CHAPTER 2

TOWARDS A PROGRESSIVE GROWTH AND DEVELOPMENT STRATEGY – WITH
AND FOR…THE WORKERS AND THE POOR

Our ANC-led alliance is in the midst of developing and consolidating a growth and development strategy to take forward the NDR. The fundamental economic challenge is to formulate and implement strategies to move us on to a new, sustainable, development-oriented and higher growth path. This will require a major effort to mobilise state and popular forces, as well as the resources in the hands of private capital.

The SACP is fully committed to this collective process, and we have no ambitions to develop our "own", parallel growth and development strategy. However, there are several areas of emphasis that are of particular importance for the SACP, and, we believe, for the working class and poor constituency that we seek to represent. These areas of emphasis derive from a number of consistent theoretical and policy engagements the SACP has been making, as well as from several practical campaigns that we have led over the past few years. They are, specifically:

• Industrial policy
• Defending the public and parastatal sector
• Transforming the financial sector
• Halting capital flight
• Our approach to macro-economic policy
• Building a co-operative movement
• Our approach to black economic empowerment
• A comprehensive system of social security as an integral component of growth
  and development
• Consolidating an effective national democratic, developmental state, and
• Local economic governance and development

INDUSTRIAL POLICY

The SACP has long called for a vigorous industrial policy – which, while involving
core manufacturing, must also encompass mining, agriculture, services and the
‘new economy’. By industrial policy we mean a policy-led process of state interventions
to drive and promote sectoral growth and development. In the case of East Asia,
where industrial policy is often seen to have been most developed, these typically
included the deployment of various incentives and penalties to mobilise and
discipline private capital behind a carefully defined state-led strategy to
promote economic growth and develop productive forces in ways that went against,
or at least ahead of, the prevailing logic of the market. While often co-existing
in East Asian countries with a negative or even hostile attitude towards trade
unions, this was coupled with a push towards a change in shop floor organization
in the direction of more participatory forms and models, with a strong emphasis
on skills development, as central pillars of raising labour productivity. Industrial
policy is broader than a "competitiveness strategy" (to which it is
often reduced in our domestic debate) although it cannot, of course, ignore
this dimension.

Our emphasis on industrial policy, as a priority focus of economic policy, derives from our conviction that "market forces" are fundamentally incapable of promoting anything other than a highly distorted and stunted development of productive forces in former colonial or semi-colonial countries like our own. Indeed, we are convinced that the central lesson of the experience of the very small number of cases where former colonial or semi-colonial countries have achieved some measure of industrial development is that this can only be achieved by policy-driven interventions directed at extensive "market failures" in the developmental process. These "failures" derive, in reality, from the priorities of profit maximisation under capitalism, and they include:

• A failure by private capital and profit maximising enterprises, of their
  own volition, to plan, invest in and lead economic infrastructure projects
  that are often critical to promoting investment in productive enterprises
• A failure by both domestic and foreign capital to invest in viable projects
  to create strategic industrial capacity or otherwise develop productive forces
  in developing countries or "emerging markets" ahead of a proven
  record of profitability
• A failure to initiate and lead strategy development at sectoral or value-chain
  level
• A failure to address a broad range of developmental backlogs and introduce
  work-place transformations to raise the capacities and skills of working people.

Looking at our own experience in South Africa over the past seven years, where we have had some successes in promoting investment and growth a number of elements have been in place. These include: -

• A government-led and -conceived (but not necessarily totally -funded)
  infrastructure development programme. The Strategic Development Initiatives
  (SDIs) or Industrial Development Zone (IDZ) programmes both embody elements
  of such an approach, although there is much to debate about the overall
  character of these specific programmes.

• An active role by a parastatal, such as the Industrial Development Corporation,
  acting as its mission statement says to "identify and support opportunities
  not yet addressed by the market". Examples of such a role include the
  Mozal and the Saldanha steel projects where the IDC acted in the market,
  but with a broader vision than immediate profit maximisation, and where
  this publicly-owned entity became the dynamic and leading force, but not
  necessarily the largest shareholder, in strategic productive investments
  (whose broader character is again open to debate).

• A government-led process of developing a sectoral or industry strategy
  backed up with appropriate incentives and benefits for firms co-operating
  in the programme. The clearest example here is the Motor Industry Development
  Programme where elements of this programme, if not necessarily its
  entire content, are indicative of what can be achieved.

The SACP’s view is that these lessons from our own experience, as well as those of successfully industrialising developing countries, need to form the basis of an integrated industrial strategy that would have to include: -

• State-led economic infrastructure development programmes
• State-driven sectoral and value-chain planning processes
• The identification of areas of strength or advantage, which, in our case,
  would include cheap electricity and raw materials beneficiation
• An active role by appropriate parastatals and SOEs
• The mobilisation of public, social and private capital behind a defined
  strategy by means of, inter alia, incentives and regulatory measures.

While some elements of such an approach can be discerned in existing policies
and practices, our view as the SACP is that we are still far from the effective
formulation and implementation of the comprehensive, integrated industrial strategy
that we clearly need. The Department of Trade and Industry (DTI) has lately
argued that "knowledge intensity" is the key to industrial strategy,
and that policy should focus on enhancing knowledge capacities, promoting innovation,
R&D, breaking down artificial barriers between manufacturing and other economic
activities, and promoting joined-up government. The SACP agrees that these are,
indeed, important aspects of industrial policy. At the same time, we
believe that we must not be tempted to see these elements as substitutes
for developing capacities in other key areas essential to the effective
implementation of an integrated industrial strategy, including those identified
above. We also believe that the legitimate desire to extend the scope of policy
beyond traditional manufacturing to service sectors (which we indeed share),
must not divert attention away from the imperative of developing more effective
strategies for core manufacturing and, indeed, the mining, agriculture and energy
sectors.

In various resolutions adopted at Strategy Conferences, the SACP has accepted that an industrial policy must involve policy choices. As a party of the working class, we have repeatedly stated that the goals of job retention, job creation and poverty eradication are central to our vision of industrial strategy. We are not convinced that it is a foregone conclusion that jobs must continue to be lost in agriculture, mining and formal manufacturing. We believe that these sectors can and must become sectors of job creation. Another critical issue is to locate the promotion of export-oriented activity in a broader context. While this is an important objective, policy cannot, in our view, focus exclusively on export-oriented sectors. We need to give a higher priority than hitherto to strategies for basic needs production, and the development of non-tradable service sectors. Public works programmes linked to infrastructure development also need to be extended as a matter of urgency.

DEFENDING AND CONSOLIDATING THE PARASTATAL SECTOR AS AN INTEGRAL PART OF A
GROWTH AND DEVELOPMENT STRATEGY

The SACP considers State-Owned Enterprises (SOEs) to have a pivotal role in the growth and development strategy. Firstly, as we have already noted, in a context where extensive "market failure" will bedevil our efforts to promote development-orientated growth, reduce inequality, etc., SOEs, operating according to a logic different from that of profit-maximising entities, will be essential for promoting and leading infra-structural development and mobilising investment in strategic projects. Secondly, from the perspective of the SACP, laying a firm foundation for the operation of SOEs and social capital in the present phase of the NDR will be an element upon which an eventual transition to socialism can be built.

In insisting on a pivotal role for SOEs, the SACP is not arguing against restructuring. The inherited state sector was developed to serve the needs of apartheid and it certainly needs to undergo fundamental restructuring to enable it to serve the needs of the NDR. Nor are we necessarily opposed to restructuring involving some form of engagement and mobilisation of private capital. Our basic perspective is that the restructuring of publicly-owned assets needs to be located within the following over-arching strategic objectives:

• Achieving the broad growth and developmental goals of the RDP, especially
  job creation;
• Building a national democratic state – an active, developmental state with
  effective strategic capacity within the economy;
• Enhancing national sovereignty at the economic level and policy level in
  general.

