising them in 2004, the Social Development and Combat to Hunger Ministry. Prior to 2004, the institutional responsibility for social protection was fragmented across several ministries. Impact of Cadastro Único governance project & Senarc One particular project that managed to enhance the effectiveness of the BFP was the World Bank’s governance project (see table 5.1), aimed at improving basic programme management, oversight and control. This was done on three levels, namely nation-wide utilisation of the registry of beneficiaries (the Cadastro Único); management of benefits; and electronic monitoring of compliance with education and health conditionalities. Project finance was used to: i) Train and provide technical assistance to state and municipalities to support the use of Cadastro Único as the main mechanism for selecting BFP’s target population ii) Create municipal- and state-level delivery units to support BFP design and monitoring and to interact with social service providers, including transfer of dedicated resources to serve the BF population iii) Configure Cadastro Único to allow multiple public agencies to select beneficiaries from its database of low-income families The seriousness with which social protection has been approached by the Brazilian government since the return to sustained economic growth (following the end of military rule) is aptly demonstrated by the array of institutions that were created to implement cash transfers and other specific social services, as illustrated by table 5.2 and the comprehensive range of functions undertaken by the National Secretariat for Citizen Income (known by the acronym of Senarc), (see table 5.3.) Some concerns over future fiscal affordability At the end of 2021, the BFP rather dramatically ceased to formally exist, with Brazil’s head of state, Pres. Jair Bolsonaro sanctioning a new cash transfer program called Auxílio Brasil. It is well-known that the success of the BFP was a mainstay of a previous head of state, Lula da Silva (leader of the Workers’ Party), who is now in opposition and, according to recent polls, more than likely to be re-elected in 2022. Bolsa Família has won international acclaim for reducing extreme poverty in Brazil and enjoys overwhelming popular support in the country. The new programme has already started paying out an average amount of R$223 per month, 18% more than the average under the BFP. The number of beneficiaries has also been increased to an estimated 14.6m families, up from the 13.9m under the BFP, which ran for 18 years before being terminated (de jure) at the end of 2021. Judging by the weakness of Brazil’s currency during the second half of 2022 and the rise in the country’s long-term bond yields (see figure 5.1), investors are fearful of an erosion of fiscal rectitude. Oxfam Brazil is on record for sharing the concern over insufficient fiscal guarantees for the new programme, whilst also pointing out its lack of fully defined values. In the past, Pres. Bolsonaro had regularly voiced criticism over the BFP, referring to the programme as being socialist. His about-turn in implementing a cash grant system that is more expensive to the fiscus seems to be heavily influenced by political ambition aimed at possible re-election (Harris et al, 2021). Government’s stated aim is to raise the monthly grant to R$400 per month, which will amount to more than double the previous level. In order to make sufficient funds available for Auxílio Brasil’s hefty increase, government has changed the reference period for calculating inflation, in order to lift the constitutional cap on spending that limits budget increases in line with inflation, as well as delaying the payment of certain court-ordered state debts. Although these amendments do not represent a technical breach of the fiscal ceiling, the deferment of state obligations may be viewed as a path to a possible default, which will render the new programme unsustainable. The rule on fiscal spending limits was passed by Congress in 2016 with the aim of getting public finances back into shape and is viewed as a cornerstone of Brazil’s economic credibility. Draft legislation before Congress proposes changing the reference period for calculating inflation in order to lift the “ceiling”, as well as delaying the payment of certain court-ordered state debts. The total public debt of Brazil is currently at a level of 83 per cent of GDP and insufficient control of the public finances is bound to lead to macroeconomic instability. Global fund managers are compelled by law to adhere to strict governance rules and prescribed mandates regarding sound investment practice. Once a country’s public debt breaches a certain limit, the taps for inward portfolio investment start turning off, thereby exacerbating an already untenable fiscal scenario, with grave implications for the economy. Although government’s intention to bypass the constitutional cap on spending does not represent a technical breach of the fiscal ceiling, the deferment of state obligations may be viewed as a path to a possible default, which will render the new programme unsustainable. Reasons for the success of Bolsa Família Contrary to much stereotyping, T’Hart & Compton (2019) have provided substantial evidence that democratic governments are often quite good at what they do. Their research has developed the following definition of public policy success: The creation of outcomes that are valued and sustained by a broad majority of society through a coordinated policymaking process. Brazil’s Bolsa Família programme clearly fits the mould of international policy successes and the country is widely regarded as having pioneered the implementation of CCTs in the developing world. The first experiences with CCTs took place in the mid-1990s in Brazil, at municipal level. Variants of the Brazilian social protection policy instruments were later adopted at the national level in Mexico, as well as in most other Latin American countries and in the rest of the developing world. It was estimated in 2017 by the World Bank that social protection mechanisms designed on the Bolsa Família principles had been adopted in more than seventy different countries. Key reasons for the success of the BFP are as follows: 1. Partnership between civil society and the state An important issue underpinning the success of the BFP is the Constitutional obligation to promote decentralisation and social participation at all levels of policy making, imprinting a unique feature to social policy in Brazil. According to Coutinho (2014), this has served to facilitate complementarity between representative and participative democracy. As a result, several national social policy councils have been created that comprise both representatives of civil society and public institutions, thereby aligning to a significant extent the wishes of the electorate with the regulatory and policy powers of government (at all levels). These councils are not merely involved with the implementation of welfare grants, but also cover other social policy areas, including education, health, labour, food security, and development in its broadest sense. They follow clearly defined responsibilities, and in some cases, they have ruling power to define policies’ directives and resources (Jaccoud et al 2010). During the Bolsa Família policy design process, local stakeholders included high-level federal bureaucrats, poverty campaigners, academics, and the World Bank. After a period of initial conflict among the ministries managing the existing CCTs, the BFP ultimately was supported by all stakeholders, recognising the need to unify efforts in the context of combating poverty 2. Lowering of poverty The Bolsa Família programme represents the most progressive social welfare system implemented and maintained by the federal government of Brazil and has proven to be a programmatic success in reducing poverty and inequality. According to Paiva et al (2019), extreme poverty in the country would be one-third higher in the absence of BFP transfers and it accounted for just above 15 per cent of the fall in the Gini coefficient during the first decade of the twenty-first century. 3. Positive human capital development A large and growing volume of impact evaluation have clearly demonstrated positive effects on school attendance (Brazil) and school progression (Brazil). Several health outcomes improved as a result of the programme, including under-5 mortality rates. 4. Employment creation Concerns about adverse effects on labour supply and fertility have also shown to be misplaced (Gerard et al, 2019) and these positive results were widely publicised. Even in cases where a disincentive effect on labour supply was present amongst beneficiaries, the increased level of consumption expenditure stimulated output and employment in relevant sectors of the economy. 5. Sound administrative processes The administrative capacity of the BFP was developed over a period of two decades, which meant that the programme was a process success. The programme was kept free of undue political interference. Permanent civil servants that occupied key administrative positions were appointed on the merits of their qualifications and experienced and not nepotism or loyalty to a particular political party, which meant that programme implementation was impersonal and transparent. 6. Decentralised system The programme also employed appropriate mechanisms of coordination between different government areas and levels. The decentralised architecture of the BFP was considered innovative, whilst promoting incentives for quality implementation (Lindert et al.). 7. Sound governance standards With the assistance of international experts and the World Bank, the structure of governance became progressively more capable of responding to technical implementation challenges, which eventually refined measurable policy outcomes. 8. Political appeal Progress towards a more effective programme was accompanied by growing political support. Unequivocal affirmation hereof was provided at the beginning of 2022, when Pres. Jair Bolsonaro, who had previously been a vehement critic of the BFP, embraced the programme as part of his attempts to be re-elected in October 2022. Despite changing the name of the BFP to Auxílio Brasil and tinkering with some of the details – including raising the benefit levels, the principles, coverage and monitoring of the BFP remains intact. The popularity of the BFP eventually became a focal point in Brazil’s elections, both at municipal and national level, as demonstrated in the last two presidential elections, when all candidates that were regarded as relevant, declared support for the programme. The programme was therefore a political success. 9. Electoral impact There is also evidence that the programme had positive impacts on political support for incumbent candidates across four presidential elections (Zucco Jr.). Opinion polls conducted on the general elections showed that three out of four voters were favourably disposed towards Bolsa Família, with approval above 50 per cent across all age, sex, race, religion, school and regional groups. In the last two presidential elections, all relevant candidates declared support for the programme (Paiva et al. 2019). According to comprehensive research by Zucco Jr on the so-called “Bolsa Família-effect” during four elections between 2002 and 2014, the effect was not regarded as large enough to swing a presidential election, at least until 2014, when estimates pointed to a huge increase in the number of votes that were swayed, from 3.6 million in 2010 to 8.1 million in 2014. 10. International recognition After some growing pains during the initial years of implementation, the administration of the BFP improved and this was reflected in positive assessments from a host of evaluation studies. Lindert and Vincensini (2010) have documented the interplay between policy effectiveness and political support - sound technical management and positive policy outcomes fed back into political support. These positive policy outcomes led scholarly researchers and multilateral organisations to support the programme as an efficient tool in the fight against poverty in Brazil, which became globally relevant, with the key elements of the BFP having been replicated all over the developing world. 11. Endurance The programme has also demonstrated resilience in the face of tumultuous political events – first with the impeachment of Pres. Dilma Rousseff in 2016 and then, a year later, with the conviction on corruption charges of Brazil’s most popular democratic president and pioneer of the BFP, Lula da Silva. The BFP also managed to survive the fiscal crisis of 2014 to 2017, caused by multi-dimensional factors stemming from the fact that it took many years for Brazil’s economy to recover from the global financial crisis. Other contributing factors were the rigidity of the public financial system, persistently low levels of business confidence, unduly strict monetary policy and the ineffectiveness of countercyclical policies (Holland 2019). The downgrading of the country’s government bonds from investment grade shortly after achieving this status for the first time also had a negative impact on inward portfolio investment. Nevertheless, at the transition of the BFP to the Auxío Brasil at the end of 2021, there were 43.7 million people registered with the CadÚnico and in 2018 the benefits were adjusted at above-inflation rates. The success of the policy has clearly endured. Postscript One of the main virtues of the Bolsa Família programme is that it reaches a signification portion of Brazilian society that has never benefited from social programs. It is among the world’s best targeted programs, because it reaches those who really need it. An estimated 94% of the funds reach the poorest 40% of the population and various studies indicate that most of the money is used to buy food, school supplies, and clothes for children. Success has sparked adaptations in more than 70 countries - including Chile, Mexico, and other countries around the world, such as Indonesia, South Africa, Turkey, and Morocco. Between 2007 and 2010, New York City implemented the Opportunity NYC conditional cash transfer program, modelled on Bolsa Família - an example of a post-industrial country adopting the experiences of a developing country. The results of Bolsa Família show that it is possible to lower poverty in a sustained manner, integrating millions of people into the economic and social mainstream of the country, without compromising other economic development goals. Chapter 6: Country case study no. 2: India The employment guarantee approach Between 2002 and 2019 (just before the Covid pandemic), India experienced exceptionally high economic growth. In US dollar terms, the country’s gross domestic product (GDP) at current prices increased from $524 billion to $2.8 trillion over this period – an average annual growth rate of 10.4%. In real terms, GDP per capita increased from just below $2,700 to just below $6,700 (at purchasing power parity in constant 2017 international dollars). This represents an average annual growth rate of 6% and is a clear indication of progress with the country’s growth and development policies. Despite relatively high rates of economic growth since a return to democracy, rural poverty continues to be a policy concern in India. An estimated two-thirds of the country’s population live in rural areas, accounting for 75% of all impoverished citizens in India (Breitkreuz et al 2017). Poverty is especially concentrated among Scheduled Castes (SCs) and Scheduled Tribes (STs). Although these two groups represent 33% of the population, they account for an estimated 80% of the rural poor. Although the criteria for classification as SCs and STs are not spelt out in the Constitution, they have become well established, subsuming the definitions contained in the 1931 Census and various official Commissions. Scheduled Castes have always been an integral part of the Indian society and have been socially and economically disadvantaged over a long period. (Breitkreuz et al 2017). Tribal communities live in various ecological and geo-climatic conditions ranging from plains and forests to hills and many areas that are hardly accessible. Tribal groups are at different stages of social, economic and educational development. Some tribal communities have adopted a mainstream way of life, whilst others (75 in total) are known known as particularly vulnerable groups, who are characterised, to a varying degree, by the criteria listed in table 6.1. Guaranteeing rural employment As is the case in many other developing countries, India has also been grappling with a low labour force participation rate, estimated at 48.1% in 2019 by the World Bank (2022). In an attempt to address the problems posed by large-scale unemployment and pervasive poverty, the Government of India introduced several nationwide schemes to address poverty, including, in 2005, the Mahatma Gandhi National Rural Employment Guarantee Act (commonly referred to as NREGA). The scheme has two main objectives – to enhance the livelihood security of people in rural areas, and to boost the rural economy. It does so by guaranteeing wage employment to members of rural households who have volunteered to do unskilled manual work and through public works, including water-resource management and tree-planting. It aims to enhance livelihood security in rural areas by providing at least 100 days of wage employment in a financial year to at least one member of every household whose adult members volunteer to do unskilled manual work. Women are guaranteed one third of the jobs made available under the NREGA. Table 6.2 provides a concise overview of the characteristics of this flagship programme aimed at poverty relief. The major thrust of the National Rural Employment Guarantee Act (NREGA) in India is to provide part-time employment to unskilled rural dwellers. Its emphasis is on water harvesting initiatives, supplemented by other infrastructure-related projects closely linked to water management and agricultural production. In a country where more than 500 million people are estimated to be dependent on rain-fed agriculture (equating to almost 7% of the world’s total population), these are indeed worthwhile objectives. The NREGA is closely associated with other important watershed initiatives, including the Integrated Watershed Management Programme (IWMP) in the state of Karnataka. These initiatives strive to provide livelihood options to disadvantaged persons in rural areas, whilst also improving the natural resource asset base. A Poverty and Social Impact Analysis (PSIA) of the NREGA implementation in the state of Karnataka was commissioned by the World Bank Group in 2012. The study found that the NREGA budget in 2011/12 was more than one billion US dollars, with between 30% and 40% of disbursements directly linked to soil and water conservation (Satish, et al. 2013). The key success of the initiative was in the area of employment. Between 70% and 80% of a total of more than 5 million job card holders had received employment under the scheme. Although few households had availed themselves of the full 100 days per annum of employment guaranteed under the scheme, the average number of days amounted to 50. Income earned from participation in the scheme represented between 5% and 15% of total income and the study concluded that public works schemes such as these had the potential to provide long-term poverty reducing impacts. A benefit-cost analysis of the schemes pointed to a payback period of about five to six years. The PSIA noted a number of misgivings surrounding the implementation of the NREGA, especially its minimal impact on closing the poverty gap in the areas surveyed and on outward migration to cities and other farming communities. The PSIA also included an assessment of the potential benefits of convergence between the NREGA and the IWMP. This list is quite comprehensive and is summarised in table 6.3. The relevance of these potential benefits to South Africa are fairly obvious, as the Expanded Public Works Programmes (EPWP) represents a pragmatic vehicle for the implementation of future workfare programmes (as discussed in the following sub-section). When utilising the IWMP in India as a proxy for other critical infrastructure-related projects, it becomes quite obvious that several of these potential advantageous outcomes could be achieved in South Africa, with the added benefit of an existing blueprint for combining workfare with a considered selection of public works programmes relevant to domestic circumstances. Rural housing via workfare and subsidies According to the United Nations, India, with its 1.4 billion people, will overtake China as the world’s most populous country in 2023. Estimates of widespread poverty vary, depending on the definition of the poverty line. An estimate by the United Nations (2019) points to 364 million living in poverty, but research by Roy & van der Weide (2022) concluded that the poverty headcount rate in India had declined by 12.3 percentage points between 2011 and 2019 (from 22.5% to 10.2%), with reductions in rural areas having been more pronounced than in urban areas. Although this represents considerable progress, it still translated to 168 million people living in poverty prior to the outbreak of the Covid pandemic. It is unsurprising, therefore, that India has placed considerable emphasis on social welfare programmes involving some element of workfare. Due to a low per capita income, the country has limited fiscal resources and a public debt/GDP ratio that has increased from 66.6% in 2014 to 74% in 2020. One of the country’s key initiatives to combat rural poverty is the Indira Awaas Yojana (IAY) programme, based on the provision of grants for the construction of houses to members of SCs, STs, freed bonded labourers and to non-SC/ST category below the poverty line. The programme was launched in 1985 by Rajiv Gandhi, the then Prime Minister of India and was restructured as Pradhan Mantri Gramin Awas Yojana in 2015. The objectives of the programme are: To support the construction of houses with ample provisions, including workplaces within the house and designed on the basis of the dweller’s requirements To promote the use of technology and material that is environment-friendly, sustainable, affordable, and conducive for generating employment To empower and encourage local authorities (Panchayats) to take a lead role at the village level for the implementation of this housing scheme The houses will be under the joint ownership of the husband and wife (where relevant) The construction of the houses should be carried out by the beneficiary, and no contractors are to be involved Addressing the Urban Conclave held in Uttar Pradesh's Lucknow on 5 October 2021, Prime Minister Narendra Modi stated that, since 2014, the construction of 11.3 million houses had been approved, most of which have been completed. Under the scheme, women will enjoy full or joint ownership of 80% of the houses. Economic impact assessment of three flagship programmes Realising that most of the research on the economic impact of social protection programmes was concentrated in the field of fiscal parameters, Sharma et al (2016) decided to evaluate the economic impact of three major social protection programmes, namely, the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA), Indira Awaas Yojana (IAY), and the National Social Assistance Programme (NSAP) in 2011/12 utilising a social accounting matrix (SAM) multiplier analysis. The authors drew on the premises identified by Mathers & Slater (2014), namely that social protection has a potential impact at the micro level (individuals and households), intermediate level (local-economy), and at the macro level (national-economy) through different channels. These include: At the micro level - an impact on growth through preventing the loss of productive capital,; the accumulation of productive assets,; enhanced access to labour markets; increasing innovation and risk-takin; and increased investment in human capital. At the intermediate level - an impact on growth through multiplier effects on the local economy; investment in public productive assets and infrastructure; and alterations to the functioning of the local labour markets. At the macro level - an impact on growth directly by increasing household productivity and employment; increasing aggregate demand; deepening capital markets; broadening the taxation base; and changes to public debt It is further recognised that social protection can influence these outcomes indirectly (to a varying degree) by facilitating economic reforms; building human capital; contributing to social cohesion; and influencing demographic trends. No over-arching framework of social protection exists in India. Although there are some constitutional provisions and international conventions, which are ratified by the Government of India. In the absence of such a coordinated framework, it is estimated that there are more than thousand social protection programmes (SPPs) of varying scope being implemented by the state governments, the central government, or jointly, usually with the involvement of local authorities. Due to the non-availability of sufficient and reliable time-series data on other programmes, the study by Sharma et al was confined to three major social protection programmes implemented by the central government The NREGA, IAY, and NSAP. The macroeconomic impacts have been measured in terms of output, income, employment, and revenue effects. A 32 sector SAM of India for 2007/08 was been constructed with two factors of production (labour and capital) and five household categories, for