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Occasional Paper 9/2023 Copyright © 2023 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. OCTOBER 2023 by Prof William Gumede Former Programme Director, Africa Asia Centre, School of Oriental and African Studies (SOAS), University of London; former Senior Associate Member and Oppenheimer Fellow, St Antony’s College, Oxford University; and author of South Africa in BRICS (Tafelberg). Introduction The BRICS New Development Bank (NDB), a new anchor institution of the trade alliance, will have to re-examine its role, model, and activities, after struggling to expand as rapidly as envisioned, battling to secure more diversified funding and failing to effectively challenge Western-dominated multilateral development financial institutions as intended at its launch. The BRICS New Development Bank, formerly called the BRICS Development Bank, appointed former Brazilian President Dilma Rousseff as president of the bank in March this year, to provide fresh leadership to the organisation. Strengthening the capacity of the NDB, refining its role and structure, was at the top of the agenda of the recent BRICS summit in August. The Shanghai-based NDB was established in 2015 with US$10 billion in paid-in share capital from each member of the BRICS trade alliance – Brazil, Russia, India, China, and South Africa – which was founded in 2009. The idea behind forming the NDB was to challenge the existing Western-dominated global financial institutions, such as the World Bank and International Monetary Fund (IMF), in providing lending to developing countries (Woods, 2006). Simultaneously, the BRICS countries also established a Contingent Reserve Arrangement (CRA), with a commitment of US$100 billion, to provide “a framework for the provision of support through liquidity and precautionary instruments in response to actual or potential short-term balance of payments pressures” among BRICS members. This was a direct challenge to the IMF. The Asian Infrastructure Investment Bank was also set up by China to counter the Western-dominated global financial institutions. BRICS and other developing countries have criticised global financial institutions, such as the World Bank, IMF, and World Trade Organization (WTO) for excluding them in shareholding, decision-making, representation voting, and ideas. BRICS have called “for the reform of international financial institutions to make them more representative and to reflect the growing weight of BRICS and other developing countries”. The BRICS members aim to reshape global power, to counterbalance the dominance of the US and Western countries and to give the Global South more power in relation to the West in multilateral institutions such as the United Nations (UN), World Trade Organization and World Bank, and the IMF – which are dominated by Western countries. BRICS also plan to create, and have tried to set up, their own alternative development organisations to rival Western-dominated international financial, trade and political institutions. Trying to forge a development bank for developing countries, rather than just for BRICS countries The New Development Bank is a key part of the BRICS development strategy to challenge Western-dominated global hegemony. Headquartered in Shanghai, the bank has US$50 billion in subscribed capital. However, the bank has been hoping to raise capital from new members. Currently, the bank has eight member countries and only loans to members, despite envisaging at its launch that it would lend to members and non-members. The only new members, outside BRICS, since 2021 are Egypt, United Arab Emirates, and Bangladesh. Uruguay is in the process of being admitted, and the bank is considering applications from 15 other countries that have applied for membership. Rousseff has stated the bank’s ambition to forge a development bank for developing countries – what she calls “a bank made by developing countries for themselves”. A previous developing country effort to create a successful alternative to the World Bank, the Banco del Sur (Bank of the South), failed to do so (Chandrasekhar, 2014). Leslie Maasdorp, the CFO of the bank, said: “The intention has always been to create a global bank anchored in emerging markets.” The bank’s aim is to lend to, without attaching political conditions such as good governance, structural adjustment, or using the staff or businesses of the lender as part of its loans, to distinguish itself from the World Bank, IMF, and Western lenders. Many developing countries have criticised Western lenders for placing onerous conditions on lending requirements to developing countries, such as insisting countries must introduce neoliberal economic policies – including often extreme austerity measures – use Western advisors and companies, and vote in global multilateral institutions in tandem with Western countries (Bond, 2001; Woods, 2006; Green & Kalomeris, 2015). While the bank may say it will not demand political conditions for its loans, the challenge is going to be for the bank to apply financially responsible conditions, to ensure its grants are prudently used, for the purposes intended, and to extract remedies when lending is abused. Development banks provide funding to large development projects deemed too risky for the private sector. Because of this, they need to put stringent performance measures, financial oversight, project feasibility measures, market analysis, and funds audits in place to ensure the funds provided are prudently used, given that the funded project is already high risk (Gumede et al, 2011). Another challenge for the bank is commercial sustainability, particularly since it sources large amounts of its funding from the markets. The one condition the NDB requires for its loans, is that governments must guarantee the loans they give to domestic state development projects – such guarantees help bring down borrowing costs and lends credibility and authority to the bank. Nevertheless, as eminent Indian economist Chandrasekhar (2014: 10) has warned: “Any form of socially concerned lending that does not yield a return adequate to cover costs and deliver at least a nominal profit will be ruled out (by the NDB). There is only so much an institution whose activities are constrained by market realities can do.” Robust social, economic, and environmental impact assessments are fundamental. Green and Kalomeris (2015) perfectly sum up the challenge for the NDB: “On one hand, the bank can be seen as an alternative to the Western-based conditionality of existing institutions. MDB loan conditions are often called excessive or even hypocritical when requirements exceed the actions of the lender at a similar point of development. On the other hand, if it supports projects with controversial environmental, social, or corruption concerns, the NDB is left open to criticism.” Green and Kalomeris (2015) argue the NDB will have to make sure “that conditionality is prudential, rather than political, is a prerequisite”. Finally, it is moot whether the NDB will be more robust in its respect for the environment, dignity of communities, good governance, and human rights in its development projects than traditional Western lenders. Civil society organisations, the media, and human rights activists in BRICS will have to hold the bank accountable. However, with only three of the founding members – Brazil, India, and South Africa – being democracies, and the rest not, and with a number of new members also likely not to be democratic, it is going to be an uphill battle. Nevertheless, it is crucial that civil society organisations, the media, and human rights activists in the developing world hold the bank accountable to uphold sustainability, good governance, and human rights. New members joining the bank The NDB has struggled to expand to large numbers of emerging markets – from its core five founding members. The bank has expressed as a priority its intention to expand its geographic representation, which compares poorly to other development banks. For example, the Asian Infrastructure Investment Bank, which was launched in 2016, has 106 members, including 45 members outside Asia and 23 European countries. Dilma Rousseff, the president of the NDB, said the bank was reviewing applications for membership – which is open for members of the United Nations – from about 15 countries. Bringing in new members is critical for the bank to diversify its project portfolio, mobilise capital and to de-dollarise. The bank is keen to get new members to increase its capital base, and it wants to increase fundraising in member currencies, to reduce its reliance on the US dollar. The entry in January 2024 of six new BRICS members – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates – in particular the petrodollar countries, who will also become members of the bank, will not only boost the geographic representation of the bank, but may bring in much-needed fresh capital and projects. Saudi Arabia, for example, is the largest economy in the Middle East and is one of 18 countries in the world with a gross domestic product larger than US$1 trillion. The US is the largest, with US$23 trillion, China second, with US$17.5 trillion, and Japan third, with US$4.9 trillion. Currently, Russia is the only large oil producer in BRICS. The fact that large oil producers such as Saudi Arabia, United Arab Emirates, and Egypt will be joining BRICS, means the group will dominate the world’s energy supply. The strength of the US dollar is partially based on the currency underpinning oil trade – the so-called petrodollar – and members of OPEC (Organisation of the Petroleum Exporting Countries) settle their accounts in US dollars. Therefore, if the petrodollar BRICS members trade with their own currencies within BRICS, it could substantially accelerate the de-dollarisation of the world. The bank’s shareholder governance structures provides that the five founding members will retain the majority voting power and the senior board and executive positions. The BRICS jointly hold the majority share of 55% of the bank, with each founding member having an equal voting share. The founding agreement stipulates that the NDB leadership will be rotated among the shareholders. The bank tries to make decisions based on consensus. However, there are fears that China, which has provided the most capital so far, will necessarily dominate decision-making in similar ways to how, for example, the US or Europe dominates the World Bank or IMF. Furthermore, a big challenge for the NDB will be whether it can maintain institutional independence from its shareholders – in order to make decisions based on developmental sustainability, rather than on political motivations. Many developing countries’ domestic development banks have failed because decisions to lend are often based on political patronage considerations, rather than on purely developmental, sustainability and growth reasons, leading to unsustainable, poor quality and low development impact projects. Nevertheless, new members may not be happy to take backseats in decision-making and management – and the bank may have to relook its governance statutes to give new members equitable say. The bank, therefore, will have to find a way to include new members in decision-making, voting and representation – if it does not want to run the risk of being accused of also being dominated by the founders in the same way Western countries dominate global financial institutions such as the World Bank and IMF. Western sanctions against Russia have undermined the NDB’s operations Western sanctions against member Russia because of its war on Ukraine have also undermined the NDB’s operations, its ability to expand more rapidly and to secure more diversified funding. In fact, the bank suspended all its activities in Russia, fearing Western sanctions – Russia holds 19.4% of the bank’s capital. Fitch, the rating agency, downgraded the bank’s debt from AA+ to AA last year, because of Russia’s holdings in the bank, saying that the bank “could face challenges to issue a long-term bond on US capital markets”. In May this year, Fitch changed the bank’s outlook to stable following the bank’s successful issuing of a US$1.2 billion green bond. The impact of the Russia-Ukraine war on the BRICS development bank is forcing a rethink of the role of the bank. BRICS countries now want the bank to play a central role in de-dollarising the global markets. However, the bank is heavily dependent on US capital markets, with the majority of the bank’s capital, around 70%, in US dollars. The bank could not issue a US$1.06 billion Russian bond after it set up a rouble programme in 2019, because of Western sanctions against the country. Sanctions against Russia have also increased the bank’s borrowing costs – particularly US dollar-based transactions. As a case in point, a five-year US$1.5 billion bond issued by the bank in 2021 had a 1.125% coupon; but two years later a similar five-year bond had a 5.125% coupon, making the bank more expensive than other development banks. Because of the increase in the costs of the bank’s lending, it reduced its new lending. The bank only lent US$1 billion loans in 2022 – partially as a result of the impact of the Russia-Ukraine war. The bank’s CFO, Leslie Maasdorp, told Reuters that, because “of the capital market challenges of 2022, and in an endeavour to preserve the bank’s core financial ratios, there was indeed a slowdown”. The bank’s role in de-dollarisation of the global economy BRICS economies are seeking to reduce the use of the US dollar in trade. Russia is proposing that the New Development Bank (BRICS Bank) should become a clearing centre for a BRICS common currency. “We are ready to discuss them within the New Development Bank framework that may become a kind of clearing centre. This is not the core business for the bank now but this is [also] not the main obstacle to solve the task,” according to Russia’s Finance Minister, Anton Siluanov. Brazil’s President, Lula da Silva, has also put forward that the BRICS bank become a clearing house for a proposed BRICS common currency. “Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries?” Lula asked early in the year during a visit to the BRICS bank’s head office in Shanghai (Bloomberg, 2023a). The bank is planning to increase its lending in local currencies, to reduce its reliance on using the US dollar as the dominant currency of transactions. Using local currencies not only strengthens local markets, but it also shields local borrowers from currency fluctuations. The currencies of many developing countries are not convertible, which causes their economies to suffer disproportionally from currency fluctuations. Two-thirds of the NDB’s loan book was in US dollars; currently only 22% of the bank’s transactions are in local currency. The bank wants to increase it to 30% by 2026, and therefore, will push for local currencies to be used more in trade between BRICS countries. The idea is that BRICS members should be able to use their own currencies to finance projects or do trade in other member countries. Leslie Maasdorp, the CFO of the bank, said the reality was that the US dollar was where the largest pool of liquidity is (Sguazzin, 2023). The bank is aiming to increase the use of local currencies to not only reduce the risks of foreign exchange fluctuations, but also as part of the BRICS trade alliance’s strategy to de-dollarise. Most developing countries use the US dollar to trade, borrow and price the commodities they produce. Their economies are therefore sensitive to changes in US monetary policy, which affects the value of the dollar, as it directly impacts on them. Many BRICS members have dollar-denominated debt, which has increasingly become expensive to service, because the US central bank often raises interest rates to counter downturns in its domestic economy. This then destabilises the economies of developing countries, who predominantly trade in US dollars. In the 18 months up to 26 July 2023, the US Federal Reserve, its central bank, had raised its interest rates up 5.25 percentage points – an aggressive strategy, which has destabilised the economies of many developing countries (Bodea, 2023). It has forced foreign capital flows from developing countries to the US where it would be more attractive for them. This depressed the currencies of many developing countries, who are then forced to copy US interest hikes, also destabilising their domestic economies, causing, for example, recessions of their interest rates, which are already high. In addition, many developing countries export or import commodities that are priced in US dollars. Exchange rate fluctuations therefore impact on their imports and exports. And since many developing countries have their debts in US dollars, this means that servicing debts becomes more expensive if their domestic currencies depreciate against the US dollar. Many developing countries also borrow in US dollars – meaning their borrowing costs will also be more expensive. David Malpass, former President of the World Bank, in April 2023, said that around 60% of lower-income countries are at high risk of debt distress – and thus, are severely impacted by US interest rate hikes. Lending in local currency would reduce foreign exchange fluctuations and risks for BRICS members; and will decrease the negative impacts of US domestic interest rate variations, which cause fluctuations in the US dollar, undermining US dollar-based transactions around the globe. The value of the US dollar has increased in relation to most emerging market currencies since the start of the Russia-Ukraine war, after the US central bank increased interest rates to tackle domestic inflation in 2022. This has increased the servicing of US dollar debt for developing countries. Vladimir Kazbekov, the chief operating officer of the NDB, explained how localisation of currencies would work. “A project in South Africa can be financed in the [Chinese currency] renminbi, not with US dollars. This would be done especially with projects that require the importing of parts, which would be cheaper to use local BRICS currencies than using US dollars,” Kazbekov said (Mahlaka, 2023). As part of this new strategy to de-dollarise, the bank will, in 2023, lend in the South African, Brazilian, and Indian currencies – either through currency swaps or debt issuing (Bloomberg, 2023b). Two years ago, the bank made a commitment to provide US$3 billion to finance South Africa’s “Just Transition” from coal to renewable energy. However, South Africa has been unable to provide the projects to finance. In 2019, the bank registered an initiative to sell R10 billion in debt on the Johannesburg Stock Exchange. The bank issued its first South African debt sale in 2023 when it sold R1.5 billion in bonds. The NDB closed the auction of the rand-denominated bonds on 15 August. The South African bond auction raised R1.5 billion, which will be used to fund development, infrastructure, and industrialisation initiatives in the country. The NDB also plans to fund South Africa’s ailing state-owned entities, but will provide funding to private companies too, it says. The bank is already lending in Chinese currency, the yuan. In fact, more than half of the bank’s lending has been in yuan. Most of the bank’s funding has been from the Chinese market, using the proceeds from issuing yuan-dominated bonds in the Chinese market to fund projects. In May 2023, the bank raised 8.5 billion Chinese yuan (US$1.20 billion) through a so-called Panda bond transaction, with the proceeds being invested as part of the bank’s liquid assets. The Bank of China was the lead underwriter of the bond. Up to 100 percent of the net proceeds from a Panda bond, or yuan-denominated bond – which were first issued in 2005 – may be remitted offshore in yuan and converted into other currencies. The bank is now planning to register to issue bonds in Indian rupees to the tune of US$2.5 billion over five years. Typical new projects funded The NDB’s mandate allows it to “support public or private projects through loans, guarantees, equity participation and other financial instruments”. The bank has an authorised capital of US$100 billion. Since its launch, it has approved 80 projects in all of its member countries, translating into a portfolio of US$30 billion. The projects cover transport, water and sanitation, clean energy, digital infrastructure, social infrastructure, and urban development. The bank aims to channel 40% of its lending to climate-related projects. Since the Russia-Ukraine war, the bank has stopped lending to Russia, for fear of Western sanctions. The largest proportion of the bank’s lending is to South Africa, which makes up more than 18% of the bank’s total loans of US$33 billion. The NDB has announced it would provide Transnet, the South African state-owned logistics company, with a loan facility of US$1 billion by the end of 2023 for the modernisation of the Transnet fleet and locomotives. The NDB has given the loan to Transnet on condition that the South African government stands as guarantee for the full loan. Transnet posted an annual loss of R5.7 billion (US$304 million) for the 2022/2023 financial year. The SOE’s debt has ballooned to R130 billion – it is paying R1 billion a month to service this debt pile (Jacobs, 2023). At this rate, the chances are high that Transnet will default on its debt repayments in the future. If this is the case, the government will have to repay the Transnet NDB loan. The NDB in August 2023 also provided a US$75 million loan to Telkom for the expansion of its telecommunications infrastructure and network. In addition, the NDB has given South Africa’s state-owned Trans-Caledon Tunnel Authority (TCTA) a R3.2 billion loan to implement Phase Two of the Lesotho Highlands Water Project. The project involves the building of the Polihali Dam and Reservoir, which is a 38km water transfer tunnel that combines roads, bridges, and telecommunications networks. The project on completion will provide South Africa with 71 million litres of water per year; it currently produces 24 million litres of water per year. The South African government is providing full guarantees for the project – as per the NDB’s lending conditions. In July 2023, the bank approved a US$57.6 million loan to the Serra municipality in the southeastern state of Espírito Santo in Brazil, to develop its public transport infrastructure. In the same month, the bank approved a US$60.95 million water sanitation infrastructure project for the Water and Sanitation Company of Paraiba, in the Brazilian state of Paraiba. The bank also approved a US$120 million loan to the municipality of Aparecida de Goiânia in the state of Goiás in Brazil, to improve urban mobility and social infrastructure. In March 2023, the bank approved a US$638.12 million loan to the government of the state of Bihar in India to improve rural roads. In December 2022, the bank approved a US$346.72 million loan to the state of Tamil Nadu in India for the Chennai Metro Rail Limited state entity to upgrade rail infrastructure. In July 2022, the bank provided US$79.05 million in funding to the state of Meghalaya in India for its Meghalaya Ecotourism Development project. In July 2023, the bank approved 2.415 million yuan to China’s Hubei Province for the establishment of the Wuhan Smart Logistics Hub in the Wuhan Municipality. In June 2023, the bank approved US$50 million to the Bank of Huzhou Co. to finance a municipal project in the Zhejiang Province, to develop low-carbon, clean energy, and energy efficiency. Within the project, the NDB facilitates the private sector in China to bridge the funding gap for clean energy projects. The bank in October 2022 approved US$200 million funding for the Liaoning Environmentally Sustainable Urban Development Project in the Liaoning Province of China to finance sustainable urban infrastructure in the Anshan and Lingyuan Municipalities. Conclusion The Russia-Ukraine war – and the threat of sanctions against the bank – is one of the reasons for the bank’s increase in lending costs, slowdown in lending, and failure to secure more funding from capital markets. The entry of six new BRICS members, especially the oil producers, offers an incredible opportunity for the bank to extend its geographical reach, secure new capital and increase its operations. For BRICS members, the bank is likely to be a key institution, to push its strategy of de-dollarisation. In 2023, as part of this new strategy to de-dollarise, the bank will lend in the South African, Brazilian, and Indian currencies – either through currency swaps or debt issuing. Lending in each other’s currencies will not only be a tool to de-risk transactions against exchange fluctuations, but it is also likely to increase the de-dollarisation of the global economy – over the long term. Under the new leadership of former Brazilian President Dilma Rousseff, the bank enters a new era, with a focus on becoming a development bank for developing countries. However, to reach this goalpost, and to challenge Western-dominated global development banks, the NDB will have to expand its geographical footprint, dramatically scale up its lending capacity and transform its governance structure to allow for new members to have a say in decisions. Finally, it is critical that the bank respects the environment, sustainability, the dignity of communities, good governance, and human rights in its development projects, footprint, and partnering. References Africanews. 2023. BRICS bank can help African countries tackle urgent challenges. 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[Online] Available at: https://www.ndb.int/news/ndb-admits-bangladesh-as-new-member-development-bank-established-by-brics-begins-membership-expansion/ [accessed: 21 September 2023] Norton, B. 2023. BRICS New Development Bank de-dollarising, adding Argentina, Saudi Arabia, Zimbabwe as members. [Online] Available at: https://geopoliticaleconomy.com/2023/06/06/brics-new-development-bank-dollar-adding-members/ [accessed: 21 September 2023] Savage, R. 2023. No new BRICS bank members to be announced at summit: CFO. [Online] Available at: https://www.reuters.com/business/finance/no-new-brics-bank-members-be-announced-summit-cfo-2023-08-23/ [accessed: 21 September 2023] Savage, R. & Goh, B. 2023. BRICS bank should raise local currency use as Russia sanctions bite, says Godongwana. [Online] Available at: https://www.businesslive.co.za/bd/national/2023-08-10-brics-bank-should-raise-local-currency-use-as-russia-sanctions-bite-says-godongwana/ [accessed: 21 September 2023] Sguazzin, A. 2023. China, Russia and their BRICS allies have a ‘medium to long term ambition’ to create a dollar rival as a currency, official says. [Online] Available at: https://fortune.com/2023/07/05/will-dollar-get-replaced-brics-brazil-russia-india-china-africa-ambition/ [accessed: 21 September 2023] Silk Road Briefing. 2023. BRICS New Development Bank: No Common Currency Yet. [Online] Available at: https://www.silkroadbriefing.com/news/2023/07/06/brics-new-development-bank-no-common-currency-yet/ [accessed: 21 September 2023] Stott, M. 2023. BRICS bank strive to reduce reliance on the dollar Shanghai-based lender’s president says. [Online] Available at: https://www.ft.com/content/1c5c6890-3698-4f5d-8290-91441573338a [accessed: 21 September 2023] TASS. 2023. NDB could be ‘clearing center’ for common BRICS currency – Russian Minister. [Online] Available at: https://tass.com/economy/1625965 [accessed: 21 September 2023] Woods, N. 2006. The Globalizers: the IMF, the World Bank, and their Borrowers. US: Cornell University Press. Xinbo, S. 2021. New Development Bank expands. [Online] Available at: https://news.cgtn.com/news/2021-09-10/New-Development-Bank-expands-membership-and-moves-to-new-building-13rbKEetuU0/index.html [accessed: 21 September 2023] Xinhua. 2023. Interview: BRICS bank to increase membership, finance in local currencies, says president. [Online] Available at: https://english.news.cn/20230825/76830e2a98b54d418b54d010caf98131/c.html [accessed: 21 September 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

- an Inclusive Society Institute and Daily Maverick collaborative project Hosted by: Daily Maverick Associate editor Ferial Haffajee. Panellists include: Associate Professor, School of Governance at the University of the Witwatersrand Prof William Gumede and Professor of Law, Stellenbosch University Prof Geo Quinot. On Wednesday, 20 September our panel of experts delved into the intricacies of Social Economic Rights as envisioned by our constitution. During this enlightening session, the panel shared their perspectives on the invaluable insights presented by Justice Albie Sachs, a distinguished former judge of the constitutional court.

The recent summits of BRICS and G20 as well as the ongoing UN General Assembly conveyed one clear message: the multilateral system needs to change, and the Global South will have a stronger voice in its reform. Navigating a complex, crisis-ridden and increasingly polarized geopolitical landscape, South Africa champions this push for more inclusive multilateralism. Yet from a progressive perspective: what does it look like? What are South African interests and priorities? And where do we find the necessary allies on the global stage? Following previous conferences and roundtables hosted by the Friedrich Ebert Stiftung (FES) in Johannesburg, together with the Institute for Global Dialogue (IGD) and the Mapungubwe Institute for Strategic Reflection (Mistra), a reflection group was convened on 2 October 2023 at the FES premises in Johannesburg, to ponder these questions. The CEO of the Inclusive Society Institute, Daryl Swanepoel participated in the event. In the first part of the event, Dr Siphamandla Zondi gave an observation and reflection on South African actors´ interests in multilateralism. In the second part, Dr Rolf Mützenich, a long-serving German MP and Chairperson of the SPD Parliamentary Group, considered the possible shared interests with German and European Social Democrats.

A lunchtime seminar on the economic, social and political developments in South Africa was hosted by Arena Idé on Monday, 25 September 2023, at Arenagruppen in Stockholm, Sweden. Reflecting on the thirty years that have passed since apartheid was abolished and the transition to democracy took place, the CEO of the Inclusive Society Institute, Daryl Swanepoel, shared insights on socio-economic and political developments in South Africa. The ANC still holds government power, albeit with less voter support than before and with coalition politics becoming a feature of the political landscape. South Africa has become a global player. At the same time, the country has major socio-economic challenges. Increased prices and costs for food, fuel and electricity are hitting many in South Africa hard, and unemployment remains stubbornly high. Where is the country heading? South Africa faces major socio-economic challenges, and the political environment is fragile. But the macro-economics of the country remain in relatively good shape and the democratic and judicial system functions well. There is despair, but hope prevails.

