Copyright © 2022 Inclusive Society Institute PO Box 12609 Mill Street Cape Town, 8000 South Africa 235-515 NPO All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the permission in writing from the Inclusive Society Institute D I S C L A I M E R Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. Author: Percept Actuaries and Consultants Editor: Daryl Swanepoel JULY 2022 Content List of figures List of tables List of information boxes Acronyms and abbreviations 1. Introduction 1.1 The relationship between population growth and inequality 1.2 Demography and inequality in South Africa 1.3 Core principles of this report 2. Demographic change in South Africa 2.1 The ‘demographic transition’ 2.2 Where is South Africa in the demographic transition? 2.3 Why are we not realising the demographic dividend? 2.3.1 Unemployment 2.3.2 Educational attainment 2.3.3 Intergenerational wealth transfer and social mobility 3. Policy scenarios for realising the demographic dividend 3.1 Elevating women 3.1.1 Policy strategies to elevate women 3.2 Taking care of the elderly 3.2.1 A picture of South Africa’s elderly population 3.2.2 Leveraging the longevity dividend 3.3 Investing in people-centred, high-quality universal health coverage 3.3.1 The demographic impacts of Anti-Retroviral Therapy 3.3.2 Health interventions to tackle inequality and harness population dynamics 4. Conclusion References Appendices List of Figures Figure 1: Population pyramids for South Africa showing demographic transition Figure 2: Stages of demographic transition in Sweden, 1750-2010 Figure 3: South Africa’s age dependency ratios, 1960-2020 Figure 4: South Africa’s demographic transition, 1960-2050 Figure 5: Young, working-age, and elderly population share for South Africa, 1960-2050 Figure 6: South African unemployment rates, 1991-2021 Figure 7: Changes in working-age population compared to total employment in South Africa Figure 8: Average earnings by age and level of education completed (five -year moving average) Figure 9: The Great Gatsby Curve for a set of developed and developing countries Figure 10: Education consumption by race, 2015 Figure 11: Health consumption by race, 2015 Figure 12: Private net transfers by race, 2015 Figure 13: Gender Inequality and Income Distribution as estimated by Gonzales et al. (2015) Figure 14: Policies which support women and leverage the demographic dividend Figure 15: Life expectancy of South Africans from 1985 to 2020 Figure 16: Roll-out of Anti-Retroviral Therapy in South Africa from 1985 to 2020 Figure 17: Number of new HIV infections compared to deaths in South Africa from 1985 to 2020 Figure 18: Trends in the under-five mortality rate in South Africa Figure 19: Components of the lifecycle deficit by race, 2015 Figure 20: Private versus public transfers by race, 2015 List of Tables Table 1: Comparison of dependency ratios, 2020 Table 2: Estimated shifts in South African inequality measures with improved GII score List of Information Boxes Info Box 1: What is demographic transition? Info Box 2: Measuring inequalities in intergenerational transfers between racial groups Info Box 3: Quantifying the impact of empowering women Acronyms and Abbreviations 1. Introduction South Africa is widely regarded as the most unequal country in the world, ranking at the top of the global Gini index.[1] More than half of the nation’s income is concentrated among the richest 10% of the population, while the poorest 40% share just 7.2% of the country’s wealth.[2] Over the past 30 years, South Africa has seen significant gains in access to education, healthcare and social security, and a dramatic recovery in life expectancy following the public roll-out of HIV/AIDS treatment.[2] However, profound structural inequality has meant that the impact of these gains is not evenly distributed: far too few South Africans have realised the promise of democracy. Instead, distributions of power and privilege continue to trace and reproduce centuries-old fault lines of gender, race, and geography – trapping millions of South Africa’s poor in cycles of multi-dimensional, intergenerational poverty. The fact that South Africa’s population growth has outpaced projections in the 2012 National Development Plan (NDP) might, for some, suggest an added challenge to reducing inequality and achieving the country’s development goals. This report explores and complicates the relationship between South Africa’s inequality and its demography. It outlines the nature, drivers, and implications of the country’s demographic change, and then suggests a range of policy options for how we might harness population dynamics for greater equality. The report’s overarching argument is that while understanding, and paying attention to, population dynamics is critical for South Africa’s development planning, we cannot rely on demography alone to shift inequality. Although slowed population growth might seem to have a common-sense and immediate relationship with improved equality, particularly in Africa, the reality is a lot more complex. Instead, the flourishing, wellbeing, and prosperity of a country’s people hinge in large part on the shape (and not just the size) of their population, their intergenerational dynamics, and most especially, investment in their human capital. 1.1 The relationship between population growth and inequality In a 2017 paper on income inequality trends, Ayodele Odusola and his co-authors summarise the channels through which changes in population growth impact income inequality[3]: Fertility rate: declining fertility rates increase women’s labour market participation, improving their incomes and reducing both income and gender inequality.[4] Smaller families are also often able to invest more in the education of their children, which enhances human capital accumulation in the next generation, allowing them to earn higher incomes and thus reducing inequality.[3] As such, the positive effects of declining fertility hinge on quality jobs for women, and expanded access to early education, healthcare and nutrition. Dependency ratio: although declining fertility is often associated with the alleviation of inequality, the relationship between slowed population growth and reduced inequality is not straightforward. Indeed, declining fertility rates can also be associated with an ageing population, and thus higher old-age dependency ratios, which, in turn, can exacerbate inequality.[5] So, the gains of slowed population growth depend on whether the health, wellbeing and contribution of older persons is supported. Share of the working age population: an increase in the share of the working-age population is associated with improvements in per capita income, household income, and national output,[3] all of which are expected to reduce overall inequality. However, this is assuming that a growing working-age population translates into more people being gainfully employed. Reduced mortality in adults and children[6]: lower child mortality rates often reduce the incentive to have large families, and enables families to invest more resources in their children’s education.[6] Meanwhile, lower adult mortality rates, improve overall labour productivity, supporting economic prosperity.[3] While extended longevity might increase the older-age dependency ratio, it also means increased returns on human capital investment over a lifetime,[6] complicating the effects on inequality. In other words, there is robust evidence that we cannot rely on demography alone to shift inequality. 1.2 Demography and inequality in South Africa Understandings of the relationship between population dynamics and human development in South Africa have been significantly shaped by neo-Malthusians, who dominated the discourse on population and development in the 1960s and 70s, and whose views are again gaining traction amid the climate crisis.[7] Traditionally, neo-Malthusians have warned about the negative impacts of population growth on poverty, arguing that expanding populations inevitably put pressure on natural and national resources. Many have called for proactive population control, including highly coercive birth control practices targeted particularly at the poor.[8] When South Africa’s state-sponsored family planning programme was instituted in 1974, it too was widely interpreted as a strategy by the apartheid state to curb Black population growth.[8] By the early 1990s, a more nuanced consensus on demography and development was gaining traction. Moving away from alarmist neo-Malthusian discourse, the 1994 Cairo International Conference on Population and Development emphasised the socio-economic structures that drive both fertility and poverty.[7] Since Cairo, global policy has sought a more inclusive approach to population dynamics, promoting reproductive rights, empowering women, and advancing maternal and child health.[7] In contemporary South Africa, questions about population dynamics often sit uncomfortably with justice and rights-based approaches to combat poverty and inequality. Nevertheless, the country is presently undergoing several complex and intersecting demographic shifts, each of which is entangled with the past, present and future of South African inequality: In contrast to wider trends in Sub-Saharan Africa, South Africa’s population growth is slowing along with a steady decline in fertility: total fertility has more than halved since the 1980s.[9] Despite the fact that fertility rates have been slowing for nearly a century, poverty, unemployment, and inequality in South Africa have continued to deepen, suggesting a much more complex relationship between fertility and development than Malthusians might argue. Declining overall fertility has meant that the proportion of the population that is of working-age is growing. This is anticipated to offset inequality by driving economic growth and reducing dependency ratios. Yet this is by no means a given: realising the advantages of South Africa’s demographic dividend will hinge on the extent of investment in the children and young people that are forming, or will in future form, this working age population. A dividend is a type of gain one receives when one invests; the so-called “youth dividend” is no different. Improved longevity has produced a growing elderly population in South Africa. Older people (particularly women) are frequently household lynchpins, providing essential care to children and grandchildren, and in many instances, serving as primary breadwinners (through their pensions). Their care contribution can offer a critical safety net to South Africa’s poorest, thereby alleviating inequality. However, if the elderly themselves are not cared-for through quality healthcare and social support, this benefit will not be realised and households with elderly dependents may find themselves worse-off. South Africa is urbanising rapidly, with nearly two-thirds of the population already living in towns and cities. This proportion is expected to increase to 77% by 2050.[10] Urbanisation can be a boon for development, improving access to schooling, healthcare, and higher wages. However, it can also expose populations to pollution, heat-stress (as a result of building materials holding heat), violence, and overcrowding. More so, urbanisation and urban-focused development can widen the gap between rural and urban livelihoods, thereby deepening inequality. In South Africa, many households are ‘stretched’ across urban and rural locations, with children and youth most likely to move between them. This complicates how we think about the relationship between urbanisation and inequality, and indeed how we classify households. Children remain less urbanised than adults and many grow up without a co-resident parent. Central to the relationship between demography and inequality in South Africa (and elsewhere) is the question of generations, i.e. how inequality is reproduced or undone across and between generations. South Africa has low levels of intergenerational mobility, which means that the livelihood prospects of the country’s children are all-too-often tied to those of their parents. Yet it is possible that key interventions at critical life points could change the path, not only for that generation, but for all those with touchpoints to that person, as well as all future generations. 1.3 Core principles of this report Demographic variables like fertility, mortality and migration are closely connected to how socio-economic vulnerability, and indeed the benefits of economic growth, are distributed. As such, this report articulates a bi-directional relationship between inequality and demography. Demography is not destiny. Instead, demographic processes are mutually constituted by social, economic, and political processes to shape the nature of global and local inequality. Justice-oriented policies can help address or harness population dynamics. The Gini Coefficient is useful but limited, given its exclusive focus on income inequality. Adopting a wider scope that includes access to quality nutrition, health services, housing, education, water, and caring networks within the frame of inequity can offer us a better sense of its real effects on human life and flourishing, whilst still recognising the centrality of money, especially in circumstances where public services and infrastructure do not function well. Understanding the relationship between demography and inequality demands that we not only pay attention to population quantity (i.e. its size and shape), but also to quality of life and human potential, i.e. to what extent is said population able to participate in social, civic, and economic activity? Realising the benefits of certain population dynamics, like a youth dividend for example, hinges on these questions of ‘quality’. Indeed, a growing youth dividend (that is, a large, young working-age population) can become a significant risk to social stability if the potential and wellbeing of young people are not adequately invested in. Seeing this requires a more holistic view of a person rather than simply looking at headcounts of people in different parts of the population – the term “demography” needs to be viewed with this depth. While we can observe, analyse, and model trends in population dynamics, our ability to predict future population trends is limited by the complexity of factors shaping demographic change, unanticipated shocks (like new epidemics, recessions, or natural disasters), and the possibility of powerful policy interventions. The public-sector rollout of Anti-Retroviral Therapy (ART) in South Africa, for example, had an astounding impact on longevity, saving and extending millions of lives. At the time, many doubted South Africa’s ability to implement ART at the necessary speed and scale and questioned the level of uptake and adherence to medication they would be able to achieve. The remainder of this report is structured as follows: Section 2 describes the speed, shape, and implications of South Africa’s ‘demographic transition’, relative to other countries. It highlights stubborn, structural drivers of inequality that, despite demographic change, have limited our ability to reap so-called ‘demographic dividends’. In Section 3, we explore three policy scenarios through which South Africa might better harness its population dynamics to alleviate inequality. A summary of findings and recommendations is provided in the Conclusion (Section 4). 2. Demographic change in South Africa As of the most recent mid-year population estimates for 2021, South Africa’s population is currently estimated to be around 60.1 million people.[11] This is almost 1.6 million higher than the 2012 National Development Plan (NDP)’s – somewhat ambitious –projections for 2030.[12] In a more conservative projection, The 2019 United Nations World Population Prospectus estimated that South Africa’s population would be closer to 66 million by 2030.13 How should we read these demographic changes? 2.1 The ‘demographic transition’ South Africa is currently undergoing a (much awaited) ‘demographic transition’. As fertility rates decline and life is extended, the ratio of working-age people to ‘dependents’ is shifting, producing a swell in the economically productive youth population and associated hopes for an economic boom. Already 34% of the population are between the ages of 14 and 34 years,[14] with the dependency ratio set to drop by a further 14% by 2050.[13] This is often described as a demographic or youth ‘dividend’. South Africa’s demographic transition is illustrated in the three population pyramids shown below in Figure 1.[15] Lower fertility rates are depicted by the shrinking of the base of the pyramid (the under-15 population) and the widening of the middle of the pyramid (the working-age population aged 15 to 65).[16,17] Figure 1: Population pyramids for South Africa showing demographic transition South Africa is currently experiencing a bulge in its working-age population and can expect to see growing elderly and shrinking child populations as it approaches 2050. Source: PopulationPyramid.net, 2021 Growth in the country’s working-age population relative to the dependent population can be leveraged to generate improved economic productivity, incomes, and social welfare.[16,17] These benefits, which accrue from the dynamics of the demographic transition, are defined as the ‘demographic dividend’, which is estimated to last approximately 50 years.[16] South Africa’s population pyramids (above) show that some of these dynamics are at play in South Africa. Over the last 30 years, the share of young children has declined, and the working-age and elderly population share has grown, resulting in a narrowing of the population pyramid which is projected to continue over the next 30 years and beyond. Figure 3 (next page) shows how this translates in terms of dependency ratios. The Age Dependency Ratio (ADR), indicated by the blue line, is the proportion of the dependent population – those under the age of 14 and over 65, to the working-age population – those aged between 15 and 64.[20] The higher the ADR, the higher the level of dependency on the working-age population. The ADR gives us a sense of the age structure of our population and can help with informing how policies and services need to account for a relatively young or older population. Figure 3: South Africa’s age dependency ratios, 1960-2020 South Africa’s age dependency ratio is steadily declining, driven largely by a decrease in the youth dependency ratio. Source: The World Bank, 2022 South Africa’s ADR is estimated to be 52.2%,[21] which means that for every 100 economically active (working-age) South Africans, there are on average 52.2 people that are economically dependent on them. The Youth Dependency Ratio (YDR), indicated by the red line in Figure 3, is the percentage of people 14 years of age or younger that are dependent on the working-age population, and the Old-Age Dependency Ratio (OADR) is the percentage of people aged 65 years and older that are dependent on the economically active population.[20] In 2020, the YDR was 43.8% and the OADR was 8.4% for South Africa.22,23 The country’s ADR has been declining since the late 1960s and this decline has been largely driven by the declining YDR. Meanwhile, the country’s OADR has been increasing steadily since the early 1980s, linked to improved longevity. It declined slightly in the early 2000s but has continued to steadily increase again since 2007. In addition to impacting OADRs, population ageing has also been shown to increase income inequality due to its impact on labour supply.[24] It is theorised that since population ageing leads to a larger share of elderly people and a decline in labour supply, this results in reduced labour productivity overall and thus lower national income.[24](See Luo et al. (2018) “Aging and inequality: The link and transmission mechanisms” for a detailed decomposition of the transmission mechanism) However, this is not yet a major concern for South Africa, because despite the ageing of the country’s population, the decline in the fertility rate has not yet resulted in a decline in labour supply. Table 1 provides a comparison of South Africa to other countries in the African region, as well as to higher-income countries and regions. South Africa’s ADR is more similar to that of Organisation for Economic Co-operation and Development (OECD) countries as opposed to other countries in East and Southern Africa (ESA). However, due to South Africa’s relatively young population compared to that of OECD countries, the split between ADR, YDR and OADR is more similar to other countries in the region.[22,23,25] Japan and Uganda are highlighted separately in this table to indicate the stark difference between the dependency ratios of an ageing country, such as Japan, compared to a youthful country like Uganda. Table 1: Comparison of dependency ratios, 2020 South Africa’s age dependency is significantly lower than others in the East and Southern African region. Source: The World Bank, 2022 Given what has been described above and in Box 1, population growth – which could be driven by increased longevity – is not necessarily a problem in and of itself, but rather a natural process of demographic transition, where the second and third stages of this transition are characterised by rapid population growth. This implies that it is not the size of the population that is most important for realising equality, but rather its shape. Whether population growth bears positive economic dividends is predicated on whether the shape and composition of the population changes favours more working-age people relative to dependents (children under 15 and the elderly over 64 years), and whether people in this working-age population can find meaningful employment. 2.2 Where is South Africa in the demographic transition? Figure 4 shows the total population size, crude birth and death rate trends, and projections for South Africa from 1960 to 2050.[26] The graph shows that South African birth and death rates have shown a declining trend since 1960. The crude birth rate has fallen by more than half from 41.1 live births per 1,000 people in 1960 to 19.8 in 2020, and is projected to almost half again to 10.6 by 2050.26 South Africa’s death rate per 1,000 people fell consistently from 17.4 to 8.04 from 1960 to 1991, after which it began to rise again due to the HIV/AIDS pandemic and peaked at 13.99 deaths per 1,000 people in 2005.[26] Due to the widespread roll out of Anti-Retroviral Therapy for people living with HIV, the death rate has since continued to fall since then and is projected to continue to do so until 2025.[26] The country’s population is projected to continue to increase to over 75.5 million people by 2050.[26] Figure 4: South Africa’s demographic transition, 1960-2050 While South Africa’s population continues to grow (perhaps faster than anticipated), both birth and death rates are steadily declining. Source: The World Bank, 2022 In a 2017 paper, demographer Tom Moultrie argues that South Africa’s demographic transition is almost complete, yet the “youth bulge” which the demographic dividend requires to deliver economic growth has not materialised.[27] According to a narrower definition of the demographic dividend put forward by the United Nations (UN), the window to reap the benefits of a demographic dividend opens when the dependent population aged 0-14 falls below 30% and before the elderly dependent population aged 65 and older is above 15% of the total population.[27] Figure 5 shows that South Africa’s youth dependent population fell below 30% in 2009 and the elderly dependent population will not have crossed the 15% threshold by 2050. Figure 5: Young, working-age, and elderly population share for South Africa, 1960-2050 South Africa’s demographic change is being driven by a declining child population and a growing elderly population. Source: The World Bank, 2022 However, Moultrie (2017) argues that, despite this, South Africa’s fertility decline has been slow, meaning that the rate at which the structure of the country’s population has changed has not created the required “youth bulge”, since the population under 15 years is still relatively large.[27] The high death rates during the height of the country’s HIV/AIDS pandemic in the 1990s and early 2000s also greatly reduced the number of people in the working-age population.[27] These factors, Moultrie argues, have meant that this “youth bulge” is unlikely to materialise for South Africa and that the opportunity to capture the first demographic dividend has already passed, making the second dividend all the more unlikely.[27] It should be noted that the economic benefits of a demographic dividend have not been observed in all countries.[27] In fact, East Asia (China, Indonesia, Malaysia, Singapore, South Korea and Thailand experience demographic transition between 1960 and 2015, along with high rates of economic growth.[17]) and Latin America (Brazil, Chile, Colombia, Ecuador, Peru and Venezuela also went through demographic transitions between 1960 and 2015, but their growth rates were not as strong as the above mentioned Asian countries.[17]) seem to be the only regions where the two demographic dividends have materialised in observable positive effects on GDP per capita for developing countries.[17,27] They have not materialised in the rest of Latin America, the Middle East and North Africa, or the transitional economies of Eastern Europe.[27] In sub-Saharan Africa, the first demographic dividend has been negative and the second has been marginally positive.[27] This is because, as Moultrie puts it, “the benefits of the demographic dividend do not mechanically translate into economic benefit.” Rather, they depend very much on health, education, social, and economic policies that precipitate and leverage changes in the country’s population structure.[27] Comparing ADRs for South Africa and other Low- and Middle-Income Countries (LMICs) – as we did in Table 1 – illustrates the importance of the relationship of the young and working-age population in leveraging the demographic dividend. The bulk of South Africa’s dependent population are young people that will eventually graduate into the working-age population. To fully reap the demographic dividend, this young population needs to be adequately equipped with the tools to maximise their productive potential. These tools include human capital in the form of education which boosts their productivity, and jobs which are well matched to these skills. 2.3 Why are we not realising the demographic dividend? “Although statistically South Africa is in a position to cash in on a demographic dividend, the challenges of joblessness and HIV/AIDS are a burden on those who are working. If not managed, the perfect window could become the perfect storm.” Source: South African National Planning Commission (NPC), 2012 As described in Box 1, one of the necessary conditions for realising the demographic dividend is that there must be sufficient livelihood opportunities for the larger working-age population; this is essential to increase household and national incomes, and to further invest in the education of the (smaller) cohort of children. 2.3.1 Unemployment Figure 6 shows that South Africa’s unemployment rate has remained stubbornly high for decades[17,28–31] and, due to weak economic growth,[32] the economy has struggled to create enough jobs to absorb the number of young people entering the labour market every year. This graph also shows that people with lower skills find it more challenging to find work than their higher-skilled peers; the unemployment rate for those with only basic education is 35.5% compared to those with advanced education at 14.7%. However, South Africa’s unemployment rate overall has been trending upward since 2008, and more recent estimates for the fourth quarter of 2021 place it at 35.3%.[33] This translates to 7.9 million people under the official definition of unemployment, but according to the expanded definition, 12.5 million South Africans of working age (46.6%) are unemployed.[33] Figure 6: South African unemployment rates, 1991-2021 Between 2007 and 2019, the working-age population increased by 6.5 million (This number is calculated by subtracting the total number of people who left the working-age cohort (those aged 65 or older) between 2007 and 2019 from the total number of people who entered the working-age cohort (those aged 15 to 64).), while the number of people employed increased by just under 2 million.34 Source: The World Bank, 2021 & 2022 The South African economy has also struggled to create jobs. Figure 7 below compares the changes in the working-age cohort to the changes in total employment. The solid blue line shows that the working-age population has been increasing, with on average 600,000 people added to this cohort annually between 1990 and 2021. However, it is increasing at a lower and lower rate each year; this rate is shown by the grey dashed line which has declined from 3.4% growth in the working-age cohort in 1993 to 1.4% growth in 2021.[26] This decline in growth is projected to continue to the furthest projection of 0.3% in 2050.[26] This is in line with declining fertility rates, and increasing life expectancy, therefore fewer people are being added to this cohort over time relative to the people that are living past the age of retirement and graduating out of this cohort. The solid green line in Figure 7 represents the year-on-year increase or decrease in the total number of people employed and the dashed blue line reflects what this means in terms of the percentage year on year change in total employment. Statistics South Africa’s (Stats SA) quarterly employment statistics from 2007 to 2019 show that the number of people employed increased by just under 2 million (from 8.2 to 10.2 million),[34] however the working-age population increased by 6.5 million (This number is calculated by subtracting the total number of people who left the working-age cohort (those aged 65 or older) between 2007 and 2019 from the total number of people who entered the working-age cohort (those aged 15 to 64).) over the same period.[26] It should also be noted that during the COVID-19 pandemic-induced economic downturn, 594,000 jobs were lost in 2020, as shown by the sharp drop in the number of net annual change in employment in Figure 7.[33] Figure 7: Changes in working-age population compared to total employment in South Africa The South African economy has not been able to create enough jobs to keep up with the growing working-age population. The number of people employed increased by just under 2 million between 2007 and 2019, but the working-age population increased by 6.5 million over the same period. Source: Stats SA, 2008-2022. Quarterly employment statistics; The World Bank, 2022 Although it should be noted that South Africa’s labour force participation rate has averaged about 50% for the last 30 years,[35] the economy has only been able to create jobs for about half of its economically active adults. More so, this jobs shortfall has only deepened pre-existing inequalities, concentrating unemployment among young, Black women (in particular). Even when they are employed, this cohort of workers is less secure, earns less, and often remain stuck in the unskilled labour bracket.[36] Today, South Africa has the second highest youth unemployment rate in the world, standing at 59.6% in 2020, with most recent estimates placing it at 64% due to the job losses caused by the economic impact of the COVID-19 pandemic.[32,37] This means that rather than driving South Africa’s social and economic flourishing, many young people are trapped outside the labour market, excluded from circuits of social and economic capital. Without the right support, long-term unemployment can impact young people’s mental well-being, self-confidence, social relationships, and physical health, which reproduces cycles of social exclusion. Alcinda Honwana (2014) has described this period as one of ‘waithood’ – waiting for adulthood – as a way of articulating young people’s lived experience of social immobility.[38] Because poor, Black youth make up the largest proportion of those without work, patterns of youth unemployment in South Africa are reinforcing decades of structural inequality. These have also concentrated disadvantage among poor, Black women, reproducing cycles of racialised, gendered and class inequality. Graham and Mlatsheni (2015) describe the youth unemployment problem as having its roots in the shift in government policy in the late 1990s and early 2000s to support a “high productivity, technology led growth path”.[39] The aim of this was to promote investment in skills development and boost wages.[39,40] However, this policy was implemented at a time when the size of the lowerskilled labour force was increasing and there was a decline in the labour-intensive agricultural industry. This resulted in a decline in the employment of lower-skilled workers.[39] At the same time, workers with higher skills were needed to drive technological development, which resulted in an increased demand for them; meaning that people with tertiary qualifications found it much easier to find work.[39] Therefore, the 20% gap between the unemployment rates of those with advanced versus basic education, shown in Figure 5, can be partially explained by a mismatch between the skills which the majority of workers have versus the skills needed by the labour market. As discussed in ISI’s previous report, “Ideas of Hope: Policy directions and recommendations for reducing inequality in South Africa”, although there is much anxiety around the growth prospects for the South African economy in the medium term, growth in GDP does not always translate into a reduction in inequality – what matters is what types of jobs are created by GDP growth.[41] Recent labour market statistics published by Stats SA for the fourth quarter of 2021 show a recovery in the job market with a 1.6% increase in total employment, with job growth in the trade, community services, and manufacturing industries.[42] However, this increase is driven by growth in part-time employment and hides the 0.5% decline (44,000 jobs lost) in full-time employment, with the construction, transport, business services, mining, and electricity sectors all shedding jobs in the last quarter of 2021.[42] Although this gradual improvement in job creation is welcome given the significant job losses during the pandemic, the quality of jobs created also impacts the ability of young people to improve their life outcomes. In their study of transitory (The transitory unemployed are defined as those who reported being unemployed in one or two of the four NIDS survey waves.[43]) and chronic (The chronically unemployed are those who are in three to four of the NIDS survey waves.[43]) unemployment in South Africa, Wakefield and Swanepoel (2022) found that although those who were defined as the transitory unemployed are relatively more educated than the chronically unemployed, these two groups share many of the same characteristics.[43] Both groups tend to urbanised, Black females between the ages of 25-44 years old and living in Gauteng, KwaZulu-Natal and the Eastern Cape.[43] The chronically unemployed also tend to be younger.[43] The authors found that the transitory and chronically unemployed people who were recorded as employed in the most recent data were predominantly employed in low-skill occupations and were earning on average one-third of what people in consistent employment were.[43] Wakefield and Swanepoel find that although the transitory and chronically unemployed share characteristics, particularly that they are young, transitory-unemployed people outnumber the chronically unemployed by a factor of 10.[43] This, coupled with the increase in jobs in the part-time sector, mean that policies should be geared towards ensuring that those in transitory employment find entry-level work with more ease that allows them to be employed with more intensity.[43] 2.3.2 Educational attainment Although education is often quoted as “the great equaliser”, in highly unequal societies, wealthier parents tend to spend more of their private income on education for their children than poorer parents. More financial resources mean that the wealthy can afford to spend more on education and other human capital investments than poor people, which widens the income attainment gap. In turn, high levels of income inequality mean that poorer people have fewer educational opportunities, and therefore fewer chances of earning higher incomes and achieving upward social mobility. As a result, they invest less in the education of their children, further reinforcing the attainment gap and intergenerational inequality. In South Africa, only half of children who start school complete all 12 years of education, which the National Planning Commission (NPC) justifiably describes as “wasting significant human potential and harming the life-chances of many young people”.[17] In describing South Africa’s higher education landscape, the NPC goes further: “The South African post-school system is not well designed to meet the skills development needs of either the youth or the economy… Though some institutions perform well and have the academic expertise and infrastructure to be internationally competitive, many lack adequate capacity, are under-resourced and inefficient… The data on the quality of university education is disturbing… The need to improve quality is demonstrated by the reports of graduates who are unable to find employment.”[17] Despite the variable quality of education in South Africa, it is still an important mediator of inequality across generations.[44] As mentioned before, in order to fully leverage the youth dividend, one needs to ensure that they are equipped with the requisite skills and opportunities for employment to maximise their productive potential. Figure 8 shows estimates by Taylor Salisbury (2016) that illustrate the differences in average lifecycle earnings by level of education in South Africa.[45] It shows that for those with no schooling or some lower secondary education, earnings remain relatively flat on average and peak at about double early career earnings.[45] For those with complete upper secondary education, their starting monthly earnings are already much higher and increase by three-five times by the time they reach their peak.[45] Figure 8: Average earnings by age and level of education completed (five -year moving average) The returns to education in South Africa are high, approximately 18.7% for each additional year of schooling. Those with the most education (complete matric or more) see their earnings increase by higher magnitudes throughout their lives compared to those with less schooling (incomplete secondary education or less). Source: Salisbury, 2016 Salisbury also estimates that the return to an additional year of schooling is approximately 18.7%. Therefore, in order to level the playing field, more investment is needed in improving equality of access to and the quality of basic and higher public education. This education also needs to match the skills required by the labour market, so that graduates can find meaningful employment. How do we leverage demographic change in our efforts to alleviate inequality? The policy scenarios explored in this report suggest that answers to this question are necessarily intergenerational. The flourishing of current and future generations rests heavily on our ability to build and harness multi-dimensional forms of intergenerational wealth: the health, education, financial security, and social ties of one generation have indelible consequences for the next. At the heart of South Africa’s inequality challenge is whether its citizens can escape long-held patterns of social exclusion and deprivation. Inequality meets demography in the ways it is reproduced or undone across and between generations. 2.3.3 Intergenerational wealth transfer and social mobility When considering the tools that young people need to maximise their opportunities for employment and increased earnings, one can divide these tools into two categories. The first category are those which are afforded to them by society or the state, in the form of public education institutions, such as schools and universities, and public health facilities. The second are those that are “inherited” from their parents or family; these may include literal inheritances of wealth or “softer” inheritances in the form of social capital. In theory, the first category of tools should be equal for all children, but they are not. Due to the history of racial oppression and segregation in South Africa, the quality of education and healthcare that South African children have access to varies by race and the geographic location where these children live, which is also still largely a function of race. This is also true for the second set of inherited tools; due to generations of privileged and exclusive access to better schooling, healthcare access, and labour market protections, White South Africans are on average born into wealthier families with more social and financial capital to bequeath to their children. For almost every country where there is available data, the income of parents is found to be a determinant of the future earnings of their children.[46] One of the major challenges created by income inequality is that it limits social mobility, producing an inequality of opportunities. This means that upward social mobility is challenging even for talented, hardworking people who are born into poverty.[47] Therefore, countries with higher levels of income inequality also tend to have very low levels of social mobility; this relationship is known as the Great Gatsby Curve (GGC).[47] Figure 9: The Great Gatsby Curve for a set of developed and developing countries Countries with high levels of inequality, measured by the Gini Coefficient on the x-axis, tend to have low rates of social mobility, measured by Intergenerational Earnings Elasticity on the y-axis (where values close to zero represent high social mobility and values close to one represent low or no social mobility). Source: Corak, 2012 In the inequality literature, two measures are used to quantify social mobility – Intergenerational Elasticity (IGE) and the index of Inequality of Opportunity (IOp). The IGE is the most widely-used measure of intergenerational inequality and measures the degree of association between the incomes of parents and their children, whereas the IOp estimates how much total inequality can be explained by a set of predetermined circumstances outside of one’s control (such as parental education, parental occupation, and race).[46,47] Lower IGE measures mean that the income of parents has less of an association with the income of their child, and a higher IGE means that parental income is a stronger determinant of their child’s income.[48](p1) Similarly, a low IOp measure indicates that predetermined circumstances have little bearing on overall inequality, and a high IOp measure implies that the opposite is true.[46] Using three waves of NIDS panel data, Patrizio Piraino (2015) estimates that the IGE and IOp for South Africa are 0.6 and 0.241, respectively.[46] This means that in South Africa, 60% of one’s earnings can be explained by the earning of one’s parents and 24.1% (almost a quarter) of income inequality can be explained by predetermined circumstances, in this case parental education and race.[46] According to Piraino, these measures indicate that “inherited circumstances explain a significant fraction of South Africa’s earnings inequality” and “the inequality of opportunity index is high in view of the limited set of circumstances (parental education and race) included in the analysis.”[46] Piraino’s findings are congruent with Oosthuizen’s analysis described in Box 2. Wealthier families invest significantly more resources in their children; this inevitably translates into better health, education, and other factors which contribute to human capital development, and thus higher earnings. Also, given the legacy of South Africa’s history of segregated and inferior education, health services, urban planning, and “colour bar” policies in the labour market, it is not surprising that intergenerational resource transfer follows the patterns described by Oosthuizen, and that parental education and race are still major determinants of inequality in South Africa. 3. Policy scenarios for realising the demographic dividend In the remainder of this report, we present three policy strategies for harnessing South Africa’s demographic dynamics to advance greater equality and prosperity. As already demonstrated, realising the dividends of the country’s youthful population hinges on our ability to invest in their potential, create opportunities, and support them throughout the life course. Investments in children – which determine whether or not they have an equal start – are made in the context of homes and families, and inherited by older generations. Similarly, as young people enter working-age, their labour participation and social mobility often hinges on financial and social support afforded by generations above them. This is where intergenerational inequality is made or broken. In the first two scenarios presented below, we take a view of demographic change from the perspective of women and older groups. These two populations are not only particularly vulnerable to the effects of inequality, but can offer critical support to children and working-age adults. Indeed, realising dividends from future generations rests on our support of the existing generations caring for them. In the final scenario, we suggest that investments in healthcare not only support demographic change, but also propel demographic dividends by alleviating inequality, bolstering social and economic life, and improving the future chances of children. 3.1 Elevating women “Parents suffer, children suffer, and they also suffer for each other” Source: ATD Fourth World, 2019 Achieving the benefits of a youthful population rests (in part) on our ability to elevate women and their work. Today, more than one in three of South Africa’s young people (aged 15-34) are not in employment, education, or training (NEET)[50]: most of them are women. While ‘waithood’ aptly reflects the powerlessness, and ‘stuck-ness’, that many defined as NEET may feel, it risks underplaying the agentive and aspirational forms of unpaid and/or unseen labour that young people undertake during this time, including job-seeking, domestic chores, and various forms of entrepreneurial hustling, chance-taking and volunteering. Women, for example, rather than ‘waiting’, often undertake intensive caregiving responsibilities, performing the bulk of household work and unpaid care (including for children, the elderly and the sick) that drives social reproduction. Women’s underemployment is entangled with their disproportionate care burden, which makes it difficult to look for, and keep, a job. From an early age, disproportionate caregiving and domestic responsibilities can also shape young women’s future employability by making it difficult for them to stay, and succeed in, school.[51,52] When relatives fall sick or there are younger siblings at home and in need of childcare, women and girls are more likely to take on caregiving responsibilities, again illustrating the interdependency of thriving and well-being across generations. Despite having made great strides in expanding women’s education and labour participation since the early 1990s, women continue to fare worse than men in the South African labour market. Women are more likely to complete school and more likely to achieve a tertiary qualification, but the irrefutable benefits of these human capital gains seem to nevertheless be capped for women. At present, women remain less likely to be employed than men[53]; are concentrated in low-skilled and less secure positions[36]; and earn lower wages for work of equal value (75% of what their male peers earn).[54] The overall gender wage gap has widened significantly since 2007.[55] In the early months of the 2020 COVID-19 lockdown, women accounted for two-thirds of net job losses[56] and have also been slower to recover employment since.[56] Female-headed homes are often caring for multiple generations of children and grandchildren. The higher dependency ratio, coupled with lesser employment and earnings, means that female-headed households are poorer than those headed by men,[36] despite women being the primary recipients of state social support. NIDS data (waves one-five) suggests that about 15% of household entries into poverty are associated with the household head shifting from male to female.[57] Children inherit the effects of this gender inequity, reproducing cycles of intergenerational poverty, in which their own prospects are limited by those of their caregivers. Even with expanded access to health and social services post-democracy, health and economic outcomes of children remain strongly tied to the conditions of previous generations.[58] Women are more likely than men to invest a higher share of their household income on educating their children (See Luo et al. (2018) “Aging and inequality: The link and transmission mechanisms” for a detailed decomposition of the transmission mechanism.), meaning that realising demographic dividends, both now and in the future, is critically dependent on elevating women.[60] 3.1.1 Policy strategies to elevate women Policies which empower women are also policies which enable the demographic dividend to be realised. Figure 14 below, from the United Nations Population Fund, illustrates policies which can be used to empower adolescent girls to leverage the demographic dividend; these include sexual and reproductive health policies, strengthening institutions, and providing social safety nets and support.[64] More specific policy recommendations are described below. Figure 14: Policies which support women and leverage the demographic dividend Policies which promote education, sexual and reproductive health, and economic empowerment of women and girls also increase the likelihood of achieving the demographic dividend. The absence of these policies result in a missed demographic dividend. Source: Herrmann, 2017. Demographic transitions, demographic dividends, and poverty reduction. United Nations Population Fund. Boost women’s labour participation Even with a generous social grants system, labour market income makes up 85% of household income in South Africa.[55] As such, improvements in employment are critical to alleviating poverty and inequality. Boosting women’s economic participation not only reduces gender inequality in the labour market but is also particularly effective in alleviating overall poverty and inequality because of how women’s assets are distributed among household members, with knock-on effects for children. Amid the COVID-19 lockdown in South Africa, for example, food insecure women were more likely to shield children from hunger.[65] By increasing paid work among women, remunerating and supporting care work, and closing gender gaps in the labour market, countries are expected to be healthier and more productive both now and in the future. Some describe these benefits as ‘gender dividends’.[60] This is the responsibility of all employers, be it state or private. Invest in the care economy In addition to providing the bulk of household care, women also constitute the vast majority of most of the care economy (healthcare workers, teachers, early childhood practitioners, domestic workers etc.), in which care providers are notoriously overworked and underpaid. Lay and informal care work, performed predominantly by Black women, is particularly undervalued and insecure. The achievement of minimum wage for these care workers has been critical to reducing the gender wage gap at the lower end of the wage distribution.[55] The minimum wage is currently R23.19 per hour.[66] Because of the benefits for both care providers and care beneficiaries, investing in the care economy represents a multi-pronged strategy to securing demographic gains and reducing inequality. By improving skills-building, remuneration, working conditions and rates of employment in the care economy, we are driving women’s labour-force participation, advancing gender equality, and supporting the health, well-being, and education of millions of care beneficiaries. Through investments in care, we disrupt preexisting distributions of care, power and privilege that have kept (particularly Black) women on the margins of social and economic life and thwarted the future chances of their children. The multiplier effects are particularly pronounced when investing in affordable and accessible early learning programmes. Expanding early learning programmes not only expands jobs for historically marginalised women and stimulates women-led micro-enterprises, but also improves access to childcare, which frees women to enter the workforce and unlocks the future potential of their children. Support pregnant women Research suggests that there is often a bi-directional relationship between poverty and fertility. Relative to other women of reproductive age, pregnant women in South Africa are 45.6% less likely to have an income.[67] Among those receiving an income, those employed in the informal sector will not receive maternity leave. This has significant implications for the health and wellbeing of both women and children and can deepen pre-existing inequality. Research, by the National Scientific Council on the Developing Child 2007, over the past two decades has shown that many life-long patterns of illness and health, as well as emotional and cognitive development, are calibrated in the first years of life, especially during pregnancy.[68] The physiological and neurological capital accrued in these early years influences not only a child’s ability to survive, but also to grow, learn and rise out of poverty.[69] At present, a quarter (27%) of children under five are nutritionally stunted, making them more likely to drop out of school, struggle to find work, and live in poverty. Stunting is driven, in part, by mothers’ mental health and nutritional status,[58] yet studies suggest that pregnant women in South Africa’s disadvantaged communities are experiencing high rates of food insecurity and depression.[70] Income support and access to affordable antenatal care could improve the nutrition and psychological well-being of pregnant women, as well as the physical and cognitive functioning of their children.[71] If stunted children receive extra nutrition and cognitive stimulation, their life-time earnings potential can increase by 25-40%.[72] Extending support to pregnant women should include supporting both expectant and new mothers to stay in school. South African public discourse is gripped with concerns about teenage pregnancy, partly because of its perceived age-inappropriateness, and partly because of the potential effects on the well-being of mother and child. From a demographic perspective, earlier childbearing is also associated with higher fertility rates. Notwithstanding the recent dramatic spike in young pregnancy over the COVID-19 lockdown,[73] South Africa’s adolescent fertility rates have been steadily declining, dropping by 27% over the past 50 years.[74] Adolescent fertility now falls well below the regional (sub-Saharan African) average.[74] However, adolescent girls are still far more likely to fall pregnant in South Africa than in most other low- and middle-income countries.[74] Research tells us that there is a mutually reinforcing relationship between pregnancy and school dropout (Stoner et al. 2019): young women who leave school are more likely to fall pregnant, and young women who fall pregnant are more likely to leave school. What is often missing from the narrative is the role that schools, households, and policymakers play in determining whether a young mother returns to school or not. For many girls and young women, an unintended pregnancy means social stigma and isolation, along with major disruptions to schooling. Without the right type of support, the physical toll of pregnancy, regular antenatal visits, and caring for a new-born often come at the expense of young women’s schooling. If we are to leverage declining fertility and a growing working-age population to reduce inequality, we cannot afford to back-track on the gains made in women’s education and employment. Keeping young mothers in school will improve their chances in the labour market, and improve the future health, education and earning potential of their children. Both are likely to have the added consequence of reducing future childbearing. All the above advocate for supporting and elevating women, particularly at critical life points – points that can powerfully determine each woman’s path as well as those of the many that depend on women, thereby aiming to drive a way out of poverty and inequality. 3.2 Taking care of the elderly Declining fertility and improved longevity mean that South Africa’s population growth rate is slightly slower than the global average, and significantly slower than other countries in the region. In 2015, people over the age of 60 constituted an estimated 8% of South Africa’s total population,[17] with this proportion expected to increase to 15.4% by 2050.[75] A growing elderly population has a range of potential implications for poverty and inequality. Older persons are often positioned as ‘dependents’ in need of care, which can translate into significant costs for the state and for households. While the ‘demographic dividend’ of a growing working-age population is often associated with a decreasing dependency ratio, a growing elderly population (which is an inevitable consequence of current demographic shifts) attracts greater ambivalence because of its ability to increase the dependency ratio. In South Africa, the link between old age and chronic illness will likely contribute to a growing burden of chronic multi-morbidity and disability in the country.[76] Moreover, high levels of poverty and unemployment might thwart South Africans’ ability to save for old age. While income support coverage, through the state-provided old-age grants or pensions, is very high (92.6%), an estimated 40% of the elderly are poor.[77] The maximum pension rate, as of 2022, is R2,000 per month.[78] More so, 46% of older persons are considered functionally illiterate, which risks compounding their vulnerability.[17] Age malleability means that there is significant diversity in how people age. The vulnerability of South Africa’s elderly population is exacerbated by inequalities experienced over a life course. Health, function, and survival among elderly people are therefore unequally distributed across the population, with the poor more likely to be disabled or in ill-health.[77] 3.2.1 A picture of South Africa’s elderly population Older persons in South Africa are participating in the labour market By 2035, people over the age of 50 are expected to be about 25% of the workforce.[17] At present, the majority (55%) of older persons (aged 50-64) are in the labour force.[17] Even after retirement (age 60), more than 10% of South Africans continue to work.[17] Old age in South Africa is feminised 60% of people over age 60 in South Africa are women,[17] owing in part to their significantly longer life expectancy. These women are also more likely to be living with high blood pressure, diabetes, or arthritis.[17] Longevity is unevenly distributed South Africa’s population is ageing at different rates, reflecting patterns of structural inequality. Black South Africans have the lowest proportions of older people to children. Older Black South Africans are most likely to live in extended (as opposed to nuclear) households and less likely to have completed schooling.[17] Older persons are more urbanised than we think Gauteng experienced a 38.6% growth in the older (60+) population between 2011 and 2016[17]; with rural provinces like Limpopo and the Eastern Cape facing out-migration. This might reflect older persons’ own labour-related mobility, or their support of migrating working-age children. While the old-age grant constitutes 81% of older persons’ income in rural areas, those in urban areas earn 33% of their income from salaries, wages and commissions.[17] Urbanisation can enhance the wellbeing and productivity of older people, improving access to healthcare and employment. But it can also expose them to pollution, heat-stress, violence, and overcrowding. Older persons are household lynchpins Older persons in South Africa play a critical role, both as care providers and often as household breadwinners, bolstered by the state old-age pension. As working-age South Africans migrate from lesser-resourced areas in search of work, some will leave their children in the care of elderly kin. In previous decades, HIV/AIDS-related death and illnesses among working-age adults contributed to older people assuming the role of caregiver for their co-resident grandchildren. As a result, skip generation households are more prevalent (above 10%) amongst households headed by the elderly than among South African households in general.[17] One in three older persons lives in a triple-generation household.[17] Nationally, the ratio of children to older persons was visibly higher amongst females (1,37) than males (0,75).[17] This indicates that households headed by older women were more likely to reside with or care for children than men. Widespread unemployment and the impact of HIV/AIDS on families have left many older adults with significant care and financial responsibilities, as they use their pensions and their time to support their children and grandchildren. This financial and caregiving burden can impact their well-being. Older persons rely heavily on the public health system Only 18% of older South Africans (above the age of 60) have medical aid, meaning that the remaining 82% rely on the public health system for healthcare.[17] 3.2.2 Leveraging the longevity dividend Policy responses to a growing older population have often emphasised the direct costs of ageing, overlooking the significant and growing contributions that older people make to social and economic thriving. As critical sources of childcare support, South Africa’s older persons unlock the potential of younger generations, supporting working-age children to participate in the labour market, and providing the nurturing and nourishment essential to children’s development. If we are to leverage demography to alleviate inequality, we must build public systems that will support older persons to thrive and allow us to reap the benefits of a longevity dividend. These systems should empower older persons to continue to live meaningful lives in a society that recognises them as important sources of enrichment, expertise, and community building and support. Continue and bolster the old-age pension Not only is the old-age pension critical for supporting the health and wellbeing of older persons themselves, research demonstrates that it also has knock-on benefits for their households, with whom older grant recipients regularly share their income. The South African social protection system has historically not provided income support to unemployed persons of working-age, with the recent Sustainable Development Goal (SDG) being landmark in this respect. As a result, old-age pensions and other grants are often redistributed informally to unemployed relatives of the beneficiary. More than half of older persons in South Africa are living in households in which no-one is employed.[17] This redistribution creates an implicit subsidy for unemployed persons, but also risks minimising the potential benefit to older persons themselves.[80] Research suggests that living in a household with an old-age pension boosts members’ chances of employment. Women (aged 20-30) living in recipient households are reported to be up to 15% more likely to be employed, and 9% more likely to participate in the labour market than those in nonrecipient households.[80] Overall, those living in a household with an old-age pension recipient report even better labour market and poverty outcomes than those living with a child support grant recipient, most likely because of its higher value, and the role that a well-supported older person can play in providing childcare for working-age adults.[80] Compared to non-recipient households, those receiving an old-age pension also report higher shares of expenditure on food and education.[80] Children also experience improved health outcomes, including better height-for-age and weight-for-height.[80] Align health services with the needs of older populations To start, we must begin to think about ageing before people get old, strengthening preventative healthcare interventions. Our health systems must also be strengthened to deliver chronic and long-term care that is affordable and accessible to older people. Research shows that in countries that spend more on health, older people work and volunteer more, bolstering society’s social and economic systems.[79] Rather than being a demographic drain, older persons in South Africa can provide a critical lever to unlocking the potential of younger generations and maintaining nurturing homes and communities. Recognising this and acting accordingly can create a powerful impact on poverty and inequality. 3.3 Investing in people-centred, high-quality universal health coverage Leveraging population dynamics to achieve a more equal society depends largely on the health of its population. As this report has illustrated, the health of children is often entangled with that of their parents, and their parents’ parents. Caregivers (whether children, adults, or elderly) can also compromise their own health in their attempt to care for others. As such, ill-health not only impacts the well-being of the individual, but can also burden families, drain public resources, weaken communities, and squander human potential. Because poor health is an impediment to intergenerational mobility, it holds significant implications for our ability to realise demographic dividends and alleviate poverty and inequality. Ill-health is often a poverty trap, placing significant financial burdens on households, with already-vulnerable households most likely to experience health-related shocks. Many people in poverty also cannot practice preventative care because they are unable to access healthy food, work under risky conditions, or live in polluted areas. As such, the relationship between ill-health and poverty is bi-directional. Despite expanding health and social services since democracy, South Africa remains among the sickest nations on earth.[81] Relative to other middle-income countries, it has worse age-adjusted death rates, years of life lost to premature death and life expectancy at birth.[82] The country’s HIV/AIDS epidemic, and the subsequent (though unjustly delayed) roll-out of Anti-Retroviral Therapy, illustrates not only the staggering toll of HIV, but also the radical possibilities of expanding access to affordable, quality healthcare. 3.3.1 The demographic impacts of Anti-Retroviral Therapy Over a period of less than 20 years, post-apartheid South Africa saw a dramatic and unprecedented rise and fall in mortality because of the HIV/AIDS epidemic and subsequent ART roll-out. These effects were not evenly distributed, with those in the poorest municipalities more likely to die of AIDS-related illness and less likely to benefit from subsequent treatment programmes. As a consequence, both mortality and absolute mortality inequality by income spiked (for 18–59-year-olds) in the lead-up to 2006[83] and dropped rapidly thereafter as South Africa’s ART programme was scaled. By the time the HIV/AIDS epidemic peaked, in 2004, 10 years had been cut from South Africa’s 1990 life expectancy.[84] Over the same period, the under-five mortality rate had risen to 79.2 per 100 000 births.[85] Many who were dying were doing so at the prime of their lives: homes and communities lost their most economically and biologically productive generation. Often it was close relatives, especially grandmothers, who assumed care for the orphaned children of their dead, bringing emotional and material resources to bear on AIDS illness with little assistance from the state. Indeed, the HIV/AIDS epidemic has contributed to a series of generational anomalies: the elderly have buried their young, small children have nursed their parents, and adolescents have headed households. It has also amplified and necessitated intergenerational reciprocity, as grandmothers and grandchildren step in to complete the work of their ailing children or parents. Figure 15: Life expectancy of South Africans from 1985 to 2020 The HIV epidemic caused a dramatic decline in the life expectancy of South Africans, but since the roll-out of ART, the life expectancy has recovered and now exceeds the pre-HIV epidemic level. Source: MacDonnell and Low, 2019 Figure 16: Roll-out of Anti-Retroviral Therapy in South Africa from 1985 to 2020 Source: MacDonnell and Low, 2019 The HIV/AIDS epidemic took a serious, but also uneven, death toll. Death was concentrated among the poor, and although HIV infection rates were higher among women, men were disproportionately more likely to die of AIDS.[83] While the country has made significant inroads in curbing mortality since 2006, poor, Black men continue to have the lowest chances of survival. Having reached a low of 53.2 in 2004, life expectancy has since recovered dramatically – to an estimated 66.5 by 2019.[84] Meanwhile, under-five mortality has reached a low of 32.2.85 Research tells us that child health and survival also have knock-on effects for fertility, as mothers of healthy children tend to have fewer children.[86] Almost all these changes in mortality occurred among Black South Africans. Figure 17: Number of new HIV infections compared to deaths in South Africa from 1985 to 2020 The rapid roll-out of ART has resulted in the rapid decline of new HIV infections and AIDS related deaths. Source: MacDonnell and Low, 2019 These staggering gains in life expectancy have been attributed to the widespread roll-out of Anti-Retroviral Therapy across the country. South Africa now has the largest HIV treatment programme in the world: in 2020, 5.1 million people (age 15 and older) were receiving ART.[84] As the death toll has plummeted, so too has the likelihood of new infections, with consistent ART radically reducing the infectiousness of those living with HIV. Curbing the HIV/AIDS epidemic will depend on the rate at which people are starting ART relative to the rate of new infections. In 2009, the rate of treatment initiation surpassed the rate of new infections for the first time – a trend that the country must work to maintain.[84] Figure 18: Trends in the under-five mortality rate in South Africa Under-five mortality has declined dramatically over the last 30 years, with the 2020 rate at almost half of what it was in 1990. Source: MacDonnell and Low, 2019 Some researchers suggest that poorer municipalities benefited more from ART during the first five years of the roll-out, despite reports of poorer provinces lagging.[83] Widespread ART availability has also been associated with larger decreases in AIDS-mortality for women than men, in part because of higher infection rates among women, but also because of poor testing and delayed health-seeking among men. ART has had a dramatic impact on recovering mortality in South Africa: between 2000-2014, ART is estimated to have saved 1.72 million lives, and 6.15 million life years.[87] However, the delay in rolling out treatment constituted a devastating loss of life. Researchers suggest that as many as 8.8 million life years might have been saved if South Africa had more readily taken up WHO guidelines and moved more quickly in scaling ART uptake.[87] 3.3.2 Health interventions to tackle inequality and harness population dynamics People-centred, high-quality universal health coverage South Africa’s health system is starkly unequal: a small proportion (27%) of South Africans is enabled, through medical scheme contributions and those who pay out of pocket, to access expensive private healthcare services. Meanwhile, the majority (71%) is reliant on the public health system, which is notoriously under-resourced and under-staffed.[88] To advance health equity, and expand access to affordable quality care, South Africa has initiated a pathway to universal health coverage. Because of the bi-directional relationship between poverty and ill-health, removing the financial burden of accessing quality care is critical to alleviating poverty and facilitating social mobility in South Africa. Universal health coverage must include: Non-judgemental, accessible sexual and reproductive health services South Africa’s population is constituted by a growing proportion of young people. Safeguarding the Sexual and Reproductive Health (SRH) rights of these young people is a prerequisite to them achieving their potential, and the country’s ability to reap the benefits of their contribution. Expanded SRH services should empower young people to make choices in their sexual lives. They should enable them to avoid, delay or space pregnancies and seek out healthcare. Young people who are empowered to stay healthy also do better in school, acquire more skills, and take on a life course that is both more productive, and more fulfilling. With expanded access to SRH, young people usually delay their first birth, and choose to have fewer children, which can contribute to a demographically induced economic upswing.[89] More so, because they are more likely to stay healthy, and in school, the children they do have also inherit greater human capital. Despite high contraceptive prevalence rates (64.6%), contraceptive service delivery, choices, access, and contraceptive counselling are relatively weak.[90] Affordable and comprehensive SRH (including family planning options) are not widely available in the South African public health sector and many women who try to access these services experience stigma and punitive treatment. Despite an overall decline in fertility rates, South Africa saw a slight increase in unwanted births between 1998 and 2016 (i.e. births to women who did not want any more children).[54] Improving men’s access to primary healthcare The story of South Africa’s HIV/AIDS epidemic illustrates worse mortality outcomes, and poorer treatment access for men. This reflects a more generalised challenge in the health system, in which men frequently delay or avoid health seeking, and health facilities are perceived as feminised spaces. This has implications for their own physical and psychosocial well-being as well as that of their families and workplaces. Men and adolescent boys in South Africa experience higher rates of premature mortality and are more likely to die from preventable causes.[91] Men are also less likely to know their HIV status or access treatment; and are at greater risk of mortality from injuries or suicide.[91] The health outcomes of men and women are interdependent, which means that as South Africa moves towards universal healthcare, our interventions must be responsive to the varied needs and risks of all genders. 4. Conclusion This report has explored the shape and pace of South Africa’s demographic transition and the complex implications for inequality. At the crux of the country’s inequality problem is the reality of a large unemployed working-age population, with no secure income and few footholds in the labour market. As this young population grows faster than the growth in employment, so too does the back-log of young people ‘in waithood’ (Figure 7). We cannot expect reducing fertility rates to do the work of shifting inequality: future demographic change does little to address the scale of the historical problem that we face. Indeed, even if South Africa were to realise the same level of gender equality as Sweden, for example; it is estimated that our Gini index would not fall by more than 3.8% (see Box 3) – which is not to say that the change in gender equality would not have other profound effects and is desirable in and of itself. As further evidence of the intractability of the Gini: our previous report[92] shows little to no effect on the Gini Coefficient if one were to remove the top 1% of earners, or even the elderly (over age 65) population from calculations. A radical shift in the Gini means that we must find ways to absorb our growing working-age population into the labour market. Economic growth, alone, will not be enough to secure the livelihoods of young people. Economic growth must translate into jobs and livelihoods; and young people must be resourced, equipped and connected enough to take up these opportunities. More so, these opportunities must translate into transferable skills and quality work to break existing patterns of youth ‘churn’ in the economy. Realising ‘demographic dividends’ and advancing equity hinge on education, jobs, intergenerational support and quality healthcare. There is no escaping the urgent need to address the jobs shortfall. But policy must also drive resources to the people and programmes that will have the most impact, both on overall inequality, and young people’s future chances. To this end, this report has explored South Africa’s demographic change through the youth, through the increase in the working-age population; the lens of women, due to the declining birth rate; and the lens of the elderly, who are living longer and are becoming an increasing share of the total population. The report also considers the importance of the health system in both supporting this demographic shift, and sustaining the well-being and economic productivity of South Africans. Equity in quality health access is also an important lever for reducing inequality overall and reaping demographic dividends. The discussion on the youth dividend shows how inequality of opportunity is an inheritance. In South Africa, parental income and, still, race are important determinants of the opportunities one is afforded for social mobility. Despite this, education is still shown to be an important mediator of inequality. Therefore, empowering the youth with access to quality education maximises their opportunities to find work in an economy which favours highly qualified employees. Economic policies also need to focus on not only driving growth but creating employment, opportunity and livelihoods for the many young people who do not complete school or have access to higher education, and thus have lesser qualifications. In exploring inequality through the lens of women, the role of policies which support women’s labour force participation and protect pregnant women and girls is crucial. We provide analysis illustrating that gender inequality has been empirically shown to exacerbate overall income inequality. Given that women are also more likely to invest higher shares of their income in educating their children, investing in the elevation of women is also an investment in the next generation. Considering the elderly, we challenge certain assumptions of this population. The over 60 population is not a homogenous group. Although many rely on the state old-age pension, 33% of those who live in urban areas earn their income from salaries. The elderly are also the lynchpins of South African households. They are an important source of childcare support which enables women to find and retain work. Their pensions together with incomes earned through work support their working-age children to look for work and participate in the labour market. The livelihoods, social mobility, and contribution of all three of these groups – youth, women and children – rests on their wellbeing – their being able to afford and access healthcare, and prevent health shocks that risk plunging them and their families into financial crisis. Given the nature of South Africa’s demographic change, all three groups will also be living longer, with potentially more chronic illness, and thus reliance on the health system. Therefore, moving towards equity in access to quality healthcare must form part of the policy tool kit for reducing inequality. South Africa has a declining fertility rate, a youthful population, and steadily decreasing infant and adult mortality. We have also seen a radical expansion in post-apartheid access to education, healthcare and social services. At this level, we appear to have all the ingredients for social and economic flourishing. Yet, we are failing dismally to realise the promises of democracy. As illustrated in our first Inequality Report,[92] access to public services has not translated into quality services, nor meaningful gains in equity, wellbeing and social mobility. Primarily, we are failing our young people, the majority of whom have the odds stacked against them well before they reach school. These inequalities compound as they make their way through the schooling system, and finally into the labour market. 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PLOS Med. 2017;14(12):e1002468. doi:10.1371/journal.pmed.1002468 Statistics South Africa. General Household Survey.; 2018. http://www.statssa.gov.za/publications/P0318/P03182018.pdf#page=37 Berlin Institute. Accelerating Adolescent Sexual and Reproductive Health and Rights for Demographic Dividends.; 2021. https://www.berlin-institut.org/fileadmin/Redaktion/Publikationen/PDF/Food_for_Thought_Paper_4.pdf Harries J, Constant D, Wright V, Morroni C, Müller A, Colvin CJ. A multidimensional approach to inform family planning needs, preferences and behaviours amongst women in South Africa through body mapping. Reprod Health. 2019;16(1):159. doi:10.1186/s12978-019-0830-6 National Department of Health. The South African National Integrated Men’s Health Strategy 2020-2025.; 2020. https://www.knowledgehub.org.za/system/files/elibdownloads/2021-02/Men%26%23039%3Bs%20Health%20Strategy.pdf Institute for Social Inequality. Trends in Multidimensional Inequality and Socio-Demographic Change in South Africa during 27 Years of Democracy.; 2022. https://www.inclusivesociety.org.za/post/trends-in-multidimensional-inequality-and-sociodemographic-change-in-sa-during-27years-of-democracy Appendices Figure 19: Components of the lifecycle deficit by race, 2015 Source: Oosthuizen, 2019 Figure 20: Private versus public transfers by race, 2015 Source: Oosthuizen, 2019 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

