South African History Online

23 November 1991

Chairperson,
Honoured guests,
Comrades and friends.

In welcoming you to this meeting may I underline the importance of the task
that lies ahead of all of us committed to a just and democratic South Africa.
Not only do we have to formulate economic policy to meet the challenges of a
democratic South Africa we also have to address immediate socio-economic
problems of the majority of our people.

The brutal socio-political destabilisation and economic positions adopted by
the regime sometimes appears to be a deliberate strategy to discredit and
cripple the ANC in the run-up to possible elections for a transition to a
non-racial, democratic South Africa. On the one hand there is a systematic
campaign to blame the ANC for the violence and on the other hand the ANC is
portrayed in the media at best as being incapable of formulating economic policy
and at worst as preparing for a massive nationalisation programme. On both
accounts the intention is to instil fear in the minds of our own people and
those sections of the business community who may support our efforts to create a
democratic South Africa. Monopoly control of the media by the state and big
business makes it difficult for us to put across our views without it being
misrepresented. It is our hope therefore that this initiative will provide us
with the capacity to respond to some of the issues relating to economic
policy.

The economy of this country always has and will continue to remain central to
our struggle for national liberation. On the one hand the black majority is
desperately fighting to redress historical injustices and present inequalities
and on the other hand the white minority government is using every means at its
disposal to maintain economic power in the hands of the whites and big business
in particular. The intention is of course, to ensure that whites continue to
enjoy a privileged life style. While engaging us in the arena of political
negotiations the government is implementing economic strategies that go well
into the future and might even tie the hands of a democratically elected
government. The aim of course is to make it as difficult as possible for a new
government to implement policies of redistribution and socio-economic
justice.

The systematic exclusion of the democratic movement from the arena of policy
formulation significantly weakened its ability to formulate policies. There is
therefore, a need to increase the capacity of the ANC and the entire democratic
movement in the field of economics. Initiatives are required involving economic
policy research, training in economic research and communication of economic
policy options. Conscious of this problem we realised that it will be necessary
to call on assistance from our international supporters. Thus during my visit to
Canada last year I asked the prime minister, Mr Brian Mulroney, to help us
strengthen our capacity for economic research and policy formulation. At the
request of the Canadian government the International Development Research
Centre (IDRC) sponsored a visit by a team of international economists whose
mission was to make an assessment of present capacity and priority areas for
policy research. The team was joined by members of the ANC's Department of
Economic Policy (DEP). The mission report made recommendations confirming the
need to establish a national capacity for economic research and policy
formulation for the democratic movement in general and the ANC in particular.
Let me now address myself to the background leading up to this development.

After almost two years of vigorous, if not rigorous, debate most economists
representing a broad spectrum of our society are agreed that a mixed economy is
a necessity under present conditions.

A mixed economy includes both the role of the state and the market in
directing re-distribution of wealth and promoting growth of the economy. Many
developed and developing countries have different forms of the mixed economy
with varying degrees of state and market interventions. In many instances the
degree of intervention depends on the level of transformation, readjustment and
transition from an economic crisis situation to a situation of stability.
History provides us with many examples of state intervention being used as a
means of promoting growth and redistribution. The experience closest to us is
the use of the state by the nationalist government to promote the interest of
whites in general and poor whites in particular. In this case the budget was
used as an effective instrument for redistribution.

In as much as it was possible for whites to claim a full share of public
expenditure irrespective of their tax contribution, so must blacks be entitled
to equal treatment by a democratic state. We must reserve the right to use any
economic instrument to stimulate growth and effect redistribution to redress
historical economic imbalances and injustices. In addition, apart from using the
budget previous minority governments have established and administered state
enterprises as instruments for economic policy objectives. Therefore, it is
evident that the present hysteria that characterises big business and government
responses to the ANC debate on economic policy is an attempt to foreclose
discussion on any option that the ANC may choose in attaining its policy
objectives. Thus nationalisation is presented as an ANC policy objective when it
is in fact one among many economic instruments that may be used to achieve
growth through redistribution. It is therefore imperative that a major task of
our research effort will have to examine the degree and form of state
intervention necessary to redress the historical socio-economic injustices.