The Party also strongly endorses the processes envisaged in the National Framework Agreement of 1996, key features of which include: -

• Restructuring needs to avoid simplistic ideologically-driven notions that
  the essential aim of restructuring is privatisation as well as managerialist-inspired
  notions about "turn-around" formulae, and the like;
• Restructuring needs to be negotiated strategically between the two key
  partners in publicly-owned entities – government and unions. But care must
  be taken that the needs of users, especially those historically marginalised
  – black households, rural communities, commuters, etc. are adequately represented;
• While reconstruction and development are the key objectives, the related
  objectives of job creation and retention must be central to any restructuring
  process.

While there is a high level of agreement within the tri-partite alliance on most, if not all, of these points, several problems, in our view, continue to characterise policy on this important issue.

Problem Number One - An inferiority complex about public ownership.

For most of the 1980s and 1990s, a triumphalist neo-liberalism has sought to denigrate publicly-owned entities. Neo-liberalism has presented parastatals as inherently bloated, tax-guzzling, inefficient and uncompetitive "corporations". The fact that we inherited an often bloated, inefficient, unsustainable and people-unfriendly apartheid public and parastatal sector has sometimes lent an unjustified aura of validity to the neo-liberal dogma in our own situation. That we need to restructure our public and parastatal sectors is obvious, that this restructuring has to be neo-liberal privatisation is less obvious. But the conflation of the two things is often made, and, of course, deliberately fostered by certain forces. We need to rebuild confidence in a democratic, and effective public and parastatal sector. The argument for publicly-owned entities includes the following dimensions: -

• Developmental priorities – this is, probably, the most obvious
  and increasingly accepted argument. Clearly, privately-owned, profit-maximising
  corporations are not going to invest major resources in overcoming the huge
  structural inequities in our society – delivering educational, health, electricity,
  telecommunications and transport infrastructure and services to the marginalised

• Strategic economic priorities, including the defence of a relative
  national economic sovereignty – we must be careful not just to confine
  the importance of public-ownership to social "basket" cases where
  there is so-called "market failure". In a number of key areas,
  critical economic strategic priorities will not be realised without public-ownership.
  The short-termism of private capital, and its foot-lose cosmopolitanism
  mean that key strategic economic (and not just social) national/regional
  objectives may be ignored or frustrated by private capital, or its undue
  influence. A recent positive example of these points can be found in the
  key role of the IDC in ensuring private sector investment in Mozal, critical
  for the overall Maputo-corridor SDI. Without public ownership of IDC, and
  without the IDC making the strategic commitment to a 20% share in Mozal,
  the development would not have happened at all.

Problem Number Two - Weak corporate governance – the failure of boards
and senior management to take seriously their public mandate

As many aspects of the SAA debacle remind us, a majority public ownership on its own is not sufficient to ensure the realisation of national economic strategic priorities. It is critical that the senior management of publicly-owned entities has a clear sense of public responsibilities and national strategic priorities, and that they grasp the qualitative difference and advantages of publicly-owned entities. The tendency for some senior public sector managers to see themselves as under-graduate capitalists, rather than public sector managers with their own mandate and long-term commitments is part of a major problem. Other cases of poor corporate governance include: -

• Telkom, where the shareholders agreement appears to favour the
  minority shareholder over the government majority, and this has allowed
  decisions that do not make sense from a public and worker perspective, including
  mass retrenchments, increased tariffs, and little in the way of improved
  services.

• Post Office - This is another case where the presence of a minority
  private-sector management partner has compromised the company. There is little
  evidence of any improvement since the SMP was announced, indeed there has
  been a deterioration in services. Government has intervened to terminate the
  contract. The question is whether it should ever have been granted at all.

Problem Number Three - Assuming that privatisation is the only way to mobilise private sector (including foreign) investment

A common argument advanced for privatisation (including complete sales, concessioning out, IPOs, and PPPs) is that this is a means to mobilise private sector investment (including foreign investment) for RDP goals, like infrastructure development and service provision. This argument is not necessarily wrong. Where it is wrong is when it assumes that this is the only possible way to mobilise capital resources for extension and maintenance of infrastructure and service provision. The privatisation route must always be weighed against the advantages and disadvantages of other possibilities for raising investments including: -

• Public borrowing – governments are able to access major relatively
  low interest loans on foreign capital markets, especially for infrastructural
  projects. While this will increase the public debt, it may well prove to
  be financially more prudent in the medium and longer term. International
  examples abound of privatisation projects designed to relieve governments
  of financial burdens that have back-fired. The example of Argentinian rail
  is a good current example. The freight rail system was concessioned off
  into six regional, privately-run entities. State subsidies to freight rail
  have increased 17,7% since this concessioning (not to mention major
  job losses and a serious decline in services).

• Publicly owned entities are able, in principle, to steer more surplus
  into re-capitalisation – Here a good example is the Airports
  Company of South Africa (ACSA). In 1998, Aeroporti di Roma paid a once-off
  R819-million for its 20% share-holding. In 2000 ACSA made a R292 million
  profit – which suggests that every two and a half years ACSA could make
  as much, but over and over, as Aeroporti di Roma paid once-off. Are there
  compelling reasons to continue to sell-off more and more of ACSA, as we
  are currently planning to do? In April this year, ACSA, with 80% still publicly
  owned, announced a restructuring and investment strategy which will see
  the enterprise pump R2,7 billion into airport operations over the next five
  years. This is very much in line with government’s vision of major infrastructural
  investment, contributing through improved transport efficiencies to the
  overall lowering of input costs throughout our economy. As Business Map
  has noted: "A fully privatised company would probably pay out a much
  higher proportion of profit as dividends to investors". Again, we need
  to ask, are there compelling reasons to moving inexorably to selling off
  more and more of ACSA?

Problem number four – the assumption that government should "steer but not row"

A common argument for privatisation is that government should best occupy its time and resources with setting strategic objectives, leaving management and ownership to the private sector. This might, in many cases, be the most feasible option, not least in a national and global economy that is dominated by capitalism. However, we need to be careful about the apparent seductiveness of the "steer but don’t row" argument. There are at least three reasons for caution: -

• Public management and public ownership can sometimes be absolutely
  critical for strategic steering itself - privatisation/partial
  privatisation might impair one’s capacity to steer strategically.

• Attempting to regulate the private sector might prove to be more complicated
  than actually owning and managing an entity – Numerous international
  examples of municipal level PPPs, concessions, and other restructuring projects,
  including our own experience with Dolphin Coast (water tariffs going up
  a projected 15%), and Umgeni Water, raise questions about the complexity
  of regulating private entities, and of ensuring that they do indeed deliver
  efficiently and that they do effectively carry risk (the ostensible reason
  for being "rewarded" with profits). All too often private entities
  nominally carry risk, until there are losses, then they expect to be baled
  out with public subsidies. It is true that we often lack capacity and resources
  in the public sector and in parastatals, but it might, in the medium-term,
  prove to be more reliable building such capacity and resources. The task
  of regulating major transnationals, especially if you are a municipality,
  might be more daunting, than improving your own public service capacity.

• Means and not just outcomes are sometimes critical – one of the
  key policy decisions of our democratic government has been to prevent private
  "international peace-keeping forces" operating from our country.
  We have correctly recognised that these entities are little more than mercenary
  forces, and, regardless of whether their services are sought by relatively
  progressive governments elsewhere in our continent, or in the third world,
  we cannot allow private armies to fulfil a strategic function. In cases like
  this, "efficiency", "outcomes", etc. are not the only
  criteria - means do matter. International peace-keeping must be the function
  of a constitutionally established public entity like the SANDF.

The same, surely, applies in a range of other areas? We would, we believe, agree that most education in our society needs to be provided publicly. Clearly, most of us would agree that the burgeoning of private security firms is a problem, and that our medium and longer-term objective must be the building and extension of the capacity of the SAPS and its associated arms. Is the running of prisons a function that should be increasingly handed over to profit-seeking, private firms? And the paying out of pensions?

