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Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town, 8001 South Africa All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of the their respective Board or Council members. Developmental fiscal and monetary policy By Prof William Gumede Associate Professor, and former Convener, Political Economy, School of Governance, University of the Witwatersrand; and former Senior Associate and Programme Director, Africa Asia Centre, School of Oriental and African Studies (SOAS), University of London; and author of South Africa in BRICS (Tafelberg) Abstract Developing countries often pursue persistent deficit spending which, over time, balloons into large national debts and sees the countries pay the price through rising levels of poverty, underdevelopment and financial instability. The result is that these countries pay the price in rising levels of poverty, underdevelopment and financial instability. This article examines the phenomena by considering lessons that can be learnt from selected international jurisdictions. It considers Japan, where the central bank adopted a strategy of reducing the volatility in the country’s currencies by building up large international reserves; Brazil, who in contrast prioritised growth rates to maintain support, which led to runaway inflation and budget deficits; Sweden, who maintained prudent monetary and fiscal policies to finance the welfare state; and Botswana, who’s prudent macroeconomic management reflects an African post-colonial exception. The lesson for the South African policy makers is that monetary policy is about balancing the competing objectives of economic policy: price stability, exchange rate stability and free capital mobility. Introduction Prudent macro-economic policy, especially the management of monetary, fiscal and public debt is more crucial in developing countries wanting to catch up to or surpass industrial countries in terms of development. In the postcolonial period many developing countries who genuinely pushed broad-based development fell short when they neglected fiscal and monetary discipline, undoing their development efforts. Unpacking the terms: “Fiscal policy” relates to the policy decisions on the levels of government spending, taxation and borrowing. Whereas “monetary policy” is the coordination of the supply of money in the economy to influence inflation, the value of the currency and employment. Many developing countries put little focus on curbing inflation, keeping exchange rates stable or managing public debt levels. Furthermore, they often allow large budget deficits, where expenses exceed revenue by huge margins. Milton Keynes in his General Theory made an argument for “functional finance”, the use of deficit spending to overcome “cyclical fluctuations in the economy” (Keynes, 1936). However, many developing countries by the 196os onwards pursued persistent deficit spending which over time ballooned into large national debts (Emenike et al, 2017). For example, by the 1960s many African governments had, on average, budget deficits of 30% of GDP. The Nigerian economist Bade Onimode writes that many African countries have, since independence from colonialism, experienced a “chronic balance of payments crisis” (Onimode, 2000). The economists John Healy and Mark Robinson say: “There was a fairly common pattern to African economic policy in the 1970s and early 1980s which included the following recurring features: the persistence of high and volatile public sector deficits, often financed from the banking system; failure to stabilise inflation, especially in the face of terms-of-trade shocks; lack of clear prioritisation of public expenditure and weak economic appraisal of investment together with overvalued exchange rates” (Healy & Robinson, 1992). Chronic balance of payments crises undermine development Many developing countries also mismanaged their balance of payments situations (Ocampo, 2016). The balance of payments being the record of all transactions between the residents, firms and government of a country and the rest of the world. There are three parts to this record: a current account, a capital account and an official financing or balancing account. The current account is the balance of trade, which includes both government and private sector payments and the earnings on foreign investments excluding payments made to foreign investors and cash transfers. Whereas the capital account is sales and transfers of contracts, ownership of fixed assets and patents. The financial account is the transfers of financial assets and liabilities between residents and non-residents, including banking flows – hot money, portfolio flows – debt and equity and foreign investment flows, and official reserves. Developing countries often struggle to manage their budget deficits, current accounts and their exchange rates. Setting developmental interest rates – which promote the outcomes set out in the national industrial or developmental plan, keeping inflation manageable and setting sustainable exchange rates are crucial for development. Moreover, public spending is often not disciplined and in many cases developing countries do not use taxes towards increased development. The result is that they pay the price in rising levels of poverty, underdevelopment and financial instability. Therefore, the challenge for many developing countries is “balancing the competing objectives of economic policy: price stability, exchange rate stability and free capital mobility” (Nassif et al, 2011; Williamson, 2008; UNCTAD, 2011; Rodrik, 2008). Furthermore, the Brazilian economist Luiz Carlos Bresser-Pereira points out how “the experience of the East Asian countries has demonstrated, keeping the budget deficit as well as the current account under control is a necessary condition for keeping the macroeconomic prices right and the macroeconomic aggregates balanced” (Bresser-Pereira, 2017). Naturally then, when developing countries pursue expansionary fiscal policies – whereby they increase public spending to stimulate aggregate demand in the economy – ill-discipline results in unchecked government spending, which may cause harm including rising inflation and crowding out private investment. Developing countries often increase public spending to levels where they end up increasing the budget deficits. The government spends more than it collects in revenue and grants, thereby running a budget deficit, resulting in macroeconomic imbalances. Unless the budget deficit is covered by private savings, it creates a current-account deficit withthe rest of the world, obliging the country to borrow to finance said deficit. If the government cannot finance the deficit by borrowing, pressure builds to finance it through depreciation of the national currency. Depreciation then leads to greater exports and, hence,reduces the current-account deficit. The problem with this is, firstly, that many developing countries export single commodities, with prices dependent on demand in buying countries. Secondly, depreciation may lead to inflation, which cuts purchasing power. Another issue is that developing countries often hold their currency at too high a rate for the state of the economy, meaning the country’s exports are more expensive than its imports. And during periods of low growth, an overvalued currency is bad for the economy. Brazil, for example, experienced overvaluation of its currency for most of the mid-1990s period. It has worsened now because many industrial country investors move their money to developing countries when interest rates in those countries are low, to seek higher investment returns. Then, when interest rates increase again or during times of economic and political uncertainty within those countries, the investors move their money out to avoid losses. Post-Second World War macroeconomic management success in Japan For a brief period following the Second World War, during the occupation of the country, the operations of the Bank of Japan (BOJ), the central bank, was suspended and a special military currency used in the country. The bank was restructured in 1949 and began to play its central developmental role in Japan’s post-war economic miracle. The BOJ operated with reasonable autonomy during the post-war period, although critics throughout have criticised it for being too independent (Horiuchi, 1993). Many East Asian developmental states have been successful in reducing the volatility in their currencies by building up large international reserves (Aizenman & Ito, 2014; Rodrik, 2008; UNCTAD, 2011). Many of these states, such as South Korea, Malaysia and Singapore, pegged their currencies to a basket of currencies. In the post-war period, Japan focused its monetary policy on promoting “export- and investments-led growth”, focussing determinedly on ever-diversified exports. A pillar of the BOJ’s monetary policy was called “window guidance”, in which the central bank gives credit quotas to commercial banks, which they must channel to specific industries prioritised by government as growth sectors (Cargill, Hutchison and Itō 1997; Werner 2005). The BOJ would directly communicate the industries that should get quicker loans, thereby directly influencing the activities of commercial banks. Japan’s Ministry of International Trade and Industry (MITI) was one of the key institutions in setting fiscal policy. MITI managed the allocations of foreign exchange to companies, with which they bought raw materials or equipment. Government subsidies to prioritised industries were also crucial to expand industrialisation. To secure foreign exchange, companies had to, in return, support the government’s export and investment-led strategy (Pham, 2017). Many Asian economies, more recently including China, have copied the Japanese monetary policy of “window guidance” as “an effective tool to control the total volume of credit to financial institutions” and to “regulate the growth rates of money and investment spending more easily” (Pham, 2017). In the two decades before the collapse, in 1971, of the Bretton Woods System of linking currencies to the value of gold, the Japanese currency was fixed at 360 yen to the US dollar. The collapse of the Bretton Woods System caused the Japanese currency to appreciate sharply. Japan then devaluated its currency, and in 1973, set a floating exchange rate with the mission to stabilise the exchange rate. In the immediate post-war period, Japan’s external current account had large deficits which were financed by US aid. The country also experienced hyper-inflation. “Monetary policy faced difficulty in pursuing two contradictory purposes at the same time, namely stimulating investments to restore supply capacity and depressing the hyper-inflation” (Suzuki, 2017). During the same period, Japan rolled out a massive infrastructure rehabilitation and expansion programme. In addition, the government had to make large payments in reparations for damage it inflicted during the war – both of which were financed by government bonds, underwritten by the Bank of Japan (BOJ). The government formed the Reconstruction Public Finance Corporation in 1947, underwritten by the BOJ, to issue bonds to state-owned entities for industrial rebuilding. Private businesses also expanded dramatically, borrowing from private banks to finance their expansion. The BOJ provided lending to private banks who in turn provided lending to private firms. Importantly, the country’s savings were channelled into investment projects (Hamada & Kasuya, 1992). The government provided subsidies to crucial sectors, called “priority production system” (Hamada & Kasuya, 1992). By 1948, such subsidies came to 24% of the country’s general account (Hamada & Kasuya, 1992). These subsidies were financed by the Bank of Japan and also increased inflation. The Japanese government had a Trade Financial Special Account which sold crucial imports at a much lower price than the international prices. This was subsidised by the BOJ. This also caused additional inflation. There were strong arguments for deficit budgeting – which was rejected In 1946, then Fiscal Minister Tanzan Ishibashi, in his budget speech, basing his argument on Keynes General Theory, argued: “In order to achieve the goal of resuming production there is no harm if government deficits occur. Since both capital stock and labour force were clearly underemployed, the problem was simply that bottleneck factors such as the lack of raw materials from overseas stood in the way” (Hamada & Kasuya, 1992). The government until the 1950s maintained a balanced of payments equilibrium, maintaining similar levels of investments abroad to foreign investment locally. During this period, infant industries became competitive. Japan, from the 195os to the 1970s, undervalued its currency in relation to the US dollar. Furthermore, throughout the post-Second World War period, Japan undervalued its currency to encourage export manufacturing. Then, from the 1970s, the focus became currency stability (Green, 1990). The government regularly intervened in the market to either buy or sell dollars to gain that stability. Furthermore, the government regulated capital flows (Hutchison, 1984; Suzuki, 1986). Japan’s current account was in surplus since 1968. The country accumulated large foreign reserves and the country’s citizens were encouraged to save. Until 1965, the Japanese government implemented a balanced budget principal. Then, in 1965, the Japanese economy experienced a recession. The government for the first time introduced an expansionary fiscal policy, financing a budget deficit with a national bond (Takagi, 2015). The government maintained price stability – targeting inflation at 5.5% per year. The export growth focus provided a surplus in the country’s balance of payments with the world, and foreign investment was introduced selectively in targeted industries. However, capital liberalisation, whereby foreign companies could enter unencumbered, was only introduced in 1973. From 1966 to 1973, the government financed a deficit on the capital accounts, through the issuing of a national construction bond. The government also built up foreign exchange reserves which, by the early 1990s, totalled over US$100bn – a record amount for the IMF (International Monetary Fund, N.d.). During the period leading up to 1990, Japan’s currency was knocked by three international crises. In 1971, the US withdrew from the Bretton Woods System which pegged the US dollar to the value of gold. This caused an appreciation in the yen, which had been under a fixed rate to the value of the US dollar. The government responded by depreciating the currency and adopting a free-floating currency exchange policy. During the first oil shock, in 1972, Japan’s balance of payments accounts declined. This put pressure on the value of the currency, and so, the government restricted capital outflows (Green, 1990). The first oil crisis in 1973 exposed the deficit financing through national bonds. All throughout Japan’s high growth period, the government used monetary policy as a counter cyclical tool to encourage growth, rather than fiscal policy (Funabashi, 1988; Ito, 1987 and 2003; Takagi, 2015). Another shock to the Japanese yen was the Plaza Accord and Louvre Accord of 1985-1987, which again appreciated the value of the dollar. Between 1980 and 1985, there was a dramatic appreciation of the dollar against the currencies of the major industrial countries – almost 50% against the Japanese yen. All as a result of the US Federal Reserve System fighting stagflation, which hounded the US dollar in the 1970s (Frankel, 2015). However, the intervention went belly-up when the dollar became overvalued (US Department of Treasury, 1983). In 1985 the Ministers of Finance and central bank Governors of the G5 countries – the US, Japan, Germany, France and the United Kingdom – signed the Plaza Accord, which agreed on a planned devaluation of the dollar, with the other countries coordinating their activities with that of the US central bank. By the time of the Plaza Accord the US economy was in recession, its current-account deficit was at 3.5% of GP and its exporters uncompetitive. The intervention helped to narrow the US trade deficit with major industrial countries. By 1987, the devaluation of the US dollar had now decreased the value of the dollar against the yen by 51%, and Japan had restrictions on imports. The appreciation of the yen forced the country to respond with an expansionary monetary policy. It increased the money supply, lowered interest rates and decreased the value of the yen – to increase aggregate demand, the total use of goods and services in the economy. However, this in turn caused an asset price bubble, deflation and low growth. The combination of these would become known in Japan as the Lost Decade (Obstfeld, 1990). In 1987, the US industrial country partners signed the Louvre Accord to stop the devaluation of the dollar. In a coordinated approach, the US would in 1988, reduce its deficit to 2.3% of GDP, cut interest rates and cut government spending by 1% (US Department of Treasury, 1983; Krugman, 1991). All four of Japan, Germany, France and the UK would cut interest rates, reduce public spending and taxes. Japan would reduce its trade surplus. Throughout the period, the Japanese government emphasised currency and price stability. The government maintained a low interest rate policy throughout the high growth phase and contained inflation. It also eschewed used tax increases to finance budgets and channeled savings to support targeted export manufacturing, infrastructure and housing. Lessons from Japan Independent central bank, the Bank of Japan (BOJ) Developmental monetary policy prioritised export- and investment-led growth Ministry of International Trade and Industry (MITI) set fiscal policy Monetary and fiscal aligned to prioritise export and investment-led growth Throughout Japan’s post-Second World War high growth period, monetary policy was used as a counter cyclical tool to encourage growth, rather than fiscal policy The BOJ provided lending to private banks who in turn provided lending to private firms Throughout the post-Second World War period, Japan undervalued its currency to encourage export manufacturing The government regulated capital flows Until 1965, the Japanese government implemented a balanced budget principle Only in 1965, when the economy was in recession, an expansionary fiscal policy was introduced, financing a budget deficit with a national bond The government maintained price stability throughout the postwar period, targeting inflation at 5.5% per year Capital liberalisation, whereby foreign companies could enter unencumbered, was only introduced in 1973 From the 1970s currency stability became the focus Persistent balance of payment crises undermined Brazil's post-Second World War development In Brazil, the military took power in 1964 and ruled until 1985. The military governments prioritized high growth rates to maintain support. The high initial growth rates – from 1960 to 1980, came through state investments in infrastructure, telecommunications, mining and atomic energy. It was dubbed the Brazilian Miracle. The high economic growth rates came with high inflation and large budget deficits. From 1981 to 1994, growth slowed down, and was accompanied with hyperinflation and large deficits (Ayres et al, 2018). Throughout the period from 1960 to 1994, Brazil’s central bank was not independent (Ayres et al, 2018). Brazil fell into a balance of payments crisis in early 1970s, as global demand for its commodities slumped because of slowdowns in industrial country economies buying its commodities (Ayres et al, 2018). The government pursued import substitution industrialisation, economic diversification and self-sufficiency. The import of products that were already locally produced was restricted. The costs of this conversion were paid by foreign loans. The plan was that over time a structure in the economy would materialise, whereby more local products would be produced for export, and the foreign earnings would pay for the accumulated debt. The Brazil government ran a large current account deficit. In 1973, the deficit was US$1.7bn and by 1980 it was US$12.8bn. Foreign debt became more expensive to repay because of higher interest rates charged by lenders. In the 1960s Brazil introduced what it called “indexation”, in which it tried to align prices, interest rates and wages, to past inflation levels, to keep inflation constant across the economy. This, in the absence of firm monetary policy, actually increased inflation (Ayres et al, 2018). By the mid-60s until the early 1970s, the government increased taxes to plug deficit holes, including introducing value added tax (VAT). Until 1964, Brazil had no official central bank. The Treasury implemented monetary policy through the Bank of Brazil, which was a state-owned bank, while at the same time being a commercial bank (Ayres et al, 2018). The government had in 1945 established a Superintendency of Money and Credit (SUMOC) committee, with powers over monetary policy. The Bank of Brazil had majority seats on the SUMOC, giving it a controlling say over monetary policy. In 1964, the government created the Central Bank of Brazil (CBB). At the same time the government restructured the SUMOC into a National Monetary Council (CMN), which oversaw the central bank. The Central Bank of Brazil has been nominally independent, however, in 1994 the bank was given formal independence, and put fully in charge of monetary policy (Ayres et al, 2018). By 1983 Brazil had the largest foreign debt of any country in the world – standing at US$92bn. The government responded by hiking interest rates to record levels, and Brazil’s terms of trade – the ratio between a country’s export prices and import prices – deteriorated by 10% between 1971 and 1979. The 1973 oil crisis, in which the price of oil spiked, hit the economy badly. In addition, the US ran up large budget deficits in the early 1970s, of US$200bn annually, which forced its main trading partners to increase interest rates. Developing countries such as Brazil with very high foreign debts struggled to pay interest on their debts because of the higher interest premiums. Worse, Brazil imported large numbers of products, from machinery, components and raw materials. Efforts to diversify local production of at least consumer goods were pedestrian. The government also repeatedly devaluated the currency, which increased inflation. Low growth, high inflation and high interest rates caused the collapse of many local companies. The second oil crisis in 1979 gave the Brazilian economy another knock, increasing the foreign debt, as interests on repayments of foreign loans rose further, lowering the terms of trade and worsening the balance of payments crisis. Until then, the early 1980s, the government maintained its strategy to lift growth. However, as the debt accumulated, the government changed tack to foster trade surpluses, by pushing exports, and using the income to pay off debt. The 1982 Mexican debt crisis had a further knock-on effect on the Brazilian economy. The International Monetary Fund and Western commercial banks put pressure on the government to introduce a structural adjustment programme, adopted by the country’s legislature in 1983, which included reducing inflation, cutting wage increases and privatisation of state-owned entities. In 1994, Fernando Henrique Cardoso was elected president, and introduced a stabilisation programme, the Real Plan, with a new currency. Monetary policy was tightened, the new currency was anchored to the US dollar, and inflation was reigned in. Lessons from Brazil Military took power in 1964, ruled until 1985 In 1945 a Superintendency of Money and Credit committee was established, with powers over monetary policy Until 1964, Brazil had no official central bank In 1964, the government created the Central Bank of Brazil Throughout 1960 to 1994, Brazil’s central bank was not independent Treasury implemented monetary policy through the Bank of Brazil, a state-owned bank, operating as a commercial bank Import substitution industrialisation strategy, a trade and economic policy focusing on replacing foreign imports with domestic production The military governments prioritised high growth rates to maintain support Initial growth rates – from 1960 to 1980 - came through state investments in infrastructure, telecommunications, mining and atomic energy. It was dubbed the Brazilian Miracle. The high economic growth rates came with high inflation and large budget deficits. From 1981 to 1994, growth slowed, accompanied with hyperinflation and even larger deficits Overvalued currency in early 1970s undermined export 1970s oil crises caused a trade imbalance Heavy borrowing increased the current-account deficit Current account deficit financed through foreign debt Expected import substitution industrialisation with exports rising over time, which was anticipated to result in trade surpluses, failed In 1983, the International Monetary Fund and Western commercial banks pressured Brazil into a structural adjustment programme, resulting in the reduction of inflation, the cutting of wage increases and the privatisation of state-owned entities. Prudent macroeconomic management under Sweden's Rehn-Meidner economic model Left of centre governments in industrial countries – such as Sweden, which was governed by the Social Democratic Party – maintained prudent monetary and fiscal policies to finance the welfare state (Braconier & Steinar, 1999; Calmfors, 1993; Calmfors et al, 2001; Erlandsen & Lundsgaard, 2007; Forslund and Krueger, 1997). In 1951, Swedish trade union economists Gosta Rehn and Rudolf Meidner, at the Swedish Trade Union Congress, designed what would be called the Rehn-Meidner economic model (Rehn, 1952, 1969, 1977, 1982 and 1987; Meidner, 1952 and 1988), which was based on high growth, low inflation, full employment and income equality (The Swedish Confederation of Trade Unions [LO], 1951). The model was based on a “third away” between Keynesian, central planning and neoclassical economics. After the Second World War until the end of the 1970s, the Swedish model was “able to combine a relatively fast rate of GDP growth with full employment, considerable economic security, and a rather equalitarian distribution of income” (Lindbeck, 1997: 1273). The Swedish economist, Assar Lindbeck, who chaired what became the Lindbeck Commission - an inquiry in 1993 into the reasons for Sweden’s economic decline in the late 1980s and early 1990s - listed seven crucial institutional elements of the Swedish “third way” model. These are according to Lindbeck (1997: 1274): “ (a) large public-sector spending and high taxes; (b) a stabilisation policy, to foster full employment, with an active labour market policy as a tool; (c) government intervention to influence aggregate saving, credit supply, and investment, as well as their allocation, by public sector saving, capital market regulations, taxes, and subsidies; (d) strong central government control of local governments; (e) centralised wage bargaining on a national level; and (f) centralised decision making in the private sector, where a small group of large firms dominates on the production side and where the holdings of financial assets, including shares, are highly concentrated in a few large institutions, banks, insurance companies, and investment firms; with (g) the centralised private sector system being combined with a strong free trade regime.” At the heart of the Swedish model was a growth policy, based on disciplined macroeconomics, with price stability, but still advocating for fair wages, through using an active labour market policy. Immediately after the Second World War, a number of Western European Social Democratic Parties implemented Keynesian policies, which were “counter-cyclical” fiscal policies, by reducing spending and raising taxes during boom times, and increasing spending and reducing taxes during downtimes (Beveridge, 1944). These governments pursued expansive macroeconomic policies. They used expansionary fiscal policy by using their budgets to increase spending or cut taxes; and expansionary monetary policy through expanding the money supply through lowering reserve requirements, lowering interest rates and lowering the currency. In the Swedish model, applied during the country’s golden growth period from the late 1940s to the late 1970s, the “expansionary macroeconomic policy measures are combined with selective fiscal measures and with regulation to conquer inflation” (Erixon, 2010). For example, the Swedish Social Democratic Party reduced possible rising inflation, current deficits and overvaluation of the currency that would result from expansionary policy, by “regulation, including informal incomes policy, and by extraordinary fiscal measures” to “moderate price and wage increases in the most overheated industries” (Erixon, 2010). The Swedish central bank, the Riksbank, had both functional and institutional independence, and was one of the agencies that were directly reporting to Parliament (Commission of Inquiry, 2007). The country has a National Debt Office, a public entity reporting to Parliament, which ensures that government borrows prudently. The government used restrictive fiscal policy, particularly indirect taxes to hold down inflation. The country introduced consumption taxes – taxing people when they spend money on goods and services, rather than on income or profits, and devaluated the currency in 1949. “Sweden met actual and expected deficits in the current account with a devaluation of the krona, not with deflationary macroeconomic policy measures” (Erixon, 2010). Sweden in the 1950s to the 1970s began to coordinate wage bargaining, to protect weak industries and to manage inflation (Nickell et al, 2005; Johannesson, 1981). Although the model envisaged wage increases linked to productivity, and wage restraint during tough times, underproductive firms would necessarily go under (Rehn, 1982). However, the argument was that new industries would be created simultaneously through investments in new more market-relevant industries, active labour policies, including continuous industrially relevant training and social welfare (Gowan & Viktorsson, 2017). Wages are determined centrally through collective bargaining. This often resulted in uncompetitive and low-productivity firms, that were unable to afford the agreed wages, to collapse. More productive firms secured comparatively lower wages “than they would have to pay in a ‘free’ labour market” (Ryner, 2003). In the Swedish model, during recessions, a countercyclical fiscal policy, reducing spending and raising taxes during boom times, and increasing spending and reducing taxes during downtimes, was still part of the macroeconomic arsenal. In the model, during a recession the temporary use of budget deficits, moderating wage increases and selective employment subsidies in weaker industries are practical options. To prevent inflation, the government used prudent public finance management. It pursued strict fiscal policy, focusing on generating budget surpluses. Uncompetitive companies with high costs and poor price structures struggled, whereas highly productive companies, with favourable cost and price structures were advantaged (Erixon, 2010). Through effective coordination of the economy, the government continually shifted employees from low-growth to high-growth sectors (Blanchflower et al, 1995). The government managed an active labour market policy: comprehensive industrial skills, training, education, life-long adult-education programmes to cushion the “losers” (Erixon, 2010). Full employment was seen as unemployment below 3%. A core part of the Swedish welfare state was universal education, health and pensions. The model also has a high degree of gender equality, including in the labour market. Private property rights and the freedom of companies to trade internationally were pillars of the model (Bergh, 2017). Progressive taxation, including that on property, funded many of the welfare programmes (Lindbeck, 1997). During the 1950s to the 1970s, Sweden extraordinarily for the country’s size, had large global engineering firms – SAAB, Ericsson, SKG, Electrolux, Volvo and others – which by the 1960s had accounted for 20% of the country’s total exports. In the early 1970s there were criticisms that wage constraints in profitable firms meant that massive profits went to a small circle of private company shareholders and owners. The Swedish Trade Union Confederation (LO), ally of the Social Democratic Party, proposed the establishment of a worker controlled, “wage-earner” funds, which would be funded through taxes. The proposal would give trade unions a direct say in the investment decisions of listed companies. Organised business saw it as a “collectivism of corporate ownership” (Gylfason, 2020). The Swedish government established commission in 1973, proposing employees become shareholders over time. This would be done through setting up sector-based wage-earner funds which would get a proportion of company profits through shares. These funds would be managed by employees. Proportions of the proceeds of the wage-earner funds would be reinvested in their companies, used to finance research and specialist management training for employees, to provide them with the skills to run businesses. However, the wage-earner fund proposals were not implemented – as it faced opposition from employer organisations (Gowan & Viktorsson, 2017). More importantly, the disagreement over the wage earner proposals would collapse the famous Swedish tripartite consensus model (Lindbeck, 1997). Sweden was also hit by the 1973 and 1979 oil crises. The Bretton Woods System of fixed exchange rates, with the US dollar’s value fixed to gold, was ended in 1971, essentially collapsing the fixed currency system (International Monetary Fund, 1972-810). In addition, Sweden struggled in the new conditions to stabilise the value of its currency. The rise of Japan and East Asian developmental states now also provided competition to Swedish global manufacturing. Furthermore, the global recessions sparked by the oil and currency crises meant diminished markets for Swedish products – the Swedish economy faced headwinds (Erixon, 2010). The Swedish Social Democratic Party lost power in the 1976 elections; and only returned to power in 1982. A limited form of wage-earner funds was established in 1984, funded through “excess” profit tax over a 7-year period, rather than through acquiring company shares (Gowan & Viktorsson, 2017). It was not employee managed. The Swedish Social Democratic Party lost power again in 1991, and the funds were privatised by the new government post-1992, after the Social Democratic Party were out of power again. In the post 1970s oil crisis period, Sweden, whether governed by the Social Democratic Party, or the centre-right coalitions that took power for periods thereafter, struggled to maintain Sweden as an open, competitive economy. And amid the global economic crises, together with increased competition from the rising East Asian economies, they battled to maintain the social benefits of the welfare state, (Bergh, 2017). Until the early 1990s, successive governments tried to maintain the economy’s competitiveness through currency devaluations (Lindbeck, 1997). The policy of high marginal taxes to fund the welfare system, saw many high net individuals seeking ways to avoid tax; and at the same time generous welfare benefits discouraged many who could work from seeking work (Bergh, 2017). The support to companies to protect jobs often led to the cushioning of uncompetitive businesses. Rather than innovate to stay competitive, many companies sought government bailouts. Furthermore, wages increasingly rose above productivity increases, causing rising inflation. “Repeated currency devaluations led to both a lower living standard and investment-sapping uncertainty” (Bergh, 2017). Between 1991 and 1993, struck by the most severe financial crisis since Great Depression that hit several Scandinavian countries, the Swedish government instituted an inquiry into why the successful post-war model had faltered after three decades and how it could be refined for new times. Both the government and opposition parties accepted the criticisms and advice of the report and implemented its key proposals to modernise the Swedish welfare state (Gylfason, 2020). Lessons from Sweden “Third away” between Keynesian central planning and neoclassical economics Growth policy, based on disciplined macroeconomics, with price stability, but still advocating for fair wages, using an active labour market policy Expansionary macroeconomic policy combined with selective focused fiscal measures Combat possible rising inflation, current deficits and overvaluation of the currency that result from expansionary policy Through regulation, including informal incomes policy, fiscal measures taken to moderate price and wage increases Focused on generating budget surpluses Restrictive fiscal policy, using indirect taxes to lower inflation Dealt with expected deficits in the current account through a devaluation of the currency Actively coordinated wage bargaining to protect weak industries and to manage inflation During recessions, a countercyclical fiscal policy, reducing spending and raising taxes during boom times The temporary use of budget deficits during recessions, moderating wage increases and practical options such as selective employment subsidies in weaker industries Increasing spending and reducing taxes during downtimes part of the macroeconomic arsenal To prevent inflation, the government used prudent public finance management Central bank, the Riksbank, has been relatively independent and one of the agencies reporting directly to Parliament Botswana's prudent macroeconomic management is an African post-colonial exception Botswana is one of the few African countries since colonialism to pursue prudent macro-economic policy, especially the management of monetary, fiscal and public debt (Maipose, 2008). When Botswana became independent in 1966 it was among the poorest countries in the world, but through prudent economic management, the country achieved real GDP growth averaging 9 percent between 1965/66 and 2005/06. The country is now an upper middle-income country (Rodrik, 2003). Immediately after independence, Botswana borrowed from abroad, like many African countries (Maipose, 2008). However, the foreign loans were used for infrastructure, unlike in most African countries in the immediately post-colonial period. Botswana also immediately went searching for foreign investment, specifically to develop new industrial sectors (Maipose, 2008). Many African countries immediately after independence discouraged the entry of private investment, often nationalising or indigenising, replacing the owners, managers and employees with locals, frequently members of the governing party, not necessarily with the experience to manage sophisticated private sector firms (World Bank, 1989; Young, 1982; Elbadawi, 1996; Rosberge and Jackson, 1982; Ndulu & O’Connell, 1999; Collier & O’Connell, 2007). The government was also tougher on corruption than most African countries. In 1976, it enacted a law, the Finance and Audit Act, which made accounting and project officers personally liable for waste, misuse and stealing of public funds (Crisuoldo, N.d.). The government ran budget surpluses for 16 years since 1982; and only in 1998/99 ran up a budget deficit (Harvey, 1997; Gaolathe, 1997; Lewis, 1993; Mupimpila, 2005; Sentsho, Eds.; UNDP, 1998). It judiciously accumulated foreign reserves and used the savings from these to finance the budget deficits of the 1998/1999 and 2002/2003 financial years. The Botswana government has a National Employment, Manpower and Income Council which annually determines public service wage increases. The Council does this by taking into consideration the overall macroeconomic targets, including inflation levels, whether the country has a budget deficit and the levels of public debt. During budget deficit years, the government has capped public salary increases (Maipose, 2008). Like many other African countries, Botswana relied on a single or two commodities – in the case of Botswana, beef. This often causes “boom and bust” cycles, with revenue depending on the price and uptake of the commodity (Brautigam, 1996; Gaolathe, 1997; Hyden, 1983; World Bank, 1989). Since commodity prices are volatile, African economies have years of booms followed by recessions, depending on the global commodity price they export. In 1973, the Botswana government put together a long-term strategy which would build up reserves during boom periods to be used during downturns. The government planned much more competently than most other African governments. “The government explicitly pursued a counter-cyclical policy in the management of foreign exchange reserves and government cash balances, basing year-to-year spending decisions on the intermediate-term forecasts of export earnings and government revenue, and on a realistic view of spending capacity” (Maipose, 2008). Furthermore, the Bank of Botswana has exceptionally been one of the most independent central banks in Africa, where central banks are often appendages of the governing party or used by the leader as a private bank. It has been central to consistent exchange rate stability, low inflation and sustainable current account levels (Hill & Knight, 1999). The Bank of Botswana also judiciously invested commodity surpluses. Monetary and fiscal policies are tightly coordinated between the central bank and the Department of Finance and Development Planning to ensure alignment of objectives. The Pula has been consistently under-evaluated to “a level below the perceived equilibrium” (Maipose, 2008), to promote exports. In 1973, the Botswana government resolved to establish three funds to stabilise debt, reserve and to fund local development. In 1979, the Public Debt Service Fund (PDSF) and the Revenue Stabilisation Fund (RSF) were established. The main Revenue Stabilisation Fund became the repository of export surpluses to finance the budget during downturns. By 1995 Botswana had the highest domestic savings rate in Africa at 45% of GDP (Motsomi, 1997). In 1975 it was 16% of GDP (Motsomi, 1997). By 1984, all gross fixed capital formation, the acquisition of new fixed assets, minus disposals, by government, business and households were financed by local savings (Maipose, 2008; Motsomi, 1997). The Botswana government have maintained strict discipline in using the Revenue Stabilisation Fund only for the purposes of creating budget surplus during downturns and not for other things, as is the case in many African countries which set up such funds (World Bank, 1989; Elbadawi, 1996). The government also built up large foreign exchange reserves. “The high level of foreign exchange reserves is a result of a deliberate policy to accumulate as much as possible for unexpected changes regarding the balance of payments” (Maipose, 2008). The Public Debt Service Fund was to pay off public debt. It was financed by appropriations from the national budget, budget surpluses and the profits of investments that were made by the fund. The fund essentially, over time, became an investment fund, loaning funds to state-owned enterprises for the purposes of infrastructure, new investments and buying new stock. Subsequently, the government established the Domestic Development Fund to finance local development. Foreign funding was initially deposited into the Domestic Development Fund. Later, money specifically set aside for capital spending is also deposited into the fund. Development project proposals are evaluated by the fund, and if they meet the requisite standards, funds are disbursed (Maipose, 2008). Depositing donor money into a separate fund, dedicated to development, is also a departure from general African practice of donor funding going uncoordinated to different government departments and local projects (Brautigam, 1996; Gaolathe, 1997; Hyden, 1983; World Bank, 1989). Lessons from Botswana The Bank of Botswana has been one of the most independent central banks in Africa The central bank has been central to consistent exchange rate stability, low inflation and sustainable current account levels Botswana ran budget surpluses for 16 years since 1982 Only in 1998/99 did Botswana run up a budget deficit for the first time since 1982 It judiciously accumulated foreign reserves and used the savings from these to finance the budget deficits of the 1998/1999 and 2002/2003 financial years To ensure alignment of objectives, monetary and fiscal policies are tightly coordinated between the central bank and the Department of Finance and Development Planning The Pula has been consistently under-valued to promote exports Export surpluses finance the budget during downturns By 1995 Botswana had the highest domestic savings rate in Africa - 45% of GDP The government built up large foreign exchange reserves After independence Botswana borrowed from abroad, however the loans were used for infrastructure Botswana also searched for foreign investment, specifically to develop new industrial sectors The government was tougher on corruption than most African countries A National Employment, Manpower and Income Council determines public service wage increases on an annual basis The Council takes the overall macroeconomic targets, including inflation levels, whether the country has a budget deficit and the levels of public debt into consideration During budget deficit years, the government has capped public salary increases The government pursued a counter-cyclical policy in the management of foreign exchange reserves and government cash balances It based year-to-year spending decisions on the intermediate-term forecasts of export earnings and government revenue Developmental fiscal and monetary policy lessons for South Africa Developmental fiscal and monetary policy must, in the public interest, be done in partnership with social partners and be part of an overarching national industrial plan. Brazil during its period of high growth with inflation, balance of payments crises were run by dictatorship – and alternative policy voices were snubbed out. Botswana in the first two decades after independence was more inclusive in economic policymaking, bringing in government and business to cobble together macroeconomic policy. In Sweden, there was a partnership between government, labour and business to jointly strike developmental fiscal and monetary policies. Japan, Asia’s most democratic nation, struck up partnership agreements over economic policy between governing and opposition parties, and with business and labour. Macroeconomic policy must be aligned to and support the national industrial plan. It must focus on growth. However, successful broad-based development necessitates prudent macroeconomic policies. It needs fiscal and monetary discipline. This means keeping inflation at low levels, keeping exchange rates stable and sustainably managing public debt levels. Public spending has to be disciplined. Setting developmental interest rates, keep inflation manageable and setting sustainable exchange rates are crucial for development. Developmental fiscal and monetary policy is complicated, sophisticated and complex. It means the institutions that oversee fiscal and monetary policy must be staffed by competent people. There has to be the policy sophistication to deliberate on the appropriate policy solution, to correctly analyse the environment and to change tactics, when there are economic shifts. All of this demands coordination between the private sector, government and local and global markets. For government to be trusted by the markets, private sector and implementing government entities, it must be seen as credible, honest and competent. 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New Haven: Yale University Press. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This article has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town, 8001 South Africa All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of the their respective Board or Council members. CLIMATE CHANGE Challenge change: Transition to a sustainable economy By Yaseen Lockhat BA Geography (Honours); PGDip Planning, MSc Development Planning Abstract Humanity is experiencing an anthropogenic-induced climate emergency. Climate change is framed as an emergency due to the numerous catastrophic physical risks, which are increasing over time. A global response is needed to address the challenges posed by climate change. It will require redesigning many sectors and activities of the economy to reduce its environmental impact, in particular the energy sector which is responsible for a significant amount of the total emitted carbon. The transition to a low-carbon economy is a complex process due to the magnitude of the shift and the dependencies of the economy on the activities that need to change, thus the transition also poses a severe risk. However, the benefits of transitioning far outweighs the costs. It is vital for South Africa to have a holistic climate change strategy, as the country is susceptible to both physical and transitional risks. Introduction Climate change can be described as one of the single greatest challenges that humanity has ever faced. It poses a highly complex challenge due to its interconnected and multifaceted nature. Climate change is a consequence of certain activities within the current societal and economic systems, yet at the same time it negatively impacts these very same systems. Thus, climate change needs to be addressed methodically as it is embedded at a universal level within the global systems people are dependent on. The one thing that is guaranteed by both climate change and climate action, is change. Whether there is climate action or inaction, there will be drastic changes. Humanity is however at a point where the change can be influenced for the better. The globe is faced with a choice. It can either focus efforts on transitioning to a sustainable economy that will ensure a high quality of life for future generations or decide not to respond to climate change, which may result in short-term gains that will be eroded by the rapid deterioration of the physical environment. However, both climate action and inaction pose risks, and this is particularly true for South Africa. This paper will explore the physical risks posed by climate change, the physical risk posed to South Africa, the global response to climate change and its challenges, the South African context, and conclude with recommendations for the country. Climate change of the Anthropocene There is an overwhelming scientific consensus that climate change is driven by anthropogenic activities (Oreske, 2018). Whilst climate change as a process is a cyclical phenomenon that is undoubtedly a part of the earth’s natural climatic process, it was previously thought that humans do not have the capacity to alter or influence a system as large as the earth. However, since the industrial revolution, technological improvements led to the acceleration of greenhouse gas (GHG) emissions, most notably carbon dioxide through the burning of fossil fuels and land coverage change, most notably deforestation. These two shifts, albeit land coverage change to a lesser extent, have led to the drastic increase of heat retained in the atmosphere and ultimately the acceleration of the climate change process (IPCC, 2007; IPCC 2019). Scientific consensus is demonstrated through the Intergovernmental Panel on Climate Change (IPCC), a global body established by the United Nations to consolidate various climate change studies, from hundreds of scientists across the globe, into assessment reports that shed light on climate change ‘implications and potential future risks’ and to suggest ‘adaptation and mitigation options’ to governments and policymakers (IPCC, 2021). The IPCC reports are cited for their credibility as ‘In the scientific community and media, its reports are broadly viewed as the most comprehensive and reliable assessments of climate change’ (DW, 2019). In 2018 the IPCC produced the ‘Special Report Global Warming of 1.5°C’ on the need to curb emissions to 1.5°C above pre-industrial levels. The report is authored by 91 experts from over 30 countries including South Africa. The report paints a bleak picture of the current climate change risk trends, as it reveals that anthropogenic activities have already resulted in climatic changes. Moreover, the IPCC report further reveals that climatic changes will increase, and the associated risks will be exacerbated as global warming continues, with the report emphasising that a mere half a degree of warming may result in significant changes. For example, Dosio et al., (2018) found that at 1.5°C, 13.8% of the global population will experience an extreme heatwave once every five years, whilst this percentage may drastically increase to 36.9% of the global population at 2°C warming. Climatic change will not be evenly distributed as certain regions will warm at higher rates than the global average and consequently, as seen by the example citing Dosio et al., (2018) these areas will likely experience more severe extreme climatic events. This is further reinforced by a study by Arnell et al., (2019) which found that there is an increase in frequency across climatic events when average temperatures increase. Thus, this phenomenon is not unique to heatwaves but is also true for other extreme weather events such as drought and flooding. Figure 1: Climate risks of a 1.5°C change compared to a 2°C change (Source: World Wide Fund for Nature, 2018) Climate change in Southern Africa According to the IPCC ‘Special Report’ (2018) Southern Africa warms at twice the rate of the global average. This means that if the globe warms by an average of 1.5°C, Southern Africa will experience an average rate of 3°C warming. As temperatures increase, Southern Africa is expected to experience drier, warmer conditions with an increase in rainfall variability, and of consequence, an increase in extreme weather events that are linked to these climatic changes (IPCC, 2018; Miller et al., 2020). A closer examination of South Africa indicates that the west of the country may become drier and experience an increase in drought, whilst the north-east of the country may experience an increase in ‘extreme rainfall events’ such as flooding and cyclones (IPCC, 2018; Vogel, 2019; Engelbrecht, 2020, cited in Arnoldi, 2020; Mbokodo et al., 2020). Of particular concern is the threat climate change poses to South Africa’s water security, as the country is already classified as a water stressed country that is ranked as the 30th most arid country (GreenCape, 2020). Physical climate risk Climate change will result in a plethora of physical climate risks and the paradox is that human activities are responsible for climate change, and yet it is also negatively impacted by climate change. In certain instances, this can be the same activity, for example there are agricultural practises that contribute to climate change, such as clearing forests for farmland, and yet agriculture is also impacted by climate change as the changing climatic conditions may result in lower yields (Dean and Green, 2019). The following are examples of risks that are directly attributed to the physical risk of climate change: food insecurity may increase – as shifting weather patterns decrease arable areas; risk to health and physical wellbeing – as more people are exposed to extreme weather events; and financial risk – as it may disrupt business supply chains (Chersich and Wright, 2019; Nhamo et al., 2019; Mbokodo et al., 2020). Often these issues affect the most vulnerable groups and thus may exacerbate poverty, inequality, and other socio-economic issues. The climate change response The scientific body of climate change literature is enhancing and growing and is thus improving the understanding of the physical implications of climate change. In addition, more climate risks are materialising, as risks move from perceived risks to actual occurrences. Thus, the need to respond (to climate change) has become more urgent. The World Economic Forum’s (WEF) annual risk ranking report The Global Risk Report (2021) is dominated by environmental risks that are linked to climate change. The report ranks ‘extreme weather’ as the number one global risk in terms of likelihood, the second is ‘climate action failure’ and the third is ‘human environmental damage’. Only one of the top five risks in terms of likelihood is not classified as an environmental risk, and that is the risk of ‘infectious diseases’, which is ranked fourth. This is profound as even during the global Covid-19 pandemic, climate change poses the greater material risk. A similar trend is observed in the report’s risk impact ranking, with three of the top five risks classified as environmental risk related; ‘climate action failure’ is ranked as the risk most impactful after the risk of ‘infectious disease’. Lately, scientific consensus has broadened to agree that the world is in a climate emergency, which is further testament to the severity of climate change and the need for urgent action (Fischetti, 2021). Figure 2: World Economic Forum Global Risk Report (2021). In response there is a global effort to address climate change and in recent years this effort has intensified. At a global level, the Conference of the Parties’ (COP 21) Paris Agreement (PA) has been instrumental for action against climate change. The PA is a global, legally binding agreement signed in 2015 that commits signatory countries to reduce their carbon emissions and to adapt to the changes that are brought about by climate change. The agreement was signed by 195 countries, including South Africa, who are required to submit a National Determined Contribution (NDC) report, which is a framework document that outlines how a country will achieve their PA targets for both emission reduction and climate adaption. The ‘ratchet mechanism’ within the PA requires countries to update their NDCs by increasing their climate action ‘ambition’, once every five years. Other aspects of the PA cover financing, transparency and loss and damages (United Nations, 2015). Climate action: Adaption vs mitigation As demonstrated in the PA, climate change can be addressed via two methods namely, climate adaption and climate mitigation. Mitigation is described by the IPCC (2014, p.4) as ‘a human intervention to reduce the sources or enhance the sinks of greenhouse gasses’. The PA requires countries to reduce their emissions so that global warming is kept below 2°C above pre-industrial temperatures. However, it does encourage countries to preferably limit warming to 1.5°C. To achieve their commitments to the PA, countries must embark on a transition away from high carbon intensity. Countries will need to develop mitigation pathways to transition various sectors of the economy over time. Most countries are focusing their mitigation efforts on the decarbonisation of the electricity sector, as the electricity sector is one of the largest sources of carbon emissions, primarily through the burning of fossil fuels (EEA, 2017; Markard, 2018; Doh, Budhwar and Wood, 2021). In addition, technological advancements in renewable energy, battery storage, and other related infrastructure are further driving the energy transition, as improvements and wide-scale adoption has led to a sharp decrease in the costs of renewable energy (WEF, 2019). Transitioning to a low or a decarbonised economy adds to the complexity of climate change, as the process poses significant risks, which is termed ‘transitional risk’ (CISL, 2019; Oliver Wynman, 2019). Transitional risks may manifest through the following (CISL, 2019): - Policy and regulation May increase the cost of carbon intensive business activities, for example the implementation of a carbon tax. - Consumer preferences Consumers and clients opting for ‘green’ alternatives, for example individuals preferring electric vehicles over petrol- and diesel-powered vehicles. - Technological advancements Innovation disrupting ‘traditional’ activities/sectors. - Reputational damage Stakeholders litigating against, disassociating from, or disinvesting from organisations linked to climate change. The transition These risks are most likely to affect individual companies, but it can result in systemic risk if there is a disorderly transition. A disorderly transition can be characterised as a transition that occurs as a set of events that unpredictably and suddenly result in the limiting of emissions or other restrictions on carbon intensive activities. Whilst an orderly transition can be characterised as a transition that occurs steadily according to a long-term plan that outlines the country’s transition strategy (UNEP Finance Initiative, 2021). An orderly transition strategy (roadmap) may be based on a climate scenario coupled with a study that considers when various mitigating technologies become technologically and financially viable to optimally limit emissions in a manner that is least disruptive from a socio-economic perspective. Transitional risk is of particular concern for countries that have a concentration of carbon intensive sectors, including financial institutions with portfolios that have a significant percentage of assets in carbon intensive sectors/activities. Whilst there is risk with the transition, the cost of not transitioning will be far more costly. A study by Swiss RE (2021) indicates a correlation between the rise in global temperatures and economic contraction. With a 2°C increase in temperature, it is predicted that the global gross domestic product (GDP) will contract by 11%, whereas at a 3.2°C rise the global GDP is expected to contract by 18.1%. On a regional basis, the Middle East and Africa are predicted to fare worse than the rest of the globe, with an estimated 14% contraction of its GDP with a 2°C increase, and an estimated 27.6% contraction with a 3.2°C increase. The role of financial institutions in the transition The financial sector plays a critical role in addressing climate change, and thus far this paper has only explored the relationship between climate change and financial risk. But transitioning to a low carbon economy also presents an opportunity for the financial sector, as the process requires significant investment and financing. It is estimated that a global investment of between $1.5 trillion and $2 trillion is needed annually for the next 30 years to achieve carbon neutrality. This represents 1.5% of the world’s combined GDP. That said, it is a fraction of the cost when compared to the cost of allowing climate change to increase to temperatures beyond 2°C (Turner, 2020). To assist the financial sector with navigating through the transition and climate change, the Basel Financial Sustainability Board developed the Task Force on Climate-related Financial Disclosures (TCFD). The purpose of the TCFD is for companies to produce detailed information on their strategic and risk management processes in respect of climate risks and opportunities. The TCFD has created a set of recommendations, which focuses on four key operational areas, namely governance, strategic risk management, and metrics and targets. There is additional guidance for certain crucial sectors, including the financial sector. Ultimately, having credible and standardised disclosures will assist the financial sector in making better long-term decisions (for finance, investment, insurance and even disinvestment) (TCFD, 2021). The Just Transition It is vital for transitioning countries and companies to do so in a just manner. The ‘just transition’ is a concept that was first promoted by labour unions. The Just Transition Centre (2017, p. 3) describes the International Labour Organisation’s concept of a just transition as: ‘a bridge from where we are today to a future where all jobs are green and decent, poverty is eradicated, and communities are thriving and resilient. More precisely, it is a systemic and whole of economy approach to sustainability. It includes both measures to reduce the impact of job losses and industry phase-out on workers and communities, and measures to produce new, green and decent jobs, sectors and healthy communities.’ A just transition is recognised as a critical component to achieving a successful transition, as it addresses social sustainability risk that may emanate from the transition to a low carbon economy, and without a just transition, socio-economic issues will be exacerbated. Consequently, the notion of a just transition has been adopted by global multilateral organisations as well as within countries’, and even within companies’ strategic plans and roadmaps. Contextualising South Africa's response South Africa is in an invidious position with regards to climate change. On the one hand, the country is vulnerable to several physical climate change risks and on the other hand it is vulnerable to transition risk. South Africa ranks as the largest GHG emitter in Africa and the 14th-largest emitter in the world (McSweeney and Timperley, 2018), with 39% of the country’s total emissions attributed to Eskom (Full Disclosure, 2019) who burns fossil fuels, primarily coal, to generate most of the country’s electricity. Thus, a large part of South Africa’s transitional risk is linked to electricity and the coal value chain. A report by Climate Policy Initiative (CPI) (2019) indicates that South Africa lost an estimated $60 billion of coal export revenue between 2013 and 2017 and is susceptible to a further $120 billion of transitional risk, most of which is predicted to emanate from the loss of coal export revenue as countries transition their energy sector to align with the PA (CPI, 2019). Moreover, major sectors of the economy such as the agricultural, electricity, mining, and transport sectors are vulnerable to both physical and transitional risk, and consequently this places thousands of jobs at risk. These sectors contribute 22% to South Africa’s total GDP (Stats SA, 2021a) and employ 15% of the workforce (Stats, SA, 2021b). South Africa’s climate response predates the country’s signing of the PA. In fact, South Africa is seen as one of the most climate change progressive developing countries, as it has produced several pieces of policy and legislation in response to climate change. Most notably is the National Climate Change Response White Paper (published in 2011), which provides the basis for all other policy and legislation. However, despite the release of the White Paper, the country’s climate response decelerated from 2009 to 2018, as there have been several delays to key policies and programmes amidst political and economic turbulence (Averchenkova, Gannon and Curran, 2019). Despite these delays, the release of the Low Emission Development Strategy (LEDS) (2018), the implementation of carbon tax (in 2018), the drafting of the Climate Change Bill (first draft released in 2017), will all build on the White Paper, together with the recently released draft update of the NDC which was opened for public commentary. In addition to these policies the Presidency has established a Climate Commission, where a broad stakeholder base is focussing on creating a ‘just transition’ pathway to transition to a low carbon economy, and National Treasury (NT) has released a technical paper termed ‘Financing a Sustainable Economy’ (2020). A financial sector-wide Climate Risk Forum (CRF) is currently focusing on implementing the recommendations of the NT technical paper. The purpose of the CRF is to provide a financial sector-wide platform to address climate risk and other, non-competitive, climate issues that impact the financial sector. The CRF’s current focus is to give effect to the general recommendations of the technical paper, which is envisaged to increase the capital allocation to sustainable development and the transition to a ‘climate-resilient economy’ (Climate Risk Forum, 2020). The NT technical paper recommends the development of: · A sustainability taxonomy · Technical guidance for disclosures as per TCFD · The sectors’ competency and capacity (for both the financial and public sector) · A climate risk benchmark scenario · The sustainable finance landscape As indicated in previous sections of this paper, the finance sector should play a vital role in the climate response and thus the CRF is seen as a critical part of the process to address climate change and its associated financial risks in South Africa, including the provision of sustainable finance to enable the just transition to a low carbon economy. However, despite the establishment of the CRF and the aforementioned policies and initiatives, South Africa is yet to demonstrate an integrated and co-ordinated vision and response to climate change. By way of example, the Independent Resource Plan (IRP) 2019 contradicts the LEDS aim to achieve carbon neutrality by 2050, as the IRP 2019 includes coal in the energy mix post 2050 and allows coal-based power stations to be built until 2030 (Climate Action Tracker, n.d.). In addition, government seemingly wants to expand the country’s economic reliance on fossil fuels as the Department of Mineral Resources and Energy is seeking to promulgate the Upstream Petroleum Resources Bill (released in 2019), which aims to develop the country’s petrol and gas industries following discoveries of offshore gas fields (Reeler, 2021). Such a fragmented and misaligned approach increases the likelihood of a disorderly transition as well as heightened physical climate risk, where mitigation and adaptation strategies to minimise the socio-economic impacts may not be maximised. Conclusion South Africa has scope to enhance its climate response. But if South Africa does not adequately coordinate and address its carbon emission transition and build resilience to climate change, the country may be less competitive, as this may result in the marginalisation of the country on the global stage. To expand, as countries transition, so too will their consumption patterns and, thus, products, manufactured using fossil fuel energy or within countries that do not adhere to international carbon emission commitments, may be subjected to carbon tariffs when exported to compliant countries. South Africa should create an overarching transition strategy for climate change that describes a unified vision for South Africa’s decarbonisation, including the year when carbon neutrality is possible and under what supporting conditions (developed countries committed themselves to providing technological and funding support to developing countries for transition purposes in the PA). Most countries that have set a net-zero carbon goal intend to do so by 2050. Furthermore, South Africa needs a detailed roadmap which is more encompassing than the abovementioned LEDS. It should provide a detailed overview of the sectors and activities that contribute to climate change as well as the sectors and activities that are to be impacted by climate change. The roadmap should contain a detailed adaption plan for impacted sectors and a detailed mitigation strategy for contributing sectors. The mitigation strategy may be based on a study that details how best to transition these sectors and activities based on their economic and technological viability. For example, sectors may not be able to transition due to the lack of carbon neutral technology or the cost to implement such technology, whilst other sectors may require an electricity transition to enable their transition, such as manufacturing and electric vehicles. Therefore, as previously explored, the electricity sector represents a low-hanging fruit as it currently offers a viable transition pathway, which is attributed to the advances in renewable energy technology. The energy sector will be further shaped by advancements in green hydrogen technology as it progresses to a level where it will be a viable source of energy and where it, together with renewable energy, is expected to dominate energy sources globally. South Africa ought to capitalise on these opportunities given the country’s competitive advantage, due to its favourable climatic conditions, by producing renewable energy and green hydrogen. The roadmap should also leverage off work that is currently being undertaken, such as work by the CRF, the Climate Commission and the ‘Just Transitions Pathway Project’ that is being conducted by Business Unity South Africa and the National Business Initiative (National Business Initiative, 2020). The roadmap should combine the findings of all these studies into its strategy. In addition, the strategy should ensure that there is policy certainty, alignment and mainstreaming across all three spheres of government. There cannot be contradictory messaging from departments and all public programmes should align to the climate strategy, for example the department responsible for mining activities should not explore opportunities to increase the country’s coal mining capabilities, but rather it should align to the climate strategy and ensure that there is climate resilient mining infrastructure. This structured approach will allow for the management of an orderly transition, and ensure that there is a just transition, as it can pre-empt the sectors where there will be job losses, provide the necessary upskilling of human resources affected by the transition, and determine sectors where there will be job and economic opportunities. It is crucial for the roadmap to contain a cost analysis of the envisaged transition, as this will assist in allocating and assessing the finances required to undertake the transition, including the quantum of international funding support required. Government will not be able to solely finance the transition and thus would need to crowd in private and development finance by ensuring projects are commercially viable and sustainable. Where projects are not commercially viable and sustainable, government would need to access donor funding or employ innovative financing models, such as blended finance. This once again highlights the importance of finance in addressing climate change, but it also highlights the importance of a detailed climate change roadmap as it will provide credibility and certainty, and thus attract international investment and funding. This paper reinforces that both climate change and climate action will bring about significant change and risk. However, if carefully managed a transition to a low carbon economy can address the many climate change challenges and may even result in benefits that transcend the environment, as a just transition promotes social sustainability. Thus, an adequate climate response offers South Africa a chance to not only respond to climate change, but to also determine its own course of change. In doing so, it may result in solutions for many other challenges that the country is faced with such as the lack of energy security and the high degree of social inequality. Reference Arnell, N.W., Lowe, J.A., Challinor, A.J. and Osborn, T.J., 2019. Global and regional impacts of climate change at different levels of global temperature increase. Climatic Change, 155(3), pp.377-391. Arnoldi, M., 2020. Climate change will hit Africa much harder than other continents – panel. [online] Engineering News. 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Available at: https://www.ft.com/content/33bb3714-93cf-4af5-9897-e5bf3b013cb7 [Accessed 22 April 2021]. UNEP Finance Initiative, 2021. Decarbonisation and Disruption. United Nations / Framework Convention on Climate Change (2015) Adoption of the Paris Agreement, 21st Conference of the Parties, Paris: United Nations. Vogel, C., 2019. Living with 1.5 and climate change – what may it take? World Economic Forum, 2019.The Speed of the Energy Transition Gradual or Rapid Change? World Economic Forum, 2021. The Global Risks Report. 16th Edition. World Wide Fund for Nature, 2018. Climate Risks: 1.5° vs 2° Global Warming. [image] Available at: https://www.wwf.org.uk/updates/our-warming-world-how-much-difference-will-half-degree-really-make [Accessed 18 May 2021]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This article has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town, 8001 South Africa All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of the their respective Board or Council members. Judicial review: A constitutional imperative or a corrosive separation of powers? By Adv Wendy Andrew-Befeld Bachelor of Laws (LLB); Bachelor of Arts (BA); Communications Abstract This article explores the allegations of judicial overreach that have been levelled at the South African judiciary in recent years, by asking whether the judicial review that has taken place is the fulfilment of a constitutional imperative or a corrosive separation of powers in a young and vulnerable democracy? In answering the question, the fundamental building blocks of constitutional democracy are unpacked including the rule of law, the counter-majoritarian dilemma, and the separation of powers doctrine. These are examined with specific reference to the complex South African context, in which much has been achieved to ensure the liberties of our people, while far less has been done to meet their pressing socio-economic needs, in spite of one of the world’s most advanced, progressive and directional Constitutions. The role of the Judiciary in circumnavigating this complex landscape is examined with reference to various cases that have come before our courts and the country’s electoral system is identified as a key problem area. In the final analysis, the picture that emerges is one where the lines separating the powers have indeed been blurred. However, where this has occurred, it has been the line between the Executive and the Legislature. In spite of any allegations to the contrary, it is the Judiciary that has, succeeded in “staying in its lane” (author’s expression). Moreover, the Judiciary has been pivotal in ensuring that South Africa has remained true to the guiding principles and values enshrined in our Constitution (RSA, 1996) and fundamental to a healthy, robust constitutional democracy in service of all of its people. From a supreme Parliament to a supreme Constitution Prior to the advent of constitutional democracy in South Africa, the judiciary was effectively crippled. Constrained by the Westminster system of Parliamentary sovereignty, the courts were bereft of any powers of judicial review and confined to interpret and enforce legislation based on procedural issues alone. They were precluded from considering substantive questions of legality, merit or morality. As such, they were reduced “to a mere spectator over the injustices perpetrated under the apartheid legal order” (Ngcobo, 2016:8). In 1994, pursuant to multi-party negotiations aimed at ensuring a peaceful transition from oppression to democracy, “a deeply divided society” (RSA, 1993) formed a constitutionally democratic state founded on the values of human dignity, equality and freedom; the advancement of human rights; the rule of law; and the supremacy of the Constitution (RSA, 1996, hereafter referred to as “the Constitution”). The hallmarks of this new constitutional supremacy were a justiciable constitution entrenching the fundamental human rights of all South Africans in a Bill of Rights, and fully independent courts that would protect and uphold those rights. So how has South Africa’s constitutional democracy fared in the years since then? What has become of the dreams and hopes voiced by South Africa’s first democratically elected President, the late, great Nelson Mandela - and shared by so many ordinary South Africans? Protecting liberties but failing to provide necessities There can be no question that we have come a long way since the days of apartheid, when many South Africans were deprived of the most basic human rights, such as dignity, liberty and even the right to life. But there is also an inescapable reality to be faced and it is this: more than twenty-seven years after liberation from the shackles of apartheid, too many South Africans continue to suffer a cruel socio-economic fate - with no discernible end in sight. This is because although our justiciable constitution and our new independent judiciary has, by and large, succeeded in upholding and protecting our first generation, civil human rights, such as freedom and security of person, or freedom of speech, the state has fared much more poorly when it comes to dealing with our second generation, socio-economic human rights. These include those enshrined in section 26 of the Constitution, which provides for universal access to adequate housing; section 27, which provides for right of access to health care services, emergency medical treatment and sufficient food, water and social services; and section 29, which provides everyone with a right to both basic and further education. So, why has one of the world’s most advanced Constitutions (and Bill of Rights) which boasts a more expansive list of socio-economic rights than most others, imposes both negative and positive duties on the state in terms of access to and realisation of political and socioeconomic rights, and renders these socio-economic rights justiciable, rather than being merely directive, as is the case in most other Constitutions, nonetheless failed to adequately and properly fulfil its mandate as a transformative Constitution? How can it be that it has failed to meet the basic welfare needs of its most vulnerable citizens? The answer to these questions is no idle speculation. It matters a great deal. Not only because it addresses pressing political and socio-economic concerns in South Africa, but because it has much broader significance for the continent as a whole. As Fombad (2013) points out: “no region of the world presently endures the severe disparities between people’s rights and their realisation that occurs in Africa.” Furthermore, it is thought that a rights-based approach to social security is the best way to address disparities and as South Africa has one of the most constitutionally entrenched frameworks for protecting the right of access to social security on the continent, our Constitution has and will continue to be modelled (Fombad 2013). As we transformed from a turbulent past characterized by human rights abuses to the advent of a new Constitutional democracy, we did so determined to avoid the injustices of the past. Fundamental to our constitutional vision was a decisive break from the unchecked abuse of state power and resources virtually institutionalized by the apartheid regime. To achieve this, we adopted accountability, rule of law and supremacy of the Constitution as foundational values of our constitutional democracy. Moreover, we have what is widely acknowledged to be one of the finest constitutions anywhere in the world – one that was carefully and thoughtfully crafted, pursuant to an extensive public engagement process. It sought to ensure a strong, independent, effective judiciary and a modern, comprehensive and inclusive Bill of Rights that could serve as a benchmark for human rights everywhere. It was designed to protect its people from the injustices of the past and to pave the way to a brighter, well deserved future. So how did we get here? And what can we do to course correct? To answer these questions, we need to unpack the basic building blocks of our democracy in order to see what has worked and what has not. The essentials in the South African context Rule of law defined As a concept, the rule of law resists definition. “Like democracy, what precisely is meant by the term is deeply, perhaps essentially, contested” (Krygier, 2018:13). It has been defined in many different ways from a “sophisticated doctrine of constitutionalism, revealing law as the antithesis of arbitrariness” (Krygier, 2018:13), to the simple explanation that it requires government to act according to clear, general rules that are enforced via fair procedures in impartial courts. However it is defined, it prohibits the arbitrary exercise of power and serves as a restraint on the exercise of authority. Furthermore, in a constitutional democracy where the constitution is supreme, the rule of law applies to ALL – including state institutions and organs of state, whose actions must be lawful. It is also clear that the rule of law has both procedural and substantive attributes. The procedural component of the rule of law forbids arbitrary decision making. The substantive component requires that the state should respect an individual's basic rights. This is in accordance with the new constitutional scheme and is a radical departure from the previous apartheid regime, where legality was merely a procedural formality. The apartheid regime propagated the narrow, legalistic version of the rule of law in order to advance their authoritarian, race-based agenda. They succeeded in doing so as a consequence of the parliamentary sovereignty that prevailed at the time, rendering the judiciary powerless to counter substantive injustice. However, with the advent of the new constitutional dispensation and a supreme Constitution that has entrenched the rule of law as a founding principle, the Constitutional Court has made good use of the principle in a number of cases that have come before it. Soon after its inception, the Constitutional Court tackled the rule of law head on, in order to assess the constitutional validity of legislation. In Fedsure Life Assurance Ltd. and Others v Greater Johannesburg Transitional Metropolitan Council and Others 1998, the Court held that it includes, at a minimum, the principle of legality which requires: that all three branches of government act in accordance with the legal principles and rules that apply to them; that laws be clearly formulated and evenly administered by independent courts; and that self-help is inimical to a society based on the rule of law. In Pharmaceutical Manufacturers Association of South Africa and Another: In re Ex Parte President of the Republic of South Africa and Others 2000, the Constitutional Court found against the state, confirming that in terms of the rule of law, the exercise of public power by the Executive and other functionaries may not be arbitrary. Since those early days of democracy, the Judiciary has had many more opportunities to deepen, develop and further refine rule of law jurisprudence for the new South Africa, as case after case has come before the Constitutional Court, the Supreme Court of Appeal and the High Courts. Brought by political parties, Chapter 9 institutions, NGO’s and others, they have dealt with everything from signal jamming at the State of the Nation (SONA) address (Primedia Broadcasting and Others v Speaker of the National Assembly and Others 2016); to the forcible removal of MP’s from Parliament (Democratic Alliance v Speaker of the National Assembly and Others 2016); to an unauthorised withdrawal from the Rome Statute of the International Criminal Court (Democratic Alliance v Minister of International Relations and Cooperation and Others 2017); to a bitter fight between government and the TAC over antiretrovirals, in what would be dubbed “the judgement that saved a million lives” (Honermann & Heywood, 2012). The common thread running through all of these rule of law cases is that when all else fails, the Judiciary has not. More on that later. In any event, as Constitutional Court Justice Madala (2003) observed, the rule of law “is not the enemy of liberty but its partner” and as such, it was enshrined as a foundational value in section 1 of the South African Constitution. Section 1 of the Constitution states that: “South Africa is one sovereign, democratic state founded on certain values including the rule of law, accountability, responsiveness and openness”. The inclusion of the rule of law in the values-based opening section of the Constitution (s1(d)) is no accident and given the country’s dark past, characterised by tyranny, oppression and a distinct LACK of the rule of law, it is unsurprising that the framers of the Constitution sought to entrench the rule of law as a founding value of the new constitutional democracy. To ensure the enforcement of these values, section 2 of the Constitution (known as the supremacy clause), provides that the Constitution is the supreme law of the Republic; that any law or conduct inconsistent with it is invalid; and that the obligations imposed by it must be fulfilled. Section 8 of the Constitution provides that the Bill of Rights, which sets out all of our fundamental rights and freedoms, has supremacy over all forms of law and binds all branches of the state. Section 165 ensures an independent Judiciary, whilst section 167(4)(e), gives the court the power to ensure that Parliament fulfils its constitutional obligations and section 172 of the Constitution then provides that a court MUST declare any law or conduct that is inconsistent with the Constitution invalid to the extent of its inconsistency, thereby giving the courts the power of judicial review. These critical Constitutional clauses, thoughtfully conceived and articulated by the framers of our Constitution, make it patently clear that the judiciary is not only permitted to enforce the rule of law, but it is their specific constitutional duty to do so. Judicial review or judicial overreach? Judicial review may be defined as: “the power of the courts…to declare invalid and strike down legislation…not in conformity with the requirements of the constitution” (Du Plessis, 2000:229). Dennis Davis describes it negatively, as a process undertaken by unelected judges “empowered to overturn the will of a democratically elected and accountable legislature”. Therein lies a dilemma. How to justify censure of a democratic political system by an unaccountable institution? (Du Plessis, 2000: 230). This dilemma is debated wherever constitutional supremacy has been adopted but, according to Du Plessis (2000:230), the consensus reached is that judicial review is an essential part of the democratic process, and that the disadvantages are outweighed by the advantages of having judges perform an independent check on government. The process does however create tension between the will of the majority and the judges’ power of judicial review and this is known as the counter-majoritarian dilemma. The Counter-Majoritarian dilemma In S v Makwanye and Another 1995 the Constitutional Court - in opposition to overwhelming public support for its retention - ruled that the death penalty was unconstitutional and accordingly, abolished it. This case was a vivid demonstration of the type of tension that may arise when the will of the court is at odds with the will of the people but assertions “that democratic will is being overridden by unbounded judicial preference” (Dent, 2015:12) would be a step too far and notably counter to the current reality in South Africa. This is because, as Dent (2015:6) puts it, “the counter-majoritarian dilemma takes on a significantly different tone in the South African context”, which may be described as follows: Self-aware South African courts, particularly the Constitutional Court, balance pragmatism and principle in order to operate in a new democracy and further develop case law and common law in line with the fundamental values and principles of our Constitution. Moreover, it has become clear in recent years that the state capture so roundly complained of includes an element of what may be termed “legislative capture”. As the apartheid judiciary was once expected to quietly tow the legislative line, now our democratically elected legislative branch is expected to tow the party line. The people of South Africa have grown increasingly frustrated and angry as they have watched parliamentarians repeatedly sidestep their constitutional obligations, in order to curry favour with their political party, rather than the electorate they are mandated to represent. The reason for this is that our current electoral system is based on a closed list proportional representation (PR) system, whereby the electorate vote only for a party, rather than a person. The seats in the National Assembly and the provincial legislatures are then filled on the basis of this closed list, which cannot be altered by voters. At the end of the electoral process, these ranked lists are then used to fill the seats allocated to each respective party. It is this exclusively closed list system that drives Parliamentarians to place their party before their people in order to ensure their own political survival. As British MP Lord Acton famously remarked in his letter penned to Anglican Bishop Mandell Creighton, on April 5th, 1887: “Power tends to corrupt, and absolute power corrupts absolutely” (Dalberg-Acton, 1887). That is not to say that this is intended as an indictment of the ruling party per se – it is an indictment of a system poorly designed for self-interested human beings. It is a system likely to be abused by any political party and the end result is predictable. In any event, the repeated, unsuccessful attempts to oust President Jacob Zuma via no-confidence votes in Parliament during the course of 2015 and 2016 constituted a turning point for many South Africans. They came to view the majority of the members of the Nation Assembly as nothing more than partisan representatives of their political party, rather than representatives of the people and they began instead, to view the courts as their champion. This about face, where the Judiciary is increasingly viewed as the champion of a frustrated nation, and the best hope for the rule of law in South Africa, is particularly exemplified by the so-called Nkandla case (Economic Freedom Fighters v Speaker of the National Assembly: Democratic Alliance v Speaker of the National Assembly 2016) and a number of other cases, all of which render the counter-majoritarian dilemma in South Africa a rather distant concern at this point in the country’s political evolution. The Makwanyane case took place a long time ago, when the legislature had a clean slate and the judiciary had yet to prove itself. A lot has changed since then. It is nonetheless regrettable that our courts are increasingly required to preside over matters, such as the Nkandla case that would never have come before them, had the other two branches of government acted in compliance with their constitutional mandates. This has been a disquieting development in the context of already overcrowded court calendars and it is particularly unfortunate for the Constitutional Court, who, in a youthful democracy, has much to do in terms of interpreting legislation, and developing common and customary law, to “promote the spirit, purport and objects of the Bill of Rights” (RSA, 1996). Furthermore, it has led to an increasingly embattled judiciary upholding the rule of law, enshrined as a bedrock value in our Constitution, often in the face of opposition from the other branches of government, who have regularly accused the Judiciary of judicial overreach and breaching the separation of powers. The Separation of Powers Doctrine Separation of powers is the most ancient and enduring element of constitutionalism and it is a central construct of the constitutional democracy that we now enjoy in South Africa, pursuant to the adoption of the Constitution of the Republic of South Africa in 1996. The doctrine of the separation of powers is based on the assumption that power corrupts and separation of powers is essential to liberty and democracy. Charles Louis de Secondat, better known as the Baron de Montesquieu, was the first writer to give the principle paramount political importance in his seminal work on the subject, De l’Esprit des Loix (The Spirit of the Laws), originally published in 1748 (Montesquieu and Varnet, 1748). He continues to be considered the foremost authority on the subject to date. Montesquieu's thinking was underpinned by the idea that man, although rational, is led by his desires into “immoderate acts”, and “that every man invested with power is apt to abuse it and carry his authority as far as it will go.” (Montesquieu, 1748). Accordingly, the end result of the concentration of too much power is tyranny and the suppression of liberty. The Baron's prescription for preventing the abuse of power was that everything be done to ensure that power should check power. To guarantee the protection of liberty and freedom against tyranny and dictatorship, he therefore recommended the separation of powers. He strongly advocated both equality with and independence of the judiciary from the legislative and executive branches of government. The principle of the separation of powers is entrenched in the Constitution of the Republic of South Africa. In terms of section 165 of the Constitution, judicial authority is vested in the courts, which are independent and subject only to the Constitution and to the law, which they must apply impartially and without fear, favour or prejudice. The issue of judicial independence, as envisaged in section 165, is one of the main pillars of the doctrine of separation of powers. The judiciary serves as an important check on the other branches of government and should, therefore, be independent and beyond reproach. The Constitution furthermore established the Constitutional Court as the highest court in all constitutional matters and the final arbiter of decisions in the event of conflict of competence between the different spheres of government. Notwithstanding the guarantee of judicial independence that is enshrined in our Constitution, the South African judiciary still faces serious challenges. In the first instance, the judiciary must continue to fulfil its constitutional mandate whilst taking care not to encroach into the domain of either the executive and/or the legislature and in a newly democratic hybrid system of government, such as ours, this balancing act is no easy feat, as the case law indicates. In addition, the judiciary is subject to attack from many quarters, including the ruling party, who are increasingly challenged by both the citizenry of South Africa and the opposition political parties, all of whom look to the judiciary to ensure a fully functioning democracy based on the rule of law. In the early days of our democracy, the court noted in De Lange v Smuts NO and Others (1998: para. 60), that there is no universal model of separation of powers and that it is not absolute. However, Ackermann J observed that: Over time our courts will develop a distinctively South African model of separation of powers, one that fits the particular system of government provided for in the Constitution and that reflects a delicate balancing, informed both by South Africa's history and its new dispensation, between the need, on the one hand, to control government by separating powers and enforcing checks and balances and, on the other hand, to avoid diffusing power so completely that the government is unable to take timely measures in the public interest. Unfortunately, there has been growing concern regarding separation of powers. Some commentators claim the courts’ expanded role in upholding the rule of law, in recent years, is a legitimate consequence of the other branches’ failure to fulfil their constitutional obligations. On the other side of the ideological divide, there are those in the Executive and the Legislature who accuse the Bench of supporting opposition party politics and special interests in a new brand of “law-fare” (Ngcobo, 2016) and whilst healthy tensions between the branches are inevitable, “they must not be elevated to the level of a struggle for power because…rule of law will suffer and with it the administration of justice” (Madala, 2003:36). Judicial review: a legitimate consequence of a case of "law-fare"? According to Feliciano (1992:23), “judicial review is essential for the maintenance and enforcement of the separation of powers and the balancing of power among the three departments of government.'' Yet, it is also a limitation on the principle of the separation of powers in that by striking down laws or Acts of Parliament, the judiciary encroaches upon the functions of other branches of state authority, especially the function of the legislature. Therein lies the paradox of judicial review. In a democratic state that adheres to the rule of law, it is a paradox that gives rise to a tension between the judiciary on one hand, and the legislature and the executive on the other. The tension arises because the judiciary is empowered to decide on the legality of the conduct of the other two branches of government but as pointed out by Maswanganyi (2010:14-15), “if the rule of law is to mean anything, the executive and legislature must accept judges peering over their shoulders.” Not only is judicial review a routine part of a democratic society where constitutional supremacy is embraced, but section 172 (1)(a) of our Constitution specifically empowers the courts to act as guardian in respect of the protection and promotion of our constitutional values and principles against ALL who may violate them. As to whether the Constitutional Court’s efforts to uphold the rule of law has thus far constituted judicial review, as opposed to judicial overreach, the fulfilment of a constitutional imperative rather than a corrosive breach of powers, one has only to look at the ever-increasing list of jurisprudence on the subject. As it turns out, the Constitutional Court is to be commended for adopting a consistently careful, impartial and self- aware approach to the separation of powers and judicial review, and whilst it has made rulings that affect the executive and legislature, it has deferred to the other branches of government when appropriate to do so. In Soobramoney v Minister of Health, KwaZulu-Natal 1998, for example, the court demonstrated early on that it was impartial; had no intrinsic bias in opposition to the Legislature or the Executive; and would rule in the favour of either, if the application of law and the facts supported such a decision. In S v Dodo 2001, the court did just that when it held that although sentencing is a judicial function, a law prescribing a mandatory minimum sentence was not inconsistent with the separation of powers, as the legislature also has a responsibility in respect of sentencing. However, in Executive Council of the Western Cape Legislature v President of the Republic of South Africa 1995, the court held that it was inconsistent with the doctrine of separation of powers for Parliament to delegate its power to amend the laws to the President as head of the Executive. In Doctors for Life (2006), the court confirmed (in particular at paragraphs 37-38) that the constitutional principle of separation of powers requires that other branches of government refrain from interfering in parliamentary proceedings. In this case, the ruling was intended to serve as a caution to the courts that they too must observe the constitutional limits of their authority and should be careful not to interfere in the processes of other branches of government, unless to do so is mandated by the Constitution. Conversely, in our constitutional democracy, the Constitution is the supreme law and it is therefore binding on all branches of government including Parliament. When it exercises its legislative authority, Parliament must act in accordance with the limits of the Constitution. Furthermore, Section 167(4) entrusts the Constitutional Court with the power to ensure that Parliament fulfils its constitutional obligations. That brings us to the landmark case dealing with the Nkandla matter, brought before the Constitutional Court by the Economic Freedom Fighters and the Democratic Alliance against the National Assembly and Others in 2016, as a result of Parliament’s failure to hold then State President, Jacob Zuma, to account for refusing to comply with the remedial action prescribed by the Public Protector. As history has recorded, instead of facilitating the enforcement of the remedial action prescribed by the Public Protector, the National Assembly (Parliament) had effectively absolved the President for failing to comply and in so doing, the National Assembly had breached its constitutional obligations in terms of s55(2) and 181(3) of the Constitution (Economic Freedom Fighters v Speaker of the National Assembly and Others 2016). The rule of law and separation of powers were central to the Constitutional Court’s findings in this case and the Constitutional Court grappled with the issue of judicial review as never before. The apex court made it clear that it is the ultimate guardian of our supreme Constitution and its values; that the Constitution is binding on all branches of government; that the courts are constitutionally mandated to ensure all branches of government act in accordance with the law and fulfil their constitutional duties and obligations; and that remedial action is binding, not optional, because our constitutional order hinges on the rule of law. As the Honourable Chief Justice stated in paragraph 1 of the Court’s judgment: Certain values in the Constitution have been designated as foundational to our democracy…If these values are not observed…we have a recipe for a constitutional crisis of great magnitude. In a State predicated on a desire to maintain the rule of law, it is imperative that one and all should be driven by a moral obligation to ensure the continued survival of our democracy. The court held further, that no constitutionally or statutorily based decision may be independently disregarded without first having recourse to a court of law. To do so is to take the law into your own hands and is tantamount to self-help, which is inimical to the rule of law. However, as clear as the court was about constitutional supremacy and rule of law, it was equally careful to make itself clear vis a vis separation of powers, referring to the dictates of Constitutional Principle VI; appropriate checks and balances; and acknowledging that the Judiciary is just one of three branches of government and must be conscious of the vital limits on judicial authority and the Constitution's design to leave certain matters to other branches of government. This means that the judiciary should refrain from interfering in the processes of other branches of government, save for where such interference is mandated by the Constitution. The Chief Justice was clear. Where the Constitution entrusts a matter to a political branch of government, making the manner of fulfilment discretionary, it is not for the Judiciary to prescribe to that branch of government how to fulfil that obligation. The court’s role is simply to determine that fulfilment has taken place. The ruling in this case underscores the minority judgment in Glenister v President of the Republic of South Africa and Others 2011, wherein the Constitutional Court held that there are matters that, for good reason, are reserved for the political branches of government and judicial review merely ensures these branches undertake their constitutional obligations in accordance with the prescribed limits of their authority. This careful approach and due regard for the separation of powers shown by the Constitutional Court in both the Nkandla and Glenister cases (and others) is a demonstration of the court’s commitment to judicial review – as opposed to judicial overreach – and its respect for separation of powers. The good, the bad and the obvious South Africa has demonstrated that a solid constitutional framework serves as the foundation for the protection of human rights but it is just that – a foundation – for there are other important factors to be considered. No matter how constitutionally entrenched human rights are in the Bill of Rights, whether these rights operate within a bona-fide democracy, a pseudo-democracy, a transitional democracy or a dictatorship will matter, as will the availability of the state’s economic resources, which are diminished and diverted by corruption and state capture. Having reviewed the basic building blocks of our democracy, it does indeed become clear what has worked to further our constitutional dream, and what has not. There is certainly a lot that has been and is working. We learned lessons from our nation’s turbulent political past (and culture of human rights abuses); we learned from other States (and their Constitutions); and from the international human rights community. We took this collective wisdom and forged it into a truly outstanding Constitution, complete with an ambitious and contemporary Bill of Rights, aimed at achieving the promotion and protection of first, second and even third generation human rights. Our Constitution imposes both negative and positive duties on the State and it does so in a way that is justiciable and not merely directional. Moreover, in the new constitutional dispensation, the rule of law is now legitimately exercised and where this is not the case, the judiciary is empowered by the supreme Constitution to deal with contraventions thereof. The Judiciary has in turn demonstrated that the separation of powers is alive and well and claims of judicial overreach are largely unsubstantiated. It may therefore be said that in stark contrast to the apartheid era, the citizenry of South Africa now have an effective safeguard against the arbitrary, excessive or unjust exercise of government power. Unfortunately, neither our revered Constitution, nor our carefully sewn tapestry of constitutional checks and balances, including a robust and independent court, has proved a match for human frailty and self-interest, aided and abetted by an electoral system that eschews accountability. Accountability and the need for electoral reform Generally, the post-apartheid electoral system in South Africa has been “characterised by simplicity, inclusiveness and a strong sense of fairness” (February, 2021). Proportional representation coupled with an exclusively closed list system does, however, lack accountability, particularly in the context of one-party dominance and “it is on the key democratic value of accountability where the system remains weak” (February, 2021). This deficit has weakened key institutions, enabled the emergence of a one-party dominant system and “the dominance of party executives” (February, 2021). It has facilitated rampant corruption, mismanagement and state capture, resulting in the diversion of money from social delivery programmes, intended to promote human rights and social welfare, into the hands of the powerful elite. The result is that the government has neglected to fulfil its constitutional responsibilities to the people of South Africa in terms of their socio-economic human rights. Moreover, the negative effects of this go much deeper than the journalistic headlines and as Mantzaris (2017) has pointed out: The tens of billions of Rands that are squandered in rampant corruption could be utilised to deliver basic, foundational guarantees such as adequate housing, food, healthcare and education. A clear and evident solution to the slow and ineffectual delivery of socio-economic human rights is exhaustive electoral reform that renders representatives of the people accountable to the people they serve and not party elites and those in service of personal agendas. It is proposed as a means to “induce the correct balance between individual and party accountability” (February, 2021) and as such, to begin restoring greater accountability, and rule of law in the context of the one-party dominance that appears so solidly entrenched in South Africa. This reform is critical. It is clear that the exclusively closed list proportional representation system (underpinned by the very lack of accountability that such a system tends to generate), coupled with a culture of corruption and state capture that has until recently characterised the political landscape in South Africa, has diluted the power of our formidable Bill of Rights. It has effectively handicapped its efficacy in terms of protecting and promoting the full range of human rights on behalf of all South Africans. Comprehensive reform would begin to reverse this process. It would serve to restore accountability and reduce corruption, thereby affording the ambitious Bill of Rights in the South African Constitution, a realistic and resourced framework within which to operate. Whilst the difficulties our young democracy has encountered are complex and multi-faceted and it would be disingenuous to suggest that electoral reform is a simple fix – a panacea for all that ails us – it is advocated as a critical, foundational step in creating a more accountable, independent legislature, predisposed to fulfil their constitutional obligations to the electorate, thereby redistributing responsibility for the rule of law more evenly between all branches of government. This would, in turn, reduce the burden on an already overburdened judiciary, and moreover, it would serve as an invaluable aid in combatting corruption and mismanagement, which deprives the electorate of essential resources. So, how do we go about making this fundamental course correction that has such significant long-term implications for the governance and stability of our country? Course correction: Will the recent Constitutional Court ruling pave the way for comprehensive reform? On 11 June 2020, Justice Mbuyiseli Madlanga handed down a defining judgment in New Nation Movement NPC and Others v President of the Republic of South Africa and Others 2020, wherein the apex court ruled that the Electoral Act is unconstitutional on the grounds that it does not allow citizens to be elected to the national and provincial legislatures as independent candidates. Parliament was ordered to remedy the defect within 24 months and the media was jubilant – hailing the judgment as a game changer – a victory for all South Africans…but can it get us to where we need to go? There is no question that the ruling is a step in the right direction. What remains to be seen is whether the changes Parliament makes will lead to the kind of comprehensive overhaul we so desperately need in order to ensure that our elected representatives are accountable to the people they are elected to serve, and that they remain so? Analysts have pointed out that the closed list PR system that was originally designed to facilitate only our inaugural democratic election, has been in dire need of electoral reform for years. In fact, Cabinet commissioned an Electoral Task Team (ETT) as early as 2003 (ETT, 2003). They were asked to report on the matter and propose legislation for an electoral system in the years to come. The ETT (also known as the Van Zyl Slabbert Commission) highlighted accountability as a concern and tendered its recommendations. Unfortunately, the proposed changes were never made. So where to from here? With characteristic sensitivity in respect of separation of powers, The Constitutional Court did not pronounce on how Parliament should rectify the unconstitutionality of the Electoral Act, nor on a preferred model, expressly leaving this to Parliament to determine. Home Affairs Minister, Aaron Motsoaledi, recently indicated that South Africa's electoral system is set for a major overhaul, and that the changes would not be limited to the Constitutional Court's directive regarding independent candidates (Business Day, 2021). The Minister’s announcement is a positive indicator that government may indeed action the course corrections advocated by the Van Zyl Slabbert Commission so long ago, and now so overdue. The Independent Electoral Commission of South Africa (IEC) has however expressed concern about the 24-month time frame mandated by the court and this is indeed likely to be problematic given the potential scope of the work to be done and the necessary due processes to be followed in amending the electoral system (Business Day, 2021). This concern has been echoed by a number of other organisations, including the Inclusive Society Institute (ISI) whose response to the judgment suggests effecting consequential improvements where possible, whilst implementing system changes to accommodate independent candidates. The hope is that broader reform will need to follow over time. Final thoughts For the many South Africans leading lives that are a far cry from the hopes and dreams they nurtured at the birth of our democracy, change simply cannot come soon enough. In the interim, South African’s must continue to rely on the judiciary to ensure that the rule of law in our young democracy is upheld by ALL, including the State. And for as long as that continues, there will naturally be those who continue to pose questions about whether the separation of powers principle is alive and well and at work in South Africa? The answer to that question, based on the evidence, is yes and no. If there exists any credible threat to the separation of powers, it lies in the blurring of the lines between the executive and the legislature. Where the judiciary is concerned, it is merely stepping into the breach, which it is constitutionally obliged to occupy. As the Constitutional Court pointed out in the Nkandla case, the National Assembly (Parliament) is intended to embody the voice of all South Africans, especially the “poor, the voiceless and the least remembered”. The Constitutional Court referred to Parliament as the eyes and mouthpiece of the people, responsible for playing an oversight role with respect to the Executive and state organs alike, and for ensuring the execution of their constitutional and statutory obligations. Alas, as the Nkandla case (and others) have demonstrated, the legislative branch of our government is not always equal to that task. Moreover, sometimes the problems that come before our courts have nothing to do with politics or the need for electoral reform. Sometimes, the courts are simply dealing with the unintentional consequences of poorly drafted or ill-considered legislation that falls afoul of the Constitution. Certainly, it would be disingenuous to suggest that there is a silver bullet that is a cure for all of these difficulties. What is however certain is that when we look at what has worked and what has not, the blueprint for our success, becomes a little clearer. That blueprint must, at a minimum, consist of electoral reform, redressing the paucity of accountability that has arisen in our system of political representation. It must also provide for improved legislative capabilities and performance, by ensuring that our law makers promulgate well researched, well drafted and constitutionally sound legislation. Ideally, that blueprint should also provide for further capacitating our courts and thereby enabling them to continue fulfilling their constitutional imperative, as we continue to reform and refine our young democracy… …and while we wait for change to come, we can take comfort in the fact that we may rely on our courts to uphold the Constitution and as enjoined in section 165(2), to “apply the law impartially and without fear, favour or prejudice”. References Business Day, 2021. SA's Electoral System set for major overhaul. 