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

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

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

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

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

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

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

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

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

The ACM has as its objective the bringing together of think-tanks from across Africa to consider, discuss and develop policy proposals that will advance development on the continent. Eight think tanks, drawn from North,  West, East, Central and Southern Africa participated in the meeting. Deliberations at the meeting focused on, in the first instance, consolidating a collective African position on major contemporary challenges facing the continent, and, in the second instance, on further  integrating the African think-tank community into the broader Global South think tank community. During the discussions concentrated on Africa’s approach to multilateralism in general, its relationships with regional formations such as the Forum for China Africa Cooperation (FOCAC), and others advancing the cause of the Global South; and peace and security on the African continent. The meeting had four objectives: To serve as an embryo for the setting up of an annual consultative meeting amongst likeminded African think tanks for the purposes of dialoguing substantive political and socio-economic issues confronting the African continent. The idea is to prepare these think tanks for engaging in various international conferences on the basis of an engaged contribution. To prepare a synthesised African position on China-Africa relations intended as a contribution to the China Africa Think Tanks Forum (CATTF) To seek cooperation amongst the participants for the development of an Africa Fragility Index. To introduce the Global South Perspectives Network and Global Resilience Council. Participants included: Ms Buyelwa Sonjica, Chairperson of the ISI Advisory Council and former Cabinet Minister Prof. Wei Xu, Deputy Director of the Institute for African Studies, Zheijiang Normal University, and Prof, Ariella Liu, Director of the South Africa – China Think Tank, based at Nelson Mandela University Business School. Mr Zine Barker, Head of Academic Chair, Arab League Educational, Cultural and Scientific Organization (ALECSO), Algeria Prof Assi Kimou, Deputy Director Cellule d’Analyse des Politiques Économiques du CIRES (CAPEC), Cote D’Ivoire, and Dr Ndiakhat Ngom, General President South-South Transatlantic Institute, Senegal Dr Melha Rout Biel, Executive Director,   South Sudan  Center for Strategic and Policy Studies (CSPS), South Sudan Prof Francis Matambalya, Executive Director, The Nyere Foundation, Tanzania, and Prof. Omar Mjenga, Centre for International Police Africa, Tanzania Dr David Monyae, Co-Director University of Johannesburg Confucious Institute (UJCI) Hon. Faiz Jacobs, a senior Member of Parliament from our host province the Western Cape Ms Febe Potgieter, a former senior diplomat at amongst others the African Union. Representatives of the Africa Women’s Association led by its President Ms Jenny Wu. Dr Georgios Kotsakis, Director of the Foundation for Global Governance and Sustainability. Mr Priyal Singh from the Institute of Security Studies.

