The Missing Link: State Capacity, Service Delivery and the Politics of the Developmental State in South Africa

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How to cite this thesis

Surname, Initial(s). (2012) Title of the thesis or dissertation. PhD. (Chemistry)/ M.Sc. (Physics)/ M.A. (Philosophy)/M.Com. (Finance) etc. [Unpublished]: University of Johannesburg. Retrieved from: https://ujdigispace.uj.ac.za (Accessed: Date). THE MISSING LINK: STATE CAPACITY, SERVICE DELIVERY AND THE POLITICS OF THE DEVELOPMENTAL STATE IN SOUTH AFRICA

Mbulaheni Mulaudzi

Thesis submitted in fulfillment of the requirements for the degree:

Doctor Litterarum et Philosophiae

Department of Politics Faculty of Humanities University of Johannesburg

Supervisor: Professor Chris Landsberg SARChI Chair: African Diplomacy and Foreign Policy; Senior Research Associate, UJ School of Leadership

September 2015

DECLARATION

I, Mbulaheni Mulaudzi, declare that “The Missing Link: State Capacity, Service Delivery and the Politics of the Developmental State in South Africa” is my original work and that all the sources that I have used or cited have been indicated and acknowledged by means of complete references, and that this work has not been submitted before for degree purposes at any other university.

DEDICATION

I dedicate this dissertation to very special people in my life: my late grandmother, Ms Nyaphophi Matamela Sigida, for raising me, instilling the values of hard work and nurturing my interest in politics. By narrating historical events–in particular your recollection of past political and cultural milestones and our discussions on land dispossession in the former Transvaal and Venda territorial areas, you turned my gaze to the truth that lay embedded beneath the heavy calumny of politics in South Africa and encouraged me to find lasting solutions towards the betterment of the quality of life of historically disadvantaged people. I also dedicate this study to my late father, Mr Johannes Ratshidaho Mulaudzi (Maphaha), for his support and love. He constantly emphasised the value and importance of hard work throughout his life. He was a Dad and special friend.

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ACKNOWLEDGEMENTS

It is apposite to thank God Almighty for the strength He has given me in the course of researching and writing this thesis.

I would especially like to thank my supervisor and promoter, Professor Chris Landsberg, for his stewardship, constant encouragement and valuable input.

A debt of gratitude is owed to Ms Rae Israel, Department of Politics at the University of

Johannesburg, for her encouragement and assistance in ensuring that Prof Landsberg received whatever document I left with her.

I wish to thank Ms Zelda Geldenhuys of the University of Johannesburg Library Section, for providing me with the necessary information and reading. Without her assistance my task would have been difficult.

I want to take this opportunity and also thank Ms Salamina Molamu of the Africa Institute of

South Africa, for conducting an information search that has helped the study evolve into

‘publishable form’.

Special thanks to Dr Manelisi Genge for been an excellent mentor and role-model.

Thanks are due to Professor Kgomotso Michael Masemola of the University of South Africa who meticulously edited this thesis.

A very special word of thanks goes to my family: my wife, Mulisa Sheilla, and children,

Mufunwa Angel and Rotonda Andrew Mulaudzi Maphaha, for their continuous support and inspiration. You are the best people in my life! I love all of you very much!

I would also like to, in a special way, thank my mother, Ms Johanna Matamba Mulaudzi

Maphaha. I am proud to be your child, not least because of your unique qualities. You were such a strict and firm mother and wanted us to do the best at all times. You were not educated,

yet you understood the value and importance of education. You woke up in the early hours of the morning and walked more than eighty kilometers to work daily just for us to achieve a better education. You had a vision of the future South Africa when few could dream of a better life in which all people would have equal opportunities.

Appreciation is due to my brothers, Daniel and Azwindini Mulaudzi Maphaha, and their families, for their extensive support and encouragement during the study; and my sisters, Lilly

Tshiwela and Phumudzo Calfornia Mulaudzi Maphaha, for their support and constant interest in the progress of the study. You are special people in my life!

I thank my mother-in-law, Ms Mpho Ruth Booi, not only for her fine words of wisdom and encouragement, but also for giving birth to such a spirited woman that is my wife.

My brother-in-law, Mr Ramari Anderson Booi, and his wife, Mrs Happy Booi, were generous in their support. For that, I thank them. I would also like to thank colleagues at the National

Department of Social Development—Mrs Mpontseng Kumeke, Lindi Mkwanazi, Lydia

Maredi, Rethabile Chobokoane, Gisela Welgemoen, Dudu Sibande, Mulatedzi Ramorope and

Emma Tabane, for their steadfast interest in the progress of the study and inspiration during a period when my working conditions were most difficult. Your support made me realise the power that the Almighty has over our lives.

I would like to thank Pastor Edgar and Elsie Neluvhani’s family for being true friends and offering me spiritual support and care.

Special thanks also goes to my spiritual father, Pastor George Mbulaheni Muhali, and family, for interceding for me before the Almighty. Pastor, this study is a result of the seed you planted in my life.

I would like to thank the following families: Mr Mamukhwana’s, Mr Mulaudzi’s of Montana,

Pastor Sinyosi’s, Pastor MA Mafukata’s, and Mr and Mrs Marara’s of Centurion. You are great men and women of God who stood by me at all times. May God bless you always.

ABSTRACT

If, in theory, the developmental state is no mere declarative fiat, the main proposition of this thesis tends towards a reduction of the South African state to subjective constraints that have detoured the post-2004 policy and strategic thrust towards its realisation. Although the South

African government has declared a developmental state, the state lacks the necessary capacity to become a state that delivers service to the citizenry and thus meet declared developmental goals. The importance of state capacity to deliver services is, to be sure, paramount. This study is an assessment of state capacity to deliver services in the context of South Africa’s aspirations to become a developmental state. In contemplating the pursuit of this developmental agenda, there is room for caution. First, without requisite technical and institutional capacity, South

Africa lacks the core capabilities of a developmental state to interpret policies and link them effectively with service delivery interventions. Thus, on a balance of evidence, strong counter- tendencies against developmental outcomes are manifest. There also arise another complexity that is not as straightforward. The complexity arises as much from problems of normative definitions of the developmental state as the particularities in the South African context of the state as both a subject and object of transformation. Common and distinctive features of the developmental state thus co-exist in a sort of dualism of a modern and effective state and a transformative state. In the view propounded in this study, there is an embedded subjective dynamic of state capture, less as a developmental state with a transformative thrust and more allied to the idea of the embedded autonomy of political elite. The South African state, in other words, has yet to combine its institutional form and national character with the service delivery capabilities of an effective state in a definitive developmental state capable of mediating historical and contemporary challenges of racial redress, economic growth and distribution in an economic context of internationalisation.

Keywords: state capacity, politics, developmental state in South Africa, service delivery, developmental goals, technical and institutional capacity, interventions, transformation, historical and contemporary challenges of racial redress, economic growth and distribution.

LIST OF ACRONYMS

AAC Anglo-American Corporation

ABSA Amalgamated Banks of South Africa

AEC African Economic Commission

AG Auditor-General

AGOA The African Growth and Opportunity Act

AGSA Auditor-General of South Africa

AHPS Administrative Head of Public Service

AIDS Acquired Immune Deficiency Syndrome

ANC African National Congress

ART Antiretroviral Therapy

ASEAN Association of South East Asian Nations

ASGISA Accelerated and Shared Growth Initiative of South Africa

AWUSA Allied Workers Union of South Africa

B-BBBE Broad-based Black Economic Empowerment

BEE Black Economic Empowerment

BEEEE Black Economic Empowerment and Employment Equity

BRICS Brazil, Russia, India, China and South Africa

CBO Community Based Organisation(s)

CE Chief Executive

CEO Chief Executive Officer

COGTA Cooperative Governance and Traditional Affairs

COSATU Congress of South African Trade Unions

CSG Child Support Grant

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DA Democratic Alliance

DBSA Development Bank of Southern Africa

DCS Department of Correctional Services

DDG Deputy Director-General

DEP Department of Economic Policy

DG Director(s)-General

DPE Department of Public Entreprises

DPLG Department of Provincial and Local Government

DPSA Department of Public Service Administration

DPW Department of Public Works

DTI Department of Trade and Industry

ECA Economic Commission for Africa

ECOWAS Economy of West African Countries

EPWP Expanded Public Works Programme

ESKOM Electricity Supply Commission

FBOs Faith Based Organisation(s)

FIFA Fédération Internationale de Football Association (International Federation of Association Football)

GCE Group Chief Executive

GDP Gross Domestic Product

GEAR Growth, Economic and Redistributive

GS Goldman Sachs

HIV Human Immunodeficiency Virus

HOD Head(s) of Department

HOG Head(s) of Governments

IJR Institute for Justice and Reconciliation

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ICT Information Communication Technology

IDC Industrial Development Corporation

IDP Integrated Development Plan

IGR Inter-Governmental Relations

IMF International Monetary Fund

INP Integrated Nutrition Programme

JIPSA Joint Initiative for Priority Skills Acquisition

LA Latin America

LAC Latin American Countries

LRA Labour Relations Act

MDG Millennium Development Goal(s)

MPM&E Ministry of Performance Monitoring and Evaluation

MERG Macro-Economic Research Group

MIDP Motor Industry Development Programme

MISTRA Maphungubwe Institute for Strategic Reflection

MITI Ministry of International Trade and Industry

MOF Ministry of Finance

MSC Municipal Systems Act

NDP National Development Plan

NDR National Democratic Revolution

NGC National General Council

NGP National Growth Path

NIC Newly Industrialised Countries

NIPF New Industrial Policy Framework

NIS National Innovation System

NPC National Planning Commission

NRS New Right School

NSP National Strategic Plan

OECD Organisation of Economic Corporation and Development

PA Productivity Agreement

PAAS Pan African Advisory Services

PALAMA Public Administration Leadership and Management Academy

PAWUSA Public and Allied Workers Union of South Africa

PCAS Policy Coordination and Advisory Service

PHC Primary Health Care

PME Performance, Monitoring and Evaluation

PO Office of the President

PP Public Protector

PPP Public-Private Partnership

PSC Public Service Commission

PSO Private Sector Organisation(s)

QES Quarterly Economic Survey

RDP Reconstruction and Development Programme

SA South Africa

SAA South African Airways

SABC South African Broadcasting Corporation

SACC South African Council of Churches

SACP South African Communist Party

SADCC Southern African Development Cooperation

SAHRC South African Human Rights Commission

SAICE South African Institution of Civil Engineers

SALGA South Africa Local Government Asssociation

SAMDI South African Management Development Institute

SANCO South African National Civic Organisation

SANGOCO South African National Non-Governmental Organisation Coalition

SARB South African Reserve Bank

SMME Small, Medium and Micro Enterprise

SOE State-Owned Enterprise(s)

SONA State of the Nation Address

StattsSA Statistics South Africa

TB Tuberculosis

Treasury National Treasury

UN United Nations

UNSC United Nations Security Council

UNDESA United Nations Department of Economic and Social Affairs

UNECA United Nations Economic Commission for Africa

UT University of Tokyo

UNOG United Nations Office in Geneva

UNRISD United Nations Research Institute for Social Development

US United States

USG Under Secretary-General

UPB Upgrading and Building Programme

USSR Union of Soviet Socialist Republic

WB World Bank

WPLG White Paper on Local Government

WPTPS White Paper on Transformation of the Public Service

CONTENTS

DECLARATION...... ii DEDICATION ...... iii ACKNOWLEDGEMENTS ...... iv ABSTRACT ...... vi LIST OF ACRONYMS ...... vii CONTENTS ...... xii CHAPTER 1 ...... 1 INTRODUCTION TO THE STUDY ...... 1 1.1 Introduction ...... 1 1.2 Background ...... 2 1.3 Research Problem ...... 6 1.4 Research Questions ...... 11 1.5 Relevance of the Study...... 12 1.6 Contribution of the Study to the Body of Knowledge ...... 13 1.7 Summary of the Preliminary Literature Study ...... 13 1.8 Research Design and Methodology ...... 18 1.9 Theoretical Framework ...... 20 1.10 Presentation and Analysis of Data ...... 21 1.11 Outline of Chapters ...... 22 1.11.1 Chapter 1: Introduction to the Study ...... 22 1.11.2 Chapter 2: The Concept of a Developmental State: A Framework for Analysis ...... 22 1.11.3 Chapter 3: A Rational Planning State ...... 22 1.11.4 Chapter 4: The Institutionalisation of State Capacity ...... 23 1.11.5 Chapter 5: The Evolution of the South African Developmental State Agenda ...... 23 1.11.6 Chapter 6: The Institutional Dimension: The Specificity of Racial Redress in Service Delivery ...... 24 1.11.7 Chapter 7: The Missing Link: State Capacity as a Condition for a Developmental State in South Africa .... 24 1.11.8 Chapter 8: Learning from MITI in Japan ...... 24 1.11.9 Chapter 9: Conclusion: Prospects for a Developmental State in South Africa - Challenges and Recommendations ...... 25 CHAPTER 2 ...... 26 THE CONCEPT OF THE DEVELOPMENTAL STATE: A FRAMEWORK FOR ANALYSIS ...... 26 2.1 Introduction ...... 26 2.2 Theorising the State ...... 27 2.3 Antecedents to Developmental State Theory ...... 30 2.3.1 The Post-World-War II Keynesian Period ...... 31 2.3.2 The Period of Rapid Industrialization ...... 32 2.4 The Specificity of the Post-Keynesian Conjuncture ...... 33

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2.5 A Theorisation of the Post-Keynesian Developmental State ...... 35 2.5.1 The Formulation of the Developmental State Concept ...... 35 2.5.2 Defining the Developmental State ...... 36 2.5.3 The Post-Keynesian School ...... 37 2.6 Distinguishing Features of the Developmental State...... 40 2.6.1 A Relatively Strong State ...... 41 2.6.2 An Effective and Productive Investor ...... 42 2.6.3 Embedded Autonomy...... 42 2.6.4 A Strategic Planning Instrument ...... 44 2.7 The Catalytic Role of the Developmental State ...... 45 2.7.1 The Meaning of Selective Interventions ...... 46 2.7.1.1 The ‘Rule’ and ‘Reign’ Nexus of Selective Interventions ...... 47 2.7.1.2 The Role of State Institutions in Selective Interventions...... 47 2.7.1.3 The State Bureaucracy in Selective Interventions ...... 48 2.7.2 The State as a Catalyst of Globalisation ...... 49 2.8 Conclusion ...... 50 CHAPTER 3 ...... 52 A RATIONAL PLANNING STATE ...... 52 3.1 Introduction ...... 52 3.2 The Wider Context: Contending Ideological Paradigms ...... 53 3.3 The Dual Role of the State ...... 55 3.4 State-Led, But Market-Based Development ...... 56 3.5 The Developmental State as a Strategic Planning System ...... 58 3.5.1 Strategic Planning ...... 59 3.5.2 Industrial Policy as a Foundation for Strategic Planning ...... 60 3.5.3 Planning as a Process ...... 62 3.5.4 Strategic Pillars of Planning Processes ...... 63 3.6 The Strategic Utility of Managerial Elites ...... 64 3.6.1 Bureaucratic Leadership ...... 65 3.6.2 The Role of Competent Techno-Structures ...... 65 3.7 The Developmental State as a Strategy for Industrialisation ...... 66 3.7.1 The Initial Planning Phase...... 67 3.7.2 The Power and Authority of the State ...... 68 3.8 Conclusion ...... 69 CHAPTER 4 ...... 71 THE INSTITUTIONALISATION OF STATE CAPACITY ...... 71 4.1 Introduction ...... 71 4.2 The Developmental State and National Development Goals ...... 72 4.3 Institutionalised Coordination and Cooperation ...... 76 4.3.1 The Concept of Embedded Autonomy ...... 80 4.3.2 Practical Features of Embedded Autonomy ...... 83

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4.4 Meritocratic Bureaucracy as an Institutionalised Planning Tool ...... 84 4.5 Institutional Capacity and the Developmental State ...... 86 4.5.1 Variants of State Capacity ...... 90 4.5.1.1 Institutional and Political Capacity ...... 91 4.5.1.2 Ideational Capacity...... 91 4.5.1.3 Environmental Capacity ...... 92 4.5.1.4 Other Essential State Capacities ...... 93 4.5.2 State Capacity as a Key Indicator of State Power ...... 93 4.5.2.1 Internal State Capacity ...... 94 4.5.2.2 Institutionalised Public-Private Partnerships ...... 94 4.5.2.3 Core Economic Ministries ...... 95 4.5.2.4 Pilot Agencies for the Coordination of Economic Change ...... 96 4.5.2.5 Capacity to Gather and Distribute Information ...... 96 4.5.2.6 The Power of a Tightly-Knit State Structure ...... 97 4.5.2.7 Powerful Oversight Structures ...... 98 4.6 The State as Vehicle for Insitutionalised Socio-Economic Transformation ...... 99 4.6.1 The Politics of Patriotic Leadership ...... 100 4.6.2 Societal Mobilisation around the Developmental Agenda ...... 100 4.6.3 Principles of Legitimacy ...... 101 4.7 Conclusion ...... 102 CHAPTER 5 ...... 103 THE EVOLUTION OF THE SOUTH AFRICAN DEVELOPMENTAL STATE AGENDA ...... 103 5.1 Introduction ...... 103 5.2 The Economic Policy Evolution Pre-1994 ...... 104 5.2.1 Post-Apartheid Liberal Discourse ...... 106 5.2.2 The ANC’s Economic Policy Response ...... 109 5.2.2.1 The ‘Mixed Economy’ (1989-1990) ...... 109 5.2.2.2 Rethinking Policy: The Macro-Economic Research Group (1991) ...... 111 5.2.2.3 The Reconstruction and Development Programme (1993-1996) ...... 113 5.3 Socio-Economic Policy Challenges Post-1994 ...... 116 5.3.1 Growth through Redistribution’ ...... 116 5.3.2 Redistribution through Growth ...... 119 5.3.3 Limits of the Reconstruction and Development Programme ...... 122 5.3.4 The Growth Employment and Redistribution Strategy: 1996-2000 ...... 125 5.3.5 Factors That Led to the Failure of Gear ...... 127 5.4 The South African Developmental State ...... 130 5.4.1 Accelerated and Shared Growth Initiative-South Africa as a National Development Plan ...... 130 5.4.2 The Joint Initiative for Priority Skills Acquisition ...... 135 5.4.3 The Limits to Change under ASGISA...... 136 5.4.4 The New Growth Path (2010) ...... 136 5.5 Results and Prospects ...... 138

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5.6 Conclusion ...... 141 CHAPTER 6 ...... 143 THE INSTITUTIONAL DIMENSION: THE SPECIFICITY OF RACIAL REDRESS IN SERVICE DELIVERY ...... 143 6.1 Introduction ...... 143 6.2 The Constitutional and Legal Context for Service Delivery ...... 146 6.2.1 The Constitutional Mandate ...... 146 6.2.2 The Legislative Framework ...... 147 6.2.3 The Specificity of Racial Redress in Service Delivery...... 153 6.2.4 A People’s Contract: An Evolving Paradox ...... 155 6.2.5 Service Delivery: From Protest to Challenge ...... 159 6.2.6 A Balance Sheet ...... 160 6.2.7 The Transformation-Development Paradox ...... 162 6.2.8 The Travails of the ANC’s Deployment Policy ...... 166 6.3 New Challenges: The Insitutional Dimension ...... 171 6.3.1 Institutional Theory ...... 173 6.3.2 Problems of Institutional Coherence ...... 177 6.3.3 Institutionalised Coordination as a Basis for Cooperation ...... 179 6.3.4 The Problem of Human Capabilities ...... 181 6.4 Conclusion ...... 185 CHAPTER 7 ...... 187 THE MISSING LINK: STATE CAPACITYAS A CONDITION FOR A DEVELOPMENT STATE IN SOUTH AFRICA ...... 187 7.1 Introduction ...... 187 7.2 Defining State Capacity ...... 188 7.3 Capacity as a Condition for a ‘Capable State’ in South Africa ...... 189 7.4 The Nature and Impact of the Problem ...... 191 7.4.1 The Skills Shortage ...... 192 7.4.2 The Supply-Demand Mismatch ...... 193 7.4.3 The Economic Impact ...... 197 7.4.4 The Institutional and Organisational Impact ...... 201 7.5 Strategic Challenges: State Capacity and Service Delivery ...... 203 7.5.1 The Limits of Government’s Policy Response ...... 204 7.5.2 The Missing Link: State Capacity ...... 206 7.5.2.1 Restructuring the Public Service ...... 208 7.5.2.2 Skills Development ...... 209 7.5.2.3 Ideological Reach ...... 210 7.5.2.4 Coordination ...... 210 7.5.2.5 Meritocratic Recruitment ...... 211 7.5.2.6 Administrative Talent versus Political Appointments ...... 212 7.5.2.7 Institutional Capacity ...... 212 7.5.2.8 Opportunity-Driven Development ...... 213

7.6 Priority Interventions: Enhancing Local Government Capacity ...... 214 7.6.1 Municipal Service Delivery: Context and Legislation ...... 214 7.6.2 Constitutional Provisions ...... 215 7.6.3 The White Paper on Local Government ...... 217 7.6.4 Municipal Systems Act of 2000 ...... 218 7.6.5 The Municipal Service Delivery Record ...... 218 7.6.6 Local Government Capacity...... 220 7.6.6.1 Embedded Autonomy ...... 222 7.6.6.2 Coordinating Capacity ...... 222 7.6.6.3 Administrative Leadership ...... 223 7.6.6.4 Managerial and Technical Capacity ...... 224 7.6.6.5 Policy Implementation ...... 225 7.6.6.6 Deliberative Forums ...... 226 7.6.6.7 The Local Government-Developmental State Nexus ...... 227 7.7 Conclusion ...... 230 CHAPTER 8 ...... 233 LEARNING FROM MITI IN JAPAN ...... 233 8.1 Introduction ...... 233 8.2 The Historical Necessity of a Developmental State in South Africa ...... 234 8.3 Recasting the South African Developmental State ...... 235 8.4 Determinants of a Developmental State in South Africa ...... 237 8.5 The East Asian Experience: Lessons from Japan ...... 240 8.5.1 East Asian Interventionist Policies ...... 240 8.5.2 The Japanese State Bureaucracy ...... 242 8.5.2.1 The State Driven Economy ...... 243 8.5.2.2 Key Pillars of State Intervention ...... 243 8.5.2.3 The Regulation Thesis ...... 244 8.5.2.4 The Ministry of International Trade and Industry (MITI) ...... 246 8.5.2.5 The MITI Bureaucracy ...... 246 8.5.2.6 MITI’s Administrative Guidance ...... 247 8.5.2.7 Strategic Thinking and Policy-Making Capacity ...... 248 8.5.2.8 Understanding the Japanese Bureaucrat ...... 249 Chapter 9 ...... 250 CONCLUSION: PROSPECTS FOR A DEVELOPMENTAL STATE IN SOUTH AFRICA - CHALLENGES AND RECOMMENDATIONS ...... 250 9.1 Introduction ...... 250 9.2 The Role and Identity of the South African Developmental State ...... 250 9.3 Key Challenges in Pursuance of a Developmental State ...... 251 9.3.1 Vision 2030: A Strategic Review ...... 253 9.3.2 The Problem of Poverty and Inequality...... 255 9.3.3 Partnerships in the Eradication of Poverty and Hunger ...... 256 9.3.4 State Capacity to Deliver the RDP Mandate ...... 257

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9.3.5 Human Capacity ...... 257 9.3.6 Infrastructure Development as a Means to Strengthen State Capacity ...... 258 9.3.7 Trade Investment...... 258 9.3.8 Equitable Employment Opportunities ...... 259 9.3.9 Entrepreneurial Skills for Youth ...... 259 9.3.10 The Role of the State and Institutional Capability ...... 259 9.3.11 The Role of Public Servants and Politicians ...... 260 9.3.12 The Public Service Commission ...... 261 9.4 Recommendations towards Better Strategic Coordination ...... 261 9.4.1 The Role of Policy and Coordination under the Mbeki Presidency ...... 262 9.4.2 Coordination Challenges ...... 263 9.4.3 The National Planning Commission ...... 264 9.4.4 Recasting the National Planning Commission ...... 265 9.4.5 Institutional Coherence ...... 266 9.4.6 Technical Capacity ...... 267 9.4.7 Towards a National Innovation System (NIS) ...... 268 9.5 Conclusion ...... 269 REFERENCES ...... 272

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CHAPTER 1

INTRODUCTION TO THE STUDY

1.1 Introduction

Some ten millennia separated the agricultural revolution from the rise of the first industrial nation. A mere two centuries has seen the supersession of the first industrial revolution by the second. The new information revolution, underway since the late twentieth century, has yet to acquire a definitive epithet. However, if we may denominate an era by its staple, we see the

Age of Corn (the agrarian state) giving way to the Age of Information, or contemporary globalisation, in which the latter does not displace the state, but merely drives the quality and intensity with which a staple derives its value in the world economy.

On one level, this study will broadly draw attention to a paradox in the contemporary history of political economy: rather than being a powerless locational, political and economic institution in the face of disintegrating national economies and genuinely global markets, the notion of the developmental state is wholly consistent with a highly internationalised economy in which the integration of markets is being interpolated not only by multinational corporations, but also by national governments.

If conventional theories of globalisation hypothesise the extent and novelty of transnationalism, they also underrate the centrality and adaptability of the state within historically framed national institutions. The study, therefore, sought not simply to highlight the irreducibility of the epistemological notion of locational identity to a polymorphous world, but more specifically, to demonstrate theoretically and empirically the enhanced importance of state power in developing economies within the new international context. Indeed, rather

than counterposing nation-state and global market as antinomies, the study will show, based on evidence from Japan and the experience of East Asian developmental states, that strong states – that is, those with fairly firm control over socio-economic goal setting and robust domestic linkages–have leveraged the changes identified as globalisation often as catalysts of internationisation strategies of their corporations, and sometimes in the process internationalising state capacity. However, to the extent that state capacities – as critical determinants of whether a country is a strong or weak economy–have historically differed between developed and developing countries. It therefore stands to reason that the capability to deal with internal and external pressures in an era of globalisation and to exploit the opportunities of international economic change has appeared much more marked in some countries than in others.

In engaging different kinds of claims on the South African post-apartheid state, the active premise of this study will rest on the theoretical proposition of the developmental state as a necessary long-term economic planning instrument in developing countries for the elimination of historically differential capacities of the national economies of developing countries vis-à- vis developed ones. The question is whether the South Africa state, despite government’s declaration, qualifies as a long-term planning instrument.

1.2 Background

That the post-apartheid state has been problematised as a heavily contested institutional and ideological terrain in the years since 1994 is hardly surprising. The political demise of official racial segregation, when the African National Congress (ANC) took power, brought about significant gains for racially defined groups hitherto denied basic political and economic rights; yet the ossification of substantive racial inequalities – in employment, income, education, housing and other socio-economic spheres – compounded by the inheritance of a virtually bankrupt state quickly demonstrated the limits of the Reconstruction and Development

Programme (RDP). The latter was a doctrine advocating a mixed economy and radical state interventions aimed at actively promoting substantive equality, and thus significantly narrowing the cross-cutting dynamics of race- and class-based forms of subordination in the post-apartheid era. The RDP White Paper, to be sure, provided concrete targets for redistribution, notably a doubling of the national income share of the poorest 40% of households by 2005 (South Africa, 1994: 2); (Weeks, 1999: 796).

This temporal context matters: ‘only in the aftermath of the fiscal constraints of state-led redistributive measures could the logic of certain Weberian hallmarks of capitalism’ not be intelligible. Thus, to rewrite this to clearly convey meaning: the rational organisation of economic activities and macro-economic policies such as inflation targeting and monetary control measures displace the ideological attraction of the RDP. Nowhere was this new framework of macro-economic stabilisation more clearly on display than in the austerity measures of the Growth, Economic and Redistribution (GEAR) announced in mid-1996.

GEAR inaugurated, among other things, “a reduced budget deficit and falling rate of inflation, improved performances in fixed investment and non-gold exports to propel growth [and] redistribution through job creation realised from economic growth and labour market reforms”

(Khamfula, 2005:7-8).

Although civil society and trade union broadsides on GEAR frame it as an ideological shift rather than policy adjustment to shift resources in a meaningful way, it was demonstrated by

GEAR’s omission of reducing inequality as a policy goal and emphasis on decreasing unemployment with growth (Gelb, 2006:1-2). Such a dispensation may have been misleadingly cast as an ideological embrace of neo-liberalism by the ANC-led government, and the policy choice was nonetheless consistent with a fundamental reconceptualisation of state capacity for macroeconomic stabilisation and growth rather than a coordinated and strategic response to inequality. There is thus some credence to critiques of GEAR as a market-

friendly and globally competitive economic policy that left little room for redistribution (van

Wyk, 2009:29). Yet, state capacity for a stabilisation strategy under GEAR cannot simply be reduced to weakness and non-intervention. The point to underline here is that it was not the state as such that was enfeebled by GEAR. If anything, it was the design of specific policy instruments which was in question. In particular, the macro-economic adjustment strategies which focused almost exclusively on fiscal and monetary policies seemed untenable. More generally, both Keynesian and neo-liberal policies are similar in this regard, implying a focus on short to medium term macro-economic objectives. In both cases, the instruments of intervention are predetermined, and there is little room for creative adjustment. It is within this framework of fixed-term, macro-economic stabilisation measures that the RDP as a programmatic vision for redress has sat uneasily with priorities set for the developmental state.

For if the proclivities for macro-economic adjustment to neo-liberalism seemed hard to square with the RDP and the notion of the developmental state, we should look in the first instance, strategically, to the policy orientation of the ANC as the governing party rather than pragmatic interventions of government. To put this another way, in failing to distinguish short to medium term government policy measures from the ideological and strategic orientation of the ANC, opponents of GEAR and proponents of the developmental state have been blinded by an important possibility: far from a non-interventionist, neo-liberal state, the role of the state from mid-1996 to the mid-2000s should be interpreted in a dualistic fashion: both growth-oriented and transformative.

Thus, it was that the ANC, as a ruling party, has over a period of time aspired to build a developmental state shaped by the historical socio-economic dynamics of South African society and articulated within the framework of the National Democratic Revolution (NDR) and numerous supporting policy documents such as the ANC Strategy and Tactics of 2007 and

ANC Manifesto for the 2009 general election (Gumede, 2012:19). The inference is thus that,

the problematic of the state, the hybrid coexistence of state capacity for austerity adjustment and transformation as the veil of neo-liberalism, and of the massive presence of the market, was narrowly drawn around assumptions that deficit reduction would result in a fall in the interest rate, an increased current account deficit consistent with a lower interest rate, and a lower interest rate that would, in turn, impart a strong stimulus to private investment.

If GEAR opened up the possibility of establishing economic stability, the achievement of a six

(6) percent GDP growth rate, the target set under GEAR and budget surplus by 2004 reorientated and constellated the debate over policy and the type of state in a strategy around the relationship between the new expansionist thrust of government policy and the state. To be precise, it was during the second term of President Thabo Mbeki’s government during the period (2004-2008), when he famously pronounced South Africa a duality of economies, one white and wealthy; the other mainly black and poor. The developmental character of the state, at least officially, came to the surface in discussions of strategic interventions to address socio- economic imbalances.

Of course, the choice of historical context in which to situate the developmental state depends on how one interprets the country’s economic policy evolution. What is nonetheless true is that the developmental state was buttressed by new programmatic interventions such as the

Accelerated and Shared Growth Initiative of South Africa (ASGI-SA). But this characterisation was as yet contradictory, not least because macro-economic policy was still enjoined by the same requirements of restraint and inflation targeting. No less than GEAR, ASGI-SA combined monetary policy and a New Industrial Policy Framework (NIPF) in a curious admixture of policy instruments and interventions, among them the Joint Initiative for Priority

Skills Acquisition (JIPSA) and the Broad-based Black Economic Empowerment (B-BBEE) programme. Lacking, it seems, was a clear conception of state capacity to dissolve emerging polymorphous distinctions between the range of macro-economic and new industrial policy

assumptions. In other words, the distinction between macro-economic and industrial policy interventions remained important, but the state’s capacity to intervene in strategic areas of the economy was now subsumed in a larger social and economic context than fiscal and monetary stability. Here the notion of modernity seem to contain the potential for realising the ANC’s wish that the difference between the state and market be restricted to the sphere of what has become known as developmentalism.

Yet as a subject and object of change, the state had to transcend the ideological contestations and socio-economic travails of a dual economy, apparent from rising service delivery protests and, in cases of organised social movements, incipient anti-state tendencies by boycotting against the state for the most trivial of reasons at municipal level throughout the country. It is not the scope of this study to evaluate this burgeoning area of discussion. The important point to note is simply that social conflict and ideological contestation exist and have played some part in tussles over the form, character and direction of the state. Other than an official declarative by the ANC at its 2007 Polokwane Conference of South Africa as a developmental state, the question of state capacity for service delivery has since emerged as a functional element of interventions in economic and social development.

1.3 Research Problem

To come to terms with the notion of a developmental state in the South African context as yet only loosely articulated by the Department of Public Service and Administration (DPSA) as a transformative and efficient state (DPSA, 2012:5), is to pose the question whether the swelling dominance of antipathies toward patronage, fraud and service delivery backlogs can be more compellingly explained by the state as a subject of transformation, and thus prone to counter- productive tendencies. Indicative of the times, debates about central issues of service delivery and poverty reduction now move within a much more expansive compass of development economics. While there are, of course, differences of emphasis on what that means in practice,

the general level of policy conformity to developmental notions is not only high, but is rather widely an accepted fact of life among traditional activist currently opposed to GEAR, a significant part of which, now reinvented, has tended to resign itself to the notion of an efficient state. In a narrowly practical construing of the problem, then, the issue has come down to capacity or, more pointedly, the state’s institutional and human capability to drive its developmental agenda (Naidoo, 2006:484). The challenge of capacity, in the formulation of the problem of this study, cannot be resolved through the transcendence or obliteration of this field, and certainly not through the vain promise of retrieving a unity of purpose wrought through historical exclusions, especially one that reinstitutes historical marginalisation as the condition of its own possibility.

In theory, the developmental post-apartheid state has claimed to have stood in a convergent field of contestation between politicised sectional interests and their repoliticisation as a national interest. Here the strength or weakness of the state depends on whether a constitutive rupture that makes conflict possible on identitarian grounds is forestalled by a certain mobilising effect of the state as a basis of national unity. Factionalisation, understood as the process whereby one identity excludes another in order to fortify its own unity and coherence, makes the mistake of locating the problem of conflict as that which emerges within the state itself; but contestation is the condition of possibility of national identity or, rather, its constitutive limit.

This may seem to be precisely the fallout of social conflicts around issues of poverty into identitarian and factional struggles over state largesse that the then President Mbeki hoped could be forestalled, even transcended, by state interventions to address second economy challenges. The notion of a second economy is rooted in large swathes of underdevelopment, structural manifestations of poverty and marginalisation alongside a first economy of relative development, including privileged access to basic services (Levin, 2011:261-262). In his 2004

State of the Nation address, Mbeki (2004:10) explained the problem and challenge thus:

We have already identified the challenges posed by the Second Economy … We must therefore move vigorously to implement all the programmes on which we have agreed to ensure that we extricate all our people from the social conditions that spell loss of human dignity … At the same time, we must continue to focus on the growth, development and modernisation of the First Economy to generate the resources without which it will not be possible to confront the challenges of the Second Economy. This is going to require further and significant infrastructure investments, skills development, scientific and technological research, development and expansion of the knowledge economy, growth and modernisation of the manufacturing and service sectors, deeper penetration of the global markets by our products, increasing our savings levels, black economic empowerment and the further expansion of small and medium enterprises.

In a context of fiscal austerity bearing down on more and more sections of the poor, Mbeki was justifiably outlining the state’s eagerness to intervene in the economy as a means of addressing socio-economic inequalities. The pronouncement was in fact the first clear signal since 1996 that the lines of defence against economic dualism could no longer be held by essentially macro-economic interventions. The government had little choice except to shift to a developmental state agenda. But it was Mbeki’s (2004:10) concluding caveat in his 2004

State of the Nation address which underscored the nature of the problem within the state:

We must be impatient with those in the public service who see themselves as pen-pushers and guardians of rubber stamps, thieves intent on self- enrichment, bureaucrats who think they have a right to ignore the vision of Batho Pele, who come to work as late as possible, work as little as possible and knock off as early as possible.

At issue, in Mbeki’s view, was the capacity of the developmental state to meet the modernising and transformative challenges of the second economy, particularly at local and provincial levels, where core capacities require the state to cascade policies and link them effectively with service delivery interventions. According to Ghani, Lockhart and Carnahan (2005:7), without the requisite capacity to become a developmental state, South Africa would be unable to deliver adequate services to its citizenry. “[A] developmental state project must possess a set of core capacities that will enable it to design and deliver policies”.

Thus, a developmental state is broadly understood as one that evinces a clear commitment to a national development agenda; one that has strong capacity and capability to meet its service delivery or redistribution objectives (Fritz and Menocal, 2006:4). However, capacity weaknesses have persisted well beyond Mbeki’s embrace of an interventionist agenda to address challenges posed by the second economy.

The problem of capacity was further emphasised during the ANC’s 52nd National Conference held in Polokwane in 2007. The Polokwane resolutions (ANC, 2007a:22) laid out the government’s strategic priorities thus:

Building the human capacity of the state by establishing uniform and high entrance requirements and standards of employment in the public service; emphasising professionalism, discipline and a commitment to serve; adequate numbers of personnel to ensure delivery, particularly in the case

of front line staff in areas such as education, health and policing; and building the technical capacity of the state to engage with, understand and

lead the development of dynamic and globally integrated economic sectors.

Cast in economic terms, the conference resolved that the state should maintain its strategic role in shaping key sectors of the economy, including the minerals and energy complex and national transport and logistics system. While the forms of state interventions would differ, the overriding objective would be to selectively intervene in strategic sectors that had the potential

to simultaneously drive the growth, development and transformation of the structure of the economy.

By the time new political leadership under President Jacob Zuma took office in 2009, the

ANC’s Election Manifesto (ANC, 2009:2) tended to lean towards more decisive economic interventions in the national interest:

One of the defining features of a developmental state is the state’s intervention in the economy in favour of the needs of society as a whole. A key instrument for state intervention will be a state-led industrial policy programme that will guide key aspects of economic transformation, supported by an appropriate and sustainable macro-economic policy stance, as well as trade and labour market policies.

Specifically, the manifesto flagged as an urgent issue and blueprint for economic development the state’s capacity to intervene through the implementation of massive industrial programmes hedged on a platform of an appropriate long-term macro-economic policy perspective. It also stressed the centrality of coordinating state-guided strategies in engaging key stakeholders in an inclusive process towards the implementation of key aspects of economic transformation grounded in a sustainable macro-economic and labour market policy. According to President

Zuma (2009:4):

Working with the people and supported by our public servants, we will build a developmental state, improve public services and strengthen democratic institutions.

If the abovementioned points are anything to go by, they remind us of the enhanced importance of state power in development by the close of the first decade of the new millennium. By the same token, they should not be taken to imply that the state’s transformative capability was consistent with government’s policy declaratives. On the contrary, President Zuma (2011:2)

highlighted the shortcomings of state capacity in his 2011 State of the Nation Address:

On basic services, we are also making progress. More than 400,000 additional people were served with basic water supply last year. About 81% of the country is electrified as compared to 63% in the year 2000. Indeed, we agree service delivery should move faster.

For these reasons, we will confine the problem to the limits and their implications for the developmental state to strategically pursue the social and economic goals identified by the government. Two points are important here: first, there was continuity between the Mbeki and

Zuma governments on the strategic policy perspective of South Africa becoming a developmental state. Second, the government appears to have worked on the assumption that the state possessed the requisite capacity to intervene in the economy.

1.4 Research Questions

There is some logical substance to the sequence of government interventions since 1994 leading to the new industrial policy framework and developmental state paradigm in the mid-

2000s. The full development of this presumptive economic and institutional logic, in turn, rests on an engagement with the South African government’s decreed paradigm of a developmental state. The important question turns on the empirical meaning of the developmental state as both a programmatic and strategic proposition to meet the peculiar challenge of economic dualism. Is the South African state developmental in form and substance? If such a state exists, one would expect to find evidence indicating that the state has conformed to at least three criteria:

1. Scope – how substantial is it in size?

2. Capacity – does the state possess a meritocratic bureaucracy, well-trained civil

servants and necessary institutional arrangements to make selective economic

interventions?

3. Service Delivery – to what extent is the state capable of delivering services through

its existing instruments?

In other words, is a developmental state, as a general rule, a process of meeting these criterias or an outcome of their resolution? (Gumede, 2011:179-180). This question will be tackled by focusing on the differential capacities of the developmental state model based on an assessment of whether the South African state has intervention capacity. The question will thus come down to whether state policy is consistent with a definitive developmental agenda and whether the agenda is adequately captured in government policy statements. Empirically, are policy and service delivery outcomes synchronised? Finally, do South African political leaders and policy experts involved in the debate around a developmental state share the same goal? (Gumede,

2012:25). If the answer to both questions is in the affirmative, then we have evidence of a developmental agenda, of state-led industrialisation and growth rather than oscillation. If, the answer is negative, there are limits.

1.5 Relevance of the Study

While the developmental state discourse has grown in importance during the course of the past decade, few studies have explored, in a strategic sense, state capacity for service delivery. Ever since the South African government adopted a developmental state paradigm, it has consistently maintained a policy commitment to become a developmental state. Against this backdrop, those celebrating the strategic shift to a developmental growth trajectory are troubled by persistent problems of execution within the state. The rationale for the study is a lacuna in the literature and public discourse on the South African state’s ability to meet certain criteria.

The gap in the literature is not that it is wrong about the new constraints on government capacity to implement policy. Rather, it is the failure to interrogate the assumption that such constraints are relative rather than absolute, and that they represent an evolution of the developmental state’s adaptation to both external and internal challenges. The study will

specifically focus on service delivery capacity. The study will determine the missing link between policy declaratives and practices, and make proposals on actions to be considered in order for South African state to become a developmental state.

1.6 Contribution of the Study to the Body of Knowledge

Much of the literature has focussed on state capacity as a problem and challenge in itself. This study will critically analyse the post-apartheid state, from 1994 to date, in the context of service delivery capacity, and as such will make a novel contribution to the discourse on the developmental state. Critics tend to exaggerate the state’s capacity under GEAR in order to claim feebleness in the present. The study will examine the state proportionally; in other words, in relation to inherited capacity and the scope of intervention to make sufficient inroads in the context of a service delivery crisis. Given that the study is written in a semi-policy textual genre, it will offer policy recommendations on how the South African state could strengthen its capacity to intervene and deliver services to citizens. In this regard, the study’s presumptive logic is that it matters not whether a state is big or small; it matters more that all functions of governments are important in the face of weak capacity. By examining these claims, the study will deepen the historical context and expand the knowledge base in relation to the developmental state debate.