The Chief Executive Officer of the Inclusive Society Institute, Daryl Swanepoel, represented the Institute at the New Economic Order Conference that was held in Stockholm, Sweden, on 21 September 2023. The conference was organised by Sweden-based Arena Idé and Germany-based Dezernat Zukunft. The conference focussed on the future of Progressive Fiscal Policy. The organisers gathered some of the world’s leading progressive economists, researchers and opinion leaders, who are focussed on turning the page on the new chapter that the current economic crisis may lead to. Session themes included, amongst others: Time to democratize central banking? Inequalities and the cost-of-living-crisis unravelled Counter inflationary measures Tax policy and public attitudes towards redistribution How to fight inflation in an age of overlapping emergencies

A delegation of the Inclusive Society Institute participated in the Inclusive Governance for a Peaceful and Resilient World conference, which was hosted by the Foundation for Global Governance and Sustainability (FOGGS), Global South Perspectives on Global Governance Reform, the Peacemaking Reflection Group and HumanizaCom. The event was hosted at the Church Centre for the United Nations in New York on 15 September 2023. The Inclusive Society Institute was represented by its Chief Executive Officer, Daryl Swanepoel, and Dr Klaus Kotzé, both of whom authored articles that formed part of the Global South Perspectives on Global Governance Reform Report which was released at the conference. Ms Buyelwa Sonjica, the Institutes Advisory Council Chairperson also delivered a speech on Global Resilience at the event. The programme comprised four parts, namely: The presentation, comment on and discussion of the Global South Perspectives on Global Governance Reform report. This part was also chaired by Ms Sonjica. Mr Swanepoel and Dr Kotzé served, amongst others, as panellists. The presentation, comment on and discussion of the PRG booklet on an Enhanced Role for the UN in Peace and Human Security A panel discussion on Resilience for he world and a Global Resilience Council for the UN A panel discussion on The Russia – Ukraine war and the need for global peace architecture. The panel discussion was chaired by Mr Swanepoel. Click to access: Global South Perspectives on Global Governance Reform report Speech by Ms Sonjica - Resilience for the World and a Global Resilience Council for the UN Speech by Daryl Swanepoel - Institutional reform needed to deal with global challenges

The Inclusive Society Institute joined forces with the Chinese Consulate General as well the Africa Chinese Women’s Association in commemorating the National Women’s Day in South Africa but furthermore to this celebrating the role of women nations. The event was hosted by the above-mentioned organizations on the 8th of August 2023 at the Hilton Hotel in Sandton Johannesburg. Nondumiso Sithole, advisory council member at the Inclusive Society Institute (ISI), attended and delivered a keynote address. Inclusive Society Institute mobilized key panelist, Dr Farhana Paruk and Dr April Yazini who partook in the panel discussions. The panel of women gave input on session themed “BRICS corporation in women’s view” and the second session an “independent and self-sufficient women.” The event was attended by academics, businesswomen and political party representatives who engaged in rigorous debates on the challenges as well as the road that lies ahead in fostering societies and nations that don’t converse but actually implement solutions that will emancipate women and foster the role of women in all pivotal spaces. Consul-general Tang Zhongdong paid tribute to all women and highlighted the fact “regardless of cultural backgrounds or geographical distances, women across the two nations share several inherent characteristics”. He also highlighted the fact that the year 2023 marked 25 years of the establishment of diplomatic relations between South Africa and China and that there is ongoing discussions and dialogue on issues related to gender-equality and women’s empowerment.

- an Inclusive Society Institute and Daily Maverick collaborative project Thought-provoking webinar that delves into the integral relationship between administrative justice and South Africa's journey towards constitutional democracy. As we reflect on the remarkable strides taken by the nation, this webinar shed light on the pivotal role that administrative justice has played in the collective struggle against apartheid and its continued significance as we approach the 2024 National Elections. A panel of experts delve into the intricacies of administrative justice as envisioned by our constitution. During this enlightening session, the panel shares their perspectives on the invaluable insights presented by Justice Albie Sachs, a distinguished former judge of the constitutional court.

On Thursday 24 August the Inclusive Society Institute presented its Constitutional training workshop to the learners of Bonteheuwel High. The workshop titled “Taking the Constitution to the People: Know your Rights and Responsibilities” introduces learners to the national Constitution, its concepts, meaning and importance. The workshop aims to raise awareness of how young people can apply the Constitution in their day-to-day lives. The workshop was well received, and learners eagerly engaged to learn more about the values and principles of the Constitution. The school principal, Mr. Fester, expressed interest in having the workshop being offered on a yearly basis and was keen to expose Life Orientation teachers to the content of the workshop so that they can apply its subject matter in their teaching. The Institute is delighted to have been joined by Sibulele Mdleleni from the Law Department at the University of Cape Town who took the opportunity to introduce the learners to Constitution Compass, a downloadable app that offers accessible guides to the national Constitution.

The In Transformation Institute hosted a dialogue on “Building the Centre” on 24 August 2023, which flowed from five previous localised round table discussions. The focus of the one-day event was to unpack the need and urgency for the centre to hold, and what business, civil society and political formations can and should do through creative actions and activities to broaden this, within the current national political landscape. The message conveyed at the previous dialogues was clear: We must now move forward from Analysis to Action. Around 80 leaders from business and civil society participated in the discussions aimed at consolidating the views and ideas presented at the earlier engagements. The objective was to find ways to translate them into pragmatic and effective actions and activities that will continue to advance the key theme of Building the Centre. The Inclusive Society Institute was represented by its CEO, Daryl Swanepoel. The programme was structured around five themes: The Criminal Justice System / NPA; Basic Education; State Reform; Civic life; civic education and civic action (election focus); and Health / NHI.

Occasional Paper 8/2023 Copyright © 2023 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. AUGUST 2023 by Prof William Gumede Former Programme Director, Africa Asia Centre, School of Oriental and African Studies (SOAS), University of London; former Senior Associate Member and Oppenheimer Fellow, St Antony’s College, Oxford University; and author of South Africa in BRICS (Tafelberg). Introduction The Russia-Ukraine war is likely to increase the de-dollarisation of the world. Russia, which is trying to circumvent Western economic sanctions against it as a result of its war with Ukraine, is increasingly pushing the Brazil, Russia, India, China and South Africa (BRICS) alliance – to increase the use of BRICS currencies in trade between members, reduce the use of the US dollar and, ultimately, to speed up the formation of a common BRICS currency. BRICS makes up more than 40% of the global population and a third of global economic output, and some of its members – such as India, more recently – have notched up high growth rates. The BRICS economies surpassed the Group of Seven (G7) in 2020, if using purchasing power parity. However, US GDP is still close to 25% of the global economy – which underpins the demand for US dollars. BRICS countries also see the formation of a BRICS currency as a way to protect member countries from similar Western sanctions to those that Russia is under (Cele & Bowker, 2023). The domination of the US dollar often means that US monetary policies to tackle domestic economic crises, disproportionately negatively impact on emerging market economies (Rajan, 2014; Ahmed, Akinci & Queralto, 2022). Raghuram Rajan (2014), the former governor of the Indian Reserve Bank, has warned in the past that because the dollar is the globe’s reserve currency, one-sided domestic monetary policy in the US – which does not take into consideration its impact on the global economy – is a “source of substantial risk” to many developing-country economies. For example, the US Federal Reserve, its central bank, increased interest rates in 2022, which caused negative spillovers in developing economies across the globe (McNamara, 2023). The recent US interest rate hikes have increased the value of the dollar and the commodities priced in the currency, plunging many developing countries’ economies into turmoil. China has for years prior to the Russia-Ukraine war agitated for an alternative to the dollar-backed international financial system and has in the past pushed its own strategic goal of increasing the power of its own currency, the yuan (Gumede, 2014). Following the acceleration of the move towards a multipolar world unleashed by the Russia-Ukraine war, China is now pushing for a common BRICS currency to rival the US dollar (Wheatley & Smith, 2022). New Brazilian president Lula da Silva has already loudly called on BRICS to step up efforts in finding an alternative global currency to the US dollar for use in international trade (Bloomberg, 2023). Lula recently expressed his determination to work toward de-dollarising international trade, during a visit to the Shanghai-based New Development Bank, a financial institution created by BRICS countries as an alternative to the Western-dominated World Bank and the International Monetary Fund (IMF). “Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries?” Lula asked (Bloomberg, 2023). “Who decided that the dollar was the [trade] currency after the end of gold parity?” BRICS have tried to set up alternatives to Western-dominated global financial, trade and political institutions. This includes wanting to replace the dollar as the world’s reserve currency – ending over-reliance on the US dollar in the global financial system has been one of the major objectives of the BRICS trade alliance. The BRICS countries argue that the global use of the dollar gives the US unequal economic, market and political power. Domestic uncertainty in the US often brings dollar volatility, which then also spills over to economies around the world that hold dollars in their foreign reserves. Some BRICS strategists have been calling for a BRICS global reserve currency, with the idea of a BRICS common currency similar to the euro, the common currency of the European Union, being floated. Although up until now, BRICS’ efforts to reduce the global use of the dollar have been slow going, one of the outcomes of the Russia-Ukraine war is very likely to be that the BRICS countries’ activities to increase the use of their own and other currencies, rather than the US dollar, are likely to accelerate (Wheatley & Smith, 2022). The BRICS bloc will discuss a proposal on whether to work towards a common currency at its next meeting in South Africa, on 22 August 2023. The proposal for a BRICS common currency envisages that such a currency would over time become similar to that of the euro and would be used in transactions by countries outside of BRICS. De-dollarisation key to the economic survival of Russia following Western sanctions A number of BRICS countries are exploring ways to de-dollarise their trade. Close to half of Russia’s international reserves in Western countries – which stood at US$607bn in mid-April 2022 – have been frozen, and its foreign trade transactions – including those with some emerging markets – have been blocked (Reuters, 2022a). Seven of Russia’s banks have been excluded from the world’s leading international payment messaging system, SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is responsible for conveying messages on how payments should be made and received. A SWIFT ban means Russian banks cannot do digital cross-border transactions. The Russian banks managing energy – oil and gas – related transactions were exempted from the SWIFT ban, giving the country’s faltering economy a critical lifeline (Blenkinsop, 2022). For example, Gazprombank, which handles the bulk of oil, gas, and coal transactions, are exempt from the ban. This is good news for Russia, considering that while the country is the world’s third-largest oil producer, it is the world’s largest exporter of oil. BRICS countries have been buying Russian resources, offering the country vital support amidst its isolation by the US and the European Union (Verma, 2023). For example, India imports of Russian oil in May 2023 reached record levels of about 1.95 million barrels per day (Verma, 2023). According to the International Energy Agency, China and India bought 80% of Russia’s oil in May 2023, with China buying 2.2 million barrels per day (PTI, 2023). For Russia, isolated from the international financial system over the war, it has now become more urgent for its own economic survival to integrate its payment systems with those of BRICS and other developing countries, and to bypass the US dollar and expand the use of its own and BRICS and developing-country currencies in global transactions. So far, Russia has stockpiled US$77bn of foreign reserves – or 13.1% of its reserves – in RMB since Western sanctions started in 2014 (Harper, 2023). Russia’s Finance Minister, Anton Siluanov, told a finance ministerial meeting of BRICS countries in 2022 that it is urgent the “existing international monetary and financial system based on the US dollar” must be changed (Reuters, 2022b). Following Western sanctions against Russia after the country’s invasion of Crimea in 2014, Russia, in 2015 already, set up its own banking messaging system, called System for Transfer of Financial Messages (SPFS), in competition with SWIFT, and in anticipation of future exclusion from the SWIFT system by Western countries. The Russian SPFS includes countries who were members of the former Union of Soviet Socialist Republics (USSR). Russia also started its own card payment system, MIR. “This pushes us to the need to speed up work in the following areas: the use of national currencies for export-import operations, the integration of payment systems and cards, our own financial messaging system and the creation of an independent BRICS rating agency,” Siluanov told the BRICS finance ministers last year (Reuters, 2022b). Increased currency integration between BRICS following Russia-Ukraine war Russia is proposing that the New Development Bank (BRICS Bank) should become a clearing centre for a BRICS common currency. Russia’s Finance Minister, Anton Siluanov, said: “The idea of creating a common currency, although I would probably call it a payment unit inside BRICS countries, is floating around and is being discussed. We also have proposals about using digital financial assets supported by real assets, for example gold – stablecoins” (TASS, 2023). “Nevertheless, we are ready to discuss them within the New Development Bank framework that may become a kind of clearing centre. This is not the core business for the bank now, but this is [also] not the main obstacle to solve the task,” according to Siluanov (TASS, 2023). Despite China’s global trade expansion, the country’s currency, the RMB, is not very convertible (Sguazzin, 2023). It lacks the capital markets, market transparency and the supporting financial institutions. China has also set up its own payment system, the Cross-Border Interbank Payment System (CIPS) in 2015, linked to its trade, loans, and investments in developing countries. China has reported that 103 countries are now linked to its CIPS (Reuters, 2022c). However, very few Western banks have joined China’s CIPS and the international transactions of the CIPS are still done through SWIFT. In fact, international transactions of the CIPS only make up 3.2% of global transactions (Reuters, 2022c). Russia started in negotiations with China in 2016 to integrate its SPFS with that of China’s CIPS (Wu & Isjwara, 2022). Russia also has a bilateral currency swap agreement with China’s People’s Bank that allows the two countries to exchange currencies at a fixed interest rate – to reduce currency volatility impacting on trade between the two countries. About 70% of trade payments between Russia and China are done in the national currency of each country (TASS, 2023). As the Russia-Ukraine war rages on, BRICS members India, China and Brazil have been buying oil, gas, and fertilizers from Russia. Both China and India have progressively increased their oil purchases from the Russian bear as the Russia-Ukraine war has progressed, with China paying its oil purchases in yuan, the Chinese currency. Russia has asked India to use its SPFS system for bilateral payments for the oil, weapons, and goods the two countries trade. The proposal involves India making rupee-rouble-denominated payments using Russia’s messaging system, SPFS (Srivastava & Beniwal, 2022). According to the Russian proposal, rubles would be deposited into Indian banks and changed to rupees and vice versa. If the Russian proposal is accepted by India, a decision would be made whether to fix or float the exchange rate in the transactions. India has a unified payments interface (UPI) system, an interface through which one can transfer money between accounts across a single window. The Indian UPI was launched in 2016 by the National Payments Corporation of India (NPCI), the organisation that manages retail payment systems in India, and governed by the Reserve Bank of India, the central bank. Russia wants India to link the UPI system to the Russian MIR payments system, which would make it easier between the two countries with regards to bank cards issued by Indian and Russian banks. India has also moved over the past few years to diversify its foreign reserves. Reserve Bank of India (RBI) governor Shaktikanta Das has said: “Our reserves are distributed in various foreign currencies and not just concentrated in just one currency” (TNN, 2022). India does not release the currency composition of its foreign reserves, but it is estimated that between 30-40% of India’s foreign reserves are non-dollar currencies (IMF, 2023). In its diversification strategy, the RBI has been concentrating on buying the euro, pound sterling, yen, and the Swiss franc. However, data from the International Monetary Fund (2023) showed that by the end of 2021, the US dollar share stood at 59.15%, the euro at 20.48%, the Japanese yen at 5.83% and the Chinese yuan at 2.66%. In late 2022, Brazil’s central bank quadrupled its foreign reserves in Chinese yuan (Ayres, 2022), and reduced holdings of US dollars and euros. Until 2018, Brazil had no yuan in its foreign reserve holdings, whereas now its holdings of yuan stand at 4.99%, making it the third largest behind the euro, which was reduced to 5.04%. Brazil also reduced its dollar reserves from 86.03% to 80.34%. China has long overtaken the US as Brazil’s largest trading power, having 28% of its trade, and the US having 14%. Brazil has also increased its reserves of other countries’ currencies, such as the Japanese yen, British pound, and Canadian dollar. “We sought greater diversification in the allocation of currencies, without prejudice to the countercyclical profile of the portfolio as a whole,” Brazil’s central bank said in its report on its foreign reserves (Ayres, 2022). Expansion of BRICS will accelerate de-dollarisation One significant impact of the Russia-Ukraine war will be the accelerated expansion of the BRICS trade alliance, from its current members of Brazil, Russia, India, China, and South Africa. This will hasten the shake-up of the United States-European Union-Japan-led post-Cold War consensus, which dominates global political power, multilateral institutions, and prevailing ideas. Both China and Russia are particularly keen for a rapid expansion of BRICS. Many large developing countries are eager to join the BRICS alliance, which they see not only as alternative trade partners to the West, but also in some cases as a bulwark against what they see as developed global hegemony in markets, ideology, and culture. A BRICS Expansion dialogue meeting was held in May 2022, with the Finance Ministers of many countries attending and expressing their formal interest to join BRICS. In March 2023, Mexico applied to become a member of BRICS. Argentina, Indonesia, Saudi Arabia, and Iran have already applied to join. Turkey, United Arab Emirates, Iran, and Egypt are also keen to join. A larger BRICS alliance will likely increasingly rival the Group of Seven (G7) large industrial economies of the US, EU, UK, France, Japan, Italy, and Canada – which together are home to 16% of the world’s population and account for 62% of the global economy. The BRICS countries, on the other hand, consist of 41% of the world’s population and account for 26% of the global economy. The average per capita GDP of G7 economies is six times that of BRICS economies. However, a swift expansion of BRICS will increase the trade bloc’s share of the global economy much faster than earlier predictions, which did not take into account that BRICS will expand its membership very quickly. A larger BRICS will mean that the world would increasingly use US dollars less. Currently, only Russia is a large oil producer amongst the BRICS countries. If large oil producers such as Saudi Arabia, United Arab Emirates and Egypt join BRICS, it would result in the group dominating the world’s energy supply. The strength of the US dollar is also partially based on the currency as underpinning oil trade – the so-called petrodollar – and members of OPEC (Organisation of the Petroleum Exporting Countries) settle their accounts in US dollars. Therefore, enlarging BRICS to also include the oil producers and persuading them to use a new BRICS currency, rather than the US dollar, to settle their accounts, will be a game-changer – not only will it be a vote of confidence in a new BRICS currency, but such a move is also likely to accelerate the de-dollarisation of the world. Rise of new regional currency blocs There has been a rise in calls by trade regions to align their currencies, to minimise their trading in US dollars. Gita Gopinath, the IMF’s first deputy managing director, has already warned of the emergence of new currency blocs based on trade between separate groups of countries (Wheatley & Smith, 2022). Brazil and Argentina – South America’s two biggest economies – have announced they are starting preparatory work on a common currency, and plan to invite other Latin American countries to join them. In a joint letter, Brazilian President Luiz Inácio Lula da Silva and Argentina’s President Alberto Fernandez said they planned to “advance discussions on a common South American currency” (Ayres, 2023). Lula and Fernandez called for the envisaged Latin American currency union to extract the continent from the use of the US dollar. Lula more realistically envisaged that such a common South American currency would not be like the European Union’s euro, which is used as a currency for transactions within the EU bloc. According to Brazilian and Argentinian government officials, the South American currency would only be used for trade purposes (Ayres, 2023), while the individual currencies of the countries would remain in existence. The proposed Latin American common currency could be a digital currency, which is pegged to major currencies or to gold. Nevertheless, the challenge is that digital currencies are unregulated, more volatile, and unstable – and it will not be simple to create a digital-based common trade currency for Latin America. Although geographically close, having a large volume of inter-regional trade and institutional familiarity, an attempt by Brazil and Argentina in the 1980s to launch a shared currency for trade, called the ‘gaucho’, collapsed because of divergent monetary policy regimes, economic institutions, and political systems, amongst others. In Francophone Africa, countries who were former colonies of France use the colonial-era CFA franc currency. The CFA franc was established in 1945 and was at the time called “Colonies françaises d'Afrique” (French colonies of Africa). The CFA franc is used in 14 West and Central African countries. Countries using the CFA franc must keep 50% of their currency reserves with the Banque de France – which pegs the African franc to the euro. This, in fact, means that the monetary policy of the CFA franc members is conducted by the French central bank in Paris. In 2020, the Economic Community of West African States (ECOWAS) members of the CFA franc currency zone resolved to replace the currency in time with a new local one, called the eco (Africanews, 2019; Bahgat, 2021). Only the West African countries of Benin, Burkina Faso, Guinea Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo – all former French colonies, except Guinea Bissau – will be part of the new currency. The remainder of countries – Cameroon, Chad, Central African Republic, Congo Republic, Equatorial Guinea, and Gabon, also all former French colonies, except Equatorial Guinea – will continue to use the CFA franc. However, ECOWAS postponed the launch of the new planned common currency because of economic challenges caused by Covid-19, and because of economic and political instability in many of the member countries. It will now launch the new single currency in 2027. BRICS common currency not immediately practical – other options available At the core of the proposal to create a common BRICS currency, is for members to initially use a common currency for trade settlements between the members, while the countries continue to use their domestic currencies for home use. Over time the currency is envisaged to be used in trade with non-members. A BRICS currency, if launched, will likely be backed by gold (and other commodities) – meaning such a currency will be convertible into gold. However, the reality is that a common currency between BRICS (Brazil, Russia, India, China, and South Africa) countries is not – in the short-term, at least – practical, feasible or implementable, given the divergent monetary regimes, the poor convertibility of the individual country currencies, and that inter-trade areas between the countries are not large enough to sustain a common currency. India has now stated it may oppose the BRICS common currency idea, with its leadership saying it wants to rather strengthen its own currency, the rupee. India is currently the most dynamic economy – with the highest annual economic growth rates – within the BRICS alliance (Gumede, 2023c). For another, India’s foreign strategy is to trade with both the US and BRICS, rather than one or the other. India’s trade with the US and Europe brings it billions in income, which it does not want to risk by dismissing the US dollar for an untested BRICS currency (Despande, 2023). India is also worried that China wants to use the idea of a BRICS currency to essentially turn its own currency into the BRICS currency (Despande, 2023). Nevertheless, opposition from India may slow down the BRICS currency formation. In an interview with Bloomberg, South African Reserve Bank Governor Lesetja Kganyago also cautioned about the challenges of establishing a BRICS common currency regime (Sguazzin, 2023). Kganyago wondered how practical it would be to attempt to establish a common currency in a trade bloc where the members are spread over vastly different geographical locations. Common currencies also need to be underpinned by stable political regimes. As seen by Russia’s invasion of Ukraine, there are structural weaknesses in the political stability of the BRICS countries, which also undermines the stability of their currencies – and will undermine a common BRICS currency. Although China has experienced high growth over the past decades, growth has slowed down. China has structural inefficiencies; its political stability depends on continuous high growth levels. In addition, there is the ever-present threat that China could copy Russia’s invasion of Ukraine, to invade Taiwan. Brazil has also experienced regular political and economic upheavals and its currency has been prone to volatility. Brazil is deeply divided between supporters of new leader President Lula da Silva and the supporters of his predecessor, former President Bolsonaro. Similarly, the ANC government in South Africa has been mired in corruption, mismanagement, and inefficiency, which has also undermined the stability of the rand. It is instructive that individual BRICS countries do not have large foreign exchange holdings of the currencies of fellow BRICS members. Rather, most of the BRICS countries have traditionally stocked stable currencies – supported by stable governments – such as the yen, Swiss franc, and the euro. However, the major challenge is that trade within BRICS countries is too small – the phenomenon of needing an “optimal currency area (OCA)” – to sustain a common currency (Mundell, 1961). The reality is that switching from the US dollar as global reserve currency to any new currency will not happen overnight. US GDP is still close to 25% of the global economy, which underpins demand for US dollars, whilst BRICS countries together only account for 26% of the global economy. When the dollar overtook the British pound as the global reserve currency, it took 50 years for a full switch to take place. Although expanding BRICS membership will help to secure an optimal currency area to make a common BRICS currency possible, it is highly unlikely that the Russia-Ukraine war will topple the dollar as the global reserve currency. However, it will reduce its power, and may foster currency blocs either between countries or between trading blocs of countries. As important, BRICS countries presently do not have the capacity to replace the US dollar. For BRICS countries to wean themselves overnight from the US dollar, it would unleash massive economic shocks in BRICS countries. A BRICS common currency will require a central bank, which will require commonality in monetary policy, alignment of fiscal policies, and synergy between political regimes across the trade bloc. But the BRICS countries have vastly different central banking regimes – not easily convertible, unlike, say, the European Union when they established a common currency, the euro. China and Russia’s central banks are state controlled. South Africa, India, and Brazil have independent central banks. A big question is whether China or Russia would surrender sovereignty over their national currencies – crucial to the success of a common currency. It seems that the most practical step to reduce the use of the US dollar – and therefore reduce trade transaction costs – in trade between BRICS countries, is for the members of the group to use their bilateral trade, using methods such as credit receipts. A case in point, in March this year, China and Brazil worked out an agreement with each other to settle the foreign trade between the two countries in Chinese yuan or Brazilian real, to eliminate the US dollar as a third currency in trade between them and reduce the costs of trade. Conclusion The global challenge remains that using the US dollar as the world’s only reserve currency makes developing countries prone to negative spillovers from US monetary policies, economic and political crises – even if the developing countries had no say in the US policymaking which impacts on them. What is not in question is that the likelihood of the Russia-Ukraine war toppling the US dollar as the global reserve currency is very slim. But given the added structural weaknesses in the US economy, institutions, and politics, the power of the dollar is likely to decline, although only gradually, and may foster currency blocs either between countries or between trading blocs of countries. Similarly, given the structural weaknesses in the economies, institutions, and politics of developing countries, it is very unlikely that an envisaged BRICS common currency would replace the US dollar. However, it is very likely that the BRICS alliance will create a trading currency pool, which may not replace the dollar, but will offer an alternative to it (Wheatley & Smith, 2022). Leslie Maasdorp, the CFO of the New Development Bank, said the BRICS countries are pushing to conduct with each other in domestic currencies, but they are not yet ready to issue a common currency that could challenge the US dollar. Maasdorp said rightly that the creation of a global alternative currency to the US dollar is a medium- to long-term ambition, rather than an immediate possibility. He said that even the Chinese renminbi is a “long way from becoming a [global] reserve currency” that can challenge the US dollar (Sguazzin, 2023). The supporting institutions of the dollar-based economic system, such as the International Monetary Fund, are also likely to lose their global influence, as new institutions to support alternative global currency pools, such as the BRICS institutions, emerge. South African International Relations and Cooperation Minister Naledi Pandor warned in an interview with Bloomberg: “I don’t think we should always assume the idea will work, because economics is very difficult and you have to have regard to all countries, especially in a situation of low growth when you are emerging from crises” (Sguazzin, 2023). Gita Gopinath, the first deputy managing director of the International Monetary Fund, has rightly said that one ripple effect from the Russia-Ukraine war, will be countries gradually decreasing the dominance of the US dollar and increasingly including currencies other than the dollar in their foreign reserves, ultimately leading to the rise of currency blocs based on trade between separate countries (Wheatley & Smith, 2022). References Africanews. 2019. End of an era: West African states to halt use of CFA Franc. [Online] Available at: https://www.africanews.com/2019/12/22/end-of-an-era-west-african-states-to-halt-use-of-cfa-franc// [accessed: 7 August 2023]. Ahmed, S., Akinci, O. & Queralto, Y.A. 2022. U.S. Monetary Policy Spillovers to Emerging Markets: Both Shocks and Vulnerabilities Matter, International Finance Discussion Papers 1321. Washington: Board of Governors of the Federal Reserve System. Ayres, M. 2022. Brazil central bank quadruples exposure to Chinese yuan. [Online] Available at: https://www.reuters.com/world/americas/brazil-central-bank-quadruples-exposure-chinese-yuan-2022-03-31/ [accessed: 7 August 2023]. Ayres, M. 2023. Explainer: What Brazil and Argentina’s ‘currency union’ really means. [Online] Available at: https://www.reuters.com/world/americas/what-brazil-argentinas-currency-union-really-means-2023-01-23/ [accessed: 7 August 2023]. Bahgat, F. 2021. West African bloc aims to launch single currency. [Online] Available at: https://www.dw.com/en/ecowas-west-african-bloc-aims-to-launch-single-currency-in-2027/a-57970299 [accessed: 7 August 2023]. Blenkinsop, P. 2022. EU bars 7 Russian banks from SWIFT, but spares those in energy. [Online] Available at: https://www.reuters.com/business/finance/eu-excludes-seven-russian-banks-swift-official-journal-2022-03-02/ [accessed: 7 August 2023]. Bloomberg. 2023. New BRICS currency must replace dollar, says Brazil’s Lula. [Online] Available at: https://www.news24.com/fin24/markets/new-brics-currency-must-replace-dollar-says-brazils-lula-20230413 [accessed: 7 August 2023]. Bose, S. 2022. India’s non-dollar forex assets seen at 30-40% of reserves. [Online] Available at: https://www.financialexpress.com/economy/indias-non-dollar-forex-assets-seen-at-30-40-of-reserves/2469944/ [accessed: 7 August 2023]. Cele, S. & Bowker, J. 2023. BRICS Nations Say New Currency May Offer Shield From Sanctions. [Online] Available at: https://www.bloomberg.com/news/articles/2023-06-01/brics-nations-say-new-currency-may-offer-shield-from-sanctions#xj4y7vzkg [accessed: 7 August 2023]. Daniel, W. 2022. Russia prepared for 8 years to be cut off from the West. Meet the payment system that’s still processing its credit card transactions. [Online] Available at: https://fortune.com/2022/04/01/russia-credit-card-transactions-nspk-mir/ [accessed: 7 August 2023]. Despande, P.P. 2023. BRICS’s plan to float a common currency & India’s reaction to it. [Online] Available at: https://timesofindia.indiatimes.com/blogs/truth-lies-and-politics/bricss-plan-to-float-a-common-currency-indias-reaction-to-it/ [accessed: 7 August 2023]. Durden, T. 2023. The Gold Standard Is Back: BRICS to Intro Gold-Backed Reserve Currency. [Online] Available at: https://www.zerohedge.com/markets/gold-standard-back-brics-intro-gold-backed-reserve-currency [accessed: 7 August 2023]. Gumede, W. 2013. Complicated relationship holds BRICS back. [Online] Available at: https://mg.co.za/article/2013-03-22-00-complicated-relationship-holds-brics-back/ [accessed: 7 August 2023]. Gumede, W. 2014. Currency devaluations lead to bigger crises. [Online] Available at: https://www.enca.com/currency-devaluations-lead-bigger-crises-0 [accessed: 7 August 2023]. Gumede, W. 2023c. India set to carry the torch for BRICS bloc. [Online] Available at: https://www.businesslive.co.za/bd/opinion/2023-05-05-william-gumede-india-set-to-carry-the-torch-for-brics-bloc/ [accessed: 7 August 2023]. Harper, J. 2023. How China’s yuan props up Putin’s anemic budget. [Online] Available at: https://www.dw.com/en/yuan-how-chinas-currency-props-up-putins-anemic-budget/a-64544507 [accessed: 7 August 2023]. International Monetary Fund (IMF). 2023. Currency Composition of Official Foreign Exchange Reserves. [Online] Available at: https://data.imf.org/?sk=e6a5f467-c14b-4aa8-9f6d-5a09ec4e62a4 [accessed: 7 August 2023]. Ishiyama, Y. 1975. The Theory of Optimum Currency Areas: A Survey. [Online] Available at: https://www.elibrary.imf.org/view/journals/024/1975/002/article-A004-en.xml [accessed: 7 August 2023]. Liu, Z.Z. & Papa, M. 2022. Can BRICS De-dollarize the Global Financial System? Cambridge: Cambridge University Press. McNamara, P. 2023. Why a BRICS currency is a flawed idea. [Online] Available at: https://www.ft.com/content/02d6ab99-ea36-41c4-9ad3-9658bb1894a7 [accessed: 7 August 2023]. Mundell, R.A. 1961. A Theory of Optimum Currency Areas, The American Economic Review, 51(4): 657-665. Pakistan Tehreek-e-Insaf (PTI). 2023. India, China bought 80% of Russia's oil in May: International Energy Agency. [Online] Available at: https://www.thehindu.com/business/india-china-bought-80-of-russias-oil-in-may-international-energy-agency/article66975192.ece#:~:text=India%20and%20China%2C%20the%20world's,IEA)%20said%20in%20a%20report [accessed: 7 August 2023]. Patnaik, I. & Sengupta, R. 2021. Why RBI’s hoarding of forex reserves over currency concerns will be counter-productive. [Online] Available at: https://theprint.in/ilanomics/why-rbis-hoarding-of-forex-reserves-over-currency-concerns-will-be-counter-productive/684190/ [accessed: 7 August 2023]. Rajan, R. 2014. We need more global monetary policy coordination, Speech by Governor of the Reserve Bank of India, Bank of Japan Monetary Policy Conference, Tokyo. Reuters. 2022a. Sanctions have frozen around $300bln of Russian reserves, FinMin says. [Online] Available at: https://www.reuters.com/article/ukraine-crisis-russia-reserves-idUSL5N2VG0BU [accessed: 7 August 2023]. Reuters. 2022b. Russia calls for integrating BRICS payment systems. [Online] Available at: https://www.reuters.com/business/finance/russia-calls-integrating-brics-payment-systems-2022-04-09/ [accessed: 7 August 2023]. Reuters. 2022c. Factbox: What is China’s onshore yuan clearing and settlement system CIPS? [Online] Available at: https://www.reuters.com/markets/europe/what-is-chinas-onshore-yuan-clearing-settlement-system-cips-2022-02-28/ [accessed: 7 August 2023]. Sguazzin, A. 2023. BRICS Bank CFO Sees No Move Any Time Soon Toward Common Currency. [Online] Available at: https://www.bloomberg.com/news/articles/2023-07-05/brics-has-no-immediate-plan-for-a-currency-cfo-of-its-bank-says#xj4y7vzkg [accessed: 7 August 2023]. Srivastava, S. & Beniwal, V. 2022. Russia is offering SWIFT alternative to India for ruble payments. [Online] Available at: https://www.aljazeera.com/economy/2022/3/30/russia-is-offering-swift-alternative-to-india-for-ruble-payments [accessed: 7 August 2023]. TASS. 2023. NDB could become ‘clearing center’ for common BRICS currency – Russian Minister. [Online] Available at: https://tass.com/economy/1625965 [accessed: 7 August 2023]. TNN. 2022. RBI diversifying reserves from dollar. [Online] Available at: https://timesofindia.indiatimes.com/business/india-business/rbi-diversifying-reserves-from-dollar/articleshow/90362187.cms [accessed: 7 August 2023]. Toyana, M. 2020. South Africa’s fx reserves rise in April as gold price rally cushions outflow shock. [Online] Available at: https://www.reuters.com/article/safrica-economy-reserves-idAFL8N2CQ24H [accessed: 7 August 2023]. Wheatley, J. & Smith, C. 2022. Russia sanctions threaten to erode dominance of US dollar, says IMF. [Online] Available at: https://www.ft.com/content/3e0760d4-8127-41db-9546-e62b6f8f5773 [accessed: 7 August 2023]. Wu, J. & Isjwara, R. 2022. Russia’s pivot to China for payment alternatives offers limited gains. [Online] Available at: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/russia-s-pivot-to-china-for-payment-alternatives-offers-limited-gains-69377467 [accessed: 7 August 2023]. Vecchiatto, P. 2023. Kganyago highlights limitations, central bank debate as BRICS mulls common currency. [Online] Available at: https://www.news24.com/fin24/economy/kganyago-highlights-limitations-central-bank-debate-as-brics-mulls-common-currency-20230511 [accessed: 7 August 2023]. Verma, N. 2023. India’s Russian oil buying scales new highs in May. [Online] Available at: https://www.reuters.com/business/energy/indias-russian-oil-buying-scales-new-highs-may-trade-2023-06-21/ [accessed: 7 August 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