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

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

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

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

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

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

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

Occasional Paper 10/2023 Copyright © 2023 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8010 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. DECEMBER 2023 by Prof William Gumede Former Programme Director, Africa Asia Centre, School of Oriental and African Studies (SOAS), University of London; former Senior Associate Member and Oppenheimer Fellow, St Antony’s College, Oxford University; and author of South Africa in BRICS (Tafelberg). Introduction Special economic zones (SEZs) can still play a critical role in developing new industries, beneficiating raw materials, and diversifying South Africa’s exports. That is, if they are linked to the overall national development strategy, done in full partnership with business, and freed from the public sector’s governance problems – such as incompetence, corruption, and inefficiency – which have stymied SEZs up to now. SEZs, which are also termed export processing zones, free trade zones and free ports, are geographically demarcated areas which governments dedicate to specific industrial development by giving fiscal incentives, regulatory exemptions, and public infrastructure support (Aggarwal, 2008; Asian Development Bank, 2007; Cirera & Lakshman, 2014; Farole & Akinci, 2011; Fruman & Zeng, 2015). It is a key policy tool many high-growth economies in Asia have used to build manufacturing, export capacity, and lift economic growth (IFC, 2016; ILO, 1988; Ishida, 2009; Jayanthakumaran, 2003). The South African government has adopted as a policy objective the establishment of regional industrial zones – Special Economic Zones and Industrial Parks (IPs) – and corridors (Gumede, 2022a; Gumede, 2022b). The SEZs and IPs are recognised amongst the tools that are catalytic economic drivers in regional economy ecosystems. They drive continuous attraction, promotion and retention of direct domestic and foreign investment to achieve transformative industrialisation and sustainable economic growth in South Africa, especially in underperforming regions (Jayanthakumaran, 2003; Johansson & Nilsson, 1997; Cirera & Lakshman, 2014; Litwack & Qian, 1998; Rhee et al, 1990; Rodrik, 2004; Zeng, 2017; UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). The first industrial SEZ was established in 1959 in Shannon, Ireland. The country established the Shannon Free Airport Development Company, a development agency, to establish an industrial free zone, to generate alternative sources of traffic, business and tourism at the Shannon airport and adjacent area. Investors were given special tax concessions, simplified custom operations, and cheap investment attractions. The area was transformed into an air training base, maintenance and repair centre, and a tourist attraction. Global impact of SEZs According to the International Labour Organisation (ILO), by 2007, SEZs accounted for US$851 billion-worth of exports – which is around 41% of global exports – and for 68 million direct jobs created (ILO, 1988). Clustering infrastructure, industries, and public goods in one specific region, means that a country can leverage scale to build a critical mass of related, complementary, and synergetic value chain components that need similar skills, technologies, and market links. This forms an ecosystem that boosts economic development, attracts investment, and fosters an environment for innovation. Companies share resources, costs, and infrastructure. The overriding idea is to concentrate limited public funds, resources, and infrastructure on developing or establishing new industries with the help of private sector investment, skills, and technology. Importantly, as Douglas Zhihua Zeng (2017) argues, SEZs “should only be used to address market failures or binding constraints that cannot be addressed through other options. If the constraints can be addressed through countrywide reforms, sector-wide incentives, or universal approaches, then zones might not be necessary”. If successful, SEZs could provide positive spillovers to the rest of the economy. These spillovers can be direct or indirect. The direct impacts are rising economic growth, new manufacturing industries, and beneficiation (Jayanthakumaran, 2003; Johansson & Nilsson, 1997; Cirera & Lakshman, 2014; Litwack & Qian, 1998; Rhee et al, 1990; Rodrik, 2004; Zeng, 2017; UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). It boosts employment, increases local and foreign exchange income. It brings new technology, innovation and skills, and diversifies the economy. It increases the productivity, efficiency and competitiveness of local companies, the productivity of local labour, and the income of local citizens. Figure 1: The growth of SEZs around the world since 1975 (UNCTAD, 2019 SEZs Report) Why do countries establish SEZs SEZs are established because governments lack the skills, resources, and capacity to introduce nationwide reforms to establish conducive environments for investment attraction, industrial upgrading, and infrastructure development. Furthermore, as Douglas Zhihua Zeng argues, governments also established SEZs because they lack the capacity to tackle vested interests, capture, and political opposition to country industrialisation reforms, and then implement it on a smaller, more protected and ring-fenced scale, through SEZs. If a country lacks effective state capacity, public services, and infrastructure such as power, water and transport, SEZs – located in a smaller geographical area – could offer an opportunity to use the limited state capacity, public services and infrastructure to potentially great impact, which could catalyse other parts of the economy. However, if investments can be attracted, industrialisation fostered and technology, knowledge and skills acquired through normal policy avenues, incentives, and state-business partnerships, SEZs are not necessary. SEZs must only be established if constraints such as government corruption, incompetency and red tape cannot be addressed speedily in the broader economy, and SEZs then are established as smaller protective zones where these governance failures are absent. A critical part of the success of SEZs is that they need to be part of the overall national industrial strategy of a country – they must be exempt from the inefficiencies, corruption and mismanagement normally associated with developing country governments and must respond to real market demands (Warr, 1989; Watson, 2001; White, 2011; Wolman, 2014; Zeng, 2017). Some of the purposes of SEZs are to create new industries that do not exist at the time, beneficiate raw materials and so create new value-add industries, attract foreign investment when it is difficult to do so under normal circumstances, and to develop an export economy. SEZs can also be specifically established to transfer new technology, knowledge, and skills that the country lacks, but are critical to industrialisation. The SEZ is almost an incubator, where experimenting, manufacturing, innovation, and learning can happen behind protective barriers – and the final product then exported to global markets. SEZs have been crucial in skills, technology and knowledge transfer and industrial upgrading from basic to value added industries in South Korea, Taiwan, and Singapore. Dubai created a successful Dubai Internet City SEZ, which attracted the world’s largest technology companies, such as Microsoft, Oracle, and IBM. Dubai also created universities as special economic zones, bringing in foreign universities, teachers, and technology to accelerate skills transfer, technology upgrading and innovation (Khaleej Times, 2019). Africa, Morocco, and Nigeria set up SEZs to penetrate the European Union market (Bräutigam & Tang, 2010; Farole, 2011; Fruman & Zeng 2015). Rwanda set up SEZs to manufacture new products for exports. Within three years, 3% of Rwanda’s workforce were employed in its new SEZ. Mauritius set up SEZs to produce processed sugar for export. Such was the Mauritian success, that when the sugar industry was at its peak, the country dominated 50% of the EU market for processed brown sugar (Bräutigam & Tang, 2010; Serlet, 2022). The SEZs must be a zone of competent