In short, and related to the points made above, we need to defend the values of a public sector that embodies the ideal of public service, defined by the needs of the service user, not his or her market power. A sector that gives meaning to "community", to institutions (schools, hospitals, an army, trains) that we can describe as "ours" in a way that we would never refer to Pick n Pay, or Sentry Armed Response, or BP as "ours".

Problem number five – the need to develop a more differentiated appreciation of different modes of private participation

From all sides of the political and economic policy spectrum there are tendencies to collapse the restructuring challenge into a simplistic public-ownership versus privatisation. Of course, there are different kinds of restructuring to access private participation, ranging from full privatisation, through strategic partnerships, to concessioning, to PPPs. There are many variants within each of these as well. It is important to assess the strategic strengths and potential dangers in each of the options.

Bearing in mind the points made above (that regulating/steering private capital is never an easy exercise), different variants of privatisation are more disposed to public strategic steering than others. This is something that must always be factored into any assessment of restructuring. Some examples include privatisation through a stock market offering (eg. the proposed Telkom IPO) which is a route that is least likely to secure some strategic hold over an entity. Securing private sector partners (as with the initial Telkom restructuring, as with ACSA), or borrowing from banks, at least gives one identifiable interlocutors whom one can seek to persuade of medium and longer-term perspectives. Negotiating with the stock exchange is an improbable venture. The more a public entity is exposed to the stock market, the more it is exposed to short-term profit-maximising, with all the attendant dangers of asset-stripping, cherry-picking, etc.

It is often tempting to concession out fragments of a parastatal – private investors are likely to be interested in specific rail-lines (example the high density Coallink or Orex lines and not the whole of Spoornet). Or one might concession out different operations to different private sector operators in the name of specialisation (eg. as in the UK rail case – track maintenance to Railtrack, passenger services to a range of different operators, etc). The dangers are that the rest of the network collapses (with knock-on effects perhaps even for the cherry-picked lines that looked profitable, but where the importance of feeder lines was neglected), or that coherence across the network (as in the UK) is completely lost, with seriously declining service and safety standards.

Problem number six – the place of black economic empowerment in the restructuring process

BEE is an important strategic objective of the ANC-led liberation movement. Restructuring of publicly-owned assets in SA needs to be, in part, about the BEE process, most obviously in the very broadest sense of BEE – namely, the provision of basic economic empowerment to millions and millions of black South Africans through access to jobs, and through the provision of affordable and reliable electricity, housing, transport, telecommunications, etc. But restructuring also presents opportunities to advance BEE in the narrower senses of the term – namely, through the increasing promotion of black managers into senior positions within parastatals; and through the opening up of business opportunities to emerging black entrepreneurs – from the SMME level to an emerging black-controlled large corporate sector.

While there is no necessary contradiction between the pursuit of BEE in both the widest and narrower senses of the term (senior black public sector managers in Metrorail will probably have a greater appreciation of the needs of commuters), we cannot simply assume that this will always be the case. Promoting business opportunities for emerging black private businesses might, in some concrete cases, frustrate the realisation of wider economic empowerment. This dilemma is not always adequately surfaced in our policy debates and assessments.

Problem number seven - flawed processes

Although, in the National Framework Agreement (NFA), we have a remarkably progressive national agreement on the kinds of processes required to ensure effective and strategic restructuring - in practice, the NFA is not working well. The NFA continues to be dysfunctional with labour dissatisfied with the lack of commitment shown to the NFA by managers of public enterprises in particular. Government seems unwilling in most cases to direct these managers and ensure that the NFA is adhered to.

Sometimes the NFA purview is too general, and the real problems occur in the detail of restructuring. At other times, negotiations are formal and not substantial, with decisions already taken by government. The SACP is, obviously and correctly, not a direct participant in NFA negotiations. However, there are some general observations around flawed processes, including an over-reliance on external consultants, international "turnaround" specialists and strategic partners. We need to carefully review and learn from many experiences – including the NZ Post Office episode, and the Coleman Andrews case. Obviously we should not shut ourselves off from international expertise. But we need to be very careful that we are not swept off our feet in the process by agendas that have very little to do with what we are seeking to achieve. In particular we must guard against the assumption that there is some single, generic, "corporate turn-around" strategy package. Too often entities like the Post Office or SAA are approached as if they were simply corporations, and not strategic entities facing specific communication or transport challenges.

What is worse, sometimes the external consultants are merchant banks with a
major vested interest in rapid and extensive privatisation of South African
assets. For example, Rothschilds were used by government to advise on the restructuring
of Spoornet. The details of Rothschilds consultancy contract are not public,
however, it has recently come to light that Rothchilds would have been a beneficiary
of any concessioning of the Spoornet system.

The way forward in the defence and consolidation of an effective parastatal
sector

Arising from the above, the SACP recommends, amongst other things, the following:

• A comprehensive review of the restructuring of public enterprises to date.
• Constant emphasis on the clear, centralised direction and control of the
  restructuring by the national government, including over local government-level
  restructuring.
• This should include ensuring that public sector corporate governance becomes
  a model of strategic competence, and plays a leading role in ensuring our
  growth and development objectives. We must also ensure that publicly-owned
  assets are used to broaden the public sphere, and role back the tyranny of
  the market. There must be full public disclosure of all decisions, contracts
  and information regarding the public sector. The public should be allowed
  access to all crucial meetings where decisions are taken with respect to tenders,
  etc.
• The logic of private capital clearly needs to be challenged. In the restructuring
  process the emphasis should be placed on extension of services to those who
  need them the most, to public control of enterprises and services that are
  essential to development. These include water, electricity, transport, health,
  education, postal services and telecommunications.

The imperative of developing a much clearer industrial policy strategy, and
the linking of such a policy to the restructuring of publicly-owned assets is
crucial. Where private investment is needed, careful strategic evaluation of
the best ways of leveraging this investment is required. PPPs with government
controlling a minimum of 51% are, for instance, more likely to assure the realisation
of strategic goals, than the sale of public resources on the stock exchange.
Each case must be examined strategically, and in detail.

TRANSFORMING THE FINANCIAL SECTOR

Over the past few years, the SACP has played an active leadership role in a
national campaign to transform the financial sector in our country. This campaign,
which has struck a chord among a broad range of social forces, has highlighted
the extent to which the existing financial system is manifestly failing either
to contribute to promoting development orientated growth, or even to providing
basic banking services to the majority of our people. Yet again we believe we
are encountering a challenge of "market failure" in which state intervention
and leadership will be critical.

The existing formal banking and financial system in our country emerged under
colonialism and apartheid to serve the needs of conglomerate capital (with which
it was closely connected), and secondarily to provide personal banking services
to higher income (mainly white) individuals. The majority of working people
and the poor were marginalised from this system, although alternative institutions
like stokvels developed among our people. Regulation of the financial
sector by government was largely prudential regulation, aimed at guaranteeing
the integrity of the system and protecting investor funds.

The liberalisation of the sector in the 1990s tended to reinforce and indeed
exacerbate these patterns. A number of foreign banking institutions entered
the South African market, most seeking to provide niche services as corporate
or merchant bankers. At the same time, on-line banking and computerised services
were introduced, requiring significant investments by banks. Both of these developments
unleashed competitive pressures, leading established South African banks increasingly
to re-position themselves with a greater focus on more lucrative corporate services
and to embark on aggressive cost cutting. This led, in turn, to increasing service
charges, the ending of "cross subsidies" and cutting of less profitable
services to lower income clients.