The Inclusive Society Institute (ISI) is part of the Global South Perspectives on Global Governance Reform Network, which gathers international affairs, sustainability and communication experts from Latin America and the Caribbean, Africa and the Middle East. The network is a collaborative initiative by the Foundation for Global Governance and Sustainability (FOGGS), based in Brussels, Belgium, and the research group Humanitarian Journalism and Media Interventions (HumanizaCom) of the Methodist University of Sao Paulo, Brazil. The Network is currently undertaking in-depth research into the main non-military threats facing the Global South, such as economic, social, environmental, technological, and health crises. Additionally, it is considering proposals related to the reform of the United Nations (UN) and the future of multilateralism. The research outcomes will be released at an event in New York on 15 September 2023. To this end, the ISI hosted a focus group with African experts on 27 July 2023. Delegates were drawn from academia, policy think-tanks and experts, the diplomatic corps, the political establishment, media experts, business and civil society. South Africa, Tanzania, South Sudan, Algeria and Senegal were represented.

The Inclusive Society Institute, supported by ASLA, organised a highly successful Construction Summit which was held at the Cape Town International Convention Centre on 8 August 2023. The objective of the Summit was for it to serve as a scoping exercise for the Institute’s further research into the development of both the social and economic infrastructure needed to radically change the fortunes of the South African economy, and how the construction sector can be best positioned to deliver with the urgency required. The aim was to identify the issues that need attention in the sector, policies that need to be revised or developed, and/or legislation that needs adaption. The programme was developed around two main themes, namely, The current performance of the construction sector within the economy and its prospects under the status quo and The regulatory environment, and innovative thinking to leapfrog construction’s contribution to GDP and economic growth. The Summit was opened by the Deputy Minister of Finance, Hon. David Masondo, with an impressive range speakers and experts also participating in the event.

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 Philosophy’s response to the problem of recession in Nigeria by Dr Valentine Ehichioya Obinyan, (Ph.D) and Dr Faith Gloria Eheimua, (Ph.D) Abstract What is the cause of the rise and fall of the wealth of nations? Is a question Adam Smith has paddled the philosophical interest in economics with. This to some extent informs the idea of fluctuation and recession noticeable in nations around the world. But what is recession and its causes? Development is a typical characteristic or focus of man. The aim of philosophy has been to see the development of every individual and the society, through effective economic policies and activities. Hence an epistemic foundation for economic development is instrumental in the economic of nations. Nigeria is wrecked with economic challenges with evident indices of recession. The interest of this study is a response to the problem of recession in Nigeria from a philosophical perspective. It therefore critically and empirically examines the content of recession reflecting on other economies. It identifies the reasons for recession in Nigeria, seek an economic policy for Africa and proffers suggestions worthy of stabilizing and sustaining the economy through an egalitarian instrument of economic equality in wealth and value distribution. Key Words: Economic, Recession, Development, Philosophy, Nigeria 1. Introduction Man's primary interest is to sustain himself from natures resources. Altering this cast a burden on human existence. In social, political, religious and economic pursuit, dimensions for survival and continuity takes priority. The objective of philosophy and other sciences is specifically to aid development through rational ethical principles formed from the general knowledge and consciousness of the nature of and challenges in man’s environment. There are various forms of development; Human, Psychological, Economic, and Societal development. These are central concerns of philosophers in their propositions for man's needs while respecting his dignity and value. Imhotep, Ptah hotep, Socrates, Aristotle, John Locke and Thomas Hobbes1, Hume, Marx etc., have advanced delibrations and principles for sustainable development from various perspectives. Economic development has always been in direct relationship with ethical issues especially with regards to medical, environmental, religious issues, Economic development is also the process by which a nation improves the economic, political, and social well-being of its people. A historical cases of development is the 4th dynasty in of drought in Egyptian through the Nile valley irrigation systems. What will happen to countries without economic philosophy or development policies? Many scholars have argued that Africa as a continent and Nigeria as a nation lack economic theories to sustain and provide new expansion avenues. The 21st century economics affects directly and indirectly, lack in economic philosophy therefore is a dangerous venture into economic collapse and recession 2. Philosophy and the problem of recession Lack of pragmatic developmental policies and economic philosophies in a nation causes recession using stable economies as examples. What philosophy can revamp the Nigerian Economy? Does Africa have authentic economic developmet theories? According to Omoregbe Joseph in ‘knowing philosophy’ "philosophy in its practical aspect is the most important aspect of development as it sharpens the human development practical development and even our daily living, as pragmatist have said that, only that which is useful should be carried out that’s the aim of philosophy in development."2 Philosophyhere, is the practical aspect of development /economic development. Todaro and Smith in 'on Economic development' argued that "it’s not just enough to talk about economic development, but also to talk about various factors that could hamper development and therefore lead to recession in a nation".3 This various arguments are pointers to justifying this study. 3. Economic development and recession 3.1. What is recession? The period of general economic decline4, typically accompanied by a drop in the stock market, increase in unemployment, and a decline in the housing market, is recession. According to the reports of the National Bureau of Economic Research (NBER, 2010): Recession is a Significant decline in the economic activities visible in real gross Domestic product (GDP) growth, real personal Income, employment (non-farm pay rolls), Industrial production, and wholesale- retail sales.5 In philosophy of economics and economics as a science, quantitatively and ‘technically’, a recession is a period a nations GDP declines at least for two consecutive quarters in a quarter to quarter comparison. Compared by various economic indicators like GDP decline, duration, unemployment, fall of industrial production, downturn of stock market indices, decrease in trade volumes or real personal income and many others. One recession may be evaluated as ‘mild’ or ‘severe’ in quantitative terms. From research, a deep recession influencing more than one country and lasting for a long time is called a ‘depression’6. It is a sustained, long-term downturn in economic activity in one or more countries. It officially began on the Black Tuesday of October 29,1929, although, there might have been earlier cases of it that were not taken into book; it was due to crashed in wall street stock market rapid in stock prices. Popularly called 'The great depression' in the USA and lasted for 4 years affecting terribly more among others, the Afro- Americans but causing the end to prohibitions7. This, many egalitarian philosophers like O’Neill, Pietro Meffetone8 have identified as lack in distribution of socially valuable resources in the restructuring plan. In philosophy of social change, recession can be considered a factor and an instrument for policy implementation and revolution. Are they types of recession? What are its causes? 3.2. Types of Recession 3.2.1. V Shaped Recession V Shaped Recession In this diagram, the economy falls into sharp recession but is quick to recover. This shape V shows a sudden fall followed by a quick recovery. 3.2.2. W Shaped Recession Also called the ‘double-dipped’ recession of up to 10 years. It has a very sharp downturn followed by a temporary recovery. After this small recovery, the economy falls downward again after which it finally recovers completely. It is diagrammatically represented as follows. However, world economies try to avoid this through the implimentation of workable economic ideologies. V Shaped Recession 3.2.3. U- Shaped Recession U shaped recessions involve a prolonged period or recession ( up to 24 months). This is said to be the current stage of global recession. Unlike V shaped recessions, they are not quick to end. 3.2.4. Boom and Bust Recession This occur after a previous economic boom when growth is above the long run trend rate of growth causing inflation and current account deficit This soars consumer’s confidence resulting in fall in saving ratio and a rise in private borrowing to finance higher spending. The economic boom is financed by rising debt. In explaining this, Tejven Pettinger noted "many recession occur after economic boom in growth above the long run trend leading to rapid growth, inflation, and a current account deficit and growth is unsustainable".9 The 1973 recession in UK following barber boom in 1972, the 1990-1992 recession following Lawson boom of late 1980’s are sticking examples. 3.2.5. Balance Sheet Recession This is a large decline in balance sheets due to falling asset prices and bad loans leading to fall in investment and spending and fall in assets prices.10 This kind of recession can last for a very long time and it’s susceptible to double-dip shape of recession. 3.2.6. Supply Side Shock Recession This caused by a very rapid rise in oil prices due to the decline in living standards. For example, in 1973, the world was highly dependent on oil, the tripling in the oil price caused a sharp fall in disposable income and also caused lost output due to lack of oil11. This kind of recession is not so common since the world is less dependent on oil than in time past. 3.3. Causes of recession Generally, recessions are caused by a fall in aggregate demand due to financial crisis, rise in interest rates or fall in asset prices, high inflation and taxation, leading to low purchasing power, debt accumulation and servicing (foreign debts), high- interest rate discouraging investors, fall in aggregate demand, wages or income, mass unemployment and general loss of confidence in the government economic planning etc,.. Some philosophers of economics such as Heidi Grasswick, Ian Carter, Daniel M. Hausman, Peter Hylton, and Gary Kemp, Willard Van Orman Quine George Smith, strongly deviate from the above as the real and only causes of recession. For Brian Duignan, after studying the Great Recession, recession is caused by financial crisis or liquidity.12 For Pietro Meffetone, the main causes of financial instability... [that] …has gone unnoticed by the philosophical community is income and wealth inequality coupled with income stagnation at the bottom of the income distribution13 For Arthur Burns in a presidential address to the Anerican Economic Association and supported by Paul Krugman, Nouriel Roubini, from the Great Moderation, the biggest economic threat had become inflation14 others are from the Keynesian, Jon Maynard Keynes shown clearly as a result from the lower aggregate expenditure in the economy of the nation which contributed to a massive fall in income and employment below the average thus the nation’s economy reached equilibrium at lower economic activity and very high unemployment rate. From the monetarist, Milton Friedman and Anna Shwartz, it is as a result of the great contraction.15 4. Nigerian economy and recession: Way forward According to the analysis of the Nigerian economy carried out by the CIA world fact book, Nigeria’s economy is a middle income, mixed economy and emerging market with expanding manufacturing, financial, technology and entertainment sectors. Ranked as the 21st world largest economy in nominal GDP terms and the 20th largest in term of purchasing power parity16 (PPP). Nigerian is a major exporter of oil, yet only 2.7% of its supply is gotten from Nigeria. This economy, once buoyant in agricultural produce is now dependent on importation of food stuffs for consumption. In 2014, the Nigerian economy changed its economic analysis to account for the rapidly growing contributors to its GDP, such as telecommunications, banking, and its film industry17. In 2005, Nigerian economy achieved a milestone agreement with the Paris club of lending nations to eliminate all of its bilateral external debt. Nigeria ranked 151 in the United Nations Development Index in 2004 and non-energy- related infrastructure is inadequate18. Nigeria’s economy is unstable In 2003 to 2007, Nigeria attempted an economic reform program called the National Economic Empowerment Development Strategy (NEEDS) to raise standards of living through macro-economic stability, deregulation, liberalization, privatization, transparency, and improve agricultural productivity. Although with a Debt-to-GDP ratio of 16.075 in 2019, the height of insurgency and herdsmen attack in the North-East affecting agricultural activities, employment and distribution of food produce, sveral efforts will be needed to improve the economic and health sector to combat recent effect of COVID 19. 4.1. Nigeria and economic recession: Philosophers response Studies shows that recession is caused by lapses in a economic policies by insensitive government to changing economic models. Reflecting on Adam Smith's Wealth of Nations and Why Nations Fail, crytalize perennial evolutionary admonitions about future changes in a relatively booming economy. When we examine closely world economy before the World War II, economic decentralization and wealth and value distribution was lacking. Meffestone identified several reasons for recession but primaryly recommends government close study the economic models to ensure efficient policies. Our country Nigeria is more an Increase-in-debt-to-GDP economy than an economic-growth-wealth-distribution-oriented economy. If an economy runs on any of both, we can tell the result. Philosophy as a second order discipline aims at analysing and moderating the policies of other disciplines. Its interest in recession is as it affects human stability and continuity. We cannot estimate the death rate caueed by hunger, diseases and starvation during the great recession. The case in Nigeria is no different owing to poverty, instability/regulation policies, corruption issues etc. The effect of this on lives and properties cannot be overemphasised. Towards strengthening the economic policies to stabilize and avert recession while improving human conditions therefore, the philosopher recommends the following; 4.1.1. Fight Corruption and Insurgency Sincerely A cross sectional survey of data points to the fact that corruption, bad governance, political instability, insurgenc has been a major challenge of Nigeria. Several agencies like the ANEEJ, Anti-corruption Academy of Nigeria (ACAN), Bureau of public procurement (BPP), Economic and Financial Crimes Commission (EFCC) etc, are to no avail. Even the #END SARS# protest were in view of this change. Various administrations like President Muhammadu Buari launched an anti-corruption drive after taking office in May 2015 with the mandate for change but here we are, still recovering loots, increasing debt, struggling with development and unemployment, importing even the most common commodities, being silent to insurgency amongst others. The reason is our social-economic and political philosophy is vague. We must improve on our justice system, and revaluate our currency. Government must ensure security of lives and propertied, strengthen our foreign relations and investment, introduce effective diversification policies, create jobs, preserve our national treasury and better the economy through effective and responsible leardership. 4.1.2. Small and Medium Scale Empowerment SME are very important part of the Nigerian economy. SME contributes a much higher proportion to GDP around the world. SME’s in NigeriNigeria play an important role in the growth, and development of the economy. Although, these SME’s aere affected by several problems from environmental related factors, government instabilities and frequent policy change, it has been defined by the National council of industries as busines enterprises whose total cost excluding land is not more than 200 hundred million naira. SME's are empowered through advantaged policies, soft loans and other fiscal incentives. In 2019, World Bank has estimated the growth rate for Nigeria’s economy at 2.1% with job creation rise of 10% quarterly if local or raw materials and resources are utilised efficiently. An epistemology of economic factors is required here. Government and industries must put the best machinery and think tanks in place to ensure solutions. Attention should be given to SME sub-sector from the Support and Training Entrepreneurship Programme (STEP), the Association of Nigerian Development Finance Institution (ANDFI) as well as Individual Development Finance Institution’s (IDFI). SME’s is the engine of growth in any economy around the world. As labour intensive, capital savers and job creators, government and other NGO's should support SME's. They constitute 97.2% of companies and contribute immensely to national development by positively influencing income distribution in both functional and nominal terms. The central bank report of 2003 noted that SME are very important catalyst in developing the industrialised countries, in developed countries, 98% or more than belong to the small and medium scale business.19 This clearly would empower the workforce of the nation, engage industrial activities and stabilise the business cycle of the economy while averting recession. 4.1.3. Popularization of Our Local Product and Stabilize Power Supply In the Nigerian economy, less concern has been shown towards the issue of stable power supply and value for our local product. For example, middle class citizen would prefer a foreign product than made in Nigeria. Our local products ranges from our locally produced crops to our locally made clothes and cars: building materials, locally made drugs and other products.20 But we prefer the imported products because we consider ours inferior. A need to adjust our sense of value through for foreign product over the local is a step in the right direction. Can this be possible without stable power supply and reorientation? No. The government should work on power through sincere spending and transparent co tract allocation and monitoring. Government should change this inferiority ideology and inspire interest in our local product through support that will expound interest and increase involvement. An aesthetics of packaging is required here. This would encourage production in quality/quantity, increase demand/supply, reduce importation, control price and value, distribute wealth, create employment moderate total reliance on foreign product and cub recession. 4.1.4. Shutting Down Our Importation Importation in Nigeria has increased the expenditure of government and industries. Importation, which is the buying of goods from other countries to supplement the available goods we have is a very common activity in developing countries but the case of Nigeria is irritating. Too much dependence or reliance has been placed on imported goods. In Ben Murray Bruce idea, if the Nigerian government could legalise the illegal firms in the country and empower them, then pump finance into their productivity, then more products will be gotten from these firms and this could help us.21 Thus if this illegal refineries could be legalised and are reconstructed and stocked with the right equipment it will help a long way. For many years the rate of importation has been at an alarming increase. The embarrassing part is that we import all that we can produce e.g matches and tomatoes, tooth pick, rice wmong others. In fact it is as a result of laziness in all part. In 2019, the federal government implemented policies against importation but with ‘the North and us’ taking the center discussion, sincererity is in doubt. However, stopping importation of some products would increased patronage of locally manufactured products and in the long run, avert recession. 4.1.5. Inputting Price Regulation Policy The prices of goods / products in Nigeria is uneven. A commodity can have four different princes within the same location, (a product gotten at 100 naira in this place, could be gotten for 400 naira at another) This has caused an imbalance and dissatisfaction in the economy. Price policies/regulation refers to the policy of setting prices by a government agency, legal statue or regulatory authority. Under this policy, minimum and maximum prices would be set for all products; it would also consist of “guidelines” which specify the magnitude by which prices can increase as in the case of rent control. These four major methods are the means through which our economy could get better and step out of recession. The government should implement price regulation policy for every product, in other to manage the cost of living of the common man, avert inflation and recession in a reasonable way. 4.1.6. Over Dependency on Oil and Diversification of Economic The fall of Nigeria’s economy as a result of dependency on oil and the neglect of other economic avenues is still a problem. The issue of development in Nigeria over the years has been unstable. At the very point of developement, several factors abort the process. Even the fiscal policies to salvage the economic issue appear inefficient. Due to dependency on oil, other areas suffer; livestock and the aquatic space are destroyed by spillage; farm lands and produce are destroyed. Sadly, government to no responsible steps. Due to this dependency impacting farmland/producenand, the Nigerian economy was predicted to slide into famine early 2017. Although significant economic researches has shown that Nigeria could become the best economies in the world hence government aim is at diversifying the economy, shifting reliance on oil sector to other areas of the economy. Efforts are being made to validate locally made goods, reduce importation and empower individuals as this will boost economic expension and cub recession. 4.1.7. Economic Egalitarianism Nigeria is consumed by segregation and group interest. This is replicated in the political, religious, power, oil, and primarily the economic sector in terms of infrastructure, policy making and representation. In the long run, other areas are relegated to the background and left undeveloped as there is no responsible representation and distribution of wealth. To combat recession, government must ensure economic equality which emphasise the equal distribution of value and wealth of the nation. This will lighten dark areas the nation economy annexing resources to sustain the economy against down slide. 5. Conclusion Philosophy of development always takes importantly the ideas that compose development such as micro and macro- economic that determines the well-being of nations and their citizens. Economic development requires a high level of epistemological and empirical investigations, namely the development of mindsets, a spirit of the times, an ethos, such as moral norms (like Hegel's ‘Geist’). With this epistemological tool, philosophy of economics rigorously and critically examines the scientific nature of the economic theories of nations with special interest in the theory structure, theory confirmation, explanatory adequacy, and ethical foundation. It also suggests that nations must incorporate more studies of their economic institutions, paying more attention to its comparative trajectories. Is a culture of interest in the academics and educational stability is reqiured? For Africa’s economic development the existential realities of our social-economic space must be well understood to determine consumptiond, production and supply. Thus the existential theory of national development is the desideratum for Africa’s meaningful development. To achieve this, the following must be encouraged; Patriotism among the political class. Ensuring a highly scientific or technological culture among African nation states. Underscoring the importance of Indigenous value systems as the energy for efficient development theories. The political class in Africa must rise to the mental and cultural responsibilities needed to inspire home-grown economics development. They must embrace economic existentialism. This reflection takes us to undue dependence on Breton Wood institutions for blueprints on national development. But beyond this, the level of dependency of African on other economies is alarming. Has Africa noting to bring to the international table on economic developmentt policies? A few policies philosophy importantly propose. To address and sustain human development avert recession in Nigeria and Africa we must invest in; The right economic education Inculcating of good moral up-bringing to combat corrupt practices Addressing ambiguity in the scope of distribution of resources Resolute in the adoption of egalitarianism that is, the principle of equity through theory of distributive justice. Empirically, no determination of a recession defense mechanism should solely rely on macroeconomic indicator, namely GDP, as other parameters such as geographic scale, unemployment rates, decrease of stock indices, fall of industrial production or real income and ethics of bussiness are of great importance even though ambiguity arises. This is a new perspectives on comparative studies in recent economic downturn, their causes and likely solutions. Endnotes Locke John Social Contract Theory UKEssays.com11 2018, All Answers Ltd. 03 2020and Hobbes, Thomas Levithan, (Lodon: Penguin. 1985) p.223 Joseph Omoregbe, Knowing Philosophy: A General Introduction (Maryland; Joja Educational Research and Publishers Ltd.,1990) p. 192. Micheal Todaro. P., and Stephen Smith .C. Economic Development 11.ed. ( USA: Pearson Higher Education, 2003) p.1 Jim Chappelow, “Economics: Overview, Types, and Economic Indicators” in Investopedia, June 29th 2019http://www.investopedia.com/term/e/economic-asp assessed 21/02/2020 See also Jiri Mazurek, Elena Mielcova,The Evaluation of Economic Recession Magnitude: Introduction and Application”, (Ukraine, 2013), p.182 “Business Circle Expansion and Contractions Natona Bureau of Econmic Research” Achived form the original on 12 October 2007assessed 29/02/2020 Chappelow, Ibid Washu Olin, “Stock Market Crash of 1929”, in History.Com.Editors https://www.history.com/topic/great-depression/1929-stock-market-crash assessed 02/03/2020 Pietro Meffetone, “Egalitarianism and the Great Recession: a Tale of Missed Connection” in Res Publica 24, 237-256(2018)https:doi.org/10.1o007/s1158-016-9349-7 Tejvan pettiger, “Types of Recession”, in Economics. Help: Helping to Simplify Economics October, 1, 2019 https://www.economicshelp.org/blog/4848/economics/types-of-recession/ assessed 12/03/2020 Ibid Ibid Brain Duignan, Great Recession: Economics {2007-2009}, Enclyclopaedia Britannica https://www.britannica.com/topic/great-recession, assessed 3/03/2020 Meffetone, Ibid, p. i Herica Handloff, “The Great Depression and the Great Recession in the North Atlantic” May 4, 2015 (ed) Washington Center For Equitable Growth: Evidence for a Stronger Economy.https://equitablegrowth.org/great-depression-great-recession-north-atlantic/ assessed 5/03/2020 Pierre Berton, The Great Depression, See also Robert S. MacElvaine, The Great Depression: America 1929-1941, 1984 https://en.m.wikipedia.org/wiki/Great_Depression assed 23/02/2020 “Manufacturing Sector Report:2015. Manufacturing in Africa” https://en.m.wikipedia.org/wiki/Economy_of _Nigeria_ assed 23/02/2020 “Africa’s New Number One” in Economist.com. Ibid Adenikinju Adeola “Efficiency of the Energy Sector and it Impact on the Competitiveness of the Nigerian Economy” Ibid see also Arinze Ngwube Matthew Ogbuagu,” Global financial crisis and Nigeria Economy” Vol 14, Issue 4 (2014), p. 25. Essay, U K. Importance of Small and Medium Enterprise in Nigeria. November 2018 Retrieved from https://www.ukessays.com/essays/economics/importance-of-smaol-and-medium-entreprise-in-nigeria-economics-essay.php/vref=1 assessed 2/03/2020 Ayo Teriba, “Nigeria’s economic outlook in 2017” in Proshure ( April , 11, 2017). Ademiluyi Tony, Ben Murray Bruce, “Boosting Our Economy” (March 2, 2017).and “Nigeria: The Hanging of Ben Maurice Bruce” The Guardian, Https://allafrica.com/stories/201905230379.html assessed 21/02/2020 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