management, corruption-free, devoid of public sector red tape, and effectively integrated within local and global markets. SEZs must have a specific industrialisation purpose and must not become a collection of subsidised warehouses that create jobs artificially at great cost, as has been the case in many failed SEZs in Africa and South Africa. Many researchers worry that SEZs may only develop certain parts of a country, creating “enclaves”, and the impact will not be transferred to the wider economy. The rise of SEZs Taiwan in 1966, Singapore in 1969, and South Korea in 1970 were amongst the first to create SEZs (Asian Development Bank, 2007). Both Singapore and South Korea established SEZs to use their cheap and available labour, to foster labour-intensive, export manufacturing industries and attract foreign investment – based on giving investors incentives for setting up these industries (Lall, 2000). Singapore established SEZs to build a transhipment trade hub, removing goods and service taxes on products. By the 1970s Singapore created specialised SEZs, particularly to build the petroleum refinery-related industry (Koh, 2006). Singapore has established more than 400 companies trading in petroleum and related products since it established its first SEZ in 1969. For another, the creation of the petroleum refinery-related industry has spurred associated and related petroleum business, including professional services, research and development, and marketing and sales. After the Asian financial crisis, these East Asian states changed the focus of their SEZs, as economic circumstances changed, to industrial upgrading, productivity increases and innovation (UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). They moved their SEZs from low-skilled, low-cost labour to value added activities and technology – these economies now had developed high-skilled workforces, for high-skilled labour. For example, these countries introduced technology, biotechnology, science, and software SEZs. China successfully used SEZs as zones of experimenting to develop the market system, while building new industries the country did not have and learning new technologies it lacked. China launched its “Open Door” reforms in 1978 to introduce market reforms in selected regions, in what former Chinese leader Deng Xiaoping called “crossing the river by touching the stones” (Shen & Xu, 2011; Sklair, 1991). The Chinese SEZs were zones where the usual government red tape, corruption and ideology were set aside, focusing on securing foreign investment by giving incentives, attracting new technology and knowledge. The Chinese SEZs built new industries, created new jobs and new export industries (Shen & Xu, 2011; Sklair, 1991). It fostered positive spillovers to the economy – new knowledge, new technology, and new management techniques were transferred to other parts of the economy, which lifted economic growth, development, and the country’s competitiveness (Shen & Xu, 2011; Sklair, 1991). It is estimated that SEZs have contributed to 22% of China’s GDP, 41% of the country’s foreign direct investment, and 60% of its exports. China’s technology commercialisation rate is around 10%. However, in SEZs the technology commercialisation rate is around 60%. SEZs in Africa There are an estimated 237 SEZs in Africa, found in 38 countries (Farole, 2011; Fruman & Zeng, 2015). Mauritius introduced Africa’s most successful SEZs. In 1970, the country established its first SEZ to manufacture textiles and garments, food and beverages, and batteries for export. In the Mauritius export processing zone, companies are free to locate anywhere on the island. Mauritius’ 1970 Export Processing Act broke from the typical post-colonial African import substitution strategy to one of an export-led industrialisation strategy. Mauritius was more successful than many African countries in that it focused on export-led growth, and the SEZ was part of its export-led industrialisation strategy, not a standalone policy like in many African countries where SEZs have had pedestrian results (Bräutigam & Tang, 2010). Mauritius allowed duty-free imports of inputs meant to be used to make products for export. The country gave tax holidays to exporters. Exporters were given reduced rates on power, water and building materials – charging rates similar to international competitors. Domestic companies who were exporters received credit from banks at lower interest rates. The Mauritian government was careful to push labour-intensive production, to soak low-skilled unemployment. Cheaper credit was calibrated in such a way that companies did not shirk labour-intensive for capital-intensive production, because of the cheaper capital available. Mauritius’ priority was to get manufacturing going in the country – whether it was foreign owned or not – transferring knowledge, technology, and skills, and so, fostering positive spillovers to the rest of the economy. Mauritius placed no restrictions on foreign ownership of manufacturing companies – unlike many countries in post-colonial Africa. The country has been governed more pragmatically than almost all African countries, by spending more attention on building and maintaining reliable infrastructure. Mauritius, governed for most of its postcolonial history by coalitions, has been Africa’s most stable country – it has managed its public finances prudently and is amongst the least corrupt – which is an immediate attraction for investors (Gumede, 2022a). The country also prioritised making its public service competent. The SEZs were governed competently, honestly, and pragmatically. By 1988, employment in Mauritius’ SEZs was 85% of total manufacturing employment and 31% of total country employment. By the late 1980s, value add produced in SEZs made up 12% of GDP. More recently, Ghana, Ivory Coast, and Nigeria were successful in processing cocoa through SEZs, by partnering with Western companies to co-produce chocolate, the value-add of cocoa, for export, rather than exporting raw, unprocessed cocoa (Gumede, 2022a; Gumede, 2022b). The value-add chocolate creates more jobs, and earns more money, than the raw commodity cocoa. Morocco and Nigeria have also recently established successful SEZs in partnership with foreign investors to penetrate the European Union market. Rwanda has successfully established SEZs in partnership with industrial country companies to manufacture new products for exports. SEZs in South Africa: The Tshwane Automotive SEZ The ANC government has adopted the policy of SEZs as one of its pillar strategies to lift growth, boost investment, and increase job creation (Majola, 2023). The South African SEZ programme started with the Industrial Development Zone policy review in 2007 by the Department of Trade, Industry and Competition (the dtic). The SEZ Act stipulates that SEZs should have a feasibility study and business case. Most of South Africa’s SEZs are state operated. There are 11 designated SEZs, with nine fully operational. They have attracted 167 operational investors, with total private investment of R21,9 billion, and created almost 20 000 operational jobs. The SEZs include Saldanha Bay in the Western Cape, Dube Trade Port and Richards Bay in KwaZulu-Natal, East London and Coega in the Eastern Cape, Maluti-A-Phofung in the Free State, Musina Makhado in Limpopo, and Tshwane Automotive in Gauteng. The Tshwane Automotive SEZ launched in South Africa in 2019 appears to offer the prospect of being a model SEZ. It secured and was driven by a private sector anchor, Ford Motor Company. The company invested over R15 billion to produce the next generation of Ford Rangers. Ford, the national and provincial governments, and the City of Tshwane are co-governing the SEZ in a public-private partnership. Ford is represented on the management board of the entity, which includes representatives of the dtic, Gauteng Department of Economic Development, and the City of Tshwane. Staff from the Eastern Cape SEZ, Coega, were deployed to assist in the establishment of the Tshwane Automotive SEZ. This is one of the rare occasions where all spheres of government are involved in a governing partnership with the private sector. The Tshwane Automotive SEZ was co-designed from the start with Ford and has been given clean audits since its inception. The government has spent R2 billion on the project, with material inputs for the production aimed at 45%. The SEZ will, in cooperation with Transnet, develop a rail-to-port corridor for vehicle and components exports – which will include Tshwane and Gqeberha, in the Eastern Cape – the completion of which is a critical component that will determine the success of the SEZ. Figure 2: Special Economic Zones in South Africa Critical success factors for SEZs Before a country establishes SEZs it must put together a national industrialisation, economic growth, or long-term development plan (Aggarwal, 2008; IFC, 2016; ILO, 1988; Ishida, 2009; Jayanthakumaran, 2003). Such a plan must be based on an analysis of the state of the country’s economy, its development needs, and its human capital. There must be an assessment of the comparative advantages – the resources – the country has, what it can do with domestic resources, capital, and skills, and what will need to be built with outside help. Related to this, there must be a comprehensive analysis of the country’s comparative position in the global economy, trade, and supply chains. A central pillar of any country’s industrialisation, growth and long-term development strategy is how to build local production capacity (Aggarwal, 2008; IFC, 2016; ILO, 1988; Ishida, 2009; Jayanthakumaran, 2003). Establishing SEZs, for example, could be a mechanism to build local production capacity through attracting foreign investors to the SEZs and then getting them to upgrade local production capacity, by partnering, transferring technology, skills and knowledge, and sourcing inputs from local firms. There must be clear reasons for the establishment of SEZs, including how they fit into the national industrialisation, development, or long-term country economic growth plan (Gumede, 2022a; Gumede, 2022b). For example, if the intention is to attract foreign direct investment – which the country cannot do through traditional methods – the objective of attracting investment through the SEZs must be integrated into the country’s economic growth plan. There must be a business case for SEZs (Zeng, 2017), meaning there needs to be a global demand and a market for the products manufactured in the SEZs. SEZs must be embedded in the comparative advantage of the country. They cannot be established based on political, ideological, and interest-group considerations. It is crucial that SEZs form part of a country’s national long-term development or industrialisation plan, rather than operating as standalone job creation exercises. Once the business case for SEZs has been made, there must be an assessment of the implications of establishing them for existing businesses, institutions, and policies. After this, SEZ laws, policies, and supporting and governing institutions will have to be created. Well-thought out, pragmatic and credible laws, regulations, and institutional frameworks are crucial to govern SEZs. Governments must implement these consistently, honestly, and competently to foster investor, market, and society confidence that SEZs are not simply going to be another avenue for corruption, self-enrichment, and failure (Gumede 2022a; Gumede 2022b). The business environment must be conducive, efficient, and friendly. The costs of doing business – registration, logistics and customs – should be conducive to companies setting up. The public infrastructure – power, rail, and water – for SEZs must be working, reliable, and cost effective. Poor, unreliable or lack of infrastructure is a significant factor increasing the costs of doing business, global pricing competitiveness of products manufactured and of labour utilisation. Sound infrastructure is a vital competitive advantage for investors to set up shop in an SEZ – without it, it makes no sense. SEZs must also be linked to the supply chains of local industry (Jayanthakumaran, 2003; Johansson & Nilsson, 1997; Cirera & Lakshman, 2014; Litwack & Qian, 1998; Rhee et al, 1990; Rodrik, 2004; Zeng, 2017; UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). Local firms must provide the inputs, material, and services to the companies in the SEZs. If local firms do not have the capacity to do so, it will be crucial for governments to also provide them with assistance, incentives, and rebates to enable them to link into the supply chains of the SEZ firms. Doing this considerably maximises the positive spillover effect of SEZs. South Korea, Taiwan, and Singapore, for example, provide tax rebates, technical assistance, and infrastructure subsidies for local companies to their SEZs, to foster backwards linkages between SEZ companies and local ones. In addition, there must be a clear strategy of how local firms will be linked to the supply chains of the global firms in the SEZs (UNCTAD, 2019; UN ESCAP, 2019; UNIDO, 2015). Many global firms buy more than half of their inputs from other firms and outsource their manufacturing to other smaller firms. In such cases they only retain design, marketing, and research and development functions. It is important that, as part of the industrialisation strategy, a country encourages global firms attracted to the SEZs to source their inputs locally. And if local companies do not have the capacity to produce inputs for global companies, the SEZ strategy must outline how the capacity of local firms could be built up with the support of foreign investors. This would usually involve incentives being given to foreign players to build the capacity of local suppliers through transferring skills, technology, and providing financial support, where necessary. Governments must actively intervene to overcome market failures in the value chains linking local suppliers to that of international investors (Jayanthakumaran, 2003). For example, local suppliers may not know about the opportunities available to produce inputs for international companies. At the same time, the international companies may not know of the existence of local companies with the capacity to provide inputs for their products. In some cases, the inputs of local companies may be of too poor a standard or too costly for global firms. Government SEZ policy must then provide tools to help local firms to produce quality inputs at affordable prices for global investors. Also, in many cases developing country hosts of SEZs employ predominantly unskilled citizens because educational institutions are weak, ineffective, and under-resourced. The SEZs can be a catalyst to establish new training institutions, research, and development centres, and to upgrade existing ones. There must be clear monitoring, evaluation, and assessment mechanisms to ensure that SEZs are on track to meet their stated objectives (Gumede 2022a; Gumede 2022b). There must be benchmarking of SEZs against comparable successful ones elsewhere, and mechanisms need to be in place to intervene if they are in danger of veering off course. Those managing SEZs must be held accountable for delivering on the stated objectives of the entities. China, for example, in 1996 issued an official administrative decree for the compulsory regular evaluation of SEZ performance: SEZs that are poorly managed, not meeting their development targets, and growing too slowly lose their SEZ status. Chinese SEZs are evaluated based on several performance indicators, including knowledge creation and technological innovation – which are measured based on how much the education level of employees has been uplifted – R&D expenditure, the number of R&D institutions and technology innovation incubators established. Another performance indicator is the level of industrial upgrading and how structural optimisation capabilities have been boosted, which are measured by the number of new high-tech companies created, the number of services firms established, the number of intellectual property registrations, and the number of listed companies attracted to the SEZ. The SEZ performance in China is also measured based on how local companies developed in the SEZs penetrate international markets and fare in global competition, by the ratio of their employees who have received education abroad, and the number of intellectual property registrations lodged abroad (Asian Development Bank, 2007). The Chinese SEZ performance is also measured in relation to companies’ sustainable development capacity increases, by way of looking at the number of employees with master’s and doctoral degrees, the increases in taxable revenues, the growth rate of the companies, and the amount of new investment undertaken. SEZs could be fully government or business owned or could be public-private arrangements. In developing countries, the SEZs that have been fully government owned have mostly failed – as all the governance failures of the public sector, such as corruption, incompetence and red tape are also repeated in the SEZs, making them unviable. Public-private arrangements, in which the private sector co-govern and co-manage, have generally been the most successful. An effective, competent, and pragmatic management structure is crucial in managing an SEZ, and sound operational management skills are vital to its success. Many SEZs in African countries and in South Africa fail from the same lack of implementation and execution management capacity found in their public sectors – especially if the same incompetent public sector managers are operating the SEZs. It is also important that the SEZs’ good infrastructure development is from time to time transplanted to the wider region in which they are situated. This means that the infrastructure built for the SEZs must be part of an integrated public infrastructure development programme, whereby the SEZs’ public infrastructure investment would be the anchor of broader infrastructure expansion. Another point is that SEZs are often giant industrial structures that could damage the environment significantly. Therefore, the construction and management of SEZs must be done in such a way that it protects the environment, which many first generation SEZs neglected. Many are now trying to clawback environmental destruction in the wake of mass industrialisation that took place without taking the environment into account. It is very important that SEZ investors be required to report on environmental, sustainability and governance (ESG) performance. Many of the first generation SEZs’ construction also rarely consulted with local communities, civil society, and interest groups. It is essential that new SEZs do not repeat this mistake. If a site chosen to construct the SEZ involves uprooting local communities, acquiring their land and property, the process must be done in consultation with them, fairly and compassionately. Consultations of local communities, civil groups and interest groups are also essential in identifying the local comparative advantages and to link the SEZ investor activities with local input, material, and services – and so, crucial to maximising the positive spillover effect of the SEZs. Why SEZs have failed in many African countries Some SEZs in African countries have failed for the same reasons that development has failed in these countries (Farole, 2011; Fruman & Zeng, 2015). These reasons include SEZs not being integrated as part of a national growth, industrialisation, or long-term development strategy. SEZs are often set up for ad hoc policy objectives, such as only job creation or only attracting foreign investment. In Africa, only Mauritius, Rwanda, and Morocco made SEZs part of their national development strategies. In many African countries, SEZs are often set up for ideological, patronage, and corrupt reasons – and without making a business case. In many cases African governments established SEZs without having anchor private sector investors, with the exception of Mauritius, who was successful with its SEZs in developing a processed sugar export industry because the government partnered with European processing companies. African SEZs have not prioritised linking industries to global value chains (Jayanthakumaran, 2003). They also have not prioritised using SEZs to develop new industries for export. Neither have African countries used SEZs to add value to the primary commodities they export, or to upgrade their countries’ skills, industrial and technology bases. Projects are often not decided based on a business case, but rather on which company gives the largest kickback. A case in point, the CEO of South Africa’s Dube Port SEZ was suspended because of alleged corruption. Many African and South African SEZs are not internationally competitive – and are economically non-viable. To add insult to injury, the public sector governance failures – such as incompetence, corruption, and inefficiency – that often undermine development, delivery and efficiency in South Africa and African countries, are often replicated in SEZs. These problems have stymied SEZs and continue to do so. The legal, regulatory, and institutional structures of SEZs are often lacking or poorly defined – open to different interpretations or not consistently implemented. Furthermore, in some cases, although national governments decree SEZs, they in many instances do not give them the financial, infrastructure or political support they need. New governments, whether national or provincial, often withdraw support for SEZs established by their predecessors. Furthermore, SEZs in African countries often take a long time to put legal, regulatory, and institutional structures in place – and sometimes even longer to operationalise. Incentives are regularly either uncompetitive or overgenerous, undermining local industry outside the SEZs. Business procedures are slowed down by red tape, and special customs and tax are incoherently applied. Governments often do not have an adequate understanding of the requirements of businesses they want to invest in the SEZs. Many African and South African SEZs start without any anchor business investor, which means that the state is the anchor or biggest investor. In South Africa, the most successful SEZ is the Tshwane SEZ, which started with an anchor investor, the Ford company. Public infrastructure in African and South African SEZs is often as bad as in other parts of South Africa, with the supply of power, water, rail, roads, ports, and internet frequently not consistent. This makes it unproductive for investors to set up in SEZs – as the cost of infrastructure is a determining factor. In South Africa, and in many African countries, the governance management structures of SEZs are in many instances run solely by the state – and the corruption, incompetence, and mismanagement that is found there is oftentimes replicated in the SEZs. One of the reasons for the success of the Tshwane SEZ has been the partnership between the government and the private sector, where both co-govern the management structure. Many African and South African SEZs are not linked to their domestic economies, but operate largely as enclaves, disconnected from the national economy and local businesses (Litwack & Qian, 1998). Investors in SEZs are also insufficiently linked to local suppliers. And there are for the most part no special efforts to strengthen the capacity of local suppliers who may not have the capacity to deliver inputs to foreign companies in the SEZs. For another, SEZs also often do not integrate primary, secondary, and tertiary industries into the investor supply chain. Unlike in China, Singapore, or Taiwan, African and South African SEZs regularly do not integrate the boosting of research and development into the industrial value chains of companies in the SEZs (Zeng, 2017). The technical learning, knowledge transfer, and industrial upgrading is therefore not as effective as it has been in many Chinese, South Korean, or Singaporean SEZs. This means that the positive spillover effects of SEZs are absent or minimised. Many African and South African SEZs have faced opposition because they were constructed on sites where local residents had to be forced off their land, moved out of their homes, and their ancestral and historical sites disturbed. This has led to local communities often being hostile to SEZs in their areas. For example, communities opposed the construction of the Makhado, in Limpopo, and Dube Port, in KwaZulu-Natal, SEZs over allegations that their land rights had been trampled on. It is therefore crucial that land, property, and historically sensitive site disputes with local communities over the location of SEZs are resolved in a participatory manner. More importantly, SEZs must not be located on sites where it involves displacing communities, expropriating their property, and desecrating their historical sites. SEZs: Policy lessons for South Africa There has to be a solid business case for creating an SEZ. However, many of South Africa’s SEZs have been established without a credible business case. In 2001, the government established the Coega Industrial Development Zone in Gqeberha to create an integrated steel producing hub. The steel hub was not based on a business case that looked at global demand over the coming years. Not surprisingly, the government struggled to attract initial anchor business investors. The business case for the Musina Makhado