The result of all of this is:

• Increasing numbers of our people are denied access to basic banking services,
  becoming as a result both "unbanked" and "unbankable"
• A growing reluctance by banks to provide finance for SMME development,
  low income housing, and other priority developmental activities
• Rapidly increasing service charges, particularly on services accessed by
  lower income clients
• The emergence of a sizeable small loans industry, initially unregulated
  and taking advantage of an exemption from the Usury Act, providing small loans
  at very high rates of interest to persons excluded from bank credit – mainly
  personal loans to waged individuals

From our extensive interactions on these issues we are convinced that neither market forces, nor appeals to the "good will" of banks, will fundamentally alter this pattern. A major, state-led project is needed to transform the financial architecture of the country in ways that will make the sector more supportive of development oriented growth and of the broader NDR. Among the key strategic areas that the SACP believes financial sector transformation must include are:

The fostering of co-operative banking – by means of, amongst other things:

• enabling legislation;
• active government support programmes – including technical support,
  favourable funding, etc;
• private sector banks playing a constructive role - sharing skills
  and experience, providing technical assistance; and, in the case of merchant
  and financial banks, extending favourable credit lines.

These issues need, in turn, to be one aspect in a broader package of community re-investment legislation – this needs to be structured in a way appropriate to South African conditions and could include:

• Compulsory disclosure of performance around a range of specified development
  and community related activities, e.g. involvement in SMME finance, low
  cost mortgage lending and support to cooperative banking. Elements of this
  approach already exist in the Home Loan and Mortgage Disclosure Act, and
  in a new Community Re-investment Bill. Comprehensive legislation on community-reinvestment
  could consolidate disclosure requirements into a single, uniform package
  that could, for instance, inform decisions on awarding contracts or placing
  accounts with particular banks by governmental agencies, trade unions, progressive
  CBOs and NGOs.

• The setting of targets around CR, through some specified system of awarding
  credits for CR performance and/or imposing penalties for non-compliance.

Financial sector transformation also includes prescribed asset requirements. This would require insurance companies and other funds to hold a certain percentage of their assets in the form of investments in prescribed development oriented activities. In recent years there has been a tendency to treat this topic as a no-hoper, even though the apartheid regime had a similar requirement for investments in the security sector. We need to resist this attempt to belittle the importance of the demand, and link our demand to the similar proposals contained in the Black Economic Empowerment Commission Report. In addition, we should bear in mind that prescribed asset requirements need to target the massive investment funds in our country (pension funds, the mutuals). They must be seen as a counterpart, in respect to these investment funds, to the CR legislation, whose principal target would be the banks. In response to the polemical argument that "worker-controlled funds need to set the example" – we may agree, up to a point, but equitable and uniform measures must apply across the board, so that no funds are disadvantaged.

The issue of more effective regulation and transformation of Credit Bureaux
has also been raised. Discussion is currently underway to establish some
system of compulsory self-regulation of credit bureaux, which have a major influence
on the prospects of people obtaining credit. While we accept that this is one
aspect, we need to call for a system of independent regulation and oversight
– perhaps by way of a credit bureaux ombud. The widespread abuse, by credit
bureaux, of confidentiality rights of consumers needs to be ended. Regulation
must make clear that the role of credit bureaux is to indicate to their clients
whether an individual is credit-worthy and to what extent – not to supply extensive
details about an individual.

There are several themes we need to develop with regard to the demand for more
effective regulation and transformation of micro-lenders. The Party must
press for a cap on interest rates charged by micro-lenders. We must take up
the challenge of transforming micro-lenders from their present narrow focus
on providing consumer credit to salaried individuals, to a more developmental
and community-oriented role. We also need to constantly underline that the burgeoning
of this sector is a symptom of the failure of the formal banking sector, and
that the larger banks (including some parastatals) need to assume much greater
responsibility for banking the unbanked, including providing life-line banking
services.

Public/parastatal financial institutions have a key role to play in
the transformation of the financial sector. The SACP is particularly
concerned to ensure that the public/parastatal financial institutions do not
drop off the agenda of restructuring of the finance sector. In particular, we
believe that public and parastatal financial institutions, including a range
of development funding institutions, are critical to the SACP’s emphasis on
an industrial policy. There are a range of state financial entities that are
playing, or should be playing, a key role in SMME development, infrastructure,
and agriculture. The potential role of these institutions in leading and catalysing
growth and development industrial strategies needs to elaborated. We need to
develop a greater strategic role for Postbank – Postbank has a network that
reaches into many areas of the country where other financial institutions have
no presence. Postbank is well positioned to be used as the preferred provider
of social security grants (as the anchor business of this SOE). The development
of the Postbank needs to be linked, also, to the demand for more effective life-line
banking. We also need to highlight the role of this sector as part of our broader
commitment to re-building confidence in the importance and key strategic role
of the public and parastatal sector in general.

HALTING CAPITAL FLIGHT

The last few years have seen a tremendous loss of capital from our economy.
As can be seen from the following table, between 1996 and 2000 South African
companies disinvested on average about R40 billion a year. Capital flight has
also worsened in each of the years, although disinvestment was slightly less
in 2000. Capital inflows have been very volatile, and in 2000 fell to their
lowest level since 1994, such that there was a net capital outflow in that year.

Capital outflows and inflows, in billions of Rands

YEAR	93	94	95	96	97	98	99	2000
Foreign investment in SA	-3.9	10.1	32.4	29.0	67.8	60.1	76.1	27.9
Of which: Portfolio investment	2.4	10.3	10.7	18.0	51.6	50.5	83.9	11.8
Investment abroad by SA companies		-5.7	-12.6	-15.6	-40.8	-42.8	-53.7	-37.5
Of which was Portfolio investment		-0.3	-1.6	-8.4	-21.0	-30.1	-31.5	-25.6
Net investment in SA		4.4	19.8	13.4	27.0	17.3	22.4	-9.6

* under R0,5 billion.

Source: South African Reserve Bank, Quarterly Bulletin, June 2001, p. S-90

The past few years have seen a continual liberalising of capital and exchange
controls in various ways. This has opened the way for huge sums of money – mostly
profits from domestic production (using South African workers, raw materials,
and capital) – being invested in other countries, as seen above. Meanwhile this
capital is badly needed at home for productive investment. The rush of some
of our biggest companies to shift their primary listings offshore has also robbed
our country of capital. The argument that these companies used to motivate their
move – that it would allow them to access a greater pool of capital for investment
in South Africa – has been exposed as false. Bluntly put, every Rand that leaves
the country is a Rand less to invest in domestic enterprise and job creation.

Apart from the loss of investment, this disinvestment strategy forms part of
the capital strike by business to influence the transition in the direction
they want. It is an effective use of the power at their disposal to undermine
the power of the state to pursue a developmental strategy. It puts pressure
on government to implement policies favourable to capital. Even these more capitalist
favourable policies have, however, failed to elicit a positive response from
capital. Massive capital flight has, to a large extent, been facilitated by
the ongoing liberalisation of capital and exchange controls. Tightening these
up could assist in maximising the resources available for productive investment
and job creation in South Africa. A stronger position is also needed on the
primary listings of major South African companies shifting to overseas stock
exchanges.

OUR APPROACH TO MACRO-ECONOMIC POLICY

The SACP’s approach to macro-economic policy derives from our broader approach to economic policy outlined above. For the SACP, the "real economy" and policies directed at transforming the "real economy" are the priorities that should shape macro-economic policy. It is for this reason that the SACP has welcomed government’s important shift of emphasis, from the "macro- to the micro-economic", including a major focus on infrastructural development, urban renewal and integrated rural development. These measures were announced by government in the President’s State of Nation address in February 2001; and, in various ways, these emphases are also underlined in NEPAD.

This does not mean that we regard macro-economic policy as unimportant. Macro-policy definitely matters, we agree that prudent and effective management of scarce public resources is essential to achieve sustainable growth and transformation. We also accept that there are constraints – both external and internal – that make prudent macro-economic management essential to insulate us from the vagaries and pressures of global markets.