The Inclusive Society Institute (ISI) hosted a range of civil society organisations at its offices in Cape Town on Friday, 22 July 2022, to further deliberate the passage of legislation aimed at reforming the electoral system in South Africa. Whilst the Constitutional Court ruled that the current electoral system is unconstitutional in that it does not allow for independent candidates to stand for election, and that the legislature needs to remedy the defect, civil society is of the view that the electoral reform needs to go far beyond the mere accommodation of independent candidates. At the meeting a two-step process for electoral reform was advanced. Step one, in preparation for the 2024 general election, would respond to the Constitutional Court judgement as it relates to independent candidates, whilst the second step would aim to bring about broader reform in time for the 2029 general election. The second step would consider issues such as a constituency-based election, since there is a recognition that such a system would require preparatory processes such as, for example, constituency demarcation, which will not be able to be concluded in time for the 2024 election. Civil society remains concerned about a number of constitutional aspects to the current Bill being considered by Parliament’s Portfolio Committee on Home Affairs, which, they insist, needs to be corrected before being enacted. The Inclusive Society Institute will continue to work with civil society and the political fraternity to advance free and fair electoral processes that will promote a greater sense of accountability and representivity. Picture source: https://mg.co.za/opinion/2020-06-14-electoral-reform-allowing-independent-candidates-is-long-overdue/