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Constitution of the Republic of South Africa Act No. 200 of 1993. Pretoria: Government Printer Republic of South Africa (RSA). 1996. Constitution of the Republic of South Africa, Act No. 108 of 1996. Pretoria: Government Printer. S v Dodo (CCT 1/01) [2001] ZACC 16; 2001 (3) SA 382 (CC); 2001 (5) BCLR 423 (CC) (5 April 2001) S v Makwanyane and Another (CCT3/94) [1995] ZACC 3; 1995 (6) BCLR 665; 1995 (3) SA 391; [1996] 2 CHRLD 164; 1995 (2) SACR 1 (6 June 1995) Soobramoney v Minister of Health, KwaZulu-Natal 1998(1) SA 765 (CC),1997 (12) BCLR 1696 (CC). - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This article has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. 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Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town, 8001 South Africa All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute. DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of the their respective Board or Council members. The challenges faced by local governments since democracy: How far have we come? By Nondumiso Alice Sithole MSc. Public Policy & Management; LLB. Property & Investment Practice Law Postgrad. Cert; Legislative Drafting Postgrad. Cert Abstract It is a well-established fact that the municipalities that comprise South Africa’s local government structure have become a focal point since the advent of democracy in South Africa, given their role in delivering on the Executive’s developmental objectives for the State (RSA, 1996). These developmental objectives require local governments to be tasked with the responsibility of developing their own development plans, in the form of Integrated Development Plans (IDP’s). The Municipal Systems Act 32 of 2000 (RSA,2000) requires municipalities to undertake a robust integrated development planning process in the production of their IDPs. The objectives of the IDP’s are supposed to be achieved through the Service Delivery and Budget Implementation Plan’s (Ekurhuleni, 2021) of municipalities, which are the means by which effect may be given to their respective Integrated Development Plans (IDPs). The aim of this structure is firstly, to achieve the objectives of local government as stipulated in Section 152 of the Constitution; and secondly, to give effect to its developmental duties, as required by Section 153 of the Constitution. For example, a municipality must structure and manage its administrative, budgeting and planning processes in order to give priority to the basic needs of the community, and secondarily, to promote the social and economic development of that community. In light of what may be said to be monumental duties that fall to local municipalities, in terms of fulfilling their critical constitutional mandate, one may presume that local governments have recognized the need to ensure that they possess at least the minimum level of human capital, coupled with financial and operational efficiency. Judging by the surge of local community protest that have taken place over the past seven years, this is not, however, the case and it seems clear that the local municipalities face a crisis. In addition, the continuous findings by the Auditor-General, that local governments are regressing, serve to solidify this fact. It is furthermore apparent that the most significant challenges lie in the human resources; governance; and monitoring and evaluation systems in municipalities. This article aims to examine these issues, particularly human capital development, with the deficiency of effective human resources systems as an overarching causal factor. It furthermore provides recommendations that may be adopted or modified with the intention of adequately addressing the issues of service delivery at the local levels of government. Introduction The municipalities that comprise South Africa’s local government structure have become a focal point since the advent of democracy in South Africa, given their role in delivering on the Executive’s developmental objectives for the State. This accords with what is commonly known as developmental state theory, which is characterized by a state undertaking to prioritize economic development as its top priority, in terms of government policy, and seeking to design policies and institutions that serve to promote this broad objective and foster transformation (Pham, 2012). Developmental local government is, in turn, defined as: “a local government that is committed to working with citizens and groups within the community to find sustainable ways to meet their social, economic, and material needs and improve the quality of their lives” (RSA, 1998). Its fundamental purpose is said to be the unravelling of common national development problems; the creation of new development prospects; and the achievement of shared national development targets. Thus, developmental local governance gravitates towards creating a better future for communities through the promotion of local socio-economic development programmes and projects. To achieve this, it requires strong and capable institutions, systems, strategies, policies, processes, and procedures in order to promote grass root development. As such, it is evident that the existence of a municipality should be development oriented and our local governments should indeed be tasked with the responsibility of developing their own development plans, in the form of Integrated Development Plans (IDPs). An Integrated Development Plan endeavours to provide an overall framework for development. Its intentions are to co-ordinate the work of local and other spheres of government into a coherent plan to improve the quality of life for all the residents living in an area (Gueli, Van Huysteen & Liebenberg, 2007). Thus, as a matter of principle, IDP should consider the existing conditions, problems, and resources available for development. Furthermore, the plan should strive for economic and social development for the area as a whole. It must set a framework for how land should be used; what infrastructure and services are needed; and how the environment should be protected (JDA, 2006). According to the Municipal Systems Act 32 of 2000, municipalities are required to embark on a vigorous integrated development planning process in the production of their IDPs, the purposes of which IDP’s are, in turn, to be achieved through the municipalities’ Service Delivery and Budget Implementation Plans. The aim of this requirement is firstly, to achieve the objectives of local government stipulated in Section 152 of the Constitution, and secondly, to give effect to their developmental duties in terms of Section 153. This is theoretically achieved through means such as structuring and managing of the respective municipality’s administration, as well as its budgeting and planning processes, in order to give priority to the basic needs of the community, and to promote the social and economic development of the community (Ekurhuleni, 2019). Local government is the level of government that is closest to the citizens. In essence, municipalities are best positioned and should be able to obtain and understand people’s wishes as well as the aspirations for their locality. They should also be able to identify and unlock local potential, and to mobilize resources present in their locality. As such, specific emphasis is generally placed on the developmental service delivery role of local government. These characteristics do not automatically equate to a higher quality of service delivery and legitimacy of decisions, but they certainly have the potential to do so. Local governments are distinctive. The Constitution (RSA, 1996) enshrines “original” powers and functions to municipalities. The Constitution also provides a list of “local government matters” over which local government has authority - these are captured in Section 156. Additional powers and functions may also be transferred by national and provincial governments to local government as a sphere, or to individual municipalities. A significant part of local government’s financial authority is guaranteed through constitutional provisions that secure local government’s power to levy property rates and surcharges on fees. Lastly, the Constitution provides that local governments are entitled to an “equitable share” of nationally generated revenue, providing municipalities with a legal claim to unconditional revenue streams. In light of the autonomous status of local government in South Africa, coupled with the fact that they have been tasked with such a significant constitutional mandate, it seems reasonable to presume that the municipalities comprising local government would long have recognized the need to ensure that they possess at least the minimum level of financial and operational efficiency (RSA, 1996: 88). Yet, municipalities still fail to generate adequate financial liquidity and are often in a state of financial chaos. There is a rising trend that demonstrates that the “autonomous rights” of local municipalities don’t extend to operational and financial collapse, as higher levels of government can intervene and “take over” the affairs of municipalities on the verge of collapse (Ledger, 2019). This interdependence in relation to other spheres of government implies a relationship of supervision. The national and provincial governments are constitutionally entitled and mandated to supervise the performance of municipalities. National or provincial interventions are, however, relatively slow and ineffective when dealing with a failing municipality. This begs the question: how effective are the national and provincial levels of government in discharging their constitutionally mandated function of providing support, and at strengthening the capacity of municipalities to manage their own affairs and to exercise their powers and functions as stipulated in section 154(1) of the Constitution (RSA, 1996)? Moreover, if provinces routinely monitor the work of municipalities and provide necessary support in areas where shortcomings are identified, as required by section 155(6) of the Constitution (RSA, 1996), why have so many municipalities become either partly or fully dysfunctional, particularly in this day and age in the context of a technological world? A few key factors that have led to the consistent downward spiral of South African municipalities are discussed in this paper. Firstly, the deployment of officials from the national or provincial departments who lack the knowledge required for administration at local level. That being said, it has been observed by the author, that interventions for political purposes are, in any event, expedited when it serves a political agenda. Furthermore, the attention devoted to the administrative management of failing municipalities is not equal. This is one of the main pitfalls of the Inter-Governmental Framework (RSA, 2005) currently in place. In addition, some of the significant challenges lie not only in the availability and allocation of suitable resources but further, in the quality of those resources that are available and accessible to local municipalities, in their various forms. The Auditor General's report showed that fruitless and wasteful expenditure had amounted to R32 billion, for the audit outcomes of the 2018 to 2019 period. (Auditor-General, 2020). One of the issues in relation to this is cadre deployment. It is an issue that is highly debated, but nonetheless taken for granted. Municipalities must be staffed with qualified individuals and cadre deployment, where insufficiently qualified cadres are deployed, starves municipalities of the qualified individuals they need. The above, in essence, is a challenge of the legislation, the Regulations on the Appointment and Conditions of Employment of Senior Managers (RSA,2000). It is often alleged that most cadres do not have governance as their priority but party-political agendas. This includes qualified officials who are placed for political reasons. The above limitations detract from municipalities’ ability to function in the manner in which they were intended. Moreover, deficiencies are exacerbated by the fact that most significant challenges faced by municipalities can be attributed to inadequate resource apportionment to those municipalities. The author submits that central to the failure of the grass roots government is the inadequate human capital, or the lack thereof. Other ancillary issues are also examined. Background Local governments were established in order to assist in addressing past inequalities at a grass roots level. This level of government was, in fact, a major force leading to the national reform process which began in South African, in 1990. The process resulted in the formation of the Local Government Transition Act of 1993 (herein referred to as “the Act”). However, the Act did not provide a blueprint for a new local government system – rather it simply outlined a process for effecting a change from the apartheid regime. The process provided for by the Act was a locally negotiated transition which has resulted in a wide and non-uniform array of municipal structures, wherein efficiency and functionality are lacking. This may be the probable cause of the current disparity in municipal structures. Previously, the weaknesses of the Act exposed its urban bias (Anon., 1995) and lack of structured support processes to enable municipalities to manage the transition process from a transitional system of local government to a democratic non-racial system. The Act’s inadequacies are reflected in the municipal systems. While many municipalities, elected councils and administrations have, in many areas, made significant progress in addressing backlogs and extending services, they still face insurmountable constraints. There are still huge infrastructural disparities and inequalities stemming from the history of the country that remain most visible in grass roots communities. Furthermore, the transition process has shown that the delivery of new municipal mandates is still not being achieved within the existing institutional framework. It is also becoming increasingly challenging for municipal governments to accelerate development, owing to the difficulties associated with corruption, mismanagement and maladministration, amongst other factors. Key challenges include lack of adequate finance, human resources, leadership; and technology as the main contributors to the slow developmental progress of municipalities (Beyers, 2016). The current state of local government Our municipalities’ maladministration permeates across all types of municipal categories including district, local and metropolitans alike. This has led to a state with failing municipalities, and it has resulted in a number of municipalities having been placed under administration since the Act came into effect. In November 2018, twenty-four municipalities were under administration (Evans, 2018). In May 2019, fifteen municipalities in the North West Province alone were placed under administration and citing financial distress; collapse of service delivery; mismanagement of funds; and maladministration as some of the grounds for their failures (Seleka, 2019). Most recently, South Africa’s state capital, the City of Tshwane, was placed under administration due to instability, demonstrating a lack of proper management and a lack of adequate and capable human capital (SA News, 2020). Incidents such as those detailed above clearly indicate the need to reform the way in which municipalities are managed, and to further re-examine some of the pieces of legislation, including but not limited to the Municipal Structures Act (RSA, 1998), which outlines the different powers and functions of human capital in municipalities. In terms of the Act, politicians are prohibited from interfering with the executive. They are not, however, barred from interceding with municipal priorities such as those espoused through the IDP. This causes conflict between the executive and legislative parts of councils over decision making powers (RSA, 1993). Municipalities are strategically located. As such, they have far greater institutional control over their jurisdictions; policy makers; the entire scope of conduct of their own officials; and the communities within which they govern. This then begs the question: why do they still, notwithstanding this greater degree of control, have so many significant and public failures? It is the author’s submission that the reasons for this vary, from a shortage of adequate skills; ineffective performance management systems; outdated technology; lack of leadership commitment; and most prominently, the deficiency in the human resources of municipalities, coupled with an insufficiency of expertise in critical roles. For the purposes of this article, it is suggested that the shortage of human capital and effective human capital is at the epicentre of municipalities failing to perform. Section 195(1)(h) of the Constitution (RSA, 1996), states that “good human resource and career-development practices, to maximize human potential, must be cultivated”. This goes to the core of what human capital development should achieve: maximizing the potential of the employees that make up local government organizations, by ensuring that there are sufficient career paths for those who perform, as far as organizational objectives are concerned. It has been determined that the problems experienced by smaller municipalities include “procedures followed when appointing new staff members” (Du Plessis, 2016). When proper procedures are not correctly applied and followed in the appointment of new employees, one can draw the inference that persons that are ill suited to the respective jobs may be appointed and that this may, in turn, lead to ineffective performance. It has also been suggested that municipal officials often fail to perform because they do not expect any punitive action against them. This once again points to how problematic the political-administrative interface may be and how political influence in human resource issues can be to the detriment of local government achieving its goals. Political interference in the recruitment process allows for poorly qualified individuals and cadres to be deployed to strategic positions. The testimony at the Zondo Judicial Commission, reveals that this practice is unfortunately widespread throughout all spheres of government. Academics and practitioners have, for years, maintained that sustained competitive advantage for organizations could accrue from industry level barriers such as “technological supremacy, patent protection and government regulations” (Du Plessis, 2016). Further, they have stated that in the modern environment, requiring flexibility, speed-to-market, effectively developing and managing employees’ knowledge, experiences and skills and expertise – collectively defined as ‘human capital’- has become a key success factor for sustained organizational performance” (Du Plessis, 2016). The argument is that it is important for any organization to maximize performance outcomes through the optimal deployment of existing resources and that one of the most important of these resources, is human capital. Furthermore, academics argue that if talented employees are not deployed where they are needed, an organization risks “missed market opportunities, poor customer service and revenue erosion” (Du Plessis, 2016). It is clear that the modern organization requires employees that are knowledgeable, experienced, skilled and who possess the necessary expertise in their vocational areas, in their organizations, in order to optimize performance and therefore the achievement of organizational goals. It is furthermore clear that the maximization of human capital can be regarded as a critical requirement for sustained organizational performance that is imperative for its long-term success. Finally, it is also clear that failing to pay sufficient attention to the issue of human capital development could expose any organization to significant risk. This is the view taken by the author, and specifically, it is the position the author takes when it comes to local government, for the purpose of this article. Human capital management may be defined as “the approach to staffing which perceives people as assets whose current value can be measured in terms of productivity and whose future value could be enhanced through investment”. The nexus to the above, is the term talent management as “the process through which an organization’s anticipated talent needs are planned for through acquisition or development strategies” (Thornhill, 2014:313). The assertion is thus that public organizations, like municipalities, have to invest in their existing human capital. This is done by taking care of their developmental needs, whilst there also has to be a process of pre-planning in terms of what the institution’s future human capital needs may be, in order to facilitate sustained organizational performance. It could be argued that if municipalities made a concerted effort in terms of attracting suitably talented people, as well as creating an environment in which investing in existing human resources is part of the organizational culture, being employed by such municipalities will be regarded as a career path of choice (Du Plessis, 2016). The role that inadequate human resources and shortage of skills plays is at the crux of municipal malperformance and remains the biggest challenge in terms of their ability to achieve efficiency. In many underperforming municipalities, this recurring theme relates, in particular, to key critical positions being occupied by individuals lacking in the essential skills required for the efficient operations of the respective municipalities, or by those managing those who are in those critical positions (Madumo, 2015). The extensive timeframe in which rare skills are filled exacerbates productivity and efficiency, resultant is inefficient use and underutilization of those precious resources that cities are in possession of, for example, funds directed at filling of vacancies. The role of the most senior municipal official, now called the municipal manager, has changed significantly. Since 2000, each municipal council has had the authority to appoint a municipal manager, as well as other senior management personnel that report directly to the municipal manager (RSA, 2000). This structure was designed to produce a senior management team in the municipality that understands, and operates in sync with, the political principals in its municipal executive. Although this objective is supported, the structure does have negative side-effects. Now, when there is political instability in a municipal council, there is an immediate and direct ‘knock-on’ effect on senior management. A change in local political leadership; shifts in a ruling coalition’ or even a reform within a ruling party often leads to the dismissal of the municipal manager, and sometimes even to the dismissal of managers reporting to the municipal manager (De Visser, 2009). This is evidenced by the large number of unfilled vacancies in the top two echelons of municipal administration. In some instances, municipalities have high percentages of posts at senior management level that stand vacant for months on end. Municipal administrations thus suffer from a lack of continuity at senior management level. In 2020, Gauteng’s Cooperative Governance and Traditional Affairs, and Urban Planning Department, revealed that Gauteng municipalities had a 20% vacancy rate at senior management level (Zuzile, 2020). The highly charged political environment and profile of local municipalities and senior management positions has contributed immensely to the shift in control over appointments, from the municipal council to the internal workings of political parties. There has been, and still is, widespread concern, that the need for ‘political suitability’ has eclipsed the need for qualified and skilled senior managers in municipalities. The fact that thirty percent or more of senior municipal management has five years or less of local government experience demonstrates a demoralizing trend towards the appointment of inadequately skilled senior managers (Businesstech, 2021). It is argued that this is the result of excessive political involvement in what should be appointments on the basis of merit. In order for local government to further improve its performance, a new balance needs to be struck between the need for the political alignment of top management with the municipal executive on the one hand, and an insistence on quality, on the other. Serious consideration should be given to removing the appointment of the second layer of management from the realm of the municipal council and leaving this to the municipal manager. It is suggested that this will assist in reducing political involvement in the administration, whilst leaving the political alignment between the municipal manager and the municipal executive intact. Clarifying the roles and functions of the Council and the municipal manager is crucial. The distinctions between the responsibility of the Council and that of the municipal manager must also be emphasized. The Council is responsible for the formulation of policies, strategies and vision, whereas the municipal manager is responsible and accountable for the implementation of Council’s strategies, plans and policies (Paulin, 2014). The end result or effect of the failure to adhere to the abovementioned principles is that municipal departments don’t reach their objectives, as a consequence of their inefficient processes. For example, it is a common occurrence that technical posts, such as engineering posts, are occupied by staff who do not possess the appropriate technical qualifications. The damaging effects of this include instances where project managers in municipalities fail at project management undertaken on behalf of the municipalities, that in turn result in the municipalities being embroiled in litigation, with its resultant cost implications and halting of service delivery. Interventions that may lead to increased efficiency When considering some of the interventions that may lead to better performance, the undermentioned factors are not discussed in the order of what may be deemed to be most important. They are, in essence, all equally relevant. An investigation of the exact extent to which municipalities’ strategies are influenced by their human capital capacity and how human capital capacity influences the development and implementation of municipal strategy, should be an ongoing exercise of their respective Human Resources departments. The Human Resources departments should undertake continuous assessments in this regard. They should also determine the extent of the influence of municipal councillors; communities; and community organizations, as significant strategic partners in municipal processes. Consistent training and upskilling of general employees, but more acutely, of rare skills staff, is also critical to addressing the above identified major constraints, particularly in so far as they relate to shortcomings emanating directly from human resources factors. The focus on the training of staff must be particularly focused in terms of both the quantity and quality of appropriately trained personnel in these key roles. The shortage of expertise in senior positions impacts the capacity of municipalities to perform at the level that they are theoretically capable of. Skills development should become ingrained in the DNA of local governments. It is also essential that skills audit are always continuously conducted. A key requirement in achieving organizational or municipal goals is that the modern local government organization must ensure that their employees are experienced, have the requisite skill base and knowledge, and also the vital expertise in their vocational areas within their organizations. This may have an impact in terms of contributing positively to the optimization of performance and will ultimately lead to objectives not only being met departmentally, but the municipality will also achieve its organizational goals. An organization that has knowledgeable key staff members leading lower members of staff will be able to lead appropriately and with confidence. This kind of structure should further be bolstered with performance management systems, which should, in turn, be linked to a greater organizational system, which is related to, amongst other things, organizational performance versus individual employee outputs, and reward and recognition systems within the organization. The author has observed that the importance of motivating municipal employees has been neglected by most municipalities. Performance management should be maintained and implemented in organizations in order to achieve, amongst others, the following objectives: the creation of a climate of motivation; the creation of a performance culture; and the linkage of remuneration with performance, amongst other things. It is the author’s submission that the existence and continued proper implementation of a good performance management system within an organization could assist both the organization, and the individual employees. Municipalities should employ the use of participatory monitoring and evaluation techniques, that focus on addressing challenges facing municipalities. Municipalities should decide on evidenced-based monitoring and evaluation framework which consults with the stakeholders and essential business partners of the municipality. (Cloete & Eigelaar-Meets, N.d.). Secondly, the adoption and use of essential, innovative technological systems that are commensurate with the needs of the economy within which the municipalities and their stakeholder operate, continues to occur at what may be termed snails-pace. The impact of technology is that it results in modifications to time spent on service delivery. Moreover, the digital and technological transformation of economies is drastically changing the way that people live in South Africa, Africa and globally. However, Smart City initiatives fail due to changes in political leadership. Smart cities are municipalities that use information and communication technologies (ICT) to increase operational efficiency, share information with the public, and improve both the quality of government services and citizen welfare. Long term projects, such as municipalities developed IDP’s, require long term commitment from municipalities. One of the main strategies of smart cities is the promotion of innovation (Marais, 2019) and municipalities should be encouraging “innovation ecosystems” (Marais, 2019) that enable structural economic transformation, from traditional to new/IT-based economic activities. The achievement of this objective is, in the authors view, developing at a stagnant pace. Therefore, it is perhaps necessary to seek to achieve a balance of the use of technology in places where human capital is not necessarily essential. An example of this would be the use of automatized systems at toll gates, where traffic ordinarily piles up, perhaps as a result of the fact that there is only one teller/employee who is doing their best to execute their job but only can only do what is reasonably expected of an individual. The use of an automated system may, in this instance, execute the particular task more speedily. The use of automated systems will, in turn, be aimed at easing the burden of the rate payers. Thirdly, financial mismanagement is a devastating contributor leading to flawed municipalities, as is the case with any other enterprise. The maladministration of finances is observed to be a widely pervasive malignancy in a wide number of the economies across the African continent. Generally, political structures are not held accountable (Henao, Moyer & Namakula, 2017). A large portion of legislation such as the Municipal Systems Act 32 of 2000 and the Municipal Finance Management Act 56 of 2003 (the MFMA) (RSA, 2003) deals with directives and consequences for the administration. Legislation does not, however, place a similar obligation on politicians and collective accountability for their conduct. The exception is section 32 of the MFMA. Whilst the legislation provides, for example, that Councillors may not interfere in the administration, who actually polices this? The author’s submission is, therefore, that legislation must be amended to make politicians accountable and liable for their actions. In the case against Bathabile Dlamini (Constitutional Court, 2018) the Court took this route. This will not, however, be a readily available solution until accountability and liability for politicians is legislated. The legislation must also address behaviour and conduct. While political bickering, whether inter-party or internal to a party is a hallmark of democracy, such conduct must be limited when it compromises service delivery. An example of this conduct is when a party walks out of a council meeting, preventing decisions from being made (Frank, 2021). Furthermore, the under-allocation of budgets to municipalities, by Treasury for municipalities’ functional activities, can also be linked to poor performance in municipal service delivery. Municipalities deliver a range of specified services to relatively small geographically delineated areas. Municipalities should, therefore, be allocated proportionate funds by Treasury, according to the type of municipality that particular local government is. The creation of new and larger amalgamated municipalities has also resulted in significant transition costs, due to the merging of administrations. This has resulted in municipalities being faced with challenges in terms of containing personnel expenditure. In addition, some local governments are still, to date, struggling with the fact they have limited effective tax capacity. The inhibition of their taxing powers has a negative effect in terms of generating revenue. In 2016/17, Ekurhuleni was, for example, the only city out of five large cities not to have borrowed money for capital expenditure, Sixty two percent of this was funded through internally generated funds (Mughogho, 2018). This is evidently a difficult thing to achieve. Therefore, such challenges must still be re-visited if municipalities are to deliver municipal services at reasonably affordable prices; to provide free basic services to poor households; and to continue to promote social and economic development, in line with their developmental mandate. With the above submission made, it should also be noted that municipalities should strive to inject supplementary and additional efforts into generating new income streams, perhaps drawing on certain practices from the private sector that may assist in generating revenue. An area in which municipalities are also lagging behind as far as growing their revenue is concerned, is asset management. Public property management has historically been a combination of maintaining properties that are used for essential services and disposing of surplus properties, as either a public-sector service, or as part of social development. Property has also been used to address housing needs. Municipalities should not extend their role in so far as their properties are concerned. Public properties must, however, be viewed as a portfolio of assets, the effective management of which can be used to generate income. The establishment of a proper property asset register further establishes the financial value of such a portfolio, which, in turn, requires a direct link to the valuations roll. This requires the establishment of a skilled task team(s), together with the investment of further resources, as this may be the steppingstone to establishing potential value, or future value, that can be obtained from public assets. Task teams should also be in charge of other strategic aspects that will look at ways to expand the economic output/s that can be acquired from any and every property. One must however appreciate the fact that the above can only be achieved once there is clarification of local governments’ property rights and fiscal autonomy. Currently, legislation is very limiting in this regard. Nonetheless, nothing prevents municipalities from creating policies that can assist them in driving effective public property management as one of their core objectives. The lack of enforcement of financial accountability in municipal organizations has had a detrimental effect on their operational efficiency; how the leadership of municipalities are viewed; but most importantly the performance of the municipalities. In many municipalities financial accountability is absent to non-existent given the significantly high levels of the mismanagement of resources (Reddy, 2017). Municipal leadership can, however, assist in the stemming of corruption in local government, by providing support to law enforcement agencies enforcing the law, as prescribed by the Public Finance and Management Act (PFMA) in terms of illegal activities, and prosecuting corrupt officials misusing public resources for personal gratification (Reddy, 2017). It is pertinent knowledge that local governments have an array of legislation and policies at their disposal which in the instant are developed by them. Furthermore, local governments adopted “Batho Pele” (Ekurhuleni, 2017) good governance principles to facilitate, improve and sustain service delivery by them. This has not necessarily resulted in higher levels of performance by municipalities, which has been evidenced by numerous service delivery protests over the years. Local governments, in general, face a wide range of risks associated with their daily operations, including financial, reputation, political and operational risks. One may therefore assume that care would be exercised in establishing the functions and role of corporate governance in municipal organizations. The authors’ assertion is that government, as a whole, but in this context specifically local governments have neglected the development and up scaling of their corporate governance departments and in essence, they lack such offices within their institutions. So, although local governments have good legislative frameworks and policies on managing local government, they have failed to fully implement corporate governance. The protocol on corporate governance in the public sector provides guidance to state owned entities in achieving the socio-economic objectives of the government, without particular emphasis on local governments (DPE, 2002). The legislative frameworks and policies do not provide clear guidelines as to how corporate governance can transpire in local governments. This is what has also led to a lack of accountability and disregard for good governance, and inevitably, to severe failures in local governments. There is a significant degree of responsibility entrusted in local government leadership, which necessitates ethical values to enhance accountability, fairness and transparency as dictated by corporate governance principles. It is in the implementation where the deficiency exists. It is suggested that a strong system of accountability, that works effectively to make sure that municipalities are constantly reminded and held to account as far as their obligations are concerned, is the remedy for this. In order to achieve this, it is recommended that the Ministry of Cooperative Governance and Traditional Affairs and the Ministry of Public Service and Administration, together with SALGA (the South African Local Government Association), must therefore provide expertise and facilitate the development of corporate governance frameworks that will apply to different categories of municipalities, or to each local government. Secondly, the facilitation of corporate governance must be compulsory for all local governments. This means the actual establishment of divisions or offices within their departments designated to monitor implementation of policies by the various employees and to develop and explain their practices, according to their environment. In cases where there is no capacity and capability in terms of skills, competence, and expertise in the management of the local government, external agents should temporarily be utilized, in order to provide strategic guidance on the creation of such offices. The employees, who are employed by these departments, should be required to be custodians of good governance in the organization. Their role would be not to get involved in the politics of the local government, but to oversee and ensure that there is compliance with the corporate governance principles and policies in place. The above places an earnest emphasis on the proper implementation of monitoring and evaluation mechanisms in local government structures. Although there is a policy tool, the Policy Framework for the Government-wide Monitoring and Evaluation System (RSA, 2007), that has been developed, much can be said as to whether this has been effectively used as a developmental tool. In general, monitoring and evaluation capacity is low in the majority of municipalities - perhaps even more so in smaller municipalities. This also has an adverse effect on their capacity to deliver quality monitoring and evaluation services. Local municipalities should prioritize the skilling of their current staff responsible for monitoring and evaluation functions. Again, an environment that attracts and retains technical staff by offering incentives, such as training opportunities, should be promoted by local municipalities. The foundation for proper monitoring and evaluation systems must stem from the support of both the political and administrative leadership at a municipal level, in order to ensure that such municipality functions optimally by offering citizen-responsive services. The strengthening of accountability within the municipality and holding municipal leadership accountable for their performance will serve to eliminate or address systemic challenges in local government, thereby enhancing quality service provision. It is furthermore recommended that interdepartmental relations should be enhanced among colleagues to assist in addressing challenges at different levels. This would enable departments to play an oversight role, when required at certain intervals, thereby mitigating errors made by colleagues from other departments. Legal, Risk and Internal Audit departments should also assist in identifying risks and ongoing breaches that occur in municipalities, the reasons why they occur and possible remedies and interventions that ought to be employed. It suggested that an awareness of the advantages of good governance should be promoted in municipal councils, in line with the principles of the King III report (IODSA, 2009). Furthermore, the political leadership occupying key positions, should set the collective tone with respect to accountability issues and challenging transgressions. They must lead by example in effectively managing bad governance, poor performance and non-compliance – and they must do so in relation to not only their staff, but also with their very own peers. The establishment of and adherence to good governance principles in local governments should not be met with resistance from politicians, as this sets the tone of the municipalities. Corporate governance should be used as a tool to effectively manage the relationship between the administrative and political leaderships in local governments, since such governance concerns itself with issues of responsibility and accountability. Local governments should begin to challenge the view that now predominates, in terms of which they are viewed as having enabled an erosion of accountability, and that they are incapable of leading world class municipalities. This is something that needs to be addressed if a capable state is to be established and sustained. African countries such as Egypt, Congo, and Lesotho, etcetera (Francois, 2018). In particular face extensive challenges due to above-mentioned. In as much as the author has highlighted other key arears that municipalities must focus on including resources and leadership etcetera, it is suggested that they are all ancillary issues to the epicentre of the problem, namely the need to have human capital that has a strong sense of service orientation in local government. What is needed is local governments that will apply the correct procedures in the appointment of employees, that will accordingly be well suited to the job they fill, the end result of which is more effective performance. The electorate must also be educated about their rights and the power they have to bring about change. Currently, communities tend to vote for parties because of sentiment, rather than serving their interests. This allows non-functioning councillors to remain in office and even to return in successive elections (Frank, 2021). Municipalities that perform well are generally characterized by the following; a strong tone set by effective leadership characterized by accountability; controlled environments that are institutionalized; a strong oversight on financial management and debt collection; capable and skilled staff members; proper governance structures in place, with effective monitoring and evaluation systems in place; compliance with supply chain management processes and relevant. These are just some of the elements which, when collectively applied, lead a municipality to perform better. In a qualitative analysis, undertaken by the author, the following municipalities were evaluated: Ngaka Modiri Molema District Municipality (North West province), Dipaleseng Local Municipality (Mpumalanga province) and Okhahlamba Municipality (KwaZulu-Natal province). . The majority of the failures of these municipalities stemmed from exactly the same challenges, or extremely similar challenges. Ngaka Modiri Molema District Municipality has been experiencing serious challenges since the year 2014, when it was placed under Administration. Section 139 of the Constitution (RSA, 1996) provides for an intervention by the provincial sphere of government, where a municipality, as a result of a crisis in its financial affairs, is in serious or persistent material breach of its obligations to provide basic services or to meet its financial commitments. The province is empowered to intervene and can take steps to impose a recovery plan; dissolve the council; or assume responsibility. In this case, the Section 139 intervention arose due to the fact that the District Municipality had been experiencing a myriad of governance and administrative challenges. The Council had appointed a Municipal Manager and senior managers who did not meet the competency requirements in terms of the local government regulations, despite being advised against such appointments. In addition to the other unsuitably qualified senior management staff, the Chief Financial Officer, who was appointed in the 2012/2013 financial year, was also insufficiently qualified, in that he did not have the relevant experience as a financial management practitioner in the local sphere of government. Furthermore, there were reports that the supply chain management processes, with respect to key services, were being consistently flouted by the Municipal Manager and other senior managers. Lastly, failure by the Council to act on the alleged maladministration, fraud and corruption led to the collapse of the municipality. The collapse of this municipality is not surprising given that it accounted for half of the six material irregularities, that were identified as having occurred at three municipalities under audit by the Auditor General (Auditor General, 2020). The Auditor General’s 2020 report still identified the most material financial irregularities, three, at Ngaka Modiri Molema (Auditor-General, 2020). The challenges that the Dipaleseng municipality faced around service delivery emanated from administrative, financial management and governance issues. It appears that these challenges recurred over long periods of time, and that they have been repeatedly highlighted in the Municipality’s annual reports, as well as the 2020 report of the Auditor-General. It is reported that the municipality has not been proactive in employing procedures or taking steps to prevent the losses incurred or to mitigate the abuse of the supply chain management regulations and contraventions of MFMA laws that have been prevalent within the municipality (Dipaleseng District Municipality, 2018). The financial sustainability challenges are a result of poor financial management, operations, administration, lack of proper leadership and planning, inadequate delegations, lack of staff discipline, poor performance and lack of accountability. Given the nature of local government, rural municipalities fall short in collecting revenue compared to the urban cities and district municipalities. As a rural municipality, OKhahlamba municipality suffers from staff that lack technical skills, knowledge, leadership and management skills within local government. In addition to the officials and councillors of the municipality lacking these basic skills and knowledge, the local government also lacks adequate tools and resources to carry out the necessary tasks to deliver services. This has resulted in the quantity and quality of service delivery being compromised (Mabizela & Matsiliza, 2020). Non-compliance by municipal officers is also a pervasive threat that leads to poor performance and inefficiency in the Okhahlamba municipality. A further challenge in rural arears is that of technology in remote arears. The lack of electricity, or access to it, results in a slow pace of service delivery and innovative ways need to be utilized for effective service delivery to occur. The supply of energy can play a crucial role in underpinning efforts to achieve the Millennium Development Goals and improving the lives of poor people across South Africa. However, there are low levels of access to electricity in rural arears. This also affects officials in terms of being able to obtain information; collect and store data; and most importantly, to become trained and skilled through the use of technology. The above demonstrates that the issues that affect the municipalities reviewed, resemble the issues that other municipalities have. A recent report, released in August 2020 by the Research Unit in Parliament, and dealing with Municipalities Under Section 139 Intervention, found that 140 municipalities had been placed under administration between the years 1998 to 2019 (Parliament, 2020). The findings of the study revealed that the challenges of service delivery in local governments remains a serious governance challenge and that this challenge is most prevalent in rural areas in the KwaZulu-Natal and North West provinces. It is also apparent from the research material that was studied, that the state of rural developments is slow. That being said, it is worth noting that the majority of residents in rural arears, where agriculture and farming are the backbone of economies for the district municipalities, cannot afford to pay for basic services, due to the fact that jobs are scarce. Consequently, these municipalities do not receive sufficient revenue from residents; hence they do not have sustainable resources, with which to provide services. It is the author’s submission that political leaders and senior management officials employed by local government in rural areas should make more use of structures such as traditional leaders and chiefs in such areas for the distribution of information, but also for data and governance purposes. Local leaders are normally able to transmit crucial information and to win over the local population. A recent poll conducted in 2021 by Ratings Afrika, on behalf of Money web, listed the most improved and the most deteriorated municipalities over a period of five years. The findings indicated that the most improved municipalities focused on getting the basics right. These were improving revenue collection; eliminating wastage and corruption; and better service delivery, which is, in turn, dependent on maintaining and improving infrastructure spending and the maintenance of existing infrastructure. In these municipalities, there was a concerted effort from the senior management to improve the municipalities’ financial sustainability. What stood out the most – and served as a huge alarm bell - is the fact that the calibre of management staff in municipalities was\ found to have had a huge bearing on their performance. The fact that many municipalities have chased away skilled administrators has left the door opened for incompetency. Furthermore, municipalities are often embroiled in legal battles to get rid of “problematic staff”. In the final analysis, what was suggested is that it’s not impossible to fix the messy situation that municipalities find themselves in. This can be achieved by targeting the actual source of the problems at local government level, which is usually the quality of management and human capital (Ryan, 2021). Recommendations It is recommended that in working towards the 2030 sustainable development goals (Lina Henao, 2017), municipalities should focus on the following issues:: human resources departments must be capacitated with human resources specialists, who must play a strategic role in the acquiring of skilled human capital; corporate governance must be prioritized in the public sector, coupled with a revamp in legislation to help guide the implementation; legislation with respect to the policing of those in leadership positions must be reworked in order to achieve effective accountability and provide for proper checks and balances to be put in place; continuous upgrading and modification of monitoring and evaluation systems so as to align them with global standards; and technology must be used as a tool to assist in achieving effective service delivery. Rural municipalities must also utilize the assistance of traditional leaders as they are the bridge to their communities. Finally, the continuous upgrading of the level of education for councillors is crucial to guarantee that they will be able to ensure proper oversight, and to ensure proper accountability. Conclusion The global outbreak of Covid 19 requires local governments to be more aggressive in respect of being innovative, progressive and instrumental in ensuring that service delivery is not hindered and ensuring that they meet their objectives as outlined in their respective IDPs. Frameworks of reference, defining the qualifications and responsibilities of local government staff and a national local government capacity-building strategy should be implemented at local level. Vacancy rates for senior management positions by municipalities should be highly regulated through the use of external HR consultants, who can be utilized in ensuring that the hiring of senior professional staff is conducted properly and purely on the basis of merit. The adoption of this procedure, as a formal requirement, would solidify ongoing “buy-in” (author’s emphasis) to the commitment of adequate and appropriate resourcing and to the up-skilling of municipal staff. Capacity building should include regular training; improvements to salary structures; adequate working conditions; mandatory development courses; and a demonstrable commitment to staff well-being. Monitoring systems and measures related to performance management should be vigorously implemented by Human Resources departments, in order to keep track of the skills base. It is critical that municipalities be adequately resourced with competent monitoring and evaluation tools and system for their personnel. They must also be well-resourced with up to-date training in the maintenance and use of such mechanisms. This is important for strengthening their capacity to deliver efficient monitoring and evaluation services. Smart technology methods should be employed by municipalities in order to increase their abilities to meet citizens demand for services. An example of this is the use of automated machines to operate toll gate operations. This may have job-loss implications, but such losses may be mitigated through increased opportunities in other areas. Automation, for example, results in a greater need for technical roles in terms of app development and equipment maintenance. The need for guidelines and a legal framework that will facilitate the implementation of corporate governance in a municipal context, is also a key factor in working towards improving the performance of local governments. This must be coupled with the personnel who are adequately trained to assist municipalities in implementing the guidelines within their respective organizations. Furthermore, it is the authors observation that factors such as leadership, technology, and adequate human and financial resources as invaluable in achieving what Sections 152 and 153 of the 1996 Constitution determine is the very essence and purpose of local government: namely to provide public goods and services to local communities and to enable their social and economic development. Lastly, the author has considered the crucial issue of human capital as a meaningful contributor to local government organizational performance. Having done so, the author has made recommendations to the effect that consistent ongoing training is key if municipalities are to achieve their objectives. The functioning of municipalities is highly dependent on the people involved in them and on those who run the day-to-day operations of the organization. Their ability to work optimally has a direct nexus to the achievement of the organization’s mandate. It is therefore evident that no organizational strategy can be easily accomplished or achieved without aligning it with the human capital available, or without taking decisions on human capital acquisition or development, with the organizational strategy in mind. References Anon. 1995. Front Matter. Journal of Southern African Studies, 21(1) [Online] Available at: www.jstor.org/stable/2637327 [accessed 22 June 2020]. Auditor-General. 2020. Not much to go around, yet not the right hands at the till. Pretoria: Auditor General. Beyers, L. J. E. 2016. Service Delivery Challenges Facing Municipalities: A case study of Fetakgomo Local Municipality in Sekhukhune District Municipality. Bangladesh e-Journal of Sociology, 13(2). Businesstech. 2021. Almost half of South Africa’s senior municipal officials don’t meet minimum competency levels. [Online] Available at: https://businesstech.co.za/news/government/483989/almost-half-of-south-africas-senior-municipal-officials-dont-meet-minimum-competency-level [accessed 4 June 2021]. Cloete, H. & Eigelaar-Meets, A. F. W. S., n.d. The Challenges Faced By The Municipal Skills, s.l.: School of Public Leadership. Constitutional Court. 2018. Black Sash Trust (Freedom under law intervening) v Minister of Social Development and others [ 2018] ZACC 36. Pretoria: Southern African Legal Information Institute. Department of Public Enterprises (DPE). 2002. Protocol on Corporate Governance in the Public Sector. Pretoria: Department of Public Enterprises. De Visser, J. 2009. Developmental Local Government in South Africa: Institutional Fault Lines. The Commonwealth Journal of Local Governance, 2. Dipaleseng District Municipality. 2018. Draft turnaround strategy/financial recovery plan. Mpumalanga: Dipaleseng District Municipality Du Plessis, L. M. 2016. 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Cape Town: Government Printer. Paulin, M. 2014. Corporate municipal governance for effective and efficient public service delivery in South Africa. Journal of Governance and Regulation, 3(4):98-106. Pham, H. H. 2012. The developmental state, the evolving international economic order, and Vietnam. PhD dissertation. University of Birmingham. Reddy, P. 2017. Operationalizing an effective monitoring and evaluation system for local government: Considerations for best practice, Cape Town: African Evaluation Journal. Republic of South Africa (RSA). 1993. Local Government Transition Act. Pretoria: Government Printer Republic of South Africa (RSA). 1996. Constitution of the Republic of South Africa. Pretoria: Government Printer. Republic of South Africa (RSA). 1998. Local Government Structures. Pretoria: Government Printer. Republic of South Africa (RSA). 1998. The White Paper on Local Government. Pretoria: Government Printer. Republic of South Africa (RSA). 2000. 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[Online] Available at: https://citizen.co.za/news/south-africa/politics/2195933/another-north-west-municipality-placed-under-administration-council-dissolved [accessed 15 May 2020]. Thornhill, G. V. D. I. I. 2014. Public Administration & Management in South Africa: a developmental perspective. Cape Town: Oxford University Press. Zuzile, M. 2020. Gauteng municipalities have a 20% vacancy rate among senior managers. [Online] Available at: https://www.timeslive.co.za/news/south-africa/2020-10-14-gauteng-municipalities-have-a-20-vacancy-rate-among-senior-managers/ [accessed 4 June 2021]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This article has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. 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Roundtable report on the National Health Insurance Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. All records and findings included in this roundtable report, stem from the discussions that took place during the roundtable dialogue on the National Health Insurance, 2 December 2019 at Deloitte, Woodmead, Sandton, Johannesburg, South Africa. Content Setting the scene for the NHI roundtable dialogue – Ms Sue van der Merwe, Chairperson of the Inclusive Society Institute Purpose and objectives – Daryl Swanepoel, Chief Executive Officer of the Inclusive Society Institute 1. Executive Summary of the National Health Insurance Roundtable Dialogue held on 2 December 2019 in Sandton, Johannesburg 2. Desktop review on the potential constitutional implications of the NHI bill 3. Recommendations 4. NHI ushers in universal health coverage for all in South Africa: An extract from the presentation of Dr Nicholas Crisp, NHI Fund Developer, Ministry of Health 5. NHI is a healthcare revolution, not a political motivation: Dr Gwen Ramokgopa, former Deputy Minister of Health and ANC NEC Education & Health Sub-committee member 6. Extracts from presentations by sectoral representatives 6.1 Business proposes joint ranks with government over NHI to balance capacity 6.2. Workers call for urgent quality healthcare from government in response to NHI 6.3. NHI gives rise to constitutional challenges 6.4. NHI presents a golden opportunity to equalise the health system 6.5. Quality and standards: the cornerstones of achieving universal health coverage 6.6. Managing the lifeblood of the NHI 6.7. Integrating family practitioners as gatekeepers to the NHI 6.8. MedTech as a solution to the NHI’s pricing challenges 6.9. Fundamental principles for NHI success: efficiency, quality and responsiveness 6.10. Bringing the frontline of healthcare to the NHI debate 6.11. Fair play in the pharmaceutical trade in Africa 7. Finding pathways to consensus on the NHI (Open discussion) Setting the scene for the NHI roundtable discussion Ms Sue van Der Merwe | Chairperson of the Inclusive Society Institute The Inclusive Society Institute held a roundtable discussion on the National Health Insurance (NHI) system on 2 December 2019, with dialogue continuing from midday until late into the afternoon. The meeting was hosted at Deloitte Place in Sandton, and moderated by Deloitte’s Life Sciences and Healthcare Lead, Ashleigh Theophanides. The keynote speaker was Dr Nicholas Crisp, NHI Fund Developer in the National Department of Health, who presented on the National Health Insurance Bill. A number of other key South African stakeholders also delivered their input. After which there was an open discus­sion where the other notable guests in attendance were invited to express their views and concerns. The primary focus of the Inclusive Soci­ety Institute, and to a large degree the dialogue around the table on the day, was to work on and promote a more in­clusive society, as its name suggests. There is much noise being made in South Africa’s national discourse about various present-day issues, but not much of it is positive. The institute has been established to create a platform where this discord can be presented and discussed, to find some middle ground in dealing with the pressing issues the country faces. It may sound overly optimistic but there is more in common between the diverse societal players than one might think. And those commonalities seem to become particularly evident when the nation wins at something – winning the Rugby World Cup this year is case in point. The country’s natural optimism and natural energy as a society comes to the fore in these instances. But when tackling complex, difficult issues, this optimism risks getting drowned out by the negative talk. The question of the National Health Insur­ance is one of these stumbling blocks. National discord is not unique to South Africa; anybody who reads the news, will know that. In fact, people world­wide are taking to the streets to voice their arguments against the state of their own societies. South Africans generally fair better than other countries at getting around the table and thrashing out current is­sues, coming up with policy platforms, such as the Inclusive Society Institute, that offer a broader network of support for society. The institute then becomes a valuable resource for identifying areas of align­ment and disagreement and finding ways to bridge those gaps. Doing so through robust discussion, keeping an open mind to the perspectives of the various stakeholders around the table, and through undertaking research and analysis of public policy shortcomings. In the foreseeable future, the insti­tute will be organising many more opportunities for dialogue like the NHI roundtable. In addition, it will be producing publications through a variety of media avenues. And all with the intention of seeking to facilitate cooperation with similarly focused international and local institutions. The NHI discussion has come at the right moment – at a point where gov­ernment legislation on, and the process in which we progress and go forward with the health of our nation, is at the pinnacle of transformation. Hopefully this dialogue will encourage further debate and discussion on the issue, with the result of finding pathways that could achieve consensus. Key takeouts 1. The Inclusive Society Institute held a roundtable discussion on the Draft NHI Bill on 2 December 2019 at Deloitte Place in Sandton. 2. The keynote speaker was Dr Nicholas Crisp, NHI Fund Developer in the Ministry of Health, who presented on the National Health Insurance Bill. 3. The primary focus of the Inclusive Society Institute, and to a large degree the dialogue around the table, is to work on and promote a more inclusive society. 4. The institute has been established to create a platform where discord can be pre­sented and discussed, to find some middle ground in dealing with pressing issues. 5. The institute is a valuable resource for identifying areas of alignment and disa­greement through robust discussion, and research and analysis of public policy. 6. The institute will be organising many more opportunities for dialogue such as the NHI roundtable. 7. In addition, it will be producing publications through a variety of media avenues. 8. The intended outcome of the NHI discussion is to encourage further dialogue and debate on the issue, in order to find pathways that could achieve consensus. Purpose and objectives Daryl Swanepoel | Chief Executive Officer of the Inclusive Society Institute The National Health Insur­ance Bill (NHI) was tabled in parliament on the 8th of August 2019. The purpose and objective of the bill is to usher in an era of quality healthcare for all, as is envis­aged in the Constitution of the Republic of South Africa, Act 108 of 1996. The NHI is the proposed enabling funding mechanism to give effect thereto. The public responses to parliament’s call for comment on the bill have been profoundly polarised, with proponents in favour of the bill enthusiastically embracing it, and opponents thereto strongly rejecting it. The remarkable fea­ture of the public discourse, however, is that whilst universal support has been registered in favour of the principle ob­jective of delivering an affordable, quality and universally accessible healthcare system, little attention has been given to seeking out a middle ground position on the financing mechanism that could realise it. The Inclusive Society Institute is of the opinion that such a consensus position is achievable and is driven by a desire to find an equitable mechanism for funding universal health coverage responsibly. The purpose of the roundtable on the Na­tional Health Insurance Bill was to take stock of the wide-ranging critique that had surfaced during the parliamentary public comment phase. Its objective was to assess the areas of alignment and disagreement on the bill; and to evaluate the potential to bridge the gaps. This report does not constitute the policy position of the institute. Instead, it is a summary of the policy positions taken and arguments made in the public debate on the NHI. Given the broad rep­resentation at the dialogue, the institute is confident that the reported outcome sufficiently represents all the main aspects that need attention during the upcoming legislative process. It trusts that this report will serve as a useful tool to inform and aid public officials and representatives in their important task of delivering inclusive public policy. Executive summary Ashleigh Theophanides | Life Sciences and Healthcare at Deloitte It is clear from the roundtable pres­entations and discussions around the recently published NHI Bill and NHI in general, that there are various areas of alignment, areas of disa­greement or lack of clarity and some uncertainty on the way forward. All participants agree that there is a need for universal healthcare (UHC). Many of the providers of the healthcare services have shown a keen desire to be involved in assisting with this process as well as being Providers of the various services. The idea of a single purchaser model by the State for public healthcare services is generally accepted by most. The view that the NHI Board be ap­pointed by the Minister of Health, and the CEO of the Board appointed by the Board, seems to be the preferred route for the NHI Fund organisation. It is also generally accepted that all healthcare providers and stake­holders need to be involved and give their views in order to help shape an effective NHI system. The need for UHC is welcomed, as there is agreement that the current levels of inequality in the South African health system are not sus­tainable. In addition, greater levels of collaboration between the public and private sector is welcomed. Primary Health Care is recognised as the appropriate first stop on the referral network. There are concerns around the imple­mentation of the NHI. Some of these concerns stem from either disagree­ment with the high level principles/ proposals stemming from the NHI Bill or lack of clarity around various proposed elements. One of the main concerns is that the implementation phases of the NHI Bill are based on timelines that do not link back to any measurable milestones and outcomes. This aspect needs further consideration. There are high levels of concerns with regards to Section 33 in the NHI Bill. It creates uncertainty around the role of medical schemes post the implementa­tion of NHI. The “complementary cover” that medical schemes may provide is not clearly defined, nor is the benefit package that NHI will provide. Further clarity and specifics with regard to the composition, governance, operations, funding and coverage of the Fund is needed to ensure more deliberate de­bate and consultation can be had. Funding mechanisms for NHI accord­ing to the Bill, include tax revenue, reallocation of funding from medical scheme tax credits, payroll tax and a surcharge on personal income tax. The current constraints within the fiscus, along with the very low levels of GDP growth has raised questions regarding the sustainability of the proposed NHI. In addition, the financial sustainability of the proposed NHI has been further questioned given the lack of clarity with regard to fundamental building blocks such as the benefits that will be covered by the Fund. This lack of clarity has a significant impact on investor sentiment and therefore on the broader South African economy. It was suggested that the focus should be on fixing the public sector and Dr Crisp confirmed that this is the first priority as without this, NHI cannot be implemented. There is also concern as to how the funds collected will be utilized, due to the failure of many of the SOE’s in South Africa. Concerns were raised that not all relevant providers and funders of healthcare services were sufficiently included in the NHI deliber­ations. Further consultation will be needed once further details of the NHI become available. This important process should continue to be as inclusive as possible. Some argued that the process of impos­ing a state system while restricting the operations of the private system was unconstitutional and there is no global precedent for this. Further investigation is needed to understand the conse­quences of this recommendation. There were also various views that the focus should be on growing the economy first, before tackling NHI. Some partic­ipants felt that the timing and priority around this was not ideal. Arguments were also made that the unmet need of the population are so dire that the health system must reform in the next 5 years to ensure South Africa does not fall into social unrest as many other countries have seen in the recent past. Clarification is required around some of the key issues identified in order to remove uncertainty and provide some degree of comfort to all healthcare stakeholders. Key takeouts 1. Some of these key issues and the way forward with them are briefly summarised below: 2. The benefits package that will be provided through NHI has to be clearly defined 3. The role of medical schemes and the definition of complementary cover needs to be clearly articulated. 4. All Providers and Funders of the various healthcare services need to be included in future discussions around NHI in order to get the nec­essary buy-in and optimal solutions for NHI to ensure its success. 5. The Funding mechanisms that will be used for NHI, post determining the benefits to be provided and the costs of this provision, needs great­er clarity. 6. The risk mitigation strategies that are going to be implemented to en­sure NHI is sustainable in the long term needs to be clearly communi­cated. 7. There is a great desire to get NHI implemented as soon as possible to demonstrate to the citizens of South Africa that NHI is not a pipe-dream. This however needs to be balanced with a genuine desire to ensure future credibility and sustainability of the system. The process should therefore not be unduly rushed. It is encouraged that future round-ta­bles that allow robust debate to occur continue. This will contribute to the development of a sustainable and equitable health system for all South Africans. Potential constitutional implications In the course of the dialogue, frequent reference was made to the bill not garnering sufficient support to pass constitutional muster. Therefore, the arguments raised during the roundta­ble were subsequently subjected to a desktop review in order to flag the potential constitutional implications and challenges. Whilst state law advisor Ayesha Johaar confirmed that the bill had been certified as being aligned with the Constitution (Gerber, 2019), the desktop study revealed various consti­tutional concerns from a broad spectrum of organisations. The first argument relates to section 18 of the Bill of Rights, which guarantees every person the right to freedom of association. Some in the legal frater­nity argue that by being compelled to associate oneself with the NHI, one’s right to decide with whom to associate – either the NHI or a medical scheme – may be unfairly and unduly limited (Botha, 2019; Kirby, 2019; Van Staden, 2019). In this regard, Professor Shabir Moosa, a professor of Family Medicine and Primary Care at the University of the Witwatersrand and president of the Afri­can chapter of the World Organisation of Family Doctors, believes that no citizen can be prevented from having a medical aid scheme offering the full range of ser­vices, even including procedures covered by the NHI offering, precisely because the NHI Bill is constitutionally unsound (Medical Brief, 2019). It is further argued that the freedom to choose healthcare services may well be intertwined with the constitutional right to bodily and psychological integrity entrenched in section 12(2)(b) of the Constitution. This right guarantees all people control over their own bodies (Anonymous, 2019; Botha, 2019). Another argument relates to section 25 of the Constitution. In essence, the bill does away with a medical scheme’s ability to provide and charge for services rendered under the NHI regime. This, it is argued, may constitute an “unlawful infringement of a medical scheme’s right to property”, which is specifically prohib­ited by section 25 of the Bill of Rights (Kirby, 2016). Whilst state law advisor Johaar argues that section 27 of the Constitution, along with the Republic’s responsibili­ties in terms of international treaties, imposes a duty on the state to take rea­sonable measures to give effect to the right to healthcare, (Gerber, 2019), others rely on the Constitutional Court ruling in Government of the Republic of South Africa v Grootboom 2001 (1) SA 46 (CC) to support their argu­ment that the current NHI Bill may in fact infringe on their section 27(1) right to access to healthcare. In Grootboom, the court ruled that “the positive rights in the Bill of Rights – those rights that entitle South Africans to services from government, such as housing, healthcare, education, etc. – are themselves also negative rights. Whilst government is expected to progressively make possible the right to healthcare, government may not hinder South Africans from them­selves giving effect to this right” (Van Staden, 2019). Yet, even though govern­ment may therefore not prevent citizens from providing their own healthcare, the NHI Bill does not include an “opt-out clause”, and clause 33 relegates medical schemes to offering only “complementary cover to services not reimbursable by the Fund” (Van Staden, 2019). Another area of potential conflict touched on during the roundtable is the potential impact on an individual’s right to freedom of trade, occupation and pro­fession guaranteed in section 22 of the Constitution. Here too the Constitution­al Court has provided guidance, this time in Affordable Medicines Trust v Minister of Health 2006 (3) SA 247 (CC), where it held that “there are two components to this right: it is the right to choose a profession and the right to practice the chosen profession”. The court concluded that where a law regulating a profes­sion has a negative impact on citizens’ choice of profession, the statute must be subjected to the rationality test. Some in civil society question whether the NHI Bill in its current form will in­deed pass such a test, particularly given its lack of evidence of public purpose as well as the legislature’s failure thus far to present proper financial feasibility studies (Anonymous, 2019; Botha, 2019; Van den Heever, 2019). This is despite the state law advisor’s insistence that “the bill’s provisions connected ratio­nally with constitutional obligations” (Gerber, 2019). In a similar vein, the civil society organisations Section27 and TAC have questioned the bill’s specific exclusion of applicability of the Competition Act 89 of 1998. Excluding the NHI from the scope of the Competition Act, they believe, is not in the interest of health or of the NHI Fund (Section27 and TAC, 2019). There is also a suggestion that the bill may fall short of the limitations clause contained in section 36 of the Constitu­tion, which states that “the rights in the Bill of Rights may be limited only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including … (d) the relation between the limitation and its purpose [and] (e) less restrictive means to achieve the purpose” (RSA, 1996). Proponents of this argument emphasise the lack of published evidence to prove that the NHI is indeed necessary to achieve universal access to healthcare, claiming that there are numerous other approaches that could be implemented that would be less restrictive than section 33 of the bill (Anonymous, 2019; Van den Heever, 2019). Finally, both the roundtable and the subsequent desktop study have found that the vagueness of many aspects of the legislation, including the costing and funding model, and the unpredictability of the legislation’s intended outcomes may constitute sufficient grounds for a constitutional argument. In its founding provisions, the Constitution affirms that the state is founded on, among others, the value of the “supremacy of the constitution and the rule of law” (RSA, 1996). The rule of law suggests that legislation should be clear, unambiguous and provide reasonable certainty and sufficient information to enable those affected by it to respond in an informed manner. This notion was supported in the Constitutional Court ruling in Van der Walt v Metcash Trading Ltd 2002 (4) SA 317 (CC). Here, the court stated an absence of arbitrary power and unpre­dictability as essential elements of its understanding of the rule of law (Venter, 2011). Furthermore, in Affordable Medi­cines Trust, the court held that legis­lation should “indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly” (Constitutional Court, 2005). References Anonymous. 2019. Confidential correspondence between the CEO of the Inclusive Society Institute and academic attached to the University of the Witwatersrand, 5 December 2019. Botha, C. 2019. Submission on the National Health Insurance Bill [B11-2019] (“NHI Bill”). Cape Town: Centre for Constitutional Rights, The FW de Klerk Foundation. Constitutional Court of South Africa. 2005. Af­fordable Medicines Trust and Others v Minister of Health and Another (CCT27/04) [2005] ZACC 3; 2006 (3) SA 247 (CC); 2005 (6) BCLR 529 (CC) (11 March 2005). [Online] Available at: http:// www.saflii.org/za/cases/ZACC/2005/3.html [accessed: 4 January 2020] Gerber, J. 2019. NHI Bill is constitutional - state law advisers tell Parliament. [Online] Available at: https://www.news24.com/SouthAfrica/News/nhi-bill-is-constitutional-state-law-ad­visers-tell-parliament-20190829 [accessed: 3 January 2020]. Kirby, N. 2016. Many areas of concern in NHI paper. [Online] Available at: https://www.iol.co.za/busi­nessreport/opinion/many-areas-of-concern-in-nhi-paper-1970022 [accessed: 6 January 2019] Kirby, N. 2019. No mandatory requirement for South Africans to join fund under NHI bill as currently proposed. [Online] Available at: https:// www.werksmans.com/legal-updates-and-opinions/no-mandatory-requirement-for-south-africans-to-join-fund-under-nhi-bill-as-currently-proposed/ [accessed: 3 January 2020]. Medical Brief. 2019. Little of the criticism of the NHI Bill is ‘constructive’. [Online] Available at: https://www.medicalbrief.co.za/archives/little-criticism-nhi-bill-constructive/ [accessed: 3 January 2020]. RSA. 1996. The Constitution of the Republic of South Africa, 1996. Act 108 of 1996. Pretoria: Republic of South Africa. Section27 and TAC. 2019. Section27 and TAC NHI Submission November 2019. [Online] Available at: http://section27.org.za/2019/11/56382/ [accessed: 3 January 2020]. Van den Heever, A. 2019. National Health Insurance Policy Bill Review. Expert review of the National Health Insurance bill submitted by the Minister of Health to Parliament in 2019 for submission to Parliament as a response to the request for public comment. Chair in the field of Social Security Systems Administration and Management Studies Wits School of Governance. [Online] Available at: https://docs.mymembership.co.za/docman­ager/1e9aea2c-b58d-4aed-b5a2-96187d705aee/00146348.pdf [accessed: 3 January 2019]. Van Staden, M. 2019. Proposed NHI throws con­stitutional caution to the wind. [Online] Available at: https://www.freemarketfoundation.com/arti­cle-view/proposed-nhi-throws-constitutional-cau­tion-to-the-wind [accessed: 3 January 2019]. Venter, F. 2011. South Africa as a “Diceyan Rechtsstaat”, in Matthias Koetter / Gunnar Folke Schuppert, Understandings of the Rule of Law in various legal orders of the World, Rule of Law Working Paper Series Nr. 18, Berlin (ISSN 2192- 6905). [Online] Available at: http://wikis.fu-berlin.de/download/attachments/173736195/Venter+­South+Africa.pdf [accessed: 4 January 2020]. Recommendations In pursuance of its objective to secure inclusive public policy, the Inclusive Society Institute, makes the following recommendations in an attempt to secure broad consensus on the National Health Insurance Bill. The institute is of the opinion that it is possible to achieve such an accord by adopting a rational approach to this important national dialogue. Recommendation 1 The state law advisor has certified the National Health Insurance Bill as being aligned with the Constitution. However, given the strongly stated arguments to the contrary, the insti­tute recommends that the relevant parliamentary portfolio committee further interrogate the constitutional arguments being made, and seek a legal opinion prior to finalising its report. This would avoid a Constitu­tional Court challenge. Recommendation 2 The Constitutional Court has cau­tioned against adopting legislation that is vague and unpredictable. Concerns have been raised with regard to the lack of adequate financial modelling, insufficient clarity as to the prescribed benefits that will be covered by the NHI, and the conflicting provisions on the future role of private medical schemes in sections 8 and 33 of the bill. In this regard, the institute recommends that the relevant parlia­mentary portfolio committee either seek from the executive, or obtain its own, financial estimates regarding the affordability of the scheme and the fiscal impact of reducing the role of private medical schemes. To avoid vagueness and strengthen predict­ability, the institute believes that this modelling exercise should be based on the NHI benefits ultimately envisaged, as opposed to relying on a staged approach. Recommendation 3 The institute recommends that the relevant parliamentary portfolio committee do a comparative study of the universal healthcare systems and private medical schemes in oth­er jurisdictions. This would ensure that the bill passes constitutional muster as it relates to the limitation of rights in terms of section 36(1) of the Constitution, and specifically the section 36(1)(e) requirement for less restrictive means to be consid­ered to achieve the same purpose. It is proposed that at least the opt-in/opt-out model (e.g. that found in Germany) and the co-existence model (e.g. that found in Ireland) be included in such study. NHI ushers in Universal Health Coverage for all in South Africa Dr Nicholas Crisp | NHI Fund Developer in the Ministry of Health There are some mixed messages about what the National Health Insurance is – and what it is not – floating around in the media, and people themselves have different interpretations and different reasons for either liking the idea of the NHI or disliking it. The fact is, the NHI is a financing system; it is not the healthcare system of South Africa. It is a chosen route to achieve univer­sal health coverage. The NHI aims to address three problems simultaneously: increasing the number of people who have access to coverage in South Africa, increasing the amount of healthcare they receive (i.e. the benefits available to them), and decreasing the burden on the individual at the point of care, ensur­ing that when healthcare is needed, peo­ple are not turned away simply because they cannot afford to pay for it. Healthcare is a human right, and access to healthcare in South Africa is enshrined in the Constitution, under sec­tion 27. Furthermore, there is nowhere in the world where people would deny the basic principle of access to healthcare or that the level of healthcare received should not be dependent on the financial and social status of individuals, but rather on the ailment itself. In its present condition, the health sys­tem in South Africa is badly failing. The country currently has one of the most inefficient health systems in the world, where the outcomes in no way match the inputs. And this problem not only lies within the public health system; it also spans the private health system. Each of these systems has its own set of drawbacks and reasons for evolving in the direction it has, but collectively these systems are failing to achieve the outcomes expected from the 8.5% of GDP expended on healthcare. On one hand, there is the public sector, which is fragmented, poor, inefficient, understaffed and ill-equipped, serving the majority – roughly 85% of the popu­lation. On the other, the private sector is fragmented, overserviced, overspecial­ised, expensive, and serving only roughly 15% of the population. It is unsustaina­ble to have such dichotomous systems running concurrently, using up resources unequally that belong to all people in South Africa. It is simply not feasible for government to fix the one system with­out fixing the other at the same time. The whole system needs a facelift – and not just a tinkering around the edges. There are many ways to tighten up both sectors individually – reduce costs, re­duce corruption, improve labour relations – but the problem is really systemic in nature. This is the NHI’s underlying proposition: to address the healthcare system as a whole entity. How will the NHI work in principle? Firstly, it is designed to be one fund; a single pool of resources. The fund pur­chases services on behalf of everybody who lives in South Africa. That fund then contracts directly with service provid­ers – this is with regards to personal health services. Non-personal health services which are not going to be fund­ed through the NHI will still be funded through the provincial equitable shares in government and through the municipal allocations in local government. The legislation currently on the table suggests a purchaser/provider split, where the purchaser is a new public entity, defined according to schedule 3A in chapter 6 of the Public Finance Management Act (PFMA). This public entity has very specific powers. It may not borrow, invest, purchase, or enter into agreements with companies. In the most basic sense, the entity acts as an administrator of government business outside of the public service; the administrative purchasing entity for the funds that are channelled through the NHI fund. Private medical aid will still be made available. According to the NHI Bill, there will be providers from both the public and private sectors. The fund will buy directly from each provider, in the primary healthcare and hospital envi­ronments, and on the basis of accred­itation. To clarify, accreditation is not the same as compliance with stand­ards – that is the responsibility of the Office of Health Standards Compliance. The standards are set by government and the Office of Health Standards Compliance then implements those standards. Following from this, the compliant provider will have to ap­proach the fund to request accredita­tion in order to provide a certain kind of service, or a certain range of benefits of service. When is the NHI Bill going to be imple­mented? It will take time to achieve a fully functioning NHI; switching on mas­sive reforms overnight would break what is an already floundering health system. The process has already started, with the NHI Bill reaching parliament. The National Council of Provinces and the National Assembly are currently in the process of considering the comments on the bill that came in before 29 November and visiting provinces to attain any further comments. There has also been an influx of lengthy petitions which will require a massive amount of administration to get through. The plan is to implement the NHI Bill in phases, with the expected delivery date being 2025/2026. Presently, the pro­cess is in the formative phase, which in­volves setting up the administrative and operational machinery to run the fund – building up the numbers, designing the administrative standards, the operating procedures, the IT systems, etc. It is going to take many years of con­centrated hard work. There will be lead times; everything has to be published in the Government Gazette as a regulation before being considered, and there is usually a substantial amount of debating before even getting to a draft regulation. The process as a progressive realisa­tion of the NHI is fundamental to the success of rolling out the new system. There is plenty of evidence to indicate that building the health, and of course the education, of a population leads to economic growth. But the determining factor has to come from a sense of social solidarity, of aiming to create a healthy nation as a whole. Another point the bill speaks about is portability, wherein no matter where a person is living in South Africa or whether they are regularly travelling within the country, they will have ac­cess to the healthcare they need at any given point. Government and the NHI still need to put the mechanics in place to enable that to happen. The fund will be the purchaser and it will purchase benefits that are ulti­mately determined and signed off by a Benefits Advisory Committee. There is a huge amount of technical work that needs to be done to define what those benefits will be, to codify them, to cost them, and then to set a price for them. There will be a negotiation around what those prices are, much like in the private sector at the moment. Except, this is for a much bigger entity. The NHI currently spends between 8.2% to 8.8% of GDP. The NHI should ultimately cost less than 8.5% of GDP owing to efficiencies and savings on systemic improvements. Under the NHI the chief source of income will be money appropriated annually by parlia­ment: general tax revenue, reallocation of funding from medical scheme tax credits, payroll tax and surcharges on personal income tax. The Constitution states that every per­son living in South Africa – including SA citizens, permanent residents, refugees, inmates and designated foreign nation­als – is protected and must have access to healthcare. The dilemma is that there are many people living in South Africa who are not bona fide refugees or visitors. And so, the bill makes provision for this by limiting protection for those living illegally in the country. The bigger debate revolves around the public/private question, around what role the private insurance industry will play. There is in fact a very clear role for private providers, suppliers and compa­nies. The question is more: what is the role of medical schemes? This concern is currently in a parliamentary process, but is dealt with in section 33 of the bill, which states that once benefits are included in the NHI package for everybody, they are no longer insurable outside of the fund. Private insurance will only fund benefits that are not included in the package. There will be options such as top-up and bypassing, but the idea is that all those living in South Africa will start off by visiting a primary healthcare facility of their choice – whether it is a GP in the private sector, public sector clinic or health centre – to register on the NHI system. Today, the public health system already has 44 million people (those previously registered at the public sector clinics) registered on the first part of its digital system, exclud­ing people in the private sector. There will be predetermined referral pathways to ensure that patients are dealt with at the most appropri­ate level of care. There will be some measure of choice in the matter: referral pathways will cover a number of options which patients will have the chance to negotiate over. From the perspective of portability, the NHI system will still detect a patient if they need to visit a different facility or enter the system through a different GP because they are away from where they originally regis­tered, for whatever reason. There are three reasons for setting the system up this way. First, the NHI wants to track the epidemiological pattern of the users in a given geo­graphical area, so as to ensure that the services purchased meet the needs of the population. The second reason is to monitor the money that the fund is spending on a particular community, to keep an eye on whether there is indeed redistribu­tion of resources, which will ensure that underserviced communities receive proper healthcare. And lastly, there is the question of the transferring of funds. It cannot be arbi­trary; it has to be very deliberate. It is the responsibility of the health system to manage these transfers efficiently and effectively. The bill provides for two main routes through which purchasing will happen. The one is through capitation funds, which will be the means for purchasing in the primary healthcare sector. The trouble here is that there are a variety of models. The costing and designing of those models is a concern, but it is the reporting of what outcomes are achieved that is actually the more tricky aspect to monitor. There needs to be more work done clarifying how to effect capitation. Contracting units for primary health­care could be used, but exactly how that will function in South Africa, within our statutory environment, who would be responsible and who would be the providers within a contracting unit – re­mains to be seen. The second route is through some form of global budgeting mechanism – 0.1% of private purchasing is presently done through a form of diagnosis-related group (DRG). This should be the primary method of purchasing services in hospitals, to avoid a fee for service environment. Fee-for-services is expensive and the development of agreed upon DRGs requires extensive engagement and substantial available data on which to base pricing decisions. DRGs are very necessary in an NHI environment where services need to be actively purchased across sectors. The way in which the provincial equi­table share gets reallocated is also a matter for careful consideration. If the NHI intends to purchase personal health services collectively for the country, it makes perfect sense to shift those funds into the NHI fund, to follow the moving function. This is not going to happen immediately. Touching on accred­itation once more – this is about making sure that the facil­ity and the providers in a facility have, in fact, not just the quality needed but also the capacity to provide a certain kind of benefit. This needs to be set up as an ongoing accreditation system, where providers can update the packages they offer with new benefits over time. The fund must determine the way the provider payment mechanisms operate. The bill says that with specialists and hospital services, payments must be all-inclusive based on performance. It then becomes about an outcome. The problem with our present system in both the public and private sectors is that no-one measures the outcomes; the focus is all on the inputs. The result is: no accountability for the services they offer. With regards to emergency medical services, they are designated in sched­ule 5 of the Constitution as provincial services. Therefore, they will have to be funded directly through the provincial equitable share. The private emergency and medical services could be funded through alternative means. Presently, the bill describes functions that the fund will execute, some of which are common sense. The NHI committee has looked into a number of other NHI funds globally. They also have consultants on hand, and treasury, who have worked in Europe in connection with recently formed insurance funds. The fund has seven key functions, with sub-functions within each. The first function, governance and administration, cannot be implemented until the fund is a schedule 3A entity outside of the public sector, in terms of the Public Ser­vice Act, as it is illegal to duplicate the administrative functions – human re­sources, procurement functions and the supply chain management – under the same accounting officer. The other six will take substantial effort to describe and will involve learning from people who are versed in these undertakings – including the considerable expertise already on South Africa’s doorstep. Function two: set up the NHI fund. This is fundamentally a sizeable bank ac­count which will have roughly R5-billion funnelling through it per week once it is a fully functional fund. It will involve a vast collection of bank accounts and commercial banks, careful cash flow and cash flow balances on a daily basis. How the money comes in from the treasury and how it is dispersed is going to need to be closely watched. The fund will not be run by health professionals; it will be managed by medical scheme administrators with actuarial, financial and clinical skills. The third function is the benefits and the provider payment designs. The key starting point will be getting the bene­fits designed early. Then working out the payment designs: calculating the costs, negotiating a level of pricing and what the profit margins will be, and who will be providing the services. There are no laws prohibiting any one of the multitude of payment design options. The next function (the fourth) is health products procurement. There is some debate about whether this function specifically needs to be carried out by the fund, whether it should be the department’s responsibility or whether it should be an autonomous function. But this is not a warehousing function; it is described as a function of negotiating prices. It follows then that if there is economies of scale, there is the lever­age to attain better prices. Function five belongs to the realm of digital information. The whole NHI sys­tem has to run on a digital platform. It would be impossible to run such a large-scale operation in the same fashion the government has been running health services up until now, which is manually. As such, this realm will require substantial infrastructure investment, software investment and data analytics capacity building. The sixth one is risk and fraud manage­ment, the majority of which needs to be designed into the NHI system. This would be a similar system to those uti­lised in the medical scheme and hospital environments. There also needs to be a way in which to respond to whistle-blowers and people’s complaints outlined in the system. User and service provider management is the last function (seventh). This concerns the rules around what data the fund is at liberty to keep on people using the system. The NHI will not keep the kind of data that a hospital does on personal records, but it needs to have a certain amount of information – whether a patient accessed care and the out­comes of that care – in order to monitor the epidemiological trends, to keep tabs on where the money in the fund is being spent. Exactly what data the fund will be allowed to retain still needs to be determined. And then of course there is the information about the service pro­viders, those who get accredited, which needs to be taken into account. These are the building blocks of the NHI fund. There will ultimately be a board that is accountable. There will be an accounting officer, with an office to deal with the core adminis­trative functions. Although, corporate services will only come into being once the NHI fund is a schedule 3A entity. There may need to be some form of decentralised administration, the details of which are being discussed with the provinces. In terms of the fund itself, until there is money to be paid out, there is no real purpose of having a fund – in the interim, perhaps only a few officers to determine the rules. The National Department of Health will still be responsible for policy standards and coordination of the entire system. The provincial departments of health will still be responsible for stewardship over the public and private providers. The bill is not explicit about whether that will be a primary assigned function but says a great deal of the current provincial functions will be removed and then delegated back to the provinces. The municipalities will primarily be re­sponsible for non-personal services and intersectoral collaboration. The presi­dent is setting up coordinated district meetings to improve the relationship be­tween the traffic department and trade and industry around liquor licensing and water, etc., to relieve pressure on the health department from the throngs of patients arriving at hospitals and clinics with complaints that are due to the social determinants of health. Within the provinces, how the districts are managed in terms of the setup of the primary healthcare units will largely depend on how the economy is performing. As the Minister of Finance explained, if the economy is perform­ing poorly, we would implement less, and then when cash flow increases do more. The NHI needs to trim the fat from the system: sort out the ineffi­ciencies of the public service, the way people are employed and then allowed to offer their services in the private sector, the unnecessary, costly duplica­tion of tests and examinations. The four contentious issues that the NHI is keenly aware of, and is engaging on, are the role of the medical schemes, the role of the provinces, the capability of the state to manage the fund, and cen­tralised procurement. Each issue needs a unique perspective to accommodate the role players as individuals. In the meantime, while the fund is being designed and people are being employed to engage with those who have been through the process, the private sector needs to organise itself. The Health Market Inquiry (HMI) report is not declared null and void because healthcare in the country is moving in the direction of the NHI, far from it, it is as important if not more important than ever. There are numerous social compact issues between private sector players, civil society, the public sector, and so on. And these issues are not negat­ed by the NHI at all. They all need attention; and they will all be seen to in good time. Key takeouts 1. The NHI is a financing system, not a healthcare system, to address the number of people who have access to cover­age, the amount of healthcare they receive, and the burden on the individual at the point of care. 2. The problems with healthcare in South Africa lie in both the public and private health systems. The NHI proposes to address the healthcare system as a whole entity. 3. The NHI is designed to be one fund; a single pool of resources which will purchase services on behalf of every person living legally in South Africa. 4. The NHI fund will contract directly with accredited service providers from the public and private sectors with regards personal health services. 5. Non-personal health services not funded through the NHI will be funded through the provincial equitable shares in gov­ernment and the municipal allocations in local government. 6. The purchaser will be a new public entity, defined ac­cording to schedule 3A in chapter 6 of the Public Finance Management Act (PFMA) and will act as an administrator of government business outside of the public service. 7. NHI benefits will be defined, codified, costed and priced. Prices will be negotiated much as they currently are in the private sector. 8. The chief source of the fund’s income will be appropriated annually by parliament. But essentially, it will come from tax revenue. 9. Once benefits are included in the NHI package, they will no longer be insurable outside of the fund. The private insurance will only fund benefits that are not included in the package. 10. All patients will start off by visiting a primary healthcare facility of their choice to register on the NHI system. 11. The NHI system offers portability in order to track the epidemiological pattern of users in a geographical area, monitor the fund’s spending and track referrals. 12. Purchasing will happen through capitation funds or through a global budgeting mechanism such as DRG, ideally one that avoids a fee for service environment. 13. Provider payment mechanisms must be all-inclusive based on performance to create an outcomes-based measure­ment standard for services, building accountability. 14. The National Department of Health will still be respon­sible for policy standards and coordination of the entire system. 15. The fund’s seven key functions: First: governance and administration; Second: set up the NHI fund; Third: benefits and provider payment designs; Fourth: health products procurement; Fifth: digital information; Sixth: risk and fraud management; Seventh: user and service provider management. NHI highlights Why do we need NHI? It is a human right that everyone should be entitled to It should not be related to income levels Currently there are poor outcomes in both public and private sector Public and Private sector are mutually dependent The whole system needs a facelift How will NHI work? One NHI Fund NHI Fund will purchase services (benefits) from both public and private sectors NHI Fund will contract directly with service providers When will NHI be implemented? Implemented in phases 2025/2026 expected delivery Objectives of the NHI Bill Achieve universal access to quali­ty health care services Aims Achieve progressive realisation to­wards Universal Health Coverage Pool financial resources and ensure risk protection Provide quality health care services Single purchaser of health ser-vices to end fragmentation Create a single national health system Portability of health care services to enhance access The NHI Fund Purchase health care services determined by the Benefits Advi­sory Committee Chief sources of income are money appropriated annually by parliament: General tax revenue Reallocation of funding from medical scheme tax credits Payroll tax Surcharge on personal in­come tax Beneficiary Users of the NHI SA citizens; permanent residents; refugees; inmates; designated foreign nationals Complementary Cover Only applicable to benefits not included in the NHI Fund Health Care Services Coverage The Fund will contract accredited providers and health establish­ments at primary health care and at hospital level, based on the health needs of users and in ac­cordance with referral pathways Services will be portable Transfer to appropriate provider if required NHI Fund as Purchaser Fund will purchase health services for all based on need Various models for reimbursement are outlined Accreditation of Service Providers All Health care service providers and establishments will need to be accredited to deliver health care service (benefits) at the appropriate levels of care NHI Fund Functions Seven Main functions: Governance & Administration NHI Fund Health care benefits & Provider Payment Design Health Product Procurement Digital Information Risk & Fraud Management User & Service Provider Management NHI Fund Organisation The Fund structure is as follows: Board CEO Fund Corporate Services Decentralised Administration Functions What will NHI cost? NHI is expected to cost between 8.2% to 8.8% of GDP Contentious Issues A number of contentious issues have been identified, not limited to: The role of medical schemes Role of provinces The capabilities of the State to manage the NHI Fund Centralised procurement NHI is a healthcare revolution, not a political motivation Dr Gwen Ramokgopa | ANC NEC Education & Health Sub-committee member and former Deputy Minister of Health South Africans will have the NHI bill that suits its environment, its stage of development and what is best for all its citi­zens. And the binding principle will be social solidarity. When a person is sick, they will not have to check how deep their pocket is before receiving healthcare. No-one can disagree with that. The World Bank has been training min­isters of finance to understand why every country – for its productivity and sustainable economic growth – needs to go the universal healthcare route. In fact, this is in the NDP, which is one of the few consensus documents across political parties. There needs to be engagement in a manner that co-creates what is ideal for the majority of South Africans and addresses legitimate concerns. There needs to be controls put in place in order to avoid corruption and systems breaking down further. Over the years, there has been a disin­vestment in the public health system – the funding of central hospitals has halved over the past ten years. The health providers, both in the public and private sectors have been left with the responsibility of deciding how to care for patients while still earning enough to survive themselves. The health system needs to deal with the challenges in both sectors. One of the main concerns is corruption; there need to be adequate controls in terms of governance. The minister should appoint the board, and the board must appoint the CEO, in consultation with the minister. If the minister appoints both the board and the CEO, it will undermine the board. The second concern is the issue of the medical aids. The question here is whether it is too soon to pull the resources from the medical aids. And if not now, when? What led to the near collapse of the public health system in Gauteng is partly the economy. The global economic recession has also resulted in the number of medical aids in the private sector decreasing. And the affordability of catastrophic health situations like cancer has become unmanageable for the ordinary person. Financial protection of all South Afri­cans is critical, as both the public and private sectors are crumbling. There needs to be a wall-to-wall health system that is reliable and includes both sectors in its implementation. Entrepreneurs and investors can diversify or look at other areas where government is looking only to the private sector to service. For example, government will not manufacture equip­ment. Government will still depend on the private sector to avail their skills to help strengthen the NHI and to con­sider putting health and productivity of people before profits. There needs to be a realistic approach which acknowledges that if there are further delays, neither system will be able to provide for the country’s pa­tients. There is no room for arrogance. The NHI and universal healthcare is a revolution, not from a political point of view, but how it will impact the way healthcare is done in the country. There is no other solution. There are recommendations, for instance, that government continues with the 86% of the public receiving funds from treasury and the private sector going to the market to raise funds from investors. But investor money moves. The result will be a much more stressed public sector that will collapse even further. Privatisation is not an option. Health is not a commodity for the free market. People do not want to hunt for and negotiate the best price when they are sick, they want to negotiate good health. The World Bank has done many studies on this and it is no longer a mat­ter of debate globally; it is a consensus. The need for a benefit design is understandable. The Council for Medical Schemes, through the Medical Schemes Act, came up with prescribed medical benefits (PMBs) to protect those with chronic ailments. But when the courts ruled against having a price reference list, instead of improving, the situation actually worsened because medical administrators and medical aids simply found a way around it. There are also lessons to be learnt from Vitality and other programmes that reduce the burden of disease, which is a real risk to the fund. In terms of the current financial framework, including both percentage of health and the economy, and rands and cents, a particular element to emphasise is the issue of affordability. WHO recommends 5% of GDP, but South Africa is already at 8.5%. Looking at it from the perspective of rands and cents, in the public health system there is R230-billion. In the private sector the contributions are also over R200-billion. The NHI is not a reckless politically motivated decision. There has been so much wastage in the public health system. And in the private sector there has been much extraction of the health rand meant for people on medical aids, but used for intermediary support ser­vices, for example. There is much work to be done with treasury to figure out what the amount is that is available, including looking at the inefficiency of tax rebates for healthcare. These rebates come out of a common central revenue and go back to individuals who are working and can af­ford healthcare. Essentially, this means the poor are subsidising the rich. Government through the Council for Medical Schemes and a number of government medical aids participates in private sector health – there is no paucity of information. At the same time, the information is also not that integrated. When referring to compre­hensive benefit packages, this means that nobody will be turned away if they have a health need. And the protocols will be determined by experts, not by government. The same experts that have been developing them for both sectors. There is a small community in the private sector which is making exces­sive profits. And those profits are not shared throughout; it is purely extrac­tionism. There is no problem with the entrepreneurs and private solutions making reasonable profit margins. But the huge returns on investment in private/personal healthcare come at the expense of the vulnerable. The IRRs are about 26%, which is an indefensi­ble figure. Serious investors will know that they need a healthy population to improve productivity. As a society, there needs to be agree­ment on the principle that if a person is sick, it is a human right to have access to quality care, nearest to where they are, anywhere in the country. And health professionals should not have to deal with the issue of whether a person can or cannot afford it every time they treat a patient – that is a massive moral burden to bear. There needs to be research into afforda­ble solutions. There has been waste on the part of government and also the pri­vate sector in the past, so there needs to be zero tolerance for inefficiency, maladministration, extractionism and exploitation in the health sector of the future – whether public or private. Key takeouts 1. South Africans will have an NHI bill that suits its environment, its de­velopment and what is best for its citizens. And the binding principle will be social solidarity. 