Our critique of government’s 1996 macro-economic policy framework document, GEAR, was not that its goal of stabilising macro-economic variables was wrong in itself. Our concern was that GEAR prioritised stabilisation over all other considerations, and set ambitious targets based on what were seen to be "global norms", on the assumption that these measures would appeal to foreign investors who would respond by significantly increasing foreign direct investment (FDI) in our economy. GEAR has over-achieved on most of its macro-economic targets, but massively under-performed in its growth and employment creation targets.

Former World Bank chief economist, Joseph Stiglitz, expressed similar concerns
when, in 1997, he criticised "Washington consensus" policies for simplistically
assuming that "a few economic indicators – inflation, money supply growth,
interest rates, budget and trade deficits - could serve as the basis for a set
of policy recommendations". Stiglitz argues that this approach underestimates
the trade-offs between the pursuit of these "macro stability" goals
and other (real economy) objectives. With the recent depreciation of the Rand
– itself in part a product of capital export and exchange control liberalisation
– leading to price rises, the costs of pushing moderate inflation down may well
exceed any benefits.

The SACP’s approach to macro-economic policy is, therefore, that macro-economic policy must be formulated and implemented within a broader, holistic framework, in which real economy and developmental objectives have priority. Secondly, we are convinced that we must formulate policy in the short and medium term on the assumption that the "global environment", created by capitalist globalisation, will both be a source of "external shocks" and reproduce inequalities between developed and developing countries. This does not mean that we should not pursue whatever reforms we can at the global level, but rather that, for policy purposes, we should not over-estimate prospects in this regard. Fundamentally, therefore, the SACP believes macro-economic management should seek, as far as possible, to insulate our economy from the negative impact of global market forces and speculative pressures. We cannot assume that the only remedy in the face of "external shocks" or crises is further liberalisation.

BUILDING A CO-OPERATIVE MOVEMENT

Background

The 1999 SACP Strategy Conference, the 2000 ANC National General Council, the 2000 Congress of COSATU, and the Ekurhuleni Alliance Summit in April 2002, all passed resolutions to build a progressive co-operative movement as part of an overall growth and development strategy. These programmatic resolutions represent an important convergence on policy around the prioritisation of co-operatives. In addition, there is a growing awareness in many South African communities and mass-based organisations of the potential of cooperatives.

A study published in 2001 by the National Co-operative Association of South Africa (NCASA) estimates a total of 60 000 participants in co-operative enterprises. Economically, the co-operative movement is still small in our country. A recent survey of 654 co-operatives in South Africa found that their aggregate turnover was R1,3 billion – however, this figure falls to a mere R84 million if the agricultural sector co-operatives from the previous era are excluded.

There has been a long tradition of co-operatives within the dominant classes. Emerging Afrikaner capital, in particular, used co-operative enterprises, especially for the marketing of agricultural products. This sector still dominates significant segments of production and marketing in our economy, and largely excludes the black working class and rural poor from any active co-management, or significant benefits.

Various forms of co-operative survival activity have, however, long been a feature among the oppressed majority, especially among black women. The urban and rural poor have sustained various savings co-operatives, for instance – stokvels, burial societies, savings clubs. Outstanding women communists, like Dora Taman, played a pioneering role in establishing food purchasing co-operatives, and child-care co-operatives in the 1940s. There have also been more recent attempts from within the democratic and worker movements to establish co-operatives, including production co-operatives – often in response to mass retrenchments. Important, but limited, successes have been achieved. Lessons learned in all of these experiences are important for our ongoing struggle to build a vibrant co-operative sector.

The potential of co-operatives

Co-operatives are not a panacea, nor are co-operatives necessarily progressive – as the established capitalist-based, agricultural co-operatives from the previous era remind us. However, co-operatives owned and controlled democratically by the urban and rural poor have an enormous potential:

• Co-operatives can be an important response to the poverty crisis in our
  society – they offer a feasible strategy to pool scare resources, collectivise
  efforts and help to build sustainable local communities;

• Co-operatives can play (are already playing) an important role in empowering
  urban and rural poor women – providing a more equitable response
  to the burden of unpaid re-productive labour. In the face of deepening unemployment
  and the HIV/AIDS pandemic this burden is likely to increase.

• Significant strategic emphasis has recently (and correctly) been placed
  on fostering black-owned small, micro and medium-sized enterprises (SMMEs).
  However, the model for these enterprises has often assumed a single owner-entrepreneur,
  and the tacit assumption is even sometimes that every owner-entrepreneur
  should be an aspirant Harry Oppenheimer or Bill Gates. These assumptions
  set up the great majority of SMMEs for failure. The pooling of limited resources
  through the co-operative approach, and the strategic orientation to different
  objectives (sustainable livelihoods and community development) are, we believe,
  more likely to provide an effective basis, in many cases, for SMME success.

• Finally, co-operatives are extremely important for the social values that
  they can help to nurture. Co-operatives build on traditions of collective
  endeavour, they are more attuned to the spirit of vuka zenzele (than
  free market competition) that we are seeking to deepen, and they can, therefore,
  play an important role in the moral regeneration identified by the ANC as
  a critical task of the NDR. From an SACP perspective, a progressive co-operative
  movement is an important building block in the struggle for socialism. Progressive
  co-operatives can build the economic power of workers and the poor, they
  can nurture a sense of class capacity, and they build confidence in socialised
  forms of economic activity.

The problems faced by a progressive co-operative movement

Operating, as they have to, in a capitalist-market dominated environment, and in communities beset with huge problems of under-development, progressive co-operatives face many challenges. However, the democratic breakthrough of 1994, and the ongoing consolidation of progressive state power, create conditions in which a progressive co-operative movement can flourish.

The principal problems faced by progressive co-operatives are:

• inappropriate existing legislation governing co-operatives. The legislation
  was enacted by the apartheid regime to promote marketing co-operatives among
  white commercial farmers;

• the existing banking and broader financial sector is completely inadequate
  for the developmental challenges facing our country (as noted in the section
  on transforming the financial sector above). Co-operatives, like other SMMEs,
  battle to get effective funding.

• When co-operatives somehow manage to leap the hurdle, and obtain financing,
  it is often "over-geared", i.e. the co-operative is saddled with
  a huge debt repayable at high rates of interest. Small enterprises in developed
  countries are often initially funded partly by the state, and/or partly
  through the mobilisation of personal savings. The urban and rural in South
  Africa general lack adequate "own finance" when starting enterprises
  – hence the dangers of "over-gearing".

A progressive co-operative movement – what is to be done?

In government:

• We must enact appropriate legislation and develop an enabling policy
  framework to create the appropriate environment for the building and sustaining
  of a vibrant, progressive co-operative movement;
• In all government departments and in all spheres of government, building
  and sustaining a co-operative movement must enjoy strategic emphasis. In existing
  awarding of tenders guidelines, for instance, BEE small businesses
  are mentioned, but without any reference to black-owned and controlled co-operatives.
  Progressive co-operatives must be given the necessary recognition and preference,
  including access to what must become a much more extensive programme of public
  works.
• Government and parastatals must direct funding towards the progressive
  co-operative sector – start-up funding, poverty alleviation funds, research
  and development, and state assistance with marketing are all possible
  and necessary.
• Land restitution and land reform measures must be much more
  aligned with a co-operative enterprise approach.

Mobilising other financial resources

• In the section on "Transforming the Financial Sector" we have
  already under-scored the importance of community reinvestment legislation
  and prescribed assets – such legislation and/or regulation should
  be linked to programmes to develop the co-operative sector;
• Internationally, successful co-operative movements have often been linked
  directly with a network of co-operative banks. Partly linked to this,
  we need to more effectively consider ways of mobilizing and co-ordinating
  finance that is already held in stokvels, burial societies, savings clubs,
  etc.