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 Accounting for social value in funding public colleges in Higher Education in South Africa by Dr Cornelia C September (DaVinci Institute) Co-contributors: Dr S Lloyd and Professor P Singh Abstract The need has become imperative to look not only at the effect on the public purse of the South African government, but also a need to focus on the long-term change achieved by government through funding public education. The aim of this research was to investigate the use of a social-return-on-investment (SROI) as a benefit to the public college sector. The research undertaken followed a qualitative design, using inductive reasoning. The study revealed that a disjuncture exists between the funding framework and policies that govern the public colleges. As a result of public pressures to demonstrate financial prudence, many government policy and program evaluation has, historically, been conducted through a monetary or financial lens. Social-returns-on-investment refers to a framework for measuring and accounting for the concept of value and seeks to reduce inequality, degradation as well as bringing about improvements. The study concluded with development of a social-return-on-investment framework as a means to measure a social-return-on-investment in the public college sector in South Africa. Key words: Social-return-on-investment, frameworks, measuring, social value. Introduction It appears that government’s show an interest to adopt and adapt Vocational Education and Training (VET) programmes worldwide. While skills development receives important attention internationally, requisite funding of the TVET sector appears internationally to be a challenge. Developing financing systems as well as transforming the TVET system remains a daunting task as TVET systems tend to be more expensive than general education and therefore remain underfinanced according to Majumdar (2017). There has been growing interest by governments and other agencies of rate-of-returns from investment in education along with research to guide macro-policy decisions and financing education reforms (Patrinos & Psacharopoulos, 2010). They have also been keen to use the rate-of-return studies innovatively to set overall policy guidelines while acknowledging that more research on social benefits needs to be undertaken (ibid). The effective measurement requires an evaluative shift towards measuring the outcome experienced by Higher Education in general but into public college funding in particular. This shift is in tandem with the emerging concept of ‘social value’ and it is proposed that social impact valuation methods could fill the desired developmental agenda of an improved socio-economic outcome needed. A review of the social impact sector identifies SROI as the most developed method with a robust framework for implementation. SROI generates monetized results, anticipated to enhance transferability compared with typical educational funding evaluation summaries and facilitate the dissemination and usefulness of findings within Higher Education. This paper uses SROI methodology to analyse the social impact of the ‘public colleges in Higher Education in South Africa. The research explored the broadening of an evaluation technique that lends itself to understand the value a social understanding in the lives of the beneficiaries and government alike. A literature review and a documentary analysis as methods were undertaken for the research. The conclusion offers practical recommendations for future applications of SROI to the public sector environment. Background The history of Further Education and Training (FET) colleges in South Africa can be traced back to the Technical Colleges that supported the apprenticeship system for certain racial groups only in South Africa. In the view of Thompson (2002), vocational education aims to address the development of human abilities in terms of knowledge and skills. This approach meant that TVET is instrumental in providing the human capital to industry (Tikly, 2013), as an investment. The philosophy ascribed to vocational education in various literature sources describes the vocational technical education as any kind of education which has a purpose. The main purpose of vocational education is to prepare people for employment. The philosophy according to the human capital theory (Borjas, 2004), ascribes education as an investment, with the return being an increase in skills and individual productivity. South Africa has been increasing its budgetary allocation for both Basic and Higher Education and Training since 1994 (OECD, 2018). However, poverty has not been reduced in South Africa and according to (Galal, 2022), by 2025 around 18.5 million South Africans will live on a maximum of 1.90 US dollars per day. As part of her doctoral research, the researcher undertook to understand whether the public college system was responding with empirical evidence of improved social gains, and socio-economic gains to the requirements of the developmental state, and whether the increased funding played a role in the social gains achieved. Aim and objectives This paper draws on the researcher’s thesis titled “A Social-Return-on-Investment in Higher Education in South Africa” which was the central phenomenon that was explored. The phenomenological inquiry, as part of uncovering what the expected social-return-on-investment would be from the college sector was studied in the context of South Africa as a developmental state. In the original research, the critical epistemology was one of subjectivism which is based on real world phenomena and linked with societal ideology (Scotland, 2012). The objectives therefore were to: Determine the rationale of the South African developmental state devoting a considerable increase in the public college sector budget allocation. Examine the policy, norms and standards processes established to analyse the demonstration of return-on-investment on government expenditure Investigate the use of social ROI information to the benefit of the TVET sector as it relates to setting financial policy guidelines. Analyse the development of measures of ROI across different countries. Develop a social ROI framework that can measure social ROI in the public college sector in South Africa. Primary research question What is the nature and scope of the public funding of the public college sector and how does it affect the SROI in Higher Education in South Africa. Theoretical framework The researcher sought to look at the relationship among the key variables to explain a current state and also to look at predicting future concurrences. Conceptual framework The research problem formed part of the researcher’s conceptual framework, which framed the study and identified what was going on in the world with regards to budget increments to the public college sector, as well as the social gains derived from such an investment. Research methodology The research focussed on identifying the problem on whether the expected social-returns-on-investment had been achieved through the financial investment by the South African government to the public college sector. The qualitative approach focused mainly on the deliberate government strategy to address the legacy of the past inequalities in education in South Africa. The research utilised critical theory to explain what social value was demonstrated through increased budgetary allocation. The method of enquiry included the researcher’s social constructivist ontological perspective which formed part of her interpretivist epistemological perspective, and qualitative approach included referencing documentary work undertaken by several authors. The first phase dealt with the conceptualisation of the research problem and question within the contextual and literature review. The second phase, consisted of the research approach and the empirical design, methods and processes of in-depth data collection and analysis. Therefore, the purpose of the second phase, the empirical section, was to provide a functional plan, i.e. the philosophical positioning as the research approach or paradigm to the qualitative methodological decisions of data collection and the qualitative data methodological decisions made that concerned the grounded theory data analysis procedures (Roller, 2017). The case of a social priority towards a social-rate-of-return in education Why should return-on-investment be measured? SROI is a method that measures and accounts for a wider concept of value for the attainment of multi-bottom lines in the not-for-profit sector. The returns to investing in equality accrue over time and ultimately lead to communities with more trust and less social ills, i.e. more social capital. Deliberate TVET financing increase by the government plays a major role in ensuring the public college’s implement and have as an outcome the country-specific objectives guided by the Constitutional (1996) objectives and the requisite legislative framework. Korea provided an interesting illustration from the East Asia region of how a country’s TVET financing mechanisms has changed as TVET objectives changed (Lee, 2016). TVET financing approaches do not operate in isolation of other TVET reforms and therefore governments need to create a conducive policy, regulatory and administrative climate for a financing mechanism to function. Due to SROI being the instrument used to measure value and governments’ in the instance the South African, to be held accountable with regard to their financial obligations to society, governments need to have a tool to evaluate the value of their fiscal obligations. The same consideration should be considered by a government to examine the investment in a college education or whether such an investment should not be made elsewhere. Public confidence in public colleges as well as universities is considered through the lens of its understanding of the ROI the institution can generate for society especially and including individual students. The investment in public college education should measure the sum of all economic and non-economic net benefits that accrue to society at large and the students, measured against an investment by a student, government and in the instance of private colleges, by other contributors too. Economic impact is more easily measured but it is the social impact that completes the whole SROI as studies indicate that social implications in training are most important to understand as they provide a true value of training that is often neglected in TVET research due to difficulty in measuring it (Schueler et al., 2017). A holistic approach to return-on-investment is that financial return is one way to evaluate ROI, but return-on-investment can be measured not only by increased student enrolment but also by values, especially for communities that are not traditionally reflected in financial statements. Education and the rate-on-return, evaluation of the TVET One of the fundamental factors of development in a country is education. Education improves the quality of lives and provides social benefits to individuals as well as society. The reasons given for the popularity of estimating returns-to-education derives from the resulting efficiency, equity and the financing decisions. This can assist policy makers to make informed investment decisions. These are to be found, for example in the educational impacts on the economy, on labour productivity, health, technology, and income distribution. Several studies of the Southeast Asian countries bear testimony to achieving high income per capita growth when there have been high rates of investment (ibid). These studies concluded that heavy initial investment in human capital by households and governments as well as investments in physical capital are responsible for the high income per capita growth in East Asia (ibid). The literature refers to two methods being used to calculate the returns in education, namely, the discounting method and the Mincerian function (Psacharopoulos, 1995; Mattson, 1998). In South Africa STATSSA (2016) revealed that the census 2016 survey showed that 13,4million black Africans aged 25-64 had not reached secondary education level, 3 million black Africans in the same age group dropped out of school with some primary education. Disparities in post-secondary education still exist as Whites and Indians have the highest proportions of such graduates. A fair education system could provide for upward mobility for poor families as the past structural inequality is still at play in educational mobility. Social value measurement is an evidence-based approach. Even though market proxies may lack the precision of market exchange, effort is made to assess items that are of importance and measurable, and to use measures that are transparent and that can be independently verified. Often social value measurement attempts to focus on change in an organisation. One of the challenges in doing so is that organisational change can be attributed to many internal and external factors and separating change that is attributable to the organisation from change that occurs because of other factors is very challenging (Mayne 1999; Mook et al., 2007). The benefit of providing information on SROI is that governments and funders are provided with analytical information on the performance of the system (Psacharopoulos, 2014), and provides a justification for the expenditure on TVET. The approaches that demonstrated the value of TVET to the economy through increases in employability and increasing productivity are referred to as: Determining the SROI for spending that has occurred. Investigating the potential return should funding/spending alter. Griffin (2016) and Schueler (2016) inform the researcher that measuring SROI in TVET is very complex as there are different dimensions of outcomes to consider. These include economic growth, equity and sustainability (Marope et al., 2015). Return-on-investment in the public sector, a myth debunked In the public sector the view has been expressed that government is not able to demonstrate a return on investment, due to some myths that are prevalent. These common myths are (Blagg & Blom, 2018): That government services are essential and therefore may not need the level of evaluation. The absence of revenues and profits make the concept of ROI inappropriate. Governments generally lack real or hard data. Investment decisions in the public sector take place in a context of political and policy influences. The global environment is changing government organisations’ practices and acceptance of new concepts are only limited to the private sector organisations. Policy makers have to consider opportunity costs; for example, when government builds a bridge and invests in education, government should expect a rate of return at least equal to the yield from alternative uses of the money (Zerbe, 2014). Governments have to deliver services that must benefit the citizens as well as enhance the value of government as a public asset. The three dimensions of ROI in the public interest are: The Financial ROI which is direct, measurable benefits and costs. Social ROI which is indirect and difficult to measure, the “public good” benefits and costs. Political ROI which is motivational feasibility of the project or the benefits and costs for interested parties, for example opponents and decision makers. The restraints to ROI include: Bureaucratic and approval cycles The scale and complexities Shrinking annual budgets Lack of alignment with government policies A silo-culture and multiple stakeholders The motivating attributes include: Government policies become effective. There is an improvement in efficiencies. The economic policy objectives can be met. Qualitative improvements in service delivery can be realised as well as gaining trust from the citizens (Al-Khouri, 2009). Al-Khouri (2009) demonstrated what the reality is in the following manner in response to the myths that the public sector should not undertake an exercise of ROI. It is argued that these exist in many agencies through legislation: The argument that ROI is a corporate concept is wrong as the cost-benefit analysis has its origins in the public sector. ROI studies pay off in cost savings through improvements in productivity as well as direct costs reduction. Data exists in the public sector as output is required of all programmes and this can be converted to monetary value. The ROI methodology represents both qualitative and quantitative data. Both the private and public sectors have multiple constituencies and the development of training programmes for various leaders in the institutions can be considered. There is a vested interest in the outcome of education of the different stakeholders such as students and the institutions. The likelihood of the results being misused for political purposes might be addressed by presenting several types of data with several recommended solutions. Whilst government budgets are declining, some organisations report that they have doubled their evaluation budgets by undertaking the ROI evaluation exercise. The decisions policymakers face is not only to look at which types of colleges and programmes to devote funds to, but how to allocate them across the different functions (Blagg &d Blom, 2018). For some institutions expenditure on students’ services lead to better outcomes than instructional spending on the margin (Webber et al., 2010). Other arguments suggest that increasing spending can be more effective than decreasing tuition (Deming et al., 2017). Thus calculating an accurate ROI will depend on understanding the productive value of each investment (Kristin et al., 2018). Policy makers have access to data on higher education institutions such as the college scorecard, student throughput, college performance, and this lays a basis to consider the return on investment from higher education institutions (ibid). With access to data, especially as it relates to the performance of institutions in higher education, the need to review policies and to change legislation seems possible. Review of the ROI in developing countries Most research that has been done to estimate the returns-on-investment to education has been conducted in high-income countries (Card, 2001). A few studies have been done to identify the returns to education in developing countries (Psacharopoulos, 1981, 1985, 1989, 1994a, 1994b; Psacharopoulos and Patrinos, 2004). While both Card (2001) and Duflo (2001) argue that returns on education in developing countries are likely higher than in industrialised countries, supporting empirical evidence is scarce. A study done between 1985 and 2012, revealed that overall returns are remarkably heterogeneous across regions, countries and residential locations and that in Africa returns are over two times the average in Asia (Peet, 2015). Peru experienced rates of returns close to zero in 1994 but returns greater than 13 percent in 1985. Other features of the research found that returns-on-education for females and in urban areas are higher as opposed to returns-on-education in rural Asia that are higher than returns-on-education in urban areas. Private returns on educational investment appear to be consistently above five (5) percent (ibid). Models of ROI Different models apply to different situations and thus if economic and social returns are included, this will influence the selection of the ROI model along with the choice of the forecasting perspective. Different returns on investment models include: Cost-Benefit Analysis which assigns monetary value to costs of the training programme to determine the cost benefit ratio. Internal Rate of Return – Rate of interest that equals the returns from an investment to the cost of the investment. Kirkpatrick/Phillips Evaluation Model (globally recognised method of evaluating the results of training and learning programs) - 4 Levels of Evaluation – Reaction, Learning, Behaviour, Results plus Level 5 ROI that converts 4th level to monetary value. Net Present Value- Compares the value of money now with the value in future. Return on Expectation- Estimates returns to training relative to stakeholder expectations. Social-Return-on-Investment- Stakeholder driven evaluation with cost-benefit analysis and strong focus on social impact (Schueler, 2017). Major Findings The literature reviewed by the researcher showed that the use of SROI was a phenomenon that was not widely used by governments. The findings within the qualitative phenomenological methodology motivated by Saevi (2017) describe this approach as an educational research and therefore the researcher added meaning to educational thinking and practice. The findings, motivated by the grounded theory methodology, selected information-rich literature. This method provided an in-depth understanding about the research question as it related to the SROI experiences and outcomes, the roles and responsibilities of policy makers and implementers, international experiences on TVET funding evaluation, amongst others. The literature review identified the different aspects that emerged from the research as it related to the increase in public funding and colleges. It offered some insights about what had gone into the aspect of social-return-on investments and offered comparisons on the different expenditure patterns in South Africa from 1994 and beyond, as well as provided international comparisons. Different responses have been given on the need to do research into the SROI from finance allocation of government on public college education and whether there is sufficient reason to propose that it is a good investment and whether government should not invest in other socio-economic needs. From the literature review it emerged that returns on education use two main methods which are the full-discounting method and the Mincerian earnings function. Researchers have tended to prefer the Mincerian method as it is apparently convenient (Mincer, 1974). The Mincerian earnings function has also attracted criticism in the literature (Psacharopoulos et al., 2018; Layard, 1979; Heckman, Lochner & Todd, 2006). The critique of estimating returns to education is missing variables such as ability bias. Others such as Griliches (1977) argue that bias is small or negative. The Mincerian method relates to private returns as opposed to the full discounting method that provides us with private and social returns. To understand a SROI analysis, is to understand what benefits such measurements could mean for the TVET sector as well as government. Within the documentary analysis of Karl Marx, he stated that “Education of the Future” is part of the struggle for a new society (Rikowski, 2004). He further expanded that polytechnic education must combine physical, mental and practical training as a combined education. Understanding Marx’s future society is an understanding that the TVET sector must be located within a concept of preparing work-ready graduates, enhancing their employability and skills improvement. These are part of the social-returns-on-investment of the government’s financial investment into the public college sector. The reviewed literature informed the researcher’s study that a ROI analysis could be used as a tool to address efficiencies, provide advice on funding agreements as well as investment decisions. A social-return-on-investment is about value rather than money only. A framework for measuring and accounting should therefore be based on the concept of value and improvements. The TVET education is undervalued and therefore the TVET sector can benefit from an analysis of its value, to inform policy makers to understand the economic and social value of TVET investments. A review of the literature on ROI consistently indicates that ROI is context specific to the stakeholder and relative to the environment (OECD, 2008). The measurement of ROI is diverse and thus key indicators must be identified to formulate a conceptual framework which requires an overarching structure that supports a practical approach and broad application (Schueler et al., 2017). Most of the research acknowledges the importance that the TVET sector can contribute towards the economy, but calls for better financial frameworks and ensuring that the finances that are set aside must achieve the objectives that are set. Because a specific return-on-investment is required to measure the benefits government derives from the increasing investment into public college education, the impact data might have to be converted into monetary benefits. While the literature raised the difficulties in doing a ROI on the college sector, it however pointed out that the myth that exists in the government sector can be remedied to undertake an ROI exercise in the public sector. Some research had been undertaken in South Africa on rates of return amongst the levels of education (levels refers to the South African Qualifications Framework which is separated into predetermined levels, which are guidelines that dictate the qualification you have). The studies however were conducted by Joubert (1978), Trotter (1984), Archer and Moll (1992) and Hosking (1990, 1992a, 1992b, 2003) and it should be noted that they conducted the research before 1994 (South Africa ushered in a democratic dispensation in 1994 and therefore studies post 1994 becomes more relevant to the research undertaken). According to the literature, it is pointed out that the main aim of the research was to encourage funding by government. A further consideration in the literature relates to the calculations of the role ROI plays in the evaluation of public policies related to TVET. Multiple forms of returns that interest policy makers are in the realm of social effectiveness, credibility and strategic effectiveness. This leads to impact assessment using a mix of qualitative and quantitative approaches (Stufflebeam et al., 2000). An example is the United Nations Development Program (UNDP) which established an indicator around the following key policy objectives of TVET: The social outcomes are influenced by the institutional settings, as the nature of the social benefits will change depending on the type of system and country in which TVET is situated. The dimensions of ROI must be represented in the right context and by a framework that considers the scope and key stakeholders. The context and scope will be the main elements towards measuring SROI. The findings reveal that dimensions must include the context of employability, consider the Not in Education, Employment or Training (NEET) and idle factor of young people, output must be aligned to identifiable sectors such as towards a reduction in crime and gender-based violence. For the TVET sector this will include all the various stakeholders such as government, public colleges, and student and industry participants. Within the documentary findings ascribed to Smith and Todaro (2009), developing economies are cautioned not to waste limited financial and human resources on unproductive ventures and investment projects must be chosen on the basis of taking overall development and long-term objectives into account. The nature of development planning as in the case of economic planning requires government to choose social objectives. Based on development planning, government would set targets and finally organise a framework for implementation, co-ordination and monitoring and development. In Australia, the National Centre for Vocational Education Research (NCVER) however, embarked on an international guideline to measure ROI in TVET. They wanted to understand where to invest and which qualifications could generate the best economic returns over a lifetime. The ROI exercise made a case for additional funding for TVET in Australia in “thin markets” (which are places of inadequate service delivery resulting in participants needs not being met, especially in rural areas) using social indicators. Discussion Looking at the strength and benefits of SROI, reveals that it makes a concerted effort to include all impacts which are important to stakeholders in the evaluation process. A paradigm shift by government and society is required in the success of social programs. SROI frames social policy as an investment as opposed to an expense. This results in a more balanced focus between productive and technical efficiency, between measurable and non-monetisable costs and benefits. Furthermore, SROI can lead to more effective decision-making at the program planning level (SROI Canada Network, 2010). SROI allows organizations to become more familiar with the complexity of solving socioeconomic problems among individuals and institutions (Arvidson et al. 2010; Rotheroe and Richards 2007) SROI completed in the planning stages will be a forecast of potential social value creation. Not only will the SROI indicate the expected social return for comparison sake, it can also highlight activities that may be improved to create additional social value if adjusted or direct policy-makers towards activities with higher potential social value. The measurement of SROI includes different dimensions that must be considered. As with the economic and social aspects, undertaking a SROI completes the whole ROI (Schueler, Stanwick & Loveder, 2017). To understand a SROI for the TVET sector is to understand the true value of TVET programmes and what they produce. The documentary analysis provides government with an understanding that a social-return-on-investment can be an enabler towards performance evaluation possibilities. In turn it can provide for a justification for expenditure on the TVET sector and the much-needed calculation of the value of the TVET sector to the economy. Inherent in the findings are the complexities of TVETs with different existent dimensions as stated. Myths exist that SROI is inappropriate to the government sector as education is an excludable good and not for profit. These views negate the constitutional obligations, laws and policies that advocate a TVET to be responsive to the needs of society and the economy and that government expenditure requires an adherence to meet the needs of its people. A new education financing system, framed within the parameters of a SROI, will seek to reflect from theory to practice towards a desired outcome of what is expected from the TVET sector. Furthermore, this will include having an outcome which promotes responsible and accountable control over the quality and delivery of services, ensuring the integrity of the public finances and maintaining effective and efficient administration. In addition to satisfying key general principles such as these, education financing arrangements must accommodate the diverse needs, abilities, aspirations, interests and choices of learners of all ages and make a full contribution to educational redress, reconstruction and development. A social-return-on investment has to be underpinned by the values of those that matter most. Value refers to the relative importance of different outcomes informed by the beneficiaries such as students, broader society, the public colleges and government. A social-return-on-investment methodology according to the literature, accounts for the value for money realised by the public colleges in the country. SROI frames social policy as an investment as opposed to an expense. Conclusion The literature review identified the different aspects that emerge from the research as it relates to the increase in public funding and colleges. It offered some thoughts about what has gone into the aspect of social-return-on investments and offered comparisons on the different expenditure patterns in South Africa from 1994 and beyond, as well as provided international comparisons. When a measurement by government is strictly through a financial lens, all other value is placed as secondary. A distortion of views on value creation occurs as well as acknowledging the important goals the TVET sector are to contribute towards improving the quality of life and to contribute to the reduction of inequality of society tends to be overlooked. Different responses have been given on the need to do research into the SROI from finance allocation of government on public college education and whether there is sufficient reason to propose that it is a good investment and whether government should not invest in other socio-economic needs. The measurement of a SROI has not been done in the TVET sector in South Africa according to the literature and documentary analysis. A plethora of research has been done on the financing of education as the highest expenditure in a country’s budget, and on strengthening the TVET and college sector, the need for the private sector to improve their contributions towards ending the skills deficits in the countries, especially developing and lower income countries. The dominant theories of human capital presented by Psacharopoulos and Patrinos (2018) have been provided in most literature and researchers who wrote about the concept of rates of return-on-investment being similar to other investment, cost and benefits as well as the human capital theory put forward the concept that investments in education increase productivity. Comparisons between different public colleges in South Africa offer opportunities of what are working well, planning, and the introduction of innovative ideas and possible areas of improvements. A new education financing system, framed within the parameters of a social-return-on- investment, will seek to reflect from theory to practice towards a desired outcome of what is expected from the TVET sector. This will include having an outcome which promotes responsible and accountable control over the quality and delivery of services, ensuring the integrity of the public finances and maintaining effective and efficient administration. In addition to satisfying key general principles such as these, education financing arrangements must accommodate the diverse needs, abilities, aspirations, interests and choices of learners of all ages and make a full contribution to educational redress, reconstruction and development. A social return of investment has to be underpinned by the values of those that matter most. Value refers to the relative importance of different outcomes informed by the beneficiaries such as students, broader society, the public colleges and government. 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Policymakers need to be mindful of opportunity costs. Winter 2013-2013 Regulations. Public Finance. Available on cato.org. (Accessed 16 May 2020). - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