both rural and urban areas. The household categories were categorised in quintile classes based on monthly per capita expenditure for both rural and urban areas. The main data sources were the input/output (I/O) table for 2007/08; the 66th consumer expenditure survey by the National Sample Survey Office; the income/expenditure survey by the National Council of Applied Economic Research for 2004/05, and National Accounts Statistics by the Central Statistics Office. The impact was evaluated of the three selected SPPs on the expenditure incurred by the government on during 2011/12. The study found that these programmes have significant output effects. The indirect output effects are higher than the direct output effects due to linkages with other sectors of the economy. Moreover, these programmes have generated employment for large numbers of people, both directly and indirectly. From an employment perspective, there is no doubt over the significant impact of NREGA, as illustrated by the large numbers of people demanding work under this scheme (see figure 6.1). The income effect of these programmes is found to be almost twice the value of government expenditure on the selected SPPs. In general, a higher income effect was evident for the bottom classes of rural households, in line with the objective of poverty alleviation. The programmes also generated significant government revenue through taxation (directly and on the induced income and consumption). Tables 6.4, 6.5 & 6.6 provide details of the macroeconomic impact of these three SPPs. Chapter 7: Macroeconomic impact of social welfare – international Since the beginning of the new millennium, there has been unprecedented interest in the outcomes of social protection policies (SPPs) as a method to improve the aggregate welfare and level of human development in low-income and middle-income countries. Most of the academic & empirical studies in this field have concentrated on the effects of SPPs on lowering the prevalence of poverty and inequality and also on the effectiveness of social protection in targeting the poor, as discussed in detail in section 4. Those that have utilised econometric analysis to gauge the effects of social welfare policies on economic output and growth (and, as an inference, on fiscal stability), have been sparse, especially due to the relatively short time span since the developing world has embraced the concept of social protection via non-contributory grants and other benefits aimed exclusively at improving the well-being of the poorest segments of society. A comprehensive literature review has nevertheless resulted in a number of relevant impact analyses of the macroeconomic impact of SPPs that have been conducted in post-industrial countries and developing countries alike. This section highlights the key conclusions drawn from selected and relevant scholarly research, based on quantifiable evidence. i) Haile & Niño-Zarazúa, (2018) – 55 countries This study provided some insight into the effect of government spending on health, education and social welfare on three measures of aggregate welfare, including the Human Development Index (HDI), which incorporates a substantial weighting related to GDP per capita. The study utilised longitudinal data from 55 developing countries from 1990 to 2009 and found strong evidence to support the proposition that government social spending had played a significant role in improving aggregate welfare in the developing world. ii) United Nations (2018) – global According to its 2018 Report on the World Social Situation, the United Nations stated that social protection is fundamental for achieving the Sustainable Development Goals (SDGs). The UN’s research showed that, despite gaps in coverage, social protection systems are crucial to keeping people out of poverty, whilst contributing to gains in health and education among beneficiaries and reducing income inequality. In terms of the macroeconomic impact of social protection, it can also stimulate demand and boost consumption, and hence contribute to economic growth. During recessions, social protection spending can help revive economies and stimulate employment. iii) International Labour Organisation - ILO (2011) – global Research by the ILO confirmed that measures such as cash benefits, old-age pensions, in-kind transfers and disability benefits were instrumental in cushioning the impact of the 2008/09 global financial crisis among the most vulnerable groups in society, while also serving as a macroeconomic stabiliser and enabling people to overcome social exclusion and poverty in both developed and developing countries. iv) Organisation for Economic Co-operation and Development – OECD (2019) – global At the individual and household level, this study by the OECD on the economic effects of social protection policies identified a number of channels that have a positive impact, including via the accumulation & preservation of productive assets and the stimulation of innovation and entrepreneurship. The OECD also found that social protection can exert a positive effect on growth outcomes at community and national levels by generating multiplier effects from increased local consumption and production. The study pointed out a number of indirect effects that could further spur growth, including the facilitation of economic reforms, building human capital and enhancing social cohesion. v) Gechert, et al (2021) – Germany This study involved a narrative dataset of legislative social security shocks, constructed for Germany. The dataset covered major legal changes in benefits and contributions from 1970 to 2018. The macroeconomic effects were estimated in a proxy structural VAR. In response to a cut in contributions, a fiscal multiplier of about 0.4 on impact occurred, that faded relatively quickly. For benefit increases, however, the impact multiplier was 1.1 and more persistent. The response of other macro variables suggested that benefits worked through a strong demand-side channel, while contributions exhibited supply-side effects. Combining the shocks with household data confirmed a strong consumption response of beneficiaries. vi) Romer & Romer (2016) – United States In 2016, Romer & Romer published a study aimed at determining the effects on the macro-economy of increases in social benefits in the US. The methodology and results of the study are widely regarded as one of the academic benchmarks for embedding changes to social benefits in a vector auto-regression (VAR) framework. Although the data utilised for this study (1952 - 1991) pre-dates the universal implementation of UCTs and CCTs in the developing world, the results remain relevant to any assessment of the macroeconomic impact of social welfare expenditure by the state. The study determined that social security benefit increases over the reference period were highly irregular in timing and size, and presents evidence that most of the increases were not taken in response to current or prospective macroeconomic developments or as part of larger policy programmes. As a result, these benefit increases can be used to estimate the short-run macroeconomic effects of changes in transfers. The key finding of the study is that transfers matter. The estimates suggest that a permanent increase in Social Security benefits raises aggregate consumer spending in the first month the larger benefits arrive roughly one-for-one. The initial impact is highly statistically significant and remains high for about half a year, after which it declines. An interesting conclusion was related to the estimated response of consumption to temporary benefit increases, which were found to be small and not statistically significant. The study also compared the impact of permanent social security benefit increases with relatively exogenous tax changes, which showed a marked contrast. While the tax changes are slower to impact on consumption, their effects were much more persistent, more statistically significant, and far larger over an extended period than those for benefit increases. As a result, tax changes affect broader economic indicators, while benefit increases do not. Both types of changes had their primary impact on total consumption by raising expenditures, especially on durable goods. vii) Nikiforos et al (2017) – United States The underlying premise for the Levy Institute’s research on an unconditional cash grant in the US was that it would substantially alleviate extreme poverty, which has been on the rise during an era in which existing unconditional transfer policies had been scaled back and repurposed. Although ample evidence of the global poverty-alleviation effects of welfare grants had been provided by a large volume of quantitative research, most notably the World Bank’s ASPIRE data-base, questions still remained over the likely impact of such a policy on the macro-economy. In attempting to provide an answer to this question, Nikiforos et al (2017) utilised the Levy Institute macro-econometric model to estimate the impact of three versions of such an unconditional cash assistance program over an eight-year time horizon. The Levy Macro-Economic model is used to examine the medium-run prospects of the US economy and to simulate the effects of alternative policy options. It is Keynesian because the macroeconomic performance of the economy is driven by aggregate demand both in the short- and medium-run. Moreover, it follows the so-called Stock-Flow Consistent macroeconomic methodology, which allows for an integrated treatment of the real and financial sides of the economy; After the global financial crisis of 2007-2009, analyses based on the Levy model have argued that conventional projections for the U.S. economy (for example, those produced by the International Monetary Fund) have consistently been overoptimistic. The same reports have also demonstrated that the extreme inequality in income distribution was one of the main causes of the economic crisis, and they have argued in favour of a large public infrastructure program (such as is currently being implemented by the Biden administration). Three versions of unconditional cash transfers (UCTs) were examined by Nikiforos et al (2017), namely $1,000 per month for all adults, $500 a month for all adults, and a child allowance of $250 per month. For each of the three versions, the macroeconomic effects of these transfers were modelled, using two different financing plans - increasing the federal debt, or fully funding the increased spending with increased taxes on households. The results were then compared to the effects to the Levy model’s baseline growth rate forecast, as depicted by table 7.1 for two different funding models under two different levels of UCTs. The findings included the following: For all three designs, enacting the grants and funding them by increasing the federal debt would grow the economy. Under the smallest spending scenario, $250 per month for each child, GDP is 0.79% larger than under the baseline forecast after eight years. According to the Levy Model, the largest cash program - $1,000 for all adults annually - expands the economy by 12.56% over the baseline after eight years (excluding distributional effects). After eight years of enactment, the stimulatory effects of the program dissipate and GDP growth returns to the baseline forecast. Importantly, though, the level of output remains permanently higher. When funding the policy by increasing taxes on households and incorporating distributional effects into the model, the economy also grows, but at a slower rate. In a fiscally neutral aggregate model, a universal basic income grant (BIG) has negligible effects because the increase in the income of the households is fully compensated by the increase in taxation. However, a program related to comprehensive cash transfers like this implies a more egalitarian distribution of income - to the extent that it is financed by the increase in the taxes of households in high-income brackets. From a macroeconomic point of view, this translates into income gains for households with a higher marginal consumption propensity (MCP) and income losses for households with a lower propensity to consume. Although not specifically modelled by the 2017 Levy Institute model, it stands to reason that UCTs targeted at poorer households will exacerbate the distributional effects inherent in the model (as has been confirmed by other econometric studies discussed in this section). viii) Furceri, & Zdzienicka (2012) – OECD The aim of this study was to assess the short-term effects of social spending on economic activity, using data from a panel of OECD countries from 1980 to 2005 and employing ordinary least squared (OLS) methodology. This involved the standard approach developed by Romer & Romer (1989), based on an estimation of a dynamic growth equation and the derivation of impulse response functions from the estimated coefficients. From a theoretical point of view, the authors identified at least four channels through which social spending is likely to affect output positively in the short term: First, an increase in social spending will increase demand by rising public consumption Second, since a number of social policies target low-income individuals and credit constrained agents, an increase in social spending is likely to have a positive impact on private consumption expenditure Third, some measures of social spending, such as active labour market polices, may affect output by increasing employment (especially in the area of public works) Fourth, social spending in health may affect investment by enhanced human capital and, to the extent that private and public investments in the health sector are complementary, also by rising capital expenditure in the health sector The authors included a test to determine the existence of crowding-out versus crowding-in effects on consumption and investment. The results suggested that while social spending had a positive and significant impact on consumption (mostly determined by health and unemployment benefits), it had a negligible and insignificant impact on private investment The key conclusion derived at is that social spending has a significant short term effect on output - a 1% increase in social spending increases output by 0.12 percent in the short term and by about 0.25 after three years. In terms of multiplier effects, the estimates imply that an increase of social spending of 1 percent of GDP increases output by 0.57 percentage point. Furthermore, the increase in social spending has to be interpreted as social spending shock which leaves the debt-to-GDP ratio unchanged. A third finding was that social spending was counter-cyclical in most of the countries. Countries with higher public debt and with a higher initial level of the ratio of total social spending to GDP were characterised by a lower level social spending growth. ix) Gerard et al (2021) – Brazil This study contributed to the literature on social welfare impacts by studying the effects of a large-scale means-tested cash transfer programme (the Bolsa Familía - BFP in Brazil) on aggregate formal employment in local labour markets. It is well established that cash transfer programs have expanded widely in developing countries and have been credited for sizable reductions in poverty. However, their potential disincentive effects on the labour supply by beneficiaries have remained open to debate. The one argument is based on concerns that the targeting of some of these programmes, such as the use of means testing, could distort beneficiaries’ incentives to work, especially in the formal economy where earnings are more easily verifiable. By contrast, some studies argue that cash transfers can help beneficiaries find better jobs by unlocking liquidity constraints or that they can stimulate labour markets through increases in labour demand due to multiplier effects in the local economy. In practice, these effects can coexist, but evidence exists on their relative importance to inform the policy debate, despite formal job creation representing a primary focus of economic policies in developing countries. The reasons are obvious, as formal jobs are more likely to provide workers with enhanced social security coverage and better working conditions and are also associated with higher output and total factor productivity. The authors used longitudinal administrative data covering the universe of formal workers and BFP beneficiaries, along with the benefits disbursed through the program to estimate the impacts of a policy that increased the total number of BFP beneficiaries by more than 17 percent (or almost two million additional families) in 2009. One of the key findings was that higher grant payments increased local formal employment, by exploiting variation in the size of the expansion across Brazilian municipalities. The evidence is consistent with multiplier effects of cash transfers in the local economy, which dominate potential negative effects on formal labour supply among BFP beneficiaries. The differential increase in total BFP payments led to an increase in the number of private-sector formal jobs that reached 2% by 2011, two years after the expansion of the system. The effect on total payroll was slightly smaller (1.7%) because the increase in formal employment was concentrated in lower-skill occupations. The results were robust across various specifications and definitions of treatment intensity. The study also explored whether the overall increase in formal employment occurs despite negative effects of PBF on beneficiaries’ formal labour supply or are partly driven by positive responses among beneficiaries. This was done by comparing formal employment outcomes for families that were eligible for different benefit amounts within a local labour market through a Regression Discontinuity (RD) design. Taken together, the results of the study indicated that cash transfer programs are highly likely to exert positive effects on formal labour markets and the local economy at large, even if they create potential disincentive effects on beneficiaries’ labour supply. The study also included an estimation of the effects on municipal GDP and taxes paid in the municipality. The results were in line with formal employment results, with increases in local GDP and local taxes reaching 1.7% and 2.7% by 2011, respectively. x) Brazil (various authors) In Brazil, most of the studies of economic multiplier effects have been concentrated on public sector investment programmes in social and economic infrastructure. A number of macroeconomic impact studies of SPPs have nevertheless been conducted in Brazil, most recently by Sanches & De Carvalho (2022). The study was based on a structural vector autoregressive (VAR) modelling exercise, to determine fiscal multipliers for social benefits in Brazil for 1997-2018. Social protection multiplier dynamics can be enhanced since people who receive these benefits tend to have a relatively high propensity to consume. As reported by the Institute of Applied Economic Research Ipea (Sanches & De Carvalho 2022), 80 percent of resources transferred by the Bolsa Familia Programme (BFP) are received by the bottom two income quintiles. Consumer expenditure data analysis in Brazil has found a consumption propensity of larger than one for the bottom income quintile, in contrast to only 0.43 for the top income quintile. The latter trend for a significant gap in consumption propensities between the rich and the poor is evident in all developing countries. It represents the fundamental logic behind the positive economic multiplier effects that have been determined in various studies on the impact of social assistance programmes. The authors provided a disaggregated analysis which estimated social protection multipliers flowing from household consumption, private investment and different types of social benefits expenditures (including cash transfers, unemployment insurance, and pensions). Two periods were used as samples, with one that included Brazil’s economic recession of 2014 to 2016. The study revealed that a social protection spending shock triggers a more significant output increase in the sample that includes the recession. Overall, the findings aligned with the range of estimates of short-term multipliers for total government spending on social protection presented in previous empirical studies, as depicted by table 7.2. In particular, the macroeconomic effects of social protection were found to be similar to the evidence provided by Resende (2019), as well as the study by Orair, Siqueira and Gobetti (2016), which provided evidence of more significant economic multipliers during economic recessions. The study by Sanches & Carvalho emphasises that social protection expenditure performed a significant income stabilising effect via aggregate demand during this period. They found that Brazil’s GDP would have been 2.53% lower if social benefits had not continued to grow in 2016 and 2017 (due to constitutional obligations). The key conclusion drawn from the above studies is that social benefits have relatively large multiplier effects in Brazil, comparable in size to those estimated for public investment, whether the economy is in recession or in growth mode. Click here to continue

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Author: Dr Roelof Botha Editor: Daryl Swanepoel FEBRUARY 2023 Content Chapter 1: Introduction Chapter 2: New reflections on the welfare state Chapter 3: The Broader context to social grants Chapter 4: The performance of social protection programmes (SPPs) Chapter 5: Country case study no. 1: Brazil Chapter 6: Country case study no. 2: India Chapter 7: Macroeconomic impact of social welfare – international Chapter 8: Economic impact studies on South Africa’s welfare system Chapter 9: Some caveats to the design of social welfare systems Chapter 10: Modelling the impact of the basic income grant (BIG) on the economy Chapter 11: Conclusions Chapter 12: Recommendations References Cover image credit: istockphoto.com | Micky Wiswedel Chapter 1: Introduction Background and Objective The detrimental economic effects induced by the Covid pandemic have been particularly severe on the lower income groups in South Africa and unemployed persons, many of whom are dependent on other household members for their subsistence. As a result, the debate on the feasibility of a basic income grant (BIG) has received new impetus, especially in the wake of the implementation of the social relief of distress grant (SRDG), commonly known as the Covid-grant, which has proven to be fiscally affordable, despite the need to keep a watchful eye on the stability of the country’s public finances. Several studies have been undertaken in recent years to gauge the likely poverty-reducing impact of South Africa’s welfare grant system, which is widely acknowledged to be one of the most effective in the developing world, although a grant targeted at unemployed persons is still not a permanent part of the welfare system. Over the past decade, few developing countries in the upper-middle income group have matched South Africa in the quest to reduce the prevalence of poverty, whilst the country also ranks in the top-four regarding the indicator for per capita job creation via public works programmes. Impact studies have nevertheless mostly been restricted to the areas of poverty reduction and lowering the level of income inequality. Recognising the dearth of empirical economic analysis of social protection policies in South Africa, the Inclusive Society Institute (ISI) commissioned such a study early in 2022. The main objective of the study is to determine the macroeconomic impact of a basic income grant (BIG) that is fixed at the food poverty line (R624 per month at the time of the econometric modelling exercise). It was also regarded as necessary to conduct a comprehensive literature study on the global and domestic experience with social protection policies, both with regard to their composition and their impact on the combating of poverty and the macro-economy. Structure The study commences with a discussion of the evolution of social welfare policies over the past three decades. It is pointed out that the state’s role in providing social protection to those in need has become an imperative in virtually all countries, not a choice. There has nevertheless been a noticeable shift in emphasis towards introducing some form of conditionality for beneficiaries to qualify for grants and other forms of welfare in South Africa, as well as combining welfare with programmes aimed at providing temporary employment (referred to as workfare). This section also points out the dangers of resorting to wealth taxes to fund welfare programmes. The second section provides a comprehensive overview of the broader context of South Africa’s social grant system, including trends in gross and net social benefits received by households, as well as the extent of poverty in the country. This section concludes with a brief analysis of South Africa’s social protection response to poverty. Section three discusses the performance indicators that have been developed for determining progress with the combating of poverty via a large variety of public welfare initiatives. Significant resources are invested in the implementation of social protection programmes, which necessitates the continuous monitoring of the effectiveness of these programmes. The focus of the analysis will be on South Africa’s peer group, developing countries that are classified by the United Nations as upper-middle income countries. Clear evidence is provided of the substantial impact that social welfare programmes are making in the global fight against poverty, with South Africa’s performance being exemplary. Two