2. The World Bank has been training ministers of finance on why every country – for productivity and sus­tainable economic growth – needs to go the universal healthcare route. 3. There needs to be engagement in a manner that co-creates what is ideal for the majority, dealing with challenges in both the public and private sectors. 4. One of the main concerns is corrup­tion; there needs to be adequate controls in terms of governance. 5. Another concern is the issue of the medical aids. The question here is whether it is too soon to pull the resources from the medical aids. And if not now, when? 6. Government will depend on the private sector to avail their skills to help strengthen the NHI and to consider putting health and produc­tivity of people before profits. 7. Health is not a commodity for the free market. People do not want to hunt for and negotiate the best price when they are sick, they want to negotiate good health. 8. There is no problem with entre­preneurs and private solutions making reasonable margins, but huge returns on private/personal healthcare are at the expense of the vulnerable. 9. Health professionals should not have to bear the moral burden of whether a person can or cannot afford it every time they treat a patient. 10. There needs to be zero tolerance for inefficiency, maladministration, extractionism and exploitation in the health sector as a whole. Business proposes joint ranks with government over NHI to balance capacity Business point of view Businesses’ position in terms of the NHI’s values is that it sup­ports universal and equitable healthcare – in fact, it forms part of the team’s mandate. One of its other key points is that it believes wholeheartedly that South Af­rica needs to take on board the NHI bill. Further to this, it believes the process of implementing the bill needs to unfold in such a way that it crowds in the pri­vate sector, rather than pushing it out. And not just with regards to healthcare. The underlying sentiment in business’s ongoing discussions with government, from the president down, is that the private sector is able, ready and willing to help in a whole range of ways. The reality of South Africa’s present situation is that the resources of the country lie in the private sector. It makes sense then to use those re­sources to match government capacity with private sector capacity. This is the principle that the business sector brings to the table. It firmly agrees that this depends on mutuality and mutual dependence between the public and private sectors, and that government needs to increase efficiencies within these two sectors and leverage the strengths of both. This is also critical from a funding point of view, given the dire state of the economy, with indications this last quarter that South Africa may be head­ing into a recession. At the very most, the country is looking at a GDP figure of roughly 0.1%. This fiscal situation is reason for great concern, with increas­ing shortfalls in tax collection. These are issues that will have an impact on any proposed strategies, from either the public or private sectors. Funding of the NHI and how much it will cost, therefore, depends on what is expected from it, as a percentage of GDP. Clearly then, there needs to be growth of GDP. As it stands, a percentage of GDP would mean next to nothing. Bearing that context in mind, to fund any major project at this point, or for the foreseea­ble future, from the fiscus is going to be an extremely challenging endeavour. That is of critical importance in the funding discussion. Government needs to clarify the role of the private sector for business continuity and investment purposes. Although it has been said that the role will be a mutual one, the hard discussions are still needed between business and the National Department of Health working on this issue. In parallel to this, there needs to be a focus on fixing up the current public sector capacity – and government will need private sector capacity to do that. The business sector’s proposition is to merge the two and find a way to bring the capacity to bear, though this will take years to implement. Ordinary people on the street who currently use public services do not have years to wait – government needs to remedy this in the short term. And business suggests working together to do that. If the rollout of the NHI is handled properly and the discussions are con­structive – not just talk of it depending on mutuality between the public and private sectors, but agreement on how the two are going to work with each other – then the NHI will have the opportunity to enhance and even regain skills. If the discussion is not construc­tive and the mutuality concept is not bedded down in real, hard terms, then this could very well bleed skills instead. Another point is that the pooling of funds and the creation of the fund under the Public Finance Management Act (PFMA) needs more clarity: on who is going to manage it, how it is going to be managed, what the board is going to look like. Because there is no escaping the reality that public sector pools of funds have not had a good track record over the past years. The private sector is not free from blame in that regard either, but billions of rands have been misappropriated in the public sector and now the conversation is about additional billions of rands in the form of the NHI fund. It is not just the private sector that needs absolute clarity and transparency on how the fund is going to be managed, it is the whole country that needs peace of mind. There are also constitutional issues to take into consideration related to free­dom of choice and what sort of health services a person will have access to. These issues need to be discussed further and government needs to put a plan of action in place to deal with them going forward. There is some impatience around the often talked about potential legisla­tion, but a lack of conversation around the issues. Legislation gets passed and signed into an act, and then when issues arise, government simply blames them on unanticipated, unintended consequences. But as in the case of the Credit Amendment Bill recently, during the process of engagement, the govern­ment was warned of the consequences, compounded by their own socio-econom­ic impact assessment – and still signed the bill. It is now time for government to take responsibility for actions; to take heed of the early warnings. Business understands full well that the process of implementation will be a lengthy one; to rush this would be irre­sponsible and that is not the intention of the NHI. But substantive engage­ment and maximum agreement early in the process will help implementation, rather than allowing those interactions to drag on and cause disruption further down the line. Early on in discussions between the department and organised business, in the first meeting with the Minister of Health, Dr Zweli Mkhize, it was decided to have a deadlock breaking mechanism for managing disagreements and reaching a consensus. Achieving this promptly means that business and the department will have a better chance of working together productively and implementing the NHI successfully, albeit over time. Despite the fact that rolling out this massive project will not be an easy process and there are bound to be differ­ences that come into play, The business sector remains supportive and confident that in the interaction with the depart­ment, and in the parliamentary process, concerns will be addressed and a clear strategy for equitable healthcare will come to light. Key takeouts 1. Business fully supports the NHI values of universal and equitable healthcare. 2. Business believes South Africa needs to take on board the NHI Bill and implement it in a way that crowds in the private sector, rather than pushing it out. 3. Using the resources of the private sector to match government capacity with private sector capacity depends on mutuality and mutual dependence between the two sectors. 4. Government needs to clarify the role of the private sector for business continuity and investment purposes. 5. The country’s fiscal situation is reason for great concern, with increasing short­falls in tax collection. This will have an impact on any proposed strategies for funding the NHI. 6. There needs to be a focus on fixing up the current public sector capacity. The busi­ness sector proposes to merge the state and private sector, bringing the capacity to bear for the long term and for the short term to address immediate needs. 7. The pooling of funds and the creation of the fund under the PFMA needs more clarity. 8. There are constitutional issues to take into consideration related to freedom of choice and what health services a person will have access to. 9. Business understands that to rush the process of implementation would be irresponsible, but substantive engagement and maximum agreement early in the process will lead to less disruption further down the line. 10. In the first meeting between the Minister of Health, Dr Zweli Mkhize and organised business, it was decided to have a deadlock breaking mechanism for managing disagreements and reaching a consensus. Workers call for urgent quality healthcare from government in response to NHI Labour point of view Organised labour representatives recently concluded a process whereby they visited all nine provinces to discuss the NHI Bill with workers – to discuss what the bill is trying to achieve and to get their views on what they believe national health insurance is. The most salient point to come out of the discussions is the urgency for workers on the ground to have access to quality healthcare, and soon. Workers simply cannot afford to be members of medical aid schemes for much longer; it is not practical for them anymore. South Africa’s health system is in dire need of an overhaul in terms of its financial arrangements, management, and its ability to deliver quality healthcare services. Access to quality health services is currently dependent on a person’s geographical location, race, employment status, income level, gender, and on where the healthcare services are being delivered at the time. From labour’s perspective, the unequal distribution of health spend in South Africa and the deteriorating state of public healthcare necessitates the implementation of the National Health Insurance. The findings of the Health Market Inquiry reports reaffirm labour’s opposition to the commercialisation of health and its consequences on both quality and access to healthcare. Labour supports the NHI as well as the bill. The reaffirmation of primary healthcare is a critical component of the NHI, as it constitutes the foundation of the healthcare system. Primary healthcare reengineering and the intended effort to grow a strong district health system is crucial to the endeavour of re-orientating the South African healthcare system. Furthermore, labour supports the establishment of a single fund, the appointment of a board as well as a number of functions related to the NHI fund. Though there is obviously concern about the board pertaining to how secure the funds will be. Corruption has burnt particularly the workers. Wherever there has been an onslaught of corruption, it seems the workers take the fall. SAA and Eskom are cases in point. The only solution to corruption there so far has been the imminent retrenchment of workers. Ignoring the impact of corruption, especially in state-owned enterprises, means workers will continuously be at a disadvantage. There is an opportunity, being at the beginning of the rollout and implementa­tion of the NHI for government to estab­lish clear-cut methods and mechanisms within the board and its functions, to ensure that it is carefully monitored and managed. Labour also supports the inclusion in the NHI bill of the complimentary role of medical aid schemes. It is becoming less and less affordable to be on med­ical aid. During provincial consultation processes conducted by labour repre­sentatives, many have indicated that they chose to first try signing up for a government employee medical scheme, only for it to turn out to be like any other medical scheme, where it quickly becomes unaffordable. The benefits do not justify the amount of money that is being spent on medical aids. With regards to the issues relating to the contracting unit for primary healthcare services, there have been numerous collective bargaining agree­ments put forward that allow for Collective Bargaining Council clinics on site at various workplaces. Workers too are willing to play an active role in the implementation of the NHI, even if it means opening their collective bargain­ing clinics for use by people living in close proximity to the clinics. When it comes to the sources of funding, it seems the NHI will be heavily reliant on taxation. It was said that this is a contradiction of the principles that are set out in the NHI bill, whereby it is based on social solidarity and cross subsidisation. Social solidarity from labour’s point of view means that the rich subsidise the poor; the healthy subsidise the sick. Although there are grievances among the representatives of labour as to how heavy the NHI will lean on taxation, the workers are still willing to come to the table and agree to the sources of fund­ing that have been proposed by the bill. But there needs to be a bit of homework and a bit of groundwork done by the government on looking at additional sources of finance. This is going to be a fund that will benefit all South Africans and, therefore, all South Africans should have a part to play in the financial arrangements. Over and above the various tax streams that have been made use of, there is a need to venture into a discussion about the wealth tax. Regardless of the fact that the Davis Committee has already gone through the process of looking at these various streams of financing, labour feels strongly that this discussion needs to be reopened. If the NHI is to live up to and reflect the standards and processes set out in the bill, which largely focuses on the attainment of section 27 of the constitution, there needs to be con­structive dialogue around how al South Africans will play their part equally with regards to funding the NHI – whether that means looking at a wealth tax, a tax on currency transaction or a tax on financial transactions. Broadly, it would appear that labour agrees with the aims and intentions of the NHI. There have been resolutions at several congresses of labour that a national health insurance is needed, because it is the only vehicle that could achieve universal health coverage. Labour has made several concessions. Ideally, and when the process started, it purely wanted the public sector to be involved. The concession has been made to allow for private sector involvement in the process, on condi­tion that there is a boost in access to healthcare. And that is labour’s main end goal on the matter. There are likely to be additional conces­sions to be made as the rollout of the NHI progresses, but multistakeholder forums of this nature will make it easier to find consensus on the matters that arise. Labour will not be alone in this; other stakeholders will also have to dig deep and take a good look at ideologies they have previously held onto and make their concessions. But at the centre of these considerations must always be the workers and people on the street who are not afforded the access to quality healthcare. Key takeouts 1. Labour’s discussions with workers revealed the urgency for workers on the ground to have access to quality healthcare, as they cannot afford medical aid. 2. South Africa’s health system is in dire need of an overhaul. 3. From labour’s perspective, the unequal distribution of health spend and the deteriorating state of public healthcare necessitates the NHI. 4. The findings of the Health Market Inquiry reports reaffirm labour’s opposition to the commercialisation of health and its consequences. 5. Labour supports the NHI bill and the establishment of a single fund, the appoint­ment of a board as well as a number of functions related to the NHI fund. 6. There is obviously concern about the board pertaining to how secure the funds will be. Wherever there has been an onslaught of corruption, it seems the workers take the fall. 7. Labour also supports the inclusion in the NHI bill of the complimentary role of medical aid schemes. 8. With regards to the contracting unit for primary healthcare services, there have been numerous agreements put forward that allow for Collective Bargaining Council clinics on site. 9. Labour is willing to agree to the sources of funding proposed by the bill, but the government also needs to look at additional sources of finance. 10. Labour has made the concession of allowing for private sector involvement in the process, on condition there is a boost in access to healthcare. NHI gives rise to constitutional challenges Health industry point of view Nobody in the NHI debate is ar­guing against universal health coverage, but unfortunately many in this debate are having a fundamental debate – literally for and against the NHI. This is unfortunate. Many believe that the debate needs to move past this this approach. The lead­ership within both the public and pri­vate sectors – and the NGOs and others who are part of this conversation – need to move past this high level debate, and to rather focus on those elements of the proposals which can be supported and the elements that are problematic and need further discussion. For many in the private sector, there has been consistent support for the broad policy of the NHI, as well as much of what is found in the NHI Bill. But there are some critical concerns with the current draft of the NHI Bill – the most important of which is Section 33 and the consequences of this. There are some other concerns. For ex­ample, the lack of clarity and informa­tion on the benefit package and, linked to that, the absence of any detailed information on the likely costs and financing of the NHI. It is understand­ably difficult for government at this point to be explicit about these issues – it requires a mountain of work – but it not appropriate in a democratic society to ask the parliamentarians to approve a massively important and impactful Bill such as this one in the absence of such critical information, including the benefit package, and also the associated costs. In addition, there is concern around issues of governance. The model that has been put forward is precisely the model that has led to serious cor­ruption with very damaging impacts on our economy. The main concern is that as currently drafted, too much power is vested in the Minister of Health in terms of appointments and governance. This creates the risk of politicising the NHI. Many stakeholders would suggest that different governance models are ex­plored. For example, in the HMI report, the governance model recommended for the Supply Side regulator could work very well. In fact, it is the same model used by the Judicial Services Commis­sion. In essence, the idea is to have a broad grouping of civil society and all political parties come up with names for the Board and other governing bodies, and then Minister selects the nominations from that short list. The Board then picks its own chair, and also appoints the CEO, who in turn appoints the organisation. This model would preserve more accountability and avoid some of the risks of the current model. Section 33 of the NHI bill is highly prob­lematic. It has the potential to spark significant resistance and objections to the NHI, which are completely avoida­ble. This is why it is important for some compromises to be made in relation to this Section. This Section was incorpo­rated into the Bill at a very late stage, and it was not included in the prior version of the Bill from June 2018. This means that the public had no chance to comment on these drastic provisions in the prior round of comments on the June 2018 Bill. There has also not been any kind of open process or consulta­tion with the private sector, which is most impacted by this Section. For this reason, it is believed that there is no basis to justify such a drastic change from the June 2018 version of the Bill to the current version. There are at least six fundamental problems with section 33. Firstly, no rational policy basis has ever been set out to justify Section 33. No paper or explanation from any of the policy makers has been provided to properly explain the reason for such a drastic in­vasion of both the rights of people and intervention in the healthcare system. The industry has attempted to under­stand the implicit policy arguments, in the absence of clear and explicit explanations from the policy makers. One argument appears to be that Section 33 will deal with the maldis­tribution of resources in the private and public sectors. However, this argument fails to recognise that central to the issue of resources is lack of funding in the public system, as well as very poor conditions of service for health prac­titioners within the public healthcare system. Currently, approximately 25% of specialist posts are unfunded. Funding those posts would make a massive impact on the shortages in the public sector. It is wrong to blame medical schemes for the fact that doctors choose to work in the private sector. The lack of funded posts, and poor working conditions in the public sector are a major part of the problem. There is no need to shut down large parts of the medical scheme environ­ment to force health professionals into the NHI/public system. This approach will not address inequity; it will actually make inequity worse. It will do so by driving up out-of-pocket expenditure, which would be unfor­tunate considering South Africa is currently one of the best performers in the world with regards to out-of-pocket expenditure. These unintended conse­quences of Section 33 have not been properly researched or understood. Another argument appears to be that Section 33 will allow funds to be moved from medical schemes into the NHI Fund. But this is simply wrong. Im­plementing section 33 will not increase funding for the NHI. The only way that can happen is through increased funding from the Treasury, which will require tax increases. Medical scheme funds are owned by their members, and Section 33 will not move any funds from schemes to the NHI. A second point is that there has been no evidence or policy rationale put forward by the policy makers to support this approach. This Section was not included in the prior version of the NHI Bill, and therefore there has been no op­portunity to comment on it, nor is there any reason why it has been included. Thirdly, perhaps most crucially, is that the implementation of Section 33 will have severe consequences for the healthcare system and for the economy as a whole. It will also greatly increase the burden on the NHI. It does not make sense to create a policy that takes nine million people who can fund them­selves and transfers them into the NHI. There is an older average age profile for the medical scheme members, and in some respects a worse disease burden. Adding these 9 million people to the care burden of the NHI will only detract from the limited resources available to improve the healthcare of those who cannot fund themselves. This is therefore actually a retrogressive step. It will impair the ability of the NHI to allocate scarce resources to the most needy in our country. Why not allow those who can contribute to the NHI, and then make an additional contribu­tion to medical schemes to continue to do so. This is precisely the model that is implemented in the UK, for example, which has an outstanding National Health Service, but allows citizens to purchase additional private medical insurance if they wish to. We have already seen that the publi­cation of the NHI Bill with Section 33 included has had a significant negative impact on investor sentiment, with many local and international investors looking for reasons to exit South Africa. And this Section of the Bill is confirm­ing the concerns of sceptical investors who see a government that appears willing to implement an irrational policy without a solid policy foundation to support it. It is very clear that the implementation of Section 33 as drafted will cause material damage to private healthcare. Estimates are, depending on how much money the system can mobilise, that if all healthcare is moved into the NHI, this will have a dramatic negative im­pact on the income of hospitals, private doctors, pharmaceuticals, etc. This will result in the loss of potentially thou­sands of jobs, losses of tax revenues as well as reducing the attractive­ness of our country as an investment destination. The argument that the NHI will support private providers is not convincing as the NHI will simply not be able to fund private sector providers at their current tariff levels. Nor is the argument that increased volumes will compensate for lower tariffs. Most private sector providers cannot accept much of an increase in volumes and no evidence has been provided to back up this view. In addition, the impact of cross-sub­sidies is vital. Medical schemes pay higher prices than the public sector, and therefore effectively provide a subsidy to the public sector. If medical schemes are forced out of the market, as envisaged in Section 33, pharma­ceutical and device prices will have to increase substantially from current state tender prices in order to sustain a pharmaceutical environment and a medical devices environment, with a single payer. And the same is true of doctors and hospitals. The fourth problem with Section 33 is that it will almost certainly lead to legal challenges on various grounds including constitutional challenges. Many stakeholders have received senior counsel advice with clear arguments that under the Constitution, rights can be limited under section 27, but that section 36 of the Constitution obligates the State to justify those limitations, firstly by showing that they will have the desired effect, and secondly by showing that there are no alternative that can avoid the limitation of rights. Thus far, there hasn’t been any justifi­cation for this limitation of rights, and there are certainly alternative models to achieve the same objectives. If the inevitable delays were to be avoided due to legal challenges, surely the way to do this is to find some compromise in relation to Section 33 and some of the other areas of major concern in the NHI Bill. A fifth concern is the fact that there is no country in the world that has, in attempting to implement or run an NHI or similar system, made such a drastic intervention in reducing voluntary health insurance. There are countries that have certain limitations, but there are none that have vetoed cover for anything that the NHI is covering. The reason for this is that other countries have not seen such a drastic interven­tion as a necessary step to achieve their own NHI, and nor is it necessary in our country. The NHS in the UK, which achieves pre­cisely the aspiration of universal health coverage which South Africa aspires to, allows private health insurers to cover whatever they wish to. The NHI Bill should be implemented without Section 33 and the way to go is to build a highly functioning NHI that is supported by all stakeholders and that compete the medical schemes out of business. If the NHI provides a cost effective high quality alternative to schemes, citizens will vote with their feet. There should be no reason for the draconian measure of shutting medical schemes down. Nor does there necessarily have to be only one single public payer. There are brilliant models around the world which have both the public fund and medical schemes or their equivalent carrying the NHI package. Finally, one of the biggest concerns with the bill is that the phases of the bill are tied to dates and not to actual outputs and delivery. Again, this could provide a basis for legal challenge and this can surely be avoided. Some policy makers have said that it will take a lot longer than five or six years to roll out the system. However, the public in South Africa and investors, foreign and local, have the impression from the Bill itself that the date for full implementa­tion and therefore the implementation of Section 33 is 2026. And that implies a drastic curtailment of the role of medical schemes. That is what the millions of medical aid members, which include hundreds of thousands of trade union members as well as public sector employees, as well as the broader business community and civil society are very concerned about. Key takeouts 1. Leadership in the public and private sectors – and NGOs and other stakeholders – need to focus on the details which can be supported and the elements that are problematic. 2. Generally, the private health sec­tor is in strong support of the NHI, but a critical concern is section 33 of the NHI bill. 3. Other concerns include lack of clarity and information on the ben­efit package, costs and financing, the governance model and the timeline. 4. Many stakeholders propose a different governance model: a broad grouping of civil society comes up with names for a board, then the minister picks the board. The board picks a CEO, who in turn appoints the organisation. 5. Section 33 was incorporated into the bill late and with no open process for inputs to provide a rational justification for the move from the June 2018 draft to now. 6. Shutting down large parts of the medical scheme environment will not address inequity; it will drive up out of- pocket expenditure. 7. Adding in the nine million peo­ple who can fund themselves will increase the burden on the NHI, detracting from the limited resources available to those who cannot fund themselves. 8. The country has already seen a negative impact on investor sen­timent, and there will be damage to provider cross-subsidies that currently exist and are needed to ensure sustainability. 9. No country in the world has made such a drastic intervention in re­ducing voluntary health insurance and none that has vetoed cover for anything the NHI is covering. NHI presents a golden opportunity to equalise the health system Health industry point of view When looking at the bigger pic­ture with respect to the NHI, the state of South Africa’s present economy and its likely trajectory over the next decade or two are critical considerations. Whatever the decisions, they need to be made with the certainty that they will not further damage the economy, drive up public debt or stifle an already stagnant economy. Decisions that are made based purely on being patient-friendly and pa­tient-centric often disappoint patients down the line, as they are economically unaffordable to implement. There does need to be a patient-centric system in place, however, solutions that will further worsen public debt and not offer the appropriable public/private partner­ships need to be avoided. This requires a collaborative effort from both the public and private sectors. As organised business there is much that can be supported and needs to be supported in the NHI bill. It is clear that the status quo is undesirable, unten­able and unsustainable. The solution needs to, for the next 50 years, provide a healthcare system which will address the gross inequalities at a financing and service level in the public sector. But there are a few concerns with the bill. The first, the ‘treasury concern’, is to ensure that there is no burden left for future generations to deal with. The country is already paying R1.3-billion daily to service its debt. And the debt to GDP ratio is not looking good. The solution needs to be one that works across both sectors, that will not worsen the public debt position and will deliver equality in healthcare. The second concern is that, speaking to investors, there are a number of issues that are putting them off sinking their money into the country. One of those is policy uncertainty and lack of implementation of policy. Unfortunate­ly, this is the way the bill is presently expressed. Parliamentary processes are urgently needed to constructively contribute towards fixing those issues. As it stands, both foreign and domestic investors are deeply uncertain. Capital is agnostic; it will only follow where there is certainty. South Africa desper­ately needs to attract foreign direct investment. In fact, if the country does not get FDI and domestic investment, it will be forced to rely on the IMF and the World Bank to run it. There needs to be a focus on the prac­tical actions that can be taken to make investors feel comfortable. Some are questioning that when the bill first came out, there was between R40-billion and R80-billion wiped off market capitalisation. The protagonists say that was entirely a consequence of the bill, and those that are defending it say there were a number of other reasons, including poor management, etc, within those companies. The real question though, is whether the policies are investor friendly. If it is cab­inet’s number one imperative at present to grow the economy and solve unemploy­ment, there needs to be a focus not only on what will achieve the desired outcome, but also on keeping investors on side. With regards to the governance issue, there are many models to follow that could resolve that conundrum. Reit­erating the points that have already been made is not helpful, it simply gets investors reacting. The flurry and frenzy of articles and opinion pieces is not the way to achieve a meeting of minds. The last concern is section 33. From a pharma perspective, pharma and de­vices are the only sectors that supply products to both the public and private sectors. The rest of the subsectors in health are largely private-centric. There are no access issues around medicines in the public sector. In the private sector, 87% of chronic condi­tions can be treated for R100 or less a month. The most consumed product in the public sector, antiretrovirals are taken by close to five million patients every month, costing the state roughly R70 for a month’s supply for one person. The access problems begin at around 30 or 40 molecules, mainly oncology molecules. Implementing section 33 in its extreme form, with no medical schemes and, therefore, a completely different model will disrupt the public/private subsidy which enables the selling of an ARV for R70 a month, or less than R3 a day, in the public sector. If that is disrupted, how will the NHI continue to supply those five million patients their treat­ments every month? There are concerns, but there are also opportunities in the bill. The real opportunity that exists for South Africa and its citizenry is to use this platform as an instrument to once and for all bring the two sectors closer together to find common ground. To use this bill as a vehicle to explore other options available that would lead to achieving universal coverage and equalising of the system, with­out having a negative impact on the economy and patients by disrupting the subsidy that exists and chasing away investors. The outcomes of the discussions and comments are now subject to the parliamentary process. But at the end of the day, the real action will be in the hands of the expertise that resides within the health department. There is a golden opportunity to work with the health department on many different levels: getting the infrastruc­ture right, the capex, reducing problems such as debtors books, and introducing 4IR technology into the system to make it more efficient. Using technology and digitalisation would solve some of the human capital issues. In the private sector, pharma­cists spend most of their time on the phone trying to get a benefit through the medical aid, instead of counselling a patient. And in the US, 25-50% of all hospital admissions are iatrogenic in nature, mostly from drug interactions that are not picked up or suboptimal use of drones, etc. Many of the aims that the bill aspires to achieve can partly be serviced through the public sector – there is nothing in it that excludes contracting services from the public sector. The aim to keep an eye on, is how best to equalise the system. Key takeouts 1. Decisions about the NHI need to be made with the certainty they will not further damage the economy, drive up public debt or stifle an already stagnant economy. 2. Decisions based purely on being patient-friendly and patient-centric often disap­point patients down the line, as they are economically unaffordable to implement. 3. The solution needs to, for the next 50 years, provide a healthcare system which will address the gross inequalities at a financing and service level in the public sector. 4. The ‘treasury concern’, is to ensure that there is no burden left for future genera­tions to deal with. 5. Investors are being put off of sinking their money into the country due to policy uncertainty and lack of implementation of policy. If South Africa does not get FDI and domestic investment, it will be forced to rely on the IMF and the World Bank to run it. 6. There needs to be a focus on the practical actions that can be taken to make inves­tors feel comfortable, for example, by ensuring that policies are investor friendly. 7. With regards to governance, reiterating the points that have already been made is not helpful, it simply gets investors reacting. 8. There are no access issues around medicines in the public sector. Implementing section 33 in its extreme form, with no medical schemes and, therefore, a com­pletely different model will disrupt the public/private subsidy. 9. Bring the two sectors closer together to find common ground and use the bill to achieve universal coverage and equalise the system, without a negative impact on the economy and patients by disrupting the subsidy that exists and chasing away investors. 10. There is an opportunity to work with the health department on the infrastructure, the capex, reducing the debtors books and introducing 4IR technology to make the system more efficient. Quality and standards: the cornerstones of achieving universal health coverage Health industry point of view There is much talk about providing quality health services through implementation of the National Health Insurance (NHI) fund. The term ‘quality’ has been used frequently by stakeholders during the discussions on achieving Universal Health Coverage (UHC); however, this is actually a highly complex area. The accreditation of health services focuses on a key aspect in this field: developing and implement­ing accreditation standards. Those representing the accreditation concern wholeheartedly support UHC and believe that quality improvement and compliance with robust standards are cornerstones of achieving this target; in this regard, the Office of Health Standards Compliance (OHSC) has a mammoth task ahead. The extent of this task is indicated in its recent report from 2016/2017 which exposed the enormous gaps in the quality of healthcare services indicated by the lack of compliance with the regulatory national core standards across public sector facilities. The accreditation bodies are ready and willing to offer support and expertise in supporting facilities to improve ser­vice delivery and patient safety across both the public and private sectors and thus achieve compliance with the regulations. One such accreditation body is COHSA­SA, which is just over two decades old, has worked in over 600 healthcare facili­ties in 13 African countries. Notably, COHSASA worked with the Ministry of Health and Wellness in Botswana to de­velop national health quality standards and has accredited 16 facilities in the programme. Furthermore, COHSASA is currently assisting the Ministry of Health in Uganda and the Uganda Healthcare Federation (UHF)—a collaboration be­tween the public and private sectors— to develop baseline standards in order to allow the nation to implement its own NHI in order to achieve UHC. It is vital to invite on board bod­ies such as this, that already have first-hand experience to offer in the process of improving service quality to support the rollout of the NHI in South Africa. It also appears to be the only organisation in Africa accredited by the International Society for Quality in Health Care (ISQua). Within the context of the NHI, capacity is a massive issue. The appropriate accreditation bodies would be able to assist in training healthcare workers to evaluate their services and to address the compliance gaps and deficiencies in the sector. As a result of the multitude of the facilities starting at a low base, it is recommended that, once they are certified by the OHSC as compliant with the regulatory standards, a system of “Graded Recognition” be implemented to allow weaker facilities to demonstrate that they are moving towards compli­ance with accreditation standards. By this method, instead of losing a facility and the personnel due to lack of motiva­tion because they have not achieved full accreditation immediately, the relevant authorities are able to guide and offer a support base to reach key milestones, and eventually reach full accreditation. There have been some interesting innovations when it comes to motivating personnel and healthcare facilities to adhere to quality improvement programmes. For example, a recent TED Talks presentation demonstrated how a consulting firm, employed by the Indian Ministry of Health, helped develop mechanisms to motivate primary health­care facilities to improve the quality of services provided to the population. An example of one method used to enhance motivation involved ranking clinics (and publishing the results publicly) based on key quality performance indicators including patient and family feedback on the level of service received. This intervention was necessary as studies revealed that patients were boycotting primary healthcare facilities and opted to remain sick as opposed to receiving sub-standard care. Similar interventions could be leveraged in South Africa where hospitals and clinics are ranked—based on their progress in complying with the regulatory and accreditation stand­ards— within national and provincial leagues, thereby motivating personnel and management to uphold quality improvement efforts. Quality improvement is a lengthy pro­cess; patience is needed to achieve the desired outcomes and constant monitoring is required to maintain high standards of care. Overall, a commit­ment to working together over an ex­tended period of time is of paramount importance. It was recommended to exempt facilities that have already achieved international recognition, whether through COHSASA, ISO, or an equiva­lent accreditation body. The key deci­sionmakers should focus the country’s limited resources on facilities that are in dire need of assistance and use the facilities that are accredited as Qual­ity Learning Centres (QLCs) to share their learning expertise with the rest of the healthcare sector, both public and private. Finally, it is important to note that quality improvement is founded on the values of excellent governance, leadership and management—these values cannot be neglected. Key takeouts 1. The Office of Health Standards Compliance’s (OHSC) recent re­port shows the enormous gaps in the quality of healthcare servic­es and lack of compliance with national core standards. 2. The first step in the trajectory towards good quality services is for all facilities to achieve compli­ance with the National Regulatory standards assessed by the OHSC. 3. There are capable accreditation bodies to assist the health es­tablishments in improving service delivery and has extensive experi­ence in developing and implement­ing health facility standards. 4. COHSASA has worked in over 600 healthcare facilities across 13 countries in Africa. 5. COHSASA worked with the Ministry of Health and Wellness in Botswana to develop national health quality standards and has accredited 16 facilities in the programme and is currently assisting the Ministry of Health in Uganda. 6. COHSASA is the only International Society for Quality in Health Care (ISQua) accredited organisation in Africa. 7. The appropriate accreditation bodies would be able to assist in training healthcare workers to evaluate their services and to address the compliance gaps and deficiencies in the sector. 8. The accreditation process assists providers to achieve the required standard rather than closing them down. There is an awareness that organisations which have worked primarily in the private sector in South Africa will need to adjust according to the local context. 9. Quality improvement is a lengthy process; patience is required to achieve and sustain the desired outcomes and a system of “Grad­ed Recognition” should be imple­mented to allow weaker facilities to demonstrate that they are moving towards compliance with accreditation standards. 10. It was recommended to exempt facilities that have achieved inter­national accreditation and instead to focus the country’s limited resources on the facilities at the lower end of the quality spectrum. 11. It was suggested to use the facilities that achieve international accreditation to participate as Quality Learning Centres (QLCs that share their expertise with the rest of the healthcare sector. 12. Quality improvement is founded on the values of excellent governance, leadership and management. Managing the lifeblood of the NHI Health industry point of view At the recent NHI Roundtable discussion, representatives of the South African National Blood Service pointed out that the organisation captures the values of the NHI in that it aims to offer a reliable, cost-effective, high quality service which gives every patient in South Africa the coverage – in this case, the unit of blood – that they need, and also aims to ensure that no patient gets a unit of blood they do not need, as blood transfusions are not without their complications. It would appear that through the blood service, government is in the unique position of having access to data from more than seven million donors across the country from diverse backgrounds. Moreover, they have the capability of geomapping this data, which has the benefit of being able to show, for instance, what the incidence of iron deficiency or anaemia is in a particular geographical area. In effect, government has a bird’s-eye view of what the country’s healthcare system looks like – and what can be seen is that there are two different healthcare systems in play. Of course, this has already been proven in the majority of the submissions that have been made and in the research that has been done. But it is worth opening up this discus­sion again, as the difference really is profound. There is a vast discrepancy be­tween what healthcare looks like in the public sector, how sick these patients are, compared to what is happening in the private sector. In the public sector, it appears that patients present later with disease and when presented, the dis­eases are more severe, whereas in the private sector the incidence of disease more closely mirrors the patterns found in the European countries. Furthermore, government not only has access to data of the donor community, but also data of the hospital patients – and a marker that shows severity of disease, which is anaemia. There was recently a blood demand versus supply study conducted. The resulting estimate showed that if government proceeds with implement­ing the NHI and increases access to healthcare, the need for blood in the hospitals is likely to increase by an as­tounding million units. Currently, there are 760 000 units being supplied, but there are concerns that this figure may be out by as much as a million units. With such a massive gap between the public and private sectors, in terms of disease, it is reassuring that the NHI has stated that it will take time to implement the new healthcare system and that it will be rolled out with the utmost care. Looking again at the data, from a real world point of view, in the private sector there are at present 28 units per thousand people being supplied, which is lower than the number in Europe at 33 per thousand. But in the South African public sector (excluding the Western Cape), the audited figure for 2018 is only nine units per thousand – showing a huge deficiency in healthcare in this sector. Another important factor to consider in the NHI discussion is the likelihood that the cost of blood products will rise if the system is implemented as is, and if there are no adjustments made to actually prevent patients from receiving unnecessary blood products. There may be a solution to this which could have an immensely positive affect on healthcare in South Africa. Patient Blood Management involves a system, which has been adopted by the WHO, that would ensure no patient gets a unit of blood unnecessarily, and is based on an IT system that inte­grates hospitals, laboratories and the blood service. Such a system, which has already been implemented in Australia, would take roughly seven years to apply, but would improve patient outcome enormously. Where it was implemented in Australia, it improved in-hospital mortality by 28%, length of stay in hospital by 15% and complications from blood transfu­sion. It cost AU$5-million to put the system in place, but the saving was AU $180-million. There are also possible new solutions being worked on for cancer therapy and degenerative diseases, in the form of immunotherapy and cellular therapies, which will contribute to the efficiency of the NHI. With regards to the NHI bill itself, it makes no mention of blood services. To clarify, the blood service is neither a pharmaceutical service, nor a healthcare service. It provides a unique service: taking blood from donors, processing it and deliver­ing it to every patient in need of it. The organisation is the custodian of the blood products and is also tasked with the responsibility of monitoring the adverse events of these products. According to the WHO, the cost recovery model is the most efficient. It should never be a for gain model. It was suggested that government continue with the cost recovery model and with a non-remuneration system for donors, in the interests of blood safety. Key takeouts 1. The Blood Service captures the values of the NHI: to offer reliable, cost-effective, high quality products and services which gives every patient in South Africa the coverage they need. 2. It would appear that through the blood service, government is in the unique position of having access to data from more than seven million donors in South Africa from diverse backgrounds. 3. It has the capability of geomapping this data, with the benefit of showing, for in­stance, what the incidence of iron deficiency or anaemia is in a particular area. 4. In the public sector, it appears that patients present later with disease and diseases are more severe; in the private sector the incidence of disease mirrors the patterns found in Europe. 5. If government proceeds with the NHI and increases access to healthcare, the need for blood in hospitals will increase by a million units. Currently, there are 760 000 units being supplied, but there are concerns that there is an undersupply of a million units. 6. In the private sector there are at present 28 units per thousand people being supplied. In the public sector (excluding WCBS data) this figure is only nine units per thousand – showing a huge deficiency in healthcare in this sector. 7. Patient Blood Management is a multidisciplinary approach that ensures that the patients’ own blood supply is preserved and does this through a monitoring system that includes IT integration. 8. In Australia, the system improved in-hospital mortality by 28%, length of stay in hospital by 15% and complications from blood transfusion. It cost AU$5-million to put in place, but the saving was AU$180-million. 9. There are also possible new solutions being worked on for cancer therapy and degen­erative diseases, in the form of immunotherapy and cellular therapies. 10. It is concerning that the NHI bill makes no mention of blood services. Integrating family practitioners as gatekeepers to the NHI Health industry point of view This contribution approaches the NHI from a family practition­er’s – a family doctor or GP –perspective, and not from the perspective of a specialist, who works in a different environment from family practitioners. IPAs are independent practitioner associations, which loosely refers to a group of family practitioners from a common area who come together to form a society, in effect sharing a net­work of knowledge and resources and working together to improve health­care. The various smaller IPAs would then fall under a larger IPA within the province. And then nationally most of these IPAs fall under the umbrella of IPAF (Independent Practitioners Association Foundation). There are roughly 5 000 GPs across South Africa. There is a common vision among these health providers: one of patient-centric care, including peer reviewing and mentoring to ensure high quality cost-effective care to their patients. There are also opportunities within these groups for family practi­tioners to take part in regular upskilling training. In addition to medical aid patients, GPs have been providing healthcare to uninsured patients for years. They have discounted their services in these communities, thus making healthcare accessible to numerous disadvantaged individuals. The community of family practitioners is in full support of the ethos of the NHI, since it will essentially be an extension of the kind of services that GPs have already been providing in many of those communities that struggle to access private healthcare. According to the NHI bill the services that will be dispensed first and fore­most will be primary healthcare based. Family practitioners have been specifically trained in this area of providing primary healthcare services to all individuals, regardless of age, gender or illness. They provide prima­ry and continuous care to entire fam­ilies, within communities, addressing not only the physical aspects of health, but psychological and social problems too. It is for this reason that the input from the independent practitioner associa­tions into the NHI is vital. It is imperative that they are included in the discussion around primary healthcare, since they have developed the nec­essary skills and experience over the great number of years that they have been servicing these communities, to assist in successfully implementing the NHI. An area that needs more attention from government is the connection between IPAs working on the ground and the Department of Health in terms of the NHI. A pathway for interaction needs to be created, a consultative process, in order to create a platform on which to discuss the issues that are fundamental to the NHI, which are primary healthcare based. Considering that family practitioners are the gatekeepers of healthcare, or the first point of contact, for most patients within the communities, their representatives need to be at the table when issues such as service delivery requirements, scope of primary healthcare services provided, licensing, accreditation, contracting and dispens­ing medication are discussed. These issues have a direct effect on how the IPAs will function in the NHI envi­ronment; in the universal healthcare environment. For example, the district health man­agement office is set to be a contract­ing unit for primary healthcare. But at this point little is known as to how this will play out in real terms and there is no avenue through which to consult or interact with the district committees. The family practitioner group is more than willing to get involved, to assist with the process of rolling out the NHI, but there is a lack of opportunities for connection and conversation around these matters. Although there are a few unanswered questions that currently concern the group, they believe in the ethos of universal healthcare and are committed to engaging in this consultative dia­logue. The independent practitioners called for the group to be represented on the committees that are discussing issues which will affect family practi­tioners and, in this way, to be inte­grated into the process, allowing the associations to be more meaningful partners to the NHI. Key takeouts 1. IPAs loosely refers to a group of family practitioners from a common area who come together to form a society. 2. Smaller IPAs fall under a larger IPA within the province. Nationally most of these IPAs belong to IPAF. 3. Family practitioners share a common vision: one of patient-centric care, including peer reviewing and mentoring to ensure high-quality cost-effective care to its patients. 4. There are roughly 5 000 GPs across South Africa, who have been providing health­care to uninsured patients for years at discounted rates to enable disadvantaged individuals to have access to healthcare. 5. The community of family practitioners is in full support of the ethos of the NHI, since it will essentially be an extension of the kind of services that the GPs have already been providing. 6. Family practitioners have been specifically trained in this area of providing primary healthcare services to all individuals, regardless of age, gender or illness. 7. An area that needs more attention from government is the connection between IPAs working on the ground and the Department of Health. 8. Family practitioners are the first point of contact for most patients. 9. Representatives of the family practitioners need to be part of discussions about ser­vice delivery requirements, scope of primary healthcare services provided, licensing, accreditation, contracting and dispensing medication. 10. The independent practitioners called for the group to be represented on the com­mittees that are discussing issues which will affect family practitioners. Medtech as a solution to the NHI’s pricing challenges Health industry point of view The medical technology industry fully supports the concept of a National Health Insurance – a well-formulated NHI is crucial to assisting South Africa in advancing universality and social solidarity as the pillars of patient-centred health systems that do not discriminate along economic lines. The South African medical device market – consisting of consumables, imaging, ortho and prosthetics, patient aids, dental and digital services – to­tals US$1.3-billion. There are a limited number of South African manufactur­ers, with an output of approximately US$2.5-million, of which half is export­ed. This makes South African small- to mid-sized distributors with less than 50 employees on average, highly de­pendent on imports. Medical technology is not a commodity and unlike, for example, pharmaceuti­cals, the industry undergoes a rapid cy­cle of improvement – it only takes 1-2 years before newer and better products are introduced. MedTech can be seen rather as a solution consisting of various elements such as hardware, software and con­sumables. It doesn’t necessarily have a dedicated purchase price as such, as it combines and includes services, technical support and training. MedTech can be tailored for certain needs and re­quirements and hence, could offer useful solutions to some of the issues plaguing the NHI process. There are risks an NHI could bring, espe­cially in putting pressure on the price, as this has an immediate effect on servic­es and training, which is where the high investment on the distributor side sits. Furthermore, an over-regulated market bears its risks. The regulatory framework in South Africa needs some attention, if it is going to be any kind of support to the NHI. The Medicines Control Council, which is now SAHPRA, sits at the top of established frameworks such as CE and FDA, and seems yet to become fully functional, with massive backlogs on licence applications and approv­als. There are a number of grey areas that need clarification. The role of these new, yet to be established local regulatory bodies may be confusing to overseas suppliers and this, together with pressure on price, could result in deprioritising the South African market and, worst case, pulling out completely. This would not only have a negative effect on the vast amount of small to medium local distributors, it would also result in a decrease in the quality of healthcare, which is the opposite of what the NHI and government are trying to achieve. Rather, a solution could be transforma­tion. South Africa needs to be marketed as innovative and open to new, more cost-effective technology, building on an already existing excellent digital infra­structure. Paired with the speed at which South Africa is accepting and making way to new technology, compared to other economies, the healthcare system could vastly benefit from this head start and attract over­seas suppliers. There is an obvious opportunity, as well as a need, to create digital services around expensive medical devices. For example, taking screening and diagnos­tic monitoring out of expensive special­ist and overwhelmed hospital environ­ments, has an immediate cost savings effect, making quality healthcare more accessible. Especially in remote and rural areas, digital health and cloud technology solutions could support an NHI on its mission to offer equal standards of healthcare for all South Africans, con­sidering the ever-decreasing number of specialists in the country. Often, all that is needed is a 4/5G net­work, which is widely available in South Africa, and a smart phone or tablet pc to connect a nurse or health worker with a specialist. One of the devices currently applied is used for remote cardiovas­cular screening. The diagnostic devices are cost effective and can be easily employed by a nurse or health worker, af­ter which the patient’s ECG is uploaded to an assessment centre, where experts conducting the analysis are able to give immediate feedback and advice on further action. In summary, part of the strategy for a successful rollout of the NHI could be to upgrade the current system step by step, enable technology and, of utmost importance, create an exciting environ­ment for all stakeholders, as this will benefit all patients. Key takeouts 1. The medical technology industry supports the concept of a national health insurance that doesn’t dis­criminate along economic lines. 2. There are only a limited number of medical device manufacturers in South Africa, therefore the industry is largely dependent on imports. 3. The output of domestic manufac­turers is only two to three million USD, and half of it is exported. 4. Medical technology is not a commodity. It combines hardware, software and consumables, as well as service and training. 5. Pressure on pricing may result in outdated technology, lack of service and training, and would negatively affect the standard of healthcare in South Africa. 6. The regulatory framework in South Africa needs attention, if it is to be a support to the NHI. 7. South Africa needs to be marketed as innovative and open to a new, more cost-effective technology. 8. Digital solutions should be im­plemented, building on an already existing excellent data infrastruc­ture, reducing costs and making healthcare more accessible to all South Africans 3 Fundamental principles for NHI success: efficiency, quality and responsiveness Health industry point of view There are many naysayers in the South African communities – doubtful about whether the NHI and the promises made will come to fruition, worried that it will be too expensive (for government, and for the people who will be using the ser­vice), that the benefits will be too few, that the financing will be corrupt. The NHI is one of the biggest reform programmes in the country. Involving the values of visionary leadership, participation and coordination, the NHI is well on its way to achieving universal health coverage for South Africa. But the financing/benefit design conundrum is a particularly challenging part of the process that still needs to be tackled. The global need for universal healthcare is inevitable. It is an inescapable under­taking brought on by the pressures of changing demographics, an increase in the elderly, an increase in the number of people getting sick, changing dis­ease patterns, higher rates of chronic disease, and so on. The costs of these pressures are incremental; increasing on a yearly basis. The time for the NHI in South Africa has come. But in what form? This needs to be approached with caution: medical care needs are so extensible, unlimited – the needs of patients differ, in some cases dramatically; the financial invest­ment into the NHI Fund will be enor­mous; the professionals and the clients need to be retrained with regards to provision and consumption of services. In many countries, there have been cer­tain ideologies that have disabled their national health insurance. Some people believe there is nothing wrong with the system and all that is needed is to protect against unpredictable expenses by imposing financial disincentives for utilisation. A philosophy that is geared towards leaving the system as it is; just improving it. Whereas others believe the whole system needs reform, that it needs to have a distributive intent. In other words, looking into efficiency, allocation and equity. Clearly, the NHI in South Africa is taking the latter view. A framework has been outlined for how to proceed. While certain areas are well-explained, others are still lacking in detail, understandably, considering the nature and the magnitude of the work that lies ahead. The NHI bill is a framework that out­ lines the governance structure, what governance processes and institutions need to be put in place. There is less focus on other vital structures such as strategic purchasing and the benefit design, which are more relevant to the managed healthcare environment. These issues are key to the affordabil­ity of the NHI. The bill also mentions eligibility of members, the financing, budgeting and reporting – which talks to accountability. Looking at what the critical elements and implications are, and what the tools and remedies will be to miti­gate those implications, needs to be the first action in every step of the process. The implication of raising the finance centrally is that it is distributive in intent. The aim is to move money from the haves to the have nots, including a vast number of unemployed people. Then there is the issue of equity. A person who is paying taxes, paying towards national health insurance, may have a certain sense of entitlement about equity, about how the system is going to work. In addition, there needs to be a definite commitment by government towards economic growth, to undertake such a huge project. Not having a clear direc­tion of where the economy is headed will be problematic in implementing the NHI. From the perspective of particular­ly the taxpayer, there needs to be great sensitivity towards the potential for fraud and abuse of the funds. The purchasing of services is obviously an important issue in terms of cost containment. It will be a purchasing function that has probably never been seen before in this magnitude. Huge money, huge purchasing pressure that is likely to bring down the cost of healthcare, not only for the public sector but also for the private sector – there will be benchmarks set. With regards to location and levels of service, again there is the issue of equity. There need to be safeguards put in place against simply entrenching the status quo. The issue of no payment at the point of sale: this needs to be stratified, because it also comes with the issue of entitlement. The benefit needs to be ex­plained properly to avoid having to deal with human rights issues further down the line. There needs to be clarification about what those rights are, for the patient and for the service provider. Currently, the remedies are primarily legislative. According to the World Health Organisa­tion the benefit packages are crucial to cost effectiveness, impact on financial protection, equity and access across populations. Of utmost importance in the design of benefit packages is effi­ciency, quality and responsiveness. The NHI needs to be effective. In addi­tion, it needs to be affordable, which comes with a level of complexity. But the more complex the NHI is, the more effective it will be, and probably more affordable too. Involving the private sector will increase the complexity but also effectiveness and affordability. The financing is a range. The services will be public/private, and the financing will be mainly public. Within the financing model, these need to occur concurrently. Financing from the government, from treasury and from the actuaries, needs to feed into the NHI model. And it needs to be an iteration; an ongoing process. Key takeouts 1. The NHI is one of the biggest reform programmes in the country. 2. There are concerns that the NHI will be too expensive, that the benefits will be too few, that the financing will be corrupt. 3. The need for the NHI has been brought on by changing demographics and disease patterns; an increase in the elderly, the sick and rates of chronic disease. 4. The NHI needs to be approached with caution: medical care needs are unlimit­ed, financial investment will be enormous, professionals and clients need to be retrained with regards to provision and consumption of services. 5. In some countries, the belief is there is nothing wrong with the system and all that is needed is to protect against unpredictable expenses by imposing finan­cial disincentives for utilisation. In other countries, the belief is that the whole system needs reform, that it needs to have a distributive intent – looking into efficiency, allocation and equity. 6. The NHI bill framework outlines the governance structure, what governance pro­cesses and institutions need to be put in place. There is less focus on other vital structures such as strategic purchasing and the benefit design, which are key to the affordability of the NHI. 7. The bill also mentions eligibility of members, the financing, budgeting and report­ing – which talks to accountability. 8. The purchasing pressure is obviously an important issue in terms of cost contain­ment. This is likely to bring down the cost of healthcare, for both sectors. 9. With regards to location and levels of service, there need to be safeguards put in place against simply entrenching the status quo. 10. The benefit packages are crucial to cost effectiveness, impact on financial pro­tection, equity and access across populations. Bringing the frontline of healthcare to the NHI debate Health industry point of view At the health summit last year, representatives of the private hospitals in South Africa offered insight into what its spare capacity in the private sector was, showing that at public sector admission rates, it may be possible to absorb a population of seven million. The real question is whether there is capacity for a different discussion, as the 2019 version of the NHI bill seems infinitely more aggressive on the role of medical schemes than the draft that was put forward in 2018. As long as a service provider could continue running their practice sustain­ably, they would be indifferent as to who the patient was or whether the patient could afford to only pay half of the cost or only in a year’s time, it would probably be acceptable. But when does it become unacceptable? Would it be when it is at 30% of the patient base, or 50%? There would come a time when it becomes impossible to pay staff, rent, etc. And that is what it boils down to from a provider perspective – whether it is possible to continue offer­ing quality service in a sustainable way. Having Deloitte and the medical schemes at the table leads into the sorely needed discussions around cost and sustainability. There was a class action in 2008/2009, wherein 22 healthcare service providers approached the court demanding that it look at cost studies before deciding on pricing that had been recommended by DoH. The problem with costing is that the price guideline, known as the Reference Price List (RPL) – used as a departure point when medical aid schemes determine their tariff or rates structures – would be loss-making for hospitals from the get-go. The fact is that the Uniform Patient Fee Schedule (UPFS) was lower than the RPL, and the ten wards assessed did not work from the start. That is the reason why these discus­sions are a bit charged. It is not because people do not support universal health­care, it is simply that there needs to be space for a more balanced discussion with more compromise in order to figure out how to shift the discussion and the debate forward. There are so many different elements that need to be discussed, but most important is section 33. And yet, in every session of dialogue about the future of healthcare, there is the same proviso: section 33 may not be discussed. It is hard to see how a middle-income country could do that without cross subsidies from private patients. No one wants to pay three times what they should for healthcare. In addition, no one wants to pay a gen­eral tax, another tax that might come up for healthcare, on top of paying for private healthcare. If a person can afford to, the money will be added to the broader healthcare envelope. Currently, the country has a fairly broad health­care envelope, in excess of R300-bil­lion, but half of that is private money. It will be challenging to substitute that over time. There needs to be further discussion on the role of the medical schemes and how that might change over time. The idea of 2026 being the timeline is most probably unrealistic. Why not rather have measurable milestones? Representatives from the private hospital sector called for a review of the wording of section 33, or the purpose of section 33. Hand-in-hand with that is introducing changes with immediate effect to the Medical Scheme Act, which will merely cause unnecessary uncertainty with regards to an aspect that only really becomes relevant at a later stage. Rather intro­duce it when the time is right and for the right reasons. Obviously, the private hospital sector embraces the objectives of the NHI and understands the need for it – as it is currently structured, the health system will not be able to deliver. Therefore, there is a need for change. What also needs to be acknowledged now though, being close to the point where the rubber hits the road, is that until now the private sector people who truly are on the frontline – the funders, providers, consumers – have not entirely been part of the debate. For some rea­son, it has side-tracked them. The other reality is that they are the ones in the know about what is happening on the ground: how to deliver the healthcare, how to fund the healthcare, about consumer health­care. In fact, moving forward it is crit­ical that, as the gaps begin to emerge in the process, those on the frontline of healthcare – not those sitting in the government boardrooms, but the people who are practically running the institutions – need to be part of the debate in earnest. Key takeouts 1. At public sector admission rates, it may be possible to absorb a population of seven million. 2. The 2019 NHI policy draft is more aggressive on the role of private medical schemes. 3. As long as a service provider could continue running their practice sustainably, they would be indifferent as to who the patient was or whether they could afford to pay. 4. The problem with costing is that the RPL would be loss-making for hospitals from the get- go, but the UPFS rates are even lower. 5. In every session of dialogue about the future of healthcare, there is the same proviso: section 33 may not be discussed. 6. Immediate changes with the Medical Scheme Act will merely cause unnecessary uncertainty. 7. The association embraces the objectives of the NHI and understands the need for it – as it is currently structured, the health system will not be able to deliver. 8. Currently, the country has a fairly broad healthcare envelope, in excess of R300-billion, but half of that is private money. 9. The funders and private providers need to be part of the NHI debate in earnest. Fair play in the pharmaceutical trade in Africa Health industry point of view The private health sector has been working closely with providers and communities on the NHI bill, since it was published in August 2019. The vision of the private health sector is in line with that of the NHI, to create partnerships with various stakeholders to achieve universally accessible and affordable healthcare for all. The aim is to establish private/public partnerships that are sustainable, and which can be rolled out within the African continent. The intention is to unify the private sector in order to engage and take inputs to the Department of Health. In addition, it is to reach a collective perspective and a common purpose around finding solutions to the healthcare challenges faced by the private sector. It is fundamental in choosing repre­sentatives of the private health sector, and indeed those of the NHI, to look for individuals who are knowledgeable and of high integrity. Corporate governance has to be in place; there needs to be accounta­bility, joint decision-making and the ability to identify solutions that have worked and that are sustainable. The idea is to move away from finding private sector solutions for public sector problems but rather to focus on joint participation between the two sectors. The private health sector in South Africa, with all its affiliations, is fully functional across the African con­tinent. There are evidence-based projects currently being rolled out in Africa. For example, the Africa Health­care Federation of South Africa (AHF­SA) is a platform that has pledged to constructively engage government on the implementation of national health insurance, and comments have been submitted through various relevant stakeholders. There needs to be fair regulations in place to allow for a level playing field for all stakeholders in the health sector. The Health Market Inquiry (HMI) has offered great insight into the challenges faced and has made recommendations on how they can be addressed. Healthcare services need to be pro-poor and should promote the needs of the ordinary South African. There are platforms available that could be used for constructive dialogue, joint decision-making, and arriving at solutions that will help with health­care re-engineering, redesigning and restructuring in the implementation of universal healthcare. Proposed interventions that will ensure success include utilising the network available in Africa to under­stand the needs / gaps in the African market, consolidating the lessons that have been learnt in Africa, and to be less reliant on solutions found in first world countries which will not be practical in the South African or African market. Identifying innovative solutions will also help to solve the problems of the African continent. The East African Healthcare Federa­tion member, Kenya, has established successful Public Private Partnerships with organisations such as Amref Health Africa PharmAccess to strengthen the health system towards universal health coverage. The Africa Union (AU) has endorsed the vision of the Africa Healthcare Federation. The AU has also highlighted that the pharmaceutical sector will be an area of focus. Challenges facing the sector include counterfeit medicines being dumped in Africa, regulatory challenges and reviewing trade agreements that are inhibiting free flow trade. Ethiopia has been exemplary in that it has drafted a strategy for the pharmaceutical sector and it has also established in­dustrial park in Addis Ababa to attract investments and growth opportunities. Pharmacy is ready for business. There are three factors as evidence of this: the first is that the licensing in phar­macy is already in place. The second is that the Pharmacy Council is able to identify each and every practicing pharmacy or pharmacist in South Africa. And third, it has attempted to tackle and reduce the cost of medicine through the introduction of a Single Exit Price (SEP). There are also well structured platforms where can engage as pharmacists, community, industry, academia and hospitals. Key takeouts 1. The vision of the private health sector is in line with that of the NHI, to create partnerships with various stakeholders to achieve universally accessible and af­fordable healthcare for all. 2. The aim is to establish private/ public partnerships that are sus­tainable, and which can be rolled out within the African continent. 3. The intention is to unify the private sector in order to engage and take inputs to the Depart­ment of Health. 4. The idea is to move away from finding private sector solutions for public sector problems. But rather to focus on joint participa­tion between the two sectors. 5. There needs to be fair regulations in place to allow for a level play­ing field for all participants in the health sector. 6. The services need to be pro-poor and promote the needs of the ordinary South African, and African, on the ground. There are platforms available that could be used for constructive dialogue and joint decision-making, and arriving at solutions that help with healthcare reengineering, redesigning and restructuring. 7. From the pharmaceutical sector perspective, the issues with regards to healthcare include access to quality, essential and affordable medication. 8. One of the major challenges Africa is facing is that it has become a dumping zone for med­icines. Counterfeit medicine is a critical problem that needs to be addressed. Finding pathways to consensus on the NHI Open discussion The NHI roundtable dialogue was wrapped up with an open discussion, where all partici­pants were given the opportu­nity to respond to the speeches and air any further concerns. The aim was to consolidate the areas of agreement, areas of disagreement and potential pathways to achieving consensus. At the start of the discussion, an im­portant clarification was made with re­gards to the lack of forward momentum and representatives to approach. The NHI is still in the process of splitting from the Department of Health and set­ting up office. There will be functions that will remain in the department to do with policy formulation and health services, and the NHI fund office will be dealing with fund matters: how to pay for and fund the system. The minister and the director general cannot just create a component. They have to have the money, the authority of the Department of Public Service, etc. It is a complex, time consuming and difficult process, not to mention dealing with the media. In terms of the role of the private sector for business continuity, govern­ment’s view is that it is not a homoge­nous group. And while there might be a constituency called BUSA, or any of the other groupings, these hold complex, different players within them that find it just as challenging to come to agreement on how the NHI may or may not affect their business. Then there are the political imperatives, political alliances which the minister and the deputy minister have to handle with other political players. Therefore, it is important to segment and try to understand what the problems are within the various environments to be able to make valid comment around their concerns. However, in terms of the formal contri­bution, the minister’s team, which in­cludes the Department of Health, is not at liberty to comment on the bill in the public environment at present. It is in a parliamentary process – the officials in the department cannot be seen to be agreeing or disagreeing with something which they may find differently. From many of the presentations and discussions on the day, there is clearly consensus on the need for universal healthcare coverage in South Africa. Further consensus was around the need to grow GDP in order to ensure a sustainable economy and to be able to cover various benefits from healthcare to education. Elements that need further clarity include how the NHI will be implement­ed, timelines, the board and security of money, the role of the private sector, how accreditation will happen and how purchasing will be done. Another con­cern is the role of medical schemes and private care and whether it is appropri­ate to withhold the right to opt out of the healthcare system. It has been made clear in discussions and submissions outside of parliament that section 33 is a massive issue for all stakeholders. It begs the question of whether this will result in further investor uncertainty and how that may impact the market. Although section 33 will undoubtedly remain in the bill, government has taken note and understands the arguments against it. There needs to be more definition with regards to the idea of making profit out of healthcare. What is also agreed upon is that an even greater worry than economic performance is staving off rising social unrest. People everywhere are restless, unhappy with the lack of jobs, service delivery, housing, sanitation, etc. There needs to be action to make the lives of the people better, and timeously. In addition, there needs to be a con­certed effort to create channels for communication for all stakeholders: the general public, hospitals, doctors. People have the right to know what is happening at every stage. The public sector failure to meet the needs of the people from a healthcare point of view, extreme inefficiency in the private healthcare system and in­equity are common concerns. Fixing the public sector will not happen without cooperation between the two sectors. However, the budgets for next year are being cut. The implications of this will not be to expand and increase and fill vacant posts, it will mean forgoing certain elements and closure of more hospitals. The reality is government has extended its spending to every last cent. In addition, the public service deliv­ery system is not in the hands of the National Minister of Health. They have almost no authority over it. It is in the hands of the MECs and the heads of departments in the provinces, and their executives. And building that trust and that relationship with a considerable number of new MECs takes time. From the medical technology side, the key will be in health technology assessment. There is consensus that technology is crucial to decreasing the reliance on people and decentralising healthcare, getting it closer to commu­nities for easier access. The problem though is that the new gadgets and innovations do not necessarily add value and the temptation once bought is to use and charge for the expensive gadget, regardless of its usefulness. How the NHI fund chooses which tech­nologies to include in the costing of a benefit will be an important factor. Medical schemes are no longer afforda­ble for the majority. This trajectory, over the last 20 years now, has reached a tipping point. But the Healthcare Market Inquiry (HMI) was very specific. It did not indicate getting rid of medical schemes, but rather made recommendations on how to make them more affordable. The principle issues it found was lack of gov­ernment stewardship and an incomplete regulatory environment. The current trajectory that section 33 envisages is building one large public financing system and marginalising private financing. But some stakehold­ers are of the view that it would be better to build the NHI to a point where it competes private funding out of the picture. The system needs to be affordable – for the people and for government. The critical issues for the NHI to look at are understanding utilisation of services, benefit design, digital healthcare and the central purchasing function of government. Another area of consensus is the need for growth in the economy and a de­crease in debt. To find the right balance between what needs to be achieved economically, while bridging the in-equality in the healthcare system, both at a service and a financial level. There is concern around the narrative in the media. There needs to be caution about creating an unrealistic political narrative – this is not a healthcare sys­tem; this is a national health insurance bill. The public is being led to believe that by 2026 the NHI will be up and running, when in fact it will be a much longer process. Government’s aim is to see visible change within the next five years. The system needs to build carefully, to avoid a precipitous event where suddenly a million people leave their medical aids and switch to the public sector before the NHI is prepared. The minister, through the national health council, is presently working through what needs to be done with the MECs. There are many examples of people putting processes in place, including the pharma industry, which has made con­crete proposals on how to strengthen the NHI. The devices industry has begun a process with the Department of Trade and Industry to boost the manufacturing of devices in South Africa. Government has done a full costing of all the public sector infrastructure needs and is in dis­cussions with the DPSA on how to fund that, which will dramatically improve the construction industry. It makes sense to focus energy on making sure that, whatever comes out of the process, every resource is used more efficiently. The first step is to get enough people with the right knowledge into an office and make them accounta­ble for the benefits. Then to move past the theory, to a point where medical codes are developed, where everybody understands what the benefits offer, that there is a clinical pathway and a health technology assessment (HTA) of the cost of the medicines and diag­nostics has been done. The number of accredited and unaccredited providers needs to be measured, and there needs to be an investigation into what the present case mix is and how to better collect the data. Over the next three months, until 1 April 2020, the IT systems of the new organisation will be formally created. Patients on the current system then need to be loaded and those seconded to be the nucleus of the team designing the operational procedures need to be appointed. There is a small budget which government will have access to from 1 April 2020, and between now and then it will advertise a few posts and bring in more permanent people. And then there are some global donors who have offered to support various activities and posts. There is concern about whether the financing aspect can be dealt with appropriately, given the lack of cer­tainty around what will be included, in terms of benefits, and how that will be phased in – as well as the overall fiscus sustainability of the fund itself. It would be unwise to assume that money spent voluntarily in the private sector will suddenly become available to the public sector, but there are mechanisms to move it, slowly. Gov­ernment, together with the CMS, will monitor the number of people who are shifting out of the medical aid sector, thereby watching people’s affordability to anticipate what the impact will be of removing that subsidy. There is unease around the potential heavy reliance on taxes. Treasury will ultimately make the decision on the use of tax to fund the NHI. But a relationship needs to be built and discussions had in order for treasury to properly understand what the demands and pressures are within the health service. The bill creates the possibility of a pay­roll tax to prepare for the eventuality where people trust the services of the NHI and decide they do not need med­ical aid anymore. The planning for that is being done with close cooperation between the new office of the NHI fund, private sector medical schemes and the Council for Medical Schemes, which coordinates and watches the figures. There may need to be a regulation on what data elements are needed to responsibly monitor these decisions. Obviously patient confidentiality is to be respected, and their information will not be distributed. But the NHI needs to know where a patient has logged into a primary healthcare facility in order to monitor the healthcare it is providing and at what cost. From the public sector side there is a massive programme on the go. One part of this is that the Law Reform Com­mission has done an investigation into medical legal claims, not just for the public sector but for the professions too. That report is in the public domain and can be found on the Internet. Government has now started pooling all the cases to examine them collective­ly, and has found disturbing patterns among the claims, where the same patient has claimed for the same condi­tion in more than one province. All the provinces are now engaged in processes of improving their mortal­ity and morbidity management, risk management, clinical governance processes, etc. To the extent that their current environment allows them, there are concerted efforts and deliberate plans afoot. There has not been sufficient coordi­nation across the healthcare delivery system. But this roundtable dia­logue, set up by the Inclusive Society Institute, saw representatives from government, hospitals, independent practitioners and medical aid schemes, to the pharmaceuticals and equipment industry participating. If the rationality of this discussion was captured in the public media, it would be a source of much comfort for society. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

Survey - How are SMMEs coping with the coronavirus lockdown and proposed measures to alleviate financial distress? Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. All records and findings included in this report, stem from the survey from the survey on the impact of COVID-19 on the SMME sector, which took place over the period 9 to 13 April 2020. Contents 1. Setting the scene and objectives of the survey 2. Key findings 2.1 Are SMMEs able to cope during the initial lockdown (which includes the two-week extension to 30 April 2020? 2.2 How have the workers of these SMMEs been affected? 2.3 How would the survival prospects change for the SMME sector should there be a further extension of the lockdown beyond 30 April 2020? 2.4 What has the take-up been with regard to the financial aid measures announced to alleviate the impact of the lockdown on business? 2.5 The testing of the acceptability of a selection of potential post-COVID-19 recovery measures. 3. Survey methodology 4. Recommendations 5. Summary of detailed data 5.1 Summary of detailed data for all enterprises surveyed 5.2 Summary of selected data for manufacturing, services and wholesale & retail sectors List of figures Figure 1.2: The lockdown and its effect on business Figure 2.1: Indicators with regard to the enterprises’ chance of survival Figure 2.2: Composition of SMME enterprises surveyed Figure 3.2: Composition of SMME enterprises surveyed Figure 5.1: Sector indicators compared with all enterprise averages References 1. Setting the scene and objectives of the survey On 31 December 2019, the World Health Organisation (WHO) was informed about the outbreak of a pneumonia of unknown cause, which was detected in the Chinese city of Wuhan. On 30 January 2020, the WHO declared the outbreak a Public Health Emergency of International Concern; and on 11 February 2020 it announced the name for the new coronavirus: COVID-19 (WHO, N.d.). On 12 March 2020, Dr Hans Henri P. Kluge, WHO Regional Director for Europe, confirmed that COVID-19 was declared a pandemic (WHO, 2020). On 5 March 2020, South Africa’s National Institute for Communicable Diseases announced the first case of COVID-19 in the country (NICD, 2020). With more and more cases being declared on a daily basis thereafter, the President of the Republic of South Africa announced on the evening of Monday, 23 March 2020, that in terms of the Disaster Management Act, in a decisive effort to save millions of South Africans from infection, a nationwide lockdown for 21 days would come into effect at midnight on Thursday, 26 March 2020. During the lockdown, all South Africans, except for designated essential workers, would have to stay at home and would not be allowed to leave their homes except under strictly controlled circumstances (RSA, 2020). The president acknowledged that the measures would have a considerable impact on people’s livelihoods and on the life of society and the economy, but believed that “the human cost of delaying…[the] action would be far, far greater” (RSA, 2020). Workers and enterprises exempted from the lockdown included health workers in the public and private sectors, emergency and security services personnel, other persons necessary in response to COVID-19 and “those involved in the production, distribution and supply of food and basic goods, essential banking services, the maintenance of power, water and telecommunications services, laboratory services, and the provision of medical and hygiene products” (RSA, 2020). Figure 1.2 The lockdown and its effect on business (Source: News24) All other workers had to stay at home for the full period of the lockdown and enterprises not considered essential had to remain closed. While emphasising the importance of a lockdown, the president urged all firms that were able to continue their operations remotely, to do so (RSA, 2020). In response to the impact that the lockdown will have on the economy, government announced various relief measures aimed at assisting enterprises to retain staff and remain afloat. These included amongst others, the setting up of a Solidarity Fund aimed at assisting small businesses to endure, the setting up of a temporary employee relief scheme and debt relief schemes for both enterprises and employees (Mail & Guardian, 2020). Other measures included employer relief measures, such as the provision of a four-month tax subsidy for employees in the private sector. The aim thereof would be to encourage employers to retain workers during the lockdown. It was also announced that the payment of employment tax incentive reimbursements would change from twice a year to monthly, so as to ensure that cash got into the hands of compliant employers as soon as possible, and tax compliant businesses with a turnover of less than R50-million were, for a four-month period, allowed to delay 20% of their employees’ tax liabilities. A portion of their provisional corporate income tax payments could also, over a six-month period, be deferred without penalties or interest (Deloitte, 2020). On the evening of Thursday, 9 April 2020, the president announced a further two-week extension of the lockdown (News24, 2020). At the time of undertaking this survey, the lockdown was scheduled to run until 30 April 2020. The Inclusive Society Institute, with a view to post-COVID-19 policy planning, undertook a survey immediately after the extension was announced by the president. The objective of the survey was to: Assess how SMMEs were coping with the lockdown Determine SMME confidence levels in their survival post-COVID-19 Consider the potential impact that a further extension of the lockdown on their survival prospects would be Test a number of potential post-COVID-19 policy measures that could be implemented to ease the South African economy back into normality Stimulate SMME thinking as to measures that could be taken through a public-private participative approach aimed at overcoming the calamity that befell the country. The survey period ran from the evening of 9 April to close of business on Monday, 13 April 2020, and should be viewed as a snapshot of SMME thinking during said period. The institute will promote the survey to public policymakers as its contribution towards consolidating national reflexion on economic recovery. The institute supports economic measures that will enhance equality, inclusiveness and solidarity. 2. Key findings Given the urgency to issue the report prior to the conclusion of the lockdown period, this report mainly confines itself to a global overview of all the enterprises that participated in the survey. It does, however, also provide a high-level analysis of the three largest sectoral components of the survey, namely manufacturing, wholesale and retail, and services. The report therefore covers the data captured for 1 084 enterprises from across all sectors. With minor exclusions, they are micro-, small and medium-sized enterprises. These findings restrict themselves to five main themes: Are SMMEs able to cope during the initial lockdown (which includes the two-week extension to 30 April 2020)? How have the workers of these SMMEs been affected? How would the survival prospects change for the SMME sector should there be a further extension of the lockdown beyond 30 April 2020? What has the take-up been with regard to the financial aid measures announced to alleviate the impact of the lockdown on business? The testing of the acceptability of a selection of potential post-COVID-19 recovery measures. The vast majority – 72 per cent – of the 1 084 enterprises surveyed were not able to operate during the lockdown period. Combined, they employ 39 943 workers and have a turnover just on R33 billion. Twenty-eight per cent of the enterprises were considered essential services. As mentioned, the analysis did not test all individual sectors. It did, however, examine the three largest sectors in the sample survey, namely manufacturing, services, and wholesale and retail. In the main, the conclusions on manufacturing as well as wholesale and retail correlated with the ‘all enterprises’ trends. The services sector, it appears, finds itself in a particularly difficult position and will face greater challenges to recover once the economy normalises. The key finding of this survey is that the SMME sector will most probably be able to recuperate should the lockdown be lifted at the end of April 2020. However, any further extension of the lockdown, in its current format, will have dire consequences for the sustainability of this sector in the longer term. 2.1 Are SMMEs able to cope during the initial lockdown (which includes the two-week extension to 30 April 2020)? Almost all enterprises, that is 98 per cent, have seen a decrease in their turnover. Seventy-eight per cent of the enterprises do not have sufficient cash flow to see them through the lockdown period. Despite these drawbacks, 69 per cent of the enterprises are of the opinion that they would survive the setback presented by the COVID-19 lockdown measures. The sectoral analysis revealed that in terms of those enterprises that were confident of surviving the initial lockdown period, services as well as wholesale and retail were slightly more confident than average, whilst the manufacturing sector was considerably less confident. Seventy per cent of enterprises in the services sector and 74 per cent of those in the wholesale and retail sector were confident of surviving, whilst only 47 per cent in the manufacturing sector expressed confidence in enduring beyond 30 April 2020. Similar patterns were detected across all sectoral analyses with regard to the percentage of enterprises that did not have sufficient cash flow to see them through the lockdown: Seventy-two per cent of manufacturing enterprises, 82 per cent of services enterprises and 83 per cent of wholesale and retail enterprises lacked adequate cash. 2.2 How have the workers of these SMMEs been affected? It appears that the enterprises have in the main managed to make arrangements to retain most of their workers, although it still bled 7,5 percent of their workforce. Only 202, or 19 per cent, of the enterprises surveyed laid-off staff during the lockdown. If this percentage were to be extrapolated to the full number of workers employed in the SMME sector as per the SEDA report mentioned in the methodology section of this report - 10,839,819 workers - then the lockdown could result in the loss of 812,986 jobs. With regard to the sectoral breakdown as it relates to enterprises that had to reduce their staff levels during the lockdown, 15 per cent of manufacturing enterprises, 24 per cent of those in services and 29 per cent in wholesale and retail indicated that they had to do so. However, it appears the aforementioned negative impact on jobs will be somewhat mitigated, in that 21 per cent of enterprises indicated that they would re-employ the workers once they were able to again operate after lockdown, whilst a further 68,5 per cent of enterprises said that they would reemploy the workers once cash flow permitted. As a result, in time almost 90 per cent of the workers will be re-employed. The real job loss could therefore be contained to around 80,000, should enterprises be in the position to re-start at the beginning of May 2020. In manufacturing, the percentage of enterprises that would re-employ retrenched staff, either when they re-open or once cash flow permitted, was 60 per cent; in services, it was 47 per cent, and in wholesale and retail, 97 per cent. This would indicate that the services sector would find it more difficult to revive themselves, whilst the manufacturing and the wholesale and retail sectors would find it easier. That being said, the opposite will hold true should the lockdown be extended beyond 30 April 2020. Seventy-six per cent of enterprises indicated that, in such instance, they would have to reduce their staff complement. This should be read together with the statistic indicating that 70 per cent of enterprises do not believe they could survive a further extension of the lockdown; and 92 per cent of them would not have the cash flow to carry them over an extended period beyond 30 April 2020. 2.3 How would the survival prospects change for the SMME sector should there be a further extension of the lockdown beyond 30 April 2020? The situation becomes somewhat bleaker, should government decide to extend the lockdown beyond 30 April 2020. Respondents were requested to give their assessment should the lockdown be extended by a further month. It was found that there was a far greater number of enterprises that believed they would not survive such an extension. Whereas 69 per cent of enterprises were confident that they would survive the initial lockdown period, this declined dramatically to only 29,5 per cent. Ninety-five-and-a-half per cent of the enterprises are of the opinion that their turnover would decline and 76 per cent would have to lay off more staff. A similar trend was detected in the manufacturing, services, and wholesale and retail sectors. Only 29 per cent of manufacturing enterprises, 25 per cent of those in services and 30 per cent of those in wholesale and retail believed they would survive should the lockdown be extended by another month. A startling statistic has been revealed apropos the ability of the enterprises to fund themselves beyond 30 April 2020. Ninety-two per cent of the enterprises indicated that they do not have the necessary cash flow in place to carry them beyond the end of April. Whilst the manufacturing and the wholesale and retail sectors reflected a similar trend, the services sector was particularly hard hit. Less than one per cent had sufficient cash flow to see them through an extended lockdown. Figure 2.1: Indicators with regard to the enterprises’ chance of survival (Source: Inclusive Society Institute) 2.4 What has the take-up been with regard to the financial aid measures announced to alleviate the impact of the lockdown on business? Only 22 per cent of enterprises indicated that they have sufficient cash to carry them over the lockdown period. This means that they have had to make alternative arrangements to secure funding to see them through until 30 April 2020. To this end, 56 per cent have applied to the various funds set up to assist with the alleviation of the hardships imposed on business by the COVID-19 lockdown decision. However, as of 13 April 2020, only 4 per cent have received approval for such assistance. The full effect of these measures is still to be determined. 2.5 The testing of the acceptability of a selection of potential post-COVID-19 recovery measures In this part of the survey, two new financial measures, which have to date not been widely promoted, were put to the respondents for consideration, together with five policy measures that are already widely publicised in the media. This report will expand on the machinations and potential of the new concepts, whilst only report on the level of support for the others. The first of the two new concepts is a proposed once-off "COVID-19 RECOVERY LEVY" which would be a levy on turnover. The survey suggested that the levy be set at 2,5 per cent, although, alternative levels should form part of any economic modelling – which has not been done – in this regard. The intention of this proposal at this point is to merely consider the willingness of the business community to make financial sacrifices in the national interest. As stated, no economic modelling has been done, and in retrospect the percentage is in all probability too high. Nevertheless, even a fractional percentage on the R9,986,053-million combined annual turnover of all industries (Stats SA, 2020:8), would yield a sizable contribution that could help off-set the repercussions of the COVID-19 lockdown. At a mere quarter of a percentage point, tax revenue of close on R25-billion could be raised. Even at such a high level, more than a third of the respondents (34 per cent) indicated support for the idea. Set at more realistic levels, the concept would in all probability receive broader support. The second new measure that was proposed was the concept of a "SOLIDARITY TAX" of between 1 and 2 per cent on personal incomes above a R240,000 per annum threshold. In the 2018 tax year, at 74,9 per cent returns assessed, the South African Revenue Services collected R332,595-million in personal income tax from taxpayers that had a taxable income in excess of R250,000 per annum (BusinessTech, 2019). The taxable income for personal taxpayers with a taxable income above R250,000 per annum, amounted to R283,920-million. Thus, a one per cent solidarity tax would yield approximately R2,8-billion, and at two per cent between R5,6- and R5,7-billion (SARS, 2019:44). The imposition of a solidarity tax was supported by 44 per cent of respondents. The results from the survey for the other measures proposed, were: The SMME preferences with regard to the types of government interventions preferred are indicated in figure 2.2 below: Figure 2.2: SMME government intervention preferences (Source: Inclusive Society Institute) 3. Methodology The estimated SMME population size in South Africa is around 2,550,540, of which 736,198 are formal and 1,754,443 informal. Combined, they provide approximately 10,839,819 jobs (SEDA, 2019). Sampling, data collection and data subjects Sampling was carried out through the dissemination of the survey by electronic means to a representative database comprising SMME businesses drawn from across the country and from all sectors. In total, 1 084 responses to the questionnaire were obtained. Since “the quality of the sample will be higher, the more completely the sampling frame covers the target population” (European Social Survey, 2016), the data-base selected contained only SMME enterprises, which was the subject of the study. Standard data cleansing and validation procedures were carried out. The chart contained in figure 2.2 below, reflects the composition of the subject SMME enterprises. Figure 3.2: Composition of SMME enterprises surveyed (Source: Inclusive Society Institute) Confidence level and margin of error In determining the sample size, the research relied on the standard 95 per cent level of confidence and 5 per cent margin of error, which is common for social sciences studies (Royse, 2008:209). Sample size In determining the sample size required to achieve a confidence level of 95 per cent and a margin of error of approximately 5 per cent, the author was guided by the table published in Glenn (1992) and Cochran’s (1963) formula for calculating a sample for proportions. The former suggested a sample size of 400 obtained responses and the latter 385. Whereas the survey size should accordingly not be smaller than 400, the actual number of obtained responses amounted to 1 084, nearly three times the standard minimum. This would serve to strengthen reliance on the report since the margin of error would be closer to 3 per cent (Creative Research Systems, N.d.). Question set The survey contained a total of 26 questions, which could be grouped into five categories: Category 1 – questions of a demographic nature In category 1, the series of questions designed was aimed at eliciting information that would assist in answering questions related to the nature of the enterprise participating in the survey. This would help the stratification of enterprises in terms of their size (micro or medium), sector, whether they are considered essential services or not and/or whether they are reliant on government for business. In so doing, findings could be made, amongst others, as to outcome differences between the various sectors, and the extent to which an enterprise being declared an essential service improves their ability to survive. Category 2 – questions related to the impact on workers The series of questions contained in the third category of questions was aimed at assessing the impact of the lockdown on the enterprise itself. It would assist in gaining answers to the enterprise’s likelihood of survival during the current post-COVID-19 lockdown and how a further extension thereof would exacerbate the situation. Category 3 – questions pertaining to the impact of the lockdown on the viability of the enterprise The series of questions contained in the second category of questions was designed to assess the impact that the lockdown has had on workers, and to assess the impact that an extension of the lockdown will have on workers. Category 4 – questions aimed at testing the enterprises’ reliability on financial aid The fourth set of questions was designed to enable findings to be made with regard to both whether the affected enterprises are reliant on the relief measures announced by government, and whether three weeks into the lockdown any access has been achieved. Category 5 – questions aimed at testing potential post-COVID-19 economic recovery measures The last series of questions was designed to initiate thinking with regard to relief measures that could be instituted post-lockdown to mitigate the negative effects that the lockdown has had on the enterprises, the economy and society in general. 4. Recommendations Recommendation 1: Enterprise Survival The results of this survey would suggest that SMMEs across the board are experiencing hardship as a consequence of the COVID-19 lockdown implemented by the authorities. There has been a material impact on the enterprises’ cash flow and ability to retain staff. Notwithstanding, indications are that the majority of these enterprises will survive the lockdown scheduled to end on 30 April 2020, and most jobs lost will be recouped. The policymakers should, however, take cognisance of the finding that 70 per cent of enterprises surveyed believe they would not survive a further extension of the lockdown under the current rules, and that 76 per cent of enterprises would reduce staff in such event. It is recommended that any extension take these findings into account and that, should a further extension of the lockdown be required, mechanisms be considered to allow businesses to operate more effectively, albeit with strict social distancing rules. Recommendation 2: Recovery Measures Part of the survey tested enterprises’ willingness to accept new fiscal measures that would require further sacrifices in terms of higher taxations. This survey introduced two new concepts that do not form part of the current public discourse. The once-off “COVID-19 RECOVERY LEVY” based on company turnover and a “SOLIDARITY TAX” on personal incomes above R240,000 per annum (also once-off) was introduced. More than one third of the respondents supported the former, and 44 per cent the latter. Whilst retrospectively grasping that a 2,5 percent levy on turnover is too high, and that only a fraction thereof – still with the ability to generate substantial revenue – will most probably be feasible, it is proposed that the policymakers undertake economic modelling to examine the feasibility of such new financial measures. Recommendation 3: Relief Measures The survey finds that the vast majority of SMMEs require financial assistance to see them through the lockdown period and that sustained support will be required to aid the recovery of the sector. It is accordingly proposed that the policymakers consider additional mechanisms to support the SMMEs and that the mechanisms, current and future, be streamlined to ensure speedier decision-making and transfer of financial aid to the enterprises. 5. Summary 5.1 Summary of detailed data for all enterprises surveyed No. % 5.2 Summary of selected data for manufacturing, services and wholesale & retail sectors Figure 5.1 below, which contains trends with regard to a selection of indicators, is included in order to compare the performance of the manufacturing, services and the wholesale and retail sectors against the ‘all enterprise’ average. (Source: Inclusive Society Institute) References BusinessTech. 2020. These 3 graphs show who’s paying South Africa’s income tax. [Online] Available at: https://businesstech.co.za/news/finance/363120/these-3-graphs-show-whos-paying-southafricas-income-tax/ [accessed: 12 April 2020]. Cochran, W. G. 1963. Sampling Techniques, 2nd Ed. New York: John Wiley and Sons, Inc. Creative Research Systems. N.d. Sample Size Calculator. [Online] Available at: https://www.surveysystem.com/sdesign.htm [accessed: 13 April 2020]. Deloitte. 2020. South Africa: Tax relief measures announced in response to COVID-19. [Online] Available at: https://www2.deloitte.com/za/en/pages/tax/articles/south-africa-tax-relief-measures-inresponse-to-COVID-19.html [accessed: 10 April 2020]. European Social Survey. 2016. Sampling Guidelines: Principles and Implementation for the European Social Survey. [Online] Available at: https://www.europeansocialsurvey.org/docs/round8/methods/ESS8_sampling_guidelines.pdf [accessed: 13 April 2020]. Israel, G.D. 1992. Determining sample size. Fact Sheet PEOD-6. Gainesville: University of Florida. Mail & Guardian. 2020. South Africa’s economic plan for Covid-19. [Online] Available at: https://mg.co.za/article/2020-03-23-south-africas-economic-plan-for-covid-19/ [accessed: 10 April 2020]. National Institute for Communicable Diseases (NICD). 2020. First case of covid-19 coronavirus reported in SA. [Online] Available at: https://www.nicd.ac.za/first-case-of-covid-19-coronavirusreported-in-sa/ [accessed: 10 April 2020]. News24. 2020. Struggle is far from over. [Online] Available at: https://www.news24.com/SouthAfrica/News/in-full-struggle-far-from-over-read-ramaphosasstatement-on-2-week-lockdown-extension-20200409 [accessed: 10 April 2020]. Republic of South Africa (RSA). 2020. President Ramaphosa announces a nationwide lockdown. [Online] Available at: https://www.sanews.gov.za/south-africa/president-ramaphosa-announces-nationwidelockdown [accessed: 10 April 2020]. Royce, D. 2008. Research methods in social work, 5th edition. Belmont: Thomson Higher Education. Mall Enterprises Development Agency (SEDA). 2019. SMME Quarterly Update, 1st Quarter 2019. Pretoria: SEDA South African Revenue Services (SARS). 2019. Tax Statistics 2019. Pretoria: SARS. Statistics South Africa (Stats SA). 2020. Quarterly Financial Statistics (QFS) December 2019. Pretoria: Stats SA. World Health Organisation (WHO). N.d. Rolling updates on coronavirus disease (COVID-19). [Online] Available at: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/events-as-theyhappen [accessed: 10 April 2020]. World Health Organisation (WHO). 2020. WHO announces COVID-19 outbreak a pandemic. [Online] Available at: http://www.euro.who.int/en/health-topics/health-emergencies/coronavirus-covid-19/news/news/2020/3/who-announces-covid-19-outbreak-a-pandemic [accessed: 10 April 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