SEZ in Limpopo is also not clear. The Musina Makhado SEZ is supposed to be an energy metallurgical cluster centred around a coal cluster, which consists of 20 interdependent industrial plants, including ferrochrome, ferromanganese, stainless steel, high manganese steel and vanadium steel, thermal, coking, coal washery and lime, and cement plants. The Limpopo provincial government said 11 memorandums of understanding have been signed with the Chinese government for investment of around US$1.1 billion. The government said 70% of what would be produced will be exported to China. But there is a real danger that the Musina Makhado SEZ may not align to global demand, so crucial to the success of any SEZ. In September 2021, China’s President Xi Jinping (Volcovici, Brunnstrom & Nichols, 2021) told the United Nations General Assembly that China will not build any new coal-fired power projects overseas, in support of increasing its green and low-carbon energy footprint in developing countries – which raised questions around building a coal cluster SEZ in Limpopo based on exports to China. The South African government often takes a long time to put legal, regulatory, and institutional structures in place for SEZs – and sometimes even longer to operationalise. When finally in operation, business procedures are slowed down by red tape, and special customs and tax are incoherently applied. In comparison, the Hamriyah Free Zone in Sharjah, in the United Arab Emirates could grant a license to establish a business within 24 hours of submitting all the required documents. The problem is that South African national, provincial or city governments often do not have an adequate understanding of the requirements of businesses they want to invest in the SEZ. The government services provided for SEZs are also frequently not tailored for the investors they want to attract. Then Trade and Industry Minister Rob Davies announced the formation of the Musina Makhado SEZ in 2017. However, the project has yet to get off the ground. In March 2021, the Limpopo Economic Development and Tourism Department temporarily stopped the project, saying its environmental impact assessment was “insufficient”. The project was also deemed not to have widely consulted with local communities, traditional authorities, and farmers. Countries face heavy competition for foreign investment, which can go anywhere in the world. This means countries cannot afford to give the same or a lesser value proposition to competitor countries. Despite this, incentives to attract private sector investors in South Africa are often uncompetitive. South Africa’s special economic zone tax incentive was introduced into the Income Tax Act, but it is overly bureaucratic compared to other countries’ SEZ tax incentives – for example, to qualify, the Minister of Trade and Industry and Minister of Finance must approve. Qualified companies can get a reduced corporate tax rate of 15% instead of the current 28% rate (SARS, 2018). Furthermore, companies could get an accelerated depreciation allowance of 10% on cost of any new and unused buildings or improvement owned by the qualifying company (SARS, 2018). Morocco, in comparison, has seven Special Economic Zones, with no corporate taxes for the first five years and significantly reduced rates thereafter (Böhmer, 2011). In Morocco, companies have exemption from building and equipment tax for the first 15 years, and goods entering or leaving the SEZ are not subject to laws on foreign exchange. Companies are also exempted from dividends and share taxes when paid to non-residents and a low tax rate of 7.5% if they are paid to locals. Morocco has built a successful aeronautics industry through attracting global aeronautics players to manufacture for export in the country – with the export industry now accounting for US$2 billion in export revenues. It is critical that SEZ industries are linked to the local enterprises – through market opportunities, access to finance, technology, and training (Rifaoui, 2021). Morocco has focused on building full industry ecosystems in the SEZs, using the SEZs to develop an export manufacturing sector in very specific areas. The country has, importantly, ensured that all the firms in the SEZs are industrially interconnected, linked to local players, and the products linked to global supply chains. In South Africa, Coega, after a slow start, has increasingly fostered linkages with local SMMEs. During the 2015-2020 period, there was a 35% SMME procurement participation rate (Coega, 2020). The Hamriyah Free Zone in Sharjah, in the United Arab Emirates, incorporates fiscal incentives, which include complete exemption from taxes, customs and commercial levies; and financial incentives, which include low rents and subsidised energy (Böhmer, 2011). Many global firms want infrastructure incentives to invest in SEZs (Rodríguez-Pose et al, 2022). South Africa not only generally does not offer generous infrastructure incentives, but the country’s infrastructure – power, rail, and ports – is also deteriorating, which is actually a disincentive to attract investors for local SEZs. The success so far of the Tshwane SEZ is instructive for other SEZs in South Africa. The Tshwane Automotive SEZ launched in 2019 was initiated by government securing a private sector anchor investor first – the Ford Motor Company – rather than government being the anchor investor. The Tshwane SEZ is co-governed in a genuine public-private partnership. Most SEZs in South Africa have been state-led and started without a private sector anchor investor. In the Tshwane SEZ, Ford, the national and provincial governments, and the City of Tshwane have been co-governing the SEZ in a public-private partnership from the start. Ford is represented on the management board of the entity, which includes representatives of the dtic, Gauteng Department of Economic Development, and the City of Tshwane. The SEZ has been given clean audits since its inception, and the government has spent R2 billion on the project. In South Africa, SEZs have not been integrated into a long-term development plan, industrialisation, or growth plan. Such a plan must be based on an analysis of the state of the country’s economy, its development needs, and its human capital. Related to this, there has to be a comprehensive analysis of the country’s comparative position in the global economy, trade, and supply chains. In fact, most of the SEZs in South Africa have been set up for ad hoc policy objectives, either by national or provincial governments, such as only job creation or only attracting foreign investment. Many of South Africa’s SEZs operate largely as enclaves, disconnected from the national economy and local businesses. Investors in SEZs are insufficiently linked to local suppliers. There are often no special efforts to strengthen the capacity of local suppliers who may not have the capacity to deliver inputs to foreign companies in the SEZs. For another, SEZs also often do not integrate primary, secondary, and tertiary industries into the investor supply chain. SEZs have also not been able to effectively upgrade South Africa’s skills, industrial and technology bases. Unlike in China, Singapore, or Taiwan, African SEZs also often do not integrate the boosting of research and development into the industrial value chains of companies in the SEZs. The technical learning, knowledge transfer and industrial upgrading in South African SEZs has therefore not been as effective as it has been in many Chinese, South Korean or Singaporean SEZs. This means that the positive spillover effects of SEZs are absent. The problem for South Africa is that SEZs have not delivered the volume of export manufacturing, value add production or employment as expected. Neva Makgetla writes that national government transfers to SEZs amounted to R1.1 billion in 2020-2021, from R600 million in 2013-2014, and after a peak of R1.7 billion in 2017-2018. However, Makgetla rightly says that these figures excluded provincial transfers, which for example in the Eastern Cape ran up to R500 million a year (Makgetla, 2021). According to the dtic figures, in 2021, Coega accounted for half of the private investment to SEZs, the East London IDZ accounted for 20% and the Dube Trade Port for 10% (dtic, 2021; Makgetla, 2021). Over the 2013 to 2019 period, manufacturing employment dropped by 3.7% and valued added manufacturing only rose 0.7% (Makgetla, 2021). Many of South Africa’s SEZs have frequently faced opposition because they were