1.7 Summary of the Preliminary Literature Study

In researching this thesis, the study examined wide-ranging claims on the notion of developmentalism on the East Asian success story. One has to do with an explicitly post-World

War II scholarship on the study of the state in a post-crisis context, sometimes understood as extraordinary interventions towards the reconstruction of economies devastated by war. The second has to do with the latter-day tendency to anchor the developmental state in developing countries to globalisation; in crass form, the tendency is to dismiss anti-statism as neo-liberal agendas of the West preoccupied with stateless politics in developing countries, and then to

construe this politics as factionalising, identitarian, and particularistic.

What emerged from this patchwork is a universalisation of the concept of the developmental state which finds expression in the work of several scholars. Johnson (1982:20) states that,

“[A] developmental state is one which endeavours to steer economic development in a particular direction and determine the pace at which such economic progression is achieved.”

Following Johnson’s early conceptualisation, more writers started to explore the meaning of the concept. In most writings, scholars associated the concept with the so-called East Asian miracle. They equated the concept to the role that the Japanese state played in driving that country’s extraordinary and unexpected post-war economic success (Kennett, 2008:80-81).

The fixation of a vast body of scholarship on the East Asian developmental state was meant to come to terms with the capacity of the state to successfully intervene in economic growth strategies and processes.

A second phase of this literature survey focused on the developmental state as a concept that explains Japan’s rapid development through state intervention. In this literature, the characteristics of a development state were outlined, with a view to theorising state capacities as functional markers of the definition of a developmental state (Karagiannis, 2002:28-38). It also constructs a conceptual frame which, in theory, could allow comparability between the performances of the distinct functional systems of the state. Following Karagiannis’s (2002:28-

38) description, the active presumption here is that the developmental state:

… should prioritise the building of infrastructure and create conditions for modern systems of development and competitiveness. A developmental state should be capable of, and willing to address the developmental challenges facing its citizens. Moreover, it should promote state-private partnerships, with the state taking a lead in setting the national development agenda, and have the capacity to translate it into effective service delivery programmes.

Some of the forms of this discussion have been taken to include an institutional focus of political economy discourse on the critical challenges of developmental capacity, including disparities in and a lack of resources, training, education, and social services (Karagiannis,

2002:28-38). Indeed, skills development is a key plank of developmental state discourse. This viewpoint is also shared by Edigheji (2007a:11) and Kauzya (2008:14) who maintain that:

Governments and bureaucracies that want to push their countries towards developed status should therefore focus on improving the health, education, and skills of their population so that they can compete in the global marketplace for services. The developmental state should invest in bureaucratic capacity in order to develop policies and strategies, forecast and anticipate future trends, react to rapidly changing global and local conditions.

The third component of this survey was thus an evidential base for an examination of the conditioning influences and prerequisites for the construction of a developmental state in South

Africa. Certainly, if history is a yardstick, the South African state has to ensure that it focuses on key service delivery areas such as education, health, the training and development of its workforce, and the construction of a strong, and professionally, impartial civil service. In a word, the South African state needs to deploy resources towards the development of a public service bureaucracy capable of developing policies and strategies and anticipating future developments. In this respect, it is by now axiomatic that one of the key ingredients of a developmental state is a meritocratic civil service that would enable the state to harness the capacity to react to unplanned global and local economic recessions (Evans, 2008:9) ; (Kauzya,

2008:14).

The fourth phase of the literature survey focused on an abstract review of state capacity to deliver services. According to Evans (2008:8-9), in a developmental state, capacity is:

The fundamental determinant of long-run growth. Therefore, in order for such a state to accelerate economic growth, it should have the capacity to expand access to the existing stock of ideas, increase effective utilisation of these stocks and generate new ideas suited to country-specific circumstances.

For a state to effectively intervene in economic development, it should have the capacity to expand access to information, increase effective usage of information, including new ideas suited to a country’s conditions and possibilities for enhanced delivery of services. For if the capacity of the state to deliver services re-affirms the idea that “a developmental state is synonymous with the delivery state” (Fakir, 2005:1), in literal terms a developmental state is one that essentially delivers relevant demand-driven services to the citizenry by providing guidance to the private sector.

According to Evans (2010:38), “Without accurate knowledge of what kinds of collective goods the citizenry needs and wants, states can invest vast resources, but fail to enhance capabilities”.

The administrative capacity is thus important in enabling the state to deliver services such as health, education and infrastructure. Administrative capacity, in turn, rests on the capacity of the state to respond to the demands, needs and aspirations of the citizenry. The state needs to have the capacity to understand, interpret and formulate rules and laws that are aimed at responding to people’s needs.

However, administrative capacity needs political support in the form of accurate information and knowledge of the kind of services that members of the public need or want. Without accurate information, it is difficult for states to allocate resources efficiently and marshal developmental programmes towards positive outcomes. This point also found its expression in

Amartya Sen’s work. Sen (1999), underscored the point thus, “development is about the well- being of citizens and capabilities, then development strategies and policies cannot be formulated by technocrats, but must be derived from democratically organised public

deliberations” (Evans, 2010:44). In essence, Sen argued that policy cannot be the remit of political and bureaucratic elite such as policy specialists; it has to be an outcome of continuous engagement and discussion with the general public. Clearly, one more or less implicit assumption in this line of argument is the notion of deliberative forums which enable citizen involvement in decision-making processes around matters that concern their well-being

(Evans, 2010:44). According to Sen (1999), “[D]evelopment should be people-centred and people-driven as opposed to state-driven … in which development strategies and policies are formulated by those in positions of power.” Development should thus lead to the improvement of well-being and acknowledgement of potentialities of citizens. In essence, state bureaucrats should serve the interests of the people, and create platforms for citizen engagements with the political system (Evans, 2010:43).

According to the Economic Commission for Africa (ECA) (2011:30), this human capabilities school premises the developmental state on massive investments in human capacity to develop and implement policies. This sense of human-centredness inscribes social policy as one of the building blocks of aspiring developmental states. As in the case of the Asian Tigers, social policy should include measures to increase income support and income equality.

Although this is not quite the chain of equivalence of the Asian Tigers, which were largely undemocratic, the human capacity focus in the scholarship of Sen and Evans is nonetheless consistent with massive investments in skills, education, health care and infrastructure as important capability expansion areas and conditions for the enhancement of the productive base of economies.

The fifth phase of this survey turned to some of the lessons of the developmental state for the

South African government. If South Africa has declared itself a developmental state, and has prioritised service delivery, the question remains whether a mere declarative appellation is sufficient qualification for a developmental state. On the other hand, is the process of becoming

one at once a developmental state? The prioritisation of service delivery is reflected in the

Constitution of the Republic of South Africa, Act 106 of 1996, which commits government to taking reasonable measures within its available resources, to ensure that all South Africans have access to adequate housing, health care, education, food, water and social security” (See for example ANC Strategy and Tactics, 2007 and Towards a Ten Year Review, 2003. In virtually all official documents, the developmental state is synonymous with a delivery state.

Whether stated policy is matched by action is an issue that needs investigation (Fakir, 2005:1).

1.8 Research Design and Methodology

The study will employ a number of research approaches to compliment the research process.

A qualitative research approach and an extensive literature review will be utilised. For starters, a qualitative approach is a research approach that focuses on social action whereby the researcher studies human action from the insider‘s perspective with a goal of describing and understanding rather than to explaining and predicting (Babbie and Mouton, 2011:53). Given that the researcher plies his trade in a state department that provides the matrix of this study, the qualitative approach is both apposite and meritorious.

For, in one place, Babbie and Mouton (2011: 270) affirm that qualitative research is naturalistic in nature since it studies attitudes and behaviours within their natural setting as opposed to an artificial setting. In another, they indicate that a thick description will capture the sense of actions as they occur and place the events in the context that are understandable to the actors themselves (Babbie and Mouton, 2011:272). In the natural setting of government, where programme after programme is rolled out, the setting is amenable to capture defining moments that railroad the practical realization of the developmental state or otherwise. In order to add value beyond description of capacity and structure, there is a dire need for an exploratory approach that involves collecting in-depth information from a variety of published materials.

Secondary materials consulted include articles in accredited and peer-reviewed journals (both

national and international), books, chapters to books, edited works, monographs, bulletins, newsletters and newspaper articles related to the area under study. Primary sources to be consulted will consist of departmental memos available in the public domain, white papers, commentaries and reports related to the topic under research. It is here that most corroborative reports appear and are the most crucial outlet (Neuman 1997:91).This allows the researcher to observe and explore systematically the environment and context of the history of developmentalism in the state.

In applying the methodology, state-generated documents will be scrutinised especially related to utterances relevant to the selected area of research, discussions and debates by senior officials in government, including Executive Directors of Private Sector Organisations (PSOs).

The researcher would also focus on political actors and their views, particularly in respect of streamlining policy to align to development objectives.

In addition to the above, a comparative element will be incorporated into the study. Apart from

South Africa, an exemplary case of a successful developmental state system, namely Japan will be brought to view. Of necessity, the two selected cases will be compared through extant literature on economic agencies and policy instruments. Ostensibly, the purpose of the comparison will be to gauge the functions, strengths as well as weaknesses of the cases under scrutiny. Where possible “lessons learnt” will be drawn from the insights gained through this comparison.

Due to the fact that each defining moment of success or of catapulting the state to a defining moment cannot, in the case of Japan and South Africa, be arrested, measured or quantified on a correlational basis, the current research approach will exclude any quantitative elements such as surveys and interpretation of data generated through such surveys. Strictly speaking, a quantitative approach will not be able to account for the inability to move forward, or even

account for the prime drivers that shape the fast-tracking of programmes that are development- oriented. As Babbie and Mouton, (2001:49) rightly observe, the quantitative research paradigm as that part of social science research which values measuring properties or quantities as the best way of assessing a phenomena. This study deliberately bucks the trend, and wants to breathe life to the numbers that define success as it captures the political zeitgeist behind them.

1.9 Theoretical Framework

The post-Keynesian marker for harmonising and mobilising divergent interests around national development objectives as a lever for social and economic development is the development of variants of the developmental state theory or model. Post-Keynesian theories, as the conceptual sphere of developmental political economy seemingly furthest removed from macro-economic monetarism, might be thought to possess the potential for grappling with the manner and extent to which growth results in an equitable distribution of resources. If one considers economic growth as what is needed for an economic agenda and robust policy plan to be potentially viable, then the espousal of the developmental state theory is one limb of an argument to the effect that equitable distribution is what is needed for growth to be sustainable.

For sustainable growth to occur, a state should strive to reconcile individual goals with national development objectives. Embedded in this strategic approach is the overall coordination and mobilisation of individual private sector strategies around a broader governmental agenda or national development strategy. Thus, the developmental state is a capable state of government, or state institutions populated by competent, dedicated, skilled and highly educated officials that have the capacity and capability to deliver adequate developmental services. To be clear, the theoretical anchoring of developmentalism is not a welfarist abstraction of, or place-holder for, neo-liberal or Keynesian macro-economic management, but a foundation for sustained growth based on a combination of interventions in the real economy and cast within an overall industrial strategy. This type of expansion depends on the efficient provision of collective

goods. Health and Education are the most crucial of such goods or services (Evans, 2008:7).

Capability expansion simply refers to the state’s potential or capacity to deliver services.

The power and durability of some of the theoretical propositions underpinning the developmental state depends on a synchronic process of goal setting, the general developmental framework within which the private sector would operate in support of the state’s national development strategy. In this regard, the state should be able to mobilise key constituencies around development goals, in the process addressing spatial disparities and the lack of human and material resources, training, education and social services within society.

In essence, a developmental state must have the capacity to set the developmental framework as a sort of gravitational pole around which all role-players within society orbit.

This means that the developmental framework is integrated and every sector contributes to the realisation of the goals set or articulated within the framework. Thus, the designing of the framework is itself a balanced process, meaning it assimilates the interests of all the poor and the rich, those living in rural and urban areas. In so doing, the framework theoretically addresses spatial and class disparities or developmental imbalances that tend to favour certain areas or social groups. In this fashion, the developmental state ensures an equitable distribution of resources. It is this post-Keynesian notion of development that we will apply to the South

African case in this study.

1.10 Presentation and Analysis of Data

A descriptive and exploratory approach drive the narrative of this study. Information on the manner in which the data has been gathered and the area in which the information will be collected will be spelt out in detail. In the final analysis, it will be dealt with in the presentation of the findings. This specifically applies to the documentary exploration and the two units of analysis selected (the comparative element), namely South Africa and Japan. In applying the

data to the analysis, the information will be reviewed, links identified, patterns and common themes established, the arrangement of facts ordered, and the findings presented. Through this approach, the researcher will after data gathering reflect on the data and make recommendations and draw conclusions. Lessons learnt will be brought to the fore and incorporated intothe recommendations section.

Segments of the work will be disseminated to a wider academic and expert-practitioner audience through publication in top drawer accredited journals and publications to ensure that the findings reach as many stakeholders as possible. Finally, the work will be circulated to project funders, government departments and civil society organisations.

1.11 Outline of Chapters

1.11.1 Chapter 1: Introduction to the Study

This chapter sets out the theoretical framework in which the study will be cast. By framing the data and information as an analysis, epistemological flaws in many theories will be exposed, and a conclusion shall be made whether South Africa is a developmental state or not. It provides an overview of the developmental state by examining comparative international studies.

1.11.2 Chapter 2: The Concept of a Developmental State: A Framework for Analysis

This chapter reflects on the theorization of the notion a developmental state by various international scholars and academics. The chapter also contains the theoretical foundations of the study and the extent to which the concept has evolved since its origins. Finally, a note on the research methodologies employed to collect data is made.

1.11.3 Chapter 3: A Rational Planning State

This chapter examines the nature and modalities of the developmental state. It also focuses on

the key operational functions of the developmental state. The manner and extent to which the state has been able to play a strategic role in promoting international trade and investment will form an important plank of the chapter. The extent to which the state has managed to blend national interests with foreign or international trade, its ability to protect, guide and selectively intervene in industrial development in favour of its national companies against multinational competitions will support or refute the claim of the developmental state as a strategic planner in development initiatives.

1.11.4 Chapter 4: The Institutionalisation of State Capacity

This chapter traces the evolution of the South African state over the first 16 years after the onset of the non-racial democratic dispensation, focusing on government policy shifts and examining whether or not South Africa is a developmental state. How the South African state pre-and post-1994 has implemented its policies and managed the transition–in particular, the implementation of poor-poor policies–responds to the question of whether post-apartheid policies have resulted in economic development with redistribution. In essence, the chapter will elucidate the extent to which the South African state has managed to formulate and implement appropriate policies, and whether the policy shift has spawned a developmental state.

1.11.5 Chapter 5: The Evolution of the South African Developmental State Agenda

This chapter explores the meaning of service delivery and state capacity in South Africa. It is therefore vital to tease out the extent to which the two concepts are interlinked. It appraises the assessment of the capacity of the South African state to become a developmental state. As a developmental state is synonymous with a delivery state, the chapter will reflect on progress with regard to service delivery since 1994. In this regard, the chapter will also look at the evolving nature of South African state policies as either antipathetic to, or consistent with, the

country’s professed developmental trajectory.

1.11.6 Chapter 6: The Institutional Dimension: The Specificity of Racial Redress in Service Delivery

This chapter will focus on service delivery in South Africa. The chapter will highlight service delivery problems and the extent to which such challenges have been able to impede the state to pursue its developmental state agenda. The chapter will also reflect on government institutions as prescribed in the South African Constitution and concomitantly assess their capacity to render adequate services. Other legislative frameworks will also be looked at in terms of which they advance the course of improved service delivery and state capacity of the

South African state.

1.11.7 Chapter 7: The Missing Link: State Capacity as a Condition for a Developmental State in South Africa

This chapter will focus on the manner in which the developmental state agenda of the South

African state has evolved. The chapter will also look at how the ANC-led government has attempted to construct a developmental state agenda, and whether in the path to build such a state it has managed to address all key elements of a developmental state critical to building a developmental state. The chapter will focus more on state capacity and assess whether the

South African government possesses all those qualities that make it a strong developmental state.

1.11.8 Chapter 8: Learning from MITI in Japan

This chapter will demonstrate that although a strong centre is able to deploy skills throughout different spheres of government as part of an innovative plan, it falls short of a tangible lever on the capacity problem. Dwelling on a long list of administrative and legal changes does not get to the nub of the crisis. Even latest proposals to prioritise outcomes over inputs and outputs leave the quantity and quality of human capabilities and institutional capacity intact. There is,

however, a way forward that is crucial to the reform process: it lies partly in harnessing capacity, and partly in reconciling competing interests in the public sector to the national interest. This, it must be understood, is a process of engagement, often beyond formal institutions and organisational forms, in the realm of informal institutions at local government level–the site of forming a social contract involving all stakeholders as a basis for a common discussion on a national consensus around the role of the developmental state.

1.11.9 Chapter 9: Conclusion: Prospects for a Developmental State in South Africa - Challenges and Recommendations

By reflecting on policy shifts since 1994, this chapter will construct a balance-sheet of whether

South Africa is a developmental state or not. It will also look at various capacities of the South

African state and whether its delivery capabilities rank it a developmental state. The characteristic features of a developmental state will be explored in relation to the manner in which in which South Africa has attempted to fulfill its developmental requirements. This chapter will provide various recommendations for policymaking and policy review.

CHAPTER 2

THE CONCEPT OF THE DEVELOPMENTAL STATE: A FRAMEWORK FOR ANALYSIS

2.1 Introduction

In seeking to explore the extent to which South Africa is a developmental state, the study applies the post-Keynesian notion of developmental state theory as a frame of reference for an examination of the South African state. Thus on one theorerical level, this chapter will provide a conceptual framework for an empirical engagement with the notion of a developmental state in South Africa as a pragmatic alternative to neo-liberal orthodoxy.

On another level, ideology is always self- referential, it dismisses and denounces its opponents.

This study, in its intention at any rate, does not propose a depoliticised economic logic against the prevailing neo-liberal orthodoxy of developed countries. In form and substance, it is in a sense a rejoinder to certain limits of both Keynesianism and liberalism and thus becomes ideological by both design and default.

The crucial point is the conceptual frame of an interventionist state model in developing countries like South Africa attempting to define themselves and their places in an internationalised economy interpolated by an inter-state system—not so much as supra- national economic blocs as new spheres of influence for powerful hegemonic forces. What we find here, of course, is an exemplary case of the predominant cliché, ‘globalisation’, in which the limits of macro-economic management of the Keynesian and neo-liberal variety and its corollary, monetarism, have offered opportunities for developing countries to catalyse alternative growth and development paths within a fresh paradigm.

As such, the theoretical supposition of this chapter is not between two variants of monetarism

Keynesianism and neo-liberalism. The schema of the developmental state, with which this study is conceptually concerned, is in fact more than an undefined, or deferred, concept which resonates somewhere in the suspension of time between liberal orthodoxy, or even

Keynesianism, and a transitional post-Keynesian system of economic governance struggling to come of age as an ideological construct. Post-Keynesianism, like its Keynesian antecedents is a statist system grounded in the very structuring principle of global capitalism. It is however anchored in a progressive, read ‘developmental’, political economy of establishing ‘chains of equivalence’. That is to say that its foundational bedrock is the very domain of developing countries that constitute part of the global ‘South’ in a post-Cold War era, with their continuously shifting displacements and condensations characteristically sustained by the key role of the state as a catalytic instrument in the economic struggle for development.

To come to terms with the ‘post’ in the emergence of the post-Keynesian developmental state, it is important, firstly, to identify the different waves of theorisations and to differentiate them; secondly, to discuss the contradictions and challenges of neoclassical approaches to economic growth and development; thirdly, to present the conjunctural specificity of the post-Keynesian state; and finally, the concept of the developmental state will be examined toward a framework for analysis.

2.2 Theorising the State

According to Max Weber, the state could be understood in terms of two critical areas: power and authority. The manner in which various authorities are coordinated as a form of state, as well as authority or power that such institutions carry in discharging their responsibilities determines whether the state is strong or weak. The state becomes the overarching authority of authorities in the sense that it is made up of independent institutions that have power, but whose power is not complete until they are part of the complete whole (Van Gelder, 2007:2-4).

In the modern era, the predominant form of socialisation is the nation-state as the medium of identity formation, that is, the determinate form of individual or group identities inhere in the specific mode of sublimation of the particular (ethnic, religious, social, locational identities) by the abstract institution of secondary identification, viz, the nation-state.

On the one hand, the state as the principal and organisational unit that exercises political and public authority in the contemporary era, following Weber’s interpretation, is the expression of various institutions such as courts, security services, and parliament as a structured authority which sublimates organic local forms of identification by universal ‘patriotic’ identification.

On the other hand, it posits itself, in the view of Karl Marx, as an “executor of the ruling class” and is thus partial and, in the era of late capitalism, become what Mandel (1972:45) perceives as a a denationalised, or a pseudo-national boundary of the global market economy that delimits ‘internal’ from ‘external’ commerce.

Economic activity is thus sublimated, raised to the level of the market, and legitimated as a patriotic contribution to the nation. In Mandel’s Late Capitalism, we find theoretical and empirical evidence that the balance is constantly threatened from both sides: from the side of

‘organic’ forms of particular identification which do not simply disappear but continue their subterranean life outside the public sphere, as well as the side of the immanent logic of capitalism whose transnational nature is inherently indifferent to the boundaries of the Nation-

State.

Therein resides the highest effort, in the view propounded here, of the dialectic of modern life in the era of global capitalism–not in describing the process of mediation of organic identities or, say, the disintegration of organic identities into fiefdoms but in explaining how this very process of mediation, characteristics of modernity, can give birth to new forms of national and transnational identities.

The theoretical premise of this chapter is therefore concerned with the notion of ‘mediated’, or temporal, forms of national communities and nation-states in an era of globalisation. Thus pre- modern communities, the nation-state and today’s emerging transnational, universal society clearly fit the triad of traditionalism, modernism, and post-modernism, elaborated by Jameson

(1991:35). The standard narrative of the passage from the state as a structured executor of national and global class hegemonies to mediated communities of interest can thus be understood, at least ideologically, as the emergence of developmental states.

According to Monyae (2011, 34), a developmental state is central to mainstreaming and

‘naturalising’ social order. Here the state is the prime strategic authority, and thus imposes classification systems that sanctify prevailing hierarchies of society, establishes and reproduces shared symbolic forms of thought, and presides over a symbolic order that is coherent and systematic for the common good of the country (Monyae, 2011, 34).

In this discourse, state intervention and strong state control of the economy was important

(Monyae, 2011, np). The state has the overarching mandate to mediate the delivery of services to the general public. However, it is important to understand that in contrast with Weberian and Marxian theorisations of the state, the developmental state does not claim neutrality as a phantasmatic pretext for deception or as an instrument used and controlled by political leaders to achieve narrow interests under the guise of the national interest. The developmental state does not reside in a hidden hand beneath an anonymous global machine blindly running its course and animating the state as an instrument of narrow interests (Yegenoglu, 2003:51).

What we find instead is the equivalent of a post-Marxist state which proposes neither the restoration of Marxist theory of a dialectical movement forward nor the abandonment of the strategy and principle of developmentally oriented activist states. In short, we find the exemplum of what is known as post-Keynesianism.

2.3 Antecedents to Developmental State Theory

If the gradual loss of substance of certain Weberian, Keynesian and Marxist notions of the state bears witness to the emergence of the developmental state concept, the latter is itself an abstract notion that is not really bound, contrary to public perceptions, to the ‘conditioning influence’ of post-World War II economic phenomena. Although the actual genesis of the idea of a developmental state reaches back at least to List (1909) and Gerschenkron (1962), whose concern was the role of the state in rapid late industrialisation in continental Europe and the

1950s when the modern developmental state came into being, the concept of the developmental state as a matter of fact existed in Bismarck’s Prussia.

It was also preponderant in Japan during the Meiji era beginning in the 1868s, an undemocratic period in Japan’s development, when leaders of Meiji Restoration realised the importance of education in their pursuit of “civilisation and enlightenment” and campaigned for strengthening the state to resist Western intruders (Bagchi, 2006:240). As a movement toward political reform under Japanese traditionalism (Bolesta, 2007:105-107); (Compton Jr,

1964:113), the government followed a developmental economic trajectory and interventionist approach to economic development during this period.

The modern developmental state was conceived following research in East Asia, where it was conceptualised and introduced in 1982 in academic disciplines and literature (Bolesta,

2007:105); (Huque and Zafarulla, 2006:206). The developmental state thus owes its existence to the authority of people committed to the transformation of the social, political or economic order (Bolesta, 2007:105). Moreover, when the developmental state was introduced in East

Asia, the main objective was to achieve economic development by fostering state intervention to the mainstream economy. It was ostensibly meant to resist western imperialism and ensure national survival or the continued existence of East Asian states (Bolesta, 2007:108). It was, in effect, a post-World War II attempt by developing countries, Japan in particular, to bolster

the role of the state as a catalytic instrument of growth.

2.3.1 The Post-World-War II Keynesian Period

The ability of governments to practice effective macro-economic management took off at

Bretton Woods in the aftermath of World War II. In the face of run-down European economies devastated by war, the Bretton Woods post-war system guaranteed fixed exchange rates and stable policy-making environments.

Expansionary macro-economic policies by post-war governments and the fiscal surpluses to spend under demand management of the Keynesian reflationary variety certainly seemed to produce results. In essence, Keynesian demand management such as it was conceived by

British economist John Maynard Keynes has asserted state expenditure and monetary control.

It essentially brought an expansionist system artificially manipulated through monetary controls, under a relatively planned macro-economic paradigm as an efficient alternative to laissez faire capitalism. Put differently, it represented a combination of planning between the state and market in a creative partnership. In this sense, both anti-statism and Keynesianism are flip sides of the same macro-economic paradigm. The structure here is the principle of macro-economic demand management.

Troubled growth, recession and falling incomes in Organisation of Economic Corporation and

Development (OECD) countries after the oil crisis in 1973 removed the fiscal surpluses. The point to emphasise here is that many of the difficulties national policy-makers have experienced with macro-economic management, for example, balancing budgets, mobilising sufficient revenue to fund programmes and so forth, have had more to do with internal fiscal difficulties caused by downturns, and little to do with ‘globalisation’ tendencies. Even where tariff structures that facilitate foreign direct investment stimulate negative growth, an internal fiscal peg should, in the normal course of things, stabilize the economy of the state through

structural cushions other than inflation targeting or currency devaluation: governance instruments at the cogs of the state’s delivery machine–globalisation’s exchange controls notwithstanding.

Thus, the trend towards fiscal conservatism, and shift from demand management under the rule of US President Ronald Reagan and British Prime Minister Margaret Thatcher during the

1980s owed much to such domestic pressures. Prolonged economic recession coupled with demographic changes compelled governments to raise more taxes. Equally important in explaining this policy shift, at least after 1973, were the effects of the oil shocks and the inflation they accelerated.

2.3.2 The Period of Rapid Industrialization

The most recent examples of successful transformations by developmental states have been those in East Asia between the 1950s and 1980s following the post-war industrialisation of

Continental Europe. From a contemporary vantage point, the convergence of recession, removal of the gold standard in 1971 and subsequent liberalisation of exchange controls, and international capital flows, or financial internationalisation, in the 1980s what has been termed

‘neo-liberalism’ to distinguish the latter from its post-World War II variant gave life to the idea and reality of ‘globalisation’. Whichever way we look it, there is sufficient evidence that neo-liberalism could be interpreted to mean the coincidence of globalisation and perceptions of weakened Keynesian demand management, thus undermining governments’ ability to practice effective macro-management.

Although there is compelling evidence that the state has ever had the sorts of powers that allegedly it had been forced to relinquish to footloose global markets, in reality deflationary, fiscally conservative policies marked a significant departure from Keynesianism and inaugurated the New Right School of market efficiency over state involvement in the economy

(Karagiannis, 2002:35-36). Along with the decline of the American neo-conservative school of the Reagan era associated with American hegemony in an era of internationalisation, there has thus been a swoop back to neo-classical theory in developed Western economies since the

1990s, which was generally associated with laissez-faire and anti-government philosophies.

There emerged a desire to avoid active government and belief in the inherent stability of the market.

New Right theorists have claimed that the growth of government results in significant reductions in long-term growth and employment and hurts overall economic performance.

Hence, less government would improve aggregate wellbeing by improving economic efficiency. Instead of government forcing people to do things through bureaucracy, markets are viewed as superior in every respect, with expressions like the “freedom” or “choice” to replace the “serfdom” of government (Karagiannis, 2001:4). According to this theory, the market is capable of naturally resolving economic difficulties and mediating opportunities without interference of the state. The irony is that when markets fail, it falls to the State to roll out absorbtion mechanisms for the resulting shocks. Despite this, stimulus packages that catalyse the markets to a point of efficiency are tied to the state’s fiscus.

However, the qualifications of market efficiency have suggested that because the state lacks the technical know-how to set long-term strategic goals, the expansion of its role and functions harms employment creation and overall economic performance (Karagiannis, 2001:4).

2.4 The Specificity of the Post-Keynesian Conjuncture

Whilst globalisation has been commonly identified as the factor undermining Keynesianism, the East Asian experience, starting with post-war Japan, ushered a post-Keynesian moment, supplanting short-term macro-economic management with state led industrial policy. Japan’s industrial bureaucrats in the Ministry of International Trade and Industry (MITI) played a key

role in creating innovative tools, more suited to the environment and the tasks this engendered: supporting self-governing cartels in basic materials, promoting, and diffusing, technological innovation through corporatist arrangements, as well as facilitating internationalisation, or corporate activity, through export promotion instruments.

Studies have shown that during the period following 1945 the level of internationalisation was in certain respects no less remarkable than today (Weiss, 1998:5.9). According to Weiss, as with trade, the ratios of capital flows relative to output appear higher during the Gold Standard period in the early twentieth century than even the 1980s. From the early 1970s onwards, as we have argued, the combination of depression and war, followed by the strong political consensus for Keynesianism, helped weaken financial integration and strengthen autonomy in policy matters.

What set the post-Keynesian conjuncture apart, however, was the emergence of contemporary globalisation, facilitated by the onset of new technologies, proliferation of debt finance and transnationalisation of production processes. But this did not mean national economies were being outflanked by transnational linkages. Quite the contrary. Transnationalism was catalysed by national economies, in developed economies, driven by a neo-liberal dictum. But it is in the context of less developed countries that this conjunctural convergence has resonated with a post-Keynesian developmental paradigm, partly in response to neo-liberalism, partly as an alternative development-oriented model.

Certainly, in the case of the East Asian Newly Industrialised Countries (NICs) such as Korea,

Hong Kong, Singapore, Japan, Taiwan and China including second-generation NICs Malaysia,

Indonesia, Vietnam and Thailand in the 1990s, this post-Keynesian conjuncture buttressed the centrality of the state in the new international environment. In a sense, then, globalisation has often been a by-product of states promoting internationalisation strategies. Put differently, far from acting in concordance with neo-liberal prescriptions developing economies in East Asia

have adapted strong states to their external environments. Internally, institutions of the state have acted as centrifugal forces for the provision of services such as health, education and infrastructure, the latter in turn functional to a policy of internationalisation. Accordingly, institutional arrangements have buttressed the state as a centrifugal force for policy and decision-making and economic performance, playing an instrumental role in shaping or guiding institutions of the private sector towards a development oriented growth path.

Thus, if globalisation has not exerted the uniformly debilitating effects so often claimed for it, the post-Keynesian state seemed to have emerged out of a conjuncture characterised by what

(Weiss, 1998:6) has called “weak globalisation”, or strong internationalisation. Either way, there emerged a condition in which state power, adaptability or differentiation is a creative partnership between state planning and the market (Arestis and Sawyer, 1998:4); (Karagiannis,

2001:4). Here we might see in the 1950s the onset of a period of revisionism.

2.5 A Theorisation of the Post-Keynesian Developmental State

Embedded in the economic dynamic of an inter-state system has been the concept of the developmental state. As macro-economic tools appear to have begun to lose their efficacy since the mid-1980s, as external pressures for homogenisation of trade barriers have increased, and as financial capital has flowed more freely, so too have developing economies in East Asia sought to increase their control over the impact of external pressures. Although responses to these pressures have not been uniform, there are discernible features of the reconstitution of power around the consolidation of domestic and international linkages that have harmonised around national developmental plans.

2.5.1 The Formulation of the Developmental State Concept

The concept ‘developmental state’ formally received recognition with Chalmers Johnson’s seminal work MITI and the Japanese Miracle (1982) on the East Asian developmental state.

In his writing, Chalmers Johnson has contrasted Japan’s developmental state model with the

American model of capitalism, where the government acts largely to ensure fair competition, and with the communist model in which the state both plans and controls industrial growth. In the case of Japan, the state played a direct role in planning the development of a capitalist economy by setting substantive social and economic goals (Leftwich, 2000:157). In this characterisation, a developmental state is thus a state-led, market-oriented apparatus.

In Chalmers Johnson’s specific use of the term “developmental” to describe the role the state played in the post-war growth and development of Japan, he assigns to the state a significant role: a state attempting to match the economic achievements of Japan must adopt the same priorities as Japan. It must first of all be a developmental state by setting out to lead and practice development (Plaatjies, 2011:4).

However, it cannot be argued that the state alone was solely responsible for the industrialisation of Japan. What the state did was to provide a favourable platform for all to operate effectively.

Chalmers Johnson highlighted that in Japan the role of the state has been the will of the state to “define its essence”, its character and determination, which is a post-World War II economic development context since the 1950s.

2.5.2 Defining the Developmental State

From the above analysis, we can thus extrapolate a conceptualisation of the developmental state as the manner in which it organises itself and distributes the resources at its disposal; how it regulates markets and the excesses of private capital; how it responds to social conflict; how it deals with poverty, unemployment, inequality including gender inequality, sustainable development, the environment; and how it navigates and negotiates its way through difficult economic times, particularly in the domestic economy (Saloojee and Pahad, 2011:5).

Developmental states are states that are able to plan and distribute resources, provided they

have the capacity to regulate the market as well as intervene in the affairs of the economy.

Such states are able to harmonise conflicting forces by engaging social actors and withstanding difficult economic challenges towards stable economic environments (Saloojee and Pahad,

2011:5).

The definition of the developmental state thus also refers to the state’s ability to effectively apply power or exercise authority in addressing various societal challenges, its capacity and capability as well as authority and legitimacy to address developmental challenges through the creation of job opportunities and redressing the problem of poverty and underdevelopment. In essence, a developmental state is an active or strong state able to deal effectively with economic and societal challenges.

2.5.3 The Post-Keynesian School

The question, however, is this: To what extent can post-Keynesian developmentalism be theorised as a thing that exists sui generis, or a self-contained ideological construct? The first point to make in the view advanced here is that ‘developmental’ is being contrasted with

‘interventionist’. For if Keynesians have advanced ‘selective intervention’ as one of the distinguishing features of the developmental state, what set of theoretical abstractions has distinguished post-Keynesianism from all other variants of state interventionism? Is the separation of developmental state discourse from the study of the Keynesian regulation school simply a matter of varying emphases? How is this separation related to the essential role of the state?

The first point to make is that the distinction is a way of highlighting the general tendency of developmental states to seek institutionalised partnerships with sectional interest groups through corporatist arrangements and, similarly, regional alliances between states and corporate actors. Whereas neo-liberal orthodoxy, and to some extent even Keynesianism,

draws a sharp division between state and industry and focuses on the essential opposition of market forces and government, developmental theory stresses the role of the state in the active promotion of industrial development where the state adopts an entrepreneurial posture, either in its own industrial operations or its promotion of private enterprise, and creates opportunities that would not otherwise exist (Karagiannis, 2002:35-36); (Sawyer,1989:56-57).

Post-Keynesian developmental theorists have therefore defined the state as a relatively strong state, a strategic and effective investor which is not (overly) influenced by interest groups.

Such a state, by no means a homologous utopia, presupposes the diversity and relative strength of existing social forces (that is, social classes, local governments, interest groups, trade unions etc) and synergises these strengths towards greater social and economic goals.

Yet, is this not simply an attempt to guarantee conditions of stability for capital accumulation through fiat, whether through the finesse of rationalist notions of the common good which prioritise a notion of progress bereft of class and conflict? Is the point of post-Keynesian developmental rhetoric of national unity not simply through domestication and subordination precisely those subaltern movements that tend to partly stand in opposition to such domestication and subordination, showing that proponents of the ‘common good’ have failed to read the history that has made conflict both possible and, in the view advanced by both

Marxists and neo-conservatives, necessary?

Paradoxically, the very notion that continues to animate the market is responsible, in the critiques of the post-neo conservative New Right School (NRS), with its paralysis. Unlike

Keynesianism and its narrowly identitarian construal of interests and narrowing of the public sphere, there is no reason to assume that developmentalism is reducible to identitarian formations. Neither for that matter are there grounds for assuming market paralysis as a direct result of state encroachments on capitalist economic relations. The post-Keynesian theory of the state holds that the problem of national unity cannot be resolved through the unbridled

market, as even Keynesianism maintains, but through reinstituting a strong state as a condition for its possibility. The only possible unity will not necessarily be the enforced synthesis of a set of conflicts, but will be a mode of politically harnessing contestation in economically productive ways, a practice that demands that different interests articulate their demands under national goals aimed at improving the condition of society as a whole (Karagiannis, 2001:11-

13).

It is significant to note that within the post-Keynesian academy, developmental states are naturally referred to as strong, engaging states whose power lies in the strength of social forces such as classes, interest groups and trade unions (Karagiannis, 2001:11-13). According to the theory, the state cannot do everything. An integrated approach is posited which combines finance with a wide range of services to strengthen economic growth in specific companies, projects based on local sector research and specific sector skills. For the state to be effective in meeting social and economic goals, public investment agencies should operate as players within a mixed economy. This in turn means that, the state is the driving force of a developmental agenda whilst the private sector works within the long-run goals set by government at various levels, that is, local, provincial, national and international levels. This assertion of ‘chains of equivalence’ among social forces demonstrates that in a developmental state paradigm the private sector and civil society groups do not operate in a vacuum; rather, they align their objectives and programmes with a national development plan. The role of government in this regard is to stimulate growth and ensure greater equity in the distribution of economic opportunities and benefits by promoting productive investments and high quality employment (Cowling, 1990:55).

The importance and significance of structural arrangements within the state sector are therefore asserted as relevant for effective policy, decision-making processes and the overall economic performance of the state. The state is not just a bystander; it is an important player in the

provision of strategic support and guidance to the market or private sector as part of, and in addition to its responsibility of service delivery (Karagiannis, 2002:4). In this way, while the state and market are typically rendered distinct conceptually, the analysis of the one in developmental theory cannot proceed without the analysis of the other. A different dynamic is at work in relation to the developmental state, and the rest of this chapter deals with that issue.

2.6 Distinguishing Features of the Developmental State

For many commentators, the power of the state, especially of the developmental state, to undermine the monetary and fiscal policies of government seems an incontrovertible truth. It is also viewed as the key constraining feature of a globalised economy: forcing markets to respond to political rather than economic incentives. From this perspective, two conclusions follow. First, developmental states are all powerful, forcing on the private sector distorted inward-looking national agendas, read ‘economic nationalism’. Second, it matters not whether states are efficient; all states are essentially non-market actors and therefore incapable of totally regulating economic activities. Each of these claims warrant scrutiny hereunder.

The problem with the ‘economic nationalism’ thesis is not that it is wrong about the constraints on government capacity to conduct economic activities in an efficient manner. Rather, it is the assumption that such constraints are absolute rather than relative, and that the state is antithetical to globalisation rather than a function of an evolution of state adaptation to both external and internal challenges. The reality is that the State can leverage globalisation through instruments such as The African Growth and Opportunity Act (AGOA), a platform for the trade and commercial relationship between the United States and Africa (United Nations

Economic Commision for Africa (UNECA) online, http://www.uneca.org). Further to this, it is worth noting that Stiglitz elucidates such balanced trade relationships are geared towards

‘fair trade’ in many respects: “a combination of state policy, better adherence to liberal rules and amore participatory, redistributive global trading system”(Stiglitz, 2006: 82). Here the

state is able to influence the trade environment, negotiate favourable tariff structures and increase trade volumes. This does not, however, diminish the pressure of internal challenges.

In respect of the latter, four distinguishing conceptual features in particular deserve highlighting (Karagiannis, 2001:12):

1. A relatively strong state;

2. An effective and productive state investor;

3. A state which is not (over) influenced by interest groups that is a state that is embedded and autonomous; and

4. A state possessing a strategic role.

2.6.1 A Relatively Strong State

The first characteristic of developmental states is that their political purposes and institutional structures are developmentally driven, while their developmental objective is politically driven. Political factors shape the urgency, thrust and pace of developmental strategies through the structures of the state (Leftwich, 2000:154). Clear political goals and agendas are sine qua nons for developmental projects to be attained. Far from the central assumptions of fecklessness, capable state institutions are critical in driving development as a set of strategic programmes that the state pursues aimed at improving the quality of life.

But it is the idea of the strength of the state to drive development that is fundamental. This presupposes that the state has the capacity to achieve its goals (Karagiannis, 2001:13). In other words, the roles of politicians and public servants are well defined: politicians play roles on the input side of things while bureaucrats and meritocratic civil servants play roles on the output side of things.

2.6.2 An Effective and Productive Investor

As an interventionist state, the developmental state is one that seeks to be indispensable to the success or direction of strategic investments while remaining substantially independent from other elements of economic activities. Thus, far from supplanting market forces the developmental state maintains sovereign responsibility over the strategic direction of industrial development and economic growth. Planned investment in the national interest is underpinned by a strategic and long-term vision (Karagiannis, 2001:12).

About a century of facts prove the historical involvement of the government sector in important development efforts. For example, a package that entails spending on roads, schools, and airports will certainly add to total output and current employment is in effect a contribution to the provision of services intended to improve the socio-economic needs of the citizenry both in terms of socio-economic upliftment and growth-enhancing results (Ahrens, 1997:114);

(Karagiannis, 2001:13).

2.6.3 Embedded Autonomy

By embedded is meant that the state and civil service are fortified from capture by narrow interest groups in society. Some observers support the claim that we are witnessing the end of an era marked by the ‘integral state’, with assured control over the means of legitimacy, security and production. But at a time when serious analysis of state power, or the state’s role, has become academically wanting, there will be doubt cast upon the assertion that in place of the integral state we are now witnessing the rise of the homologous post-capitalist developmental state.

In Karagiannis’s view (2001:12), developmental states have had relative independence from dominant classes and interest groups, and a state technocracy of well-educated, well trained and efficient planners has played an important and active role in export-oriented development.

To the extent that planning for productive investments, on the one hand, and bureaucratic power and accountability on the other, are a correspondence between ‘state autonomy’ and

‘state capacity’ (Karagiannis, 2001:12), embedded autonomy is the ability of the state “to implement official goals, especially over the actual or potential opposition of powerful social groups or in the face of recalcitrant socioeconomic circumstances” (Skocpol, 1985:3).