Amongst the people

At the end of the day, however, the success of a progressive co-operative movement will depend on the mobilisation, the initiative and resourcefulness of millions of working people and the urban and rural poor.

The SACP, and particularly it branches and districts, will play an active role, together with our alliance partners, and with progressive community and mass-based organisations in popularising and nurturing a progressive co-operative movement.

OUR APPROACH TO BLACK ECONOMIC EMPOWERMENT – WITH AND FOR…THE WORKERS AND
THE POOR

Over the last decade the strategic objective of achieving "black economic empowerment" (BEE) has become increasingly enshrined in the programmes and perspectives of our liberation movement and ANC-led government. The concept itself originates in the civil rights struggle in the United States, and reflects the ways in which corporate America has often sought to accommodate and deflect the aspirations of the Afro-American community in that country.

In South Africa, the concept of BEE is often used ambiguously. On the one hand, it can refer to the overall economic empowerment of the great majority of South Africans who continue to suffer from the legacy of apartheid capitalism. But more often than not, BEE is evoked in a narrower sense, to refer to the advancement of a black minority, through equity acquisitions and individual promotion into the senior management ranks of the private and public sectors.

The SACP, obviously, strongly endorses the notion of BEE in its widest sense. We need, constantly, to inject a race, gender AND class perspective into the debate about the character and direction of economic transformation. In evoking BEE, the emphasis must be placed on the aspirations and crises confronting workers and the urban and rural poor, who are overwhelmingly black. In this sense, job creation for the millions of unemployed is the number one BEE challenge. All of our other transformational programmes – building a progressive, developmental public and parastatal sector, the provision of water and electricity, telecommunications and transport infrastructure, integrated rural development and urban renewal, education and skills training, the fostering of micro-enterprises, and particularly cooperatives, and the transformation of the financial sector, etc. – are integral to this wider sense of BEE.

Neo-liberal forces in our society have actively sought to deflect our national liberation effort through the limited and partial deracialisation of the capitalist ownership and management functions. Indeed, this agenda has had some success over the last several years. While the "deracialisation" of wealth, power and privilege is often exaggerated, the most significant deracialisation has indeed happened at the upper quintile level (the wealthiest 20% of our population). The proportion of urban Africans in the richest quintile increased five-fold between 1990 and 1995 (from a mere 2 percent to 10 percent), a trend that has probably continued. However, poverty, marginalisation, unemployment, vulnerability to disease remain overwhelmingly racialised (and gendered).
(statistics from South Africa: transformation for human development 2000, UNDP; and Bureau for Economic Research)

The SACP is opposed to capitalism. Insofar, as the private ownership of the
major means of production persists in our society, then obviously the SACP will
not oppose the deracialisation of capitalist ownership. But the deracialisation
of the capitalist ownership function in our country should never be allowed
to deflect our liberation movement from the much more substantial economic transformation
challenges that confront our society. In any case, the deracialisation of capitalist
ownership that has occurred so far, has been extremely limited and uneven, even
for the most direct beneficiaries. It has tended to rest on equity acquisitions,
for a very limited number of black individuals, based on financial loans that
have left real power in the hands of the established corporations and their
owners. In the first years after the 1994 democratic breakthrough, black share
ownership on the JSE rose rapidly to over 7%. But with the 1998 decline in share-values,
the black equity share quickly dropped to a paltry 2%.

While black capitalist ownership may present our liberation movement with some tactical and strategic leverage, the case should not be overstated, and it will rest considerably on the objective circumstances, and on the effectiveness of our liberation movement and government in directing and disciplining black (and indeed white ) capitalists.

The SACP rejects the concept of a "black bourgeoisie", as if there were two capitalist classes in South Africa. There is one capitalist economy in South Africa, and there is one capitalist class. This capitalist class is segmented in a variety of ways, according to sector, size of enterprise, its principal market (domestic or export), and, to some extent, according to race and ideology. Likewise, and for related reasons, the SACP is sceptical about the notion of a "patriotic bourgeoisie", defined simply by race. This is not to say that the SACP and broader national liberation movement, without too many sentimental illusions, should not continuously seek to foster – through persuasion, accords, compulsion and regulation – a patriotic commitment from the black (and white) sectors of the bourgeoisie to the extent that this is possible.

BEE is also often associated with managerial promotion of black individuals
in the private and public sectors. This kind of active promotion holds out more
transformational possibilities. In principle, the promotion of individuals with
an organic connection to poor working class communities can help (and in practice
is often helping) to change the character of private, and especially public
sector institutions. However, here too, matters cannot be taken for granted,
the core objective of managerial BEE strategies is overall and collective transformation,
not individual promotion.

A COMPREHENSIVE SYSTEM OF SOCIAL SECURITY AS AN INTEGRAL COMPONENT OF A GROWTH
AND DEVELOPMENT STRATEGY

The social security system in place at present is extremely limited, and it only targets certain categories of the poor and marginalized. Under apartheid, the two principal pillars of the social security net were short-term unemployment insurance and old-age pensions. The UIF was premised on the assumption that formal employment is the norm for those of working-age, and that unemployment is a temporary condition.

Although there was racial discrimination in pension scales, old-age pensions to Africans and Coloureds at least offered a meager life-line to poor families. As the Report of the Committee of Inquiry into a Comprehensive System of Social Security for SA notes: "even under apartheid, the final distribution of income was significantly more egalitarian than the market distribution of income."

Since 1994 formal racial discrimination has been ended, important new grants (notably the Child Support Grant for children under seven) have been added, and various other major initiatives have extended the social wage of the poor (free health-care, free basic amounts of water and electricity, etc.). However, the structure and underlying assumptions of our social security system are still fundamentally premised on the assumption that employment is the norm for the working-age population, and that social security should, then, target the most vulnerable in other sectors of the population (the very young, the aged).

These assumptions are fundamentally flawed. Unemployment stands at 37 per cent, and it has been rising. For millions of South Africans, including hundreds of thousands of young, new entrants every year, any, formal employment will never be realized, certainly not within any medium-term scenario. The unemployment problem in South Africa is systemically rooted in apartheid under-development, but it may also be related to the global restructuring of production and the increasing global inability of capitalism to absorb working-age people into formal employment.

The current levels of poverty, inequality and systemic unemployment act a major restraint on any growth and development. The challenge of developing a comprehensive system of social security in South Africa is, then, not to make nearly half our population passively dependent on welfare grants, but to use a comprehensive social security system as an important leverage within a sustainable growth and development strategy that includes a focus on:

• building self-sustainable communities;
• building a progressive co-operative movement
• stimulating local economies, including stimulating local consumption and
  trade
• fostering training and skills development
• public works programmes
• engendering our overall approach to economic growth and development.

The SACP supports the call for an intensive exploration of the feasibility
of providing a Basic Income Grant to all South Africans, funded primarily
through a more progressive taxation system. A BIG system has much to
recommend it – it is potentially simpler than means-tested grants, its coverage
will be universal, and its positive knock-on multiplier effects are calculated
to be very significant. The principal challenge in implementing a BIG system
will be capacity to roll it out. The SACP, therefore, supports the call to extend
the Child Support Grant to older ages – on its own merits, but also as an important
means for developing and testing our capacity to extend social security to include
a Basic Income Grant. The SACP believes that the publicly-owned Post Office
Bank should be the preferred institutional network for rolling out an extended
Child Support Grant, and any eventual Basic Income Grant.

CONSOLIDATING A NATIONAL DEMOCRATIC, DEVELOPMENTAL STATE

We must not reduce the state to a narrow economistic role. But, as we have already insisted, we must also not reduce our growth and development strategy to a narrowly economic, still less macro-economic, programme and process. A coherent and sustainable growth and development strategy requires, for instance, that:

• we address the social deficit and not just the budget deficit,
• we create a favourable environment for survivalist, "informal"
  and co-operative sector activities and not just (and not primarily) for private
  sector corporations,
• in seeking to mobilise resources, we understand that there are substantial
  community-based, social, budget and parastatal resources, and not just private
  sector capital.