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 Ethical reflections on population challenges by Dr Motsamai Molefe MA (Developmental Studies), Phd (Philosophy) Abstract The paper is a contribution to debates on population growth. It contributes to debates on population growth from an ethical standpoint. It draws two resources from moral philosophy to reflect on population growth issues. The first revolves ethical frameworks in environmental ethics and/or justice. Specifically, it considers the debate whether a robust approach to morality must be one that is human-centred (anthropocentric) or one that is non-anthropocentric. The insight from this approach is that it will challenge moral agents, at individual and institutional levels, to adopt ethical and policy frameworks that is more sensitive to the general well-being of the environment beyond the human good. The second ethical framework relates to the abortion debate in moral philosophy, where we consider the permissibility of abortion. We consider this debate as it might have ethical implications for managing population growth via the permissibility of the use of contraceptives. In the final analysis, the paper indicates that there are resources in moral philosophy to contribute to debates on population growth. Key words: Abortion, Contraceptives, Environmental ethics, Human dignity, Population, Well-being Introduction In 2011, the human population on planet Earth was just over 7 billion. A United Nations report indicates that this number could jump to over 15 billion by 2100, if the current growth trajectory continues unabated (UN, 2011; UNFPA, 2011). This would mean that by 2100 the population would have increased by over 50%. There is no doubt that population changes have serious social, economic and environmental consequences that require our earnest and urgent attention. Some of these issues are ethical in nature, as they relate directly to questions of human dignity, well-being, or even justice itself (Cripps, 2021). In relation to dignity, the question revolves around whether, as the population changes, individuals, cultures and institutions will provide conditions suitable for decent human habitation, where we can survive or even thrive. Or whether human beings will find themselves living under deplorable and dehumanising conditions. In relation to human well-being, the concern is whether human beings will have access to the basic needs and conditions required for their lives to go well. In terms of justice, the focus is on how we protect the interests and welfare of future generations. As the population grows, it throws out all manner of problems for policymakers and, in the instance of this paper, for ethicists too. The central concern then revolves around developing ethically robust “policies for reducing fertility rates and … stabilising human numbers” (Coole, 2021). The motivation for seeking to stabilise human numbers, or population, is informed by the observation that there is a direct relationship between population changes and consumption (The Royal Society, 2012). The idea of “population changes” is very broad. It encompasses more than just population growth; it also includes a variety of complex dynamics related to the population such as migration, urbanization, age structure, education structure, and so on. Human beings require access to resources – which they access from the natural environment – so that they can produce goods for consumption. The natural environment provides natural capital. And it is this natural capital, by use of technology, that is processed and converted into goods which human beings can consume to satisfy their basic and aspirational needs (Budolfson & Spears, 2021). As the human population grows, we need to extract and use more natural resources to respond to human needs. Bear in mind that it is not only the human population that relies on the natural capital of the planet for their survival, but also many other species. The complex ecosystem functions precisely to respond to the needs of other components of the natural environment, all things being equal. It is, however, human activity that has the most extensive impact and places extraordinary demands on Earth’s natural resources. The technical term “Anthropocene” is used to capture the extensive, fast-paced and pervasive human activity on the social, cultural and environmental components of the planet, and its demands and impact on planet Earth (Meybeck, 2013; Trevennon-Jones, 2022). One crucial consideration related to human activities and requirements associated with human existence, in relation to consumption, is the fact that the planet is finite (Meadows et al., 1972). In other words, as the population grows and changes, the demand for natural resources grows as a result of the increase in human needs, but the planet itself is not growing – the planet does not have a limitless supply of natural resources. To exemplify the point of the finite nature of Earth and the serious problems it presents for current and future generations in light of a growing population, consider the example of a soccer stadium. A stadium might have the capacity to carry 80,000 people. The human need to consume soccer, in this instance, can only accommodate 80,000 people. Should the population of soccer-lovers who want to go to the stadium exceed this number, the stadium would be put in a precarious situation, where it might collapse as a result of being forced to carry a number of people beyond its natural capacity. The ethical questions focussed on this paper pivot on the finite status of the natural resources provided by planet Earth. If it is a fact, as I suppose it is, that the planet has a set capacity and, therefore, its resources are limited, how should we ethically respond to this situation? In other words, what moral responsibilities are engendered by the limited nature of the natural resources of the planet? This paper provides some ethical suggestions on how we might respond to the challenges posed by population changes. Specifically, given that the problems of increased consumption have to do directly with extracting more resources from the planet, the solution will encompass suggesting means – ethical ones – to manage or reduce population growth. In pursuing the task of proposing ethical means to positively intervene in our relationship with the natural environment, its natural capital, this paper is divided into two major sections. The first section appeals to the environmental ethics framework, to inform our approach to the environment and our duties towards it, or, at least, some components of it. At the heart of the environmental ethics framework is the question of the boundary of morality. Specifically, the debate centres on whether we require an ethical framework that limits our duties to human beings or one that locates it beyond human beings. The consideration which emerges in this section is that robust ethical frameworks that could point us towards an ethics that requires us to be respectful towards the environment, are possible, which will have serious implications for our approach to the environment, how we relate to it, and what within it counts as a resource for human consumption. The second section focusses on the ethics of birth. It does so via the debate in moral philosophy regarding abortion and its direct relation to the question of contraceptives. It suggests practical ways, drawing from ethical perspectives, to reduce fertility. Section One: Environmental Ethics What is the relationship between human beings and the natural environment? One obvious answer is that human beings are located and navigate their entire lives, be it as individuals or through family, cultural groups and institutions, in the natural environment. It is our home, our only home, and we cannot begin to imagine or conceptualise human lived experience outside of it. It provides the very context for what is humanly possible. All that I have stated above is not controversial. We could ask – a somewhat controversial question – do we have ethical duties towards the natural environment, or at least some of the non-human components in it, like animals? In other words, should we think of ourselves as having duties towards mountains, rivers, forests, animals, oceans and so on? The answer we provide to this question is important for its own sake, as it will challenge both our influential ethical theories and our attitudes about how we ought to relate to the natural environment. But this question is also crucial because it has direct implications regarding how we ought to relate to nature at an “engineering” level. By engineering level, I mean we have to decide what technological means to use to produce goods in the world. This question is not a purely empirical or scientific question, it is also one that is deeply ethical. It involves what scholars in Development Ethics describe as “the ethics of means”. The underlying idea here is that “the technological, cultural and economical policies and actions” we exercise in the context of development must be ethically sound (Goulet, 1996; Crocker, 1991). The ethics of means accentuates a view which rejects the claim that the ends justify the means. Economic growth, and the means we employ to achieve it, must be subjected to ethical considerations, where ethics is primary and the pursuit of economic growth secondary (Sen, 1987). The means themselves, the “how part”, which involves the choice of technology we use to achieve our production-method-and-goals, must be ethically justified. The engineering aspect, do not forget, is crucial in the process of converting natural resources to goods which human beings can consume. So here, we are confronted by ethical reflection on two levels. On the one hand, we are asking questions about whether the whole or parts of the natural environment are objects of moral concern towards which we have duties of respect – it is this question that lies at the heart of environmental ethics. On the other hand, we have the question about how we ought to go about choosing and using technology to produce goods for human consumption – the ethics of means. Both levels of ethical reflection are crucial for how we relate to the environment. Do we relate to the environment merely as a resource? Or do we have to nurture respectful attitudes and duties towards it? In the rest of this section, I focus on the first of these two questions – the question of (1) “who else” in the natural environment is the object of direct duty other than merely human beings? and (2) what means are ethically justified to produce goods for human consumption? I hope it is clear how both questions are central in ethically relating to a finitely resourced planet. These questions have direct implications for human consumption. The first question involves concerns about what we may consume in the natural environment. The second question involves concerns about how we go about producing the things we may consume. Underlying these questions about how to relate to a finite planet and its resources are the values of dignity (respect), human well-being and intergenerational justice. These values are directly connected to human survival or even flourishing, for the current and future generations. For the sake of focus, in relation to the environmental ethics, I limit myself to the case of animals. The inquiry is centred on whether we are ethically justified to continue regarding them as a mere resource for human consumption. I select this question because it has direct implications for the environment and climate change insofar as the choice of what we consume and the methods of production we use have environmental costs. Some options have high and some low environmental costs. The question of environmental costs is crucial because it requires us to choose options that are sustainable. Moreover, my focus on animals might offer us a useful way to think about our duties to other finite resources in the environment as we proceed to search for a robust ethical framework in relation to managing finite natural resources. Our Relationship with Non-Human Components in Nature (Animals) The central question for our consideration here is whether we should see ourselves, being moral agents, as having duties towards non-human components in the environment, or even the environment itself. This question arises because of the negative consequences our attitudes and conduct has had on the natural environment. The large-scale degradation of the natural environment could be traced, in part, to our moral theories and the attitudes they foster in us towards it. The concern raised in the literature on environmental ethics is that many of our ethical theories circumscribe the enterprise of morality strictly to human-to-human relations. That is, ethical concerns are strictly limited to issues revolving around human well-being and/or dignity. The implication of such an approach to ethics is that it tends to exclude all other elements of the natural environment from the moral purview, and without a place in the moral community, they remain exposed and vulnerable to all kinds of use or, even, abuse. What is worse, such (ab)use of other non-human elements cannot be condemned, as it is not immoral, since the environment is not a proper object of moral obligations. There are at least two prominent ethical theories that have come to shape our relationship with the environment and its contents. One is religious: a Christian ethical perspective that accounts for the highest value in the world in terms of human beings as bearers of the divine image (Schroeder & Bani-Sadr, 2017). With this view, only human beings bear the divine resemblance which creates responsibilities of respect towards them. Since almost all of nature is devoid of the image of God, it is not an object of moral concern. Another theory is secular, and it explains the highest good in terms of rationality, where only entities with the capacity for rationality belong to the community of respect (Rosen, 2012). The upshot of such religious and secular ethical views is that we can “fill the earth” without any concern, and we can go on to “subdue it”, that is, extract as much as is possible from it – for our consumption – without any concern (Jamieson, 1996). These influential moral theories have tended to be human centred in ways that foster attitudes of total disregard towards the environment. Environmental ethics emerges as a concern and response to these human-centred theories and the negative attitudes they foster in society towards the environment (Brennan & Lo, 2002). The moral intuition behind many scholars’ criticism of and scepticism towards human-centred ethical approaches is that on the one hand, it does not tell us the whole story about the nature and scope of our duties towards the planet. The intuition is that surely our moral debts ought to go beyond human beings. On the other hand, human-centred moral theories reflect a false story about the environment and other non-human inhabitants in it. Theories and policies that limit the scope of morality to human beings and their well-being are described as “anthropocentric” (Grey, 1993; Almiron & Tafalla, 2019). The idea of “anthropocentrism” literally means the policy or ethical theory under consideration is human centred, which implies that only human interests, well-being and goals should matter in our moral calculus (Behrens, 2011). All other elements of the environment can be rightly regarded as a mere resource for human consumption, or tools to make such consumption possible. If all value is intrinsically connected only with the human good and the environment in its totality is reduced to a mere resource, then there is no ethical limit to the extent of the damage that can be done to it. Environmental ethics emerges precisely as an objection to this kind of theorisation about the environment and its non-human components. It is an attempt to elevate the imagination of our moral systems to carefully think about the place of the environment in our moral schemes. One way to appreciate the possibility that environmental ethics could challenge us to rethink the place and status of the environment in our ethical frameworks, policies, attitudes and conduct, is by focusing on animals for heuristic purposes. I focus on animals, and I include fish in the community of animals, for the sake of making a point about how environmental ethics could challenge us to rethink what falls within the scope of human consumption and our general attitudes towards the environment. The issue of animals (and fish) is crucial because they are an important aspect of our culture in terms of consumption, but we have tended to ignore ethical concerns around our duties towards animals. Notice that the Royal Society report on population and its impact on the planet make this point about animals and fish as a requirement for human consumption: A greater number of consumers exist than ever before because of population growth. Economic development has meant that the material needs of societies have become more complex, reflecting aspirations as well as basic needs. Over the last sixty years total fish production has increased nearly fivefold … and total world meat production fivefold ... (2012: 11). A serious ethical and policy implication related to such increases in the production of fish and animals is its environmental costs. Note, for example, that a recent study on the environmental costs of meat-and-fish production indicates that “the highest impact production methods were beef production and catfish aquaculture” (Hilborn, 2018). They used four metrics – energy use, greenhouse-gas emissions, release of nutrients, and acidifying compounds – to measure the environmental cost of meat-and-fish production, among others. At an environmental policy level, it occurs that we need to be intentional in terms of supporting the production of certain foods and we equally need to distance ourselves from others precisely because of their associated high environmental costs. Meat production, as indicated in this study, has a high environmental cost in as far as it has adverse consequences for the environment. In this light, environmental ethics could come in handy in relation to challenging our cultural, institutional and individual attitudes and conduct in relation to animals (and possibly fish) production and consumption. Environmental ethics operates with the moral intuition that our exclusion of animals, for example, from the community of respect, is premised on arbitrary and unjustified human prejudice and greed. Some scholars of ethics argue that animals do reach the minimum threshold for moral consideration warranting moral attention and respect (Regan, 1987; Singer, 2009; Behrens, 2011; Horsthemke, 2015; Metz, 2017). There are several ways to capture the minimum threshold for inclusion in the moral community, where “one” (whatever object or entity that might be referring to) may be worthy of moral recognition and respect. One influential model proposes “rationality” as a minimum standard for inclusion for moral candidacy. The problem with appealing to rationality is that it does not only exclude animals from the moral community. It excludes more than our moral intuitions and standards would permit, since it also disturbingly excludes infants and people living with serious mental disabilities (Kittay, 2013). Very few of us believe that people living with serious cognitive disabilities are not objects of ethical respect in their own right. However, taking rationality as a standard of being a member of the moral community has the unpalatable implication of excluding beings we would naturally include as objects of ethical concern, such as infants. Another influential moral theory proposes “sentience” as a minimum threshold for inclusion in the moral community (Singer, 2009). Sentience refers to the ability to experience suffering and/or joy. With this view, the worst evil in the world is pain and suffering, and the good involves joy or happiness (George & Lee, 2009). The implication of this view, which is more inclusive than typical anthropocentric theories, is that animals do have a moral standing, and, as such, deserve moral recognition, protection and respect. It is in this light that Tom Regan commented: I regard myself as an advocate of animal rights — as a part of the animal rights movement. That movement, as I conceive it, is committed to a number of goals, including: the total abolition of the use of animals in science; the total dissolution of commercial animal agriculture; the total elimination of commercial and sport hunting and trapping (1987: 179). I may not entirely agree with Regan regarding the first point on the use of animals in science. I do, however, believe many of us can agree with him on the points involving commercial animal agriculture, more so that we know its environmental costs, and the use of animals for hunting and entertainment. The underlying concern and objection informing animal ethics and animal rights movements is that animals, as components of nature, “are not merely a resource for human consumption”, but they warrant respect in their own right so they can pursue a good life according to the possibilities inherent for their species (Nussbaum, 2017). An animal free from unnecessary human interference can go and live its life to the fullest. To think of animals as objects of ethical concern, and not as mere resources for human consumption, has serious implications for human consumption and the environment. For example, Peter Singer, in his elaboration of animal liberation observes that the acceptance of the moral idea that animals are not a mere resource for human consumption – they can suffer or enjoy their own lives in their own-species-related way – has revolutionary implications for human beings and consumption tendencies. He observes that it will cause a massive change in our fridges, eating tables, restaurants, forms of entertainment, as animals and meat will no longer be a part of our diet. The entire meat industry would have to close down or drastically be reduced in respect of the rights of or duties we owe to animals. This ethical revolution in relation to our attitudes about animals would radically challenge us to rethink animals and fish as a resource for human consumption. The implication is that to mitigate the increasing consumption of meat and fish, which has a high cost on the environment in terms of energy use, greenhouse gas emissions, release of nutrients, and acidifying compounds, we may seriously have to consider promoting and educating about less costly food types and production methods. In this light, policymakers may have to promote more plant-based food choices, as they tend to be less demanding and costly on the environment, and they promise to have positive consequences for human well-being now and in the future. The one interesting conclusion we might draw from this rough discussion of environmental ethics, is that it offers us a positive way to approach the planet and the resources it offers. Environmental ethics requires us to abandon anthropocentric moral theories and policy options in relation to the planet. One consequence might be the promotion of plant-based foods and their accompanying low production costs in relation to the environment, which might have positive consequences for the environment and future generations. This means, our policy options in relation to consumption and production of food could be interpreted within a non-anthropocentric framework, which requires us to take a generally humble and respectful attitude towards the environment. The pressing implication gleaned from environmental ethics concerns what in the natural environment counts as a resource for mere human consumption. Here, we suggested that some interpretations insist on the general removal of animals as a resource for human consumption. One wonders what else an extensive analysis of environmental ethics might reveal in relation to what counts as a resource and the kind of attitude we ought to have towards the environment. There are two other useful moral-theoretical frameworks associated with environmental ethics, which might be helpful in terms of rethinking our attitudes towards the environment. Here, we might distinguish between weak anthropocentrism as opposed to the strong versions of it – the latter are represented by the religious and secular theories mentioned above. Bryan Norton (1984: 131) recommends weaker forms of anthropocentrism in as far as they “provide a basis for criticising individual, consumptive needs … providing an adequate basis for environmental ethics”. The insight here is that it is not only human interests that matter, we also need an approach to the environment that will be robust enough to identify and criticise greedy, excessive and often unnecessary human consumption, and that will foster respectful attitudes towards the environment (Passmore, 1974; Bookchin, 1990). This form of anthropocentrism is weak in that it recognises that some elements of nature, like animals, might have value in their own right, but it still assigns greater value to human beings. In other words, in a trade-off situation where one has to choose between saving a human being or an animal, all things being equal, one ought to save a human being because they have greater value. Very close to weak anthropocentrism is the “enlightened anthropocentrism”, which, like stronger versions of anthropocentrism, only locates value in human beings (Brennan & Lo, 2002). Unlike strong anthropocentrism, it recognises our general strong indirect duties towards the environment. This view requires us to be kind and respectful towards the environment because how we relate with it has direct consequences for human well-being. From this view, we might have to minimise our consumption of beef in order to manage its environmental costs and consequences. From this perspective, it is not wrong to eat meat per se, it is, however, imprudent to do so in large scale, which might end up harming the well-being of present and future generations. Weak anthropocentrism also has direct implications for the second question involving the means, or the how part, of producing consumptive goods. The general crucial point facing governments and policymakers is the awareness that we have an ethical duty to be critical and ethical when we exercise options for pursuing our goals of development or economic growth (Crocker, 1991). The Industrial Revolution was extremely costly, ethically speaking, for many aspects of the natural world. The most important goal of industrialisation was economic growth, but the growth came at a high cost to the environment and human beings. We saw in it the worst forms of environmental degradation and human exploitation. Efficient production plants were established everywhere in Europe and the Americas without any sensitivity to the environment and the damage done to it. The mantra was development or economic growth. Weak anthropocentrism promotes policies that require us to take approaches to economic growth that are sensitive to people’s cultures, by way of encouraging their participation in decision-making, respecting other non-human communities on the planet – animals, rivers, mountains – so that Earth remains habitable and beautiful. Section Two: Ethics of Birth This section focuses on another aspect that directly affects population growth: fertility rates. If we are serious about managing population growth and changes, it is absolutely essential for us to have clear ethical and policy thinking around matters relating to fertility. To properly situate the discussion of ethically reflecting on birth and fertility, I look to the debates in moral philosophy on abortion. I do not enter this debate for its own sake, I engage in it because it is directly related to the question of pregnancy, birth and contraception, which speaks to the theme of population growth. The discussion on abortion is important in contexts where you have unwanted pregnancies due to poverty, lack of economic opportunities, no access to contraceptives, and general lack of decent sexual education (Royal Society, 2012; Bongaarts et al, 2012). Reflecting on debates pertaining to abortion and contraceptives is vital if we are to make progress in addressing population growth, considering researchers predict that the human population might increase to up to 15 billion by 2100. It is also worth noting that as much as over 50% of this increase might come from Sub-Saharan Africa (Royal Society, 2012). We need to have policies grounded in clear ethical perspectives regarding how to reduce fertility rates. The first pressing ethical question focuses on whether abortion is ethically permissible or impermissible. The aim here is not to come up with a definitive or final statement on this debate, but to show how it might contribute on deliberations and policies aiming to manage population growth in ways that are ethically robust. The question pertaining to the permissibility/impermissibility of abortion (and contraceptives) is important for its own sake, as it will normatively guide us regarding our duties, or lack thereof, towards foetuses. This question is also significant as it relates directly to questions of population growth, where it might play a crucial role in informing robust family planning strategies and programmes that will speak directly to reducing fertility rates. To get a concrete sense of how abortion debates affect population policies, consider the implications of this debate. If abortion is morally justified, that is, if it is permissible to terminate a foetus, then a robust family planning policy might include the roll out of accessible and affordable, if not free, abortion clinics to manage population by responding to unwanted pregnancies. It might also require expanding access to reliable and healthy contraceptives. If, however, abortion is impermissible, then it also has direct implications for our strategies and programmes to manage fertility rates in the world. Thus, ethical considerations relating to abortion are crucial because we are informed that: Voluntary family planning is a key part of continuing the downward trajectory in fertility rates, which brings benefits to the individual well-being of men and women around the world (Royal Society, 2012). To get a sense of how ethics might help to reflect on issues of the ethics of birth and to reduce fertility rates, we have to explore ethical theories, albeit our exploration aims merely to be cursory. To begin, we can distinguish between religious and secular theories of abortion. It is worth noting that it is largely religious theories of value that usually forbid abortion. For example, Christian ethics tends to consider abortion to be immoral, and therefore impermissible. Catholic ethics considers abortion to be an instance of murder, which violates the divine commandment that forbids killing (Tooley, 1972). Many of these theories depart from the assumption that from conception, at the embryonic stage, we are dealing with a being that bears divine worth (Morgan, 2013). On the other hand, secular views generally consider abortion to be