The role and place of the Afrikaans-speaking community in South African society The Inclusive Society Institute expresses its appreciation to the In Transformation Initiative, who’s contribution has enabled the implementation of the roundtable dialogues reported on in this publication. In support of efforts to promote social cohesion in South Africa, the Inclusive Society Institute hosted a series of roundtable dialogues to reinforce nation-building and reconciliation in the country. It forms part of the institute’s broader efforts aimed at promoting a cohesive inclusive society. The roundtable dialogues covered in this report relate to the institute’s engagement with the Afrikaans-speaking community. The ongoing broader programme will also engage the other minority communities of the country, and it will facilitate inter-community dialogue aimed at building a common South African identity. Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this roundtable report, stem from the discussions that took place during the social cohesion roundtable dialogues on the role and place of the Afrikaans-speaking community, which were held in Cape Town on the 11th of February 2020 and Pretoria on the 18th of February 2020. Content Setting the scene for the roundtable on the role and place of the Afrikaans-speaking community in South African society | Keith Khoza | Board Member of the Inclusive Society Institute Purpose and objectives | Daryl Swanepoel | Chief Executive Officer of the Inclusive Society Institute Executive Summary | Roelf Meyer | Director, In Transformation Initiative Social Cohesion survey Recommendations A message to the Afrikaans Community | Paul Mashatile | Treasurer General of the African National Congress Protecting the identity of the Coloured Community in South Africa | Dr Ruben Richards | Chairperson of the Ruben Richards Foundation Inclusive economic growth key to social cohesion | Theo Vorster | Chief Executive Officer of Galileo Capital Summary of the open discussion: Working together to build on nation Annexure A: Tabulated list of concerns Annexure B: Action plan Setting the scene for the dialogue with the Afrikaans-speaking community Keith Khoza | Board Member of the Inclusive Society Institute Mr Keith Khoza, a member of the Inclusive Society Institute’s Board, in his welcome remarks at the Pretoria dialogue, set the scene for the evening’s discussion. He said that 1994 was a watershed year in this country, where we embarked on a journey to redefine ourselves as a people, as a nation, and as a new democracy. It came with all sorts of challenges, problems, and learning to co-exist and to embrace each other. Twenty-five years later, we are still walking that journey. We have not yet achieved all the milestones we have set ourselves – to be a vibrant nation and a formidable force in the rest of Africa. Clearly then, we have a huge task ahead of us and that is why conversations such as these being organised by the Inclusive Society Institute are so important. As a diverse nation we need to continuously reach out in an effort to find each other and understand where we come from, where we are going, and to agree amongst ourselves what the legacy is that we wish to bequeath the generations to follow. We want a South Africa that can be proud of itself. As an institute we are very aware of the many challenges that the nation is facing, including the important issue of social cohesion. That is why we believe these conversations to be crucial. At times, they may not be comfortable conversations to have, they are complex issues that need interrogation, analysis, understanding and compromise – not always easy content to deal with. But we have to do it. This platform that the Inclusive Society Institute is creating, we trust, will make a meaningful contribution to reigniting our nation’s dream of an inclusive society that works for all who live in it, black and white. Likewise, Ms Sue van der Merwe, the institute’s Chairperson, introduced the proceedings at the Cape Town dialogue. Purpose and objectives Daryl Swanepoel | Chief Executive Officer of the Inclusive Society Institute The Inclusive Society Institute has identified social cohesion as a theme that needs critical attention in our country. It recognises that nation-building and reconciliation are vital components that are required to build a cohesive nation capable of providing growth and stability for society as a whole. The institute is concerned with a sense of dissipation of South Africa being the rainbow nation. It shares the view of the African National Congress (as expressed in the 2020 January the 8th Statement and by President Ramaphosa in his 2020 State of the Nation Address) that this national question deserves the urgent attention of South Africa’s policymakers. With this in mind, the institute has embarked on an extensive programme to analyse the current state of demographic cohesion in the country. It intends to develop a set of proposals that could help guide public policymakers in their promotion of a common South Africanism that works for the nation as whole. The institute is concerned with the negative narrative promoting racial intolerance and suggestions of alienation amongst certain sectors of the community. It believes that the tendency by some to stereotype communities based on the actions of certain individuals is harming the national project which requires all groups in society to work together as co-builders of the country. This dialogue on the role and place of the Afrikaans-speaking community, forms part of the institute’s broader social cohesion programme. It seeks to test the attitudes and perceptions of this particular community as to their commitment and sense of belonging. It also aims to direct policymakers to the issues in society that drive a wedge between communities, and which need attention in pursuit of nation-building, reconciliation and the harnessing of all the country’s talents in pursuit of a common future that benefits society as a unit. This phase of the social cohesion programme entails a series of roundtable discussions with the various minority communities in the country. It is important for policymakers to understand the psyche of these communities. The institute is, however, of the opinion that just as important an issue is the breaking down of the silo-effect and that much more effort is required around inter-community interaction aimed at promoting a better understanding of our fellow South Africans. To this end, the next phase of the programme will focus on these aspects. Executive Summary Roelf Meyer | Director, In Transformation Initiative The Inclusive Society Institute held two roundtable discussions on the role of the Afrikaans-speaking community in South Africa. The first was held on the 11th of February 2020 in Cape Town and the second on the 18th of February 2020 in Pretoria. Invited guests ranged from academics to community activists, private sector business leaders, members of the clergy, entrepreneurs, economists, members of the judiciary, government representatives, members of the media and film sector, civil society organisation representatives and educators. The aim of the discussions was to achieve a better understanding of how the Afrikaans-speaking community views its place and role within the country, as well as their experiences in the promotion of social cohesion and national unity. Additionally, the engagements also served as an opportunity to bring the concerns of citizens to the attention of national leadership and policymakers, and develop policy recommendations that will allow the Afrikaans-speaking community to fully contribute to the development of an inclusive society and economy in South Africa. The roundtable discussions revealed areas of alignment, disagreement and lack of clarity pertaining to the definition of a South African’s national identity and how this is informed by the individual’s ethnic, linguistic, racial and cultural histories. Overall, participants expressed their commitment and hope that the issues plaguing South Africa can be resolved, despite echoes of frustration and scepticism regarding the political will from national leadership to consider the concerns and issues expressed. All participants agreed that there is a need for pragmatic solutions in the country which can be achieved through collaborative efforts by government, the private sector and civil society. The Afrikaans-speaking community expressed a keen desire to be involved in these processes and believe they can also be providers of critical solutions to issues of unemployment, service delivery, training and skills transfer and economic growth. However, most participants had the perception that there was a lack of political will to implement recommendations and to address the issues expressed through dialogue initiatives. This perception, be it real or not, continues to deepen the apathy among citizens. Consequently, this makes the mobilisation and motivation of citizens to contribute to the development of the country, that much more difficult. It was generally expressed that members of the Afrikaans-speaking community, including both White and Coloured people, need to be involved and give their input in shaping the narrative around social cohesion, legislation, political participation and economic empowerment. Several participants reiterated that the Afrikaans-speaking community is not one of homogeneity, nor one without its contradictions and complexities and should, therefore, also not be approached with the stereotypes that have historically been associated with this community. Additional key issues that were expressed during both discussion sessions included the lack of clear and consistent leadership required to inspire citizens to reclaim their agency in contributing to national unity, nation building and social cohesion. The continued discrimination against minority groups as a result of divisive political messaging and exclusionary national polices was also a cause for concern. Moreover, there are high levels of concern regarding the current economic climate. Given the uncertainty created by prolonged economic stagnation, urgent intervention and guidance from leadership will be necessary for any improvement in the current economic growth trajectory. The adverse effect of BBBEE and affirmative action was also emphasised by many of the participants. Some argued that the legislation surrounding these policies does not benefit the intended recipients and contributes to a lack of business growth, as well as the loss of critical skills from the country. Additionally, clarification is required around some of the key issues such as the definition of the South African identity, the narrative of national unity, property rights, land redistribution and the current status of constitutional principles, among others. Guidance from national leadership on these issues is needed in order to remove uncertainty and provide a degree of clarity to industry stakeholders, investors and society in general. Key takeouts The Inclusive Society Institute held two roundtable discussions on the role of the Afrikaans-speaking community in South Africa. Keynote speakers for the events were Ruben Richards of the Ruben Richards Foundation (Cape Town) and Theo Vorster, an economic commentator and CEO of Galileo Capital (Pretoria). The primary focus of the Inclusive Society Institute is to promote a more inclusive society by creating a platform where discourse around often divisive topics can be conducted through engaging with diverse and representative groups. The majority of participants continue to feel a sense of hope and optimism for the future of the country, despite many frustrations and challenges. Several participants reiterated that the Afrikaans-speaking community is not one of homogeneity nor one without its contradictions and complexities and should, therefore, also not be approached with the stereotypes that have been historically associated with this community. It is important that minorities are included in these types of discussions towards contributing to the narrative regarding national unity, national policy and the effectiveness and implementation of principles set out in the constitution. The current state of the economy is adversely affecting social cohesion and inclusive growth in South Africa. The Inclusive Society Institute is committed to conducting future dialogue discussions of this nature, towards engaging with more participants in a structured manner and influencing different role players in the country. The Institute can provide valuable insights into areas of alignment or division through facilitating robust discussions and providing analysis and research into public policies and issues of national interest. Social cohesion survey The composition of the two roundtables covered in this report, the institute considers generally representative of the broader Afrikaans-speaking community in South Africa. The roundtables served as focus groups to test their attitudinal sentiments as it relates to their role and place in society. To further assist in the analysis, a questionnaire was developed which probed the attitudes of the attendees on a range of issues that would allow for a broad assessment of this specific community’s commitment to the new democratic dispensation in South Africa, the issues in society that they find most concerning and the prospect of their social integration into an inclusive society, free from discrimination and racial division. The twelve questions posed, could be divided into three broad themes: Theme one tested their willingness to be co-builders of South Africa and their acceptance of the rainbow nation’ concept. Do you believe that, as a member of the Afrikaans community, you can make a meaningful contribution to build and sustain an inclusive society in South Africa? Do you identify with the following statement? A modern-day Afrikaans citizen is one that is in touch with the times, identifies as African, and experiences/ accepts other cultures without fear of having to give up his/her own cultural identity. The second theme tested whether they felt a sense of belonging in the country, and gave insight into whether they believed their rights as an Afrikaans-speaking community were being upheld. This test gave an indication as to whether they considered themselves to be valued as equal citizens and whether they had confidence in the country’s capacity to move beyond racebased policy dialogue. Do you feel that your fundamental rights are being recognised in South Africa? Do you feel excluded from political decisions and policymaking? Do you believe that Afrikaans people and/or their culture are being discriminated against? Do you think the Afrikaans language is being marginalised? Do you believe that the new (younger) generation of Afrikaans people are still being held accountable for the actions and decisions of the previous regime? Do you experience a sense of solidarity between the various racial groups in the country? The third theme served to test the community’s confidence in South Africa, and thus the likeliness of them committing themselves and their families to the long-term future of the country. It is also important for the country to retain the skill sets contained within the Afrikaans community. This theme also specifically tested their susceptibility to emigration. Do you feel economically secure? Do you have confidence in the future of the country? Do you feel safe in the country (physically)? Have you considered emigrating? Interpretation The overall conclusion to be drawn from the responses to the questions posed under theme one is that there is a high commitment across both groups to the building of a sustainable and inclusive South Africa. Ninety-six percent of the respondents in Cape Town and 100% of the respondents in Pretoria (98% average) believe they can make a positive contribution to the building of a shared future in South Africa. An average of 86% of the respondents across both groups identify themselves as [South] African and accept the other cultures of the country, without the fear of having to give up their own culture. At 95% this sentiment was especially high in the Pretoria group, but at 74% somewhat lower, yet still high, in the Cape Town group. Given these statistics, the fair conclusion to be drawn is that given the right motivation and support, the Afrikaans-speaking community will respond enthusiastically to a call to build a united, non-racial, non-sexist South Africa. However, despite the high levels of aspiration to be part of the solution, from the responses it is evident that the Afrikaans-speaking community do not share the belief that the policymakers in South Africa share such sentiment. The trends in both Cape Town and Pretoria were similar in all the questions designed to elicit an understanding of their sense of inclusion. Fifty-nine percent of the respondents were of the opinion that their fundamental rights are not being recognised, 73% feel excluded from political decisions and policymaking, and 63% believe that Afrikaans people and/or their culture are being discriminated against. In terms of their thinking that the Afrikaans language is being marginalised, here too, both the Cape Town and Pretoria groups recorded a high level of discontent, albeit somewhat higher in Cape Town (Cape Town 78%, Pretoria 54%, Average 64%). In terms of their conviction that the new (younger) generation of Afrikaans people are still being held accountable for the actions and decisions of the previous regime, a staggering 86% believe it to be the case, although in this instance, at 91%, it was the Pretoria group that felt more strongly so. In Cape Town it was 78% of the respondents that felt so. The general sense of exclusion reflected in the aforementioned statistics has distinctly resulted in the conviction that there is a lack of solidarity between the various racial groups in the country. Only 30% of respondents believe such solidarity exists (Cape Town 22%, Pretoria 35%). Also on the negative side, both in terms of their current levels of confidence in the country, and in their own personal futures, the statistics are quite glaring. There is a general lack of confidence in their economic future. Only 41% of the respondents in Cape Town and 35% of the respondents in Pretoria feel economically secure. Even more alarming was their sense of not being physically safe in the country. In this regard, only 15% of the respondents in Cape Town and 24% of the respondents in Pretoria feel physically safe in South Africa. That being said, the aforementioned negativity was not reflected to the same degree in their general sense of confidence in the country’s future, although there was a considerable differentiation to be made between the Cape Town and Pretoria groups. Sixty-eight percent of the respondents in the Pretoria group have confidence in the country’s future. The percentage of Cape Town respondents that have confidence in the country’s future was significantly lower (44%). The average between the two groups stood at 58%. The same schizophrenia was detected in the responses to whether they had considered emigration. Whilst only 35% of the respondents in Pretoria consider emigration as an option, this grew to 52% of the respondents in Cape Town. It is not clear what has given rise to this anomaly, nevertheless, with an average of 42% of respondents indicating that they have considered emigration, given the necessity to retain skills and capital in South Africa, this is an aspect that deserves further investigation. The correlation between the two concepts of still holding the younger generation accountable for the actions and decisions of the previous regime and their susceptibility to emigration has not been tested. In this regard a follow-up study will be undertaken to determine whether there is such a link, and whether the notion of emigration is confined to specific generational strata or not. To reach the goal of an inclusive society From the aforementioned analysis, it can be deduced that, in terms of creating an inclusive society, a significant trust deficit exists between the Afrikaans-speaking community and the country’s policymakers. In itself, this should be a cause for concern in terms of the stated objective of promoting social cohesion. On the positive side, however, the policymakers will find the Afrikaans-speaking community receptive to programmes designed to promote their inclusion and mainstreaming into the public policy processes and implementation programmes of the state, as well as into the broader society. In doing so, policymakers should design strategies that aim to remove the concerns that have been clearly identified in this research as inhibitors to integration. Social cohesion survey The role and place of the Afrikaans community in South African society Recommendations The following recommendations have emerged from the roundtable dialogue sessions held in Cape Town and Pretoria. 1. Encourage participation and collaboration through future dialogue and community programmes The roll-out of community-focused engagement aimed at educating citizens on the principles of democracy and active citizen participation, will serve to empower members of society and shape the narrative regarding political participation and social cohesion. These programmes can also contribute to the development of innovative solutions for issues affecting communities and inform the younger generation’s understanding of national identity. Committing to future dialogue between government leaders and citizens can help to promote national unity among South Africans feeling excluded from decision-making processes and consultations. Moreover, workshops aimed at finding practical solutions to issues and blockages can restore citizens’ agency and motivate them to be active participants in building South Africa. Robust, honest engagements need to take place regarding what is required to move the country forward. People from all races, ethnicities and cultures must be considered contributors in finding solutions, regardless of their political affiliations. Improved collaboration between government and the private sector is needed to combat unemployment and implement training and skills transfer programmes in accordance with the needs of the economy. Moreover, the absorption of university graduates into the workforce is something that needs to urgently be addressed. 2. Shape the narrative of non-racialism Government is encouraged to re-assess the use of language regarding racial differentiation such as ‘Blacks in general and Africans in particular’, in an effort to confront the exclusion and discrimination experienced by minority groups that fall outside of these parameters. Moreover, strategic and deliberate decisions pertaining to the messaging on national policy and critical matters affecting society, must be taken to inspire and motivate citizens to take action. This can also serve to combat the current disconnect experienced between leadership and communities that feel excluded from the agenda. Lastly, public officials are urged to steer away from stereotyping and generalisations when making public pronouncements which include racial aspects, as this has a demoralising effect on minority groups, especially those that have come to the party in terms of taking action and providing support. 3. Define the vision for South Africa and promote partnerships The leadership in South Africa need to define the future envisioned for South Africa. Clarity is required on the definition of the new South Africa and what leadership is going to do to achieve this image in the country. People need motivation from leadership. Furthermore, improved collaboration between government and the private sector is vital to combat unemployment and implement training and skills transfer programmes in accordance with the needs of the economy. 4. Provide inspirational, transparent and accountable leadership Address the messages coming from government leaders that discredit constitutional values and re-establish the sense of discipline amongst leaders. South Africans, regardless of ethnicity or culture will support this when seen in practice. Don’t use political power to oppress minorities or exclude certain races from the decision-making processes. Follow the prescripts of the constitution of equality and fairness and justice for all people and give every race an opportunity to participate in all sectors of the country. Government must hold those found to be involved in corruption to account. Visible consequences must be implemented for citizens to see that government is serious about condemning and combatting corruption. 5. Clarity and reflection on legislation Leadership is encouraged to reflect on the intended versus the applied impact of policies. In the case of BBBEE and affirmative action, government could consider reform regarding the implantation of these policies to avoid the current adverse effects experienced by workforces, industry and private sector business. It should be an enabler for business to grow, develop and benefit the intended benefices. Drastic intervention is needed in the education sector. Educators require support from government pertaining to a lack of resources and well-trained educators. The suggestion is to address the shortage in teachers by re-opening education colleges and training colleges for teachers. Moreover, citizens require clarity and certainty from government on areas such as property rights, land redistribution without compensation, the National Democratic Revolution (NDR), economic reforms, the protection of the Judiciary and the status of Constitution following the effects of State Capture. 6. Mentorship initiatives There remains a great sense of optimism and willingness among the Afrikaans-speaking community and business to work together, mobilise and collaborate with government. Citizens are willing, able and skilled to participate in programmes that promote the transfer of skills and establishing mentoring programmes throughout various sectors and trades in the country. It is recommended that leadership consider collaborating with private business stakeholders and skilled artisans in establishing training and mentoring programmes that can offer young people, graduates and unskilled workers opportunities to learn from experienced professionals and receive the support needed for the development of scarce skills, business growth and entrepreneurial enterprises. Additionally, leadership can also consider approaching inactive or retired professionals and experienced stakeholders as participants in these mentorship programmes, thus making use of this currently overlooked yet available group of citizens. A message to the Afrikaans community: South Africa is your homeland too Paul Mashatile | Treasurer General of the African National Congress The focus of this address was on the ANC’s commitment to an inclusive society and the actions taken by the ANC to promote social cohesion: The release of Mr. Nelson Mandela on the 11th of February 1990 was highlighted as the day when South Africa was placed firmly on a path to unity, reconciliation and democracy. “During my lifetime I have dedicated myself to this struggle of the African people. I have fought against white domination, and I have fought against black domination. I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities. It is an ideal which I hope to live for and to achieve. But if needs be, it is an ideal for which I am prepared to die.” (Nelson Mandela, 1964) The history of the ANC is reflected on as a point of departure for its long-standing commitment to an inclusive society and the promotion of social cohesion. In a seminal article published in October 1911, Pixley ka Isaka Seme, one of the foremost intellectuals at the time, called on Africans to put their differences aside and forge a Native Union. In the article, Seme wrote: “The demon of racialism, the aberrations of the Xosa-Fingo feud, the animosity that exists between the Zulus and the Tongas, between the Basutos and every other native must be buried and forgotten; it has shed among us sufficient blood! We are one people. These divisions, these jealousies, are the cause of all our woes and of all our backwardness and ignorance today.” It was this article that laid the basis for the formation, in 1912, of the South African Native National Congress, which later became the African National Congress. The article was the founding document of the ANC. Writing about the ANC’s founding conference, Seme had the following to say: “It was a conference of races and of nations – many of whose ranks had been devastated by the demon of inter-tribal strife and jealousy.” The Freedom Charter, which was adopted in Kliptown in 1956, reflects the views of South Africans from all corners of the country. Most profoundly, this people’s document declared boldly that South Africa belonged to all who live in it, Black and White. Even during the dark and difficult days of banning, exile, mass detentions, torture, political persecutions, assassinations and killings by the apartheid regime, the ANC remained steadfast in calling for a South Africa that belonged to all who live in it. At its 1969 conference in Morogoro in Tanzania, the ANC officially opened its membership and leadership to all races, transforming itself into a truly non-racial organisation both in form and character. Morogoro also reaffirmed that South Africa belonged to all who live in it. In articulating an alternative vision for South Africa, President O.R. Tambo stated: “Our task is to remake our part of the world into a corner of the globe on which all of humanity – Black and White – shall live and work together as equals in conditions of peace and prosperity.” According to the view of O.R. Tambo, it was the ANC’s responsibility to break down barriers of division and create a South Africa where there will be neither Black nor White, just South Africans free and united in diversity. The ANC has learnt from its forebears that the struggle for liberation was never about replacing one form of oppression with another. The struggle was principally about building a united, non-racial, non-sexist, democratic and prosperous South Africa. Up to this day this remains the guiding vision of the ANC. Drawing from the ANC’s rich and proud history of promoting an inclusive society, the country’s democratic constitution reaffirms that South Africa belongs to all who live in it, united in our diversity. The National Development Plan: Vision 2030, the lodestar to the future, envisions a South Africa where everyone is able to say: “I cannot be without you, without you this South African community is an incomplete community, without one single person, without one single group, without the region or the continent, we are not the best that we can be.” As part of practical efforts to contribute towards building an inclusive society and to promote social cohesion, the ANC initiated community dialogues in all provinces on social cohesion and nation building in 2011. These community dialogues culminated in the first National Summit on Social Cohesion and Nation Building in Kliptown, the home of the Freedom Charter. That historic summit brought together more than 3 000 delegates from across the country representing various religious, political, business and civil society organisations to take stock of the process made in uniting the South African nation. Delegates recommitted themselves to the vision of a South Africa where we are one people, one nation, one humanity with a shared destiny. The summit asserted that true and lasting reconciliation, social cohesion and nation building is not an event but a process – it is a journey. This journey will require that we redouble our efforts to address key challenges such as joblessness, poverty, unequal access to opportunities, landlessness, homelessness, the burden of disease, gender inequality and discrimination as well as gender-based violence. It is perhaps time that the declaration and resolutions of the 2012 National Summit on Social Cohesion and Nation Building are revisited and brought to life. The ANC stands ready to work together with all those seeking to revive the letter and spirit of that summit. Sport must continuously be used to build bridges of unity among South Africans, for we know it all too well that South Africa is a sporting nation and that sport is the greatest unifier. Under the leadership of President Cyril Ramaphosa, the country and the ANC has entered a period of renewal. This moment of renewal is an opportunity to reset the moral compass of the country and the movement. It is an opportunity to recommit to strong and unquestionable leadership. It is also an opportunity to rededicate ourselves to the goal of building a truly united South Africa. This is an opportunity to restore and maintain the non-racial character of the ANC – to keep the ANC as the Parliament of all the people of South Africa. It is in this context that I wish to take this opportunity to reassure the Afrikaans community in our country that they are an integral part of the South African landscape, history and heritage. Equally, you are part of the future of this country. We will never forget the role played by Braam Fischer, Dr. Beyers Naude and many other patriots from the Afrikaans community in securing our freedom. I assure all of you that your language, your culture and heritage will continue to be acknowledged, appreciated and celebrated. You are as South African, as all of us. South Africa is your home. You are contributing immensely to the development of our society. For that you have earned the trust and respect of all South Africans of goodwill. Your views, your aspirations and your needs matter, they carry equal worth and value as those of your fellow South Africans. Your dreams are valid. You are free to pursue them. In 1999, Madiba said: “I have great confidence in Afrikaners. They have their name because they considered themselves to be from Africa. Their language originated here in Africa. I know that the vast majority of them will continue to help build this African homeland of theirs.” Let us work together to build a South Africa we can all be proud to call home. Let us also work together to ensure that the ANC remains a home for all South Africans including members of the Afrikaans community. Key takeouts The history of the ANC has a long-standing commitment to an inclusive society and the promotion of social cohesion. The Freedom Charter (1956) declared boldly that South Africa belonged to all who live in it, Black and White. The vision of the 2012 National Summit on Social Cohesion and Nation Building of a South Africa where we are one people, one nation, one humanity with a shared destiny, should be revisited and brought to life. The Ramaphosa era is an opportunity to recommit to strong and unquestionable leadership. It is also an opportunity to rededicate ourselves to the goal of building a truly united South Africa. The country’s democratic constitution reaffirms that South Africa belongs to all who live in it, united in diversity. Sport must continuously be used to build bridges of unity among South Africans. The ANC views the Afrikaans-speaking community as an integral part of the South African landscape, history and heritage and part of the future. Its language, culture and heritage will continue to be acknowledged, appreciated and celebrated. Their views, aspirations and needs matter. Protecting the identity of the Coloured community in South Africa Dr Ruben Richards | Chairperson of the Ruben Richards Foundation Condensed Biography: Dr Ruben Richards is the Chairperson of the Ruben Richards Foundation, an NGO with a focus on facilitating healing within the context of trauma. He is the former Executive Secretary of the South African Truth and Reconciliation Commission, former Director General of the Scorpions, a notable author, community leader within the Coloured communities in the Western Cape, speaker and company director. He also served in executive and leadership positions in government, higher education institutions, the faith community and the private business sector. Richards delivered the keynote address during the Cape Town roundtable discussion, during which he stressed the importance of protecting community identity with specific reference to the Coloured community in South Africa. Richards emphasised that the current concerns and anxieties experienced by the Afrikaans-speaking community is not exclusive to them. He stated: “You don’t have a copyright on anxiety.” The anxieties relating to marginalisation, economic exclusion and inability to influence national policy, continues to be experienced by the Coloured community within the new dispensation. The overarching theme here is inclusivity, which begs the question: who is excluded? What does one have to do to be part of this inclusive society? Additionally, Richards noted that the current education system in South Africa produces people who do not find a way to be included in society. There are more than five million people that form part of the NEET generation: Not in Education, Employment or Training. Richards highlighted some of the consequences of exclusion from mainstream society as experienced on the Cape Flats, sighting issues of gangs and teenage pregnancies; particularly pregnant teenagers who are carrying the babies of gang leaders, which often results in child abuse within these immature relationships. He also cautioned against stereotyping: “Stereotypes are very, very strong. And what we physically represent on the outside is often what dominates the initial interactions.” Key takeouts Protection of community values and history is central to individual identity. The current concerns of the Afrikaans-speaking community relating to marginalisation and exclusion is not exclusive to this group. The Coloured community is continuing to experience exclusion and marginalisation in the new dispensation. The current education system produces the NEET generation: Not in Education, Employment and Training. Inclusive economic growth key to social cohesion Theo Vorster | Chief Executive Officer of Galileo Capital Theo Vorster, the CEO of Galileo Capital and economic market commentator, served as a keynote speaker for the Pretoria roundtable discussion. Vorster began his address by stating the following: “I think the key point of departure is that for any complicated problem, there's a simple solution that doesn’t work. Our problems are complicated, then so are the solutions.” Vorster presented on the current lack of economic growth in South Africa and eluded to factors such as the departure of critical skills and the loss of influential private sector business, which further exacerbates the stunted economic growth in the country. In the early 1990s there was a close correlation between South Africa’s GDP growth rate and that of the rest of the world. In fact, the GDP per capita tracked the rest of the world. In 2012/2013, that correlation broke. Currently, the GDP per capita in the rest of the world is nearly 50% higher than that of South Africa and, consequently, South Africa is now 12 years behind. For several years, economic growth was at 5%, which means that the economy doubles every 15 years. If the growth is at 1%, the economy will double every 72 years. Therefore, at a growth of 0.5%, the economy will take 150 years to double. If South Africa had kept track with the rest of the world, the economy would have been at a 15% growth rate and the unemployment rate would have been closer to 20%, instead of 30%. Reconciliation, social cohesion and keeping skills in South Africa is easy if the economy is growing. But if it is a struggling economy, we have the unfortunate situation whereby the people who can afford to – those with capital, and the talented – leave the country. Therefore, due to the current context we find ourselves in, the GDP growth will need to come from the private sector. Koos Bekker is known for saying that there are only a few people that grow the economy: engineers and entrepreneurs; and in our case, these are the people that are leaving. Additionally, Vorster also noted that the Afrikaans business community is a major contributor to economic growth and could help to create employment opportunities and encourage much-needed inclusive growth through private sector business. Vorster cited the example of Naspers, which in the late 1990s was a company with a market capital of roughly R6-billion. Today, Naspers is worth R1.2-trillion and constitutes 10% of the national GDP. Approximately R1 in R10, of every government employee’s pension is invested in Naspers, the biggest company on the JSE. The Afrikaans business community can contribute immensely to economic growth, business development, creating employment and opportunities. In conclusion Vorster indicated that inclusive growth must be a focal point of government towards addressing the current economic climate, combatting unemployment and the eroding effects this has on the national GDP. Key takeouts Economic growth and stability are necessary for reconciliation, social cohesion, and the retention of skills and investment to be successful in South Africa. Due to the current context we find ourselves in, the GDP growth will need to come from the private sector. The Afrikaans business community is a major contributor to economic growth and can help to create employment opportunities and encourage much-needed inclusive growth through private sector business. Inclusive growth must be a focal point of government towards addressing the current economic climate, combatting unemployment and the eroding effects this has on the national GDP. Working together to build one nation Summary of general conversations A Snapshot! There remains a great sense of optimism and willingness among the Afrikaans-speaking community and business to work together, mobilise and collaborate with government. However, they are often discouraged due to a perceived lack of political will to acknowledge the role that this community and other minority groups can play in improving South Africa. Dialogues and discussions such as these need to result in visible action and implementation. Several participants expressed the need for cultural identity to be upheld, protected, promoted, and embraced, while promoting nation building and a cohesive society. The Coloured community remains a minority group that is marginalised, politically excluded, and economically disempowered. South Africans need a clear vision and dependable leadership to overcome the current apathy and disenfranchisement among the citizenry. The issue of unemployment has been acknowledged but not enough is being done to resolve it. Practical solutions need to be put into effect. BBBEE and affirmative action is considered, rightly or wrongly, by most participants as discriminatory and one of the biggest inhibitors for business and utilising the economic potential and skills available in the country. Economic growth and stability are necessary for reconciliation, social cohesion, retention of skills and investment to be successful in South Africa. Prof David Mosoma, Chairperson of the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities, commented that tentative solutions for the country are needed and can be developed through collaboration between different communities in South Africa, including the Afrikaans community. Development must be done together and in such a manner that does not culminate in separate development. Clarity is needed on the status of the National Democratic Revolution (NDR). There is great concern about the current status of the Constitution, as well as the effect that State Capture has had on both the Constitution and the Judiciary. Focus must be given to increasing citizen and sectoral stakeholder participation in decision-making. Participants remarked that although the ANC’s intention towards creating an equal and inclusive society for all citizens was true, a disconnect occurred between the ANC’s intended goals and the realisation thereof on a grassroots level. Efforts towards social cohesion must not be discouraged by comments and messaging from political leaders that deepen societal divides. The Cape Town and Pretoria dialogue sessions on the place and role of the Afrikaans-speaking community concluded with open discussion sessions where all participants had the opportunity to respond to the addresses by the guest speakers and raise any further concerns within the presence of the ANC Treasurer General, Paul Mashatile. The aim of the discussion was to achieve a better understanding of how the Afrikaans-speaking community views its place and role within the country, what hopes and fears they have and the possible recommendations they could offer to resolving the plethora of challenges currently facing the country. Several members acknowledged the value and need of dialogue sessions such as these, which allow for honest and open exchanges between leaders and the ruling party and by extension, the government. A platform of this nature also presents an opportunity for people to gain insights and understanding about one another's assumptions, concerns and ideals. Overall, participants expressed their commitment and hope that the issues plaguing South Africa can be resolved. This, despite echoes of frustration and scepticism that the country's leadership will take heed of the fears and issues expressed by them. The lack of leader­ ship and vision from government was a recurring theme expressed among the participants. Many indicated that block­ ages towards resolving issues such as unemployment, economic decline, education and the loss of skills due to emigration, need to be addressed by government with urgency. Emphasis was also placed on the fact that citizens need to see actions and results stemming from planning conferences and dialogue discussions. The lack of apparent political will from leadership to implement recommendations and address the issues expressed through these initiatives continues to contribute to apathy among citizens. This makes the mobilisation and motivation of citizens to contribute to the solutions that much more difficult. Discussions pertaining to the narrative of national identity as it is understood within South African society, was expressed by several participating members in the general discussions. There were contrasting views regarding what constitutes the identity of a South African and how this affects social cohesion in the country. Moreover, questions were raised regarding how this definition of national identity is formed and under­ stood by most citizens in the country, as well as, how this narrative is being communicated from leadership both in government and in communities. Some indicated that they associate more closely with their identity as a South African, above their racial, cultural or linguistic community identity. While others argued that a space within this notion of national identity must be created to include, promote and protect the individual’s cultural identity in such a way that still contributes to nation building and national unity. With regards to social cohesion, some participants expressed their lack of belief in the notion that South Africans can be united in their diversity. Additionally, some believe that the constitutional principles to respect, protect, promote and fulfil the basic rights of all South Africans, are not truly being applied from government’s side. Concerns were raised regarding the breakdown of the values of non-racialism in society and the role that all citizens and leadership need to play to ensure that these values are protected and strengthened among South Africa’s youth. Participants expressed that the use of phrasing such as ‘Blacks in general and Africans in particular’ continues to perpetuate exclusion and discrimination against other races and cultures that do not form part of this classification. The development of an inclusive society in South Africa must include the promotion of non-racialism, however, phrasing in legislation such as this, further perpetuates exclusion of certain groups and the exclusivity of others. The Cape Town session keynote speaker, Ruben Richards, also highlighted that minority groups such as the Coloured community, remain marginalised, politically excluded and economically disempowered. Focus must thus be placed on these minorities to ensure that they become active and participatory citizens to hold governing officials accountable whether at a local, provincial or national level. It is imperative that the Coloured community be included in these social debates and that the value in their contribution to the country is recognised. The need for vision and inspiration from national leadership was greatly emphasised. Dr Rudi Buys, Dean of Humanities at Cornerstone Institute, stated that diverse and influential voices are currently missing from leadership, which are needed to motivate citizens to be activists and to empower them to contribute to the solutions needed for the many challenges facing the country. Strategic and deliberate messaging from the right leaders on national policy and critical matters can help to overcome the current disconnect experienced by citizens. The lack of accountability and transparency from government continues to remain of great concern. Other issues emphasised during the discussions included the current education system, which does not fully allow for the inclusion of all youth into society and the economy. According to Ruben Richards over five million people are part of the ‘Not in Education, Employment or Training (NEET) generation’, which leaves individuals unable to integrate into society, further putting pressure on the fiscus. Additionally, the value of home-language education should also not be overlooked, along with the dire need for resources and well-trained educators within the sector. The current economic climate remained a prominent point of discussion. The lack of growth and prolonged economic stagnation, as well as the loss of human capital from the country is a major concern and urgent intervention from leadership will be necessary for any improvement in the current economic growth trajectory to occur. Comments were made that government is currently overlooking small business and only focusing on collaborating with big business in its efforts to stimulate economic growth. With the right support and opportunities, small business can be valuable for job creation. The negative effect of policies such BBBEE and affirmative action was extensively discussed by a majority of the participants. The necessity of these policies in supporting previously disadvantaged citizens was acknowledged and supported, however, many participants indicated that the current approach and implementation of BBBEE has had devastating effects on businesses, industry and the economy. The loss of critical skills from the country due to lack of opportunity was also contributed to the implementation of these policies. Therefore, the intended versus achieved outcome of BBBEE has become questionable, as it appears to benefit the wealthy more than the intended recipients. Moreover, participants noted that the legislation surrounding BBBEE companies does not serve to benefit or protect the workforce from exploitation. With regards to the issue of unemployment, participants expressed the need for practical plans to be put in place to effect change and growth. Closer collaboration between government and private sector business through programmes like the Public Private Growth Initiative (PPGI) should be increased and emphasised. Moreover, the absorption of university graduates into the workforce urgently needs to be addressed through collaborative efforts. Youth unemployment is one of the greatest challenges in the country, which not only limits the prospects of young people but also applies unsustainable pressure on governmental social programmes amidst stagnant economic development. There needs to be more pragmatic solutions put in place from both government and the private sector to address this crisis, which perpetuates the wealth disparity between the privileged and poor communities in South Africa. During both the discussions in Pretoria and Cape Town, the willingness from the Afrikaans-speaking community to be a part of the solution to the challenges in the country was clearly expressed. This is a sentiment echoed by other communities and sectors of South African society. Members of the Afrikaans business community indicated that they are able and ready to develop innovative initiatives to address issues such as unemployment, economic growth, investment, community empowerment and the transfer of skills. However, many feel they are often overlooked as a result of political agendas. Moreover, policies like affirmative action and BBBEE are preventing skilled and motivated people from gaining equal access to employment, business opportunities and, ultimately, economic participation. During closing remarks at the Cape Town event, Ruben Richards reiterated the need for government to strongly condemn the levels of corruption experienced among officials and hold implicated individuals accountable. Additionally, he also urged government to make use of the available skilled and competent people in the country, who are willing to step forward and put their shoulder to the wheel. The discussions were concluded by comments and responses from the ANC Treasurer General, Paul Mashatile, and the facilitator, Roelf Meyer. The Treasurer General remarked that these engagements and dialogues are important for leadership to hear and understand the fears, hopes and recommendations of its citizens. The honesty and frankness expressed by the participants is greatly appreciated and importance will be placed on the issues raised regarding policy and legislation. Mashatile remarked that the ANC would not advocate policies that are regressive. Mashatile also stressed the necessity of developing action plans to address the issues expressed; strengthening the country’s vision of building a non-racial, non-sexist and democratic society for all people; focusing on decisive economic and structural reforms; repairing trust between government and the private sector through partnership; creating certainty for citizens, businesses and investors; and stimulating public investments within the domestic market. Moreover, the Treasurer General also stated that the current ideals and narrative perpetuated among the younger generations is instilling polarisation and segregationist ideals, which left unaddressed will make the notion of unity in South African society that much more elusive. As South Africans, we can only truly be brought together as one nation with a singular goal to pursue. There must be momentum from all sectors of society. Therefore, platforms like these created by the Inclusive Society Institute must continue to be expanded upon for people to engage and for leadership to take notice of what citizens need. Roelf Meyer concluded the events by commending the participants for speaking openly about difficult discussion topics and being forthcoming in expressing their concerns. Meyer reminded participants that despite the current challenges facing our society, we as South Africans must still appreciate the fact that our society and identity as a country could have looked much different today. Strategic decisions were made by leaders in the country to change the face of a nation that previously defined itself as an exclusive society. We made a new start and completely reorganised and redefined the very identity of a country on the basis of the constitution we have today. We need to focus again on living up to those principles captured in the constitution, a task that is the responsibility of all citizens in South Africa. Additionally, Meyer reiterated two points strongly communicated in both Cape Town and Pretoria, that the Treasurer General could relay to national leadership: Firstly, people in the Afrikaans-speaking community are committed to working towards building the country and creating opportunities for growth, and secondly, don’t discriminate against minorities. The Inclusive Society Institute will continue in its commitment to creating platforms for engagement and bringing more stakeholders to the conversation. Key takeouts Dialogue can no longer be conducted simply for the sake of engaging. The principles that unify us as South Africans must drive us towards a common goal. The conduct of national leadership and community leaders in public platforms cannot continue to be pervasive and counterproductive in shaping a non-racial and unified society. Collaborative space between government, the private sector and civil society must be opened up for all to provide their inputs. Action plans must be formulated to effectively address the issues identified and influence decision-making processes in government. All South Africans have a contribution to make in shaping the narrative around national identity, unity and promoting the principles captured in the constitution. The Inclusive Society Institute is encouraged to facilitate future roundtable discussions of this nature which allow for robust debate to occur and continue. This will contribute to the promotion of a unified and cohesive society. Tabulated list of concerns Following the Cape Town and Pretoria engagements with members of the Afrikaans community on their place and role in South African society, the following concerns, be it perceived or real, were identified: Concerns identified Engagements towards improved dialogue need to be succeeded by action and the implementation of resolutions The lack of vision and reliable leadership from government has resulted in distrust, apathy and disenfranchisement among the citizenry Lack of accountability and transparency from national leadership. Inability to hold those implicated in corruption responsible Need for diversification of voices in leadership to inspire citizens towards action and activism No clear definition and direction from leadership on national unity and how this can be achieved Efforts towards social cohesion are threatened by comments and messaging from political leaders that deepen societal divides Disconnect between what young South Africans understand regarding the intended outcomes and principles forged during the South African transition and the manifestation of these desired outcomes in their lives today Continued use of racial differentiation in legislation and policy including the use of ‘Blacks in general and Africans in particular’, which perpetuates exclusion and discrimination against other races and cultures not part of this classification Discrimination against minorities through legislation and policies resulting in political and economic disempowerment Youth feel excluded from the political agenda and lack opportunities to participate Lack of civic participation in holding government officials accountable and promoting good governance No visible application of constitutional principles that form the foundations of national unity, tolerance and inclusive society The growing crisis of unemployment has been acknowledged; however, more practical plans need to be developed to effect change Increasing levels of youth unemployment and a lack of initiatives aimed at absorbing unemployed graduates into the workforce Economic stagnation and difficulty of doing business in South Africa Discriminatory nature of policies such as BBBEE and affirmative action Competent, skilled and willing individuals feel they are overlooked when it comes to selection for programmes and initiatives aimed at solving the economic crisis in the country, due to politics playing a role in selection Need for mentorship initiatives, training and skills transfer programmes The loss of critical skills and qualified individuals as a result of lack of opportunities and stagnant economic growth Urgent intervention in the education sector is needed, regarding the quality and level of education, shortage of educators and resources, and home-language teaching Clear vision on economic reform and the empowerment of private sector business towards contributing to solutions Lack of clarity on issues of property rights, land redistribution without compensation and the status of the NDR Concerns regarding the status and protection of constitutional principles, as well as attacks on the Judiciary Government continues to pursue avenues and legislative decisions that do not result in positive outcomes or visible effective changes/improvements Action plan to address issues and concerns raised at the dialogues Annexure B The concerns raised during the two dialogues, as captured in the tabulated list of concerns (Annexure A), can be broadly grouped into three action types: The first group of concerns are those for which political leaders and policymakers need sensitisation and which they need to take heed of in their policy formulations and public pronouncements. The second group of concerns are those concerns that require further dialogue between the political leadership, policymakers and the Afrikaans-speaking community. The third group of concerns are those that require further policy research and/or analysis. The concerns are grouped hereunder within an action plan that sets out the concern, action required, the body to be engaged and the target deadline for concluding the action. The outcome of each action will serve as the basis for engaging the political and policymaking leaders of the country and/or to motivate further investigation/research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

Summary of themes from a Roundtable discussion hosted in Cape Town, South Africa Acknowledgements The visit by Hon Schmidt and Mr Knieps, as well as the roundtable dialogue and associated events, was made possible by the Friedrich Ebert Stiftung and is part of a larger exchange of public policy and governance ideas between South Africa and Germany. All records and findings included in this report, stem from the discussions that took place at the roundtable dialogue and technical meetings arranged to consider lessons for South Africa on transitioning to universal health coverage from the German experience. The meetings took place in Cape Town on the 19th and 20th of February 2020. Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. In support of efforts aimed at influencing the national policy discourse in South Africa, the Inclusive Society Institute hosted these roundtable and technical discussions in order to consider what lessons South Africa could draw on from the German universal healthcare experience. These deliberations form part of the institute’s broader and ongoing research into pathways to universal healthcare in South Africa. Content Foreword - Prof Zweli Ndevu, Deputy Chairperson of the Inclusive Society Institute Acronyms and abbreviations Introduction - Daryl Swanepoel, Chief Executive Officer of the Inclusive Society Institute The current German health financing system Lessons for South Africa from Germany Building on what you have Embracing social solidarity Start moving towards universal health coverage even when it is hard Competition, consumer choice and bottom-up accountability Cover as many as possible and make the public insurer the insurer of choice Transparency and independence Centralisation vs. decentralisation: ensuring purchasing power while being locally responsive Need for a lean, efficient and technical bureaucracy to support UHC Retain the flexibility provided by multiple reimbursement approaches Moving towards a transition period for UHC Finding a way forward for South Africa’s NHI Bill Conclusion References Foreword by Prof Zweli Ndevu Prof Zweli Ndevu | Deputy Chairperson of 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, inter alia, by strengthening the public policy discourse. 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. One such issue, which is currently high on the national public policy agenda in South Africa, is the proposed National Health Insurance (NHI). Enabling legislation has already been tabled in parliament and the formal public hearing processes have commenced. The ISI has resolved to make a meaningful contribution to the process. It has accordingly commissioned a study which aims to find a consensus position that will overcome the current somewhat polarised public discourse. This it will do by fostering ongoing dialogue on the NHI, and by doing in-depth research that will provide alternative pathways to universal healthcare. In its dialogue sessions the ISI aims to take the conversation out of the formal corners of parliament and government. It hopes to create a dynamic platform where this important issue can be discussed inclusively by involving all stakeholders. That is why it the presence of the Parliamentary Portfolio Committee on Health and the Chairperson of the ANC’s NHI task team is so important, as they are an integral part of the conversation. Their participation is necessary to secure the compromise required to achieve the desired consensus. This will require open, frank and fearless deliberation from both sides of the aisle in order to underpin policy integrity. As an institute we are particularly honoured to in this component of the ongoing study to have experts on the German healthcare system contribute: the former Minister of Health, Hon. Ulla Schmidt, who oversaw its implementation in Germany and Franz Knieps, a respected technical expert who has vast experience on the practical implementation of the system. The intention is to potentially draw lessons that can assist South Africa in its own conceptual wrestling. The ISI trusts that this dialogue has been useful to achieve the middle ground necessary for finding consensus towards a universal healthcare system that works for all. Acronyms and abbreviations DRGs Diagnostic-related groupers NHI National Health Insurance PHC Primary Health Care REF Risk Equalisation Fund UHC Universal Health Coverage Introduction Daryl Swanepoel | Chief Executive Officer of the Inclusive Society Institute The Inclusive Society Institute hosted a Roundtable Discussion on Pathways to Achieving Universal Healthcare in South Africa, specifically focusing on lessons from the German healthcare system on the evening Wednesday, 19 February 2020 at the Taj Hotel in Cape Town. Hon Ursula Schmidt, the former German Minister of Health (2001-2009) and Mr Franz Knieps, the equivalent of the director-general of health (head of department) during Hon Schmidt’s period as Minister of Health shared their experiences of health financing reform relevant for South Africa. The evening was attended by various stakeholders from the South African government and the political sector, including members of the Parliamentary Health Portfolio Committee, as well as funders and providers of healthcare. After having shared their experiences, a number of questions were posed by stakeholders to Hon Schmidt and Mr Knieps and insights from the German experience shared in response to the questions. The roundtable on the 19th of February was followed by a smaller gathering on the morning of the 20th of February hosted at the offices of the Inclusive Society Institute in Cape Town. The gathering on the 20th was aimed at more intimate conversation and dialogue amongst Mr Knieps and a smaller group of representatives from the political, academic and private sectors. The more intimate nature of the meeting allowed for more questions on lessons from the German experience for South African and an interactive and focused dialogue process. The main purpose of both the roundtable and the smaller follow-up meeting was to provide an opportunity to learn from the experiences of the German health financing system which has been built on principles of social democracy and solidarity. These learnings hold particular value and relevance for South Africa, given the current public engagement and parliamentary processes associated with the draft National Health Insurance (NHI) Bill (2019). The primary focus of the Inclusive Society Institute is to work on and promote a more inclusive society. The focus aligned with the dialogue around the table on the 19th and at the smaller meeting on the 20th. There is much noise being made in South Africa’s national discourse about various present-day issues, much of which is not constructive. The Institute has been established to create a platform where this discord can be presented and discussed, to find some middle ground in dealing with the pressing issues the country faces. The current German health financing system In this section we provide brief context on the way the German health financing system functions in 2020. This provides background to the themes discussed in the remainder of the report that emerged from both the roundtable discussions and the smaller workshop discussion. In Germany, citizens have complete comprehensive health insurance coverage through multiple competing funds. This is provided through both public and private systems. On the one hand there is government-provided statutory health insurance offered by 108 competing, not-for-profit sickness funds, and on the other hand substitutive private health insurance for those who choose to purchase their insurance privately, or who are interested in buying supplementary insurance to their government insurance (Busse, Blümel, Knieps. & Bärnighausen, 2017). The private insurance is provided by 42 private health insurance funds, half of them non-profit, with the biggest ones being not-for-profit. Approximately 87% of the population have primary cover through the statutory health insurance funds, while 10-11% hold substitutive private health insurance, i.e. choose to have only private health insurance cover (Busse, Blümel, Knieps. & Bärnighausen, 2017). The remainder of the population, e.g. soldiers and refugees, obtain their health insurance cover through special governmental schemes and payments. All German citizens who are employed, as well as more vulnerable groups such as pensioners and people who earn less than the opt-out threshold (€57 600 per year in 2017) are required to have mandatory statutory health insurance (Busse, Blümel, Knieps. & Bärnighausen, 2017). Their non-earning dependents are provided with cover free of charge. People who earn incomes greater than the threshold as well as those who are self-employed can keep statutory health insurance on a voluntary basis or are allowed to pay for substitutive private health insurance, i.e. private health insurance that provides the same type of cover as the government health insurance. Sickness funds contributions are collected through payroll taxes and a small additional payment. Statutory health insurance is paid for through a contribution of about 14.7% of the income of wage earners (Busse, Blümel, Knieps. & Bärnighausen, 2017). The contribution is equally split between employers and employees. All contributions flow into the Central Allocation Pool (Gesundheidsfonds) or Central Fund and is subsidised with a relatively modest amount from central taxes (Busse, Blümel, Knieps. & Bärnighausen, 2017). The funds pooled through the Central Fund are redirected to the 108 individual sickness funds according to the risk profiles of each fund using a morbidity-based risk-adjustment scheme. Each fund is allowed to charge an additional contribution fee directly to its members to cover total expenditure (there may be remaining expenditure not covered by the Central Allocation Pool payment). These contributions typically equate to an average of 1.1% of wages, meaning total contributions (cost) tend to be around 16% of wages (Busse, Blümel, Knieps. & Bärnighausen, 2017). In addition to sickness fund contributions, long-term care insurance (to pay for nursing care for the elderly or the very sick) is separately insured but organised by the health insurance system. It requires a contribution of about 1.7% of wages (Busse, Blümel, Knieps. & Bärnighausen, 2017). A generous package is available to all who contribute and are covered. In return for these contributions, members of the sickness funds receive a generous package service, which includes services ranging from outpatient services provided by family doctors, dentists, psychotherapists and specialists, hospital care, to prevention, health promotion, and rehabilitation. It’s really an all-over coverage and it includes all essential medication, aids and appliances such as prostheses, wheelchairs and physiotherapy; members get what they need. While out-patient services are totally free, a small co-payment is required for hospitalisation. The health sector is valued, and Germans are proud of it. German citizens willingly make their contributions to the health financing part of the system and highly value the care they receive from the system. Even the CEOs of very large companies are members of statutory sickness funds and talk about their membership publicly. Lessons for South Africa from Germany Below we describe the key themes for South Africa’s transition to universal health coverage (UHC) that emerged from both the roundtable and follow up-discussion. For each theme, the German experience is briefly described, and it is then related back to the South African context and lessons for South Africa are highlighted. The themes are positioned as they were shared by the German experts. Building on what you have The start of the German health insurance system is often traced back to Bismark’s Health Insurance Act which came into life in 1883. It’s acknowledged that since 1883 it took about 125 years up to 2007-2011, the period when Hon Schmidt was the Minister of Health, to achieve mandatory universal health insurance coverage in Germany (Busse, Blümel, Knieps. & Bärnighausen, 2017). The system is still in flux and slowly improving over time, so much so that a 2017 Lancet article which reviewed the German health system made it clear that it took 135 years (up to 2017) to achieve a system built on the principles of solidarity, self-governance and competition (Busse, Blümel, Knieps. & Bärnighausen, 2017). More details on these principles are provided in later themes. This is a reminder that no system emerges fully formed. On the contrary, this complex system has evolved by step by step, always building on structures that were already in place. In a certain sense, the German health insurance system actually existed for more than 800 years, from the very first time that people first started to make provision for health events informally to when Bismarck started to incorporate these early structures into the first pillars of a unified system. The German experience shows that a well-functioning healthcare system does not come about through big-bang reform. While in public discourse it may be positioned as requiring large-scale reorganisation, in reality systems evolve step by step, ideally building on foundations that are already in place. Existing structures should not be dismantled before new ones have been built: the equivalent of the medical principle of “first do no harm”. Goals have to be set in such a way that they are attainable and in line with a country’s financial and organisational targets. While countries need the courage to make change happen, they should not underestimate the pushback that will come from those who are currently in a privileged position, and who are benefitting from the status quo. In South Africa’s own history of health system reform, we deviated from a reform pathway that built on existing medical scheme infrastructure to a single-fund strategy in 2007 (shifting from so-called social health insurance to national health insurance). Arguably, the policy formation process since 2007 has been slowed down by the big-bang nature of the proposed reforms and the resultant conflict. Similar to Germany, South Africa will need to be open to working with the components of the health system we have, but also be open and willing to course-correct if the old route is proving to be not practical. Embracing social solidarity In addition to the long history of reform and building of a health financing structure, Germany has a history of cementing social solidary principles into its health financing system. The first insurance schemes developed around worker schemes in the mining industry and, since then, there has been a history of workers and employers sharing the risks related to health expenses. Social solidarity within the German statutory system means that health service provision is determined solely by the individuals’ need, and not the income, stature, social or professional position, age, background or other characteristics of individuals. Similar to the German statutory sickness fund environment, deep social solidarity principles have already been built into the South African medical scheme system through open-enrolment (cover cannot be denied), community-rating (everyone pays the same price regardless of their demographic, clinical or risk characteristics) and guaranteed minimum benefits. The German health financing system uses a risk equalisation fund (REF) to share member risk between the 108 sickness funds. This approach ensures an equitable distribution of contributions between those who do not need it and those who do (a risk cross-subsidy). It serves to ensure that the sickness funds serving a high proportion of elderly and people with health conditions receive more money than sickness funds with younger or healthier people, i.e. ensuring that money is distributed according to need. This effectively creates a single risk pool even though there are multiple funds. During the mid-2000s, South Africa embarked of the design of and preparation for a REF. Medical schemes went through the process of designing a formula, setting up the data collection systems and then never actually implementing the scheme. It is one of the recommendations of the Health Market Inquiry that the medical schemes sector revitalise the REF process and implement it in order to stabilise the finances of struggling schemes and to ensure competition between schemes on the basis of their ability to purchase healthcare and not on the basis of risk profile (Competition Commission, 2019). Start moving towards universal health coverage even when it is hard The final stages of moving towards compulsory universal health coverage for all German citizens were undertaken during a difficult financial period (2007-2011). Changes were made during an economic crisis (the 2007/8 financial crisis), a period of high unemployment (within a developed country context) and relatively small budgets. In order to build support during this period, it meant the system had to work hard to convince people of the necessity of a comprehensive, universal UHC system: “you should show the people how much money you invest per capita, how much do you invest for homeless people, for a man with no job, or a woman with no job, for the children…”. Similar to Germany, South Africa is currently in the midst of a difficult economic situation: recessionary conditions, growing unemployment, currency weakness, a junk-status credit rating and now also the very negative impact of Covid-19 (the coronavirus) on the economy. This does not, however, mean that we should not start to experiment with the health system reform that is necessary to move towards UHC. Rather, it means that citizens and stakeholders should be taken along in the process and value demonstrated at every step. Competition, consumer choice and bottom-up accountability Consumer choice and competition through multiple funds. The Germany system provides access to public insurance cover through 108 statutory sickness funds. German citizens have a choice about which sickness fund they want to belong to. These funds report to both local structures and authorities, as well as to national level structures. There is a 300-year history of local sickness funds in Germany and their current existence is partly ascribable to the role they have been playing in addressing local health needs throughout this long period. All these funds have boards that are representative of local stakeholders and participants and provide a clear way for paying attention to local-level needs. The funds are also obligated to have representation from patient organisations and, in turn, to participate in patient organisations. This provides a good channel for patient voice and needs to be heard in the German health financing system – good linkages exist between local-level needs and centralised structures. The relationship between local level needs and centralized structures is explored in more detail in later theme in this report. Choice between public and private insurance and providers. Furthermore, apart from the choice about which sickness fund to belong to, clients or consumers in the German system are provided with other choices. Those who earn sufficient income can choose to belong to private health insurance scheme rather than the public sickness funds. The German health financing system is obligated to share information on quality with patients in a clear and accountable way. This allow patients to choose and move between local PHC providers, creating an accountability feedback loop. Quality data and ratings of hospitals are also shared, and patients can make their choices based on this. Consumers are able to choose their local primary healthcare provider and move if they are not happy with the care provided. This create incentives for quality improvement over time. The German approach to the institutionalisation of accountability to citizens in healthcare holds visible lessons for South Africa where many South Africans feel the state is not responsive to service provision needs. A much greater level of bottom-up accountability is needed than currently available in the health system. Cover as many as possible and make the public insurer the insurer of choice Germany followed a gradual process of requiring compulsory coverage of statutory sickness funds (the public system) for certain groups. In the period 2008-2011 when Hon Schmidt was the Minister of Health in Germany, comprehensive compulsory health insurance cover for everyone in Germany was finally achieved. The incentives that have been put in place around the public vs. private insurance choice support choice for the public system in that it uses a community-rating system rather than the risk rating system used by private health insurers. As a result, mobility between statutory and private funds is limited to protect the statutory funds – once you are 55 or older and become a higher health risk due to age you are not allowed to opt back into statutory insurance funds. This is used as a way of encouraging people to belong to statutory sickness funds rather than private insurance schemes at younger ages and contribute when their health need is not as high yet. This assists in ensuring the financial sustainability of statutory sickness funds. There is, however, government financial support available for individuals older than 55 who can no longer afford private insurance premiums. This is provided once these individuals have gone through an application process to show that they are unable to afford private insurer premiums. Sickness funds only offer services on an in-kind basis while private health insurers require up-front payment and claims from members for reimbursement. Certain services are also excluded from private insurance, e.g. family care, health prevention and maternity benefits, creating a strong incentive to be a member of a sickness fund rather than private insurer. This is reflected in the low and declining proportion of people covered by private insurers rather than sickness funds. Transparency and independence Transparency exists at multiple levels and in different ways in the German health financing system, from the way payments are collected to how decisions are made about service provision, the allocation of resources, and tariff determination. Funding contributions The system is funded from the insured’s own contributions which are collected separately from tax. This ensures transparency in payment because contributors’ payments are clearly visible to them. The same approach holds for the elderly in terms of contributions to long-term care insurance. Because health insurance funds are separately collected and managed from the national budget and taxes, it means that it is a very visible component of people’s expenditure. Whilst payroll taxes do have some disadvantages in terms of rigidity, the German view is that the German people place a high value on their benefits because the cost is made visible. It also acts an accountability mechanism for the system. In Germany people do not view public funds as being owned by the State once they have been paid over. Public entities such as the sickness funds have their own, independent boards and the money is viewed as belonging to the people, not the State. Service coverage decisions The range of services provided through the German health financing system is not determined by the legislature or the Minister but is set by the Joint Committee. The Joint Committee is made up of representatives of the Central Fund, physicians, dentists, hospitals and patients. It is a good example of the system of self-government that is typical in German service provision where the State provides the framework, but various stakeholders and the citizenry take responsibility for decision-making and the way services are provided. It is said that the most powerful person in the German health system is not the Minister of Health but the neutral chair of the Joint Committee. His or her vote is the final vote in tie-breaker votes. The Joint Committee determines the range of services paid for funds pooled via the Central Fund through health technology assessments, i.e. sets the basic benefit package. It uses evidence-based economic evaluations of health products and services that are conducted by a special, independent Institute for quality, efficacy and efficiency in the healthcare system. The Institute for Quality and Efficiency in Health Care is staffed by about a 150 people, including academic staff, epidemiologists, doctors, mathematicians, and so on. These staff provide evidence used by the Joint Committee in its decision-making and are also able to advise the Joint Committee. The Institute is a neutral, technical body. It has been set up to be totally independent from both the private sector, healthcare providers and the German government. The Joint Committee can follow the guidance provided by the Institute. However, if it wants to deviate from the recommendations of the Institute it is required to make it clear in publicly accessible reports why it is choosing to do so. While the Joint Committee sets the agenda and programme of the Institute, the Institute is totally autonomous and independent from the Joint Committee. The Institute is required to follow the rules of good clinical practice and have to show, if they get advice from researchers, that there are no conflicts of interest. Quality of the system The German health financing system is obligated to share information on quality with patients in a clear and accountable way. This allows patients to choose and move between local primary healthcare (PHC) providers, creating an accountability feedback loop. Quality data and ratings of hospitals are also shared, and patients can make their choices based on this. Consumers are able to choose their local primary healthcare provider, typically a GP, and move if they are not happy with the care provided. This creates incentives for quality improvement over time. South Africa does not currently have a quality reporting and monitoring system that applies to both the public and private sectors. Health facilities, both primary facilities and hospitals, are subject to infrastructure and service standards. Tariff determination The tariffs or payment levels for both hospitals and outpatient providers are set by two committees independent of the Joint Committee and of the German government. There is a special committee on financing for the hospital sector, new therapies and new medical devices which is responsible for the calculation of diagnostic-related groupers (DRGs) for the payment of hospitals. A second, similar committee is responsible for tariff determination for the outpatient care sector. The members of the committees are elected by the sickness funds and health providers and are fully independent from the German government. The state or government, in this instance, is only responsible to ensure that the committees and the Joint Committee follow regulations, but they are allowed to function independently in their representation and decision-making from government. In conclusion, while the purchaser provider split between the Central Pool and the 108 sickness funds creates the tension necessary for competition, proper oversight happens because of transparency built into the system at various levels. Centralisation vs. decentralisation: ensuring purchasing power while being locally responsive A big question facing South Africa as we embark on a UHC reform path is how you harness the benefits of centralised purchasing power while ensuring responsiveness to local needs. The German REF plays a strong role in ensuring risk sharing at a national level between the 108 sickness funds. While the funds that are available in 16 different German states allow for local needs to be voiced and directly addressed, much of the overall approach to the purchasing function still occurs at a national level: the benefit package is set by the Joint Committee at a national level, tariff determination take place in two national level committees and all collective bargaining processes also take place at a national level. To make the German system work, compromises often have to be made between the state and federal level. If a sickness fund only operates in one state, it tends to be accountable mostly at state level. However, as soon as a sickness fund operates in three or more states, accountability for the fund is situated at a central level. Responsibilities for preventative care are divided between the state and federal levels. Complications during this process often arise but are resolved through conversation between different stakeholders. Need for a lean, efficient and technical bureaucracy to support UHC A critical learning from the German health financing system has been to keep the bureaucracy that supports the financing system as lean, efficient and technical as possible. The Central Fund is a system of algorithms managed by a small group of staff at the national insurance office. It is mainly staffed by data scientists who are able to derive and implement these algorithms. The total administration costs of the financing system are estimated to be about 10% - with half of it residing at the level of individual sickness funds and the other half with different entities (like the Central Pool) in the system. Overall administration costs had to be kept as low as possible to keep the system palatable to German citizens. Retain the flexibility provided by multiple reimbursement approaches Although Germany recognised it was important to implement alternative reimbursement like capitation for hospital services to avoid the over-servicing which is associated with a fee-for-service approach, it decided to also retain fee-for-service reimbursement in certain instances. The payment system for outpatient doctors in Germany is complicated. It is typically a mix of fee-for-service and budget limits. If outpatient doctors exceed their fee-for-service budget limits, then the fees they are paid per visit reduces. This approach has worked quite well in keeping overall outpatient costs low. A fee for service approach is also used in cases where the health system wants to encourage more provision, e.g. services that are typically under-provided such as family visits by GPs or new, innovative services that the system wants to incentive the provision of. Moving towards a transition period for UHC In thinking about how South Africa will manage the process of moving towards UHC, there are at least two difficult questions. Firstly, how will we manage the trade-offs between quality and access? Secondly, how can we take both the public AND private sectors along on this journey to achieve a unified health system for all? The Germany experience offers some learnings. Preserving and expanding access while improving quality The process of quality improvement holds an inherent tension – how can we maintain access to existing health services when it is possible that some may not meet the minimum standards we associate with quality? How do we get facilities not meeting basic requirements to improve over time? The measuring and monitoring of quality essential. Quality improvement in the German health system has a long history. In the1990s when the German health system was compared to other high-income and European health systems it was ranked in only the 22nd place. Health providers and policymakers started to investigate the reasons for this low ranking. It was found that the system fared poorly at providing chronic care, maternity care, and emergency care. The hospitals reacted and created a hospital quality monitoring entity Federal Office for Quality Assurance (Bundesgeschäftsstelle für Qualitätssicherung (BQS)) (Busse and Blümel, 2014). First, only the public hospitals were required to report to the entity. Later on, private hospitals were required (by law) to participate. The quality monitoring function was eventually taken over by the AQUA Institute in 2009 (Busse and Blümel, 2014). This Institute is separate from the Institute for Quality and Efficiency in Healthcare and was selected through a European-wide procurement process (Busse and Blümel, 2014). But facilities that under-perform are supported to retain access and allow for quality improvement over time. In German hospital facilities not meeting basic requirements given were given a period of two to three years to improve. If a hospital achieved a first bad report in the quality assessment process, the report was sent to the Institute and then provided with a chance to improve without the results of the report being made public yet. During this improvement process, site visits were not done by an external agency but occurred in the form of peer inspections. Struggling hospitals were provided with peer support (colleagues from other facilities) to assist with their improvement process and were found to be quite responsive to this process of peer support. In the more rural areas in Germany that have very little competition between hospitals, additional funds are provided to hospitals to improve their facilities and quality, i.e. these facilities are financially supported to improve over time. However, patients are also provided with funds for travel and accommodation to access care at higher quality hospitals in other areas. Including private hospitals in care delivery. Hospital financing in Germany is organised on the state level. About 40% of hospitals in Germany are owned by community organisations, while 45% are owned by churches. The latter group is considered as being privately owned. The states produce infrastructure and investment plans which cover the buildings and physical infrastructure of hospitals. The plans include nearly every hospital in Germany, irrespective of the nature of ownership of hospitals. As part of the process of preserving access, private hospitals in Germany also had to be retained in the system as healthcare providers to sickness fund members. A transition period for moving to more similar funding approaches for the infrastructure of private and public hospitals was required, given that private hospitals are built with investors’ funds who require a return on investment. After the initial transition period, the German state-level governments now cover infrastructure funding for all hospitals and private hospitals. Private hospitals are required to take responsibility for only the operational costs. However, while the government provides infrastructure funding for private hospitals the funding if frequently less than the real capital needs of private hospitals. This results in some investment costs being covered from the DRG payment system, meaning there is pressure on the rationalization of DRGs. The allocation of capital costs is typically a very political issue, and it would be important for South Africa to depoliticize this process. Taking stakeholders along on the UHC reform journey Apart from the changes that are anticipated for NHI, the South African private sector and system as a whole needs to undergo certain payment and quality reforms that have been recommended in the Health Market Inquiry’s final report. In Germany, it was found that a medium-term process of working intensely with important stakeholder groups supported a transition process. An independent research group worked closely for a period of three years with key health system stakeholders to arrive at consensus outcomes and ideas on the changes required. Six books were published from this engagement. It meant the perspectives of all stakeholders were captured and shared in a public way. Furthermore, the Joint Committee essentially also consists of critical stakeholders, including sickness fund representatives, and they are involved in critical funding decisions for the system as a whole. German citizens also had to be taken along on the reform process. Success was achieved when they were able to show citizens that they would not be increasing bureaucracy and administration costs extensively and were offering value. It also had to be made clear to higher income citizens that system reform was not aimed at punishing them (the option of private health insurance was not taken away) but rather at creating a more equitable system for all. How can South Africa prepare for a transition period? The Health Market Inquiry (Competition Commission, 2019) made a number of recommendations that can already be implemented now that supports reform in the health system and will allow it to move towards a more unified, value-oriented health system. Primary healthcare teams in both the public and private sectors. The report found that stand-alone single practices or disciplines characterise the South African private health sector (Competition Commission, 2019). Unlike the public sector, multidisciplinary healthcare teams are not a feature of the private system. This limits efficient referral pathways and a more value-based approach to the delivery of care. It was recommended that the rules that currently prohibit the use of teams in the private sector be amended Competition Commission, 2019). This is something that can be done already now in the very early stages of planning to transition to a unified health system for South Africa. A quality monitoring and reporting system for the health system as a whole. The Inquiry (Competition Commission, 2019) found that there is no standardised approach to measure and report on quality in the various private sector provider markets (GPs and hospitals). There is also no one approach between the two sectors. It was therefore recommended that an Outcomes Monitoring and Reporting Organisation be established for providers, patients and all health stakeholders to collect and report on health quality and outcomes data. Even before the next steps of transitioning to NHI, it is possible to implement this recommendation given the importance of such an entity in helping to empower consumers and promote transparency. Consider stabilising the existing medical schemes environment through a REF. It was recommended that the finances of medical schemes be stabilised through the implementation of a REF and that all medical schemes (open and closed) should belong to the REF (Competition Commission, 2019). This can already be implemented now even before the full transition to UHC in preparing for setting up a centralized risk sharing mechanism. Finding a way forward for South Africa's NHI Bill A number of uncertainties and concerns about the NHI Bill in its current form were identified in an earlier report of the Inclusive Society Institute (Inclusive Society Institute, 2020). In the table below these concerns have been set out. Each concern has been paired with possible alternative approaches offered by the German experience. Dr Gwen Ramakgopa, Head of ANC Task Team on the National Health Insurance, and Dr Sibongiseni Dhlomo, Chairperson of the Parliamentary Portfolio Committee on Health Conclusion While the German experience holds insights for South Africa on many technical aspects and this will be continued to be explored in future work, many of the lessons on “softer” issues hold relevance. Germany’s journey to UHC has taken many years. Depending on when it is viewed as starting, it has taken anything from 800 to more than 130 years. During this process, realism and pragmatism but also boldness and vision were required. The Germany experience shows that one the one hand there is no big-bang change that will make UHC happen. On the other hand, first and often very hard steps are required. Inherent in the tension between these two poles is the necessity of trust between stakeholders and recognition that the system needs to build on what it currently has in hand and maintain stability during the transition process. Inclusivity featured strongly in the German journey – stakeholders across the system are represented on the Joint Committee and were worked with intensely, especially during the final stages of moving to full, compulsory UHC. There will be no easy road for South Africa to UHC but first steps and actions are required and it necessary that we trust each other on the journey ahead. The German commitment to bottom-up accountability aligns closely with South Africa’s approach to a participatory democracy and would help to offset the concerns associated with attempts to manage governance and accountability from a top-down perspective. References Busse, R. & Blümel, M. 2014. Germany: Health system review. Part of the Health Systems in Transition Series, Vol. 16 No. 2 2014. European Observatory on Health Systems and Policies. Busse, R., Blümel, M., Knieps, F. & Bärnighausen, T. 2017. Statutory health insurance in Germany: a health system shaped by 135 years of solidarity, self-governance, and competition. Lancet. 390: 882–9. Competition Commission. 2019. Health Market Inquiry: Final findings and recommendations report. Competition Commission, Pretoria. Available at: http://www.compcom.co.za/wp-content/uploads/2020/01/Final-Findings-and-recommendations-report-Health-Market-Inquiry.pdf (accessed 1 April 2020) Göpffarth, D. & Bauhoff, S. 2015. The public health dimensions of Germany’s refugee crisis. Health Affairs Blog. Available at: https://www.healthaffairs.org/do/10.1377/hblog20151022.051328/full/ (accessed 1 April 2020) Inclusive Society Institute. 2020. Towards Inclusive Healthcare: Roundtable report on the National Health Insurance. Inclusive Society Institute, Cape Town. Available at: https://www.inclusivesociety.org.za/ (accessed 1 April 2020) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Survey – how are SMMEs coping with the coronavirus lockdown and the measures taken to re-open the economy? The Inclusive Society Institute shares government’s concerns with regard to the spreading of the coronavirus and supports efforts aimed at flattening the curve. At the same time, it recognises that the current measures deployed by government are taking their toll, especially as they affect the SMME sector. The institute carried out its first COVID-19 SMME survey in April 2020, the results of which pointed to areas of serious concern. Since then, government has announced a phased approach to the re-opening of the economy, with the first steps taken with effect from 1 May 2020. This second survey assesses the SMME sector’s current position apropos the performance, sustainability prospects and opinions regarding their own and the country’s economic future. The survey was undertaken over the period 5 to 7 May 2020. Copyright © 2021 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. All records and findings included in this report, stem from the survey on the impact of COVID-19 on the SMME sector, which took place over the period 5 to 7 May 2020. Content 1. Setting the scene and objectives of the survey 2. Key findings 2.1 Findings on how SMMEs coped during the initial lockdown ended 30 April 2020 2.2 Measuring the support of SMMEs for the phased opening of the economy and how they are coping with the gradual opening up thereof 2.3 Testing SMMEs confidence in the future of the economy and gauging SMME confidence levels in the country’s leadership with regard to the COVID-19 policymaking and management 2.4 General observations 2.5 Selected sectors’ performance in relation to the SMME sector in general 3. Methodology 4. Recommendations 5. Summary of detailed data 5.1 Summary of detailed data for all enterprises surveyed 5.2 Summary of sectoral data regarding phased re-opening of the economy List of figures Figure 2.1: Breakdown of reasons given by SMMEs that are not in agreement with phased re-opening of the economy Figure 2.2: Reasons given by SMMEs that are in agreement with the decision to phase in the re-opening of the economy Figure 2.3: April vs May comparative analysis with regard to prospects for enterprise survival and cash flow Figure 2.4: Comparative analysis with regard to jobs losses under three scenarios Figure 3.1: Composition of SMME enterprises surveyed Figure 5.1: Comparative analysis of selected data: Sectoral vs All SMME average 6. References 1. Setting the scene and objectives of the survey On 31 December 2019, the World Health Organisation (WHO) was informed about the outbreak of a pneumonia of unknown cause, which was detected in the Chinese city of Wuhan. On 30 January 2020, the WHO declared the outbreak a Public Health Emergency of International Concern; and on 11 February 2020 it announced the name for the new coronavirus: COVID-19 (WHO, N.d.). On 12 March 2020, Dr Hans Henri P. Kluge, WHO Regional Director for Europe, confirmed that COVID-19 was declared a pandemic (WHO, 2020). On 5 March 2020, South Africa’s National Institute for Communicable Diseases announced the first case of COVID-19 in the country (NICD, 2020). With more and more cases being declared on a daily basis thereafter, the President of the Republic of South Africa announced on the evening of Monday, 23 March 2020, that in terms of the Disaster Management Act, in a decisive effort to save millions of South Africans from infection, a nationwide lockdown for 21 days would come into effect at midnight on Thursday, 26 March 2020. During the lockdown, all South Africans, except for designated essential workers, would have to stay at home and would not be allowed to leave their homes except under strictly controlled circumstances (RSA, 2020). The president acknowledged that the measures would have a considerable impact on people’s livelihoods and on the life of society and the economy, but believed that “the human cost of delaying…[the] action would be far, far greater” (RSA, 2020). Workers and enterprises exempted from the lockdown included health workers in the public and private sectors, emergency and security services personnel, other persons necessary in response to COVID-19 and “those involved in the production, distribution and supply of food and basic goods, essential banking services, the maintenance of power, water and telecommunications services, laboratory services, and the provision of medical and hygiene products” (RSA, 2020). All other workers had to stay at home for the full period of the lockdown and enterprises not considered essential had to remain closed. While emphasising the importance of a lockdown, the president urged all firms that were able to continue their operations remotely, to do so (RSA, 2020). In response to the impact that the lockdown will have on the economy, government announced various relief measures aimed at assisting enterprises to retain staff and remain afloat. These included amongst others, the setting up of a Solidarity Fund aimed at assisting small businesses to endure, the setting up of a temporary employee relief scheme and debt relief schemes for both enterprises and employees (Mail & Guardian, 2020). Other measures included employer relief measures, such as the provision of a four-month tax subsidy for employees in the private sector. The aim thereof would be to encourage employers to retain workers during the lockdown. It was also announced that the payment of employment tax incentive reimbursements would change from twice a year to monthly, so as to ensure that cash got into the hands of compliant employers as soon as possible, and tax compliant businesses with a turnover of less than R50-million were, for a four-month period, allowed to delay 20% of their employees’ tax liabilities. A portion of their provisional corporate income tax payments could also, over a six-month period, be deferred without penalties or interest (Deloitte, 2020). On the evening of Thursday, 9 April 2020, the president announced a further two-week extension of the lockdown (News24, 2020). At the time of undertaking the initial survey, the lockdown was scheduled to run until 30 April 2020. But, on Thursday, 23 April 2020, the president announced a 5-level lift of the national lockdown. The first level reduction came into effect on 1 May 2020. The Inclusive Society Institute, with a view to post-COVID-19 policy planning, undertook a survey of SMMEs over the period 5 to 7 May 2020. The timing of the survey allowed for the SMMEs to first become acquainted with the government regulations, which were published by the various ministers in the Government Gazette in the week following the president’s announcement. The objective of this particular survey was fourfold: To assess how the SMMEs coped during the initial lockdown; To assess how the SMMEs are coping under the gradual re-opening of the economy; To gauge the views of the SMME sector with regard to both their and the country’s economic prospects; and To gauge the level of support for the president, his cabinet and the measures they have taken to combat the coronavirus. As previously stated, the survey period ran from Tuesday, 5 May 2020 and closed at the end of business on Thursday, 7 May 2020. It should therefore be viewed as a snapshot of SMME thinking during said period. The institute will promote the survey to public policymakers as a further contribution towards consolidating national reflexion on economic recovery. The institute supports economic measures that will enhance equality, inclusiveness and solidarity. 2. Key findings Once again, as in the survey amongst SMMEs carried out during the initial lockdown period, the urgency to issue the report, required the interpretation to be restricted to mainly a globular overview of all the enterprises that participated in the survey. It does, however, also provide a high-level analysis of the four largest sectoral components of the survey, namely manufacturing, wholesale and retail, construction and services. The report covers the data captured for 1 012 enterprises from across all sectors and all provinces. With minor exclusions, they are micro-, small- and medium-sized enterprises. The enterprises surveyed represented a workforce of around 27,140 and a combined turnover of at least R18,846,424,705. These findings restrict themselves to three main themes: i. How SMMEs coped during the initial lockdown ended 30 April 2020. ii. Measuring the support of SMMEs for the phased re-opening of the economy and how they are coping with the gradual opening up thereof. The survey was conducted on the basis of the Level 4 lockdown being in place until 31 May 2020. iii. Testing the SMMEs confidence in the future of the economy and gauging SMME confidence levels in the country’s leadership with regard to the COVID-19 policymaking and management. 2.1 Findings on how SMMEs coped during the initial lockdown ended 30 April 2020 From the SMMEs surveyed, slightly more than half – 53 per cent – were classified as essential services. Despite this, 82 per cent of the enterprises were not able to operate during the initial lockdown. In addition, to exacerbate the challenges, 78 per cent of the enterprises were not able to get up and running at the end of the initial lockdown, that is, when the phased opening of the economy was introduced. Sixty-three per cent of the enterprises did not have the necessary cash flow to see them through the initial lockdown and they had to dismiss 12 per cent of their workforce. With regard to the loss of jobs, using the employment figures contained in the 2019 SEDA report as the basis for this survey’s estimations, up to 1,300,658 jobs were lost in the SMME sector during the initial phase. That is 12 per cent of the 10,838,819 number of jobs in this sector (SEDA, 2019). However, as found in the previous survey amongst SMMEs, the negative impact on jobs will be considerably mitigated once the economy re-opens. Two thirds of the enterprises indicated that they would re-employ staff once the lockdown is ended and/or when cash flow allows. This would mean that at least 838,434 lost jobs will be recouped once the economy gains momentum. It is important to note that a far higher percentage of respondents – 15 per cent as opposed to 0,5 per cent in the April survey – were not sure of what they would do. On the availability of cash flow to see the enterprises through the initial lockdown that ended on 30 April 2020, the actual position (63 per cent of enterprises) remained bleak but represented somewhat of an improvement over the sector’s initial expectation. However, it should also be noted that the number of employees retrenched increased substantially, which may have impacted the enterprises’ cash flow. The link between available cash flow and employee retrenchment was, however, not tested. The majority of SMMEs continued to believe that the enterprise will survive the initial lockdown, although the percentage declined from the previous survey. Fifty-nine per cent believed that they would survive, whilst 38 per cent believed they would not. Three per cent were not sure. Comparison to previous survey undertaken during the initial lockdown period: 1. With regard to workers: Whereas the previous report indicated the potential job losses to be in the region of 7,5 percent or 812,986 jobs, in reality this grew to 12 per cent, with the job losses closer to 1,3 million. Furthermore, in the previous survey some 90 per cent of the enterprises planned to re-employ retrenched staff once business re-opened and/or when cash flow permitted. This declined to only 66 per cent in this survey. The real job loss estimation, as at the end of April 2020, thus increased from around 80,000 in the previous survey to around 462,000 in this survey. 2. With regard to cash flow: In the previous survey undertaken during the initial lockdown period, 78 percent of the enterprises expected not to have sufficient cash flow to see them through the lockdown. The actual percentage logged at the end of April 2020 improved by 13 percentage points to 63 per cent. 3. With regard to financial assistance: At the time that the previous survey was done, 56 per cent of the enterprises had applied for financial assistance, whilst 84 per cent indicated at the time that they did not up till then receive approval. In this survey the number of applications for financial aid increased to 73 per cent. The approval rate, at 29 per cent, remained low. 4. With regard to the enterprises’ belief in surviving the initial lockdown: Fifty-nine per cent of the enterprises surveyed in this round were confident of surviving the initial lockdown. In the previous round, 69 per cent expressed confidence therein. 