The national democratic state, that we have been seeking to consolidate since 1994, is the critical integrating factor in bringing all of this potential together. But the state is a site of intense struggle, and this integrating strategic role is constantly contested and undermined by forces outside of, and within the state and parastatal sectors.

A developmental state

Wherever "Third World" societies have succeeded in breaking out of systemic under-development (even if only for a decade or two, or in other partial ways), the state has played a key strategic role. In many South East Asian societies this has, for instance, been the case. The concept "developmental state" has been coined to capture the process in which the state plays a leading, strategic role in catalysing a new accumulation path.

Our own concept of a developmental state evokes aspects of this experience drawn from other societies – the use of state power to co-ordinate, mobilise, regulate, discipline and, to some extent, to resource a variety of domestic (and even external) social forces, in order to achieve an accumulation path that spurs national development and growth. It is a new accumulation path that enables a break with the skewed accumulation and dis-accumulation patterns of under-development.

However, in our case, we speak of a national democratic, developmental state in order to underline the fact that the post-1994 South African state is (or should be) the state of a radical (national democratic) bloc of forces. This bloc of forces is strategically committed to a NDR, in which the working class is the principal (but not only) motive force for the consolidation of popular power for the advancing, deepening and defence of this revolution.

Strengthening the strategic capacity of our state

All of the other key themes touched upon in this chapter require an active, developmental state with the capacity to co-ordinate and mobilise, in the first place, the efforts and resources of all state and parastatal structures. A coherent growth and development programme needs to be the overarching strategy that informs this co-ordinating role.

Over the last several years we have introduced many reforms that, at least potentially, strengthen the national democratic strategic, co-ordinating, and planning capacity of the state. These measures include:

• the clustering of cabinet ministeries in order to counter
  tendencies towards excessive compartmentalisation;
• the introduction of medium-term budgeting which helps to align budgeting
  with strategic planning;
• the Public Finance Management Act which helps to align public management
  with strategic planning, and ongoing strategic evaluation.

The neo-liberal challenge

These attempts to strengthen the strategic national democratic capacity of our state are, however, constantly challenged, hi-jacked or undermined by very different approaches to the role of the state. In particular, there is the constant challenge of the globally hegemonic neo-liberal paradigm, with its "new public management" perspectives, backed by powerful multi-lateral institutions (like the World Bank), and by hundreds of energetic "consultancies" and "aid agencies" of all kinds.

Underpinning these endeavours is the ideological assumption that the state should be "strong":

• insofar as its capacity to force through potentially unpopular structural
  adjustment measures is concerned (liberalisation, privatisation, budget deficit
  reduction, retrenchments); and
• insofar as the protection of the property and investments of transnational
  and national corporations is concerned.

However, the state, in this paradigm, should as much as possible, leave economic growth and social delivery to "market" forces. Hence the constant themes of "user pays", "market determined pricing", "introducing competition into social delivery", and, of course, privatisation.

This paradigm, in its approach to the institutional structuring and management of the public sector, tends also to treat the public sector as if it were (or should be) carved-up into profit-making, stand-alone corporations (no doubt, mostly with a view to selling them off, sooner or later, as a new terrain for private profit-taking). Hence:

• the tendency to fragment the state, or state departments, or parastatals,
  into dozens of "agencies" and "business units", focused
  on "core business";
• the tendency to approach public service work in narrow, market-driven ways
  – the financialisation of performance assessment and reward; and
• the tendency to assess the performance of parastatals on whether they have
  made "an annual profit".

While some of these management techniques may be appropriated for progressive purposes, overwhelmingly this neo-liberal paradigm under-cuts what is critical and central about the national democratic state – namely, it is (potentially) a public entity, capable of being organised and motivated around a long-term, strategic public mandate, i.e. politics and not "market-forces" can (and must) be the primary motivating force for the state and its hundreds of thousands of cadres. Anything less than this will simply imprison us within our existing path of underdevelopment, of skewed accumulation and of dis-accumulation.

The state and popular power

Apart from mobilising public resources, the ND developmental state needs also to be a critical factor in mobilising the key motive forces of our NDR for growth and development. The national democratic, developmental state and popular power need, therefore, to exist in a thoroughly complementary relationship. However, achieving this complementary relationship in practice is a complex challenge. Since 1994 a number of important initiatives have been undertaken by the ANC and its alliance in order to consolidate the unity of state and popular power. They include:

• the transformation of the public service – deracialising and engendering
  the public service. But also, through enhanced training and skills, seeking
  to make the public service aligned to our strategic developmental objectives,
  including becoming accessible, more people-friendly, through the batho
  pele campaign, and other efforts;

• important initiatives from the side of the progressive public sector
  unions, seeking, likewise, to transform, from the bottom up, public
  service practices and attitudes;

• the fostering of participatory democracy – since 1994 we have actively
  developed a wide range of participatory democratic institutions and practices.
  At the local level, these include school governing bodies, hospital boards,
  community policing forums, and ward committees. At the national level, participatory
  democratic practices include institutions like NEDLAC, and government-trade
  union agreements like the National Framework Agreement (applying to any
  state-owned enterprise restructuring);

• related to the above, we have also launched various initiatives to foster
  a spirit of volunteerism, reinforcing the role of the state with
  community (and other) volunteer initiatives.

• advancing, deepening and defending representative democracy
  and the key institutions of representative democracy – the legislatures.
  We have inaugurated non-racial, multi-party representative democracy in
  all three spheres of governance (national, provincial and local), with exceptionally
  high to relatively high-levels of voter participation in elections. We have
  sought to consolidate the active oversight role of legislatures, and we
  have encouraged popular involvement in parliamentary law-making and policy
  oversight and development.

• Related to consolidating representative democracy is our commitment to
  and, for the moment, the achievement of a seemingly durable, relatively
  stable and substantial electoral majority. We view the ongoing consolidation
  of this stabilised electoral base, and, therefore, of a stable alliance
  electoral front, as being critical for the consolidation of a national democratic,
  developmental state. The DA and neo-liberal think-tanks bewail the reality
  of our "one party dominant" (as they despairingly call it) system,
  and they work tirelessly to undermine the ANC’s dominant electoral position.
  They seek to cobble together all manner of opportunistic electoral alliances
  in order to pose some medium-term electoral threat, they seek to split our
  alliance, to turn the social movements and NGOs against the ANC, to mount
  sustained media campaigns, etc. While a stable, and likely long-enduring
  ANC electoral dominance could lead to aloof complacency and bureaucratic
  arrogance, the SACP views the ANC’s substantial and relatively secure
  electoral majority as a major asset for the consolidation of a ND
  developmental state and, therefore, for any effective growth and development
  strategy. Relative stability and continuity (based on the correct strategies,
  of course) are absolutely critical for the profound transformation process
  that is required to overcome our country’s under-development.

In practice, we have learnt that all of these efforts require ongoing struggle. Advances are constantly undermined by bureaucratic inertia, or they are resisted by executive fears of being "delayed" by "unnecessary" processes, or of being subjected to "co-governance". Progressive transformation of our public sector is often simply confused with the uncritical imposition of imported, "international best practice", neo-liberal inspired "new public management" formulae.

The transformation of governance is also undermined by an "oppositionist" tendency often found within social movements, NGOs and even trade unions – a tendency that eschews responsibility for state power, preferring the comfort-zone of criticism from "outside", and a general scepticism about government and legislatures.

In the coming period the SACP, together with its allies, will build on the positive experience we have gained from all of the above. The SACP will counter the various negative tendencies noted. We will seek to learn from mistakes and new challenges in the constant struggle to build the ND developmental state, and the unity of this state and popular power as the critical bulwark of our growth and development strategy.