On 19 July the Inclusive Society Institute through its international rapporteur, Dr Klaus Kotzé, met with Ms Britta Utz of the Friedrich Ebert Stiftung (FES) at their headquarters in Berlin, Germany. During a fruitful conversation, the two representatives exchanged insights and discussed the ongoing activities of their respective organisations. They agreed to maintain their existing partnership and build upon their previous exchanges. They reaffirmed their support to domestic and international democracy and to assist each other in the important task of building multilateralism shaped by solidarity and increased partnership. In concluding their discussion, the ISI invited the FES to partake in its end-of-year conference which will be based on the topic of building resilient democracy in South Africa and around the world.

On 15 July 2022 the Inclusive Society Institute’s (ISI) Daryl Swanepoel, CEO and Klaus Kotzé met with the Cultural Religious and Linguistic Rights Commission’s (CRL) represented by Prof Mosoma (Chairperson), Dr Sylvia Pheto (Deputy Chairperson), Mr Brian Makeketa (Senior Manager: Research & Policy development) and Mr Mpiyakhe Mkholo (Senior Manager: Communications). The CRL is a Chapter 9 organisation, receiving its mandate from the Constitution. It is therefore a significant and influential body that plays a key role in pursuing democratic development and Constitutional consolidation. The occasion of the meeting stemmed from a discussion between Mr. Swanepoel and Professor Mosoma to deepen the conversation between the two organisations, with a view to pursue areas for cooperation. During the meeting, the ISI and CRL shared its insights and ideas, giving ideational shape to an upcoming conference later in the year on democracy, social cohesion and public leadership. The CRL will be invited to participate. It was necessary to take stock of democracy, to ask whether democracy is working and what it would mean for democracy to work, both in South Africa and abroad. In this context, the question of democratic identity plays a central role. What does our South African vision of unity in diversity really mean and how do we achieve this? To this the role of strong, democratic leadership is key. While in the past democratic leaders were the giants of the political world, now there appears to be a leadership deficit. What does democratic leadership mean in the 21st century? Tying these ideas together is the recognition that democratic fragility is an international phenomenon. Many developed democracies are also experiencing their own crises. For this reason, multilateralism will function as the conference’s fourth component. A variety of international partner organisations will be invited to participate in the conference. Professor Mosoma led the CRL’s contribution as pertaining to the conference brief. The professor pointed out that the concept of democracy has become decontextualised, both internationally and in South Africa. It is important to ask how it functions in the community where it is introduced. Whether the people buy into the concept. Many of the reasons why democracy is waning is due to the lack of democratic dividend – the people do not experience the delivery of the democratic promise. They do not experience, nor do they express their democratic power. They therefore do not take responsibility as citizens in the developmental state. Furthermore, he asked, how can people speak of unity in diversity when crime and gated communities represent the expressions of their desperation and fear? We need to find a common understanding of what unity in diversity really means. This conference must be bold, must ask difficult questions and must come up with tangible results. To give expression of how to do things differently. To articulate the characteristics of good leadership, to pull everyone together at this time, which like 1994, represents a crossroad for which a new road map is needed. In closing the representatives agreed that the conference cannot only be a talk shop. It must be bold, critical and strategic.

The CEO of the Inclusive Society Institute, Mr Daryl Swanepoel, hosted Irish Ambassador to South Africa, HE Fionnuala Gilsenan, on 7 July 2022 at the Institute’s offices in Cape Town. The purpose of the meeting was to reach out to each other for purposes of finding common areas of interest to engage on, and to establish connectivity between the Institute and likeminded organisations in Ireland. The engagement was broad ranging in its content, with specific emphasis on work being done by the Institute on Electoral Reform, Coalition Building, Social Cohesion and the strengthening of Democracy.

The CEO of the Inclusive Society Institute, Daryl Swanepoel, attended the 246th Independence Day celebrations hosted by the Consul General of the United States of America in Cape Town, Todd Haskell, on 6 July 2022. It provided an opportunity for the Institute to solidify its relationship with the Consulate, friends, corporates and other organisations. The Institute is mandated to promote international collaboration between the progressive forces of South Africa and around the globe. It is currently reaching out to likeminded organisations in the United States. In his speech at the event, Consul General Haskell, reminded the gathering that, whilst nations can get absorbed in their own challenges, many of the challenges on not unique, but shared challenges which need to be overcome through international solidarity and cooperation. Quoting from a speech by JF Kennedy at the University of Cape Town on 6 June 1966, he said: “I come here this evening because of my deep interest and affection for a land settled by the Dutch in the mid-seventeenth century, then taken over by the British, and at last independent; a land in which the native inhabitants were at first subdued, but relations with whom remain a problem to this day; a land which defined itself on a hostile frontier; a land which has tamed rich natural resources through the energetic application of modern technology; a land which was once the importer of slaves, and now must struggle to wipe out the last traces of that former bondage. I refer, of course, to the United States of America”.

Occasional Paper 6/2022 Copyright © 2022 Inclusive Society Institute 1006 One Thibault 1 Thibault Square 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. JULY 2022 by Prof Evangelos Mantzaris Hon Sociology, Public Administration & Economic Science, Ph.D Sociology Opening remarks Part of this article has been based on an empirical report on South Africa’s National Anti-Corruption Advisory Council (NACAC), as identified in South Africa’s National Anti-Corruption Strategy 2020-2030, first announced in President Ramaphosa’s 2021 State of the Nation Address. This article was sponsored and subsidised by the Inclusive Society Institute (ISI), an institution that functions autonomously and independently from any other entity. The question of trust The lack of political trust in South Africa is founded principally, if not exclusively, on political acts such as corruption, lack of ethics, state capture and perpetual legal violations. These everyday realities threaten the very legitimacy of the system, leading to mistrust and non-compliance with the law by citizens. Whereas political trust is founded on good governance based on the existence of accountability mechanisms and ethical codes in all spheres of life. Citizens expect good and ethical governance at all levels of society, meaning that politicians and public administrators are obligated and expected to adhere to the principles of accountability, transparency and integrity, which are the cornerstones of anti-corruption measures such as detection, prevention and deterrence. Policies and their honest and transparent implementation are the foundation of accountable, people-based service delivery. Political trust is not won by verbose party manifestos, distribution of food parcels or pre-election promises, but by politicians’ and administrators’ actions. Once citizens realise that manifestos, policies and promises are forgotten, mistrust becomes a tangible reality and takes on a wide variety of forms – founded on a vast array of individual and community thoughts, perceptions, relationships and actions – leading to political and social outcomes that illustrate a mixture of power relations and contradictions. Trust is both a collective and an individual reality that is inevitably transformed into feelings, relationships, plans and activities – the latter two of which are, in society, determined by the government’s answers to citizens’ questions. Recently, government’s plans and activities have been negatively associated with a plethora of dirty dealings, including two of its Cabinet Ministers spending R3.5 million in hotel accommodation, and the Covid-19 supply chain and procurement-based multibillion-rand theft. The impact of such actions on the relationship between the government and its citizens hugely undermines the honesty, accountability and legitimacy upon which administrative mechanisms operate within a democracy that is healthy and corruption-free. Every time a new policy is announced, political trust is brought into question. All levels and positions in the state apparatus come under scrutiny: from the president to the provincial premier, municipal mayor, judiciary, political parties, ‘corrupt mediators’, even the politicians’ families. In fact, the whole system comes under the spotlight. In most cases, personal distrust overlaps with governmental distrust, because policy, planning and implementation is in most instances personified by a specific individual. Familiar faces in political and senior administration dominate all social media, while middle managers in the small municipalities living it up and driving the Maseratis escape detection until exposed by whistle-blowers. Political leaders are the faces of the regimes and systems they represent. Citizens’ trust in state institutions and their rulings, or opposition parties, is a serious barometer of a healthy democracy. This trust epitomises the very essence of democratic legitimacy that is both internalised and externalised by peoples’ zest for wholehearted willingness to participate and act in the building of a democratic State that rewards honesty and punishes corruption. The South African case The latest widely acknowledged and respected opinion poll by Afrobarometer has shown that trust in the country’s Parliament has declined to 27 per cent and in the president to 38 per cent. And for the first time during the existence of the opinion poll initiative trust in the courts of law has dropped to 43 per cent. Furthermore, the level of trust in the African National Congress has fallen to 27 per cent and is especially low among more educated and younger South Africans, while the opposition parties’ tally is at a lower 24 per cent. The Public Protector received a 42 per cent vote of trust, while only 36 per cent trusted the Electoral Commission of South Africa, with trust levels particularly low among younger respondents. The Department of Health recorded the highest level of trust in comparison to other state institutions (56 per cent). Challenges and opportunities to enhance social mobilisation to combat corruption The path to social accountability is paved through the generation and articulation of citizens’ voices, to elicit enforcement of sanctions when public service provision fails, and to promote answerability of public authorities. Therefore, effective social accountability is made up of three building blocks: voices, enforcement and answers. The fundamental initiatives consist of: The achievement of citizens’ participation in the fight against corruption and paving the way to social accountability initiatives can only be achieved through citizens’ active involvement and coordination that leads to collective action capabilities. The existing local context realities are the foundation of the successful planning, designing and implementing of social accountability initiatives to counter corruption in the delivery of public services. Deep study and understanding of citizens’ expectations and attitudes is at the root of preparing the strategic State path in the process of tailoring capacity building activities that empower citizens to counter corruption. Continuous engagement of all trusted and widely respected stakeholders and actors in their communities, enabling them to share and articulate the communities’ voices. This makes social accountability initiatives more effective. Creation and development of participatory budgeting, leading directly to the planning, formulation, decision-making and monitoring of budget execution, especially at local government level. The challenges and opportunities: Concrete answers for the way forward The focus begins and ends with empirical evidence and is based on known final results. These results point to a fundamental absence of an anti-corruption coordinating body based on concrete and well accepted and known international examples. Historically speaking, it will be nationally and internationally understood that the Zondo Commission has shown with concrete evidence many corrupt individuals in the public sector. And yet, after fair court decisions only ten of these individuals have been jailed. How then, can citizens be expected to trust their government? The answer can be found in the historical success of anti-corruption coordinating bodies in Africa instrumental in enhancing social mobilisation to combat corruption. In Rwanda, the Anti-Corruption Advisory Council is headed by the country’s Chief Ombudsman and includes nine members from the key state departments, civil society organisations and private sector. A coordinating Secretariat is responsible for a daily campaign covering the whole country and reports the corruption and anti-corruption failures and successes daily on radio, television and social media. Furthermore, all the Council members communicate daily with the media, private sector and civil society, convincing them to become actively involved against corruption and mobilise their communities and constituencies to become an integral part of the effort. The Council operates at national level but is also decentralised at district, sector and cell levels. The country’s civil society leadership has been encouraged to cooperate with the Council to sensitise the public to the consequences of corruption, research and reports of corruption to the police, National Public Prosecution Authority, and the Office of the Ombudsman. The Council’s key responsibilities are to research and report/opine on strategies against corruption; thoroughly study and research all reports that emanate from anti-corruption institutions and recommendations to advance the fight against corruption; maintain continuous channels of information exchange on corruption between institutions; research, assess and evaluate all reports that emanate from organisations regarding corruption in Rwanda and recommendations that are based on their positions; planning and implementation of all processes resulting in the approval and publication of an annual report of the achievements in the fight against corruption in Rwanda. The success towards building the foundations that will lead to social mobilisation and, ultimately, social accountability can be easily compromised by specific historical, political or cultural experiences, which can influence the communities’ behaviour and attitudes towards the government at all levels. As international and South African literature has shown, there are key common issues, such as lack of citizens’ knowledge of their rights and corruption realities as well as types and particularities of corruption. These realities could be tackled through several initiatives that are achievable at all government levels, but initially beginning in the local government terrain: Awareness and promotion of the values of honesty and integrity among all communities, with a view to prevent corruption. Organisation of classes and community-based special meetings, beginning with district and local municipalities, on all subjects dealing with corrupt acts, their types, and the role of communities in their defeat. At municipal levels, the community leaders as well as the ward committees can and should play a key role in mobilisation. Identification of the causes of corruption in the context of the area’s socio-economic conditions. Investigation of a public officer’s conduct that the community or its members have reasonable grounds to believe relates to corrupt practices. Coordination and cooperation with all known state institutions and anti-corruption entities and organisations authorised to investigate, prosecute, prevent and combat corrupt practices. Consultation, cooperation and information exchange/s with the appropriate bodies locally, provincially and/or nationally authorised to conduct inquiries or investigations in relation to corruption. Adaptation and strengthening of mechanisms for educating the public to respect the public good and public interest. Development of educational and other programmes in collaboration with civil society organisations and disseminating information and sensitising the public to the negative effects of corruption. The creation of an anti-corruption coordinating body run at its initial phase by a highly trained, knowledgeable and skilled Secretariat will have several key responsibilities, including: Research and reports/opinions on strategies against corruption. Thorough study and research of all reports emanating from anti-corruption institutions and recommendations to advance the fight against corruption. Maintenance of continuous channels of information exchange on corruption among all anti-corruption institutions. Research, assessment and evaluation of all reports that emanate from organisations regarding corruption and recommendations that are based on their positions; planning and implementation of all anti-corruption processes. Collective effort on the part of all government, civil society and communities throughout the country to become aware of and active about reports and existing government strategies and plans against corruption; Secretariat-planned reports and initiatives emanating from anti-corruption institutions and entities in the effort to advance the fight against corruption; continuous exchange of all channels of information on corruption between all anti-corruption institutions and communities and all varieties of media; all reports and results of anti-corruption cases undertaken by anti-corruption agencies and institutions; monthly anti-corruption reports distributed to all national, provincial and local state departments and institutions, including the cases and successes in the corruption and anti-corruption efforts. All these initiatives, plans, designs, and their implementation will take place under the auspices of the Project Management Office. The entity’s main objective is to operationalise the existing policies, strategies and procedures together with the existing multilateral initiatives on governance and anti-corruption; identify the dynamics and realities for risk analysis and institutional assessments; governance and anti-corruption project design measures and supervision monitoring, and evaluation and similar operational matters. The following little-known case points to the need for the next unit, the Whistle-Blower Protection Unit: Grishen Bujram (43) was an underground MK fighter and a UDF activist in the 1980s. Later, as a whistle-blowing ANC councillor in the Endumeni Local Municipality in KwaZulu-Natal, Bujram was gunned down in Sibongile Township near Dundee on 15 June 2007. He had reported the unlawful sale of 17 RDP houses by then-ANC Mayor Thandeka Nukani – who had also acquired one for herself – to the police, the council, and all ANC structures. The two men implicated in the murder used the mayor’s car during the crime. Both were convicted and jailed, one for life and the other for 20 years. The mayor was also charged and appeared in court, but the charges were eventually withdrawn due to insufficient evidence. Whistle-blower protection is crucial for the success of anti-corruption detection and enforcement and should be a key aspect of any whistle-blowing system. Indeed, it will be one of the most important duties and responsibilities of the Secretariat. This is due to the nature of the corrupt individuals involved: those parties who stand to reap substantial benefits through their corrupt activities also stand to be arrested and seriously punished if they get caught out. Politicians and administrators who risk reporting these corrupt activities therefore put themselves and their families, co-workers and managers in potentially serious danger. The Whistle-Blower Protection Unit is responsible for considering the circumstances under which suspicions of wrongdoing can be reported inside and outside the organisation; has the knowledge and means to provide legal and physical protection to whistle-blowers; ensures that existing reporting channels, such as information hotlines, also exist for individuals working in the private sector; encourages positive attitudes towards whistle-blowing among citizens by promoting whistle-blowing policies and publicising post-reporting follow-up; ensures that individuals considering reporting suspected cases of wrongdoing have access to advice that is confidential and free of charge; forms part of external bodies such as NGOs and national associations; and introduces periodic assessments of the effectiveness of rules and regulations on the protection of whistle-blowers. whistle-blowers have unique knowledge, access and expertise … allows them to detect corruption or other matters of concern that might otherwise remain hidden It needs to be understood that as insiders, whistle-blowers have unique knowledge, access and expertise with regards their organisations and, therefore, also with regards the functions and dysfunctions of their institutional realities. This information allows them to detect corruption or other matters of concern that might otherwise remain hidden. However, this knowledge often places them in a difficult position, owing to loyalty to colleagues and supervisors, contractual confidentiality obligations, and the risk of retaliation. This scenario pinpoints the challenges associated with the distinction between the three different types of reporting: anonymous, where a report or information is received, but no one knows the source; open, where individuals openly report or disclose information, or state that they do not require their identity to be kept secret; and confidential, where the identity of the informant is known to the recipient, but will not be disclosed without the individual's consent, unless required by law. The staff of the entity should be enabled to negotiate with and guide everyone connected to such circumstances as well as the ant-corruption units of the specific institutions. While legislation exists that provides protection from occupational detriment for employees who disclose information of unlawful or corrupt conduct by their employers or fellow employees, more needs to be done. There are a number of initiatives that could be introduced – such as proper training, which will have a positive effect on the workplace structure, or the introduction of much stronger policies with severe consequences for the corrupt. The Research and Policy Unit is responsible for researching anti-corruption initiatives. Its key function is to facilitate and conduct research and analytical studies on issues pertaining to the development of anti-corruption initiatives locally, regionally and internationally. Researchers employed in the unit can also be directly involved in staff training throughout the anti-corruption institutional terrain; contacts, meetings and digital conferences can connect staff with colleagues and academic researchers on the African continent for exchange of ideas, research and insights. Potential staff members of such a unit should be university graduates with at least a master’s degree in the social, law or economic sciences, preferably with knowledge of and/or exposure to the anti-corruption genre. The Education Office operates at two levels: the institutional and the public. The institutional focuses on training all members of NACAC as well as those in all other anti-corruption agencies. The foundation is an ‘induction training programme’ providing basic training to new employees, all of whom spend the first few months of their service in the Research and Policy Unit to improve their knowledge on corruption and anti-corruption scenarios, investigations, successes, processes, structures and challenges, before being considered for their final posting. The new recruits’ training could last at least a year, while the trainees work and learn at the Research and Policy Unit. During the process the courses will include corruption prevention, communication skills, rules of evidence, law, computer forensics, financial investigation skills, and cognitive interview techniques, among others. Throughout the period of employment, the training continues at higher levels. On the other hand, is the public pillar, which will be reserved for awareness campaigns and educational programmes to mobilise society in the fight against corruption. Conclusion From 1994 until 2022, the South African government has enacted and implemented a vast number of laws, official rules and regulations, and introduced a populous and widely diversified group of organisations, institutions and entities to fight corruption, including Chapter 9 entities. All the existing laws, rules and regulations have been rigorously amended, so they are extremely detailed and thorough, and the anti-corruption agencies, organisations and entities have had successes and failures. But while the National Development Plan has accepted that all this effort has, for the most part, not worked, it has done so without providing reasons for the failure. The South African transition and the theory and practice of the National Democratic Revolution are still in process for many – if we believe the theorists still praying for the success of the French students’ powerful slogan from May 1968: ‘Be realistic, strive for the impossible’. This transition has been given a variety of names, including the ‘deferred revolution’, ‘first transition’, ‘second transition’, ‘second phase of the transition’. The prophets of the African revolutions, from Thomas Sankara to Oliver Tambo and from Patrice Lumumba to Samara Michel, are gone. The Africanisation of university curricula following the much debated but still misunderstood ‘Fees Must Fall’, is still in the long unveiling process. The late Claude Ake’s 1978 prophetic book, Revolutionary pressures in Africa, comes to two key conclusions. First, the revolution will be televised – as has been seen in Polokwane, Mangaung and the Expo Centre. And second, the National Democratic Revolution against corruption, greed and avarice cannot take place in stages – this is the key message of the National Anti-Corruption Strategy 2020-2030. It can only succeed if it is a continuous and un-interrupted process, coordinated efficiently, professionally and honestly. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 CEO of the Inclusive Society Institute, Mr Daryl Swanepoel, on Monday 27 June 2022, met with Todd Haskell, the Consul General of the United States of America in Cape Town. The Inclusive Society Institute is reaching out to the international community in order to promote collaboration on policy development and campaigns aimed at addressing the pressing global issues of the day. This includes, amongst others, climate change, the strengthening of democracy and human rights, migration, inequality and the building of cohesive societies. Consul General Haskell and Mr Swanepoel spoke at length on actions needed to rebuild the South African economy and the strengthening of the democratic culture. They also explored ways of deepening the political and civil society dialogue between the United States and South Africa (and Africa), particularly as it relates to ensuring a globally inclusive and balanced dialogue between Africa, and the developing and developed worlds. The Inclusive Society Institute will be reaching out to likeminded political movements, think-tanks and civil society organisations in the United States, with the objective to secure broader dialogue on matters effecting the two countries and multilateralism.