constructed on sites where local residents were forced off their land; or they were constructed without being sensitive to the environment (Buthelezi, 2022). This has often caused the SEZs to face community, court, and civil society challenges – making it difficult for them to get off the ground. There really needs to be greater consultation and involvement of local communities and environmental safeguards when sites for SEZs are identified. Conclusion The location of SEZs is no longer a comparative advantage, which means that SEZs will have to be internationally competitive. SEZs can only be successful and competitive if they are a well-thought-out part of a national development, growth, and industrial plan. There must be a business case for SEZs, based on the country’s comparative advantages, and they must be internationally and locally competitive. They have to be governed competently, honestly, and according to consistently implemented laws. SEZs have to be closely monitored, benchmarked, and have clear goals. They must be held accountable for their performance, and if they fail, they may have to in some cases be reduced as SEZs. They must also operate in ways that safeguard the environment, use green technology, and uphold human rights. SEZs must resolve Africa’s industrialisation challenges, including the inability since colonialism and apartheid to link African products to global value chains. In addition, Africa has not only struggled to add value to its primary commodities, but has also struggled to build manufacturing, diversify product offerings, and produce export industries. Africa has been unable to secure new technology, knowledge, and skills. The reality is that unless SEZs can help African countries accomplish all these important tasks, there is no business case to establish them. References Adu-Gyamfi, R., Asongu, S.A., Sonto Mmusi, T., Wamalwa, H. & Mangori, M. 2020. A Comparative Study of Export Processing Zones in the Wake of Sustainable Development Goals: Cases of Botswana, Kenya, Tanzania and Zimbabwe, Research Africa Network, WP/20/025. [Online] Available at: https://ssrn.com/abstract=3606931 [accessed: 11 December 2023]. Africa Free Zones Organisation. N.d. African Economic Zones Outlook. [Online] Available at: https://www.africaeconomiczones.com/wp-content/uploads/2020/03/African-Economic-Zones-Outlook-1.pdf [accessed: 11 December 2023]. Aggarwal, A., Hoppe, M. & Walkenhorst, P. 2008. Special Economic Zones in South Asia: Industrial Islands or Vehicles for Diversification? Working Paper, International Trade Department, the World Bank, Washington, DC. Altbeker, A., Visser, R., & Bulterman, L. 2021. What If South Africa Had a Special Economic Zone That Was Actually Special? [Online] Available at: https://www.cde.org.za/wp-content/uploads/2021/05/What-if-South-Africa-had-a-special-economic-zone-that-was-actually-special-1.pdf (accessed: 2 July 2023). Asian Development Bank. 2007. Special Economic Zones and Competitiveness: A Case Study of Shenzhen, China, PRM (Pakistan Resident Mission) Policy Note. Barceló, M. 2005. 22@ Barcelona: A New District for the Creative Economy, In: Waikeen Ng and Judith Ryser (eds), Making Spaces for the Creative Economy. Battaglia, A., & Tremblay, D.G. 2012. 22@ and the Innovation District in Barcelona and Montreal: a process of clustering development between urban regeneration and economic competitiveness, Urban Studies Research, 6. Belussi, F., & Sammarra, A. 2009. Business networks in clusters and industrial districts: the governance of the global value chain. UK: Routledge. Bobos-Radu, D. 2021. Angola Introduces Free Trade Zones Act. [Online] Available at: https://www.internationaltaxreview.com/article/2a6a8gff5n2hu8kglio74/angola-introduces-free-trade-zones-act (accessed: 2 August 2023). Böhmer, A. 2011. Key lessons from selected economic zones in the MENA region, MENA-OECD Investment Programme, First Meeting of the Working Group on Investment Zones in Iraq, Amman. Bräutigam, D. A., & X. Tang. 2010. China’s Investment in Africa’s Special Economic Zones. Washington, DC: World Bank. Buthelezi, L. 2022. Limpopo dismisses activists’ appeal against one of the biggest special economic zones in SA. [Online] Available at: https://www.news24.com/fin24/economy/limpopo-dismisses-activists-appeal-against-one-of-the-biggest-special-economic-zones-in-sa-20220709 [accessed: 11 December 2023]. Cirera, X. & Lakshman, R. 2014. The impact of export processing zones on employment, wages and labour conditions in developing countries, Systematic Review, Journal of Development Effectiveness, 9(3): 344–360. Côté, R. P., & Cohen-Rosenthal, E. 1998. Designing eco-industrial parks: a synthesis of some experiences, Journal of Cleaner Production, 6(3): 181-188. Creskoff, S., & Walkenhorst, P. 2009. Implications of WTO Disciplines for Special Economic Zones in Developing Countries. Washington: World Bank. Da Cruz, D.M. 2020. Investing in Mozambique—Special Economic Zones and Industrial Free Zones. [Online] Available at: https://furtherafrica.com/2020/07/27/investing-in-mozambique-special-economic-zones-and-industrial-free-zones/ [accessed: 3 August 2023]. Department of Trade, Industry and Competition (the dtic). 2021. Special Economic Zones Programme: Progress on the Implementation. [Online] Available at: https://static.pmg.org.za/210317SEZ_Implementation.pdf (accessed: 5 August 2023). Dube, C., Matsika, W., & Chiwunze, G. 2020. Special Economic Zones in Southern Africa: Is Success Influenced by Design Attributes? WIDER Working Paper, 61. Eastern Cape Provincial Treasury. 2020. Eastern Cape: Estimates of Public Entities Revenue & Expenditure 2020/21. [Online] Available at: https://www.ectreasury.gov.za/modules/content/files/budget/Budget%20Information/Estimates%20of%20Provincial%20revenue%20expenditure/Main%20Budget/2020/ECPT%20Estimates%20of%20Provincial%20Revenue%20&%20Expenditure%202020%2021.pdf (accessed: 2 August 2023). Farole, T. 2011. Special Economic Zones in Africa: Comparing Performance and Learning from Global Experience. Washington, DC: World Bank Farole, T. & Akinci, G. 2011. Special Economic Zones: Progress, Emerging Challenges, and Future Directions. Washington, DC: World Bank. Foreign Investment Advisory Service (FIAS). 2008. Special Economic Zones: Performance, Lessons Learned, and Implications for Zone Development. Washington, DC: World Bank. Frick, S., Rodríguez-Pose, A. & Wong, M. 2018. Towards Economically Dynamic Special Economic Zones in Emerging Countries, Papers in Evolutionary Economic Geography, 18.16. Fruman, C. & Zeng, D.Z. 2015. How to Make Zones Work Better in Africa? [Online] Available at: https://blogs.worldbank.org/psd/how-make-zones-work-better-africa [accessed: 11 December 2023]. Ge, W. 1999. Special Economic Zones and the Opening of the Chinese Economy: Some Lessons for Economic Liberalization, World Development, 27(7): 1267–85. Gumede, W. 2022a. Dysfunctional SEZs are a waste of public resources. [Online] Available at: https://www.businesslive.co.za/bd/opinion/2022-11-09-william-gumede-dysfunctional-sezs-are-a-waste-of-public-resources/ [accessed: 11 December 2023]. Gumede, W. 2022b. Trade and Development: A special focus on how SEZs can lead Africa to industrial and economic growth, ANC Business Update, 25: 18-25. Hamilton, C., & Svensson, L.O. 1982. On the Welfare Effects of Duty-Free Zone, Journal of International Economics, 13:45-64. International Finance Corporation (IFC). 2016. The World Bank Group’s Experiences with SEZ and Way Forward: Operational Note, World Bank Group, Washington DC. International Labour Organization (ILO) & United Nations Centre on Transnational Corporations. 1988. Economic and social effects of multinational enterprises in export processing zones. Geneva: International Labour Office. Ishida, M. 2009. Special economic zones and economic corridors, ERIA Discussion Paper Series, ERIA-DP-2009-16. Jayanthakumaran, K. 2003. Benefit-Cost Appraisals of Export Processing Zones: A Survey of the Literature, Development Policy Review, 21(1): 51–65. Jenkins, M., et al. 1998. Export Processing Zones in Latin America, Harvard Institute for International Development, Development Discussion Paper, 646. Johansson, H., & Nilsson, L. 1997. Export Process Zone as Catalysts, World Development, 25(12): 2115-28. Karambakuwa, R.T., Ncwadi, R.M., Matekenya, W., Jeke, L., & Mishi, S. 2020. Special Economic Zones and Transnational Zones as Tools for Southern Africa’s Growth: Lessons from International Best Practices, WIDER Working Paper, 2020/170. Khaleej Times. 