country case studies follow, namely for Brazil and for India, who, together with South Africa, possess democratic constitutions within the BRICS grouping. Initiatives to combat poverty in these two countries have been quite successful and several of them are either based on conditionality in grant payments or workfare arrangements, whereby temporary jobs are created and policy makers in South Africa could well consider introducing some of their elements into the future refining of domestic welfare programmes. A discussion of macroeconomic impact studies of welfare policies around the globe is provided in section six, all of which confirm a positive causal effect on GDP and fiscal revenues emanating from grant payments to poorer segments of society. This is followed by an overview of economic impact studies conducted on the South African welfare system (section seven) and a section that identifies a number of caveats to be considered in the design of a social welfare system, namely the dangers of fiscal instability, the problems with a universal approach to a BIG and the inherent paradox that exists in the case of certain welfare policies (section eight). Section nine contains the results of the macroeconomic impact analysis of a basic income grant, based on the food poverty line as at the end of July 2022 and utilising econometric modelling, including an estimation of the fiscal cost under two different scenarios. This followed by the customary conclusions and recommendations. Chapter 2: New reflections on the welfare state The topic of government-funded welfare policy has been at the centre of public debate for more than a century. Ever since the Great Depression, the extent of the public sector’s involvement in what is effectively the transfer of productive income from employed persons to people in need has been a focal point of election campaigns throughout virtually all of the world’s democratic countries. Welfare policy is also practised in undemocratic countries, although data on the particular elements and outcomes of such policies in countries with oppressive regimes are not always reliable. Social policy is the term used to describe the manner in which a society deals with the issues of welfare and social protection. Over a period of roughly 100 years, it has developed into a subject matter relating to the full range of social services, including health, education, employment, housing and community development. It also addresses issues relating to social problems, such as disabilities, crime, inequality and poverty. Importantly, as noted by Spicker (2014), social policy is a subject area that borrows from other social science disciplines, mainly sociology, social work, psychology, economics, political science, management, history, philosophy and law. The concepts of “welfare” and the “welfare state” are both ambiguous and are approached differently from one country to the next, especially with regard to issues such as the needs of people and their scope to exert choices in achieving well-being. Despite strong arguments for the collective provision of welfare services, it is important to recognise the direct and indirect roles played by other organs than the state in the delivery of social services and welfare. Welfare has become an imperative, not a choice From an international legal perspective, the recognition of the right to social security has been developed through universally negotiated and accepted instruments that establish social security as a basic social right to which every human being is entitled (UN 1948 & 1966). In this way, the right to social security has been enshrined in several human rights instruments adopted by the United Nations, and is expressly formulated as such in fundamental human rights instruments, namely the Universal Declaration of Human Rights (UDHR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR). Specifically, the relevant Articles of the UDHR are as follows: 22 of the UDHR lays down that: Article 22: Everyone, as a member of society, has the right to social security and is entitled to realisation, through national effort and international cooperation and in accordance with the organisation and resources of each state, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality. Article 25: 1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, and medical care and necessary social services, and the right to security in the event of unemployment, sickness, invalidity, widowhood, old age or other lack of livelihood in circumstances beyond his control. 2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection. Spicker (2014) identifies five basic arguments for the collective provision of welfare services: Humanitarian - societal concerns about poverty and need have been central to the evolution of the developmental role of the state Religious - s everal of the world's major religions view charity as a religious duty. Beyond charity, Catholicism recognises a duty of social solidarity (or mutual social responsibility), whilst Judaism, Islam and Lutheran Christianity require some form of collective responsibility for one's community. Mutual self-interest - many welfare systems have developed, not from state activity, but from a combination of mutualist activities, gradually reinforced by government. Democratic - social protection has developed in tandem with democratic rights Practical - welfare provision has economic and social benefits Wealth taxes should be avoided Any consideration of an extension to a social protection system that is already comprehensive will require scrutiny of its likely impact on fiscal stability. The current debate on this topic in South Africa has occasionally touched on the option of introducing a new wealth tax (several wealth taxes already exist), in order to fund an income grant for the unemployed. When considering the imposition of another wealth tax, the underlying motivation for such a tax must be considered, as well as its likely impact on the economy – specifically the narrow base of highly skilled people that will bear the brunt of this tax. There is little doubt that a new wealth tax should be avoided, as confirmed by a brief discussion of empirical evidence on this issue. Evidence from the OECD and BRICS In 2018, a study was conducted by Arendse and Stack on the international experience with wealth taxes over the past three decades. They found that only one of the 40 countries included in the groupings for the Organisation for Economic Cooperation and Development (OECD) and Brazil, Russia, India, China and South Africa (BRICS) has used a recurrent wealth tax on a sustained basis as a part of its economic policy. The levy of a wealth tax is not common and, as a rule, has only been implemented as a crisis measure to generate additional revenue in the face of an economic setback, usually involving a very short lifespan. Furthermore, none of the countries considered in this study have both estate or inheritance tax and capital gains tax on the assets of an estate. No precedent therefore exists elsewhere for a policy change that adds a new wealth tax to the estate duty, donations tax and capital gains tax that already exists in South Africa. Due to the wealth taxes representing less than 1% of GDP, Arendse & Stack (2018) argue that, in the case of a need for additional fiscal revenues, other types of tax or increases in existing taxes (such as the value-added tax) should be considered. Both Canada and Australia have deemed disposals on death like the capital gains tax deemed disposal rule in South Africa, but neither of those countries has estate or inheritance tax. South Africa is the only country that taxes the estate of a deceased person as well as the deemed disposal of that person’s assets on death (Ernst and Young 2015). One of the conclusions arrived at by Arendse & Stack is that South Africa’s estate duty and donations tax systems compare favourably with similar systems used in several other countries internationally in terms of the rates and exemptions that apply. Taxing wealth transfers upon death is one of the most efficient form of wealth tax as it has less impact on economic decisions than other forms of wealth tax, although the real achievement of this efficiency will depend on the use to which the tax revenue is put. If there was any meaningful yield and the tax was spent appropriately, it could go some way towards addressing economic inequality and thus contribute to addressing wealth inequality. The reality, however, is that wealth taxes are not a viable option and can do more harm than good, especially in view of the following considerations: The Covid pandemic has served to fast-track the fourth industrial revolution in creating an environment of high and increasing levels of international mobility of highly skilled persons, who will tend to seek the most advantageous tax administration they can find In view of the low yields on the sparse wealth taxes internationally, it is very unlikely that there would be sufficient tax revenue to have any impact (Evans 2013) Administrative constraints have usually made wealth taxes both unproductive and inequitable in developing countries and their most sophisticated version – the net wealth tax – has proved a costly mistake in developing countries that have attempted to implement it (Bird 1991) There is no evidence to suggest that South Africa, with its small base of taxpayers and very few taxpayers with substantial wealth, would be able to generate meaningful revenue from a wealth tax. In attempting to address poverty and inequality, attention should rather be given to measures that will stimulate the economic growth and employment creation. This requires that available capital should be concentrated where it is most productive and can add the most value, which is mainly in the hands of entrepreneurs and investors. South Africa’s recent history suggests that transferring additional capital to the government through a wealth tax will tend to stifle these objectives. Evidence from South Africa - the Davis Tax Committee The background to this particular report by the Davis Tax Committee (DTC - 2018) was the realisation that existing wealth taxes in South Africa did not constitute significant revenue streams to government (except at municipal level) and that the high level of wealth inequality posed a threat to social stability and inclusive growth. At the outset, the DTC Report provided a discussion on useful criteria for evaluating a wealth tax and also certain critical principles that must be considered when designing a well-functioning wealth tax system. Three main constraints associated with the process of designing a tax were highlighted: Tax efficiency becomes challenging when the scope of introducing a net wealth tax not only generates distortions of people’s willingness to work, but also impacts choices linked to wealth accumulation and disposal which explicitly affect the tax rate Administrative costs can be large when designing a system that levies taxes on wealth, in contrast to taxes on wealth transfer. Some forms of wealth are hard to measure and some forms are easy to hide or convert into asset classes that fall outside the defined base Tax reform and its implementation inevitably produces both winners and losers. Losers may express discontent through capital repatriation or changing assets classes. This was followed by an overview of the state of wealth taxes and wealth transfer taxes in several countries, in order to provide some notable lessons from which South Africa can draw experience. It was pointed out that several countries had abandoned the taxation of net wealth during the past two decades, including Denmark, Germany, Finland, Sweden, and India. A number of reasons were identified for the universal aversion towards wealth taxes, including the following: High costs associated with classifying and measuring net assets and structuring the tax collection system Difficulties in accounting for global assets Negligible contributions to the total tax revenue The absence of a substantial tax base (especially in developing countries like India) Tax migration (driven by differential rates of wealth taxes and banking secrecy laws) Various complexities surrounding tax administration and enforceability In the DTC’s consideration of the South African case, it was pointed out that a wealth tax is merely one tool, with which to address the pressing problem of inequality. Other methods of redress include land reform and programmes on the expenditure side of the fiscal budget such as increased access to quality health and education and the provision of infrastructure as well as effective government leading to growth and employment. The report mentioned that wealth taxes already exist but that several difficulties and unintended consequences would need to be addressed prior to implementing further wealth taxes. On the issue of taxes on property transactions, the DTC argued that the current transfer duty was second best to a properly functioning national property tax. The reality, however, was that systems were not in place to roll out a national property tax. While some municipalities had up-to-date and reasonably uncontested Municipal Valuation Rolls, this was not the case for all parts of the country. In conclusion, the DTC recognised that while a recurrent net wealth tax may be an admirable and desirable method to pursue the objectives of equity, more work was needed to ensure that the tax was well designed and would yield more revenue than it costs to administer. The Colombian experiment In a study to determine whether wealth taxation van work in developing countries, Londoño-Vélez (2019) conducted research into responses to wealth taxes in Colombia, utilising quasi-experimental variation introduced by tax reforms in 2010 and discontinuities in the wealth tax schedule. Each bracket of net worth was assigned an average tax rate, creating jumps in tax liability at bracket cut-offs. For example, in 2010, a taxpayer reporting 999.999 million Colombian pesos (R3.87 million at the February 2022 Oanda exchange rate) in wealth would have been exempt from the wealth tax. In sharp contrast, a taxpayer reporting merely one additional peso would have been liable for 1% of all taxable net wealth, resulting in a tax bill of 10 million Colombian pesos (R38,692). In the absence of responses to the wealth tax by individuals, reported wealth would be distributed smoothly around the bracket cut-off level. If, however, individual tax payers avoided the jump in tax liability, there would be so-called “bunching” in reported wealth just below this level. It follows that the degree of “bunching” indicates the responsiveness of reported wealth to the tax (Kleven and Waseem 2013). The study found large and immediate responses to wealth taxation, providing clear evidence that wealthy individuals respond to the incentives and/or disincentives created by tax policy. In the study’s main analysis, the marginal “buncher” would have reported 21% more wealth in the absence of the wealth tax, resulting in revenue losses of up to one-fifth of the mechanical projected revenue. Although the study by Londoño-Vélez found that enforcement capacity of a wealth tax could be strengthened by wider coverage of third-party reporting, this would also require systematic cross-validation of reported information and increased scrutiny of high net worth taxpayers – clearly a near impossible administrative task in most developing countries. Any serious debate on the topic of wealth taxes should bear in mind that wealth is a stock concept that depends to a large extent on asset prices, which are uncertain and can fluctuate significantly throughout a particular fiscal year (Jakobsen et al. 2018). The study by Londoño-Vélez found that, in Colombia, there had been limited systematic cross-checking of items reported in the wealth tax returns using third-party reported information. As a result, it was possible for individuals to avoid taxes by reporting lower values of assets and inflating debt. Economic & fiscal trade-offs Virtually every government in the world recognises these arguments via some form of collective social protection provision. Ongoing debates are not about whether welfare policies should exist, but about how much provision there should be, and how it should be implemented. In the design of social welfare policies, the discipline of economics should always be borne in mind, as a lack of fiscal resources may thwart the ambitions of a particular government to provide comprehensive welfare programmes to its citizens. Empirical evidence abounds that confirms a positive correlation between higher per capita incomes and more extensive systems of social protection. A detailed analysis of changes in poverty in a large sample of developing countries by Kraay (2004) showed that most of the variation in changes in poverty is due to economic growth, suggesting that policies and institutions that promote broad-based growth should be central to the formulation of welfare policies. One of the perennial challenges facing policy makers around the globe is the difficulty of this classical trade-off, namely knowing which comes first, wealth or welfare. Scholarly research into the topic of a public welfare system that strives to strike a balance between sufficient incentives for seeking employment and the funding, via the taxation system, of adequate social protection measures for the poor has been in abundance since especially the latter part of the 20th century, when fiscal pressures and globalisation conspired to force a re-examination of the limits of the welfare state. The latter term is often bandied about without conceptual clarity – to the extent that is can even be defined as a slogan. The concept of ‘the welfare state’ has always been highly politicised, especially in post-industrial countries and its ambiguity is a trademark. Unfortunately, the debate on the pros and cons of the welfare state is often disjointed, especially due to the perception created by socialist-orientated commentators who often falsely accuse conservative political leaders of wishing to ‘dismantle’ the welfare state. Against the background of the minimal changes over the past few decades in the design and range of public welfare programmes around the world, nothing could be further from the truth. The fact is that electorates in the post-industrial countries continue to support the levels of public spending on welfare that have become the norm in the post-World War II era, but a plateau has certainly been reached in terms of the fiscal commitment to welfare spending. The latter was necessitated by a combination of rising life expectancy, lower fertility rates and slower economic growth in many high-income countries and was exacerbated by the global financial crisis of 2008/09. Although the causes of the financial crisis were complex, its roots can be traced to legislation passed by the US Congress two decades earlier to encourage financing for affordable housing – arguably an indirect form of welfare policy. Ultimately, the development of predatory lending targeting low-income home buyers in a relatively unregulated environment, led to the massive over-valuation of the financial instruments underpinning this market. The development of mortgage-backed securities (MBS) and a web of financial derivatives linked to these securities eventually collapsed in value, leading to an international banking crisis and the bankruptcy of Lehman Brothers in September 2008. It led to the worst global recession since the Great Depression of the early 1930s, which had a profound impact on the ability of developing countries to pursue welfare policies. Welfare & work – seeds of a new approach In the US, several authoritative scholars of sociology, including Trattner (1989) and Gans (2010) have tended to over-emphasise ideological differences in the manner that the US government has approached the country’s welfare policy, often resorting to fairly emotional statements. Trattner (1989), for instance, accuses the so-called US welfare reform act of 1996 by Pres. Clinton’s administration as having removed the entitlement to welfare that was first enacted 60 years earlier during the Great Depression. He goes further by referring to Pres. Ronald Reagan’s tenure as a period of “…unremitting horror for the nation’s poor”, despite the fact that the Reagan-era was characterised by significantly higher growth and employment creation than the tenure of the previous head of state (who represented the Democratic Party). After the first five years of the 1996 US welfare reforms, Moffitt (2002) reviewed the evidence and concluded, inter alia, that a large measure of success had been attained for one of the four goals listed in the new legislation, namely the encouragement of job preparation and work. The overriding single piece of evidence showing that progress has been made on the agenda of helping mothers on welfare work is the dramatic increase in employment rates among single mothers in the decade between 1990 and 1999. Employment rates among single mothers, the group most affected by welfare reform, jumped markedly since 1994. Employment rates rose from 60 percent in 1994 to 72 percent in 1999, a very large increase by historical standards. Among single mothers who have never been married (the group with the lowest levels of education and some of the highest rates of welfare receipts) employment rates rose even more, from 47 percent to 65 percent over the same period (Moffitt 2002). According to Moffitt’s evidence-based research, it is clear that the American public regards work by welfare recipients as a defining goal of state and federal welfare laws, the pursuit of which deserves the highest priority in social welfare policy. Work among welfare recipients is widely regarded as part of the social contract, i.e. a quid pro quo for the provision of income support, as well as a source of self-esteem and self-reliance among single mothers. This in turn is thought to increase the mothers’ chances for long-term economic improvement for themselves and their children. Three realties for the future Despite the omnipresence of differences in the design of a state’s welfare function, three realities that should guide future deliberations on this topic are: Firstly, the fact that the divide between so-called conservative and liberal political parties is not so great as to prevent an approach that combines substantial expenditure on public welfare programmes with a large measure of pragmatism, especially in the crucial area of fiscal stability. Secondly, workfare has become a more prominent policy option than welfare per se . This approach has a three-pronged attractiveness to policy makers: The private sector gains from an expansion of the workforce, the enhancement of human capital and the likelihood of reduced social conflict, all of which exert a positive impact on productivity and profitability. Citizens benefit from training, more widely accessible job opportunities and better rewards, whilst governments have a relatively low-cost option available to the difficulties they face in maintaining fiscal support for social services as inequalities persist. A third issue is the emergence of the fourth industrial revolution, which is giving rise to the dominance of highly skilled services professions, especially in information technology. These experts are internationally mobile and can exercise wide-ranging choices regarding their preferred domicilium citandi et executandi for purposes of taxation. In a post-industrial world economic order, governments will not have as much leeway as in the past when preparing national budgets – generous welfare systems have to be funded by taxpayers and may threaten a state’s ability to fund its primary functions, namely public order, health and education. It is these realities that have become a key theme in the discussions and research on the transformation of the welfare state, particularly in Europe. Esping-Andersen (2000), has been at the forefront of stressing the need for an overhaul of redistribution policies and social rights as urgent priorities, in order for a closer alignment to evolving realities, especially longevity, knowledge-based economies and the fiscal sustainability of welfare states. Research by Handler (2009) confirms the broad-based existence of a new approach towards the state’s role in welfare, especially in Europe, where the erstwhile passive implementation has been substituted by more active labour market policies or workfare. In this process, a number of important characteristics have come to the fore. These include the following: Stricter rules have been applied to eligibility, mainly via means testing Conditionality has become more prevalent, especially in the areas of human capital formation and health screening Workfare has become virtually synonymous with active labour market policies, mostly designed to encourage people to enter the labour market In principle, near-universal support exists for state-organised welfare institutions and programmes. The debate on the extent of state intervention and priorities for welfare-state reform nevertheless remains lively, especially due to the regular occurrence in many countries of economic austerity, fiscal constraints, and changes to the labour market and demographic structures. It is not surprising, therefore, that a shift has occurred in the design of socio-economic policies over the past two decades, especially in Europe. According to Taylor-Gooby (2018), this involves a reduction in state intervention, tight constraints on government spending, expanded use of markets and of private sector services, and stronger emphasis on work incentives in social security. Workfare – towards a new social contract The essence of the new welfare regime unfolding in many parts of the world is that beneficiaries now have obligations as well as rights. In return for benefits, beneficiaries must seek work or participate in work-related activities, including education and training. The latter represented one of the key tenets of the 1996 welfare reforms in the US. According to Taylor-Gooby (2001), the principle underpinning the new-found emphasis on benefit conditionality is that paid work continues to represent the most legitimising basis for entitlement. The issue of legitimacy raised by Taylor-Gooby and other researchers has become highly relevant in advanced economies. Workfare is increasingly being embraced as a sensible and socially responsible welfare policy option, not merely from the perspective of macroeconomic stabilisation objectives and containing the costs of state welfare, but also due to an evolving consensus on striking a balance between individual responsibilities and individual rights in society. Attention is increasingly shifting from debates about the level and reach of welfare expenditure to questions about the desirability and usefulness of particular welfare programmes. As a result, the principles of selectivity and targeting within social assistance are now being restored as desirable features of an overall public welfare programme. The new wisdom incorporates the view that traditional cash benefits fail to support a proportion of recipients in becoming self-sufficient. Policy makers in the advanced economies began to turn to new policies which seek to improve the skills and capabilities of jobless people who have been unable to find work, as well as reforms aimed at reducing disincentives to take on work. In analysing the recent welfare reform experiences of a number of advanced economies, Lødemel (2005) points out that Norway, for example (a country that does not have a welfare crisis), has adopted workfare. After a lengthy period of expansion of the welfare state, both the mainstream conservative and liberal political parties agreed that extensive rights to generous state welfare benefits were threatening the ability of people to become self-sufficient and that individual responsibilities and obligations are more important than individual rights. Several other advanced economies have also made progress in reforming their welfare policies towards the introduction of a new type of social contract between the state and able-bodied people in need of welfare – one that obliges social assistance recipients to work as part of the assistance contract. In research that was confined to high income countries in the northern hemisphere, Esping-Andersen (2000) noted some implicit advantages of workfare policies that are also highly relevant to upper-middle income countries. Referring to what is termed low-end service jobs, the attraction of supplementing social grants by active labour market policies are clear: They provide easy-entry jobs for relatively young people, low-skilled workers, and women returning to the labour market. Such services, which could be facilitated within the ambit of public works programmes could fulfil a positive function if the period of low earnings and relatively unrewarding work is temporary. Such jobs could provide a bridge into the labour market and supplement income. Esping-Andersen warns against assessing the costs and benefits of low-end jobs on the basis of snapshot notions of equality for all, here and now. The only reasonable frame of reference should be the entire span of working life. Some evidence Ever since the turn of the century, a new approach to welfare policy has become prominent in social policy debates. It can be defined as the enhancement of human capital via training and the mobilisation of people into paid work. Ensuring fairer access to opportunities should ideally be part of this process. From a political perspective, the aims of a shift towards workfare programmes are tantalising and include prospects for greater fiscal stability, increased self-sufficiency of beneficiaries, the prevention of social exclusion and an increase in employment. Some evidence of its impact is briefly discussed. 1. Lødemel (2005) – Europe A comprehensive evaluation of the effects of workfare policies in European countries by L ødemel (2005) confirmed the positive employment effects of workfare programmes. Importantly from a fiscal perspective, it also resulted in increased earnings after participation in such programmes, thereby broadening the tax base. Another positive outcome is the lowering of barriers to entry into the formal sectors of the economy, especially when participants also engage in other active labour market programmes. As a general rule, participants with placements in private sector jobs stand a better chance of entering regular employment than those in the public sector. The research also indicates that being activated in workfare programmes encourages younger people to enhance their educational attainment. 2. Taylor-Gooby et al (2015) – Europe The According to research by Taylor-Gooby et al (2015), the general move towards ‘new welfare’ gathered momentum during the past two decades, given extra impetus by the 2007–09 recession and subsequent stagnation. While employment rates rose during the prosperous years before the crisis, there was no commensurate reduction in poverty. Over the same period the share of economic growth returned to labour fell, labour markets were increasingly de-regulated and inequality increased. This raises the question of whether new welfare's economic goals (higher employment, improved human capital) and social goals (better job quality and incomes) may come into conflict. In 2015, an assessment of the impact of social policies based on the principles of workfare in 17 European countries over the period 2001 to 2007 was conducted by Peter Taylor-Gooby and two associates. It showed that new welfare was much more successful at achieving higher employment than at reducing poverty, even during prosperity, but that the approach pays insufficient attention to structural factors, such as the falling wage share, and to institutional issues, such as labour market deregulation. These issues can, however be adequately addressed by complementary polices such as closer cooperation between employer bodies and government in the design of training programmes aimed at the skills requirements of the private sector, where the bulk of employment resides. 3. Report on the State of Social Safety Nets (2018) – global The World Bank’s 2018 Report on the State of Social Safety Nets pays scant attention to the ability of public works programmes (PWPs) to reduce poverty, mainly because of a dearth of information that included monetary values. The report nevertheless provides significant detail on the types of PWPs implemented by developing countries, as well as the number of people that have benefited from these programmes. Table 2.1 depicts the number of beneficiaries of PWPs in upper-middle income countries per thousand of their populations, once again confirming South Africa’s high international ranking for progress with combating poverty via social protection policies. When taking countries in lower income categories into account, it becomes obvious that PWPs possess the ability to benefit large numbers of unemployed people via employment creation, albeit mostly at much lower wages than in the formal sectors of the economy. The numbers of beneficiaries from PWPs are quite impressive. For reference years that mostly fall between 2011 and 2016, more than 97 million people benefited from PWPs, all of whom received remuneration for working on a variety of projects related to infrastructure. It should be noted that India was responsible for more than 75 million of these beneficiaries, but it is nevertheless clear from the data in table 2.1 that PWPs play an important complementary role in the design of social protection policies. According to the Department of Public Works and Infrastructure (DPWI), the Expanded Public Works Programme (EPWP) created more than one million work opportunities in the 2021/22 financial year, of which 41% were jobs for the youth i.e. 18 - 35 years of age. 4. McCord (2005) – South Africa & Malawi A study conducted for the Public Works Research Project of SALDRU, at the School of Economics in the University of Cape Town (McCord 2005), examined the role of public works programmes (PWPs) in South Africa and Malawi as a social protection instrument (with the aim to reduce poverty and vulnerability). It found that one of the advantages of PWPs is their ability to simultaneously create public goods and provide employment for those unable to find alternative employment. From a political perspective, the attraction of public works over alternative social protection initiatives is based on the following: First and foremost, PWPs create employment at remuneration levels that are not subject to personal income tax, resulting in a high degree of progressivity Beneficiaries invariably represent the bottom income quintile and their work effort is rewarded, which avoids to a large extent the perceived dependency effects of direct income transfers No trade-off exists between productive investment in infrastructure and expenditure on welfare as public works provide social assistance and create assets. 5. Escudero (2018) – Peru A workfare programme known as Construyendo Perú was implemented in Peru from 2007 to 2011, with the objective to support unemployed people confronted with poverty. In estimating the medium- to long-term effects of this programme, Escudero (2018) utilised regression discontinuity design (RDD). Her study was part of a series of research projects undertaken by the International Labour Organisation (ILO) aimed at assessing the effectiveness of a ctive labour market programmes in Latin America and the Caribbean. This methodology is a quasi-experimental pre/post-test design that aims to determine the causal effects of interventions by assigning a cut-off or threshold above or below which an intervention is assigned. By comparing observations lying closely on either side of the threshold, it is possible to estimate the average treatment effect in environments in which randomisation is unfeasible. Recent study comparisons of randomised controlled trials (RCTs) and RDDs have empirically demonstrated the internal validity of this methodology (Chaplin, et al . 2018 ) . The paper concluded that the workfare programme helped raise employment and reduced inactivity for certain groups of beneficiaries but at the cost of locking participants into lower quality jobs, especially in the informal sectors. Specifically, the programme increased the probability of women, poorly educated participants and the overall population of being employed and attached to the labour market. The lack of positive employment effects for certain groups, especially more highly educated men, may be related to deadweight losses (i.e. participants would have found a job in the absence of the workfare programme), as most participants were already engaged in a remunerated activity before the programme started. The research also found that the workfare programme increased the probability of participants securing employment in the informal sectors of the economy. These effects were statistically significant for both men and women. The effects seem to be related to the impact of the programme on the status of employment - i.e. increasing the probability of participants working for their own accounts, whilst decreasing the probability of working as waged employees. In other words, the programme increases the odds of participants working in occupations aligned closely to informal sector activities. An important observation from this research is the impact of the choices of public investment projects underpinning the workfare intervention. According to Escudero (2018), changes in political priorities and availability of resources in 2009 appear to have driven a pronounced move from infrastructure projects to services sector projects by the public sector between the first and last two years of the programme’s implementation, with detrimental effects on the programme’s results. The paper also found that in addition to the challenges posed by the selection and characteristics of public investment projects, the programme suffered from multiple participation and over-representation of particular groups, which serve as an indication of the need for enhanced enforcement of targeting rules and eligibility criteria in general. 6. Cruces et al (2017) & World Bank (2022) – Bolivia Bolivia’s economic crisis during the past quarter of the 20th Century is well-documented. It was caused by a combination of economic mismanagement, wasteful public sector investment and negative external factors such as high global inflation. The country’s national income was declining, hyper-inflation set in and no new local or foreign capital was invested in the economy. President Victor Paz Estenssoro came into office in August 1985 and had the vision to immediately embark on a structural adjustment programme, despite the knowledge that such a policy would only deliver dividends after a substantial measure of fiscal and monetary stability had been reinstated – which would take several years. Although inflation was brought under control almost immediately and the economy started growing again in 1987, unemployment in the mining sector rose and poverty worsened. In an attempt to cushion the adverse short-term effects of structural adjustment, Bolivia launched the Emergency Social Fund (ESF) late in 1986. The ESF was designed as a Socio-economic Development Fund (SEDF), with the mandate to create jobs by funding a variety of public works projects and by raising the level of social services in those parts of the country where poverty and unemployment was the most prevalent. Although an SEDF is by no means designed as a centrepiece of social protection policy, it can play an invaluable role in a workfare-type of approach that fits the mould of active labour market policies (ALMPs), as is evident from the characteristics listed in table 2.2. The ESF was very much result-oriented. It had as a target to spend US$180 million in three years, of which Bolivia only contributed US$8 million. Management believed that if the World Bank became interested in the project, other donors would follow easily. This was achieved and the World Bank was ultimately prepared to be flexible, e.g. by allowing the ESF to negotiate directly with contractors for projects up to US$250,000. The Fund’s major objective was to finance labour-intensive infrastructural and social projects with the minimum of red-tape. The ESF reported directly to the president and was given a free hand to seek funding from foreign governments and international agencies. The responsibility for hiring contractors and overseeing the execution of projects was left to the organisations receiving funds from the ESF. The ESF itself was built up and turned into an efficient organisation in a very short period of time. Its basic operation was simple & effective, as depicted by the diagram. The World Bank also managed to get projects appraised, negotiated and sent to its Board of directors for approval in about two months, instead of the normal 12 to 18 months period. By 1988, nearly US$60 million had been pledged to the ESF by the Bolivian government, the World Bank and donors such as United Nations Development Programme (UNDP), Switzerland, West Germany, Great Britain, Canada, The Netherlands and the United States. Italy, Sweden and the Organisation of Petroleum Exporting Countries (OPEC) provided assistance at a later stage. Between 1988 and 1991, a substantial body of evaluations were conducted on the Bolivian Emergency Social Fund (ESF), with a view to assessing how well it worked. Table 2.3 depicts the average technical quality rating of the public works that were undertaken under the ESF, by location and by project type. These ratings were conducted for a sample of 186 different projects by independent engineers. As pointed out by Grosh (1992), the ESF managed to appraise, finance, and monitor the implementation of thousands of small development projects. This was no mean feat given the prevailing public sector climate in Bolivia, where, typically, only about 50 percent of planned public investments came to fruition. The division of labour between the programming, evaluation and supervision departments and the good collaboration between them is considered one of the reasons of ESF's success. Bolivia’s ESF has attracted a great deal of both national and international attention, and several programmes bearing similarities to the ESF have been set up in other developing countries. Proponents of an SEDF cite its demand-based approach, its efficiency and transparency, and its rapid results as a clear-cut rationale for consideration as a policy to complement social protection policies via public works and active labour market policies. In the evaluation of the macroeconomic impact of the Bolivian ESF, it is important to note the positive longer-term effects, as emphasised by research conducted by Cruces et al (2017). During the ensuing years and especially since 2000, Bolivia experienced positive economic growth and improved all of the country’s labour market indicators. Despite the global recession caused by the financial crisis of 2008/09, Bolivia’s economy managed to sustain positive growth during this unfortunate episode. Over the past two decades, unemployment has declined, educational levels improved and all the indicators of poverty and inequality decreased substantially (World Bank Aspire 2022). Although criticism has been voiced against the programme's ability to provide permanent poverty alleviation, the objective of an SEDF is to simultaneously improve infrastructure and social service delivery and to create unemployment for relatively low-skilled workers, who invariably emanate from the poorest segments of society. Criticism of and SEDF’s institutional position outside the public sector is unwarranted, as this aspect involves less bureaucracy and remains subject to sound corporate governance oversight, including that of the various global sponsoring countries and a Board that includes government representatives. The need for a diversified approach – factor market reform It is important to recognise the shortcomings of welfare policies that are designed to provide some security of income to the poor. Grants, whether conditional or not, represent the core element of such strategies. As important as these policies are, even when well targeted, they do not suffice for addressing the problem of unemployment. Cash transfers certainly assist poor individuals and families that are already in poverty and at serious risk, as proven by a plethora of international research, but they are invariably based on income redistribution, which mitigates to a varying degree a country’s economic growth potential. In the absence of a welfare system that is aligned to a pragmatic growth and development strategy, long-term poverty reduction will remain elusive. In order to reverse the cycle of poverty that characterises many poor communities, a broad-based strategy is required that ensures the sustainability of the fiscal resources required for immediate poverty reduction (such as cash grants) as well as policies designed to enhance the income generation potential of poor people. The latter should ideally consist of long-term investments in human capital, especially health, education and training. An adequate level and quality of public social expenditures in these critically important areas are widely regarded as essential elements of a long-term poverty reduction programme. The World Bank (2000) has developed a so-called trilogy of policies which are necessary for reducing poverty, namely security, opportunity and empowerment. Investment in human capital is a key element of such a strategy, as it can be designed to straddle the provision of some security to the poor (via conditional grants) and creating better opportunities for the poor via enhanced participation in the economic growth process. According to Wodon & Velez (2001), Pro-growth reforms in urban and rural factor markets can help in improving earnings and employment opportunities for those who are less skilled, thereby resulting in poverty reduction. In a review of several studies on the socio-economic impact of social welfare in South Africa, Woolard & Leibbrandt (2013) showed that the existing grant system seems to be promoting desirable education and health behaviours, even though these grants are unconditional. Their research makes the point, however, that the ultimate return to these positive human capital outcomes should be an ability to become a productive citizen, which suggests that a more virtuous interaction with the labour market should be considered in future deliberations around welfare policy in South Africa. Factor market policies have the added advantage of being able to generate more immediate beneficial impacts and examples of such policies can be found in many developing countries, especially in South America. A variety of socio-economic programmes to augment cash transfers have been implemented with a large measure of success in Mexico (Aguila et al 2012). They include: Opciones Productivas (options for productivity), which allows individuals in the marginalised regions to develop productive projects and opportunities for self-employment, which assists in the generation of additional income and the well-being of their households. It also provides access to financial services, such as saving and lending. Another programme provides beneficiaries in rural areas with transitory employment opportunities and training if it is required Mexican craftsmanship is supported by an agency that manages four different programmes to market crafts, organise contests, train craftspeople, and finance the production of crafts Tu Casa (your house) is an initiative that aims to reduce families’ vulnerability by increasing their wealth, combining own savings with subsidies for housing acquisition or improvement A fifth programme focuses on rural and indigenous communities, providing families with subsidies to construct, buy, or improve a home. Measures designed to enhance the functioning of factor markets should ideally form an integral part of a developing country’s welfare policies. While investments in human capital tend to have an impact on poverty only in the longer run (for example, when healthy and better-educated children reach adulthood), factor market policies may have more immediate beneficial impacts. Chapter 3: The Broader Context to Social Grants Trends in social benefits received In South Africa social grants form part of a broader system of social protection that includes social security funds – such as the Unemployment Insurance Fund and the Compensation Fund – where households are both contributors and beneficiaries. Figure 3.1 (top) shows the scale of the gross social benefits received as a share of gross household disposable income. The gross social benefits received were equivalent to 12 percent of gross household disposable income in 1995. This rose to over 14 percent in 1998 and then declined steadily to around 10 percent over the following decade. In the wake of the Global Financial Crisis of 2008/9 it trended higher to exceed 17 percent in 2015, then generally stabilised over the subsequent four years. The increase in benefits received during the first year of the COVID-19 pandemic saw the ratio rise sharply – from 16.6 percent in 2019 to 22.3 percent in 2020. In 2021, social benefits received were equivalent to 19.6 percent of the gross disposable income of households. Figure 3.1 (bottom) indicates net social benefits received (i.e. gross benefits received less contributions paid) as a share of gross household disposable income. It is apparent that, with a few exceptions, South African households were generally net contributors to social benefits (i.e. contributed more than they received back in benefits) between 1995 and 2008. However, since 2009 a progressively greater share of household disposable income has been subsidised from outside the social benefit system (mainly the tax system), or through reductions in the accumulated surpluses of the social security funds. Figure 3.2 shows the value of these net transfers from/to households. Whereas South African households paid R20 billion more in social contributions than they received back as benefits in 2008, by 2015 they were receiving net benefits equivalent to R131 billion and in 2020 this rose to R344 billion. Figure 3.3 shows the relative trends in various metrics related to social benefits. Between 1995 and 2021 the nominal value of social benefits received increased by 1,475 percent (an average of 10.8 percent per annum). By contrast, the gross disposable income of households rose by 869 percent (8.4 percent per annum), primary income generated by households [1] increased by 775 per cent (8.4 percent a year), social contributions paid were up 714 percent (8.1 percent a year) and consumer prices increased by 321 percent (5.5 percent a year). The start of the accelerated growth of social contributions received coincides with the Global Economic Crisis of 2008/9 as well as the adoption of the concept of a developmental state. The extent of poverty in South Africa The 2030 Agenda for Sustainable Development adopted by all United Nations member states in 2015 identifies 17 Sustainable Development Goals (SDGs) that “ recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests” . In relation to the objective of eliminating poverty, the SDGs set the following goal targets: By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions. Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable. By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance. By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters. Ensure significant mobilisation of resources from a variety of sources, including through enhanced development cooperation, in order to provide adequate and predictable means for developing countries, in particular least developed countries, to implement programmes and policies to end poverty in all its dimensions. Create sound policy frameworks at the national, regional and international levels, based on pro-poor and gender-sensitive development strategies, to support accelerated investment in poverty eradication actions. Different poverty lines are used when attempting to measure poverty. Statistics South Africa employed the internationally recognised cost-of-basic-needs approach to produce three poverty lines, namely the Food Poverty Line (FPL), the Lower-Bound Poverty Line (LBPL), and the Upper-Bound Poverty Line (UBPL). These lines capture different degrees of poverty and allow the country to measure and monitor poverty at different levels. There are also internationally-used measures of both extreme and less-extreme poverty. The five different poverty lines included in this analysis are defined as follows: Food Poverty Line (FPL). The FPL is the rand value below which individuals are unable to purchase or consume enough food to supply them with the minimum per-capita-per-day energy requirement for adequate health. Lower Bound Poverty Line (LBPL). The LBPL is derived using the FPL as a base, but also includes a non-food component. Individuals at the LBPL do not have command over enough resources to purchase or consume both adequate food and non-food items and are therefore forced to sacrifice food to obtain essential non-food items . Upper Bound Poverty Line (UBPL). The UBPL is also derived using the FPL as a base, and also includes a non-food component. Individuals at the UBPL can purchase adequate levels of both food and non-food items. Daily income of less than the equivalent of PPP$1.90/per person/day. The global threshold of extreme poverty is set by the World Bank at 1.90 international (PPP) dollars per capita per day. Over 900 million people globally were estimated to have lived under this line in 2012, and over 700 million in 2015. Daily income of less than the equivalent of PPP$3.20/person/day. A less extreme international definition of poverty refers to people living on incomes less than the equivalent to 3.20 international (PPP) dollars per capita per day. The National Development Plan seeks to see the full population living above the LBPL by 2030 [2] . Figure 3.4 shows the monetary values associated with these different poverty lines. The UBPL increased from R834 per person per month in 2012 to an estimated R1,347 per person per month in 2021. By contrast, the equivalent rand value of the international PPP$1.90/day [3] rose from R295 per person per month to R412 over the same period. Figure 3.5 indicates the average annual changes in the monetary (rand) values associated with the different poverty lines. These are contrasted with the corresponding average changes in overall consumer prices as well as average food inflation. It is noteworthy that the Food Poverty Line (FPL) increased at a faster rate (6.1% p.a.) than the other poverty lines – due largely to the fact that CPI food inflation was higher than All Items inflation. The average annual changes in the international measures (PPP$1.90 and PPP$3.20 per day) were the same at 3.8 percent. This suggests that – on average – annual inflation in South Africa was 3.8 percent higher than the weighted average for other countries over this period. Estimating the number of poor people in South Africa There are a number of challenges associated with estimating the number of poor people in South Africa according to the different poverty lines. The most significant of these is that comprehensive analysis of the incomes and expenditures of individuals residing in South Africa is done infrequently as part of the Census. While this is supplemented by smaller sample surveys such as the General Household Survey the focus is typically on the income and expenditure of households rather than individuals. Households are defined in the System of National Accounts (SNA) as “a small group of persons who share the same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food." [4] It is therefore assumed that all the members of a household have the same poverty status: if the collective income of the household is below the corresponding poverty line, all members of the household are classed as poor. However, incomes and expenditures are typically measured at the household level, while poverty lines are defined at the individual levels and household sizes can vary greatly [5] . To convert from households to individuals it is therefore necessary to know the average household size for each income or expenditure category. The approach adopted in this study is as follows: 1. The annual expenditure range per expenditure decile published in the Consumer Price Index was used. Annual values were extrapolated for the years in which new CPI weights were not calculated. The 2020 and 2021 values were estimated using the corresponding CPI inflation for each expenditure decile and the overall change in total household spending. This generates a range of possible household expenditure per decile over time – as shown in Table 3.1. 2. The average number of people per household per expenditure decile was then estimated using data contained the General Household Survey [6] . This was then used to calculate the average expenditure per person per month over time – as reflected in Table 3.2. 3. The monetary values of each poverty line were then compared with the corresponding lower, upper and mid-range expenditure values for each decile. If the value of a particular poverty line in a particular year was somewhere between the expenditure values for the second and third decile, then the number of people estimated to be poor would be two times the relevant population decile (one tenth of the population estimates for that year) plus the ratio of the difference between the poverty line value and the lower-limit of the expenditure decile and the difference between the lower- and upper-limit of the expenditure decile multiplied by the number of people in the population decile. The resulting “headcount” estimates for each of the poverty lines are shown in figures 5 to 9. Figure 3.6 shows the resulting estimated number of people that would be classed as poor in relation to the Food Poverty Line (FPL). In 2021, the number of people that had insufficient income to meet their essential food intake requirements to ensure adequate health ranged from 9.9 million (associated with the upper-limit of the expenditure decile) to 14.9 million (associated with the lower-limit of the expenditure decile), with a mid-range of 12.4 million people. The number of “food poor” people initially declined between 2012 and 2015 – with the mid-range falling from 13.8 million to 9 million. However, since 2015 the number has increased steadily – accelerating in 2020 to 12.4 million. Figure 3.7 indicates the estimated number of people that are poor based on the Lower Bound Poverty Line (LBPL). In 2021, estimates range from 14.5 million to 21.2 million with a mid-range value of 17.8 million. As with the FPL, the number of people classed as poor using the LBPL dropped quite sharply between 2012 and 2015 – from a mid-range of 18.5 million to 13.5 million. Since 2015, 4.3 million additional people have been classed as poor according to this poverty line. Figure 3.8 shows the number of people classed as poor according to the Upper Bound Poverty Line (UBPL). In 2021 estimates ranged from 23.8 million to 26.5 million, with a mid-range value of 25.1 million. In the case of this poverty line, the number of people classed as poor using the mid-range declined from 23.6 million in 2012 to 20.2 million in 2016 but increased by 4.9 million people in subsequent years (from 2016 to 2021). The number of people classed as poor according to the international definition of having incomes less than the equivalent of PPP$1.90/day is shown in Figure 3.9. It indicates 2021 estimates that range from 6.5 million (associated with the upper-limit of the expenditure decile) to 11.2 million (associated with the lower-limit of the expenditure decile). The mid-range estimate declined from 11.7 million in 2012 to 7.3 million in 2016 and then rose to 9.2 million in 2020 before declining to 8.9 million in 2021 [7] . Figure 3.10 shows the estimated number of people classed as poor according to the international PPP$3.20/day poverty line. Estimates range from 11.1 million to 16.6 million in 2021 – with a mid-range of 13.8 million. The mid-range values declined from 17.8 million in 2012 to 11.7 million in 2015 and 2016, and then increased steadily to 14.4 million in 2020 [8] . When these estimates are expressed as a share of South Africa’s population – as reflected in Table 3.3 and Figure 3.11 - the prevalence of poverty is put into context. Using the mid-range estimates the share of the population classed as poor according to the Upper Bound Poverty Line decreased from 45 percent to 38 percent between 2012 and 2015, but subsequently increased back up to 42 percent in 2020 and 2021. The other poverty lines followed similar trends, with the share of the population that is “food poor” dropping from 26 percent in 2012 to 16 percent in 2015 and then increasing back to 21 percent in 2020 and 2021. South Africa’s social protection response to poverty The preceding analysis focused on both the level and dynamics of South Africa’s poverty problem. The policy response has largely been to expand social protection through increases in the number of people receiving social grants and higher-than-inflation increases in their value. However, the social wage – defined as publicly provided services that replace or subsidise day-to-day expenses such as housing, education and amenities, and thereby reduce the cost of living to recipient households – extends beyond income transfers. Figure 3.12 indicates trends in the nominal and real value of the social wage (as quantified by National Treasury) on a per capita basis. Nominally, it increased from almost R12,700 to close to R17,900 between fiscal 2015/16 and 2021/22 (an average annual increase of 5.9 percent) and is budgeted to rise further to over R18,400 in 2022/23. In real terms it increased by 1.1 percent a year between 2015/16 and 2021/22 but is projected to decline significantly over the medium term (i.e. till 2024/25). In reality, many of the services and transfers that make up the social wage are target at, or largely used by, lower income households. The per capita social wage for those recipients is therefore likely to be substantially higher than shown in Figure 12. Figure 3.13 shows that the total nominal value of social grants disbursed increased from R57 billion to R190 billion between 2007 and 2020 – a 9 percent a year average increase. In 2021 it declined to R188 billion. Figure 3.14 shows the corresponding trends in the number of grants disbursed. These increased from 12.4 million in 2007/8 to 18.4 million in 2020/21. In 2020/21 70 percent of these were Child Support Grants, 20 percent were Old Age and War Veterans Grants, 5 percent were Disability Grants. The remaining 5 percent were split between Foster Child Grants, Grants in Aid and Care Dependency Grants. The total number of grant beneficiaries is shown in Figure 15 (left hand graph). This differs from the number of grants shown in Figure 14 because some beneficiaries receive more than one grant. There is also a difference between the total number of adult and child support grant beneficiaries and the total number of discrete beneficiaries since some recipients of grants to support children also receive adult support grants. In 2021 there were 7.6 million beneficiaries of grants aimed at supporting children and 5 million beneficiaries of grants for adults, but only 11.4 million discrete beneficiaries – suggesting that around 1.2 million beneficiaries received both adult and child support grants. Figure 3.15 (right hand graph) shows that in 2014 each beneficiary received almost 1.5 grants and that this increased in 1.64 grants per beneficiary in 2017. In 2021 it had declined to 1.62 grants per beneficiary. The graph also shows the average value of the grants received by each discrete beneficiary. This rose from R853 per month in 2014 to R1,413 per month in 2020. It declined to R1,370 per beneficiary per month in 2021. Table 3.4 shows how the average value of each of the grants disbursed (calculated by dividing the total value of disbursements by the number of grants disbursed) has changed over time. Old Age Grants increased from R852/month in 2007/8 to R1,814/month in 2020/21 while Child Support Grants rose from R200/month to R549/month over the same period. The limitations of South Africa’s social protection response to poverty It is evident from the preceding analysis that South Africa has increased and expanded its social protection system significantly over the past decade and more. However, despite these efforts, the number of people that can be categorised as poor has increased steadily since 2015 – no matter what measure of poverty is used. This deterioration coincides with a persistent deterioration in the economic performance of the country, which resulted in a progressive decline in the real GDP per capita – a crude measure of average incomes before taxes and transfers. As Figure 3.16 indicates, between 2012 and 2015, the food poverty headcount declined by 35 percent. Over the same period the real value of social protection spending per capita rose by 6 percent, but real GDP per capita only rose by 1 percent. Between 2015 and 2021 the food poverty headcount increased by 37 percent while real social protection spending per capita increased by a further 9 percent and real GDP per capita decreased by over 6 percent. This suggests that – apart from any fiscal affordability and sustainability considerations - devoting progressively higher proportions of government revenues to social protection transfers will not, by itself, succeed in reducing poverty unless it is accompanied by a broadly supportive environment in which the rate of growth in real GDP exceeds the rate of increase in the population by a healthy margin. It is therefore difficult to divorce the debate over the extent and structure of South Africa’s social protection system from the trade-offs that arise from alternative uses of those fiscal resources. To the extent that well-considered and efficiently-implemented public sector programmes succeed in supporting an increase in the capacity of the economy to grow at higher rates, the pressure on the social protection system will be reduced – allowing it to be targeted more effectively at those most in need. [1] Comprising compensation of employees and net interest, dividends and rental incomes. [3] The definitional requirement that international (purchasing power parity dollars) are used rather than US dollars often seems to be overlooked and makes a significant difference to the values of respective international poverty lines. For example, while PPP$1.90/person/per day translates into an average monthly value of R412/person/month in 2021, the average market exchange rates that prevailed against the US dollar in 2021 would have required a monthly income of R854 – more than double the purchasing power parity equivalent. Similarly, an average income of R695 per person per month is required for the PPP$3.20/day measure in 2021, but this increases to R1,438 per person per month if prevailing US dollar exchange rates are used. [4] Principles and Recommendations for Population and Housing Censuses, Revision 1. United Nations, New York, 1998, Series M, No. 67, Rev. 1, paras. 2.61-2.62 [5] The General Household Survey accommodates household sizes ranging from 1 to 46 people [6] There was a typically a relatively low response rate to questions regarding income. It was assumed that the unresponsive portion of the sample was spread across the population in proportion to actual response rates. [7] These estimates differ significantly from those published in the Sustainable Development Report 2022. According to this 25.86 percent of South Africa’s population in 2012 had incomes below the PPP$1.90/day equivalent. This translates into a headcount of 13.1 million. The 2021 estimate is 26.87 percent or 16.2 million people which is over 80 percent higher than the mid-range estimate shown in Figure 9. [8] The mid-range estimate in 2021 of 13.8 million is 38 percent lower than the estimate contained in the Sustainable Development Report 2022 (37.3 percent of the population – which equates to 22.4 million people) Click here to continue

Copyright © 2023 Print ISSN: 2960-1541 Online ISSN: 2960-155X Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute D I S C L A I M E R Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. JULY 2023 Coalitions in south african local municipalities: is the constitution enabling democracy or not? by Nondumiso Sithole Msc (University of London), LLB (University of the Witwatersrand) Abstract This article aims at examining the role of coalitions in the context of South African politics, specifically within the local government or municipalities. It has become blatantly clear that the country has entered a coalition-government era. An era which is possibly going to stay for decades to come. There is certainly a projection that there will be an increase in coalitions in the national elections set to take place in 2024. This article will explore and assess what are the strengths, weaknesses, framework as well as the ecosystem in which coalitions flourish and the conditions wherein they fall apart. There will be recommendations on how to best assist with strengthening the operating of coalitions within the context of local governments in South Africa and on how the discourse of coalitions can be moulded to assist in the bettering of governance and service delivery at a municipal level. Coalitions are without a doubt becoming more relevant within local/municipal government structures, and political parties that did not have space previously are finding a niche in which to operate and have a “voice” in local councils. The primary objective of an opposition party in respect of a coalition is to unseat the incumbent, while the primary purpose of the ruling party is to ensure that they remain in power (Kadima, 2014). In as much as there is space for change and inclusivity, there are pertinent questions which must be looked at. Critical to this, is whether South Africa is able to handle coalitions. Does the country have effective systems in place to manage all that comes with the genetic set up of coalitions? Furthermore, what can be done to aid the effective functioning of coalitions in a country such as South Africa? The article also examines the effect of the legislation in place and whether the Constitution as the highest or supreme law is actually assisting at all or is but a silent tool on this matter of coalitions, which are now essential in the running of the country. Introduction South Africa’s Constitution clearly entrusts and places legislative and executive authority in municipal councils. Therefore, there is a need for the effective exercise of these vested functions. Municipal councils are considered and known to be the highest decision-making body. They are essentially the “captains” and are required to steer the directions of the municipality’s that they govern, shape the strategic direction, and take crucial decisions in respect of not only the municipalities. In coalitions, this requires close cooperation between coalition partners to ensure that the responsibilities of the council are carried out effectively. All electoral systems have thresholds of representation: that is, the minimum level of support which a party needs to gain representation. Thresholds can be legally imposed by the Electoral Act (formal thresholds) or exist as a mathematical property of the electoral system (effective or natural thresholds) – coalitions can be said to be an example of natural thresholds (Motsapi, 2022). Formal thresholds are written into the constitutional or legal provisions which define the PR system. The electoral system in South Africa is based on party-list proportional representation, which means that parties are represented in proportion to their electoral support. For municipal councils there is a mixed-member system in which wards elect individual councillors alongside those named from party lists. The 2021 local government elections produced hung councils in major metropolitan municipalities culminating in political parties being forced to enter into “contractual” arrangements in terms of coalition agreements. South Africa saw the ousting of City of Johannesburg Mayor, Dr Mpho Phalatse as well as the Speaker of Council, Mr Vasco Da Gama being removed as Speaker by the coalition government (Njilo, 2023). This proved beyond reasonable doubt that practically speaking, coalition governments are extremely unstable in nature. Furthermore, and of particular interest to followers of politics and certainly to many citizens who are severely impacted (majority of the time in the townships), is how the instability of coalition governments compromises and hinders local governments or, more specifically, their administration’s ability to deliver services to their local communities. The above hindrance occurs through various negative factors, which will be discussed in detail in the article within the section “What are the advantages and disadvantages of coalitions?”