The Inclusive Society Institute met with the Minister of Home Affairs, the Hon. Aaron Motsoaledi MP, on Thursday, 23 June 2022, to present the Institute’s proposals with regard to a new electoral model for South Africa. The Institute was represented by its CEO, Daryl Swanepoel, Professor David Masoma, a member of the Institute’s Advisory Council and members of the expert panel assembled by the Institute to design the proposed model, Mr Roelf Meyer (Convenor) and Professor William Gumede. Whilst the objective of the Institute’s work was to respond to the Constitutional Court’s declaring of the current electoral act as unconstitutional, in that it does not allow for independent candidates to stand for election to the national and provincial legislatures, the panel was of the view that broader electoral reform was needed. Government agreed this was necessary, but has, given the tight timeframe for holding the next election (2024), only introduced draft legislation that responds to the Constitutional Courts ruling. The meeting considered ways to effect broader reform, whilst cognisant of the practicalities of preparing timeously for the election. They considered the possibility of a two-prong approach, that is, to now introduced minimalistic changes to give effect to the Constitutional Court judgment in time for the 2024 election, and then directly thereafter commence a broader consultative process for introducing the broader reforms in time for the 2029 election.

The Inclusive Society Institute and a delegation of foreign direct investors met with the Minister of Home Affairs, Hon. Aaron Motsoaledi MP, on Thursday, 23 June 2022. The objective of the engagement was to share concerns and identify areas of improving the immigration laws to build an investment friendly environment. Amongst the issues raised were: Problems created for business continuity when business owners who have taken out South African citizenship have to renounce such citizenship when they returned to their birth countries. For example, when they decide to retire and family members, who need to take over, do not have permanent residence; Covid induced complications, for example, inter-company transfers resulting in technical expertise needing to return to home countries without replacements being sent; and Covid restrictions that made it impossible for some permanent residents to comply with the requirement for them to spend at least six-months in South Africa, which has resulted in a number of such permanent residencies to be cancelled. The meeting was held in a constructive spirit and since government was committed to providing an investment friendly visa regime, they would consider case-for-case and broader proposals that would improve the visa regime.

The Inclusive Society Institute in collaboration with the Tourism Business Council of South Africa convened a tourism sectoral dialogue on Tuesday, 21 June 2022. The dialogue forms part of the Institute’s research into the development of a blueprint for the rejuvenation of the South African economy. The dialogue was attended by a wide range of organisations representing various divisions of tourism in the country, including, inter alia, the hospitality the industry, the airline industry, travel agents, destination marketing agencies and the hotels, resort and game lodge establishments. Issues raised included amongst others: Need to minimise policy diversion at the political level The need for policy certainty Whilst planning was adequate, implementation of policy programmes was lacking Lack of sufficient communication and guidance from government, for example, crime and safety warnings, and health pandemics Technology not being sufficiently leveraged Slow certification in the aviation industry Monopolistic tendencies More needs to be done to improve the country’s brand reputation Improving the visa regime The sector was of the view that they themselves could improve with regard to innovation, the introduction of new initiatives and improved performance. Given more agreement than disagreement between the private and public sectors they were also of the view that the industry would be better served by focussing on areas in which there was agreement as opposed to being distracted by the areas of disagreement.