According to Skocpol, state resistance to the preponderance of powerful hegemonic forces is essentially embedded autonomy. Thus, Skocpol’s definition of state autonomy is the ability to

“formulate and pursue goals that are not simply reflective of the demands or interests of social groups, classes, or society” (Skocpol, 1985:3). This point resonates with Shafer’s (1994:6-7) claim that autonomy is the extent to which the state is not merely an arena for conflict but is distinct from non-state actors”. Nevertheless, he goes on, “autonomy is not enough; states must be able to act. But whereas autonomy is always relative [to societal actors], it is useful to think of state capacity as both absolute and relative. Absolute capacity is the extent to which the state has the authority and means to extract and deploy resources: a technocratic, meritocratic, and internally cohesive bureaucracy and effective monitoring and regulatory capabilities.

[However,] state capacity must also be seen in relation to the interests, resources, and capabilities of salient societal actors (Adam, 2004:3).

Here inheres a double meaning, a dialectical unity of colliding interests and homologous ones postulated by post-Keynesian theorists within a general developmental framework in which firms operate (Singh, 1995:35). In comparison to East Asian developmental states, these theorists assert a revisionist model somewhere between a “night watchman” role and the state

“Leviathan”. It is important to understand that a night watchman refers to Welfarist states whereas Leviathan states are autocratic and tend to rule by diktat (Sawyer, 1989:56-57). In themselves the night watchman and Leviathan approaches suggest cuts in public expenditure on education, innovation, research and development, training, and infrastructural investment in the name of fiscal prudence and widening individual choices, and therefore preclude any

discussion about the range of government economic policies which may prove useful in the encouragement of industrial development (Karagiannis, 2002:35-36). Revisionist post-

Keynesian theorists view the state as having a role to guide, direct and promote industrial development as part of the priorities of broader developmental programmes in which the market should function or operate. They believe that the state has a role to play in enabling the private sector to fulfill its developmental strategy. Here, then, developmental states need not function like observers or autocratic entities but should rather create a platform for consensus in contrast to those of East Asia (Sawyer, 1989:56-57).

2.6.4 A Strategic Planning Instrument

The fourth characteristic is the realm of policy-making in developmental states. Such policy- making would reflect national strategic objectives in the sense that the state’s institutional arrangements and the nature of the relationship the state has with non-governmental structures are tailored to planned outcomes. In most developmental states, the state would be responsible for policy formulation and implementation facilitated by specific political and institutional arrangements (Cloete, 2000:183); (Edigheji, 2010a: 5).

By providing strategic guidance and direction, the state sublimates the vagaries of the market and influences the manner in which state affairs have to be conducted. It is important to note that a planning instrument here does not necessarily refer to a state that drives development on its own through interventions such as building infrastructure and other basic services but is one that has the capacity to selectively intervene or promote targeted industries by making and enforcing policies and setting basic rules for resource allocation in the economy (Tan,

2005:85).

It is clear, then, that the state cannot be regarded as developmental on the basis of its ability to implement development programmes alone. The state becomes developmental by articulating

a strategic agenda. Moreover it is the state’s active engagement with selective interventions towards economic development that characterises the developmental state (Ahrens, 1997:114);

(Evans, 1992:141).

2.7 The Catalytic Role of the Developmental State

From the idea of strategic planning derives the catalytic role of the state. The variety of

‘interventionist’ models, macro-economic, industrial policy, regulatory frameworks, find expression in the developmental state’s capacity to catalyse strategic interventions. As such, we may refer alternately to the ‘intelligent’ state. Yet to what extent can intelligent interventions be generalised as a wired to the genetic code of the developmental state? The first point to make is that ‘catalytic’ is a way of highlighting the tendency of states to seek adaptation to new challenges by forging or strengthening partnerships with other (state or non- state) power actors at regional and international levels, rather than going it alone. The consolidation of regional alliances including the Association of South East Easian Nations

(ASEAN) and the Brazil-Russia-India-China-South Africa (BRICS) constellation can be seen as one manifestation of this tendency.

The second point, however, is that catalytic states are not necessarily developmental in thrust.

Some, like Japan and Germany, exercise strong domestic and international clout within the developmental context of developed economies while others, like the United States, exploit strong international leverage but at the expense of domestic adjustment strategy. In fact the

United States grows its economy on the backbone of one crises after another, which the state redeems with bailouts and stimulus packages whenever the need arises. What this brief analysis suggests is that the most important actors in emerging inter-state coalitions, or regionalism, are not those who catalyse them, but those who engage in them through selective interventions, reinforced by domestic developmental agendas.

2.7.1 The Meaning of Selective Interventions

One way of interpreting the strategic dimension of the state is the notion of selective interventions around government directives. It is important to note that the nature of state interventions is based on the state’s ability to assign key economic decisions to an influential group of political and administrative leaders (Dillman, 2000:6). The developmental state should thus have the capacity to make selective interventions. Its bureaucrats must have the foresight to determine interventions that propel economic development forward. The emphasis is on building strong state institutions and a “meritocratic” bureaucracy able to provide clear policy direction that restricts interventions to those of a strategic, long-term nature

(Karagiannis, 2002:33);(Mbabazi and Taylor, 2005:4). Indeed, the central thesis of this study is that the capacity of the developmental state for intervention has been underestimated. For effective or efficient states, building state capacity would seem to be the lesson of dynamic catalytic states. Therefore, amongst others, developing the skills of the civil servants and bureaucrats is instrumental to the success of developmental states. The selection of interventions in this regard should focus on strengthening the capacity of the public service to pro-actively engage in policy formulation and implementation processes.

For all practical intents and purposes, the public service in a developmental state should emphasise selection on the basis of achievement criteria and merit rather than ascriptive criteria such as caste, race, class, or language. This kind of selection is referred to as “neutral selection”. According to Petrovsky, Under-Secretary General (USG) and Director-General

(DG) of the United Nations Office in Geneva (UNOG) in the United Nations Department of

Economic and Social Affairs (UNDESA) (1999:4):

Governments, and in particular their public services, must respond to this challenge and rise to the occasion. A competent, efficient and loyal civil service imbued with ethical standards is neither a luxury nor a dream. Quite

the contrary, it is a basic precondition of democratic governance and sustainable socio-economic development.

2.7.1.1 The ‘Rule’ and ‘Reign’ Nexus of Selective Interventions

Characteristic features of selective interventions are the ability to indirectly control government funds, its think tank functions, its vertical bureaus for the implementation of industrial policy at micro level, and its internal democracy. In an effective developmental state, bureaucrats “rule” and politicians “reign” (Salojee and Pahad, 2011:3) as in the case of the close nexus developed between bureaucrats, politicians and big business in Japan – often known as "Japan Inc" (Jain, 2001:1). According to Chalmers Johnson (1982:154):

The nexus means that both sides have an important role to perform. The politicians provide the space for bureaucrats to rule by holding off special interests claimants who defect the state from main developmental priorities, and they legitimate and ratify the decisions taken by the bureaucrats. The bureaucrats in turn formulate developmental policies, draft and administer the laws needed to implement the policies, and make mid-course adjustment as problems arise.

Despite the fact that key economic decisions are discharged to an influential group of political and administrative leaders, the state is meant to allocate resources and ensure that critical economic decisions are made and implemented for the improvement of the quality of life. In essence, state intervention is all about the ability of the state to distribute resources equitably and make critical decisions regarding government policy priorities.

2.7.1.2 The Role of State Institutions in Selective Interventions

The capacity for coordinated and strategic interventions in the economy rests on the real authority and technical competence of state institutions: specifically, their strategic design and capacity in shaping developmental policies and deploying an admixture of carrots (market incentives and subsidies) and sticks in the form of punitive measures to influence private sector

behaviour. Thus, Singh (1995:10) and Karagiannis (2002:33) agree on the features of the public service in the developmental state: it consists of technocrats who are well educated, well trained, and efficient planners playing instrumental roles in driving foreign investment and exports for the benefit of the country. As a result, developmental state institutions are not ordinary planning institutions but command power and authority as well as the technical competence to influence the formulation of policies and penalise those who do not adhere to overall policy. It should be noted that these incentives and punitive measures are consistent with foreign investment and external trade and export benefits (Singh, 1995:10); (Karagiannis,

2002:33).

The idea of power and the authority to steer society and key actions in a particular direction is therefore an important one. For if such a state is able to balance the scale and ensure strategic alignment on the strength of a meritocratic bureaucracy (Karagiannis, 2002:33); (Cowling,

1990:17), the relative weight of voluntary incentives and autocracy is mediated by situation- specific competences capable of contributing creatively to managing new challenges and circumstances. A reasonable conclusion, therefore, is that the interest most served by state institutions in their selective engagements in what has been dubbed the ‘managerial state’ is the national interest (Djilas, 1957:67).

2.7.1.3 The State Bureaucracy in Selective Interventions

The enduring power of paradigmatic state interventions in highly effective developmental states has been an advantage the developmental state relinquishes at its own peril: the construction of tightly organised civil service structures with the Weberian characteristics of highly selective, meritocratic recruitment patterns and long-term career rewards which enhance the solidarity and corporate identity of bureaucratic elites. Developmental theorists assert that highly meritocratic systems attract the best managerial talent to bureaucratic elites and ensure a high degree of unity, capability, and professionalism (Evans, 2010:45). Based on

the aforementioned, it is clear that the idea of the administrative and political elite working in unison is important. Political leadership should be distinguished here from managerial or administrative stewardship which is to suggest that a developmental state should have the capacity to mobilise organisational and institutional linkages between politically protected state agencies and major private sector entities. Crudely put, the contemporary developmental attitude perceives the state bureaucracy as surpassing the limitations of contested identities and interest functions, within its own society, as narrow political and administrative elite.

That is to say, the business of economic coordination and development is essentially not an ineluctable concomitant of a democratic process. It is managed by specific institutions whose task is to organise critical interactions between states and the private sector (Edigheji,

2010:45). Put another way, far from bemoaning democracy as an ideal, the technocratic elite concerned with long-term developmental plans by focusing on state investments, accelerators of development and endogenous competency at provincial and local government level, gives rise to an ethos in which contending interests and identities gradually ‘naturalise’ themselves; or, an undemocratic process gives rise to benign conditions which make democracy possible by default (Karagiannis, 2002:53).

2.7.2 The State as a Catalyst of Globalisation

The final strand of this theoretical exposition is that we are witnessing changes in state power; but these changes have to do with the reconstitution of power around the consolidation of domestic and international linkages. If this reasoning is accepted, then developmental states are catalysts for government-business alliances in the domestic market and inter-state coalitions at international level via regional alliances. In other words, developmental states have their strategic capacity anchored in a normative and institutional base for strengthening developmental capabilities at home to simultaneously drive internationalisation strategies.

They do not only have powers to make targeted or selective domestic interventions, but also

to direct foreign investment towards desired sectors through regulations on the admissions of foreign companies, the purchase of new foreign technologies, and the promotion of exports through incentive schemes. In focusing on national priorities that could be enhanced through foreign, inward and export-oriented investments, the developmental state plays a strategic role at a global level, hence its role as a catalyst for globalisation (Tan, 2005:85).

2.8 Conclusion

According to Chalmers Johnson, the idea of a developmental state is suggestive of both the manner in which the role of the state is conceived, and the sorts of internal and external relationships that constitute the state itself. On the one hand, the state is seen as having an important and legitimate role to play in determining the course and content of national economic development. On the other hand, the developmental state is suggestive of a particular collection of political and economic relations amongst social actors that constitute “the state”

(Beeson, 2010:3).

What this means is that no state can declare itself a developmental state; its quintessential character is moulded by a complex process of goal-setting, institution-building, policy formulation and execution, the construction of technocratic bureaucracies and the deployment of capacities within an overall national development framework. In other words, becoming a developmental state is a process, not an event. Given the aforementioned hypothesis, this chapter has advanced three conceptual propositions and lessons. Firstly, the developmental state does not fully intervene to guarantee fair competition. For if unfettered markets in developed countries like the United States tend to render playing fields uneven, developmental states play a direct role in planning, directing and guiding economic investments, capital accumulation and distribution for the common good. The developmental state, here, is not just a referee; it is an active player in the developmental process, the process of building the state.

Second, according to Beeson (2003:2), when Chalmers Johnson formulated the idea of a developmental state, the main focus was to determine the direction and pace of economic development in Japan because of its ability to intervene in development processes rather than relying on uncoordinated efforts of the private sector in the allocation of economic resources

(Beeson, 2003. 2). His assessment indicated that the developmental state has played an important role through the formulation of social and economic goals that were to drive the process of development and social mobilisation. In the case of Japan, the main important goal was the reconstruction of industrial capacity. It was easy to achieve this goal, Charmers

Johnson found, due to a social consensus around the economic trajectory the country had been pursuing. And so, industrialisation and building industrial capacity are central to developmental state formation (Beeson, 2003. 2).

Finally, the process and pace of globalisation, and national responses elicited by that challenge, together with the proliferation of regional trade agreements and economic blocs, suggest that we can expect to see major reconstitutions of power in developing countries at the centre of alliances formed either within or outside the state. For these states, building state capacity, rather than discarding it, would seem to be the lesson of dynamic adaptation to the re-ordering of the global economy.

CHAPTER 3

A RATIONAL PLANNING STATE

3.1 Introduction

Until the onset of the 2008 global financial and economic crisis, mainstream liberal and conservative market orthodoxy was ascendant in the context of the post-Cold War hiatus, compelling the American institutional theorist and neo-conservative ideologue Francis

Fukuyama to declare the era “the end of history” (Fukuyama, 1992). On the economic policy front, decisive moves towards less government and more openness in the global market seemed to be prima facie evidence of a new global ‘logic of capitalism’. According to this logic, states were virtually powerless to make real policy choices but allowed market forces free reign; transnational markets and footloose corporations had so narrowly constrained policy options that more and more states were being forced to adopt similar fiscal, economic and social policy regimes that seemed to accord with a convergence on the neo-liberal, market-based ideals of the American model (Weiss, 2000:9).

It is undeniable that striking changes inside nation-states in recent times, lending credence to notions of planned economic development, have had a profound effect on our understanding of what a market-led and statist approach to economic development might mean. What is axiomatic is that the end of the Cold War, a complex and far-reaching turning point in contemporary history, was not so much the ‘end of history’ as the beginning of new intellectual capacities for imagining a post-Cold War paradigm. Typically, the debate on the market and the state has been interpreted and classified into two distinct approaches or schools: the political and the economic (Jomo and Fine, 2006:103). The political school of thought stands in contrast with the economic school, with the latter exclusively concerned with the necessity

for economic policy at the expense of political conditions that allows it to be identified and adopted. The political approach, on the other hand, is driven by the logic of market imperfection and, ideologically, by an antipathy to neo-liberalism. The economic school has been summarised by Cummings’ analysis as “spider without a web”, and the political school as a “web without a spider” (Jomo and Fine, 2006:103). Yet, in the view that will be advanced in this chapter, the political and economic dimensions are inextricably intertwined. In essence, the two concepts suggest that economic development cannot be realised if political leaders are not determined to advance the economic agenda. This also indicates that the two concepts are dependent on one another and that political leadership in a developmental state is as important as economic development and vice versa.

This chapter will explore how the two schools of thought have influenced the developmental state concept, and how, empirically, such states have blended the two in the construction of strong planning states (Jomo and Fine, 2006:104). In contrast to mainstream liberal orthodoxy, the chapter will also argue that while the patterning of change in the world economy is still sufficient to support the idea of a ‘transnational’ tendency (that is, genuinely global markets in which locational and therefore national constraints no longer matter) the changes are consistent with greater adaptability of state capacities to the vagaries of reckless market forces.

3.2 The Wider Context: Contending Ideological Paradigms

Until 1989 it would have been entirely acceptable to divide the discourse on political economy into three ideological schools. The first, quite distinct from the other two, was mainstream liberalism, favouring fiscal discipline as well as trade liberalisation and privatisation. If we think of liberal ideology in ideal-typical terms, a process of price discovery and stability is the work of a “hidden hand”, following Adam Smith, in the market more naturally tending towards an inner logic rather than artificially determined ratios between supply and demand. A reformulation of the argument is that by virtue of certainty about the market without

interference by the state, economic actors are prepared to tolerate the uncertainty of perpetual crises of what in market logic is called a dynamic disequilibrium. The second school was made up of variants of socialist and communist ideological models of the state in eastern and central

Europe. They shared a broad commitment to social equality, a disdain for market forces, and the assumption that states did better than market forces, especially in health and education. The differences, all in the domain of democracy and civil liberties, are well-mapped out and do not need further elaboration. Safe to say that the disdain for the market was an interpretation of the state as a fortress of class hegemony; it was, following Marxist analysis, to be captured and wielded as an intermediate stage in the transition, the “withering away of the state”, to a stateless and classless utopia.

The third school consisted of ‘northern’ social democracies, with those of the Scandinavian countries offering the most celebrated examples; but it also included the Austrian and German social democracies as well as labour-based variants of the Netherlands and Britain, and the

Belgian socialist states. All these systems operated often in coalition arrangements in relatively well-developed capitalist economies. Their task was not the modernisation of capitalism but its management, and the proper distribution of wealth resulting from its growth (Giddens,

2001:180). Most of them, especially the Swedish, German and Austrian social democracies, were strong and based on working class support.

On the basis of national traditions of state institutionalised policy experiences from the 1930s, and by the location of each national economy in the immediate post-war world, there had developed a strong institutionalised commitment to full employment in five OECD countries.

Norway and Sweden got that commitment from social democracy based on the establishment of a sturdy welfare state. Japan, an East-Asian economy, did not, receiving it rather from a political economy of non-Western developmental consolidation. Like all taxonomies, the latter two distinctions between ‘state socialism’ in the East, ‘classic’ social democracy in the North

and modernising variants of both subsumed strong internal differences under similar planning state models. Nevertheless, though they have not entirely lost their validity, they should be understood, at least conceptually, as a western alternative to the neo-liberal orthodoxy of the

United States: a model of social democracy in developed countries with varying degrees of enthusiasm for market economics while trying to regulate market forces. Given the experience of OECD countries, we may linger for a moment on the issue of the state, illuminated now by hindsight and confronted with strong neo-liberal and developmental interpretations.

3.3 The Dual Role of the State

In broad terms, post-war social democratic states in Europe passed legislation in which four goals of economic policy were defined: price stability, high levels of employment, reasonable and steady growth, and balance of foreign trade. In designing effective instruments or apparatuses to achieve these goals there emerged a discourse on the relative weight of the market and state (Bagchi, 2006:227-228). From a neo-liberal perspective, the debate has turned on market purism, that is, economic laws which postulate the market’s self-correcting mechanism to reach price stability and an equilibrium point in the ratio between aggregate supply and demand. From a social-democratic point of view, markets are imperfect, prone to perpetual crises of over-production and employment, and thus incapable of self-regulation and economic stability.

Out of all this emerged a new dimension to economic development: rather than a singular role of the state, the state plays a dual role of promoting the market economy and serving as a conduit to regulate the economy. Other definitions of the state underscore the effectiveness with which key functions are fulfilled and services, including the provision of employment, health care and welfare to which every citizen has a right, are provided. Yet more definitions focus on locating the state in society, paying close attention to the web of the state-society relations defining how the nexus between social expectations and state capacity is mediated,

how political power is exercised, and how service provision and resource allocation are determined (Monyae, 2011, 54). This suggests that the distinction is not an immutable law of economics, for it rests on the class interests of capital. The work of (Althusser, 1970: 133) explains how the political and economic themselves become established as separate spheres, indeed, how the institution of the economic (the state) as a separate sphere is itself political in the sense that it is the consequence of the operation of abstraction initiated by capital. Marx, in The German Ideology, himself was aware that such distinctions are the effect of the culmination of the process of capital accumulation and cannot, therefore, be excluded from its structure of political economy.

This in part is what drove the structural Marxist, Louis Althusser’s effort to rethink the state in his treatise ‘Ideology and Ideological State Apparatuses’ in terms of the “forms of ideological subjection” that provide for the reproduction of economic power. This salience of the ideological in the reproduction of economic power culminates in Althusser’s argument that

“an ideology always exists in an apparatus, and its practice, or practices” (Althusser,

1970:133). Thus, even if the market were conceived only in the economic sphere, that sphere should still be located in the ideological state apparatus and practices of its institutionalisation.

3.4 State-Led, But Market-Based Development

How, then, considering the fundamental place for the political in the thinking of economic production and distribution, would the political emerge as the exemplary figure for the economic within ideological forms of discourse on development? Within developmental discourse, the turn by developing countries, as opposed to their Northern social democratic and socialist counterparts in Continental Europe, to the state imported elements of the bourgeois analysis of production and distribution into the critique of neo-liberalism, and assumed for a time a paradigmatic status for the thinking of production and distribution. Moreover, it was this important move that challenged the distinction between political and economic spheres.

If the market was a given, according to post-Keynesian discourse, prone to forms of ideological subjection in the political sphere, the process of its institutionalisation was at once the abstraction of the common good. If the regulation of the market, in the argument advanced here, challenges the neo-liberal distinction between the political and economic spheres, then how might the transformation of the lines of those divisions capture the market?

In Althusser (1972:157) we find “a de-emphasis of economic reality” and “a flight forward into ideology: as the sole means of the general good “from the contagion of those so-called

‘particular’, i.e. social interests: A flight forward for it has no end. “The ideological solution, that ‘keystone’ which holds up to heaven the whole political arc, needs heaven.” Here

Rousseau adds a note: “If the object is to give the state consistency, bring the two extremes as near to each other; allow neither rich men nor beggars”. These two estates, which are naturally inseparable, are equally fatal to the common good; from the one comes the friends of tyranny and from the other tyrants” (Althusser, 1972:157-158).

This possibility, according to Althusser, marks the beginnings of dependence, which becomes universal when, “all the land being occupied, the supernumeraries…are obliged to receive their subsistence, or steal it from the rich, and the rich are able to buy or constrain the poor”. It is this reality which, in the formulations of both Rousseau and Althusser, forms the practical solution of the Social Contract. In a word: Rousseau and Althusser separately invoke as a practical solution to the problem (how to suppress the existence of particular interests) an economic regression into ideology which is to say, the primary motive of the modern developmental state. The question is not whether development economics thus belongs to the political sphere, but how the very practices of the developmental state effectively combine the two.

3.5 The Developmental State as a Strategic Planning System

According to Karagiannis (2002:63), developmental states assume a fundamental development roles in the economy with government acting as a major provider of services such as education, health and infrastructure as well as shaping private sector institutions (Karagiannis, 2002:63).

Here, planning is an essential and pivotal means of guiding and accelerating economic growth.

The state plays a guiding and supportive role in the initial phase of development, and state intervention creates the initial conditions of industrialisation through state investment in infrastructure, development of human resources and technological change.

However, in the later state of development, state intervention becomes functional, institutional and strategic. Importantly, the state also plays a role in the stimulation of the economy including direct economic bail-outs of the business sector. This kind of intervention is meant to ensure harmonious relationships between the desires of the private sector and the social and developmental goals of government (Karagiannis, 2002:45). Planning is thus an essential tool in a developmental state in the sense that the state should always have an understanding or be on top of issues that may hinder development (Karagiannis, 2002:45).

Strictly speaking, the developmental state consists of planning instruments which include innovative public institutions, formal and informal network of partnerships between citizens and government, and the use of new opportunities for trade and industrial development. The key advantage for the developmental state is its ability to change gears from market-directed to state-directed growth (Bagchi, 2006:227-228). Of course, this presupposes that the state has the economy to achieve these goals. Clearly, key amongst the state’s roles is that of ensuring economic development, and in pursuit of this goal the state would establish effective instruments that enable it to realise its developmental mandate. From a social and economic point of view, then, the developmental state is viewed as performing two critical roles and functions. The first is that of promoting the economy and serving as a channel through which

the market is regulated. The second role of the state is that of providing services such as health and education to the citizenry. However, it is important to consider that the state should render the aforementioned roles and functions in partnership with all those involved in the development. This means that the state has to consult all key players in the form of beneficiaries, stakeholders and partners in its endeavour to create a balance between the expectations of the citizenry and its capacity to deliver on expectations or service delivery demands. It also has to consult its partners in terms of how power would be exercised and with regard to how service provision and resource allocation are to be balanced. In essence, the state should consult in terms of the distribution of resources, and the role of each partner in development (Monyae, 2011:56).

3.5.1 Strategic Planning

However, it is not planning per se that we are interested in but strategic planning. According to Cowling (1990:12-15), a coherent, national strategic planning system is an essential element of any efficient economic system for three fundamental reasons: transnationalism, short- termism of the market system, and centripetalism. Therefore, the developmental state should be concerned with offsetting regional disparities and the lack of capital equipment, training, education, and social services (Karagiannis, 2002:37-38). This means that in a developmental state, there is a national strategic planning system that ensures that there is equal distribution and allocation of resources, thereby addressing provincial inequalities (Karagiannis, 2002:37-

38).

As a delivery system, the national strategic planning system functions as an enabling cog of economic system that is efficient in assessing whether people are accessing services through a partnership model amongst all role-players involved in the service delivery value-chain. In this way, the system counter-balances self-serving interests of the private sector which is required to operate within the system (Karagiannis, 2002:38). This presupposes that there is coherence

and co-ordination across all spheres of the economy, which make it possible and simple for the state to make selective interventions that goad the private sector away from its narrow view of making profits to a broader view of contributing towards the development of the country. Thus, the private sector would also start to contribute towards addressing poverty and inequalities, skills development and building capacities of the citizenry. All this necessarily conditions the planning architecture for service delivery: in effect, the private sector would be participating in national development programmes of the state which include the provision of services

(Karagiannis, 2002:38).

The resilience and capability of national strategic planning ultimately hinges on the levers of greater coherence in policy coordination and state interventions without which it is difficult for the state to regulate imbalances in market forces that could be harnessed for the provision of equitable services to the citizenry. The effective functioning of the system would ensure that all role-players contribute towards the national developmental goals (Karagiannis, 2002:38).

3.5.2 Industrial Policy as a Foundation for Strategic Planning

The main institutional attributes for early developmental states have been their greater reliance on the government as a coordinator in production and distribution (Tan, 2005:99). Given its current newly framed importance, it is useful to take a leaf from the East Asian experience where governments have coordinated domestic industrial development initiatives and promoted enterprise development in targeted industries through concerted policy formulation and implementation. Moreover, industrial policy as a strategic compass for interventions is concerned with strategic actions for achieving outward-orientated development, and thus has the potential to contribute to long-run supply side initiatives aimed at promoting the activities of prioritised sectors and industries (Karagiannis, 2002:46). The state is here concerned with planned interventions that are focused more on the international economy towards sustainable interventions in line with the state priorities (Karagiannis, 2002:46).

Importantly, the developmental state’s responsibility is not only to pick sectors and industries for government attention and support, but create the necessary conditions for the development of such sectors and industries (Karagiannis, 2002:53). In essence, it befalls the state to create a favourable environment for the development of priority sectors so as to enable them to compete at international level. Export-driven growth is in part a result of the state’s strategic planning initiatives.

In Japan, for example, the motor industry was one of the priority areas, hence the ability of

Toyota and Mitsubishi to compete in an international market (Karagiannis, 2002:53). As a matter of fact, the success of the Japanese economy has been attributed to its industrial policy, regarded as unique in the sense that it has combined very clear objectives, not determined by market conditions, through a very close collaboration between the state and industry towards the realisation of those objectives (Devine, 1988:48). It can thus be said that there is no developmental state without strategic development. The two are synonymous: the strategic planning aspect seeks to explain some essential requirements for such a supply-side strategy.

In this, industrial policy as a strategic planning framework differs in fundamental ways from previous systems of state intervention typically cast in a liberal paradigm and focused on microeconomic initiatives, with the state working on the edges of the market system and dictated by the pressures of events. Direct state action, in the latter case, has tended to be short- run, often highly partial, considerations and short-term measures that are often in contradiction to the long-term strategic objectives of a classic developmental state. Strategic planning within developmental state models is thus long-term. As Cowling (1990:12) argues:

The market could not be relied on since, within the market, there are vicious and virtuous circles of cumulative causation. This short-termism of the market does not give proper attention to longer-term considerations and crowds out long-term issues. So, fundamental changes, involving leaps in product, process or structure will not be handled well.

Cowling’s critique, in essence, is that markets follow narrow business interests that do not necessarily serve national interests. Government has the power to oversee and direct the work of the market or business sector. It can look ahead of the market when drawing up long-term parameters for developmental interventions, which do not deny the importance of the market operating within its overall strategy. This explains why even the United States ensures faster growth through what John Ralston Saul (2005: 44), describes as “a combination of tariffs and national policies”. Through national policies the state takes a leading and proactive role and the market works within the long-term parameters set by government at various levels

(Karagiannis, 2002:37-38).

3.5.3 Planning as a Process

If, without strategy, policymaking is a vacuum and becomes directionless it is wrongheaded to describe it as a planning per se. Rather, the implied emphasis is on strategic planning as a process. In fact, in a developmental state system it is the planning process, and not the plan, which is more important. In other words, the use of long-term parameters allows public institutions from top management downwards to develop a shared vision for the future. And so while strategic planning may be essential for efficiency, the nature of the process of planning is all important (Cowling, 1990:11-12). The process itself should be consultative and inclusive.

Through engagement in strategic planning, the state is able to provide direction both in terms of defining national interests, increasing foreign direct investment and resetting strategic objectives (Cowling, 1990:11-12).

The absence of planning processes is an indication that the state lacks a strategic perspective on how it intends to address its developmental challenges or roll out its service delivery programmes. At the same time, we need to look beyond the content to the form. The planning process itself maps the contours of the state’s strategic programmes and goals as a cohesive national development agenda. It also outlines in detail the manner in which the state would

prime institutions to navigate the process of realizing the goals of industrial development, trade and investment, economic development and how all these would contribute towards social development. This renders the plan itself immaterial. It is the planning process that binds the developmental state (Cowling, 1990:12).

3.5.4 Strategic Pillars of Planning Processes

According to Bozeman and Straussman (1990:4) there are three major factors of the strategic approach: clear goals and objectives, developing an action plan that mediates the relationship between public institutions and the environment and designing operational methods of effective implementation.

First of all, planning should be strategic and proactive rather than passive, selective rather than comprehensive, and whenever possible, based on some notion of consensus (Bozeman and

Straussman, 1990:54); (Cowling, 1990:16-17). For state actors to move in the same strategic direction is crucial for the developmental state. The state needs to set out its strategic focus clearly by setting clear goals and objectives. This is essentially a political endeavour. Secondly, the state needs to develop an action plan that mediates the work of the state’s executive, legislative and judicial arms and the environment constituting factors such as the needs of the citizenry, the needs of the market and related socio-economic needs. Such a plan needs to cascade down to society through seamless implementation. The plan should also define the extent to which the state would be able to design implementation programmes that are aimed at addressing such problems (Bozeman and Straussman, 1990:54); (Cowling, 1990:16-17).

Thirdly, accountability as a mode of operation is another key ingredient of a developmental state planning system. According to Hughes (1998:225), a system of political and managerial competence are tightly related and essential for any government. The system of accountability is what ties the administrative part of government to the political part, and ultimately to the

public itself. In the traditional bureaucratic administration, accountability relies upon the form of links provided through hierarchical structures (Hughes, 1998:225). It is accountability that can mitigate errors to achieve outcomes. Improving accountability should be a specific aim of the move towards entrepreneurial intervention by the state. Public institutions would then be responsible for the effective implementation of strategic plans and monitoring their performance (Hughes, 1998:225). Accordingly, effective states are required to have accountability measures in place. Such measures reflect both political accountability in the sense that political leadership is accountable to the electorate, as well as administrative accountability. States must also have managerial accountability. They should have monitoring and evaluation institutions that assess whether the state is democratic and transparent.

In other words, an efficient administrative state of accountability is a necessary component of a planning process which ensures that state resources are taken care of and not squandered for personal or political meddling (Hughes, 1998:225).

3.6 The Strategic Utility of Managerial Elites

With this, we reach the heart of the argument on the rational planning state. Without a conceptual frame of leadership, concepts of planning will lack ontology. This is why leadership is often discussed in the literature using relativistic criteria in terms of accountability, autocratic and elitist in terms of strategic autonomy and execution, and normatively in terms of binary oppositions. Deontologised in this way, leadership as a planning instrument is always transmutable. According to Kennett (2008:81-82), developmental states, such as Japan, were initially led by determined developmental elites. These elites, or leaders, had developmental determination, a commitment to economic growth and transformation and the capacity to follow through.

3.6.1 Bureaucratic Leadership

As elites made up of leaders with strong connections between top civil and military bureaucracies and high political office and possessed of a nationalistic sentiment, the state was strong politically and endowed with a large and competent bureaucracy. Moreover, the inter- relatedness between key bureaucracies and the business sector had resulted in public-private partnerships that were eager to effectively attain common developmental goals. The emphasis on effective bureaucracies highlighted the importance of a bureaucratic power, which refers to very powerful, professional, highly competent, insulated and career-based bureaucracies whose responsibility is to direct economic and social development.

Different political classes could not capture the bureaucracy for selfish political gain. The effectiveness of a developmental state in East Asia was therefore based on the fact that instead of letting the market drive the economy, the state took an active role in guiding the economy and society (Kennett, 2008:81-82).

3.6.2 The Role of Competent Techno-Structures

There is a tendency on the part of analysts and political commentators to underestimate the role of technocrats and administrative elites in driving state programmes and agendas. The economic success of Japan could not have been achieved without the decisive role of competent ‘techno-structures’ and their determined political developmental elites in economic and social planning processes. Essentially, an important feature of these technocracies has been their technical competence, and many of the top officials of Japan and other East Asian developmental states have received advanced training abroad. Capacity building and competence are thus important strategic goals that determine the extent and pace of fundamental changes within the public sector and state institutions (Hughes, 1998:261). South

Africa should appreciate the role of technocrats and public managers, as the conventional wisdom that it has too much technocracy could be challenged on the strength of its

indispensable skills. Strategic human resource management and planning coupled with investment spending in human resource development (that is, high quality and timely education, training and continuous development of scientific manpower) should be strongly linked to a modernisation process of the public sector and state institutions towards better and more effective state action. Conversely, external pressure on appointments and patronage should be eliminated (Hughes, 1998:261). What sets technocrats apart is their insulation from the political vicissitudes of the state and the political classes.

As Karagiannis (2002:78) has argued, the ability of the state to provide services efficiently is a result of establishment of brilliant organisational capacity, and a system that is designed to attract best managerial capacity available to the upper echelon of bureaucratic leadership as an independent layer responsible for policy formulation and implementation processes without pressure from interest groups. Autonomy and insulation from capture are paramount.

3.7 The Developmental State as a Strategy for Industrialisation

According to Karagiannis (2001:15), if the issue is the long term trajectory and development of state and society, the essence of strategic planning is an industrialisation strategy that is responsive to changes in the internal and external environment. Such a strategy should require the state to assume responsibility for growth and development. In trying to specify what the results should be, and to set out how achievements aggregate into the overall purpose, strategic industrialisation planning and interventions are important as they give direction and purpose to public organisations without which s policy-making would be directionless (Karagiannis,

2001:15).

Put in a different way, if the concept of the developmental state was conceived as a strategy for industrialising the developing world to catch up with the developed world, state-led industrialisation must necessarily assimilate into modes of operation and planning instruments,

the essential criteria of a planned economic development path. This point has been emphasised thus, “[I]n economies seeking to make up lost ground on already existing capitalists powers, it was quite common to find that the state itself led the industrialisation drive; it took on developmental functions” (Coates, 2000:62). This point was further highlighted by Chan

(1990:59), who has argued that, “at an early stage in their history, industrialising or developmental states used a combination of interventionist industrial, trade and technology policies to foster the development of their own incipient industries and stimulate a catch-up processes”.

Evidently, the developmental state is meant to intervene and strengthen trade and technology policies, based on a strategic plan, with the aim of promoting the development of emerging industries (Chan, 1990:59).

3.7.1 The Initial Planning Phase

The initial planning phase in the evolution of developmental state centres the state as a strategic guide, marshaling the private sector towards national development plan. The state’s role during this stage is that of developing an investment pattern that prioritizes infrastructure that enables the state to operate effectively. This includes infrastructure development such as roads, railway lines, ports, electricity, and other infrastructure sectors, and the provision of training to staff or officials as well as the execution of technological shifts from the old to the new and modern system. In this regard, state intervention takes three forms: practical, in terms of putting together all infrastructural requirements; institutional, in terms of putting together all institutional mechanisms that would render the state fully functional; and strategic, in the sense that there has to be forward planning. Included in these responsibilities is the ability of the state to stimulate the economy and provide bail-outs in areas where the private sector experiences difficulties (Karagiannis, 2002:45).

3.7.2 The Power and Authority of the State

As we have seen in the case of Japan, the issue of the power and authority of the state remains crucial. Importantly, the state’s responsibility is not only to select sectors and industries for government attention and support, but also to create necessary conditions for enabling the development of such sectors and industries. This kind of intervention places the state in a position of authority as the principal player in developmental economy in the sense that it has the power to guide, direct, intervene and promote trade and investment. It does so with a view to ensuring that all social and economic players contribute to national development plans

(Karagiannis, 2002:53).

We can again zero in on the exemplary case of Japan. According to Leftwich (2000:158), the developmental state in Japan was originally envisaged as an interventionist state having tried to achieve its goals through a set of instruments such as tax credits, tax breaks, subsidies, import control and export promotion measures. Its interventions were set out to benefit citizens.

We should remember that a developmental state is one that intervenes and guides the direction and pace of economic development. For it to function effectively, the Japanese state established a strong technical machinery to implement the planned process of development. The machinery was entrusted with the responsibility and authority to oversee, direct and guide the developmental process. Above all, the bureaucratic machinery was complemented by a

“meritocratic bureaucracy”, or strong public service, that was capable of formulating policy and translating them into tangible outcomes. Bureaucratic authority was spelled out by Johnson thus, “[T]he developmental state requires that the politician reign and the bureaucrats rule”

(Leftwich, 2000:158).

Moreover, Chalmers Johnson has interpreted the Japanese developmental state’s authority as comprising four elements. These are: an elite bureaucracy; a political system in which the bureaucracy rules; the legislative branch; and market-confirming methods of state intervention

in the economy. All these were achieved through a pilot institution like the Ministry of

International Trade and Industry (MITI) (Pekkanen, 2004:364); (Abe, 2006:9). Accordingly,

Japan assigned to the bureaucracy the tasks of planning, constructing, and supervising industry.

Secondly, Japan had established the political system to support the bureaucracy. Third, when the government needed to intervene in the market, it allowed plenty of scope for activities of private enterprises; and lastly, the political direction of the MITI had effective functions (Abe,

2006:9); (Pekkanen, 2004:364).

In addition, three characteristics were identified as necessary attributes of a developmental state. First, it sets out to rid itself of traditional structures or other institutions that allowed the private sector to exercise non-market force or bully other institutions. Secondly, political leaders show a strong sense of inclusionary patriotism in their political agenda and action.

Lastly, political leaders show a desire to learn from other countries. No state is an island, and

Japan appreciated the importance of including its competitors and enemies and used that lesson to promote economic and human development (Bagchi, 2006:228). Japan became a successful developmental state in part because it promoted learning from the international community, adapted to technologies and organisations to local conditions, and the introduction of product innovations (Bagchi, 2000:416); (Bagchi, 2006:235).

3.8 Conclusion

What this analysis has revealed is that economies under developmental states are planned, rational capitalist endeavours. At base, as Woo-Cummings explains, the developmental state is “neither socialist nor free-market but something different: the plan-rational capitalist developmental state which links interventionism with rapid economic growth”. What this means is that such states are neither development drivers nor market regulators but strategic and balanced capitalist developmental states. Their economies are driven by planned selective interventions towards economic growth. The emphasis here is on steering the market; not

controlling it. The advantage of developmental states as opposed to socialist or laissez-faire systems is that leadership is strongly committed to developmental goals based on a national development plan (Fritz and Menocal, 2007:534).

At the ideological and institutional level, developmental states are characterised by a mixture of economic models, institutional forms, capacities, visions, norms and ideologies associated with specific interventions in their evolution. A common factor among developmental states appears to be a committed leadership that is embedded in the “right” context of demands, usually characterised by a marshaling effect towards common developmental goals, and which places national development ahead of personal enrichment and/ or short-term political gains

(Fritz and Menocal, 2007:534).

But for a state to become developmental, it has to assimilate within its institutional architecture numerous capacities such as administrative, political, and idelogocial apparatuses. It is imperative to now proceed to the institutional underpinnings of the state in the next chapter.

CHAPTER 4

THE INSTITUTIONALISATION OF STATE CAPACITY

4.1 Introduction

The strategic anchor of the developmental state is appropriate and well-functioning public institutions with the administrative capacity to buttress state power in a multifaceted and dynamic developmental agenda. If the central issue that this study attempts to understand is institutionalised capacity, this chapter begins on the supply side with the question of what institutional arrangements are critical for economic development and how these ought to be fashioned.

The specific issue with which this chapter is concerned is the meritocratic civil service. Evans

(2010:46) has stressed bureaucratic coherence through meritocracy and personal networking as the key to the state’s insulation from contending special or group interests. This leads to the second strand of this discussion: that of the institutionalisation of interests or what in developmental parlance is called ‘embedded autonomy’ in the national interest.

Thirdly, the chapter will argue that there is no simple, abstract ideal. But there are changing visions born and amended in practical conditions. The National Developmental Plan (NDP) is thus not a set of universal goals but national approximations of certain principles. This concluding exposition offers hints of a conceptual framework for the characterisation of the

South African developmental state with which ensuing chapters are concerned. Naturally, the institutional capacity of the state to execute its developmental agenda will form a key plank of this discussion.

4.2 The Developmental State and National Development Goals

Since the previous chapter concluded with an exposition of the notion of planned development, it suffices to briefly map the main arterial chords of the discussion before exploring the institutional and strategic undercarriage of state-society relationships. One argument in the discussion with which the planning state is to be shaped has taken the following practical solution as its predominant logical form (Althusser, 1972:158):

Equality, we are told, is a speculative chimera which cannot exist in practice. But if its abuse is inevitable, does it follow that we should not at least make regulations concerning it? It is precisely because the force of circumstances tends continually to destroy equality that the force of legislation should always tend to its maintenance.

When Rousseau speaks of ‘bringing the two extremes as near to each other as possible’, it is hardly necessary to note, according to Althusser (1972:159), the presupposition that the two

‘extremes’ have all that is required to constitute themselves as human groups defending their

‘interests’ without caring about categories of generality or particularity. In a word: if in reality particular interests can only turn round and round in reality (ideology-economy-ideology), there is one recourse: the Social Contract.

The central formulations of this argument hinge on the reality explicated in Rousseau’s

Discourse of Inequality: “From the moment one man began to stand in need of the help of another; from the moment it appeared advantageous to any one man to have enough provisions for two, equality disappeared” (Althusser, 1972:158). It is this reality which informs, in modern times, the discourse on the national interest and national development goals. Experience has shown that it is possible to hold particular interests in a schematic formulation of the state as an interpellator of interests mediated by national developmental goals.