. The optimal or effective functioning of a municipality commences with its leadership. Exemplary leaders set the tone both strategically with regards to and in relation to an organisation’s or, in this instance, a municipality’s vision, mission, goals and objectives. This however requires that a tone of good morals and values be set by leaders (SACN, 2021:262-263). The above sounds good in theory, however, our local municipalities in South Africa are plagued by many challenges emanating from this exemplary leadership, which is required for the successful functioning of any organisation and even the running of a country. Local governments now have an additional layer of complexity attached to coalition governments. Coalitions are formulated out of convenience rather than ideology, which ultimately leads to instability – especially when it comes to portfolios being divided, leaders are often unable to hold coalition partners to account. Party factionalism is another cancer in the effective running of a municipality that impedes the potential of having efficient administrations, has occasioned a lack of direction and decision-making, and played a major role in the interruption of service delivery and reduced investor and business confidence (SACN, @021:262-263). What is of concern, is the position that local governments must “play”, “practically” speaking, because they are the closest government to the people, versus the hierarchy in which they are placed by the provincial and national government. It is submitted that there must be a re-thinking and assessment in terms of the autonomy that is provided to local governments in the “real sense”, versus what they are vested with by legislation or by operation of practices in frameworks or the constitution of government structures. This is one of the biggest challenges of municipalities. Mayors are seen to have less political authority than provincial leaders. Mayors are elected by the party hierarchy and not by communities through elected councillors. Mayors and municipal managers require provincial and national government to offer them support – through legislative instruments and other tools – that “does not” infringe on the autonomy of local government. In addition, the blurring of boundaries between the administration and political leadership has most often resulted in confusion over roles and given rise to political-administrative tension and conflict (SACN, 2021). It is foreseeable that there will always be political changes, however, these changes in essence should not impact on the administrative functions or affect the operating of municipal services, as they currently do. Background A coalition government can be defined as a form of government in which political parties cooperate to form a government. The usual reason for such an arrangement is that no single party has achieved an absolute majority after an election, an atypical outcome in nations with majoritarian electoral systems, but common under proportional representation. The Cambridge dictionary defines coalitions as a group of two or more political parties working together to win an election or govern an area. The term ‘coalition’ is derived from the Latin word ‘coalitio’, which means ‘to grow together’. Thus, technically, coalition means the act of uniting parts into one body or whole. Politically, coalition means an alliance of distinct political parties. When several political parties join hands to form a government and exercise political power based on a common agreed programme or agenda, we can describe the system as coalition politics or coalition government (Gahatraj, n.d.). De Visser (2021) defines a coalition as when two or more political parties agree to cooperate to govern together as a ruling coalition government. There are several different types of coalitions, namely: bare majority coalition government, grand coalition, government of national unity (at the national level), and minority government. South Africa is said to be a representative democracy. This means citizens do not govern the country themselves, but rather, it is governed by individuals or representatives who are members in the different political party organisations and who contest for positions councillors are elected (voted) for to be the representatives of citizens in the various arms of government, i.e., national government (Parliament), provincial government, and local government (municipalities and district councils). This is how political leaders ascend to holding the seats that they do in councils, Parliament, etc. The political party that wins the majority of seats in an election, be it in local government elections or at the national elections for Parliament automatically has the right to form the government, based on attaining over 50% of the votes. This is when a government party is called the majority or ruling party. In this instance the parties that receive a lesser portion of the votes become minority parties or opposition parties. It is essential to point out that the government is not permanent – the citizens give it the right to rule the country for a term of five years (Parliament, n.d.). This is how the South African Constitution is set up to be a majoritarian government system. Whether this constitutional set up is working for or against democracy and the very citizens it should serve, is something that unquestionably warrants reassessment and perhaps must be made a key priority in order to change the despairing state of local governments. What is the “genetic make-up” of coalition governments? Section 26 of the Electoral Act provides that a political party may contest an election if such party is registered and has submitted a list of candidates. Section 27 of the Electoral Act provides that a registered political party that intends to contest an election must nominate candidates and submit a list of those candidates for election to the chief electoral officer (Mhlongo, 2020). South Africa has for some years produced “hung” councils, which unfortunately leads to more problems than solutions, particularly where highly contested municipalities are concerned. A council is deemed to be a “hung council” when no political party wins an outright majority – meaning more than 50% of the seats in the municipal council – thus making the formation of a coalition or minority government inevitable (De Visser, 2023). It is important to understand what constitutes coalitions or the rationales for coalitions. It can be said that coalitions become mandatory or get “imposed” on political parties by the voters based on the outcome of voting during the elections. The outcome is generally one which results in a “hung” municipality or “hung” legislature. It is said that coalitions can create political stability and governability in areas with “hung” municipalities or in legislatures in which no single party has won an outright majority or where there are multiple choices of competitive political parties. If no political party gains a majority of seats in a specific election, the rationale for the formation of a coalition can be said to be one of political necessity. In this instance, the political parties are obliged to cooperate to avoid ungovernable situations, also taking into consideration the fact that inability to form a government may eventually lead to a by-election of the entire council and, in some instances, even provincial intervention – such as with the City of Tshwane, although this was reversed in court. Political parties have a legislated responsibility to the electorate to ensure that a stable government can be formed to respond to the needs of their communities (Ndou, 2022). Firstly, political parties that enter or wish to enter into coalition agreements normally consider the following: there must be an agreement on a policy or programmes, and they must have a consensus from the onset with regards to these policies. The agreement on the policy/policies should be joint and the policy/policies should be properly prepared by the parties to the agreement. The proposal with regards to the above founding aspect, is that coalition partners ought to aim at drafting policies that are practical and will be easy to implement. These easy-to-implement policies must be within IDP/SDBIP. This factor is inherently interesting, due to the fact that manifesto objectives of the different political parties have different party objectives, thus the coalition agreements may not necessarily be amenable to the other coalition partners, or even lawful (Motsapi, 2022). The analysis is that coalition partners must aim at adopting policies that will be easy to implement and not policies that will cause further delays in rolling out service delivery or are unimplementable, as the core objective of municipalities is service delivery. De Visser (2009) states that a policy programme of a coalition agreement must set out the objectives that the coalition wants to achieve in the municipality in which they will be governing, over the five-year council term. The lack of clear objectives by the coalition partners can lead to political parties being dependant on parties to which they are diametrically opposed in terms of party objectives. This was seen with the DA being dependant on the EFF in the City of Ekurhuleni in 2022. So, one can draw the conclusion that coalitions are necessitated by conditions that have nothing to do with party objectives. Furthermore, it is crucial that the policy programme must be detailed, realistic (meaning achievable), and one which all partners in the agreement will support. Lastly, it must be feasible and financially sound. Secondly, the distributing of political positions as equally as possible is an important condition that the coalition parties ought to agree upon. Political parties should ideally receive seats proportional to what they contribute to the coalition agreement. The allocation of seats in key and strategic positions in the executive, proportional to the contribution that the coalition parties made to the overall coalition, is paramount and can play an imperative role. It is the prerogative of the political leader to allocate executive positions. This has proven in the recent scenarios of the City of Johannesburg and City of Ekurhuleni to potentially be a major obstacle for coalition partners, as service delivery comes to a halt when there are constant votes of no confidence submitted in council by parties. We saw the two big metros that were led by the DA for most of 2021, filing papers in court in urgent motions. Therefore, the fights that get taken to court end up impacting how council is run and on council operating efficiently. De Visser (2021) emphasises that institutional arrangements of a coalition government may determine how the incentives for cooperation in a coalition are structured and how they may take formulation. An important part of this is the distribution of political positions. A cornerstone of building a solid foundation is also premised on how coalition parties must consider how political offices will be shared amongst the coalition partners. The three key positions in municipalities that are usually the bone of contention are the Mayor, the Speaker and the Whip. These three positions are now fully recognised in legislation as political office bearers with legislative authority provided for in the Municipal Structures Act 117 of 1998. There have been amendments to the Municipal Structures Act, which has seen the office of the Whip of Council being empowered legislatively and the Whip being provided with “proper” accreditation and authority as a critical office bearer for the creation or, rather, fostering and enhancement of political cohesion. Previously this was not the case when it came to the office of the Whip of Council. It was only the Mayor and the Speaker who were recognised as political office bearers. It will only be with practice and with time that one will be able to measure the role that the office of the Whip and the Whips of Council play or ought to play in the bringing about of cohesiveness within councils that have diverse views, and which are led by coalitions. In addition, to assess key indicators that play an enabling factor in the Whip being able to execute this role effectively or otherwise. Third, it is important that an actual or physical coalition agreement or document is drafted and comes into existence. This document must stipulate the arrangements of the coalition partners along with its terms and actual mechanisms of the agreement must have been entered. Political parties sometimes enter into agreements without any written documentation. Oral agreements often result in useless “he said”, “she said”, “they said” arguments, and furthermore, there is no form of proof showing, or acting as evidence, that there were indeed agreements in place or discussions that took place. This is a major pitfall as political parties cannot hold one another accountable. This point will be elaborated on in the section “Proposed Interventions”. A coalition agreement is a contract-like political agreement that “binds” the coalition parties to the full range of compromises made in the negotiations. The coalition agreement is to serve as a point of reference in respect of the terms and conditions agreed to in the negotiations by the coalition parties. In order to try and effectively constrain parties from drifting from the agreed coalition terms, the coalition agreement covers the procedural rules for decision-making in the coalition, prescribes rules for coalition behaviour, provides for the coalition programme, and reflects the composition of the coalition as well as the scope and functions of the various members in the coalition (Beukes, 2021). These mechanisms are to become the hoist that is meant to pull parties to act according to the objectives of the coalition. However, coalition agreements are not self-enforcing and it is ultimately up to the coalition parties to decide whether to abide by or depart from the coalition agreement. It is submitted that political parties are likely to stray from the terms as there is nothing binding in law. What are the advantages and disadvantages of coalitions? Whether the South African landscape is ready or not, coalitions have become the focal point of governance in the municipal context. Coalitions can become invaluable in advocacy for better and effective governance due to the fact that they have the potential to create structures for organisations’ political leadership to share ownership of common goals. The advancement of advocacy work can be strengthened considerably using coalitions. However, there are both advantages and disadvantages to forming or joining a coalition, especially when it comes to the political leadership. A proposal is that the joining or formulation of a coalition should only be taken after careful consideration following research and risk analysis. It is conceded that the high pressure to provide efficient service delivery by any municipal organisation, can lead to added pressure in terms of entering into discussions and, ultimately, coalition agreements by political organisations. It is, however, an extremely sensitive matter for any political organisation to make with haste and without proper consideration. The decision of whether working with the coalition is the best way to solve governance problems, and whether values and approaches by different political backgrounds with different political views can be shared, is life altering for the residents of any municipality. Not enough consideration is taken or even “due diligence” conducted with this point. It is therefore essential to explore the pros and cons in respect of these agreements, which have an altering effect on the scales of governance at a municipal level. The advantages may be the following: there will be consensus- or majority-based decisions, as they are taken where there has been extensive consideration of views of other coalition parties; nationalism is favoured and regionalism is lessened to a certain extent; regional aspirations may be fulfilled, as they are a result of thorough consideration by the coalition; the tyranny of a single dominant political party is lessened in a municipality or region – a result of power being spread out and no single political organisation being dominant; a more responsible government may emerge as a result of human resources and expertise being pooled together; coalitions have the potential to enlarge bases of support in networks and connections once investors see that there are collaborative efforts in a particular region or jurisdiction that is striving towards achieving similar or the same objectives; there are strengthened efforts in the facilitation of information exchange, skills, experience, materials, and opportunities for collaboration; it provides safety for advocacy efforts and protection for members who may not be able to take action alone, particularly when operating in a hostile or difficult environment; it magnifies existing financial and human resources by pooling them together and by delegating work to others in the coalition; and it helps develop new leadership skills amongst members (Anon., n.d.). While there are some attractive advantages, there are also some glaring disadvantages that come with the formulation of coalition partnerships. The damage they can potentially cause is huge, due to their nature – as witnessed recently in the municipalities of the Gauteng province. Coalitions are a new beast that is untamed and unregulated. The coalition troubles that have been most highlighted and displayed in the news recently are those that occurred in the City of Johannesburg and City of Ekurhuleni in 2022. Coalitions result in unstable governments, where decisions in respect of key issues become a time-consuming process and an exercise in which political parties can bully and strong arm each other through the reluctance of not supporting good programmes. This can have a paralyzing effect on the progress of service delivery and create a lack of clear objectives, or difficult to agree upon common objectives. The large political party which has the numbers can dominate over the smaller and minority party. Furthermore, power is not always going to be distributed equally amongst the coalition members, due to the seats that smaller partners have providing them with a limited say on issues and decisions. Coalition partnerships can also lead to political partners having to compromise their stance on particular issues to accommodate their partners and as a strategy on particular issues as well as partners compromising on their tactics. Certain dominant role players may not always get credit for progressive work and/or objectives achieved, as the coalition as a whole gets recognition rather than individual members – certain members of a different political organisation get or claim more recognition than others, causing conflict and resentment. If the coalition process breaks down, it can harm everyone's advocacy by damaging members' credibility; coalition activities can be difficult to monitor and evaluate. Lastly, there is also pressure on political parties created by legislation to enter into coalition arrangements due to timeframes which are not conducive to the proper and careful appointment of office bearers – the law doesn’t provide sufficient time. In a nutshell, coalitions can have the following negatives attached to them: they can lack clear objectives and/or political parties can have challenges in terms of agreeing to common objectives; the formulation of coalitions themselves can be a daunting task and, moreover, the managing of a coalition can be a very time-consuming and bureaucratic process that can and does take away time from working directly on campaign issues and organisational tasks that ought to be aimed at service delivery issues. One political party can be the more dominant and powerful party, which leads to the obvious uneven distribution of powers amongst the partners. This causes friction amongst the coalition partners and leads to a plethora of other problems in that diverging views crop up on matters of importance and partners end up pulling in different directions. This ultimately leads to partners not wanting to compromise in respect of the positions that they assume on critical matters and issues. The mere fact that there is shared decision-making powers, and because of this shared power, dissenting views emerge. The result in some cases is that decision-making in respect of core issues can lead to staggering, slow progress on matters, and in fact, decision-making processes may become paralyzed. There can also be constrained resources, which can hamper the implementation of policies and programmes of the partners. A coalition partner may not always get credit for the work it does; it is the coalition that gets the recognition rather than individual members. In some cases, certain members get or claim more recognition than others, causing conflict and resentment. If the coalition process breaks down, it has the potential to harm the coalition partners advocacy by damaging members' credibility. Lastly, the coalition partners activities can be difficult to monitor and evaluate, therefore making it difficult to measure or assess the progress and impact that the coalition has had on the governance of that particular municipality and/or region. Situational analysis As a result of this significant change of central power, coalition politics is now an integral part of South African politics. The voting trends and polling suggest that it may play an even more crucial role in provincial and even national politics in the coming years (Ndou, 2022). The local government elections held in November 2021 resulted in 66 hung councils in South Africa. This means that none of the political parties that competed in the elections obtained an outright majority of over 50% or at least 51%. The African National Congress (ANC), which had from the onset of 1994 been achieving over 50%, lost control of its majority councils. This obviously changed because the ANC failed to attain more than 50% and this seemingly amended the trajectory of the composition of local governments, as the ANC had to seek coalition partners. The Democratic Alliance (DA), being the second in command, did not do substantively well either as it achieved less than 22% of the total votes in the elections. These results have borne a complex situation as the two largest political parties have never trusted each other and thus were resistant to enter into coalitions with each other. Out of South Africa’s eight metropolitans there were only two that achieved an outright majority: the DA won a majority in the City of Cape Town and the ANC received outright majority in Buffalo City. The ANC retained Mangaung with only one seat majority (Moffat, 2021). The months of September and October 2022, saw the DA-led municipalities of City of Johannesburg as well as City of Ekurhuleni tabling votes of no confidence motions against their respective mayors, and importantly, the coalition partnerships that were entered into “collapsed”, so to speak. The ruling national party managed to garner enough votes to oust both the mayors. This was, however, short-lived for different reasons in both the top municipalities in Gauteng. The motion of no confidence in the City of Johannesburg was challenged in court and the courts ruled in favour of the ousted Mayor, Mpho Phalatse, citing reasons of procedurally flawed processes to unseat the DA-led coalition. The DA retook the helm, governing the City of Johannesburg via enforcement of court order. The DA-led coalition in Ekurhuleni was also destabilised by the brief removal of the DA-led coalition because of the tabling of the motion of no confidence by the ANC. The instability and ping-pong as seen above shows that the political parties have not grasped the foundations of coalitions or building proper roots for a coalition to thrive. The result of this is failed arrangements. It appears that there is a lack of time or no time to consult with the members of political parties and voters when these coalition arrangements are entered into. The ordinary citizens who voted for these political parties are left in the dark when discussions about coalitions are being conducted. It should also be borne in mind that negotiations for forming coalitions require sacrifices, including shifting from party policy ideology to suit coalition demands (Ndou, 2022). Party politics overshadow residents or community needs; there is always reluctance by municipal councillors and administration to engage with communities. Due to the temporary nature of partnerships, public participation is compromised. Ndou (2022) correctly states that having the coalition activity being in the hands of the elite, we, therefore, need to accept that the elite theory seeks to account for power relationships in the society. Public policy may be viewed as the preference and values of the governing elite or the leadership in power. In this respect, public policy does not emanate directly from public participation. The elite shape and mold mass opinion, then the masses shape elite opinion. Public servants and administrators carry out policies decided by the “elite” or those that are in power and public policy flows downward from nobility to the groups. The failure of dominant political parties – the ANC, DA, EFF and ActionSA – to find common ground in finding practical local coalitions hands enormous and unwarranted power to the smallest parties. The smallest parties somehow end up becoming more powerful as they maneuver the dominant parties in coalition negotiations. They also end up demanding bigger parties to dance to their tune and ultimately situations where “puppet” mayors are the result. Consequently, many coalition agreements are gross distortions of the will of the electorate. When a political party with less than one percent of the voters behind it, is handed the mayoral chain or the speaker’s hammer, it has nothing to do with democracy. That is a subversion of the will of the electorate (Nkamana, 2023). It is this distortion that ultimately leads to voter apathy and a poor turnout in South Africa during elections. The question posed in this article is whether the Constitution is enabling democracy or not when such occurs. It is proffered that the Constitution is a tool that is distorted in some instances to suit the needs of the elite and those that are in power. The Constitution considers local government as an equal and autonomous partner within a non-hierarchical structure of government “spheres”; however, this has been undoubtedly diluted by political arrangements and party structures, which are by their nature and form, hierarchical. Inevitably, the outcome is a general weakening of the local “voice”, with more importance given to provincial (rather than local) leaders and officials (SACN, 2021). Legislation, electoral and other various pieces of legislation are silent on some salient matters pertaining to the operation of coalitions, most crucial is that there is no law preventing political parties from entering into these coalition agreements. This in itself in terms of the South African Constitution would be deemed to be undermining the principles of democracy. And herein lies the epicentre of the destructive position that the very tool that is meant to serve the electorate, the Constitution, ends up indirectly protecting the “rights” of political parties instead of the population. Proposed interventions Coalitions at municipal level in South Africa are mostly chaotic, with devasting impacts on municipal administration and service delivery. Our political parties are therefore doing something wrong. It is not possible to legislate political behaviour without overreach or coerce political parties into stable coalitions. Key interventions are discussed hereunder, wherein there is already existing debate around some of the interventions that are submitted, also with the view of adding to the debate and ideas to assist in laying solid foundations for stability within coalition agreements. Firstly, there is the strengthening of municipalities existing and enabling legislation around the tabling of votes of no confidence in councils. Municipalities already have standing orders, which are effectively policy guidelines and/or by-laws that set out the procedures and processes as to the running of council. De Visser (2023) states that motions of no confidence have become the local politicians’ toy of choice. The most troubled councils experience endless motions of no confidence. These motions can throw the municipality into disarray, leaderless paralysis, and a state of limbo – a prime example being the City of Ekurhuleni. This also occurred in the City of Tshwane in March 2023. De Visser (2023) submits that the law can limit the use of motions of no confidence. There is also the notion that standing orders or policy documents of municipalities should limit the number of motions of no confidence that can be tabled in council. Secondly, there needs to be legislation that is developed specifically for regulating and founding governance procedures, rules and regulations in respect of coalitions. Legislation in South Africa in its totality from municipal right up to the other two spheres of government did not consider the subject matter of coalitions back when it was drafted. The developing or strengthening of legislation can be coupled with the publishing of coalition partners and their agreements. It