Copyright © 2022 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. All records and findings included in this report, originated from a dialogue on the Meaning of Social Democracy in the Modern World, which took place on 23 November 2021. Author: Dr Klaus Kotzé Editor: Daryl Swanepoel Content Executive Summary Setting the scene Key takeaways from the dialogue National strategic vision Fiscal conditions Appropriate institutions Opening remarks by the Inclusive Society Institute Daryl Swanepoel, CEO, Inclusive Society Institute Remarks by panellists Lord Peter Hain, former UK Labour Cabinet Minister and anti-apartheid activist Dr David Masondo MP, South African Deputy Minister of Finance and Principal of the Oliver Tambo School of Leadership, Shouth Africa Dr Michael Dauderstädt, former Head of the International Policy Analysis Unit, Friedrich Ebert Stiftung Prof Chris Mullard, former Professor of Education and Ethic Studies at the University of Amsterdam and Visiting Professor at the University of London and at the Royal Agricultural University. Co-founder of Focus Consultancy, UK Mr Franz Knieps, member of the Board of the BKK Dachverband, Germany Mr Johan Hassel, International Secretary of the Swedish Social Democratic Party Dr Martyn Davies, Managing Director of Emerging Markets in Africa, Dean of the Deloitte Leadership Academy and Chief Economist at Deloitte Hon Maria do Rosario MP, Workers Party, Chamber of Deputies, Brazil Mr Mariano Schuster, Editor, Nueva Sociedad, Argentina Executive Summary Setting the scene The Inclusive Society Institute (the Institute) recognises that progressive policies are required to advance the nations of the world, and in particular those of the developing world, towards greater equity and development. The Institute furthermore recognises that before any policy can have its desired effect, suitable conditions must be in place. Without the appropriate preconditions, even the best policy can only have a limited impact. On the 22nd of March 2022, the Institute held the second in its series of dialogues on social democracy. While the first dialogue discussed the meaning of social democracy in the modern world, the second investigated which preconditions are required for a society to advance towards a welfare state. The aim of this dialogue was not only to contribute to the global discussion, but, more specifically, to provide guidance in the South African context. The dialogue offered the panellists from seven countries the opportunity to showcase and expand on the development of the welfare state in their respective countries. The speakers representing both developing and developed countries at various stages of welfare implementation, were brought together to provide a broad understanding and, therefore, illustrate the modes and complexities involved in administering such a system. Regardless of the form that it takes, a welfare state entails an extensive programme of action, requiring coordinated effort and vast amounts of money. It is therefore imperative that critical debates showcase the requirements as well as the possible effects which could ensue from implementing welfare measures. By drawing from various experiences and insights, the Institute hopes to demonstrate possible routes and scenarios that could inspire and direct South African policymakers in their thinking on social welfare. A welfare state cannot be wished into place; it needs to be built based on calculated decisions and on strategic and sustainable pathways. It is the Institute’s aim to learn from and work with others on an ongoing basis in order to assist policymakers in their critical decision-making process. The participants in the discussion were: Lord Peter Hain, former UK Labour Cabinet Minister and anti-apartheid activist Ms Maria do Rosário, MP Workers’ Party, Chamber of Deputies, Brazil Dr David Masondo MP, South African Deputy Minister of Finance and Principal of the Oliver Tambo School of Leadership, South Africa Dr Michael Dauderstädt, former Head of the International Policy Analysis Unit, Friedrich Ebert Stiftung Prof Chris Mullard, former Professor of Education and Ethnic Studies at the University of Amsterdam and Visiting Professor at the University of London and at the Royal Agricultural University. Co-founder of Focus Consultancy, UK Mr Franz Knieps, member of the Board of the BKK Dachverband, Germany Mr Mariana Schuster, Editor, Nueva Sociedad, Argentina Dr Martin Davies, Managing Director of Emerging Markets in Africa, Dean of the Deloitte Leadership Academy and Chief Economist at Deloitte Mr Johan Hassel, International Secretary of the Swedish Social Democratic Party Mr Daryl Swanepoel, CEO of the Inclusive Society Institute The moderator of the discussion was Mr Roelf Meyer, former Minister of Constitutional Development and currently, Director of the In Transformation Initiative. Key takeaways from the dialogue The unfolding dialogue revealed the scope of measures that should be kept in mind when establishing social welfare measures. The different voices from different countries provided a hugely beneficial perspective on the range of requirements and limitations facing the South African welfare state. A key lesson that emerged from the dialogue was that the implementation of a welfare state must foremostly be based upon a strategic balance between what is socially desirable and what is administratively and fiscally possible. All actions must first critically consider this strategic balance. Broadly speaking, the implementation of a welfare state requires: 1) a national strategic vision, 2) fiscal conditions, and 3) appropriate institutions. National strategic vision Every nation requires a strategic vision that clarifies its identity and its goals. Such a vision, according to panellist Professor Chris Mullard, is based on the principles rooted in each state. It is imperative that the peoples and the government of each state have a clear understanding regarding what the principles are that bind it and drive it forward. Without a strategic vision, societies crumble. A firm argument for South Africa’s endurance since apartheid – contrary to its perverse inequality – is that post-apartheid South Africa has maintained a vision of transforming into a just and equal state. The principles articulated by the Constitution have bound both citizenry and government to a common set of democratic values. A strategic vision must be pursued and accordingly adapted throughout changing national conditions. Social and economic justice are prerequisites that must drive policy formulation and implementation. It must guide national debates on fundamental issues such as the protracted land issue. Citizens have an active role to play in establishing and advancing the transformative state. As the path changes, the vision borne from principles must continue to pave the way. According to Professor Mullard, though South Africa initially set an example in the articulation and pursuit of a strategic vision, it has, together with the rest of the world, lost its ability to draw up a strategic vision based on its own principles and values. Instead of focusing on the implicit and collective values that paved the way for democratisation, South Africa has instead adopted Western values. While a nation’s vision must be based on its principles, it must strategically be balanced in order to respond to the situation on the ground. The vision and its implementation must align with the needs and lived reality of the citizenry. This means that one group should not benefit at the expense of another. While the conditions of the poor must be central, the richer population cannot feel that they are not receiving commensurate benefits for their higher input costs. Accordingly, people who work for longer periods should be afforded better pensions. The experience of Social Democrats in European states is that social welfare requires a constant adjustment to ensure that both rich and poor draw benefit. Furthermore, the strategic vision for social welfare is a timeous process that requires constant adjustment. For transformation to be durable and thorough, social welfare must be set up in a sustainable way, where the wellbeing of citizens remains central. National leadership is critical in the formulation and implementation of a strategic vision. It is the role of leadership to create the environment for trust to be built between different role players, particularly between the state and private enterprise. Cooperation allows for both private and public sectors to flourish. Countries such as Germany and Sweden showcase the advantages of cooperation. Though South Africa does not have the financial power of these states, it must build the belief, based on trust, that through cooperation benefit will be mutual. Fiscal conditions The second impression drawn from the dialogue is that fiscal conditions determine the extent and structure of social welfare. A strategic balance must be drawn between maximally supporting people, while always doing so within fiscal constraints. In his contribution, Deputy Minister David Masondo emphasised that while government is providing enormous support to the needy, it cannot do so beyond its fiscal means. Government has significant debt obligations. To provide more support than it can fiscally afford will not be strategic and will simply incur larger debts and, therefore, social pressures down the line. A growing economy is required to expand the social welfare system. Economic growth will, amongst other things, ensure that more tax can be collected from a larger tax base. Currently, too few people are relied upon to pay income tax. An increase to welfare measures will demand even more from a group of taxpayers that already carry a large tax burden, often without seeing commensurate benefits. When the economy grows, the balance between what is just and what is prudent becomes an easier decision to make. According to panellist Martyn Davies of Deloitte, the answer to this equation is to create jobs. Davies stressed that South Africa’s biggest problem – and the basis for its inequality – is structural unemployment. Structural reform is required to improve fiscal conditions, which will, in turn, open up more space for programmes such as social welfare. The items addressed under structural reform include properly functioning services, a drive towards re-industrialisation, a move away from commodity reliance, and policy certainty. Appropriate institutions Policy certainty is the domain of government. While Deputy Minister Masondo committed government to structural reforms and sectoral master plans, he, amongst other panellists, stressed the role of institutions in setting up and administering social welfare. A successful welfare state requires appropriate and properly functioning institutions. This is central to the building and maintenance of a capable state. This was the message shared by various speakers. Legislation must provide for the establishment of appropriate and capacitated institutions to distribute and redistribute public goods. When institutions – particularly financial institutions – are not regulated, they pose a direct risk to social conditions. Former anti-apartheid activist Lord Peter Hain suggested that institutions should be established to help people support themselves. One such example mentioned is a national investment bank that helps finance investment and infrastructure. This will be particularly attractive to investors such as pension funds and insurance companies. Institutions that are seen to empower people will re-establish trust in the social contract. Appropriate institutions with a people-centred mandate will assist people to empower themselves. German panellist Franz Knieps pointed to a key lesson from Germany’s long history with social welfare. In Germany there is legislation that empowers workers to have direct and proportional representation in the functioning of industries and sectors they work in. People are both empowered and required to take up active self-administration – contributing to the everyday management and organisation of the sectors they are involved in. Ensuring that people are central to the environment in which they live and work, will build trust and responsibility. It will ensure that institutions and industries are people-centred and do not only seek profit. When social welfare is part of the institutional make-up, it will reduce the reliance on government handouts and will assist citizens to empower themselves. Opening remarks by the Inclusive Society Institute “It is therefore important to consider which socio-economic and socio-political conditions are needed to underpin the funding and sustainability of the welfare state” Daryl Swanepoel, CEO of the Inclusive Society Institute The first dialogue on social democracy stressed that no system is cast in stone. Though there are underlying values that remain – such as freedom, equality and solidarity – what does change over time is how values are interpreted and how best they should be pursued. There can be different answers to these questions, depending on context and grouping. At the previous event, panellists agreed that extensive discussion is required on social democracy and its implementation. Following the event, in its subsequent report, the Institute identified five themes around which a series of workshops will be developed to delve deep into the issues that were identified. This series of workshops will commence shortly. The issues that were identified are as follows: social democracy requires a strategic definition; social democracy is about people; it requires an internationalist approach; it must advance a credible alternative to neo-liberalism; and, lastly, it requires the development of a persuasive narrative. This second dialogue looks at the conditions required for a country to install and advance a welfare state. The objective of this discussion is to afford the panellists the opportunity to share the experience of their countries’ pathways towards the implementation of welfare programmes. To get an understanding of the participant countries’ economic, employment and fiscal structures. For example, how the introduction of welfare programmes benefits the vulnerable in society. Welfare measures may be quite feasible in countries where unemployment is low and there are large numbers of taxpayers paying high taxation rates. In South Africa, where unemployment stands at 46% and the upper margin of personal tax is already at 45%, only around 1.58 million people out of a population of nearly 60 million pay income tax. Just under 25% of those who pay income tax, pay 80% of all the income tax that is collected. It is therefore important to consider which socio-economic and socio-political conditions are needed to underpin the funding and sustainability of the welfare state. This is an important discussion within the South African context, where public policymakers have recently introduced a suite of legislation that supports the advancement of the country towards a welfare state. This includes legislative proposals aimed at introducing a national health insurance, a basic income grant and a national social security fund. These measures come on top of already approved and implemented social interventions, such as free housing, free schooling and tertiary education for the poor, free water and electricity for the poor, and school feeding schemes and child and other welfare grants. What is of concern to many in the policy development fraternity is the long-term sustainability of those interventions. This question remains largely unanswered. This discussion aims to shape and direct policy in this regard. The Institute wishes to reiterate the importance of these dialogues. Globally, Social Democrats need to formulate their message in a way that establishes clear blue water between themselves and those to the right. More than ever, the world cries out for social justice and greater equality. The Russia/Ukraine conflict proves that an internationalist approach is crucial. It is now needed more than ever. This approach must be based on a value system that places the development of the economy and the wellbeing of citizens at the centre. It is only if the economy is successful and growing, that governments are able to fund the programmes which are needed to truly deliver a just and equitable society. How to balance these two, is what this discussion is about today. Remarks by panellists “Unless social democracy provides an alternative to systemic neo-liberal failure, we will not recover the ground, either in Britain, in South Africa, or across the world” Lord Peter Hain, former UK Labour Cabinet Minister and anti-apartheid activist Putting aside the real danger of Vladimir Putin’s barbarous war in Ukraine spreading to the rest of Europe and beyond. Putting aside the immense problems of living with Covid-19 and recovering from lockdowns. Putting aside the seismic threat of climate change, the principle sustainable way to create a decent welfare state, is by building a strong economy. Generating faster, greener growth. And learning from Scandinavian countries in particular, who’ve been more successful in achieving these objectives than almost any other country. That, in turn, means abandoning the disastrous grip of neo-liberalism, since its advent around President Reagan and Prime Minister Thatcher in 1980. Its apocalypse should have been the 2007/2008 global banking crisis, which claimed, from allowing recklessly irresponsible bank lending, to become a law unto itself. Untroubled by a flawed system of financial regulation, most governments across the world permitted market forces to lead financial institutions like lemmings, right over the edge. Today, the casino side of banking still poses a deadly threat to economic stability – with bankers facing the same temptation to take needless reckless risks in the belief that the taxpayer will step in to save them when things go wrong again. Free market systems are inherently unstable and financial markets are prone to periodic failure. The banks may soon become too big to save. Former IMF Chief Economist Simon Johnson has summed up the situation, saying that “we’re nearing the end of our fiscal and monetary ability to bail out the system. We’re steadily becoming vulnerable to disaster on an epic scale”. Social Democrats should be insisting upon stricter rules for all financial institutions, including the shadow banking sector of private equity outfits and hedge funds. Public interest must be paramount. Although neo-liberalism ought to be lying in pieces, fit only for the rubbish bin of history, it has nevertheless continued unabated. The Global Financial Crisis, which threatened to plunge the world economy into a second Great Depression, ought never to have happened, according to the efficient market hypothesis. Sudden shocks on the scale of the 2008 banking crisis, ought not to occur. And if they do, the system is supposed to correct itself quickly, with no need for significant state intervention. But the scale of the state rescue of the financial system is enormous. In the UK alone, 133 billion pounds sterling was measured out in cash outlays. The potential cost – including government guarantees of over one trillion pounds – surely shattered any myth that the financial system has self-stabilising properties. Social Democrats must regain their economic self-assurance. They must start by recognising the success of Keynesian economics, post-World War II. The period 1945 to 1980 saw relatively high average growth – higher than the period under neo-liberalism, at least in the West. Spending was cut by £220 billion, in today’s figures. Eighty-two percent of these cuts were to public spending. Tax cuts continue to be promised by the neo-liberal UK Chancellor. Instead, he should be adopting a big fiscal stimulus, to reverse the current slowdown and get the economy growing. Despite IMF research showing that, “instead of delivering growth, some neo-liberal policies have increased inequality, in turn, jeopardising durable expansion. There remains a constant cover for neo-liberal austerity across the world”. Looking further ahead, longer life expectancy and increasing demand for what the American management writer Peter Drucker termed knowledge workers, means an expanding role for the welfare state. In education, pensions, and health services – especially elderly care. Neo-liberal attempts to shrink the role of the state are taking society in entirely the wrong direction. Social Democrats must stop acquiescing in such mistaken strategies. They must renew the case of a balance between private market enterprise, private enterprise, and market economy and public provision. Jacob Hacker and Paul Pearson in their 2016 study of the part played by government in helping societies flourish, said, “the mixed economy remains a spectacular achievement. By combining the power of markets with a strong dose of public authority, we achieved unprecedented prosperity”. Everyone outside the financial system now realises that the light touch regulation of the banks was a big blunder. Insiders, like former Governor of the Bank of England, Lord King and ex IMF boss, Christine Lagarde, warn that another financial crisis cannot be ruled out. Breaking up the big banks to separate retail banking from investment banking, with taxpayers guaranteeing only the socially essential parts – like payment systems and customers deposits – and not the risky casino side, is essential to prevent another financial collapse. And growing inequality must be reversed by social democratic policies. If this is not done, countries like South Africa will experience increased social unrest. Research in 2015 showed that there had been no rise in the real wages of working and lower middle-class Americans since the late 1970s. Indeed, the level was lower than in the late 1960s and early 1970s. No wonder then, that in 2016, Donald Trump’s ugly populism found a ready response, also amongst key former Democrat-voting white working-class Americans. As middle and lower America lost out, inequality widened hugely. Certain public services were cut, and social and political unrest increased. Adair Turner, former Chair of Britain’s Financial Services Authority, confirms that much financial activity is socially useless. In his 2015 book, Between Debt and the Devil, he argues that the vast majority of bank lending in advanced economies does not support new business investments. Instead, funds increased consumption, or the purchase of already existing assets, in particular real estate, and the urban land on which it sits. Achieving faster growth in the medium- and longer-term means adopting an active industrial strategy. In her book, The Entrepreneurial State, Mariana Mazzucato has cited dozens of examples from America, South Korea and Taiwan, where the state has been the source of innovation, prompting technological advance in areas like aviation, the internet, biotechnology and green technology. A National Investment Bank could also help to finance investment in infrastructure, including accelerating investment in housing and in low-carbon innovation, by attracting funding from pension funds and insurance companies – because the latter need to acquire long-term assets to match their long-term liabilities. An initiative like this would fit with what radical thinkers like Noah Smith call New Industrialism, an approach to economic policy that respects the power of the private sector but isn’t afraid of an activist government. Unless social democracy provides an alternative to systemic neo-liberal failure, we will not recover the ground, either in Britain, in South Africa, or across the world. Remember that after World War II, UK national debt as a share of GDP was more than double what it is now. Yet, Britain, following the war, created a welfare state and achieved higher economic growth and prosperity to fund it than has been possible since. The choice for South Africa and elsewhere is not between a high performing economy and high public spending, but rather, both can be unlocked through a balanced, activist approach. “The role of the welfare state is to ensure that people don’t have to depend on the market for their survival” Dr David Masondo MP, South African Deputy Minister of Finance and Principal of the Oliver Tambo School of Leadership, South Africa The role of the welfare state is to ensure that people don’t have to depend on the market to survive. While they do need to participate in the market, their incomes should not determine whether they can participate. The question as to how South Africa has built a welfare state is an important one, ranging from the old-age pension to the disability grant and childcare support grant. Our unemployment rate, as Daryl mentioned, is close to 40%, which is around 11 million people. Since the arrival of Covid-19, government has been granting the poorest in South Africa US$23 per month as a way of providing them with some income, to allow them to participate in the market. In total, almost 28 million people in South Africa receive direct transfers from government. That is almost half of the population. And that excludes those who receive free education, housing, and other free items that are awarded in terms of means testing. Within this context, only seven million people in South Africa pay personal income tax. In terms of US dollars, that’s 400 billion – almost the same size as Denmark’s economy of US$356 billion, with a small population of almost six million. In South Africa, it is not that there is no will to spend, to increase the public expenditure, but rather, that there are very real fiscal constraints. South Africa has a public debt of R4 trillion – that is a lot of money that is owed to lenders. On the tax side, the economy has not been growing since the global economic crisis. For this year, 2022, it is projected that the economy is going to grow by 2.1% against the National Development Plan target of 5%. South Africa’s revenue is clearly limited and constrained. Addressing the problem raised by Peter Hain, it is not that South Africa has not been spending. In fact, the expenditure has been growing, but unfortunately, it has been growing targeting unproductive expenditure: bailing out state-owned entities. Since 2019 we have spent almost R293 billion on these entities, which is almost US$19 billion. And that has had an impact on other expenditure items in government. We are working very hard to reorganise our state-owned entities, to make sure that they don’t continue to be a fiscal burden on our finances. We agree that it’s important to grow the economy. One of the constraints for the growth of our economy, since the global economic crisis, has been on the supply side – the supply of electricity, energy, telecommunication, water and skills. In order to address these constraints, the government has embarked on a programme called Operation Vulindlela, which is aimed at providing reliable electricity, water and telecommunications. There are people who criticise government, saying that it is not focussing on the demand side of the economy. But this is not correct. One only needs to look at the huge amount of money that is paid to provide for the poor. Besides, one cannot realise demand, if one doesn’t deal with the supply side of the economic constraints. There could be demand globally, for many goods and services, yet these items need to be transported to global markets. Demand has recently improved thanks to the commodity boom. This, however, has been cyclical growth that cannot be depended upon. And it’s for this reason that it is important to have structural change, towards sustainable growth. Government is embarking on industrial policies towards reversing the de-industrialisation that has occurred since 1994. There are different master plans that have been put in place, to boost manufacturing capacity. These plans also take into account the climate, the environment, and re-industrialisation through the green economy. “The central challenge the welfare state faces is the inequality in the country” Dr Michael Dauderstädt, former Head of the International Policy Analysis Unit, Friedrich Ebert Stiftung South Africa should consider the experiences of other countries, such as Germany, in its discussions on a social welfare state. The history, institutional structure and financing of the German welfare state offers interesting lessons for South Africa. Created in the 19th century, under the Chancellor von Bismarck, the German welfare state is one of the oldest such structures in the world. It provides insurance for old age, sickness and accidents at work, and is financed through contributions from workers and employers. This structure has remained the same throughout the years, being a wage-based insurance-type welfare state at its core. But lately, major reforms have been brought about, including care insurance, reflecting an increasing number of old people needing care. The German welfare state has a progressive tax system, which means that people with higher earnings pay more. Germany has also more or less abolished the wealth tax it had until the 90s, where poor people do not pay any income tax at all. The whole system is now basically orientated towards protection of status, rather than redistribution from the rich to the poor. This means that if you are earning well during your working life, you will get a higher pension. Similarly, if you become unemployed, you will receive benefits at the level you were employed. Overall, the German welfare state has worked relatively well, reducing the inequality between the market distributions of income. The inequality of disposable income is much lower in Germany, than the market income inequality. The German system, therefore, provides a type of insurance against poverty and old age. There is de facto a minimum income for poor people. If someone is unemployed for a very long period, they receive – what the Americans call in the narrow sense – a welfare benefit. It’s the same if a person receives a pension which is too low, they will receive an additional topping up to have a minimum level of income. The German state, as a whole, spends about €1 500 billion, which is about 50% of German GDP. This goes towards all the different services, including education, health and social protection. Viewed over the long term, since German unification in 1991, it becomes clear that in absolute terms there has been a continuous increase. From this funding, the lion’s share goes to old age, family and disability. Unemployment is a relatively small share, due to German unemployment, fortunately, being relatively low over the last decade or so. As mentioned, the welfare state is financed by taxes and contributions from workers and employers. Almost 35% of the fund comes from gross wages. The Social Insurance Fund only takes a percentage of wages up to a certain income threshold, which is about €5 000-€6 000 per month. Mothers, for instance, get an additional pension for each child. There are also some other special features which are not reflected in the contributions, and therefore the state contributes tax money to the pension system. The central challenge the welfare state in South Africa faces is the inequality in the country, which in Germany is comparatively very low. But still, it’s substantial, and increased in the late 1990s and early 2000s. Although it has been relatively stable of late, Germany still has a significant number of poor people, with a poverty rate of between 15-20%. As a result of the Covid-19 pandemic, there has been an increase in unemployment and poverty. Germany is a society which is aging fast. While life expectancy is increasing, birth rates are more or less declining, or at least staying at a low level. In earlier times, 100 contributors to the social insurance system had to take care of about 50 pensioners. This will increase to 66 in the next ten years or so. And about 30 years ago, there were only 10 pensioners to be supported by 100 contributors. This is a major problem. So too, is the burden that migration and refugees are placing on the welfare system. “When looking at its vision, South Africa sets an example … The realisation of its vision, together with the realisation of the constitution itself are not static entities. They change and must be modernised” Prof Chris Mullard, former Professor of Education and Ethnic Studies at the University of Amsterdam and Visiting Professor at the University of London and at the Royal Agricultural University. Co-founder of Focus Consultancy, UK This contribution will take a critical look at which socio-economic and socio-political conditions are needed in a country to underpin the funding and sustainability of a welfare state. To these ends, there are four prerequisites that need to be addressed urgently if transformative change is to occur. First is the reassertion of an organic home-grown conceptualisation of a national vision. The world as a whole, not just South Africa and Africa, has lost its ability to conceptualise and pursue a vision. Second is the economic and material realisation of this vision. Third is the creation of a transformative and entrepreneurial state. And lastly, is the reinvigoration of collectively legitimated and community anchored leadership. When looking at its vision, South Africa sets an example. Its articulation of the rainbow nation was bound by a set of constitutional and democratic values. This realisation of its vision, together with the realisation of the Constitution itself are not static entities, rather, they change and must be modernised. Many politicians are saying much the same thing; therefore, these are not simply theoretical points. As societies change, constitutions and laws too must change, and must be articulated and reinforced in legislation. Judges must act on important matters, such as the question regarding land. Herein, all citizens play an equal part in the making of a society – a notion of collective action and responsibility that is the vision of President Ramaphosa. Vision, as can be seen here, is not a static set of principles or static set of values, but rather, an ongoing building set of ideas that are organically rooted. The second aspect is the economic and material challenge regarding inequality. Policy cannot simply be talk, it must be accompanied by actions that are orientated towards real change. The comment by Deputy Minister Masondo on the need to create a manufacturing base is an important one, as South Africa and other African societies have been losing theirs. Here, both neo-colonialism and the flight of capital have played a central role. These and other related issues need to be addressed in a more systematic way. For example, it is important to look at how wealth is being distributed within a society, to look at the bureaucracies that are stifling growth. It is important to assess the institutional representation that citizens really occupy and influence. What does true representation mean? It means the remodelling of the state to reflect citizens’ boundaries. Not the boundaries of the middle class or of the elite – black or white – but the values of the citizens, ordinary citizens. And their demands for employment, housing, education, opportunities, infrastructural improvements, and so on. Societies have shifted away from the values of citizens, the values of the communities, the values that informed the change to democratisation. In their place, Western values have been adopted. This is clear from the behaviour of leaders and administrators. Furthermore, the rights of citizens must be central in the transformative state: it is the citizen that counts, not the elite. It’s not just about parliament and the judiciary and so on, the state must be central to citizens’ lived reality. And not just at the national level, but also at the provincial, metropolitan and community levels. It calls for a reinvigoration, if you like, and a kind of dictatorship of the community. The collective awareness and the acceptance of vision and objectives is absolutely necessary, and in fact, community and social action is derived from this collective awareness. This is not a debate that must be held in Cape Town, or Westminster or Stockholm, for that matter, it must occur organically within the community. This remodelling would ultimately allow for collective government. Leadership, as the last point, is a precondition for change. Wartime cooperation is needed, as the world is now in a struggle for social freedom. Objective-driven leadership is needed for an economically inclusive society, which is currently lacking in the world. Leadership must be decisive, time-bound and monitored. And if necessary, punitive, even retributive on current and past corruption, on tax evasion, avoidance and non-compliance, and so forth. All these things must be part of that package called modern and entrepreneurial state leadership. Some might call this a form of benevolent dictatorship, but I would prefer to term it a collectively driven transformative leadership. For this leadership to flourish, it is necessary to come together and reengage with the very values, beliefs and ideas that created the original democracy here in South Africa. These four aspects are imperatives. Unless these are grasped as the real fundamentals, the state will remain unable to grow, leading to a situation where its people and communities are unable to grow. Where there is, in fact, only progressive freedom, which is not freedom at all, but a control of the people. People must be allowed to prosper in the interest of communities. “A welfare state, as can be seen from Germany’s long experience, needs time to organise” Mr Franz Knieps, member of the Board of the BKK Dachverband, Germany A successful welfare state requires appropriate and well-functioning institutions to deliver on constructive change. Such a system is not put together overnight, as can be seen from Germany’s long experience, it needs time to organise. The nucleus of such a system is social solidarity, which for Germany first started with the miners in the 12th century. The mining fund is now more than 750 years old; its long history holding many lessons on how to propel and adapt social security. Employers and administrators must work strategically. One needs both sides to form the Bismarck-type social insurance system. Bismarck did not simply want to improve social security, instead, he tried to defeat the unions and Social Democrats. Yet, in fact, his legislation was the most important contribution to involve workers. Their representation in legislation and administration was critical – not at the top level in parliament, but at the second level, in a system of self-administration. In recent years, social security has been a precondition for change. Not only for changing the consciousness of people, but also for changing working conditions and other things, towards growth. Without a system of social solidarity, there would not be the acceptance and willingness from the population. Of late, there has been a rapid change in the ideology regarding the system of social security. Up until the early years in our century, costs for social security were seen in a negative light. But now there’s a fundamental change, as costs are handled in the light of investment in health, comfortable aging, and so on. In Germany, the welfare state is fixed, but there are still debates about how it should be organised to ensure financial stability and sustainability. These debates are good; they guide the administration and institutions dealing with insurances and welfare to ensure that the best and most balanced scenario prevails. The most important questions revolve around how tax money is allocated to the pension funds and to the health insurance and long-term care insurance funds. The second big topic relates to how the state integrates care, especially long-term and chronic care. Germany is the world champion of acute care, but it’s a developing country when it comes to chronic care for the elderly and for people with disabilities. The new government is committed to modernising the structures in primary care centres, reducing the number of small hospitals and fostering digital transformation. In Germany, highly paid professionals have their own social security and pension systems, with many privileges. While Germany is a rich country, it still has inequalities and barriers to access. The government is always working to reduce these privileges, thereby ensuring greater equality. It may be a wealthy country that is able to afford an extensive welfare programme, however, it is Germany’s history and critical, discursive practice around social welfare that allows it to strategically address inequalities on an ongoing basis. “Social Democrats believe in the state. When people don’t trust the state, they don’t pay taxes and parallel societies develop. This leads to people turning to alternatives such as far right and populist movements” Mr Johan Hassel, International Secretary of the Swedish Social Democratic Party Three tasks need to be advanced in order to develop an inclusive and socially democratic welfare society: poverty must be eradicated, human capital must be developed, and appropriate institutions must be put in place to distribute and redistribute public goods. At the core of the first task – the effort to curb poverty – is the question of employment. In Sweden, the goal of full employment has been the guideline of the Social Democratic Party since the 1950s. Through the emphasis on improving the lives of all, Sweden has been able to fundamentally increase its wealth over the last century. Today, there are new social risks, new structures in the economy. The first job of the welfare state is to establish the contract between the state and its citizens. Secondly, there should be equity in financial terms. Everybody should get a fair chance of a pension, which is exactly what states with social welfare systems such as Germany and Sweden have done, bringing about systems that are both inclusive and universal. Those who have worked for a longer time, should have a larger pension. This gives recognition to the elders in society. The third institution is housing. In many countries, as it is in Sweden, this is a question for the market economy. For Social Democrats, housing is a fundamental social right, especially for those in the lower class. In Sweden, housing is again one of the most dominant political issues. It is driving segregation, and it is driving the split in society, between different people. Indeed, the inequality seen in housing is one of the main reasons for the split in Western societies today. Social Democrats have neglected this issue and have neglected the role of communities. Housing is essential for keeping the society together and for eliminating poverty. The fourth is the cost of living, and finally, there is healthcare. Good healthcare should be made available for everybody. These are the five main areas which are crucial for a state to erase poverty and to build trust between citizens and the state. These issues have been neglected and are now some of the main reasons for the drive towards the right in Europe and the United States. The second task in developing an inclusive and socially democratic welfare society is to increase human capital. Education at all levels, but especially pre-education, for example kindergartens, is essential. Societies must invest in early childhood education, something that has been neglected in Sweden since the society turned towards privatisation. Vocational and appropriate adult training is also very important, as when the economy and industry changes, people must constantly upgrade their skills. Currently, the transformation of energy and industry is driving the need for digital skills. To ensure these skills, investment in human capital is central. The state must play a proactive role in investing in the economy of tomorrow in order to erase poverty – the state must invest in human skills. Furthermore, the state must be as fair on taxes as it must be hard on corruption. If corruption maintains a foothold in society, in institutions, then people will not trust the state and it will pose an existential threat to the ideas of social democracy and solidarity. The reality of tax havens and tax fraud has led to significant distrust in societies, to the shrinking of the tax basis. If this can be reversed, then all states, in principle, will have the resources needed to set their societies on a better course. However, none of this can happen without collaboration between states and societies. Social Democrats believe in the state. When people don’t trust the state, they don’t pay taxes and parallel societies develop, which leads to people turning to alternatives such as far right and populist movements. “When one wants to address inequality in society, one has to tackle unemployment. This is the primary cause of inequality” Dr Martin Davies, Managing Director of Emerging Markets in Africa, Dean of the Deloitte Leadership Academy and Chief Economist at Deloitte Before any discussion can take place on the nature or extent of a social welfare state in South Africa, it must be asked: what are the central provisions needed for such a system? Here the answer is clear, South Africa first needs to create the fiscal space. South Africa urgently needs structural changes, with inequality being the burning issue of the time. The World Bank has recently allocated South Africa the highest Gini coefficient in the world. This level of inequality is politically, economically, socially, and morally unacceptable. It is truly a burning issue in South Africa. With structural dependence on the export of commodities, one often sees that inequality is baked in. Herein there is no trickle-down effect, instead, the rents from the trickle down are extracted or captured by political leaders. This is a standard model, unless you are Norwegian, or perhaps Canadian. Since 1994, the de-industrialisation of the economy has seen haemorrhaging of jobs. Perhaps the only successful proactive industrial strategy we’ve had in this country is in the automotive industry. There may have been some green shoots in other sectors, such as the textile garment sector, in the last year or two, but that is as a result of a unique set of circumstances coming together. Supply chain disruptions and Chinese inflation in labour costs has perhaps been more supportive of the domestic industrial agenda around textile garments, than proactive policies of government. Manufacturing is so important to cancel out inequality. Manufacturing creates certain incomes, unlike typical agricultural jobs where income is not as predictable. It creates a so-called structural employment. Also, manufacturing embeds knowledge and diffuses knowledge into the economy and creates skills, residual skills. And there’s no sector like manufacturing that also encourages and spurs the growth of the services sector, which arises on the back of manufacturing. To be where South Africa is, on the downward slope of deindustrialisation, is a very precarious position to be in. In the era of digital, or the so-called Fourth Industrial Revolution, capital is not interested in labour-intensive models, particularly in economies where one has restrictive labour legislation. And that’s the challenge that South Africa faces. Many speakers have touched on the inability of the state to provide public goods and services to a wider population. This failure is a major contributor to inequality. Indeed, the failure to provide basic goods and services is a major contributor to inequality in any society. An interesting exercise undertaken by FirstRand, and reported in its Annual Report, asked what the major contributor is to South Africa’s unacceptable Gini coefficient. According to the report, the answer is structural unemployment. FirstRand did an intriguing assessment: it looked at the Gini coefficient of the staff of FirstRand Group. In 2014, FirstRand had the same Gini coefficient as the United States. They also assessed a listed mining company in South Africa. Again, contrary to news reports, in terms of income disparities between high earners and relatively lesser earners, the mining company had a score equivalent to that of New Zealand. From this, it is clear that the inequality in South Africa is due to structural unemployment and not pay differentials between senior management and so-called blue-collar workers. This is not a politically popular statement to make, but it’s an economic fact. When one wants to address inequality in society, one has to tackle unemployment, the primary cause of inequality. By creating permanent jobs, a society moves from structural unemployment to giving people the opportunity to create well paid jobs and add value to their lives. How this is done is the ultimate question that South Africa faces. First, there is a need to shift to an economy that looks more towards manufacturing and services. The competition is becoming far greater. However, because of the invasion of Ukraine and the Covid-19 pandemic, there is an ongoing move towards the fragmentation of the global supply chain. In terms of the invasion of Ukraine, there has been an increase in the balkanisation of the global economy. This may create renewed opportunity for peripheral economies, such as South Africa’s, to be more involved in local value chain development and manufacturing. Furthermore, it is clear that competition drives efficiency and results in gains in productivity in the economy. This is as true for companies as it is for countries. Competition drives efficiency, and therefore should not be hindered in any way. Big, enabling capital should not be limited from investing in big, enabling economic infrastructure. In South Africa, there is an inability to remove red tape and bureaucracy. This is a big disruption to the rise of small business and the opportunities for aspiring entrepreneurs. It disrupts the creation of a workforce with the skills that the economy needs. Lastly, there is the matter of policy certainty. South Africa will not be able to attract capital if it does not have policy certainty. Recently there has been good rapport built between business and government; the conversations have been world class. But the same is needed in terms of policy certainty from the political power establishment, regardless of what side of parliament they sit on. Capital needs clarity. In conclusion, to solve societal problems, the GDP must rise. Inclusive growth ultimately comes from high GDP growth over a generation or two. In 2008, South Africa was growing at 5.5%. This occurred with the fiscally conservative policy of GEAR, which has received a lot of political criticism over the years. Had South Africa maintained this growth rate, this conversation would have been a very different one. If only government could have retained the correct policies, and above all, practical and good implementation of those policies. There’s no reason why South Africa cannot get back to a 5%-plus growth in the current global economy. “The task of opposing fiscal neo-liberalism and advancing democracy is the task of everyone the world over” Maria do Rosário, MP Workers Party, Chamber of Deputies, Brazil Under President Bolsonaro, Brazilian democracy has undergone a tumultuous and destructive few years. The social democratic policies that former presidents Dilma Rousseff and Lula da Silva implemented have systematically been eroded. Instead of their pro-poor agenda, Bolsonaro has undone social interventionist policies. He has allowed the rich to attain a disproportionate amount of the nation’s wealth. His policies have furthermore wreaked havoc on the environment, the Amazon particularly, and have neglected public infrastructure, rebuffing social investment commitments. With former President Lula da Silva eligible for election this year, there is hope that social democratic policies will return. Lula is polling strongly and has massive support from those who know his leadership, as well those who see Bolsonaro as being centrally responsible for the recent decay. There is now a good chance that the democratic gains that have been lost under Bolsonaro can be regained. These gains have essentially to do with the people-centred policies of social democracy. Under Lula, social rights and support was bolstered and many people – especially the indigenous and lower classes – were allowed to improve their living standards. While Lula is the champion of the people, it is more about these gains of democracy that need to be championed. Brazilian people and those around the world must rally behind movements that are people centred, while anybody who actively works against the will and prosperity of the people must be confronted in the name of democracy. Everyone the world over must advocate for democracy and unity. This must take place in a substantive manner, relating to a broad range of issues. This is essential for the world to experience true democracy. This, the task of opposing fiscal neo-liberalism and advancing democracy, is the task of everyone everywhere on Earth. Thus far, there are some victories. Chile and Argentina are two examples where the tide has turned towards social democracy. Brazil must now do the same. Brazil will have a general election in October, which will have a real effect on the global movement towards social democracy. These last few years in Brazil have been an awakening for the Labour Party. Now it is again gaining traction, with democracy being built in a much stronger fashion. In 2016, Brazil underwent a rupture when President Bolsonaro was elected. The crumbling of institutions has been ongoing and Brazilian democracy has been negatively affected. With the effects of Covid-19 and with record unemployment, Brazil is in an untenable situation. Healthcare for all people has declined, and yet the government has executed policies to reduce the resources for health, social welfare and employment, which has directly affected the indigenous and poor people of Brazil the most. These developments are the responsibility of the right-wing government in power – a government whose policies undermine social cohesion. Brazil is a country undergoing a dictatorship, even if this is not known by the population. Crimes are not taken to court, military control has again grown out of control, and human rights are neglected. What is happening in Brazil is very dangerous. Power is radicalised, and there is an ongoing destruction of the public sector. Brazilians should be very concerned about the independence of the election process. Today, former President Lula is on track to regain power and turn the tide back to social democracy. A new Lula government will create a very strong front of support for democracy in Brazil – a front that will advance democratic debate through ideas and concepts. Under Bolsonaro, democracy has been affected in a very negative way. Today, Brazilians feel that the interests of the people in power are different from those in society, which has a direct impact on the rights of the people, especially indigenous people. The Brazilian democratic front will advance fundamental human rights in the manner that President Lula and Dilma did when they were in power. “Social democracy is a political movement that originally was a protest movement against capitalism” Mr Mariana Schuster, Editor, Nueva Sociedad, Argentina This contribution will address some issues with and the differences between welfare and social democracy. Social democracy is a political movement and popular culture that was originally a protest movement against capitalism. It advocated for socialism and has transformed to become a very powerful movement towards reforms within capitalism. This is best seen in the development of Europe, but in South America it has also been successful, albeit in ways that differ from Europe. Social democracy left the transformation of socialism centred on reforms within. This transformation, according to the classic literature, led to the development of the welfare state. This system is different from the Bismarck Model. Even if the concept or understanding of social democracy was not evident at the formation of the welfare state, its meaning was baked in. However, social democracy and the welfare state are not the same. In Europe, at least in Western Europe, the welfare states were the product of a social political action, whereas outside Western Europe, one finds something completely different. In Latin America, social democracy as a force was developed in Chile, Uruguay and Argentina at the beginning of the 20th Century. The welfare state became stabilised during the 1940s and 1950s. In Argentina, under Juan Domingo Perón, social democracy was a force towards providing security to workers. This movement was not about socialism, but about social democracy as a populist force. Across South America, classic welfare states did not arise as a social democratic force until the 1980s, and welfare was advanced through the labour parties as the forces of the left nationalism, of revolutionary nationalism. Over the last 30 years, South America has seen the development of the left wing, similar to what Europe is working on today. In South America, what can be considered as welfare politics has been pushed by Social Democrats; the continent has its own social democratic forces that have been working in different ways to those of their European partners. In South America the welfare state is still being built up. Until now, the Social Democrats have been trying to destroy the structures of the right, but they have not had the outright success that their European compatriots have had over the last 50-60 years. The challenge of the developing world is not only to install and constantly improve upon policies, but also upon deep transformation of the state, which allows for changes that are more durable and sustainable. While there are many lessons to be learnt from European countries, there are also many classic examples of other countries, especially in the Americas, that offer clear and experienced templates to follow for those in the developing world. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

27 May, 2022: A large cohort of civil society organisations held a roundtable discussion to deliberate and decide on a collective approach to the Electoral Amendment Bill currently before Parliament. This gathering took place just two weeks ahead of the 11 June 2022 deadline set by the Constitutional Court for Parliament to change the country’s electoral laws to be in line with the Constitution. Following the New Nation Movement judgment of June 2020, Parliament was ordered to change our unconstitutional electoral laws to allow for South Africans – who are not members of any political party – to run for public office and serve their country. OSA, OUTA, CASAC, Democracy Works, the Independent Candidate Association, the Inclusive Society Institute, the FW De Klerk Foundation, Africa School of Governance, Raising Righteous Rulers, Citizens Parliament, the Helen Suzman Foundation, Devoted Citizen and My Vote Counts agreed on several matters. Firstly, that Parliament has not met its obligations as set out by the Constitutional Court. All parties agree that the proposed Bill in its current form is unconstitutional as it stands. They agreed that a full overhaul of the electoral system with a constituency-based system at its core is what Parliament is required to undertake and not the light touch approach to amending the Electoral Act that it has adopted. There was also unanimous agreement that the next elections in 2024 must be conducted under a new electoral system – there can be no delay, postponement or an election conducted under unconstitutional legislation. In this regard, concern was expressed by all the organisations about the lack of meaningful public participation that Parliament created in its hurried process to produce the Bill. Some organisations are exploring their legal options regarding the processing of the current Bill. The parties agreed on a set of negotiables and a set of non-negotiables. These are: Non-negotiables Constituency based system within an overall proportional system (Regions can be redefined easily without new demarcation process, or use existing municipal districts) There should be a mechanism to enable independent candidates to participate in the compensatory votes – i.e., all 400 seats in the National Assembly Vacancy of seats must be resolved Barriers to entry need to be fair, reasonable, and equitable (particularly the financial requirements) Votes threshold for constituency and PR seats must be reasonable and equitable (irrespective of the split of constituency vs PR seats) Negotiables How seats are to be divided nationally and regionally in National Assembly Single ballot vs Two ballots Open vs Closed party list system Fundamentally, the civil society organisations are concerned with ensuring a constitutionally compliant electoral process that upholds the sanctity of the ballot box and honours the dignity, worth and equality of each individual voter. To this end they agreed to work collectively in looking to galvanise all South Africans towards electoral change that will leave a legacy for generations to come.