permissible, particularly before the first or second trimester, since the foetus has not developed crucial value-endowing properties like sentience (Metz, 2012). There are scholars, however, who consider abortion to be permissible throughout the entire pregnancy, thus granting women power to be the final arbiter over whether to abort or not (Warren, 1997). It is also interesting to notice that there is a continuity between a moral theory in relation to its recommendation, whether it permits or forbids abortion and its stance on the permissibility of contraceptives. If, for example, as most religious views tend to do, it does forbid abortion, it will also quite naturally forbid the use of contraceptives. If, on the other hand, as do many secular theories, it does permit abortion, then it will tend to allow individuals to use contraceptives. So, the debate on abortion should generally be understood to have serious consequences for our moral use – permissibility or impermissibility – of contraceptives, which has direct implications for implementing robust family planning education and programmes. With more societies, however, including those in developing countries, coming to embrace secular cultures, they are more open to abortion as a way to manage the problem of unwanted children. Moreover, it is very important to appreciate that questions of abortion and contraceptives can be mediated at a cultural level. Many African cultural beliefs, for example, tend to look unfavourably on abortion. Often, upon careful analysis, it will emerge that these cultural groups forbid abortion not so much on ethical grounds, but on the basis of controversial metaphysical commitments. I consider the metaphysics involved controversial not in a pejorative or patronising sense, but in light of our intuitions informed by science and the plurality of competing and contradicting views on such topics. To get a sense of controversial metaphysics, consider the case of an African practice which requires that those who are serving a king should be killed on the day of his burial and be buried with or around him, so as to accompany and continue serving him in the afterlife (Wiredu, 1996). What is controversial in this practice is the belief, a metaphysical one, that there is an afterlife. Note, my claim is not that the belief is false, I am simply claiming that it is controversial. It is upon this controversial belief of the afterlife – and that the king would still need his vassals around him to serve and attend to him in light of his status as a king – that the practice of killing people and sending them off as servants to attend to the dead king in the afterlife was justified and generally accepted. Analogously, some beliefs about the permissibility of abortion in some regions might rest on such cultural or metaphysical beliefs. Note, for example, that African scholars tend to construe an African community as constituted by three distinct members: the unborn, the living and the living dead (Magesa, 1997; Bujo, 1998; 2001; Ramose, 1999). The category of the unborn is taken to be an actual community of those that have not yet made it into the real world but will be joining it in the near future. We also have the community of the living, you and me. The third community consists of those who continue to live after their physical death as spiritual members of the community. From this African view, abortion is impermissible because it harms the unborn, who are living in a state of readiness to join the living (Molefe, 2020). It is upon this controversial view about the existence of the community of the unborn that many individuals and groups in Africa believe in the impermissibility of abortion and contraceptives (Tangwa, 1996; Bujo, 2001). Here, I wish to propose an approach which might assist us to resolve the challenge posed by cultural beliefs that may forbid abortion. This intervention does not suggest that we should not have robust discussions about abortions, its implications for family planning, and our strategies to manage population growth. These debates are important, but it is crucial to underscore the relation between religious and secular ethical theories and the inclination to forbid or permit abortion and contraceptives. My intention is to suggest ways in which conceptual clarity might be useful to distinguish proper moral and metaphysical issues. It is easy to conflate cultural or metaphysical for proper ethical issues. The examples of the practices of servants of the king being killed to accompany their king challenge us to separate pure ethical from metaphysical issues. I take it many of us might contest this practice, even among Africans, at several points. For starters, one might question the metaphysical presupposition that informs this practice – the belief in the afterlife. One must rightly ask critical questions, without being condescending toward those who embrace the belief, concerning why we should accept that there is an afterlife in the first place. Asking this question is important for its own sake because it might teach us a lot about what we believe about the world and our destiny as human beings. It might lead us to think critically about the implications of our deeply held beliefs. One might also question the ethical implications of such a belief in terms of whether they coincide or diverge from our deeply held moral intuitions. In other words, we might ask whether it is morally correct to kill another person so that they can accompany another one. Here our concern is to evaluate the ethical appropriateness of the practice of killing innocent persons and cutting their lives short for the sake of another. The point I am trying to make, in a roundabout way, is the importance of not only education in general, but also proper ethical education. Education about the debates inherent in our varied cultures and beliefs on issues that might affect policy and our goals for managing population growth. The theoretical challenge I am bringing to attention is the ability for us, as we evaluate cultures on controversial issues like those of abortion and contraceptives, to distinguish mere metaphysical from proper ethical issues. But although in most instances we should take upon ourselves a duty to be sensitive and respectful towards the diversity of human cultures and their metaphysical beliefs, we should never elevate cultures to be an ethical standard. We should also note that some cultural beliefs are objectionable on ethical grounds – killing servants to accompany the king, for example. Even in the debates on abortion, as societies adopt secular approaches like those anticipated in human rights policies, we will be able to set up proper family planning services that are compatible with rolling out abortion clinics and making contraceptives easily accessible. Moreover, in the evaluation of our cultural beliefs, in relation to abortion and contraceptives, we should be careful of the undue and continued influence of cultural norms riveted on the undemocratic values of patriarchy and unscientific basis (Gillighan and Snider, 2018). Often, human cultures frown on abortion and contraception because there is a tendency, sponsored by patriarchy, to reduce women to mere makers of children. It is for this reason that we need to imagine robust education contexts and programmes for both women and men, which are emancipatory in their orientation and empower women to take charge of their own lives, which surely ought to involve voluntary family planning options. The research clearly indicates that there is a relationship between access to education and women’s attitudes towards family planning, abortion and contraception, which will definitely have implications for population growth (Potts et al., 2009). The expansion of meaningful access to education for women, in particular those living in areas with high fertility rates, who have the potential to contribute greater proportions towards population growth, will have a telling consequence. As education and economic opportunities open and expand for women, we might expect positive developments in relation to our efforts to manage population growth. Martha Nussbaum (2004: 327 - 328) in an interesting paper, Women’s Education: A Global Problem, makes the following remarks: Women’s education is both crucial and contested. A key to the amelioration of many distinct problems in women’s lives, it is spreading, but it is also under threat, both from custom and traditional hierarchies of power and from the sheer inability of states and nations to take effective action. In this article, I shall try to show, first, exactly why education should be thought to be a key for women in making progress on many other problems in their lives. I think Nussbaum is correct to identify the education of women, or the lack thereof, as a global problem. Many societies and countries still fail to equalise women by empowering them through access to robust and meaningful education, and to create conditions through which they can liberate themselves from the shackles of traditional hierarchies of power. It is through access to education and economic opportunities that women can make progress in resolving many challenges facing them such as poverty and gender-based violence. The suggestion being made here is a macro-ethical-and-political one, where global and local policymakers need to prioritise the education of women, as a group, particularly those from poorer regions of the world. The prioritisation of women in education is decisive in as far as it has direct implications for solving many problems in the world. Two of those problems stand out in the context of our discussion on population growth: one is that between one to two billion people living in extreme poverty and the other is high fertility rates. With regards to the first, there is an urgent need to pull the over one billion people out of the absolute poverty they currently live in. This we need to do in ways that raises consumption without further depleting limited natural capacities. The second problem resonates with the observation that as we meet the sustainable development goals, and, as women gain access to education, fertility rates tend to drop (Royal Society, 2012). Hence, the macro-ethical intervention to prioritise their education will go a long way in our quest to addressing population growth, by addressing their access to education and economic opportunities. Conclusion This paper offered cursory ethical reflections on issues of population growth. Its discussion was situated within the context of seeking to achieve the goals of reducing population growth and understanding how to respond to the increasing depletion of our finite resources. To do so, it suggested that environmental ethics and the ethics of birth might offer useful ways to respond to challenges posed by population growth. In relation to environmental ethics, I suggested how it could point us to earth-friendly policies, which might challenge us to rethink some of our habits and cultures that rely on the production of meat and fish, which has relatively high costs for the environment. The weak and enlightened versions of anthropocentrism might also challenge us to take a humble and sensible approach to the environment for the sake of ensuring the well-being of the current and future generations. Such approaches could involve making more judicious choices in relation to how we relate to the finite resources of the planet, and how we might maximise them for the benefit of all, including future generations and non-human elements in nature. In relation to the ethics of birth, I pointed to the relationship between abortion and contraceptives. If a moral theory forbids abortion, it is also more likely to forbid the use of contraceptives. While if it does permit abortion, it is also more likely to permit contraceptives. In addition, I indicated that religious ethical theories and traditional societies tend to forbid abortion, whereas secular and more modern societies tend to permit it. This general awareness of the debates about abortion is important because it will inform how policymakers frame their efforts to promote a robust culture of family planning, which has direct implications for increasing or decreasing fertility rates. 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The state of world population 2011: People and possibilities in a world of 7 billion. United Nations Population Fund (UNFPA): New York, NY. Warren, A. 1997. Moral Status: Obligations to Persons and Other Living Things. Oxford: Clarendon Press.D. J. & Walters, C. R. (2017). The impacts of price and spending subsidies on US Post-Secondary Attainment Working Paper. Cambridge, MA Harvard Kennedy School. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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. 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Copyright © 2023 Print ISSN: 2960-1541 Online ISSN: 2960-155X Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute D I S C L A I M E R Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. JULY 2023 Role of industrial policy and the fourth industrial evolution within fibre processing and manufacturing (FP&M) sector by Victor Kgalema Mphil: International Finance (University of Glasgow) Abstract This paper investigates industrial policy, strategy, and trends in the FP&M sector. It does so by looking at the global and local macro-economic overviews of the subsectors, the impact of industrial policy and the fourth industrial revolution (4IR) on growth and development, and the implications for skills development. The paper finds that while the role and efficacy of industrial policy continues to be a bone of contention in debates, it is clear that industrial policy remains a key tool employed by countries to help guide industry to achieve sustainable growth in all economic segments within the FP&M sector. There is also no doubt that a significant number of industries – with well organised stakeholders – do benefit from financial and non-financial support emanating from these policies. However, the success of any policy intervention is dependent on skills development strategies that respond to and support such growth strategies. The emergence of the 4IR has radically shifted the workplace paradigm: traditional technical skills remain in demand, but the composition and content of these skills has altered, causing skills gaps. What is becoming even more critical is the emphasis on formal education by industry stakeholders, requiring a workforce with the ability to learn and re-learn. Keywords: Industrial policy, fourth industrial revolution, 4IR, FP&M sector, macro-economic, growth and development, sustainable growth, skills development, skills gaps 1. Introduction 1.1. Background to the study This study explores global and local industrial policy, strategy and trends in the FP&M sector, within an environment where there are radical structural and technological changes driven by the advent of the fourth industrial revolution (4IR) globally. It also explores the extent to which current industrial policy and strategy approaches are able to support companies in the FP&M sector to respond to these changes. 1.2. Industrial policy Industrial policy as an economic subject has attracted different viewpoints and debates from major economic stakeholders, making it a contentious topic. At the centre of these debates and this contention is the role and efficacy of industrial policy in a free-market capitalist economy. Before the 2008 global financial crisis, many leading economies had dismissed the efficacy, if any, that industrial policy has in facilitating economic growth, however, after the crisis, more economies were willing to recognise the value of industrial policy and often put measures in place to strengthen it – the United States of America (USA) and Germany being the most prominent examples of these economies (Chang & Andreoni, 2020). Industrial policy usually refers to a set of policies designed to promote promising industries or segments thereof, while propping up or easing the falling or declining segments. Defined that way, industrial policy is often described as the government picking winners and losers (Neely, 1993).This paper adopts the following definition of industrial policy: “as selective targeting of pre-identified industrial sectors or subsectors, particularly within manufacturing to enhance efficiencies and promote productivity, growth and long-term sustainability”. 1.3. Fourth industrial revolution While the paper explores the role of a coherent industrial policy in the promotion and enhancement of growth and sustainability of the sector, particular attention is paid to how the fourth industrial revolution (4IR) also impacts on the economic fortunes of this sector. The term 4IR has been used in the main to frame and analyse the impact of emerging technologies on nearly the entire gamut of human development in the early 21st century, from evolving social norms and national political attitudes to economic development and international relations (Schwab, 2016). The paper adopts the definition that: 4IR or Industry 4.0 is a holistic automation, business information, and manufacturing execution architecture to improve industry with the integration of all aspects of production and commerce across company boundaries for greater efficiency. 2. Methodology 2.1. Research questions The study was guided by the following research questions: How does the sector compare to other sectors within manufacturing, in relation to its contribution to GDP, employment and other economic indicators? Are there discernible structural, growth, technology, skills and employment changes in this industry over the last five years or so? What are the key drivers underlying such changes? Are there government industrial policy measures in place to support growth and long-term sustainability of the sector or part of its subsectors, e.g., financial incentives, tariffs or state procurement preference, etc.? What are the global drivers and trends in the FP&M sector, with regards to market structure, growth, technology, skills requirements and employment? With regards to those trends, how are they relevant to the South African FP&M sector, and how is the country responding compared to its international counterparts? That is: What can we learn from various international case studies about what kinds of strategies could be adopted or strengthened locally for supporting the domestic FP&M sector? 3. Structure of the report 3.1. Global macro-economic overview of manufacturing, with a focus on the FP&M sector Broader global and domestic manufacturing industry context is provided so as to analyse and appreciate similarities and dissimilarities between the domestic and global economic dynamics within the sector. The manufacturing industry is considered a key catalyst and multiplier for job creation and broader economic growth. The sector accounted for approximately 16% of global GDP and 14% of global total employment in 2018, and continues to grow its contribution globally (Businesswire, 2020). Despite its growth, though a bit muted, the 2008 financial crisis highlighted the need for new sources of jobs and growth. Policymakers are already re-examining industry-related policy interventions, as they reflect on the changing nature of the sector globally. These changes include: the declining share of manufacturing activity in OECD countries; growing competition from emerging economies; the growing demands for resource-efficient manufacturing; the increasing complexity and importance of global manufacturing value chains; and finally, the accelerating pace of technological change across all segments of the industry (O’Sullivan et al., 2013). With all these structural changes, the industry remains critical to both the developing and developed world. In developing economies, the sector continues to provide a pathway away from subsistence agriculture to rising incomes and living standards. Whilst in developed economies, the sector remains a vital source of innovation and competitiveness, and continues making outsized contributions to research and development, exports, and productivity growth. Sustained changes within the sector over time have brought both opportunities and challenges and neither business leaders nor policymakers can rely on old responses in the new manufacturing environment (Manyika et al., 2012). 3.1.1. Industrial policy and the fourth industrial revolution As mentioned above, the 2008 global financial and economic crisis has forced researchers and policymakers to confront the reality that market forces alone generally do not lead to pareto-efficient outcomes (Stiglitz et al., 2013). Most countries continue to review and re-adjust industrial policy measures and instruments to respond to continuous industrial changes, both disruptive and non-disruptive. Recent industry research studies show that a significant number of economies, both within the developed and developing world, are still lagging behind in fashioning coherent responses to current industry disruptions (Guliwe, 2019). Some of the response delays, or lack thereof, are attributed in part to a global manufacturing landscape that has become increasingly fragmented and complex. Goods are increasingly created in stages – including raw material extraction, component production, assembly, and customisation – that may occur in different locations and countries (Shi & Gregory, 1998; Cattaneo et al., 2010). Each of these stages may involve multi-level interactions between firms from different manufacturing and non-manufacturing sectors, thus making it difficult for effective design and implementation of policy instruments (Park, 1989; Pilat et al., 2006). Despite the industrial policy design challenges mentioned above, there are a significant number of countries that are already engaged in the policy design and implementation or are at an advanced stage in designing such policies, to ensure that their economies are able to effectively and in a targeted manner respond to current structural and technological changes. For example, countries like the United Kingdom (UK), China and Vietnam are at different stages of policy formulation and implementation when it comes to responses to the fourth industrial revolution – the UK already has a white paper (government policy) in place that seeks to guide government and industry in responding to the fourth industrial revolution (UK Government, 2019). Even companies that are attempting to implement a response are confronted by a number of hurdles. Figure: 2 Source: WEF, 2018 Figure 2 above lists the top nine factors that make it difficult for companies to accelerate changes needed to take advantage of potential benefits availed by the fourth industrial revolution. 3.1.2. Emerging trends and implications for skills development Industrial policy has re-emerged as a critical and potent tool employed by governments and industrial stakeholders in guiding growth and sustainability of targeted economic sectors. A number of governments and industry have come to embrace potential disruptive changes that the fourth industrial revolution is likely to bring to this industry. Developed and developing economies alike, are busy setting up policy and regulatory frameworks in an attempt to effectively respond to the fourth industrial revolution. Research undertaken in this industry, including the research done by the European Union (EU), India and Vietnam, shows that while traditional technical skills remain crucial and are in most cases still not optimally supplied, skills which were mostly in the background are becoming even more critical as the industry rapidly transform. In addition, emerging research information shows that changes within the sector are rapid and ongoing and therefore make it difficult for skills development experts and practitioners to work out the nature and form of skills that would be needed by industry in the near future. 3.2. South African macro-economic overview of the FP&M sector The South African manufacturing sector contributes 14% to the country’s GDP and 11% to total employment in the economy (Stats SA, 2018). Within the FP&M sector, wood products, paper and printing form the fourth major contributor to manufacturing value add, at 11%, whilst textiles and clothing, and furniture contribute 3%, respectively. The country has managed to establish a resilient manufacturing base and to induce substantial competence in the automotive, metal, chemical, food and beverages, and the textiles and clothing sectors (Stats SA, 2018). Production in manufacturing has experienced downswings over the last two decades, from 19% in 1997 to 14% in 2018. The sector has seen a loss of 105,000 jobs in just one quarter of 2017, and it has managed to register a lackluster growth in 2018 of 1.2%, coming off a 0.5% contraction in 2017 and a growth rate of 0.7% in 2016. This is despite successive policy interventions by government in a number of segments within the sector, like automotive, textiles and clothing, and agro-processing (South African Market Insights, 2019). Figure: 3 below provides a macro-economic overview of the manufacturing subsector’s contribution to the country’s manufacturing sector’s value add. Source: Stats SA, 2018 Figure 3 above shows the contributions of different subsectors to manufacturing value add. As the fourth-largest industry in the country, manufacturing contributes 14% to GDP, whilst the various subsectors contribute the following: food and beverages is the biggest contributor at 26% to total manufacturing activity; within the FP&M sector, wood products, paper and printing is the third-largest contributor within the sector, contributing 11% to manufacturing value add (Stats SA, 2018). 3.2.1. Industrial policy and the fourth industrial revolution South Africa developed elaborate industrial policy measures and strategies over the years, designed for targeted support to identified economic segments, particularly within manufacturing. These policy instruments were and are still designed to enable such targeted economic segments to improve their growth and sustainability prospects. Some of these policies are: the National Development Plan (NDP), which sought to map-out a planned long-term economic development trajectory of the country; Broad-Based Black Economic Empowerment (B-BBEE), which seeks to transform the economy in ways that improve participation of black people at all levels of the economy; and the Industry Policy Action Plan (IPAP), which provides targeted sectoral support programmes (the dtic, 2017). These policies, for varied reasons, of which some are discussed in this paper, have mixed results in their attempt to transform and grow the economy, particularly manufacturing. For example, a sector like clothing and textiles was brought from the verge of collapse and stabilised through targeted policy interventions during the late 1990s and early 2000s (Allais et al., 2021), whilst on the other hand, parts of the steel economic segment have either disappeared or are struggling to survive despite sustained government support. Due to limited information and the fact that South Africa is in the early stages of developing comprehensive policy responses when it comes to the 4IR, only limited evidence is emerging from a few studies that show most stakeholders in this industry are aware of this revolution and are beginning to explore ways to respond to the 4IR (Allais et al., 2021). There are, however, also a number of sectoral initiatives led by government in partnership with industry, who’s objectives are to develop sectoral masterplans for national priority sectors – these plans are to guide planning and strategy implementation aimed at enabling industry to effectively respond to current changes (Barnes et al., 2016). 3.2.2. Emerging trends and implications for skills and skills development Industrial policy is one of the key instruments used by the South African government in its quest to build and grow a sustainable manufacturing base. There is general recognition and acceptance by major industry stakeholders that the industry is being confronted by rapid and disruptive changes brought about by the fourth industrial revolution. Emerging occupations are likely to be disproportionately concentrated in the non-routine and cognitive category and require skills that cannot be easily automated. There are strong emerging arguments, that meeting the skills demands of the fourth industrial revolution requires strengthening learnability, the willingness and ability to learn, unlearn and relearn, amongst the current and future workforce. Skills remains a major challenge within the sector, as industry is struggling with supply of appropriate skills. Changes in the structure and business models within the sector, are also having an impact on the profile and/or content of current technical skills. 4. Clothing, footwear, leather and textiles 4.1. Global macro-economic overview of the sector The clothing and textiles sector is varied, which means that many countries choose their own path and direction to follow, whether it is medical textiles or high fashion. However, there are a few discernible trends that seem to be the new direction for most of the textiles market. The sector remains a significant contributor to economic growth in countries like Vietnam, Bangladesh and India – these are countries that dominate significant parts of the global clothing and textiles value chain and markets, after China (Knack, 2017). The sector also remains a major employer, particularly of women, in a number of economies globally. It is estimated that the total number of textiles, clothing and footwear (TCF) workers employed in the sector is 75 million worldwide, with textiles and apparel exports totalling more than $750 billion in 2017, however, a significant number of these workers are without contracts and labour law protection (Solidarity Center, 2019). The geographical distribution of production in the TCF industries has experienced a dramatic change in the past 30+ years, resulting in sizeable employment losses in the developed economies of Europe and North America, while Asia and other parts of the developing world, on the other hand, gained from these changes. This trend, according to the International Labour Organization, has been generally accompanied by a parallel shift of production from the formal to the informal sector in many countries and that, in some cases, has had negative consequences on wages (ILO, 1996). 