is necessary that legislative timelines be revised to be able to facilitate a better transition and proper formulating of a “new government” once the general elections are finalised. Extending the 14-day period at the commencement of the term after elections can aid governance. The law insists that the newly elected council elects its main office-bearers within 14 days. In a hung council, this timeline is not practical or conducive at all for the proper establishment of a coalition. Negotiating a proper coalition agreement requires more time, therefore, even 30 days. It is highly likely that if political parties are not provided with sufficient time to enter these coalition arrangements, they only stand a small chance of succeeding. Therefore, it is suggested that the 14-day period must be extended to allow more time for negotiations, hopefully leading to coalition agreements that last. If it is not extended for all municipalities, then it must be done at least for hung councils. No municipality can withstand a prolonged power vacuum at the top. Accordingly, supplementary provisions ought to be made and it must be possible to legislate a holding pattern after the general elections, in which either the outgoing municipal executive, or the municipal manager, is empowered to take the decisions necessary to keep the municipality going (De Visser, 2023). Beukes (2021) and De Visser (2023) both advance the view that coalition agreements should be made public. The argument is that coalition agreements are political programmes of the incoming local governments, and the public ought to know the plans of its government. It is also said that having the agreement published makes it more difficult for coalition partners to breach the agreement, because the public can hold them accountable for their behaviour. Currently, coalition agreements mean little to those who signed up to them, and this is partly because the public does not know what they say. However, making coalition agreements “public” will not necessarily have a binding effect on political parties towing the line and upholding their agreements. It is suggested that South Africa should go a step further and bolster this intervention through prescriptive legislation that will state that for a coalition agreement to be valid and recognised in law, it must be set down in writing and must be made public. It is conceded to that this can be one of the founding or core requirements drafted as part of legislation. An observation is that whether documents are made public or not, political leaders as well as political parties still find themselves in various breaches and violations, in any event. The main effect that the publishing of coalition agreements may have, is that the voters of the various parties can hold parties accountable where it matters the most – at the voting polls and during elections – should parties be found to be in gross violation of coalition agreements. The public scrutiny does not make the agreement legally binding, but rather, politically binding. It is critical that legislation is revised wholistically not just for local government but also for provincial as well as national government. Germany uses practises or a methodology, so to speak, of “political rules” with regards to their coalitions. These rules govern its country through the usage of political conventions instead of legislation. It is said that compliance and conformance with a coalition agreement is not regulated by law, but instead, by “political calculation”. Parties and their leaders are cognisant of the fact that they will be assessed at the next election, for their track record and performance in a coalition as well as their capacity to deliver sound policies. Germany’s electorate does not look favourably on a party or on politicians who do not stand by their word and instead, cause the instability that comes with the breakdown of a government (Peschke, 2023). South Africa’s political landscape does not have the fertile ground nor the political maturity as yet to adopt this method solely as a mechanism, but rather, it requires a multidisciplinary approach which is the combination of both prescriptive legislation as well as political rules. Thirdly, there is a consensus that there needs to be an electoral reform with how the electoral system operates. Currently, power in councils is largely centred in caucuses of different political parties. At a local government level, public representatives are elected through a mixed system, i.e., direct election of ward councillors and proportional representation by political parties. The voice of constituencies is eliminated when decisions are made by a central command of the party caucus in council. For example, a councillor being a member of the EFF may have informed a community that they (the councillor) despise corruption and will not support the ANC, then the councillor becomes elected by that community based on these publicly pronounced views. However, when the councillor gets elected, their party takes a decision to work with the ANC. The voice of the councillor’s community and the undertaking that the councillor gave becomes mute and the voice of their community is eliminated in this manner. All the three big political parties take decisions through caucuses and not constituencies and are guilty of deal making. Another example and recent trend is smaller parties who would ordinary not be getting mayorship positions being given these positions when political parties wrangle for power. Democracy is being undermined with how some coalition agreements are being structured (Nkamana, 2023). Lastly, it seems that a strong contender for being a potentially key factor in the stabilising of coalitions is the role that committees can play to strengthen coalitions. It is therefore cardinal to provide a background on committees or rather, their basis in law. Section 79 and 80 Committees are established in terms of section 79 and section 80 of the Local Government: Municipal Structures Act 117 of 2008. Section 79 of the Act states that a municipal council may establish one or more committees necessary for the effective and efficient performance of any of its functions or the exercise of any of its powers and that the council may appoint the members of such a committee from amongst its members. Furthermore, the council may also dissolve a Section 79 Committee at any time. The Act provides that a municipal council must determine the functions of a Committee and may delegate duties and powers to it in terms of section 32 of the Act. The council of the municipality must appoint the chairperson and may authorise a committee to co-opt advisory members who are not members of the council. The council may remove a member of a committee at any time and may further determine the procedures of the committee (RSA, 1998). Section 80 provides that if a municipal council has an executive committee or executive mayor, it may appoint in terms of section 79, committees of councillors to assist the executive committee or executive mayor. It is, however, provided that such committees may not exceed the number of members of the executive committee or mayoral committee in numbers, i.e., they must be smaller focused groups. A Section 80 Committee must report to the executive committee or executive mayor in accordance with the directions of the executive committee or executive mayor. Importantly, the Act provides that when the above committees are established, “a municipality must take into account an examination of the powers, functions of the municipality and the extent of those powers”. The consideration of the above must be aligned to and tailored to suit the requirements of that municipality in terms of its needs as well as the need for efficiency and effectiveness. It is also a given that the municipality must consider the financial and administrative resources that are available to enable that committee with the support it requires to discharge its duties optimally. There have been numerous debates in terms of proposals of how committees can add more value when it comes to assisting in the strengthening of coalition agreements. Salga is of the view that committees ought to be a core anchor in providing oversight support within coalitions. It suggests that smaller committees ought to be established as the engine for oversight and scrutiny – smaller in size, more frequent, focus on specific (combinations of) portfolios and provide much greater opportunity for engagement than the council meeting; coalition partners can utilise their respective representations on committees to monitor the implementation of the coalition agreements; Section 79 Committees are generally well-suited for oversight over the municipal executive and the administration;committees can be an instrumental mechanism for coalition partners to monitor the implementation of the compromises that were agreed upon in the coalition (Joel, 2023). In addition to the above, a multidisciplinary approach must and can be strengthened through questions in council as well as committees. Most municipalities have rules and policy documents prescribing and providing guidelines in terms of how council proceedings ought to run, as mentioned above. The City of Ekurhuleni uses its Standing Orders By-law, which has as a matter of fact seen much more reliance by political parties in council. Lance Joel (2023) submits that these rules and orders of the municipal council should permit councillors to pose written and/or verbal questions in council meetings – directed at members of the municipal executive. In the City of Ekurhuleni, this has indeed been one of the best tools that political parties utilise to solicit information and answers in scrutinising decisions taken by the executive members of council. It can also be used to check progress in respect of implementation of coalition programmes. This tool can be further used by coalition partners to monitor the implementation of the coalition agreement. There is a view that the executive mayor system needs to be overhauled and the executive committee system entrenched more now that there is governance through coalitions. The submission is that there are already legislative roots to assist this. De Visser (2023) argues that executive committees function differently in that the political composition of the executive committee is largely fixed by law and is not necessarily subject to majority rule. In this regard, coalition negotiations are then able to focus on the key vacancies of the mayor, the whip of council and committee chairs. Crucially, when the coalition ends up collapsing, and the mayor is removed from office, the rest of the executive committee stays on. Consequently, there is a higher chance for a more stable governance system. De Visser (2023) correctly states that the law already provides for executive committees, and approximately 50% of municipalities have them. The MEC for local government may change a municipality from an executive mayor system to an executive committee system. Conclusion The glaring problem with coalition governments in South African municipalities can be seen and concluded to be a political one. It is not mainly a legislative or constitutional challenge; however, it is conceded that, in part, law plays a role. In scenarios where political parties that are seemingly working together have opposing policies, or where political parties are not controlled primarily by their stated ideological commitments but are driven by the urge to acquire large power and the access to resources and patronage that this presents, the normal ideological denominators that may hold coalitions together are absent or become non-existent. It is obvious that this leads to instability and thus the collapsing of coalitions and governance. Given this dynamic, imposing an additional legal requirement on political parties that seek to form a governing coalition or coalition agreements plays a factor in reducing the instability of a ruling coalition. It has been established in this article that South Africa does not have legislation drafted directly for providing guidelines, establishing or even regulating coalition government in totality, i.e., directed at all three spheres of government. It is apparent that with the coming elections in South Africa in 2024, there will possibly no longer be an outright winner or a dominating political party. South Africa is an amended or hybrid version of a parliamentary system of government in all three arms of government, instead of a system with a directly elected head of the executive, or a presidential system. The main difference between the two systems is that with the presidential system the government cannot be replaced, even if a majority of the legislature desires it. The government can be replaced in a legislative system of government if the majority of members of the legislature cease to support it; the position of the executive potentially becomes precarious when one party does not obtain a majority of seats in the legislature. The life of the government in a parliamentary system of government is dependent on the will of most elected political party representatives. Vos (n.d.) states that it is also, to a certain extent, dependant on the will of the political party leaders. A situation where no party obtains a majority of seats in the relevant legislature potentially leads to a more unstable government than in systems in which the head of the executive is directly elected by the electorate. Vos submits that the cause of this, is that in hung legislatures more than one party will have to work together to elect the head of the executive, to pass legislation, and to ensure its long-term ability to govern effectively, and to survive. This suggests that the stability of the government will formally depend on the whims of the elected representatives of political parties in a legislative body, although, in fact, it is more likely to also depend on political party leaders who, for various reasons, retain considerable control over the conduct of their elected representatives (Vos, n.d.). Literature suggests, a parliamentary system can generate more incentives for political parties to form coalitions (Mainwaring, 1990). It is said that this is more likely to transpire when the policy differences between the dominant or majority party and other minority political parties, together constituting a legislative majority, are small. Where these differences are small, it is submitted that the dominant party would be able to make necessary policy concessions to the other parties and offer them enough incentives to hold the coalition together (Austen-Smith & Banks, 1988; Cheibub et al., 2004: 566). In the hybrid parliamentary system operating in South Africa, wherein no party obtains an absolute majority in the legislature, political parties will be forced to work together, either in a formal or informal capacity, in order to ensure the election of the head of the executive, which is a precondition for the formation of a government. So, in the absence of a complete overhaul of the system of government, other smaller changes could and may be affected for the benefit of more stable and efficient coalition government. One can concede that coalitions are not as important as the maturity of the political leaders who can drive the stability and the sustainability of the coalition agreements. This, however, is not what must be a determining factor. Political leaders and political parties must be reminded of the will of the electorate and the will of the citizenry that elected them into power. Political leaders as well as their parties ought to know what accountability is. Investopedia defines accountability as “an acceptance of responsibility for honest and ethical conduct towards others. In the corporate world, a company's accountability extends to its shareholders, employees, and the wider community in which it operates. In a wider sense, accountability implies a willingness to be judged on performance”. The concept of accountability is the foundation of representative democracy. In a representative democracy, the representatives (e.g., MPs) should be held responsible (i.e., accountable) for their actions and decisions. In reality, the accountability of councillors or representatives becomes real when they contest in election. In politics and administration, responsibility was the technical term that was preferred to indicate the duty that persons in public authority had to “respond” in their conduct and actions as public officials. In law, liability was (and is) preferred to indicate that by doing a certain action (or entering into a certain contract) a person has put himself under an obligation and is therefore answerable for the consequences following from that action (or from entering into that contract) (Castiglione, 2012). This is a critical concept in politics but has lost meaning; the nature of coalitions requires the highest form of oversight coupled with accountability. Legislation can again play a role in the enforcement of legal consequences when parties to a coalition agreement fail to abide by the terms and conditions of an agreement, whereby the consequences become that a coalition collapses. The party in breach must be held liable in law and thus accountable. In conclusion, and having considered the historical background, the political and to a certain extent the economic background in line with geopolitical relations, having a single party system may very well be outdated. The political discourse within South African municipalities has demonstrated that they are still a work in progress when it comes to delivering effective governance to South African citizens. Coalitions of course are the new order of the day; however, much work needs to be done, especially when it comes to the regulating of coalitions. It is absurd to have positions of mayors – which are traditionally powerful positions – being handed over to smaller parties, who then abandon their ideologies and mission to occupy these positions, only to get “steered” from behind by the political parties that do have majority seats and are dominant in regions, provincially and nationally. This in law is termed “simulation” or rather simulated agreements or transactions. This is when parties make an agreement as a sham or pretence. They are disguised agreements that conceal the true or genuine intentions of the agreements – the same can be said to apply to some of these political arrangements. References Anon., n.d. World Animal Net. [Online] Available at: https://worldanimal.net/our-programs/strategic-advocacy-course-new/module-4/networking-and-alliances/advantages-and-disadvantages-of-working-in-coalitions [Accessed 25 November 2022]. Austen-Smith, D. & Banks, J. 1988. Elections, Coalitions, and Legislative Outcomes. American Political Science Review, 82: 405-422. Beukes, J. 2021. Dullah Omar Institute. [Online] Available at: https://dullahomarinstitute.org.za/multilevel-govt/local-government-bulletin/archives/volume-16-issue-1-march-2021/coalition-governments-guidelines-for-coalition-agreements [accessed: 11 November 2022]. Beukes, J. & De Visser. 2021. A FRAMEWORK FOR COALITIONS IN LOCAL GOVERNMENT. [Online] Available at: https://www.cogta.gov.za/cgta_2016/wp-content/uploads/2021/11/A-Framework-for-Coalitions-in-Local-Government_Dullah_Omar_.pdf [accessed: 5 October 2022]. Castiglione, D. 2021. Accountability. s.l.: Encyclopedia Brittanica. Cheibub, J.A., Przeworski, A. & Saiegh, S.M. 2004. Government Coalitions and Legislative Success under Presidentialism and Parliamentarism. British Journal of Political Science, 34(4):565-587. De Visser, J. D. 2009. Developmental Local Government in South Africa: Institutional Fault Lines. The Commonwealth Journal of Local Governance, 2. De Visser, J. D. 2023. Coalitions in local government: ideas for law reform. [Online] Available at: https://dullahomarinstitute.org.za/multilevel-govt/local-government-bulletin/archives/volume-18-issue-1-march-2023/coalitions-in-local-government-ideas-for-law-reform [accessed: 14 June 2023]. De Vos, P. n.d. The constitutional-legal dimensions of coalition politics- Chapter 9, [Online] Available at: https://mistra.org.za/wp-content/uploads/2021/10/Coalitions-Chpt-9-for-WP.pdf [accessed: 1 August 2023]. Gahatraj, D. n.d. Coalition Governments, Political Science, India: s.n. Joel, L. 2023. Coalition Governments: A SALGA Response. Alberton: Salga. Kadima, D. 2014. An introduction to the politics of Party Alliances and Coalitions in Socially divided Africa. Journal of African Elections, 13(1): 1-24. Mainwaring, S. 1990. Presidentialism in Latin America. England: Cambridge University Mbanyele, S. & Moffat, C. 2021. Hung Councils, coalitions, minority governments & the precarious future of South Africa's municipalities. [Online] Available at: https://gga.org/hung-councils-coalitions-minority-governments-and-the-precarious-future-of-south-africas-municipalities/ [accessed: 1 August 2023]. Mhlongo, L. 2020. A critical analysis of South Africa's system of government: from a disjunctive system to a synergistic system of government. [Online] Available at: http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S1682-58532020000200004 [accessed: 21 June 2023]. Motsapi, M.M. 2022. Interview with Head of Department, Corporate Legal Services, Ekurhuleni on 10 January 2022. Ndou, L. 2022. An analysis of a coalition government: A new path in administration at local government level in S.A. North West: North West University. Njilo, N. 2023. ‘Delinquent’ Joburg mayor to deliver State of the City Address despite threat of motion of no confidence. [Online] Available at: https://www.dailymaverick.co.za/article/2023-06-06-delinquent-joburg-mayor-to-deliver-state-of-the-city-address-despite-threat-of-motion-of-no-confidence/ [accessed: 21 June 2023]. Nkamana, Z. 2023. Interview with Chief Legal Specialist: Legal and Procedural, City of Ekurhuleni on 21 June 2023. Parliament of Republic of South Africa, n.d. How our democracy works. Cape Town: Parliament of the Republic of South Africa. Peschke, A. 2023. How to build a stable coalition government - the German experience. [Online] Available at: https://www.timeslive.co.za/sunday-times/opinion-and-analysis/opinion/2023-05-14-how-to-build-a-stable-coalition-government-the-german-experience/ [accessed: 1 August 2023]. Republic of South Africa (RSA). 1998. Local Government Structures Act 117. Cape Town: Government Printer. South African Cities Network (SACN). 2021. The Challenges and Issues Facing Local Government Beyond 2021. Online] Available at: https://www.sacities.net/wp-content/uploads/2022/04/S4-Challenges-and-issues-facing-government.pdf [accessed: 23 June 2023]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

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

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

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

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

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