The CEO of the Inclusive Society Institute (ISI) has returned from an outreach visit to the United Kingdom where he met with likeminded organisations with a view to solicit cooperation and collaboration. During the visit and with a view to further developing the ISI’s liberation archival portal, he met with, amongst others, Action Southern Africa (formerly the Anti-Apartheid Movement) and the Weston Library at Oxford University. He also met with the School for Oriental and African Studies (SOAS), London University, in search of research and dialogue collaboration, as well as with, for purposes of furthering the ISI’s efforts to promote international cooperation between likeminded social democratic parties and organisations, representatives of the Labour Party, including the Rt Hon Emily Thornberry MP, Shadow Attorney General and Joe Correy-Roake, Senior International and Devolved Nations’ Policy Advisor. He also met with the Westminster Foundation for Democarcy. During the visit the CEO also paid a visit to the Black Cultural Archives, and attended the opening of the new Africa Centre, as well as the Evensong Celebrating the life and work of Archbishop Desmond Tutu, which was held at Westminster Abbey. The ISI and Liliesleaf Trust UK also concluded their discussions with regard to the entering into of a Memorandum of Agreement between themselves with regard to joint work related to the Centre for Memory and Learning, which project aims to draw lessons on promoting inclusive societies from the South African liberation struggle.

Occasional Paper 5/2022 Copyright © 2022 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. JUNE 2022 by Dr Klaus Kotzé BA Social Dynamics, BSocSci Honours Political Communication, Master in Global Studies, PhD Rhetoric Studies Introduction This paper discusses the meaning and significance of social cohesion in South African democracy. Social cohesion, vis-à-vis the social division or exclusion that formed the basis of historical South Africa, is foundational to South Africa’s constitutional project. It presents a national standard; a useful lens through which to analyse national progress and the achievement of the national ends. With South Africa’s persistence as being one of the world’s most unequal countries[1], social cohesion as a concept can become trite. Instead, it deserves candid examination. This paper will briefly probe and explain how social cohesion forms part of the constitutional project, before looking at factors that are impeding it. This work then draws on existing investigations undertaken by the Inclusive Society Institute (the Institute)[2], with the purpose of assessing and advancing social justice and cohesion. Instead of discarding it as a quasi-conceptual or unproductive term, it is the belief of the Institute, that social cohesion holds an important place in national transformation. A critical approach is required to ensure that it evolves as a term of transformative consequence. Social cohesion: Setting the scene Conceptual social cohesion differs from place to place. Whereas other countries see social cohesion reactively as an adaptation to increasing multi-culturalism, in South Africa the concept occupies a strategic quality. Here, it should not be assessed simply as a response to fears of xenophobia or social dominance. Instead, the advance of social cohesion and nation-building lie at the heart of the post-apartheid South African project. It has deeply contextual significance. It is shaped by history. Whereas distinction and discrimination were the modalities of governance under colonialism and apartheid, the transformation towards a cohesive and just society has been the overarching national strategy since the accord between political opponents gave rise to the democratic and constitutional order. Driving unity in diversity, advancing a single, legitimate national society from where before there was a divided, illegitimate pseudo nation, is the central strategic function in South Africa. The drive towards social cohesion, therefore, forms the basis for overcoming a past where people were divided, excluded primarily on their race, but also on their religion, gender and other social features. Social cohesion is a term with both descriptive and prescriptive meaning. It is understood as “the ongoing process of developing a community of shared values, shared challenges and equal opportunity … based on a sense of hope, trust, and reciprocity”[3]. A socially cohesive society is one where there is an absence of conflict based on race, gender, ethnicity and other social markers. It is one where there is no great discrepancy based on wealth or access to education, health and other services. Instead, there are social bonds that create the experience of a shared reality. A society where people “feel a sense of belonging, that they perceive the whole society as greater than the parts, and when differences develop, they can be dealt with peacefully”[4]. The emphasis on “shared” suggests that such a society must take a singular form; either becoming united or advancing an existing social unison. Social cohesion is therefore a prescriptive term that achieves its end by promoting values and policies that reduce difference. According to the OECD, a cohesive society is one that advances the well-being of everyone in society, “fights (all forms) of exclusion and marginalisation, creates a sense of belonging, promotes trust, and offers its people the opportunity of upward mobility”[5]. From the previous research conducted by the Institute, we see that there are several determinants that drive or obstruct social cohesion. These determinants include racial diversity, economic inequality and historical events[6]. In all of the above, there are clear divisions whereby trust, identity and social cohesion are determined. The group subjugated to the conditions or policies listed above, are either locked out or experience long-term negative impacts. This results in a rejection of the existing social values and institutions. They experience social conditions as benefiting others, not them. Or they simply reject social cohesion as assisting in the pursuit of their needs. This rejection can take the form of protests among populist formulations. We return to this later. The South African story Historically, South Africa’s social organisation is marked by division. Before social cohesion could be pursued, the socio-political structure had to be fundamentally changed. Installing non-racial democracy in 1994 conjured the proverbial rainbow nation. The concept of the rainbow nation has recently received considerable rebuke. Its use, as an appeal, is however misplaced. The rainbow nation, or the rainbow people of God, as introduced by Desmond Tutu, did not suggest socio-economic equality between different groups, therefore that transformation had been achieved. Instead, by installing a social arrangement where for the first time all people were politically and legally equal, it allowed for the potential to transform. Social cohesion was central to enabling transformation. The ending of apartheid did not summarily achieve social cohesion. Instead, equal rights, for the first time, created a shared reality whereby everybody would not only be enfranchised, but also tasked with the role of continuously overcoming the various divisions of the past. The Constitution, as the foundational text of the emergent South Africa, serves as the guide, as well as the infrastructure, towards the transformed society. It does so through its programme of aspirational norms and principles. In its preamble and with its first words, ‘We, the people of South Africa,’ the Constitution both presents the foundational argument towards building something new and surmounts the divided past by establishing a singular ‘We’ that comprises all peoples. The past as well as the future not only belongs to but is also established by all people in their collective ways. The Constitution provides a normative as well as structural guide for this social development. It is the bedrock for transformation. A technology of and towards social cohesion. The Constitution deftly delegitimises any path for social discord based on racial or other divisions. By rejecting the means and ways that measure and partition according to difference, something new is built. The Constitution calls on all South Africans to “heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights”[7]. In addition to establishing unison between all people, the phrases of the preamble also instruct all of those who comprise the ‘We’, to “recognise the injustices of our past … believe that South Africa belongs to all who live in it, united in our diversity”[8]. Social cohesion – and by extension, social justice – is set up to be achieved through an active rejection of the former national strategy. According to Former Chief Justice Pius Langa, the Constitution presents “a space between an unstable past and an uncertain future”[9]. It is thus a technology that connects and coheres a society which before was forced apart. This technology is referred to in the Interim Constitution of 1993 as a bridge: “This Constitution provides a historic bridge between the past of a deeply divided society characterised by strife, conflict, untold suffering and injustice, and a future founded on the recognition of human rights, democracy and peaceful coexistence and development opportunities for all South Africans”[10]. The Constitution plays an important role in formalising much of the myth upon which South Africa is founded – including the myth that South Africa is somehow special, a democratic miracle, where the indignity of apartheid was replaced by a rainbow nation. The bridge functions as a system of meaning making. It does not coldly separate from the past, thereby denying or forgetting, but instead, it maintains the past as reference, connecting it with the future. In doing so, it establishes a singular normative pathway that binds everyone in society. All people must cross the same bridge, must take ownership of and pride in the national symbols, the national myths and the national heroes. Enacting the vision of a singular nation, and thereby arriving in a shared future. Social cohesion as the method to transcend divisions has a deeply political grounding in South Africa. It is useful to note that the apartheid government tried for some time to maintain power under the promise of reform. It sought, through various political manoeuvres, to legitimate its maintenance of power in a new, reformed political reality. Its plan required “a (conservative) black middle class that could be co-opted into ‘managing’ urban black townships within the envisaged consociational model”[11]. This co-option of a credible, yet pliant black leadership, as embodied in the titular representation of coloureds and Indians in the Tricameral Parliament, alongside black leaders in homelands, was a tactic that recognised the power and importance of cohesion or acceptance between different social groupings. A tactic to maintain legitimacy. “While government motioned to legitimate representation, achieving a new political normalcy was prevented by its own mechanisms, which denied authoritative black input and therefore real negotiation”[12]. The governing party failed to persuade that it could reform into one, a system it essentially held apart. Its approach of division fundamentally rebuffed real social cohesion, thereby leading to its fundamental delegitimation. It was only when the National Party’s strategy fundamentally changed, when instead it sought to advance the effective participation of all in a singular political regime, that the political settlement became conceivable. At the time of the political negotiations, the political basis was racial division. The significant pressure from both white conservative and radical black groupings sought to maintain this order. Neither of these groupings advanced a shared national project. It was, therefore, on the grounds of accepting a shared future, in a single country (as motioned in the future Constitution), that the opposing political forces of the erstwhile government and the liberation movement led by the African National Congress coalesced and agreed on a political settlement. The pursuit of a single, coherent nation became the measure on which South African political legitimacy would be based. Under the brokered political settlement, the party controlling the political arena would be the vanguard not only of a specific group, but of all people. Central to sustained legitimacy would be their commitment to social cohesion. This pursuit embodies government’s fulfilment of the social contract. Under the Constitution, the government is tasked with formulating and implementing policies that transform South Africa towards marked equality. At the turn to democracy, social cohesion lay at the heart of political decision-making – appeasing different social groups and bringing all into the Constitutional ‘We,’ so as to maintain order and political legitimacy. The Truth and Reconciliation Commission (TRC) presented the foremost programme of transitioning from the past. Through legislation, confessing perpetrators of the apartheid regime were afforded clemency and crossed the proverbial bridge. The TRC, together with various government programmes, such as the National Development Plan 2030 (NDP) and the Social Cohesion Framework, all rely on citizens to enact the transformed nation. The approach of government is clear: it proposes the plans, it details what social cohesion and nation-building means[13], while the act of cohering resides with the populace. The rhetoric around the social compact, the citizenry’s activation of social cohesion, has returned to the spotlight under the Ramaphosa administration. The current South African president is perhaps the loudest proponent of a renewed and emboldened social compact[14]. Encouraging public participation in enacting the constitutional vision is central to his strategy, which he has said is the same strategy as President Mandela. Under Mandela, as is the case under Ramaphosa, the governing party “frames the measurement of social cohesion as the demonstration or enactment of a unitary South African identity, the persistent move to instantiate the centrality of liberation heroes and the liberation movement through place renaming, for example, appears rational and even necessary”[15]. The command of this strategic narrative has narrowed to be one overly associated with ANC as political party and its leaders. Instead of having direct bearings on the lives of people, social cohesion has arguably become a rehashed buzzword. According to Abrahams, the academic and commentator Raymond Suttner has suggested that the “social cohesion framework can be seen as an extension of the completed yet rehearsed narrative of liberation. Seen in this way, Suttner suggests that social cohesion continues the historic mission of the liberation movement in South Africa, causing the political party – the ANC – to become the vanguard of ‘nation’”[16]. The control or dominance of the South African project as exhibited by the governing party’s ideology propounds that the citizenry adopts the same liberationist position that it does. The ANC so construed dominates the national vision, it “does not envisage much space for independent identities”[17]. There are many contradictions in the ANC today. The tension between dominating the national vision and seeking citizen command is one such contradiction. The pursuit of the Ramaphosa administration, to attain endorsement from the country’s people, suggests that the tensions in the ANC and the weaknesses of the state are too great. While the Ramaphosa administration seeks broad contribution to building the state, another part of the ANC pursues total control in line with the party’s belief that it is the vanguard of the (ongoing) liberation. This approach, while purporting to champion the constitutional prerogative of social cohesion, does so in a manner which measures transformational progress according to strictly ideological terms. This pursuit of representation according to quantity and not quality, often appeases ideology while not having a direct bearing on national transformation in terms of social justice. According to Abrahams, concepts such as nation-building have been more about the pageantry of governmental power than the empowerment of people. Instead of a truly transformative social agenda, South African social cohesion has been rather superficial. “Social cohesion as a concept needs to be redeemed from the tropes of nation-building; the wider value of the concept is at stake, as is the actual practice of a truly socially cohesive country by all members of society, all political parties and all ideologues”[18]. The NDP clearly states that “social cohesion needs to anchor the strategy. If South Africa registers progress in deracialising ownership and control of the economy without reducing poverty and inequality, transformation will be superficial. Similarly, if poverty and inequality are reduced without demonstrably changed ownership patterns, the country’s progress will be turbulent and tenuous”[19]. Accordingly, social cohesion is equivocal to the realisation of socio-economic transformation. “Unless there is real material transformation in the lives of those who have been apartheid’s victims,” warned Desmond Tutu, “we might just as well kiss reconciliation goodbye. It just won’t happen without some reparation”[20]. Rejections of social cohesion From what has been discussed here, there is clearly a tension between the power, ideological and tactical purposes of social cohesion in South Africa. Furthermore, the concept, and the aspiration towards it, has been damaged by what is seen as the pageantry of nation-building and its failure to correspond to material concerns. People do not actively cohere with others when others benefit without them or benefit at their expense. In South Africa, the rejection of social cohesion as foremost strategy has taken several pathways. One such pathway is broadly considered as xenophobic nationalism. This has various components; its rejection of social cohesion has historical, political and economic foundations. The following description is brief and by no means comprehensive. In South Africa, xenophobic nationalism sees locals taking their socio-economic grievances out on migrants from other African countries. Africans who reside in or operate businesses in proximity to South Africans have been targeted. Whereas black South Africans traditionally have a deep history of solidarity with and appreciation for the role that Africa played in South Africa’s liberation, it is this group that has become most vocal and violent towards migrants. There have been various waves of xenophobic attacks, with the most lethal taking place in 2008 when 62 people lost their lives[21]. These xenophobic attacks have been suggested to be caused by people taking violent action to protect their interests. Suggested reasons why African migrants are the victims include their cultural difference to the in-group where they live. They are seen as taking lower paid jobs and are accused of criminal activities, including the drug trade. But the central reason for xenophobic nationalism is poverty[22]. The people undertaking xenophobic attacks are seen as turning to these actions out of desperation. Instead of seeing the desperation of their victims, they blame them of illicit undertakings or for simply being in South Africa illegally[23]. Their antagonism to coherence is based on their own poverty; their dissatisfaction of their socio-economic reality is passed down the line and onto another victim. The recent rise of the Operation Dudula movement and the anti-constitutionalist Radical Economic Transformation (RET) segment aligned to the governing party are illustrations of an evolving socio-political situation in South Africa. Operation Dudula is a South African nationalist movement that undertakes protest and active citizenry measures against illegal foreign nationals and their perceived illicit behaviour. The movement has been accused of vigilantism, whereas they say that they are taking action where government has failed. Their rise stems from unaddressed frustration and worsening conditions. The movement introduces a new dynamic to modern South Africa, one where fringe groups do not wait for the political establishment to lead but does so themselves. Theirs is not first an unwillingness to adopt social cohesion, but a re-articulation of its meaning. Not a denial of the social contract but giving up on the previous order, so as to establish something new. As there are various factors playing into this re-articulation of the social contract, it is still too early to see what kind of role it will have on the broader political establishment. In a related but different development, there has been an increasing movement from within the political establishment, and particularly the ANC, to reject the political settlement of the early 1990s in favour of radical economic transformation. The strategy of this grouping is to realign the governing party to more aggressive redistribution and away from norms and values that underpin cohesion. The radical revolutionary approach sees the constitutional order more as an obstacle than a conduit towards equality. According to some reports, this grouping has turned away from its earlier strategy of blaming white people[24] for the poverty and inequality in South Africa. With slogans such as “put South Africa first” channelling Trumpist ethno-nationalism, there has been a shift towards attributing responsibility for the nation’s ills to African migrants. The overarching motive here is not only to find a scapegoat, but to denounce social cohesion as the foundation to the national project. It seeks to dislocate equality and a rights-based order, subjugating social ends to the deeply material ends of the National Democratic Revolution (NDR) grand strategy. The NDR seeks to bring about a national democratic society characterised by: “the resolution of antagonistic contradictions between the oppressed majority and their oppressors; as well as the resolution of the national grievance arising from the colonial relations”[25]. The advance of these economic resolutions does not require social cohesion, nor do these resolutions have to abide by legal or normative prescriptions. The populist claim of these revolutionaries, of which former President Jacob Zuma and his coterie are central, suggests that the “constitutional order is ineffective in achieving the revolutionary ends of the liberation movement … To Zuma, the constitutional state was always a means towards the ends of the revolution. Unconstrained political power, where the ends justify the means, is therefore the superior and legitimate approach”[26]. Those advancing this view have increasingly sought to equate the democratic state to the unjust, illegitimate apartheid state – seeking to break down its foundational legitimacy and subvert order to disorder. The looting and destruction that took place a few days after Zuma’s incarceration, in July 2021, exemplifies the subversion of the constitutional order to the materialist ends of the NDR. The populism manifested here was calculated. Looters did not have to be Zuma acolytes to act as foot soldiers of this strategy. Looters became agents of sedition, subverting the ends of the state to that of the revolution. “Amid the destructive plunder, where lives were lost and infrastructure and property were decimated, thousands of poor people returned home with items they would otherwise not ordinarily have had access to. It was under these conditions, the juncture between order and disorder, that thousands of South Africans gained materially and saw the ends of the political power of radical economic transformation”[27]. Measuring social cohesion in South Africa: Some findings The grievances detailed above are substantial. While these grievances take different forms and perform different motives, the mission of social cohesion remains central to the national strategic interest. To get a more detailed and more nuanced understanding of the broad nature and impact of social cohesion in South Africa, it is important to undertake analyses among diverse groups. Since social cohesion is an active exercise involving the building of shared values or shared enterprise, one can get a better idea by measuring these relationships between peoples. The following section draws from the ongoing research undertaken by the Institute. First, social cohesion is here understood as “the notion that relationships among members and groups in society are sufficiently good and that all feel a sense of belonging, that they perceive the whole society as greater than the parts, and when differences develop, they can be dealt with peacefully”[28]. The Institute has identified certain dimensions and factors that are central to its research on the field. The key dimensions regarding social cohesion, as first defined by Langer et al.[29] in their Social Cohesion Index, include inequality, trust and identity. Inequality refers to the extent of perceived inequalities within and across groups, which can manifest itself in various forms, such as economic, social, political, or cultural disparities. Social cohesion is threatened when there are high levels of inequalities within a society because it erodes the relationships within that society, which, in turn, may cause conflict. One often-used reference to inequality is the Gini coefficient, which measures national inequality. According to the World Bank, South Africa ranks as the most unequal country in the world. Trust is the ‘glue’ that holds societies together. When trust is missing between members of society, it weakens the ability of individuals and groups to cooperate peacefully and to collaborate in order to achieve inclusive economic growth. Mistrust towards state institutions may, for example, fuel violent protests, and similarly, mistrust between individuals and/or groups may cause aggressive behaviour towards each other. South Africans have relatively low trust in the state. Identity relates to whether people have a stronger adherence to their national identity vis-à-vis their group or ethnic identity. This is particularly applicable in multi-ethnic communities, more so in countries with a colonial history, such as South Africa. Its fractured history has made the forging of a united, common identity a difficult task. Some of the Institute’s findings on social cohesion in South Africa include[30]: South Africans remain committed to social cohesion as encapsulated in the national motto, ‘Unity in Diversity’. But nearly half of the South African population doubts whether the different groups in South Africa would be able to form a single nation. Instead, they believe that they can unite, live and work together, as fellow South Africans. 47,96 percent (nearly half) of South Africans either agreed or strongly agreed with the notion that it is not possible to form one nation out of all the different groups in the country. This finding held true across all race groups, with whites being slightly more inclined to believe it possible, and coloured people being the most doubtful. 42,7 percent of white South Africans thought is not possible to form one nation, whilst 47,45 percent of black South Africans, 54,55 percent of Indians and 55,77 percent of coloured South Africans also thought so. There was little differentiation between age and gender groupings. It is encouraging that most South Africans agree that there is reason and need to unite as a nation. Most were of the opinion that it was important for all South Africans to unite. 70,53 percent of South Africans either agreed or strongly agreed with this notion, whilst only 13,15 percent either disagreed or strongly disagreed. 2,75 percent did not know. More people agree than disagree that reconciliation is moving in the right direction. 44,97 percent of South Africans agree or strongly agree that it is moving in the right direction, as opposed to 27,54 percent who disagree or strongly disagree. 21,27 percent neither agreed nor disagreed, and 6,22 percent did not know how they felt about it. A significant degree of racial integration exists in everyday life. The survey suggests that there is a relatively high level of integration between the various race groups in the country when it comes to everyday life activities. Moreover, the integration appears to not be forced integration, but rather of a voluntary nature, where there was a high level of enjoyment flowing from such integration and friendships being formed. The statistics indicate that the black community is slightly lagging in terms of integration. This should be understood within the socio-economic context of South Africa, where the majority of the poor and jobless are black and, thus, not within the workplace or able to participate in extra-mural social activities to the same extent as the employed and socially mobile. What the statistics do tell us, is that the majority of South Africans have commenced the journey towards reconciliation, nation-building and social cohesion. Though it may be declining, racial bias is still prevalent in society. Nearly a third (33,44%) of adult South Africans still do not like associating themselves with people from other population groups. This would suggest that the country has still some way to go before it can consider itself to be fully reconciled. Racial political narrative differs from reality. There is a disconnect between the general negative political racial narrative which drives division, and the realities of everyday South Africans going about their daily business. While many in the political establishment seem to be fuelling division, citizens, in turn, are finding each other at the human level. The trust needed to underpin social cohesion is largely absent in South Africa. While they have high levels of trust in their families and neighbouring communities, South Africans do not sufficiently trust their compatriots from outside their lived environment. The lack of trust runs across most dimensions, be it race, gender, age, education, or income. South Africans do not trust at first sight. Across the board, there exists distrust between races. Instead, trust only develops after relationships are built. The more people integrate, the more trust will develop. In general, South Africans do not trust people from Africa or other overseas countries. This is particularly important in relation to xenophobia in the country. The lack of trust runs across most dimensions, be it race, gender, age, education, income, or political party. Overall, only 31,23 percent of South Africans said they completely trusted or somewhat trusted immigrants from African countries, with only a slight differentiation between men and women. 62,62 percent of male and 62,63 percent of female South Africans either did not trust immigrants very much or at all. Trust between South Africans is at a low level. This is the case with all demographic groups, be it race, gender, age, education, income, political party, or province, and immigrants. This does not bode well for social cohesion and presents a socio-political risk within an environment which is prone to xenophobic confrontation. South Africans deeply distrust fellow compatriots who do not belong to the same political party as their own. This undermines social cohesion, and points to a high level of political naïveté, in that in a mature democracy people should be able to associate freely at the personal, workplace and societal levels without overt hostility towards those who differ politically. This is particularly unsettling given the country’s past racial divisions, and party support that remains largely divided along racial lines. All of the political parties enjoy significant trust from their own supporters. There is a strong sense of community within groups. Social cohesion requires a high sense of community. It is when a community is socially invested in each other that they will come to the defence of its people, its institutions and infrastructure in times of need, threat or tragedy. Furthermore, economists find a positive relationship between social cohesion and economic growth, on the basis that social cohesion improves formal and/or social institutions, which causally drives economic growth. Conclusion: The centre holds, but for how long? The various challenges that have been shown to undermine social cohesion suggest that programmes that do not have a direct bearing on material concerns, such as nation-building, will increasingly be used to undermine the advance of social cohesion. Whereas social cohesion and nation-building receive increasing criticism as soft issues, this perception is made without sufficient historical-political regard. It is not seen for the strategic foundation it lays; the transformation put forward in the Constitution. There is, however, sufficient reason to criticise what has become the customary approach to social cohesion – the cursory, yet dominant, approach adopted by the governing alliance. The gaps in the returns on investment are clear; socio-economic inequality persists. The rich and historically privileged have maintained that privilege, whereas the poor, while being asked to uphold their side of the social contract, have not seen appropriate returns. Though there remains the wish for equity and cohesion among the different groups, the trust required is diminished. All groups feel that they deserve more, they share the mistrust – that government cannot strategically improve the lives of all. Whereas the rich can install security or leave for perceived greener pastures, some among the poor have turned to mobilising around populist and xenophobic programmes. Persistent poverty and inequality demand interventions that ensure greater material benefit. Though movements such as Operation Dudula and RET advance different objectives, their appeal to the man on the street is the same: the status quo does not serve them, it must be disrupted. Furthermore, while it is concerning to see vigilantism and sedition, there is broad proof that the majority of South Africans respect the constitutional norms and values. Though the riots last July were disastrous, they did not spread throughout the country. And when they calmed down, there was an enormous response from South Africans across racial and other divides to condemn these actions and to stand in solidarity with the victims. Further proof can be drawn from the recent municipal elections and especially from the national elections in 2019. The election results show that, unlike some nations around the world, particularly those in Europe, the extreme parties failed to draw significant support. Despite the enormous challenges faced, South African politics appear to mature towards the middle. The threat of splintering towards radical fringe parties has not materialised. As indicated above, social cohesion remains the foundation to a united and prosperous nation. Most South Africans believe this to be true. Though there is significant mistrust among people and in the government, the people in South Africa agree that the country should cohere. It is, however, clear that social cohesion without social justice can only be temporary. While social cohesion might have been foundational to the formation of democratic South Africa, social justice will be foundational to its continued existence. References [1] Inclusive Society Institute. 2022. ‘Measuring Social Cohesion in South Africa: Results from the Inclusive Society Institute’s 2021 GovDem survey’, Forthcoming [2] Ibid [3] Human Sciences Research Council. 1998. ‘Social Cohesion and Social Justice in South Africa’ [4] Langer, A. et al. 2017. ‘Social Cohesion Index’ [5] SFRI, n.d. ‘What is Social Cohesion?’ [6] Ibid, 1 [7] South African Constitution [8] Ibid [9] Langa, P. 2006, ‘Transformative constitutionalism’, Stellenbosch Law Review 351 at 354 [10] Interim Constitution (n 10) [11] Louw, E. 2004. ‘The Rise, Fall, and Legacy of Apartheid’, London: Praeger, p94 [12] Kotzé, K. 2018. ‘Strategies of White Resilience: From Apartheid to installing democracy,’ African Yearbook of Rhetoric, 8, p55 [13] Chapter 15 of the NDP is titled ‘Nation Building and Social Cohesion’ [14] Kotzé, K. 2019. ‘Cyril Ramaphosa’s strategic presidency,’ Defence Strategic Communications, 7 [15] Abrahams, C. 2021. ‘Social Cohesion as Imposition of National Identity’, Lesedi, 24, p25 [16] Abrahams, C. 2016. ‘Twenty Years of Social Cohesion and Nation-Building in South Africa,’ Journal of Southern African Studies, 42(1): 95 – 107 [17] Suttner, R. 2011. ‘Revisiting the National Democratic Revolution (NDR): The national question’ [18] Abrahams, Twenty years of Social Cohesion, 107 [19] National Development Plan, p17 [20] Tutu, D. 2000. ‘No Future Without Forgiveness’, p182 [21] Matunhu, J. 2011. ‘Revisiting the May 2008 xenophobic attacks in South Africa’, African Journal of Criminology and Justice Studies, 5(2) [22] Ibid [23] Ibid [24] The term ‘White Monopoly Capital’ has infamously been adopted to pin responsibility for the nation’s ills on white people [25] African National Congress. ‘Umrabulo’, National Policy Conference, July 1997 [26] Kotzé, K. 2021. ‘Jacob Zuma’s treasonous strategy,’ Daily Maverick, 12 July [27] Ibid [28] Langer et al. [29] Ibid [30] Inclusive Society Institute. ‘Measuring Social Cohesion in South Africa’ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 © 2022 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. 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 in March 2022 Author: Mariaan Webb Editor: Daryl Swanepoel Contents Abbreviations & acronyms Introduction Main themes Policy, regulation and legislation Government action Collaboration between government and private sector Seizing opportunities Energy crisis Other considerations Comparative research Historical analysis Counterfactual scenario Interventions for economic modelling Efficient bureaucracy Energy crisis Government coordination crisis Transport and logistics Private-sector deregulation Confirmation of property ownership through secure title Private-sector collaboration Downside risks Macroeconomic considerations Conclusion References Annexure A: Economic growth constraints per sector Annexure B: Interventions for fostering economic growth per sector Abbreviations & acronyms GDP gross domestic product GFC global financial crisis ISI Inclusive Society Institute PPP public–private partnership REIPPPP Renewable Energy Independent Power Producer Procurement Programme SMME small and medium-sized and micro enterprise SoE State-owned enterprise Introduction In recent years South Africa has performed poorly on several important economic measures, including unemployment and inequality. With the world’s highest unemployment rate and most unequal society, the country is in dire need of accelerated and more inclusive growth. After consistent economic growth in the decade leading up to 2007, South Africa’s progress slowed dramatically after the global financial crisis (GFC) of 2008/9. In the years immediately following the GFC, the gross domestic product (GDP) growth rate has hovered between 2% and 3% and, from 2014 onwards, stagnated at about 1% before reaching an historic 6.4% contraction in the pandemic-hit year of 2020 (World Bank, 2022). The sustained period of low economic growth is reflected in rising unemployment and poverty. The most recent data indicates that unemployment rose to a record of 35.30% in the fourth quarter of 2021. Using the expanded definition, unemployment is at 46.20% (Stats SA, 2022). Unless South Africa achieves faster and more inclusive economic growth, the country’s goals of eliminating poverty and reducing inequality and unemployment, will remain unachieved. The Inclusive Society Institute (ISI) has embarked on a comprehensive economic research project that will culminate in a blueprint for rebooting South Africa’s economy. The first phase of the three-phase study delved into international experiences of economies that were in dire straits but managed to turn themselves around. The second phase included a series of dialogues with various sectoral stakeholders and policymakers to gain a sectoral understanding of the policies that must be corrected and to find new initiatives to shift the economy onto a higher growth trajectory. The sectors covered include agriculture, construction, energy, mining, financial, foreign investment, hospitality, information communication and technology, manufacturing, and retail. The ISI’s research entered a consolidation phase in March 2022, bringing together several industry experts to identify the themes that require public policy interventions, as well as the priority structural reforms that should be introduced to revive the South African economy. This document is the outcome of the first consolidation exercise and identifies the main themes, interventions and policy changes that should be considered as well as the key interventions that should be included in a formal economic modelling exercise. The final report will highlight key findings of the economic modelling exercise with the aim of projecting the potential impact of policy adjustments and structural reforms over the short, medium and long term. The blueprint will be shared with government departments, including the National Treasury, and will be presented to political parties, public policy institutions and public bodies, such as Parliament and Parliamentary Committees. Main themes This section identifies the main themes that must form part of the final blueprint. These themes were identified in the research thus far, including the sectoral discussions and during the consolidation exercise. Policy, regulation and legislation Government can resolve several constraints to economic growth by assessing the true economic impact of many of its policies, regulations and legislation. Simplifying policies and reducing layers of regulatory red tape will go a long way in promoting sectoral growth. Removing administrative barriers will free up funds and human capital that could be applied elsewhere to drive growth. Further, government should measure the outcomes of certain pieces of legislation and transformation policies against their intended goals and, where necessary, use the results to amend or abolish regulations that are not achieving their aims. In some instances measures to compensate for market failures will be required. These policies and regulations should, however, be crafted with great caution. A review of the economic impact of policies, regulations and legislation will assist in resolving: policy uncertainty outdated policies prohibitive transformation policies excessive regulations the high cost of doing business onerous labour laws insufficient competition tenders and procurement issues environment unsustainability The reduction of red tape should be prioritised in: transport subsidies independent electricity investments by firms reducing the cost of doing business labour market reforms re-evaluating transformation policies creating a responsible investment environment reviewing the tender process creating policies that bolster competition incentivising localisation Government action To stimulate economic growth, it is imperative for government to improve its capacity and effectiveness if it is to honour its role in the social compact. Crucial to this is appointing skilled staff to the relevant positions in all spheres of government as the State seeks to regain its strength. These appointments must result in a marked improvement in service delivery, most notably water supply and logistical infrastructure. Overhauling the education system should be a matter of urgency. South Africa cannot create enduring economic growth using outdated skills and knowledge. Strengthening law enforcement is another crucial step. Corruption and crime reduce investor confidence and drain the fiscus and must, therefore, be dealt with decisively. Ineffectual State-owned entities (SoEs) are also a drain on finances. Those that cannot be saved and not required for national strategic interest, must be severed. This will free up money to spend elsewhere in support of proven growth strategies. Improved government capacity will assist in resolving: the failure to implement policies and/or strategies inadequate infrastructure failing service delivery poor global benchmarking weak government institutions slow vaccination roll-out the skills deficit Improved State capacity should be prioritised in: strengthening leadership curbing crime and corruption strengthening local government establishing an e-government administration developing smaller, more-focused, projects cleaning up SoEs securing electricity supply improved project management and infrastructure investment developing necessary skills Collaboration between government and private sector The state of South Africa’s public finances requires government to mobilise extensive private participation if it hopes to pull the economy from the doldrums. At the same time, business requires government’s support if it is to capitalise on new generation technologies and opportunities. Steps must be taken by government and the private sector to repair the trust deficit following a fraught number of years, owing to, among other things, corruption and State capture. Mutually beneficial arrangements and public–private partnerships (PPPs) can be devised to resolve pressing economic issues. Furthermore, it will bode well for the private sector to have amicable relations with the public and surrounding communities, as this will contribute to better buy-in from communities and boost the success rate of large-scale projects. Collaboration between government and the private sector must be improved to: access funds more easily rebuild the trust deficit between the public and the private sector address exchange rate volatility increase digital technology access reject environmentally unsustainable projects tackle poverty and unemployment address the skills deficit Improved government and private-sector relations should be prioritised in: access to finance skills transfer and development reducing unemployment creating PPPs rebuilding trust between government and the private sector driving new technology investment and productivity Seizing opportunities The South African economy risks falling behind many of its peers. Government and business must better take advantage of new opportunities that arise. The global economy is searching for partners that can keep up with the fast pace of technological, environmental, political and social changes happening worldwide. The upside of globalisation means South Africa can capitalise on these opportunities while using them to uplift local communities. By intertwining expertise and strategies, the private sector together with the State can be a driving force in positioning the country as a strong African economy, a gateway to Africa, a geopolitical force not to be overlooked by investors. Improving the seizure of opportunities will assist in: expediting technology commercialisation overcoming the lag in innovation The seizing of opportunities should be prioritised in: pursuing green initiatives developing a green hydrogen economy and green hydrogen exports enhancing competitive strengths creating a geopolitical alternative strengthening intercontinental trade promoting new mining activities rebuilding mining exploration, especially for energy metals transforming special economic zones revitalising rural economies and strengthening rural security and infrastructure further boostinig agricultural technology and agricultural exports Energy crisis The crisis in the electricity sector is considered to be at the heart of South Africa’s economic malaise and unless resolved with urgency, it is unlikely that economic interventions will succeed. The country must organise itself better to take advantage of low-carbon investment opportunities and collectively rally behind the adoption of renewable energy, which is a modular solution that can be implemented more rapidly and more cheaply than alternatives. There is pent up demand for investment in renewable energy, but regulatory barriers must be removed. While there is a shift to solar and wind electricity generation, State-owned power utility Eskom will continue to supply a large part of the country’s electricity. Eskom’s unsustainable debt needs to be resolved so that it can raise financing for investment in transmission and distribution infrastructure. At the same time, government must clearly signal the building of a new energy system that is reliable, greener and advances the country to its carbon neutrality goals. Resolving the energy crisis will assist in addressing: the high cost of doing business inadequate infrastructure failing service delivery environmental unsustainability weak government institutions excessive regulations Interventions to resolve the energy crisis should be prioritised in: dealing with Eskom’s debt problems ensuring a predictable price path removing regulatory barriers to private energy investment enhancing private-sector involvement sharpening the focus on sustainable developments developing more technical skills and capabilities Other considerations This section summarises some of the points that were made by industry experts during the consolidation exercise. Comparative research A question was raised about the findings from the ISI-led research, compared with similar research undertaken by government and other research institutions regarding the structural reforms that are required. The point was made that the National Treasury modelled the economic impact of structural reforms and that it is included in the Budget documents. However, it was pointed out that at the time when the Treasury modelled the impact of reforms on the network industries on growth, its focus was only on improving Eskom’s energy availability factor. It is felt that this model is outdated, as much of the electricity infrastructure development is happening outside Eskom. Historical analysis A suggestion was made that the blueprint should include an historical analysis of the periods of strong growth and employment creation that South Africa enjoyed since 1994. The factors behind the growth success must be considered, including the policies that were pursued, the strength of the network infrastructure, and the periods of booming commodities markets. South Africa recorded its fastest growth rates since the 1960s from 2004 to 2007, with real GDP growth averaging 5.20% a year (Industrial Development Corporation, 2013). Counterfactual scenario It was suggested that the report provide for a counterfactual scenario, which sketches the South Africa that could possibly be. For instance, to show where South Africa could have been today, had it taken a different path ten years ago. This could prime policymakers to be more open to suggestions that are put forward. An alternative to a counterfactual scenario could be to reflect and build on what is working. Some examples include the shift in the energy space towards new technology and an energy transition, or the policy shifts around freight logistics group Transnet and private-sector participation in rail and terminal operators. Rather than dwelling on the problem statement too much, the report could lift out “pockets of success” and consider whether they could be built upon to have a greater impact. Interventions for economic modelling This section focuses on suggested interventions and policy changes that should be considered for economic modelling. Modelling will quantify the impact of the suggested interventions on the economy. Efficient bureaucracy Efficient bureaucracy should be modelled. For instance, what the implications would be if South Africa cut red tape and adhered to regulatory approval timelines that are of an acceptable international standard. Energy crisis The roadmap must deal with the energy crisis in a focused manner. Specific energy-related actions with specific outcomes must be identified and modelled, such as the impact of the 100 MW reform that will boost private investment in electricity generation; the impact of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) bid windows (as well the negative impact of delays on the REIPPPP), the impact of resolving Eskom’s unsustainable debt and allowing for it to return to capital markets to fund its investments. Government coordination crisis In addition to the electricity supply crisis, there is a crisis of government coordination, or lack thereof. Although difficult to model, because it touches across so many aspects, it is one of the key reasons behind the lack of implementation in the public sector. Transport and logistics A model for transport and logistics must be pursued, considering the debilitating impact that failures in this regard are having on the economy. For instance, economic modelling could determine the value in terms of GDP growth and trade benefits. Private-sector deregulation The implications of deregulating the private sector, and specifically small, medium-sized and micro enterprises (SMMEs), must be modelled, with the examples of South Korea and New Zealand to be drawn on. The deregulation of SMMEs should not have a major cost implication for government, but could get the economy moving while other issues of electricity and infrastructure are being addressed. Confirmation of property ownership through secure title Security of title deeds for those occupying properties could be pursued. A model has already been developed that shows that giving people ownership of the properties that they occupy has a positive impact on their finances, on investment and on economic development. Private-sector collaboration Although difficult to model, the report should consider the implications of a positive mode of collaboration between government and the private sector. Downside risks The ‘downside risk’ posed by the disintegrating social fabric, lawlessness and the dysfunctional and ineffective criminal justice system must be considered and modelled. Macroeconomic considerations To achieve the objectives of the final blueprint, fiscal concerns must be balanced with inclusive growth. Balancing fiscal concerns with inclusive growth Source: Minsat, 2020 The National Treasury presented two debt scenarios in the June 2020 Supplementary Budget. In the passive scenario, which is not deemed a viable option for South Africa and was presented for illustrative purposes only, debt will spiral upwards, exceeding 100% of GDP from 2022. The possibility that government will not be able to repay its debt leads to higher debt-servicing costs. This redirects money that could be spent on health, education, and other policy priorities to local and overseas bondholders (National Treasury, 2020). In the active scenario, government stabilises debt through a combination of reforms and measures to boost economic growth, increase revenue collection and lower expenditure. The deficit would be reduced significantly starting in 2021 and the debt level would start decreasing from a peak of 87% of GDP in 2023 (National Treasury, 2020). The Organisation for Economic Cooperation and Development has proposed a progressive consolidation scenario where government does not pursue highly constrictive fiscal policy and the reduction of the deficit happens over a longer period. In this scenario, the debt level will stabilise by 2028. This progressive consolidation scenario is based on a deficit reduction of 1% a year of GDP and 2% GDP growth from 2025 (Minsat, 2021). Although there are differing views about the approach to debt reduction, taking a longer-term approach to fiscal consolidation could free up capital for investment in economic infrastructure that would be beneficial to economic growth. Pension funds must also be encouraged to invest in infrastructure, following amendments to Regulation 28 of the Pension Fund Act. However, this will require confidence in the ability of the State to be able to prioritise and prepare proper economic plans around bankable infrastructure projects. Conclusion The consensus from the panel participating in the ISI’s consolidation exercise is that the sectoral deliberations have arrived at good insights, but that the research must be further refined to make it more precise and specific in identifying key interventions to lift the pace of inclusive growth. The ISI’s final report must not dwell on the problem statement too much and should instead focus on ‘what’ needs to be done and ‘how’. It must avoid being ‘another list of good intentions’. The blueprint must offer an economically coherent approach – based on clear cause and effect, and on an appreciation of the positive impact on growth of improved efficiencies and capabilities of the State, capital, labour and new technologies. Rather than being purely theoretical, the blueprint must provide practical and immediate action steps for implementation. It is understood that not every issue can be tackled at once, thus, the blueprint should prioritise interventions, not only in terms of capacity, but also in terms of financial ability, taking into account the fiscal constraints facing South Africa. References Eskom. 2022. Weekly system status: Week 10, March 13, 2022. [Online]. Available at: https://www.eskom.co.za/eskom-divisions/tx/system-adequacyreports/[accessed March 31, 2022]. Industrial Development Corporation. 2013. The South African economy: An overview of key trends since 1994, December 2013. [Online]. Available at: https://www.idc.co.za/wp-content/uploads/2018/11/IDC-RI-publication-Overview-of-key-trends-in-SA-economy-since-1994.pdf [accessed March 31, 2022]. Minsat, A, 2021. Reinvigorating South Africa’s Economy: Key Considerations, Inclusive Society Institute panel discussion. April 14, 2021. Organisation for Economic Cooperation and Development. National Treasury. 2021. Budget Review 2021, February 24, 2021. [Online]. Available at http://www.treasury.gov.za/documents/National%20Budget/2021/review/FullBR.pdf [accessed May 10, 2021]. Statistics South Africa. 2022. Quarterly Labour Force Survey – Q4: 2021, March 29, 2022. [Online]. Available at: http://www.statssa.gov.za/publications/P0211/Media%20release%20QLFS%20Q4%202021.pdf [accessed March 31, 2022]. World Bank. 2022. GDP growth (annual percentage) – South Africa, 2022. [Online]. Available at: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2020&locations=ZA&start=2003 [accessed March 31, 2022]. Annexure A: Economic growth constraints per sector Annexure B: Interventions for fostering economic growth per sector - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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