This means that the state should have the capacity to mobilise organisational and institutional linkages between politically protected state agencies and major private sector actors, further to entrench equality through equitable service delivery. In other words, economic coordination and development is a mobilising act managed by specific institutions, whose task is to organise the critical interactions between the state as an institutionalised general interest and specific interests (Karagiannis, 2002:63). Similarly, there should be institutions that are tasked with the responsibility to drive development as well as to promote trade relations across and between states (Karagiannis, 2002:63).

This is a perfectly classic thesis, and one which can, of course, be equally amenable to reading orthodox-Marxist as anti-Marxist interpretations, since in its schematic formulation, this thesis gives weight to the idea of common interest. However, the distinguishing feature of national development goals of developmental states is precisely the social contract: the supposition that differences are mediated by common goals rather than extinguished by the class struggle. It is not Marxism that is applied to the state, but Marxism inverted; the application, in other words, of Hegelian superstructure to Rousseau’s Social Contract.

The developmental state is conditioned by the reality of capitalist economic sub-structure and is thus concerned with long term developmental plans focused on state directed investments as accelerators of market development and endogenous competency at international, national, provincial and local government level (Karagiannis, 2002:53). According to Woo-Cummings,

(1999:346) “the developmental state is an embodiment of a normative or moral ambition to use the interventionist power of the state to guide investment in a way that promotes a certain solidaristic vision of national economy”. This means that the state would guide and direct the economy in a way that would lead to a national or integrated economy (Bolesta, 2007:106). In essence, if the economy exists to serve the interests of all in the country, the insertion of developmental state theory into the ideological superstructure means, in real terms, a departure

from the narrow interests of capital in a neo-liberal economic ideology and a drift towards the corralling effect of the state as an economic manager of the national interest.

Unlike communist centralised models, the national development paradigm of the developmental state does not weaken the market economy but strengthens it through a series of planned interventions. Such a trajectory in turn enables the expansion of specific national goals such as export expansion, full employment and security of energy supply.

An important distinction must be made between Rousseau’s regulatory state and the developmental state. The emphasis on the substantive or fundamental nature of issues as opposed to procedural or technical goals differentiates a developmental state from a regulatory state (Chan, 1990:58). The developmental state develops detailed plans and emphasises the attainment of national developmental goals. Examples of a developmental state are Japan,

Taiwan, Singapore, and South Korea (Chan, 1990:59).

Japan, Taiwan, Singapore and South Korea have achieved rapid and sustainable economic development because their governments have been strong and capable of nurturing and promoting national industries to compete at international level to marshal or assemble resources for beneficial economic enterprises. It is noteworthy that, to distinguish themselves,

“Taiwan, China and Japan are busy developing an increasingly strong civil relationship and important investment patterns” (Saul, 2005: 209). The distinction, of course, follows a functional logic: for the Social Contract to work, long-term national developmental goals must be set, profitable positions in international markets staked, and the economic and political influences of foreign companies in their economies regulated.

The state ostensibly drives its national agenda by intervening in two ways: directly, through nationalisation of key sectors in which the state would have control and ownership of public institutions and projects that are viewed as essential for economic growth and empowerment.

In such instances, states have ownership of mines and manufacturing industries. However, a state can also intervene indirectly in the sense that it would make interventions in the form of easy credits, low taxes, secure and cheap supply of raw materials, guaranteed government purchases, as well as the application of trade discrimination against foreign imports in particular areas of industry (ECA, 2011:10-11).

However, it is important to note that the capacity to deliver goods and infrastructure has a political base, in the sense that without accurate knowledge of what collective goods the citizenry needs states can invest vast resources but fail to enhance capabilities. Therefore, capability expansion depends on the efficient provision of collective goods (Evans, 2010:7).

Without competent, coherent public bureaucracies, capability-expanding public services will not be delivered. In a 21st Century developmental state, the focus on capability expansion and need for information and engagement from societal partners is even greater, but the interlocutors and character of the network are more complicated. Accordingly, accurate information on collective priorities at the community level is the sine qua non for a successful

21st Century developmental state (Evans, 2010:11).

The developmental state requires that multiple institutionalised arrangements are established in order to effectively guide the national developmental agenda towards the delivery of services. However, service delivery requires that recipients of services become active participants rather than passive recipients. This is because the provision of services to passive recipients produces results that are sub-standard and services that are not targeted or do not respond to the needs and demands of the citizenry (Evans, 2010:11). Here the planning state is in effect institutionalised cooperation, that is to say, the institutionalisation of the Social

Contract.

4.3 Institutionalised Coordination and Cooperation

In Keynes, we find that planned development is the “most efficient” alternative which combines state and the market in a creative partnership. Planned development presupposes the state as a powerful engine of service delivery and, in particular, long-term economic growth and production-oriented industrial development. The line of argument is that, “at a minimum, the process of development requires the guiding hand of the state, and does not come about through the market system alone” (Kitthananan, 2008:82), (Karagiannis, 2002:39). If the argument about the state occupying a central role in the development process, where economic activities are guided and directed by the state, is granted the point to emphasise here is that planned development and creative partnerships rest on the appetite and capacity of the state for a coordinated and strategic response to economic challenges of development.

However, because state capacities differ, so the ability to exploit the opportunities of international economic change, rather than simply succumb to its pressures, appears much more marked in some countries than others. Since much of the evidence in favour of robust state capacity drawn from East Asia, it is important to clear away at the outset any possible misconception around the debt crisis in Latin American Countries (LAC) in the 1980s and the

Thai currency crisis in 1997 may have encouraged. This is in order to demonstrate the point of insitutionalised coordination which catapulted Brazil into regaining its economic foothold in the 2000s.

It needs to be emphasised that, due to historical, geopolitical, institutional and policy differences, the state capacity concept does not apply in any uniform sense to the countries of

East Asia and Latin America (LA). The developmental state concept faced criticisms following the debt crisis of Latin American Countries (LAC) in the 1980s, and subsequent economic stagnation in East Asian states. During this period, government interventionist approaches resulted in high inflation rates, impeding macro-economic balances, and creating inefficient

and wasteful government policies (Federal Reserve Bank of San Francisco, 1998:1). The developmental states were criticised mostly for their inability to deal with the debt crisis and economic downturn of Japan. The area of attention has been the state interventionist approach linked to problems of growing inflation rates, and obstructive macro-economic imbalances.

There was thus little attention to plans for industrialization. In fact, countries were dragged into narrow economic foci (Federal Reserve Bank of San Francisco, 1998:1).

The 1997 crisis raised concerns about the effectiveness of the East Asian Miracle and the role of the state in the industrialisation process, throwing into sharp focus a key component of the developmental state model: the alliance between politics and the economy and, more precisely, the effectiveness of the partnership that existed between the state and private sector. Moreover, these economic crises were blamed on poor regulatory procedures and a lack of transparency, made possible by the institutional framework of the developmental state. It was also blamed on the absence of risk management plans (Federal Reserve Bank of San Francisco, 1998:1).

The economic demise raised questions about developmental states’ ability to direct the developmental programme, including the state’s ability to coordinate the development process in partnership with the private sector. The economic downturn was blamed on poor regulatory policies and the lack of institutional structural arrangements of developmental states (Federal

Reserve Bank of San Francisco, 1998:1).

Yet, to collapse the developmental state model into general failure is to ignore important variations between developmental states. Even at the most basic level, there are major differences between first and second generation East Asian Newly Industrialised Countries

(NIC). In Thailand in the 1990s, for example, the availability of easy finance coupled with the virtual absence of investment guidelines contrasted sharply with the highly coordinated investment strategies put in place earlier by the Taiwan, Korea and Japan at a similar stage of development. Whereas the state-guided strategies of the three generated high levels of

investment in strong-growth industries, Thailand’s unco-ordinated approach encouraged intense speculative activity, leading to a frenzy of over-investment in the property sector and ultimately contributing to the currency crisis in 1997.

Casting the variations in the possible light of cooperation, John Ralston Saul (2005: 203) turns to South America as he makes an important observation:

In the first half-decade of the twenty-first century, six South American chose

moderate left governments opposed to neoliberal economics. They are focused

on egalitarian, anti-poverty policies, reticent about global trade theories,

particularly if encouraged by the United States, and they are especially

interested in regional cooperation. Brazil seems to be the lodestar for this

expanding group. Meanwhile, Chile, stable and increasingly prosperous since

the exclusion of General Pinochet, has developed a particular model that is

both nationalst and attached to free trade.

If these lessons remind us that no region or country is crisis-proof, they should not be taken to imply that the developmental state concept as a whole as opposed to some parts of it in the practical experiences of countries is inherently fragile. The issue demands the partculars of management of crises as well as the quality and capacity of state institutions, to which we now turn. This in turn depends on a process of institutionalising internal cooperation, or creative partnerships, towards selective interventions in order to effectively direct the economy.

Here the inter-connectedness between the state and the private sector guides the functioning of the private sector. The common denominator in both the “authoritarian” and “democratic” forms of the developmental state is “institutionalised public-private partnership” in the process of economic policy formulation and implementation (Öniş, 1991:115).

According to some scholars, Peter Evans lists public service unity as another fundamental determinant of institutionalised cooperation (Weiss, 1998:36); (Compton Jr, 1964:126-127).

In economics, the benefits of state coordination have been noted for a range of areas, including: coordinating balanced investment decisions as well as the coordination of specialist functions such as sharing of information, technological acquisitions, learning and diffusion (Weiss,

1998:6). A state that has strong coordination mechanisms has the potential to effectively assess investment opportunities. In essence, such a state has the potential to undertake or execute certain developmental aspects including fully realising the state’s potential to coordinate small institutions in order of priority.

In respect of state-capital relations, Japan is a powerful case in point. To suggest that Japan’s political and economic elites were keen to revitalise the national economy in the wake of the war is hardly novel (Beeson, 2010:4). It is possible to generalise public policy as the pursuit of economic growth. It is important to note, however, that what distinguished Japan, and what has attracted a great deal of academic interest is not simply that country’s dramatic success but the specific mechanisms that underpinned it (Beeson, 2010:4). The Japanese political class pursued economic growth in an extraordinary manner in the post-Second World War era.

However, it is always important to bear in mind that the Japanese success story is not a result of the state’s inherent ability to turn around things but the methods and instruments that underpinned the success story.

Part of the success story, to be sure, is the distinctive pattern of institutionalised relationships, or partnerships, between “business” and “government”. The use of the word “business” in this context refers to the private sector including big conglomerates such as Mitsubishi and Mitsui and their affiliate companies that dominated the Japanese economic market. Similarly, government in this context refers primarily to a number of key ministries in the state bureaucracy, particularly the Ministry of Finance (MOF) and Ministry of International Trade

and Industry (MITI), and their roles in guiding the course of Japan’s post-war development project. This kind of institutionalised arrangement was seen by many as conferring specific advantages of the protectionist kind. Peter Evans has suggested that a number of East Asian states had followed Japan’s lead, having derived specific benefits from a pattern of relationships he has described as “embedded autonomy” (Beeson, 2010:4). Indeed, Japan is a sterling example of how a state has used partnerships to build and promote its economy and deliver services.

Evans concludes that a number of conditions are essential if state policies are to be consistent with a transformative or developmental project and in line with growth-oriented goals. The one is that of the insulation of the state’s key policy-making agencies from special interest groups and clientelistic pressures (Weiss, 1998:36). In this regard, it is worth revisiting

Theodore Roosevelt’s campaign against privilege or, as he saw it, unregulated financial power within its panoply of speculation and lobbying by “men of wealth, who find in the purchased politician the most efficient instrument of corruption” (Saul, 2005: 185). Thus, the state’s policymaking institutions must be independent from the influence of interest or concerned groups which in turn enables the state to define the developmental path without interference or resistance from such organisations (Weiss, 1998:36).

The other condition is that of a competent bureaucracy committed to organisational objectives.

For a state to become developmental, the public service must be comprised of capable and experienced public servants committed to the government’s established goals and agenda. We will proceed to discuss the two in turn.

4.3.1 The Concept of Embedded Autonomy

Evans argues that states which are more effective in coordinating their developmental goals tend to be insufficiently autonomous to formulate their own national developmental goals, but

are also sufficiently embedded in particular industrial networks to implement them. With the notion of embedded autonomy, Evans contributes an important intellectual tool to the discourse, not only for differentiating Third World capabilities but also for making sense of differential capabilities within the advanced industrial world (Evans, 1998:35).

The notion of autonomy is crucial for our understanding of the state bureaucracy’s mode of operation in pursuing the “national interest”. Autonomy refers to effective, protected bureaucracies, which provide security against uncontrolled influence by particularist societal groups on state decisions (Huque and Zafarullah, 2006:207). In this line of reasoning, bureaucratic independence is important in the sense that it determines whether the state would effectively be able to play a role in pursuing the national interest.

On the other hand, the state cannot be too insulated from society without running the risk, of drifting away from society and becoming completely aloof and detached, thus making it difficult for the state to appreciate the needs of the people so as to be able to put into place service delivery measures (Fritz and Menocal, 2006:535). Thus, the state must be ‘embedded’ in society so that it is “connected to a concrete set of social ties that bind the state to the society and provide institutionalised channels for the continual negotiation and recognition of goals and policies” (Fritz and Menocal, 2006:535). In so doing, institutionalised channels for the continual negotiation and recognition of goals and policies become a permanent fixture of constantly mediated relationships (Fritz and Menocal, 2006:535).

By embeddedness, this study means the developmental state is based on networks that link the state to particular social groups with which the state shares a joint project of transformation

(Huque and Zafarullah, 2006:207). As a matter of fact, the concept of embedded autonomy was coined by Peter Evans in an endeavour to solve the puzzle of why some highly interventionist states are able to translate their developmental goals into practice whilst others have been less effective in economic management. Evans wanted to gain an understanding of

the underlying conditions which determine whether a developmental state is strong or weak

(Weiss, 1998:35). In solving this puzzle, Evans explained that there are certain attributes internal to state structure that heightens insulation or autonomy from pluralistic interests.

However, he cautioned that autonomy is not sufficient if goals are not implemented successfully. For that to occur, autonomy must be ‘embedded’ in society: “[I]t is an autonomy embedded in a concrete set of social ties which bind the state to society and provide institutionalised channels for the continual negotiation of goals and policies.” Evans concluded that embedded autonomy thus draws attention to the capacity of the state to combine two seemingly contradictory aspects: “Weberian bureaucratic insulation with intense immersion in the surrounding structure” (Weiss, 1998:35).

What this means is that the state bureaucracy should work in partnership with other capable institutions for the state to become a strong developmental institution. This hinges on partnerships and networks of relevant institutions which, in turn, define the extent to which some interventionist states are able to translate their developmental goals into practice (Weiss,

1998:35).

After all, if a developmental state is one that engages and helps steer society in the direction of common development, the apparatus of the state being too distant or lacking in effective capacity will weaken the state’s ability to implement policy and guide the course of development in ‘appropriate’ ways. On the other hand, if it is too close, it risks being captured by self-serving interests of rent-seeking business groups (Beeson, 2010:5-6). In practical terms, the subsumption of the state in society or society in the state without the requisite capacity to understand the needs of people is likely to thwart the implementation of policy (Beeson,

2010:5-6). With the concept of embedded autonomy, Evans therefore shifts the analytic focus from state structure and autonomy per se to the effectiveness with which the state carries out its transformative tasks, and so to state-economy linkages.

4.3.2 Practical Features of Embedded Autonomy

East Asian bureaucracies have on the whole been effective coordinators because they have used their insulation from special interest constituencies to develop more encompassing networks (Weiss, 1998:81). It needs to be noted that the model for coordination as applied by

East Asian states is not the application of coercion but rather a reliance on the use of incentives or negotiated power.

This point is amplified by (Kitthananan, 2008:82) who argues that the key organisational features are “autonomy” of state institutions which enabled it to define and promote its strategic developmental goals, and its “embeddedness”, which is the state forming alliances with key social groups in society that helps it to achieve its developmental goals. In this regard, autonomy would imply the presence of high degrees of coherent developmental goals. Put differently, autonomy means the ability of the state to behave as a coherent actor that is able to identify and implement developmental goals.

According to Weiss (1998:83), the most important issue is for the state to be able to use its autonomy to consult, negotiate and elicit consensus and cooperation from its social partners in the task of national economic reforms and adjustment. Therefore, cooperation or trust is a central element of embedded autonomy, although co-operation in this regard is limited to the private sector where state-society relations are government-business relations or elite coalitions (Kitthananan, 2008:82); (Edigheji, 2008:19). Nevertheless, the state-private partnership is based upon the ability to deliver services in the context of national and global economic challenges and should therefore be a consultative institutional arrangement that is able to negotiate and elicit consensus and cooperation from its partners, particularly with regard to service delivery courses of action that it intends to take or implement (Edigheji,

2005:5); (Edigheji, 2010a:4).

In economic terms, embedded autonomy enables state officials to strategically and selectively intervene in the economy, focusing on sectors which they perceive as crucial to the future of industrial growth and transformation. Embedded autonomy is thus the institutional foundation of the developmental state that enables it to respond adequately and effectively to rapidly changing global economic conditions (Edigheji, 2010a:4). Societal challenges require partnership between the state and the private sector in so far as the state has an obligation to direct and guide the private sector. An effective developmental state is one which state-society relationships are at a high level in the sense that cohere around national development goals

(Gainsborough, 2009:1319). The study now turns to the second condition articulated by Evans for strong developmental states: that of the meritocratic bureaucracy.

4.4 Meritocratic Bureaucracy as an Institutionalised Planning Tool

According to Evans, the developmental state is autonomous in so far as it has a rationalised bureaucracy characterised by meritocracy and long-term career prospects, traits that render civil servants professional and detached from powerful rent-seeking behaviour. In this conception, embedded autonomy is consistent with the ideal-typical Weberian model in which the bureaucracy is composed of a competent, meritocratically determined corps of civil servants enjoying a “certain kind” of autonomy (Rauch and Evans, 1999:3); (Beeson, 2010:5).

For if the developmental state becomes self-sufficient as long as it has a lean bureaucracy that is well educated and trained, it follows that such a bureaucracy has professional attributes disconnected from political interference. This understanding aligns well with the Weberian view of bureaucracy, where a competent, shrewd and determined staff, having undergone competitive examinations through procedures for hiring rather than political appointments enjoy a certain kind of independence and the necessary respect (Beeson, 2010:5).

In East Asia, the delivery of government services has been conferred high status. Merit-based recruitment and promotion of officials, rather than political appointments, have tended to

minimise political manipulation of the bureaucracy. In so doing, government has been able to attract highly qualified individuals. Similarly, the “non-bureaucratic forms of recruitment bound such groups more tightly to the state and thus served to foster the kind of bureaucratic culture in which individuals took as their own objectives the goals of their organisations”

(Weiss,1998:50). The point to emphasise is that without competent, cohesive public bureaucracies, capability-expanding public services will not be delivered (Evans, 2010:11).

The East Asian bureaucracy became successful in the sense that it has comprised the brightest and the most competitive public servants who share the same tradition and culture. Promotions and recruitment to positions of authority have depended on one’s ability to showcase brilliance and expertise. This method of recruitment and promotion has minimised the abuse and exploitation of state resources by those connected to political leadership even though such approaches have been aligned to the goals of political organisations and that of the government in power (Weiss, 1998:50).

Basically, a developmental state is efficient, well-coordinated and populated with skilled employees. It is a state that has administrative, technical and political capacity, and competency to set national goals. To this effect, it is believed that meritocratic recruitment would contribute to three objectives: the creation of unity; high standard of performance and professionalism. In essence, developmental states are usually characterised by leadership which is strongly committed to developmental goals, and which places national development ahead of personal enrichment and/or short-term political gains (Fitz and Menocal, 2006:534).

It is important at this point to consider that a state is not developmental due to it being advanced and developed; rather, it is due to a state’s pursuance of a set of criteria that conform to growth and strong management (Bolesta, 2007:110).

4.5 Institutional Capacity and the Developmental State

Capacity is the ability to translate goals into intangible outcomes. This means that for a state to become developmental, it should show some potential to deliver services and make necessary interventions in various sectors in need of change.

There is in both the literature and actual experiences of developmental states a three-pronged definition of capacity: individual, institutional and environmental capacity (Koma, 2010:115).

Individual capacity is the potential and competency, or lack thereof, found within a person or a group of persons, normally expressed through his or her specific technical and generic skills, knowledge, attitudes and behaviour accumulated through forms of education, training, experience, networks and values. In a developmental state, individual capacity would refer to the competency of bureaucrats and civil servants to deliver services (Koma, 2010:115). The state has the capacity to deliver services when it shows the potential to make necessary interventions. This depends on the ability of state bureaucrats with the necessary skills and knowledge, attitude and behaviour to effectively render social and public services. These capacities are acquired through formal means of education, training, experience, networks and values. Ultimately, bureaucratic capacity determines whether the state is capable to deliver quality services.

Importantly, developmental states are the embodiment of their transformative outcomes which include, amongst others, a combination of capacities, visions, norms and ideologies (Fritz and

Menocal, 2007:534). The point is that a state that does not have the requisite capacity would find it difficult to deliver adequate services or outcomes in a transformative manner. The point is also emphasised in Ghani, Lockhart and Carnahan (2005:1); (Bomba, 2011:28) who assert that:

A developmental state project must possess at least two essential attributes. First, the state must have the capacity to control a vast majority of its

territory and possess a set of core capacities that will enable it to design and deliver policies; secondly, the project must involve some degree of reach and inclusion, and have an institutional, long-term perspective that transcends any specific political figure or leader.

Therein resides the rub. According to Ghani, Lockhart and Carnahan (2005:1), state capacity is an essential condition to build an effective state. Focusing firstly on its ability to control the areas under its jurisdiction, Leftwich (2000:167-168) argues that states should have additional capacities that will enable them to formulate and deliver policies with a long-term perspective that is not limited to any political figure or leader. This kind of thinking was further elaborated by Leftwich when he defined the attributes of an ideal-type developmental state as one that demonstrates a “determination and ability to stimulate, direct, shape and cooperate with the domestic private sector and arrange or supervise mutually acceptable deals with foreign interests”(Leftwich, 2000:167-168); (Fritz and Menocal, 2006:4). The determination and ability to which Leftwich refers as the state’s capacity to drive the economy and development in a way that stimulates, shapes, directs and cooperates with the private sector in the national interest.

According to the United Nations Research Institute for Social Development (UNRISD)

(2010:259) with regard to state capacity, it is worth noting that states that have been effective in promoting growth and structural change that reduce poverty have not generally inherited the right capacities or bureaucracies for development. In most cases, developmental states were quick to form effective bureaucracies with the means to ensure institutionalised power, that is, the structured capacity to devise, implement and achieve social, economic and policy goals.

Such bureaucracies, we have already noted, were generally well trained, well paid and highly competitive with respect to recruitment and promotion.

The major point and a fundamental pillar of this thesis is that the key focus is on the construction of the capacity of the bureaucracy or the public service. This means the capacity

for public servants or bureaucracy to guide, direct and deliver quality services to the citizenry and with the potential to improve the life of the poor and vulnerable. It is here, in the institutional realm of the developmental state, that an earlier reference to well trained and paid public servants, recruited on merit and academic excellence resonates (UNRISD, 2010:259).

Where such merit is in short supply, there should be enough political will generated to develop meritocratic cadres.

According to Weiss (1998:36), the central hypothesis of this narrative is that of state capacity for service delivery. It is important to note that in one of his earliest formulations of the idea of embedded autonomy, Evans explained that with regard to the developmental states of East

Asia “the efficacy of the developmental state depends on a meritocratic bureaucracy with a strong sense of corporate identity and a dense set of institutions linked to private elites”.

Moreover, he emphasised that embedded autonomy depends on the existence of a project shared by a highly developed bureaucratic apparatus with intervention experience and a relatively organised set of private actors who can provide useful intelligence and the possibility of decentralised implementation.

The argument thus circles back to a simple yet poignant fact: the meritocratic, or intelligent, public service is one that is able to guide, direct and coordinate its services and programmes with the private sector based on a shared national development programme. Such institutionalised partnerships could include sharing of such projects as highly developed state tools and systems that have been tested over time. They also depend on the capacity of the private sector to provide the best brainpower or human capacity. Thus, in practical terms embedded autonomy implies the existence of domestic linkages: the full array of institutional ties, policy networks, think-tanks or research councils and the like, which link government and industry in the information-exchange and policy-making process. Domestic linkages arm relevant agencies with a vital mechanism for acquiring adequate information and coordinating

agreements with the private sector over the content and implementation of policy (Weiss,

1998:55). Embedded autonomy defines the very condition of the developmental state and its institutional anchoring: a state in which the Social Contract is an institutionalised national consensus managed by a competent bureaucracy responsible for “actual planning, intervening in, and guiding of the economy”. However, this is not to suggest that bureaucratic elites are the only players in the process of developmental governance (ECA, 2011:10-11). They are responsible for actual planning, intervening and guiding of the economy only after political elites have defined broad policy parameters.

Bureaucratic elites, as technicians, have to be tasked with formulating detailed policies and plans to achieve the broad developmental goals set by political elites. Because these bureaucrats are recruited on merit and have long-term and predictable career paths as compared to the political elites, they are likely to resist pressures from political leaders and sectional interest groups that could undermine long-term national developmental goals (ECA, 2011:10-

11). But once the latter have defined the broad policy parameters, economic elites within the private sector and public sector technicians have to formulate detailed policies and plans to achieve the broad developmental goals outlined by political leaders (ECA, 2011:10-11).

To make this point clear, the work of the national political executive and bureaucracy which serves the executive office is informed by three overriding capacities: (1) the ability to formulate policy goals and develop strategies for implementing them independent of societal pressures; (2) the ability to change the behaviour of important internal groups in order to further their policies; and (3) the ability to restructure the internal environment in pursuit of its goals

(Weiss, 1998:26). In short, it is about the ability of the bureaucracy to formulate and develop strategies for development independent of pressure groups (Weiss, 1998:26).

What makes this apparent legitimation of patriotic contribution unique to developmental states is that it is not only pragmatic, focussed on the bureaucratic management of day-to-day service

delivery tasks. On the contrary, offers an economic and institutionalised frame for a process of mediating the practical immediacy of delivery in an ‘alienated’, individualised society characteristic of modernity, the notion of ‘mediated communities to which we referred earlier, with a process of mediation concerned with the future social and economic structure (Weiss,

1998:35). Perhaps this designation of role and identity is best characterised as forward planning, which is to say, the nature and workings of national development plans. These plans, ultimately, are indicative of the delivery of services to the citizenry as a long-term standard narrative of the passage from the present to the future where the future is a determinant outcome of the ever shifting borders of national and transnational economic forces (Weiss,

1998:35).

4.5.1 Variants of State Capacity

To grasp the full meaning of state capacity, it is important to see capacity at its most elementary level: firstly, the availability of and access to human, financial, material or technological resources and, secondly, the knowledge and skills not part of human resource capabilities to plan and implement tasks. In the same vein, the state possesses capacity when its officials have relevant knowledge and skills, and are afforded financial and material resources to make necessary interventions. This is referred to as ideational capacity: that the state is not capable unless it has the necessary capacities that allow it to deploy knowledge and skills, and financial and material resources towards planned national development goals.

The availability of resources has to be inter-linked with bureaucratic knowledge to implement policies and deliver services. This is because, in the absence of such knowledge, it would be very difficult for the state to allocate its resources according to the needs and wants of the citizenry (Koma, 2010:113-114). Having provided a brief conceptualisation of capacity, we will now distinguish variants of capacity.

4.5.1.1 Institutional and Political Capacity

According to the Department of Provincial and Local Government (DPLG) (2008:6), institutional capacity focuses on the structured, or collective, competency found within organisations including human resources, strategic leadership, organisational purpose, institutional memory, internal confidence, partnerships, inter-governmental relations and functions, infrastructure and financial capability. Institutional capacity essentially focuses on the institutions of state as embodiments of human resources that are well trained and well educated to provide a clear organisational purpose.

According to Khan (2004:180-184), institutional capacity is insufficient without effective political capacity to overcome resistance of powerful social groups who are opposed to particular property rights transformations or the implications of particular rent management strategies or social groups opposed to the delivery of certain services or the payment thereof.

Thus institutional and political factors are closely intertwined because the political failure to enforce productive rights and rents can often rapidly lead to a loss of morale and personnel in the bureaucracy (Khan, 2004:180-184). Indeed, bureaucratic or meritocratic capacity is the foundation of the success of any developmental state, without which it is difficult to distribute or deliver services to the people whereas political capacity as an effective structure of governance is a condition for the construction of a tightly knit state structure that is capable of maintaining both distance (autonomy) and collaboration (embeddedness) with private capital, as well as controlling and mobilising labour for industrialisation (Southall, 2007:14).

4.5.1.2 Ideational Capacity

Ideational capacity refers to the degree to which the legitimacy of the state is embedded in state institutions, political practices and the ideas of individual members of the society (Southall,

2007:19). In this regard, the state should work with other institutions that are operating within the society such as Research Organisations and other political institutions outside the ambit of

government. As the term suggests, ideational capacity refers to the power of ideas and policy

(Southall, 2007:19). Moreover, the concept refers to the ability of the state to transform its own will and purposes into reality. Policy clarity can have a profound impact on the country’s process of industrialisation. For instance, the state of development of a country’s economy is determined in part by ideas pertaining to industrialisation. Therefore, to strengthen state capacity is to strengthen the state’s ability to mobilise society around ideas and policies. Where

‘policy and ideational capacity’ and ideational challenges are impeded, the knocks are felt at the level of industrialisation and modernisation in any given country (Wang and Hu, 2001:5-

6).

Without ideational capacity, the state would face an uphill struggle to attain developmental ambitions. If states are to attain stated industrialisation and modernisation goals, state capacity

(including ideational capacity) is fundamental. In short, a country with strong state capacity would be able to mobilise the necessary resources, as well as direct and guide the manner in which development should take place. This guiding role is ideational and an important one in the sense that it determines whether a country is a developmental state or not (Wang and Hu,

2001:5-6).

4.5.1.3 Environmental Capacity

Environmental capacity refers to the potential and competency, or lack thereof, found outside municipalities and other formal governmental structures including socio-economic and demographic composition; political, legislative and social capital within communities; and natural and mineral resources available (Koma, 2010:115);(DPLG, 2008:6). This simply means the potential and competency of municipalities to drive socio-economic development, deliver services to the broader population as well as the political, legislative and social capital within communities including natural and mineral endowments available to drive development within the local government sphere.

4.5.1.4 Other Essential State Capacities

If in essence state capacity refers to the state’s ability to transform its own desires and aspirations into authentic programmes, according to (Wang and Hu, 2001:25) there are four major types of state capacity:

1. Extractive capacity, which refers to the capacity to mobilise economic resources;

2. Steering capacity, which refers to the state’s capacity to guide the economic

development of society;

3. Legitimation capacity, which refers to the state’s capacity to employ political symbols

to create consensus among citizens of the nation, and thereby consolidate its own

governing position and capability; and

4. Coercive capacity, which refers to the capacity of the state to employ violent means,

organisations and threats to maintain its ruling status (Wang and Hu (2001:25).

Together, these four categories of capacity provide a comprehensive matrix of institutional capabilities in which state power is anchored. They are the defining characteristics of the developmental state, in the absence of which state incapacity could slide into a classic condition of failed states.

4.5.2 State Capacity as a Key Indicator of State Power

How then does state capacity as a functional institutional structure and resource for the execution of the developmental state agenda relate to the strength of the nation-state? First of all, state capacity is a necessary condition for the strength and prosperity of the nation.

According to (Wang and Hu, 2001:27), the stronger the country’s state capacity, the more capable it is of dealing with economic shocks, the greater its ability to regulate and control the macro-economy, and consequently, the better its overall economic performance. State capacity

is a key requirement for the state to become a powerful state; the latter, however, need not to be confused with an overbearing state. Conversely, a state that has weak capacity typically resembles poor strength or power and is an indication of the state of poverty in a country.

Typically, weak state capacity shows the misalignment between the tangible capacity of the state and the ability of the state to realise national goals. A strong developmental state must have internal capacity within various departments and spheres of government and external capacity (Wang and Hu, 2001:21).

4.5.2.1 Internal State Capacity

Based on the above assertions, Peter Evans argues that three main features of internal organisation of East Asian states are relevant: “the quality and prestige of the economic bureaucrats, a strong in-house capacity for information gathering, and the appointment of a key agency charged with the task of coordinating industrial change” (Weiss, 1998:50). These conditions are significant in as far as they contribute to the insulation or autonomy of the bureaucracy; for they preserve policy-making from domination by private interests, and so enhance the likelihood that state agencies would pursue projects broader than the interests of any particular group (Weiss, 1998:50). This means that the capacity to conduct evidenced- based research in order to comprehend developmental challenges, thereby enabling the formulation of policies should be informed by strong coordinating institutions that provide guidance and direction to political leaders and the private sector (Weiss, 1998:50).

4.5.2.2 Institutionalised Public-Private Partnerships

According to (Kitthananan, 2008:85) one area in which authoritarian and democratic forms of developmental states converge or have common understanding is “institutionalised public- private partnerships” in the process of economic policy formulation and implementation

(Kitthananan, 2008:85). According to developmental state theorists, the state-business relationship should evolve from the bottom to become more cooperative. This means that

state-private partnerships need to be informed by the needs and wants of the people and should not become self-serving in themselves. For the state to become effective, it should partner with all relevant institutions and partners. According to theorists, in an effective government-private sector relationship government should provide necessary information and suggestions, which are regularly evaluated (Huque and Zafarullah, 2006:209).

It should be noted that institutionalised cooperation, the context in which the state provides necessary information and suggestions which are regularly evaluated by social partners in a common forum, is a natural focus of strong developmental states. Issues of legitimation are bound up with institutional pacts that are taken to indicate the state’s role as an interpellator of interests, opportunities and policies that need to be undertaken by all parties.

4.5.2.3 Core Economic Ministries

The third related feature of state power is that of core economic ministries possessing powerful capacities for marshaling and analysing economic information in-house. In Japan, the Ministry of International Trade and Industry (MITI), a dedicated research institute, yielded much of the data, analysis and conceptual equipment that have enhanced the Ministry’s role as a powerful think tank (Weiss, 1998:50-51). Having command of an intelligence gathering infrastructure has enabled MITI to identify new technology areas with important commercial potential and alert companies to, and encourage them to act on opportunities for change. Similarly, in Korea an information gathering network has been established as a mandatory reporting system which allowed the bureaucracy to keep close track of priority industries during the high growth period. Through these monitoring systems, the state gained access to up-to-date knowledge of production conditions in priority areas (Weiss, 1998:50-51).

Typically, developmental states have super-ministries comprised of economic, trade, and planning departments in particular with the capacity to analyse and interpret economic data

that helps map the developmental path of the state. MITI in Japan, for instance, has information-gathering systems that have enabled MITI to identify new technology areas with strong potential for growth and expansion. MITI also informs the private sector of new business opportunities, thus effectively directing and guiding the private sector in their economic investments.

4.5.2.4 Pilot Agencies for the Coordination of Economic Change

The fourth important condition for strong developmental states is what Chalmers Johnson has referred to as “pilot agencies”, charged with coordinating economic change. These structures are also the functional equivalent of the idea of a super-ministry. They engage in policy coordination and each is removed from direct contact with special economic constituencies, giving developmental states an advantage at government level driven by a talented, technically able public service charged with a broad institutional mission and relatively insulated from special interests, and which has developed an impressive in-house capacity for acquiring and managing production-relevant information (Weiss, 1998:53-54). Thus, besides super- ministries, pilot agencies are charged with policy coordination and galvanising economic change on the same functional lines as super-ministries. Each pilot agency structure is likewise removed from direct contact with the public partly so that public servants or bureaucrats are able to work without any interference from external interest groups, partly to give the institutions a clear vision and mission without influence by special interests or areas of conflict.

4.5.2.5 Capacity to Gather and Distribute Information

In the 21st Century, the developmental state’s focus on capability expansion, information generation and institutional engagement with societal partners is even greater than in the past.

But the interlocutors and character of the networks are more complicated. Accordingly, accurate information on collective priorities from the community level upwards is the sine qua non for a successful 21st Century developmental state. Without multiple channels of getting

accurate information, the developmental state will end up investing inefficiently and wasting precious public resources. The state must here be actively engaged in the delivery of services. to passive recipients produces sub-optimal and sometimes even counter-productive results at best (Evans, 2010:11). Among the challenges of the 21st Century developmental state, is the development of capacity to gather information in the national interest. At the level of municipalities, accurate information on collective priorities at the community level is an outcome of a 21st Century developmental state. Clearly, this is indicative of the fact that without valid and adequate information on any given aspect there is likely to be a whittling down of the state’s ability to deliver services.

4.5.2.6 The Power of a Tightly-Knit State Structure

It is not only such consensual structures as pilot ministries, agencies and corporatist institutions that have been vital intermediaries in both formulating and transmitting notions of common interest. Less representative structures, sometimes ephemeral, have invariably nourished in cyclical waves of economic crisis, too. Certainly, the structure of developmental state claims, tactics and organization and the mutual influence of tightly knit state structures is as important as consensual decentralised fora for coordinated responses to challenges. Indeed, if consensual structures and institutions that have played a part in formulating the developmental state agenda largely operated at the level of a negotiated national consensus, the driving force for intervention must come from a more compact body.

The construction of political capacity in East Asian states followed the establishment of just such a structure: a tightly knit state structure capable of maintaining both distance (autonomy) and collaboration (embeddedness) with the business sector (UNRISD, 2010:260). In simple terms, developmental states must institutionalise the capacity to intervene, monitor and create a space for development to take place. Similarly, it should also have the capacity to partner with the private sector in driving developmental programmes of the state. The importance of

such administrative capacity to efficiently deliver goods and infrastructure is by no means ephemeral. For without it the state would not have ability to analyse and understand the nature of problems and services required by the citizenry (Evans, 2010:7).

4.5.2.7 Powerful Oversight Structures

Finally, for a state to be able to address service delivery problems and challenges, it has to establish strong and capable oversight institutions. This should comprise a well-resourced and quality cohort of public servants with the capacity to monitor performance without fear of a prospect of political interference. In any developmental state, economic challenges require competent and impartial referees which are to be found in strong institutions. Thus, a high- quality civil service that has the capacity to monitor performance is essential. A high-quality civil service also augments government’s ability to design and implement policies (Ibadan,

1993:11). Such an institution allows the state to formulate and implement proactive policies to improve access to services.

On another level, it is by now axiomatic that in order to tackle coordination problems, leaders need institutions and mechanisms to reassure competing groups that each should benefit from growth. The first step is typically to recruit a competent and relatively honest technocratic cadre and insulate it from day-to-day political interference (Ibadan, 1993:14). Moreover, there should be centralised institutions with the responsibility to tackle coordination challenges.

However, for effective coordination to take place, politicians need to develop institutions and formulate mechanisms that would enable members of society to have confidence in the neutrality of such institutions.

This would instill in citizens confidence that such institutions serve their interests. The success of coordination, then, lies in the competence of the public service to perform its task; it involves the coordination of policy and developmental interventions (Ibadan, 1993:11). The process of

mobilizing the developmental agenda, in short, is far easier to sustain when it is legitimized by what the Italian Marxist Antonio Gramsci has called the “active consent” of the citizenry.

4.6 The State as Vehicle for Insitutionalised Socio-Economic Transformation

If issues of representation are bound up with the source of authority and capacity of state institutions, issues of legitimation are far from resolved. The developmental state, to be sure, owes its source of authority or existence to societal legitimacy; which is the consent of people and their commitment to the state’s agenda of transforming the social, political or economic order (Bolesta, 2007:107). In this form, developmental states resemble a peoples’ contract. The evolution of forms of institutionalised consent between people and political leadership is here a central plank of the very process by which a developmental state galvanises and marshals bureaucratic actions toward the delivery of services to people in an endeavour to improve their socio-economic condition. In the latter sense, (Woo-Cummings, 1999:53) in his conceptualisation of the developmental state has argued that, “the source of authority in the developmental state is not one of Weber’s ‘holy trinity’ of traditional, rational-legal, charismatic sources of authority”. It is rather a revolutionary authority, following Johnson’s formulation, of a people committed to the state’s agenda of transforming the social, political or economic order.

A major source of influence of this transformation agenda was East Asia, where the capacity of the developmental state to extirpate the closest thing that existed to an economic development movement was fostered by state intervention in the mainstream economy mobilised by national sentiment against Western imperialism and the survival or continued existence of East Asian states following World War II (Bolesta, 2007:108). It was, in a sense, a developmental state model committed to deliberative power and the willingness and desire of the citizenry to see to the transformation of the social, political or economic order.

While there were, of course, differences from one country to the next, the general level of conformity by the citizenry to the state’s social, political and economic transformation agenda was a widely accepted fact throughout the region. In other words, a developmental state is an active state where citizens themselves contribute to social, political and economic development in their own interests whilst working in partnership with key role-players (Bolesta, 2007:108).

When one considers the continuities in the economic policy of East Asian developmental states, this would appear to be more than a merely pedantic economic policy statement. It is a political act through and through.

4.6.1 The Politics of Patriotic Leadership

Specific postures of political leaders can be revelatory: they can demonstrate their strong sense of inclusionary patriotism and commitment to a common agenda with a political act of involving members of other formations and organisations rather than narrowing the political compass on personal or sectional agendas. We have here the developmental state mediating institutionalised inclusivity in protracted processes of nation-building or democratic legitimation. Such mediation is less as a form of political tolerance than a neutralization of contending interests through institutionalised channels of economic cooperation and human development (Bagchi, 2006:228).

4.6.2 Societal Mobilisation around the Developmental Agenda

A developmental state should thus be able to construct and deploy its institutional architecture and mobilise society towards the realisation of its developmental project. According to the

(ECA, 2011:7), the project is defined in political, ideological and institutional terms as one that creates and regulates:

The economic and political relationships that can support sustained industrialisation” and which “takes the goals of long-term growth and structural change seriously, ‘politically’ manages the economy to ease the

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conflicts inevitable during the process of change (but with a firm eye on long-term goals), and engages in institutional adaptation and innovation to achieve those goals.

This definition highlights both the bureaucratic (organisational) and political capacity of the developmental state. A reformulation of the argument might well suggest that by virtue of certainty about major long-term matters, political actors are prepared to tolerate uncertainty of minor ones. It is apposite to elaborate on this latter point. Political actors only operate securely when those with the capacity to terminate those in office are confident that interests they think of as vital are securely mobilised and brought within institutional arrangements of the state towards the attainment of a developmental agenda (ECA, 2011:7).

At base, then, the developmental state politically mobilises tolerance for the economic and establishes deliberative fora for cooperation that can support prolonged industrialisation efforts towards sustainable long-term growth. While the domain of economic interventions is meant to address structural changes, politicians intervene in the economy to reduce conflicts that may arise during the process of change and engage in institutional modification or adjustment. This testifies to the importance of bureaucratic and political capacity of the developmental state

(ECA, 2011:7).