It is quite clear that by politicising the issue of nationalisation big
business and the minority government are trying to instil an element of fear
into the small business community, the professionals, the informal sector and
organised labour. The truth of the matter is that there can not be a climate of
free enterprise in this country as long as a few conglomerates, who, with the
assistance of the state, maintain control of almost two-thirds of the economy.
Aspiring black and white entrepreneurs have more to fear from the rampant
concentration of economic power in the hands of a few monopolies than a future
ANC government. Unlike the USA, Germany and other developed and developing
countries, we do not have any significant regulations against wholesale
monopolisation. The small business community has virtually no protection against
unfair competition from the monopolies.

Experiences in other countries indicate that more jobs and training
opportunities are created by medium and small businesses than by the monopolies.
In South Africa, the alarming insolvency rate among small businesses is an
indication that this sector of our economy is left virtually unprotected.
Furthermore, apartheid legislation has prevented the emergence of a
manufacturing and productive section in the black business community.

The biggest threat to democracy, socio-economic justice and economic growth
in this country is the monopoly control by a few companies of the whole economy.
Clearly, by attacking the ANC, the intention of the media is diverting attention
away from the alliance between government and big business against labour and
the development of small and medium businesses.

An ANC policy formulation capacity will have to examine ways and means of
encouraging the growth, development and protection of small and medium business
as an important instrument in creating jobs and developing technical skills
training and human resources. Thus, for us, state intervention will ensure equal
opportunities for hitherto disadvantaged communities and groups from all
sections of our society. State intervention, through the provision of
incentives, must also redirect small and medium businesses away from the service
sector towards manufacturing and the production of input and final consumption
goods.

Our draft resolution on economic policy identifies the overall goals which
will provide the guidelines from which our economic policy can be formulated.
Among other priorities we will have to concentrate our efforts on job creation;
raising real incomes; correcting racial and gender imbalances; implementing land
reform; promoting rural and urban development; providing housing and
infrastructural needs and encouraging the growth of small and medium
businesses.

From a macro-economic perspective, and under normal conditions, governments
and alternative political organisations have to translate these goals into four
main policy objectives. These include: the issue of relative full employment;
maintaining stable prices and the control of inflationary trends; ensuring a
healthy balance of payments, and, the achievement of a steady rate of economic
growth. However, because of the legacy of apartheid, we have to go beyond these
general objectives. We will have to focus on bringing down to reasonable levels
an incredibly high unemployment rate (about 42%) in the short term. We have to
redress imbalances in housing, land distribution, health, education, and social
security benefits. We have to provide the community and industry with adequate
means of transport, electricity and fuel requirements so as to ensure
infrastructural stability for economic growth. These objectives must be the
foundation of our policy framework.

Over the years labour has been in the forefront of the liberation struggle
and is one of the main components of our constituency. Thus we have a
responsibility to incorporate labour, wages and income-policies as an important
parameter in our macroeconomic framework. It is essential that this is done in
consultation and collaboration with the labour movement. Such consultation and
collaboration will also have to address the short and long term implications of
industrial restructuring strategies to meet the demands of stimulating
productivity and industrial growth.

Maintaining a balance between meeting socio-economic obligations to the
disadvantaged and oppressed people of our country and at the same time
stimulating economic growth will be a daunting task at the best of times. It is,
however, not impossible. The budget can be used as an instrument to adopt fiscal
policies which will meet in the medium-term, to some degree, our social
expenditure requirements while guarding against fiscal indiscipline. In the
absence of the capacity to effect dramatic transformations overnight, the
expenditure side of the budget becomes an effective instrument of
redistribution. On the other hand fiscal discipline should not be used as a
means to maintain the present discriminatory character of the budget.

Nowhere has the discriminatory character of the budget been more dramatically
demonstrated than in the field of education, health and social security. The
high costs of such discrimination can be calculated in political and
socio-economic terms and has contributed significantly to the present structural
crisis. This has been felt most significantly in meeting the human resource and
technical skills needed for the economy.