4.1.1. Industrial policy and the fourth industrial revolution (4IR) Developing countries remain highly competitive in a number of segments within the clothing and textiles sector, despite market restrictions and high tariff walls imposed by developed economies. Comparative advantages of the developing economies over the developed ones, are in the main driven by lower labour costs in emerging economies. However, developed economies are continually reviewing these market restrictions, some of which can be traced back to 1935 when Japan was forced to announce a voluntary restraint (VER) on textiles exports to the US. Recent market restrictions by the developed economies are better illustrated by the Multifibre Arrangement (MFA). Introduced in 1974, the MFA was an international trade agreement regulating clothing and textiles that was in place from 1974 till 2004. The arrangement imposed quotas on the amount of clothing and textiles exports from developing countries to developed countries. Despite these restrictions, the export market share in the sector by developing countries was more than 50% in 1987, and growing (World Bank, 1990). The effectiveness or success of industrial policy measures within the clothing and textiles sector currently depends to a large extent on the manner in which they are designed, to enable industries to respond to the new wave of changes brought about by the 4IR. The clothing and textiles sector, having been at the cutting edge of changes during the first industrial revolution, finds itself again at the cusp of this new revolution. New business models are being developed within TCF and production processes are being re-imagined or re-designed. The fourth industrial revolution, it is said, presents unimaginable opportunities within clothing and textiles, while at the same time, it also brings with it challenges. For example, whilst digitisation enables companies to improve production efficiencies and competitiveness, and also bring new fabrics and new manufacturing techniques powered by a wave of new innovations across the physical, biological and digital worlds, such as 3D printing, artificial intelligence and biomaterials, it however also poses a threat to developing economies, as it may put emerging economies at risk of losing their cost advantage (Andreoni et al., 2021). Figure 4 below shows a list of the top ten barriers to digitalisation, with the most inhibiting factor shown at the bottom of the figure. Figure: 4 Source: McKinsey & Company, 2017 Figure 4 above shows the top ten key barriers to companies fully embracing digitalisation. At the top of the list, companies identify upfront investment in systems integration as highly prohibitive. 4.1.2. Implications for skills and skills development Changes in the factory business model and production line, has significantly impacted on skills required within manufacturing and the economy, broadly. A recent study by the European Skills Council on textiles, clothing and leather identified expectations for future skill needs based on a series of scenarios on how the sector in Europe might progress towards 2020 that: What were once secondary competencies are coming to the foreground – such as the increasing importance of logistics and commercial skills, reflecting that, for many companies, ‘trade has taken the place of production’. Technical production competences remain central to recruitment and training plans, although with increased focus on the demand for motivated and versatile staff, who, given the overall decline in staffing levels, can operate across different workstations to meet shortages. The priority focus should be on basic skills linked to recruitment difficulties, the characteristics of the workforce, and changes in work organisation (including an increased focus on ICT). There should be a general focus on technology, innovation and sustainability (Horgan, 2014). The Indian National Skills Development Corporation (NSDC) also identifies significant skills gaps in the current workforce required by industry in order to adjust to current industry challenges. Two functions are highlighted below where such skills gaps are said to exist (NSDC, 2022). Table: 2 Skills gaps within India’s garment economic segment Source: NSDC, 2022 The table above shows that Purchasing Managers and Senior Merchandisers in India are some of the skills gaps experienced by industry (NSDC, 2022). 4.2. South African overview of the sector The South African textiles, clothing and footwear sector has a long history of being considered critical within the country, in that it is seen as a source of employment in the economy, particularly for women and peri-rural communities. The employment creation potential of the sector has benefited from government support over the years, through financial incentives and high tariff bearers and preferential procurement (the dtic, 2017). The sector contributed R10 billion to manufacturing value add in 2017 and employed approximately 59,000 workers in 2016. Policy instruments like the Clothing and Textile Competitiveness Programme (CTCP), the Competitiveness Improvement Programme (CIP) and the Production Incentive Programme (PIP), have played quite a key role in recent years to help stymie job losses and reposition the clothing and textiles sector for sustainable growth (the dtic, 2017). From the earliest beginnings, the South African clothing and textiles sector was built to focus on supplying the domestic market, with no clear strategy to grow it beyond this market. This domestic focus was further strengthened by economic sanctions against the country in the 1980s. By the early 1990s the sector sourced the majority of its fabric from local textile mills, supplied 93% of local clothing demand, and exported only a small proportion of total output (Hirschsohn, Godfrey & Maree, 2000). 4.2.1. Industrial policy and the fourth industrial revolution The clothing and textiles sector was built on the back of high tariff walls, which sought to protect it from internal competition. The sector was in the main created by government, through financial incentives and industrial policy measures designed to establish it and set it on a sustainable growth path. An industry study by the Board for Trade and Industry, commissioned by government in 1950, for example, provides quite a comprehensive background on how the industry was conceptualised and developed. The objective of the study was to determine the prospects of, and the conditions for, the development of the local textiles industry to a stage where it could obtain a substantial domestic market (John Maree, 1995). While government succeeded in the establishment of the industry through the above-mentioned measures, a number of them were revised in 1993 as the country sought to join the World Trade Organisation (WTO) and had to comply with the organisation’s rules (Vlok, 2006). The revision took place on the eve of democracy; all tariffs were radically slashed. Even though the trade unions, with the support of Nelson Mandela the incoming president, tried to reverse what was seen as destructive policy, they were only partially successful in changing the country’s offer in the final talks (The Journalist, 2016). The reduction of tariffs resulted in significant job losses in the sector, leading to the establishment of the Swart Commission to investigate policy options required to halt the demise of the sector. In its recommendations the Commission noted that the sector needed technology upgrading, infusion of new skills, improved process management systems, specialisation and dynamic marketing efforts. The industry’s lack of capital, technology and innovation, led to high labour and management costs in relation to output, and its domestic market focus meant it was never able to achieve economies of scale (Barnes, 2005: 7). In the evaluation of the impact of 4IR within the sector, emerging research shows that the majority of companies are aware of these radical structural changes driven by 4IR, however, a significant number of these companies say they are not yet in the position to attend to these challenges, as they are still focusing on measures designed to deal with immediate concerns about the survival of their businesses and/or maintaining their current markets (Allais et al., 2021). A number of other research studies conducted in the sector make similar findings. They show that as industry and government continue with efforts to restructure the sector, in order to set it on a sustainable growth trajectory, a significant number of companies are at the same time grappling with the design and formulation of new strategies to respond to new disruptions (TIPS, 2018). 4.2.2. Emerging trends and implications for skills Industrial policy remains a key growth driver within the clothing and textiles sector. South Africa is lagging far behind in developing a policy framework to guide industry responses to the fourth industrial revolution, compared to a significant number of comparable countries. There is also emerging evidence that points to re-ordering of key skills within manufacturing broadly, that is, skills which are currently predominantly utilised in the service sector are said to be becoming key drivers of the new business model or smart factory within manufacturing. Domestic clothing and textiles industry stakeholders, despite being concerned about market retention and business survival, are however also actively influencing industry and national skills development policies and strategies in an effort to ensure that skills requirements and emerging skills gaps are addressed as the technical content of traditional skills evolves and/or changes. 5. Forestry, pulp and paper, wood products, and furniture 5.1. Global sectoral overview The pulp and paper sector is considered a strategic sector globally, not only because of its significant contribution to the fiscus and employment, but also because of its extensive contribution to technological development and acquisition, including skills development within the global economy. The sector is valued at US$63.3 billion in 2018 and is expected to reach US$76.8 billion by the end of 2025, growing at a Compounded Annual Growth Rate (CAGR) of 3.56% during 2019-2024 Research studies show that some of the segments in this sector, like paper and forest products, are experiencing growth, albeit at a slower pace than before, as other products are filling the gap left by the shrinking graphic-paper market. Although a relatively small market, pulp for textile applications is also registering noticeable growth. In addition, a broad search for new applications and uses for wood and its components is taking place in numerous labs and development centres within a number of developed and developing countries (Berg & Lingqvist, 2019). The paper and forest-products industry is not disappearing as initially anticipated by industry pundits, far from it, but it is changing, morphing and developing, though the sector as a whole is going through the most substantial and/or radical transformation it has seen in many decades (Berg & Lingqvist, 2019). The pulp and paper sector is dominated globally by the Asian region, both as producers and consumers of pulp and paper products. For example, China's accelerated economic growth over the past decade has driven a sharp increase in the nation's demand for paper and paperboard products. In 1997, China's apparent consumption of paper and paperboard was 32.7 million tonnes; and by 2007, this figure is estimated to have reached 71.9 million tonnes (China Paper Association, 2007). Total pulp imports increased more than tenfold between 1995 and 2005, from 750 000 tonnes to 7.2 million tonnes (UN Comtrade, 2007). The structural changes that have been taking place in the sector for the past two decades, led to consolidation into growth segments of the sector, and in some instances resulted in big companies becoming even bigger in their chosen areas of focus. At the aggregate level, the world’s largest paper and forest-products companies have not grown much, if at all. As mentioned above, several of them have, in fact, reduced in size and what they have done is to focus their efforts on fewer segments. As a result, concentration levels in specific segments have generally, if not universally, increased. Figure: 5 Source: Berg & Lingqvist, 2019 Figure 5 above shows the segments of the pulp and paper sector identified as having growth potential and those that do not show potential at all. The world production of paper and paperboard is around 390 million tonnes and is expected to reach 490 million tonnes by 2020. Total revenue of the industry for 2018 stands at US$422 billion and it has 7,278 companies and employs 1,1 million people (Bajpai, 2014). The top 10 countries by forest sector employment are: China, USA, Brazil, Russia, India, Japan, Germany, Indonesia, Italy and Malaysia. Some studies estimate that the number of jobs attributable to forestry could be much higher and that these figures are likely to be a vast underestimate of the true levels of employment in forestry, despite the generally small contribution of the sector as a formal employer, as it is characterised by a high degree of informality. Particularly in developing countries, it remains a significant employer, particularly within rural communities. It is estimated that it employs 54 million workers globally, 13 million within the formal sector and the remainder in the informal sector (FAO, 2019). A tendency that reinforces the weight of informal work in the subsector is the expansion of illegal logging. Although women are important in the wood industry and forestry operations around the world, their work is often overlooked. Furthermore, the rapidly evolving tourism industry in the Middle East and Africa is anticipated to boost the growth of the market for furniture in the coming years. The forestry subsector, on the other hand, employs globally an estimated 13.7 million formal workers, which is equivalent to 0.4% of the total global labour force. The industry is dominated by ten countries, which concentrate more than 60% of the total employment. Out of these, China employs 3.5 million in the formal sector, which accounts for 26% of the world’s employment (ILO, 2018). 5.1.1. Industrial policy and the fourth industrial revolution A number of segments within the sector enjoy considerable government support through a range of policy instruments globally. Some of the segments within the sector are highly regulated by the majority of countries because of their negative impact on the environment. Whilst this paper focuses on incentives – that is, financial and non-financial – derived from government, environmental regulations employed are the key policy instruments, used to guide production behaviour of companies in support of greener or cleaner processes. For example, because of the sector’s existing environmental problems, which include global warming, human toxicity, ecotoxicity, photochemical oxidation, and the generation of solid wastes, countries have introduced stringent regulatory majors (Söderholm et al., 2019). Countries like China and Canada have always provided a number of financial incentives to establish, grow and modernise the sector. For example, China aggressively promoted the development of a domestic wood pulp industry, integrated with a plantation-based fibre supply and downstream paper production in 2004 – one of the highlights of the extent to which industrial policy measures are utilised, in this case to establish and grow an industrial sector. The government did so by providing discounted loans from state banks, fiscal incentives, and capital subsidies for the establishment of at least 5.8 million hectares of fast-growing pulpwood plantations (Barr & Cossalter, 2004). These policies obviously are also being implemented within an environment where the industry is undergoing immense market and structural changes. For example, the industry has experienced mixed results in recent years due to increasing digitisation of the global economy and rising internet usage across the globe, which has cut into demand for various traditional industry products, such as newsprint and other forms of paper. However, the sector has benefited from other trends. Rising consumer spending and increased use of online retail have resulted in booming demand for paper packaging products, and many operators have pivoted (Price, 2022). There is lack of information as studies are still being undertaken to review if some or most of the industrial policies being developed are factoring in the fourth industrial revolution. Furthermore, whilst there is increasing acknowledgement and preparedness to embrace the 4IR, research studies show that a number of countries have made significant strides in setting up policy frameworks, and that there is an equal number of countries that are still lagging behind in formulating responses to these industry changes (Guliwe, 2019). 5.1.2. Implications for skills and skills development The Confederation of European Paper Industries (CEPI) has found that there is a clear demand, not just to strengthen core technical competence, but also “softer” skills. Closer to the core technical competences, such as health and safety and maintenance, there is a growing need for a broader set of skills with regards to mastering entire production processes. Behavioural skills, such as communication, team building, the ability to learn and be results-driven, are becoming more important. They are needed to help workers to adapt to a continuously changing and more complex work environment. In short, workers will need a broader set of skills and the basic and higher education system will have to help provide these skills (CEPI, 2016). Figure: 6 Source: European Commission, 2018 Figure 6 above shows that there is an increasing need for team building and ability to learn skills, which are seen to be critical in driving the new production process. 5.2. South African overview The sector straddles the primary, secondary and tertiary industries with one of its large segments in forestry, which is part of agriculture (primary industry). The reality is that South Africa’s forestry value chain reflects a legacy of historically import-substituting industrialisation policies. This segment is a resource-based set of activities, the majority of which are local value addition and are globally competitive, however, there are major changes occurring in the value chain. Dominant amongst these changes is the transformation of the forestry resource base, as the government privatises its plantation forestry holdings and simultaneously shifts afforestation to small growers (Kraak, 2009). It is a multibillion-rand industry, responsible for 9.8% of the country’s agricultural Gross Domestic Product (GDP) and 4.9% of South Africa’s manufacturing GDP, with an export value of over R38.4 billion (Forestry South Africa, 2019). On the other hand, pulp and paper is estimated to be R29 billion and has a direct contribution to the balance of trade of R7 billion in 2016. Table 3 below shows the forest-paper subsector contribution to the country’s GDP, to manufacturing industry’s GDP and to agriculture from 2015 to 2017. The subsector is shown to be a major contributor to the agricultural GDP (PAMSA, 2016). Table: 3 Source: PAMSA, 2016 Table 3 above shows that forestry-paper contribution to the South African agricultural GDP remains substantial at 21% in 2017, having moved from 23% in 2015. The two subsectors are quite significant contributors to manufacturing GDP, at 3.6%. Forestry, pulp, paper and furniture is one of the sectors identified as part of lead sectors in the National Industrial Policy Framework (NIPF), because of its potential for growth and employment-creation, particularly in rural areas, and also for its potential to enable economic and industrial decentralisation (the dtic, 2018). The sector, especially sawmilling and activities further down the value chain, is one of the most labour-intensive in the country’s economy. However, despite its potential, the sector faces major structural challenges around access to raw materials, especially for small-scale saw millers. 5.2.1. Furniture The South African furniture industry is viewed as one of the strategic and important sectors in the country’s economy, considering its labour-intensity and its real potential for developing small, micro and medium-sized businesses, and also for exports. The industry is sustained by timber supplies from a vibrant South African forestry sector. It contributes about 1% to manufacturing GDP and 1.6% to manufacturing employment. South Africa’s exports of furniture were worth US$4.29 billion in 2016. Seven out of the top ten South African export destination markets for furniture are other African countries, namely: Namibia, Botswana, Swaziland, Lesotho, Zambia, Mozambique and Zimbabwe (the dtic, 2019). The furniture industry currently comprises more than 2,200 registered firms involved in manufacturing of furniture, bedding and upholstery and employs approximately 29,000 people. The economic segment has seen its employment number shrink over the years, from a labour force of 44,536 in 1995, the work force shrank to 23,300 in 2010, before a modest recovery to 28,411 in 2018. These jobs are now in danger unless protection against external competition is increased and there is a clampdown on illegal imports, which do not meet the required standards. General lack of competitiveness in the South African manufacturing sector results in the country being a net importer of furniture, with 2014 imports amounting to R8.3 billion compared to exports valued at R5.7 billion. Most furniture imports originate from China, however, even with the current weakness of the rand – which should be an advantage for the local manufacturing sector – imports from China and other Asian countries are still cheaper. Local manufacturers attribute this to support in the form of subsidies from the Chinese government and much lower input costs (Harrison, 2015). 5.2.2. Industrial policy intervention and the fourth industrial revolution Financial incentives provided by the Canadian government for modernisation of the Québec paper mills, discussed above, are not an exception within this industry globally. Most countries like the USA, China and India, use a number of incentives, both financial and non-financial, to help, protect, develop and modernise this industry (Québec Ministry of Finance, n.d.). The forestry, pulp and paper, wood products, and furniture sector forms part of a number of sectors identified by the South African government as being a strategic industry (the dtic, 2017). The sector is seen as showing potential for significant growth, which would lead to an increased contribution to the country’s fiscus and employment, amongst others. For example, the IPAP outlines a number of industrial policy interventions developed by government to help grow the sector – two such interventions are the Forestry Beneficiation Framework and the Furniture Competitiveness Programme (the dtic, 2017). Whilst current industrial policy interventions by government within the furniture segment are not necessarily designed to respond to the 4IR challenges, processes are in place to develop a framework or legislation so as to enable government, through policies, to guide industry in the design and deployment of appropriate strategy responses to challenges posed by the 4IR. However, in the meantime, companies have been rapidly increasing the speed of automation, to maintain or improve their market share. A number of companies in the industry are saying, to fully embrace the 4IR, companies will need huge upfront capital investment and this is the most inhibiting factor in this regard (Allais et al., 2021). The other main challenge facing the sector in South Africa is that there are significant segments of the sector that operate in the informal sector and current policies are not calibrated to take this into consideration (Kraak, 2009). 5.2.3. Emerging trends and implications for skills There is a global push to move the sector or a significant number of its segments to develop and adopt cleaner production technologies, and this would demand injection of new skills and capabilities. There is general acknowledgement and acceptance by most industry stakeholders of the need for urgent policy and strategy, which should guide the sector through the disruptive changes of the 4IR. The sector is accelerating automation, as part of a costs management strategy, and the process entails multi-skilling of workers and moving them up the skill ladder. A number of segments within the sector are unable to attract young workers, while faced with an ageing workforce. This poses a serious risk to skills in the medium- to long-term, unless the industry finds ways to attract this cohort of future workers. 6. Publishing, print media, printing, and packaging 6.1. Global macro-overview The global printing industry is forecast to reach US$821 billion by 2022, driven by growth in packaging and labels, rather than graphic applications, and digital rather than analogue printing, according to a new market report (Smithers, 2019). The report further indicated that global printing markets are changing many publishing products, electronic versions replacing previously printed volumes. E-books, online newspapers and magazines are taking significant market share (Long, 2018). Many commentators and analysts have recently confidently declared that the age of the printed newspaper is over. Industry-wide developments, including falling advertising revenues and fragmented audiences that are increasingly shifting to online content are said to signal the end of the newspaper industry as we have come know it. However, research information shows that the industry is far from disappearing, actually, the publishing, print media, printing and packaging subsector (sometimes referred to simply as ‘printing and publishing’), worldwide, remains in a stage of transition but not disappearing. On the other hand, market research shows that packaging demand across the world is increasing at a faster pace, reaching US$917.1 billion in 2019 and is expected to grow in the coming four years, according to the latest data from industry analysts. Consumption at current prices has increased from US$861 billion in 2014 to US$891 billion in 2018, a compound annual growth rate (CAGR) of 0.9%. In a comprehensive study, “The future of global packaging to 2024”, industry research analysts forecast market expansion across 2019-2024 at a 2.8% CAGR to reach US$1.05 trillion in 2024 (Smithers, 2019). 6.2. Industrial policy and the fourth industrial revolution Interventions by government in some segments of the sector have been for some time considered necessary for a number of reasons, for example, media and publishing form part of segments considered cultural and therefore demands government support. For example, the European Competitiveness Report stresses that the economic rationale for government intervention in favour of cultural industries is based on the notion that this sector constitutes a significant locus of economic dynamism in the post-industrial world (European Commission, 2009). Besides, the media have an acknowledged role in the functioning of democracies, triggering consequent rights and responsibilities with respect to human rights, democracy, and freedom of information and cultural diversity (De Prato, Simon & Sanz, 2014). This role of media is then made to justify public intervention beyond the mere correction of imperfect markets and/or market failures. Despite guaranteed government intervention in the sector, technological and business models brought about by what is now considered to be the fourth industrial revolution, have transformed the sector beyond recognition in the past two decades. Segments like print media and publishing were even expected to disappear in most economies, whilst recovery in some segments demands even more focused and targeted government support. The impact of the fourth industrial revolution on the printing segment of this sector comes at a time when this segment has gone through continued changes since it started developing digital more than two decades ago. The printing process has become more sophisticated and quality has improved over time, whilst the printing infrastructure has also become more advanced, with complex operational capabilities and a level of flexibility that could not have been imagined at the beginning of these changes. These rapid technological advances are seen to be leading to an increase in skills gaps as candidates with knowledge needed to operate sophisticated machines become fewer, and the 4IR will make this situation even more pronounced than it is now. 6.3. Emerging trends and implications for skills Industrial policy is one of the key drivers of growth and sustainability of the sector. Changes in technology and organisation are transforming jobs and the skills needed in the sector. Emerging key drivers of skills in the sector and to an extent, all other economic sectors are: the overall performance of the global economy: that is, the overall level of economic growth continues to put pressure on skills requirements. changing patterns of demand: customers are changing the ways that they want products and services delivered, thus demand changes on current business models. changing patterns of doing business: technological change is perhaps the most important driver of skills demands, as it is altering the ways in which companies produce their products. 7. Conclusion It is clear that industrial policy remains a key component of measures employed by countries to help guide industry to achieve sustainable growth in all economic segments within the FP&M sector. Whilst the role and effectiveness of these policies in the long run remains a major point of discussions, there is no doubt that a significant number of industries do benefit from financial and non-financial support emanating from these policies. Having said that, we need to acknowledge that while this is true, as illustrated throughout this paper, a number of economic papers have also argued that these policies encourage inefficient and uncompetitive ways of production, in that they also support companies and/or economic sectors which do not possess a comparative advantage in the products they produce. What is however clear from the review of the role of industrial policy, is that industries with well organised stakeholders are able to leverage government support for their benefit. The success of any policy intervention, in many ways, is dependent on skills and skills development strategies that respond and support such growth strategies. On skills, research evidence shows that whilst what is usually referred to loosely as traditional technical skills remain in demand, the changing nature of work has altered the composition and content of these skills, thus causing what is termed skills gaps. There is an emerging increased demand of skills that were traditionally in the background of the production process, particularly skills that are employed in the services sector. What is becoming even more critical is the emphasis made on formal education by industry stakeholders, as there is more and more a realisation that the changing nature of the structures and business models within the industry is continuously altering not only the profile of skills required by industry, but also the content and nature of these skills, and thus, requiring a workforce with the ability to learn and re-learn. 8. References Allais, S., Kgalema, V. & Marock, C. 2017. 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[Online] Available at: https://www.bcg.com/publications/2017/media-entertainment-digital-organization-companies-go-digital-who-is-charge [accessed: 31 July 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