4.6.3 Principles of Legitimacy

Finally, according to (Jomo and Fine, 2006:103), a state is developmental when it establishes as its principle of legitimacy its ability to promote and sustain development, where such development manifests in the combination of steady high growth and structural change in the productive system, both domestically and in its relationship to the international economy.

What this suggests is that the state becomes developmental when it is able to distinguish itself as developmental based on certain characteristics. These include its capacity to promote and

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sustain the kind of development that results in high economic growth rates and changes in the manner in which goods are produced and distributed both domestically and internationally. In the case of Japan, and contrary to the American school of Political Science, the power of the

Japanese state has not been delegated to it by elected representatives of the people; the state had instead imposed its economic achievements on the people and won their allegiance in doing so (Johnson, 1995:67). What this means is that a developmental state, while embedded within society, is actively involved in the affairs of the market, guiding and enforcing patterns of investment, accumulation and distribution (Johnson, 1995:67).

4.7 Conclusion

We can now discern the institutional elements that constitute the vital conditions of general capabilities in formulating, transmitting and legitimating notions of common interest in a developmental state. The role of the state in embedding developmental practices in society as a mobilising platform for the neutralisation, or accommodation, of particular interests is a complex and carefully calibrated sequence of coordinated interventions that depend on the capacity of the developmental state to advance an economic growth and development agenda.

At a deeper level, however, the question is whether the economic movements that so significantly advanced the economies of East Asia in the past six decades are to be transubstantiated in a country like South Africa, considering that it only ended apartheid two decades ago. If the greatest challenge of the 21st Century developmental state is squarely economic, then something as fundamental as institutionalised democratic gains carry the burden akin to that of empty fortresses abandoned to democracy. Whether South Africa, in fortifying its post-1994 gains against encroachments of the past, has successfully transcended its legacy is a question to which we now turn.

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CHAPTER 5

THE EVOLUTION OF THE SOUTH AFRICAN DEVELOPMENTAL STATE AGENDA

5.1 Introduction

The resurgence of earlier pre- and post-1994 policy avowals by the ANC led government has in the last decade come as a surprise to many on the Left of the political spectrum. The Left saw the new democratically elected government as abandoning a redistributive growth path and, instead, producing conditions which favoured only the exercise of elitism in the economy.

Many who rejected the ANC’s adoption of the Growth, Employment and Redistribution

(GEAR) macro-economic policy in mid-1996 had their own theses that they extrapolated from a racially discriminatory past (apartheid) to a racially discriminatory future (neo-apartheid).

Some leftist critics in the ANC-led Tripartite Alliance found an ideological strain towards ‘neo- liberalism’ in the party’s soul, a standpoint from which the earlier optimism of a ‘better life for all’--the clarion call of the ANC’s 1994 election manifesto, now seemed a naïve form of

‘praetorian’ blindness, a drift by the ANC-led government towards the institutionalised containment of social forces (Marais, 2011:111-112) The call for ‘a better life for all’ was later mobilised under the government of President Thabo Mbeki by the party leadership’s embrace of ‘modernisation’ (Gumede, 2005:124). Thus those with left sympathies concurred on the swelling dominance of market forces and the concomitant retreat of the state as an instrument of historical redress. Such mishaps of interpretation typically occur easily when we take the way the tide flows at any moment for the long-run trend of history, those on the left, unfortunately, used to take downturns in the business cycle for the final crisis of capitalism.

South Africa’s embrace of a developmental state will indeed remain surprising to those who

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think of the state and transformation as a single, fixed ideological and institutional paradigm which nations at one time or another more or less attain. Yet, if we enquire what kind of economic system has evolved, and in whose interests, about the constraints on redistribution in the South African nation state of globalising capitalism, then it may be possible to see what it really amounts to.

Having discussed in previous chapters the theory and practice of the developmental state, this chapter will explore the deeper historical context of the economic policy evolution and key programmes of the South African developmental state agenda as a prelude to the principal enquiry of this study: Is South Africa a developmental state?

Work on such areas as the state may modify or disprove specific analytic formulations set out in this study thus far. But if we wish to understand something about this agenda or the extent and modalities of a putative deepening of the developmental state since 2004, it is helpful to cast the discussion on South African economic policy in three distinct goals: attracting foreign investment and embedding it in the local economy; promoting local firms that have huge global scope, and creating a macro-economic environment that enables the transformation of the

South African economy and its integration into and even domination of regional African economies (Salojee and Pahad, 2011:119). As a basis for an exploration of the developmental state, this chapter is a wide-ranging exploration of policy. In doing so, we will consider whether the state has the capacity to promote the expansion of local companies with the required capability to invest and participate in the global economy.

5.2 The Economic Policy Evolution Pre-1994

Historical analysis indicates that the developmental state approach in South Africa started in

1955, with the ANC’s adoption of the Freedom Charter which asserted that “The people shall govern” and that they “shall share in the mineral resources of the country”.

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Since the dawn of democracy in 1994, the ANC-led government experimented with various policy conceptualisations to address the challenges inherited from apartheid South Africa, having initially taken its cue from historical documents such as the Freedom Charter, as it tried to navigate post-apartheid policy discourse.

It was only a decade later that it started to articulate more clearly the idea of seeking to transform South Africa into a “developmental state”. However, in the immediate post-1994 period, advances and setbacks were often the outcome of strenuous and sometimes noisy ideological contestations between the pro-interventionist left and a more conservative business-orientated technocratic wing during the Nelson Mandela and Thabo Mbeki

Presidential eras, largely perceived as an era of economic stabilisation and structural transformation.

Although it is difficult to agree on precisely what constitutes a developmental state in the specific South African socio-economic context of what former President Thabo Mbeki has described as ‘two economies’, it is nonetheless possible to trace the evolution of the ANC’s post-apartheid policy agenda as a dual challenge, consistent with Mbeki’s characterisation, of skewed growth and redistribution. Based on a long-range interpretation of the ANC’s strategy and tactics, we may more accurately pose the question: Is the South African policy evolution consistent with the evolution of a developmental state?

Such a line of inquiry demands, first of all, a periodisation of policy since 1994, given that such policies inform the strategic posture of the state. But it also points to the poverty of attempting to interpret the South African state as either neo-liberal or developmental as though the latter were a fixed entity. The enquiry has another lesson: that we move away from talk of a ‘transitional’ stage followed by a ‘consolidation’ that is so common in much writing on the

South African developmental state. Such talk suggests that a developmental state is a magic moment to be declared, a fixed entity more or less approximating to the idealised institutional

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and economic designs of East Asian developmental states.

On the contrary, as we shall see, the ANC’s economic policy had remained more or less consistent with the developmental state model even though government’s macro-economic policy between 1996, when GEAR was adopted, and 2004 tended towards austere stabilisation and liberalisation measures.

The very first thing to note is the hybrid characteristic of government policies since 1994, reflecting in large measure the complex and often contradictory business of governance and economic management. It is appropriate to begin in the early 1990s, which appears to be the moment when the word ‘liberalisation’ stopped being primarily a term known to the ANC as one of the apartheid government’s liberalisation strategems from the mid-1980s onwards, what had been called ‘neo-apartheid’ on the left, and entered the language of post-apartheid policy debates.

5.2.1 Post-Apartheid Liberal Discourse

By the early 1990s the term liberalisation was, in varying degrees, a part of policy discourse, with even some beneficiaries in established business of apartheid identifying themselves as

‘democrats’. The latter group also included those who had upheld conceptions of legally defensible racial privilege during the apartheid period, in opposition to more left leaning social democrats and communists in the ANC-led alliance. In the debates surrounding the post- apartheid government’s economic policy, the business elites could sometimes identify their fear of popular sovereignty with ‘democracy’ by advocating a minimalist role of the state in transformation. As the legitimating power of individual rights grew between 1994 and 1996, so too did fears on the left of elites (old and newly emerging) attempting to create policy and institutional frameworks that would be acceptable to at least the less radical democrats in the

ANC and yet would protect elite interests.

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In its barest form, liberal discourse has sought, since 1994, to preserve inherited advantages through denial of race as a core tenet of a progressive political economy discourse in South

Africa. For liberalism, the race question in the South African social and economic formation is something to be overcome in a free market as a dystopian blight on the core constitutional values of the post-apartheid order of universalism and individualism. If this is consolidated, it will follow the formula of ‘colour blindness’.

However, it is less easy in this approach to declare these values optimally operative in post- apartheid South African political economy and demonstrate that they apply to race than to teleologically telescope them back to earlier stages of economic history. The Enlightenment doctrine of ‘natural rights’ has been at least partly constitutive of post-apartheid liberal policy discourse. But it is equally true that countervailing principles have co-existed in liberal discourse during apartheid, notably, doctrines of European superiority, which justified earlier colonial conquests of supposedly lesser peoples.

Indeed, the Enlightenment principle itself, adapted by the mining magnate Cecil John Rhodes and Sir Alfred Milner to South African early capitalist development, was troubled by various idealisms which coursed within it: its assertion of the existence of a detached and impartial reason, for example. Supposed possession of this faculty provided a warrant for domination of the natural world and, with that world, a class of humans subservient to the logic of capital.

The latter operationalised a principle for classification of individual rights according to attributions about their closeness to or distance from the enlightenment ideal. Europeans attributed to non-Europeans a lack of access to this faculty, or a lesser, lower grasp of it, thus justifying their arrogation of power and privilege with which to appropriate the non-

European’s labour, taxes, property in general and land in particular.

Beyond apartheid, the doctrine of natural rights continued to frame the liberal view of citizenship in a post-apartheid constitutional order that, in turn, has informed the liberal view

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of racial redress and new class formation. It is visible in a liberal creed of a universalising and individualising tendency that would ultimately sweep away irrational race prejudice and bigotry. It is also visible in current liberal assertions of ‘Open Society’ in the early twentieth century (Popper, 1965:11). And it is visible still in the basic anti-statism and laissez-faire attitude of large corporations, particularly in regard to racial matters of wealth distribution.

Besides its fundamental suspicion of racial redress, the (neo) liberal project has cast doubt on the tractability of issues of racial equality, tending to argue that the state cannot ameliorate poverty through interventionist policies and measures, but can only exacerbate it. Such appeals to natural rights and individualism are far more subtle than open or coded appeals to white racial fears, since the rhetoric of such appeals has far greater capacity to represent race in apparently egalitarian and democratic terms. Indeed, the very hallmark of the liberal argument has been that, beyond the proscription of explicit racial discrimination, every invocation of racial significance manifests ‘race thinking’. This instantiates a reductio ad absurdum.

Crucially, the refusal to engage in ‘race thinking’ has amounted to a defence of the racial status quo, in which systematic racial inequality and discrimination are omnipresent.

Thus, to the extent that it functions as an argument against policies aimed at increasing substantive racial equality, it is not difficult to explain the wholesale conversion of ‘moderate’ whites, as well as many upwardly mobile minority black professionals and business people, to liberal politics in the post-apartheid era. In the former case, the objectionable element has been declining opportunities of middle class white professionals which has now been extended beyond strictly racial issues to quasi-liberal defence against a neo-patrimonial state and corruption of the political and cultural canons of Western civilisation. It not only argues for a

‘colour-blind’ racial politics, but rearticulates formerly anti-racist perspectives in a discourse denying any validity to perceptions of the race question and an interventionist state acting as a developmental agent. Thus it may serve for some as a rationalising formula, a lament about

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the complexities of a post-apartheid order in which the traditional verities have come under fire. Yet, as soon as it advances beyond critique to proposals for action, its pious professions of universality and liberality are quickly replaced by advocacy of laissez-faire policies, and hence the status quo.

Whatever its merits and demerits, what liberalism has been or should be as a policy deployed in and adapted to post-apartheid challenges of growth and development, it has undergone a continual evolution and has been continually debated. That a certain institutional configuration within the state has come to be accepted by the ANC and business as more or less defining the type of interventions needed to resolve the unfinished business of the transition from apartheid is culmination of a process with its own history, largely unwritten. And if liberals and ANC policy-makers in the early to late 1990s appeared to demonstrate consensus on identifying a macro-economic stabilisation policy framework (GEAR) with non-interventionist political and economic institutions of the state, it does not follow that there was a de facto consensus.

5.2.2 The ANC’s Economic Policy Response

5.2.2.1 The ‘Mixed Economy’ (1989-1990)

Until the late 1980s, the ANC’s policy reference point had been largely ideological and political, influenced by both the ideological contest between Western imperialism and the

Soviet Union for influence in post-colonial developmental projects of African countries since the 1950’s and the ideological canon whose provenance gave rise to the National Democratic

Revolution (NDR) in the struggle to overcome apartheid in South Africa.

If by the late 1980s, much of the left had been making peace or trying to with the market economy following the domino effect of the collapse of East European Communist States and the self-destruction of communist parties in Western Europe, the ANC had only just begun to grapple with post-apartheid economic policy when a team of party economists was appointed

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to explore the practical utility of a mixed economy, with the state still seen as a central economic actor (Marais, 2011:98). Still heavily influenced by communist ideology by 1990, when proscribed anti-apartheid political organisations were unbanned, the ANC lacked a proper manifesto that spelt out its economic policy. The mixed economy policy stance, designed when the ANC was not in government, hinged by this time on vague statements such as “the people shall govern” and “the people shall share in the country’s wealth” outlined in the 1955 Freedom Charter (Marais, 2011:99).

To be sure, the idea of a mixed economy is contained in the ANC’s Freedom Charter of 1955.

But from a policy perspective, more than mere declaratives was needed. The attempt to fill the policy vacuum led to a “Discussion Document on Economic Policy”, issued by its new

Department of Economic Policy (DEP) in 1990. At base, the document focused on

“restructuring’” the economy with the state playing an active role in planning industrial strategy and overcoming racial, gender and geographical inequalities. Here already were some hallmarks of developmentalism, with the emphasis on an activist role for the state.

The DEP stressed the need to restructure the financial sector which, it argued, did “not sufficiently direct savings neither into productive activity nor into critical areas of infrastructural development”. Instead of “encouraging” a scramble for short-term speculative profit that would run dramatically in the opposite direction of the goals of the ANC, the document proposed as an alternative to the market the regulation of savings and foreign investment into targeted productive areas of the economy and sustainable projects such as infrastructural development (ANC, 1990:12). Basic needs would not be met through

“inflationary financing but by marshalling domestic savings and raising corporate tax rates”, unbundling conglomerates and facilitating the entry of small and medium sized enterprises into the economy that would open the market for emerging black economic empowerment companies to start participating in the domestic and global economy, the reducing private and

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public sector salaries to achieve international competitiveness (ANC, 1990:12). By design, the combined effect of the foregoing amounted to a “growth through redistribution” approach to economic transformation, a classic Keynesian formula in which redistribution would act as a stimulus for growth and in which the fruits of such growth would be redistributed to satisfy basic needs (ANC, 1990:12).

5.2.2.2 Rethinking Policy: The Macro-Economic Research Group (1991)

In 1991, the ANC set up the Macro-Economic Research Group (MERG), to explore a new macro-economic model for South Africa. However, there was grumbling about the strong presence of foreign economists on the research team and resistance from members of the

ANC’s Department of Economic Policy (DEP) who feared the initiative would overshadow them. Similarly, MERG members believed that the DEP was frustrating their work with spoiling tactics (Padayachee, 1998:8-9).

MERG’s general approach to poverty in South Africa was an interventionist state modelled on a form of social democracy (Padayachee, 1998:9). Its point of departure was consistent with the ANC DEP Discussion Document: declining demand, associated with a downward trend on the supply side, would lead to further reductions on the demand side, leading in turn to further declines in consumption so that the problem became a circular structural phenomenon. In its research findings, the group found that limited and stunted local markets with low economies of scale arose due to gross inequalities in income and wealth, heavy dependence on foreign exchange distorted, deformed the structure of the economy, and limited the scale of employment generating manufacturing and the state’s ability to deliver services (Padayachee,

1998:9).

The result of the team’s research was the 1993 MERG report, Making Democracy Work, which proposed a restructuring of the economy through the labour market by means of improved

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training, education and skills development, and wage improvements. State intervention, the report argued, would set predictable parameters within which to regulate and improve the structure and operation of the private sector, output and pricing decisions in the mineral sector, the housing and building supplies market, mergers and acquisitions, the behaviour of participants in oligopolistic markets, and create supervisory boards for larger companies, consisting of banks, trade unions and other representative interests (Davis, 2002:35).

In other words, MERG saw intervention in social and physical infrastructure such as housing, school education, health services, electrification and road development accounting for more than half of growth, as the trigger to sustained growth-inducing effects throughout the economy. It further proposed that the state should apply a mix of incentives and regulations to restructure and improve industrial performance and recommended a national minimum wage around which all South Africans should be mobilised through productive employment which would widen the domestic market and bring them into the mainstream economy. This seemingly Keynesian approach squared the DEP proposal: a big push would generate an expansion of the domestic market, domestic demand, domestic production and domestic employment (Turok, 2008:87-88). The group identified massive social programmes such as the Expanded Public Works Programme (EPWP) as critical in advancing demand, particularly in sectors such as housing, transport and education.

In this sense, MERG saw a need for the state to provide leadership and coordination across strategic sectors of the economy (Davis, 2002:33-34). Regulations were to be formulated to deal adequately with those companies that were not aligned to the national development goal.

In essence, the state was to provide strategic guidance and direction to economic forces

(Marais, 2011:107).

Arguably, MERG presented the first ever cohesive blueprint for a developmental state in South

Africa, having formulated a state-led national development plan to create 300 000 jobs per year

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on the back of an annual growth rate of 5 percent.

Unfortunately, the report’s proposals were not aligned with dominant thinking on economic policy within the ANC’s DEP. Central to the ANC’s disagreement with the report was the emphasis on an economic restructuring initiative through the labour market, such as improved training, education and skills building, higher wages and interventions aimed at improving the structure and operation of business.

5.2.2.3 The Reconstruction and Development Programme (1993-1996)

The ANC’s rejection of the MERG report soon prompted the Congress of South African Trade

Unions (COSATU) to consider policies that would form the basis for an ANC election platform

(Marais, 2011:107). There was moreover a concern that the ANC had been negotiating a settlement without outlining a clear economic development programme to overhaul the structural foundations of a society in which injustice and inequality had been horribly combined (van Wyk, 2009:7-8); (Ngoasheng, 1992:116-117). Thus followed a series of meetings between the ANC, Congress of South African Trade Union (COSATU), the South

African Communist Party (SACP) and South African National Civil Organisation (SANCO) with many participants from civil society formations where the RDP of the African National

Congress were hammered out (Turok, 2008:88).

The RDP represented a broad socio-economic plan for South Africa. Although major ructions between the ANC and COSATU over the thrust of the RDP coursed beneath the surface, the

ANC adopted the document as an election pact known as the Reconstruction Accord. By virtue of certainty about major matters, for the sake of progress, a pact which guaranteed the ANC the support of labour in the 1994 democratic elections, political leadership were prepared to tolerate uncertainty in minor ones.

Even this sketchy formulation suggests that although the ANC and COSATU were not in

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agreement on fundamental economic policy matters. In pushing for the RDP, COSATU believed that the right to vote would be meaningless if not accompanied by the right to proper housing, education, health, jobs and other social rights. The view of COSATU was that political freedom would be of less importance if it was not accompanied by access to proper services such as health, education and jobs. A solution to the underlying economic and social crisis required more than a viable political basis for consent. It also demanded coordinated social and economic restructuring, a new development path (Marais, 2011:78).

All this culminated in a Keynesian macro-economic perspective known as “growth through redistribution”. In an influential formulation, the RDP Base Document was introduced with four main thrusts: meeting basic needs, developing human resource, building the economy, and democratising of state and society. Debates on economic policy now moved within varying degrees of emphasis on meeting basic needs such as the construction of a million low-cost houses and the extension of electricity and piped water to people without such services. Framed thus, the idea was that expenditure on basic needs would assist in kick-starting the economy by expanding employment and putting more resources into the hands of the poor (Jeffery,

2010:239); (Turok, 2008:90).

Within the state, the locus classicus was on strengthening human capacity to enable the state to become a key instrument in the delivery of services and programmes (Jeffery, 2010:239).

Services were to be provided under the guiding principle of a developmental state – that is, social justice and equity–meaning that all citizens would have access to basic services regardless of where they live or racial lines (Marais, 2011:78); (Davis, 2002:33-34). Broadly, the most obvious form of such an articulation was the state’s role in guiding the market and ensuring that the economy expanded in a manner that reduced poverty and created employment. Democratisation of the state and society meant that the citizens would participate effectively in the decision-making process. In this regard, the state’s service delivery

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mechanisms would be guided by the needs of the citizenry.

The power and durability of the RDP document was ground-breaking in the sense that it ushered in a new approach to development that was an integrated and sustainable policy, people-driven development or participative. According to the draft report:

The RDP integrates growth, development, reconstruction and redistribution

into a unified programme. The key to this link is an infrastructural programme

that will provide access to modern and effective services like electricity, water,

telecommunications, transport, health, education and training for all our

people. The programme will meet basic needs and open up previously

suppressed economic and human potential in urban and rural areas. In turn,

this will lead to an increased output in all sectors of the economy and by

modernising the infrastructure and human resource development; we will also

enhance export capacity. (Pottinger, 2009:74)

In essence, the report emphasised the multi-dimensional nature of the RDP, in the sense that it integrated economic growth with development, reconstruction and redistribution into a single whole.In effect, then, there was a link between public participation and economic growth, key features of a developmental state, and hence the emphasis on development preceding growth

(Turok, 2008:90).

The great challenge, though, if the economy was to have a meaningful future, certainly in the minds of the ANC leadership, was the absence of a detailed policy agenda responsive to massive debt and structural economic dislocations the new government had inherited. By the time the ANC took power in April 1994, the policy challenge had shifted from ideological abstractions to the business of governing the country and managing the economy. As debates about central issues of post-apartheid policy moved within a more restricted economic

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compass, a significant part of the developmentalist ideology that characterised the ANC’s policy position was thus renovated to accommodate the marketplace with the post-apartheid state.By 1994, the transformation agenda of the RDP was scaled down to deal with the country’s burgeoning fiscal crisis (van Wyk, 2009:25-26).

5.3 Socio-Economic Policy Challenges Post-1994

The ANC had long articulated its stance in historical documents, but as soon as it assumed power in 1994 visions and broad principles had to be contained in actual policy. In November

1994, the RDP White Paper on Reconstruction and Development was adopted by Parliament.

By codifying the RDP, there was a concerted effort to elevate it to the status not just of ANC policy, but state policy. It was implemented as an anti-poverty strategy that sought to eradicate the consequences of apartheid and stimulate the economy through increased demand for producer and consumer of goods and services (Luiz, 2011:132).

However, the adoption of the RDP as official policy raised questions whether the RDP was an economic policy or anti-poverty strategy. By 1994 the programmatic focus of progressive movements to the left and centre of the ANC-led Tripartite Alliance were not symmetrical. At the time the economic policy debate was bifurcated into two ideologically distinct approaches.

The first approach, redistribution in favour of the “excluded”, had been triggered by fears by labour of a drift to liberal orthodoxy, which is to say, an interpretation of the ANC’s concerns about the limits of the RDP as having a ‘neo-liberal’ cast (Davis, 2002:33-34). The second was essentially a fiscal and macro-economic stabilisation programme. Let us consider each in turn.

5.3.1 Growth through Redistribution’

The growth through redistribution approach rested on a combination of export promotion and inward industrialisation strategies and was geared towards boosting both domestic demand and social infrastructure (Marais, 2011:100); (Kaplinsky, 1991:50-54). In the realm of macro-

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economic management, the idea was that economic growth would ultimately result in an equitable distribution of resources.

Thus, it was believed that the strategy of redistribution would be able to knit together socio- economic benefits. For example, in outlining resource distribution, the government would be able to understand the kind of services required by citizens. With the principle of social justice and equity, the government would ensure that everyone had a fair share of state resources

(Nattrass; 1994:348). Redistribution, then, would be driven by the demands of historical disadvantaged communities as opposed to white communities, a key priority during the apartheid era.

In the realm of business, the private sector would engineer a small, increasingly multiracial enclave of privilege and seek to gradually reduce the numbers of South Africans trapped in precariousness. With all these interventions, the state’s aim was to reduce the number of those trapped in poverty, and believed that the whole process would contribute towards building an inclusive society in which all have access to basic services (Marais, 2011:79).

Clearly, the material incentive to continue this pattern of growth through redistribution was strong. But concerns in the ANC about the capacity of the state to sustain the strategy in the absence of a clear policy led to a significant shift in emphasis to growth. The RDP White Paper, unbeknown at the time, foreshadowed a seismic policy shift that anchored a long-term redistribution strategy in a growth-led stabilisation programme. According to the White Paper, growth would be the fulcrum on which policy adjustment rested.

However, the document still retained some of the objectives of the freedom charter:

1. All people shall have the right to live where they choose to be decently housed, and to

bring up their families in comfort and security;

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2. Unused housing space to be available to people; rent and prices shall be lowered, food

plentiful and no one shall go hungry;

3. A preventative health scheme shall be run by the state;

4. Free medical health scheme for mothers and young children;

5. Slums shall be demolished and new suburbs built where all have transport; roads,

lighting, playing fields and social centres;

6. The Aged, the Orphans and the sick shall be cared for by the state (Martin, 2011:6).

Moreover, targets for the expansion of access to housing and basic services were set thus:

1. Constructing one million houses;

2. Providing electricity to 2-5 million additional households in the same years, thus

doubling the number of households connected to the network from 36 to 70 per cent;

3. Providing running water and access to the sanitary network to the entire population in

the long-term;

4. Ensuring that everyone has access to health care and telecommunications;

5. Ensuring that everyone has access to health care and telecommunications;

6. Ensuring free medical care to all children under six years old and to pregnant women;

7. Extending the number of years of free and compulsory education to 10 years; and

8. Redistributing 30 percent of agricultural land to small black farmers (Martin, 2011:6).

While the visionary statement seemed to be supported by concrete goals, whether they came about on the basis of proper evidence-based policy analysis remained doubtful. What is clear

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is that translating the RDP’s objectives into practical policies contained in the White Paper had been shaped by the twin challenges of dealing with the legacy of apartheid and integrating the country into a rapidly changing global environment (South Africa, 2008:3).

In broad terms, however, the RDP still retained a critique of the orthodox ‘redistribution through growth’ perspective. Pillay (2007:201) stressed that:

Growth - the measurable increase in the output of the modern industrial economy – is commonly seen as the priority that must precede development. Development is portrayed as a marginal effort of redistribution to areas of urban and rural poverty. In this view, development is a deduction from growth. The RDP breaks decisively with this approach.

5.3.2 Redistribution through Growth

The second option, fiscal conservatism, meant adjusting, but not displacing the fundamental contours of the economy (Marais, 2011:78). The introduction of the RDP White Paper was, in some respects, a signal that the South African state faced challenges of economic uncertainty and lacked a clear developmental policy trajectory. Most importantly, it signalled confusion within the leadership hierarchy. The first tangible sign of a policy shift was the location of the

RDP ministry in the Office of the President (OP), which was not an implementing department or in development state theory a pilot agency, thus posing huge hindrance to the enforcement of the policy (Turok, 2010:90). In the absence of an official economic policy document and an implementation agency, the ground was laid for a policy overhaul. The ANC had by this time already identified cadres to attend training courses at the investment bank Goldman Sachs (GS) in the early 1990s, with a view to preparing them to serve in government. Included amongst these officials was Tito Mboweni, who later became Labour Minister and subsequently

Governor of the Reserve Bank; Maria Ramos, who later became Director-General (DG) of

National Treasury and subsequently Chief Executive Officer (CEO) of Transnet and currently

Group Chief Executive of ABSA Bank. The belief was that, once trained, they would occupy

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senior government positions that would enable them to provide policy direction and guidance to the government and its major parastatals. This was to be done in an incremental manner, as they would not establish a coherent approach without a policy that tied everything together in a national strategic goal (Marais, 2011:106).

By late 1994, criticism was more openly levelled at the “growth through redistribution for its socialist undertones and perceived populist leanings. The ANC argued that driving growth with state spending would overheat the economy and stall it in a tangle of foreign exchange shortages, currency devaluations, rampant inflation, severe indebtedness and cuts in real wages. Some economists even argued that the growth through redistribution was advocated or pushed because it served the political purpose of uniting various constituencies within the

ANC.

The pressures of debt, globalisation and challenges of governing presented a vastly new context for engagement over the direction of economic policy; a co-ordinated social and economic transformation agenda which included a change of mindset of the inherited bureaucracy was seen as a new priority that the RDP did not address. To put this in historical context, the end of the Cold War, the supremacy of neo-liberalism and an increasingly graphic sense of veto powers in the United Nations Security Council (UNSC) had by the early 1990s placed developing and emerging countries in a quandary over how to exit the impasse of underdevelopment. During the 1990-1993 political negotiations, the ANC hurried to make up lost ground. Its historical neglect of economic policy left it prone to the counsel of business and mainstream experts that set about schooling ANC leaders in the realities of world and geo- economies. The remnants of Keynesian economic thinking had not entirely dissolved, but its persuasive power was on the wane. The RDP White Paper, adopted in November 1994, departed significantly from the original RDP objectives and was introduced as an added goal.

The White Paper had dropped the notion of redistribution, and the government’s major role in

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the economy was reduced to the task of managing transformation. Given the ANC’s commitment to fiscal discipline and macro-economic balance, no fiscal space was available for proper implementation of the RDP, the redistributive implications of its poverty alleviation programme and its emphasis on meeting basic needs.

As South Africa embraced the 1994 election results, there was already strong evidence that post-apartheid economic policies would conform to pronouncements of business, made seven years earlier by Anglo-American Corporation (AAC) scenario planner Clem Sunter who asserted that when “negotiations work, rhetoric is dropped, reality prevails and in the end the companies concerned go on producing the minerals, goods and services” (Marais, 2011:98).

As the perception of this possibility became more widely recognised in the ANC-led government, the rules of the game began to change. The usual rhetoric of growth through redistribution was dropped. In fact, the ANC’s economic policy guidelines made no reference to “growth through redistribution” and activists were discouraged from referring to it

(Padayachee, 1998:10-11); (Kaplinsky, 1991:50-54). Instead, the realities of the global market forces prevailed, and the advice given was to focus on nurturing the market economy. In

Sunter’s High Road scenario, the private sector should be provided with the necessary space to operate without any state interference. The state would thus be limited to the role of facilitator.

As a matter of fact, Sunter’s scenario for South Africa was confirmed by Nelson Mandela as early as 1991 during an address to an audience in Pittsburgh in the United States (US)

(Marais:2011:98):

The private sector must and will play the central and decisive role in the struggle to achieve many of [transformation] objectives. Let me assure you that the ANC is not an enemy of private enterprise. We are aware that the investor will not invest unless he or she is assured of the security of their

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investment. The rates of economic growth we seek cannot be achieved without important inflows of foreign capital. We are determined to create the necessary climate which the foreign investor will find attractive.

If Mandela’s speech demonstrated a laissez-faire attitude towards the affairs of the private sector, by late 1995 the ANC government’s economic policy had acquired a distinctive class character, having turned the ‘growth through redistribution’ mantra of the RDP on its head.

Policy now seemed to be aimed at servicing both national and international capital along with the ambitions of an emerging black capitalist class (Marais, 2011:98). All the various schemes hatched in the shift from redistribution to growth in the RDP White Paper seemed to be hemmed in the belief that foreign investment would yield positive economic results. It was expected that foreign capital inflows would improve the livelihoods of the Black majority when synergized with some intervention by a South African state that sought to the remove the socio- economic blockages that were designed to prohibit the participation of blacks in the mainstream economy. In short, in the post-cold war age the ANC was looking for a new economic posture.

5.3.3 Limits of the Reconstruction and Development Programme

Even more remarkable than the ideological contest between the ANC and its left allies in the

Tripartite Alliance over the RDP was the attempt to legitimise the policy shift through a resurrection of the National Democratic Revolution (NDR) as a multi-class project aimed at achieving a non-racial, non-sexist and democratic society both politically and economically.

Because the NDR was a diverse current and not an ideologically defined left tendency, it possessed a wider berth on post-apartheid policy options than the RDP and, as such, became a strategic legitimating lever for a critique by the ANC of the RDP.

Central to this perspective was the view that the RDP contained no guidelines or strategy for growing the economy and redistributing wealth to the poor and vulnerable through the

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implementation of various interventions (Kotze and Taylor, 2010:201); (ANC, 1997:10);

(Terreblanche, 2008:111-112); (Turok, 2000:6). The RDP, according to this view, demonstrated major policy ambiguities which undermined business confidence and investment. For example, the RDP called for growth and job creation but also demanded new labour legislation which undermined employment. It also called for labour intensive agriculture, simultaneously raising the cost of labour under the Labour Relations Act (LRA), and began removing tariffs and subsidies, thereby encouraging commercial agriculture to shift to more capital-intensive methods in order to boost productivity and international competitiveness (Jeffery, 2010:243).

There was, as always, more to the quandary. Capacity bottlenecks were blamed on a lack of skills among new ANC functionaries and a lack of commitment on the part of public service managers the ANC had inherited from the National Party government and a shortage of funds.

Line departments also begrudged the RDP Office, undermining a necessary co-ordination mechanism (Jeffery, 2010:242).

Moreover, the RDP was implemented without institutional capacity at national, provincial and local levels despite efforts by the government to create the institutional structures necessary for its implementation (Turok, 2008:90). In the end, there was no department responsible for implementing the RDP at provincial and local government level, denuding the authority of the national RDP office. According to (Blumefeld, 1996:4);(Luiz, 2011:133), conceptual uncertainties of the RDP meant different things to different people. Its openness constituted strengths and weaknesses. Amongst others, it allowed major interest groups to unite behind the broad vision but obscured the lack of consensus behind the following specific, yet controversial policy options (Luiz, 2011:133):

1. Funding - the affordability of the programme was questioned from the outset, and

initial estimates of the five-year costs of the RDP ranged from R40 billion. This

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seemed to contradict government’s intention to reduce the fiscal deficit;

2. Institutional uncertainties - from the outset it was unclear whether the RDP Office was

intended to be a “super ministry”, auditing the activities of other departments or a

planning agency initiating new transformation projects. Moreover, although it was

given a high profile and located within the President’s office, it was given neither the

resources nor the authority to realise its vision of overarching power;

3. Ideological struggles - the RDP was caught up in the evolving struggle between those

wary of creating a culture of dependency and those who viewed the RDP as a

facilitating condition for the ultimate ‘socialist transformation’ of South Africa;

4. Implementation failures – the government lacked capacity to deliver on its promises,

and even though only a few projects were approved, only a small portion of this was

implemented. Furthermore, the bureaucratic procedure for administering the

programme involved excessive red tape. In essence, the RDP assumed state capacity

instead of prioritising the need to build this capacity (Luiz, 2011:133).

This was followed by policy confusion, contradictions and uncertainties within the state over its strategic role, mandate, power and authority as a policy and implementation arm of the

RDP. According to Policy Coordination and Advisory Services (PCAS) (2008:3), the problem was exacerbated by the incapacity of the bureaucracy to deliver services as promised by the

RDP document. This point is further elaborated by Patrick Bond (2000:97) the RDP was

“fatally undermined by timid politicians, hostile bureaucrats and unreliable private sector partners”. Moreover, the RDP Minister Jay Naidoo did not command the respect of his ANC parliamentary colleagues and did not always see eye to eye with President Mandela on RDP issues.

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5.3.4 The Growth Employment and Redistribution Strategy: 1996-2000

The final straw was the new ANC government’s first major economic crisis in February 1996, when the value of the Rand plummeted by more than 25 percent (Bond, 2001: ix). The sudden collapse of the rand highlighted the RDP’s failure to stimulate growth and signalled the necessity for a change in policy direction. Simultaneously, and more importantly, the deficit rose from 9.3% of GDP in the 1993/4 financial year to 3.4% in 1998/9 (Nattrass and Seekings

2001:61); (Magubane 2002, 97). On one level, the crisis was endogenous; yet, on another, it highlighted a lack of consistency in the policy position of government, a direct result, it would appear, of a lack of clarity as to whether the RDP was an economic policy or government anti- poverty strategy.

In February 1996, the then Deputy President Thabo Mbeki called for a new growth and development strategy, arguing that, “The RDP can only succeed if it is underpinned by a broader, investment-friendly economic growth strategy that will help government generate the taxes and general wherewithal to finance the RDP’s programme to give the disadvantaged a better chance.”

The result was the closure of the RDP office and organised business and labour structures

(Jeffery, 2010:244). The Ministry of the RDP was abolished in March 1996 and the Office of the RDP was transferred to the office of Thabo Mbeki (Visser, 2004:8). In mid-1996, the ANC government adopted the Growth, Employment and Redistribution (GEAR) strategy – developed by a technical team of 15 policy-makers including representatives from different institutions, including the World Bank (WB) and the South African Reserve Bank (SARB) as official policy, leaving in its wake a muddled conception of the state: on the one hand, a seemingly neo-liberal conception, where a procedurally democratic state was reduced to a facilitator of market-driven “development”, obsessed with the fiscal deficit; on the other hand, a substantively democratic developmental state that intervenes decisively to eliminate the

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social deficit (Pillay, 2007:201); (New Age, 2011:31).

The implications were considerable. From a focus on state-led interventions in industries, government started to shift to monetary policy, which primarily hinged on managing the value of the currency, interest rates, money supply and access to credit. The main aim was to steer the economy away from high interest rates which affected investment negatively and increased payments on government debt (Turok, 2008:15).

GEAR appeared to have all elements of a pro-growth strategy, with growth being a key feature of developmentalism. At base, GEAR was a five-year macro-economic stabilisation policy which sought to challenge the lines of the so-called Washington Consensus. Social issues received less attention than in the RDP; instead, GEAR advanced trickle-down economics where the proceeds of growth would be used to address socio-economic development challenges. By eliminating ‘dissavings’ it was envisaged that more resources for public and private investment would be released (New Age, 2011:32). According to then Finance Minister

Trevor Manuel (Weeks, 1999:795-811); (Marais, 2011:113) put it succintly:

The higher growth path depends in part on attracting foreign direct investment, but also requires a higher domestic saving efforts, greater industrial competiveness, a tighter fiscal stance, moderation of wage increases, accelerated public investment, efficient service delivery and a major expansion of private sector are integral aspects of the strategy. A rate policy consistent with improved international competitiveness, responsible monetary policies and targeted industrial incentives characterise the new policy environment. A strong export performance underpins the macroeconomic sustainability of the growth path.

By this neo-classical logic, high investment would in turn lead to a higher national income and employment. Thus, GEAR saw a prudent fiscal policy as a means towards development, poverty reduction and the reduction of inequality. Prudent fiscal policy also aimed at reducing

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the budget deficit: GDP ratio to 3 percent by 1999-2000. The reduction of the debt burden would have the added benefit that interest payments claimed less government revenue, leaving more room for expenditure (New Age, 2011:32).

Although GEAR was introduced as a strategy for re-building and re-casting the economy in the developmental context of the RDP, the actual policy position was a departure from the

RDP in the sense that it prioritised economic growth over redistribution. According to

Landsberg (2004:13), with the introduction of GEAR, “the ANC abandoned its demand for a command economy which would have included nationalisation of other strategic industries, and it agreed to an open, market-led, post-liberation economic regime (Landsberg, 2004:13).

5.3.5 Factors That Led to the Failure of Gear

For the ANC government to come to terms with the challenges of reconstruction and economic development would have involved a deep national reckoning. The consequences of this agonising self-appraisal would necessarily have included massive economic redistribution and the kind of atonement for white supremacy which was later associated with demands for compensatory programmes such as Black Economic Empowerment and Employment Equity

(BEEEE) in the workplace or, more properly, reparations. Yet such an approach would have severely threatened the foundations of the nation-state, a realisation that arguably drove a stabilisation programme rather than a redistributive one in the years following GEAR in 1996.

Although government and the business sector supported GEAR, it encountered significant resistance from COSATU and key social partners, the SACP, the South African Council of

Churches (SACC) and the SANGOCO (New Age, 2011:32).

The basic philosophy behind GEAR was summarised by then Minister of Finance Trevor

Manuel in his 2005-2006 budget speech: “Over the past decade we have laid the macroeconomic and fiscal foundations on which increased investment and a stable business

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environment rest” (New Age, 2011:32). It should be remembered that a developmental strategy places a high premium on growth; GEAR certainly prioritised this, stressing the importance of faster economic growth and job creation thus, “Accelerated economic growth associated with stronger employment creation is a key to continued progress towards an equitable distribution of income and improved standards of living for all”.

Government claimed that GEAR’s ‘integrated approach’ would create an average of 400 000 jobs annually, achieve an annual growth rate of 6 percent by the year 2000, boost exports by an average 8,4% per annum and drastically improve social infrastructure (Department of

Finance, 1996:1);(Davis, 2002:37-39). Accordingly, it was believed that redistribution would emerge from “job creation and more focused public expenditure”. Significantly, the growth projections rested as much on increases in private investment as net-gold exports. The private sector was identified as the main source of investment and a key partner in government’s efforts to meet its infrastructural and other obligations (Jeffery, 2010:245).

It was precisely this pro-macro-economic, pro-fiscal policy position that was rejected by organised labour and NGOs. For them, GEAR did not reflect a pro-poor, but rather a pro- business posture. COSATU argued that instead of growing the economy, GEAR placed a damper on it: “Cuts in government spending mean a smaller market for business as well. Under

GEAR, falling government spending reduced demand for goods and services; this depressed economic growth” (New Age, 2011:32-33). It also argued that “higher social spending is a necessary condition for development and rapid economic growth”. Thus, whilst the government’s view of GEAR was that it was intertwined with the fiscal policy, economic growth and then to development, COSATU had a different perspective. According to

COSATU, growth would not result in job creation; instead it would lead to job losses and inflation (New Age, 2011:32-33).

While the adoption of GEAR may have led to macro-economic stability, both its employment

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and redistribution goals and its targets of a 6 percent annual growth rate were not achieved

(Jeffery, 2010:245); (Edigheji, 2007a:13). Conversely, there were no specific measures and instruments put in place to ensure that the private sector met its assigned duty of productive investment (Jeffery, 2010:245). By 2000, the economy had averaged an annual growth rate of

2 percent since 1996.

Unemployment had increased; more than half a million jobs were lost between 1994 and 2000 as a result of the introduction of labour saving technologies by business, increased outsourcing and a determined shift towards casual and contract labour. This was exacerbated by downturns in the global economy and a lag in savings and fixed investment, signalling GEAR’s failure to achieve its stated goals of high employment creation and high growth rates (Jeffery, 2010:248).

