Easier Said Than Done

Dramatic contrast••• the RDP aims to build hundreds of thousands of low-cost houses to accommodate squatters who have built vast shack lands on the fringes of South Africa’s towns and cities. Here, a new housing scheme near Johannesburg contrasts with a shanty town.

After the pomp and ceremony of South Africa’s transition fromapartheid to democracy, the praiseworthy intentions of the new government’s Reconstruction and Development Program (RDP) must be transformed into tangible benefitsfor millions of its supporters. But, as government has quickly discovered, turning words into deeds is a difficult business. Jenny Cargill takes a critical look at the RDP and then has a frank discussion with Jay Naidoo, Minister responsible for co-ordinating its implementation. History will undoubtedly show that the record of the first of South Africa’s democratically elected governments will be the most unenviable. Everyone, government and the people, entered the new South Africa with expectations too great to fulfil. President Nelson Mandela set a gruelling deadline of 100 days for the kick-start to an ambitious Reconstruction and Development Program (RDP). But that first landmark passed quietly. As the cabinet came to experience the gargantuan task before it, ministers began to temper their undertakings and to lengthen the timeframes in which to implement their plans. The people, on the other hand, knew little of the hurdles and blockages their chosen politicians were up against. They scanned the horizons for change, and saw little to convince them that the government had channelled its  energies appropriately in the first 100 days. Communication with the grassroots, Mandela conceded, had been lacking. But that, he argued, should not negate the fact that work had been done. Free health care to specified sections 36 at one of the population had been provided; a primary school feeding program was poised to be launched; furthermore, additional finance would be channelled to the provinces to deliver on their electoral promises. Minister without Portfolio Jay Naidoo – who is responsible for co-ordinating the RDP effort – admits that they did not anticipate the full extent of the challenge. Be that as it may, government cannot now backtrack without being seen to renege on its election promises. The more critical liken the RDP to a wish list. Certainly, it is true that the RDP is less ofa program and more a statement of intentions. The kinder interpretation is that it is a vision – albeit detailed – of a dramatically different, but nevertheless normalized society, in which a disadvantaged majority can feel confident of sharing in the fruits of economic growth and development. Whatever the interpretation, responsibility for the implementation of the RDP is not for the feint hearted. President Mandela’s African National Congress (ANC), the senior partner in South Africa’s Government of National Unity, has inherited a collection of crises and socio-economic distortions which, no matter how favourable conditions are, will take much longer to resolve than what people are likely to find acceptable. State finances are an over-riding constraint. With his usual missionary zeal on the subject, Rand Merchant Bank economist Rudolf Gouws recently gave the parliamentary standing committee on finance a barrage of statistics to underline his point that the new government has inherited a “fiscal mess”. What does this mean? The long and the short of it is that government doesn’t have the finances to implement its ambitions through increased state expenditures. Of course, there is nothing to stop it disregarding the dangers of inflation and printing money; or raising taxes; or worsening its already too high budget deficit of some 6.6 per cent.

On all counts, however, it has undertaken not to follow such a course. It hopes to sidestep the fiscal crisis by injecting efficiency into the civil service and changing expenditure patterns to ensure that state spending discards its apartheid biases and assumes an RDP flavour throughout. This is where a heavy dose of scepticism comes in. Few believe that the ANC will get the civil service to work better. Given the commitment to step up employment of black civil servants, when the jobs of the “old guard” are guaranteed, an increase in the 1.2 million strong bureaucracies is expected. Public Administration Minister Zola Skweyiya is frank on this. That will cost the country. In addition, the unavoidable chaos around restructuring the many former homeland and provincial administrations into nine new provincial governments adds another layer of burden on the fiscus and civil service. As director general of state expenditure Hannes Smit said in the run-up to the April election: “I’ve never seen a restructuring exercise that does not add costs to budgets.” If savings and efficiencies cannot be achieved in the civil service, what room is there to implement the RDP? Many in business believe that government must resort to additional and/or higher taxes. They reckon that the once-off 5 per cent levy imposed on middle-to-upper income individuals and companies, which were announced in the June Budget to cover costs involved in the country’s transition from apartheid to democracy, will be repeated. But, at this stage, their views are supposition. What alternatives are there? As yet unexplored is the input of the private sector into the fulfilment of the RDP. If the RDP is about growing the economy in a way which distributes income to the disadvantaged black population, then the private sector should be important in the equation. But, for the moment, it is not. Naidoo argues that the RDP needed a kick-start, and at this stage, only government could provide it. This, he adds, explains why their approach seems so weak on non-government participation. The next phase, however, will draw that in. The kick-start mechanism is the RDP Fund, first set at R2.5 billion ($714 million), with the promise of another injection of R1.7 billion ($485 million). The Fund has been financed from cuts in state department budgets by an average of 3 per cent of consumption expenditure. Additional finance – perhaps as much as R4 billion ($1.14 billion) could be reaped from cashing into the strategic oil reserve built up over the apartheid days of the oil embargo. So far, however, government has said nothing about this reserve. ANC-appointed deputy finance minister Alec Erwin says the fund is designed to entice state departments to introduce RDP-type programs. In other words, if departments want to draw on the Fund and hence compensate for money lost through the average 3 per cent cuts, they will have to formulate projects which are consistent with the RDP. The Fund also hopes to attract grant aid from foreign donors and local business. But this is unlikely to be substantial. All in all, the Fund is there to give focus to the RDP. The sums expected in it are far too small to serve as the mechanism through which the RDP is implemented. Rather the idea is that the entire state budget must eventually reflect the RDP, with a good share of the program being carried forward through private sector and non-government activity. There is no doubt that the RDP has enormous investment potential. Housing, telecommunications, water, energy are all earmarked for enormous growth as such services are extended to deprived black communities. However, for the moment, there is some concern within the top levels of government that they are not corning to grips with an economic policy which addresses the fundamentals, notably productive investment and labor productivity, which is a strong inhibitor on South Africa’s international competitiveness. The realization of this is a plus. But tough decisions are needed. For instance, there is a deafening silence on the issue of training – critical to improving productivity.

It remains early days – and judgments need to be held in abeyance. But there are pointers to watch. Most important is the course of state expenditure; the space provided to the private sector and non-government organisations to participate in the RDP; the emphasis given to private investment; and the policies to enhance training and productivity. If there is positive movement on these fronts, the ANC will be able to govern more comfortably and confidently.

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Jenny Cargill