2019. Dubai Launches Free Economic, Creative Zones Universities. [Online] Available at: https://www.edarabia.com/dubai-launches-free-economic-creative-zones-universities/ [accessed: 11 December 2023]. Koh, W. T. 2006. Singapore’s transition to innovation‐based economic growth: infrastructure, institutions, and government's role, R&D Management, 36(2): 143-160. Lall, S. 2000. Technological Change and Industrialization in the Asian Newly Industrializing Economies, Technological Learning and Economic Development: The Experience of the Asian NIEs. UK: Cambridge University Press. Lin, J.Y. & Wang, Y. 2014. China-Africa Cooperation in Structural Transformation: Ideas, Opportunities and Finances, WIDER Working Paper, 2014/046. Litwack, J. M., & Qian, Y. 1998. Balanced or unbalanced development: special economic zones as catalysts for transition, Journal of Comparative Economics, 26(1): 117-141. Majola, F. 2023. New approach to development of special economic zones. [Online] Available at: https://www.businesslive.co.za/bd/opinion/2023-02-21-fikile-majola-new-approach-to-development-of-special-economic-zones/ [accessed: 11 December 2023]. Makgetla, N. 2021. Learning from experience: Special Economic Zones in Southern Africa, WIDER Working Paper, 2021/124. National Assembly Select Committee. 2021. Report of the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour on a Virtual Engagement with National, Provincial and Local Government on Special Economic Zones and Industrial Parks on Realizing Government Policy Outcomes in Respect of Investments, Economic Growth and Job Creation at Provincial and Local Government Level. [Online] Available at: https://pmg.org.za/tabled-committee-report/4597/ [accessed: 3 August 2023]. National Treasury. 2020. Explanatory Memorandum on the Taxation Laws Amendment Bill, 2020. [Online] Available at: https://www.treasury.gov.za/legislation/acts/2020/Explanatory%20Memorandum%20on%20the%202020%20TLAB.pdf (accessed: 3 August 2023). National Treasury. 2021. Estimates of National Expenditure. Pretoria: National Treasury of South Africa. Phiri, M., & Manchishi, S. 2020. Special Economic Zones in Southern Africa: White Elephants or Latent Drivers of Growth and Employment? The Case of Zambia and South Africa, WIDER Working Paper, 2020/160. Porter, M. E. 1990. The Competitive Advantage of Nations, Harvard Business Review, 68(2): 73-93. Rhee, Y.W., Katterbach, K. & White, J. 1990. Free Trade Zones in Export Strategies, Industry Development Division, Industry Series Paper, 36. Rifaoui, A. 2021. Special Economic Zones in Africa (SEZs): Impact, Efforts and Recommendations. [Online] Available at: https://infomineo.com/sustainable-development/special-economic-zones-in-africa-impact-efforts-and-recommendations/ [accessed: 11 December 2023]. Rodríguez-Pose, A., Bartalucci, F., Frick, S.A., Santos-Paulino, A.U. & Bolwijn, R. 2022. The challenge of developing special economic zones in Africa: Evidence and lessons learnt, Policy & Practice, 14(2): 456-481. Rodrik, D. 2004. Rethinking Growth Policies in the Developing World. Massachusetts: Harvard University. Serlet, T. 2022. How universities lead to successful SEZs. [Online] Available at: https://www.fdiintelligence.com/content/opinion/how-universities-lead-to-successful-sezs-80777 [accessed: 11 December 2023]. Shen, X., & Xu, S. 2011. Shenzhen Special Economic Zone: A Policy Reform Incubator for Land Market Development in China. Washington, DC: World Bank. Sithole, L. 2023. This is how special economic zones can boost small businesses. [Online] Available at: https://www.businesslive.co.za/bd/opinion/2023-03-16-lethabo-sithole-this-is-how-special-economic-zones-can-boost-small-businesses/ [accessed: 11 December 2023]. Sklair, L. 1991. Problems of Socialist Development—The Significance of Shenzhen Special Economic Zone for China Open-Door Development Strategy, International Journal of Urban and Regional Research, 15(2): 197–215. South African Government. 2014. Special Economic Zones Act, 2014. Act No. 16 of 2014, Government Gazette, 587: 37664. South African Revenue Service (SARS). 2018. Brochure on the Special Economic Zone Tax Incentive. [Online] Available at: https://www.sars.gov.za/wp-content/uploads/Ops/Brochure/LAPD-IT-G28a-Brochure-on-the-Special-Economic-Zone-Tax-Incentive.pdf (accessed: 30 November 2023). The Economist. 2015. Special Economic Zones: Not So Special. [Online] Available at: https://www.economist.com/leaders/2015/04/04/not-so-special [accessed: 11 December 2023]. Tudor, T., Adam, E. & Bates, M. 2007. Drivers and limitations for the successful development and functioning of EIPs (eco-industrial parks): A literature review, Ecological Economics, 61(2): 199-207. UNCTAD. 2019. Special Economic Zones, Chapter IV, World Investment Report, 128-206. United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP). 2019. Success Factors and Policy Recommendations for SEZ Development, Operation and Management, National Workshop on Investment and SMEs in Kyrgyzstan, Bishkek, 22-25 October. United Nations Industrial Development Organisation (UNIDO). 2015. Economic Zones in the Asean: Industrial Parks, Special Economic Zones, Eco Industrial Parks, Innovation Districts as Strategies for Industrial Competitiveness. [Online] Available at: https://www.unido.org/sites/default/files/2015-08/UCO_Viet_Nam_Study_FINAL_0.pdf [accessed: 11 December 2023]. Vietnam News. 2015. Ministry urged to destroy ineffective IZs. [Online] Available at: http://bizhub.vn/news/ministry-urged-to-destroy-ineffective-izs_10330.html [accessed: 11 December 2023]. Volcovici,V., Brunnstrom, D. & Nichols, M. 2021. In climate pledge, Xi says China will not build new coal-fired power projects abroad. [Online] Available at: https://www.reuters.com/world/china/xi-says-china-aims-provide-2-bln-vaccine-doses-by-year-end-2021-09-21/ [accessed: 11 December 2023]. Warr, P. 1989. Export Processing Zones: The Economics of Enclave Manufacturing, World Bank Research Observer, 9(1): 65–88. Watson, P. L. 2001. Export Processing Zones: Has Africa Missed the Boat? Not Yet! Africa Region Working Paper Series, 17. White, J. 2011. Fostering Innovation in Developing Economies through SEZs, In Farole and Akinci (eds), Special Economic Zones: Progress, Emerging Challenges, and Future Directions. Wolman, H. 2014. Economic competitiveness, clusters, and cluster-based development, Urban Competitiveness and Innovation, 229. World Bank. N.d. Special Economic Zones: China’s Experience and Lessons Learned. Washington, DC: World Bank. World Bank. 2010. Chinese Investments in Special Economic Zones in Africa: Progress, Challenges, and Lessons Learned. Washington, DC: World Bank. Yeung, Y. M., Lee, J., & Kee, G. 2009. China’s special economic zones at 30, Eurasian Geography and Economics, 50(2): 222-240. Zeng, D.Z. 2012. China’s Special Economic Zones and Industrial Clusters: Success and Challenges, Lincoln Institute of Land Policy. Zeng, D.Z. 2017. Special Economic Zones: Lessons from the Global Experience, PEDL Synthesis Paper Series, 1. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 eight parties to the Multi-Party Charter invited a wide range of civil society organisations to get input as to what civil society expect from the Charter. This engagement was held on 28 November 2023 at the Birchwood Hotel in Boksburg. The Inclusive Society Institute (ISI) attended the meeting in order to gain a deeper understanding as to the objectives and policy approaches of the Charter. It was noted that the individual parties would continue to campaign independently, and that the Charter was in effect a pre-election coalition agreement. The Charter does not have its own set of policies, but have agreed a set of principles around which a government programme should be designed. The ISI will continue to monitor the developments within the Charter.

The Inclusive Society Institute (ISI) participated in the CiviNovis/School for Social Innovation/Konrad Adenauer Stiftung Masterclass on Coalition Governance, which was held at the Dutch Reformed Church Hall in Bellville Cape Town on 7 and 8 November 2023. The ISI was represented by its Chief Executive Officer, Daryl Swanepoel. The workshop entailed the garnering of a deeper understanding of the current state of affairs regarding coalitions in South Africa, case studies and group discussions. It also explored coalitions that count, that is a focus in ethical practices, and resilience through mindful compassion. It also considered future perspectives apropos coalitions in the country.