LOCAL ECONOMIC GOVERNANCE AND DEVELOPMENT

The consolidation of a ND developmental state relates to all three spheres of government (national, provincial and local), but local economic governance and development require special focus.

Our approach to local economic development is guided by the strategic objectives of the NDR, and, in particular, our commitment to a growth and development strategy that is both people-centred and people-driven. It is, precisely, at the local level that it is often most possible to develop a people-centred and people-driven approach. Our neo-liberal strategic opponents like to limit discussion of economic policy options to an elitist and technocratic domain that is often disempowering of our political formations, not to mention our mass base. Local economic development is, potentially, one terrain on which we can seek to mobilise popular participation.

A new, progressive legislative framework

One of the important constitutional and legislative achievements of the post-1994 period is a relatively unique, and remarkably progressive legal framework for community participation in local governance. In our new local government system, a municipality is legally defined as comprising not just the councillors and administration, but the local community as well. Among the objects of local government in the Constitution are "to provide democratic and accountable government for local communities" and "to encourage the involvement of communities and community organizations in matters of local government".

In terms of The Municipal Systems Act a municipality "must develop
a culture of municipal governance that complements formal representative government
with a system of participatory governance". The Act makes it clear that
residents have the right to contribute to the municipality’s decision-making
processes. They also have the right to submit recommendations and complaints
to the council and are entitled to prompt responses to these. They have the
right to "regular disclosure of the state of affairs of the municipality,
including its finances". In order to encourage residents to pay promptly
for their services, municipalities are required to inform them about the costs
of providing the services, the reasons for the payments of the fees, and the
uses to which the monies raised are put. Residents also have the right to give
feedback to the municipality on the quality and level of services offered to
them.

Although not compulsory, the new system provides for ward committees to be set up in each ward of a municipality in order to "enhance participatory democracy". A ward committee may make representations on any issue affecting a ward to the councillor or through the councillor to the council. It can also exercise any duty or power delegated to it by the council. A ward committee comprises the ward councillor as the chairperson and up to 10 other people representing a "diversity of interests in the ward". Women have to be "equitably represented" in a ward committee. While a municipality may meet the administrative costs of a ward committee, it cannot offer committee members a salary. In terms of the Code of Conduct, councillors are required to have at least four public report-back meetings.

Challenges

This constitutes a remarkably progressive framework for consolidating popular power at the local level. However, there are many challenges:

• The local sphere of democratic government has been the slowest to be inaugurated,
  and it is only with the December 2000 local government elections that a fully
  democratic dispensation has begun to prevail in this sphere;
• Local government is beset with many capacity and resource challenges, including
  human resources;
• Despite progressive legislation, many citizens are completely unaware of
  their local government rights, and municipalities themselves have often been
  slow to implement participatory measures – either ignoring them, or doing
  the bureaucratic minimum;
• The tendency towards the demobilisation of our mass forces after 1994,
  and weaknesses in the mass and community based organisations that had been
  so important in the anti-apartheid struggle, have further contributed to a
  slowness in taking up the new popular participatory possibilities;
• The SACP and its alliance partners have also often failed to give effective
  political leadership on the ground. This has either further compounded the
  demobilisational problems, or it has resulted in demagogic populist forces
  mobilising around local grievances.

In addition, we have also already encountered many difficulties and shortcomings when, and where, participatory measures have actually been implemented:

• Ward councils are, in practice, often little more than formalistic affairs,
  to fulfil the letter (but not the spirit) of the legislation;
• Or they are sometimes dominated by a handful of self-appointed community
  notables, gate-keepers, who suppress, rather than facilitate genuine community
  involvement;
• IDPs are reduced to pet projects, or uncoordinated wish-lists, rather than
  being genuinely integrated, three-year developmental plans.

None of these problems are insurmountable, but they underline that building
an effective ND developmental state at the local level is not something that
simply flows spontaneously from progressive legislation.

The way forward

In the coming period, working together with our allies and all other progressive
formations, we must:

• Play an active role in a massive educational and mobilisational
  programme on the rights of residents to participate in municipal affairs,
  and on the importance of community participation;
• Such a programme should also include training and capacity-building
  for councillors, administrations and communities;
• Active involvement in the preparation, implementation and review of IDPs;
  the establishment, implementation and review of a municipality’s performance
  management system; monitoring and review of a municipality’s performance;
  preparation of a municipality’s budget; and involvement in decisions
  about the provision of municipal services.
• Establishment of effective ward committees.
• Establishment of effective sub-councils in metropolitan municipalities.
• Ensure that our ANC election manifesto commitment to the provision of free
  basic amounts of water and electricity is implemented, and that other
  potential areas of decommodification of basic needs are taken up.

These are some of the critical tasks that we must take up together with the entire progressive movement. In addition, the SACP must specifically ensure:

• Every structure of the SACP, from branch upwards, has a comrade or committee
  focused on local government;
• The Party has annual national and/or provincial local government and economic
  development workshops; and
• All of the other core programmes of the Party (integrating growth and development,
  defending the public and parastatal sector, transforming the financial sector,
  building a progressive co-operative movement, etc.) are thoroughly integrated
  into local economic development and governance.

SOCIAL DIALOGUE, SOCIAL PARTNERSHIP AND STRATEGIC AGREEMENTS BETWEEN GOVERNMENT, BUSINESS, LABOUR AND OTHER CIVIL SOCIETY ORGANISATIONS

The perspectives elaborated in the various sections above do not aspire to be a comprehensive growth and development strategy. There are many critical sectors of the economy that we have hardly touched upon – ICT, energy, transport, mining, key manufacturing sectors, etc. Many SACP members are active, through the ANC and government, through their trade unions and other structures, in important policy and practical endeavours in these and other fields. In this document, we have sought to highlight the specific areas of strategic policy and mobilization in which the SACP has been most active. These are areas which we believe require particular attention and emphasis, and we intend to take them forward in the coming years.

Self-critically, there are some areas that have not received adequate SACP attention, areas which are of particular importance to our working class and poor constituency, and which are central to our NDR and longer-term socialist vision. In the coming period the SACP will ensure much more effective communist theoretical and practical attention is given to:

• Land reform and agricultural transformation and development;
• The building of an extensive social security system.

Nonetheless, much of the SACP’s economic policy development and active popular mobilization occurs not as a stand-alone endeavour, but within the context of our alliance, and within the context of thousands of communists being active participants in various structures of governance. The SACP supports this way of working, and communists will continue to be active and disciplined participants within many other progressive collectives.

The SACP, furthermore, endorses our broader alliance perspective that, while the alliance must assume a leading responsibility for the elaboration and implementation of a progressive growth and development strategy, the support of the widest range of domestic and international forces should be sought.

It is in this context that the Ekurhuleni Alliance Summit of April 2002 endorsed government’s call for a National Growth and Development Summit. There has been a growing consensus in our country that social dialogue has an important role to play in the elaboration and implementation of a sustainable growth and development strategy. Various international experiences show that social dialogue and agreements of various kinds between government, business, labour and other civil society organizations, can help with managed restructuring of an economy, creating some certainty, and even significantly improving social equity and employment opportunities.

Of course, there can be dangers for the organized working class entering into agreements of this kind. The working class can become demobilized, and agreements may limit the extent to which the working class can advance its own interests. In addition, excessive expectations around a Growth and Development Summit, or a "social accord", can end up creating more, rather than less, negative sentiment if agreements fail to materialize.

Notwithstanding these real dangers, given that:

• The domestic balance of forces is, in principle, sufficiently weighted
  towards progressive forces;
• The domestic systemic crisis of capitalism is so entrenched; and
• The independent capacity of private capital to chart a path, and to implement
  a coherent programme, to overcome this crisis is so limited

…the SACP believes that the call for a National Growth and Development Summit,
and the convening of many industrial sector summits, need to be pursued actively
with a view to forging broad national strategic consensus.

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