2.2 Measuring the support of SMMEs for the phased opening of the economy and how they are coping with the gradual opening up thereof As indicated earlier, the survey was conducted on the basis of the Level 4 lockdown being in place until 31 May 2020. Findings in this section are, therefore, made on that basis. Seventy-eight per cent of enterprises surveyed were not in agreement with the phased re-opening of the economy. Of them, 57 per cent would have wanted the economy fully opened, whilst 43 per cent would have wanted more businesses and sectors to have been included as businesses that could trade under Level 4 of the lockdown. Figure 2.1: Breakdown of reasons given by SMMEs that are not in agreement with phased re-opening of the economy (Source: Inclusive Society Institute) And of the 22 per cent of the enterprises that agreed with the phased re-opening of the economy, two thirds believed more could have been done for enterprises to become operational. Figure 2.2: Reasons given by SMMEs that are in agreement with the decision to phase in the re-opening of the economy (Source: Inclusive Society Institute) On the expected performance of the enterprises during Level 4 of the lockdown, the following key findings were made: Seventy-three per cent of the enterprises suggested that they would not have sufficient cash flow to see them through the Level 4 lockdown. And only 49 per cent believed they would survive the Level 4 lockdown, with an equal number suggesting they would not. This represented a 10 percentage points decline in business’ confidence of surviving the COVID-19 calamity. Figure 2.3: April vs May comparative analysis with regard to prospects for enterprise survival and cash flow (Source: Inclusive Society Institute) The decision to phase in the re-opening of the economy could result in a further material loss of jobs. Of the enterprises surveyed, a further 17 per cent of employees would need to be retrenched. An extrapolation across the SMME sector would therefore suggest a further potential of 1,842,769 jobs that could be lost. This is over and above the 838,434 dismissed during Level 5 of the lockdown. In total, therefore, the impact of the COVID-19 measures taken could affect the livelihood of as many as 2,681,203 workers. Again, on the same assumption that two thirds of the workers will be re-employed when the economy is fully opened and/or when cash flow permits, the actual number of long-term job losses will be considerably reduced to around 885,000. This, nevertheless, remains an extremely worrisome situation. Figure 2.4: Comparative analysis with regard to jobs losses under three scenarios (Source: Inclusive Society Institute) 2.3. Testing SMMEs confidence in the future of the economy and gauging SMME confidence levels in the country's leadership with regard to the COVID-19 policymaking and management A staggering 78 per cent of the enterprises surveyed were of the opinion that the economy would not recover over the next three to five years to the level it was at just prior to when the lockdown was announced. Furthermore, should the economy remain largely locked down beyond the end of May 2020, economic prospects could further worsen. Eighty-six per cent of the enterprises indicated that they would in such instance not have sufficient cash flow to see them through, and 78 per cent would have to further reduce jobs. On testing the confidence in government in managing the COVID-19 pandemic, there was an equal split between those enterprises whose confidence in the president had either remained the same or grown, as opposed to those whose confidence had declined. A large majority of the enterprises surveyed had reduced confidence in the performance of the ministers assigned to manage the disaster. The reasons behind this sentiment have not been tested and will require further investigation. 2.4 General observations From the trends contained in the two surveys undertaken by the institute, that is the first in mid-April 2020 and the second in early May 2020, the following general observations can be made: The measures taken to combat the COVID-19 pandemic have been particularly harmful to both the survival prospects of the SMME sector and their ability to provide and grow jobs in the economy. The recovery of the SMME sector will take some time: 78 per cent of the enterprises surveyed indicated it would take longer than three to five years to recover to the level just prior to the introduction of the COVID-19 measures. There has been a marked decline in SMME optimism from the initial measures taken by government, and the phased-in approach to the re-opening of the economy. For example, in the survey done in April, 53 per cent of enterprises indicated that they would immediately be able to get up and running should the lockdown have ended on 30 April 2020. This declined to only 21 per cent of enterprise surveyed this time round. Likewise, there has been a marked decline in the SMMEs level of confidence of survival and their ability to retain workers. For example, in the April survey, 69 per cent of enterprises were confident of surviving. This declined by 10 percentage points to 59 per cent in this survey. And whilst job losses were predicted at 7,5 percent in the April survey, it increased to 12 per cent in this survey, with more job losses predicted should the SMME sector remain largely excluded from economic activity beyond May 2020. Confidence in leadership decision-making is starting to wane. 2.5 Selected sectors' performance in relation to the SMME sector in general As mentioned earlier in the report, this research did not attempt to do a full analysis of each of the SMME sectors. It did, however, test selected data for the four largest categories of businesses, namely construction, manufacturing, services, and wholesale and retail. As can be gleaned from the detailed data in section 5.2 of this report, similar trends are to be seen across all the categories of businesses. 3. Methodology The estimated SMME population size in South Africa is around 2,550,540, of which 736,198 are formal and 1,754,443 informal. Combined, they provide approximately 10,839,819 jobs (SEDA, 2019). Sampling, data collection and data subjects Sampling was carried out through the dissemination of the survey by electronic means to representative databases comprising SMME businesses drawn from across the country and from all sectors. In total, 1 012 responses to the questionnaire were obtained. Since “the quality of the sample will be higher, the more completely the sampling frame covers the target population” (European Social Survey, 2016), the database selected contained, with only a few exceptions, SMME enterprises, which was the subject of the study. Standard data cleansing and validation procedures were carried out. The chart contained in figure 3.1 below, reflects the composition of the SMMEs surveyed. Figure 3.1: Composition of SMME enterprises surveyed (Source: Inclusive Society Institute) Confidence level and margin of error In determining the sample size, the research relied on the standard 95 per cent level of confidence and 5 per cent margin of error, which is common for social sciences studies (Royse, 2008:209). Sample size In determining the sample size required to achieve a confidence level of 95 per cent and a margin of error of approximately 5 per cent, the author was guided by the table published in Glenn (1992) and Cochran’s (1963) formula for calculating a sample for proportions. The former suggested a sample size of 400 obtained responses and the latter, 385. Whereas the survey size should accordingly not be smaller than 400, the actual number of obtained responses amounted to 1 012, some two and a half the standard minimum. This would serve to strengthen reliance on the report, since the margin of error would be closer to 3 per cent (Creative Research Systems, N.d.). Question set The survey contained a total of 25 questions, which could be grouped into four parts: PART A – Questions of a demographic nature In part A, the series of questions designed was aimed at eliciting information that would assist in answering questions related to the nature of the enterprise participating in the survey. This would help the stratification of enterprises in terms of their size (micro or medium), sector, whether they are considered essential services or not, and the impact on the labour market. In so doing, findings could be made, amongst others, as to outcome differences between the various sectors, and the extent to which an enterprise being declared an essential service improves their ability to survive. 1. How many workers (including yourself) do you employ? 2. What was your annual turnover in the last financial year? 3. Are you classified as an essential service in terms of the current lockdown regulations? 4. In what sector or sectors does your enterprise operate? 5. How many years has your enterprise been in operation? PART B – How did your enterprise cope during the initial lockdown phase that ended on 30 April 2020? 6. Were you able to do business during the initial phase of lockdown? Yes or No 7. Was your enterprise able to immediately get up and running once the initial lockdown ended? Yes or No 8. Did you have sufficient cash flow to see you through the initial lockdown period that ended 30 April 2020? Yes or No 9. How many workers did you dismiss during the initial lockdown period? 10. Will you re-employ the same workers once lockdown is over? Yes, No or When cash flow again permits 11. Have you applied for any financial aid that has been made available to cope during lockdown? Yes or No 12. If Yes in question 11, has your application been approved? Yes or No 13. If Yes in question 12, has cash reached your bank account yet? 14. Do you believe your enterprise will survive? Yes or No PART C – Questions about the phased re-opening of the economy The series of questions contained in the third part of the question set was aimed at assessing the sustainability prospects of the enterprises as they enter the phased re-opening of the economy. The enterprises were requested to make the assessment on the basis that the current Level 4 regulations will be in place until the end of May. 15. Are you in agreement with the President’s strategy to gradually open the economy? Yes or No 16. If No in question 15, then indicate your preference: a. Keep lockdown until COVID-19 risk is eliminated or sufficiently neutralised b. Rules should be relaxed for more types of businesses and sectors c. Fully open the economy 17. If Yes in question 15, then indicate, for your specific business, whether you believe the arrangements are: a. Adequate b. Could have done more c. Keep lockdown 18. Do you have sufficient cash flow to see you through to the end of May 2020? 19. Indicate the number of additional workers you will still have to retrench, if any, (over and above those already retrenched in the initial phase) despite the new arrangements? 20. Do you believe your business will survive given the newly announced gradual opening of the economy? Yes or No PART D – Questions aimed at testing the enterprises' views on the economy future of the country and the government's management of the coronavirus pandemic 21. On a scale of 0 (weak) to 10 (excellent), what is your level of confidence in the current decision-making processes of the authorities? 22. Looking ahead, where do you believe South Africa will be in 3-5 years? a. Much weaker b. A little weaker c. Recovered to existing levels d. Slightly improved e. Better off 23. Will you have to retrench more workers if you are unable to open up beyond end May? 24. Will you have enough cash flow to see you through the gradual opening of the economy, if it is extended beyond the end of May 2020? 25. With regard to your confidence in the leadership of the country: a. For the President, has your confidence grown, stayed the same, declined? b. For the members of the Cabinet, has your confidence grown, stayed the same, declined? 4. Recommendations Recommendation 1 It is clear from the two surveys undertaken that the SMME sector does not have the support structure or means in place to absorb the economic knock that the lockdown measures have given them. They do not have the necessary reserves in place to see them through an extended shutdown. This is bound to lead to a material loss in jobs and closure of firms. Whilst support for social distancing and heightened hygiene measures to combat the spreading of the COVID-19 virus is evident and welcomed, the authorities will at the same time have to give serious and immediate consideration to ways of easing the means of doing business, since a further deferment will have irreversible consequences for the economy. Recommendation 2 The responses obtained in the conducting of this survey have shown that the SMME sector is having serious cash flow problems as a result of the measures being taken to combat the COVID-19 virus. To overcome this, they have in large numbers applied for financial aid to see them through the COVID-19 calamity. The large number of applications that have not been approved or settled appears to be exacerbating their current financial woes. The reasons behind the non-finalisation of the applications is unclear. It may be administrative in nature, or an issue of too stringent criteria. It is recommended that the authorities review both the administrative procedures and the qualifying criteria in order to enable a wider range of enterprises to gain access to the support. 5. Summary of detailed data 5.1. Summary of detailed data for all enterprises surveyed 5.2 Summary of sectoral data regarding phased re-opening of the economy Figure 5.1: Comparative analysis of selected data: Sectoral vs All SMME average (Source: Inclusive Society Institute) 6. References BusinessTech. 2020. These 3 graphs show who’s paying South Africa’s income tax. [Online] Available at: https://businesstech.co.za/news/finance/363120/these-3-graphs-show-whos-paying-south-africas-income-tax/ [accessed: 12 April 2020]. Cochran, W. G. 1963. Sampling Techniques, 2nd Ed. New York: John Wiley and Sons, Inc. Creative Research Systems. N.d. Sample Size Calculator. [Online] Available at: https://www.surveysystem.com/sdesign.htm [ac­cessed: 13 April 2020]. Deloitte. 2020. South Africa: Tax relief measures announced in response to COVID-19. [Online] Available at: https://www2.deloitte.com/za/en/pages/tax/articles/south-africa-tax-relief-measures-in-response-to-COVID-19.html [accessed: 10 April 2020]. European Social Survey. 2016. Sampling Guidelines: Principles and Implementation for the European Social Survey. [Online] Available at: https://www.europeansocialsurvey.org/docs/round8/methods/ESS8_sampling_guidelines.pdf [accessed: 13 April 2020]. Israel, G.D. 1992. Determining sample size. Fact sheet PEOD-6. Gainesville: University of Florida. Mail & Guardian. 2020. South Africa’s economic plan for Covid-19. [Online] Available at: https://mg.co.za/article/2020-03-23-south-africas-economic-plan-for-covid-19/ [accessed: 10 April 2020]. National Institute for Communicable Diseases (NICD). 2020. First case of covid-19 coronavirus reported in SA. [Online] Available at: https://www.nicd.ac.za/first-case-of-covid-19-coronavirus-reported-in-sa/ [accessed: 10 April 2020]. News24. 2020. Struggle is far from over. [Online] Available at: https://www.news24.com/SouthAfrica/News/in-full-struggle-far-from-over-read-ramaphosas-statement-on-2-week-lockdown-extension-20200409 [accessed: 10 April 2020]. Nirrandes, N. 2020. President announces 5-level lift on nationwide lockdown. [Online] Available at: https://www.capetownetc.com/news/president-announces-5-level-lift-on-nationwide-lockdown/ [accessed: 6 May 2020]. Republic of South Africa (RSA). 2020. President Ramaphosa announces a nationwide lockdown. [Online] Available at: https://www.sanews.gov.za/south-africa/president-ramaphosa-announces-nationwide-lockdown [accessed: 10 April 2020]. Royce, D. 2008. Research methods in social work, 5th edition. Belmont: Thomson Higher Education. Small Enterprises Development Agency (SEDA). 2019. SMME Quarterly Update, 1st Quarter 2019. Pretoria: SEDA South African Revenue Services (SARS). 2019. Tax Statistics 2019. Pretoria: SARS. Statistics South Africa (Stats SA). 2020. Quarterly Financial Statistics (QFS) December 2019. Pretoria: Stats SA. World Health Organisation (WHO). N.d. Rolling updates on coronavirus disease (COVID-19). [Online] Available at: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/events-as-they-happen [accessed: 10 April 2020]. World Health Organisation (WHO). 2020. WHO announces COVID-19 outbreak a pandemic. [Online] Available at: http://www.euro.who.int/en/health-topics/health-emergencies/coronavirus-covid-19/news/news/2020/3/who-announces-covid-19-outbreak-a-pandemic [accessed: 10 April 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Survey synopsis - What impact have the measures taken by government to combat the coronavirus pandemic had on the leadership and support of the ANC? In an effort to combat the Covid-19 pandemic, the South African nation is currently under lockdown. This is resulting in a considerable impact on people’s livelihoods and on the life of society. As the ruling party of the country, it has to act in the national interest, despite the potential negative impact that some government decisions may have on its own support base. The survey covered in this report assesses the political impact on the membership and supporters of the measures taken by the authorities and the effect that it has had on the leadership of, and levels of support for the movement. Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, stem from the survey undertaken from 13 to 15 May 2020 on the impact on the leadership and support of the ANC as a result of the measures taken by government to combat the COVID-19 pandemic. Content 1. Purpose and objectives 2. Key findings 2.1 Questions aimed at measuring the level of support of ANC members and supporters for the measures being taken by government to combat the COVID-19 pandemic 2.2 Questions aimed at gauging the opinion of ANC members and supporters on government’s management of, and competence in, combatting the COVID-19 pandemic 2.3 Questions aimed at assessing the impact of the measures on ANC members and supporters’ perception of the leadership of the ANC’s President, the Cabinet and the ANC itself 2.4 Provincial comparisons 2.5 Findings in a nutshell 3. Methodology 4. Detailed summary of data 4.1 Demographic data 4.2 Perceptual data 4.3 Detailed summary of data by province List of figures Figure 2.1: Percentage breakdown of support for measures taken to combat the COVID- 19 pandemic Figure 2.2: Percentage breakdown of how the management of the COVID-19 crisis is being perceived Figure 2.3: Opinion with regard to the performance of the authorities and security forces in combatting COVID-19 Figure 2.4: Breakdown on views for future prospects – personal wellbeing and the economy Figure 2.5: Breakdown of changes of opinion with regard to the President, Cabinet and ANC Figure 2.6: Provincial comparisons for selected data Figure 3.1: Breakdown of respondents surveyed per province Figure 3.2: Respondent demographics 5. References 1. Purpose and objectives On 31 December 2019, the World Health Organisation (WHO) was informed about the outbreak of a pneumonia of unknown cause, which was detected in the Chinese city of Wuhan. On 30 January 2020, the WHO declared the outbreak a Public Health Emergency of International Concern; and on 11 February 2020 it announced the name for the new coronavirus: COVID-19 (WHO, N.d.). On 12 March 2020, Dr Hans Henri P. Kluge, WHO Regional Director for Europe, confirmed that COVID-19 was declared a pandemic (WHO, 2020). On 5 March 2020, South Africa’s National Institute for Communicable Diseases announced the first case of COVID-19 in the country (NICD, 2020). With more and more cases being declared on a daily basis thereafter, the President of the Republic of South Africa announced on the evening of Monday, 23 March 2020, that in terms of the Disaster Management Act, in a decisive effort to save millions of South Africans from infection, a nationwide lockdown for 21 days would come into effect at midnight on Thursday, 26 March 2020. During the lockdown, all South Africans, except for designated essential workers, would have to stay at home and would not be allowed to leave their homes, except under strictly controlled circumstances (RSA, 2020). The president acknowledged that the measures would have a considerable impact on people’s livelihoods and on the life of society and the economy, but believed that “the human cost of delaying…[the] action would be far, far greater” (RSA, 2020). On the evening of Thursday, 9 April 2020, the president announced a further two-week extension of the lockdown which would run to 30 April 2020 (News24, 2020). On Thursday, 23 April 2020, the president announced a 5-level lift of the national lockdown. The first level reduction – that is to level 4 – came into effect on 1 May 2020 (Nirrandes, 2020). The lockdown will continue to trouble society for some time to come. President Ramaphosa has in the interim initiated a consultative process to consider a move to level 3 of the lockdown in certain parts of the country as from the end of May 2020, but it is apparent that in the economic heartlands of Gauteng, the Western Cape and KwaZulu-Natal, level 4 will continue for some time (Mvumvu, 2020). The Inclusive Society Institute, with a view to post-COVID-19 policy planning, undertook a survey amongst members and supporters of the African National Congress (ANC), to assess the political impact of the measures taken by the authorities and the effect that it has had on the leadership of, and levels of support for, the movement. The objective of this particular survey was threefold: To measure amongst the ANC members and supporters, the level of support for the measures being taken by government to combat the COVID-19 pandemic; To gauge their opinion on government’s management of, and competence in, combatting the COVID-19 pandemic; and To assess the impact of the measures on ANC members and supporters’ perception of the leadership of the President, the Cabinet and the ANC itself. The survey period ran from Wednesday, 13 May 2020 and closed at midday on Friday, 15 May 2020. It should therefore be viewed as a snapshot of the ANC membership and supporters thinking during that period. The institute will promote and use the survey to inform and help guide political thinking in the interest of strengthening democracy and civic awareness. The institute supports social democracy and policy that promotes equality, inclusiveness and solidarity. 2. Key findings This section contains the key findings with regard to the three objectives set out in the previous section of this report, namely the measuring of the support of ANC members and supporters for the measures being taken by government to combat the COVID-19 pandemic, the competence as to the government’s handling of the pandemic and the impact of the lockdown on the support for the ANC and its leadership. 2.1 Questions aimed at measuring the level of support of ANC members and supporters for the measures being taken by government to combat the COVID-19 pandemic There is overwhelming support for the measures being taken by the authorities to combat the coronavirus pandemic. Ninety per cent of respondents indicated their support therefore. Only 4 per cent were not in agreement of the measures, with 5 per cent indicating that they were not sure. Figure 2.1: Percentage breakdown of support for measures taken to combat the COVID-19 pandemic (Source: Inclusive Society Institute, 2020) 2.2 Questions aimed at gauging the opinion of ANC members and supporters on government’s management of, and competence in, combatting the COVID-19 pandemic Generally speaking, ANC members and supporters are satisfied with the government’s management of efforts aimed at combatting the COVID-19 pandemic, although there is some space for the authorities to improve. Thirty-nine per cent of the respondents believe the authorities to be “very good” in the management of the pandemic, 21 per cent thought they were “good” and 30 per cent were satisfied. Overall, 90 per cent of the respondents were therefore not negatively inclined towards the government’s efforts in this regard. Figure 2.2: Percentage breakdown of how the management of the COVID-19 crisis is being perceived (Source: Inclusive Society Institute, 2020) Similarly, 88 per cent of respondents were confident that the authorities will bring the COVID-19 pandemic under control (71 per cent confident and 11 per cent somewhat confident). Only 11 per cent of respondents were not in agreement. Likewise, most of the ANC members and supporters, albeit to various degrees, believed the authorities and security forces to be exercising their duties responsibly and that they displayed competence in the exercising of their duties. Sixty-seven per cent thought they were carrying out their duties in a responsible manner, whilst 78 per cent of respondents considered the authorities and security forces to be displaying an acceptable level of competence in the carrying out of their duties (15 per cent highly competent, 34 per cent competent and 29 per cent somewhat competent). Figure 2.3: Opinion with regard to the performance of the authorities and security forces in combatting COVID-19 (Source: Inclusive Society Institute, 2020) Despite the overwhelming support for government’s current efforts and measures, ANC members and supporters did not share quite the same level of optimism with regard to their own and the country’s economic future. Less than two thirds of respondents (64 per cent) believed that their own future would improve after the lockdown is lifted, whilst a staggering 84 per cent were not optimistic about the country’s economic future. In terms of the economy, only 14 per cent of respondents were of the opinion that the economy would improve in the year after lockdown to levels better than before the measures were announced. Twelve per cent thought the economy would not improve, 50 per cent supposed it would not grow to the level it was prior to lockdown and 22 per cent were of the opinion that it would only improve to levels the same as before lockdown, thus with no growth potential and further setting back prospects for addressing backlogs in society. Figure 2.4: Breakdown on views for future prospects – personal wellbeing and the economy (Source: Inclusive Society Institute, 2020) 2.3 Questions aimed at assessing the impact of the measures on ANC members and supporters’ perception of the leadership of the ANC’s President, the Cabinet and the ANC itself All things being equal, the president and his Cabinet can draw solace from the data on the ANC membership and supporters base’s changing opinion of them. The results for both the president and the Cabinet show an improved opinion of them since the measures aimed at combatting the COVID-19 pandemic were announced. In terms of support for the president, 62 per cent of respondents’ opinion of him improved since the measures were announced, whilst 30 per cent’s opinion remained the same. Only 7 per cent of respondents indicated that their opinion of him declined. In terms of support for the Cabinet, 46 per cent of respondents’ opinion of the Cabinet improved, whilst 34 per cent’s opinion of them remained the same. Nineteen per cent of respondents indicated that their opinion of the Cabinet has declined. The latter aspect deserves careful consideration as to what has led to the decline. The ANC itself, also shows that a material number (48 per cent) of respondents’ opinion of the movement has improved, whilst 34 per cent’s view has remained the same. Seventeen per cent of respondents indicated a diminished opinion for the movement. It is important to note that these percentages do not necessarily correlate with electoral support for the particular leaders. It is an indication of changed opinion, which, in itself, is a basis on which to grow a leadership mandate. Figure 2.5: Breakdown of changes of opinion with regard to the President, Cabinet and ANC (Source: Inclusive Society Institute, 2020) 2.4 Provincial comparisons In line with the methodology as set out in section 3 of this report, comparisons were done to test the national validity of the conclusions. In all three of the sampling exercises done, it was found that the trends were similar across the three provinces selected. These three provinces, Gauteng, Free State and KwaZulu-Natal, between them, made up 81 per cent of the total number of valid responses received from the survey. In all three sampling exercises, the provinces were all within a 10-percentage point margin of the national average. In testing the ANC members and supporters’ support for measures taken by government to combat the COVID-19 pandemic, 90 per cent of respondents from Gauteng were in support, 89 per cent from the Free State and 84 per cent from KwaZulu-Natal. The national average in this respect was 90 per cent. In assessing the ANC members and supporters’ views with regard to the government’s management of the pandemic, 91 per cent of Gauteng respondents were favourably inclined. Of this, 41 per cent thought government was managing the pandemic “very good”, 22 per cent “good” and 28 per cent “satisfactory”. In the Fee State, the overall percentage of 97 per cent was slightly higher, with the breakdown being 37 per cent very good, 22 per cent good and 38 per cent satisfactory. Respondents from KwaZulu-Natal, were, on the other hand, slightly more critical, with the overall percentage being 86 per cent, broken down as 33 per cent very good, 26 per cent good and 27 per cent satisfactory. The national average in this regard stood at 90 per cent. And finally, in gauging the impact of the lockdown measures on the political support for the ANC and its leadership, it was found that in Gauteng, 93 per cent of respondents either had an improved opinion, or the same opinion of the president, as compared with immediately prior to the lockdown measures. In the Free State, this was a similar 91 per cent of respondents and in KwaZulu-Natal it was 86 per cent. The national average in this regard was 92 per cent. Figure 2.6: Provincial comparisons for selected data (Source: Inclusive Society Institute, 2020) The institute is of the opinion that in light of the clear trend in similarities across all data sets, that the validity of the national trends have been confirmed. The national results conveyed in this report can, in the opinion of the institute, be relied upon. 2.5 Findings in a nutshell The following general observations are deemed fair: (i) In general, both government and the country’s political leadership, as does the ANC, enjoys the overwhelming support of the ANC supporters for the measures they are taking to combat the COVID-19 pandemic. (ii) ANC supporters are generally satisfied with the competence and way in which the aforementioned measures are being carried out. (iii) The opinion of the President, Cabinet and ANC has changed for the better. (iv) Despite their support for the measures being taken, ANC supporters are concerned about their own and the country’s economic future. (v) Despite the favourable change for the good in terms of opinion of ANC supporters for both the members of Cabinet and the ANC, there are a meaningful number of supporters whose opinion declined. This is an area that deserves careful consideration and further research. 3. Methodology The African National Congress (ANC) is the ruling party of South Africa. With 10 026 475 votes received in the 2019 general election, it holds 57,50 per cent of the vote (IEC, N.d.). As the ruling party of the country, it has to act in the national interest, despite the potential negative impact that some government decisions may have on its own support base. Sampling, data collection and data subjects Sampling was carried out through the dissemination of the survey by electronic means to representative databases comprising members and supporters of the ANC. In total, 499 valid responses to the questionnaire were obtained. Since “the quality of the sample will be higher, the more completely the sampling frame covers the target population” (European Social Survey, 2016), the database selected contained, with only a few exceptions, individuals that have in general expressed their support for the ruling party. Responses, although strongly biased towards Gauteng, were received from across all provinces. Figure 3.1: Breakdown of respondents surveyed per province (Source: Inclusive Society Institute, 2020) In terms of the respondent demographics, there was, as indicated in Figure 3.2 below, a good spread across all age groups and levels of education. Sixty-nine per cent of respondents were men and 31 per cent were women. Figure 3.2: Respondent demographics (Source: Inclusive Society Institute, 2020) Confidence level and margin of error In determining the sample size, the research relied on the standard 95 per cent level of confidence and 5 per cent margin of error, which is common for social sciences studies (Royse, 2008:209). Sample size In determining the sample size required to achieve a confidence level of 95 per cent and a margin of error of approximately 5 per cent, the author was guided by the table published in Israel (1992) and Cochran’s (1963) formula for calculating a sample for proportions. The former suggested a sample size of 400 obtained responses and the latter, 385. Whereas the survey size should accordingly not be smaller than 400, the actual valid number of obtained responses amounted to 499, thus around 20 per cent above a standard academic minimum. Limitation This survey was done by means of electronic dissemination. This therefore restricts the interpretation to be representative of those members and supporters that have access to electronic means of communication. Furthermore, whilst pro-active steps have been taken to ensure data integrity, and all indications are that data is beyond reproach, the possibility of external manipulation of data input cannot be completely excluded. Question set The survey, as it pertains to the objectives of this report, contained a total of 10 questions, in three parts, which is set out hereunder: Part 1 – questions aimed at measuring the level of support of ANC members and supporters for the measures being taken by government to combat the COVID-19 pandemic 1. Do you support the government’s current efforts to combat the COVID-19 pandemic? Support Do not support Unsure Part 2 – questions aimed at gauging the opinion of ANC members and supporters on government’s management of, and competence in, combatting the COVID-19 pandemic 2. In your opinion, how is the government managing the COVID-19 pandemic? Very good Good Satisfactory Bad Very bad 3. Have you got confidence that government will be able to bring the pandemic under control? Confident Somewhat confident Not confident 4. Are the authorities and security forces seen to be carrying out their duties responsibly? Yes No 5. What is your opinion of the level of competence displayed by the authorities, including security forces? Highly competent Competent Somewhat competent Lacking in competence Very poor competence 6. Do you believe that the economy will in the year after the lockdown be able to recover and to what degree? It will not recover Will not recover sufficiently to grow the economy to higher levels than before the lockdown It will recover to levels better than before lockdown It will recover to levels the same as before lockdown 7. Do you believe your life will improve after the lockdown? Yes No Part 3 – questions aimed at assessing the impact of the measures on ANC members and supporters’ perception of the leadership of the ANC’s President, the Cabinet and the ANC itself 8. Has the government’s handling of the COVID-19 pandemic crisis changed your opinion of the President? My opinion has improved My opinion has remained the same My opinion has declined 9. Has the government’s handling of the COVID-19 pandemic crisis changed your opinion of the Cabinet? My opinion has improved My opinion has remained the same My opinion has declined 10. Has the government’s handling of the COVID-19 pandemic crisis changed your opinion of the ANC? My opinion has improved My opinion has remained the same My opinion has declined Testing national validity Given the out of proportion number of responses received from the various provinces, and in particular, given the large number of responses from Gauteng, it was important to do sampling within the various provinces to ascertain whether the national average was reflected in the individual provinces. If this was so, it could comfortably be concluded that the national average stood. On the contrary, were it to be found that the various provinces have considerably different views on the questions posed, an argument could be made as to the validity of the national conclusions. To this end, a sample question was selected from each of the set of questions related to the three objectives of the research. The first question, “Do you support the government’s current efforts to combat the COVID-19 pandemic?”, was obvious, since it was the only question that tested the support for the measures being taken by government to combat the coronavirus. The question selected to test the opinions with regard to the effectiveness of government’s management of the COVID-19 crisis was: “In your opinion, how is the government managing the COVID-19 pandemic?’’. And lastly, with regard to testing the impact of the measures on the political support for the ANC and its leadership, the question selected was: “Has the government’s handling of the COVID-19 pandemic crisis changed your opinion of the President?”. 4. Detailed summary of data 4.1 Demographic data 4.2 Perceptual data 4.3 Detailed summary of data by province 5. References Cochran, W. G. 1963. Sampling Techniques, 2nd Ed. New York: John Wiley and Sons, Inc. European Social Survey. 2016. Sampling Guidelines: Principles and Implementation for the European Social Survey. [Online] Available at: https://www.europeansocialsurvey.org/docs/round8/methods/ESS8_sampling_guidelines.pdf [accessed: 13 April 2020]. Independent Electoral Commission (IEC). N.d. 2019 National and Provincial Elections. Results Dashboard. National Assembly 2019. [Online] Available at: https://www.elections.org.za/NPEDashboard/app/dashboard.html [accessed: 15 May 2020]. Israel, G.D. 1992. Determining sample size. Fact sheet PEOD-6. Gainesville: University of Florida. Mvumvu, Z. 2020. SA's big cities and coronavirus 'hotspots' could remain under level 4 [Online] Available at: https://www.timeslive.co.za/politics/2020-05-13-sas-big-cities-and-coronavirus-hotspots-could-remain-underlevel-4/ [accessed: 15May 2020] National Institute for Communicable Diseases (NICD). 2020. First case of covid-19 coronavirus reported in SA. [Online] Available at: https://www.nicd.ac.za/first-case-of-covid-19-coronavirus-reported-in-sa/ [accessed: 10 April 2020]. News24. 2020. Struggle is far from over. [Online] Available at: https://www.news24.com/SouthAfrica/News/in-full-struggle-far-fromover-read-ramaphosas-statement-on-2-week-lockdown-extension-20200409 [accessed: 10 April 2020]. Nirrandes, N. 2020. President announces 5-level lift on nationwide lockdown. [Online] Available at: https://www.capetownetc.com/news/president-announces-5-level-lift-on-nationwide-lockdown/ [accessed: 6 May 2020]. Republic of South Africa (RSA). 2020. President Ramaphosa announces a nationwide lockdown. [Online] Available at: https://www.sanews.gov.za/south-africa/president-ramaphosa-announces-nationwide-lockdown [accessed: 10 April 2020]. Royce, D. 2008. Research methods in social work, 5th edition. Belmont: Thomson Higher Education. World Health Organisation (WHO). N.d. Rolling updates on coronavirus disease (COVID-19). [Online] Available at: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/events-as-they-happen [accessed: 10 April 2020]. World Health Organisation (WHO). 2020. WHO announces COVID-19 outbreak a pandemic. [Online] Available at: http://www.euro.who.int/en/health-topics/health-emergencies/coronavirus-covid-19/news/news/2020/3/who-announces-covid-19-outbreak-a-pandemic [accessed: 10 April 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Survey synopsis - What impact have the measures taken by government to combat the coronavirus pandemic had on the socio-economic wellbeing of ANC members and supporters? In an effort to combat the Covid-19 pandemic, the South African nation is currently under lockdown. This is resulting in a considerable impact on people’s livelihoods and on the life of society. As the ruling party of the country, it has to act in the national interest, despite the potential negative impact that some government decisions may have on its own support base. The survey covered in this report assesses the socio-economic impact of the measures taken by the authorities to combat Covid-19 on the membership and support base of the ANC. It follows on a previous report on the political impact on the membership and supporters, of the measures taken by the authorities and the effect that it has had on the leadership of, and levels of support for the movement. The two reports, read together, comprise the full analysis of the survey undertaken between 13 and 15 May 2020. Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, stem from the survey undertaken from 13 to 15 May 2020 on the impact on the leadership and support of the ANC as a result of the measures taken by government to combat the COVID-19 pandemic. Content 1. Background 2. Key findings 2.1 Members and supporters who continue to receive their salary during lockdown 2.2 Members and supporters who do not receive their salary during lockdown 2.3 Findings in a nutshell 3. Recommendations List of figures Figure 2.1: Indication of access to food with regard to supporters continuing to receive their income during the lockdown Figure 2.2: Demographics of households receiving income during the lockdown, but with insufficient food Figure 2.3: Comparative analysis on perception of economic future: Respondents with income during the lockdown, but insufficient food versus all respondents Figure 2.4: No salary/wages during lockdown household demographics Figure 2.5: Comparative regarding support for the measures taken by the authorities to combat Covid-19 and retained favourable opinion of the ANC: Households not receiving salaries or wages during lockdown versus overall average Figure 2.6: llustration of new grant recipient potential additions as a result of Covid-19 lockdown Figure 2.7: Comparison between respondents not receiving salary or wages during lockdown versus overall average 1. Background The Inclusive Society Institute undertook a survey between 13 and 15 May 2020 to test the impact of Covid-19 on the members and supporters of the ANC. It tested both the impact of the measures taken by the authorities on the leadership of and support for the movement, as well as the socio-economic impact thereof on ANC members and supporters. The first report was issued on 21 May 2020 and is available on www.inclusivesociety.org.za. It dealt with the first part of the assessment, that is the impact on the support for the movement and its leaders. This synopsis contains only the key findings of the survey with regard to the socio-economic impact aspects of the survey. The motivation for the survey, background and methodology thereof is contained in the aforementioned report. 2. Key findings 2.1 Members and supporters who continue to receive their salary during lockdown Sixty-three per cent of those surveyed continued to receive a salary during the lockdown. Ninety-five per cent and 92 per cent of those respondents that continue to receive their salary during lockdown, had access to electricity and clean water respectively. Of those members that continue to receive their salary, 79 per cent had access to food (74 per cent sufficient, 5 per cent some but needed additional help), with 18 per cent indicating that they did not have sufficient access to food. The full breakdown is illustrated in Figure 2.1 below. Figure 2.1: Indication of access to food with regard to supporters continuing to receive their income during the lockdown A deeper study of the 17 per cent that receive a salary, but which did not have access to sufficient food, revealed that 74 per cent of those households had unemployed persons in their households, 54 per cent had more than three children per household and 48 per cent had unemployed persons in the household, together with more than 3 children per household. Figure 2.2: Demographics of households receiving income during the lockdown, but with insufficient food It is interesting to note that, despite not having access to sufficient food, 80 per cent of those respondents’ opinion of the ANC either improved or remained the same (52 per cent’s opinion improved, 28 per cent’s remained unchanged). And 91 per cent continued to support the measures taken by the authorities to combat the coronavirus. However, only 54 per cent, which is much lower than the two-thirds of all respondents, believed their lives would improve after lockdown. Similarly, this group of respondents were less confident in the economy’s ability to recover sufficiently in the year ahead. Seventy-six per cent believed that the economy would either not recover (11 per cent) or not to the same levels as prior to lockdown (65 per cent). This juxtaposed against the overall average of 62 per cent of all respondents – that is those receiving and not receiving income during the lockdown – that believed the economy would either not recover or recover to levels the same as prior to lockdown. Figure 2.3: Comparative analysis on perception of economic future: Respondents with income during the lockdown, but insufficient food versus all respondents 2.2 Members and supporters who do not receive their salary during lockdown Thirty-seven per cent of respondents do not continue to receive their salaries or wages during the lockdown. Of the 37 per cent, 86 per cent have access to electricity and 91 per cent have access to clean water. With regard to having access to food, the majority (61 per cent) either did not have access to food, or not access to enough food (31 per cent no food and 30 per cent not enough food). Of those respondents that indicated that they either did not have access to food or to enough food, 81 per cent had unemployed persons in the household and 85 per cent had children in the home (of which 40 per cent had 1 to 2 children in the household and 45 per cent three or more). Thirty-one per cent of households in this category of respondents had unemployed people and three or more children in the household. Figure 2.4: No salary/wages during lockdown household demographics In this category of respondents, 87 per cent supported the measures taken by the authorities to combat the coronavirus, and 79 per cent’s opinion of the ANC improved or remained the same. With regard to support for the measures taken, this is not far off the overall percentage of all respondents, where 90 per cent supported the measures. Similarly, the percentage of respondents whose opinion of the ANC improved or remained the same was not much lower than the overall percentage of 82 per cent. Figure 2.5: Comparative regarding support for the measures taken by the authorities to combat Covid-19 and retained favourable opinion of the ANC: Households not receiving salaries or wages during lockdown versus overall average Eighty-five per cent of the respondents who do not continue to receive a salary during the lockdown, did not receive a government grant or aid prior to the lockdown. Of this 85 percent, 74 per cent now need a government grant or aid, for example food. Seventy per cent of such respondents have or intend to apply for a grant or aid. Figure 2.6: Illustration of new grant recipient potential additions as a result of Covid-19 lockdown From the limited data available, it appears that those respondents that have applied for aid in one form or another have found the process quite difficult. Seventy-six per cent indicated that the process was either difficult or very difficult. A deeper understanding is required as to this perception, for which the data does not exist in this survey. Back to the respondents that do not receive their wages or salaries during the lockdown, as they perceive the future, 62 per cent of respondents were of the opinion that the economy will not in the coming year recover to levels prior to lockdown, whilst 57 per cent felt positive about their own life improving after the lockdown. Whilst the former is in line with the overall average of 62 per cent, the latter is somewhat lower than the 64 per cent overall average. Figure 2.7: Comparison between respondents not receiving salary or wages during lockdown versus overall average 2.3 Findings in a nutshell 2.3.1 Respondents continuing to receive their wages and salaries during the Covid-19 lockdown With regard to the ANC members and supporters who are continuing to receive their wages and salaries during the lockdown, they appear to be coping adequately under the lockdown situation the country finds itself in. In the main, they have access to electricity (95 per cent), water (92 per cent) and food (79 per cent). That being said, there is a material number (17 per cent) of respondents that are having difficulty in accessing sufficient food. The households that are finding the sourcing of food difficult are, to a large extent, characterised by having unemployed members in the household (74 per cent), as well as big families with three or more children (54 per cent), which conceivably contribute to their ability to provide sufficiently. Forty-eight per cent of households finding it difficult to source sufficient food have unemployed persons and three or more children to take care of. These respondents remain firm in their support for the ANC. Even those finding access to food difficult, remain loyal, with 80 per cent of their opinion of the ANC either improving or remaining the same. In all, 84 per cent of the respondents in this category have improved their opinion of the ANC or it has stayed the same. The overall average of all respondents, that is those that receive wages and salaries and those that do not, is 82 per cent. In a similar vein, this category of respondents is firm in their support for the measures taken by the authorities to combat the Covid-19 pandemic. Overall, 92 per cent support the measures, including an exceptionally high 91 per cent of those respondents that have difficulties in accessing food. The overall average of all respondents, that is those that receive wages and salaries and those that do not, is 90 per cent. However, whilst the category in the main is of the opinion that the economy will not improve to levels similar to those just prior to the lockdown, there is a diversion between those that do not have difficulties in accessing food and those that do. Those that do not have problems in accessing food stand at 64 per cent, whilst those that do have such difficulties stand at 54 per cent. The overall average of all respondents, that is those that receive wages and salaries and those that don’t, is 62 per cent. And similarly, 67 per cent of those that do not have difficulties in accessing food believe their own well-being will improve after the lockdown is lifted, this percentage drops to 54 per cent amongst those that do have difficulty in accessing food. The overall average of all respondents in the survey stands at 64 per cent. 2.3.2 Respondents that do not receive a salary or wages during the lockdown As can be expected, this category of respondents is finding it significantly more difficult to keep their heads above water during the lockdown. It has, however, not significantly swayed their support for the ANC. In the main they have access to electricity (86 per cent) and water (91 per cent). However, 61 per cent had insufficient food, and are now largely dependent on grants and/or aid to survive. These respondents remain relatively firm in their support for the ANC. Seventy-nine per cent’s opinion of the ANC either improved or remained the same. The overall average of all respondents, that is those that receive wages and salaries and those that do not, is 82 per cent. In a similar vein, this category of respondents is firm in their support for the measures taken by the authorities to combat the Covid-19 pandemic. Eighty-seven per cent of respondents in this category support the measures. This is virtually in line with the overall average of all respondents, that is those that receive wages and salaries and those that do not, which stands at 90 per cent. This category is as resonant as the other categories with regard to the economy’s ability to recover to levels similar or better than those just prior to the lockdown. Sixty-two per cent, which is on par with the overall average, believed that the economy will not improve to levels similar to or better than those just prior to the lockdown. The greatest diversion is with regard to this category’s opinion related to their own future. Whilst the overall percentage of all respondents stands at 64 per cent, in this particular category it stands at only 57 per cent. They are thus significantly less optimistic about their own future, as opposed to those continuing to receive their salary or wages during the lockdown. 3. Recommendations Recommendation 1 Whilst the data suggests continued high support levels for the ANC, there is a meaningful percentage of supporters whose views have not remained the same or improved. The ANC will have to design strategies and tactics to address the phenomena. It is important to note, however, that declined support does not equate to no support for the ANC. Respondents may have expressed a declined level of support but may very well still support the ANC in an election. Recommendation 2 Access to food, be it whether the respondents continue to receive their salaries and wages during the lockdown or not, is a significant problem. The ANC should monitor the situation carefully, as the data suggests that the category of respondents that are experiencing problems with regard to accessing food may be fickler than the others. A sustained momentum of this nature could potentially impact future support for the ANC and the measures taken by the authorities to combat the coronavirus negatively. Recommendation 3 Even though the data at the disposal of the institute is not expansive enough to make a conclusive determination, there is a suggestion that respondents that need to access state grants and or aid, are finding it difficult to do so. Whether this is perception or real is unknown. Nevertheless, it would serve the movement well in terms of retaining support, for the authorities to evaluate their current application processes and performance. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

Potential constitutional issues arising from the proposed NHI in South Africa Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. Authors: Percept & Daryl Swanepoel Graphic Design: Nini van der Walt Setting the scene for the roundtable discussion on the constitutionality of NHI The Inclusive Society Institute hosted an online roundtable on the constitutionality of the National Health Insurance Bill on 19 May 2020. The roundtable formed part of the institute’s broader research into achieving universal healthcare coverage. It was facilitated by Prof Dirk Kotze, with several legal experts, and industry representatives, participating. Each of the potentially problematic constitutional issues identified in relation to the NHI Bill were examined. This report sets out the main issues identified during the roundtable. The primary focus of the Inclusive Society Institute, and to a large degree the dialogue around the table on the day, was to work on and promote a more inclusive society, as the institute’s name suggests. There is much upheaval being made in South Africa’s national discourse about various present-day issues, much of which it is not positive. The institute has been established to create a platform where this discord can be presented and discussed, in an attempt to find some middle ground in dealing with the pressing issues the country is confronted with. The question of the National Health Insurance is one of these stumbling blocks. Different stakeholders have gotten fixed on certain potentially fundamental points of disagreement around National Health Insurance. This poses the risk of a number of possible constitutional challenges. The purpose of this report is therefore to logically set out these potential areas of constitutional concern, introduce new information and perspectives and, in doing so, develop a brief that could potentially serve to obtain legal advice and certainty with regard to the constitutionality of the legislation being put forward. Content Setting the Scene for the Roundtable Discussion on the Constitutionality of NHI 1. Introduction 2. Potential constitutionality and other legal issues identified with the NHI Bill during a desktop review 3. Discussion of constitutionality issues at a roundtable of constitutional and legal experts 4. Request for legal clarification References 1. Introduction Various commentators and the media have raised the possibility of taking legal action against the NHI Bill in its current form (Cohen, 2019; Mokone, 2019). Although not all submissions on the Bill are in the public domain, some have highlighted various potential legal issues with the Bill (e.g. Van den Heever, 2019). Given these concerns, the Inclusive Society Institute commissioned a desktop review of potential constitutionality and other legal issues with the NHI Bill. This review was published in the ISI’s report on an NHI Roundtable which took place in Johannesburg during December 2019 (Inclusive Society Institute, 2020). Following the NHI roundtable, the ISI hosted an online roundtable on the constitutionality of the NHI Bill on 19 May 2020. The roundtable was facilitated by Prof Dirk Kotze, and several legal experts, as well as industry representatives, participated. Each of the potentially problematic constitutional issues with the NHI Bill were discussed and debated. In this brief to Senior Legal Counsel, various concerns with the constitutionality of the NHI Bill as identified through the desktop review are presented first. This is followed by a summary of views on each of these identified issues that were discussed at the Constitutionality Roundtable. The brief is concluded by asking for further legal interpretation and clarification on the legal muster of each of the potential issues. 2. Potential constitutionality and other legal issues identified with the NHI Bill during a desktop review The text below has been taken verbatim from the Inclusive Society Institute’s report on the NHI Roundtable (Inclusive Society Institute, 2020). Whilst state law advisor Ayesha Johaar confirmed that the Bill had been certified as being aligned with the Constitution (Gerber, 2019), the desktop study revealed various constitutional concerns from a broad spectrum of organisations. Section 18 of the Bill of Rights: the right to freedom of association The first argument relates to Section 18 of the Bill of Rights, which guarantees every person the right to freedom of association. Some in the legal fraternity argue that by being compelled to associate oneself with the NHI, one’s right to decide with whom to associate – either the NHI or a medical scheme – may be unfairly and unduly limited (Botha, 2019; Kirby, 2019; Van Staden, 2019). Section 12(2)(b): The constitutional right to bodily and physical integrity It is further argued that the freedom to choose healthcare services may well be intertwined with the constitutional right to bodily and psychological integrity entrenched in Section 12(2)(b) of the Constitution. This right guarantees all people control over their own bodies (Anonymous, 2019; Botha, 2019). Section 25: The right to property Another argument relates to Section 25 of the Constitution. In essence, the Bill does away with a medical scheme’s ability to provide and charge for services rendered under the NHI regime. This, it is argued, may constitute an “unlawful infringement of a medical scheme’s right to property”, which is specifically prohibited by Section 25 of the Bill of Rights (Kirby, 2016). Section 27(1): Infringement on the right to access to healthcare Whilst state law advisor Johaar argues that Section 27 of the Constitution, along with the Republic’s responsibilities in terms of international treaties, imposes a duty on the state to take reasonable measures to give effect to the right to healthcare, (Gerber, 2019), others rely on the Constitutional Court ruling in Government of the Republic of South Africa v Grootboom 2001 (1) SA 46 (CC) to support their argument that the current NHI Bill may in fact infringe on their Section 27(1) right to access to healthcare. In Grootboom, the court ruled that “the positive rights in the Bill of Rights – those rights that entitle South Africans to services from government, such as housing, healthcare, education, etc. – are themselves also negative rights. Whilst government is expected to progressively make possible the right to healthcare, government may not hinder South Africans from themselves giving effect to this right” (Van Staden, 2019). Yet, even though government may therefore not prevent citizens from providing their own healthcare, the NHI Bill does not include an “opt-out clause”, and clause 33 relegates medical schemes to offering only “complementary cover to services not reimbursable by the Fund” (Van Staden, 2019). Section 22: Impact on an individual’s right to freedom of trade, occupation and profession Another area of potential conflict touched on during the roundtable is the potential impact on an individual’s right to freedom of trade, occupation and profession guaranteed in Section 22 of the Constitution. Here too the Constitutional Court has provided guidance, this time in Affordable Medicines Trust v Minister of Health 2006 (3) SA 247 (CC), where it held that “there are two components to this right: it is the right to choose a profession and the right to practice the chosen profession”. The court concluded that where a law regulating a profession has a negative impact on citizens’ choice of profession, the statute must be subjected to the rationality test. Some in civil society question whether the NHI Bill in its current form will indeed pass such a test, particularly given its lack of evidence of public purpose as well as the legislature’s failure thus far to present proper financial feasibility studies (Anonymous, 2019; Botha, 2019; Van den Heever, 2019). This is despite the state law advisor’s insistence that “the bill’s provisions connected rationally with constitutional obligations” (Gerber, 2019). Exclusion of applicability of the Competition Act In a similar vein, the civil society organisations Section27 and TAC have questioned the Bill’s specific exclusion of applicability of the Competition Act 89 of 1998. Excluding the NHI from the scope of the Competition Act, they believe, is not in the interest of health or of the NHI Fund (Section27 and TAC, 2019). Section 36: Rights may only be limited to the extent that limitations are reasonable and justifiable There is also a suggestion that the Bill may fall short of the limitations clause contained in Section 36 of the Constitution, which states that “the rights in the Bill of Rights may be limited only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including … (d) the relation between the limitation and its purpose [and] (e) less restrictive means to achieve the purpose” (RSA, 1996). Proponents of this argument emphasise the lack of published evidence to prove that the NHI is indeed necessary to achieve universal access to healthcare, claiming that there are numerous other approaches that could be implemented that would be less restrictive than Section 33 of the Bill (Anonymous, 2019; Van den Heever, 2019). Vagueness and non-specific nature of the Bill Finally, both the initial NHI roundtable and the subsequent desktop study have found that the vagueness of many aspects of the legislation, including the costing and funding model, and the unpredictability of the legislation’s intended outcomes, may constitute sufficient grounds for a constitutional argument. In its founding provisions, the Constitution affirms that the state is founded on, among others, the value of the “supremacy of the constitution and the rule of law” (RSA, 1996). The rule of law suggests that legislation should be clear, unambiguous and provide reasonable certainty and sufficient information to enable those affected by it to respond in an informed manner. This notion was supported in the Constitutional Court ruling in Van der Walt v Metcash Trading Ltd 2002 (4) SA 317 (CC). Here, the court stated an absence of arbitrary power and unpredictability as essential elements of its understanding of the rule of law (Venter, 2011). Furthermore, in Affordable Medicines Trust, the court held that legislation should “indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly” (Constitutional Court, 2005). 3. Discussion of constitutionality issues at a roundtable of constitutional and legal experts An online roundtable on the constitutionality of the NHI Bill was hosted on 19 May 2020 via Google Meetup. At the start of the roundtable, participants were reminded that the aim of the discussion was to test whether the previously identified constitutionality issues have merit. Participants were also encouraged to put forth any other legal issues that may need to be considered. The questions that participants at the roundtable had to address were: (1) whether the policy is compatible with constitutional principles; and (2) whether it will also promote the principles of the constitution. The roundtable provided a platform to facilitate robust discussion and debate and not to necessarily establish consensus. Consensus on whether concern for each of the potential constitutionality issues was warranted, was rarely achieved. Below we discuss the various sections of the Constitution where the NHI Bill may be in conflict or infringe on rights as well as participants’ views on each of these possible areas of concern. While some sections raised no concern, with others there was clearer consensus amongst participants of the potentially problematic interaction between the NHI Bill and the Constitution. There was quite a lot of consensus about both Section 22 (right to trade, occupation and profession) and the irrationality argument with regards to NHI which has bearing on the relationship between the NHI Bill and Section 36 of the Constitution. Potential infringement of the NHI Bill on part (a) of Section 27(1): “Everyone has the right to have access to health care services, including reproductive health care;” Section 27(1) of the Constitution deals with the right to health and healthcare, including reproductive healthcare. The state must provide resources to allow for progressive achievement of these rights and no one must be refused medical treatment. While there is an obligation in terms of Section 27 to provide essential health services, this does not preclude an individual from making their own arrangements for access to healthcare. The fact that there is an obligation to provide access to essential health service implies both a positive and a negative right: the obligation to provide (positive) and also the responsibility to ensure that the obligation does not infringe on the right of people to provide for themselves. It was mentioned that as part of this obligation, it is important that the South African government does not take regressive steps in terms of healthcare provision, that is in an attempt to provide more care to some, take away care from others. Essential health services have not been defined in either the Bill, or by the courts. The term is lacking clear definitional content. A basic benefit package has not been set out in the NHI Bill and it is therefore not possible for the Court to pronounce on whether the health services to be provided by NHI can be considered essential or not. The major stumbling block, however, in terms of NHI is with regards to “available resources”. In NHI discussions and arguments it is generally assumed that available resources include the money spent in the private sector (4% of GDP) as well as the public sector. There’s an assumption that the equivalent private sector amount can be raised in taxes and redistributed to the whole population. This lack of definition with reference to available resources is what creates the impasse around reaching agreement on NHI between critical stakeholders. Generally there are thought to be three groups of stakeholders with regards to the resourcing of NHI: (1) those who argue ‘let’s work with the public funds available’, (2) those who say ‘let’s pool everything, both public and private resources’, (3) and stakeholders who argue for the creation of new resources through new taxes, fund raising, etcetera. Ultimately, the main mechanism to access resources in the private health sector would be the tax system. Changes to the tax system to allow for resource pooling from existing private healthcare sector expenditure would be constrained by the design of the tax system, making it difficult to match tax revenue to be collected to the full amount as currently spent on private healthcare. The lack of an NHI financing paper which stakeholders had thought would be released in parallel to the NHI Bill has not assisted with providing clarity on the likely financing mechanisms. During the discussion it was argued that the right to health does not have definite content. The courts have generally not pronounced on resource availability in the hard sense. It will be interesting to see in which direction the positive and negative rights associated with Section 27 are weighed, that is do the negative or positive rights have a heavier weight attached to them. Potential infringement of the NHI Bill on Section 18: “Everyone has the right to freedom of association.” Section 33 of the NHI Bill (National Department of Health, 2019) currently confines the role of medical schemes (the existing private healthcare funding market) to complementary cover once NHI has been fully achieved: “Once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.” Given that medical schemes will be limited to complementary cover only, there is potentially an infringement on the right to freedom of association. Citizens who want healthcare access will be compelled to be associated with NHI(1). In this context, it was argued that having a choice in terms of a medical scheme as alternative to public or NHI healthcare is a freedom of association. The NHI policy therefore potentially violates the right to freedom of association. A few questions emerged from this debate: Is there a need to create a limitation on private funders in order to increase capacity in public health sector? And more importantly, can one choose a preferred practitioner? It is important to take note that the NHI Bill does not prohibit out-of-pocket payment for private healthcare –it is individuals right to private insurance that is limited, not the right to private care. Legal experts argued that this line of reasoning is a tenuous one (a “tortured argument”). Section 18’s conception of the right to freedom of association relates more to the protection of liberty and protecting participatory democracy rather than choice in the market. The right of association has to do with the right to form groups with common interest, to associate with those we want to in public, etc. *1 There are parallels to this in other parts of the economy: the formally employed are compelled to contribute to the Unemployment Insurance Fund (UIF) and via fuel levies to the Road Accident Fund (RAF). This does not, however, preclude individuals from taking out private insurance for the same risks covered by these public funds. In this context, one of the experts voiced the concern that there is a danger of conflating the practical difficulties of questions with the crisp details the roundtable aimed to discuss. What the roundtable discussion was meant to answer remained unclear: Is the Bill constitutional, yes or no? Nothing in the Bill states that South Africans cannot belong to a medical aid scheme once NHI is implemented – it was argued that Section 33 of the Bill is forward looking and will only limit medical schemes to complementary cover once full NHI has been achieved. A counter argument to this (also made in other discussions) is that the implications of the Bill once fully implemented, rather than simply the current implications, should be considered. Potential infringement of the NHI Bill on Section 12(2)(b): “Everyone has the right to bodily and psychological integrity, which includes the right to security in and control over their body;” It is argued that the freedom to choose healthcare services may well be intertwined with the constitutional right to bodily and psychological integrity entrenched in Section 12(2)(b) of the Constitution. This right guarantees all people control over their own bodies. In debating the validity of this line of argument, it was stated that we need to be cautious of adopting a consumerist view of healthcare and avoid information asymmetries such as moral hazard and adverse selection. because the patient may not always know what’s best for them. It is usual for health systems to have referral pathways, or to select contracted providers on the basis of quality of services provided. A strength of the Bill is the referral pathway and reference to the need for evidence in the way care is delivered. Who is best equipped to make the expert medical judgements? Following the line of argument around consumers needing to choose their providers potentially leads to a minefield discussion about who is best equipped to make difficult health decisions. It was asked whether this line of argument may only become relevant in the long term. However, arguments around the envisaged endpoint of NHI need to be considered. It was argued that if the public health system is going to determine who your doctor will be and you’re not comfortable with it, then it becomes problematic (especially given that medical schemes will eventually be limited to complementary cover only). While participants noted not being able to choose your own doctor as a concern with the NHI Bill, this is already the status quo for many medical scheme products. Medical schemes also impose doctor and hospital networks. The NHI Bill also does not prohibit out-of-pocket payment for private care. Measuring the Bill relative to this section also raises the issue of whether NHI will be a funding or a servicing mechanism. The service provision aspect of NHI may ultimately limit what is possible in this regard. Section 8 of the NHI Bill states that if you do not follow the referral pathways set out by NHI, you need to pay for these services on an out-of-pocket basis. A question was raised about whether this could potentially be viewed as punitive and therefore undermining to theright to bodily and physical integrity. The public health sector currently follows strict referral pathways – patients are not allowed to access tertiary care without having followed appropriate referral pathways from the primary healthcare level. Potential infringement of the NHI Bill on Section 22: “Every citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated by law.“ The facilitator introduced the discussion on this section by asking whether there are limitations in the Bill that prevent the right to (a) trade as a healthcare practitioner and (b) enter into the health sector. Will practitioner options to freedom of trade, occupation and profession be limited? One set of opinions that were offered is that the answer to the above questions is very much dependent on how NHI will be implemented – there is not a problem in the legal construct but in the practical implications and implementation. If NHI rates (used for contracting with GPs and other specialists) are reasonable, it may not impact freedom of trade. Potential constitutionality issues arising with this section are rooted in execution. How will we protect the system as it stands? Does a right arise from the status quo? How do we protect current rights? Some legal experts believed the way the Bill is currently drafted does not create any conflict with Section 22 of the Constitution. They said there is nothing in the Bill that suggests that someone who wants to be a doctor and work in the private sector can’t work there. They expressed the opinion that the Bill, as currently constituted, was written as mainly a funding bill that may have some service design implications. There was, however, disagreement between experts. Some experts felt this particular section of the Constitution had more force with regards to the Bill than previous sections highlighted in this report. In thinking about restrictions on trade, the whole healthcare profession (not limited to the private sector) should be considered. Professions cut across both sectors and NHI may imply restrictions on the ability to trade freely and work for an employer of choice. Again, it was recommended that the Bill should be reviewed in terms of the current situation (what is currently being proposed) and what the realisation of these proposals are likely to look like. The Bill does not set out the future details of the private sector but mainly focuses on the public sector. Which assumptions underlie what the private sector is envisaged to look like? The Bill should be more forthcoming with private sector aspects of the health sector. The lack of details on the private sector leads to varied interpretations of the Bill: in some cases it refers to the private sector or where there isn’t sufficient infrastructure it mentions purchasing and obtaining infrastructure from the private sector. It was argued that the lack of clarity around the private sector in the NHI Bill has created much uncertainty and speculation about what the future is likely to look like. Potential infringement of the NHI Bill on Section 25: The right to property The Bill does away with a medical scheme’s ability to provide and charge for services rendered under the NHI regime through Section 33 (cited earlier). This, it is argued, may constitute an “unlawful infringement of a medical scheme’s right to property”, which is specifically prohibited by Section 25 of the Bill of Rights (Kirby, 2016). There was consensus amongst participants that stating that the NHI infringes on the right to property is a weak argument. While the NHI Bill may revoke the right of medical schemes to render financing for comprehensive health services, there is nothing in the Bill to suggest that it will appropriate the assets of medical schemes. However, the bill is suggesting that medical schemes will no longer be able to provide to their clients base the full suite of medical scheme products. Furthermore, the state has the right to appropriate service delivery in certain areas, for example housing. This does not, however, preclude the private sector from also providing housing. Issue about the NHI Bill’s specific exclusion of applicability of the Competition Act of 1998 The NHI Bill (National Department of Health, 2019) excludes the NHI Fund and related activities from the ambit of the Competition Act: “S3(5): The Competition Act, 1998 (Act No. 89 of 1998), is not applicable to any transactions concluded in terms of this Act.” While participants thought this will be helpful for the functioning of the private health sector by enabling collective price bargaining, this section in the Bill needs to be made clearer. More specifically, it needs to clearly stipulate the rationale for why the exclusion is required. Participants argued that many of the problems in the healthcare sector, including the absence of proper pricing guidance, were caused by the Competition Act and the section which excludes the Bill from the Competition Act was merely intended to address this shortcoming. Roundtable participants concluded that in principle the NHI Bill’s exclusion from the ambit of the Competition Act was a non-issue. Potential infringement of the NHI Bill on Section 36: “The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including...” There is a suggestion that the Bill may fall short of the limitations clause contained in Section 36 of the Constitution, which states that “the rights in the Bill of Rights may be limited only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including … (d) the relation between the limitation and its purpose [and] (e) less restrictive means to achieve the purpose”. It was mentioned that there are major concerns around the Bill’s ability to meet the requirements of rationality and being justifiable, given the potential infringements on rights. A restriction of rights needs to be clearly substantiated. How does NHI set out to achieve health systems objectives? The limitations in this section cannot be abused. In weighing whether there are less restrictive means to achieve the purpose, limitations have to be understood relative to those in other open, democratic societies. However, ultimately the limitation clause can work in both directions – limitations to public and private sector. Rights are not absolute and can be limited/infringed. To the extent that proposals are currently linked to dates (Chapter 9 of NHI Bill) and that the Minister can determine that the NHI is fully implemented, there are irrational elements contained in the Bill. It was argued that the implementation of NHI should be linked to clear, measurable milestones which should be referred to in the Bill (rationality argument). There was a strong opinion in the group that if a landing point cannot be found for the implementation issue, the bill can be rationally challenged. General issue: Vagueness and non-specific nature of the Bill The discussion on the Bill’s vagueness was introduced through a question on whether the Bill is so vague that it can challenge the notion of the rule of law. Is there a legal precedent that could show the way in terms of the specificity required in a bill to allow for implementation? It was agreed that there will always be an element of uncertainty. But the question still remained: What is the legal test for certainty and predictability? Administrative law could provide a lens/solution to this question. Ultimately, the policies and implementation approaches may matter more than the law itself. For the NHI project to be successful, concerns about the vagueness of the law, and therefore potentially also the vagueness of supporting implementation policy, have to be internalised to the system (Section 33, Rights of Just Administrative Action). There are standards to this, but their application makes a huge difference. Emerging issue: Intergovernmental relations in the Bill A further area of concern with the Bill is that it does not clearly deal with the issue of inter-governmental relations; in particular, with provincial competence and the split in service delivery responsibilities between the various levels of government – national, provincial and municipal. It is not clear what the immediate implications are. The most relevant Section of the NHI Bill (National Department of Health, 2019) is in Section 32: “S32(2) Subject to the transitional provisions provided for in section 57, the Minister may introduce in Parliament proposed amendments to the National Health Act for the purpose of centralising the funding of health care services as required by this Act, and in such cases the Minister may— (a) delegate to provinces as management agents, for the purposes of provision of health care services, and in those cases the Fund must contract with sections within the province such as provincial tertiary, regional and emergency medical services;” This type of intervention into a distributed function will have real implications for constitutionally allocated responsibilities, specifically also around procurement (Section 217). During the discussion, it was mentioned that at NEDLAC the NHI discussion is that, in principle, funding following function. Amendments will have to be made to the National Health Act to change the provincial functions. The idea is that government will amend inter-governmental responsibilities in the Health Act. The Department of Health is arguing that the level at which services are delivered does not have to be re-specified in the Constitution itself if it be amended in the National Health Act. However, this will depend on whether the National Health Act is itself constitutional. Ultimately, concerns around inter-governmental relations at the level of service delivery respond to the issue of whether the Bill is primarily focused on financing, service delivery or both. While NHI is presented as a financing model, the Bill goes much further and has significant implications for health service delivery. 4. Request for legal clarification We end this brief with a request for legal clarification on the above potential constitutional and legal issues raised by the NHI Bill. In particular, this is a brief for interested and concerned Senior Counsel to provide opinions on the issues and questioned raised in this document. References Anonymous. 2019. Confidential correspondence between the CEO of the Inclusive Society Institute and academic attached to the University of the Witwatersrand, 5 December 2019. Botha, C. 2019. Submission on the National Health Insurance Bill [B11-2019] (“NHI Bill”). Cape Town: Centre for Constitutional Rights, The FW de Klerk Foundation. Cohen, T. 2019. Is the National Health Insurance Bill open to a constitutional challenge? Business Maverick. 20 August. [online] Available at: https://www.dailymaverick.co.za/article/2019-08-20-is-the-national-health-insurance-bill-open-to-a-constitutional-challenge/[accessed 9 June 2020] Constitutional Court of South Africa. 2005. Affordable Medicines Trust and Others v Minister of Health and Another (CCT27/04) [2005] ZACC 3; 2006 (3) SA 247 (CC); 2005 (6) BCLR 529 (CC) (11 March 2005). [Online] Available at: http://www.saflii.org/za/cases/ZACC/2005/3.html [accessed: 4 January 2020] Gerber, J. 2019. NHI Bill is constitutional - state law advisers tell Parliament. [Online] Available at: https://www.news24.com/SouthAfrica/News/nhi-bill-is-constitutional-state-law-advisers-tell-parliament-20190829 [accessed: 3 January 2020]. Inclusive Society Institute. 2020. Towards Inclusive Healthcare: Roundtable report on the National Health Insurance. Inclusive Society Institute, Cape Town. Available at: https://www.inclusivesociety.org.za/ [accessed 25 June 2020] Kirby, N. 2016. Many areas of concern in NHI paper. [Online] Available at: https://www.iol.co.za/businessreport/opinion/many-areas-of-concern-in-nhipaper-1970022 [accessed: 6 January 2019] Kirby, N. 2019. No mandatory requirement for South Africans to join fund under NHI bill as currently proposed. [Online] Available at: https://www.werksmans.com/legal-updates-and-opinions/ no-mandatory-requirement-for-south-africansto-join-fund-under-nhi-bill-as-currently-proposed/ [accessed: 3 January 2020]. Mokone, T. 2019. DA to fight NHI bill ‘all the way to the Constitutional Court’. [Online]. Available at: https://www.timeslive.co.za/politics/2019-08-13-da-to-fight-nhi-bill-all-the-way-to-the-constitutional-court/ [accessed 9 June 2020] Medical Brief. 2019. Little of the criticism of the NHI Bill is ‘constructive’. [Online] Available at: https://www.medicalbrief.co.za/archives/little-criticism-nhi-bill-constructive/ [accessed: 3 January 2020]. National Department of Health. 2019. National Health Insurance Bill. Pretoria: Government Gazette. Available at: https://www.gov.za/sites/default/files/gcis_document/201908/national-health-insurance-bill-b-11-2019.pdf [accessed 25 June 2020]. RSA. 1996. The Constitution of the Republic of South Africa, 1996. Act 108 of 1996. Pretoria: Republic of South Africa. Section27 and TAC. 2019. Section27 and TAC NHI Submission November 2019. [Online] Available at: http://section27.org.za/2019/11/56382/ [accessed: 3 January 2020]. Van den Heever, A. 2019. National Health Insurance Policy Bill Review. Expert review of the National Health Insurance bill submitted by the Minister of Health to Parliament in 2019 for submission to Parliament as a response to the request for public comment. Chair in the field of Social Security Systems Administration and Management Studies Wits School of Governance. [Online] Available at: https://docs.mymembership.co.za/docmanager/1e9aea2c-b58d-4aed-b5a2-96187d705a ee/00146348.pdf [accessed: 3 January 2019]. Van Staden, M. 2019. Proposed NHI throws constitutional caution to the wind. [Online] Available at: https://www.freemarketfoundation.com/article-view/proposed-nhi-throws-constitutional-caution-to-the-wind [accessed: 3 January 2019]. Venter, F. 2011. South Africa as a “Diceyan Rechtsstaat”, in Matthias Koetter / Gunnar Folke Schuppert, Understandings of the Rule of Law in various legal orders of the World, Rule of Law Working Paper Series Nr. 18, Berlin (ISSN 2192- 6905). [Online] Available at: http://wikis.fu-berlin.de/download/attachments/173736195/Venter+- South+Africa.pdf [accessed: 4 January 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Assessing the democratic consciousness, social cohesion and integration, and the life experiences of the LGBT+ community The Inclusive Society Institute is committed to promoting the values enshrined in the South African Constitution. As its name suggests, the institute is working towards the establishment of an inclusive society, that works for all that live in and call South Africa home. The LGBT+ community are an integral part of South African society. The moral and ethical objective of guaranteeing all citizens the right to freely live and express their gender, sexual and sexual orientation preferences, aimed at correcting past injustices is enshrined in the Constitution and post-1994 legislation. This survey, which was undertaken over the period 10 – 22 June 2020, assesses the lived experiences against the stated public policy objectives. And given that the survey was executed at the time that the COVID-19 lockdown was put in place to curb the pandemic, it included an appraisal of the impact that the regulations have had on the LGBT+ community. Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, stem from the survey on the lived experience of the LGBT+ community in South Africa, which took place over the period 10 – 22 June 2020. Authors: Mpho Buntse and Daryl Swanepoel Proofreading: Olivia Maine | Graphic Designer: Nini van der Walt Content 1. Setting the scene and objectives of the survey 2. Methodology 3. Key findings 3.1 Findings in relation to constitutional and democratic rights 3.2 Findings in relation to social cohesion and the integration of the LGBT+ community into South African society 3.3 Findings related to attitudinal changes toward the LGBT+ community within South African society 3.4 Findings in relation to the family environment of the LGBT+ community 3.5 Findings in relation to the health of the LGBT+ community 3.6 Findings in relation to the impact of the measures taken to combat the COVID-19 pandemic on the LGBT+ community 3.7 Testing of the national validity of the results 3.8 Testing male versus female (as assigned at birth) differentiation 4. Recommendations 5. Summary of detailed data 5.1 Summary of data for all respondents 5.2 Summary of data for Gauteng respondents 5.3 Summary of data for Female versus Male comparative analysis using gender assigned at birth List of figures Figure 2.1: Breakdown of respondents by gender identity and sexual orientation Figure 2.2: Breakdown of respondents by province Figure 3.1: Analysis of LGBT+ community’s awareness with regard to their constitutional rights and opinion regarding whether the rights are adequate Figure 3.2: Analysis of LGBT+ perception of being discriminated against due to their gender identity/sexual orientation Figure 3.3: Analysis of service areas where the LGBT+ community are experiencing discrimination Figure 3.4: Analysis from whence discrimination is experienced by the LGBT+ community Figure 3.5: Analysis of levels of discrimination against the LGBT+ community within the cultural and religious environment Figure 3.6: Analysis of attitudinal changes in society towards the LGBT+ community Figure 3.7: Analysis with regard to the level of treatment – public versus private sector Figure 3.8: Analysis-degree to which the LGBT+ community function within a healthy family environment Figure 3.9: Analysis-degree to which LGBT+ community is being subjected to abuse Figure 3.10: Analysis of the state of the LGBT+ community’s mental and non-mental health segmented by age Figure 3.11: Analysis of the difficulties in accessing services (for the 30 per cent of respondents with problems in this regard) Figure 3.12: Gauteng province versus national comparative analysis of selected questions to test validity of national results Figure 3.13: Analysis of the lived reality of the LGBT+ community – Female versus Male using gender assigned at birth Figure 3.14: Analysis of various differentiated life experiences – Female versus Male using gender assigned at birth Figure 3.15: Analysis of discrimination against LGBT+ – Female versus Male using gender assigned at birth Figure 3.16: Analysis of COVID-19 measures on LGBT+ community – Female versus Male using gender assigned at birth 1. Setting the scene and objectives of the survey The Bill of Rights in the Constitution of the Republic of South Africa (RSA, 1996), guarantees that no one may be discriminated against by the state or any other person on the grounds of, amongst others, gender, sex, and sexual orientation. It further states that national legislation must be enacted to prevent or prohibit unfair discrimination on these grounds. In a study commissioned by the African National Congress (ANC), it is suggested that the Post-Apartheid dispensation in South Africa paved the way for a “progressive global precedent for the Lesbian Gay Bisexual Trans Intersex and Queer equality” (Brown & Buntse, 2020). South Africa, they say, was the first country to recognise LGBT+ rights in its constitution and the country has subsequently developed a suite of policies and laws to give practical effect to these rights. This, Brown & Buntse argue, has made South Africa “a global benchmark for the rights of sexual minorities”. Despite these advances, it is suggested that the LGBT+ community remains subjected to many adverse predispositions (Brown & Buntse, 2020). They argue that several of which are deep-rooted in colonial systems and institutional cultures that are antagonistic towards the LGBT+ community (Brown & Buntse, 2020). This, they say, has again been aptly exposed during the COVID-19 pandemic, where several human rights violations have illustrated that marginalised groups, including women, children, the LGBT+ community and people living with disabilities, have remained at the receiving end (Brown & Buntse, 2020). Brown & Buntse (2020), in their study proposal to the ANC, identified seven pillars that articulate the peculiar policy nuances that often disenfranchise the LGBT+ community as it relates to the provision and access to public services. These pillars are education and youth development; access to healthcare and healthcare services; safety, security and psychosocial services; experiences when accessing essential services; homelessness and access to housing; job creation, employment and access to the economy; and queer migrants and asylum seeking. The study proposed by Brown & Buntse (2020) aims to assess how South Africa’s policy frameworks relating to the LGBT+ community are ensuring their equitable benefit from government services. It will investigate the lived experiences of the LGBT+ community, as it relates to their economic and social inclusion. In addition, given the timing of the study, it was also deemed fit to assess the effect of the COVID-19 pandemic on the local LGBT+ community. The survey covered in this report serves to gather empirical data to support the aforementioned study. It will examine the level of consciousness of the LGBT+ community with regard to their constitutional and democratic rights, the level of social acceptance, integration and cohesion, and the attitudinal changes towards the LGBT+ community since the advent of democracy in 1994. Furthermore, it will delve into their lived experiences as it relates to the family, cultural, religious and personal health environment. The survey period ran from Wednesday, 10 June 2020 and closed at the end of business on Monday, 22 June 2020. It should therefore be viewed as a snapshot of the LGBT+ community’s sentiment during said period. The Inclusive Society Institute offers this survey report as a contribution towards the important study envisaged by the ANC. It will also promote the outcome of the study to public policymakers as a further contribution towards consolidating national reflexion on this key human rights issue. The institute supports measures that will advance equality, inclusiveness and solidarity. 2. Methodology In reviewing the LGBT+ population size in South Africa, this survey relied on a UK Home Office report published in 2017, wherein it is estimated that around 500,000 South Africans identify themselves as gay, lesbian, bisexual or gender non-conforming. Furthermore, up to three million present themselves in a gender non-conforming way (UK Home Office, 2017). To test its validity, a second report, published by The Other Foundation in association with the Human Sciences Research Council (The Other Foundation / HSRC, 2016) was consulted. It revealed a similar number of 530,000 adult men and women, of all population groups, both rural and urban, and across age groups, self-identify as either homosexual, bisexual, or gender non-conforming in some way – the same ratio as observed in other countries around the world. According to the study, more than six times as many people (approximately 430,000 men and almost 2.8 million women) present themselves in public (i.e. they dress and act) in a gender non-conforming way. Sampling, data collection and data subjects The survey questions were disseminated by electronic means via a number of databases associated with LGBT+ organisations. Recipients of the survey were members of the LGBT+ associations, thereby ensuring the quality of the sample, given that “the more completely the sampling frame covers the target population”, the higher the quality of the sample (European Social Survey, 2016). Standard data cleansing and validation procedures were carried out. In total, 288 valid responses, drawn from across all nine provinces, were received. Whilst the largest proportion represented cisgender (male) in terms of gender identity, there was a good spread across all classifications. In terms of sexual orientation, the greater majority of responses came from individuals that consider themselves to be homosexual. Figure 2.1: Breakdown of respondents by gender identity and sexual orientation Confidence level and margin of error In determining sample size, the institute normally relies on the 95 per cent level of confidence and five per cent margin of error, which is common for social sciences studies (Royse, 2008:209). In this particular survey, the level of confidence remains at 95 per cent, although the margin of error, at around six per cent, is slightly lower. Sample size To achieve a confidence level of 95 per cent and a margin of error of approximately 5 per cent, the institute is guided by the table published in Israel (1992) and Cochran’s (1963) formula for calculating a sample for proportions. The former suggests a sample size of 400 obtained responses and the latter, 385. In terms of the aforementioned table, 204 responses for a population size exceeding 100,000 would result in a margin of error of 7 per cent. The 288 responses received in this survey would thus suggest a margin of error midway, that is around 6 per cent. To further confirm the expected margin of error, the institute used the sample size calculator of Creative Research System (N.d.). By entering the estimated LGBT+ population sizes as suggested in the first paragraphs of this section, into the calculation, a 5 per cent margin of error for this size of population would require 384 respondents, a 6 per cent margin of error, 267 responses, and a 7 per cent margin of error, 196 responses. These calculations correspond closely with that of Israel, as outlined in the preceding paragraph. Limitation This survey was done by means of electronic dissemination. This therefore restricts the interpretation to be representative of those members of the LGBT+ community that have access to electronic means of communication. Furthermore, whilst pro-active steps have been taken to ensure data integrity, and all indications are that data is beyond reproach, the possibility of external manipulation of data input cannot be completely excluded. Question set The survey contained a total of 32 questions, which could be grouped into seven parts. Part 1 – questions of a demographic nature 1. What is your age? 2. What is your biological gender / sex assigned at birth? 3. What is your gender identity? 4. What is your sexual orientation? 5. In which province do you reside? 6. What is your marital status? 7. What is your occupational status? 8. What is your level of education? Part 2 – questions relating to constitutional and democratic rights 9. Are you aware of your constitutional rights as it relates to gender identity and sexual orientation? 10. Do you believe these constitutional rights are adequate policy? 11. Do you believe government is doing enough to guarantee your rights as it relates to gender identity and/or sexual orientation? 12. What is your lived reality in everyday South African society? Part 3 – questions relating to social cohesion and integration 13. Have you experienced discrimination as a part of the LGBT+ community in terms of social integration? 14. If yes to question 13 above, please indicate if you experienced discrimination in the following fields: Education and youth development; safety, security and psycho-social services; access to essential services; homelessness and access to housing; job creation, employment and asylum seeking; other. 15. If yes in question 13, where is the discrimination coming from: Government departments, private and NPO/NGO sector; individuals; other? 16. Do you experience any form of rejection and/or discrimination when wanting to express and participate in your own ethnic cultural practices? 17. Do you experience any form of rejection and/or discrimination when wanting to express your personal religious beliefs and/or activities? Part 4 – questions relating to attitudinal changes in South Africa 18. Do you believe that tolerance in terms of gender identity and sexual orientation has improved within South African society since the advent of democracy in 1994? 19. In your opinion, to what degree has the tolerance improved within South African society since the advent of democracy in 1994? 20. Do you believe that government departments give you fair treatment when accessing services? 21. Do you believe that the private and NPO/NGO sectors give you fair treatment when accessing services, goods or products? Part 5 – questions relating to the family environment 22. Are you accepted within your family for your gender identity and/or sexual orientation? 23. Are you in a happy relationship with your family and friends? 24. Are you abused in any way within your domestic environment? 25. If you are abused within your domestic environment, how is it manifested: Physical, psychological, other? Part 6 – questions relating to health 26. Do you have any adverse non-mental medical conditions such as diabetes, HIV/AIDS or TB? 27. Do you have any mental conditions, such as depression? Part 7 – questions relating to the impact of COVID-19 28. Has your livelihood and earnings been impacted negatively by the measures taken to combat the COVID-19 pandemic? 29. Have you experienced any difficulties in accessing basic services and food? 30. If yes in question 29 above, please specify what: Health services, security services, social services (excluding food), food, other. 31. Are you in support of the measures taken by the government to combat the COVID-19 pandemic? 32. Has your domestic environment under COVID-19 related lockdown improved, remained stable, become strained, experienced domestic intolerance or become violent? Testing male versus female (as assigned at birth) differentiation Of the 288 individuals’ responses received, 68 per cent were received from male biological gender as assigned at birth, and 42 per cent from those that identify as cisgender (male). The results are therefore heavily weighted in their favour. Furthermore, without a deeper analysis it will not be possible to determine whether there is a material differentiation to be made in terms of the results for female as assigned at birth versus male assigned at birth. The data, for selected questions, was accordingly also subjected to a deep­er analysis by comparing the results obtained between male and female (as assigned at birth). The questions chosen for this deeper examination were: What is your lived reality in everyday South Africa? Have you experienced discrimination as part of the LGBT+ community in terms of social cohesion? In what field have you experienced discrimination as part of the LGBT+ community? Do you experience any form of rejection or discrimination when wanting to express or participate in your own ethnic cultural practices? Do you believe that government departments give you fair treatment when accessing services? Are you accepted within your family for your gender identity and/or sexual orientation? Are you in a happy relationship with your family and friends? Are you abused in any way within your domestic environment? Do you have any adverse non-mental medical conditions such as diabetes, HIV/Aids, TB? Do you have any mental health conditions such as depression? Has your income/livelihood been impacted negatively by the measures taken to combat the COVID-19 pandemic? Testing of national validity Given that just half of the responses were received from the Gauteng province, with the balance more widely spread across the remaining provinces, it was important to do sampling within the Gauteng province itself, in order to ascertain whether the national av­erage was reflected in the provincial results as well. If this was so, it could comfortably be concluded that the national average stood. On the contrary, were it to be found that the provincial results differed considerably from the national average with regard to the views on the questions posed, an argument could be made as to the validity of the national conclusions. To this end, a sample question was selected from each of the questions set parts, except part one, which relates to questions of a demographic nature. The questions selected were: Part 2: Do you believe that government is doing enough to guarantee your rights as it relates to gender identity and/or sexual orientation? Part 3: Have you experienced discrimination as part of the LGBT+ community in terms of social integration? Part 4: Do you believe that tolerance in terms of gender identity and sexual orientation have improved within South African society since the advent of democracy in 1994? Part 5: Are you abused in any way within your domestic environment? Part 6: Do you have any mental conditions, such as depression? Part 7: Are you in support of the measures taken by government to combat the COVID-19 pandemic? Figure 2.2: Breakdown of respondents by province 3. Key findings The report covers the data captured for 288 individuals from across all provinces, and all LGBT+ gender identity and sexual orientation categories. It is heavily weighted in favour of male assignment at birth and cisgender (male), requiring the need for the findings to be examined more deeply in terms of assessing the level of differentiation between their lived experienced compared to that of the female at birth, cisgender (female) respondents. This report restricts itself to a comparison between male and female categorisation as assigned at birth. Furthermore, since more than half of the responses emanated from individuals residing in the Gauteng province, the data needed to be analysed in relation to the national validity of the results. The members of the LGBT+ community surveyed represent a population size of between 500,000 and 530,000 South Africans who identify themselves as gay, lesbian, bisexual or gender non-conforming. Furthermore, it represents up to three million individuals who present themselves in a gender non-conforming way. These findings restrict themselves to six main themes: (i) Constitutional and democratic rights (ii) Social cohesion and integration (iii) Attitudinal changes in South Africa with regard to the LGBT+ community (iv) The LGBT+ community and their family environment (v) The state of health of the LGBT+ community (vi) The impact of the measures taken to combat COVID-19 on the LGBT+ community 3.1 Findings in relation to constitutional and democratic rights The overwhelming majority of respondents indicated that they were aware of the constitutional rights as it relates to gender identity and sexual orientation. Eighty-six per cent indicated that they were aware of their rights, whilst only 14 per cent were not. However, this does not correlate with their belief that these constitutional rights are in themselves adequate. Only 59 per cent believe it to be, whilst 41 per cent believe it not to be adequate. This would suggest that public policymakers need to further survey the community in order to assess where the policy gaps, real or perceived, remain. Moreover, whilst the majority of respondents are both aware of their constitutional rights and of the belief that sufficient policy is in place to protect those rights, the vast majority of respondents are of the opinion that government is not doing enough to guarantee their rights. Conversely put, it appears the LGBT+ community require from government additional policy work, policy implementation and enforcement. Figure 3.1: Analysis of LGBT+ community’s awareness with regard to their constitutional rights and opinion regarding whether the rights are adequate The aforementioned data indicates that whilst the LGBT+ community are aware of their rights, and in the main believe policy to be sufficient, it seems to fail the implementation test. This is confirmed when assessing the lived reality of the LGBT+ community in South Africa. Only 34 per cent feel free (14 per cent) or mostly free (20 per cent) to express their gender identity and/or sexual orientation as they please. The balance (two-thirds) are of the opinion that bias and discrimination takes place to various degrees. Twenty-four per cent feel subtle bias and/or discrimination, 25 per cent some bias and discrimination and 18 per cent feel mistreated or discriminated against because of their gender identity and/or sexual orientation. Figure 3.2: Analysis of LGBT+ perception of being discriminated against due to their gender identity/sexual orientation 3.2 Findings in relation to social cohesion and the integration of the LGBT+ community into South African society In terms of feeling fully part of the South African society, the large majority of the LGBT+ community believe it not to be the case. Seventy-two per cent of respondents indicated that they had experienced discrimination in terms of social integration. The discrimination, it appears, is to be found across a broad range of areas, with more than half of the respondents indicating that they had experienced discrimination, citing education and youth development (69 per cent), safety, security and psycho-social services (65 per cent) and homelessness and access to housing (56 per cent) as issues needing attention. Just under half of said respondents (48 per cent) experienced discrimination in terms of access to healthcare and healthcare services, whilst 31 per cent cited access to essential services, and 22 per cent job creation, employment and asylum seeking as areas of discrimination. Eleven per cent made mention of a series of other areas of concern. Figure 3.3: Analyses of service areas where the LGBT+ community are experiencing discrimination The majority of the LGBT+ community did not consider either government departments or the private and NPO/NGO sector as the main perpetrators of discrimination, but an overwhelming majority cited individuals as the main purveyors thereof. Nevertheless, the levels of discrimination experienced across both the public and private sectors remain as an issue deserving attention. With regard to the public sector, 50 per cent did not experience discrimination from within the ranks of the public sector, in the private sector 55 per cent did not, whilst 78 per cent experienced discrimination against them by individuals. Figure 3.4: Analysis from whence discrimination is experienced by the LGBT+ community The ability for the LGBT+ community to exercise their cultural practices and/or religious beliefs, remains a major stumbling block in terms of social cohesion. Fifty-nine per cent of respondents experienced some form of rejection and/or discrimination when wanting to exercise their cultural rights, and the percentage grew to 67 per cent when wanting to express their personal religious beliefs. Figure 3.5: Analysis of levels of discrimination against the LGBT+ community within the cultural and religious environments 3.3 Findings related to attitudinal changes toward the LGBT+ community within South African society There has been a material shift in society’s acceptance of the LGBT+ community since the advent of democracy in 1994. Seventy-eight per cent of respondents were of the opinion that there was a greater level of societal tolerance in terms of individuals expressing their preferred gender identity and/or sexual orientation. Ninety-two per cent of respondents believed attitudes were improving, whilst only 8 per cent believed there were no real changes or improvements. The opinion as to the extent of the improvements differed considerably, with only 5 per cent of the opinion that there was complete tolerance of the LGBT+ community. Fifteen per cent believed there were some major changes and/or improvements, whilst 30 per cent believed that the changes/improvements were adequate. Forty-two per cent of respondents were of the opinion that only some significant changes and/or improvements had occurred. The results would suggest that whilst South Africa is certainly advancing in terms of the promotion of LGBT+ rights and inclusion, there is still some way to go before the LGBT+ community will feel completely included as fully fledged members of society. Figure 3.6: Analysis of attitudinal changes in society towards the LGBT+ community In terms of the LGBT+ community being treated fairly, the majority of respondents felt that both the public and private sectors were handling them as such, albeit to a far greater degree in the private sector. Fifty-four per cent of respondents were of the opinion that government departments treated them fairly when accessing services, whilst 70 per cent were of the opinion that the private sector treated them fairly when accessing services or when procuring products or goods. Figure 3.7: Analysis with regard to the level of treatment – public versus private sector 3.4 Findings in relation to the family environment of the LGBT+ community Generally speaking, the LGBT+ community function within a healthy family environment. Sixty-five percent of respondents indicated that their family accepted them for whom they are, and 86 per cent indicated that they were in a happy relationship with family and friends. Only 18 per cent indicated that they were abused in any way within the domestic environment. Figure 3.8: Analysis-degree to which the LGBT+ community function within a healthy family environment In terms of the 18 per cent of respondents that indicated that they were subjected to abuse, the type of abuse varied, and individual respondents were often subjected to more than only one type of abuse. Thirty-nine per cent indicated that the abuse was physical, 92 per cent indicated that it was psychological, whilst 24 per cent pointed to some other type of abuse, for example the withholding of finances, or verbal insults. Figure 3.9: Analysis-degree to which LGBT+ community is being subjected to abuse 3.5 Findings in relation to the health of the LGBT+ community The majority of respondents indicated that they were healthy. In terms of their non-mental health, 73 per cent indicated that they had no adverse medical conditions, whilst 59 per cent of respondents indicated that they had no mental health conditions. Nevertheless, the level of respondents indicating some form of adverse health condition raises the alarm. To this end a deeper analysis was undertaken in terms of age segmentation. In the age group 25 and under, it was found that 20 per cent had non-mental adverse health conditions and 53 per cent had some form of adverse mental health condition. In the age group 36 to 55, the results were 28 per cent adverse non-mental health conditions and 36 per cent some form of adverse mental health condition. The result for the age group 55 and above was 13 per cent adverse non-mental and 33 per cent some form of adverse mental health condition. The aforementioned results point to a significant finding. In terms of non-mental health conditions, the different age segments indicated similar patterns with marginal differences. However, in terms of adverse mental health conditions such as depression, even though the level across the LGBT+ community indicates a worrying pattern, it is especially high amongst the youth, that is persons under the age of 26. This would indicate a potential mental health crisis in the making. Figure 3.10: Analysis of the state of the LGBT+ community’s mental and non-mental health segmented by age 3.6 Findings in relation to the impact of the measures taken to combat the COVID-19 pandemic on the LGBT+ community Under this section, three topics are addressed: What is the level of support amongst members of the LGBT+ community for the measures taken by the authorities to combat the COVID-19 pandemic, how have these measures impacted their livelihoods and to what extent has it effected their domestic relationships. There is a significant majority supporting the measures taken by the authorities to combat the COVID-19 pandemic. Sixty-nine percent of respondents are in favour of the measures. Nevertheless, around a third (31 per cent) of respondents indicated that they are not in favour of the measures, which is higher than previous findings of surveys conducted by the institute amongst a broader segment of society. In a June 2020 survey amongst supporters and members of the ANC, it was found that only 4 per cent of respondents were not in favour of the measures (ISI, 2020). The aforementioned support in spite of the material impact that the measures have had on the income/livelihood of the LGBT+ community. Seventy-two per cent of respondents indicated that the measures taken by government negatively impacted their income/livelihood. And whilst the majority of respondents (70 per cent) indicated that they did not have difficulties in accessing basic services, a significant 30 per cent did. For those respondents indicating access difficulties, serious constraints appear to be spread across a number of service delivery areas. Sixty-six per cent had difficulties in accessing health services, 52 per cent had difficulties in accessing security services, 77 per cent had problems in accessing social services (excluding food) and 79 per cent had trouble in accessing food. Figure 3.11: Analysis of difficulties in accessing services (for the 30 per cent of respondents with problems in this regard) And finally, whilst domestic relationships seem to be holding in the main, there appears to be a disturbing negative change in the home environment. Sixty-one per cent of respondents indicated that their relationships had improved (13 per cent) or remained stable (48 per cent). Still, 39 per cent of respondents reported a turn for the worse. Thirty-three per cent indicated that their domestic relationships had become strained, 3 per cent indicated domestic intolerance, with a further 3 per cent indicating that the relationship had become violent (either physically or psychologically). Read together with the high levels of adverse mental health conditions registered in section 3.5 of this report, it would be prudent for the authorities to design a social intervention to tackle the dual impact of the COVID-19 measures and the normal lived reality of the LGBT+ community. 