Thus, despite attempts to align GEAR with the socially progressive objectives of the RDP,

GEAR set no redistributive targets expressed in the purported relationship between growth and income distribution. It also failed to integrate its main elements: for instance, the impact of restructuring government spending on employment and redistribution was circumnavigated, while the relationship between the plan and the industrial policy was left undeveloped. Far from constituting a cogent developmental strategy, the overriding aim, according to Stephen

Gelb, was to signal to potential investors the government commitment to the prevailing orthodoxy. In marketing the strategy, Senior Department of Finance officials made explicit its close parallels with the approach of the international financial institutions, while emphasising at the same time the idea that GEAR was home-grown in South Africa (Lewis, 2001:3-4);

(Marais, 2011:116).

By the year 2001, a re-think of economic and social policy was underway. However, in 2007 the economic indicators had turned negative before the government could fully consolidate its gains. The country started to witness unintended consequences of economic policies, which included the erosion of the country’s capacity to sustain the sort of growth rates needed to

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ensure the continuation of these macro-economic dependency programmes (Pottinger,

2009:71). GEAR failed as a result of lack of fundamental link between reforms that had been proposed and the achievements of its growth and employment target. There was no symbiotic relationship as suggested, and this made it difficult to co-ordinate all the efforts. Furthermore, investment flows and employment growth remained wrongly weak (Pottinger, 2009:77). The targeted investments were not realised whilst employment also growth remained weak.

In 2004, it had become apparent that GEAR had passed its sell-by date. Growth had by then averaged 3 percent per annum, half the targeted growth objective GEAR set; worse still, unemployment was growing at an alarming rate (Pottinger, 2009:77-78).

5.4 The South African Developmental State

The drift back to earlier theorisations of the developmental state can be traced to growing disillusionment with GEAR and renewed efforts to recast the South African state as a social progressive apparatus capable of meeting the United Nations (UN) Millennium Development

Goals (MDGs) by 2015. This crystallised as a wide-ranging discussion in government on the expansion of basic services by a state with capabilities to take forward a far-reaching agenda of national economic development, whilst at the same time placing people and their involvement at the centre of this process (Monyae, 2011, 56). Discussion on a pro-poor, interventionist or developmental programme set against a backdrop of increasingly volatile protests by ordinary citizens over the provision of services such as water, electricity, health care and quality education prompted the state to introduce the Accelerated and Shared Growth

Initiative of South Africa (ASGISA) (Pottinger, 2009:79).

5.4.1 Accelerated and Shared Growth Initiative-South Africa as a National Development Plan

The introduction of the Accelerated and Shared Growth Initiative-South Africa (ASGI-SA) led to an expanded role of the state through the re-appropriation of developmental discourse. The

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overall objectives of ASGISA were summarised in the ANC publication Umrabulo as the reduction of infrastructure backlogs, reduction in the cost of doing business in core export industries and an increase in the stock of ‘social capital’ or human resources (Pottinger,

2009:79). There was thus a discernible shift in government policy from a market-led and growth-oriented policy to direct state interventions in the economy aimed at reducing infrastructural backlogs and the cost of doing business to facilitate the participation of emerging businesses in the development of the economy (Pottinger, 2009:79).

The new developmental project can thus be described as statist, focused on socio-economic and industrial structure, as opposed to the macro-economic emphasis of GEAR, and somewhat class reductionist in its approach to race. The most significant and perhaps radical formulation was a reorientation of strategic priorities linked to state incapacity (Hemson, Carter and Karuri-

Sebina, 2008:153-154). The emphasis on addressing infrastructural backlogs which highlighted the requirement of well trained and skilled personnel was, in the end, recognition of the need to build capacity, thereby increasing the state’s ability to intervene.

Thus, the then President Thabo Mbeki announced in 2006 that the government would spend

R372 billion on infrastructural investments in the next three years. He also announced that the land reform process was to be accelerated, with the “willing seller, willing buyer” principle that had guided the process until then under review. In its justification of the increasing interventionist approach, the government stated that “‘the state has a responsibility to intervene in an intelligent, responsive manner that will lead to development and a more equitable distribution of resources” (Edigheji, 2007a:13).

In a context of sound macro-economic stabilisation policies, then Trade and Industry Minister, and later Minister of Public Enterprises (DPE), Alec Erwin, insisted that the macro-economic strategy and increasing state intervention in the economy was not a change in paradigm but rather a change in phasing. The two pronouncements nonetheless amounted to an overriding

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shift to micro-economic state interventions, thus marking the beginning of a post-GEAR period

(Edigheji, 2007a:14).

The new emphasis, certainly in Mbeki’s view, of the government would be eradicating poverty and unemployment. Thus, in this new phase, the developmental state was adopted at the 52nd

National Conference of the ANC held in December 2007 as the missing link. The conference mandated the ANC to transform the state into a developmental institutional apparatus, having defined and articulated its understanding and vision of the characteristics of a developmental state and its relevance to the context of South Africa. Key characteristics of the developmental state included its strategic orientation which is an approach premised on people-centred and people-driven change and sustained development based on high growth rates, restructuring of the economy and socio-economic inclusion (ANC, 2010:1-5); (Turok, 2008:13). A set of new priorities were thus aligned to national strategic goals or a national developmental agenda. In a clear move towards the realisation of these goals, the South African state started to promote

Public-Private Partnership (PPP) using its institutions, staff and administration in a strategic battle against poverty, unemployment and underdevelopment (Saloojee and Pahad, 2011:17).

The private sector was thus expected to get involved in social development in public-private partnerships between strategic institutions of the state and business (Saloojee and Pahad,

2011:17).

President Mbeki’s 2006 State of the Nation Address (SONA) highlighted the fact that ASGI-

SA was “not intended to cover all elements of a comprehensive development plan; rather it was a limited set of interventions to serve as a catalyst for accelerated and shared growth”. The statement indicated that ASGISA was to focus on selective interventions that preserved many of the precepts of the GEAR plan but laid more emphasis on public infrastructure investment and staked even greater hopes on small and medium enterprises (Marais, 2011:148); (New Age,

2011:33).

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There was in this a Keynesian infusion of public funds to rehabilitate and expand infrastructure, and extend the public works programme (Marais, 2011:148). With this approach, government put aside an additional R846 billion for an infrastructure expansion programme focused on upgrading and expanding transport infrastructure, boosting electricity production and provision, repairing a deteriorating public health system buckling under the world’s worst

HIV/Aids and Tuberculosis (TB) epidemic, and expanding the provision of supplies. There was, in other words, an overwhelming preponderance on strengthening the capacity of the state to deliver services and restoring economic growth (Marais, 2011:148).

As stated earlier, the emphasis on growth is a key element of developmentalism, and on that score at least ASGISA showed important signs of moving in a developmental direction, having targeted an economic growth rate of 4.5 percent during 2005 to 2009, 6 percent between 2010 and 2014 and a halving of unemployment and poverty by 2014. This point was further highlighted by the then deputy president Phumzile Mlambo Ncquka when she included in

ASGISA’s thrust a major push to improve skills, build and maintain infrastructure, bring down the cost of doing business, and review Black Economic Empowerment (BEE) which, she said, had never been intended to give jobs “to people who were not qualified” (Jeffery, 2010:255);

(New Age, 2011:33).

One limb of ASGISA was the following list of selective interventions aimed at unblocking six binding constraints to faster growth:

1. Macroeconomic Issues – these interventions were aimed at reducing the volatility and

overvaluation of the rand; co-ordinating fiscal and monetary policy; improving budget

to correct underestimating of revenue and overestimating of expenditure ; and

expenditure; management to prevent under and overspending against budget;

2. Infrastructure Investment – aimed at deficiencies in logistics and alleviating the

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backlog in roads, water and energy infrastructure, infrastructure investment was to

focus on electronic communication regarded as a key commercial and social

infrastructure in addition to housing, schools, clinics, business and sport facilities,

government service infrastructure, and investment related to the 2010 FIFA World

Cup.

3. Sector Strategies – the economy would still concentrate on upstream production

sectors, while the market structure would be limited to downstream production and

service industry possibilities. The intervention addressed the constraints of barriers to

entry, limits to competition and limited new investment opportunities through

strengthening competition law and industrial policies and developing sector strategies;

4. Education and Skills Development – the skills shortage in South Africa was

identified as one of the most severe barriers to public and private investment

programmes. This intervention aimed at raising the level of skills in the economy

through a range of programmes. In addressing this challenge, government formed the

Joint Initiative for Priority Skills Acquisition (JIPSA) to identify urgent skills needs

and propose solutions;

5. Eliminating the Second Economy – by acknowledging the ‘mediocre’ performance

of Small, Medium and Micro Enterprise (SMME), ASGI-SA outlined three

interventions to enhance the contribution of this sector to the economy: leveraging the

first economy to promote and support small business and broad-based empowerment,

reviewing regulations that hampers small business development; and realising the

intrinsic value of ‘dead assets’ such as land, houses, livestock skills, and indigenous

knowledge.

6. Governance and Institutional Interventions – the final intervention entailed

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institutional reform to address weaknesses that constrained the country’s growth

potential such as the way government was organised, the capacity of government to

deliver services, and leadership in policy development and implementation (Luiz,

2011:136-137); (New Age, 2011:33).

The other limb was measures to bridge the gap between the first and second economy with the ultimate aim of eliminating the second economy (Jeffery, 2010:255); (Nattrass and Seekings,

2001:45). Accordingly, ASGI-SA proposed a revamped industrial policy framework. Prior to introduction of ASGI-SA, industrial policy favoured programmes in relatively high-tech, capital-intensive industries. The showpieces, or main areas in post-apartheid industrial strategy had been capital- and energy-intensive projects, along with the Motor Industry Development

Programme (MIDP), underwritten by state subsidies, credits and tax breaks, despite their poor job creation potential (Marais,2011:149).

5.4.2 The Joint Initiative for Priority Skills Acquisition

No sooner had ASGI-SA been launched than had the Joint Initiative for Priority Skills

Acquisition (JIPSA) been unveiled to identify the skills most needed in the economy and find quick and effective solutions to the country’s skills shortage. Among other interventions, special training programmes, bringing the retired back into work, encouraging South Africans working outside the country to return, or drawing on immigrants were identified as strategic options (Jeffery, 2010:256). Then Deputy President Phumzile Mlambo Ngcuka, speaking at the launch of JIPSA in March 2006, sounded a caveat that the skills shortage was “a potentially fatal constraint upon growth, which nothing short of a skills revolution would overcome”

(Jeffery, 2010:256). JIPSA as a functional pillar of ASGI-SA was to focus on providing more engineering, planning, artisanal, and management skills, and on improving teacher training in maths and science (Jeffery, 2010:256). The importance of skills in the context of a meritocratic civil service and developmental state has already been discussed in this study.

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5.4.3 The Limits to Change under ASGI-SA

Whether ASGI-SA met the conditions for a reconstitution and adaptation of the state to the challenges of growth and development by coordinating and integrating various state interventions into a strategic initiative is a moot point. Many commentators and analysts have criticised the fact that ASGI-SA lacked structure and failed to demonstrate clearly the nature of the link between its objectives and interventions. However, despite ASGI-SA’s numerous shortcomings, it was a step forward from GEAR, having recognised many of the institutional shortcomings that hampered growth and employment creation, towards a developmental state.

If this reasoning is accurate, the political maelstrom within the ruling ANC which led to Thabo

Mbeki’s departure from office in September 2008 weakened the collaborative power of the state. There was no mention of ASGI-SA after the election of new leadership, led by President

Kgalema Motlanthe as a caretaker President and President Jacob Zuma. ASGI-SA was replaced by the New Growth Path (NGP) (New Age, 2011:33-34).

5.4.4 The New Growth Path (2010)

In his political report to the ANC’s 2010 National General Council (NGC), President Jacob

Zuma indicated that “the new growth path must start with the recognition that, on the one hand, we have had economic growth for a sustained period since the advent of democracy, with particularly high growth since the early 2000s and net job creation. On the other hand, poverty remains high; inequalities have remained the same and even grown worse, while some of the jobs created often brought low wages and poor conditions” (New Age, 2011:34).

Like GEAR and ASGI-SA before, the New Growth Path (NGP) emphasised the need to sustain economic growth in order to eradicate poverty and unemployment. It also raised concerns that some of the jobs that were created were low-wage forms of employment; hence the life of many had remained sub-par. The core of the New Growth Path was a developmental growth

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path that would enhance the labour-absorption capacity of the economy and find ways to connect knowledge and innovation to the challenge of growth and new jobs. It stressed infrastructure development, knowledge economy activity, the green economy, the manufacturing sector, the rural, agriculture and agro-processing sector, tourism and business process services, the social economy and cooperatives, public sector growth; and the continental and regional economy (ANC, 2011:5-7); (Nattrass, 2011:1)

However, the introduction of the NGP was marred by political infighting within the Tripartite

Alliance, with COSATU arguing that the framework had drifted from the ANC’s historical position on economic policy. It argued that the point of departure should have been the

Freedom Charter and RDP. COSATU further argued that the NGP document:

1. Did not change anything of significance in macro-economic policy.

2. Missed a number of important issues on industrialisation such as priority sectors.

3. Did not mention how patterns of control and ownership of the economy would change.

4. Left the role of state to indirect interventions.

5. Privileged the private sector in job creation, thereby making the profit motive the key

driver of employment.

6. Gave no clarity on the role of the state in directly delivering infrastructure.

7. Conceived black economic empowerment (BEE) in terms that had to be urgently

reviewed.

8. Had a problematic idea of the ‘social pact’ given massive income inequalities (New

Age, 2011:34).

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At first glance, the New Growth Path did not mark a radical departure from either GEAR or

ASGISA. It read more like a re-packaging of initiatives under a new label.

5.5 Results and Prospects

Against the background of ideological differences within the ANC over the best economic model to pursue growth and development following the failure of GEAR, the evolution of the developmental state more or less coincided with, and may even have catalysed the political battle between, Thabo Mbeki and Jacob Zuma. On the one side, those advocating for the nationalisation of assets; on the other side, those who favoured market-oriented policies.

Yet, there is a misconception of the long-range process towards a developmental state, starting in 1994 and still evolving into the future. That a sustained developmental agenda has meant that the state has driven and guided the economy towards a sustainable development path is axiomatic. Indeed, the South African state has maintained a commitment to restructuring the economy and socio-economic inclusion, notwithstanding left critiques of GEAR as a neo- liberal programme.

A periodisation of the policy evolution, to be sure, marks GEAR as a necessary stabilisation intervention towards an expansionary programme that addresses inequalities and creates a platform for citizens to participate in the economy. When the government shifted course to

ASGISA, the reflections of Thabo Mbeki in 2004 were revelatory, to the extent that they shed lighton the country’s progression towards a developmental state (Saloojee and Pahad,

2011:15); (Mbeki, 2004):

[T]he post-apartheid democratic state in South Africa had to be developmental. Its primary objective would be to eradicate poverty and unemployment, close the gap between the first and second economies and deal with underdevelopment, while recognising that dependent economies

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had to be integrated more fully into the global economy in an equitable way.

Mbeki believed that the adoption of a developmental state was an evolutionary process towards a stable and integrated economy. In this regard, Mbeki saw the developmental state agenda as one that would enable South Africa to play a role in the global market through an increase in foreign trade and foreign investment. All this would allow the state to focus on building the international competitiveness of the economy through multinational corporations formed and managed by South Africans.

Having favoured ‘fiscal discipline’, ‘trade liberalisation’ and restructuring state assets, whilst remaining non-orthodox in his pro-poor stance, we might consider Mbeki’s evolution from the intellectually innovative and skilled manager of GEAR, to an advocate of developmentalism in the context of the sound macro-economic and fiscal position of the country in 2004, with the unintended consequences of rising levels of poverty. Soon after the April 2004 elections which brought the ANC back into power with an increased majority, presidential advisor Joel

Netshitenzhe warned that poverty and unemployment were so acute in South Africa that it posed a risk to social stability and democracy. The government planned to help address unemployment with a promise to spend R100 billion on public works to create a million short- term job opportunities over five years. It also announced plans to spend R180 billion on infrastructure projects over five years, hoping that it would further stimulate growth and the generation of new jobs (Jeffery, 2010:251-252). These pronouncements clearly envisioned a clearer role for the state in development. More generally, they were characteristic of the unintended consequences of GEAR and signalled a policy shift to a combination of state interventions towards extensive social redistribution and high economic growth.

In his 2005 State of the Nation address Mbeki asserted that development “requires an effective state, one that plays a catalytic, facilitating role” in the commanding heights of the economy.

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He further declared that, “as a developmental state, it was vital for the government to ensure that all three spheres of governance have the necessary professional, managerial and skilled personnel to enable the state machinery to discharge its developmental responsibilities”

(Thomas, 2008:178-179); (Mbeki, 2005).

One has the impression from such statements that Mbeki had already delineated the outcome of GEAR and desire for a state focussed on building a meritocratic bureaucracy capable of dealing with unfinished business. A year later, Mbeki in his State of the Nation Address

(SONA) of 2006 could reveal a range of government achievements. On the basis of sustained economic growth, the government claimed to have, inter alia, provided access to potable water to some ten million South Africans since 1994, allocated two million housing subsidies to the poor since that year, spent particularly heavily on education and raised the annual value of the social wage to R88 billion by 2003, with the poor being the principal beneficiaries (Southall,

2007:1); (Mbeki, 2006). In short, Mbeki had signalled a turn to service delivery on the basis of certain successes, including the broad objectives of increasing investment, lowering the cost of doing business, widening economic inclusion and providing skills that are required by business (Southall, 2007:1).

The ANC in a discussion document soon followed suit (Thomas, 2008:178-179):

A National democratic society requires a state that is able to use a variety of strategic capacities to shape the development of the economy.” It further defined state capacity as “important based on two fundamental points: its strategic capacity to lead in the definition of common national agenda, mobilise all of society to take part in the implementation of this agenda and direct society’s resources … towards the shared programme.

Issues of capacity from this moment on were bound up with the developmental state debate on strategic levers to selectively intervene in the economy (Mbaku and Ihonvbere, 2006:274). The

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evolution of state capacity remains a central, however, part of the discussion.

5.6 Conclusion

What this chapter has shown is that the developmental state trajectory in South Africa is as old as the Freedom Charter, adopted in 1955, when it emphasised that all shall govern, and that they shall equally share in the resources of the country. The achievement of democracy in 1994 and installation of the ANC in government introduced a new set of variables, including the competitive dynamics of a global economy embodied in a world of rival states that espoused oppositional ideologies and leveraged degrees of national competitive advantage.

The introduction of GEAR, widely perceived as a capitulation to such oppositional ideologies, was not an end-state; rather its key proposition was the stabilisation of the economy within an overarching developmental paradigm, by no means a monolithic entity to be consolidated, but an invitation for further transformation.

Cast in this context, there is much to be said for bringing the discourse of developmentalism back into the debate in 2004. If uncovering the points in space and time, where political actors altered ANC policy, reveals continuity with the present course to a developmental state, South

Africa is on firm ground.

However, challenges remain. Despite laudable efforts to craft a new economic plan, there is as yet no strategy to build the skills and human capacity for a meritocratic bureaucracy capable of delivering services. Without South Africa addressing the skills crisis, it will not make inroads into the serious service delivery crisis it confronts.

Certainly, for South Africa to become a developmental state, institutional capacity remains wanting. This is despite the fact that South Africa has institutional mechanisms to construct a developmental state. The issue, as we shall see in the next chapter, comes down to a public

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service that is professional, accountable, efficient, effective and responsive to citizens. In achieving this mammoth task, focus needs to be a re-orientation and re-skilling of the public service in line with the imperatives of a developmental state.

The other problem related to the above is overall institutional coherence in the South African state or lack thereof. This is clearly marked by turf wars between state institutions which often result in delays in service delivery and causes duplication of resources which undermines service delivery.

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CHAPTER 6

THE INSTITUTIONAL DIMENSION: THE SPECIFICITY OF RACIAL REDRESS IN SERVICE DELIVERY

6.1 Introduction

South Africa’s growing notoriety among the world’s protest capitals was on full display in

2012 as a wave of turbulent, often violent community upsurges over poor service delivery by the state followed a deleterious pattern of spontaneous protests during the past decade

(Alexander, 2011:1). The main problem is that the nominal extension of basic services such as access to clean water, electricity and sanitation and proper human settlements has not been accompanied by proportional improvements in employment and poverty alleviation in poorer sections of the population. This, in turn, generated a cycle of non-payment, large-scale confrontations between communities and the state and a resurgent politics of direct action inserted in the gap between developmental ideology, and progressive clauses of the

Constitution, and the market-based socio-economic ties of the government.

Kotze and Taylor, (2010:206) asserts that contemporary states are meant to provide not just more services, but more complex services to society. In the case of South Africa, however, traditional public service delivery methods are proving too cumbersome to meet the needs of society. There appears to be a lag between the delivery of basic services, on the one hand, and economically enabling services such as education, health, social security, infrastructure as well as a range of municipal services geared towards strengthening the capacity of people to enhance both their quality of life and economic opportunities, on the other.

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According to the National Planning Commissions (NPC) (2010:22) the net result, to put it crudely ‘cold showers and rudimentary classrooms’, has raised concerns that while the aggregate scale of services has improved since 1994, the quality of those services and level of variation between the poor and wealthy areas has entrenched inherited faultlines. Today Black townships in South Africa (SA) are a tinderbox. By some estimates, there had been no less than one thousand (1000) reported service delivery protests between 2002 and early 2011 alone, throwing into sharp focus the South African state’s institutional, ideational, human resource and coordinating capacities to effectively mobilise its organisational instruments and institutional levers towards an integrated and, ultimately, efficient delivery system.

If these points remind us that the developmental state means more than the conceptualisation and declaration by political actors of a common national and developmental agenda, they should not be interpreted as either outright failure or success. Indeed, the evidence suggests that the developmental state agenda in South Africa is still evolving, the country’s transformative potential far from exhausted. However, such episodes of intense upheaval by civil society against the state often tell us more about the relative weakness of domestic institutions of the state in South Africa than the generalised strength of government’s programmatic ideals and policies.

This chapter will explore a missing dimension in the evolution of the South African developmental state agenda: that of capacity. In theory, a state with the capacity to deliver services should institutionalise effective systems of planning, implementation, monitoring and evaluation as well as regular interaction with social partners. Such a state should ideally be able to craft a clear national developmental agenda and demonstrate its ability, in concrete terms, to galvanise the active involvement of key social partners and private sector stakeholders towards the implementation of strategic goals of the state. For if, as we have shown in previous chapters, a developmental state is rooted in the will and aspirations of

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society and is able to steer a developmental programme, the capacity dimension, including financial, technological, inter-governmental policies and systems, and human resources, is a vital planning and mobilising pivot around which the developmental state should cohere

(Pottinger, 2009:72).

Thus, to invoke economic growth as an example, key ingredients of the developmental state are the administrative institutions and leadership committed to the attainment of national developmental goals; the financial resources to implement its developmental programmes; the technological infrastructure to make efficient use of its resources; policy frameworks to inform its activities; and a capable bureaucracy to drive the various processes towards set targets. On one level, according to Edigheji (2010a:19), South Africa is at an advantage in this regard: it has the political will, buttressed by a strong and mass ANC, and the architectural design including developmental agencies such as the Industrial Development Corporation (IDC), the

Development Bank of Southern Africa (DBSA) and a number of state-owned enterprises

(SOEs) as well as the Department of Trade and Industry (DTI) to drive a developmental state agenda with significant financial resources and analytical capacities which can be mobilised for a developmentalist project in South Africa (Edigheji, 2010a:19).

Yet, on another level developmental states presuppose the operationalization of an intellectual, cultural and philosophical shift that South Africa has not yet made, nor appears ready to make.

In such a state, the bureaucracy is composed of the nation’s brightest and best whose administrative careers are not subject to the whims of political fortunes (Edigheji, 2010a:19).

Such a technocratic and meritocratic civil service would be fired not only by the ambition of achieving economic growth, but also patriotic sentiment towards the promotion of the national interest (Southall, 2005:xxv).

This chapter will look at the challenge of transforming the South African public service to a point where it could be capable of driving the developmental state agenda (Edigheji, 2010a:25).

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The line of responsibility between bureaucrats and politicians, for instance, is still indistinct, evidenced by administrative officials or bureaucrats who occupy political positions and vice versa. Similarly, through the over-extended policy of cadre deployment, politicians invariably encroach on the administrative functions of the state. This is inimical to an effective roll-out of technically skills-based programmes that define the contours of a developmental state.

Given the above, might the problem ultimately come down to widespread skills shortages as a result of legacy of apartheid and continued dysfunctionalities of the South African education system? (Edigheji, 2010a:25). What seems a reasonable assumption is that the South African state has yet to develop the capacity to support industrial growth and development taking place within the economy (Edigheji, 2010a:25).

6.2 The Constitutional and Legal Context for Service Delivery

Up to this point, the objective of this study has been to show that the conditioning influence of external and internal factors has shaped the evolution of policies and the state in South Africa.

The study has not sought to deny shortcomings and, in some instances, the failure of the ANC and government to fully assimilate relevant lessons of developmental success stories in East

Asia, a fact which we broadly acknowledge. The concern here is to draw attention to the capacity of the South African state to meets its developmental obligations, primarily service delivery. To understand the significance and nature of the state’s capacity to delivery services, it is important to place the issues in the constitutional, legislative and political context of the state as a delivery instrument and then analyse their combined impact on the capacity and the constructive desire of the planning elite to build an efficacious developmental state.

6.2.1 The Constitutional Mandate

The constitutional and legislative context that defines public service delivery in South Africa is provided in Chapter 10 of the Constitution (Section 195) which sets out minimum standards

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of service expected of public administration. These include professional ethics such as the provision of impartial care, fair, equitable and unbiased service; the efficient utilisation of resources, and meeting people’s needs. The provision also calls for public participation in policy-making and a public service which is development-orientated.

The Constitution also establishes a range of socio-economic rights including “the right to have access to adequate housing”. The Constitution states that, ‘the state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right’. From the point of view of consistency, this economic right is premised on the distributive justice – that is to say, that all individuals should receive an equitable share of social resources (South Africa, 1996:7).

However, although the Constitution lays a firm basis for South Africa to transform itself into a developmental state, the process through which such a mandate has been structured is not defined (Pottinger, 2004:607). The need for rapid change has fostered an uncritical import of policy concepts from other contexts without careful scrutiny of the institutional foundations and structures needed for their implementation. It could be argued that public service policies since the new government came into power in 1994 have attempted to deal with the complex needs of state institutions and service delivery, as evidenced in the myriad legal and administrative reforms (Tshandu and Kariuki, 2010:195-196), but it is also plausible that government underestimated this task.

6.2.2 The Legislative Framework

Consistent with the constitutional principles, the White Paper on Transformation of the Public

Service (WPTPS), published in November 1995, encourages all national and provincial government departments to develop service delivery strategies which inspire continuous improvements in the quality, quantity and equity of service provision (Tshandu and Kariuki,

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2010:195). The attempt by the government to give the WPTPS sway over the specificity of service delivery in the South African context, referred to in political terms as ‘transformation’, has reflected centrality of racial redress in defining state policy. The principal premise of the

WPTPS was thus a defence of social transformation in the delivery of services as a strategically functional feature in the government’s characterisation of the post-apartheid state in both transformative and modernising dimensions.

In a 1996 ANC discussion document, aptly titled The State and Social Transformation, then deputy president Thabo Mbeki set forth government’s thinking, arguing that the delivery state was at once a transformative state based on residual challenges from the apartheid era and the modernising prerogatives of economic growth and stability. Thus, while legislation had to reflect a growing embrace of market realities, it had to be accompanied by an alternative strategic conception of the state that facilitated the transition from racial patterns of delivery to new forms of transformative growth and development.

This dual mandate is most evident in the White Paper on Transforming Public Service

Delivery: Batho Pele-“People First” prime strategic objectives (DPSA, 1997:5):

[I]mproving the delivery of public services means redressing the imbalances of the past and, while maintaining continuity of service to all levels of society, focusing on meeting the needs of the 40% of South Africans who are living below the poverty line and those, such as the disabled, and black women living in rural areas, who have previously been disadvantaged in terms of service delivery. Improving service delivery also calls for a shift away from inward-looking, bureaucratic systems, processes and attitudes, and a search for new ways of working which put the needs of the public first, is better, faster and more responsive to the citizens' needs. It also means a complete change in the way that services are delivered. The objectives of service delivery therefore include welfare, equity and efficiency.

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This provision should be seen in the context of de facto state interventions towards service delivery as a means by which to address the social backlogs created by the apartheid policy of segregation. Service delivery is conceptualised as the implementation of specific types of policy objectives in the public sector with various degrees of success and could be understood thus:

1. The services which are outputs or end products of government policies such as houses,

roads, water, electricity, health and education.

2. The resources or inputs needed for this purpose which include money, time,

knowledge, experience and provisions,

3. The process through which resources are transformed products, and

4. The outcomes or impact of these products (Cloete, 2000:9).

To this effect, the White Paper on Transforming Public Service Delivery of 1997 more acutely asserted that access to decent public services is no longer a privilege enjoyed by a few; it is now the rightful expectation of all citizens, especially those previously disadvantaged. “The

South African state believes that improving the delivery of public services would assist in addressing the imbalances of the past, while maintaining continuity of service to all levels of society, focusing on meeting the needs of 40% of South Africans who are living below the poverty line” (DPSA, 1997:8).

The legislative anchoring of the state is thus based on the presupposition of racially imposed categories and the challenge of their dissolution within a normalised matrix of social relations.

In other words, from a mode of oppression in which apartheid and capitalism were for a while at least functionally bound, the state would become a countervailing and counter-hegemonic instrument of the undoing of both deracialisation and modernisation. From this point of view,

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the White Paper (1997) introduced a fresh approach to service delivery: an approach which puts pressure on systems, procedures, attitudes and behaviours within the public service and re-orientates the state’s delivery outputs towards the needs of people. Thus was conceived

‘Batho Pele’, a Sesotho word meaning ‘People First’ (DPSA, 1997:3-5). The choice of context in the shift from the apartheid state to a new progressive era was captured in the following eight (8) principles for transforming public service delivery:

1. Consultation

According to this principle, citizens should be consulted about the level and the quality of

public services they receive and, wherever possible, should be given the choice about the

services that are offered. Consultation could also help to foster a more participative and

cooperative relationship between the providers and users of public services. Consultation

should not result in a list of demands that raise unrealistic expectations; rather it should

reveal where resources and effort should be focused in future to meet the public’s most

pressing needs. The outcome should be a balance between what citizens want and what

national and provincial departments could realistically afford to deliver (DPSA, 1997:8).

2. Service Standards

Citizens should be told what level and quality of public services they will receive so that

they are aware of what services to expect based on the publicisation by national and

provincial government of standards for the level and quality of services they will provide,

including the introduction of new services to those previously denied access to them.

National and Provincial departments would develop strategies to eliminate the disadvantages

of distance, for example, by redeploying facilities closer to those in greatest need (DPSA,

1997:8).

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3. Access

According to the White Paper on Batho Pele (1997), all citizens should have equal access to

services to which they are entitled. The White Paper also advocated equal distribution of

resources and services, regardless of location, to address inequalities in the delivery of

services historically skewed towards formally white areas (DPSA, 1997:8).

4. Courtesy

This principle requires service providers to engage in continuous, honest and transparent

communication with citizens. This includes communication about services, products,

information and problems, which may hamper or delay the efficient delivery of services to

promised standards (DPSA, 1997:8-9).

5. Information

According to this principle, government is required to provide citizens with full and accurate

information about the public services they are entitled to receive. As a requirement, available

information about services should be at the point of delivery for users without access to

technology (DPSA, 1997:9).

6. Openness and Transparency

According to the White Paper on Transforming Public Service Delivery Batho Pele-“People

First” (1997:9), Openness and Transparency are the hallmarks of a democratic government

and are fundamental to the public service transformation process. In terms of public service

delivery, their importance lies in the need to build confidence and trust between the public

sector and the public they serve. The key aspect of openness and transparency is that the

public should know more about the way national, provincial and local government

institutions operate, how well they utilise the resources they consume, and who is in charge.

The principle also requires that citizens should be told how national and provincial

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departments are run, how much they cost and who is in charge (DPSA, 1997:9).

7. Redress

According to this principle, the state needs to adopt a completely new approach to handling

complaints. Complaints are seen by many public servants as a time-consuming. Where

complaints procedures exist, they are often lengthy and bureaucratic, ironically aimed at

defending the department's actions rather than solving the user's problem. The first steps,

therefore, are to acknowledge that all dissatisfaction, expressed in writing or verbally, is an

indication that the citizen does not consider that the promised standard of service is being

delivered; and then to establish ways of measuring all expressions of dissatisfaction. Staff

should be encouraged to welcome complaints as an opportunity to improve services, and to

report complaints so that weaknesses can be identified and remedied (DPSA, 1997:9).

8. Value for Money

According to this principle, public services should be provided economically and efficiently in order to give citizens the best possible value for money. Failure to give a member of the public a simple, satisfactory explanation to an enquiry may, for example, result in an incorrectly completed application form, which will cost time to rectify (DPSA, 1997:9).

Leaving aside, for a moment, problems of implementation, it is apparent that the language of legislation held the potential for people-centred service delivery as a basis for transformation and conceptualisation, in the specific socio-economic context of South Africa, of the developmental state. Thus, a utopian moment can be said to have followed their publication centred on a latent vision, not generally voiced, of a delivery state in which racially inscribed categories and socio-economic hierarchies would be progressively dissolved in the very process of advancing the developmental state agenda. A discussion of the peculiar challenge of defining and building a developmental state in post-apartheid South Africa, the nexus

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between transformation and modernising assumptions of post-apartheid development, becomes a necessity. For if, ultimately, developmental states are generally distinguishable by their self-mastery and configurations of national development projects, the real question is what insight the characterisation of the South African state as both a subject and agent of progressive change brings to our understanding of the contradictory nature of modernisation.

In other words, the binary of racial redress and capacity.

6.2.3 The Specificity of Racial Redress in Service Delivery

In his analysis of the phenomenon of nations the political scientist Hans Kohn (1944:329-334) distinguishes two sorts of nationalism. The ‘Western’ nationalism of Britain, France and the

United States, which took root in countries where the state had already been built, had an essentially political form, aiming at organising the nation around the state. In contrast, the

‘Eastern’ nationalism of Italy, Germany and the Slav nations, which bore fruit in politically

‘underdeveloped’ countries where the state either did not exist or was only embryonic. This form of state took an ore of a cultural character, inspired by myths of an original community of which language, literature, and folklore are key characteristics (Kohn, 1944:329-334). If there is a distinction Hans Kohn makes between the two, it is concerning the different stages in the evolution of cultural (exclusivist) to political (liberal) nationalism.

There is of course no sharp demarcation between the two varieties of nationalism and state formation which applies as much to the apartheid state’s Afrikaner cultural hegemony as

American liberalism’s enslavement of Blacks. In fact, Kohn’s conceptual intuition merits preservation, so long as it is modified to include a third form of nation-building, that of modern economic nationalism in an era of globalisation.

The year 1994, when the ANC won power in a coalition arrangement with the Afrikaner

National Party, can be said to have coincided with just such a moment, when the new order

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replaced a political and social dispensation based on a rigid hierarchical racial and ethnic division with a more uncertain one built around an undoubted symbolic cohesion (the

‘Rainbow Nation’) and, more fundamentally, a long-term project of social and economic transformation. The moment ushered in a promise, according to the ANC’s 1994 election manifesto, to implement a radical programme to improve the quality of life for all, especially those who were marginalised, through the repeal of apartheid laws and the delivery of affordable and quality services (Khosa, 2001:247). The ANC’s campaign slogan ‘A Better Life for All’ went beyond basic services to include complex delivery promises such as ‘Houses for

All’ and ‘Jobs for All’.

This complex movement of historical reconstruction proceeded in a strange game of mirrors with the past: the recognition of the collective dimension of Black disadvantage, as the very essence of the state and the agenda of social transformation was systematised in the notion of a developmental, or delivery state. This definition of the role and identity of the state as intimately bound to racial redress was emphasised by the ANC’s reassertion of the RDP in a

2008 discussion document (ANC, 2008:15):

Development entails a growing economy in which redistribution is a critical element…it includes the preservation and development of human resources in the form of skills training, job-creation and the provision of education, health services, infrastructure, an adequate social security system, and so on. (The RDP) defined the role of the government in a Developmental State setting as that of improving service to society, through enhanced public infrastructure, efficient systems and requisite personnel.

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Here the modernity of national reconstruction lay, above all, in the appropriation of the dimension of power which called for the reorganisation and mobilisation of the bureaucratic elite under the aegis of the state as a measure of the prospect of a better future (Hemson and

Ampomah, 2004:511). Thus the state was based on a political and economic dimension.

Politics was the fruit of economic need: to ensure racial redress in the delivery of services and restore and protect the rights of the citizenry. The state here possessed a redemptive (national) quality. It was fundamentally, to caricature Rousseau’s primitive man, a matter of putting an end to the apartheid legacy and thus became necessary to create a political society which ensured the survival of individuals by demanding that those who benefitted from freedoms conferred in them during apartheid renounce their original freedom. That utopian prospect, a distant one since it required slow and difficult progress, went together with acceptance of the de facto political authority of the state to direct economic activities by prioritising issues related to human development and special measures in the delivery of services (Hemson and

Ampomah, 2004:511).

In the context of South Africa, then, service delivery does not only refer to the ability to provide users with services needed or demanded, but also a sense of redress. It is expected that the services should raise the standard of living of the majority and confirm their citizenship in the new South Africa. Given the political history of the country, service delivery is seen as an instrument for transcending class and race contradictions and ensuring a ‘social contract’ with the people (Hemson and Ampomah, 2004:511-512). It is about ensuring partnerships between the state and its citizens.

6.2.4 A People’s Contract: An Evolving Paradox

The Batho Pele strategy situated service delivery in the crisis of state capacity and moral decline of the new millennium. According to Batho Pele, ‘people-centeredness’ reflected a turn from a narrow rapacious liberalism to an introspective modernism, provoked in the ANC’s

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case, by the rise of an alien culture of self-aggrandisement and enrichment. The term ‘people- centeredness’, as used in Batho Pele, is a broad enough category to encompass a range of issues including the ANC’s struggle for embedded autonomy (read hegemony), an ethos of national unity on which the developmental state is premised, and a new approach to service delivery which literally puts people at the centre of planning and delivery by fostering new attitudes such as increased commitment, personal sacrifice, and dedication (DPSA, 1997:5-11).

What all this means is that for individual citizens to experience their humanity, what is commonly referred to as Ubuntu in the Southern African context , they require a culture that recognises the commonality and interconnectedness of their lives. This focus on a collective ethos and self-control was partly an attempt to forestall social conflict within and outside the state, especially class conflict, by redefining problems in terms of their national character. And if the key problem of state capacity was to be redefined as a challenge of service delivery, the primary measure of the effective realisation of state capacity was the extent to which ordinary people engaged in the transformation of their lives. There was in this people-centred characterisation of the delivery state, a clear attempt to instil a peculiarly South African identity on the evolution of concepts, and cultural and institutional national planning instruments in the definition of the developmental state. The maintenance of planning as well as managerial and technical capacity no longer followed the textbook formula of an apolitical and acculturated technocracy. Instead the ultimate end to be achieved was social transformation, certainly in the view propounded by Thabo Mbeki in The State and Social Transformation. At issue here, however, is the convergence of service delivery and state capacity on the overall strategy of transformative growth.

Yet, even those who agree that growth as a condition for transformation, or ‘growth with redistribution’, has been highly exaggerated, nevertheless differ when considering the effects of economic growth on state capacity. While some conclude that capacity constraints are due

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to transformation and that transformation continues to structure limited economic space, others see capacity circumscribed through transformation and growth. Here it may be worthwhile considering the crisis of state capacity as having coincided with high levels of growth from the early to mid-2000s as increasing demands on the state for economic services rose proportionately. The question is whether one can identify any clear cases which might fit this intersection, and whether, having identified them, they represent not simply a ‘weak’ state, but a condition where real economic shifts (transformation) are in train.

It is doubtful that the weak state hypothesis, where transformation is seen as a debilitating factor on capacity building, fits the actual experience which appears to inform much of this kind of reasoning. In the case of the strain on national electricity utility Eskom, by expanding investments in industry and an ever larger number of previously excluded households connected to the national grid since the mid-2000s, it has become clear that it is economic expansion driven by transformation that has eclipsed the state’s technical, administrative and coordinating capacities. Indeed, in a number of important respects, technological innovation and administrative personnel, state capacity has been growing in real terms, not declining, over the past two decades. In proportion to economic growth and the extension of services to previously excluded groups, however, it has been declining.

In one important sense, then, service delivery is a key appraisal tool to assess whether the state is capable of delivering services. Put another way, service delivery, as an outcome of effective national planning, regular maintenance of the plan as well as managerial and technical capacity serves as a barometer of the state’s capacity or incapacity to bring about socio-economic changes to the lives of the citizenry (Hemson, Carter and Karuri-Sebina, 2008:156-157). That in the South African context service delivery is inherently politicised because of its link to the politics of distribution focused on providing access to services to the citizenry is by no means a static, snap-shot political objective.

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The key point here is that it is not the notion of the developmental state that is weakened by the politics of a post-apartheid transformation agenda. If anything, it is the combined impact of the apartheid legacy: a failure to build a state to meet the needs of the majority and the inefficacy of the state’s technical, administrative and coordinating instruments, in particular the literal machinations of building a developmental state emerging from a highly unequal apartheid base (Munslow and Mc Lennan, 2009:12).

Thus, rather than attributing service delivery problems to the proclivities for socioeconomic transformation and resultant capacity constraints, one should look in the first instance, historically, to inherited shortcomings, and next, to progressive economic outcomes of the transition since 1994 and their impact on the state. If, according to Munslow and McLennan

(2009:21), the developmental state in South Africa is strongly associated with the provision of social justice, wherein the state engages in service delivery, its main intention is to ensure resource distribution, equity, the eradication of poverty and hunger, and economic growth.

According to McLennan (2007:4):

The delivery process (in South Africa) is associated with development and the notion of the developmental state is associated with the capacity to provide social justice. The conceptualisation of delivery is a consequence of the specific history and context of South Africa and its apartheid heritage.

In demythologising service delivery as a contentious thing in itself, a problem and challenge of an over-politicised and dilettante state to be overcome by professionalization, it is necessary to see the South African developmental state agenda as an evolving paradox: an object of historical legacy constraints and modernising impulses of economic growth within an overarching transformation paradigm. Rather than a regression since the end of apartheid, social transformation and the progressive evolution of the developmental state should be seen as a politically induced phenomenon in an expanding economy. But it is political also in the

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more specific sense discussed here: that the state appears to be facilitating rather than constraining the professionalisation of service delivery to overcome the historical legacy of maladjustments in the distribution of resources and services and meet the contemporary demands of a modernising and globalising economy.