11-12 May 2022, Cape Town, South Africa On 11 and 12 May, the Institute participated in the workshop on ‘Populism(s) and social cohesion in Southern Africa: a regional challenge, a global challenge?’ The workshop was hosted by the Institute for Justice and Reconciliation, in partnership with the Research Institute Social Cohesion, based at the University of Leipzig, Germany. Participants from across Southern Africa were invited to share their insights and inputs regarding the broad challenges associated with populism and the changing meaning of social cohesion. Participants represented a wide array of organizations, think tanks, labour unions and the academy. The two-day event allowed for a meaningful discussion on the current debates in South Africa, Namibia and Zimbabwe. This multilateral approach allowed participants to engage their neighbours while relating regional tendencies with their German co-hosts. Whilst case studies on populism(s) and socio-cultural dynamics have developed over the last years, the Southern African region has lagged in regard to producing comparative projects. This workshop offered a valuable opportunity to build regional partnerships and exchanges. The Institute was represented by Dr Klaus Kotzé who delivered an Occasional Paper titled Social Cohesion: Taking stock of South Africa’s socio-political strategy. The paper which was launched at the workshop discusses the meaning and significance of social cohesion in South Africa. It probes how social cohesion forms part of the Constitutional project, whilst suggesting that for social cohesion to be meaningful (and sustainable) it needs to evolve to become a term of transformative consequence