3.7 Testing of the national validity of the results As is elaborated on in the methodology section of this report, given that just half of the responses were received from the Gauteng province, it was necessary to compare the Gauteng provincial responses to the national responses. This was to conclude whether the Gauteng outcomes distort the national outcome in any way. To this end, the data of six questions was analysed and compared to the national outcome, so as to enable a consideration as to whether the variations impact the validity of the national results. With regard to the question as to whether the respondents believed that government is doing enough to guarantee constitutional rights attached to gender identity and/or sexual orientation, 21 per cent of Gauteng respondents were of the opinion that enough was being done, whilst 79 per cent were of the opinion that this was not the case. The national response to this same question was a close correlation, with 23 per cent in the affirmative and 77 per cent in the negative. With regard to the question as to whether the respondents experienced any discrimination from being part of the LGBT+ community, 69 per cent indicated that they were subjected to discrimination in some form, whilst 31 per cent did not. Once again, this is a close correlation with the national results, which reflected 72 per cent of respondents experiencing discrimination, and 28 not. With regard to the question as to whether tolerance for the LGBT+ community had increased since the advent of democracy in 1994, 78 per cent were of the opinion that it had, whilst 22 per cent were of the opinion that it had not. Here the provincial response was an exact match with the national response. With regard to the question as to whether the respondents experienced any domestic abuse, in the provincial response, 18 per cent indicated that they had, whilst 82 per cent said they had not. Here too the provincial response is an exact match to the national response. With regard to the question as to whether the respondents had any mental health conditions such as depression, the provincial response matched the national response. And finally, with regard to whether the respondents supported the measures taken by government to combat the COVID-19 pandemic, the provincial versus national response variation was marginal. At the provincial level 70 per cent of responses supported the measures, whilst at the national level it is reflected as 69 per cent. From the aforementioned comparative analysis, it is evident that the lived reality of the LGBT+ community in the Gauteng province mirrors that of the national LGBT+ community. The institute is thus of the opinion that in light of the clear trend in similarities across all data sets, the validity of the national trends have been confirmed. The national results conveyed in this report can, in the opinion of the institute, be relied upon. Figure 3.12: Gauteng province versus national comparative analysis of selected questions to test validity of national results 3.8 Testing male versus female (as assigned at birth) differentiation A deeper analysis was done to determine whether there is a material differentiation to be made in terms of the responses from female (as assigned at birth) participants versus male (as assigned at birth) participants. The lived reality in everyday South Africa In terms of their lived reality, for both groups the response was substantially similar across the spectrum, with male respondents slightly more empowered than females. Whereas 14 per cent of males felt free to express their gender identity and/or sexual orientation, only 10 per cent of females felt the same. As for the rest of the lived reality questions, the percentages allocated to each of the groups were neck and neck. Whereas 20 per cent of males felt mostly free to express their gender identity and/or sexual orientation, 21 per cent of females felt so. The response of both groups to the feeling of subtle bias was the same – 24 per cent. Whilst 24 per cent of males felt some bias and/or discrimination, 25 per cent of females felt so. And where 18 per cent of males felt mistreated, 20 per cent of females felt so. Experienced discrimination as part of the LGBT+ community and the fields of discrimination A far greater percentage of males experienced discrimination in terms of social cohesion as opposed to females. For males it was 74 per cent, and for females it was 66 per cent. That being said, females experienced discrimination over a wider range of areas than did males. The differentiation is illustrated below: Rejection or discrimination when wanting to express or participate in own ethnic culture Female respondents indicated a slightly higher margin of discrimination (62 per cent) than did male respondents (58 per cent). But in terms of both groups, the percentages were high and worthy of policy interventions to address the problem, which is clearly against the spirit of the rights embodied in the Constitution. Fair treatment by government when accessing services The trends regarding treatment by the authorities when accessing services were similar, although males did find them to be fairer than females. Whereas 56 percent of males found the authorities to be fair, this dropped to 51 per cent amongst female respondents. Regardless of the slight differentiation, there is a high percentage of dissatisfaction to which the authorities need to pay attention, as it goes against the Batho Pele (people first) ethos of the public service. The family environment There was a large differentiation between male and female respondents as to acceptance within the family environment with regard to their gender identity and/or sexual orientation. Here too, males were better off than females. Sixty-eight per cent of males found acceptance for their preferences within the family environment, whilst this dropped to 56 per cent amongst female respondents. However, with regard to happiness within the family environment, both groups reflected a high level of contentment. For males it was 86 per cent, and for females it was 85 per cent. Notwithstanding the high level of contentment, a material presence of abuse within the domestic environment was registered for both. In this instance, females were once again in a more precarious position than males, and substantially so. Twenty-one per cent of females indicated that they were subjected to abuse within the domestic environment, as opposed to 15 per cent of males. Health Whilst females were healthier than males in terms of non-mental health conditions, in terms of mental health, males were less affected. In terms of non-mental health, 27 per cent of males were affected as opposed to only 14 per cent of females. And in terms of mental health, 38 per cent of males were affected as opposed to 45 per cent of females. The impact of COVID-19 The income and livelihoods of both male and female respondents were hard hit by the measures introduced by the authorities to combat the COVID-19 pandemic, with males experiencing slightly more hardship than females. Seventy-four per cent of males indicated that their income and/or livelihoods were negatively affected, as opposed to 67 per cent of females. And similarly, male and female respondents both registered high levels of difficulties with regard to accessing basic services during the lockdown. In this instance the roles were, however, reversed, with 27 per cent of males indicating that they had experienced difficulties during the COVID-19 lockdown in accessing basic services, with it rising to 33 per cent for females. Conclusion Across a number of areas, both male and female members of the LGBT+ community face challenges, for which the authorities need to consider significant policy interventions. Being a female member of the LGBT+ community means that those challenges become more pronounced. In all areas explored in this section of the report, females have been placed in a less favourable position than their male counterparts. But for the loss of income during the COVID-19 lockdown period and their physical health, females were in a worse position than males. In terms of their lived reality, rejection or discrimination when wanting to express or participate in their own cultural practices, and treatment by government when accessing services, the differentiation, being within a five per cent range, was not so pronounced. In terms of societal discrimination and the impact of the COVID-19 measures, more so. But in terms of conditions within the family, which includes being subjected to abuse, and their mental health, the differentiation was quite stark. This deeper analysis of the data suggests that whilst public policy could be improved to address the concerns and challenges within the LGBT+ community in general terms, certain female-focused policy interventions are required to tackle a number of areas of acute need. Figure 3.13: Analysis of the lived reality of the LGBT+ community – Female versus Male using gender assigned at birth Figure 3.14: Analysis of various differentiated life experiences – Female versus Male using gender assigned at birth Figure 3.15: Analysis of discrimination against LGBT+ – Female versus Male using gender assigned at birth Figure 3.16: Analysis of COVID-19 measures on LGBT+ community – Female versus Male using gender assigned at birth 4. Recommendations From the data processed in this survey it can be surmised that the constitutional and democratic rights of the LGBT+ community in South Africa are in nature progressive and compare favourably within the global context. As a generalisation it can similarly be deduced that the lived experience of the community is in the main positive. Nevertheless, full inclusion, tolerance and acceptance is still some way off. To achieve the complete realisation of LGBT+ rights still requires a great measure of work with regard to public policy development, the promotion of tolerance, constitutional and democratic adherence and full societal understanding and acceptance. To this end, the Inclusive Society Institute ventures three recommendations in pursuit of the full recognition and embodiment of the noble ideals embraced by the South African Constitution and legislation affecting this particular community. Recommendation 1 The findings of this survey suggests that there remains a material disparity between the constitutional and legislative framework in relation to the advancement of LGBT+ rights and the practical implementation and execution of those rights within both the public and private sphere of society. To this end, it is proposed that the authorities embark on a systematic programme to sensitise both the civil service and the broader public on their obligations towards the LGBT+ community, and more so, the manifestation of humanitarian ethos, inclusivity and solidarity. It is recommended that the Department of Public Administration design and implement an awareness programme aimed at sensitising the public service as to the rights of the LGBT+ community to receive equal and quality service from all civil servants. Likewise, the department should develop a reporting and monitoring mechanism aimed at ensuring adherence to the constitutional and legislative obligations of public officials. More generally, all government departments and provinces need to ensure the mainstreaming of issues of the LGBT+ community in all their policies. It is further recommended that the Commission for the Promotion and Protection of Cultural, Religious and Linguistic Communities prioritise engagements aimed at eliminating vestiges of discrimination with the religious and cultural fraternities. Other Chapter 9 Institutions such as the SA Human Rights Commission and the Commission for Gender Equality also have a role in creating awareness and monitoring discrimination. Given the high levels of discrimination from individuals, general awareness and social behavior change campaigns will be critical, to promote and advance rights of LGBT+ persons. Recommendation 2 The levels of discrimination across all areas surveyed are quiet worrying. Although at face value the data suggests that the LGBT+ community are generally content with public policies and their lived experience, and although, in most cases, the majority have responded positively to the areas investigated in the survey, unacceptable levels of dissatisfaction, albeit to varying degrees, were detected across the spectrum of areas surveyed. To this end, the institute proposes that a series of focus groups be commissioned to deeper interrogate the findings of the survey. As it stands, policymakers are, through this survey, being made aware of the areas and extent of dissatisfaction, but a more pronounced understanding as to the substance of the displeasure is required in order to enhance and/or develop policy interventions that could effectively address the concerns. To this end, focus groups should, in line with the seven pillars identified by Brown & Buntse (2020), interrogate public policy as it relates to the LGBT+ communities, in the areas of: Education and youth development; Access to healthcare and healthcare services; Safety, security and psycho-social services; Accessing of essential services; Homelessness and access to housing; Job creation, employment and access to the economy; and LGBT+ migration and asylum seeking. In addition to the aforementioned focus groups, it is proposed that a further focus group be established to examine the prevalence of gender based and intimate partner violence, domestic abuse and hate crimes. Recommendation 3 In the course of analysing the data, extreme findings in relation to the presence of adverse mental health conditions amongst the LGBT+ community in general, but especially amongst the under 26 age group, were detected. Fifty-three per cent of respondents in the under 26 age group indicated that they were experiencing mental health conditions such as depression. This, in the opinion of the institute, points to a health crisis in the making. It is therefore proposed that a study be commissioned by the Department of Health, amongst others, to gain a fuller understanding of the causes and potential remedial policies and interventions that could be designed to mitigate against these acute disorders. 5. Summary of detailed data 5.1 Summary of data for all respondents 5.2 Summary of data for Gauteng respondents 5.3 Summary of data for Female versus Male comparative analysis using gender assigned at birth References Brown, A. & Buntse, M.H. 2020. Queering through COVID-19: A case study on the Social & Economic Impacts of Corona Virus Pandemic on the LGBTQI Community in South Africa and the ‘invisibility’ of the Queer voice by those Providing Government Services. Johannesburg: African National Congress Creative Research Systems. N.d. Sample Size Calculator. [Online] Available at: https://www.surveysystem.com/sdesign.htm [accessed: 13 April 2020]. European Social Survey. 2016. Sampling Guidelines: Principles and Implementation for the European Social Survey. [Online] Available at: https://www.europeansocialsurvey.org/docs/round8/methods/ESS8_sampling_guidelines.pdf [accessed: 13 April 2020]. Inclusive Society Institute (ISI). 2020. COVID-19: Its effect on ANC leadership and support. Cape Town: Inclusive Society Institute Israel, G.D. 1992. Determining sample size. Fact Sheet PEOD-6. Gainesville: University of Florida. Republic of South Africa (RSA). 1996. The Constitution of the Republic of South Africa, Act 108 of 1996. Pretoria: Government Printers Royce, D. 2008. Research methods in social work, 5th edition. Belmont: Thomson Higher Education United Kingdom, Home Office. 2017. Country Policy and Information Note South Africa: Sexual orientation and gender identity. [Online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/632481/South_Africa_-_SOGI_-_CPIN_-_v1_0_July_2017.pdf [accessed: 24 June 2020]. The Other Foundation (in association with the HSRC). 2016. Progressive Prudes. A survey of attitudes towards homosexuality & gender non-conformity in South Africa. Saxonwold, Johannesburg: The Other Foundation. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

A literature review informing critical policy choices report on the National Health Insurance Copyright © 2020 Inclusive Society Institute 50 Long Street Cape Town South Africa 8000 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members. Authors: Percept Actuaries and Consultants 31 July 2020 ACKNOWLEDGEMENTS This research and publication was made possible through the kind support of the Friedrich Ebert Stiftung. It is part of a larger exchange of public policy and governance ideas between South Africa and Germany. Content Acronyms and abbreviations Executive summary 1. Introduction 2. A brief history of NHI policy evolution and key health system objectives SHI and NHI: Defining concepts 2.1 ANC Health Plan of 1994 2.2 Committee of Inquiry into NHI 1995 2.3 Department of Health SHI Working Group of 1997 2.4 The 1997 White Paper on the Transformation of the Health System in South Africa 2.5 The 2002 Taylor Committee of Inquiry into Comprehensive Social Security 2.6 The 2002 Ministerial Task Team for Implementing SHI 2.7 The 2009 Ministerial Advisory Committee on NHI 2.8 NHI Green Paper 2011 2.9 NHI White Paper 2017 2.10 NHI Bill 2019 2.11 Finding alignment across policy documentation and trajectory 3. A summary of key issues in the NHI Bill 4. The purchaser-provider split 4.1 Rationale behind a purchaser-provider split 4.2 Sticking points around the proposed purchaser-provider split 5. The single purchaser 5.1 Rationale behind the choice for a single purchaser 5.2 Sticking points around a single purchaser 6. The role of medical schemes limited to complementary cover 6.1 What does the NHI Bill state about the role of medical schemes? 6.2 Concerns with the role of medical schemes 7. Quality assurance and quality improvement mechanisms 7.1 What does the NHI Bill say about accreditation and quality? 7.2 How to measure quality 7.3 Concerns surrounding the proposed quality measurement 8. Financial considerations: what are we buying, and can we afford it? 8.1 What does the NHI Bill say about affordability? 8.2 What are we buying? 8.3 Can we afford it? 8.4 Who to cover? Refugees and undocumented migrants 9. Governance and accountability 9.1 Governance 9.2 Accountability 10. Timelines and progress milestones 10.1 What does the NHI Bill state about timelines? 10.2 What are some of the objections raised? 10.3 How can we prepare the way for NHI? 11. Potential constitutionality issues raised by the NHI Bill 12. Learnings from the Covid-19 pandemic for NHI 13. The way forward References Tables Table 1: Core policy objectives across the trajectory of UHC discussions in South Africa Table 2: Areas of alignment and contention Table 3: Tax scenarios 39 Table 4: Accountability in the NHI Figures Figure 1: Sticking points around having a single purchaser Figure 2: Concerns related to Section 33 Figure 3: Donabedian’s quality framework 31 Acronyms and abbreviations Executive summary How did we get here? South Africa’s proposed approach to achieving Universal Health Coverage (UHC) is articulated in the Draft National Health Insurance (NHI) Bill. The principles guiding the reform process, particularly in relation to equity, access and an orientation to primary health care can be traced back to the ANC Health Plan of 1994. There was an inflection point in the reform process in 2007 towards a single payer and purchaser system, away from a system that builds off existing medical scheme infrastructure. It was a change in direction that remains contentious. How has the context changed? In the 12 years since the shift in policy direction, there have been significant contextual changes which do not appear to reflect in how policy has developed. Furthermore, the recent Health Market Inquiry process put forward a number of proposals for health system strengthening which have largely not been incorporated into the policy process. Locally, we have experienced reduced trust in the State, a tighter fiscal space, and a more constrained health service delivery platform. Economic and health system vulnerabilities have been accentuated by Covid-19. Internationally, we have seen previously lauded UHC systems run into financial sustainability challenges, questions raised about the efficacy of strategic purchasing, and a move towards value-based contracting approaches. However, these systems have also weathered Covid-19 better than other systems, elevating the need for a more integrated and equitable system. Why do we need reform? There is no doubt that the current health system requires substantial reform. The two-tier nature of the system is inequitable, and both the public and private sectors are fragmented and unsustainable. However, the current proposals have been met with a wide range of criticisms and concerns from across the political spectrum. This report draws from the literature surrounding the reform process, together with insights from various interviews with critical stakeholders. The sticking points between different stakeholders in reaching consensus on the NHI Bill can be grouped into the following themes: We also note that a number of constitutionality issues have been raised by stakeholders. Many of these concerns relate to uncertainty or vagueness in the NHI Bill. Clarity, trust and consensus: Questions about what will be covered, how cover will be provided and who will be covered lie at the heart of the envisaged system. While all of these are likely to be dynamic in nature, a clearer sense of the intent would facilitate constructive engagement. The nebulous role of trust is a recurring theme. This has been exacerbated by State Capture, the failure of State-owned enterprises and poor governance of health-sector entities. The failure to build stakeholder buy-in through the reform process is apparent – this in itself raises concern about the likely conduct of a monopsony. What can we do while we wait for reform? Certain key elements of the purchasing function can be strengthened prior to implementation: accreditation, health technology assessment, information system strengthening, clinical coding, levelling of professional rules across the public and private sectors, and experimentation with provider contracting are all examples. Learning sites will be essential to enable experimentation and testing of alternative service delivery models. There are numerous pragmatic impediments to innovation which will need to be interrogated and dismantled, for example, budget structures, salary determination, Public Financial Management Act (PFMA) rules etc. Similarly, certain rules of the Health Professions Council of South Africa (HPCSA) will have to be amended to allow for team-based remuneration and telehealth which will be required as part of new service delivery models. Understaffing and low human resources for health (HRH) capacity will strengthen the notion of weak government capacity and quality, leading to lack of trust and buy-in to NHI as a concept. Ensuring that a sufficient healthcare workforce is available by the first roll-out and implementation of NHI needs to happen now, and requires continual planning and engagement to ensure future availability. Much needs to be done to improve public-sector working conditions, the absorption of the training pipeline into the system, and the ability of doctors to work across both sectors. Task-sharing and the role of mid-level health workers need to be strengthened, and the current problems with vacancies fixed. These improvements will be critical to regaining the trust of healthcare providers. Where to from here? This report is a precursor to a summary document laying out the critical policy choices relative to health system objectives as set out in various policy papers between 1994 and 2019, as identified in this report. To inform a way forward, there is a need for research that is cognisant of the shortcomings of the current system – both public and private – and the advantages and disadvantages of the proposed reforms. In questioning the way forward, it is useful to conceptualise an inter-connected set of reforms, enabling thinking about a series of policy choices and the sequencing of implementation. Clearly articulated goals of the reform process can be used to create a framework against which to assess alternative reform choices and pathways (including the sequencing of the current proposed reforms). 1. Introduction South Africa’s proposed approach to achieving universal health coverage (UHC) is articulated in the draft National Health Insurance (NHI) Bill. TThe proposed reforms see the creation of a purchaser/provider split in the health system (a), the establishment of a monopsonist strategic purchaser of care, and a minimisation of the role of medical schemes. There is a substantial reconfiguration of the public system envisaged i.e. provinces become providers of care (as opposed to both purchasers and providers) with new entities created at the local level to co-ordinate the provision of care. The policy development process underpinning the Bill has been drawn out – the Green Paper was published in 2011, the White Paper in 2017, and the first draft of the Bill in 2018. Prior to 2007, the policy trajectory was referred to as Social Health Insurance, which was a reform pathway that leveraged off existing medical scheme capacity. This pathway was abandoned in favour of a single-purchaser system. In the 12 years since the change in policy direction, there have been significant contextual changes. Locally, we have experienced reduced trust in the State, a tighter fiscal space, and a more constrained health service delivery platform. Internationally, we have seen previously lauded UHC systems run into financial sustainability challenges, questions raised about the efficacy of strategic purchasing (even in highly resourced environments), and a move towards value-based contracting approaches. This report was written at the point in the policy process where the public submission and public hearing processes have been concluded, and those inputs now need to be considered by Parliament. It follows on from three previous reports: The first summarises the discussions held at a roundtable (“Towards Inclusive Healthcare”) hosted by Inclusive Society Institute (ISI) in December 2019; The second reflects on lessons for South Africa on transitioning to UHC from the German experience; and The third outlines potential constitutional issues arising from the proposed reforms. There is no doubt that the current health system requires substantial reform. The two-tier nature of the system is inequitable, and both the public and private sectors are fragmented and unsustainable. However, the current proposals have been met with a wide range of criticisms and concerns from across the political spectrum. This report draws on conversations with a wide range of stakeholders through a roundtable discussion that took place in Johannesburg in December 2020 as well as individual stakeholder discussions before and after the roundtable. It has also been informed by the literature surrounding the financing reform process, including various NHI Bill submissions. The widely consultative process that informs this document included various stakeholders from Government, the political sphere, the private hospital sector, the medical schemes sector, doctor and specialist bodies and specific regulatory bodies. We clearly illustrate the areas of alignment and major sticking points between different stakeholders in reaching consensus on the NHI Bill. The report begins with a brief history of UHC policy evolution (Section 3). The key health system objectives are drawn from this historical context and used to inform the thematic organisation of the rest of the document. Section 4 summarises the key remaining unresolved NHI structural and process questions. For each of the themes, we provide an overview of the critical data, the status quo and conflicting stakeholder opinions (Sections 5 to 12). In section 13, we reflect on the implications of Covid-19 for the reform process. We conclude (Section 14) with a consideration of the way forward. *a https://percept.co.za/category/research/nhi/ 2. A brief history of NHI policy evolution and key health system objectives A clear understanding of key health system objectives is critical to assessing large-scale health reforms in South Africa. Our process of identifying key objectives involves a historical review of relevant NHI policy documents, specifically the evolution of these policies and how it birthed the most recent health reform policies. This chronological policy review will be limited to the post-apartheid period and therefore starts with the African National Congress (ANC) Health Plan of 1994(1) and continues up to the current NHI Bill of 2019.(2) SHI and NHI: Defining concepts Social health insurance (SHI) and national health insurance (NHI) are often used interchangeably in the relevant policies reviewed for this report. We therefore provide both a technical and conceptual description of these two terms. As described in the Taylor Committee process in 2002(3), SHI refers to an insurance model where only those who contribute to it are entitled to its benefits. Contributors could include all taxpayers, all employed people, or defined groups in certain industries. On the other hand, NHI refers to a model where usually the same taxpayers would be the contributors but unlike SHI, everyone would be entitled to benefits. South Africa’s Government Employees Medical Scheme (GEMS) is described as an SHI when the term is interpreted in its technical form.(4) Despite the technical distinction between SHI and NHI, the use of these terms are often blurred in practice, with some technically social systems called NHI and vice versa.(5) For example, Germany’s health system is known as SHI but covers the entire population. In contrast, Indonesia is implementing an NHI where initially only contributors are covered but with a long-term goal of slowly incorporating other groups. In essence, the term adopted for a mandatory insurance – SHI or NHI – remains a question of societal preference and values.(5) Professors Diane McIntyre and Alex Van den Heever argue against using politically loaded terms like NHI or SHI and instead refer to a more neutral term like mandatory health insurance, which recognises common ground in the proposals.(6) In South Africa, mid-1990s health reform proposals were called NHI.(1) Essentially the same proposed reform was then called SHI from around 2002.(5) In 2007, the terminology was changed back to NHI in the ANC documents emerging from the Polokwane conference(7) and has remained as such since then.(2) 2.1 ANC Health Plan of 1994 During the early 1990s, health reforms in South Africa focused on introducing mandatory health insurance. After the 1994 elections, policy initiatives that considered either SHI or NHI had its origins in the ANC Health Plan of 1994.(6) This seminal document is underpinned by the ultimate aim of health for all, i.e. a measurable improvement in health outcomes for all South Africans. This aim is framed in the post-apartheid context of a fragmented health system, inequitable access to health care and the subsequent inequities in health outcomes. It therefore follows that one of the main objectives of the Health Plan was to improve overall health system equity. The plan asserts that a reorientation of the health system towards primary health care (PHC) is the best strategy to provide sustainable and equitable healthcare to all members of South African society. The other key objective of the Health Plan was to address the rapidly escalating costs in the private health sector which rendered private health care increasingly unaffordable and reflected health system sustainability concerns. The plan described how the structure of the private health sector created incentives that prevented health for all. It envisaged a national health system (NHS) with a restructured private sector that played an important role in improving the health of the nation. It therefore viewed active cooperation between the private and public health sectors as essential to achieving health for all. In summary, the ANC proposed working towards a comprehensive, equitable and integrated national health system based on the principles of equity, right to access and a PHC approach. The SHI proposals made by the Health Care Finance Committee of 1994 were in keeping with the aim and objectives of the ANC Health Plan.(8) 2.2 Committee of Inquiry into NHI 1995 The 1995 Commission of Inquiry9 (also referred to as the Shisana/Broomberg Commission of Inquiry) upheld the objectives of the ANC Health Plan i.e. improving equity in the health system and addressing the cost-spiral in the private health sector. The Commission of Inquiry endorsed the objectives and proposals made in the ANC Health Plan and the Health Care Finance Committee but provided more detail on the role of medical schemes under the plan. It also strongly emphasised the strengthening of the PHC system. More specifically, it stressed that improvement in health access, efficiency, and effectiveness of publicly funded PHC services were urgently needed to ensure delivery of improved quality of care to all. The Commission’s report made detailed reference to universal access as a basic principle informing its recommendations. It defined universal access as a principle that should guarantee all permanent residents of South Africa equal access to all publicly funded PHC services and that the quality of these services should be equivalent for all users. The Commission of Inquiry was criticised10 because it seemed to favour the private health sector by encouraging competition between the public and private sectors when the former sector was poorly equipped to compete fairly. Serious concerns were expressed that the universal plan was not inclusive enough, thereby entrenching the existing disparities in access to healthcare. Furthermore, doubts were raised that the financial benefits of the NHI scheme would not be adequate to support the public health system. 2.3 Department of Health SHI Working Group of 1997 None of the proposals put forward in the ANC Health Plan and the Commission of Inquiry into NHI were further developed.(8) Instead, in 1997 the Department of Health (DoH) established the SHI Working Group with the stated objective of generating additional revenue for the public health sector.(11) The proposals developed by the SHI Working Group formed the regulatory framework for the Medical Scheme Act in 1998. The Act aimed to regulate private health insurance as well as establish the principles of open enrolment, community rating, prescribed minimum benefits and better governance of medical schemes. Despite the introduction of the Act and its supporting principles, the level of coverage for the South African population remained below 16 percent.(12) 2.4 The 1997 White Paper on the Transformation of the Health System in South Africa The 1997 White Paper on the Transformation of the Health System in South Africa put forward the main aims of restructuring the health system. These aims included developing a single unified and comprehensive NHS to deliver quality health care to all; ensuring national, provincial and district levels play different but complementary roles in the health system; increasing access to an improved package of PHC services, and uniting public and private sectors to promote these aims.(13) The White Paper provides a comprehensive list of objectives to achieve the above-mentioned aims. These objectives can be condensed into two core objectives: improving equity in the health system and generating additional revenue for the public health sector. In summary, this White Paper regards SHI as the main vehicle to increase finance for public health and proposes that an SHI scheme should be introduced. Again, the proposals to establish an SHI were not taken forward for implementation. This was mainly due to continued opposition by National Treasury.(8) 2.5 The 2002 Taylor Committee of Inquiry into Comprehensive Social Security The Department of Social Development appointed Professor Vivienne Taylor to chair the 2002 Committee of Inquiry into Comprehensive Social Security to provide a vision for the transformation of all aspects of social security, including retirement reform and health care reform.(3) The Taylor Committee Report remains an important document and its recommendations are still being implemented. It provided the first set of policy recommendations on mandatory health insurance that explicitly called for an NHI.(8) The broad objectives underpinning the Taylor Committee’s proposals on NHI included the provision of universal access to basic health care, ensuring social protection and solidarity as well as addressing the persistent issue of escalating costs in the private health sector.(8) More specifically, it was proposed that the universal cover should provide a minimum level of essential benefits that could be provided by both the public and private health sectors. The public health sector would continue to be the foundation of the overall health system, while the private health sector was envisaged as increasing levels of funding above the usual tax allocations. It was recommended, however, that private sector activity should take place in a closely regulated environment. The Committee argued that addressing the problems arising from the private health sector would promote efficiency in the health system.(3) 2.6 The 2002 Ministerial Task Team for Implementing SHI To implement the Taylor Committee recommendations that would achieve an NHI in the long-term, the DoH established a Ministerial Task Team (MTT) on SHI(b). In addition to the Taylor Committee recommendations, the MTT also considered findings from the Risk Equalisation Fund (REF) Task Group and the International Review Panel on REF. The MTT’s main objectives were to ensure affordable universal cover and a consistent system of cross-subsidies.(8) The MTT concluded that implementation of an NHI was not practical in the near future and that the focus should be redirected to planning for SHI.(14) However, the path to achieving universal coverage through the SHI model was not supported and implementation of the MTT’s recommendations were stalled.(12) 2.7 The 2009 Ministerial Advisory Committee on NHI In 2009 the Ministerial Advisory Committee was established to advise the Health Minister and DoH on health system reforms including the design and implementation of NHI.(12) The Committee’s mandate was rooted in Resolution 53 which was passed at the ANC’s Polokwane Conference in 2007.(7) This resolution explicitly called for the implementation of an NHI, stating that the NHI Fund urgently be set up using state revenue by 2014 and that the ANC should mobilise social support for the NHI and continue developing the White Paper and NHI legislation (envisioned to be finalised by 2013). A broad description of the ANC proposal for an NHI system was included in the ANC’s 2009 election manifesto.(15) The objectives that guided the Ministerial Advisory Committee were drawn from this manifesto and included reducing inequalities in the health system, improving the quality of care (in both the public and private sectors) and increasing human resources for health care to ensure improved health outcomes for all South Africans. *b Authors have been unable to source this document (Social Health Insurance Options: Financial and Fiscal Impact Assessment. Unpublished technical report to the Department of Health. June 2005.) 2.8 NHI Green Paper 2011 In August 2011 the DoH published the NHI Green Paper (titled: NHI in South Africa), which proclaimed that the NHI would ensure that all South Africans had access to appropriate, affordable and quality health services, regardless of socio-economic status.(12) It was proposed that the NHI would be phased in over a period of 14 years and would require major changes in service delivery structures, as well as administrative and management systems. The implementation of NHI was intended to bring about health systems reform that would improve service provision by promoting equity and efficiency. Additional guiding principles of NHI included social solidarity and effectiveness. The NHI Green Paper offered high-level solutions to achieving the following four health system objectives: to provide improved access to quality health services, irrespective of employment status; to improve equity in the health system by pooling risks and funds to create a single fund; to address rapidly escalating costs in the private health sector by procuring services on behalf of the entire population and efficiently mobilising and controlling key financial resources; and to improve health systems performance by strengthening the under-resourced and strained public sector. The Green Paper was broadly criticised for its lack of detail on the complete package of services, financing mechanisms, the role of private medical insurance schemes and implementation plans and processes. 2.9 NHI White Paper 2017 In 2015, the DoH released a draft of the NHI White Paper (titled: National Health Insurance for South Africa: Towards Universal Health Coverage).(16) Commentators indicated that few of the NHI Green Paper submissions were incorporated in the draft NHI White Paper, which appeared to be quite similar to the NHI Green Paper. The final NHI White Paper was published in 2017.(17) The NHI White Paper states that it lays the foundation for moving South Africa towards universal health coverage by implementing NHI and establishing a unified health system. The Paper proceeds to describes how implementing NHI is based on principles of the constitutional right of citizens to have access to quality health care services that are delivered equitably, affordably, efficiently, effectively, and appropriately. Furthermore, it states that NHI is based on social solidarity, progressive universalism, equity, and health as a public good and a social investment. The objective upon which NHI should be based, according to the White Paper, seems to be closely linked to the objectives of UHC: equity in access to health services, access to good quality health services, and financial risk protection. More specifically, policy trajectory of the NHI should achieve the following three objectives for all citizens: to provide adequate financial risk protection; to provide an opportunity to equitably benefit from the health system; and to ensure contributions towards the funding of the health system are based on the ability to pay. Therefore, there was some disagreement over whether the term NHI was the right choice, given that the policy expanded beyond just the financial mechanisms. The DoH highlighted that implementation of NHI would require amendments to related legislation and enactment of new laws to ensure that there is both legislative alignment and policy consistency across government departments and spheres of government. The NHI White Paper served as the precursor to the NHI Bill. 2.10 NHI Bill 2019 The NHI Bill was tabled in parliament on the 8 August 2019(2) and remains under consideration by the National Assembly’s Portfolio Committee on Health after receiving submissions via the public participation process. These submissions may inform amendments to the Bill before it is put to a vote in the National Assembly. The NHI Bill is based on two overarching but similar principles: universality – all will be able to access the same essential health care benefits regardless of their financial means; and social solidarity – all, regardless of their socio-economic status, will benefit from a national system of health care. As stated in previous policy documents, the goal of the NHI is to move towards universal coverage. The NHI Bill refers to six specific objectives that the Fund will strive to achieve to provide universal protection against financial risk; to ensure an equitable distribution of the burden of funding the universal health system; to ensure equitable and fair provision and use of health services; to ensure efficiency in service provision and administration; and to provide quality in service delivery; and to ensure good governance and stewardship. 2.11 Finding alignment across policy documentation and trajectory Table 1 below, outlines the key objectives and principles of the policies discussed in the sections above. Note the similarities in the policies, despite the different names and parties who were involved in their drafting. Table 1: Core policy objectives across the trajectory of UHC discussions in South Africa Based on this analysis, we have identified five objectives that have been consistently present over the years, while South Africa has tried to move closer and closer to UHC: To improve equity in the health system, including the sharing of resources (human and other) across the public and private health systems; To address escalating costs in the private health sector; To provide universal access to quality health care; To ensure efficiency in service provision and administration; To ensure good governance and stewardship. These key objectives of the health reform process will be used to create a benchmark against which to assess the feasibility of various policy choices and pathways. It may also assist in guiding the sequencing of current reform proposals. 3. A summary of key issues in the NHI Bill The ISI hosted an NHI roundtable in Johannesburg in December 2019. The purpose of the roundtable was to enable a high-level stakeholder dialogue to identify key areas of policy agreement and disagreement. Through discussion and presentation of the various viewpoints of different stakeholders, it was clear there are certain positions on the NHI Bill on which stakeholders are in agreement. However, some areas still require interrogation in order to arrive at a place of consensus. Table 2 sets out: The proposals where stakeholders agreed that the position taken represents the accepted or preferred route; Areas of uncertainty that possibly need to be revisited; and The proposals that are disputed, where resolution and ultimately consensus are required in order to move forward. At this point the disputed areas outweigh the areas of alignment. Table 2: Areas of alignment and contention In the following sections, we unpack these areas of misalignment, to illustrate from where the disagreements arise. This will help to inform further engagement. 4. The purchaser-provider split 4.1 Rationale behind a purchaser-provider split The NHI Bill18 outlines that the purchasing and provision of health care services will become two distinct and separate functions, performed by different entities: the former will be the responsibility of the NHI Fund alone, which will contract directly with both public and private providers. Provision of services will be the responsibility of the providers themselves and the district health authorities. The provinces currently play the roles of both purchaser and provider. A purchaser-provider split with the NHI Fund as the single purchaser was first proposed in the NHI Green Paper of 2011.(12) It is important to note that the creation of a purchaser-provider split is not necessarily linked to the creation of a single purchaser. The creation of a purchaser is intended to support more strategic purchasing.(19) This includes determining who to purchase from (putting in place both accreditation and contracting requirements), what to purchase (the design of a benefit package) and on what basis to purchase (including the development of payment mechanisms to enable provider payment).(19) A purchaser-provider split has the potential to generate multiple benefits: The suggested purchaser-provider split is expected to increase accountability of healthcare providers, by creating a distance between the Fund, as the sole purchaser, and the various providers with which it contracts.(19) The NHI Bill specifies two ways in which such accountability can be driven: through enforcing minimum quality standards for providers and reimbursing providers based on the quality of care provided (determined by measurable outcomes).(18) Additionally, the purchaser-provider split is theorised to increase competition among providers, driving innovation and efficiency, as providers attempt to improve quality and/or decrease costs so as to remain competitive.(19) If the Fund institutes price ceilings, as is expected, providers won’t be able to compete on price. The idea is that this would force competition based on quality.(20) Lastly, the proposed purchaser-provider split also has the potential to increase access to private sector resources.(19) In other words, the creation of a purchaser would enable pluralistic purchasing – purchasing from both public and private providers. The current procurement paradigm limits the extent to which this is possible. The extent of health resources in the private sector translates to a potential increase in access to quality health services under the NHI,(21) with the Fund being able to purchase services from a wider set of providers. 4.2 Sticking points around the proposed purchaser-provider split A number of potential concerns have been raised about whether the foreseen benefits of a purchaser-provider split are likely to be realised in South Africa: Evidence from other countries (such as England) has shown that there are often not enough health care providers in a given geographic area for the benefits of competition to materialise.(19) In South Africa, where many regions have very few health resources available, this is likely to be the case. It will be vital to ensure that appropriate quality measures are strongly enforced by the Fund in order to avoid competition based on unimportant aspects of health care provision, such as the aesthetics of facilities.(19) To enable competition across the public and private sectors, consideration will need to be given to the structural differences across the two sectors (for example, VAT applies only in the private sector) that may hinder fairness in their ability to compete with one another.(19) The purchaser-provider split increases accountability from a top-down perspective, which should be balanced with a bottom-up ability of clients to demand accountability and quality care from providers.(19) 5. The single purchaser 5.1 Rationale behind the choice for a single purchaser The NHI Bill(18) states (page 7, section 2) that the NHI Fund will serve as the sole purchaser of health care services under the NHI: “The purpose of this Act is to establish and maintain a National Health Insurance Fund in the Republic funded through mandatory prepayment that aims to achieve sustainable and affordable universal access to quality health care services by (a) serving as the single purchaser and single payer of health care services in order to ensure the equitable and fair distribution and use of health care services […]”(18) The choice for a centralised pool of funds was borne out of the current fragmentation of health care funding pools in the South African health system – both between public and private sector, and within each sector. The aim is to create one integrated fund that can ensure equity in spending for all South Africans. The NHI Bill states that the NHI Fund will serve as the “single purchaser and payer”(18) in order to reduce the cost of health care while simultaneously improving quality of care, through economies of scale and more strategic purchasing.(19) Shifting to a single purchaser even within the public sector alone is expected to improve equity between provinces by allowing provinces to deliver more services than historical budgets may have allowed.(19) All NHI policy papers (since the Green Paper of 2011) have indicated that the NHI Fund will serve as the single purchaser of health care services. However, previous conceptualisations of NHI were based on multi-purchaser models, expanding on the medical scheme environment.(22) This has therefore been a notable change in the policy as it essentially changes the role of provincial departments of health and limits the role of medical scheme administrators and managed care organisations. 5.2 Sticking points around a single purchaser Concerns have been raised around the rationale for a single purchaser: the NHI Bill does not explicitly state or explain why a single purchaser is preferable to several purchasers.(23) The NHI Bill emphasises the main issue to be “fragmentation of health care fund pools in the South African health system”(18), which are proposed to be addressed through the development of an integrated pool for funding.(23) Previous official documents relating to the NHI also tend to focus on the pooling function, providing little rationale or evidence in favour of a purchaser-provider split (with a single purchaser) in the South African context.(23) There are alternative mechanisms to ensure equitable funding that do not require a single purchaser, for example, risk equalisation mechanisms, needs-based budgeting, and the implementation of capitation and Diagnosis Related Groupers (DRGs). Professor Alex van den Heever argues that no evidence is provided in the Bill as to which aspects of the proposed health system reform and the current problems experienced in the health system necessitate a single purchaser.(23) In other words, can economies of scale and strategic purchasing be achieved without the creation of the NHI Fund? The State currently purchases pharmaceuticals at a national level, for example. The health component of the Provincial Equitable Share formula provides an opportunity to improve equity between provinces, and an equivalent mechanism at district level would further this equity. DRGs, as a means for directing funding towards hospital events, could also be implemented without a central fund, as could health technology assessment and other dimensions of strategic purchasing. As mentioned, having a single purchaser creates a monopsony, which, in the case of an entity as large as the NHI Fund, raises concerns around both efficiency and corruption. The Fund will have complete market power through its sole control of purchasing health care services and many argue that this will impede on provider autonomy and bargaining power.(19) Furthermore, the Bill lacks clarity around the costs of administration of such a large, centralised purchasing mechanism.(24) If the management of the Fund does become corrupted, there is the risk of a reduction in the availability of health care funds. While the concept of a single purchaser (with the State as the single purchaser) is no longer new within the NHI discussion space,(25) there are still major concerns around the concept. Firstly, the NHI Bill does not explicitly state or explain any problems directly relating to the need for a single purchaser, nor provide any evidence as to why a single purchaser would be preferable to other options in the South African context.(23) Based on this lack of evidence, the most recent investigation of health systems purchasing and pooling problems in the South African context is considered: the Health Market Inquiry (HMI) report published by the Competition Commission, based on the private sector.(23) In contrast to the proposal of a single purchaser in the NHI, the HMI recommends that the number of purchasers should increase and that purchasing should remain a decentralised function.(26) However, a centralised risk-adjustment scheme is recommended to improve the fragmentation of pools and equity across pools.(26) Although the HMI calls for more purchasers, this would differ from the current private sector context where each scheme has its own risk pool. This is an important distinction, both in terms of equity and the basis of competition between purchasers. The incentive would be to compete on the basis of quality and not on the basis of risk selection i.e. cherry picking. The centralisation of the purchasing process could come at the expense of a decrease in responsiveness to local needs and adaptability, as well as an increase in lengthy bureaucratic processes, due to the centralisation of the Fund at the national level.(19) These issues are particularly pertinent, given the size and scope of the health system.(27) In contrast to the proposed centralisation under NHI, the majority of countries are moving towards decentralising financial management functions, so as to enable critical financial decision- making to happen more locally.(27) While the benefits of economies of scale may be clear in some aspects of the health system, the importance of local relevance may outweigh these benefits in others.(19) To allow for increased local responsiveness, the NHI Bill has proposed local-level contracting units for primary health care, which will choose the combination of services and providers best suited to the relevant population.(27) The German experience, where purchasing functions are largely centralised at a national level (with some purchasing at a state level) demonstrates that various compromises between national and local levels, achieved through constructive conversation between stakeholders, need to be made in order for the system to work.(28) Germany has selected a multi-funder approach with multiple public insurance schemes that are able to be responsive to local-level needs while still benefitting from risk pooling at a national level.(28) In the proposed single purchaser model for the NHI, there is no room for competition between purchasers. This raises the concern of purchaser complacency, through the elimination of the potential benefits of such competition, both in relation to clients of the health system and health care providers. The benefits include improved service levels, improvements in the ability to purchase on the basis of value, the impact of strategic purchasing interventions and attempts to secure contracts with providers.(19) This lack of competition also removes incentives for efficient administration in the provision of and access to health care.(27) A single purchaser could, therefore, create an imbalance in the relationship between providers and the purchaser, as well as between clients and the purchaser, owing to the elimination of choice.(27) The Fund is reliant on a trusting relationship between the State and providers. Providers (public and private) will become heavily dependent on the fairness, rationality and effectiveness of the Fund(19), and vice-versa, the Fund will become heavily reliant on providers.(19) One of the risks driving the choice of a single purchaser, is the concern that providers would not choose to contract with the NHI Fund, given historical mistrust between the public and private health sectors. To prevent this, the Fund will need to build trust and credibility with providers.(19) Figure 1: Sticking points around having a single purchaser 6. The role of medical schemes limited to complementary cover 6.1 What does the NHI Bill state about the role of medical schemes? The medical schemes referenced in the Bill include medical schemes registered in terms of the Medical Schemes Act 1998 (Act No 131 of 1998) and any voluntary private health insurance scheme. The role of medical schemes is outlined in section 33 of the NHI Bill. This section was not included in the prior version of the Bill (from June 2018) and its inclusion has been contentious. Section 33 of the NHI Bill states: “Once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.” 6.2 Concerns with the role of medical schemes The inclusion of Section 33 in the NHI Bill has led to a great deal of uncertainty around the role medical schemes will play once the NHI has been implemented. The ISI roundtable meeting in November 2019 highlighted the dissatisfaction with this addition to the Bill. Medical schemes have stated their intent to fight the clause on its constitutionality.(25) Given that the Bill does not specify the benefit package, it is hard for schemes to know the extent of the services they would still be able to deliver under the NHI. It is also anticipated that the NHI benefit package will change over time raising pragmatic concerns around ongoing required changes to the corresponding medical scheme packages. It is also unclear precisely how complementary is defined in relation to referral pathways, clinical protocols, formularies, provider choice and waiting times. The Helen Suzman Foundation(29) highlighted confusion on whether the ‘complementary cover’ would only be relevant for those who choose to opt into NHI (individuals or providers). This is an unlikely interpretation given the Bill’s intention to collapse the current twotiered system. However, other stakeholders expressed similar confusion in classifying ‘complementary cover’ and there is widespread frustration at the vagueness of the role of medical schemes.(30) (29) (23) (25) The Bill and supporting documentation fail to provide justification for the inclusion of Section 33, which has led stakeholders to make assumptions about the rationale and present their arguments against this assumed rational: Section 33 may be intended to deal with maldistribution of provider resources across the private and public sectors. However, it is argued that a key challenge regarding resources is a lack of funding in the public sector together with poor working conditions, which contribute to pushing health care providers into the private sector. This links to the monopsony concern raised in relation to a single purchaser. Moving all health care to the NHI is expected to lead to a reduction in income for private hospitals, private doctors, and pharmaceutical companies, among others. This could lead to job losses and decreases in tax revenue. Many in the private sector do not believe that the agreed upon tariffs will be acceptable, even with the increase in volume.(25) This may result in a ‘brain drain’, with health care workers choosing to leave South Africa for other countries offering a higher earning potential. Section 33 may be intended to redirect existing medical scheme funds into the NHI Fund, or at least replace household contributions to medical schemes with increased taxation directed to the NHI Fund. The former is unlikely as scheme funds belong to their members, 25 i.e. this is not legally possible. There is no connection between prohibiting private schemes and implementing an NHI that is tax funded. The individuals who would make use of medical schemes post NHI implementation would still be contributing toward the NHI Fund through tax (i.e. a duplicative system is possible, where contributions to the NHI Fund are compulsory, but membership is not). The inclusion of Section 33, without sharing the evidence driving the decision, negatively affects investor sentiment. A key concern from a UHC perspective is that preventing medical schemes from providing cover could increase out-of-pocket expenses thereby reducing access and driving inequality.(25) It is argued that the inclusion of Section 33 will adversely impact both the health care system and economy. The economic consequences include the direct impact on the private health care funding industry. There is also the second order impact on health care providers in relation to reduced revenue, and there may be foreign direct investment (FDI) and multinational implications due to limitations on access to private cover and care. The inclusion of Section 33 increases the burden on the State by forcing those who can afford to fund themselves to transfer to the NHI – these are typically clients with a high degree of agency and an expectation of higher levels of utilisation. While this pressure on the NHI Fund may drive system improvements, the pressure could also have negative implications. Furthermore, scheme members are generally older, which makes them a more expensive cohort of individuals, given the relationship between age and non-communicable diseases such as diabetes. By including more people, and a ‘riskier’ group of people, the Fund will require more money to successfully purchase the necessary care. The increase in clients for the State will place further burden on both the purchasing and provision side. A potential solution for the dilemma of expensive older clients in the Fund is the opt out system followed in Germany. Individuals are able to opt out of public health insurance funds before the age of 55.(28) Once they have reached the age of 55 they are not allowed to join public insurance funds anymore. This is used as a way of encouraging people to belong to statutory sickness funds rather than private insurance schemes at younger ages and contribute when their health need is not as high yet. Given the shortage of human resources for health in the country, many have expressed concern that the system would not cope with the demand for care under a complementary cover set up, particularly as some private providers may choose to emigrate or leave their professions rather than accept regulation by the NHI Fund. Many stakeholders feel that it would be more sensible to allow those who can afford to pay for private health care to do so, while still mandating that they contribute to the NHI Fund. This is aligned with the approach used in the United Kingdom, where there is a successful National Health Service alongside an active private health insurance sector.(25) Stakeholders largely agree that medical schemes need intervention as their current operations were not aligned with the goal of UHC. However, the role of medical schemes presented in the latest NHI Bill fails to consider the numerous measures that the HMI report recommended to strengthen the private health care sector. The recommendations are referenced by most stakeholders as less drastic actions to take in the first steps in moving towards UHC. Although there is acknowledgement that private health sector costs are far too high, the HMI’s solutions include more closely regulating pricing, strengthening social solidarity mechanisms and increasing the incentives for strategic purchasing rather than significantly reducing the role of the sector. The combined effect of these factors is therefore a questioning of Government’s ability to implement UHC without the involvement of the private sector. Stakeholders see the move to NHI as an opportunity to focus on successfully regulating the private sector rather than banishing it.(23) (29) (30) Figure 2: Concerns related to Section 33 7. Quality assurance and quality improvement mechanisms 7.1 What does the NHI Bill say about accreditation and quality? The NHI Bill positions the accreditation of health service providers as a mechanism to ensure the quality of health services provided. The Bill states that accreditation of health service providers includes certification from the Office of Health Standards Compliance (OHSC) (page 21, section 39): “In order to be accredited by the Fund, a health care service provider or health establishment, as the case may be, must (a) be in possession of and produce proof of certification by the Office of Health Standards Compliance and proof of registration by a recognised statutory health professional council, as the case may be.” The NHI Bill then goes on to explain that the first phase of implementation will improve quality through certification (page 47, section 2.2.1): “The intermediate preparatory phase involves improving the quality of the health system by first certifying the health facilities to ensure they meet the requirements of the Office of Health Standards Compliance.” The Bill also makes some reference to purchasing care (it refers to contracting) from accredited public and private providers (page 20, section 37.1.2(b-c): “A contracting unit for primary health care… must assist the fund to b) identify accredited public and private health care service providers at primary care facilities; c) manage contracts entered into with accredited health care service providers, health establishments and suppliers in the relevant sub-district in the prescribed manner and subject to the prescribed conditions”. Furthermore, in the Schedule to the Bill a “provider payment” is defined as “payment to providers in a way that creates appropriate incentives for efficiency in the provision of quality and accessible health care services using a uniform reimbursement strategy”. However, there is no detail provided on how the creation of these incentives is envisaged to take place. 7.2 How to measure quality The measurement of quality of health services is a complex undertaking, owing to the multi-dimensionality and depth of the concept of quality itself. It is therefore useful to differentiate which aspects of quality are being measured, and by which measures. Quality measurements can be broadly grouped as structural measures, process measures and outcome measures as per Donabedian’s framework (Figure 3).(31) Figure 3: Donabedian’s quality framework(31) The certification of health facilities by the OHSC (which is one of the prerequisites for provider accreditation as per the NHI Bill) ensures that facilities meet a minimum set of requirements, through measuring the structural aspects.(32) Given their tangibility, structural aspects are the easiest to measure and assess but they lend themselves to less frequent assessment. While structural quality serves as a necessary foundation for the provision of quality care, it is not sufficient on its own to reflect the quality of care delivered.(32) Accreditation is only one aspect of quality measurement. Accreditation is generally a static process. Quality measurement can be used in a more ongoing way by using the data created when interacting with the health system as part of the measurement toolkit. Therefore, a purchaser is able to relatively quickly pick up where there have been episodes of poor quality (for example, by analysing the occurrence of bed sores in hospitalised patients) and intervene timeously. Accreditation processes can also be costly, given that assessors would need to visit facilities semi-regularly to ensure compliance. The other process and outcome measures provide a more efficient way to measure quality between assessments. Linking reimbursement to quality measures can also help to improve quality. If the NHI Fund is seen to value quality and is able to quickly pick up and intervene where there are quality issues, it could also help the provider space to self-regulate to ensure their continued contracting with the Fund.(32) 7.3 Concerns surrounding the proposed quality measurement Various NHI submissions have raised concerns around the accreditation of providers and the implications thereof on quality of health services. A key concern is that while the NHI Bill highlights the need to ensure quality health care, it provides little detail as to how this will be achieved(33) or monitored.(24) The lack of process quality measures, with regard to treatment guidelines and protocols, was a common complaint.(24) Many feel the Bill also fails to acknowledge the complexity of ensuring and improving quality.(33) There is also concern that a large number of public health facilities will not meet the certification requirements of the OHSC, based on the OHSC 2016/17 Annual Inspection Report which found only seven of the 696 investigated facilities achieved scores of 80 percent (the benchmark score for compliance) or more.(23) The low level of compliance in the public sector raises the concern as to whether there will be enough accredited providers to deliver the care envisaged by the NHI, since the Fund can only contract with accredited providers.(32) An insufficient number of accredited providers will result in over-burdening of facilities that are contracted by the NHI, and is likely to translate to decreased quality of care as a result.(34) This also poses a threat to access to health care, which will be reduced if many existing facilities are not contracted by the Fund, especially in rural areas where there may only be one health facility for a large geographic region.(33),(35) Furthermore, there is a question as to what will happen to public facilities, and their employees, that are not accredited.(33) Stakeholders have also questioned whether the OHSC has sufficient budget and personnel to routinely investigate and monitor compliance to certify all the health facilities in the country.(33) The Department has attempted to answer this by stating that the non-compliant facilities will be supported to become compliant. However, public health facilities should technically already be providing quality care and therefore the Department’s ability to ensure this, within a relatively short time frame, is questionable. Using certification to improve quality relies on the fear of not being certified to incentivise providers to improve quality. However, they may lack the necessary skills and tools to improve quality and may need to be supported through this process. The NHI Bill lacks a coherent framework for ongoing quality improvement. 8. Financial considerations: what are we buying, and can we afford it? 8.1 What does the NHI Bill say about affordability? The Bill makes mention of affordability only once, as a consideration for what the NHI Fund can purchase. The Minister of Health at the time made it clear that the NDoH was leaving the financial aspects to the National Treasury. The National Treasury was due to release a financing paper in support of the draft NHI Bill, that would detail the fiscal space available for NHI and the mechanism for revenue collection. Unfortunately, to date, the financing paper has still not been released. As mentioned in previous sections, the Bill does not include any detail on the benefit package. It states that the Benefits Advisory Committee, in consultation with the Minister and the NHI Fund Board would be responsible for determining the final package. 8.2 What are we buying? The lack of detail has made it impossible for stakeholders to comment on the benefits package and whether what we are ‘buying’ is appropriate or sufficient for the need. This came up in most submissions on the Bill and in our stakeholder interviews. Notably, it also came up in the Davis Tax Committee report of 2017, which analysed the 2017 NHI White Paper. In that report, the committee was clear that affordability cannot be measured without details of what is included in the package.(36) However, in the University of Witwatersrand’s School of Public Health NHI Bill submission, the authors argue that it may not be necessary to detail the benefit package. Instead it is recommended that the NDoH work on a ‘negative list’ of services that will definitely be excluded.(37) This is the method used in Thailand, on which South Africa has in many ways based its NHI policy. This would help medical schemes to begin to know what their complementary cover might include and will also give citizens and stakeholders a better idea of what services the NHI Fund is aiming to purchase. Furthermore, a sentinel book focusing on benefit package design and funding has emphasised the need for the benefits package to be a living document.(38) By writing into the Bill the specific package, the Government may prevent innovation and learning as the NHI takes off. Of keen concern then is the process for determining the benefit package. It is worth noting that the Bill does not currently link the benefit package process to the budget setting and affordability process nor the provider negotiation and reimbursement processes. The Bill also makes mention of a Health Technology Assessment unit, that will assist in cost-effectiveness decision-making to ensure affordability.(18) This body would ultimately inform what can be included in the benefits package. Transparency on how the HTA will assess cost-effectiveness would also assist to build support for the Benefits Advisory Committee. The lack of a benefits package to interrogate has remained a sticking point for almost all stakeholders. It has also inflamed discussionsaround the complementary cover clause for medical schemes. 8.3 Can we afford it? In 2017, the DPME conducted an impact assessment on the NHI White Paper.(39) Although the document references some more recent work by the NDoH supported by PWC, the majority of the costs still derive from the original Green Paper costing in 2011. This is problematic as the financial picture in South Africa has shifted dramatically since then. PWC has estimated that ~R3.6 billion is needed to implement the infrastructure and personnel-related costs for NHI implementation over six years for the ‘base scenario’. There is, however, no detail on what the base scenario includes and the NDoH has subsequently distanced itself from this costing as it was not based on sufficient evidence.(23) Most submissions also focused heavily on affordability. In one of our stakeholder interviews, it was emphasised that irrespective of what the State includes in the benefit package, the final available services will have to be in line with the available funding envelope. This could create a liability for the NDoH, where users are able to litigate against the State if they do not provide the services outlined in policy documentation, or if there is a contraction is services over time. This is further incentive to include a ‘negative list’ only, to prevent this scenario. Alternatively, a detailed and pre-costed package is required to ensure that the package is within the affordability parameters. The costs associated with the Fund should not be considered only a single-year time frame, or even over the short term. Long-term projections and stress-testing are necessary. The reimbursement mechanisms used for providers are relevant for consideration of longer-term costs. For example, a system like DRG’s allocates funds for every hospital admission. If hospital admission rates were to rise, so to would the financial obligation of the Fund. The fact that the financing paper still has not been released has also alerted stakeholders to perceived tension between the NDoH and National Treasury, bringing up further worries that the Bill has not been costed. The DPME impact analysis outlines five different scenarios (see Table 4) for revenue collection (with a stated preference for Scenario B). Table 3: Tax scenarios39 The Davis Tax Committee also outlined several options for revenue collection but still concluded with the finding that the scenarios for revenue collection outlined in the NHI White Paper (2017), would be insufficient to fund the NHI, thereby concluding that the NHI policy, as it was written in the White Paper, was unaffordable.(36) The use of general taxes and personal income tax has also been widely disputed as insufficient and overly punitive given the small tax base.(23) Professor van den Heever’s Bill submission further outlines the concern that no detailed financial feasibility assessment has been done since the 2011 Green Paper. Given South Africa’s current fiscal climate, including the ramifications locally and globally of the Covid-19 pandemic, stakeholders expressed grave concern over whether the NHI is achievable and particularly, whether it is achievable by 2025/26. The University of Witwatersrand submission cautions that if user expectations are not managed, the Fund may overspend on its budget, threatening its financial sustainability. A negative spiral has occurred in other lower- and middle-income countries (LMIC) where providers refuse to deliver care to registered patients, because they are not reimbursed or cannot rely on being reimbursed timeously. Essentially, this scenario would result in providers losing confidence in the Fund. Therefore, the submission calls for an implementation time frame that allows for gradual phasing in to build trust and for the development of an information system to safeguard quality and efficient provider payment. One stakeholder we interviewed for this report suggested that the State could, in the meantime, contract in some services from the private sector without much system reform, to bolster quality and availability in the public sector. This is meant to happen as part of Phase II of the NHI implementation. The lack of movement on this front has also made stakeholders more doubtful of the State’s ability to be a single, centralised, purchaser of health care services. Until the financing paper is released, questions of affordability will remain. In the absence of a benefit package, the finance paper would have to come from a top-down approach, outlining the funds that could be available for the NHI under the most palatable revenue collection scenario. It would then be up to the NDoH and the Benefits Advisory Committee to cost and prioritise which services it can reliably offer, within the given financial envelope. This would then need to be tested against current benefits offered in the largely free-at-the-point-of-use public health system. 8.4 Who to cover? Refugees and undocumented migrants The inclusion or exclusion of undocumented migrants and refugees has been a standing concern since the 2011 Green paper was circulated. As a way to curb costs, Government has suggested limited access for refugees and temporary residents. This has caused concern given South Africa’s Constitution, which allows for health care for all within its borders, irrespective of status. The move to exclude refugees and undocumented migrants would require a change to the Constitution,(40) which is unlikely. Section27 also notes that by excluding these populations from sexual and reproductive health care and HIV prevention and management services, South Africa is placing population health at risk. The DPME impact assessment offers a potential solution by suggesting a contingency fund for undocumented migrants and refugees. It suggests engagement with SADC countries and the African Union. The DPME assessment involved multiple stakeholders, and there was widespread agreement that these population groups should be covered within the NHI. 9. Governance and accountability The themes of governance and accountability were repeatedly raised in various NHI submissions and in interviews with stakeholders. Although the themes are related, here we discuss them separately and interpret governance arrangements as dealing with the structures that will govern the NHI Fund and its operations, while accountability refers to feedback, choice and incentive mechanisms that will ensure the NHI Fund and its providers are kept accountable to various stakeholder groupings. 9.1 Governance Fund governance was a common concern in Bill submissions and stakeholder engagements. In particular, many are worried about the relationship between the Minister of Health and the NHI Fund Board. The Bill currently states that the Minister will be ultimately responsible for selecting the Board and has the powers to dissolve the Board if s/he feels they are not performing. This creates a concern around the potential for corruption and poor accountability under this set up. The University of Witwatersrand submission also highlighted that the NHI reform is to institute a purchaser-provider split. The Minister would likely play a coordinating role between these two arms. Therefore, the Minister should not have a vested interest in either arm, in order to play a neutral arbiter role ensuring that the NHI meets its policy objectives.(37) The submission by Section27 and the TAC supports this point, calling for an oversight mechanism to safeguard the Fund from nefarious activity.(40) The history of State Capture in South Africa unfortunately has made many stakeholders suspect of centrally controlled, large government funds. A final key consideration highlighted by one of the stakeholders is that the results of the HMI report indicate that the state has failed to adequately regulate the private sector, despite it being a policy goal since the early 1990s. Weaknesses across the range of health regulators point to existing gaps in health system governance, and weaken trust in the likelihood of the Fund being well governed. 9.2 Accountability There are several concerns related to accountability within the NHI, we detail these, together with stakeholder-suggested remedies in Table 4 below. Table 4: Accountability in the NHI 10. Timelines and progress milestones 10.1 What does the NHI Bill state about timelines? The NHI policy papers (Green, White, and draft Bill) all speak of the rollout of NHI taking place over phases. In the draft Bill, the initial phase (2012-2017) was viewed as the testing phase of health systems strengthening initiatives, while the current phase 2 (2017-2022) is the phase during which supporting legislation has to be developed, the foundations of the Fund have to be established and interim purchasing of health services for vulnerable groups (e.g. women, children and the disabled) has to take place. Lastly, in the final phase (2022-2026), additional resource mobilisation by the Fund may start (e.g. contribution collection from salaried employees), and the Fund will start to purchase services from providers (the Bill refers to ‘selective contracting of services from private providers’).(18) 10.2 What are some of the objections raised? Six NHI submissions were considered (TAC, Section27, SAPPF, Helen Suzman Foundation, FW De Klerk Foundation and Professor van den Heever’s submission) and all six highlighted an objection to the proposed timeline. Largely, these objections related to the timeline being too short for successful implementation. Many of the necessary steps and considerations to achieve the timelines are not included in the latest Bill. The Helen Suzman Foundation highlighted that the State has previously failed to timeously implement a simpler initiative: the payment of social grants by SASSA in 2017. This does not instill confidence in the State and their ability to implement NHI. There is concern that the implementation of the NHI is being rushed. Section2740 and the TAC41 were also particularly concerned that the Government was continuing into phase 2 before there had been any publicly available assessment of the success of the initial phase.(41) Further, there appear to be no benchmarks or milestones set, making it difficult for external bodies to hold Government accountable. The FW De Klerk Foundation(30) also raises concern on the lack of feedback from the initial phase. The initial phase (2012 to 2017) planned to include activities in preparation to implement NHI such as strengthening the health system. There were lessons to be drawn from this phase and recommendations were provided based on an evaluation of this phase. However, the Bill does not mention how it will implement the recommendations and it does not acknowledge the existence of the initial phase which both hinders the ability to draw lessons from the initial phase/pilot but also creates confusion. Another salient concern was the lack of detail in the timeline – the Bill often defaults to providing the Minister with the power to decide on the detail at a later stage. A further criticism is around the lack of clarity in the transitional arrangements presented in the Bill.(42) For example, it is stated that interim purchasing of personal health services for vulnerable groups will occur in the current phase yet there is no mention of which legal framework the purchasing will occur under nor when such a framework will be established. Similarly, the transitional arrangements outlined for the final phase are vague and fail to provide meaningful detail. The Helen Suzman Foundation(29) states that the lack of detail in the implementation plan allows the minister to decide on when the publication of necessary regulations will occur and effectively construct their own timeline. Lastly, there is doubt that enough public health facilities will be fully accredited by the OHSC in the provided implementation timeframe in order to deliver meaningful access to quality care. Given the current weaknesses in the public sector and infrastructure, the low level of resourcing of the OHSC and the lack of a quality improvement framework, this may lead to insufficient capacity to rollout the NHI or an NHI reliant on sub-optimal providers. This threatens support for the reform. Van den Heever(23) supports the notion that the proposed institutional framework cannot be achieved in the given timeframe, labelling the Bill unjustifiably optimistic and over-ambitious. 10.3 How can we prepare the way for NHI? Strengthen the purchasing function while enabling innovation in service delivery: It is possible to strengthen the purchasing function in the short term in the public and private sectors. Certain key elements of the purchasing function can be strengthened prior to implementation: accreditation, health technology assessment, information system strengthening, clinical coding, levelling of professional rules across the public and private sectors and experimentation with provider contracting are all examples. The current budget structure limits innovation in public service delivery. Learning sites will be essential to enable experimentation and testing of alternative service delivery models. This can be done ahead of full implementation. There are numerous pragmatic impediments to innovation which will need to be interrogated and dismantled – budget structures, salary determination, Public Financial Management Act (PFMA) rules etc. Similar to the strengthening of the purchasing function, certain rules of the HPCSA will also have to be amended to allow for team-based remuneration and telehealth that will be required as part of new models. Invest in people now: Reflection on years of provision of universal health coverage by the UK’s NHS has shown that getting the human resources right is critical to the success of UHC (Friebel et al. 2018). South Africa’s last Human Resources for Health (HRH) Strategy in 2011 (Department of Health 2011) was never comprehensively implemented. The development of a clear human resources operational plan was articulated as an outcome of the Presidential Health Summit that took place in October 2018 (Gonzalez 2018). HRH shortages have been noted in terms of doctors (GPs), specialists, nurses and dentists. Ensuring a sufficient healthcare workforce is available by the time of the first roll-out and implementation of NHI is something that must happen now already and requires continual planning and engagement to ensure future availability. Under-staffing and low HRH capacity will strengthen the notion of weak government capacity and quality, leading to lack of trust and buy-in to NHI as a concept. Much needs to be done to improve public-sector working conditions, the absorption of the training pipeline into the system, and the ability of doctors to work across both sectors. Task-sharing and the role of mid-level health workers need to be strengthened, and the current problems with vacancies fixed. These improvements will be critical to regaining the trust of healthcare providers. Take stakeholders along on the journey: The German process of transitioning to UHC has shown how important it is to take all critical stakeholders along on the journey.(28) Significant trust can be built by being responsive to the needs of stakeholders and involving them in the transition process. In Germany, it was found that a medium-term process of working intensely with important stakeholder groups supported a transition process. An independent research group worked closely for a period of three years with key health system stakeholders to arrive at consensus outcomes and ideas on the changes required.(28) Six books were published from this engagement. It meant the perspectives of all stakeholders were captured and shared in a public way.(28) 11. Potential constitutionality issues raised by the NHI Bill The ISI produced a separate report(43) that focuses only on the constitutionality issues that may arise from this Bill. Many of the concerns raised relate to areas of uncertainty in the draft Bill, and, depending on the implementation of the Bill, constitutional issues may arise at a later stage. Note that further legal input is required to engage with whether the issues outlined below are meaningful concerns, or not. Many stakeholders have questioned the constitutionality of Section 33 of the draft NHI Bill, in particular. For brevity in this report, we only include those issues foremost in stakeholder engagements and in various NHI submissions. (30) (25) (29) (23) Section 18 of the Bill of Rights guarantees every person to the right to freedom of association. It is argued that requiring all citizens to fall under the NHI may be limiting one’s right to decide who to associate with. Entrenched in section 12(2)(b) of the Constitution is the right to bodily and psychological integrity. It is argued that the freedom to choose health care services is tied to this right. Section 25 of the Bill of Rights speaks to the right to property and it is argued that the inclusion of Section 33 in the NHI Bill may be infringing on this right. Section 27(1) of the Constitution speaks to the right to access to health care. Government may not hinder individuals from themselves giving effect to this right. Section 33 of the NHI Bill may therefore be infringing on this right by reducing access to health care for some. By taking away substitutive or duplicative medical scheme cover and thereby forcing individuals to register to become users of the NHI Fund, the State is argued to be potentially infringing on “the most basic contours” of a person’s life “through coercion”. Section 36 of the Constitution states that rights in the Bill of Rights may be limited if the limitation is reasonable and justifiable. This includes taking into consideration the relationship between the limitation and its purpose and consideration of less restrictive means to the purpose, among other considerations. Stakeholders suggest that the Bill will fall short of this clause due to the inadequate justification and lack of evidence of considerations of other measures to achieving UHC. 12. Learnings from the Covid-19 pandemic for NHI South Africa is likely to fare worse than the Global North as a result of Covid-19 because our health system and economy are both more fragile, we have fewer health workers, and access to health care in rural parts of the country is poor. The pressure on the health system impacts not just on patients but on health workers too. Weak leadership is made visible because it exacerbates the situation by not being sufficiently responsive and clear. Covid-19 has highlighted the weaknesses in both the public and private health system, and driven home the need for UHC in South Africa. In our engagements with one stakeholder they expressed a desire for an integrated health system and argued that Covid-19 should make the need for such a system very clear. Systems that have functional UHC, like Germany, have managed to weather the Covid-19 storm better than those without UHC or with weak health systems. Covid-19 has also given us a glimpse of what is possible for health system reform: rapid innovation in digital access to health, the deployment of community health workers to accelerate our response, home delivery of medicines in the public sector and private sector doctors willing to roll up their sleeves for the public good. The centrality of stewardship is beyond question. There are many things that would have made our health system more resilient but were missing because of lackadaisical regulation and oversight. Examples include the lack of progressive telehealth regulations and the absence of risk-based capital regulations for medical schemes. Other elements of the health system have also been highlighted through the pandemic. A gross under investment in technology has resulted in difficulties with patient management across facilities and sectors (for example, electronic patient records) and the availability of tracking and tracing technology to curb the spread of Covid-19. Manual and paper-based systems have fallen over with high patient volumes, and this is critical to improve before instituting a nation-wide system. Covid-19 has highlighted some of the contracting capabilities that we need to build as we move toward NHI. For example, agreement on tariffs for Covid-19 patients to be treated in private hospitals was challenging albeit eventually reached. Covid-19 has provided an opportunity for NDoH and Treasury to ensure that provider reimbursement is timeous and fair during this period. Dealt with appropriately, this could go a long way to building trust between the sectors. However, most pressing on everyone’s mind is the way in which Covid-19 has decimated economies around the globe. This has further weakened stakeholders’ belief that the NHI is an affordable option for South Africa. Given the increased reliance on loan funding, it is likely that South Africa will come under increased lender scrutiny around the financial sustainability of major policy changes. During the pandemic, medical schemes came together to discuss how their reserves could be used to ensure care during an unusually high utilisation period. The WHO has asked how the NHI Fund plans to ensure there are enough reserves to allow for the same kind of security. As we continue to weather the storm, no doubt there will be more lessons and more opportunities to practice some of the mechanisms that the NHI and the NHI Fund plan to rollout. If done well, this could provide the experience needed to build trust and confidence in NHI reforms. 13. The way forward This report is a precursor to a summary document laying out the critical policy choices relative to health system objectives as set out in various policy papers between 1994 and 2019, as identified in this report. The intention of this report was to provide an overview of various critical issues and concerns stakeholders have raised with regards to the NHI Bill. Arguments for and against certain positions taken in the bill were presented. The report ended with reflections on how the Covid-19 pandemic is already shaping the future of NHI. Critical interrogation of key sticking points between stakeholders is required in order to not only question the way forward proposed by the NHI Bill, but to also find a practical road ahead that can take all critical stakeholders along on the journey. There is a need for research to inform a way forward that is cognisant of the shortcomings of the current system, both public and private, and the advantages and disadvantages of the proposed reforms. In questioning the way forward, it is useful to conceptualise an inter-connected set of reforms – enabling thinking about a series of policy choices and the sequencing of implementation. 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South African Med J 107 109. 2017;107(12):1099. doi:https://doi.org/10.7196/SAMJ.2017. v107i12.12539. Van den Heever AM. South Africa’s universal health coverage reforms in the post-apartheid period. Health Policy (New York). 2016;120(12):1420-1428. doi:10.1016/j.healthpol.2016.05.012 Van den Heever A. National Health Insurance Policy Bill Review.; 2019. South African Private Practitioners Forum. Submission on Draft NHI Bill to National Department of Health.; 2019. Inclusive Society Institute. Towards Inclusive Healthcare. Cape Town; 2020. doi:10.4018/978-1-4666-4245-4.ch011 Competition Commission. Health Market Inquiry. Pretoria; 2018. http://www.compcom.co.za/wp-content/uploads/2018/07/Health-Market-Inquiry-1.pdf. Percept Actuaries and Consultants. Strategic Purchasing HASA Policy Brief Series: Brief 7. Cape Town; 2019. Inclusive Society Institute. Lessons for South Africa on Transitioning to Universal Health Coverage from the German Experience. Cape Town; 2020. doi:10.1017/CBO9781107415324.004 Helen Suzman Foundation. The National Health Insurance Bill Submission by the Helen Suzman Foundation to the National Assembly’s Portfolio Committee on Health.; 2019. The FW De Klerk Foundation. Submission on the National Health Insurance Bill [B11-2019].; 2019. Donabedian A. Evaluating the quality of medical care. Reprinted 1966 article. Milbank Q. 2005;83(4):691-729. doi:10.1111/j.1468-0009.2005.00397.x Percept Actuaries and Consultants. No Strategic Purchasing HASA Policy Brief Series: Brief 5. Cape Town; 2019. Helen Suzman Foundation. The National Health Insurance Bill Submission. Cape Town; 2019. The FW de Klerk Foundation. Submission on the National Health Insurance Bill. Cape Town; 2019. Section27, Treatment Action Campaign. National Health Insurance Bill Submission. Cape Town; 2019. The Davis Tax Committee. Financing a National Health Insurance for South Africa.; 2017. Goudge J, Kawonga M, Mosam A, Wishnia J. Comments on the NHI Bill.; 2019. doi:10.1017/CBO9781107415324.004 Glassman A, Giedion U, Smith PC. What’s In, What’s Out: Designing Benefits for Universal Health Coverage.; 2017. DPME. Socio-Economic Impact Assessment System (SEIAS): Final Impact Assessment (Phase 2): White Paper on National Health Insurance.; 2017. Section27, TAC. Submission On The National Health Insurance Bill 2019.; 2019. Section27, TAC. Section27 And Treatment Action Campaign Submission.; 2018. SAPPF. Submission on Draft NHI Bill to the National Department of Health.; 2018. Inclusive Society Institute. Briefing Document: Brief to Senior Counsel for Formal Legal Opinion; Potential Constitutional Issues Arising from the Porposed NHI in South Africa. Cape Town; 2020. https://drive.google.com/file/d/1oaNITNgYc618G2A_uYEu6HzCLz-dVhty/view. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