A survey of the educational and human resources statistics of South Africa
will reveal glaring disparities. Over 60% of the African population has had
little or no formal education; forty-one out of a thousand whites receive
tertiary education, while four out of thousand Africans benefit from tertiary
level of study. These statistics, as shocking as they are, do not reveal the
destruction of our human resources and the long term consequences for our
socio-economic development.

Providing a constant supply of highly qualified labour power for industry
must surely be one of the priorities in determining macroeconomic policy. We
believe that any capacity building for economic research and policy formulation
must include training as one of its fundamental tasks. In this regard the
participation of the universities in the present initiative should contribute
towards bridging the gaps in respect of the study of economics. For our part we
will do everything in our power to strengthen the capacity of universities to
meet the demands for economic research and policy formulation.

As a liberation movement we are committed to the empowerment of the most
disadvantaged sections of our people. We believe that this process can begin
through a programme of affirmative action and black advancement in areas where
racial and gender imbalances exist. We have to break the racial and gender
division and domination of intellectual labour by certain racial groups. If we
are to effect a meaningful transition to democracy then development of our human
resources should begin now.

In opting to use the expenditure side of the budget as a redistributive
mechanism we are very often questioned about the sources of revenue to finance
such a programme. Our response to this would be to closely examine the need for
tax reform which addresses, what the IDRC mission report identifies as, the
equity of the tax system; the revenue efficiency of the system with emphasis on
widening the tax net and raising the tax yield and, the trade-offs between
revenue objectives and providing incentives for trade and industry.

We must also examine what savings can be made in cutting out wasteful
apartheid administrative expenditure and excessive unproductive military
spending.

By expanding expenditure on health, education, housing, rural and urban
infrastructure and social services for the majority, we are also extending the
incomes and revenue base and stimulating growth by opening up the present
restricted market for goods and services.

In other words research in these areas may provide us with short-term fiscal
policy options which will require a restructuring of the tax system without
dramatically pushing up the rate at which taxes have to increase or new taxes
introduced.

Both the IDRC mission report and other economic analyses indicate that
current state spending an services to the privileged minority will have to be
drastically cut in order to meet expenditure targets for the African majority.
This issue has to be looked at in detail especially with regards to removing all
present discriminatory aspects of budgetary allocations.

Notwithstanding the above mentioned options meeting long-term reconstruction
and redistributive demands may require extra-ordinary tax measures in the
short-term. Such extra-ordinary measures have been used successfully elsewhere
without any adverse effects. Research into this possibility of financing
redistribution must be a priority on our agenda.

When the present government came to power fiscal policy played an important
role in diverting resources from the private sector towards the upliftment of
the Afrikaner community in general and Afrikaner capital formation in
particular. High taxes were imposed on profits from mining and easy credit and
subsidies were accorded to Afrikaner businesses and farmers.

Similarly, we should not shy away from examining such principles for
redistributing wealth and incomes. We should not allow the monopoly controlled
media to intimidate us into limiting our options to parameters fixed by big
business and government. We have a wide range of successful experiences from
which we can learn useful lessons and from where we can draw expertise.

Another area of immediate concern is the importance of international economic
relations in strategies for restructuring industry, mining and agriculture.

After the installation of a new democratically elected government and the
subsequent lifting of economic sanctions, the issue of markets for goods,
services and finance will be brought to the top of the agenda.

While it is true that restructuring industry and embarking on public works
programmes will stimulate growth and diversify our industrial base the effects
will only be felt in the long term. In this regard despite the declining
fortunes of gold, mining in general has implications for all our macroeconomic
balances. It is still one of the largest employers; it is an important foreign
exchange earner; it absorbs large amounts of locally produced industrial
outputs; it impacts on the energy, transport and chemical sectors; it has
implications for monopoly control, labour industrial relations and price
stabilisation. As a sector its importance cannot be underestimated. Research has
to be undertaken to examine the possibilities of reorienting mining towards the
benefication of minerals and exploiting our comparative advantage in the
productions of mining technology and equipment.