6.2.5 Service Delivery: From Protest to Challenge

Having characterised the post-apartheid state as an instrument of racial redress and modernisation through service delivery, the next strand of this argument is that we are witnessing changes in state power. However, these changes have to do not with the diminution but the reconstitution of capacity around the consolidation of the market’s propensity for growth and the state’s responsibility to correct maladjustments in the distribution of resources.

For many political actors and commentators, the potential of the state’s institutional and organisational malaise (especially its service delivery quandary) to undermine the achievements of the government had been accepted as an incontrovertible truth by the time

ASGISA was adopted. It was viewed as the key constraining feature of the post-apartheid transformation agenda: forcing government departments to somewhat regressively adapt to new constraints on state capacity to make and implement policy. Viewed from this perspective, the problem was nowhere more apparent than from President Thabo Mbeki’s caveat in his

2006 State of the Nation address, “[W]e cannot allow that government departments become an obstacle to the achievement of the goal of a better life for all because of insufficient attention to the critical issue of effective and speedy delivery of service” (Edigheji, 2007:27). These qualifications to service delivery seemed to have seeped into the post-Mbeki era, heralding a dramatic expansion of infrastructure including housing, electrification, telephony, potable water, roads, schools, community halls, sporting facilities and clinics geared towards the needs of the poor (Pottinger, 2009: 272).

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Yet the problem lay in the state’s capacity to roll out new projects, drawing into its gravitational orbit a mix of old and new constraints. Here we will examine the service delivery record as a precursor to an analysis of the historical challenges and constraints of service delivery before turning to some of the core institutional issues that beleaguerd state capacity.

6.2.6 A Balance Sheet

More than anything, it has been the aggregate rise in delivery outputs by the state, the emergence of equitable redress as a principle and practice of service delivery in historically excluded communities, and the policy of cross-subsidisation in the distribution of resources from historically White to Black communities that have led government to conclude that significant improvements have been made in service delivery since 1994.

Certainly, the post-apartheid government was able to offer free education in state schooling, increasing the access the uptake rate in basic education to more than 99 percent; increase public health expenditure in the last eight years although real per capita expenditure has remained at between R967 and R907; built 1600 clinics and healthcare centres between 1994 and 2000 under the clinic Upgrading and Building Programme (UBP) and thereby increase the access rate to 95% of South Africans living within a 5 km radius of a health facility; enrol the largest number of people on antiretroviral therapy (ART) in the world (The Presidency,

2003:21); (The Presidency, 2008:25); introduce a Free Healthcare policy for women and children under the age of six; increase the Integrated Nutrition Programme (INP) from 89 % of targeted learners to 4.58 million children (The Presidency, 2003:21), thus reducing malnutrition among children under five years old from 88 971 cases in 2001 to 28 165 in 2007

(The Presidency, 2008:25); and increase access over the past ten years to clean drinking water to 9 million additional people, a rise from 60 percent in 1996 to 85 percent in 2001. These achievements which have pulled together state and industry in reasonable but tension-fladen cooperation, have underpinned rapid structural change.

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There the optimism dissolves, however. In real terms, according to Munslow and Mc Lennan

(2009:41), the majority of South Africans still lack services such as water and electricity. In most rural areas, service delivery has not touched the lives of the most marginalised and disadvantaged groups in society. Munslow and McLennan observe that there are still vast swaths of poverty and deprivation throughout the country a clear indication that the South

African state still has a major role to play in as far as the delivery of services is concerned (The

Presidency, 2008:25).

On a more profound level, it must be said that the radius of cooperation between the state, private sector and communities has not extended to sustainable capability-enhancing adaptations of government institutions. Quite simply, the state’s capacity for a coordinated and strategic response to the challenges of growth and development has not kept pace with demands for institutional arrangements which make key decision-makers in the economic bureaucracy at once autonomous and in some important respects accountable to communities.

If the character of autonomy applies in so far as decision making is largely insulated from the plurality of special interests and clientelistic political pressures that in most liberal democracies tend to privilege the politics of skewed distribution over national priorities, both autonomy and accountability are severely lacking.

Thus, rather than a shared growth paradigm in which the character of service delivery applies to the politics of transformation, the state has functioned more like a counter-hegemonic force to the market, with the latter choosing to contract out of the public sector in privatised delivery arrangements such as private schooling, hospitals and security. The cost of contracting out has been felt in the artificially high or inflated pricing structures and costing exercise that have constently hamstrung service delivery.

On another level, then, while the problem of non-delivery is technically located in demographic shifts and the unwillingness of the national government to enforce the rule on the law-book on

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its own operatives in local government (Koelble and LiPuma, 2010:566); (Kahn, Madue and

Kalema, 2011:212), the failure of the state to mobilise cooperative arrangements, and thus technical and administrative competencies in the national interest, has reinforced a strange dualism consistent with Mbeki’s theorisation of two economies in which the one is wealthy and privatised, the other poor and wholly dependent on the state.

According to (Atkinson ,2007:33) it is within the second economy that a large number of mass protests and violent confrontations between communities and the democratic states’ coercive apparatus since 1994, reminiscent of the apartheid state’s struggle against its own citizens, has reflected a “longitudinal confrontation” preceded by independent variables such as the political opportunism of opposition parties, individuals and/ or groups pursuing sectarian interests (Van

Dijk and Croucamp, 2007:671).

The upsurge of social movements has provided examples of social fragmentation, stimulating a new militancy which in turn opens channels for the creation of anti-state tendencies, independent of a national development agenda. Their militancy is based on residual elements from the previous populist era and reflects a growing rejection of ‘neo-liberalism’. Despite the mythical characterisation of the state, the voluntary nature of a social contract in which social partners buy into a national developmental agenda the conceptualisation of the state as developmental has not been accompanied by cooperative arrangements that convert the periodic paralysis of service delivery including the privatisation of complex services into new forms of engagements and interventions. In such circumstances, state capacity as both a technical problem of skills and an institutional challenge of cooperation reflects the contradictory nature of the transition from apartheid.

6.2.7 The Transformation-Development Paradox

In a discussion document titled Prospects for a Social Accord in the South African Public

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Sector: Strategic Challenges and Recommendations, prepared for Public Service and

Administration Minister Lindiwe Sisulu in July 2012, Ray (2012:43) articulates the challenge, typical of transitional societies such as South Africa, as an “evolving paradox”:

As the democratic State has attempted to rebalance its growth and development priorities, the reconceptualisation of policy instruments has revealed some intrinsic problems” (Ray, 2012:43). This includes “an admixture of competing economic interests, conflicting programmatic goals, institutional ambiguity and thematic incongruities in the same policy and institutional instrument” (Ray, 2012:43). As such, what seems to have emerged from “a rather ramified ideological hangover of the ruling party’s liberation mandate, the National Democratic Revolution, is a discursive idea of ‘progressiveness’, cobbled together on a yet to be realised institutionalised partnership between the state, civil society and the market.

It is importat to situate the problem in the context of the dual nature of public sector institutional goals, that is, transformative and modernising in order to better understand the wider strategic context of the challenge.

Government’s attempt to drive the vision of an efficient state over two phases is now seemingly bounded by complex internal organisational and institutional contradictions of the transition from the one to the other. The first phase saw the consolidation of the patchwork sub-national government structures inherited from the apartheid period into nine provincial governments, six metropolitan districts, and 283 municipalities. The second phase, of institution-building, the design of requisite service delivery and public investment arrangements – began in the mid-

2000s, and is still evolving (Ray, 2012:55).

However, according to Ray (2012:55);

Until 2002/03 the absence of questions of state capacity from the strategic thrust of government’s restructuring left unsettled the deeper institutional

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malaise of the apartheid legacy [mainly structural dislocations in the state’s capacity] and the delivery instruments to resolve the problem. Consequently, the post-2004 policy shift by National Treasury – from a phase during the post-apartheid transition primarily focused on macroeconomic stability and fiscal restraint, to an expansionary budget – meant that the earlier fruits of stabilisation would have an unanticipated and counter-productive effect on the public sector’s institutional capacity to adjust quickly enough to the economic growth and development objectives, and medium-term delivery targets, of the developmental state.

The greatest concern since the onset of the post-2004 growth trajectory was that old apartheid legacy constraints on state capacity would spread from a previous period of under-spending in areas like capital expenditure to the market. Having extracted R116 billion from Treasury in

2007, the then President Thabo Mbeki had hoped to enhance social and economic infrastructure rollouts to catalyse private sector investment and alleviate poverty. Mbeki’s solution lay in a combination of ambitious interventions that required the capacity to produce certain outcomes in the economy: among them ASGISA and the Department of Trade and

Industry (DTI)’s industrial policy framework and 24 ‘Apex’ priorities meant to fast-track the process under way since the early 2000s, streamlining things within a relatively short time essentially, more swiftly integrating a fractious public sector by realigning relevant departments falling within the ambit of the State and configured along functional organisational lines on a transversal axis split across spheres and different tiers of government and between departments – in a restructuring effort to square the state’s growth and development objectives (Ray, 2012:55). As Ray (2012:56) argues:

At the same time, the transformative thrust of policy reform, which, in the first phase of organisational restructuring, correctly called for swift and sharp cutbacks in the old guard, including highly sought after technical and managerial skills and institutional knowledge in the state, effectively reduced the state’s institutional capacity through the implementation of extraordinary equalisation policies – such as employment equity and black

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economic empowerment programmes, and orthodox organisational reconfigurations without significantly reducing its physical size.

This was a missed opportunity, if there ever was one, to realign the state sector on an economic axis as well. Strictly from the stand of political economy, according to Ray (2012:56):

If we were to combine the positive results of the political transformation of the apartheid state during the first restructuring phase with the economic impact of the institutional realignment exercise during the second restructuring phase, the results are, at once, politically and socially progressive and economically counter-productive. The net effect [minus the deficit] of professional expertise available to government at senior and middle management level in public service departments has been, according to (former Minister of Public Service) Geraldine Fraser- Moleketi, ‘a deficiency of skills and overall capacity in real terms within government administration. According to Fraser-Moleketi, “We had costly inefficiencies at middle management and professional levels, budget overruns at lower levels, and a monopoly of information and political oversight very high up in the public service, while the intention was that this insight should permeate the organisation much deeper”.

For the most part, then, the radical and wide-ranging institutional overhaul of the apartheid state had left “a legacy of severe structural misalignments between public sector capacity, on the one hand, and the complex developmental challenges of a modernising economy on the other” (Ray, 2012:56).

The institutional challenge, in the second restructuring context, according to Ray (2012:56):

Has adversely been that many of the state’s organisational and administrative policy levers had been designed and put in place, but the public sector has remained bloated, far too large one might say, on the one side; organisationally cumbersome [terminally lethargic] and economically inefficient [expensive] on the other – an impasse, it would

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appear, that’s militated against the idea of a big public administration and yet has implicitly been a key pillar of the state’s employment and social transformation strategic agenda.

To be clear, the legislative mandate of the Department of Public Service and Administration

(DPSA) is, inter alia, the “transformation, reform, innovation and any other matter to improve the effectiveness and efficiency of the public service and its service delivery to the public”

(Ray, 2012:56-57); (Hustädt, ny:41). The department’s vision is explicitly a professionalised state bureaucracy: “An efficient, effective and development-oriented public service.”

However, the moral and ideological dimension of a politicised state justifiably influenced by the ruling party’s programmatic mission to transform society by legitimately circumventing the legislative partition of party and state through the instrument of cadre deployment has resulted in a “strategic aggregation” of interventions, a curious synonym for a less explicit change objective.

Therein resides the paradox of party political deployments (politicisation), on the one hand, and state capacity (professionalisation), on the other.

6.2.8 The Travails of the ANC’s Deployment Policy

The ANC clearly took its cue from the Constitution when the first democratic government committed itself to the empowerment of the poor and historically disadvantaged, This commitment played a key role in the party’s 1994 election victory (Khosa, 2001:247);

(Mulaudzi, 2006:1). At the centre of the election campaign was a promise to implement a radical programme to improve the quality of life for all, especially of those who were disenfranchised under apartheid, namely, rural women and Blacks.

According to Tshandu and Kariuki (2010:191), The ANC government upon coming to power identified the following transformation priorities and processes: rationalisation and

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restructuring to ensure a unified, integrated and “leaner” public service, institution building and management to promote greater accountability, organisational and managerial accountability, demographic representation and affirmative action, transforming public service to meet basic needs and correct imbalances; human resource development, employment condition and labour relations; and the promotion of a professional ethos.

However, the attempt by the government to build the state as a legitimate promoter of economic development, often directly in the form of state-managed processes towards a

“professionalisation” of the public sector has, oddly, been at the expense of the state as an economic organisation. In his 2005 State of the Nation speech, President Mbeki acknowledged the state’s limited political capacity, evidenced by provincial and local government failures to implement policies, and proposed for the first time officially at least the ANC’s deployment policy as a remedy. Thus, the centralisation of power and control, as well as the imposition of penalties on those who did not adhere to state policy whilst rewarding those who were supportive of state policies was advocated. This statement mimicked Japan’s carrot and stick method and, on one level, was probably the clearest indication yet that South Africa was moving towards the implementation of a developmental state agenda (Mbeki, 2005:10).

On another level, however, the fact that the ANC’s attempt to address the skills shortage in the public sector during its 52nd National Conference in December 2007 followed the political dictums of ‘deployment’, a term by then used with great affection by the ANC to mean the appointment of suitably skills cadres in strategic positions of the public serice, with a view to ensuring the strict adherence to the programmatic rollout of the state’s developmental agenda.

In practice, deployment took the form of assigning loyal supporters to strategic institutions of state with a particular mandate to implement ANC policies in institutions they are serving. But despite the deployment of cadres, the South African state continued to face service delivery challenges which later prompted the ANC to acknowledge that there is limited state capacity

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particularly at the level of provincial and local government (Southall, 2005:xxxvii). At best, part of the challenge narrative is the deployment of ideologically adept cadres who possess qualifications that do not match the specifications of the turnkey positions they occupy; at worst, another part of the challenge narrative of is the scandalous deployment of cadres with either embellished resumes or false qualifications in government and parastatals.

In a sense, then, the politicisation of the state’s developmental agenda is precisely the kind of organisational maneuvering in the political/administrative interface of the state and ruling party against which the NPC Diagnostic Overview cautions It uggests not only an evolving paradox as the State tries to square its priorities but a fundamental strategic shift by the government in the form and substance of the goal away from the State as a site of contestation to the State as an impartial, rules-based bureaucracy directing and managing a modernisation agenda as cited in the NDP (NPC, 2011, 23):

Many of government’s best performing institutions are characterised by the stability of their leadership and policy approach, but the level of political influence over the day-to-day operations of the public service often serves to undermine this stability. Public servants are, first and foremost, employees of the State and accountable to elected leaders. The nature of this accountability should be managed in such a way that it does not blur the distinction between political party mandates and the need for professional, non-partisan obligations of the bureaucracy.

On balance, the problem, as the previous section has shown, was not only a weak cadre deployment policy of the ANC but the deterioration in state capacity in the context of a rapid transition since the end of apartheid. The transition process affected the human capital, institutional coherence, and the reach of the state: specifically, a lack of technical and managerial skills, an inability to extend the responsiveness of the state to the needs of people.

To put this in perspective, the problem of state capacity started way before the fall of apartheid

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and was compounded by the vacuum created during the initial transition period in which more focus and energy was directed at setting up the institutional architecture at provincial and local government level. During this period, most old order public servants left for greener pastures in the private sector, whereas newly appointed personnel did not have requisite skills such as technical and managerial capacities. It was thus difficult for the state to provide services in all areas and adequately respond to the needs and aspirations of the citizenry.

This lack of capacity to deliver services was highlighted by Mbeki in his 2006 State of the

Nation Address thus, “[W]e cannot allow that government departments become an obstacle to the achievement of the goal of a better life for all because of insufficient attention to the critical issue of effective and speedy delivery of service” (Edigheji, 2007:27). Yet, these impediments were at least partially a result of weak deployments by the ruling party and, consequently, government’s inability to selectively intervene in the economy with a view to accelerating service delivery. According to Edigheji (2010a:25-26), in order for South Africa to address its capacity problems, the state should have shifted its focus towards transforming the structure of opportunities by, among other things, widening access to basic services and physical infrastructure (Edigheji, 2010a, 25-26).

Here opportunity-driven deployments as opposed to political ones might serve as a caveat. To some extent, a culture of over-politicisation rather than over-professionalisation has distorted the economic incentives needed to attract a professional bureaucracy, thus distorting supply- side issues in government institutions and the private sector alike.

Because historically disadvantaged groups under apartheid did not have proper access to education in a system manipulated to advance narrow political interests during the apartheid era, a significant part of the capacity problem beyond 1994 has been that the country did not produce nearly enough skilled Black personnel (Munslow and Mc Lennan, 2009:6). But besides serious systemic and structural problems in the education system, there is as yet no

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culture, as was the case in East Asian developmental states, of technical learning adequate to the task of producing enough skilled people to maintain a competitive edge. In liberal discourse, the dominant strand emerging from critiques of the opposition Democratic Alliance

(DA), the problem of capacity has thus been conflated with a failure by the ruling party to promote an individualist and meritocratic society based on very strict institutional arrangements to keep political authority under control and avoid any excessive encroachment on civil society; hence the constitutional separation of powers and the installation of political representation through the parliament. Yet, as the study has demonstrated, this political creed of liberalism, following the ideas of John Stuart Mill and Alex de Tocqueville of the fear of the ‘tyranny of the majority’, misses the point. The main challenge, in the strategic perspective of the ANC, has been political control of state structures. However, because patronage, a strategic lever in any developmental state, has been used as an avenue for politicians not only to manage policy but accumulate power and money, interference in the work of the bureaucracy has had detrimental effects upon the technical competency of those responsible for service provision (Munslow and Mc Lennan, 2009:10). In many cases, political appointments to senior executive management positions suggest that it is unlikely that requisite levels of technical expertise will be maintained.

The problem with patronage is not so much the politicisation of the state, or what has been called ‘state capture’, but the lack of expertise to deliver services efficiently (Munslow and Mc

Lennan, 2009:10). Indeed, the sheer scale of political appointments of ANC cadres in positions of authority has, of late, severely undermined service delivery, so much so that reported instances of politicians manipulating the state procurement system and bureaucracy by appointing friends and relatives with a view to accumulating power and money is now routine repartee.

Based on the above analysis, it is reasonable to conclude that the overarching achievements of

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post-apartheid transformation in South Africa have been stymied by state capture, not by a political elite but a narrow patronage network for which the deployment of systems and mechanisms to facilitate regular interaction between the state and its citizenry and service delivery outputs are of minor importance.

There are, in a word, wide-ranging capacity challenges that stem from both the apartheid legacy and, to use the ANC’s own distinction, a politically engineered “comprador stratum”.

These challenges, have already been noted in the preceding chapter, identified in the ASGISA programme as manifestations of “weaknesses in the way government is organised, in the capacity of key institutions, including some of those providing economic services, and insufficiently decisive leadership in policy development and implementation, all (of which) constrain the country’s growth potential” (Hemson and Ampomah, 2008:153). The ASGISA statement was a clear acknowledgement that the institutional arrangement of government does not support service delivery.

6.3 New Challenges: The Insitutional Dimension

A fundamental tenet of the role of the developmental state in social transformation, the ruling party’s 2007 policy document asserted, is that, “People acting collectively in the spirit of human solidarity must shape the contours of economic development” (ANC, 2007c:np).

Consequently, “the State must be buttressed and guided by a mass-based democratic liberation movement” within the framework of a “people’s contract” (ANC, 2007c:np).

Defining the combination of institutional relationships, other than a general acceptance of the need for aggressive action by an interventionist state to correct historical distortions in accumulation and distribution patterns that best enable collective action for a people’s contract remains, at best, a theoretical puzzle for the ruling party and the government. What, for instance, does a “state buttressed by a mass-based movement” imply for the government’s

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technocratic formula of a ‘modern’, ‘professionalised’ bureaucracy in the public sector working towards the vision of an efficient State? Given that the strategic role of the ruling party in social transformation is delivering a modern, efficient state ultimately compatible with a mass-based movement, can a people’s contract simultaneously mobilise various conflicting interests and groups and develop organisations as deliberative arenas of policy coherence, collective action and human solidarity in the national interest?

On one level, these complications tend towards “the State’s role in social transformation as not technical but social, political and organisational” (Evans, 2007:59). This, the ruling party rationalises by drawing attention to the fact that “the movement only holds elements of State power” (ANC, 2002:2-3). Building a democratic State, therefore, requires “political mobilisation of the motive forces” (ANC, 2007b:12).

Implicit in this perspective is a strategic variant of ‘State capture’ by the ANC. Yet, does the vision of a modern developmental state—not antiquated traditional theoretical references-that frame the State and developmentalism in the post-1994 duality of a liberation movement in government? What simultaneously emerges from an analysis of the issue is a somewhat contradictory theorisation of the developmental State as “the necessary strategic organisational and technical framework to drive and lead development” (ANC, 2007b:12). In theory, according to Ray (2012:64-66), the ruling party has attempted to resolve the problem of the two extremes in an unhappy marriage of ‘continuity and change’ since 2007, and, more recently, the mooted policy departure to a “second transition”.

Lacking in both perspectives is an institutional frame that accounts for a liberation movement wrestling with its evolution into a modern State; and in the process of adapting to a new order, losing the homogenising influence of its old liberation identity as the collective ethos of liberation politics dissolves into a dissembling array of competing interests and non- progressive class identities. In the end, the theoretical relationship between

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the technocratic solution of the developmental State and the political and ideological thrust of State capture for social transformation remains complex and ambiguous: It neither supports an overly politicised State as a general approach to transformation nor strictly technocratic solutions to the problem of economic and institutional reform.

The missing dimension is apparently a challenge of a cohesive and contemporary theorisation of institutional economics for our understanding of the South African state as a development and transformation agent.

6.3.1 Institutional Theory

Over the past generation, and more acutely since the collapse of central planning models in

Eastern Europe, a vast field of institutional economics on the role of the state in economic development has dominated development discourse around the world. It is not the aim of this discussion to survey the breadth of scholarship; suffice it to say that there has been something of a revival and convergence of institutional economics and theory around the model of

‘strong’ states intervening in irrational and reckless markets since the onset of the global economic and financial crisis in late 2007.

Whether this ‘swing back’ to the state constitutes a challenge to the rules of neoclassical economics and its corollary, rational market human behaviour theory, and a new embrace of

Keynesianism, or social-democratic variants thereof, is not altogether clear at this stage. In any event, what matters for the purpose of this study is not whether the body of knowledge now emerging amongst the Left social and trade union movements answers the question: Are governments capable of guiding economic development better than markets? It is more appropriate, in the context of the South African state sector, to probe what type of institutional arrangement is best suited to the twin challenges of growth and development in a developing market context.

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Assuming for the moment that the theoretical challenges of the contemporary terrain are a battle over how to practically enhance the role of the state, the public sector cadre is an interventionist agent of growth and development and instrument for social transformation, around racial and contemporary South African class identities. As the debate and discussion within the ANC and government on a policy and strategy for change has proceeded, the strategic question in the contemporary context of the South African public sector is this: Can the state indeed be buttressed by a collective identity around economic development?

From an institutional and organisational perspective, the issue, following Evans (2007:3-4), is

‘relative emphasis’: “a collective spirit of national solidarity versus racial, ethnic, and class identities of labour and communities”; a professionalised public sector of capable individuals in a modern corporatised institution vis-a-vis a state buttressed by the transformative politics of liberation.

None of these competing emphases can be dismissed outright but, in the view that is being advanced here, the extent to which greater emphasis is placed on any one depends on how all are sequenced as institutional and strategic interventions towards the goal of transformation and increasing the well-being of the South African citizenry. The organising framework of a

“people’s accord” or social contract is thus both a precondition for, and outcome of this process of institutionalizing the developmental state.

But, how exactly can such an accord emerge? To start with the first binary, an important process that may provide a basis for solving social contradictions in the public sector is the extent to which sectional interest groups such as trade unions identify with the State and use this identification as a reference point for their policy decisions and bargaining postures. For if sectional interest groups which strongly identify with the State have been empirically shown to exercise greater restraint in public resource dilemmas such as service delivery and public sector wages, the legitimacy of the State is critical.

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How then does social identification influence actions in a social dilemma characterised by a national (developmental) agenda and sectional class interests? A first possible explanation may be that progressive social identification blurs the distinction between narrow sectional interests

(people's personal welfare) and the welfare of others or the nation as a whole. An increased national identification may reduce the psychological distance between sectional interests so that they perceive each other as a collective in terms of their goals and achievements (Putzel,

1997:939-949).

Consequently, people will become motivated to achieve positive outcomes in the national interest rather than their own, which would result in far greater contributions to the collective good. Following this process, national identification is believed to give rise to a

“transformation of motivation”, where narrow interests at sectional levels of society are redeemed at the collective level and the outcomes for competing social forces and the State become practically interchangeable (Putzel, 1997:939-949).

This transformational interpretation is consistent with the psychological theory of social identification: ‘The reduced differentiation between one's own and others’. An important rider here is that seemingly rival interests cohere, as a general rule, when outcomes associated with the nation provide one mechanism for increasing the weight given to collective outcomes within sectional interest groups. In the process, the beneficial effects of outcomes within interest groups enhance perceptions of trust in the state as an institution constitutionally charged with managing economic interactions in the national interest. According to this interpretation, a heightened social identification promotes contributions to a public good because it raises the expectation that a sufficient number of other group members will cooperate as well.

This brings us to the second binary: that of the state as a professional public service versus a politicised agenda of transformation. The developmental framework for organisational theory

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views modernising States mediating tensions in much the same way as the process of social identification works. In the process of evolving, compromises between social forces involve trade-offs between short-term sectional interests and the beneficial effects of collective outcomes for the national good. In turn, the basis for economic cooperation, on which a rich profusion of social partners can cohere, depends on the psychological distance between the short-term costs of sectoral compromises with the State and the long-term benefits of development, and trade-offs between efficiency and risk.

Institutional theorists such as Francis Fukuyama (2004:69-70) argue that a perfect alignment of efficiency and risk resolves institutional and organisational ambiguity, provided the goal is clear. Not everyone agrees. Evans (2007:60), for instance, insists on the “centrality of democratic deliberation to economic goal setting” but in the same breath goes on to concede to a “conundrum” on how best to implement this principle in South Africa. In fairness, enabling communities to engage the State in deliberative arenas is a well-taken point, but targets need to be set, decisions need to be made, and institutions marshaled towards larger national goals.

Yet, such engagements, or “deliberative arena”, presume that principals of the state in government, as national arbiters, are actors who understand the larger problem and goal completely.

On the other hand, there has long been a major branch of institutional theory that has emphasised the limited rationality of social participants. Fukuyama (2004:70) empirically observes that the behaviour of individuals or interest groups tends to deviate from the economic model of rational optimisation; instead, in modern economic organisations “goals never exist clearly at the level of union members (for example) who may not see the bigger picture in the same way as the government principals do, but rather emerge as the result of interactions among different organisational players”. For in so far as social forces have bounded rationality, their observation and interpretation of differences vents itself as a “social process” of

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interaction and engagement that tempers expectations.

There is, however, an important caveat to this line of argument. State institutions are generally tempted to base their strategic decisions on political-economy criteria (social transformation, redistribution, agency, constituency mobilization) rather than strictly economic criteria of development and growth. What distinguishes strong states from weak ones is the political will to benchmark social trade-offs against the goal of efficiency and growth. What matters, ultimately, is not whether the state should be professionalized or whether political influences and sectional interests will attempt to influence outcomes, or for that matter, whether the state will from time to time attempt to sublimate those influences in the national interest; it is a question of the process of mediating conflict through a sequence of trade-offs and incrementally building deliberative arena for cooperation and reciprocal trust in the outcome of an efficient state.

6.3.2 Problems of Institutional Coherence

State-building is essentially about the institutional architecture for public service management and oversight to deliver services. Together, these challenges have put enormous pressure on the South African service delivery system, despite the post-apartheid government having put in place Constitutional provisions for the separation of powers between the legislative, judicial and executive authorities, and established Chapter 9 oversight offices of the Public Protector, the South African Human Rights Commission (SAHRC) and the Auditor-General (AG)

(Manby and Tungwarara, 2007:37).

Since the logic of the expansion of service delivery and racial redress has been intimately related to the post-1994 transformation of the state, politically, organisationally and economically, across different spheres of government, it would be a mistake to dismiss institutional coherence as a minor matter. The challenge was reflected by Kahn, Madue and

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Kalema (2011:100), who asserted that “the central question to ask is whether the problems in the system should be attributed to either an imperfect design or the context-the newness of the system, the overwhelming imperative for social transformation and dominance of the ANC”.

The answer, Kahn, Madue and Kalema concluded, “must be that all these factors contribute to weaknesses we now see”. According to Kahn, Madue and Kalema, the effective coherence of the system is central in determining whether South Africa has the capacity to deliver services or not.

The problem is evidenced by the impact on service delivery which has resulted in increasing inter-departmental turf wars, contestations and a lack of shared power and responsibility (The

Presidency, 2009:1). In effect, institutions have either become powerless or have ended up been dismantled or unable to provide quality services in line with their mandate (The

Presidency, 2009:13).

The net effect in the case of state-driven structures that are supposed to provide services such as Eskom, the Land Bank and South African Airways (SAA), and health , education and water supply services, is a crisis of institutional coherence and coordination (Southall, 2005:xix-xx).

At the level of local government, examples of poor coordination of local government reporting abound. The sphere of local government is also burdened with institutional fragmentation in compliance regulations with multiple reporting lines: municipalities have to report to their provinces, sector departments, the Department of Cooperative Governance and Traditional

Affairs (COGTA) and the National Treasury. The result is either weak or inadequate reporting, which is non-aligned to actual implementation.

In other words, the capacity for a coordinated and strategic response to economic challenges of service delivery, from municipal to national level, depends not so much on the actual design of policy ‘instruments’ than on their coherence and structural linkages within an institutional

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arrangement which renders decision-making and implementation of delivery objectives in the economic bureaucracies across different levels and spheres of government autonomous from specific interests and turf wars and responsive to citizens’ needs.

6.3.3 Institutionalised Coordination as a Basis for Cooperation

Ultimately, according to Hemson, Carter and Karuri-Sebina, (2008:164), service delivery in

South Africa is affected by a lack of efficient and effective systems that include the correct identification, definition and delimitation of developmental objectives. The problem is exacerbated by poor, fragmented and uncoordinated planning practices and systems across spheres of government which make it difficult for different levels of the state and stakeholders to understand common problems and develop mechanisms for solving them (Hemson, Carter and Karuri-Sebina, 2008:164). At the level of local government, this divergence of interests is often an ideological contest fundamentally at odds with processes of adaption to an overriding national interest. Thus, for instance, municipal boundary disputes and strike action are widespread.

What this analysis suggests is that the mobilisation of specific interests within a national development framework is only possible in a strongly coordinated institutional system. If this reasoning is accurate, then we must enter a caveat to the notion of institutional coordination.

Domestically strong developmental states will more likely have integrated institutions and robust delivery capabilities, while weak states, especially highly unequal ones, will be stymied by policy implementation deadlock, divisions between stakeholders (Plaatjes, 2011:242). In such cases, rather than a concentration on cooperation we can expect to find oscillation, as weak states shift between different levels of government acting alone and nominal cooperation.

Thus in the South African context success depends on the state’s ability to augment conventional power resources with collaborative power: different levels of government acting

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in concert and engaging stakeholders, corporations, communities and business associations, to form cooperative agreements or coalitions. But by far the most important of these coalitions will be partnerships of government and business, for this goes to the very heart of state capacity.

In contrast to government’s conception of inter-governmental relations, levels of coordination and cooperation across tiers and spheres of government and between stakeholders imply that the state is not so much ‘devolving’ power, in a negative sum manner, to other actors from whom it then maintains a passive distance. Rather, the state is constantly seeking power- sharing agreements which gives it scope for remaining an active centre synthesising or integrating its priorities into a single and coherent socio-economic strategy.

Contrary to the expectations of critics of diminishing state capabilities, there have been several attempts over the years to improve coordination between the three spheres of government in order to maintain policy coherence and ensure programme alignment. More recently, former

Minister of Public Service and Administration Roy Padayachee attempted to align inter- governmental structures to qualitative impacts of policy decisions and interventions by measuring inputs and outputs (Fourie, 2011:20). This outcomes-based approach implemented by the Ministry of Performance Monitoring and Evaluation (MPM&E) is presently seen as a solution to the challenge of fragmentation and lack of coordination. The results, however, have been wanting: duplication and wastage of resources in a context of fragmented service delivery have not had a significant impact on the quality of life, which in turn created frustration, conflict and violence. With the focus of the outcomes-based approach on the qualitative impact of policy decisions and interventions its focuses on quantitative measurements i.e. the number of beneficiaries of a programme creates the wrong impression that government is meeting the basic needs of the citizenry whereas it is not making meaningful or major service delivery impact (Fourie, 2011:20).

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The solution, however, would appear to be misdiagnosis of the problem. At local government level, the majority of municipalities in South Africa simply do not have dedicated departments responsible for development planning and facilitation. The result is a fragmented planning process by sector departments in typical silos or pyramid-type organisational structures. These silo structures make it difficult not only to integrate planning across various planning sectors but also develop integrated strategies and harness different sectors to work towards common goals (Coetzee, 2010:22-23).

6.3.4 The Problem of Human Capabilities

The underlying enquiry is: Can the problem be institutionally and structurally excised? If there were a linear answer, institutions of the state would more than likely commonly move along, and be configured on a universal design continuum. We might even argue that the institutional conundrum in South Africa of state-building could be resolved without regard to the specific sectional interests of social forces. Yet, for effective public sector institutions across the board to have universal applicability would imply a near perfect economic (declassed) and political

(democratic) society in which the state, as an arbiter of sectional interests and manager of resource allocation, would “wither away”, as Karl Marx would have it. Despite commendable strides by the South African democratic state towards the delivery of inclusive services to excluded groups and poverty alleviation, the pattern of inequality is as old as the post-apartheid transition. Statistics SA quarterly surveys have consistently shown that poverty is counter- intuitively rising in proportion to wealth accumulation (Statistics SA, 2012:51-54). The real question, then, is what role should the democratic state as an agent for social cohesion and national solidarity play in an economic setting of social fragmentation and, potentially, disintegration?

Defining the combination of economically stabilising (growth) policy interventions and structures and developmental (redistributive) ones that best enable effective collective action

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across competing agendas remains an unsolved problem. This is, moreover, the prime strategic challenge of defining an interventionist, developmental State in present-day South Africa.

According to Evans (2007:59), a human capabilities [institutional] approach underlies the importance of this challenge:

Earlier versions of the developmental State emerged in small countries where levels of investment in human capital were already high and the immediate overall economic impact of increasing manufactured exports was likely to be large. The problem of informational inputs and goal-setting was correspondingly simpler, at least in the short run. Potential returns from investment in manufacturing could be projected by looking at earlier manufacturing successes (e.g. Japan) and engaging in intense dialogue.

An unequal “dual” economy such as South Africa, faces a 21st century context in which the state’s human capacity is a core problem requires a more complex framework of state institutions and reforms. To the extent that effective, independent institutions are not created by the state, competing and partially overlapping interests will shape large institutions primarily along sectional interests, but with serious implications for the state’s capacity to address the overarching national interest.

The danger of policy lapses in the alignment and sequencing of state interventions with a vague and confused policy admixture of “continuity and change” is that a vast field of ambiguity on the definition of the developmental state is opened up. Institutional coordination is part of the solution. Yet substituting institutional forms (coordination mechanisms and integration planning processes) for substance (size, efficiency), while understandable in a far from ideal transitional setup such as South Africa, prolonged the problem, as we shall see in the next chapter In turn, this plays the persistent negative economic impact of the delivery crisis on the state’s developmental objectives forward and lays the foundation for state and economic failure.

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If a large state sector such as the South African public service, presently employing about 1.3 million public servants, is not ultimately efficient, service delivery would be compromised.

Post 1994, government’s policy response has been driven by institutional design created out of the overhaul of the apartheid state during the 1990s. By the new millennium, there was a real question asked of whether the state was efficient to deal with numerous service delivery challenges in manner that strengthens legitimacy – from communities, to labour and to the market. Mounting community protests, as we have argued, over service delivery had created a legitimacy deficit that in many ways tainted subsequent efforts at far-reaching reforms.

By 2001, the necessary accommodation of the public service to the reality of a growing economy at the time had also in many ways forestalled any radical restructuring agenda. At the same time as the South African economy was poised to scale a maturity curve on the back of earlier stabilisation policies, from an industrial to post-industrial information society increasingly reliant on diversity in the industrial structure and higher levels of worker skill, the adaptation of the state meant not only that a professionalised and more complex public sector labour cohort was urgently needed. The degree of delegated discretion would also have to increase.

This was a radical departure from the old model of centralised authority towards a vertically integrated spherical state, in effect the outcome was a compromise between state capacity and size. Generally, organisations function effectively when delegated risk is optimal. This, in turn, depends on the level of skill and professionalism of human resources. In public institutional and organisational theory, the need for delegated authority increases when the work done by civil servants is complex or involves a high degree of discretion and judgment. This is the case for service sector outputs involving the integration of a high level of skill with large amounts of context-dependent information, such as medicine, accounting or law. These activities cannot be fully routinised or specified through formal rules and standard operating procedures. They

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depend for their efficacy on the professionalisation of organisations.

Yet, the problem of human capability in the public sector meant that the spherical model introduced by former Public Service and Administration Minister Geraldine Fraser-Moleketi skirted the problem of size and skills by creating a structure that enabled skills mobility across departments and tiers of government in the hope that technology would help circumvent distances and thereby supplement the deficit of skills in one area with skills from another.

In this fashion, a role was envisaged for central government in coordinating and managing the increased risk that goes with devolving responsibility; hence the emphasis on ‘vertical’ in the integration model. In Fraser-Moleketi’s view, this did not amount to centralisation; on the contrary, she likened devolution without a strong centre to a world without gravity (Ray,

2012:62).

In private and public sector organisations, as in nature, you need a gravitational centre. Many would argue that, that is centralist but I liken it to a spider’s web, where the web goes out in concentric circles. And that’s what you require. You cannot decentralise in other circumstances without having a strong centre that is able to give guidance.

The solution was no doubt realistic and politically pragmatic in the context of 1.6 million civil servants by that time, many of whom were, and remain, ill-adapted to the requirements of a modern state: Given that the government could not confront the issue in a context of disaffection and a political battle with organised labour, there was recognition that the state, to be both effective and legitimate, would have to create a new institutional arrangement not by overhauling the old one but by adapting a new spherical model to existing ones in new circumstances. But, for all its richness and complexity, a huge amount of organisational theory has revolved around a single, central problem: that of delegated discretion. The conundrum of organisational theory in the public and private sector is that while efficiency requires delegated

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decision-making and authority at lower levels, the very act of delegation creates problems of control and supervision. For instance, political federalism and decentralisation have been widely touted as ways of making government more responsive politically and more supportive of economic growth. But in Nigeria, for example, poor tax enforcement has led to destructive competition of federal states with the federal government for revenues from the state tax base.

That is a political matter, compounded by Nigeria’s diverse ethnic constituencies.

The challenge in South Africa is that structural economic constraints on efficiency and concomitant hassles of accountability between agents (civil servants) and their principals in the political administration (government) of the public sector have been left intact by a combination of apartheid’s legacy and the democratic state’s mandate to redress those legacy imbalances.

6.4 Conclusion

Against the hypotheses of declining service delivery outputs by the state, over-politicisation of the state, and declining institutional accountability, this chapter has advanced three propositions. Firstly, service delivery is in crisis. Yet it is not characterized by a reversal of apartheid era reforms in which territorial boundedness coincided with racial segregation and, in order of priority, service delivery. While service delivery expectations have risen in proportion to the rate of delivery since 1994, the crisis of delivery is in large measure a result of an expanding community of consumers in a growing economy.

Second, convergence towards a politicised state as opposed to an autonomous bureaucracy is a misplaced binary. This is not simply because progress towards economic development in a depoliticised state is subject to liberal counter-tendencies than many accounts would suggest.

It is also because developmental states are meant to exhibit adaptability to the peculiar challenges of their domestic environments, both in their strategic responses to change and in

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their capacity to mediate and manage contradictions and linkages thrown up by transitional periods. In South Africa, the developmental state is inextricably bound to the internal contradictions of the transition from apartheid to a deracialised political economy.

Finally, because institutional arrangements are meant to enhance integration across spheres and tiers of government and cooperation between stakeholders, the capacity of the state to implement policies – rather than simply succumb to the pressures of state building – will be much more marked in highly unequal societies such as South Africa where capacity is partly an inherited constraint. For while levels of institutional coherence are a large part of the solution across levels of government, the capacity deficit within the state is likely to solidify institutional weaknesses. For the South African state, building institutional and human capacity, rather than discarding it, would seem to be the lesson of dynamic integration.

This chapter has demonstrated that the notion of a developmental state is a dynamic state determined to advance economic growth and modernisation while addressing the issues of poverty and inequality. Such views rely on a competent, well-coordinated and somewhat insulated bureaucracy with a sense of mission to ensure the best use of resources available, placing the capacity for resolute implementation at the centre of an active and strong state

(Hemson and Osuwu-Ampomah, 2008:155). Change is occurring, without a doubt; but it is a slow adaptation rather than momentary convergence of a developmental construct. The outcome, though, is not a forgone conclusion.

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CHAPTER 7

THE MISSING LINK: STATE CAPACITYAS A CONDITION FOR A DEVELOPMENTAL STATE IN SOUTH AFRICA

7.1 Introduction

Liberal orthodoxy has over the past decade stridently posited the steady demise of the South

African state’s moral and political legitimacy and the disintegration of the state’s capability, as an instrument of economic growth and development, under the regressive influence of programmatic compulsions to racial redress as its defining characteristic. Up to this point this study has, instead, sought to show why the notion of a wholly dysfunctional state, with its accompanying repartee about the demise of national diversity and rise of neo-patrimonialism, is fundamentally misleading.

The argument advanced in this chapter squares the discourse on the developmental state not, as we have already argued in previous chapters, as a single, fixed ideal which nations at one time or another more or less attain. Rather, the South African developmental state is an evolutionary construct that seems to be adapting – sometimes fitfully, at other times haltingly

– to an ever-changing political and economic environment. If we enquire what kind of economic and institutional system has evolved and in whose interests, about the constraints on socio-economic transformation and development, then it may be possible to see what the developmental state really amounts to. What matters, for the purpose of this study, is that the attempt by the ANC and government to construct a developmental state is a process strewn with contradictory impulses that nonetheless appear to tend towards giving it a shape and form proportional to the peculiar historical and contemporaneous socio-economic challenges South

Africa faces.

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To come to terms with this process it is important, firstly, to identify capacity as the missing link in the evolution of the developmental state; secondly, to present data documenting the scale and impact of the problem; thirdly, to discuss the limits of policy, both in terms of its strategic and economic focus. Finally, strategic recommendations on how to move forward will be proposed, along with an exploration of prospects for a unifying framework towards an efficient state.