Summary of themes from the panel discussion hosted on June 29, 2020 Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place on June 29, 2020 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel Motivated by the objective of fostering accelerated, transformative and broad-based growth, the Inclusive Society Institute is aiming to develop a new economic blueprint for South Africa. As part of this work, the institute is assessing the country’s current economic model and is seeking to benchmark economic policy frameworks against best-practice frameworks of other countries. This report considers lessons for South Africa from examining the growth path that the Japanese economy followed after World War Two. Content Abbreviations and acronyms Introduction Japan’s post-war growth Lessons from Japan Building a shared national vision Fostering social cohesion Strengthening the State’s role in development Providing policy support to exports Promoting food productivity Nurturing capital investment Conclusion References Abbreviations and acronyms ANC African National Congress B4SA Business for South Africa DTI Department of Trade and Industry GDP Gross Domestic Product GFCF Gross-fixed Capital Formation JETRO Japan External Trade Organisation MITI Ministry of Trade and Industry NDP National Development Plan NGP New Growth Path RDP Reconstruction and Development Programme SARB South African Reconciliation Barometer SADC Southern African Development Community SoE State-owned enterprise WW2 World War Two Introduction South Africa’s economy remains stubbornly sluggish. Even before the Covid-19 pandemic, the country was unable to produce the growth needed to address historic backlogs and propel the economy into a new growth phase. Prior to the new novel coronavirus that turned the global economy upside down, South Africa’s gross domestic product (GDP) growth was forecast to be below 1% (National Treasury, 2020). The shutdown measures to contain the spread of the virus further throttled the economy, which is now on course for its biggest contraction in nearly 90 years. GDP is forecast to shrink by 7.20% in 2020 (Mboweni, 2020). The global economy is also heading for its deepest recession since World War Two (WW2), with a decline of 5.20% forecast, compared with a pre-Covid-19 estimate of a 3.30% expansion in 2020 (World Bank, 2020). Globally joblessness is rising. In South Africa, using a narrow definition that excludes many of the long-term unemployed who have ceased actively looking for employment, South Africa’s unemployment rate increased by one percentage point to 30.10% in the first quarter of this year (Stats SA, 2020). Unemployment is forecast to increase further to 35.30% by the end of the year (IMF, 2020). Tax revenues are projected to fall sharply in South Africa’s 2020/21 financial year from about R1.43-trillion to R1.12-trillion, contributing to a sharply higher-than-expected consolidated budget deficit of about 15.70% of GDP (Mboweni, 2020). The growth trajectory of public debt is rising sharply. Finance Minister Tito Mboweni says the country has a “Herculean task” to stabilise its national debt, which will be close to R4-trillion, or 81.80% of GDP, by the end of the 2020/21 financial year (Mboweni, 2020). The coronavirus pandemic has exacerbated South Africa’s problems and highlights the need for reforms to generate strong and sustainable growth. Inclusive Society Institute CEO, Daryl Swanepoel, says imaginative thinking is required to catapult the country out of its current downward trajectory. Simultaneously, the economy must be transformed to address inequality, to mainstream the informal sector and to become more demographically inclusive. The institute’s deputy chairperson, Professor Zweli Ndevu, who is also head of the School for Public Leadership at the University of Stellenbosch, says South Africa must scrutinise its current economic policies and fix the shortcomings of those policies. “The Covid 19 pandemic offers a portal to another world, one which we may call a new world. Because we cannot dare to go back to the normal – the ‘old world’ as we know it,” says Ndevu. “Everywhere, everyone is talking about reinventing, changing the economy to be equitable and more sustainable, but the question remains, what form will this take and will this be an inclusive process?” The Inclusive Society Institute aims to work towards developing a new economic blueprint for South Africa – motivated by the objective of fostering accelerated, transformative, and truly inclusive and broad-based growth activity. As part of this, the institute is assessing the country’s current economic model and is seeking to benchmark current and future economic policy frameworks against best-practice policy frameworks that have been effective in other countries and which have been effective at promoting inclusive growth, while beneficially integrating their economic activity into the global economic trade and investment architecture. As part of this overall mission, this report published by the Inclusive Society Institute considers lessons for South Africa that can be gleaned from examining the growth path that the Japanese economy followed after WW2. The information in the report is based on a June 29, 2020, webinar hosted by the Inclusive Society Institute. Participants in the webinar included: Dr Katsumi Hirano, executive senior research fellow at the Institute for Developing Economies, which is associated with the Japan External Trade Organisation (JETRO). Hirano was the former vice president of JETRO. Theo Vorster, a South African economist, and CEO at Galileo Capital. Professor Tania Ajam, associated with the School for Public Leadership at the University of Stellenbosch. She is also a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council. Vusi Khanyile, chairperson of Thebe Investments and a director of several public and private companies. He serves on the Presidential State-Owned Enterprises Council. Khanyile is also the chairperson of the Inclusive Society Institute. Professor Zweli Ndevu, head of the School for Public Leadership at the University of Stellenbosch. He is the Inclusive Society Institute’s deputy chairperson and chair of the institute’s Research Committee. Japan’s post-war growth The spectacular growth of East Asian nations in the decades following World War Two (WW2) led to their being considered the economic wonders of the world. Japan and the four ‘Asian Tigers’ – South Korea, Taiwan, Hong Kong and Singapore – have been dubbed the ‘miracle’ economies, because of their unparalleled accomplishments in the latter half of the twentieth century. Development economists recognise Japan’s rise after WW2 as the first appearance of the ‘East Asian Miracle’. Devastated by WW2, including nuclear bombardments and other raids, the ravaged Japanese economy rose from the ashes of WW2 to become the second-largest economy after the US. In 1964, Japan became a member of the Organisation for Economic Cooperation and Development, signalling its successful transformation into a fully industrialised economy. Numerous economists, political scientists and historians have examined Japan’s economic acceleration. The country’s growth story is mostly credited to intensive and systematic cooperation between government bureaucrats, such as those working in Japan’s Ministry of Trade and Industry (MITI), and businesspeople, such as the leaders in major companies – dubbed the zaibatsu – involved in the manufacture of, among others, steel, ships, automotives and electronics, which set the economy on a path of export-led expansion (Imade, 2016). This process was buoyed by aggressive domestic investment, selective protectionist barriers, industrial policies that promoted targeted industries, research and development, as well as technology imports from the developed world. Growth in real GDP per capita in Japan, Britain and the US, 1870 to 2008 Source: The Maddison Project US involvement in the immediate aftermath of WW2 and during the Cold War, when the US was cultivating global alliances, also contributed to Japan’s economic rebound. Between 1945 and 1958 – considered the recovery period – Japan’s per capita GDP increased at an average of 7.10% a year. This was followed by a period of high economic growth from 1959 to 1970, averaging 9.50%. During this period, economic growth exceeded 10% in 8 out of 12 years (Beckley, Horiuchi and Miller, 2018). By 1973, Japan had nearly caught up with Western nations, with a GDP per capita of 95% that of Britain and 69% that of the US. That was the last year of the so-called rapid-growth era, but the Japanese economy continued to expand at a comparatively rapid rate for almost two more decades (Tetsuji, 2015). By 1991 – the last year of the ‘bubble economy’ – Japan’s GDP per capita was 120% that of Britain and 85% that of the US. From 1986 to 1991, real estate and stock market prices were greatly inflated. In early 1992, the price bubble burst and Japan’s economy has since then continued to stagnate, with persistently low rates of economic growth and ongoing risks of deflation, exacerbated by the demographic realities associated with an aging population (Tetsuji, 2015). Lessons from Japan The key lessons that South Africa can learn from Japan’s economic development can be categorised under the following headings: Building a shared national vision Fostering social cohesion Strengthening the State’s role in development Providing policy support to exports Promoting food productivity Nurturing capital investment Building a shared national vision The development experience of Japan reflects the importance of a shared vision or common focus that a country can rally behind. For many decades, Japan’s top national priority was to catch up with industrialised economies. The vision took hold during the Meiji era in the late nineteenth century and continued after WW2 until the early 1970s, when Japan’s economy matured. During this time, economic policies and corporate strategies were geared to achieving a common vision: ‘to catch up with the West’ (Tetsuji, 2015). The lesson for South Africa is that for accelerated inclusive growth to be achieved, it will be necessary that a common strategic vision be developed that is shared among those in the country’s public and private sectors, non-governmental organisations and by society as a whole. Unlike a relatively homogenous society like Japan, South Africa, which is more racially, ethnically and regionally diverse, will also need to develop a common ‘sense of us’ – uniting the people of the country in their diversity – to effectively create a rallying point. A common vision will enable people to address and overcome historical exclusion and inequality and make the sacrifices needed to fast-track development. This approach has been broadly reiterated by South Africa’s governing political party the African National Congress (ANC) in its document on ‘Reconstruction, Growth and Transformation’, released in response to the Covid-19 pandemic, where it has stated that: “The private sector, workers and the rest of civil society will variously and jointly have critical contributions to make in devising and implementing the [country’s economic growth and development] plan, ranging from investment, implementation of initiatives agreed upon in recent summits and in sector charters, to broad agreements on productivity and income, a new approach to representivity in enterprise governance structures and management of relationships between enterprises and communities in which they are located” (ANC Economic Transformation Committee, 2020). Many overlapping and similar points have been outlined in South African business’s response to the Covid-19 crisis contained in the B4SA document ‘A New Inclusive Economic Future for South Africa’, which states that the country “requires a social and economic compact between all partners with the focus on shared prosperity” (B4SA, 2020). Post-apartheid South Africa has a history of such intentions, but the problem has been in the lack of effective execution of well-intentioned plans. The Reconstruction and Development Programme (RDP) that the ANC government of Nelson Mandela implemented in 1994 tried to facilitate and create such a national vision. The RDP was aimed at addressing the socio-economic problems facing South Africa at the time. Although viewed as the cornerstone of government development policy, the RDP did not deliver as hoped for, particularly in terms of economic growth and transformation (South African History Online, 2020). Consequently, the ANC government unveiled a new vision in 2011, the National Development Plan (NDP) – to chart a path for the country, arguing that South Africa looks “very different to the one left behind in 1994” (NPC, 2011). Yet, for many poor South Africans, there is still much that looks the same, highlighting serious shortcomings in the country’s development path. In December 2012, the NDP was adopted as the blueprint for future economic and socio-economic development. Dr. Katsumi Hirano Inclusive Society Institute chairperson, Vusi Khanyile, who is also chairperson of Thebe Investments and a director of several public and private companies, argues that one of the shortcomings of the socio-economic policy framework is that programmes are often administration bound. When an administration changes, so do its plans. “Administrations must know we are all in a relay. You pick up the baton and you know where you are running to. We need to improve our capacity to develop a vision that goes beyond the timespan of an administration.” “I long for the time that we can say as South Africans, we have a generally accepted vision of South Africa that we desire, how it will function and what it will look like,” says Khanyile. Fostering social cohesion A cohesive society is one where citizens feel they can trust their neighbours and State institutions. One where individuals can seize opportunities for improving their own well-being and the well-being of their children. Social cohesion is often described as the glue that holds societies together (OECD, 2011). Still transitioning from its racially divided past, South Africa remains mired in inequalities and lack of social cohesion. In the case of democratic South Africa, the foundations for social cohesion were laid by President Mandela. However, from an outsider’s perspective, executive senior research fellow at the Institute for Developing Economies, Dr Katsumi Hirano, says it appears that South Africa has lost its way in its drive to become a non-racial society. Hirano, who was stationed in Zimbabwe in the 1980s before being posted to South Africa, says he is “deeply disappointed” in the political development of both countries post-democratisation. The emigration of many white businesspeople, in his view, poses serious problems for the future growth and development of the South African economy. “Becoming a truly non-racial society is the big starting point for South Africa’s reconstruction,” he says, arguing that the marketplace must develop the fundamental right for all to participate without regard for social position. Khanyile suggests that South Africa should prioritise the need to improve collaboration among South Africans, irrespective of race or gender. “For as long as we are kept apart by the historic division that we have had, we cannot talk of social cohesion.” Source: South African Reconciliation Barometer 2019 Strengthening the State’s role in development The economic policy of the State was a key factor in the fast growth that Japan experienced in the post-WW2 era. The MITI was the central architect of Japanese industrial policy and was one of the most influential agencies of the government. At the height of its influence, MITI effectively ran much of Japan’s research and directed investment. MITI facilitated the early development of nearly all major industries by providing protection from import competition, technological intelligence, help in licensing foreign technology, access to foreign exchange and assistance in mergers. A major objective of MITI was to strengthen domestic manufacturing interests. Today, it is known as the Ministry of Economy, Trade and Industry. Hirano describes the model that Japan followed as an administrative State, or a developmental dictatorship – one in which Parliament has less influence and the administration office, especially in the economic department, significant power to lead the country on a path to high economic growth (Hirano, 2020). It is said that, in a political system where bureaucracy is given sufficient scope to take initiatives and operate effectively, politicians ‘reign’, while bureaucrats ‘rule’. Japanese bureaucrats were well acquainted with economic and industrial knowledge, and the government bureaucracy attracted the ‘brightest and the best’ to help to administer and manage the programmes of Japan’s developmental State. Collaboration between the State and big business has long been acknowledged as the defining characteristic of the Japanese economic system. Hirano says there should be closer collaboration between government and business in South Africa, a suggestion with which Professor Tania Ajam, from the School for Public Leadership at the University of Stellenbosch, agrees. Currently, mutual distrust exists between government and business, as South Africa is only just starting to emerge from a decade of State capture. The damage that State capture inflicted on the South African economy has been laid bare during the response to the Covid-19 pandemic. State capture under the administration of former President Jacob Zuma has destroyed trust and State capacity. Ajam emphasises that the country needs honest and competent people in government. “When you mention issues around cadre employment, you always get told ‘oh, but America does it’. If you look at [US President] Donald Trump and you see the deployment of incompetent cadres, you see why America is bearing the cost now of eroding the State capacity they have” (Ajam, 2020). The quality and types of bureaucrat also play a vital role in advancing economic development. Individuals in bureaucratic positions must be independent of political and business networks. “The people we have in the Department of Trade and Industry (DTI) and a lot of these small business agencies have never run a business themselves. They do not have networks in business. All they have is political connectivity. We want to get to the type of bureaucrat who understands politicians, because that is very important, but also understands business people,” Ajam says. This is particularly important if South Africa is to successfully manage the vision it needs its State-owned enterprises (SoEs) to fulfil. The country’s SoEs are facing severe financial difficulties and operational problems, yet government has placed these enterprises at the centre of the State developmental agenda. Whereas State-owned power utility Eskom had the potential to play a major developmental role on the African continent, it is now a burden on the fiscus, with debt of R450-billion. Providing policy support to exports Export-oriented industrialisation was characteristic of the development of the national economies of Japan and the Asian Tigers in the post-WW2 period. Through export-led growth, governments seek to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets. Much of Japan’s growth was based on competitive exports of products in which the country had a specific benefit or relative competitive edge. Two of South Africa’s export success stories are the motor vehicle industry, which is incentivised by government, and citrus fruit exports. South Africa is currently the world’s second-largest citrus fruit exporter. Export performance, according to former World Bank chief economist, Anne Krueger, is a function of effective government policies. Success with the export-promotion model requires supportive government intervention. However, South Africa will need to be selective in choosing in which sectors it is most likely to have export success. To successfully build an export market, South Africa must start with the industries in which it already has a strong foothold and see how those could be moved up the value chain. In some areas, such as the automotive sector, as well in the export of table grapes and citrus fruit, the country already has private-sector vibrancy. Government interventions could also be used to further develop sectors such as the labour-intensive renewable-energy industry and fertiliser production. The country already has the skills and some of the infrastructure required in these sectors. South Africa’s current policies and government programmes, including the NDP, the New Growth Path (NGP) and the Industrial Policy Action Plan, call for “developmental trade policies” to encourage and upgrade value-added, labour-absorbing industrial production. The NGP states that South Africa’s trade policy should seek to promote exports, while addressing unfair competition towards domestic producers and assisting new activities to achieve competitiveness. It calls for trade policies to become more focused, identifying opportunities for exports in external markets, using trade agreements and facilitation to achieve these (NPC, 2011). The NDP envisages 6%-a-year export growth by 2030, with non-traditional exports increasing by 10% a year (NPC, 2011). South Africa’s access to global markets is enhanced by its trade agreements, such as the Southern African Development Community (SADC) Free Trade Area, the EU-SADC economic partnership agreement, preferential access to the US market under the African Growth and Opportunity Act, and the new African Continental Free Trade Area. Promoting food productivity Raising agricultural productivity and accelerating agricultural growth is a core development strategy employed by developing countries. Japan and other East Asian economies experienced impressive growth in agriculture, sparked by the Green Revolution after WW2. This facilitated rapid industrial expansion and a decrease in relative poverty. The Green Revolution refers to a series of research, development, and technology transfer initiatives, occurring between the 1940s and the late 1970s that increased agriculture production around the world, beginning most markedly in the late 1960s. Between mid-1950 and about 1970, Japan’s rice production productivity increased sharply (Hirano, 2020). Food productivity is one of the main reasons for the competitive advantage that East Asian countries have in labour. The cheaper price of food materials makes it possible to lower average wages in the manufacturing sector, which contributes to the competitive advantage of the labour force. Using price indices of cereals and meat, Hirano points out that between 1985 and 2000, Asia’s food prices have remained well below that of Africa (Hirano, 2020). Food productivity is therefore important to ignite higher economic growth and for the sustainability of society. Japan: Economic growth and food production Source: Dr Katsumi Hirano High productivity brings low price Price index of cereals Price index of meats Source: Dr Katsumi Hirano (citing ILO statistics) Ajam agrees with Hirano’s proposal about improving food productivity. South Africa must improve on its research and development in agriculture to gain better market intelligence, as the effects of climate change and water shortages are becoming more visible in the country. At the same time, the country also has to address the issue of land reform. Ajam posits that land reform in South Africa has been a failure, arguing that the redistribution of land has not resulted in a redistribution of productive capacity. Nurturing capital investment Japan’s era of high growth was accompanied by very aggressive investment. Gross fixed capital formation (GFCF) peaked at 38% of its GDP in 1973. In the preceding five years, Japan’s yearly GDP growth rate averaged more than 9% (Hirano, 2020). The NDP envisages GFCF of about 30% for South Africa by 2030. Weighed down by persistent low business confidence, sluggish real economic activity and the further deterioration of the fiscal position, GFCG declined to 17.90% in 2019 – the lowest since 2005 (NPC, 2011). Although South Africa has invested vast sums in the past decade, the investment has not been productive, partly owing to State capture. To crowd in investment, the public sector must ensure that the investment delivers what is expected. Ajam emphasises that policy certainty is crucial to attract more private investment. Investors require at least 20-year visibility and certainty that goalposts will not shift. “You cannot have mixed signals – one minute you want to do renewables and the next you suddenly want to go back to nuclear.” In its post-Covid-19 recovery, government is placing infrastructure at the centre of its economic stimulus, but public finances are under strain. As a result, government will need to signal a consistent, pro-investment message if the private sector is to be expected to play an increasingly important role in financing infrastructure projects. There are growing calls to amend pension fund regulations to enable more investment in infrastructure. Regulation 28 of the Pension Funds Act limits the extent to which retirement funds may invest in particular asset classes. The aim of this regulation is to ensure that the savings South Africans contribute towards their retirement is invested in a prudent manner and not only protects the retirement fund member, but is channelled in ways that achieve economic development and growth. Head of the ANC’s economic transformation committee, Enoch Godongwana, has said: “If properly packaged, there is no reason why pension funds should not invest in infrastructure directly, instead of using third parties in the form of asset managers.” Ajam is of the opinion that pension funds could be used more productively for infrastructure investment, noting that this has been done in other countries. The guidelines, however, have to be very stringent to ensure that pension funds do not become a looting pot. The State-owned Public Investment Corporation, which has about R2-trillion of assets under its management, including that of the Government Employees Pension Fund, has been under pressure from politically connected people who want access to it for sub-optimally productive purposes. Hirano says that, frankly speaking, South Africa has become “un-investible”. Conclusion Although Hirano is hesitant to offer blanket support to the idea of Japanese society and experience being a development model, there are lessons that South Africa can learn from the Japanese experience. His three suggestions for South Africa are: Focus on food production. Establish an effective developmental State and a social contract. Sharpen policy support for exports, as foreign market competition is beyond government discretion and leaves little room for corruption (Hirano, 2020). South Africa should also extend collaboration between the people who have the political mandate to govern and the professionals involved in policy making and execution. Hirano cites the Japanese model where economic policy was made by professionals in the MITI as an example to imitate (Hirano, 2020). Further, more tangible ideas on policy, especially around employment, and education and motivation of the younger generation, will go a long way to reinvigorate the economy. Khanyile has underscored the need to increase the knowledge index of the country and to improve the health outcomes. “You cannot have a well-functioning economy in a population of sick people. Health, education and economic development go hand-in-hand . . .” Economist, Theo Venter, highlights that South Africa cannot emerge from the Covid-19 pandemic with an “old normal”. “We need a normal that is much more effective, more efficient and fairer. We need to establish a normal where each and every South African is part of the long-term future and success of this country.” Swanepoel concludes: “We cannot have transformation of our society, without economic growth. Similarly, you cannot have transformation in society if you do not have social cohesion. For that you need a vision as a nation and you need to have a structured plan that can go from one administration to the next administration.” References African National Congress (ANC) Economic Transformation Committee. 2020. 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[Online] Available at: https://www.gov.za/sites/default/files/gcis_document/201409/devplan2.pdf [accessed: 22 July 2020]. National Treasury. 2020. Budget Review 2020. [Online] Available at: http://www.treasury.gov.za/documents/National%20Budget/2020/review/Chapter%202.pdf [accessed: 29 July 2020]. Organisation for Economic Development and Cooperation. 2011. Perspectives on global development 2020: Social cohesion in a shifting world. [Online] Available at: http://dx.doi. org/10.1787/persp_glob_dev-2012-en [accessed: 23 July 2020]. Potgieter, E. 2019. South African Reconciliation Barometer 2019. [Online] Available at: http://www.ijr.org.za/home/wp-content/uploads/2019/12/800108-IJR-Barometer-Report- 2019-final-web.pdf [accessed: 21 July 2020]. Statistics South Africa (Stats SA). 2020. Quarterly Labour Force Survey, first quarter 2020. [Online] Available at: http://www.statssa.gov.za/publications/P0211/P02111stQuarter2020.pdf [accessed: 20 July 2020]. South African History Online. South Africa’s key economic policy changes (1994 – 2013). [Online] Available at: https://www.sahistory.org.za/article/south-africas-key-economicpolicies- changes-1994-2013 [accessed: 20 July 2020]. Tetsuji, O. 2015. Lessons from the Japanese Miracle: Building the foundations for a new growth paradigm. [Online] Available at: https://www.nippon.com/en/in-depth/a04003/ [accessed:20 July 2020]. World Bank. 2020. Global Economic Prospects, June 2020. [Online] Available at: https://openknowledge.worldbank.org/handle/10986/33748 [accessed: 22 July 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Summary of themes from webinar hosted on 5 August 2020 Copyright © 2020 Inclusive Society Institute 50 Long 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 DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or its Board or Council members. All records and findings included in this report, originated from a panel discussion on developing a new economic blueprint for South Africa, which took place November 2021. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place on August 5, 2020 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel The Inclusive Society Institute is developing a new growth-centred economic blueprint for South Africa. The project comprises a number of phases, the first of which is to study several economies from historically distressed jurisdictions that have successfully turned themselves into winning nations. This report focuses on lessons that South Africa can glean from the South Korean development experience. Contents Abbreviations and acronyms Introduction ‘Miracle on the Han river’ Lessons from South Korea Prioritising human and social capital Stepping up rural development Incentivising growth through differentiation Improving coordination and accountability Conclusion References Abbreviations & acronyms GDP gross domestic product GNI gross national income ISI Inclusive Society Institute IMF International Monetary Fund KAIST Korea Advanced Institute of Science and Technology PIRLS Progress in International Reading Literacy Study Stats SA Statistics South Africa Introduction Even prior to the coronavirus pandemic of 2020, the South African economy was for a number of years unable to produce the levels of economic growth required to address historic backlogs and create opportunities for its large number of unemployed. Recent economic choices have not been able to propel the economy into a new growth phase and high levels of corruption have had an adverse impact on State capacity and on the economy’s ability to gain momentum towards inclusive growth. Through a series of dialogue sessions with economic policy experts, the Inclusive Society Institute (ISI) is exploring the development paths of previously distressed economies, which were able to successfully implement turnaround strategies, including Japan, South Korea and Germany. The ISI aims to develop a new economic blueprint for South Africa, and as part of this work, the institute is assessing the country’s current economic model and is seeking to benchmark it against best-practice policy frameworks that have been effective in other countries. The ISI believes that the South African economy has to be transformed to address inequality and to become more demographically inclusive. CEO Daryl Swanepoel says the depressed state of the economy obligates policymakers to take decisive action to make the structural reforms that are needed to reignite growth. “As we have learnt and will learn from some of the countries we are exploring, it may not be all neoliberal reform that is needed. We could also more aggressively start moving towards an effective mixed economy where the State and private sector work in a more closely coordinated manner, guided by social and national democratic values,” says Swanepoel. This report, the second in a series published by the ISI, focuses on South Korea’s rise from an economic minnow to a global powerhouse. Even though in the late 1950s South Korea had a per capita income comparable to West African country, Ghana, South Korea has, for decades, so accelerated its rate of economic growth that it is now the world’s eleventh-biggest economy with a per capita income of more than $30 000, compared with Ghana’s current per capita income of just over $2 000 (IMF, 2019). This report is based on an August 5, 2020, webinar hosted by the ISI. Participants in the webinar included: Dr Jong-Dae Park, South Korean Ambassador to South Africa. He is an economist by trade and author of the book Reinventing Africa’s Development. Theo Vorster, a South African economist and CEO at Galileo Capital. Professor Tania Ajam, associated with the School for Public Leadership at the University of Stellenbosch. She is also a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council. Joan Fubbs, director for the Centre for Education in Economics and Finance. She is also a former chairperson of the Parliamentary Portfolio Committee on Trade and Industry. ‘Miracle on the Han river’ The economic growth of South Korea has been a remarkable success story. Considered one of the poorest nations in the 1950s, South Korea has established itself as a developed, high-income country in just a few generations. The rapid development has been dubbed ‘the Miracle on the Han river’. When the Korean War ended in 1953, South Korea was poorer than many African countries at that time, with per capita gross domestic product (GDP) of $67. In extreme poverty, the nation suffered food shortages, depended on foreign aid for survival and was considered by Western powers to be a “hopeless country” (Chun, 2010). When Park Chung-hee came to power during a military coup in 1961, he proclaimed that economic development would be the central feature of his administration. He began a series of economic reforms that transformed the peninsula nation into one of the world’s biggest exporters. The government in 1962 launched its first five-year economic development plan, which set out its ambition to modernise the industrial sector and enhance its international competitiveness. The success of the first five-year plan encouraged the government to continue forging ahead, with six subsequent five-year plans pursued in the decades that followed. Each successive development plan upgraded South Korea’s manufacturing capabilities. Source: Shanghoon Kim The first five-year plan (1962 to 1966) consisted of initial steps toward the building of a self-sufficient structure, focusing on light industry, such as textiles. The second five-year plan (1967 to 1971) focused on modernising the industrial structure and rapidly building import substation industries, including steel, machinery and chemical industries. The third five-year plan (1972 to 1976) promoted heavy and chemical industries, with industries including iron and steel, automotive, household electronics and shipbuilding receiving attention. The fourth five-year plan (1977 to 1981) fostered the development of industries to compete effectively in the world’s industrial export markets. Technology-intensive and skilled labour-intensive industries were supported, such as machinery, electronics and shipbuilding. In the fifth and sixth five-year development plans in the 1980s, the emphasis shifted from heavy and chemical industries to technology-intensive industries, such as precision machinery, electronics, including televisions and semiconductor-related products. The seventh five-year plan, launched in 1992, gave preference to developing high-technology fields. One of the most fundamental problems South Korea faced, was how to finance its growth plans. To encourage domestic savings from which capital could be funnelled to development projects, interest rates were raised substantially in 1965, and, accordingly, savings grew rapidly (Park, 2019). The ‘select and focus’ strategy has been a key to economic development Source: Sanghoon Kim Under the Park administration, the central government played an important role in economic development, with the Economic Planning Board serving as the nerve centre. Headed by a deputy Prime Minister and staffed by highly capable bureaucrats, the Economic Planning Board allocated resources, directed the flow of credit and formulated economic plans (Savada & Shaw, 1990). Cooperation between government and large family-run conglomerates, or chaebols, was essential to the country’s economic success. Government generously supported chaebols, such as Hyundai, Samsung and LG Corporation, nurturing them into globally recognised brands. The practice was similar to that of the other Asian Tigers (Albert, 2018). Government and chaebols have long had a symbiotic relationship. They dominate South Korea’s economy and wield extraordinary influence over its politics (Albert 2018). However, the cosy relationship, once seen as an instrument for growth, has in recent years increasingly roused the public’s ire. Public discontent with the chaebol reached a new peak in 2016/17, with the eruption of an influence-peddling scandal that led to the ouster of President Park Guen-hye. South Korea’s economic development strategy lifted the nation out of poverty and set it on a path of high economic growth. South Korea and Taiwan are the only two countries that consistently grew at more than 5% a year for 50 years. Park argues that South Korea’s trajectory is perhaps more impressive than Taiwan’s, owing to the scale of its economy and how it has performed in its post-industrialisation phase. South Korean economic growth from 1953 to 2012 Source: Jong-Dae Park South Korea successfully overcame the oil crisis in the 1970s, the Asian financial crisis in 1998 and the global financial crisis in 2008. South Korea in 2012 joined the so-called ‘20-50-club’, those with per capita GDP surpassing $20 000 and a population of more than 50-million. At the time, the country’s Finance Ministry described it as an “unprecedented feat” for a newly industrialised economy. South Korea was the first country that was not an industrialised economy before World War 2 and the seventh country in the world to achieve this feat. In 2018, South Korea joined the even more exclusive ‘30-50 club’ of economic powerhouses, with a 50-million population and a per capita GDP of more than $30 000. South Korea’s gross national income (GNI) was $1.68-trillion in 2018 and $1.74-trillion in 2019, with a per capita GNI of $32 610 and $33 720 respectively (World Bank, 2020). While South Korea’s economy has performed well in recent years, short-term growth is moderating and long-term growth is facing headwinds (IMF, 2019). Lessons from South Korea In his 2019 book, ‘Reinventing Africa’s Development: Linking Africa to the Korean Development Model’, Jong-Dae Park categorises the essence of the South Korean model of economic development into two main elements: compressed economic growth and effective social mobilisation for change. South Korea’s development is considered unique because the country has advanced by promoting industrial transformation, while instilling the ‘can-do-spirit’ into its people and encouraging them to be active agents of development (Park 2019). There were four fundamental cornerstones upon which compressed economic growth and effective social mobilisation were realised: land reform, empowerment of the people, revolution in education and governmental reform. The most important of these, according to Park, being land reform and empowerment of people. The lessons that South Africa can take from South Korea’s economic model can be categorised under the following headings: prioritising human and social capital stepping up rural development incentivising growth through differentiation improving coordination and implementation Prioritising human and social capital Unlike South Africa that has abundant mineral resources and arable land, South Korea has little natural resources to rely on for wealth creation. Instead, effective social mobilisation and its ‘can-do spirit’ drove South Korea to become an advanced country. Besides government’s critical intervention in advancing economic development, people’s mindset and action-oriented movements played an equally important role in South Korea’s overall development. “It is not our resources that fuelled our growth, but the work of people,” says South Korean Ambassador to South Africa, Jong-Dae Park, noting that there is an important lesson in that for South Africa. “It is up to people to make use of what they have, to work hard and to be entrepreneurial. Despite the adversity you may face, if you have commitment and the people are working together, you can achieve development.” Leaders have to motivate and inspire people to be more productive and to be empowered. Centre for Education in Economics and Finance director Joan Fubbs agrees that South Africa should make its citizens an essential component of its development. “If we adopted that principle more rigorously, we would not have some of the challenges we have now.” Education plays an important role in facilitating a mindset change. The South Korean State’s investment in, and people’s passion for, education laid the foundation for the country’s economic rise. Education investments delivered a capable labour force, willing to work and to get out of poverty. Education was the biggest item in the South Korean government budget, after defence, in the late 1950s and 1960s, at which time the literacy rate reached almost 90% (IMF, 2016). The South Korean government has continuously expanded the provision of free education to all students. Starting with free primary education in 1958, which was expanded to middle school between 1985 and 2005. The country plans to provide free education to all high school students, starting in 2021. In South Korea, education is a basic right stipulated in its Constitution. South Africa’s Constitution guarantees a similar right, but Professor Tania Ajam, from the School for Public Leadership at the University of Stellenbosch, is concerned about the standard of the country’s education output. She argues that South Africa is not producing a quality education or the type of skills that a modern economy requires. Source: University of Pretoria, Faculty of Education's Centre for Evaluation and Assessment Realising the importance of science and technology in its development, South Korea also took a different approach with tertiary education. The country placed its leading science and technology university under the aegis of the Ministry of Science and Technology, instead of the Ministry of Education. This improved the quality of graduates that the prestigious Korea Advanced Institute of Science and Technology (KAIST) produces. The highly qualified scientists and engineers from KAIST have played a big part in the status that the nation currently enjoys as a large exporter of high-technology goods. Fubbs states that South Africa’s human capital remains comparatively weak in technology and skills: “There is a potential and willingness in human capital, but we are yet to grapple with how to empower people technologically as fast as we can.” Despite a spate of recent scandals, ethics has a strong foothold in the South Korean society, something which is arguably lacking in South Africa. In South Korea, the value and importance of ethics are taught to children throughout primary and secondary school, through to university. The aim is that ethics should become internalised rather than something that people have to learn as adults when they enter the work place. Stepping up rural development Although South Africa has made efforts since the dawn of democracy in 1994 to improve the lives of rural communities and regenerate rural economies, it has had limited success. Poverty has remained consistently high among South Africans living in rural areas. South Africa’s 2011 Census reported that nine out of ten households in the upper-income category are from urban settlements, whereas no-income or low-income households are more prevalent in rural areas. About 43% of rural households are living below the food poverty line, compared with about 28% of urban households (Stats SA, 2015). At the start of its industrialisation, South Korea also faced a widening urban-rural gap, as people rushed to cities for jobs. In 1971, income in rural areas was 78.80% of that in urban areas. Through a focused rural development programme, this trend was reversed and average incomes in rural areas overtook those in the cities. The average income of rural families was higher than that of urban households in 1975, and comparable to that of urban households until the early 1990s, whereafter rural households were having increasing difficulty maintaining economic parity with their urban peers. In 2010, the average farm household income was 66.70% of urban household income (Hwang, Park & Lee, 2018). South Korea’s successful land reform programme and the launch of Saemaul Undong – a community-based integrated rural development programme – contributed to narrowing the economic gap between urban and rural communities. Also known as the New Community Movement or New Village Movement, the programme emphasised that people in rural communities should not expect the State to help them, but that they should help themselves. The State provided small startup subventions for projects to develop local communities, mostly in the form of raw materials or occasionally financial subsidies, while villagers had to contribute labour. With a ‘we can do it’ approach, Saemaul Undong was based on three doctrines: diligence, self-help and cooperation. The development approach induced locals to work voluntarily in a self-help fashion to generate resources and income on their own. Citizens realised that their fate and future depended on themselves. Simultaneously, the programme instilled a belief in the power of unity, which manifested in care and encouragement for one another. There are similarities between the principles of Saemaul Undong and the African philosophy of Ubuntu, which places emphasis on ‘being self through others’ and President Cyril Ramaphosa’s Thuma Mina campaign, which focuses on volunteering and community activities to build an improved South Africa. Income growth through Saemaul Undong Source: Jong-Dae Park Park says South Africa should seek to internalise community responsibility. He suggests starting by “bringing back and rekindling” the value of community and by making better use of its rural and traditional leaders to engage people more directly. An increased focus on rural development could also address problems that are associated with South Africa’s dual economy, where on the one hand it has a small, high-skilled, high-productivity economy, and on the other hand a large, low-skilled, low-productivity economy. The large, traditional sector, is mostly in rural areas. “The benefit of rural development policies is that you skill the poor and make them more productive to work in the manufacturing sector,” says Park. The foundation for South Korea’s successful rural development was laid by the land reform programme, which is considered one of the most successful of its kind. Under the Farmland Reform Act of 1949, government pursued land reform on the principle of ‘compensated forfeiture and non-free distribution’, whereby farmland was bought from landlords at predetermined prices and sold to farmers at below-market prices. The reform ended the past landlord-tenant system and fostered self-employed farmers. When the Farmland Reform Act was passed in 1949, South Korea was still dominated by conservative members of the landowning class, reluctant to carry out land reform. However, the Korean War disrupted these vested interests and presented an opportunity for accelerated land reform led by an emerging technocratic and meritocratic leadership. South Korea’s land reform was rapidly implemented and completed in only ten years. This is in stark contrast to the disappointing results seen by many other developing countries, including South Africa, in their land reform endeavours. Ajam states that State capacity remains a hurdle to the successful implementation of South Africa’s land reform programme. Progress has been slow and redistributed land has not always been productive. Fubbs suggests that the land reform challenges in South Africa are so deeply embedded, that had South Africa followed the South Korean model by driving its land reform during a time of crisis, when the country became a democracy in 1994, it may have been easier to implement than it is now. Park believes South Africa should find a pragmatic way that balances various interests, to resolve the country’s land issues. Incentivising growth through differentiation Economic discrimination was an important driver in South Korea’s development model. It is based on the principle of meritocracy and provides selective incentives for superior economic performers. Park suggests that the concept of economic discrimination, or differentiation, be employed to encourage people to act. “If you reward everyone the same, despite their economic performance or work input, how will you grow the economy? Where is the work motivation?” he questions. Equally, people will be less inclined to repeat misdeeds if there are sanctions. Such systems and policies, which allowed for performing companies to reap rewards and where there were consequences for non-performance, meant that a healthy degree of competition was fostered in South Korea, unleashing competitive forces and efficiency gains for the country. Park explains that economic discrimination does not mean that government picks ‘winners’. The ‘winners’ perform first, then get rewarded. It is merit based. There is no controversy and no corruption. For instance, performing companies would be allowed to gain access to low-interest bank loans, import privileges, permission to borrow from foreign sources and tax benefits, whereas such preferential opportunities would not be available to non-performing companies. Citing Sung-Hee Jwa’s ‘General Theory of Economic Development: Towards a Capitalist Manifesto’, he argues that economic discrimination is essential for economic development. The so-called holy trinity of economic development – markets, government and corporations – should work together, using the principle of economic discrimination, to steer the economy towards real transformation. The ‘holy trinity’ of economics and economic discrimination Source: Prof Seung-Hee Jwa South Africa is a deeply unequal country, with deeply entrenched historical advantages and disadvantages. Since the advent of democracy in 1994, the country has not been able to effectively overcome historical inequalities or develop a system of rewards or sanctions for organisations or individuals. In fact, Ajam says that in government and the private sector, there are no obvious consequences for incompetence and corruption. Improving coordination and accountability Developing economic policies that deliver growth requires not only commitment and strong political leadership, but also efficient coordination, strong implementation and close inspection. Park implores developing countries to improve coordination, stating that the work of various offices and agencies will not be effective without it. The same goes for implementation. Ideas and plans are only as good as their implementation. South Africa continues to stumble, not because of a lack of resources or the means, but because of a management problem. According to Park, implementation hinges on ‘development-mindedness’: knowledge, practising, ownership and passion, also known as “KPOP”. Fubbs argues that South Africa has some of the best policy internationally, but its challenge remains implementation. South Africa has been struggling to apply various well-intentioned policies that are aimed at fostering economic growth and uplifting the nation. South Korea, on the other hand, successfully implemented seven consecutive five-year economic development plans between 1962 and 1996. Its first development plan was implemented during a time when the situation was dire for South Koreans. They could either give up and live poor, or do something about it. South Korea’s success in implementation hinged on several key pillars, but it came down to social capital – a mindset change and mobilising people to make it work. Often experts share knowledge and present strategies for development, but fail to address the gap between the intellectual community and the people who have to implement plans. Park suggests that specialists, under authority from government, work with the bureaucracy to direct and implement plans. On the role of government and the market in driving development, Park says both have an important role to play. He states that it is a myth that a smaller government is better. Although he does not believe that governments should necessarily be involved in running companies, he says that they have a key role in providing the framework for economic growth and development. Conclusion Park, who has been the South Korean Ambassador to South Africa since February 2018, believes that South Africa has the potential to prosper. “It can be done,” he says, but notes that the drastic transformation that is needed will require a profound change in people’s behaviour. Although fundamental rules of economic development and industrialisation apply, South Africa is in a position to leapfrog certain stages of development, owing to its existing strengths in finance, technology and its democratic system. Park does not believe that South Africa should replicate South Korea’s model step by step, but should ‘learn by doing’ and develop its own model based on its individual circumstances and strengths. “There isn’t a model you can just follow as a manual. South Korea did not develop because we were given a model by the World Bank or the IMF [International Monetary Fund]. Our model came after trial and error.” He states that Covid-19 has revealed South Africa’s underlying weaknesses and that it is a perfect time to reflect. “South Africa has many rich things that people envy all over the world. Success will come only through doing the right things, through hard work and through the changing of minds. It cannot be business as usual.” Park cautions against downward equalisation – ‘don’t kill the goose that lays the golden eggs’ and says the essence of growth is wealth creation, not wealth transfers. References Albert, E. 2018. South Korea’s chaebol challenge, May 4, 2018. [Online]. Available at: https://www.cfr.org/backgrounder/south-koreas-chaebol-challenge [accessed September 2, 2020]. Chun, S. 2010. Strategy for Industrial Development and Growth of Major Industries in Korea, April 19, 2010. Seoul: Korea Institute for Development Strategy. Available at: https://web.archive.org/web/20131011120833/http://www.kds.re.kr/pds/102/MRDA_2010_4.pdf [accessed September 2, 2020]. Hwang, J., Park, J. & Seongwoo, L. 2018. The Impact of the Comprehensive Rural Village Development Programme on Rural Sustainability in Korea. Sustainability 2018, 10, 2436. Available at: https://www.mdpi.com/2071-1050/10/7/2436/htm [accessed September 2, 2020]. Howie, S.J., Combrinck, C., Roux, K., Tshele, M., Mokoena G.M., and McLeod Palanie, N. 2017. PIRLS Literacy 2016: South African highlights report. Centre for Evaluation and Assessment.[pdf] Available at: https://www.researchgate.net/publication/326588545_South_Africa_Grade_4_PIRLS_Literacy_2016_Highlights_Report_South_Africa [accessed September 2, 2020]. Inclusive Society Institute. 2020. Developing a New Economic Blueprint for South Africa: Lessons from South Korea [webinar], August 5, 2020. [Online] Available at: https://www.inclusivesociety.org.za/economic-blueprint-for-sa-s-korea [accessed September 2, 2020]. International Monetary Fund. 2019. 2019 Article IV Consultation, May 2019. [Online] Available at: https://www.imf.org/en/Publications/CR/Issues/2019/05/13/Republic-of-Korea-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-46890 [accessed: August 31, 2020]. Kim, S. 2020. STI Policies in Korea: R&D, Technology Innovation. August 5, 2020. Seoul: Korea Institute for Industrial Economics and Trade. Kim, Y. 2012. Korea joining ’20-50 club’ marks new chapter: Finance Ministry. The Korea Herald. June 24, 2012. [Online]. Available at: http://www.koreaherald.com/view.php?ud=20120624000084 [accessed September 2, 2020]. Park, JD. (2019) Korea’s Path of Development in Retrospect. In Re-Inventing Africa’s Development, January 2019. London: Palgrave Macmillan, Cham. [Online] Available at: https://doi.org/10.1007/978-3-030-03946-2_7 [accessed September 2, 2020.] Park, JD. 2020. Korea’s development model: evolution, essence and implications, August 5, 2020. Pretoria: Korean Embassy in South Africa. Savada, A & Shaw, W. 1990. South Korea: A country study, Library of Congress, 1990. [Online] Available at: http://countrystudies.us/south-korea/ [accessed August 31, 2020]. Statistics South Africa. 2015. Census 2011: Income dynamics and poverty status of households in South Africa. [pdf] Available at: http://www.statssa.gov.za/publications/Report-03-10-10/Report-03-10-102014.pdf [accessed September 2, 2020]. Statistics South Africa. 2020. Quarterly Labour Force Survey: Q1 2020, June 23, 2020. [pdf]. Available at: http://www.statssa.gov.za/publications/P0211/P02111stQuarter2020.pdf [accessed September 2, 2020]. Watkins, T. Economic Development Plans of South Korea, San Jose State University [Online] Available at: https://www.sjsu.edu/faculty/watkins/skoreaplan.htm [accessed: August 31, 2020]. World Bank. 2020. World Development Indicators database, July 2020. [pdf] Available at: https://databank.worldbank.org/data/download/GDP.pdf [accessed: 31 August 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa Registration: 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place on August 20, 2020 Author: Mariaan Webb, Creamer Media Writer Edited by: Daryl Swanepoel The Inclusive Society Institute is developing a new growth-centred economic blueprint for South Africa. The project comprises several phases, the first of which is to study several economies from historically distressed jurisdictions that have successfully turned themselves into winning nations. This report focuses on lessons that South Africa can learn from examining the relationship between social cohesion and Germany’s economic prosperity. Contents Abbreviations and acronyms Introduction The Bertelsmann Social Cohesion Radar Lessons for South Africa Focusing on grassroots activity Building trust and perceived justice Ensuring labour market inclusion Conclusion Reference list Abbreviations and acronyms ISI Inclusive Society Institute OECD Organisation for Economic Cooperation and Development Stats SA Statistics South Africa Introduction South Africa’s transition in 1994 to a democratic dispensation, hailed as the ‘Mandela Miracle’, received international praise. However, despite positive strides since the advent of democracy, South Africa still has a long way to go in addressing limiting factors that are holding back reconciliation, social cohesion and unity. Inequality remains a stumbling block. The privilege attached to race, class and gender has not been sufficiently reversed in the quarter-century since the end of Apartheid, despite the 1996 Constitution laying the basis for the progressive realisation of a truly democratic, non-racial, non-sexist, united and prosperous society. South Africa has a vision for a society that embraces diversity – one in which opportunity is not determined by race or birth right. The National Development Plan 2030 calls for South Africans to be united around a common programme, to strive for a sense of togetherness, to achieve prosperity. Social cohesion, defined as the extent of connectedness, solidarity and trust that exists among different groups of society, is an important driver of long-term prosperity and competitiveness. Social cohesion ensures the sustainability of competiveness. Cohesive societies are politically stable and focus on economic growth and business development (Bris, 2014), attributes that are desperately required in South Africa, where growth has stalled. Considering the experiences of Germany, South Korea and Japan – three countries that the Inclusive Society Institute (ISI) has considered in its quest to develop a new economic blueprint for South Africa – it is clear that social cohesion, unity and rallying behind a common goal were important building blocks for their respective economic successes. Germany has an enduring history of economic success. Despite suffering numerous setbacks during two world wars and challenges with the reunification of West Germany and East Germany and migration, the country has maintained a leading position among developed nations. Germany industrialised in the late 1800s and remains among the top five biggest economies, weathering the rise of emerging nations. In 2019, Germany had the fourth-biggest gross domestic product, after the US, China and Japan (World Bank, 2020). The social market economy was an important factor in Germany’s success after World War 2. Grounded in German ‘ordoliberalism’, the German variant of economic liberalism, the social market economy seeks to strike a balance between market forces and the political desire to serve the common good. It is geared towards inclusion and aims to allow for as many as possible to benefit from social development, from the labour market and from consumption (Folkerts-Landou & Schneider, 2016). West Germany invested in social cohesion during its high growth period from 1948 to 1960. Although the formerly rich in West Germany remained wealthy during the ‘economic miracle’ years and the powerful stayed in power, a broad base of the West German people benefitted enough from increasing economic prosperity that they were generally happy and social cohesion was quite high. With the reunification of West Germany and East Germany in the early 1990s the West was more economically prosperous than the East, and lower-wage skilled workers from East Germany put downward pressure on the wages of workers in West Germany. German trade unions proved equal to the task of accepting this adjustment, building the foundation for successful German reunification, as well as for the ongoing growth, competitiveness and strengthening of the German economy in the decades that followed, although residual inequalities remain between the historically Eastern and Western parts of the country. This report, the third in a series published by the ISI, considers the relationship between citizens’ wellbeing and economic prosperity, based on the case of Germany and other Organisation for Economic Cooperation and Development (OECD) countries. The information in this report is based on an August 20, 2020, webinar that the ISI hosted with the following participants: Professor Klaus Boehnke from the Jacobs University Bremen, Germany. Theo Vorster, a South African economist and CEO at Galileo Capital. Professor Tania Ajam, associated with the School for Public Leadership at the University of Stellenbosch. She is also a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council. Joan Fubbs, director for the Centre for Education in Economics and Finance. She is also a former chairperson of the Parliamentary Portfolio Committee on Trade and Industry. The Bertelsmann Social Cohesion Radar Although the concept of social cohesion in Europe goes as far back as the French Revolution in the 1790s, it is only in recent years that an instrument has been developed to define and measure the state of social cohesion, the determinants that shape it and its consequences for society. Commissioned by the Bertelsmann Stiftung and under the leadership of Jacobs University Bremen professor Klaus Boehnke, the Social Cohesion Radar provides empirical information on a country’s social integration. It breaks down the concept of social cohesion into three dimensions: social relationships, connectedness and focus on the common good. Each of these domains comprises three measurable dimensions: social networks, trust in people, acceptance of diversity, identification, trust in institutions, perception of fairness, solidarity and helpfulness, respect for social rules, and civic participation. The radar is based on a broad set of indicators and has been applied in a wide range of studies, including an international comparison of the OECD nations, the 16 German federal states, the 78 communal units of the Free Hanseatic City of Bremen and non-Western societies, namely 22 countries in South, Southeast and East Asia. The research found that, in the Western world, economic prosperity, low levels of income inequality and acceptance of cultural diversity have positive effects on social cohesion. “Modern societies are based not on solidarity rooted in similarity, but on solidarity rooted in diversity and mutual interdependence. Therefore, they need an inclusive form of social cohesion that not only accepts a multitude of lifestyles and identities, but views them as a strength (Dragolov et al, 2018).” Dimensions of social cohesion Source: Klaus Boehnke Progression towards a knowledge society with more access to modern technology also helps social cohesion. “The higher a country ranks on the World Bank’s Knowledge Index, which compiles information on educational level, economic innovation and infrastructure related to information and communication technology, the more likely that country is to show high social cohesion (Dragolov et al, 2013).” A 2017 study focusing on Germany found that acceptance of diversity, compliance with basic social rules and identifying closely with one’s community fosters high levels of social cohesion. Boehnke says that in areas where social cohesion is high, people are happier, healthier and more satisfied with their lives. “In socially cohesive societies, there is also less support for populist parties,” he adds. Recommendations for strengthening social cohesion do not travel easily from one world region to another, as can be seen from the 2018 Bertelsmann Stiftung study, titled ‘Social cohesion and its correlates: A comparison of Western and Asian societies’. This study has concluded that while Western and Asian countries share similarities on economic prosperity and social cohesion, there are differences when it comes to income equality and political conditions. In the West, the larger the gap between the rich and the poor, the less cohesive the society. In Asia, however, disparities in income seem to foster social cohesion, as long as they are not excessive. In Asia, authoritarian regimes also have stronger, not weaker, cohesion, whereas in Western societies, democracy strengthens social cohesion (Walkenhorst, 2018). Lessons for South Africa Focusing on grassroots activity Considering that policy recommendations on social cohesion cannot be based on a “one-size-fits-all” approach, Boehnke is a strong proponent for measuring social cohesion and then using empirical data to shape policies. “South Africa needs to know where it stands before it can decide on policies,” he says. It would be beneficial for South Africa to apply evidence at a disaggregated level, so that it could hone in on specific areas and activities. Boehnke emphasises that fostering social cohesion is a grassroots activity and not something that can be decreed from the top. “Actions and activities of people are at the core of social cohesion. So is perceived justice and acceptance of diversity in everyday life. It is the people themselves that make social cohesion.” Cohesion benefits from individuals who have an open outlook on life and who believe that all people, regardless of social status, heritage or culture, have something in common (Bertelsmann Stiftung, 2017). In its 2017 ‘Social Cohesion in Germany’ study, the Bertelsmann Stiftung has some suggestions for fostering social cohesion that could have touch points for South Africa. “When people live in close proximity, but rarely interact or engage with each other, measures must be taken to include them more in community life, for example by promoting volunteering activities that reflect modern lifestyles. And opportunities for cross-cultural and inter-religious exchange that can help reduce feelings of not belonging are needed most where people encounter each other every day: in the cities and towns in which they reside (Bertelsmann Stiftung, 2017).” “Activities that will bring people across different races and languages into favourable exchange will improve social cohesion.” Overcoming apartheid spatial planning, including the deracialisation of suburbs in South African cities and towns by encouraging social and emotional engagement between neighbours, will go a long way in helping the country to achieve more social cohesion, says Centre for Education in Economics and Finance director Joan Fubbs. Building trust and perceived justice Central to the concept of social cohesion is the notion of trust: the level of trust in others and confidence in social and political institutions, as well as perceived justice – whether people feel that the system treats them justly. Trust in institutions, Boehnke says, arises from institutions that are perceived to be acting justly. Redistribution of wealth, for instance, is one such “just act” that could facilitate trust in institutions. University of Stellenbosch Professor Tania Ajam emphasises that social cohesion in South Africa will be difficult to achieve unless the rich are prepared to share their wealth, a sentiment that other panellists agreed with. A new “wealth tax”, as proposed by the Davis Tax Committee, could be one way to alleviate the high levels of income inequality. South Africa already has a wealth transfer tax in the form of estate duty, donations tax and capital gains, but it does not have a tax on the net wealth holdings of individuals (BusinessTech, 2020). While wealth distribution is important, the country must increase its ability to generate more prosperity, says Ajam. Further, it is difficult for the poor to share in the small available pool of wealth, because of corruption. Widespread corruption, nepotism and maladministration have dented trust in public institutions. Although several attempts have been launched to tackle corruption since the end of the Jacob Zuma administration, there is still widespread disregard for the rule of law and social integrity. Boehnke emphasises that a corrupt society cannot be a socially cohesive one. “Corruption very clearly stands in the way of social cohesion.” High economic prosperity must also be coupled with measures to improve equality. If an entire society gains prosperity, it will aid social cohesion, but if the gained prosperity is not distributed equally and people are not perceived to be treated fairly, it will damage cohesion. Meanwhile, Boehnke points out that trust in neighbours or other people is more difficult to achieve than trust in institutions and says it can differ widely between different countries. For instance, in China trust levels in neighbours are high, while Myanmar exhibits high levels of distrust. South Africans also do not fully trust people and/or public services and institutions, according to the Baseline Survey by the Foundation for Human Rights. The 2018 survey, billed as the biggest attitudinal survey in South Africa, shows that although respondents have relatively high levels of trust for relatives or neighbours, the same cannot be said for trust in people from other countries, with about two-fifths of adults indicating they had ‘no trust at all’ in foreigners. The survey also shows that more than half of respondents have some degree of distrust in at least one or more groups of people, based on race, language, religion, political affiliation, sexual orientation and nationalities (Foundation for Human Rights, 2018). Fubbs believes that some “softer skills”, like emotional intelligence and building relationships will go a long way in helping society work together. Strong relationships, built on trust in people and institutions, foster greater creativity, critical thinking and cognitive flexibility to appreciate diversity, particularly cultural diversity. However, trust and values cannot be imposed on people from the top. Values are assimilated at home, she says. However, South Africans have shown a political, social and economic resilience that defies much analysis. “Deep down, there is a reservoir of ‘Afrinism’ in all of us, in our capacity to reach out as South Africans across races,” says Fubbs. Ensuring labour market inclusion People need to realise that it is in their self-interest to have a society in which everyone feels that they have a chance, including the youth, says Ajam. Youth unemployment is one of South Africa’s most pressing socio-economic challenges and one that has a bearing on social cohesion. In a country with an already high unemployment rate, the youth (aged 15 to 34 years) is the group most affected by joblessness (Stats SA, 2020). Statistics South Africa’s (Stats SA’s) Quarterly Labour Force Survey for the first quarter of 2020, indicates that 63.30% of the total number of unemployed persons were aged 15 to 34 years. The unemployment rate within this group was 43.20% in the first quarter of 2020 (Stats SA, 2020). Ajam laments that South Africa’s education system does not equip young people with the right skill sets to enter the labour market. A lack of skills and work experience reduces the chances for young people to find employment, which ultimately results in some losing hope of ever finding a job, resulting in them becoming discouraged work-seekers. In the first quarter of 2020, 1.90-million of the young people without work were discouraged from looking for jobs (Stats SA, 2020). Ensuring that more young people gain access to the labour market will have a positive impact on social cohesion. This is evident from the 2017 Bertelsmann Stiftung study on Germany, which finds that cohesion is stronger in regions and states in the country in which more young people can find jobs. It is also true of those areas that were more successful in preventing social exclusion. Germany’s eastern states, where more young people are excluded from the labour market, score lower on the social cohesion index than their western counterparts. Conclusion South Africa faces many challenges in its endeavours to build a socially cohesive nation, but it is a goal worth working towards as there is clear evidence that social cohesion has a positive influence on economic growth and development. In addition to the German experience, social cohesion also emerged as an important factor in the two recent ISI reports focusing on the lessons that South Africa could learn from Japan and South Korea. Executive senior research fellow at the Institute for Developing Economies Dr Katsumi Hirano urged South Africa to become a “truly non-racial society” as a starting point for its reconstruction, while South Korean Ambassador to South Africa, Jong-Dae Park emphasised a rekindling of community spirit and said a “profound change” in people’s behaviour was needed (ISI, 2020). Government wants to develop a stronger social compact, through which it hopes to address issues around equal opportunities, inclusion and redress. Initiatives around social cohesion and nation building are spearheaded by Sports, Arts and Culture Minister Nathi Mthethwa, who believes that greater cohesion is within South Africa’s collective grasp. Achieving such cohesion will require “interventions that recognise and seek to bridge past divisions and simultaneously deal with the question of improving the material conditions of previously marginalised communities, mainly black and poor” (Mthethwa, 2020). Although government recognises the value of a stronger social compact in the development of the country, it appears that social cohesion has taken a backseat, while political leadership grapples with the country’s severe economic challenges. Economist and Galileo Capital CEO Theo Vorster, however, says that without social cohesion, many other policies will find it difficult to succeed. ISI CEO Daryl Swanepoel agrees, arguing that the success of economic restoration in South Africa will hinge on the ability to achieve social cohesion. “I think authorities, political leaders, community leaders and civil society would be well advised to re-emphasise the importance of social cohesion and make sure that it is built into any economic plan that is developed.” Swanepoel states that it has become clear that three elements must be built into the guiding principles of the ISI’s planned blueprint for the South African economy. These are economic prosperity, social cohesion and social justice. “If people do not feel that the system is fair, you will not have social cohesion.” Canadian writer and political philosopher John Ralston Saul has said that social cohesion of the future will require diversity and community. “Empathy, respect for difference and the willingness to accept the complexity of society, rather than exclusion and fear are the factors that will pave the way toward a successful future (Saul, 2019).” References Bertelsmann Stiftung, 2017. Social cohesion in Germany, English summary, 2017. [Online]. Available at: http://aei.pitt.edu/102573/1/LW_Abstract_Social_Cohesion_in_Germany_2017.pdf [accessed October 16, 2020]. Bris, A. 2014. Social cohesion – why it matters, April 2014. [Online]. Available at: https://www.imd.org/research-knowledge/articles/com-april-2014 [accessed October 15, 2020]. BusinessTech, 2020. How a possible wealth tax in South Africa could work, October 16, 2020. [Online]. Available at: https://businesstech.co.za/news/finance/441344/how-a-possible-wealth-tax-in-south-africa-could-work/ [accessed October 18, 2020]. Dragolov, G., Ignácz, Z., Lorenz, J., Delhey, J. & Boehnke, K. 2013. Social cohesion radar, measuring common ground – an international comparison of social cohesion. [Online]. Available at: https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/GP_Social_Cohesion_Radar.pdf [accessed October 16, 2020]. Dragolov, G., Ignácz, Z., Lorenz, J., Delhey, J. & Boehnke, K. 2018. Social cohesion and its correlates: A comparison of Western and Asian societies, June 14, 2018. [Online]. Available at: https://brill.com/view/journals/coso/17/3-4/article-p426_10.xml?language=en [accessed October 16, 2020]. Folkerts-Landau, D & Schneider S, 2016. Beacon of stability: The foundations of Germany’s success, December 15, 2016. [Online]. Available at: https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000441807/Beacon_of_stability%3A_The_foundations_of_Germany%E2%80%99s_.pdf?undefined&realload=qaIvBCiQ5Ly3lUdstn0kcqYoLX50gy2OIcgHESdbbdEqOgeq~bN2kXMo/oFd1jXAhW7AKbAkTpBUlcO6AXVJ~A [accessed October 15, 2020]. Foundation for Human Rights. 2018. SEJA Baseline Survey, 2017. [Online]. Available at www.fhr.org.za/index.php/download_file/1408 [accessed October 15, 2020]. Inclusive Society Institute. 2020. Developing a new economic blueprint for South Africa – lessons from Japan, August 18, 2020. [Online]. Available at https://www.inclusivesociety.org.za/isi-publications [accessed October 18, 2020]. Inclusive Society Institute. 2020. Developing a new economic blueprint for South Africa – lessons from South Korea, September 18, 2020. [Online]. Available at https://www.inclusivesociety.org.za/isi-publications [accessed October 18, 2020]. Mthethwa, N. 2020. National convention on nation building, social cohesion and safe communities, February 6, 2020. Pretoria: Ministry of Sports, Arts and Culture. Saul, J. 2019. How to make social cohesion work, September 4, 2019. [Online]. Available at https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/ST_Trying_Times_2019_Saul_How_to_make_social_cohesion_work.pdf [accessed October 15, 2020]. Statistics South Africa. 2020. Vulnerability of youth in the South African labour market, June 24, 2020. [Online] Available at: http://www.statssa.gov.za/?p=13379 [accessed October 18, 2020]. Walkenhorst, P. 2018. Comparing social cohesion in Western and Asian societies. [Online]. Available at https://www.bertelsmann-stiftung.de/en/our-projects/germany-and-asia/news/comparing-social-cohesion-in-western-and-asian-societies [accessed October 16, 2020]. World Bank. 2020. World Development Indicators database, July 1, 2020. [Online]. Available at https://databank.worldbank.org/data/download/GDP.pdf [accessed October 15, 2020]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

A response to the Constitutional Court judgement of June 2020 Copyright © 2020 Inclusive Society Institute 50 Long 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 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. Author: Carene Marais Editors: Daryl Swanepoel & Roelf Meyer Setting the scene In the light of the recent Constitutional Court judgement declaring the current Electoral Act unconstitutional, the Inclusive Society Institute (ISI) has embarked on a process to design potential new electoral models for South Africa. The institute has appointed an expert panel, led by Mr. Roelf Meyer, to undertake the work and has mandated its research panel to design electoral models that respects the findings of the judgement, the boundaries set out in the Constitution, retains proportionality as a basis for representation and which promotes inclusivity and accountability. The necessity to develop a new electoral model has been spurred by the recent Constitutional Court judgement declaring the current electoral model unconstitutional. The court has given the legislature 24 months to introduce new legislation that will enable independent candidates to stand for election in the national and provincial spheres of government. The institute’s findings will be presented to the political establishment and public policymakers as its contribution to the formal legislative process, for which the Constitutional Court has set two years aside for the work to be completed. Both the panel and process will benefit from the deep and varied experience that is represented by these experts. The members are: Mr. Roelf Meyer: In Transformation Initiative. Chief Government negotiator during the democratic transition in South Africa, former Minister of Constitutional Development, and currently a director of In Transformation Initiative. Ms. Deyana Isaacs: University of Stellenbosch. Researcher and lecturer in Political Governance at the School of Public Leadership, University of Stellenbosch. Prof. Dirk Kotze: University of South Africa. Professor in Political Sciences at the University of South Africa (UNISA), a Vice-president of the International Political Science Association and National Secretary of the South African Association of Political Studies. Prof. William Gumede: University of the Witwatersrand & Democracy Works. Professor at the University of the Witwatersrand School of Governance and Chairperson of Democracy Works Foundation. Mr. Ebrahim Fakir: Auwil Socio-Economic Research Institute. Political commentator and Director of Programs at Auwil Socio-Economic Research Institute. Former academic, head of political parties and parliamentary programme at EISA, visiting fellow at the Institute for Development Studies at the University of Essex, and visiting Drapre Hills Summer Fellow at Stanford University. Ms. Dren Nupen: The Elexions Agency. Former Executive Director of the Electoral Institute of Southern Africa and former Regional Director for Africa at the Open Society Initiative. She brings extensive election experience to the dialogue. Prof. Firoz Cachalia: University of the Witwatersrand. Professor at the Law School at the University of the Witwatersrand. Professor emeritus Jørgen Elklit: Aarhus University, Denmark. Member of the South African 1994 IEC and of the 2002-2003 Electoral Task Team (aka the van Zyl Slabbert Commission). Formerly also a member of the board of directors of EISA. Secretary to the 2008 Independent Review commission in Kenya. Prof. Cherrel Africa: (Flexi-member) University of the Western Cape. Formerly at the Institute for Democracy in South Africa, election analyst for the SABC and ENCA and currently associate professor and chair for political sciences, University of the Western Cape. Prof. Rassie Malherbe: University of Cape Town. Currently offers an extra-curricular programme in the drafting of legislation at the University of Cape Town. Former professor of public law and Head of the Department of Public Law at the University of Johannesburg. Dr. Denis Kadima: Electoral Institute of Southern Africa. Currently Executive Director of EISA. Previously, Senior Programme Manager at the National Democratic Institute for International Affairs. Dr. Brigalia Bam: Private. Former Chairperson of the Independent Elections Commission of South Africa. Mr. Daryl Swanepoel: Chief Executive Officer of the Inclusive Society Institute and former Member of Parliament. Content Setting the Scene Content 1. Introduction 2. Unpacking the constitutional judgement declaring the electoral act invalid 3. Discussion on the judgement and preferences related to new models that need to be developed 4. Assessing and determining the degree of electoral reform that is desired 5. Conclusion References 1. Introduction The Constitutional Court, on 11 June 2020 declared that it “is declared that the Electoral Act 73 of 1998 is unconstitutional to the extent that it requires that adult citizens may be elected to the National Assembly and Provincial Legislatures only through their membership of political parties” and that the “declaration of unconstitutionality referred to in paragraph 4 is prospective with effect from the date of this order, but its operation is suspended for 24 months to afford Parliament an opportunity to remedy the defect giving rise to the unconstitutionality.” The Constitutional Court thus declared the current electoral act as unconstitutional in that it believes independent candidates have the right to participate in both national and provincial elections. It is now a constitutional requirement to reform the act in light of the ruling. Therefore, the purpose of the panel is to draft some proposals on reforming the country’s electoral system to allow for independent candidates at provincial and national levels. The objectives of the panel are to design electoral models that will: Respect the findings of the Constitutional Court judgement declaring the current Electoral Act invalid Respect the boundaries set out in the Constitution Retain proportionality as a basis for representation Promote inclusivity Allow for independent candidates to participate in elections at provincial and national levels Other objectives as set out by the panel also include: Conceptualise proposals as how to address the limitations of the current electoral model Present the proposals to the African National Congress (ANC), the National Assembly, public policymakers, civil society, and the broader public The project is planned to take place in 5 phases; however, the process may also require some flexibility to be adjusted as is necessary. The first phase is aimed at attaining a clear understanding of the judicial prescript as it relates to the electoral act, while also understanding the boundaries in terms of the Constitutional requirements and what such a reformed electoral system needs to look like. Moreover, the panel will also work towards developing a set of guiding principles that should be incorporated into the panel’s legislative proposals, whilst also gaining consensus on the boundaries that should be applied when developing these proposed models. As part of phase 1 of the process, the expert panel held its first discussion on Monday, 20 July 2020. The aim of this initial discussion was to gain a common understanding of the court’s intentions and to develop the parameters that will guide the panel’s deliberations. The panel met again on 3 August 2020 to further elaborate on the boundaries of the research to be undertaken in the development of a new electoral model for South Africa, while also assessing the strengths and challenges of the country’s current electoral system. During this meeting, the suggestion was made to extend the panel’s work beyond the mere development of a technical model that would accommodate the requirement for independent candidates to stand for election. It would also use this opportunity to develop proposals as to how to address the limitations of the current electoral model. Presentations were made to the effect that when developing the proposed models, consideration would be given to systems that would improve accountability to the voters by elected representatives and promote meaningful and inclusive demographic representation within the legislatures. The second phase of the process will comprise of presentations by other international experts regarding electoral models in other jurisdictions that combine proportionality with the right for independent candidates to participate. To this end, the third meeting of the expert panel is scheduled for 25 August 2020. The main purpose of the meeting will be to stimulate the panel’s thinking as to what electoral model will be best suited for the South African environment, by presenting a number of electoral models from various jurisdictions. Prof Elklit will also give a presentation on the electoral models contained in the 2003 van Zyl Slabbert Commission on Electoral Reform, together with the motivations behind each of the models. The presentations will be preceded by a short dialogue by the panel to discuss the limitations and weaknesses of the current electoral system that would need to be considered and addressed as part of the broader electoral modelling exercise. The expected outcome of the meeting: Agreement as to which limitations contained in the current electoral system need to be addressed in the work of the panel; and insight into existing electoral models combining proportionality with the right of independents to stand for election. Furthermore, as part of the second phase in this process, the next discussion of the panel will follow, where each panellist will be asked to develop their thinking around models that they think will work within the South African context, based on the previous two discussions and the presentation on the different electoral models. The aim of the third phase will be to narrow down the different models, as presented by the panellists, to two or three options which can be presented to policy makers for consideration. During this phase, the preferences of the expert panel will be expressed. During phase 4, the institute will develop a report based on the proposed electoral models. Once this report has been completed, the concepts will be tested with the broader public and civil society by means of surveys, focus groups and stakeholder engagements. Lastly, in the final phase (phase 5) of the process the models will be adjusted based on the feedback from the public and stakeholder engagements and presented to politicians and policy makers as the panel’s proposed electoral models that would best suit the context and needs of the South African society today. 2. Unpacking the Constitutional judgement declaring the Electoral Act invalid A subsequent analysis by one of the expert panel’s members regarding the Constitutional Court’s judgement declaring the current electoral act unconstitutional, provides a concise summary of the judgement. On 11 June 2020, the Constitutional Court declared the following: “4. It is declared that the Electoral Act 73 of 1998 is unconstitutional to the extent that it requires that adult citizens may be elected to the National Assembly and Provincial Legislatures only through their membership of political parties. 5. The declaration of unconstitutionality referred to in paragraph 4 is prospective with effect from the date of this order, but its operation is suspended for 24 months to afford Parliament an opportunity to remedy the defect giving rise to the unconstitutionality.” Upon assessment, the judgement does not provide extensive guidance but is focused on the shortcoming or deficiency of the electoral act with regards to independent candidates. Moreover, the judgement also does not provide guidance as to how the act should or can be amended. The electoral act is subject to the Constitution, and therefore the task of the panel must be accomplished without breaching the Constitutional boundaries relating to electoral systems. The following provisions in the Constitution can be considered boundary posts regarding the amendments that can be made to the electoral act: Section 1(d): Multi-Party democracy Section 1 in the Constitution is the value clause that speaks of multi-party democracy. The Constitutional Court was referred to this clause, however, its view on the matter is that independent candidates do not stand in the way of or impede on the functioning of multi-party democracies. This is considered a boundary post, as the amendments that give effect to the judgment may not undermine this value clause. It is also of importance since this value clause is in the Constitution to safeguard South Africa from becoming a one-party state. Section 19(3)(a) Right to vote This section is normally seen as comprising four aspects: General - For all who qualify according to the basic requirements to vote. Equal - To ensure that some votes do not weigh more of less than others, which has an implication for the type of electoral system that is established and how, in this case, independent candidates can be accommodated. Direct - Every vote has a direct influence on the outcome Secret - Every voter votes voluntarily and without coercion Therefore, equality of the votes forms another boundary post that affects the amendment. An electoral system cannot be established where some votes outweigh others. Independent candidates cannot be accommodated in such a way that the votes brought out for them weigh more or less than for others. Section 19(2): Right to Free, Fair and Regular Elections Section 19 is of importance as it is the political rights in the bill of rights. Three aspects are contained in this section: Regular elections - Legislature has a fixed term, enforcing that there will be elections at regular intervals. Free - To participate without interference or coercion and to ensure that candidates and political parties must be able to participate. Fair - Equal opportunity for all parties or candidates to contest the elections. These aspects will have a bearing on the type of amendments made to the electoral system. Sections 46 and 105: Electoral system that results, in general, in proportional representation Section 105 refers to the provinces. Proportional Representation (PR) is not defined in the Constitution. However, it may include: Proportional Representation of political parties and Proportional Representation as to voter preference. There are many PR systems that give effect to both PR for political parties and voter preference such as list-systems, preferential systems, and combined systems. The current South African electoral system is based on party-list proportional representation, which means that parties are represented in proportion to their electoral support. The preferential system entails that the voter can indicate preference for a party and candidates on the ballot. The ballot can list party representatives in order of preference and can also move over party lines in this system. The combined systems incorporate PR with constituencies. Therefore, section 46 and 105 of the Constitution serves as another boundary post within which amendments to the system must be made. The system chosen must, in general, provide for Proportional Representation. Additionally, within the Constitution and consequently, because of the court judgement, parliament assumes the responsibly to choose a particular electoral system. The particularities of the system are left to parliament and it has some leeway on how to give effect to the judgement. Section 19(3)(b) Right to stand for and if elected to hold public office This is the provision that the Constitutional Court judgement focused on and forms the main grounds for the Electoral Act being declared as unconstitutional. Within the current electoral system, the exercising of section 19(3)(b) right can only be channelled through political parties. Therefore, the act does not provide for candidates to participate in elections as individuals or independent candidates. This is the crux of the judgement and what the majority of the courts’ ruling dealt with. Furthermore, Justice Mandlanga added another aspect, which can also be considered a boundary post, namely: section 18 the Freedom of Association. Justice Mandlanga’s argument was that this also includes the freedom NOT to associate. Under the current electoral act, candidates are “forced” to join a political party in order to be a candidate and exercise their right under 19(3)(b), which negates the right NOT to associate. therefore, the electoral act violates this right. Furthermore, the court also dealt with a number of other provisions that was put to the court, including the following: Sections 46(1)(a) AND 105(1)(a): The electoral system is prescribed by national legislation. The national legislature (parliament) is subject to the Constitution, thus whatever the national legislature decision, it is still subject to the Constitution. Sections 47(3)(c) AND 106(3)(c): Loss of membership of legislatures. The Constitutional Court said that this only applies to political parties and does not affect the issue of independent candidates. Sections 57(2), 178(1)(h), 193(5) AND 236: Participation by parties in legislatures. 57(2): deals with the rules and orders of the national assembly providing for minority parties to participate in the proceedings. Section 70(2): Rules and orders of National council of provinces providing for participation. Section 116(2): rules and orders of Provincial legislatures providing for participation Section 178: Participation of opposition or minority parties in the process for the appointment members of the judicial service commission. Section 193(5): Deals with chapter 9 institutions where minority parties will also participate. Section 236: Legislation to be made for the funding of political parties All these provisions are about political parties’ participation in legislature. The court found that that these provisions strengthen multi-party democracy and do not prevent making provision for independent candidates to participate. These are boundaries that dictate that whatever amendments are made; they cannot undermine the participation of parties in legislature. Section 157(2)(a): The municipal election system can either be a pure PR system according to the list system where only parties are being presented on the ballot or a PR system combined with wards. This section does not affect the national and provincial spheres. Thus, this only affects municipal level and does not prevent the court to declare the electoral act unconstitutional. Section 6, Items 6(3)(a) and 11(1)(a): Nominations by Political Parties. This only refers to the first elections after the 1996 Constitution came into effect and is thus not applicable anymore and have no current influence. In conclusion, all the above listed sections are boundary posts that the Constitution imposes on the electoral act and the amendments brought to the act. These can be viewed as the most important ones within which the amendment of the acts must take place. Below is a diagram representing the constitutional boundary posts. 3. Discussion on the judgement and preferences related to new models that need developed The question of “Proportional Representation (PR), in general” was an important point of discussion, pertaining to how this needs to be considered and incorporated as part the court ruling. It was emphasised that PR as stipulated within the Constitution must remain a prominent boundary point when considering reforms to the electoral system that will provide for the participation of independent candidates. Absolute proportionality under any system does not exist and that is one of the reasons for the use of “in general”. Sometimes a political party falls short of the votes for representation of a next member in national assembly. The surplus is allocated elsewhere and thus the end result is not 100% propositional. However, it was noted that, currently, South Africa’s electoral system is the most proportional of all systems in the world due to the fact that an electoral threshold on the size of the National Assembly does not exist. This means that parties get a certain number of seats in parliament according to the percentage of votes that they receive in an election. So, for example, if your party gets 15% of all the votes in the country then it gets close to 15% of the seats in Parliament. There are 400 seats in the national parliament, so for every 0.25% of the vote a party gets -in principle- 1 seat. “In general” does not give any additional meaning to it, but the constitution demands that the electoral system must result in proportional representation. Consequently, it can be argued that when independent candidates are incorporated within the electoral system the requirements pertaining to PR can be the same as for political parties. If the independent candidate gets sufficient votes and qualifies to get into national assembly or provincial legislature they will be regarded as a “type of party“ and it will need to be assessed if the number of seats allocated to those candidates correlates with the distribution of votes in the election. The challenge for them could be how to get to the minimum number of votes to gain a seat in legislature. The campaign system must thus also make provision for candidates to gain exposure. The key point regarding PR is that representation must be a result of the voting and thus the composition of parliament must reflect in a proportional manner, the preferences of the voters. Furthermore, it was highlighted that regardless of the electoral system proposed by the panel, several issues will need to be considered. South Africa’s current electoral system functions on two house system, with one house being the National Assembly and the other being the National Council of Provinces (NOCP). Some of the necessary considerations when implementing a PR electoral system, where the size of parliament is fixed and incorporating independent candidates includes the following: Should independent candidates or lists of independent candidates be allowed in both houses? Should the PR electoral system be the same for both houses? Should the system allow voters to cast their votes for one (or more) individual candidates (so-called personal or preferential votes) or shall it only be possible to vote for the list as such? Should independent candidates or list of independent candidates be allowed for both houses? What will the ballot papers requirements be pertaining to: Parties elected in previous parliament and still represented in parliament? Direct access, a deposit, or a certain number of seconding voters? New parties? Payment of deposit or a certain number of seconding voters? Independents or lists of independents, if allowed? Payment of a deposit or a certain number of seconding voters? Will electoral thresholds be different or the same for parties and individual independent candidates, for example based on a certain percentage of the vote, an absolute number of votes or some other criteria? These options and key decisions must be assessed by the electoral panel through their considerations and debates pertaining to the different levels of electoral reform that the panel will consider in developing proposed electoral models for the South African context. Furthermore, the argument has been made that if individual candidates are to be accommodated in the PR system, then apart from the electoral act having to change, the political party funding act has to be amended to require Individuals to also disclose funding and support they receive. Moreover, during the discussion on the court judgement, it was also debated whether the national and provincial legislatures, may have to re-think how they function, as a consequence of the judgement and the requirement of incorporating independent candidates. Furthermore, this also raised the question of what impact this amendment to the act would have on the rules and functions of legislature, and if this may require some constitutional amendments. As it stands, the rules of the national assembly under section 57(2)(b) of the constitution, indicates that the representation of political parties is also accommodating to minority parties and currently not every political party is represented on every committee in the national assembly. Consequently, with the incorporation of independent candidates this could also be the case. Therefore, the argument was made that as the wording on party representation stands (minority parties), it may in future not be adequate to provide for the participation or representation of independent candidates. While discussing the desired preferences and guiding principles that a new electoral model would need to include, A presenter proposed a number of core elements that should be focused on within a new system. Additional points raised indicated that a new system would need to provide greater ability for voters to directly elect candidates, as well an influence over how party candidates are elected. The current electoral system does not create any room for this. The electoral systems must continue to encourage diversity through minimising racialised and class-based electoral election results, as well as demographic, ethnic and religious diversity through the diversity of candidates. The system should be relatively simple to administer and to be navigated by voters. Furthermore, it was also argued that for any meaningful balance between accountability, responsiveness and representativity, inclusivity, and diversity to be achieved, bold comprehensive reforms that are in the public interest, more so than that of political party or personalities, may be necessary. Therefore, the following guiding principles should be considered in the drafting of a new electoral system or model: Representation: Representation should be translated into legislative seats and needs to represent the expressed will of the voters as to the people who will represent them. Representation can take the form of geographical representation where the voters in each region, town city, province or electoral district choose the candidates who will represent them, and these candidates are ultimately accountable to the voters in these areas. Other forms of representation are prescriptive representation where national legislature is a mirror of the nation or ideological representation, according to the party politics or ideology to which voters align themselves. Additionally, the lack of constituency-based voter representation should be considered. Transparency: Transparency should exist in both the process as well as the electoral system. Inclusiveness: The electoral system should be easily understandable and accessible to all voters in order to create a system that can allow as many as possible citizens to vote. Increased Accountability: Increased accountability is fundamentally important as the current system allows for a trade-off between accountability and representation. 4. Assessing and determining the degree of electoral reform that is desired In order to determine the degree of electoral reform that is desired, and the options that can be explored while considering some guiding principles, as well as the constitutional boundaries identified, an analysis of the strengths and weaknesses of the current electoral model was proposed. Presentations by the two of the members on the electoral expert panel outlined the strengths and challenges of South Africa’s current electoral system. The strengths of the current system are related to the emphasis that is placed on multi-party politics which aims to include as many political parties as possible. The current system also provides for diversity of political parties; therefore, voter have various parties to choose from although they cannot exercise choice over specific candidates. Moreover, diversity of pollical preferences, various demographics, ethnicities, and religious diversity are also represented through political parties. The current system further provides the possibility for minority parties to secure seats due to the PR system. Other strengths of the system also include the fact that votes carry equal power, and that the system is relatively simple to be administered and easily understood by voters. Furthermore, the panellists also presented some of the challenges pertaining to the current electoral system. Firstly, some of these issues are related to representivity as voters are currently only represented through multiple parties and not in the form of multiple candidates. Furthermore, as the current electoral system operates through a closed party list system, voters are unable to express their personal preferences regarding the candidates elected as party representative, as they cannot directly influence these appointments. Secondly, voters do not have any direct influence over who will become their representatives in legislature. Similarly, voters do not directly influence the election of the president as this is carried out by the National Assembly. Therefore, this could possibly lead to the election of party candidates or presidents that do not possess the necessary expertise and capabilities required in the legislature. This further presents an accountability challenge to voters as they cannot hold individual candidates accountable and cannot recall ineffective representatives. Although the system does allow voters to raise their complaints with the party structure, as has been seen, this rarely influences the branches to take action against representatives. Moreover, fairness is also compromised in the relationship between votes cast and the composition of the legislature and cabinet. Voters can cast their vote for a specific political party, but they have no influence over the composition of the legislature after they have cast their ballot, as these appointments are determined by the party leadership. It was further highlighted that the ruling party appointed candidates in legislatures rarely question the executive, lest they be removed by the party. Consequently, the risk is created where legislatures can become a lame-duck and lose public credibility and trust. This forces extra-parliamentary politics, where politics happen outside parliament and civil society becomes involved. Furthermore, citizens and civil society approach the courts to deal with issues that should be dealt with by legislature. Overall, the aforementioned challenges result in large numbers of voters becoming disillusioned, resulting in many citizens choosing not to participate in formal politics but rather engaging in extra-parliamentary politics. Moreover, these system weaknesses also culminate in the youth becoming disinterested and steering away from the multi-party system in the country. During the second dialogue discussion, the panel also addressed some of the practical considerations that should guide their thinking regarding a new electoral system. Practically, developing a new electoral system will take time to devise. Therefore, the 24-month time limit as stipulated by the court judgment must be considered, as it may not be possible to execute far-reaching changes within the 24-month period. Moreover, the cost factor should also be a focus, as a new system may be expensive, potentially complicated to be administered and difficult to be understood by voters. The point was raised that only changing of parts of the system, in its most limited form, would create room for independent candidates, but could possibly be easier, less costly, and quicker. However, problems with the overall system will remain under this option. Consequently, it was pointed out that the criteria for a new system should not compromise on providing representation and making elections accessible and meaningful. Moreover, the system should empower voters to participate in elections and needs to ensure that voters experience that their votes count and are meaningful. The new system should also provide an incentive for conciliation as a conflict management tool between parties or individuals. Furthermore, the new system should facilitate stable and efficient governance and includes measures for holding the government and individual representatives accountable. Legislative opposition and oversight should be promoted, and the system should encourage political parties. The election process must be workable, sustainable, cost effective and viable for every election. Additionally, international standards should be taken into account to ensure free and fair elections, the secrecy of the ballot and the principle of one-person-one-vote. While debating the different options available regarding a new electoral system, the question arose whether reforms should only be limited to including independent candidates or if some should apply to the whole system? If the panel choose to address wider reforms of the whole electoral system, then the question becomes, should they change the system within proportional representation or go outside of the system and essentially create a new system? This could however require major constitutional amendments, which the panel believes best to steer away from. Thus far, three different options for reform were identified by the different presenters on the panel: Option 1: Amending the current system to allow for independent candidate. The question to consider is if it can be done in such a way to resolve the weaknesses of the current system, and will the most minimal reforms remove the weaknesses of the current system? Option 2: Amending the current Proportional Representation system to deal with the weaknesses of the system and make the changes needed to allow for independent candidates. Option 3: Changing the entire electoral system and including the changes needed to allow for independent candidates. One of the key points raised during the panel discussion indicates that one of the biggest needs in a new system is accountability. However, in addressing this issue, as well as the other challenges currently facing the electoral system, the practicalities of developing a new system will consciously need to be considered. This includes, but is not limited to, the costs of a new system; conceptualising a system that can be understood by voters; and choosing a model that can also be effectively administered during each election. 5. Conclusion Following the two discussions held regarding electoral reform, it was emphasised that the re-design of an electoral system should fit within the current boundaries of the Constitution and the prescripts of the Constitutional Court judgement. Therefore, this will entail the retention of an electoral system that results, in general, in proportional representation, along with mechanisms providing for independent candidates to stand for election at all three spheres of government. However, it should be noted that any eventually that could require some amendments to the constitution in order to implement the amendments required, should not be entirely disregarded at this stage. The next phase of deliberations will continue on 25 August 2020. The main purpose of this meeting will be to inform the panel’s thinking on what model will best suit the South African context, through exploring several different electoral models from various jurisdictions, including the German, Spanish, Danish and Irish electoral models. Additionally, Prof Elklit will also do a presentation on the electoral models contained in the 2003 van Zyl Slabbert Commission on Electoral Reform, together with the motivations behind each of the models. The models all combine proportionality with the right of independent candidates to stand for election, which should serve to inform the panel on examples of implemented alternative electoral models. The expected outcome of the discussion includes reaching an agreement as to which limitations contained within South Africa’s current electoral system must be addressed through the work on the panel, as well as gaining insights into existing models that combine proportionality and participation of independent candidates in elections. References Inclusive Society Institute, 20 July 2020, Electoral reform dialogue with expert panel. Inclusive Society Institute, 3 August 2020, Electoral reform dialogue with expert panel. Prof Rassie Malherbe, 3 August 2020, Boundaries for Amending the Electoral Act. Professor Jørgen Elklit, 21 July 2020, Decisions necessary for implantation of a PR electoral system. Ebrahim Fakir, 14 June 2020, “Constitutional Court hands MPs an electoral reform nettle to grasp. Parties won't want to vote for legislation that spells their own demise”, Sunday Times. Available at: https://www.timeslive.co.za/sunday-times/opinion-and-analysis/2020-06-14-constitutional-court-hands-mps-an-electoral-reform-nettle-to-grasp/[accessed: 14 August 2020]. Ebrahim Fakir, 25 June 2020, “A referendum thorough-going system reform is the way to political rehabilitation”, Africa News 24-7. Available at: https://www.africanews24-7.co.za/index.php/southafricaforever/a-referendum-and-thorough-going-system-reform-is-the-way-to-political-rehabilitation/ [accessed: 14 August 2020]. Prof William Gumede, 3 August 2020, Electoral Reform presentation regarding the Challenges of the current electoral system, Democracy Works Foundation. Deyana Isaacs, 3 August 2020, Presentation on Electoral Reform Criteria, School of Public Leadership at Stellenbosch University. The Constitution of the Republic of South African, (1996). Government Gazette. (No.17678). - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2020 Inclusive Society Institute 132 Adderley Street Cape Town, 8000 South Africa NPO Registration: 235-515 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Inclusive Society Institute DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. Authors: Percept Actuaries and Consultants Edited: Daryl Swanepoel 9 October 2020 Acknowledgements This research and publication was made possible through the kind support of the Friedrich Ebert Stiftung. It is part of a larger exchange of public policy and governance ideas between South Africa and Germany. Setting the scene The Inclusive Society Institute fully supports the notion of an affordable and universally accessible health care for all. As such, it endorses the objectives of the National Health Insurance (NHI) Bill which is currently before Parliament. The ability of a state to care for the health of its citizens is a measure of its commitment to human rights and its standing within the economic development evolution. A healthy nation is after all a pre-requisite for a growing and prosperous economy. Whilst the urgency and the importance of the NHI Bill is recognised and appreciated, its legislative passage must be accompanied by its realisation in every-day South African life. In this regard, certain questions remain unanswered: Can the country afford it, and are other less intrusive pathways available to incrementally achieve its objectives? The research which the Inclusive Society Institute has embarked on goes to the heart of these two questions. It recognises that the health policy dialogue is taking place in the absence of an agreed long-term financing roadmap and that there is still much uncertainty as to the practical manifestation of the envisaged system, especially as it relates to the role of the private sector / public sector mix. The Institute is concerned that the absence of a funding plan may undermine the just objective of improving the overall quality of health care in the country, and that an over-ambitious approach may undercut its potential. To this end, the Institute’s NHI research is aimed at providing options to aid policymakers in the health policy choices they are about to make. The first part of the Institute’s research, the literature review and stakeholder engagements, assessed the level of consensus within the sector, and delineated the areas of agreement, dispute and those that required further consideration. This, the second part of the research, provides a series of pathways to universal health care. It attempts to stimulate thinking as how best to tackle the all-important national project of providing an inclusive universal health care system, where the healing of the patient is based on the condition that needs to be treated, not their social or economic standing. The final phase of the Institute’s NHI research will endeavour to cost the pathways elaborated on in this report. The Institute offers this research to public policymakers as a further tool to inform their decision-making, in the hope that it contributes to rationalising the national dialogue towards what is achievable and practical in current-day South Africa. The progressive realisation of the constitutional right of access to universal and affordable health care – which an inclusive and socially just society demands – is best achieved by choosing workable programmes over unattainable aspirations. Daryl Swanepoel, Chief Executive Officer of the Inclusive Society Institute Executive summary This document aims to open debate and discussion about alternative pathways to universal health coverage (UHC) beyond the proposals contained in the Draft NHI Bill (2019). The proposed reforms, as they stand, represent a combination of policy building blocks sequenced in a particular way. This design is by no means the only path to UHC. There are several reasons to revisit our chosen reform pathway. We find ourselves in changed circumstances, entering a period of austerity, accentuated by Covid-19. The reform pathway, as currently conceptualised, requires substantial reorganisation of a fragile system in a relatively short time frame. This big bang approach poses several risks; the biggest risk being that our system is never reformed because of resistance from across the political spectrum. In Part A of this document we synthesise the various arguments around limited or reduced support for many of the critical positions taken in the Draft NHI Bill. Incremental reform processes, with realistic milestones, are better suited to building trust and stakeholder buy-in. Our starting point is one of an ailing public sector, a resource-intensive private sector, fragmented financing, inequities within and between the public and private sectors, weak accountability, and a significant trust deficit. It is a far cry from the widely-supported principles of equity, efficiency, quality, sustainability and good governance which guide the reform process. One way to ensure that UHC continues to move forward is to remove the specifics of the modes of implementation in the policy documentation and to incrementally build stakeholder consensus as we move through the reform process. This will allow for a more agile and responsive process which is cognisant of shifts in context. Building trust in the State’s ability to steer the system through the reform process is not just a ‘nice-to-have’ but has been shown to dramatically improve and strengthen UHC implementation in other countries. There is a large trust deficit in South Africa, in part due to the many false starts for UHC over the years, but also due to missed opportunities to showcase the public sector’s strengths. The wounds from State Capture and the failure of numerous large state institutions mean that reform processes that rest on the creation of new centralised institutions reliant on top-down accountability mechanisms are unlikely to be favoured over those that are more participatory in nature. The starting point for reform is one of the most contentious areas. Does the implementation of a single purchaser (the NHI Fund) require strengthened service delivery in the public sector? Or is the only way to strengthen service delivery by creating a single purchaser? There is consensus that irrespective of the exact route taken, the private sector cannot continue to function as is and will require reform. And regardless of the reform pathway, there will be a role for the private sector in the system. Reform of the system requires stewardship, and the National Department of Health (NDoH) will need to play this role. Considering the positions taken by the NHI Bill on certain certain critical building blocks in a health financing system, relative to the UHC objectives, allows us to identify alternative approaches to achieving these same objectives. We do this using Joseph Kutzin’s framework of the functions in a healthcare system which include revenue collection, pooling, purchasing and service delivery. The details on revenue collection to fund the NHI Fund are still limited. In terms of pooling in the form of a single fund envisaged under NHI, the primary objective being pursued through this reform is equity. This could, however, be achieved in other ways, including income cross-subsidisation at the premium collection stage; virtual pooling in the form of risk equalisation or reinsurance; the further risk-sensitisation of the Provincial Equitable Share (PES) through better use of data; and the fast-tracking of the medical scheme Prescribed Minimum Benefit (PMB) review to establish a coherent package of services across both sectors. In terms of purchasing, it is foreseen that the NHI Fund will act as the single purchaser of healthcare by entering into contracts directly with accredited healthcare providers (public and private) on the basis of a basic benefit package. It is assumed that this approach will help to achieve the objectives of quality, efficiency, good governance, and stewardship. Nevertheless, the same objectives could be achieved through alternative approaches: by creating a multi-funder environment and allowing patients to choose providers; by ensuring top-down and greater bottom-up accountability; and by increasing the public sector’s contracting with the private sector. In terms of the last health system function – service delivery – it is planned that under NHI, accreditation will be used to guarantee a minimum level of quality. The private sector will be contracted to provide primary healthcare, but there is no mention of contracting with private hospitals or specialists. It is anticipated that these reforms will help achieve the objectives of greater equity, quality, efficiency, and improved governance and stewardship. There are, however, other approaches available to achieve the same objectives. Procurement legislation could be changed to become more flexible to allow for private provision of care. A combination of reimbursement approaches, such as capitation and performance-based financing (along with strong accreditation mechanisms), could incentivise improved service delivery. In Part B of this report, we outline several scenarios that allow the reader to reimagine UHC implementation in South Africa. The four scenarios are: ‘Status Quo Gold Standard’, ‘NHI Rejigged’, ‘Power to the People’, and ‘Reorienting Towards Value’. We used the comprehensive literature review conducted prior to this report, as well as interviews and documentation, to pinpoint these scenarios. At their core, each scenario addresses the five policy objectives embedded within them, and therefore the scenarios present a reimagining of the ‘how’ for NHI (see Table 1). These scenarios may help the South African Government and the various UHC stakeholders to continue furthering the important UHC agenda, without risking the public purse or service continuity as it does so. Table 1: Alternative UHC scenarios explored in this document List of figures Figure 1: Some of the key recommendations of the HMI (24) Figure 2: Components of value-based care (38) Figure 3: Porter and Teisberg model of value-based care (39) List of tables Table 1: Alternative UHC scenarios explored in this document Table 2: Areas of consensus, uncertainty, and dispute on the NHI Bill among critical stakeholders Table 3: Examples of how NHI timelines can be linked to activities and milestones achieved Table 4: A summary of the building blocks of NHI reforms and alternative policy options Table 5: Summary of alternative UHC design scenarios Acronyms and abbreviations DHIS District Health Information System DHO District health office GDP Gross domestic product GP General practitioner HIS Health information systems HMI Health Market Inquiry HR Human resources HRH Human Resources for Health IYM In-year monitoring MoF Minister of Finance NCS Norms and Core Standards NDoH National Department of Health NHA National Health Act NHI National Health Insurance NHRPL National Health Reference Pricing List OHSC Office of Health Standards Compliance PDoH Provincial Department of Health SAG South African Government UHC Universal health coverage VAT Value-added tax Content Setting the scene Executive Summary List of figures List of tables Acronyms and abbreviations 1. Introduction Part A: Where are we now 2. What are we trying to achieve? First principles 3. Where to begin? 