Copyright © 2022 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. 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 in February 2022 Author: Olivia Main Editor: Daryl Swanepoel Contents Introduction Key growth constraints Neoliberal macroeconomics Lack of localisation Corrupt politicians roam free Too many policies Not enough urgency Foreign nationals and casualisation Towards a new growth path Conclusion References Cover page image: www.mg.co.za Introduction On 2 March 2022, Employment and Labour Minister, Thulas Nxesi, officially tabled the National Labour Migration Policy (NLMP) for public comment and engagement. Touting the policy as the first time in the history of South Africa that government has formulated a comprehensive NLMP, the Minister said that “government have researched extensively and benchmarked internationally in search of policy based on best practice”. Together with the tabled NLMP, amendments to the Employment Services Act (of 2014) were proposed to limit the extent to which employers can employ foreign nationals (BizNews, 2022). And this is all good news. It points to the government’s willingness to look at labour laws that are not working and change them. But it is not enough. South Africa’s reputation – in fact its very standing – as the industrialised leader of the African continent is diminishing. On Statista.com, South Africa is listed as the third-largest economy in Africa in 2021 with a GDP of US$329.53-billion, trailing behind Egypt (GDP US$394.28-billion) and Nigeria (GDP US$514.05-billion). Our strength on the world stage has never been weaker (Statista, 2022). The situation does not look any better back home. According to the Quarterly Labour Force Survey (QLFS) carried out by Stats SA, the number of employed persons declined by 660 000 to 14,3 million for the 3rd quarter of 2021 compared to the 2nd quarter of the same year. South Africa’s unemployment rate in Q3:2021 increased by 0,5 of a percentage point to 34,9%. This is the highest official unemployment rate recorded since the start of the QLFS in 2008 (Stats SA, 2021). It seems there is room for improvement in just about every sphere of the economy. The Inclusive Society Institute has committed to an intensive three-phase research project, culminating in a blueprint for rejuvenating and reigniting South Africa’s flailing economy. This map will, ultimately, be shared with government representatives in the presidency and other important policy institutions and public bodies, such as Parliament, in 2022. A dialogue, hosted by the institute, brought together trade unionists from across a number of unions – as part of the second phase, to interrogate what in terms of the generally accepted economic architecture of the world South Africa is doing wrong. And to explore fresh out-of-the-box ideas that could grow the economy beyond the expected 2-3% to the 4-5% trajectory that is needed to really start chipping away at unemployment and backlogs (National Treasury, 2021). Key growth constraints Neoliberal macroeconomics The panel largely agreed that the South African government’s seemingly unapologetic neoliberal approach to running the economy is problematic. It was felt that the government relies too heavily on the private sector to cure social ills such as unemployment, while not doing any of the heavy lifting itself. In addition, the austerity measures that result from this neoliberalism is not speaking to the lived realities of South Africans. With no state-led development – and the private sector seemingly on an investment strike – money is not ending up in the pockets of the people. The trickle-down effect that the country has been waiting to witness for years has not come, which means the people are excluded from taking part in the economy and, so doing, contribute to growth (Mail and Guardian, 2021). As things stand, South Africa finds itself in the so-called middle-income trap with a middle-income economy, failing to transition to a high-income economy due to rising costs and declining competitiveness (Daily Maverick, 2019). The country’s macroeconomic policies are not assisting its social and industrial policies. Expenditure on industrial incentives is lacking, which does little to grow manufacturing. As a result, South Africa’s social cohesion is being tested as economic strife is compounded by the high levels of inequality still seen in the spheres of healthcare and education, among many others. Lack of localisation Far too little of the South African rand is circulating in the country. Whether it is officials receiving kickbacks from imports or consumers not buying local products, discussants felt that South Africa is losing out due to a lack of localisation. Although good work has been done to get big clothing retailers like Foschini, Woolworths and Markham’s to buy local, a lot more is needed. And not only from industry. As one discussant put it, ordinary consumers must also contribute, saying that “we should all make a little bit of effort to check the label on the trousers we choose to wear”. Additionally, too much revenue is lost to manufacturing done overseas. South Africa is a large producer of raw materials. The fact that those materials are shipped elsewhere and turned into consumable goods amounts to big losses when it comes to taxation, job creation and keeping money circulating within our borders. In a sign of the country’s lagging manufacturing capability, Trade, Industry and Competition Minister Ebrahim Patel recently requested the social partners at the National Economic Development and Labour Council (NEDLAC) to consider an import-substitution target of 20% for non-petroleum imports, which he argued could drive progressive localisation worth up to R200-billion over the coming five years. According to the minister, South Africa’s “propensity to import is out of line with peer countries and developed economies and more can sensibly and sustainably be produced locally” (Engineering News, 2021). Corrupt politicians roam free The panel was unanimous in their assessment that the South African prison system has too few corrupt politicians in its jails. The individuals who have stolen from South Africa for what seems like an eternity must be punished – and punished publicly and with consequences. Simply put, the crooks must go to jail. South Africa lost R1.5-trillion through corruption in the years between 2014 and 2019 (News24, 2021). And it is not only the government’s coffers that are being cleaned out. All over the country, copper cables are disappearing from railways faster than they can be replaced. Transnet and PRASA have seen the systematic destruction of their infrastructure by criminal syndicates over the past two years. Without money, the economy cannot grow. Without cables the trains cannot run. Commuters cannot get to work. Goods cannot get to ports. The panel felt that if the police and the National Prosecuting Authority (NPA) do not act, SOEs like PRASA will soon be gone. In addition, the public will not have confidence in the integrity of the leaders of society. Leaders such as Siyabonga Gama and Anoj Singh, former executives of state-owned infrastructure firm Transnet, as well as Brian Molefe, former CEO of public utility firm Eskom, who the Zondo Commission recommended be investigated for corruption and racketeering amounting to millions of dollars. The latest part of the report also implicates senior political leaders of the ruling African National Congress itself (Al Jazeera, 2022). Too many policies South Africa’s long history of policy changes reads as follows: In 1994, the Reconstruction and Development Programme (RDP) was chosen as the primary socio-economic programme. Two years later, government introduced the Growth, Employment and Redistribution (GEAR) programme to stimulate faster economic growth than RDP had managed. GEAR was replaced in 2005 by the even faster Accelerated and Shared Growth Initiative for South Africa (ASGISA) as a further development on the first two developmental strategies. Shortly after ASGISA came the New Growth Path (NGP), which was followed, in early 2013, by the National Development Plan (NDP) 2030 (South African History Online, 2014). In 2019 the Department of Trade, Industry and Competition (DTIC) put forward proposals for Master Plans for all 15 priority industries in the country in order to “target specific action points relating to the respective industries” (IOL, 2021). In total, therefore, a staggering 20 policies have made it onto the desks of government officials so far (SA History, 2014). The panel felt that such a large number of policies and the shifting ideologies between them is not the best way to take the country forward. The Master Plans have been in the making for three years and some are still not even concluded, while those policies that are currently in place are not being delivered on. Also problematic, is a dual system of social policies whereby one set of policies applies to the poor and another for the rich. A discussant also highlighted that to establish economic policies that are progressive, the youth and gender development must be considered. Not enough urgency South Africa’s economy is growing at a snail’s pace. Although growth was projected to rebound to 5.2% in 2021 (but that is still not enough to recover to pre-Covid 19 levels), the forecast is for the economy to slow to 1.9% in 2022 and 1.6% in 2023 (OECD, 2021). For a country brimming with natural resources, the growth rate is well below what can be achieved. In fact, it seems the only sphere showing real growth in the country is that of unemployment. The recent unemployment statistics released by Statistics South Africa show the rate of growth now sits at 34.9%, while under the expanded definition of unemployment, it rose from 44.2% to 46.6% (Daily Maverick, 2022). Yes, the recent social upheavals in the form of the looting in July 2021 are major setbacks that point to the fragile nature of the country’s social cohesion. But solutions to these problems have been tabled and are waiting to be actioned. Across the board, however, these well-thought-out policies and ideas are not being implemented. Promises are not kept as people in key positions seem to lack the energy, the will, or the know-how to act. A pertinent example is the National Anti-Corruption Strategy 2020-2030 (NACS). The first step in implementing the strategy is to establish an interim National Anti-Corruption Advisory Council, which has yet to happen, despite President Ramaphosa’s promise that it would be established by mid-2021 (Corruption Watch, 2022). Furthermore, from the names of those responsible for sabotaging Eskom, to the persons who stole directly from the State, the information about who did what has been made public. The natural – some might say inevitable – next phase to root out the problem would be to swiftly go into action and apprehend the criminals. But that is not happening. The panel felt that the slow speed of progress and political criminals still at large is, in large part, the result of a lack of political will. The ANC as the governing party has been indecisive and has thus far failed to restore the organisation to its former glory. It still has the overwhelming confidence of the majority of people in the country, but it is not able to lead a society as it has in the past. Foreign nationals and casualisation The twin issues of immigrant workers flocking to South Africa to gain employment and the country’s shift towards casualisation has profound implications both in terms of employment and social cohesion. At present, about three million of South Africa’s 60 million residents are migrants (Stats SA, 2022). Never, since the xenophobic attacks of 2008, has anti-immigrant sentiment been this high. In Gauteng recently, the Alexandra Dudula Movement and Operation Dudula have emerged with the joint purpose of ridding their townships of foreigners. Dudula loosely means to "push back" or "drive back" in isiZulu and gives an indication of the growing discontent among South African communities who feel marginalised. The campaigns of the two groups include a call for all undocumented African migrants to stop trading in Alexandra – a call they made clear by closing down all the stalls owned by foreign nationals who could not show the correct papers for running the business or a valid passport (BBC, 2022). The panel described foreign nationals working on a casual basis in South Africa as having a detrimental effect on the money earned and spent inside the country’s borders, together with taking employment opportunities away from hard-working citizens. As mentioned in the introduction to this report, a law is being finalised by government which will cap the number of foreigners that businesses owned by locals can hire. It remains to be seen whether the legislation will have a noticeable effect on the dire unemployment rate. Towards a new growth path Conclusion South Africa is a country with tremendous potential. As a discussant rightly pointed out, we are not dependent upon a single cash crop or commodity, like most African countries. We have a very diversified agricultural sector. We have all the infrastructure in the world, and we have a significant education system. Unfortunately, we are bearing witness to large parts of that potential coming to nothing through the actions – and inaction – of those we elected to represent us in what we hoped – and still do – is a democratic society. South Africa’s unemployment figures are dismal. The labour force is becoming less skilled. We are losing jobs to outsourcing and desperately poor people attracted to a country which until very recently still had the fastest-growing economy on the African continent. The outlook is poor, but the resolve of the people is not. Despite all the challenges and truly tragic events that have had this country in utter turmoil, South Africans are still pulling together and making things work. The SOEs are in dire straits, but they still exist. We have come through Covid-19 just as the rest of the world has, and let it be said that we still have a Rugby World Cup trophy – and the positivity that came from winning it – safe and secure in the country. However, people can only take so much, and the social cohesion of the country is not guaranteed. Real change is needed to bring about real hope. The labour sector invites all governing bodies to facilitate tangible changes to South Africans’ lived realities through constructive dialogue and innovative ideas – and action. The spirited discussions and the distilled solutions that come from these think tanks will then be in the public domain. More importantly, they will be within arm’s length of those with the power – and passion – to make a difference. References Al Jazeera. 2022. More S African corruption exposed in ‘state capture’ report, March 8, 2022. [Online]. Available at: https://www.aljazeera.com/features/2022/3/8/analysis-south-africas-state-capture-report-questions-anc-leg [accessed March 2, 2022]. BBC. 2021. Dudula: How South African anger has focused on foreigners, March 13, 2022. [Online]. Available at: https://www.bbc.com/news/world-africa-60698374 [accessed March 7, 2022]. BizNews. 2022. National Labour Migration Policy released for public comment, March 2, 2022. [Online]. Available at: https://www.bizcommunity.com/Article/196/717/225576.html [accessed March 3, 2022]. Corruption Watch. 2022. Solutions abound to SA’s graft problem – political will, not so much, February 14, 2022. [Online]. Available at: https://www.corruptionwatch.org.za/solutions-abound-to-sas-graft-problem-political-will-not-so-much/ [accessed March 7, 2022]. Daily Maverick. 2019. China, South Africa and the middle-income trap, April 23, 2019. [Online]. Available at: https://www.dailymaverick.co.za/article/2019-04-23-china-south-africa-and-the-middle-income-trap/ [accessed March 2, 2022]. Daily Maverick. 2022. South Africa needs renewed citizen activism and political imagination to stop the democratic degradation, January 4, 2022. [Online]. Available at: https://www.dailymaverick.co.za/opinionista/2022-01-04-south-africa-needs-renewed-citizen-activism-and-political-imagination-to-stop-the-democratic-degradation/ [accessed March 10, 2022]. Engineering News. 2021. Report warns that industrialisation-through-localisation could stunt South Africa’s development, November 16, 2021. [Online]. Available at: https://www.engineeringnews.co.za/article/report-warns-that-industrialisation-through-localisation-could-stunt-south-africas-development-2021-11-16 [accessed March 2, 2022]. IOL. 2021. Sectoral Master Plans playing a vital role in reviving SA manufacturing, June 30, 2021. [Online]. Available at: https://www.iol.co.za/business-report/opinion/sectoral-master-plans-playing-a-vital-role-in-reviving-sa-manufacturing-6873b700-9d37-47f2-836d-89f68aa589ef [accessed March 7, 2022]. Mail and Guardian. 2021. Intensifying economic insecurity may threaten South Africa’s social cohesion, February 16, 2021. [Online]. Available at: https://mg.co.za/opinion/2021-02-16-intensifying-economic-insecurity-may-threaten-south-africas-social-cohesion/ [accessed March 10, 2022]. National Treasury. 2021. Budget Review 2021. [Online]. Available at: http://www.treasury.gov.za/documents/national%20budget/2021/review/Chapter%202.pdf [accessed March 2, 2022]. News24. 2021. SA lost R1.5 trillion to corruption in five years and continues to bleed – report, June 23, 2021. [Online]. Available at: https://www.news24.com/fin24/economy/south-africa/sa-lost-r15-trillion-to-corruption-in-five-years-and-continues-to-bleed-report-20210623 [accessed March 7, 2022]. OECD. 2021. South Africa Economic Snapshot. [Online]. Available at: https://www.oecd.org/economy/south-africa-economic-snapshot/ [accessed March 2, 2022]. SA History. 2013. South Africa’s Key economic policies changes (1994 - 2013). [Online]. Available at: https://www.sahistory.org.za/article/south-africas-key-economic-policies-changes-1994 2013 [accessed March 7, 2022]. Statista. 2022. African countries with the highest Gross Domestic Product (GDP) in 2021, February 1, 2022. [Online]. Available at: https://www.statista.com/statistics/1120999/gdp-of-african-countries-by-country/ [accessed March 2, 2022]. Statistics South Africa. 2021. The South African economy sheds more than half a million jobs in the 3rd quarter of 2021, November 30, 2021. [Online]. Available at: http://www.statssa.gov.za/?p=14922 [accessed March 7, 2022]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 © 2022 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. 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 in March 2022 Author: Mariaan Webb Editor: Daryl Swanepoel Contents Abbreviations & acronyms Introduction Identifying weaknesses Ailing infrastructure Brain drain Environmental concerns Labour cost and relations Limited producer support Livestock theft Policy uncertainty Research and training capacity Trust deficit and lack of social cohesion Veterinary support Suggestions for fostering growth Conclusion References Abbreviations & acronyms AAMP Agriculture and Agroprocessing Master Plan BFS Blended Finance Scheme GDP gross domestic product ISI Inclusive Society Institute NDP National Development Plan Introduction South Africa has a well-developed agricultural sector, which is a key driver of economic growth. Good rains during the summer and winter seasons helped boost agricultural activity in 2021. Together with a rise in animal products, increased wheat production boosted the industry by 12.20% in the fourth quarter of 2021, contributing to 1.20% gross domestic product (GDP) growth in the final three months of the year. Economic growth of 4.90% was recorded for the full year, after contracting by 6.40% in 2020 (Stats SA, 2022). The agriculture industry provided employment to 829 000 people in the third quarter of 2021 (Stats SA 2021). The agriculture sector ensures that South Africans not only have enough food, but it also has a vital role to play in foreign earnings and exports. In 2020, South Africa became the world’s second-biggest exporter of citrus after Spain. While the industry delivered a stellar performance in 2021, industry association AgriSA has warned that there are many challenges that could derail its continued success, chief among them the country’s crumbling infrastructure. The impact of deteriorating economic infrastructure was a key point of discussion during the Inclusive Society Institute’s (ISI’s) recent interaction with the agriculture sector as part of an economic research project. The industry’s concern about the state of the country’s roads, railways and port infrastructure echoes that of the mining industry, which is also heavily reliant on State-owned infrastructure for bulk exports. This report is a summary of the themes that emerged from the engagement that the ISI held with the agriculture industry. The first part deals with the industry’s views on the factors hampering economic growth and development and the second part seeks to provide some answers about interventions that could place South Africa on a higher economic growth trajectory. The ISI’s research project will culminate in a new economic blueprint for South Africa. Identifying weaknesses Ailing infrastructure The agriculture sector’s growth and its contribution to the South African economy, although positive, continues to be hindered by crumbling infrastructure, particularly economic infrastructure such as roads, ports, railways, telecommunication networks and electricity generation. The agriculture sector is increasingly shifting from rail to road transport to move goods between provinces and to ports for export. The modal shift is driven by the steady decline in the efficiency of the State-owned rail industry, partly owing to theft and vandalism of critical infrastructure. The ‘Ctrack Freight Transport Index’ illustrates the change in fortunes between rail and road, particularly since the Covid-19 lockdown. Ctrack’s road freight index reached a level of 129.90 points in January 2022, compared with rail freight’s index level of 81.70 in the same month (Ctrack, 2022). In the 2021 financial year, agricultural products accounted for only 0.60% of Transnet revenue from commodities transported (Transnet, 2022). There is concern that an increase in the number of heavy trucks on the roads results in more safety incidents, damages the road infrastructure and results in more congestion. For example, to load a vessel with a 55 000 t carrying capacity, requires 1 617 trucks loaded with 34 t each, the equivalent of a line of trucks 37 km long. Poor road infrastructure, particularly in rural areas where farmers rely on gravel roads, further increases production costs to the industry. Port infrastructure is also not adequately equipped to deal with demands from the agriculture sector. Port inefficiencies can cost producers of yellow maize up to R200/t, while rail line inefficiencies can add another R150/t. The industry argues that it is imperative that South Africa improves its rail and port infrastructure to ensure the country’s global competitiveness. Transnet is considering various initiatives to improve inland and port logistics, including increased private-sector participation. Telecommunications is another area where the farming community lacks infrastructure. Land-line infrastructure has been stolen in rural areas and has been overtaken by a shift to cellular technology. However, as farmers are dispersed and often in very rural areas, the industry is not a priority for profit-driven cellular companies. A lack of connectivity is a major productivity constraint and a security concern. Brain drain South Africans with experience in farming are in high demand in other parts of the world, particularly in the US. In 2019, about 275 000 workers entered the US on the H-2A programme that allows for US farmers to hire migrant labour to assist with planting, cultivating and harvesting. While more than 90% of these labourers arrive from Mexico, South Africans accounted for the second-most in demand workers. About 7 000 South Africans successfully obtained H-2A visas in 2019 (Business Insider, 2022). As these are seasonal employees, these South Africans often ‘learn, earn and return’. However, as the number of South African citizens emigrating abroad continues to rise, farmers are among those selling up and leaving the country, with Canada and Australia popular destinations. Environmental concerns There is threat to agricultural soils from mining and fracking. The Centre for Environmental Rights published a report in 2016 that showed how some of South Africa’s best agricultural soil has been decimated because of coal mining in Mpumalanga. Labour cost and relations Although farmers, like other economic stakeholders including government, want a decent wage for their workers, given the set of inflated costs the sector is forced to contend with, the cost of labour remains a concern for the industry. In 2021, farm workers’ wages were equalised with the minimum wage, resulting in a double-digit increase. It is argued if wages are too high, farmworkers will be priced out of the market and farmers may turn to mechanisation to remain competitive. The industry’s relationship with labour also has an impact on policy developments, and certain demands could derail progress. Further, labour legislation should not be made more complex, making permitting success, for instance, dependent on labour outcomes. Limited producer support Compared with many international competitors, South Africa’s agriculture sector does not receive direct support from government. Citing an internal study by AgriSA, a participant in the ISI roundtable discussion noted that of relevance to the country, is that four of South Africa’s emerging market counterparts, which had significant budget allocations to agriculture, experienced average yearly GDP growth of 3.40% over a ten-year period. Livestock theft Livestock theft is a major concern for the industry. According to the National Stock Theft Prevention Forum, livestock theft is costing the economy about R1.40-billion a year (Independent Online, 2021). Although stock theft is not new, what has changed is that the crime is now perpetrated by organised syndicates, rather than ordinary thieves. Whereas those stealing for survival will take only a few animals, criminal syndicates operate on a larger scale. Such syndicates often also target railway lines or power infrastructure. Policy uncertainty Policy uncertainty is among the chief structural constraints holding back economic growth and development in South Africa (IMF, 2022). Uncertainty about land reform, particularly the issue of expropriation without compensation, and property rights in general, continue to rattle the agricultural industry, threatening much-needed investment in the sector. A study commissioned by AgriSA and conducted by economist Dr Roelof Botha has quantified the economic output and job losses that the country would face should it pursue expropriation without compensation. Botha’s study involved a future perspective on the likely macroeconomic impact of the policy. The study forecasts a cumulative loss of economic output over nine quarters amounting to R735-billion in one scenario and R1.15-trillion in a second scenario. The policy will lead to substantial job losses (Botha, R, 2021). The National Assembly in December 2021 failed to pass the amendment to Section 25 of the Constitution to allow for expropriation without compensation. AgriSA has said Section 25 does not pose an obstacle to land reform, concurring with findings by a high-level panel led by former President Kgalema Motlanthe, and that it is rather factors such as inadequate budgets, poor implementation, corruption and a lack of political will that hold back land reform (AgriSA, 2021). The organisation has warned that an attempt to expropriate productive land without compensation will not only undermine growth of the sector, but will damage South Africa’s economy and the country’s standing internationally. Another major contributor to policy insecurity is that plans change too often, owing to the fiveyearly electoral cycle. The agriculture sector believes that South Africa is not “policy poor” and that it should rather focus on implementing plans, such as the National Development Plan (NDP). There is cautious optimism about the Agriculture and Agroprocessing Master Plan (AAMP) and the Blended Finance Scheme (BFS). The AAMP aims to accelerate land reform by implementing a comprehensive land agrarian strategy and finalising restitution claims, as well as mitigating and preventing the outbreak of diseases among livestock and products in the agricultural value chain. The BFS, relaunched in 2021, will leverage private funding to support investments to enhance agricultural production by black farmers through deliberate, targeted and well-defined financial and nonfinancial interventions (DALRRD, 2021). These plans are specific, the goals and objectives are clear, and they are measurable with timelines linked to each. A final point on policy uncertainty centres on black economic empowerment. Although the reasons behind the policy are understood, the challenge rests with how it is being implemented. Research and training capacity Agricultural colleges, of which there are 11 in South Africa, play a vital role in producing future farmers and scientists. The research and training at some of the agricultural colleges is not deemed suitable, with the focus tilting towards subsistence farming and food security, instead of state-of-the-art research that will keep South Africa on the cutting edge of agricultural development. Practical experience among graduates from colleges and universities is also lacking. Trust deficit and lack of social cohesion A trust deficit exists between the agriculture sector and government. Farmers are less willing to participate in land reform or other government-led initiatives, such as Statistics South Africa enquiries, when they feel that the country’s progress is threatened by corruption. Farmers feel despondent when provincial and local governments misuse the money allocated for operational expenses. There is also a perception that government spends too much of its wage bill on high-paying jobs, and too little on administrators who ensure the optimal functioning of the State. The distribution of public-service personnel across various income levels has shifted dramatically in the past decade-and-a-half, according to a 2020 study by Intellidex. Using inflation-adjusted income bands, the Intellidex analysis indicates a declining share of personnel earning less than an inflation-adjusted R20 000 a month – from 85% of staff in 2006/7 to 48% in 2018/19 – and a rising share of those earning above that figure (Intellidex, 2020). Further, South Africa’s success in achieving its developmental State goal has been questioned, with participants arguing that more active citizenry is needed, and that higher levels of social unity and cohesion are required among different racial and cultural groups. The NDP envisions building South Africa into a developmental State, which relies on the capabilities of people to improve their own lives, while the State intervenes to correct historical inequalities (NDP, 2012). Veterinary support South Africa has a severe shortage of veterinarians. According to Professor Vinny Naidoo, Dean of the Faculty of Veterinary Sciences at the University of Pretoria, South Africa needs at least 100 veterinarians per million people. Currently, about half of this number are registered in the country (Farmers Weekly, 2022). Rural areas are the worst affected by the shortage. It is estimated that there is one veterinarian for every 800 small-scale livestock farmers. A shortage of veterinary support has big implications for productivity. In a globalised, trade-oriented world, veterinarians working in food production are crucial for the management of international trade in animal and animal products, disease diagnostics and surveillance. The Food and Agriculture Organisation of the United Nations recommends a ratio of one veterinarian per 100 000 livestock units. Using this norm would result in the State requiring 253 State veterinarians to carry out disease control, laboratory diagnostics and veterinary public health (Department of Agriculture, Forestry and Fisheries, 2015). A veterinary strategy has been drafted to address the issue. The strategy was published in 2015, but its implementation has not gained traction, making it difficult to effectively curb diseases. Besides a veterinary shortage, problems with veterinary medicine regulation have also been raised. It reportedly takes between three and five years to have a vaccine registered. The South African Health Products Regulatory Authority has committed to clear its veterinary backlog and to reduce registration timeframes for new registrations to 12 months and major Type II variations to between three and six months, however, these timeframes are not being met yet (Health for Animals, 2021). Poor implementation of animal biosecurity systems and the enforcement of disease control regulations limit the ability of rural farmers to participate in major contracts. Fast-food chain McDonalds, for instance, uses A-grade meat from South Africa, Namibia and Botswana for its local operations, but has said that it could use C-grade meat if it had enough supply (Sunday Times, 2014). Rural farmers in Africa are major producers of C-grade grass-fed beef, but because they lack traceability systems, they cannot supply large food chains. The commercial ostrich production industry, which in 2011 experienced an outbreak of highly pathogenic avian influenza, had to implement livestock traceability systems to continue to be able to sell into export markets. To implement a livestock traceability system required the buy-in from an entire industry, from farmers, to abattoirs and processing plants. The ostrich industry also established a private laboratory to do rapid testing to European standards, instead of relying on the State to provide testing. The commercial ostrich production industry, which is reliant on exports, advocates adopting a do-it-yourself attitude if the State does not cooperate. Suggestions for fostering growth Conclusion The agriculture sector represents a high-potential sector of the South African economy – as driver of economic growth, export earnings and employment. Supportive government policy has an important role to play in enhancing the growth and development of the agriculture sector and ensuring that it remains globally competitive. Political stability, policy certainty and labour flexibility are focus points that the industry requires to continue with ongoing investment. References AgriSA. 2021. Focus on effective implementation of land reform plans, December 7, 2021. [Online]. Available at: https://agrisa.co.za/media/focus-on-effective-implementation-of-land-reform-plans [accessed March 21, 2022]. Botha, R. 2021. Expropriation without compensation: A looming catastrophe, March 12, 2021. [Online]. Available at: https://www.farmersweekly.co.za/opinion/by-invitation/expropriation-without-compensation-a-looming-catastrophe/ [accessed March 21, 2022]. Ctrack. 2022. Transport ad Freight Index Report, February 24, 2022. [Online]. Available at: https://ctrack.com/za/february-2022-transport-and-freight-index/ [accessed March 21, 2022]. Department of Agriculture, Forestry and Fisheries. 2015. South African veterinary strategy (2015 – 2020), October 2015. [Online]. Available at: https://www.nda.agric.za/docs/media/veterinary%20strategy%2003%2010%202015%20revision%2016(a).pdf [accessed March 21, 2022]. Department of Agriculture, Land Reform and Rural Development. 2021. Official guide to South Africa 2020/21, 2021. [Online]. Available at: https://www.gcis.gov.za/sites/default/files/docs/resourcecentre/pocketguide/7AgricultureLandReformRural Development2021.pdf [accessed March 21, 2022]. Farmers Weekly. 2022. SA’s dire animal health situation is a constraint on livestock production, January 12, 2022. [Online]. Available at: https://www.farmersweekly.co.za/agri-news/south-africa/sas-dire-animal-health-situation-is-a-constraint-on-livestock-production/ [accessed March 21, 2022]. Health for Animals, 2021. Global benchmarking survey 2020, May 2021. [Online]. Available at: https://www.healthforanimals.org/wp-content/uploads/2021/05/gbs2020-report-for-south-africa-final-with-covers.pdf [accessed March 21, 2022]. Independent Online. 2021. Farmers sleep with one eye open as stock theft costs SA R1.4bn annually, February 26, 2021. [Online]. Available at: https://www.iol.co.za/business-report/economy/farmers-sleep-with-one-eye-open-as-stock-theft-costs-sa-r14bn-annually-29972e20-5e9d-4aed-a90c-0bed356ebd61 [accessed March 21, 2022]. Intellidex. 2020. The Public Sector Wage Bill – an evidence-based assessment and how to address the challenge, November 2020. [Online]. Available at: https://www.intellidex.co.za/wp-content/uploads/2020/11/Intellidex-Public-Sector-Wage-Bill-Nov-2020.pdf [accessed March 21, 2022]. International Monetary Fund. 2022. IMF Country Report No 22/37, February 2022. [Online]. Available at: https://www.imf.org/media/Files/Publications/CR/2022/English/1ZAFEA2022002.ashx [accessed March 21, 2022]. National Development Plan. 2012. NDP 2030, Our future – make it work, August 12, 2012. [Online]. Available at: https://www.gov.za/sites/default/files/Executive%20Summary-NDP%202030%20-%20Our%20future%20-%20make%20it%20work.pdf [accessed March 21, 2022]. Stats SA. 2021. Quarterly Labour Force Survey Q3 2021, November 30, 2021. [Online]. Available at: http://www.statssa.gov.za/publications/P0211/Presentation%20QLFS%20Q3_2021.pdf [accessed March 21, 2022]. Stats SA. 2022. South African economy records a positive fourth quarter, March 8, 2022. [Online]. Available at: http://www.statssa.gov.za/?p=15214 [accessed March 21, 2022]. Sunday Times. 2021. Fast Food: Behind the Golden Arches, May 11, 2014. [Online]. Available at: https://www.timeslive.co.za/sunday-times/lifestyle/2014-05-11-fast-food-behind-the-goldenarches/[accessed March 21, 2022]. Transnet. 2021. Integrated report for 2021, October 29, 2021. [Online]. Available at: https://www.transnet.net/InvestorRelations/Pages/Annual-Results-2021.aspx [accessed March 21, 2022]. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 ISI 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. To this end, it has a very active programme of international collaboration, which contributes to its research work as well as participation in conferences and seminars. During April 2022, the CEO of the ISI, Daryl Swanepoel paid visits to various institutions in Sweden and Denmark. He also took the opportunity to meet with South Africa’s ambassadors to Sweden, HE Ms Brigitte Mabandla, and Denmark, HE Ms Fikile Sylvia Magubane. On his visit, Swanepoel also met with leaders of the Social Democratic Parties of both Sweden and Denmark. A particular highlight was a meeting with Professor Jorgen Elklit, who was an international member of the Independent Electoral Commission (IEC) that oversaw South Africa’s first democratic elections in 1994. Swanepoel also engaged with the Olof Palme International Centre and International IDEA. In addition, meetings were held with the following: Institute for Future Studies Swedish International Centre for Local Democracy (ICLD) Global Challenges Foundation Arenagruppen Cevea Worker's Museum Danish Institute for Parties and Democracy (DIPD) University of Copenhagen, Centre of African Studies Arbejdernes Erhvervsrad (AE) The objectives of the visit were to build on existing international partnerships as well as to establish new opportunities for collaboration.