Mining has, in the past, determined our international economic relations.
With the decline in the importance of gold and the growing inaccessibility to
markets in Europe, north America and Asia we will have to redirect our efforts
towards regional integration in Africa. Apart from economic advantages of such
an orientation we have to consolidate the strong ties established with African
countries during the struggle for liberation.

Much of the underdevelopment in Africa and southern Africa in particular is a
consequence of colonialism and apartheid destabilisation. Many of these
countries have paid heavily in human and material costs for their support for
our struggle.

It will therefore be unthinkable for us to embark on a developmental process
without taking into account our regional obligations.

In the past South Africa saw itself as an extension of Europe in Africa. The
reality is however, that many of the development challenges which face
neighbouring SADCC states also face South Africa.

If the needs of all South Africans are to be met in the future then there is
a need for South Africa's international partners to recognise this reality. Our
macroeconomic policy framework therefore, will have to place heavy emphasis on
restructuring South African trade relations with the region and beyond.

While we realise that trade access to international markets will increase
growth, stimulate investment, diversify foreign exchange earnings and generate
substantial additional employment a democratic South Africa will want to play a
full part in addressing the challenges facing the whole of sub-Saharan Africa.
Our aim must be to facilitate progress towards achieving OAU and SADCC economic
goals and bring many direct benefits to the people of the region.

Finally, in view of the above observations it is evident that our task today
will have to provide the direction necessary for embarking on the project.
Without an economic policy framework we cannot contest economic policies and
positions adopted by the regime and its supporters. Macroeconomic policy is
based on the fundamental principles of a political organisation. Within an
elected parliament opposition parties are allowed to influence government
policies. Until we have a new constitutional dispensation in this country we
will oppose all policies that disadvantage our people and we will fight to gain
the maximum benefits within the present context through mass action if the
regime ignores our protests.

Thus in setting up the macroeconomic research group (MERG) as the interim
arrangement for the establishment of a national institute for economic policy we
are building towards the elaboration of an economic programme for the transition
to a non-racial, non-sexist democratic South Africa. Such a programme will be
based on realistic policy objectives and implemented through acceptable policy
instruments. Following the IDRC mission report recommendations the first stage
in the programme will be the construction of a macroeconomic framework for
policy formulation. Such a framework will direct the policy research and
facilitate the development of a suitable model that can be used to monitor
economic developments and test the recommendations from the research output. A
workshop is being planned in early January to address this issue.

We believe that the IDRC recommendations on priority areas for economic
research, analysis and policy formulation constitutes the basis for developing
such a macroeconomic framework. In this effort we are pleased to report that we
have the material and technical support of many donor agencies and
governments.

Apart from the IDRC several international organisations and governments have
indicated willingness to support this programme.

The universities represented have directly and indirectly played an important
role in the struggle for national liberation. We are grateful to you and we
value highly your willingness to contribute towards policy formulation and the
shaping of our future.

It is true to say that the process would not have reached such an advanced
stage without the material and moral support of the centre for development
studies (CDS). Once again we extend our appreciation to you for responding
promptly to our requests.

The inputs of the IDRC have been crucial to this whole process. In expressing
our gratitude to the IDRC we look forward to consolidating this co-operation in
realising the aims of the programme as a whole.

It is our hope that suitable and appropriate structures will be devised at
this meeting to move the process forward.

In conclusion, may I say that the ANC will develop its policy options
according to its principles and objectives. Our responsibility is to the
suffering people of this country who have been the victims of oppression.

While we also have a responsibility to all South Africans we cannot dissipate
our energies and efforts in disproportionately appeasing those sections of our
community that have benefited from apartheid over the years.

While our people in the townships continue to be massacred, retrenched, and
suffer socio-economic deprivation on a daily basis.

Our detractors should not expect from us what they do not expect from
themselves or others of their ilk. We do not command the resources nor do we
have the advantage of having operated openly and yet neither the Nationalist
party nor any other party is judged on the same basis as we are judged.

We are faced with a heavy responsibility and we have to work together in
order to mobilise our scarce resources and discharge our duties to the best of
our abilities.

I wish you all the best in your endeavours.