3.1 The argument for starting with the public health sector 3.2 The argument for implementing UHC policy alongside health system strengthening 4. Separating the principles from the approaches and mechanisms 5. Trust as a catalyst for UHC reform 6. The current fiscal climate may force a change in approach and cadence 6.1 The dire global economic situation and South Africa’s fiscus 6.2 Dramatic need for Human Resources for Health 6.3 The need to work smarter with what we have Part B: Exploring and imagining alternative pathways for UHC 7. Alternative conceptualisations of the building blocks of NHI reforms 7.1 Revenue collection and pooling 7.2 Purchasing 7.3 Service delivery 8. Alternative UHC designs 8.1 ‘Status quo gold standard’: No purchaser-provider split and strengthening the public sector 8.1.1 Improving data quality 8.1.2 Taking steps toward quality 8.1.3 Budget and spending transparency 8.2 ‘NHI rejigged’: NHI, but sequenced differently 8.2.1 Improving equity in each of the sectors (private and public) 8.2.2 Improving equity between the two sectors 8.3 ‘Power to the people’: Purchaser-provider split but with multiple purchasers 8.4 ‘Reorienting towards value’: a value-based approach to UHC 9. Conclusion References 1. Introduction In South Africa, we are at a critical point in the road with universal health coverage (UHC): an NHI Bill is currently up for discussion and scrutiny by the Parliamentary Health Portfolio Committee. With a high volume of submissions received, media reports have focused on how the Committee will be able to effectively process all these submissions. The massive response to the call for submissions indicates the level of public and stakeholder interest, support, and concern that the envisaged health-system-wide reform through NHI has evoked. Given the long history of the reforms, the severely constrained fiscus, and lessons from the Covid-19 pandemic, it is important that we pause to reflect on the range of policy choices and sequencing that are possible to achieve UHC. Large-scale reform processes need to be reflective, and open to learning and course correction. This document has two main contributions (Part B): the disaggregation of the reform process into its constituent building blocks with an analysis of how these could be reconceptualised in a way that allows the system to achieve the same policy goals; and the presentation of four alternative conceptualisations of how UHC could be achieved in South Africa: ‘Status Quo Gold Standard’, ‘NHI Rejigged’, ‘Power the People’ and ‘Reorienting Towards Value’. These are not the only possible alternatives but also serve to illustrate that we have choices about how to proceed. However, to know where we are going, we need to start at the beginning (Part A). We first consider the principles guiding the reform process and the various arguments for strengthening the current health system, before focusing on the areas of consensus, uncertainty, and dispute in the NHI Bill. Part A: Where are we now 2. What are we trying to achieve? First principles South Africa has been grappling with the path to UHC for over two decades. Despite differences in policy, rhetoric and plans, the intention has always been the same: to improve equity between the provinces and the health sectors, to ensure quality care is provided at the lowest possible cost, and to ensure the health system is governed optimally and with sound leadership. As support for this report, we conducted a comprehensive literature and stakeholder review of NHI in South Africa. Based on this, we identified five policy objectives that have been consistently present across policy documentation, while South Africa has tried to move closer and closer to UHC. These policy objectives are: To improve equity in the health system, including the sharing of resources (human and other) across the public and private health systems. To address escalating costs in the private health sector and contain future escalations in costs across the health sectors. To provide universal access to quality health care. To ensure efficiency in service provision and administration. To ensure good governance and stewardship. These key objectives of the health reform process will be used as a benchmark against which to assess the feasibility of various policy choices and pathways that have been put forward during the UHC debate. This report may also assist in guiding the sequencing of current reform proposals. Through this document, we propose that the combination of cost, quality and efficiency could be collectively reconceptualised as orienting the South African healthcare system towards value. 3. Where to begin? From the literature review, which included submissions on the Draft NHI Bill as well as more formal literature, there was a fundamental disagreement between the South African Government (SAG) and others on how the shift to UHC should begin. The disagreement, at its core, comes down to whether we should strengthen the public health sector first, or whether we should begin with massive system restructuring to improve quality and equity across the entire health system. 3.1 The argument for starting with the public health sector Many stakeholders believe that the current state of the public health sector is a non-starter for NHI (1–3). Beset with ailing infrastructure and poor quality care (4,5), many think that rolling out UHC within the current system is impractical and doomed to fail. Furthermore, the narrowing fiscal envelope for public healthcare is likely to slow down the State’s ability to improve these infrastructural or resourcing issues in the short term. This means that the State risks collecting funds to enable UHC without having the resources to successfully do so. The result is that citizens resent having to spend more money on healthcare (through tax) while still experiencing the same poor quality, and this will negatively impact on people’s trust in a state-run system, like NHI. Therefore, if rushed and implemented poorly, there will be long-term damage to the UHC project in South Africa. There are three main reasons why some stakeholders believe that the State should start within the public health sector, in order to lay a better foundation for the larger system restructuring envisioned in the Draft NHI Bill. 1. Restoration of faith in the system through high-quality services is required to enable a smooth switch to UHC. The primary argument for starting with the public health sector pertains to the quality of services currently provided. The National Treasury has expressed its concerns with health departments’ inability to spend and as such, when announcing the 2019/20 budget, the Minister of Finance (MoF) announced that unused NHI grant funds would be redirected to fund additional Human Resources for Health (HRH). Increasing availability of healthcare personnel is one way in which public health departments can improve the quality of care provided. In addition, most public health facilities are old, and require major renovations to be fit for purpose (6). Facilities are often under-resourced, not only by staff but also with equipment and other goods and services. This results in poor quality of care and is partly responsible for the proliferation of medicolegal claims against the State. It currently takes a very long time to upgrade facilities, given budget challenges and poor oversight of construction projects. Therefore, by starting on these upgrades now, using the Office of Health Standards Compliance (OHSC) assessments to guide the Department on where to invest, the public health sector could dramatically improve quality for its users. This would also restore faith in the system for many users and make the switch to UHC, with the public sector as the main vehicle for healthcare, more palatable to the South African population. 2. Large scale contracting of private providers is risky and could divert funds away from essential services. The difficulties associated with contracting are illustrated throughout the history of the NHI reforms. In the first phase of NHI, provincial departments of health (PDoHs) were able to contract in private general provider (GP) services. However, the project was largely a failure due to issues with payment and a lack of oversight (7). Nevertheless, in phase II of NHI (the phase we are currently in), the scope of privatesector provision was to be widened, to allow for contracting of services for high-risk maternity clients, among others (8). This has not happened yet. There was also an attempt to tender for oncology services from the private health sector, given the collapse of oncology services in the public health sector. However, the tender was never awarded. In August 2019, the National Treasury reported substantial underspend on the NHI grant (9). The Covid-19 pandemic increased the demands placed on the health system, in particular, the public sector. This created the need for the public system to purchase from the private sector to keep up with the requirements. However, developing a mutually agreed upon structured payment model with a clear package of care proved challenging (10). This has left many feeling that the State is not using available funds to strengthen the public health sector and has brought into question the State’s ability to manage the NHI Fund. Most importantly, many believe that this was a lost opportunity to not only showcase the State’s ability to procure efficiently, but also for vulnerable users to be afforded better care that will improve their health outcomes, a key objective of UHC (quality). Departments of health could experiment with contracting private services now without big bang NHI reforms. To improve equity, the departments of health could begin to contract with private sector services for vulnerable groups or for services that are currently unavailable. Building up a contracting capability will take time and will require learning from experimentation. 3. Pervasive state sector corruption first requires establishment of good governance and oversight before centralising funds. It is worth noting a final argument that underscores why stakeholders want the State to start with the public health sector. Corruption in the State has been brought to the fore as we have been emerging from a period of extensive State Capture. Many have concerns that centralising funds into an NHI Fund, before good governance has been embedded and corruption dealt with to prevent misuse of funds, is simply too risky. Stakeholders are therefore eager to cement the governance principles and oversight mechanisms to protect healthcare funds before moving to NHI implementation which would radically centralise health budgets. If open to corruption, the damage is even more devastating, given the quantum. In Section 7, we use these arguments for starting with the public sector to build a UHC scenario where no purchaser-provider split is implemented, and the public sector is simply strengthened. Given that public healthcare is currently available, at no charge for the indigent, it can be argued that UHC is already present, but the quality, efficiency and effectiveness of the system is poor. This scenario therefore details the steps to improve the existing UHC platform with no system restructuring. This improvement to services and quality would impact over 80% of South Africa’s population. 3.2 The argument for implementing UHC policy alongside health system strengthening Given that South Africa has been on the UHC trajectory for several years now, some – especially those within the public sector – believe that without the impetus that new policy brings, the public health sector will remain ailing and under-resourced. Some of the difficulties experienced by departments of health in contracting private providers relate to outdated and ill-suited public financial management regulation. Similarly, to truly improve quality, the system needs to change the kind of data that is collected, and make data more readily accessible for analysis. These shifts require regulatory change. A number of stakeholders believe that the NHI Bill will provide the mandate to begin these reform processes – many of which will take several years to enact. Another reason to begin implementation is that the NHI structure may help to stimulate systemic change, given the shifts in control from PDOHs to district health offices (DHOs). The NHI finally mandates the move to decentralised governance, and literature abounds on the reasons why this is better for population health and service delivery (11). Again, without the impetus for UHC from NHI implementation, this is unlikely to happen, as decentralisation has formed part of district health services policy since 1997 with limited success (12). There is broad consensus on the principles of NHI. Therefore, while the approaches are contested, it is widely supported that the health system needs to be reformed. Therefore, some feel that with this level of support for NHI principles, the mechanisms and methods can be worked out along the way without delaying the implementation phase. It is important to note that currently, the Draft NHI Bill is specific on the mechanisms and approaches for NHI. Some loosening of this language could assist in getting the principle of UHC through and allow for further discussions and debates on the ‘how’. There exists a strong belief among many NHI stakeholders that a single purchaser is needed to effect improvement in service delivery, i.e. without a purchaser-provider split, accountability won’t exist, and accreditation of service facilities will not be achieved. However, as shown in Section 7, the objectives that UHC seeks to achieve can be met in other ways. A purchaser in the form of a single fund is not a prerequisite for improved transparency, centralised stewardship, quality improvement strategies and various other policy actions which are being pursued on the back of NHI. 4. Separating the principles from the approaches and mechanisms Table 2 (below) is taken from the comprehensive literature review mentioned in the executive summary (7). It succinctly describes where there are disagreements on the approaches and mechanisms of NHI. We will unpack each one and suggest alternative pathways that still achieve the principles of NHI, albeit through different mechanisms. Table 2: Areas of consensus, uncertainty, and dispute on the NHI Bill among critical stakeholders Linked to the ‘fundamental misalignment’ we described in Section 3, is the widespread concern that the current policy implementation timelines are unattainable. Several Bill submissions described feeling rushed into formalising the Bill and lamented the lack of tangible benchmarks and milestones that would help the South African population to hold its government to account. This is linked to the issue of ‘where to begin’ because it dictates the milestones and short-term activities of the Department of Health. For example, if the State implements NHI as currently envisioned, then some of the milestones to be included will be the contracting of private providers for public sector clients, at agreed-upon tariffs. However, if the State were to start with strengthening the public health system first, the milestones could include, for example, ‘number of public sector health facilities who meet the Office of Health Standards Compliance (OHSC) accreditation standards’. Some NDoH policymakers, however, recognise the impossibility of achieving the NHI implementation timelines set out in the Bill, strengthening the case for a step-by-step approach. Given the technocratic realism around timelines, the legislation should be amended to take this into account. An option to reach consensus on timelines, is to break NHI policy down into discrete actions that can then be monitored. For the actions pertaining to strengthening the public health sector, no new policies are required, the current National Health Act (NHA) is sufficient. Therefore, the system could begin to build trust and support for the greater NHI vision by showcasing its capabilities within the public health sector. Using this method doesn’t mean the State has to discard the current NHI Bill or goal. Rather, it would be about breaking the policy up into its component pieces. Each component piece may require legislation enactment, but this should become easier and easier as the State builds up credibility. Some examples of the components are provided in Table 3. Table 3: Examples of how NHI timelines can be linked to activities and milestones achieved 5. Trust as a catalyst for UHC reform The practice of building trust between stakeholders is critical. Ultimately, trust is built by doing what you say you are going to do and by working together on a shared problem that allows disparate groups to feel heard and build consensus. In the extensive report of the Dullah Omar Institute (13) on decision-making in health, NHI is used as a case study to consider the various positions of different stakeholders and players in the South African health system. The report makes the absence of trust clear, even between different government entities, like Treasury and departments of Health. To date, the shift to NHI has been marred by a lack of true consultation and consensus-building between stakeholders. Many stakeholders feel that their proposals and recommendations were not taken into account in the final version of the NHI White Paper or the latest Draft NHI Bill. Non-NDoH government bodies similarly felt their recommendations were ignored. We see this most clearly in the lack of an accompanying financing document from National Treasury for the NHI Bill. The ability to successfully implement UHC reforms rests to a large extent on building trust between the State and private providers, a process which should begin ahead of financing reform implementation. Private providers currently contract with multiple purchasers and are understandably nervous of engaging with a single purchaser as they become dependent on that purchaser being rational, fair and effective. There are already examples within the private sector where providers feel over-powered by funders. Additionally, past experience of contracting with the NDoH has not been positive, and trust will need to be re-established to attract sufficient private providers into the reformed health financing space. In Sweden, it has been found that the most effective implementation of a purchaser-provider split was in those regions that moved beyond formal agreements and competition, to dialogue and consultation to shape the future of healthcare (14). Cooperation and trust were found to be important qualities in the creation of a purchaser-provider split. Similarly, in Germany, it was found that a medium-term process of working intensely with important stakeholder groups supported a transition process to a reformed health financing space (15). This engagement meant the perspectives of all stakeholders were captured and shared publicly, facilitating transparency and thereby trust. Another useful approach in Germany is that the committee which is tasked with making health financing decisions is representative of many different stakeholders (15). These international lessons are important for South Africa and sound the call to focus on consensus-building and open dialogue before settling on the modes and mechanisms of implementation. There is currently not enough trust in the health system between different stakeholders to power a big bang approach to UHC. Change will have to be incremental with more accountability built along the way. 6. The current fiscal climate may force a change in approach and cadence In this section, we make the case that we will need to work with what we have (available funds, infrastructure, and human resources) given the difficult economic and fiscal situation South African currently finds itself in. 6.1 The dire global economic situation and South Africa’s fiscus The global health crisis that rapidly arose as a result of the Covid-19 pandemic has triggered the deepest global recession observed in the last eight decades. This has come about due to the Covid-19 national lockdown policies to curb the spread of the disease. These lockdowns resulted in the loss of trade and tourism, and decreased capital investments which escalated debt both at the individual and the macro level. These disruptions have been further compounded by the effects on wellbeing and the massive shock to healthcare systems worldwide. Countries that had historically weaker health systems fared worse in the pandemic (16,17). While the exact impact remains uncertain, contraction in economies and long-term negative consequences are expected globally, particularly in emerging markets and developing economies. The World Bank predicts an average contraction of 2.5% in the global economy in 2020, largely as a result of the disruptions caused by the pandemic (17). A decline in per capita income by 3.6% is also anticipated, resulting in an increase in the rate of extreme poverty. Furthermore, the effects of the pandemic on schooling and access to healthcare may worsen the long-term economic impact. While global economic growth is expected to rebound to 4.2% in the following year, the decline in the economy may be as much as 8% globally, and a 5% contraction in output in emerging markets and developing economies may be observed in 2020, with only a 1% recovery in 2021. Although policy measures have been put in place by most countries to combat the economic effects of the pandemic, the recession is likely to send many individuals into extreme poverty. The economic downgrades expected globally may undo years of progress and decrease the chances of many countries achieving the Sustainable Development Goals. South Africa is no different and has been hard hit by the pandemic. The country was already vulnerable to economic decline preceding the pandemic, with a contraction of 1.4% and 1.8% observed in the fourth and third quarters of 2019, respectively (18). However, the impact of Covid-19 was far-reaching and worse than could have been anticipated. The national lockdown regulations were set in motion from April 2020 and continue to date. The second quarter of 2020 was particularly hard hit as a result of the most restrictive parts of the lockdown falling within this period (19). Despite fiscal and monetary attempts at tackling the dire economic constraints caused by Covid-19, the national budget remains in deficit due to the increased expenditure and decrease in tax collection, and is likely to have lasting impacts. Due to these constraints, rapid growth in healthcare expenditure as a share of GDP is unlikely. Rather, there exists the very real possibility of cuts to healthcare budgets. This threatens UHC implementation. 6.2 Dramatic need for Human Resources for Health The Covid-19 pandemic has highlighted the need for a strong health workforce in order to provide equitable access to quality healthcare and has shed light on the inadequacies in our current Human Resources for Health HRH mix and availability across and within the sectors. Investing in HRH is essential for the implementation of UHC, and the National 2030 HRH Strategy outlines optimistic targets for HRH in South Africa (20). However, the fiscal climate threatens to undercut the laudable goals of the 2030 HRH strategy and as such, we need to keep finding ways to innovate our service delivery platform to ensure healthcare workers are used optimally. 6.3 The need to work smarter with what we have Considering the potential that no additional funding will be allocated to healthcare and the possibility that funding may even be reduced, it is imperative that existing resources and infrastructure are utilised efficiently and effectively. Public sector To do more with less, innovative ways of thinking about the path taken to achieving UHC are required. The retention of the current workforce and the redistribution of teams in an equitable way may assist in making better use of scarce HRH. Similarly, there is significant scope to improve the allocation of existing resources across geographies. The pandemic has halted or, in some cases, inhibited the progress. However, it has also stimulated innovation through the incorporation of various technology-enabled solutions to accessing healthcare in part due to a relaxation in associated telehealth regulations. Making use of the innovations that are found to be more cost-effective may help to reduce spending while also decongesting the health system. With a focus placed on primary healthcare as a means of enabling UHC, current infrastructure may be well utilised. Promoting and strengthening PHC systems presents a way to lower the costs associated with management at higher levels of care. Currently, ward-based outreach teams are established throughout South Africa (21). These teams provide care at a community level and consist largely of nurses and community health workers. These teams have been found to be both effective and cost-effective when providing care to impoverished, high-risk individuals (22). The cost-effectiveness of using community health workers is further increased when they have access to information and technology systems as this allows for the smallest workforce required and more streamlined care through the availability of data (23). Private sector The recommendations from the Health Market Inquiry (HMI) present a detailed roadmap for reforming the private sector – specifically in relation to escalating costs (one of the core policy objectives). Legislation that facilitates multi-disciplinary teams and global fees would be catalytic in curbing costs (24). It would also improve quality and health outcomes in the private health sector (24). Despite the high expenditure of the private sector, a low proportion of the population is currently part of private risk pools (with the associated social solidarity mechanisms). Including the private sector in the financing of the NHI may assist in diverting some of the strain currently placed on government because of the pandemic. This will be further discussed in the alternative scenario below. Excess capacity exists within the private sector, and this may be utilised in order to improve access and quality of care provided to those currently receiving care within the public system. Making use of the private healthcare system through contracting of private services may also aid in decongesting the public health system, thereby improving quality. This would require mechanisms for tariff negotiation, as well as the data and technical capabilities to support contracting. Reform of the now-outdated National Health Reference Price List (NHRPL) tariff system would be a good starting point. A recent (2018) project undertaken by National Treasury and NDoH to explore private sector contracting for Primary Healthcare (PHC) services using capitation was illustrative of a consultative process together with the required technical work. The public sector has a shortage of medical specialists available to provide care. By allowing the private sector to train additional registrars, ggovernment may be relieved of some of the financial burden while still increasing the workforce substantially (if they ensure these registrars still provide services to the public sector). Attention should also be placed on stabilising the operating environment of the medical schemes market. This includes reforming the current minimum benefit package to enforce a reorientation of the private sector to PHC services, which would drive down costs. Incremental reforms With the aim of achieving UHC, South Africa can take incremental steps over time, despite the current economic climate. Making use of the current available infrastructure will allow the healthcare system to recover, improve quality and build capacity over time, while avoiding the massive financial implications of a radical shift to an NHI system. In implementing small steps over time, trust and transparency can also be built, improving social support of the system. Part B: Exploring and imagining alternative pathways for UHC 7. Alternative conceptualisations of the building blocks of NHI reforms Rather than seeing NHI as one big bang approach to UHC, it is useful to think of many of the technical proposals, which form part of NHI, as being specific policy choices with regards to certain critical aspects of any UHC system. The most widely used conceptual outline of the various functions within a healthcare system is that proposed by Joseph Kutzin (25). Kutzin distinguishes between four key areas: revenue collection, pooling, purchasing and service delivery. This section draws extensively on work previously done by Percept on the purchaser-provider split and its various important dimensions (26–28). A summary of each section’s content in the form of health systems functions, policy goals to be achieved, specific policy architecture choices made under NHI, and potential alternatives are provided in Table 4 below. More narrative detail is provided in the sections below. Table 4: A summary of the building blocks of NHI reforms and alternative policy options 7.1 Revenue collection and pooling Revenue collection refers to the way in which a health system is funded. Examples include general taxation, taxes that are directed specifically to health and household/employer contributions to health insurance. Pooling refers to the accumulation of money for healthcare for a specific population, such that the contribution by a specific household is not necessarily equal to their expenditure. Money can be accumulated in government departments, funding vehicles such as medical schemes or a new entity like the NHI Fund. Pooling offers the benefits of pre-funding, and the engineering of income and risk cross-subsidies (i.e. between healthy and sick, young and old). What is proposed under NHI, and which UHC goals will it satisfy? The revenue collection components of NHI are not yet clear, but the fact that the NHI Bill puts forward a complementary role for medical schemes is driven by the assumption that the revenue currently spent on medical schemes will rather be channelled towards the NHI Fund. However, there is likely to be some degree of leakage, not yet quantified, from the financing system and, hence, the assumption that all money currently spent on medical schemes will be available for NHI is incorrect. The NHI benefit package, referral pathways, clinical protocols and queues are unlikely to be a substitute for the current care provided in the private sector, with reduced cover for elective care and less freedom of choice. Revenue collection is likely to occur through some type of payroll tax for the formally employed and probably general tax increases. The fiscal allocation will be pooled in one fund, the NHI Fund, with a clear split between the purchaser and the provider (see below for discussion on the purchaser function). Pooling all funds into one pool and allocating them based on need through a basic benefit package is thought to help meet the goal of improved equity. How could the UHC policy goal of equity be achieved in other ways? There are other ways to achieve the goal of equity other than creating a single pool of funds. Income cross-subsidisation can be done at the revenue collection stage, resource allocation to sub-pools can be done on the basis of the needs of the population covered by the pool, and retrospective adjustments can made for higher than expected need. The technical methods used to balance resources between sub-pools are referred to as virtual pooling, risk-equalisation and/or reinsurance, and have been used successfully in systems such as the Netherlands and Germany. There is a parallel to the existing provincial equitable share (PES) formula which effectively splits the budget on a risk-based per capita basis. The PES can potentially be made more risk-sensitive by drawing on detailed improved population health data as these become available. The fast tracking of the medical scheme PMB review will also move us closer to a basic benefit package that is coherent across both sectors. 7.2 Purchasing The purchasing function in a healthcare system is about deciding how to allocate money from the pool to providers of care. This means deciding what services to purchase for which client,(*1) and how to pay for them. The terms purchaser and payer are sometimes used interchangeably, although it is possible to separate payment and purchasing functions. Our focus is on the concept of a purchaser because it is more strategic in nature. The term payer de-emphasises the need for explicit thought to be given to questions of what to purchase, from whom and on what terms. What is proposed under NHI and which UHC goals will it satisfy? The NHI Fund is to act as the single purchaser of healthcare by entering into contracts directly with healthcare providers. Through the establishment of the NHI Fund as a purchaser, a clear purchaser-provider split will be implemented. Purchasing will be done based on a basic benefit package, yet to be defined. The intention is to select providers based on criteria such as the quality of service, geographical footprint and service capacity. The OHSC will play a certification function, assessing which providers meet minimum norms and standards, with the Fund being responsible for final accreditation. Providers that satisfy certification criteria and some additional accreditation requirements set by the Fund will be granted accreditation, and will thus be eligible to contract with the Fund. To date the OHSC has highlighted severe and widespread quality failings in the public sector, and it is unclear what the process is to ensure improvement within the envisaged timelines. Accountability, and ultimately quality and efficiency, are expected to increase because of a more arm’s length contracting relationship between the purchaser (the NHI fund) and providers of care (for example, individual public and private facilities). There is also an implicit assumption that by moving the direct funding (rather than purchasing) of healthcare away from PDoHs, governance and stewardship of health resources may improve through centralisation. There is, however, no evidence to support this assumption. A key effect of the purchaser-provider split in the South African context is that it enables the NHI Fund to purchase healthcare goods and services from private healthcare providers in a way that is more flexible than under current procurement rules. For example, currently the public sector would need to enter into individual contracts with providers if they wanted to contract services from the private sector. Under the purchasing scenario set out in the NHI Bill, the provinces effectively move from being purchasers and providers currently to being primarily providers of care. The ability to purchase from both sectors is referred to as pluralistic purchasing. There is a range of ways in which the purchaser can drive accountability through pluralistic purchasing. For example, the purchaser can put in place requirements, such as minimum quality standards, that providers have to meet in order to be contracted (ideally accompanied by mechanisms for driving quality improvement in those facilities that do not meet the standards). The purchaser can also pay providers based on the quality of care delivered, by using health outcome data to measure impact. Both of these concepts are articulated in the draft NHI Bill (29) at a conceptual level. How could the UHC policy goals of quality and efficiency be achieved in other ways? It is important to recognise that the theoretical benefits sought through a purchaser-provider split are not always achieved. A single purchaser is not enough to change incentives – attention must be paid to how providers are contracted, how the purchaser measures their performance, and how the purchaser addresses poor performance. There are inherent risks associated with a large bureaucracy – an insufficiently motivated monopsony and the scope for large-scale corruption. In fact, many of the recent corruption and irregular expenditure scandals in South Africa have occurred in national-level and centralised bodies, including the Passenger Rail Agency of South Africa (PRASA) (30) and, most recently in the wake of the Covid-19 pandemic, the Unemployment Insurance Fund (UIF) (31). *1 The term client is used instead of patient, because not all users of a healthcare system are ill. The envisaged health system encompasses preventative care, family planning and other services for those who are well. The term client is preferred to the term user as it more strongly signals the centrality of those receiving services in the system (as opposed to being passive recipients of care). Much of the allure of a purchaser-provider split relies on the effects of competition between providers (see below) to incentivise quality and bring down prices. However, even in high-income countries like the United Kingdom, where there is a long-standing purchaser-provider split, there have not always been enough providers in each regional area for these competitive mechanisms to be key drivers of efficiency. In the case of Kenya, it was found that the purchasing done by the Kenyan Hospital Insurance Fund (KHIF) was not sufficiently strong to help achieve the objectives of equity, quality and efficiency (32). This was because provider monitoring and contracting by the Fund was generally weak and due to the limited geographic distribution of certain providers (32). Strategic purchasing will only ever be as good as the technical capabilities of the purchaser and requires access to good data and analytics. Other ways to achieve the benefits of purchasing without a purchaser-provider split include investing in the resources or capability for contracting with private sector resources – this includes how to design contracts and how to determine tariffs. Driving accountability through a purchaser is a ‘top-down’ approach as opposed to a bottom-up approach where clients are empowered to demand quality care from providers. Ideally, you need both mechanisms in place. An over-reliance of top-down approaches erodes sensitivity to the client voice, their autonomy and their dignity. Further ways to achieve improved accountability, and ultimately also quality and efficiency, would include giving clients choice about which funder/purchaser to pay their NHI contributions to and having funders/purchasers compete in a multi-funder environment. However, as experienced in the medical scheme environment, the basis of competition is critical. The incentives need to be in place for funders to compete on the basis of their purchasing capability, and the optimal number of funders will require investigation. 7.3 Service delivery Service delivery is the easiest part of the health system to understand. The service delivery function is performed by all the entities that provide healthcare goods and services. These include doctors, nurses, traditional healers, allied health professionals, pharmacies, and healthcare facilities like hospitals. The entities are referred to as providers, and can be either public or private. What is proposed under NHI, and which UHC goals will it satisfy? Given the resources such as hospital beds and medical specialists in the private sector, this ability to purchase care from private providers would improve access (33) and thereby also equity, leveraging these resources for the population as a whole. However, the NHI Bill focuses on purchasing primary care from private providers and is largely silent on the possibilities of enabling access to private hospitals and specialists. NHI holds the potential of simpler pricing and mechanisms for contracting. However, for some providers the accreditation criteria and data collection requirements that will be imposed could lead to an increase in their administrative burden. Ultimately, we may see competition between public and private providers vying for contracts from the Fund, which could lead to innovation and improvements in the quality of care, as well as efficiency (more services could potentially be provided with the same level of resources). A fair playing field in terms of prices across the two sectors is an important consideration to ensure that competition is possible between the two sectors. Private providers are subject to different cost and financial structures to public providers, for example: value added tax (VAT) applies; there is a need to realise a return on capital; and, at present, there are different rules relating to employment structures. The notion of competition across the two sectors is politically loaded. Private providers are likely to be concerned about the risk of political pressure to protect public providers from competition from the private sector, while public providers are likely to be concerned about the diversion of funds to private providers. There is a question of equity, presuming a quality differential between public and private providers: which patients will access private providers, and which patients will access public providers? The Bill is largely silent on principles to guide the allocation of funds across sectors. How could the UHC policy goals of equity in access, quality and efficiency be achieved in other ways? A purchaser provider-split and a single fund are not necessarily required to establish equity through better access to private sector resources, nor are they required to improve the quality of healthcare services available in both the public and private sectors. If procurement legislation were to become more flexible, PDoHs would be able to purchase more services from the private sector, thereby increasing equity through improved access. Even within the current regulatory frameworks there is room for experimentation with purchasing. Furthermore, improved quality and efficiency can be achieved without establishing a purchaser-provider split. One of the most prominent mechanisms through which quality can be promoted is through alternative reimbursement approaches. Neither a fixed-cost approach (salary remuneration), as is the case in the public sector, nor fee-for-service payment mechanisms, as is the case in the private sector, lend themselves to incentivising improving quality. Reimbursement mechanisms that reward high quality care, implicitly or explicitly, can play a large role in improving quality, although some of the pitfalls of performance-based financing (e.g. it may not have a long-lasting impact on organisational culture and the impact dwindles once incentives are removed) may remain and will have to be carefully managed. Ideally, a combination of reimbursement approaches such as capitation and performance-based financing may work best to achieve an optimal level of servicing (avoiding both under- and over-servicing) while also encouraging quality. This, coupled with strong accreditation mechanisms, either through the OHSC or through the establishment of a supply-side regulator as recommended by the HMI, can steer the health system to delivering high quality care (24). Thailand offers an example of how strategic purchasing through alternative reimbursement mechanisms can work (34). In Thailand, the National Health Security Office (NHSO) acts as the strategic purchaser for the Universal Coverage Scheme (UCS), the scheme which covers the population not covered by the Civil Servant Medical Benefit Scheme (CSMBS). The NHSO uses a capitation approach to remuneration in its negotiation and purchasing of services from the Bureau of Budget representing the Thai Government and its healthcare providers. The purchasing done by the NHSO on behalf of the UHC in Thailand is cited as an example of a strong strategic purchaser (35). 8. Alternative UHC designs In this section, we present a series of alternative design visions for achieving UHC in South Africa. These are intended to stimulate dreaming, visioning and alternative ideas of what UHC could look like. It is also intended to help break the stalemate in discussions between stakeholders. There is no one right path to achieving UHC. The conceptualisation of UHC as set out in the NHI Bill is only one, very particular way of achieving the most important objectives underpinning UHC. However, these objectives can also be achieved in other ways, as discussed below. Irrespective of the reform pathway chosen, there will be a role for the private sector in the system. Reform of the system will require stewardship, and the NDoH will need to play this role. 8.1 ‘Status quo gold standard’: No purchaser-provider split and strengthening the public sector As discussed, there is a strong push for the public sector to first focus inwards, strengthening its hardware and software for NHI implementation. Hardware refers to the tangible components of the health system, like HR, finances, and infrastructure. Software refers to the relationships and culture within the system. There are substantial hardware failings in the current system, such as ailing infrastructure, and scarce human and financial resources. Some of these issues are borne out of systemic software issues, such as poor leadership and governance, while others are a product of an under-invested system. Therefore, to strengthen the public health sector, one would need to approach the challenges with both facets in mind. We suggest three sets of approaches to drive improved equity and quality of care that do not require the creation of an NHI Fund. 8.1.1 Improving data quality A way to have better accountability and governance in the health system is by ensuring that the health information systems (HIS) are accurate and up to date, to allow for evidence-based decision-making. Given that HR make up the lion’s share of public health expenditure, an appropriate place to start would be the PERSAL system. PERSAL is a National Treasury-owned system which should be an up-to-date record of all government personnel, including details such as where they work and what their role is. PERSAL is unfortunately notoriously inaccurate for several reasons: The system is not owned by the PDoHs, and therefore, it is difficult to adjust it to be reflective of the reality on the ground. Sometimes a person is hired and placed in the incorrect post on PERSAL, due to errors in capturing or purposefully, as that is the only available post with a budget associated. PERSAL needs to be manually updated/analysed to reflect resignations or vacant posts – this makes it difficult to plan around imminent retirements and difficult to hire within the allocated time frame on vacant posts. Each PDoH should do a PERSAL clean-up and verification process. The National Treasury should support the provinces to be able to allocate staff to their correct posts or provide an option where someone is paid from one cost centre but is allocated to a different facility. The long-term goal would be that PERSAL posts accurately reflect organograms, and that the organograms accurately reflect the need. By doing this, the system would have a much better idea of how HR are shared across the provinces and districts and ensure that no ‘ghost staff’ are being paid for services no longer rendered. The next HIS worth strengthening is the District Health Information System (DHIS). The DHIS2 has been developed to allow for an electronic health record and is slowly being rolled out at facility level. However, training and usage still need to take place. Furthermore, work should begin to translate the patient-level data that will arise in the DHIS2 into cost and health outcomes data. This data should be de-identified and made publicly available for citizens, clients and research use to measure progress in the health system. By actively tracking costs, health outcomes and data stratified by age, sex and condition, the system would be able to begin to measure value. One would expect that as the system strengthens, we should see an improvement in health outcomes, morbidity and mortality in the public sector users. It will also allow for much more robust planning. 8.1.2 Taking steps toward quality Certification is one of the building blocks for quality. At its simplest, certification entails the assessment of healthcare facilities, whether hospitals, clinics or other types of health facilities, against a defined set of standards (36). South Africa began actively working towards certification in 2008, developing the first set of Norms and Core Standards (NCS) in 2010. The NCS were then used to measure public facilities from 2011, with the process managed by the NDoH. In 2013, the National Health Act was amended and the OHSC was set up as a semi-independent certification body. If the information collected through healthcare quality measurement processes is publicly shared, consumers of healthcare can use this information to make better decisions about where to obtain high(er) quality healthcare. The information then becomes part of a larger accountability process. If the information is actively used by both funders and purchasers of healthcare, as well as clients of the health system, it can help the system to become more efficient by directing healthcare in the direction of providers who are better and more efficient (37). This assumes, of course, that clients will have a degree of choice as to where to access care. Certification by the OHSC should be a first step in getting public facilities’ infrastructure up to standard. The data coming from the OHSC should allow the NDoH and PDoHs to prioritise, with the lowest scoring facilities getting maintenance and infrastructure upgrades first. Infrastructure upgrades can be expensive, and therefore, it may take several years to bring the full sector to an acceptable standard. We therefore suggest that a realistic target is set for each year, and progress is reported on publicly. If the OHSC results do not influence spending decisions, then the assessments will be a waste of limited public resources. The health outcomes published (as described above) should also show the facility where the data was collected, to illustrate the relationship between outcomes and certification, which would shift the sector to measuring quality and not just who was able to meet the minimum standard on the day of inspection. 8.1.3 Budget and spending transparency In August 2020, President Ramaphosa announced that all personal protective equipment tenders and contracts would be published openly, for all citizens to scrutinise. This was an act by the President for the State to be more accountable to its citizens. Organisations like the Budget Justice Coalition and Vulekamali have attempted to make public sector budget data available in an easily accessible format. This has been in partnership with the National Treasury. Making PDoH expenditure data and in-year monitoring (IYM) monthly progress available publicly will assist in more accurate evidence for resource allocation decisions and set up the PDoHs to be more accountable to the public. Furthermore, transversal tenders for key goods and services, managed centrally at either the province or nationally, could assist to bring down costs – but only if the tender prices are made public. This would assist in getting better economies of scale and locked-in unit prices, particularly for routine spending items such as groceries, that would relieve some of the administrative burden and reduce the opportunity for corruption and predatory pricing by suppliers. There is also a case to be made for using the current resources more equitably. The current process to revise the PES formula is a step in this direction. Including risk adjustment measures that are closely linked to health outcomes is an important way to ensure maximum effectiveness of spend. Currently, the system is characterised by historical budgeting. This embeds annual mis-allocations into the system and makes it difficult for districts and provinces to allocate resources in terms of what their performance data is showing them. 8.2 ‘NHI rejigged’: NHI, but sequenced differently Currently, the NHI has three distinct phases. While the first phase focused on piloting of innovations, the second phase deals with the establishment of the NHI Fund. This is a substantial jump and requires legislation changes such as the promulgation of the Bill. This could take years given the lack of consensus on NHI generally. Therefore, another option to begin implementation of UHC is to sequence the building blocks differently, to lay the foundation for NHI down the line. 8.2.1 Improving equity in each of the sectors (private and public) The findings from the HMI are clear, and offer implementable solutions to the problem of escalating cost and over-utilisation in the private sector. Given that private sector spend makes up more than half South Africa’s total health expenditure, despite only caring for ~16% of the population, its regulation is critical. The recommendations from the HMI are multiple and are outlined fully in the publicly accessible report (Figure 1). The major take-home in terms of NHI is that the NDoH, in the current regulatory environment, does have the mandate to regulate the private sector, and that it has not fully stepped into this role. This opens the door for more transparency on pricing, pooling, and ensuring quality care and value for money in the private sector. Figure 1: Some of the key recommendations of the HMI (24) In tandem with the private sector regulation process, the public health system could embark on the quality improvements discussed earlier in this report (see Section 3.1. Investing in infrastructure, data collection and use, and better resource allocation). As part of this quality improvement, the Government could also develop the regulations to allow for easier purchasing of private sector services for the public sector population. Furthermore, testing out the contracting mechanism and the work to negotiate fair tariffs could provide test cases for the NHI Fund when it does go live. There is also an opportunity to build trust in this process before the NHI is fully functional, which could ensure more support from private providers. A NHI Fund may also be established to experiment with strategic purchasing from both the private and public sectors on a small scale. As discussed in previous sections, availability of data is a core tenant of a functional and responsive health system. The NHI Bill currently discusses the need for a central repository for data across the health sectors. This will take time to develop and to ensure smooth dataflow between providers, sectors and funders. Given that this data repository will need to be across the sectors, there needs to be engagement on the specifications, scope and regularity of data. 8.2.2 Improving equity between the two sectors In parallel to improvements in both sectors, a process of improving equity between the two sectors should be embarked on. This will firstly require the establishment of the same benefit package between the two sectors. As suggested previously, the CMS’s PMB review process should be fast-tracked to move the basic benefit package in the private sector closer to the public sector package. A clear basic benefit package for the public sector should also be defined and costed. Once basic benefit packages are operational in both sectors, the key challenge which has to be acknowledged will be moving from multiple funds (medical schemes and the NHI Fund or via the various PDoHs) to a single fund. A risk equalisation fund, allowing for risk-sharing across the two sectors, could assist with the transition process. There could be an interim process of consolidation and putting in place criteria for fund performance across the two sectors, but also for the central risk sharing fund. Over time, learnings from purchasing and the central risk-sharing fund will enable moving to the final end-point of a single NHI Fund. 8.3 ‘Power to the people’: Purchaser-provider split but with multiple purchasers In the two scenarios presented above, there is an implicit assumption of limiting choice for those citizens that mainly rely on the public sector to one fund or purchaser. In the first scenario, citizens that currently use the public sector will remain reliant on its delivery capacity, and where some services are purchased from the private sector, its purchasing capacity. In the second scenario, the same applies, although a single NHI Fund may be established over time. In both scenarios, choice, and therefore power to citizens, is limited. Competition between multiple purchasers allow for bottom-up, or social, accountability. Clients of the UHC system should be able to exercise their assessment of the quality and efficiency of purchasing by being able to switch purchasers at least once a year. Not many countries go for a single purchaser model, and there are some risks associated with this model and the centralisation which accompanies it, such as a lack of competition and sluggishness. Although having a single purchaser brings monopsony power in price negotiations with providers, these benefits may be outweighed by the loss of efficiency through the absence of competition and choice. Given that there are already several purchasers in the private sector who could perform the funder role if need be, it makes sense to develop legislation to allow for multiple purchasers, even if South Africa does decide to remain with the single NHI Fund. The process of enabling multiple purchasers should be up for discussion and thorough review. However, some of the possibilities include allowing the current Government Employees Medical Scheme (GEMS) to act as a purchaser in parallel to the NHI Fund, and putting the opportunity to manage two or more additional purchasers out for bid to the private sector. Any bid document and the selection of the final purchasers should be a public process, with information shared freely. As long as a carefully designed benefit package is developed, risk pooling and sharing can be implemented through a central risk equalisation fund. It is recommended that this fund be free of political management and interference through the implementation of various best practice governance arrangements. A critical learning from the German health financing system has been to keep the bureaucracy that supports the financing system as lean, efficient and technical as possible (15). The German risk equalisation fund (Central Fund) is a system of algorithms managed by a small group of staff at the national insurance office. It is mainly staffed by data scientists who are able to derive and implement these algorithms. The same approach can potentially be taken in South Africa. South Africans feel the State is not responsive to service provision needs. A much greater level of bottom-up accountability is needed than is currently available in the health system. Selecting a UHC model with multiple purchasers is the most direct way to establish bottom-up accountability. 8.4 ‘Reorienting towards value’: a value-based approach to UHC Taking a value-based approach to UHC is strongly coherent with the principles laid out in the South African reform process. The notion of ‘value’ is about optimising patient outcomes, within a financial envelope. It implies a population health perspective – optimising patient outcomes, not for individual patients, but across the system as a whole – which in turn implies a focus on equity and access. In the conceptualisation of access to quality care for all, it front-ends the notion of quality and forces deeper thinking about what we mean by quality, how to measure quality and how to incentivise quality. Historical approaches to UHC, which focus on the access component of the conceptualisation, run the risk of orienting health care systems to volume, instead of value. This creates a longterm sustainability risk because the cost of the system increases as volumes rise. The implicit assumption is that a higher volume of service delivery leads to improved outcomes, but global research indicates that this is not true. The role of volume orientation in the South African private sector is illustrative of the risks associated with this paradigm. Research from the Lancet Global Commission on High Quality Health Systems indicates that “of the mortality amenable to healthcare, 60% is due to poor quality of care, compared to 40% due to lack of access” (4). Value-based approaches have a continuous improvement mindset built in – something that is lacking in the current articulation of the NHI reforms. With a value-based approach, it is less about accrediting facilities, and more about working with facilities to improve the quality of care that is delivered. The current policy lens on UHC focuses on scale and centralisation to achieve health system transformation. A value-based approach, by contrast, “requires local specificity and, once validated in the local setting, implementation at scale to truly transform systems” (38). The value-based approach builds accountability in a way that is strongly participatory, leveraging the use of data instead of through the creation of a purchaser-provider split (Figure 2). This directly questions the idea of whether a monopsony can generate the degree of behavioural change required throughout the system. Approaching the reforms with value located front-and-centre provides an alternative sequencing of reforms by starting with measurement, then focusing on delivery, and only then considering mechanisms to pay for care. This approach to reform sequencing is referred to as the ‘Leapfrog to Value’ approach which has been designed with low-and-middle-income countries (LMIC) context in mind. Figure 2: Components of value-based care (38) The required measurement reforms are significant – they require the tracking of cost and outcome information per patient. The progress to a unified health system begins by measuring the same patient outcomes across the two sectors, reforming the same patient care pathways across public and private providers, and ultimately paying for care in the same way across both sectors. The Porter model of value-based care also provides some insight into the necessary reforms to support improved outcomes (Figure 3). Figure 3: Porter and Teisberg model of value-based care (39) The starting point in the Porter model, requires reorganisation in integrated practice units – these are effectively multi-disciplinary teams. The Health Professions Council of South Africa (HPCSA) regulations currently stand in the way of the creation of these teams in the private sector, pointing to the urgent need for review of their rules (24). The Porter model places more emphasis on payment than the Leapfrog to Value model, reflecting the orientation of the model to the American health system which is largely private. The scope for payment reform that will drive quality improvement behaviours is far more limited in our public sector where staff are salaried and therefore not financially incentivised. 9. Conclusion This document aimed to stimulate thinking around alternative ways that UHC can be achieved in South Africa. There is overwhelming consensus that UHC is an important goal, and that its objectives are ones that South Africa should subscribe to. It is the path to achieving the objectives that has remained contentious. Therefore, in this document, we have proposed alternative pathways for achieving the UHC objectives. The alternative building blocks and scenarios (Table 1 repeated as Table 5 in this section) were borne out of the NHI Bill submissions, interviews and key literature and documentation. The scenarios are not exhaustive or mutually exclusive. Ultimately, we recommend a slow and steady approach to building the foundation for UHC, with several accountability mechanisms built in – both top-down and bottom-up. Regulating the private sector and improving quality in the public sector are two areas of broad consensus that could begin in the interim, even if the private sector is eventually relegated to complementary care only. Mutual trust between the State, private sector and South African citizens is not just a ‘nice to have’. It has been shown to meaningfully improve the rollout and implementation of UHC in other countries. Therefore, the process taken to begin UHC reform is exceptionally important for long-term sustainability of UHC in South Africa. We recommend alternative pathways are sought out, given the stalemate due to the current pathway proposed in the Draft NHI Bill. Table 5: Summary of alternative UHC design scenarios References 1. Section27, Treatment Action Campaign. Submission on the National Health Insurance Bill 2019. 2019. 2. South African Medical Association. Comments in respect of White Paper for National Health Insurance for South Africa: towards universal coverage. 2016. 3. South African Private Practitioners’ Forum. Submission on Draft NHI Bill to the National Department of Health. 2018. 4. Kruk ME, Gage AD, Arsenault C, Jordan K, Leslie HH, Roder-DeWan S, et al. High-quality health systems in the Sustainable Development Goals era: time for a revolution. Lancet Glob Heal. 2018;6(11):e1196–252. 5. Kruk ME, Ataguba JE, Akweongo P. The universal health coverage ambition faces a critical test. Lancet. 2020;6736(20):9–10. 6. Office of Health Standards Compliance. Annual Inspection Report. 2018. 7. Inclusive Society Institute. Universal health coverage pathways for South Africa. 2020. 8. National Department of Health. National Health Insurance Policy (White Paper). 2017. 9. fin24. Treasury worried about NHI funds not being used as planned, MPs hear. 2019. 10. Daily Maverick. Urgent need for payment deal on non-medical aid Covid-19 patients in private health facilities. 2020. 11. Abimbola S, Baatiema L, Bigdeli M. The impacts of decentralization on health system equity, efficiency and resilience: A realist synthesis of the evidence. Health Policy Plan. 2019;34(8):605–17. 12. South African National Department of Health. White Paper for the transformation of the health system in South Africa [Internet]. 1997. Available from: https://www.gov.za/sites/default/files/gcis_document/201409/17910gen6670.pdf 13. Waterhouse AS, Mentor-lalu V, Daphine A. Decision-Making on Health in South Africa – What Can We Learn From NHI? 2017. 14. Siverbo S. The Purchaser-Provider Split in Principle and Practice: Experiences from Sweden. Financ Account Manag [Internet]. 2004 [cited 2019 Jul 16];20(4):401–20. Available from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=611192 15. Inclusive Society Institute. Lessons for South Africa on Transitioning to Universal Health Coverage from the German Experience. Cape Town; 2020. 16. United Nations Industrial Organization. Coronavirus: the economic impact – 10 July 2020. UNIDO. 2020. 17. World Bank Group. Global Economic Prospects. 2020. 18. Statistics South Africa. GDP falls by 2,0%. Statistics South Africa. 2020. 19. Statistics South Africa. Steep slump in GDP as COVID-19 takes its toll on the economy. Statistics South Africa. 2020. 20. National Department of Health. 2030 Human Resources for Health Strategy: Investing in the Health Workforce for Universal Health Coverage. 2020. 21. National Department of Health. Policy Framework and Strategy for Ward Based Primary Healthcare Outreach Teams. 2018. 22. Daviaud E, Besada D, Council SAMR, Budlender D, Sanders D, Kerber K. Saving lives, saving costs Investment Case for Community Health Workers In South Africa. 2018. 23. Bennett R, Marcus TS, Abbott G, Hugo JF. Scaling community-based services in Gauteng, South Africa: A comparison of three workforce-planning scenarios. African J Prim Heal Care Fam Med. 2018 May;10(1). 24. Health Market Inquiry. Final Findings and Recommendations Report. 2019. 25. Kutzin J. A descriptive framework for country-level ananlysis for health care financing arrangements. Health Policy (New York). 2001;56(3):171–203. 26. Percept. Strategic Purchasing Policy Brief Series Brief 1: Implementation of a purchaser-provider split. 2019. 27. Percept. Strategic Purchasing Policy Brief Series Brief 2: What is strategic purchasing? 2019. 28. Percept. Strategic Purchasing Policy Brief Series Brief 5: Certification, accreditation, quality measurement and quality improvement. 2019. 29. National Department of Health. National Health Insurance Bill [Internet]. Pretoria: Government Gazette; 2019. Available from: https://www.gov.za/sites/default/files/gcis_document/201908/national-health-insurance-bill-b-11-2019.pdf 30. Malingo B. Prasa suspends 12 senior officials to root out “corruption and fruitless expenditure.” Times Live [Internet]. 2020 [cited 2020 Sep 29]; Available from: https://www.timeslive.co.za/news/south-africa/2020-03-13-prasa-suspends-12-seniorofficials- to-root-out-corruption-and-fruitless-expenditure/ 31. Nicolson G. UIF bosses suspended as auditor-general details Covid-19 relief chaos. Daily Maverick [Internet]. 2020 [cited 2020 Sep 29]; Available from: https://www.dailymaverick.co.za/article/2020-09-02-uif-bosses-suspended-as-auditor-general-details-covid-19-relief-chaos/ 32. Munge K, Mulupi S, Barasa EW, Chuma J. A critical analysis of purchasing arrangements in Kenya: The case of the national hospital insurance fund. Int J Heal Policy Manag [Internet]. 2018 Mar 1 [cited 2020 Sep 29];7(3):244–54. Available from: https://pubmed.ncbi.nlm.nih.gov/29524953/ 33. Dell AJ, Kahn D. Geographical maldistribution of surgical resources in South Africa: A review of the number of hospitals, hospital beds and surgical beds. South African Med J [Internet]. 2017;107(12):1099. Available from: http://www.samj.org.za/index.php/samj/article/view/12143 34. Patcharanarumol W, Panichkriangkrai W, Sommanuttaweechai A, Hanson K, Wanwong Y, Tangcharoensathien V. Strategic purchasing and health system efficiency: A comparison of two financing schemes in Thailand. Fan VY, editor. PLoS One [Internet]. 2018 Apr 2 [cited 2020 Sep 29];13(4):e0195179. Available from: https://dx.plos.org/10.1371/journal.pone.0195179 35. Hanson K, Barasa E, Honda A, Panichkriangkrai W, Patcharanarumol W. Strategic purchasing: The neglected health financing function for pursuing universal health coverage in low- and middle-income countries: Comment on “what’s needed to develop strategic purchasing in healthcare? Policy lessons from a realist review.” Int J Heal Policy Manag [Internet]. 2019 Aug 1 [cited 2020 Sep 29];8(8):501–4. Available from: http://ijhpm.com 36. Jovanoviæ B. Hospital accreditation as method for assessing quality in healthcare. Arch Oncol. 2005;13(4):156–7. 37. Carvounes A, Childs B, Dreyer K, Kantor G, Ranchod S. Quality Measurement and Reporting in the South African Private Hospital Industry. Cape Town; 2017. 38. Leapfrog To Value. How nations can adopt value-based care on the path to universal health coverage. 2019. 39. Institute For Strategy And Competitiveness, Harvard Business School. Key Concepts. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Copyright © 2020 Inclusive Society Institute 50 Long 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 DISCLAIMER Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or its Board or Council members. Introduction by Vusi Khanyile, Chairperson of the Inclusive Society Institute As this is the first annual lecture hosted by the Inclusive Society Institute (ISI), let us briefly visit the whys and wherefores of the Institute itself. In a nutshell, the Institute is an autonomous and independent institution, a not-for-profit organisation (NPO), which was founded for the purpose of supporting and promoting non-racialism, non-sexism, social justice and cohesion, economic development, and equality in South Africa. The Institute has existed for just 12 months and is governed by a board of directors and advised by the Advisory Council. Vusi Khanyile Chairperson Inclusive Society Institute The Institute puts its purpose into practice by conducting research and analysis which contributes to debate on public policy. It also seeks to promote education on democracy through special briefings, seminars, and conferences. Furthermore, the Institute aims to create a portal that will archive our liberation heritage, for it is within this heritage that the division of a democratic, prosperous, caring, and inclusive South Africa is enshrined. The Institute’s motive behind carrying out these aims is to encourage the country further along the path that moves it in the direction of its strategic vision. The Institute is broadly aligned with social democracy – an ideology that promotes social and economic interventions that are aimed at advancing social justice. It does so within a framework of a democratic, free-market society. Hence, it promotes the voices of the people in determining government actions, supports a competitive economy, whilst also offering a safety net to the poorer and more vulnerable in our society. This economic growth and sustainable social development need to be balanced. The ISI considers the developmental state model as the most appropriate approach for transforming the economy and society in South Africa. It believes that the well-being of South Africa is best served by an inclusive society in which the composition of the economy, government, and civil society equitably reflects the composition of the nation. In fact, issues of public ethics, morality and social cohesion are uppermost in the national psyche and mood at the present time. It is with this in mind that the ISI hosted the first Annual Lecture – with the promise of frank and open debate on these issues, at the event and moving forward. Interview with Judge Albie Sachs (Ret.), Constitutional Court Judge, conducted by Lwando Xaso, writer at the Daily Maverick Lwando Xaso Interviewer I would like to start by focusing on how the courts, and specifically the Constitutional Court, can shape the moral character of our nation. In 1962, Nelson Mandela was arrested when he returned to South Africa, for leaving the country without a valid passport and for inciting an illegal labour strike. He was sent to the Old Fort prison, which is today the home of the Constitutional Court. During that trial, he made the decision to represent himself, against the advice of his lawyer, Bob Hepple, who knew that Mandela was going to provide a very political defence and that he was going to ask the magistrate in the trial to recuse himself, because he did not believe the magistrate was able to dispense justice. Bob Hepple, having listened to Mandela’s argument for recusal, told him that it wasn’t a legal argument he was making, but a political argument. Nelson Mandela responded that it wasn’t a legal trial, but a political trial. Nonetheless, Mandela stood up in court and said: “In a political trial such as this one, which involves a clash of the aspirations of the African people and those of whites, the country’s courts, as presently constituted, cannot be impartial and fair. In such cases, whites are interested parties. To have a white judicial officer presiding, however high his esteem and however strong his sense of fairness and justice, is to make white judges in their own case. “It is improper and against the elementary principles of justice to entrust whites with cases involving the denial, by them, of basic human rights to African people. What sort of justice is this that enables the aggrieved to sit in judgement over those against whom they have laid a charge? A judiciary controlled entirely by whites, and enforcing laws enacted by a white parliament in which Africans have no representation, laws which in most cases are passed in the face of unanimous opposition from Africans, is untenable.” Judge Sachs, or Albie, what was it like to be a lawyer at that time, one that is an accused, as Nelson Mandela was? What was the justice system like for African people, specifically, in 1962? Mandela himself said, “I feel uneasy in this court.” I get a sense that Mandela was already imagining an African court. What does an African court look like? Judge Albe Sachs I’m going to start off with a correction in relation to Bob Hepple's role. Bob and I were both sons of activists, both in the underground, both lawyers practising in courts that were, of course, promoting injustice, but we were using every possible space available to change that. Bob was thrilled with what Mandela was doing because they were comrades. But Bob said, “I can't do it. I’m an officer of the court and it would be complicated for me to make that challenge. In legal terms, it’s not going to get us anywhere. But, Comrade Nelson, you could do it.” with such power and such forcefulness and with such dignity that, I read, afterwards, the prosecutor in that case went to his office and cried. This was a white prosecutor, part and parcel of this repressive system. The magistrate listened and then sentenced Mandela to the fullest term possible. At that stage, he had the power to sentence him to five years' imprisonment. It was a very important moment in the life of our nation, it was a prelude, if you like, to the full liberation struggle. However, the fight wasn’t simply within the framework of the existing legal system to achieve greater rights. t was also to challenge the whole framework itself. Although the armed struggle had really begun before that, now Mandela’s connection with the armed struggle was highlighted. It was enormously difficult functioning in those courts. The laws were overtly racist. The law said only whites could be members of Parliament. It reserved most of the land for whites. It brought about the Native Administration Act. People like you, Lwando, weren’t citizens with rights. They were subjects to be administered. Despite the fact that they could have ‘rights’ in the Bantustans, and ‘rights’ under tribal leaders, it was a grim system in which we didn’t have rule of law, we had rule by law. It was all being challenged with characteristic dignity and poise and thoughtfulness, and also power – power that came from the oppressed, through the words of Mandela. It was difficult not only for black people functioning in the courts, but for all who had to witness the injustice. Black people had to stand at places reserved for them. Even Mandela’s law partner, Oliver Tambo, was told by the magistrate in a case to move to that reserved space to address the court. But Tambo refused to do that and, as a result, was threatened with contempt of court. Eventually, it was Godfrey Pitje who took over that role because Tambo and Mandela had political work to do. One of the functions of a legal assistant then, in addition to doing everything else, was to take the rap for your principals, so that they could carry on with revolutionary activities. Tambo was sentenced to a fine and imprisonment. The case went on appeal to the Appellate Division and the Chief Justice Steyn ruled that you can address the court as well from one place as you can from another. He upheld the indignity of being told you're not a lawyer, you're a black lawyer, and therefore you have to stand in the place in the court reserved for black lawyers in order to address the white magistrates, white prosecutors, white officials in charge of everything. And the accused were overwhelmingly black. So, for all of us practising in the courts in those days, the mental gymnastics was just terrible. We had to find the language or dignity or poise to deal with it. Even simple things, like how to address a witness, were skewed. For example, if the witness was a white woman, you would address her as Miss or Mrs and with her surname. Whereas, with a black woman, who could be the same age or older, you had to address her simply with her first name. Now, what do you do then when you are counsel and you want to call the witness? Do you say, ‘Mrs Shabalala, what did you see?’ It would be like slapping the magistrate in the face. And that’s fine, but it might be bad for the case of the accused. We were doing these gymnastics all the time, in a racist environment, with racist vocabulary, racist assumptions, trying to uphold principles of dignity in relation to laws that are racist, courts that are racist. But we tried to manage as best we could to manoeuvre in those circumstances. What Mandela was doing, in a sense, was anticipating the liberation of all of us as lawyers. He was throwing off these chains. He was standing up and saying: I have no disrespect for you, Your Worship. And what I’m saying is not directed at you as a person. It is directed at the situation that I am clearly a black man in a white man's courts, and I shouldn’t feel that way. I should feel I'm just a human being. It was one of the great moments in South African history, and I'm glad that we're starting off the discussion with that particular moment. I’m imagining Nelson Mandela at that moment, standing up in court, wearing his cultural clothing, an African kaross. What do you think he was communicating in court, being dressed the way he was? I know, when it came to conceiving a new court, what the judges would be wearing in court was something that you and your colleagues thought about. The other thing I'd like you to comment on is as to why, during the struggle, courtrooms were seen as an opportunity? Why make a statement like that from the dock, like Mandela did in the Rivonia Trial as well? I am myself a lawyer, and I don’t know if I would have wanted to be a lawyer under apartheid, because when I became a lawyer in 2008, I had to swear to uphold the Constitution of this country. That's something that I'm proud to do. But back then, we didn’t have the Constitution that we have now. You always talk about being a lawyer, but at the same time being labelled a terrorist. So, you had this dual relationship with the law, in that you were supposed to dispense justice within an unjust society, but at the same time, you were also trying to sabotage the very system of which you had sworn to uphold the laws. Let me deal with the dress, first of all. Mandela was a very natty dresser, and he could carry off good clothing. He wasn't a show-off, but he paid attention to his appearance, as did Oliver Tambo. As a lawyer, he deliberately chose not to wear a suit. He chose to wear traditional garb to make a strong statement, not just to the magistrate, the people in court and the press, but to the African people. He was saying: I am speaking as an African and I'm wearing, proudly, the clothing of an African person in the community I grew up in. Today, I'm wearing a Madiba shirt. He didn't like being trapped in the formal clothing imported from Europe, with strange things like bowties. He wanted to wear something that was expressive of his personality. He even invented a dress style – an interesting, informal, comfortable kind of garb that has a certain value, an emotion to it. It happens to connect South Africa and Asia. And so, he even made something out of the Madiba shirt, which he was wearing when he signed the Constitution. It became a representation of Africa joining with the world. It was a batik design from Indonesia, styled in a way that he felt comfortable with, expressing himself as Mandela. When it came to the Constitutional Court, the question of style wasn’t more important than substance. But it wasn't unimportant. We didn't want a building that looked like a copy of the US Supreme Court, with its grand steps and massive columns representing power. The irony of the Supreme Court is that you don’t enter it by going up those steps. For security reasons, instead, you enter around the side, the back of the building. All of that in front is just for show. It gives an indication of that court representing a certain power. We wanted a court that didn’t represent power, but, rather, control of power – in terms of ethics, values, accessibility, humanity, human dignity. Not of form over substance, but of substance of the human heart, the human soul, the human suffering, human aspirations, to be represented in the style and functioning of the court. We chose the site of the Old Fort prison to erect our court, to locate the court that would dispense justice and uphold fundamental rights, on the very site of Number Four prison. The site of pain, the site of suffering, the sword where people have been locked up and denied their rights, was transformed into the ploughshare of justice. We also wanted the building to be open, comfortable, inviting, free and friendly, with all the fabric, texture, light, and sensibility of a space in Africa. Not a space in Europe planted in Africa, but a space in Africa planted in Africa. Drawing on the imaginations of the world, the architectural possibilities of the world, but containing a strong African flavour. In 2004 we opened the building. This was before there was talk about decolonisation – we were decolonised, I'm proud to say, in our minds – before it became a very important issue that was being raised by young black people challenging aspects of the colonial, the old imposed value system and ways of looking at the past. We were challenging it in terms of the architecture, and in terms of our style. The last part of my previous question is that when you decided to be a lawyer under apartheid, why did you see that as an opportunity? Considering how oppressive the law was, considering how the justice system was biased, it was not impartial. Why did you think that would be a worthy endeavour, becoming a lawyer? This a question I would have loved to ask Nelson Mandela and Oliver Tambo, and many other black people who became lawyers at the time, who saw the justice system as an opportunity when it was so clearly biased and partial. It was Thuma Mina [ send me]. We wanted them to be there. Quite a few people who became lawyers had been teachers. When Bantu Education was imposed, they were thrown out of the schools where they were teaching, where they couldn’t bear to teach Bantu Education. Many of them, like Godfrey Pitje, became attorneys. But it wasn’t simply a job to earn a living, to survive. It was a terrain of struggle. You could fight in the courts; you could fight to expose the tortures, the injustices; you could fight to challenge the laws. And we won big victories. In the 1950s, we won all our cases, even the big Treason Trial, because the prosecutions were so ridiculous. Then, in the 1960s, we lost all our cases. When you took a case in those days, you were fighting against the death penalty. You were fighting to get some of the accused acquitted, to expose the torture, to give the accused a sense of dignity, and so that there would be somebody listening to them, believing them. We had some good judges: John Didcott, John Milne and Andrew Wilson were all wonderful judges. We also had other judges who were at least open-minded. Michael Corbett played an important role in the transition afterwards. He fought against Hitler; he was anti-fascist. He was an open-minded person functioning within a racist framework, and he had to use what space was available to try to shift that. There was a famous debate between Raymond Wacks and John Dugard. The question was whether the judges should resign. Raymond said that they should, that they were simply progressive judges giving legitimacy to an oppressive system. But John, who was fighting in the courts, in the trenches, said they shouldn’t resign. And we who were in the resistance also believed they shouldn’t resign. We wanted good judges there to soften the impact of the law, to win the few little victories, and to prepare the way for the day when we would have a truly democratic nation. Some of the judges of that era, like Johann Kriegler, Laurie Ackermann, I've already mentioned John Didcott, Richard Goldstone, used the tiny glimmers of space in the courts to trip up the apartheid laws, to start coming up with a vision of what law could be like one day in South Africa. They served wonderfully on the new Constitutional Court during the transition, so that the brilliant new South African Constitution could be applied with style, with dignity, with force, in an experienced way. So that we weren't tripping over our own feet, as we were starting something completely new. For those who don’t know, South Africa has had five constitutions. I would say it's had three illegitimate constitutions – 1910, 1960 and 1983 – and then our first somewhat democratic constitution was produced in 1993, after a process of negotiations between the liberation movement and the apartheid government. The significant achievement with the 1993 constitution was to establish a Constitutional Court. The sense was that having a new court would transform this judiciary, which was known to be oppressive, that the people wouldn't trust that the courts which had existed under apartheid would dispense justice in an impartial manner. Albie, at that point, I'm sure you didn’t think that you would be one of the people sitting on that court in two years' time. But when the Interim Constitution was adopted and there was a vision of transforming the judiciary, what role did you think the court could play in the country? Was it simply in legal matters? Symbolically, what role did you think the creation of a new court could play, in the effort of transforming a judiciary that was known to be so oppressive, in a broader society? We were such a strange court, with the backgrounds of the people on it being so vastly different. But that was also such a great source of strength for the court. In my own case, I never dreamt I'd be a judge. Judges were the people up there on the bench; I was simply an advocate practising on ground level. There were some judges who were kinder and more thoughtful and more open than others. There were also many who were openly racist and reactionary, and so on. To me, judges belonged to another world. Suddenly, though, when we had a Bill of Rights, fundamental rights, and everybody could vote, then we had the chance to create a new constitution. The Constitution became a richly-imagined thing, a marvellous creation of South Africans, and to be using my skills to defend it was just the most incredible experience. I still recall so vividly, it was just before the elections in 1994, when we didn’t know what was going to happen. We'd been fighting for freedom long and hard, and suddenly we were going to get it. We had to change our whole mindset. We were no longer living for the future; we were becoming part of the future. We assumed Mandela would become the President, but we were wondering who the Minister of Justice would be. We wondered whether it would be one us: Kader Asmal Zola Skweyiya, Dullah Omar, or Albie Sachs. At that point, I couldn’t bear the thought of having invested my whole life in an ideal that would now become a job. I thought about getting out of that line of politics. I could still be politically active, but not in that way. Then I realised that it would actually be fantastic to be on that court, an unbelievable opportunity for me, as a freedom fighter, to be on that court, defending the changes we'd been fighting for. But I decided that if I wanted to be available for the court, I couldn’t have a loyalty to both the ANC National Executive and to the Constitution, constantly having to choose between the two. I would still be Albie the freedom fighter, I would still have the same ideals, but those ideals would now be in a document that we would all sign, and I would have to defend that document. And if the ANC was going to be a party to litigation, I couldn’t be worrying about what the comrades would say about any decisions I gave from my position on the court. I knew it would be quite impossible to be giving decisions from my position on the court one moment, and then heading to a branch meeting the next. So my conscience told me I needed to resign from the NEC, and afterwards, to resign from the ANC, to be free and fair. It wasn’t a repudiation of my beliefs; it was a continuation of our beliefs, because the Constitution now incorporated what we'd been fighting for. It was thrilling to be with such extraordinary people … Arthur Chaskalson, whom I'd stayed with many times – a great intellectual. He wasn't in the underground, in the resistance. He fought within the framework of the courts and gave up a lucrative legal practice to set up the Legal Resources Centre. He gave up that combative style that you need to be a tough advocate – sharp elbows, witty, quick, smart – for a much more collegial, collective way of working. One where you're not fighting just to earn a good salary in fees from the cases that you undertake, to win particular battles, but you're also fighting together with a team to try and deal with the Group Areas Act, to deal with the Pass Laws, to try and trip them up, and so on. Ismail Mahomed was brilliant, sharp, brave, thoughtful, living in his head, living for the law, difficult, complicated in many ways. But he could soar, he could reach heights that none of us could reach in terms of the lyrical things. Johann Kriegler had his own particular beautiful style of writing. He was deeply, profoundly committed to the country, the cultures of the country. Yvonne Mokgoro, having grown up in a rural area, worked as a hospital nurse in order to earn money to study, and became a professor and a judge on the court. Kate O'Regan, being my colleague at UCT. And many more. A wonderful team, a group of people who couldn’t be more diverse in personality and style but couldn’t be more united in terms of our hatred of apartheid and love of the Constitution. In any event, we established a style and a way of working, sitting around the table. Those of us who'd been in the struggle were used to debating everything, through the night if necessary. We weren’t going to give that up simply because we were judges now; we continued to debate, round and round the table. Fortunately, our colleagues like Didcott and Kriegler and the others, also loved debates and openness. They loved that style. They hated formalism – if they had loved formalism, they wouldn’t have been on the court. They all had passion and they all knew we were doing something remarkable, something new. New, I would say, in the world, in terms of the kind of court, the kind of constitution and the role that was given. We knew that there would be resistance from many of the judges on the existing judiciary, despite the imbalance. At the time of the new Constitution, there were about 150 High Court judges: 148 white, two blacks, 148 men and two women. So, it wasn’t just that the public had a distrust of an institution that had been part and parcel of the system of oppression – sending people to jail because they didn’t produce their passes, forcing people out of their homes, applying all these racist laws, turning a blind eye to the torture, the police throwing people out of buildings, and magistrates saying nobody was at fault, saying that Imam Haron got all the bruises on his body by slipping on a piece of soap and falling down the stairs. It wasn't only that. It was also that they didn’t see themselves represented on the bench. They didn’t feel that wisdom, a sense of justice, a sense of fairness, an understanding of human life was represented on the bench. In fact, only a small minority of the people were. We had to be a new court both symbolically, and in terms of the way we worked and upheld the new values of the Constitution. Values that were based on human dignity, equality, freedom, on totally turning the apartheid legal system on its head. This was a marvellous challenge, and I had wonderful colleagues. I was so proud of the role that the Constitutional Court played then, and I continue to be proud of the role that it is playing today. I think one of the sad things about apartheid is that it really robbed the country of so many talented people who could have contributed so much to South Africa. It robbed the country of innovation, of creativity, by saying that certain people, by virtue of their gender or their skin colour, couldn’t assume certain positions. That, for me, is one of the truly tragic outcomes of apartheid. When I think of our constitution now, it's about opening up South Africa. It's about creating a very integrated South Africa, an imaginative South Africa, a creative South Africa. I truly believe that the Constitutional Court is one of the few examples of what a decolonised institution looks like. And I think it’s because you and your colleagues were given a blank slate and you were told to create something that was authentically South African from scratch. What you did with that was question to everything. Why do judges have to wear black robes? Why do judges have to sit above everybody else in court? Why does a court building have to look like a sterile environment with no imagination, no artwork, just bland? You questioned every single thing, and because of that, you were able to build an institution that is still strong today. Albie, I want to take you back to the 14th of February in 1995. Nelson Mandela is sitting on the bench with all 11 judges and he is inaugurating the court. You're all wearing your green robes. You're about to hear your first case, which is a very sensitive matter that could change the moral character of South Africa in a significant way. For me, it's a full-circle moment, because in 1962, Nelson Mandela said, “I do not feel at ease in this courtroom. I'm a black man in a white man's court. I'm an accused.” And there he is, in 1995, in a courtroom again. But this time, not as an accused, as a president who is inaugurating a brand-new court that is partially conceived from his imagination. That is being built by African hands and minds. What was Nelson Mandela's call to the 11 of you on that day? What did he set as an expectation to all of you as the judges of this new institution? I remember that moment so well. It was temporary accommodation. We couldn’t have a raised Bench, because the ceilings were quite low, but afterwards, in our new high-vaulted building, we decided to keep the low seating for the judges. Allow me to paint the scene. Mandela's sitting with us. It's a small room jam-packed with our relatives and friends. We're all very excited and he's in the middle. I was on the Visitors Committee, so I had to plan the whole meeting. Everything was going beautifully, until he got a bit hoarse and reached for a glass of water. But I hadn’t thought of that glass of water! So, I'm sitting up on the bench now, the biggest moment in my life, and I'm chastising myself for not thinking of that glass of water for Mandela. But he was nice about it, and put the moment sharply in context when he opens up by saying, “The last time I was in court was to find out if I was going to be sentenced to death. Today, I inaugurate South Africa's first Constitutional Court, a court on which the future of our democracy will depend.” He was far-seeing. This wasn’t just another court sitting in the background, like a longstop in cricket, to pick up any failures in society. It was a court that was deeply integral to the implementation and the development of the democracy and would be for transformation. In some countries, the courts are there just in case there's some kind of failure. You feel you're in a functional society, and the courts are simply there to make sure nobody slips up. In our country, the court is there to say we're living in a dysfunctional and unequal society, and we are trying to change that. We have a constitution that requires change and remembers the injustices of the past. At the same time, the change must take place according to law, according to the Constitution. Not through anarchy, grabbing, and self-enrichment, or corruption. So, seeing the central role the court played, it was wonderful. Mandela was so loving and protective of the court, and he showed it in the best way he could. And how did we show our respect for Mandela, who had appointed us, who had given so much of his life to the Constitution? To show our gratitude, six months after being inaugurated, we struck down two highly important proclamations issued by Mandela! People have forgotten about it now, but they were the proclamations that were supposed to give us our first democratic local government elections. They were very good laws; they were necessary laws for democracy. But we stopped them. Parliament had asked Mandela to pass the laws, to save time, to save expense, to get the show on the road. They trusted Mandela would do a good job. But it was against a profound constitutional principle, namely, that Parliament had to pass the laws itself, and not ask the President to do so... Mandela appeared on television afterwards and said that his legal advice had been that he had the power to pass that law, but that he now accepted that the legal advice was wrong. Fink Haysom, our former comrade on the Constitutional Committee, was the one who had given that legal advice. Mandela wasn’t throwing Haysom under the bus, though. He was saying that, as President of the country, he must be the first to accept the rulings of the Constitutional Court. That moment was as important as the 27th of April in 1994, when we became a democracy. On that day, later in 1995, we became a constitutional democracy, when the president accepted, and afterwards Parliament accepted, the rulings of the Constitutional Court, affirming the Constitution. Since then, each President has accepted the rulings of the court. Thabo Mbeki accepted the rulings on access to HIV antiretrovirals in the TAC case, whether he was happy with them or not. And we now have the biggest antiretroviral programme in the world. Jacob Zuma accepted the ruling of the court in the Nkandla case. I don’t think Cyril has had a ruling against him yet, but I fully expect that if there were to be a ruling against him, he would accept it too. And he wouldn’t be the first to have to accept the ruling, he would be the fourth. That is so fundamental. I saw Gloria Steinem on TV the other day, saying the Constitution doesn’t open with the words: “I, the President”, but rather with: “We, the people.” That idea was being upheld through the Constitutional Court having authority, having legitimacy and prestige, and having a Constitution that the people admired so much, that it didn’t matter whether we were in the ANC, were non-political, or in other parties, we all agreed. It wasn't your party-political allegiance that mattered, it was allegiance to the Constitution. It somehow transcended the harsh battles. Of course, you need harsh political battles, you need contestation, you need anger, you need joy, you need a whole series of different emotions in public life, But you also need a cool, calm and collected body, filled with the passion and energy of the nation, to rule. The Constitution rules, that's the fundamental theme, and that came through from Mandela, and hopefully will continue into the future. I think you're so right, Albie. That day was the day we became a constitutional democracy. First there was the ruling against a sitting president – a very popular president who'd been elected by an overwhelming majority – there was the court impeding him from doing something. Leaving the question: where does the court get the right to do that, when the judges are not elected, but Mandela is? I think the way that Nelson Mandela dealt with that moment, as you said, has really set the foundations of how the judiciary and the government interact with each other. But it hasn’t been easy, in that there was a moment where you, a freedom fighter, a revolutionary, were called counter revolutionary. What did that feel like? Did that feel like a threat to our constitutional democracy in that moment? That if you have politicians and public servants saying the judges are counter revolutionary, that could build up a resentment by the people against the judges, and against the judiciary? It did feel like a threat. It reminded me of the kind of highly schematic language used in the struggle days. I felt it was very unfortunate. Now, I'm speaking as somebody who had been in the ANC and felt the ANC's greatest achievement. But the most undeniable achievement, the most enduring achievement, was the Constitution. Though not on its own, it had to find counterparts. I was thrilled to see Roelf Meyer as part of the board or the advisory group for the ISI. But the thrust, the idea of creating the court and the values it symbolises came from Nelson, from Oliver Tambo, from ANC people. So, to start undermining and attempting to trash one of your greatest creations would have been self-defeating for the ANC at the time. I don’t think I’m giving away any secrets when I tell you that not long after Dikgang Moseneke made his controversial statement at his 60th birthday party, “I'm not answerable to the NEC or to anybody else” Kgalema, who was Deputy President at the time, came to the court for an off-the-record discussion. And Kgalema Motlanthe responded, “You're absolutely right. You're not answerable to the NEC”. He made it clear about any challenges there might have been had been made by one particular individual. An individual that is sometimes referred to as colourful, strong, a personality, and a person who says untoward things. Kgalema felt that particular individual regretted having made that statement, and although he's not the kind of person who is quick to say: “I'm sorry”, he wouldn’t repeat that particular error in future. My last questions, before I ask you questions from the audience, have to do with a time before we even got to the judgement that was made against our former president, Nelson Mandela. It has to do with the first judgement of the Constitutional Court, that of the death penalty. It's quite mind-blowing to know that in 1995, South Africa was still a state that had the legal power to kill its subjects and that this extremely sensitive matter became one of your first judgements. And in a country that, at the time, was very divided on the issue, with strong arguments for retaining the death penalty. Even to this day, people still want to retain the death penalty. What do you think the ability to kill its subjects, that power, does for the moral character of a country? What was the tension in that case, amongst the 11 justices? What did you see as an opportunity, in your first judgement, to declare as a new way of being, despite the popularity of the death penalty at the time? Why was the State versus Makwanyane such an important case, even today? Not just for us in South Africa, but globally it's seen as a landmark judgement. After the case was heard, Arthur wondered whether we had made a mistake, whether we should have started with a much more technical case with a constitutional dimension, and not with something so dramatic. I disagreed, I said we chose the most difficult case, the hardest case, and in a constitutional state, hard cases make good law. They force you to go deep into the values, and to think profoundly. Ismail Mahomed said that in some countries, you have incremental advances and then you get a Bill of Rights, a constitution, that consolidates the advances that have been made. That wasn’t the case in South Africa, where we had a radical rupture with a past that was uncaring, that was cruel, inhumane, and disrespectful to human dignity. Now our constitution envisaged a country that will be caring and respectful, and respect human dignity. The death penalty case forced us to take an issue that would be unpopular in terms of the mass feeling – kill them, they've done terrible things, they deserve to die, to confront themselves – and bring in the idea of Ubuntu. It was Yvonne Mokgoro who raised it first. Ubuntu, the idea of the interconnectedness of human beings. The idea that if we kill each other in cold blood, in a sense, we are cutting off our own limbs. We are destroying ourselves a little bit. We are destroying a part of our society. I must have appeared in about 55 cases as a young advocate, with a potential death sentence. Two of my clients were sentenced to death. One was hanged. One the judge spared through a recommendation of mercy. The feeling of horror when you are a lawyer defending someone and their life could depend upon your skill, is indescribable. To make matters worse, in those days the outcome depended on the race of the victim and the race of the accused. If it was black on black, white on white, white on black, then there was no death sentence. But black on white, that was the main cause of the death sentence being issued. The other factor it depended on was the judge. Didcott never passed a death sentence. Herbstein, in the Cape, never passed a death sentence. We had another judge, I won't mention the name, six death sentences every year. There was something arbitrary in it. And they have a similar situation in the United States, where it depends so much on which state you're in and the kinds of juries and the prejudices, and so on. It's too much that the state has the power to take the life of a human being, cold-bloodedly, whether it's done through electrocution or hanging or poisoning. There's something awful about it. We all become party to this, and it reduces respect for human life. That was our thinking. We didn’t discuss the case before we went into the court. We only discussed it afterwards as we sat around the table, all 11 of us, with our very different backgrounds: some deeply religious, others committed secular people. Different backgrounds, different life experiences, all unanimously felt, in the new South Africa, that the state should not have the power to take the life of its citizens, however horribly they've behaved. The real deterrent is not that you’ll be sent to the gallows, it's that you'll be caught. You need to improve law enforcement. You need to deter people from doing things on the basis that they'll be caught and punished with long periods of imprisonment. I was very moved yesterday to see, in the United States, the mother of one of the men killed by ISIS, saying she's so pleased that Britain said they will hand over the prisoners for trial in the United States, on the basis that they will not be executed if found guilty. She said: rather let them suffer in prison. Let them not become martyrs. Let us not become party to the cold-blooded killing of somebody else. Albie, what I've gotten from our talk is that part of creating a new country is in the small details and in the big things. The small details of how you built an institution: the symbols of the court, the character of the judges who are on the court, the character of the building. Then the big things like the big judgements that you have handed down, which has literally changed the national discourse in South Africa on very divisive matters. The Constitutional Court has been the steady hand that all South Africans, even when we do disagree with the court, we respect, out of the three arms of government. I think it's thanks to the early work that you all did in those dark days. I'm going to move on to the questions that the audience has for you. The first one is, what is your view on the current political narrative in respect of the question of race, and the impact that it has on promoting reconciliation? The second question, is South Africa measuring up to the 1994 vision? There was a clear upwards trajectory just after 1994. Where do we stand now in terms of ethics and social cohesion? Then the third question I have is, what is your view on state capture, and it's undermining of the 1994 vision? The question of race: I dealt with it when I was a political activist and when I was a judge. You can't get away from race in South Africa, and we shouldn’t try to get away from it. If you do, you might say you're colour-blind, when in fact, you are simply socially blind. You are humanly blind. It's real, it's important, and our strength in South Africa, and our capacity to get through tough times in the future, comes from acknowledging the differences and difficulties of race. It’s better to face up to them and deal with them in a principled way, rather than to say they don’t exist. Race is not just a proxy for poverty and injustice, and so on. It's intertwined with injustice, with accumulated injustice that still exists in our minds, our ways of doing things. At the same time, we must confront race in order to create a non-racial society. We must deal with it openly and honestly. We must create conditions for advancement. Acknowledging the realities of race could be extremely important for whites in South Africa. To acknowledge, also, their potential vulnerability because of race, because of stereotyping of whites, because they are in a minority and they are seen by many as the source of all evil. We've got to combat the realities of anger and the tensions that are created around race, but we need to do so in a manner that is non-racial, principled, and based on the Constitution, which is there for everybody’s protection. When we drafted the Constitution, I remember people saying they simply wanted to forbid unfair discrimination, that that would be enough, but many of us didn’t believe that was enough. We looked at the Supreme Court in America, which struck down the rule in Richmond, Virginia, that said in any transactions that were undertaken, 15% of municipal contracts had to be set aside for minority service providers. The Supreme Court majority struck that rule down, saying that it was taking account of race, and they believed in a race-free society. Thurgood Marshall almost wept when he wrote his dissent, and he said those of us who knew the realities on the ground, knew how important it was that here was Richmond City Council, mainly whites, taking a progressive step to undo hundreds of years of oppressive history, and the Supreme Court, in the name of non-racism, just struck it down. So, we added section 9[2] to the Constitution, which expressly allows for measures of redress based on race and gender to be taken. If you look at the preamble, look at the injustices of the past, all of this relates to race. But we're not trapped in race, it’s not the only factor. We can't use race, then, as a proxy for self-advancement, corruption, getting ahead or for deployment of people who are not qualified for particular jobs, whatever their race might be. Furthermore, we can't use identification of people because they happen to be of Indian origin or from the coloured community, as mechanisms for marginalising them or denouncing them or creating rage against them. I don’t want to get into the subject of hate speech, that's very much before the courts at the moment, but in cases where hate speech has cropped up, the Constitutional Court has made it very clear that freedom of speech doesn't allow freedom to promote hatred in a way that undermines the very foundations of our society, which depends upon respect for every person. Hate speech, from that point of view, has to be looked at with constitutional eyes. I won't say anything more on the subject, because the Constitutional Court is in the process of dealing with that particular issue. In terms of the 1994 vision, our vision then, in creating the Constitution, wasn't to say now that we have the Constitution, we'll have a great society. The Constitution doesn’t create the society, it provides the mechanism and the values for creating the society. It doesn’t build homes, it doesn't build schools, it doesn’t stop corruption. It doesn’t end racism. And it doesn’t eliminate racism. But it gives you the mechanisms for doing that. Our vision then, of empowering the people through elections, through voting, through having fundamental rights, to that extent our vision has been maintained. South Africans speak freely. They speak their minds. They can set up different organisations and groups. They campaign. We have wonderful investigative journalists. We, South Africans, can take pride in the fact that we brought down Bell Pottinger. They were supporting the crooks and the rascals all over the world. South Africa brought them down. They struck a rock, in that sense, a hard, painful one. It's not just the President of the country who had to pay back the money, South Africa forced KPMG to pay back the money too. We have institutions that work. We have electoral mechanisms that work. They could work better, but they are working. Our elections are freer and fairer than the elections coming up in America quite soon. Some of the vote suppressing mechanisms that are being tried there, would never be allowed in South Africa. We have a strong judiciary, a wonderful constitution that can be invoked, and strong institutions. We have a strong civil society that is free to function, to operate – whether it's marching in the streets, or thinking things through, or having debates. We also have a people that speak their minds. So, from that point of view, the 1994 project is alive and kicking. Unfortunately, it has to kick a bit harder than we thought it would have to do. I'd like to mention at this point, I lived in Mozambique from about 1977 to 1988. It was a wonderful experience in so many ways. Great people who were very progressive on the emancipation of women, and on combating racism, on doing things for the poor. But we couldn't pull it off, and we ended up with a bitter civil war. I lost an arm, and many others lost limbs because of the landmines. So, when I came back to South Africa and my comrades were still waiting for the Revolution, and as we were on the verge of it, there was a decision made to bring about a constitution, to go the peaceful road, I was so relieved. I’m so grateful that we didn’t have the violence that beset Mozambique. We have violence and corruption, but we don’t have it to the degree that they have had it there. And we have mechanisms to deal with it. From that point of view, I feel the project that we embarked upon of having a constitutional democracy where the people can make their claims, and try and right their wrongs, that project is strong. Albie, before we run out of time, there is this last question that has come in. It says, we said no to the death penalty, but did we change the culture of violence in the country? How do we change the culture of violence in South Africa? We don’t change it through state violence. That's not the way to go. We change it through developing a culture of non-violence, and that's hard. It's not just violence from the state, it's gender-based violence. Our constitution is the only one in the world that provides a constitutional right, a protection against violence in the home, not just criminal law violence. That requires men to come forward and women to speak out. It requires education in the schools and jobs for everybody, so that people don’t go joining gangs, because there's no other occupation for them. It's a whole range of measures that have to be taken. The one thing that gives me a source of hope is that the issue is out there in the open. We don’t take it for granted. In that sense, we're not passive, we're not immobilised. We do stand up against violence and speak out against violence. We try to hold people to account for violence that is illegitimate and unacceptable. State capture, I leave that to my former colleague, Zondo, to deal with that. It's a whole other big issue in itself. What is important is that we don’t take these things for granted. We need to fight against the negative. We can use the Constitution as a mechanism to advance the positive, to advance hope, humanity, human dignity against all the things that are resisting and undermining our country. Thank you so much, Albie. One thing I've learnt from clerking at the court for Justice Edwin Cameron, and working with you now in the work that we do for Constitution Hill, is that we run the risk of overburdening our judiciary with issues that should be dealt with through other tactics and strategies. And that the Constitution was never meant to be a panacea for all the things that ail our community. What the Constitution is, is merely an opportunity, and unless we take that opportunity, then we can't expect it to self-actualise, because that's not what documents do. I'd like to thank you for this very enlightening conversation. I hope people have gleaned from your answers that there's so much we can do, in terms of looking at the world through a creative way. If we change our institutions and learn from how the court built itself, if we take some of the lessons from the court, we can really build inclusive societies. We could really build a better South Africa, just through small things that we decide to do within our sphere of influence. So, thank you so much. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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