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 Cooperatives are a vital form of economic development and job creation in the world, particularly in the developing countries like South Africa by Xitlhangoma Mabasa Abstract The world is in dire need of a solution to the ever-increasing gap between the rich and the poor, and the economic challenges currently facing most countries globally. Some developed countries, and a few developing countries, have cottoned on to the fact that cooperatives, with their dual nature of addressing both social and economic troubles, could be a potential panacea for these challenges – although not if they act alone. They need support from governments and to work side by side with companies, sole traders and close corporations if they are to succeed. While corporates importantly provide capital and jobs, their focus is on maximising profits, largely achieved at the cost of workers. Cooperatives, on the other hand, while also businesses driven by making a surplus, do this with great concern for the community. And unlike companies, which compete against each other, often destroying one another in price wars, cooperatives emphasise complementing one another. This paper argues that cooperatives are better poised than other forms of economy generating methods to enrich the poor and working class, as cooperatives encourage a more participative and empowering approach. South Africa, despite efforts to incorporate cooperatives into its socio-economic model, is lagging on the use of this crucial tool to tackle the triple challenge of inequality, poverty and unemployment. South Africa would do well to take heed of how both developed and developing countries globally are benefitting by using cooperatives as key instruments to generate economic growth, job creation and redistribution of wealth – while also enhancing the social fabric of their societies. Introduction There are numerous forms of economy generating methods in the world, from companies and sole traders to close corporations and cooperatives. Some developed countries – for example, Spain, the United Kingdom, Japan, Canada and Italy – use cooperatives as an alternative and/or supplementary form of ownership, economic growth, job creation and social development. Among developing countries, some embrace cooperatives in addition to the other forms of economic enterprises. Examples of such countries are Kenya, Rwanda, Tanzania, Cuba, Chile, China and India. South Africa is also making efforts to support and promote cooperatives, although they, thus far, continue to occupy minimal space within the economic and social spheres. This is disappointing as South Africa, together with many developing countries, and more than most developed nations, needs cooperatives to address the inequality, poverty and unemployment quagmire it is trying to get itself out of. It is widely known that South Africa is the most unequal country in the world. Cooperatives, as an economic and social tool, would help to seriously address these inequalities, which in the main are the legacy of colonialism and apartheid. A common challenge faced by developing countries that have emerged from colonialism and foreign occupations is that, although such countries have attained political freedom, for most of them economic emancipation remains elusive and a dream. However, among a number of other economic and social tools, cooperatives can assist in getting to grips with inequality and its destructive side effects, especially if supported by governments. The world needs to embrace cooperatives as they contribute towards helping the world to share its resources equitably. The world faces a myriad of dilemmas, some of which are human made, while others are beyond human control. Earthquakes, for instance, are not something we have the ability to control. Whereas climate change, which is threatening to have devastating consequences on the lives of people, and which most are well aware of, is continuing to worsen – largely because of greed and selfishness – despite our ability to have some effect on its outcome. The same can be said of the ‘triple challenge’ of inequality, poverty and unemployment, which has remained – largely unabated – at the top of the agenda facing humankind. The gap between the haves and the have-nots on a global scale is massive, and growing. And these challenges only worsen when zooming in on the developing nations, who have the added burden of the legacy of colonialism and occupations by foreign powers to contend with. Then, looking at South Africa, its history of apartheid adds to these woes. Pile on top of that gender and disability discrimination and it becomes a perfect storm. This paper focuses on cooperatives as tools potentially available to the world to help create jobs, shrink poverty and promote equality, especially in developing countries like South Africa. Surprisingly, even developed countries are using cooperatives to deal with these problems. Redistribution of wealth and resources and job creation are in the interests of all people the world over if we ever hope to raze poverty to the ground. Corporate involvement is critical to generating jobs, and governments must contribute by making the environment conducive for industry to thrive and grow, so that it can employ more people. The corporates should also help to bring down poverty. Unfortunately, even if industry does thrive and there is huge economic growth, it is not a given that such wealth will equitably and reasonably be shared with workers and the working class. We could easily have jobless growth, with the corporates sticking to maximising profits and not impacting on the lives of the poor. But one of the economic tools that can help to level the playing fields by kindling both wealth and jobs, is cooperatives, which, ideally, should exist alongside companies, sole traders and close corporations. Defining cooperatives vs corporations “A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations, through a jointly owned and democratically controlled enterprise” (International Cooperative Alliance, 1995). There are two characteristics that distinguish cooperatives from other enterprises: Firstly, they are associations of people which agree to be the owners, the makers of democratic decisions and the users of their joint enterprise. And secondly, their main purpose, as an economic unit, is to promote their members’ interests by rendering services, rather than focusing only on maximising profits. Cooperatives are based on the values of self-help, self-reliance, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in ethical values of trust, honesty, openness, social responsibility and caring for others. The core principles of cooperation are voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community (International Cooperative Alliance, 1995). Now, briefly defining a company (there are many types of enterprises, but this paper will be limited to mainly defining cooperatives and companies): “A company is a form of enterprise which is a legal entity in its own right in terms of the Companies Act. The functions of a company are divided rationally between the board of directors, which sees to the management of the enterprise, and the shareholder owners who provide the share capital. A company exists independently of its members. Its assets and profits are its own and the members have no right of ownership over the assets. Its liabilities and obligations are its own and may not be recovered from its shareholders. Their liability is therefore limited” (Le Roux, 1999). The case for cooperatives Most big foreign corporates drive the economy without any intention of redistributing the economic benefits to the native inhabitants. That said, job creation by corporates remains a welcome contribution to countries that have just obtained freedom, and foreign direct investments also become a critical necessity as such countries attempt to rebuild their economies. The problem is that wealth redistribution to the poor and the working class typically does not occur voluntarily. The situation is even worse if there are no strong trade unions to fight for better benefits for workers. After all, what is freedom if it fails to transform the economy to the benefit of the previously exploited citizens? This paper does not discuss the world’s myriad of problems and possible solutions. And this approach is not intended to undermine other solutions that are available to address problems and challenges facing the world’s populations. Rather, it consciously focuses on the social economy as one contribution to alleviate the plight of the poor and the working class. In addition, this paper’s argument does not ignore other impediments such as the flight of capital from developing countries to the developed world. Neither is it ignorant of some new leaders of liberated countries who steal from the government purse funds that are supposed to further liberate their people socially and economically. And that these challenges get more pronounced where the legislature arm of government is weak, and even more so where the judiciary is also weak or compromised. The argument advanced here in favour of the social economy and cooperatives is that even in some developed countries, cooperatives are seen as a necessary complementary form of economic activity alongside companies, close corporations and sole traders. Cooperatives build and own buildings which they rent out, for example, in the UK and other developed countries. In Germany and Spain cooperatives have developed to the degree that they occupy space in the manufacturing areas, for instance, manufacturing machinery components like motor vehicle gearboxes and engine parts. In developing countries like Kenya, Rwanda and Tanzania, cooperatives are key instruments of growing the economy. In Kenya, this is demonstrated in the milk industry. Cooperatives at family and community level take the milk to a secondary cooperative, where the milk is assessed in quality and quantity to be combined with other cooperatives’ contributions. Those huge volumes of milk are then taken to a tertiary cooperative, where it is processed into various milk products like cheese and yoghurt. Some milk is put into cartons in readiness for both local selling and exporting. And these Kenyan cooperatives operate alongside the economic activities of companies, sole traders and close corporations. Clearly, cooperatives benefit both developed and developing countries. A prominent common challenge facing the world is a persistently growing gap between the rich and the poor, which is even more pronounced in developing countries. It is not uncommon to hear of jobless growth, where governments are celebrating huge profits, while employment lies in the gutter. In contrast, cooperatives are by nature inclined to produce and create jobs and also contribute to social development (as they contribute to economic growth). Ownership is typically more dispersed under cooperatives than under companies. In developing countries, colonialism has perpetuated ownership patterns in favour of the rich. Usually, the rich are the colonialists who own a major part of the economy, and few natives may, after liberation, join the rich in sharing the spoils. Ownership patterns are characteristically against the majority, who are usually the natives of the ‘liberated’ countries. Multinational companies are, on the whole, not shy of owning a huge percentage of the assets and wealth of formerly colonised countries, where the poor and the working class remain in perpetual poverty and unemployment. It is ordinarily not the intention of big corporates to redistribute wealth to the poor and the working class. There is an argument that market forces, if left undisturbed by governments, will create and redistribute wealth. But that has proved to be a fallacy, as typically it has never materialised; the market has generally failed to redistribute wealth. Hence, we speak of market failures and the need for government intervention. Cooperatives offer a solution to market failures. Guided by the seven principles mentioned earlier, cooperatives and their leaders have noted that the disparities between the richest and the poorest must be addressed, and so, there is a deliberate plan being executed by cooperatives to narrow that gap. Some countries embrace cooperatives to a degree where they even help in the establishment of universities and technikons that specialise in training people on cooperatives. For example, in Spain (a developed country) and countries like Kenya (a developing country). The values upon which cooperatives are founded help build better communities. Complementing one another is emphasised over competing against each other. Price wars – where one company does everything to kill a competing company under a free market and untempered capitalism – are hardly heard of between cooperatives. Cooperatives as a tool for change Cooperatives serve a number of objectives: generating economic growth, job creation and redistribution of wealth. They also contribute to enhancing the social fabric of societies. Social and economic challenges continue to ravage the world in general and developing countries in particular. The 2008 economic meltdown is a vivid example. Economic tools used to address these challenges should serve humankind in a complementary way, backing what good governments are supposed to do. Using a variety of different economic tools provides diverse types and levels of services, which is needed in a world dominated by such contrasting interests and circumstances: war-thirst vs peace-loving, wealth vs poverty, greed vs generosity, totalitarianism vs democracy, corruption vs lawfulness, oppressive vs progressive, self-serving vs community serving. Although this paper focuses largely on poverty, unemployment and inequality as the main threats facing the majority of the world’s population, especially the poor and working class, there remains an awareness of other challenges across different parts of the globe. Dire problems such as climate change, racism, religious-extremism, imperialism and colonialism are all affected by and affect the ‘triple challenge’. Added to these serious worries is the horror of gender-based, xenophobic, child and transgender killings. World wars are also a threat to humankind, as we cannot discount the possibility of a third world war. As if that terrifying list is not enough, the globe is also facing the disastrous outcome of the Covid-19 pandemic. The inequalities facing the world were acutely exposed by the greed of developed countries as they hoarded vaccines in the thick of it, depriving poor developing countries of the life-saving medicine. The global leaders should strive to contribute to world peace. And whatever tools are devised, we should continually ask ourselves whether they contribute towards making the world a better place or worsening its condition. We must accept that different people will have different opinions about which tools to use, however, it is clear that if the world embraced cooperatives more, and used them alongside other progressive methods or policies, the world would not only be better positioned to address challenges such as poverty, unemployment, and inequality, but also environmental and climate change issues. Which is not to say that approaches like the creation of companies as a means of generating economic growth and wealth generation are entirely bad. Actually, the creation of companies is good for both developing and developed countries. But the corporates do not go far enough to address the plight of the poor and the working class. Unfortunately, the world embraces these other forms of economic activity, like companies, more than cooperatives. To quote Louis Favreau: “The cooperative movement is becoming aware of the severity of the crisis and its international scope: stock market capitalism, environmental disasters and rising inequalities. At the same time, cooperatives are rediscovering that they are faring better, thanks to their cautious economic approach. Leaders are now more inclined to assert that cooperatives are part of the economic alternative to this crisis. Although cooperatives tend to be politically reserved, powerful initiatives have been springing up around the world alongside with what the ICA is now trying to do as an international organisation for political representation” (Favreau, 2012). Favreau further argues for: “1) greater distancing from capitalism, which has been ongoing for some time; 2) increased international activity; 3) greening activities within several of its organisations. All this transformation seems to indicate that its legendary political neutrality may be a thing of the past. Could this be a major turning point?” (Favreau, 2012). Most corporates exacerbate the crises – poverty and inequalities – of developing countries, and they are not ashamed of publicly admitting that their main objective is profit-maximisation. For most of these companies profit maximisation is achieved at the cost of permanent workers, who are converted into casual labour, and also by denying workers essential benefits like medical aid and unemployment insurance. In the name of implementing labour flexibility, especially in developing countries where unemployment is usually too high, most workers easily get retrenched and their wages get reduced, with the utilisation of casual labour becoming the norm. It is far too difficult and risky for casual labour to form or join trade unions. Consequently, low paid workers translate into poor households with low per capita income for families and communities. Cooperatives need support to succeed For cooperatives to succeed, governments need to support them. This could take the form of governments exempting emerging and small cooperatives from paying tax for a certain period as they get their footing. It could also imply providing land, seeds and implements to agricultural cooperatives. In South Africa, a country that leads the world in terms of the gap between the few rich and the majority of poor people, cooperatives are making efforts to emerge as a role player, but that noble objective is proving to be a steep mountain to climb (DSBD, 2023). Small business is attempting to assist cooperatives to emerge as a strong role player, through various supporting agencies: Small Enterprise Development Agency (SEDA), Small Enterprise Finance Agency (SEFA), National Empowerment Fund (NEF), Companies and Intellectual Property Registration Office (CIPRO), South African Bureau of Standards (SABS), among others. These agencies provide essential supportive services, for example, SEDA empowers new cooperatives with appropriate skills that the cooperative will need in its area of operation. For instance, it would train emerging cooperative farmers, teaching them farming skills before they endeavour to start their businesses. This enhances the chances of cooperatives succeeding, reducing the chances of failure – it is a worldwide observation that most businesses fail during the early stages. SEFA then typically helps emerging cooperatives with funds after such cooperatives have been empowered by SEDA. In the 1960s the cooperative sector in Chile experienced major expansions, “with more than 3 400 active cooperatives coming into existence as a result of broad government support and promotion ... Various challenges followed which led to the University of Santiago de Chile, through its International Centre for Social and Cooperative Economy (CIESCOOP), pursuing work in various cooperative subsectors (schools, workplace, drinking water supply, etc.) with a view to strengthening and publicising the specific contributions – not to mention their very existence – of cooperatives” (Dávila et al, 2012). In Canada, it has been demonstrated that government support assisted the development and growth of cooperatives. “All cooperatives in the North had certain features in common. First, they were dependent upon government support in the form of financing for initial capital outlay (which in no way set them apart from resource industry development in the North). They received technical supporting areas of accounting, pricing, and correspondence with outside dealers, and some supervision or management of the business in order to manipulate outside markets successfully. They also relied upon access to air transportation and shipping for distribution to widespread communities, perhaps the most costly factors” (Stopp, 2012). To further illustrate how essential government support is for the success of cooperatives, Caroline Gijselinckx (2012) argues that “Governments are partners: Cooperatives in the areas of (health) care and social services cannot function without government support. Governments create the legal framework in which they can operate, but also purchase services and determine and control the criteria to which products offered and their supplies must conform, provide price or wages subsidies, grant access to investment funds that only ask a modest return on investment, assign favourable fiscal or social measures, support pilot projects, and so on”. Gijselinckx’s arguments are informed by research from, among others, Italy, UK and Sweden. “In Sweden and the United Kingdom, there are cooperative development agencies, often with co-financing by the government, supporting new cooperative developments” (Gijselinckx, 2012). In 2008, during the economic meltdown, cooperatives are among the economic entities that suffered less and mainly survived the economic onslaught. In Italy and Spain, and other countries, cooperatives survived relatively better during this time compared to companies and sole traders. Cooperatives are better at knitting communities together than other economic enterprises Economic development (even with economic growth) if unaccompanied by social development and emancipation, is inadequate in meeting the challenges facing humankind, particularly the poor and the working class. In developing countries like South Africa, cooperatives are not new. Historically, most rural places practiced an economic activity called ‘letsema’, whereby a community would collectively plough one of its members’ fields and thereafter move to plough the next community member’s field until the collective finish ploughing all the participants’ fields. That way the collective energy ploughed more fields than if each field owner had singularly worked on their field alone. This notion can be transferred to cooperatives. We simply call it the strength of teamwork. In addition to companies, close corporations, sole traders and others, cooperatives have emerged as a tool that occupies a particular niche that is often ignored by governments. “Cooperatives have been driven by principles that make them different from other organisations since their origin. The statute from the first experience on cooperatives in 1844, in Rochdale, contained principles upon which a cooperative organisation should be created. According to Schreiner, some founders of the Rochdale cooperative had already participated in pre-cooperative experiences and were familiar with the ideas of Robert Owen, a socialist utopian and founder of the cooperative movement” (Cardoso Cançado et al, 2012). To give testimony to this, are the seven principles of cooperatives listed earlier. “The founders of the cooperatives did not only want food at fair prices; they also aimed for education of family members and access to housing and employment – through the purchase of land and factories – for the unemployed and the underpaid” (Cardoso Cançado et al, 2012). Inspired by the success of cooperatives in Rochdale, “in 1895, the International Cooperative Alliance (an authority on cooperative principles) was created in London, with the initiative of English, French and German leaders” (Cardoso Cançado et al, 2012). Members of a cooperative seem to identify with their cooperative to a degree that they may even choose to agree to lowering wages if they understand that such a sacrifice will grow the cooperative. As a company exists independently of its members, employees would normally not agree to a salary cut as they are not involved in the running of a company and, in relative terms, identify less with the company. Cooperatives cooperate among themselves to a degree where they can accumulate their moneys for purchasing stock, and using the principle of economies of scale, they can negotiate better prices as they purchase in bulk. In contrast, companies guided by the principle of competition may find it easy to destroy the competitor by using a price war as a strategy. During the recent pandemic, most pharmacies increased prices of medicine for Covid-19 – for example, vitamin tablets and ginger – in their pursuit of profit maximisation. In South Africa, the Competition Commission had to intervene by investigating the claim of excess pricing, and having found a leading pharmacy, Dischem, guilty, it was penalised with a fine. In comparison, most cooperatives, while striving to make a surplus, would have been guided by the noble principle of acting in the interest of the community in which they operate. One of the seven principles, ‘concern for the community’, renders this guidance. Guided by those principles, most cooperatives would not unduly increase prices as they lean more towards caring for the community. There are two related concepts that are important to look at here: concern for community (relates to cooperatives) and social responsibility (relates to corporates). The concept of concern for the community is closely related to other concepts, like the principle of democratic member control. “The principle of concern for community is founded on two pillars: (i) the sustainable development of communities where cooperatives are located and (ii) the accomplishment of this development through policies approved by their members” (Cardoso Cançado et al, 2012). The concept of social responsibility, on the other hand, is problematic. Most companies if accused of not doing enough for the communities and countries in which they are located, deny this in response. They argue that they do carry out social responsibility in the area where they are located or operate by creating employment for community members and paying taxes, which benefit the said community. Fighting for dominance here is private interest versus collective welfare – that is, pursuing the interests of shareholders (profit maximisation) as opposed to satisfying community needs (improving quality of life). But there is a slight overlap. One argument is that most corporates are doing the social responsibility function as a public relations (PR) exercise. Another argument is that they are doing it as a marketing exercise. Reputational capital is another aim of corporates; it enhances the company brand if well executed. This partially explains why companies will go to great lengths to sponsor a soccer team that is winning. Usually, weak or new teams struggle to secure sponsorship. Therefore, social responsibility (for corporates) is not the same as the concern for community (of cooperatives). If a bigger proportion of the world could embrace cooperatives, it would indeed be a better place, both socially and economically. There is enough space for cooperatives to exist alongside companies, close corporations, sole traders and other economic methods. Cooperatives will only enrich and complement the other methods, without threatening their existence. However, although there is a strong argument to be made that humankind will be better served with a wider variety of economic and social methods, this does not mean that cooperatives are a panacea for all economic and social challenges in the world, particularly for the developing nations. For the world to become one socially and economically, more needs to be done beyond what cooperatives and corporates can offer. Other advantages of cooperatives There are many other ways that cooperatives are adding value to people’s lives. Cooperative capital is less expensive than external capital, provided that the investors – who (often) also have a user-relationship with the cooperative – are not investing in the cooperative for speculative reasons. A lower (or even zero) return on investment is accepted for cooperatives where members have great user value, for cooperatives that have a high value for the community, or that are embedded in a well-organised community of interests or ideological community, for initiatives that would otherwise have to primarily rely on the work of volunteers and charity. A higher return on investment in accordance with the market is expected from more commercially-orientated investments. Training is another virtue of cooperatives. Most cooperatives train their members not only to benefit the cooperative, but also to benefit the broader society, as those skills can be used elsewhere in society, for example, in the broader labour market. According to Caroline Gijselinckx, offering high quality services at the lowest possible price is one of the virtues of cooperatives (Gijselinckx, 2012). In addition, cooperatives offer an enriched vehicle for providing social welfare. The increasing tension between tightening state budget constraints on the one hand and growing social needs on the other has led welfare states all over the world to try to find ways to scale back public expenditures and responsibilities, by persuading citizens and private organisations to engage in the alternative financing of social services. The 2008 worldwide financial crisis has made most countries appreciate the value of cooperatives as an economic and social instrument. Yasmin Lemzeri et al succinctly summarise this: “The financial crisis that hit the banking sector in 2008 was so serious that the States had to intervene to prevent a systemic crisis. It seemed that no bank – either cooperative or commercial – was spared. However, depending on their membership structure, their level of capitalisation and geographical situation, cooperative banks appeared and seemed to weather the storm better – so much better, in fact, that their indicators had deteriorated to a much lesser extent and even improved. Cooperative banks have proven to be important contributors to financial stability. However, commercial banks have shown themselves to be more resilient in the post-crisis period. Although they suffered strong downgrades of their indicators scores, they succeeded in making up for time lost between 2006 and 2008” (Lemzeri et al, 2012). Another authority on cooperative banks in India, Sudha Kornginnaya, says, “In the past, cooperation was conceived ‘essentially as corrective to the excesses and deficiencies of capitalism’, and it is now all the more relevant in the present time. Though the financial crisis has devastated the market-driven corporate economy, cooperatives have shown their economic resilience by fulfilling common goals of the association. ‘A cooperative is a symbiosis: a union of an association of people and a business, both of which have to keep healthy for the orgasm to thrive’. Hence social achievements are vital for business success, while economic strength is imperative to yield social aims. However, the financial cooperatives that have replicated corporate banking behaviour have now embraced a renewed socialist imperative alongside their economic performance goals. There is a growing realisation among financial cooperatives that their effectiveness is based on the reconciliation between economic efficiency and adherence to social values” (Kornginnaya, 2012). Some problems facing cooperatives As favourable as the arguments for cooperatives are, this does not preclude that they face challenges. In Argentina, during its 2001 financial crisis most companies collapsed. Cooperatives took over the running of companies and converted them to cooperatives. The one challenge they faced was that they mimicked a company’s hierarchy in running their cooperatives, which believe more in a relatively flat structure. In China, in the words of Wu Xiliang: “Even although China’s rural financial markets have undergone great reform in recent years and banks financial institutions cover every township, today China’s rural mutual credit cooperatives (RMCC) remain underdeveloped in contrast with other financial institutions” (Xiliang, 2012). This constitutes a critical problem for the RMCCs. Another problem arises out of inadequate knowledge of rural areas by commercial banks. “In China, the current, longstanding government measures used to manage the banking market in the rural areas are the same as the measures used in urban areas. However, commercial banks cannot know the rural areas completely, and it is difficult for farmers to get loans from commercial banks” (Xiliang, 2012). Another reason why there is, relatively, poor knowledge of rural areas and rural cooperatives by commercial banks is that most commercial banks are situated in urban areas, as they pursue a high geographic concentration of clients (in urban areas) compared to sparsely distributed cooperatives (in rural areas), which have less appeal. To lay out infrastructure in rural areas is more expensive than in urban areas. Fortunately, there are other types of banking institutions that are suitable for the rural areas: Rural Credit Cooperative, Agriculture Bank of China and China Post Bank, rural and township banks, lending companies and rural mutual credit cooperatives. The irony is, although the China Post Bank receives more deposits from farmers, it gives fewer loans to farmers. It is a challenge. As a result of strict access rules, many civil rural financial cooperatives cannot obtain registration from the China Banking Regulatory Commission, and this encourages the existence of village and township banks that operate unregistered. But even though they are unregistered, they occupy a critical niche as they are able to serve scattered farmers who would otherwise be too expensive to service. In South Africa, remote places are hungry for banking institutions that should be located in rural areas. India and China are doing better than South Africa, as they have more cooperative banks, which are better suited to serve the sparsely populated areas. The weakness of rural places that are without cooperative and suchlike banks is that loan sharks and other opportunistic pseudo loan and borrowing institutions can spring up and occupy the space that should be occupied by properly registered banks. In Argentina, in some cases worker cooperatives (WCs) own and manage firms. These are Argentina’s recovered firms (RFs), which “represent a movement of WCs that emerged from Argentina’s 2001 economic crisis. In that crisis the economy of Argentina got completely devastated. According to the World Bank, unemployment topped 25 percent in 2002. Argentina could no longer afford to export goods or service its debts. The resulting run on Argentina’s banks marked the definitive start of the crisis in December 19, 2021” (Reese, 2012). Characteristically, most RFs are committed to community development as they run firms guided by cooperative principles. During the crisis in Argentina, cooperatives succeeded in saving some firms from complete collapse, with a number of jobs saved. Research and development are critical for the development of cooperatives and for cooperatives to keep up to date with the dynamic world development and challenges. Cooperatives are empowering: “They are developed as instruments for stakeholders who want to develop answers to their needs and expectations, and to gain mastery over their lives. Participation, active involvement, control and critical awareness are key to this mastery and this is exactly what drives cooperative development” (Gijselinckx, 2012). The dual nature of cooperatives: marrying the social and financial economies As can be seen, there are advantages and disadvantages to both companies and cooperatives, and so, it makes sense for cooperatives, companies, close corporations and sole traders to exist together in the world. In certain areas their advantages will overlap to the benefit of all people globally. It would be highly regressive for countries to shun cooperatives, which would rob communities of the benefits. Sonja Novkovic makes an important point: “Cooperative firms are known to possess a dual character; on the one hand they are business driven by economic incentives, while on the other, they are associations with a social purpose and character. Cooperatives have often been portrayed by their members as businesses that combine a social mission with their economic goals. This dual aspect has not been easy to quantify, and literature has been divided along those dual lines – social aspects have historically been addressed more or less separately from economic concerns, while economics literature has steered clear from addressing the social nature of cooperative organisations” (Novkovic, 2012). What the world needs is for all forms of economic and social development activities to act together without aiming to displace each other, because together they all add value to humankind. There is adequate space for this approach to work. Government should support all progressive forms of economic and social activities, especially cooperatives, as they are more likely to help empower the poor and the working class by addressing the inequalities between the rich and the poor in the world, where the economic and social disparities are astronomical. A fitting example of a conglomeration of corporate business and cooperatives is Mondragon in Spain, where Mondragon represents many cooperatives internally in Spain as well as all over the world. Cooperatives under Mondragon expand their interests by relating to corporate businesses in Spain and globally, with the understanding that that co-existence is in the interest of both major players. “In October 2009, Ebrahim Patel, South Africa’s newly appointed Minister of Economic Development, caused a stir by publicly expressing his support for the social economy. Opening an International Labour Organisation (ILO) regional conference on the role of the social economy in Africa’s response to the global economic crisis, he declared: ‘As we chart a new growth path on the continent, we need not see cooperatives and social economy entities as simply residual absorbers of labour. Instead of limiting their role, enterprises in the social economy can be a leading force for modernising economies and expanding economic development.’ He went on to say that the social economy was ‘absolutely vital to the recovery of African economies”. On 12 April 2011, Patel told the South African parliament: “The key to empowering women, black South African, workers, the rural population and young people is to provide them with real economic opportunities – in jobs, access to resources and entrepreneurial opportunities, meaningful self-employment, and through the social economies. This is not an act of charity, but fundamental to sustained growth, to using our wide talent pool fully and to the social solidarity any society requires to prosper” Conclusion Cooperatives are not a hostile competitor to other forms of business enterprises. Rather, they should be seen as complementary to them. All the different types of enterprises should exist side by side, as each occupies a particular niche. This complementary value is best illustrated by the German companies of BMW, Mercedes Benz and Golf, where some of their components are manufactured by cooperatives, which purchase those same vehicles to fulfill transportation needs. While one of the objectives of cooperatives is to make a surplus, it does so with utmost concern for the community in which it operates, for example, by avoiding the disposal of litter in rivers in the area. Concern for the community is one of the seven principles of the International Cooperative Alliance, to which all cooperatives subscribe. Cooperatives are better poised to enrich the poor and working class, as they encourage a more participative and empowering approach. Generally, cooperatives cooperate among themselves as a matter of principle. Sometimes, cooperators even identify with their cooperative to the point where they are willing to take a pay cut if they believe it will help their cooperative survive a financial crisis, such as the one in 2008. Cooperatives, by design, are better positioned to reduce inequalities in the workplace, as the salary gaps between the top executives and the ordinary workers is usually very low when compared to that in companies, sole traders and close corporations. International bodies should learn what some of the virtues and strengths of cooperatives are and explore integrating them into their practices, as it seems cooperatives internationally are more united than organisations such as the IMF, World Bank, United Nations, among others. Components of these bodies tend to be negative towards one another and, thereby, lose the benefits of collectivism. Governments throughout the world need to support cooperatives to benefit from their many advantages. In turn, cooperatives will fare better through this support, which could take the form of training on cooperatives in colleges and universities, or funding. Learning about cooperatives could also be added to the syllabus at high school level alongside subjects like business economics. It is clear from this paper that the pros far outweigh the cons when it comes to incorporating cooperatives into the economy. Cooperatives have the potential to address the economic and social concerns that continue to plague the globe, especially poor developing countries. They have the potential to fight the triple threat of inequality, poverty and unemployment – and to win. Countries that do not support cooperatives for whatever reason, should not be surprised to find the gap between the rich and the poor widening further. References Cardoso Cançado, A., Scalfoni Rigo, A., Torres Silva, J. & Arruda Souza, M. 2012. Beyond mimicry: a critique of "Social Responsibility" in cooperatives, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Dávila, A.N., Radrigán Rubio, M. & Penaglia, F. 2012. Fortalezas y debilidades del sector cooperativo chileno: análisis de caso en tres sectores económico-sociales, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Department of Small Business Development (DSBD). 2023. SMMES AND CO-OPERATIVES FUNDING POLICY FOR SOUTH AFRICA. [Online] Available at: http://www.dsbd.gov.za/sites/default/files/Final%20Gazetted%20SMMEs%20and%20Co-operatives%20Funding%20Policy.pdf [accessed: 28 June 2023] Favreau, L. 2012. Les multinationales devront composer avec un nouvel acteur politique : le mouvement coopératif, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Gijselinckx, C. 2012. Cooperative Answers to Societal Challenges: 9 Insights from 2 x 9 Cases, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] International Cooperative Alliance. 1995. Cooperative identity, values & principles. [Online] Available at: https://www.ica.coop/en/cooperatives/cooperative-identity [accessed: 28 June 2023] Kornginnaya, S. 2012. Achieving Business Success through Association Strategies in Cooperative Banks in India, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Lemzeri, Y., Jaeger, M. & Ory, J-N. 2012. Les banques à statut coopératif ont-elles plus de capacité à résister à la crise financière et à la surmonter?, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Le Roux, E.E. 1999. Business Management: A practical and interactive approach, Second Edition. Sandton: Heinemann Higher and Further Education Novkovic, S. 2012. The balancing act: Reconciling the economic and social goals of co-operatives, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Reese, A. 2012. Identity, participation and firm longevity: An Analysis of Worker Cooperatives through the Lens of Argentina’s Recovered Firm Movement, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Stopp, M.P. 2012. The Inuit Co-operative Movement in Northern Canada, 1959-1968, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 June 2023] Xiliang, W. 2012. Problems and Countermeasures of Rural Mutual Credit Cooperatives in China, The amazing power of cooperatives. Texts selected from the international call for paper proposals. Cooperatives Summit Quebec 2012. [Online] Available at: https://www.socioeco.org/bdf_fiche-document-959_en.html [accessed: 28 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

Articles Click on the article title below to read: Philosophy’s response to the problem of recession in Nigeria Dr Valentine Ehichioya Obinyan and Dr Faith Gloria Eheimua Accounting for social value in funding public colleges in Higher Education in South Africa Dr Cornelia C September (co-contributors: Dr S Lloyd & Prof P Singh) Ethical reflections on population challenges Dr Motsamai Molefe Role of industrial policy and the fourth industrial revolution within fibre processing and manufacturing (FP&M) sector Victor Kgalema Coalitions in South African Local Municipalities: Is the Constitution enabling democracy or not? Nondumiso Sithole Cooperatives are a vital form of economic development and job creation in the world, particularly in the developing countries like South Africa Xitlhangoma Mabasa