Copyright © 2024 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. 27 FEBRUARY 2024 AH Gaum (Advocate of the High Court) & M du Plessis (Attorney of the High Court) 1. INTRODUCTION The Inclusive Society Institute appreciates the opportunity to provide input on the General Intelligence Laws Amendment Bill [B40 – 2023]. We recognise the necessity of safeguarding national security to ensure the well-being of the Republic and its residents. However, we express significant concern regarding – a) Overreach in Definitions of Threat to National Security The Bill's broadening of terms related to intelligence activities risks overly intrusive government presence in private lives, extending well beyond legitimate national security concerns. Such expansions could unjustifiably encroach upon daily activities, stifling free expression and association. b) Overly Broad Vetting Powers The Bill authorises intelligence agencies to conduct compulsory security vetting for any "person or institution of national security interest." This broadly defined power could potentially encompass private individuals, non-profit entities, religious organisations, and commercial enterprises, subjecting them to invasive scrutiny. The potential for misuse of such extensive vetting authority raises alarms about privacy violations and abuse. c) Enhanced Surveillance without Adequate Oversight The proposal to bolster surveillance capabilities through the National Communications Centre, without instituting robust oversight mechanisms and essential privacy protections, is troubling. The absence of safeguards aligns poorly with constitutional rights to privacy and freedom of expression, setting a precarious precedent for mass surveillance practices. d) Insufficient Measures Against Fund Misuse The Bill does little to introduce checks against the misuse of secret funds, a notable issue during periods of state capture. Without clear accountability frameworks, there is a risk of continuing improper financial practices within the intelligence sector. 2. OVERREACH IN DEFINITIONS OF THREAT TO NATIONAL SECURITY 2.1. Defining activities that undermine section 9 of the Constitution as threats against national security 2.1.1. The Bill extends the definition of national security threats to encompass “any activity that seeks to harm the advancement and promotion of equality and equitable access to opportunities by all South Africans as provided for in section 9 of the Constitution”. 2.1.2. This broad and subjective interpretation could encompass various actions, from social media expressions to protests, risking an overreach into areas safeguarded by human rights and legal processes. 2.1.3. The Bill's approach, inspired by constitutional aspirations towards equality and peace (section 198 of the Constitution), overextends these principles into direct national security concerns. Traditionally, national security threats are identified as actions posing immediate risks to a nation's sovereignty and safety, such as terrorism or espionage, rather than issues of inequality or discrimination, which are typically addressed through dedicated legal and human rights frameworks[1], such as the Constitution read with the Promotion of Equality and Elimination of Unfair Discrimination Act (Equality Act) in South Africa’s case. 2.1.4. Implementing such a broad definition could conflate human rights issues with security threats, leading to potential misuse of security powers and infringing on freedoms like expression and peaceful assembly. Moreover, existing legal mechanisms, including the Equality Act, Equality Courts, South African Human Rights Commission, Employment Equity Act, CCMA and others, are already designed to handle discrimination and equality issues effectively, questioning the need for security agencies' involvement in these areas.  It appears to be irrational that security agencies are now afforded the authority to make judgement calls involving equality and equity of access whilst they are neither experts in this field, nor the authorities mandated by the Constitution and the law to adjudicate and investigate these matters. 2.2. Comment on the remaining defined threats to national security 2.2.1. Peace and Harmony (b) The inclusion of activities that harm the advancement and promotion of peace and harmony and freedom from fear and want is inherently vague and could potentially encompass legitimate protest or dissent. While aiming to protect societal harmony, this definition could be misused to suppress rights to freedom of expression, assembly and protest. 2.2.2. Foreign Hostile Acts (d) Defining threats to national security as foreign hostile acts aimed at undermining the constitutional order is reasonable and mirrors the security concerns of many nations. However, the challenge lies in maintaining a balance between genuine security measures and respecting international law and human rights. 2.2.3. Terrorism and Related Activities (e) The mention of terrorism, terror financing, illicit money flows, money laundering, and corruption aligns with global security norms. These are clear threats to national and international security, and their inclusion is justified. 2.2.4. Subversion and Undue Influence (f) The language around subversion and undue influence by hostile interests is broad, raising concerns about potential overreach. It is crucial that such definitions are applied in a manner that does not infringe on lawful international relations or suppress legitimate criticism of government policies. 2.2.5. Espionage (g) Espionage and the protection of economic, scientific, or technological secrets are standard concerns in national security laws. This definition is specific and directly relates to safeguarding national interests. 2.2.6. Violence, Intimidation, and Sabotage (h) Serious acts of violence and sabotage against the Republic's security and infrastructure are clear threats. However, the inclusion of "acts directed at overthrowing the constitutional order" should ensure it does not criminalise legitimate political opposition or peaceful protests. 2.2.7. Response to Force (i) This section's focus on protecting the Republic's ability to respond to force or threats is crucial for national defence. The exclusion of lawful political activity, advocacy, protest, or dissent is important for safeguarding democratic freedoms. 2.2.8. Natural or Artificial Calamities (j) Including threats of calamity, like pandemics, in national security considerations is a contemporary necessity, especially in light of global health crises. However, it is essential to ensure that emergency powers are not used to indefinitely extend government control or restrict freedoms beyond what is necessary for public safety. 2.2.9. Financial Crimes (k) The inclusion of theft, siphoning of state resources, and related corrupt activities addresses the internal threats to national security, echoing concerns raised by the Zondo Commission on state capture. This is a vital inclusion, given the direct impact of corruption on governance and public trust. 2.3. Recommendations 2.3.1. It is suggested that the definition of national security threats in the Bill be narrowed to focus on direct and immediate risks, explicitly excluding lawful political and social activities that are part of democratic engagement. Measures taken under the guise of national security should adhere to principles of necessity and proportionality, ensuring they do not unduly infringe upon human rights and freedoms. 2.3.2. The case of Amabhungane Centre for Investigative Journalism NPC and Another v Minister of Justice and Correctional Services and Others (CCT278/19 & CCT279/19, 2021) deals with the constitutionality of legislation impacting rights under Section 36 of the South African Constitution, focusing on less restrictive means to achieve the purpose of a limitation. The Constitutional Court found that the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA) was unconstitutional in parts because it failed to provide adequate safeguards for privacy, lacked independence in the appointment of judges for surveillance oversight, and did not ensure notification of subjects post-surveillance. The court emphasised the need for legislation to balance the purpose of surveillance with minimally intrusive methods, underlining the principle of less restrictive means to achieve the legislative aim, thereby protecting constitutional rights. 2.3.3. We are of the view that the principles set out in the Amabhungane case are instructive in respect of the definitions of threats to national security (and other areas of the Bill). 2.3.4. Based on the aforementioned concerns and principles, we recommend the definition of “threat to national security” should rather read as follows: “For the purposes of this Act, a "threat to national security" is defined as any action, behaviour, or circumstance that, based on credible intelligence and evidence, is likely to cause significant and direct harm to the safety, sovereignty, or integrity of the Republic or its residents. This includes: a) direct and immediate threats or actions that compromise the territorial integrity, sovereignty, or democratic constitutional order of the Republic. b) terrorism and Related Activities: Acts of terrorism, including planning, financing, and execution of terrorist acts; illicit financial flows and money laundering related to terrorist activities; and acts of corruption that directly compromise national security. c) unauthorised access, disclosure, or exposure of classified state security matters, economic, scientific, or technological secrets vital to national security, conducted by foreign entities or agents that undermine the Republic's sovereignty. d) serious acts of violence, intimidation, or sabotage that pose a clear and present danger to the security of the Republic, its critical infrastructure, or its constitutional order. e) actions by foreign states or entities directed at undermining the Republic's constitutional order or sovereignty through subversive or covert means. f) natural disasters and pandemics, where such events significantly impair the Republic's capacity to maintain national security and public order, as officially declared by competent authorities. g) acts of theft, siphoning, misuse or corrupt misappropriation of state financial resources, when such acts have a demonstrable and direct impact on the operational integrity and security of the state. Notwithstanding the above, lawful political activity, advocacy, protest, and dissent do not constitute a threat to national security.” 3. OVERLY BROAD VETTING POWERS 3.1. Who or what is of potential interest to national security? 3.1.1. The Bill authorises intelligence agencies to conduct compulsory security vetting for any "person or institution of national security interest." Furthermore, the Bill provides the following definition: “ ‘person or institution of national security interest’ means any person or institution, identified by the Agency in the form and manner prescribed, that conducts himself/herself or itself or engages in activities that are inconsistent with the principles set out in section 198 of the Constitution including any person or institution that engages in activities that are defined as a threat to national security in terms of this Act.” 3.1.2. It has been raised in submissions from other interested parties that this broadly defined power could potentially encompass private individuals, non-profit entities, religious organisations, and commercial enterprises, subjecting them to invasive scrutiny. However, we appreciate that the identity of the person or entity being subject to scrutiny is not in itself unconstitutional. Religious organisations, non-profit entities, commercial enterprises and private individuals can, in the right circumstances, legitimately be subjects of national security interest, and may even commit acts that are a threat to national security. 3.1.3. The issue for us is not how broadly the net is thrown in respect of who or what a person or institution of national interest may be, but rather how broadly and vaguely the Bill describes the conduct that would potentially render them a national security interest in the first place. The principles set out in section 198 of the Constitution 3.1.4. The Bill would make it such that any person or organisation who “engages in activities that are inconsistent with the principles set out in section 198 of the Constitution” would become a national security interest. We are of the view that this is far too broad and vague to pass constitutional muster. Section 198 of the Constitution states the following: “198. The following principles govern national security in the Republic: (a) National security must reflect the resolve of South Africans, as individuals and as a nation, to live as equals, to live in peace and harmony, to be free from fear and want and to seek a better life. (b) The resolve to live in peace and harmony precludes any South African citizen from participating in armed conflict, nationally or internationally, except as provided for in terms of the Constitution or national legislation. (c) National security must be pursued in compliance with the law, including international law. (d) National security is subject to the authority of Parliament and the national executive.” 3.1.5. Using the principles of section 198 as criteria for vetting individuals or institutions introduces a level of subjectivity and ambiguity that is incompatible with the rule of law. The rule of law requires laws to be clear, predictable, and understandable to allow individuals to regulate their conduct accordingly. As put by the Constitutional Court, “[t]he law must indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly.”[2] When laws or policies are vague, they fail to provide this guidance, leading to arbitrary application and potential abuse of power. 3.1.6. Constitutional principles, while crucial for guiding the ethos and actions of a nation, are inherently broad and open to interpretation. They are designed to set the tone for law-making and governance, not to serve as direct criteria for legal judgments or security assessments. Applying these principles as objective measures for national security interests conflates their guiding purpose with specific legal standards, which should be clearly defined and narrowly tailored to prevent misuse. 3.1.7. The rule and specificity of law are especially critical in the context of national security, where the stakes are high, and the implications of being deemed a national security interest are significant. Broad and vague laws risk encompassing a wide array of innocent activities, chilling legitimate expression and association, and potentially infringing on fundamental rights. Any person or institution that engages in activities that are defined as a threat to national security in terms of this Act. 3.1.8. The Bill’s definition of who or what is considered of interest to national security creates further vagueness and broadness by “including any person or institution that engages in activities that are defined as a threat to national security in terms of this Act.” 3.1.9. As stated previously, we are of the view that the Bill’s definition of activities that are defined as a threat to national security are too vague and too numerous, and one of the negative consequences of this is that people and institutions are at risk of too easily being “of national security interest” and subjected to vetting and other consequences under the Bill. 3.1.10. If the Bill were, however, to rework its definitions of threats to national security so as to be reasonable and not overly broad (as previously suggested in this submission), it would go a long way to addressing our concerns under this section. 3.2. Recommendation 3.2.1. In light of the above, we recommend that the definition of “person or institution of national security interest” should be limited by excluding reference to section 198 of the Constitution and focusing only on those individuals and institutions that engages in activities that are defined as a threat to national security (as per our prior recommendations on the definition of threats to national security). 4. ENHANCED SURVEILLANCE WITHOUT ADEQUATE OVERSIGHT 4.1. Context and Concerns 4.1.1. The Bill proposes significant enhancements to the surveillance capabilities of the National Communications Centre (NCC), ostensibly to bolster national security. However, the Bill does so without introducing commensurate oversight mechanisms or privacy safeguards, raising profound concerns about the impact on constitutional rights, particularly the rights to privacy and freedom of expression. 4.2. Constitutional Implications 4.2.1. The Constitution of South Africa enshrines the rights to privacy (Section 14) and freedom of expression (Section 16), foundational pillars of a democratic society. Enhanced surveillance capabilities, especially when unchecked, threaten these rights. The potential for mass surveillance not only invades personal privacy but also chills free speech, as individuals may self-censor for fear of surveillance. We are called upon here to recall the judgment in the Amabhungane case once more, which warned against this very same form of overreach in surveillance in respect of RICA. 4.3. Lack of Oversight and Safeguards in Interception Applications 4.3.1. The Bill's failure to specify robust, independent oversight mechanisms for the NCC's expanded surveillance capabilities is a critical oversight. 4.3.2. We note that section 2B(1), which the Bill proposes, states the following in respect of the NCC: ‘‘2B(1) The Centre shall, in a prescribed manner, and with regard to foreign signals, communications and non-communications— (a) gather, correlate, evaluate and analyse relevant intelligence in order to identify any threat or potential threat to national security subject to— (i) submission of bulk interception application in the form and manner, as prescribed for approval by a retired Judge appointed by the President, after consultation with the Chief Justice; (ii) two advisory interception experts appointed by the Minister based on his or her relevant qualifications and experience in the field; and (iii) the Centre supplying relevant intelligence to the national intelligence structures. 4.3.3. We recognise that the Bill at least makes more of an attempt than RICA, in its pre-Amabhungane interpretation, to ensure the impartiality of the judge tasked with considering the interception application (by adding the requirement that the Chief Justice be consulted in the appointment of the judge). However, the issue remains that the interception application is ex parte, without the possibility of review or appeal. We understand that the subject of intended surveillance, both in respect of RICA and in respect of national security considerations under the Bill, cannot be a party to their own interception application – this would defeat the purpose of the surveillance. However, the Bill’s failure to put in place measures to address the risks of the ex parte nature of the interception application is concerning. 4.3.4. In Amabhungane, the Constitutional Court held that “[i]n sum, RICA is unconstitutional to the extent that it lacks sufficient safeguards to address the fact that interception directions are sought and obtained ex parte”[3]. We are of the view that the Bill will face the same challenge should it be passed without having its own safeguards in this respect. While we recognise that information sought in terms of RICA may differ from the information that may be sought in terms of the Bill, the rights affected by both these pieces of legislation do not, and they require similar protections. 4.3.5. We therefore suggest that the Bill incorporate a public advocate to argue on behalf of the subject of the interception application, or a similar measure. 4.4. General Surveillance Concerns 4.4.1. The expansion of surveillance powers without explicit, strong privacy protections risks enabling indiscriminate data collection and monitoring activities. Clear guidelines on data collection, retention, use and sharing are necessary to protect individuals' privacy rights. 4.4.2. Instituting enhanced surveillance capabilities without adequate safeguards sets a dangerous precedent, potentially normalising mass surveillance practices. This could lead to a slippery slope, where the threshold for initiating surveillance is progressively lowered, further encroaching on individual freedoms. 4.4.3. Drawing on international human rights standards and best practices can provide valuable guidance. The United Nations' privacy principles[4] and the European Union's General Data Protection Regulation[5] offer frameworks emphasising the necessity, proportionality, and transparency of surveillance measures, alongside strong oversight and redress mechanisms for individuals. 4.5. Recommendations for Reform 4.5.1. Improve Judicial Oversight Make provision for a public advocate or a similar functionary to address the “ex parte” issue in interception applications. 4.5.2. Implement Privacy Safeguards Clearly define privacy safeguards, including limitations on data collection, retention periods, use restrictions, and protocols for data sharing, both domestically and internationally. 4.5.3. Enhance Transparency Require regular reporting on the use of surveillance powers, including the number of surveillance authorisations, the types of data collected, and the effectiveness of surveillance activities in achieving their stated objectives. 4.6. Conclusion While national security is undeniably important, it must not be pursued at the expense of constitutional rights. The Bill's current approach to enhancing surveillance capabilities lacks the necessary balance between security concerns and the protection of privacy and freedom of expression. Implementing robust oversight mechanisms and privacy protections is essential to maintaining this balance and safeguarding democratic freedoms. 5. INSUFFICIENT MEASURES AGAINST FUND MISUSE 5.1. General concern 5.1.1. The concern over inadequate mechanisms to prevent the misuse of secret funds within the intelligence sector is significant, especially in light of historical instances of state capture and financial mismanagement. The Zondo Commission made significant findings in respect 5.1.2. Effective governance and oversight are crucial to ensuring that intelligence funding is used responsibly and for its intended purposes. What follows below are essential considerations and recommendations to address these concerns. 5.2. Transparency and Reporting While the sensitive nature of intelligence work necessitates some level of confidentiality, it is possible to implement structured reporting mechanisms that allow for accountability without compromising national security. This could include classified reports to specific parliamentary oversight committees or the use of independent auditors with the necessary clearance. 5.3. Clear Legal Frameworks The legislation should establish clear guidelines on the use of secret funds, including permissible and non-permissible expenditures. These frameworks should detail the processes for approval, disbursement, and accounting of funds to prevent misuse. 5.4. Independent Oversight Independent bodies, such as an auditor-general for intelligence services or a dedicated oversight committee within parliament, can provide an additional layer of scrutiny. These bodies would require security clearance to access sensitive financial information but operate independently to audit and review intelligence funding and expenditures. 5.5. Whistleblower Protections Protecting whistleblowers who report misuse of funds or other malpractices within the intelligence sector is essential for uncovering and addressing corruption. The legislation should include strong protections for individuals who report wrongdoing, ensuring they are not subject to retaliation. 5.6. Periodic Reviews and Audits Regular and ad hoc audits conducted by independent external auditors can help identify irregularities or mismanagement of funds. These audits should be comprehensive, covering all aspects of financial management within the intelligence sector. 5.7. International Best Practices Drawing on international best practices and standards for financial management and oversight in the intelligence sector can provide models for implementing robust mechanisms against fund misuse. Collaboration with international intelligence oversight bodies can also offer insights and methodologies for effective fund management. 5.8. Sanctions and Legal Recourse Clear consequences for the misuse of funds, including legal sanctions for individuals found guilty of mismanagement or corruption, are crucial. The legislation should outline these sanctions and ensure that they are enforced to deter malpractice. 5.9. By addressing the risk of fund misuse through comprehensive legal and regulatory measures, oversight mechanisms, and a commitment to transparency and accountability, the intelligence sector can build trust and operate more effectively in its critical role of national security. 6. CONCLUSION 6.1. The General Intelligence Laws Amendment Bill, while aimed at strengthening national security, presents significant challenges and concerns in its current form. The broad definitions of threats to national security, expansive vetting powers, enhanced surveillance capabilities without adequate oversight, and insufficient measures against fund misuse, all raise serious constitutional and human rights concerns. These issues, if not addressed, risk undermining the democratic values and freedoms enshrined in the Constitution of South Africa. 6.2. The Inclusive Society Institute urges a comprehensive re-evaluation of the Bill to ensure that its provisions align with constitutional principles and international best practices. This includes narrowing the definitions of national security threats to focus on direct and immediate risks, ensuring robust oversight mechanisms for surveillance activities, implementing clear and stringent safeguards against the misuse of secret funds, and strengthening the independence and autonomy of oversight bodies. 6.3. It is imperative that the pursuit of national security does not come at the expense of the fundamental rights and freedoms of South Africans. National security legislation must strike a careful balance between safeguarding the Republic and its residents from genuine threats and preserving the human rights that form the cornerstone of our democratic society. We recommend that Parliament consider these concerns and recommendations carefully, with a view to amending the Bill to uphold the rights to privacy, freedom of expression, and the rule of law. 6.4. The Inclusive Society Institute stands ready to engage further on these matters, contributing to the development of legislation that effectively protects national security while respecting the constitutional rights and freedoms that define our democratic Republic. FOOTNOTES [1] For example, the U.S. has defined national security threats in terms of physical and cyber threats to the nation's sovereignty and safety, such as terrorism, espionage, and state-sponsored cyber-attacks. Issues of discrimination and inequality, while recognised as societal challenges, are generally addressed through civil rights legislation and judicial processes rather than as components of national security strategy. The UK's national security strategy focuses on terrorism, organised crime, military threats, and cyber security. While the UK recognises the importance of social cohesion and the risks posed by radicalisation, efforts to combat discrimination and promote equality are primarily managed through social policy and legal frameworks outside the national security context. Australia's national security policies concentrate on defence, counterterrorism, border protection, and cyber security. While there is an acknowledgment of the importance of social harmony and preventing radicalisation, issues of inequality and discrimination are largely addressed through domestic policies, human rights frameworks, and anti-discrimination laws. [2] Affordable Medicines Trust and Others v Minister of Health and Another [2005] ZACC 3; 2006 (3) SA 247 (CC); 2005 (6) BCLR 529 (CC) at para 108. [3] (CCT278/19 & CCT279/19, 2021) at para 100. [4] https://unsceb.org/privacy-principles. [5] https://gdpr-info.eu/. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za