7.2 Defining State Capacity

The capacity to deliver services in a sustainable way was conceived by Grindle and Hildebrand in (Cloete, 2000:10) as “the ability to perform appropriate tasks effectively, efficiently and sustainably”. Similarly, the World Bank has defined the capability of the state as ‘the ability to undertake and promote collective actions efficiently’ (Cloete, 2000:10).

Beyond such theoretical abstractions, (Cloete, 2000:10) defines capacity less prosaically as

‘the capability of the state to identify and meet development challenges in a sustainable manner’. In this regard, Savitch (1998: 260) defines institutional capacity as “the increasing ability of organisations to absorb responsibilities, operate more efficiently, and enhance accountability”.

If the state’s delivery of services depends on the promotion of collective partnerships with all role-players (Cloete, 2000:10), then according to Edigheji (2007:1) state capacity comes down to the ability of the state to act authoritatively to foster inclusive development and enhance human capabilities (Mothae, 2008:245). The capacity of the public service can thus be conceptualised in more general terms as the structural, functional and cultural ability to implement the policy objectives of the government with a view to raising the quality of life of citizens effectively and sustainably (Cloete, 2000:10-11).

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The problem with service delivery is mainly a result of the agency of delivery: that is, either a lack of commitment which triggers bureaucratic delays in allocating funds or incapacity mixed with indifference in the bureaucracy (Hemson and Ampomah, 2004:514). The capacity of the bureaucracy, or public service, is typically viewed in terms of the structure of the public service and extent to which it is independent from the political interference. It is also viewed in terms of its ability to independently perform its task of policy formulation and implementation.

Taken together, all this determines the extent to which the public service is capable of delivering services to the citizenry.

7.3 Capacity as a Condition for a ‘Capable State’ in South Africa

If the real content of the developmental state idea is capacity, what undoubtedly seemed like a foregone conclusion when the African National Congress (ANC) officially adopted the concept in 2004 remains unfinished business today. Although policy has provided a framework for a developmental state, the service delivery record to date brings out even more forcefully the challenge of streamlined institutional structures with oversight capacities over financial matters and intervention capacities to enable spheres and tiers of government with clear deficiencies to exercise their functions more effectively.

More serious though is the fact that the enormity of the task placed upon the shoulders of local government is beyond the current capacity of local government officials and institutions, at least in poorer municipalities. What has exacerbated the problem is that state institutions are staffed by administrators not trained for the tasks before them; they are very often staffed by inexperienced and badly trained appointees. In many cases, municipalities simply lack the technical expertise to perform the functions for which they are responsible (Koelble and

LiPuma, 2010:578). At the most basic level, the political and administrative leadership of municipalities seems to lack knowledge with regard to the role and functions of local government. Those are serious and important questions, but in raising them national

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government seems be paying scant attention to failures of local government, particularly in addressing capacity and oversight issues such as administrative incompetence, corruption, non- communication and a lack of accountability.

The net effect is considerable under-spending on services as a result of human resource constraints mixed with indifference in the process of allocating funds across all levels of the state (Hemson and Ampomah, 2004:529).

Three broad categories are consistent with a general description of state capacity.

1. Political Capacity

According to Edigheji (2010a:8), political capacity enables the state to act legitimately and

in a transparent and accountable manner. Political capacity determines the ability of a

developmental state to mobilise society and build consensus around its developmental

projects (Edigheji, 2010a:8). It is defined by the strength of institutions (such as a free press

and a set of commonly accepted political values) that encapsulate the people’s will to govern

themselves democratically, and by those institutions (including law and the constitution, as

well as political parties) which provide channels through which this will may be expressed

(Cook, 1995:281).

Political will and accountability matter most in ensuring that national developmental goals

are pursued, along with the effective allocation of resources as well as the drive to ensure

that service delivery takes place and the state is able to account to its citizens. The exodus

of Ministers with the recall of former President Thabo Mbeki in 2008 is an example of a lack

of political will and accountability (Hemson, Carter and Karuri-Sebina, 2008:159).

Political will, moreover, determines the capacity of political leaders to set the agenda of the

state against personal interests and towards the attainment of a national strategic goal and

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the equitable and fair distribution of resources including the state’s delivery of services

(Hemson, Carter and Karuri-Sebina, 2008:159).

2. Organisational or Administrative/Institutional Capacity

According to (Levin, 2008), organisational capacity focuses on building state structures and

systems that facilitate the realisation of a set of political, policy and economic agenda items,

whereas technical or administrative capacity is the state’s ability to translate broad objectives

into tangible ground-level projects and outputs and thus ensure their implementation.

Technical capacity is skills-intensive and relies on skilled personnel.

Organisational and institutional capacity constraints remain an enormous challenge in the

South African state’s pursuit of developmental goals. These challenges include system-wide

misalignments of structures and contradictory policy formulation processes in a whole range

of governmental functions, thus weakening the state’s capacity to provide adequate human

and physical infrastructure (Pottinger, 2009:72). In brief, a competent bureaucracy is a

necessary condition for the developmental state.

3. Human Capacity

According to Hemson, Carter and Karuri-Sebina (2008:160), successful developmental

states are able to build and maintain a cadre of professional, capable and motivated civil

servants. The South African public service has widespread skills shortages which are

manifest in a general lack of necessary and reliable systems and information. The Public

Service Commission (PSC) Review Report of 2006 emphasised the importance of human

resource capabilities in the public sector as “key among the capacity challenges that require

dedicated leadership from the executive and senior management level” (PSC: 2006:10)

7.4 The Nature and Impact of the Problem

According to (Evans, 2010:13-14), the main developmental challenge facing South Africa is

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the legacy of apartheid: a system marred by a cumulative backlog of capacity constraints on the provision of public goods and services such as health, education, and social welfare. The specific problem, Evans broadly acknowledges, comes down to the cumulative economic impact of skills shortages and institutional capacity constraints on service delivery.

7.4.1 The Skills Shortage

On virtually all important capacity criteria – institutional, political, human resources – the importance of skills remains the rule, not the exception. According to the ASGI-SA document

(PSC, 2006:1-2):

For both public infrastructure and private investment programmes, the single greatest impediment is a shortage of skills – including professional skills such as engineers and scientists; managers such as financial, personnel and project managers; and skilled technical employees such as artisans and IT technicians.

The scale of vacancies at the level of senior officials in the department of transport, and trade and industry is, by one estimate, as high as 33 percent. The report cited a lack of appropriate skills as one factor leading to ineffective and wasteful expenditure (PSC, 2006:1-2).

Official data from the DPSA suggests that the country needs 42 300 skilled and highly skilled state employees. The challenge is more acute in professional and managerial positions. A study by the Institute of Justice and Reconciliation (IJR) puts the shortfall of skilled manpower in provincial administrations at 30 percent (Kondlo, 2010: 29). Although McCord and Meth

(2007:8) have estimated a total vacancy rate of 100 000 across all state departments, Ray and

Lund, indicate that the vacancy rate at the professional and managerial level is in the region of

40 000 vacancies for all government departments (Ray, 2012:72). Ray and Lund, citing statistics calculated by renowned economist Iraj Abedian, observed that ‘the total vacancy rate across all departments and levels of government could be perilously close to 300 000’ (Ray,

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2012:72; www.parliament .gov.za.../14597_1.doc). At municipal level, the South African

Institution of Civil Engineers (SAICE) warned that engineering skills necessary to provide water services, sanitation, waste disposal and household electricity are in sharp decline (Ray,

2012:72).

For its part, government has recognised the problem as a burgeoning crisis. According to former Minister of Public Service and Administration, Roy Padayachee, “South Africa is pursuing a developmental state, which is intended to simultaneously promote economic growth and social objectives, such as poverty alleviation, that facilitate state intervention in the market, but the lack of skills makes the achievement of developmental state goals unrealistic”

(Cameron, 2010:30). The point was noted by Butler (2008:2-3), when he cautioned that South

Africa does not have the skills base that the East Asian developmental states enjoyed. The NDP observed that South Africa’s intention and ambitions to become a developmental state could be greatly affected by the lack of skills. Indeed, according to Levin, the evolution of the developmental state is ‘invariably dependent upon the strength, competency and coherence of those public servants who must convert stated developmental goals into reality’ (Butler,

2010:191).

Such statistics and statements underline a deeper structural mismatch between the supply of and increasing demands for municipal services. This point was acknowledged by former

President Thabo Mbeki in the 2007 State of the Nation address: “Many of the weaknesses in improving services to the population derive in part from inadequate capacity and systems to monitor implementation” (Mbeki, 2007:7). At issue is a severely bloated public sector lacking the capacity to translate plans into manageable projects and deliver tangible outputs.

7.4.2 The Supply-Demand Mismatch

The scale and depth of the policy and institutional overhaul of the South African public sector

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has been profound, both demographically and politically, since the dismantling of the legal pillars of apartheid in the 1990s. So much so that, there is by now substantial evidence of, and a long literature on the achievements of the democratic State: principally, a radically altered institutional landscape and the steady erosion of the racial fault-line between high- and low- end jobs in the public service occupational structure (PSC, 2010:23-24).

However, here the optimism dissolves in an institutional and economic conundrum for leadership in government. With a renewed emphasis, lately, on institutional quality and measurable delivery outcomes, towards the ‘professionalisation’ of the public sector, the state’s achievements are a progressive pattern of development if the measures of success are a rising aggregate wage bill; racially transformed public sector labour force. Despite moderate gains towards the state’s Constitutional mandate of equalising access to, and scaling up the delivery of, service delivery outputs, demand for public services has slowed on the back of interest rate hikes. State capacity has lagged a cumulative backlog of social and capital expenditure that is negatively impacting on the government’s growth and development prospects (DPSA, 2012:6-8).

Former Minister Roy Padayachee painted a gloomy picture of the state of affairs in his foreword to the DPSA 2012/15 Strategic Plan (DPSA 2012:1):

The current perception of the public service is that it is not as skilled as we need it to be; we do not have the level of management capacity we require on our mandate; we have an absence of a performance culture as there is no or little reward or sanction for good or bad performance; we have a severe problem of corruption; low levels of efficiency; and we simply do not get value for the money we pay in salaries.

To put this in historical perspective, Ray (2012:64) found that a very low budget deficit after five years of fiscal prudence since 1996, declining public debt, and a lower cost of borrowing

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enabled a decisive shift in the government’s fiscal policy stance in budget year 2001/02: a significant tax cut, especially for the lower middle and working classes, a commitment to speed up public infrastructure spending and accelerate and broaden the disbursement of social security transfers were characteristic of an expansionary budget. But the fiscal expansionary phase coincided with a period of a rapid and far-reaching strengthening of the rand, partly as a result of tight monetary policy since the 2001 shock, partly from a weakening US dollar, and partly from a buoyant global commodity market.

Thus South Africa experienced its first ever boom since 1994, driven by a broad-based expansion of domestic consumption alongside a robust minerals export sector. With the strategy as yet not strong enough to roll out investment as readily as expected, the strengthening of redistribution was meant to complement a push for global competiveness.

However, capacity was an intractable obstacle, symptomatic, in no small measure, of a malfunctioning State (Ray, 2012:15).

Oddly, the results seem to have been reinforced by a combination of the state’s own successes

– the transformation of the public service and withering away of racial inequality in the public sector occupational structure–and its corollary, a dangerously expensive wage bill. In economic terms “a wage-productivity mismatch as the state has attempted to adjust to the rhythms of economic growth” (Ray, 2012:16).

Padayachee implicitly conceded as much when he in early 2012 observed that, “If we consider that the single biggest expenditure we have is salaries, then a significant improvement in productivity will surely be needed to increase the overall return on our investment” (DPSA

2012:1).

Manifestly, the pattern now emerging is a system torn between the unintended consequences of historical redress (mainly pressures from union wage demands) and the state’s broader

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developmental and growth agenda pulling in the opposite direction. According to the Allied

Workers Union of South Africa (AWUSA) (2012:1), as current statistics on the public sector wage bill demonstrate, wages as a percentage of GDP have risen from 9.4 percent in 2007 to

10.5 percent in 2011/12, or R314.9 billion in monetary terms, in marked contrast to a real decline in GDP from 6 percent at its peak in 2007/8 to 2.8 percent in 2011/12.

In strictly economic terms, a structural mismatch between supply and demand in the government’s drive to marshal institutions and organisational instruments of the state towards social transformation has meant that the public sector has consequently had to live with inefficiency as an unfortunate by-product. This cannot be more apparent than in employment levels. Despite a sustained global downturn since 2007, and a decline in private sector employment for the last three quarters of 2009 to the first quarter of 2010, state employment had remained fairly constant. Around the time the realignment exercise was well under way, in 2006/07, a Quartely Economic Survey (QES) Business survey showed that the size of the public sector workforce actually expanded by 4 percent to 1.6 million (or 21.5 percent of the total 8.6 million formal non-agricultural workforce) over the five-year period February

2001/02 to 2006/07 (Ray and Lund, 2008:14).

According to the Department of Public Works (DPW) (2010:12), as a matter of fact the EPWP created an additional 613 498 work opportunities in the 2009/10 financial year in concert with the state’s role as a shock absorber of a legacy of apartheid labour market distortions and economic imbalances and their contemporary neo-liberal manifestation: the failure of the market to morally and objectively arbitrate the tension between growth and the social allocation of resources towards poverty alleviation. Equally, due to a perverse combination of diminishing demand in the South African economy on the back of investor fears of a global financial meltdown in the banking sector and a largely inefficient State sector, the private sector had shed 833 000 jobs during this period.

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7.4.3 The Economic Impact

The picture now emerging from well over a decade of economic and institutional reform in the public sector is a distressing one. It is of a democratic state whose human capacity, operational and unit labour costs are perilously out of sync with service delivery outputs and infrastructure backlogs. It is estimated, for example, that the magnitude of the public infrastructure backlog alone, calculated over a long time horizon from the late 1970s to date, using optimal growth targets by National Treasury of between 6 and 7 percent as a proxy, is in the region of R1 trillion (Abedian, 2012:1). Although this finding is uncorroborated, and may even be dismissed

(from a post-apartheid economic stand) as a statistical illusion because of the calculated period of time, it is nevertheless a useful baseline for the deduction of the NPC Diagnostic Overview report that, “South Africa has effectively missed a generation (30 to 40 years) of infrastructure modernisation.” As things stand, public investments in both new and existing infrastructure, the report’s findings have confirmed, fall far short of what is needed to meet the country’s economic and social needs. Net capital formation (gross investment less consumption of fixed capital) fell sharply after the boom of the early 1980s, only to recover marginally after 2003.

In other words, public sector capital formation (as a proportion of GDP) had consistently fallen year-on-year (in real terms) until 2003.

By any statistical measure, this is a slippery slope in the employment-growth-development nexus. South Africa has to significantly expand physical infrastructure to suit mining and other traditional industrial activities while at the same time ramping up technological infrastructure roll-outs demanded by an emerging knowledge-intensive economy. In terms of trade, the enormous distances between South Africa and its major partners in Asia, Europe and the

Americas contributes to high costs, and African infrastructure is inadequate and poorly maintained, raising costs and hindering the exploitation of potential comparative advantages.

What these deficiencies and challenges reveal is not only a direct impact on economic growth:

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declining infrastructure investments will also exponentially raise the cost burden on the state of repairing ailing facilities and building new projects down the line. At base, this is probably the most tangible manifestation, since 1994, of a cascading crisis of both the apartheid legacy and the (unintended) consequences of a complex, and often contradictory, post-apartheid transformation agenda. In the latter case, a process of organisational and institutional reconfiguration, under way since the late 1990s, has been steadily and progressively equalising employment opportunities in the state sector but now looks as though it is a structural barrier to the capacity of an efficient state.

Therein lies the problem. Although comprehensive data are not readily available, the overall results exhibit a lacerating trend: the propensity seems to be towards a system in which a qualitatively deficient labour cohort in the state sector is permitted to reproduce sub-par outputs for an economy ever discerning in its demand for efficiency and global competitiveness.

The NPC Diagnostic Overview, tasked with taking a broad, independent and critical view of the challenges and opportunities facing South Africa, observes that in some areas, constitutional and legal provisions have not been fully implemented; in others, there has been a lack of sustained and effective focus.

To ground its enquiry in practical challenges, the NPC has ring-fenced infrastructure and education, both strategic state competencies, as immediate problems and critical long-term stability drivers of the government’s poverty reduction programmes and necessary foundational enablers of a sustainable development trajectory over the next 20 years.

The stakes and risks are high. In an economy desperate for skills, the capacity crisis is nothing less than a failure to meet the economic challenges of an efficient state in the 21st century. By at least one estimate, it will take an entire generation (30 to 40 years) assuming a radical turnaround in the schooling system now to optimal levels of efficiency before we see the results

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of a well-educated society working its way through the labour market and economy (Ray,

2008:12).

To lend credence to this corrosive prognosis, the March 2012 report of Ministry of

Performance, Monitoring and Evaluation (MPME) Ministry in the Presidency, headed by the late Minister Collins Chabane, has found limited protected space for an efficient state across government and departments. Among other conclusions, the report observes scant evidence of a turnaround in the overall efficiency of the state as well as a lack of coordinated access to government services; and a general lack of capacity across all spheres of the public service.

In budgetary terms, current National Treasury data shows that the state spends about 13.3 % on goods and services, about 15.7 % on transfers to households (social grants), about 4 percent on capital expenditure and about 33.5 %, or one-third of the national budget, on compensation of public servants. In other words, public servants, who constitute 2.6 % of the total population of the country, consume the largest share of the national budget through salaries and benefits.

Assuming that data cited in this thesis on the state’s infrastructure backlog is fairly accurate, give or take a margin of error, and factoring in economic and public infrastructure as progressively ailing state, overall assets require constant public investment in the maintenance and refurbishment, concomitant with innovation and modernisation of logistics systems. This includes rail, roads and ports to crowd in and sustain private investment, we can logically conclude that the negative net effect on growth (after recurrent expenditure, tax, and amortization) will rise in order of magnitude as the State buckles under its capacity and delivery logjam.

Even as expenditure has steadily risen since 2004, Treasury has been extremely cautious not to allow a runaway deficit on the back of excessive borrowing from financial markets abroad, which could force a sharp and punitive adjustment in fiscal (and monetary) policy. However,

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the cumulative economic costs of net debt rollovers now means that Treasury’s risk management paradigm may be faltering on a dangerously bloated public sector wage bill 38.5 percent of the total budget at present, that is close to, if not already breaching South Africa’s debt ceiling. If a pattern of overreaching the national budget persists, it is only a matter of time before the government violates borrowing agreements with international creditors and defaults on foreign debt repayments.

The overall prognosis, if public sector wage rates continue on an upward trend, is grim news for everyone from the unemployed and export-dependent small enterprises to medium and large manufacturers. One reason is a higher and higher ratio of unaccounted expenditure off ledger to budgeted expenditure on ledger in the state sector would be diverted to government debt and away from productive investments such as public infrastructure and education. A most deletrious effect would be the shrinking of the base of productive capital and demand for imported capital products, with a compound negative effect on growth since South Africa is a net importer of capital equipment. If imports and exports falter, the resulting pain will move along supply chains and manufacturing networks to the real economy.

In order of magnitude, uncompetitive exports and costly imports due to a rising cost of capital will add to the balance of trade deficit and debt burden that could be felt from the fiscus to the real economy. Interest on debt will sooner than later have to be redeemed from tax revenue. In turn, taxation on corporate and individual citizens will have to be raised. Likewise operating costs of businesses will rise exponentially; productivity as a ratio of unit labour costs to output will become an increasingly systemic problem and difficult to turn around, eventually betraying a precipitous decline in GDP and the state’s poverty alleviation mandate. In the end, the inflationary effects of rising expenditure on the wage bill, and resultant pressure on the

Reserve Bank to raise interest rates and, therefore, the cost of capital would combine to assure a period of growing imbalances in the real economy.

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7.4.4 The Institutional and Organisational Impact

Since the advent of democracy in South Africa in 1994, an alarming number of local governments and municipalities, especially in smaller towns, have fallen into crisis, unable to deliver services because of the dearth of skills, lack of expertise and institutional memory, vacancies in senior positions, and endemic corruption. Examples abound: the Department of

Correctional Services (DCS) at local level is plagued by mismanagement, corruption and failure of financial systems. Disturbingly, public hospitals are also afflicted by dysfunctional management in a health system more generally characterised by ‘the loss of an institutional and organisational focus’ leading to demoralised and demotivated staff and ‘disappointing’ performance.

The impact on organisational structures, according to Evans, is fragmentation: parallel and separate silos of managerial authority. In the healthcare sector, for example, nurses are managed within nursing silos, doctors within silos of clinicians, and support workers by a web of separate silos for cleaners, clerks and porters. What should be managed as an integrated operational unit is instead managed in a fragmented fashion with no clear lines of accountability. Disempowered and unaccountable management structures in turn give rise to a specific management culture in public hospitals. The administration and rules, to extend the example of public healthcare, become more important than managing people and operations or solving problems and ensuring effective service delivery.

In fact, the health care problem is symptomatic of institutional fragmentation, poor performance and deteriorating services in all government institutions, from clinics, hospitals and schools, to government administration offices. There is more generally a serious problem of institutional disintegration within various managerial authorities, which creates gaps, and narrow-minded approaches to service delivery.

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The other manifestation of state incapacity is the failure to coordinate delivery of household infrastructure as part of a broader process of building vibrant and viable human settlements.

Currently, provinces deliver housing, schools and clinics. Municipalities are responsible for planning and delivering water, electricity, sanitation and refuse removal, while national government delivers protection services, bulk services and part of the transport network.

Fragmentation results in coordination failures, inefficiencies and slow delivery. The lack of a clear definition of responsibilities between state institutions is also visible in the uncoordinated delivery of household infrastructure such as water, electricity, health care facilities and education and at the level of parastatals such as the Industrial Development Corporation (IDC), the Development Bank of Southern Africa (DBSA), Transnet, South African Broadcasting

Corporation (SABC), and Electricity Supply Commission (ESKOM). There is a failure to exercise control effectively and efficiently. Thus, for example, the state’s inability to address the black-outs of early 2008, when strategic miscalculations caused weeks of electricity cuts that shut down large parts of the mining and manufacturing industries resulted in the closure of the commercial activities in the urban areas. Electricity demand had outstripped even reserve generating capacity, bringing the system to a standstill (Marais, 2011:348).

It was a matter of an extraordinary error of judgement or a basic failure to coordinate institutions and organisations of the state. But as indicated by Marais (2011:349), “a lack of capacity is a poor explanation for why certain fundamental steps such as financing the upgrade and expansion of generating capacity – were not taken at all”. At the root of the crisis lay a very basic failure of policy and stewardship on the part of the state, reflected in a lack of policy forecasting and coordination between key players.

That the public sector faces a shortage of skills in particular areas such as skilled technicians, which affects the maintenance of the power stations is a symptom of government’s policy response. There is failure of the state to come to terms with an institutional design

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commensurate with the task of implementing government’s socio-economic objectives (Levin,

2011:263).

7.5 Strategic Challenges: State Capacity and Service Delivery

If the level of state capacity is proportional to the level and quality of service delivery, then a partial solution to the problem of the size and structural composition of the public sector lies in a restructuring exercise that enhances the institutional, political and human capacity of the state to provide services (Hanson, 2015:9).

The roots of the problem, as the study has shown in previous chapters, lie far deeper and more tangled. At the core is a growing contradiction between the transformatory and modernising thrusts of a development-oriented and efficient state and fears that, left unresolved, ongoing concessions by the government to labour, and the corresponding impact of inherited capacity constraints on the state’s developmental agenda. The continuing failure of the government to take unambiguous action to restructure the institutional capacity of the public sector in the very near future and begin engagements with stakeholders to create an institutional framework and system in which all South Africans have a meaningful stake places the government in an increasingly difficult position. In the absence of clear evidence that public servants are prepared to accept fundamental changes far beyond the government’s current limited programme of reform, instability will escalate, and pressure, both domestic and international, for tighter controls of the budget is likely to grow.

As an institution that is central to any fundamental commitment to the promotion of social and economic development, the state cannot continue its business as usual whilst a crisis of potentially immense proportions threatens. At risk is not only the future economic viability of the government’s policy frameworks and instruments but the very legitimacy of the South

African developmental state.

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As one reflects on the mixture of success and failure in the public sector that has evolved out of post-1994 policy choices, one is impelled to look for explanations at different levels. How far have our policy and strategic choices, or non-choices, been conditioned by the state’s inability to reconcile conflicting sectional and national interests? How far should they be attributed to the ambiguity in the distinction between phases and stages in the evolution toward the strategic vision of a developmental state? Or does the root of the problem lie in a sound policy framework that is driven by bad implementation?

This is not the place to evaluate the full scope of this burgeoning area of discussion. The important point to note is that the choice of policies and models has largely shaped the broad contours of the capacity challenge.

7.5.1 The Limits of Government’s Policy Response

The apparent paradox between the role of the developmental state, where it is acknowledged that after a period of minimalist ‘state madness’ which led to a decline in the administrative capacity of the public sector during the late apartheid decade leading to 1994, and the need for interventions towards efficient public administrative foundations for the market and economy to flourish is what has guided the drive for an integrated model of the state. In theory, this should have meant rationalising the state as former Minister of Public Service and

Administration Geraldine Fraser-Moleketi has argued, “shedding redundant workers here, recruiting highly skilled professionals here, and mobilising the skills pool across the board to meet the government’s delivery agenda” (Ray, 2012:58).

Here, the crux of the matter is the side-effect of the state’s competing priorities as it grapples with rebalancing its dual mandate, of sectional and national interests, resulting in the institutional ambiguities of social transformation and a development-oriented economic growth trajectory. Of course, none of the emerging contradictory themes of an ideal rationality,

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on the one side, and the reality of the normative structure of the state on the other are unique to any one transitional society. After all, there is enough empirical evidence to conclude that sound economics and markets seldom shape individual states’ sense of the bigger reality; the sectional interests of organisations do. Having clearly recognised this, the DPSA, during

Minister Roy Padayachee’s tenure, had opted to work within the problem by, among other interventions, mechanistically placing normative behavioural and moral incentives at the forefront of the alignment of public sector activities with productivity targets and outputs outlined in a Productivity Agreement (PA) with labour.

In his foreword to the Department’s 2012-2015 Strategic Plan, Padayachee explained the thinking behind the policy thus: “All the work we do as government now relies on having a cadre of dedicated, skilled and hardworking public servants who are responsive and willing to go beyond the call of duty to realise the government’s objectives”.

At the core of this appeal to patriotic sentiment lay the following modus operandi, articulated by the Public Service Commission: “South Africa now has embarked on a path to promote outcomes-driven public administration and this approach inherently requires more coordination and collaboration around the achievement of defined outcomes” (PSC, 2010:3).

The PSC went on to assume “systemic problems as more actors become involved in the achievement of the outcome…[It] can be expected that the challenges associated with ‘joined- up’ government will rear their head. This should, however, not discourage government from continuing with what is otherwise a bold initiative. Rather, of importance is to appreciate that this process may not be perfect the first time around (as the experiences from other countries have shown), and that government has to build on the capacity of the public service inorder to adopt this new approach” (PSC, 2010:3).

In this combination of a shift towards measurable goals and the institutional model of integration (that is, vertical ‘inter-sphere’ and horizontal ‘within-sphere’ coordination), two

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shortcomings have emerged. First, anticipated failure is understood and accepted as an

“imperfect process” that may result in “different spheres of government acting in a manner that is contradictory” (PSC, 2010:3). Thus, “is [un]integrated planning and uncoordinated” execution, a product of transitional teething problems, weak organisational coordination, restricted and competing mandates of departments as the system evolves to maturity, and near perfection. Second, fundamental and enduring institutional problems are synonymous with the unintended side-effects of a transitional process: “The manner in which plans are currently constructed makes them weak coordination mechanisms. This is because planning is still largely restricted to the mandates of functionally organised departments and is not yet done holistically around outcomes” (PSC, 2010:3).

However, there have been barriers to the successful implementation of the integration model.

The mere pronouncement of tampering with labour conditions and wages in the state sector, a fundamental precondition for an effective and sweeping realignment exercise, is what is behind tensions between union perceptions of the state, and what has resulted in a strategic retreat by the government from a thorough-going restructuring initiative.

Thus, although the integration structure has advocated a stronger nexus between the state, private sector and society through a spherical alignment of accountability structures and mechanisms (i.e. codes of conduct, rules, performance measures, etc.) within the public sector, from top to bottom and across departments and tiers of government, this has proceeded without a corresponding reprioritisation of the strength and capacity of the state over its size. It has, in other words, counter-intuitively been at the expense of building a developmental state.

7.5.2 The Missing Link: State Capacity

The whole issue of state capacity has been misleadingly cast as a choice between two sets of macro-economic policies: Keynesian and neo-liberal. Since they are both macro-economic in

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focus, they essentially constitute a choice between two non-developmental alternatives.

There have lately been significant shifts which augur well for a strategic response to the capacity challenge; from an obsession with macro-economic strategy to the key elements of a developmental state as originally articulated by scholars such as Chalmers Johnson (Southall,

2007: xxxix). This includes a reorientation to selective interventions guided by an industrial policy framework, skills development, greater coordination across spheres and tiers of government and more a determined political leadership and meritocratic bureaucracy.

As the state advances, somewhat haltingly, towards social transformation and economic development, relations should theoretically be characterised by developmental sets of performance indicators, performance outputs and targetted interventions. In the process, the closer the state advances to the goals and vision of the government, the more likely are internal institutional and social contradictions and difficulties within the state. This can be seen in the ongoing debate around union wage demands and concern over the government’s position on the deficit and delivery outputs.

According to Ray (2012), the state may offer a useful framework to find a solution to these problems. Although solutions must be bold, those who are fearful of rankling nerves among civil servants have preferred to manage the crisis in what is amounting to an ever expanding financial and capacity conundrum.

The state thus has four immediate challenges in its relations with labour, communities and the private sector: first, to deal with the budget and delivery crisis, particularly around productivity matters, through formal and informal accommodations which will increasingly dominate a normalising matrix of relationships. Second, to professionalise the public service, not as a procedural set of interventions but by realigning its internal capacity to the budget and economic demands by undertaking a third restructuring phase. Third, to identify and sequence

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priority economic interventions in strategically important sectors of the economy that promise compound effects. Finally, and related to the last point, to try and develop in partnership with stakeholders the means to balance the state’s growth and redistribution agenda. This effectively means accommodating expectations to reality, labour to communities, and the state to the national good. This study proceeds to examine these challenges with respect to capacity hereunder.

7.5.2.1 Restructuring the Public Service

Firstly, a reorientation of the state based on a restructuring exercise is needed. According to

(Southall, 2005:xxxvii-xxxvii) the government recognised the limits of macro-economic policy when it proposed the restructuring of the public service to give greater powers of control to the centre, whilst also using its financial muscles to reward efficiency and punish laxity. A major part of the problem has been the lack of strategic interventions based on a coherent industrial policy. With the emphasis lately on restructuring State-Owned Enterprises (SOE) and making them drivers of growth, there may well be a fresh impetus towards the development of technical state capacity and hopefully a shift from a capital-intensive growth pattern to a more integrated policy that increases the economy’s international competitiveness.

This is achieved through, inter alia, increasing local demand, curbing exchange rate volatility, and developing a national public transport policy diversifies the economy so that it increases opportunities for South African companies to compete at an international level.

Such diversification could be undertaken through the application of various strategies such as increasing local demand and developing a national public transport policy. In essence, there has to be inter-linkages across all sectors of the economy so as to address the challenges in a coordinated and integrated manner (Southall, 2005: xxxvii-xxxvii).

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7.5.2.2 Skills Development

For the above to take place, there is a need, in the second instance, to build the necessary human capacity in the public service. In its endeavour to meet the skills shortage, the South African state established the Public Administration Leadership and Management Academy

(PALAMA). Its launch was viewed as the beginning of a new era of training and development of the public service that has the capacity to support a developmental state agenda. PALAMA’s main strategic deliverables are to heighten and improve the quality of management development for senior executives in the public service and extend this to junior and middle managers towards meeting the service delivery challenges of the developmental state (Kondlo,

2010:28-29).

As a developmental state, South Africa needs a public service that is professional, accountable, efficient, effective and responsive to citizens. Government recognises that transforming this sector requires appropriate capacity building and on-going support. PALAMA, as government’s training department, is thus mandated to lead and drive appropriate capacity building towards service delivery improvement (PALAMA, 2012:9). PALAMA has the responsibility to respond to training and development requirements by capacitating public servants in the following key competency areas: leadership (including mentorship and coaching), management development (with emphasis on financial and supply chain management; performance monitoring and evaluation; innovation and knowledge management; programme and project management; organisation design; development planning capacity; anti-corruption and ethics management), and administration—with emphasis on customer service, communications, writing skills, etiquette, protocol and diplomacy, and office administration (PALAMA, 2012:19).

However, the problem of vacancy rates at the level of senior management at local, provincial and national government levels is compounded by PALAMA’s inability to produce well-

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trained public servants due to its own incapacity. Instead, PALAMA has played the role of a broker or intermediary between training providers and government. There is massive reliance on consultants and external service providers.

Because skills development is an issue that has been at the centre stage in the drive for capability enhancements and industrialisation, and ultimately national prosperity, the necessary capacity within PALAMA to meet its mandate here should be given priority.

7.5.2.3 Ideological Reach

For a state to become a developmental state, it needs to have a developmental ideology and established institutions that will enable it to formulate and implement policies to achieve its developmental objectives. According to Akoojee’s and Von Holdt’s analysis of the education and health sectors, South Africa does not meet this standard as yet. It has to establish and deploy its administrative and political apparatus to ensure effective provision of education, training and health care along developmental lines (Edigheji, 2010b:26).

Ideological reach as a condition for state institutions to support critical development and transformation is here crucial. Of course, the state’s inability to reach out to its citizens could be a result of a lack of skills and competencies among officials, and thus the formulation of policies that are hodgepodge of inconsistency and contradiction. We may very well, in this instance, be tending towards a social contract that institutionalises cooperation.

7.5.2.4 Coordination

Related to the above is the strategically important issue of the state’s coordinating capacity.

There is a lack of a coordinated and integrated arrangement of state institutions which often results in turf wars, duplication of resources and minimal impact of service delivery interventions. The nature of partnerships between the private and public sector, including

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labour and communities, is not well defined as a national interest based on common national goals. As yet another factor of participation, the manner and extent of citizen participation on matters of government needs clarification.

Former President Thabo Mbeki did acknowledge the problem when he proposed the

Presidency as a centralised unit to coordinate South Africa’s efforts to create a developmental state. Mbeki and like-minded reformers in government and the ANC attempted to create something akin to a central coordinating centre, along the lines of Japan’s famous MITI

(Cameron:2010:30). The result was the PCAS body which was tasked with playing a central role in streamlining development interventions through policy formulation and implementation. It was believed that the unit would guide, direct and monitor development interventions in government which would reduce some of the bureaucratic weaknesses and poor service delivery performance (Cameron: 2010:30). Lending this unit political and legal weight remained a challenge and opportunity, as we shall see later in this chapter.

7.5.2.5 Meritocratic Recruitment

For South Africa to come of age as a developmental state, it would have to deal with the absence of “Weberian” characteristics within the state. In such a state, meritocratic recruitment and rewarding career paths for public sector workers rather than noisy wage bargains with unions annually would be the preferred modus operandi.

The concept of a merit-based system requires the public service system to admit into its lower and middle ranks a carefully selected body of bureaucrats through the establishment of a proper system of examination before appointment. Between 1994 and 1998, rapid changes took place in the public service in South Africa. The public service had to redress inherited problems which included a lack of race, gender and disability representation; a lack of accountability and transparency; lack of popular legitimacy; the absence of effective management

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information; the lack of a professional ethos and work ethic; conflicting labour relations; the lack of service delivery because the public service was more concerned with the application of rules; centralised control and top-down management; and low productivity (DPSA, 1995:7-

11); (Tshandu and Kariuki, 2010:190-191). Institutionalising a meritocratic bureaucracy could form an integral part of a restructuring exercise in the view propounded in this chapter.

7.5.2.6 Administrative Talent versus Political Appointments

According to Peters (2001:5), a committed bureaucracy requires political appointees selected for their administrative talent rather than their political views and loyalty. This point is emphasised by Cameron (2010:7-8), who has argued that incoming governments should have the right to replace staff in selected senior positions with individuals who share their ideological beliefs, provided they are administratively competent. According to Christensen

(2004:15), Ministers expect responsiveness from bureaucracy, but such responsiveness is not given automatically. This means that Ministers may have a preference for political appointments (Cameron, 2010:8) but the challenge is to avoid over-politicisation which undermines merit-based systems of employment and promotion and, by extension, efficiency and professionalism. This view is shared by Pollit and Boukaert (2004:51-52), who have observed that the politicisation of top posts creates a bigger gap between senior bureaucrats and their staff. The legitimacy of the former is often questioned in the eyes of the latter.

7.5.2.7 Institutional Capacity

In thinking about constructing a developmental state in South Africa it is important to focus on the country’s institutional architecture and its policy orientation. This study has already dealt with institutional issues in the previous chapter to the the extent that it has been acknowledged that it is institutions that will determine a developmental state’s capacity to formulate and implement its policy and programmes. South Africa has proper institutions that support a developmental state trajectory and goals.

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However, if by developmental state we mean a state that could act authoritatively, credibly, legitimately and in a binding manner to formulate and implement its policies and programmes

(ANC, 2010:6), we also have in mind institutional formations that assist in assessing the state’s capacity to formulate and implement policy and programmes that are instrumental in bringing about developmental changes or transformation in the society. Such institutions should do so on the basis of a democratic ethos and principles (ANC, 2010:6).

Central to this is the state’s capacity to intervene in the national development process. For

South Africa, establishing the right institutions will be an essential condition for developmental state success, and such institutions need to enhance rather than undermine the capacity of the state to promote its developmental efforts (Edigheji, 2010b:5-6); (ANC, 2010:7). Ultimately, however, it has to be noted that in the context of South Africa the institutional imperatives of a developmental state require that the quality of life of the citizenry is enhanced through improved service delivery and citizen participation in the mainstream economy.

7.5.2.8 Opportunity-Driven Development

According to Creamer, (2010: 205-206) a developmental state in South Africa has the primary responsibility of transforming the structure of opportunities by, among other things, widening access to basic services and physical infrastructure. He argues that the state’s wide and effective provision of social and economic infrastructure and services is a necessary precondition for broad-based participation in economic processes. In effect, Creamer argues, policy needs to respond to the major developmental challenges facing the country, which comes with the legacy of dispossession. Broadly, then, a developmental state should be able to bring about changes which ensure that economic opportunities are restructured in a manner that, they are able to benefit all citizens by enlarging access to the citizenry of basic services and physical infrastructure such as water, roads, schools, hospitals and clinics. The provision of services and physical infrastructure is in fact the first, or initial, step towards the attainment

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of mass participation in economic activities of the state.

However, as discussed earlier on, South Africa also has committed political leadership to drive the developmental state agenda. It is capable of managing private sector interests even though it has a bureaucracy or public service that is in some instances patently unable to deliver services.

7.6 Priority Interventions: Enhancing Local Government Capacity

The coalface of service delivery and capacity bottlenecks is local government. In failing to differentiate state capacities across this tier of the state, policy-makers and bureaucrats have squandered an opportunity to creatively adapt the state to local compacts and delivery outputs where it matters most: on the ground. The result has been a chasm between popular demands and state interventions, spawning a battleground of conflict between communities and the state over delivery backlogs. It is here where demand is greatest, that priority interventions should be made.

The issue is complex, but the problems come down to planning, project management and technical skills. In other words, there is a failure on the part of the state to translate plans into manageable projects and the absence of the capacity to implement such projects. To be specific, South Africa lacks technical skills such as engineering expertise to provide water reticulation and electricity. In addition, South Africa lacks skills at local level to implement policies in the area of health and education.

7.6.1 Municipal Service Delivery: Context and Legislation

In the sense in which we have characterised the particularities and peculiarities of the developmental state agenda in the South Africa context, municipal service delivery is fundamentally a set of direct interventions aimed at redressing racial disparities in the

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distribution of services to an impoverished black citizenry. Through legislative and institutional measures, government has attempted to address the challenge. A brief look at the legislative context is necessary before turning to problems that have arisen.

7.6.2 Constitutional Provisions

South Africa’s first democratic elections took place in April 1994. This milestone was followed by the enactment of the 1996 Constitution of the Republic of South Africa that came into effect on 4th February 1997 and established the objectives of local government as:

1. Democratic and accountable local government

2. The provision of services to communities in a sustainable manner; and

3. Facilitating the involvement of communities and associated organisations in local

governance.

The signing of the New Constitution in 1996 inaugurated local government as the epicentre of the service delivery system and positioned local authorities at the heart of poverty eradication initiatives (Southall, 2007:29); (Mogale, 2003:227). Thus the democratic elections in South

Africa led to the establishment of the local government sphere, entrusted with the responsibility to provide adequate services such as refuse removal, water provision, and health care.

The Local Government elections, of 5 December 2000, were the culmination of a process of establishing a democratic local government dispensation that had been preceded by an interim and transitional arrangement (Mogale, 2003:227).

Mogale (2003:227) finds it significant that section 40 (1) of the Constitution stipulates that:

In a Republic, government is constituted as national, provincial and local sphere of government which are distinctive, inter-dependent and

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interrelated. Section 151 (1) provides that the local sphere of government consists of municipalities, which must be established for the whole of the territory of the Republic.

This means that the spheres of government of South Africa are seen as one entity and are expected to work in partnership towards the attainment of the common good of society.

Section 151 (3) states that municipalities have the right to govern the local affairs of communities, subject to national and provincial legislation as provided for in the Constitution.

Further to this, Section 151 (4) asserts that national or provincial government may not compromise a municipality’s right or ability to exercise its powers or perform its functions.

Section 154 (1) in turn indicates that “national and provincial government by legislative and other measures, must support and strengthen the capacity of municipalities to manage their own affairs, to exercise their power and to perform their functions. The role of local government is viewed as an evolving one, originally from intervening in or supporting vulnerable municipalities to monitoring and capacity building” (Mogale, 2003:228).

Thus, municipalities are structures of local government mandated to govern the affairs of the community, meaning that they have the responsibility to deliver services to the local community. National and provincial government are required by law to support municipalities in governance and service delivery issues. In areas where local government lacks the capacity to deliver services, the two spheres of government are required to strengthen the capacity of municipalities to meet the demands and aspirations of the citizenry.

Local government’s role is to intervene in areas where municipalities are unable to function effectively, or support those municipalities that are incapable of delivering services. The kind of support should be in the area of development, monitoring tools and capacity building.

At base, then, local government is expected to provide the following services: provision of

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water, sanitation and sewerage system disposal, roads, storm water drainage, electricity reticulation and municipal health services (Cameron, 2003:113).

7.6.3 The White Paper on Local Government

The basis for developmental local government in South Africa is founded on provisions set out in the White Paper on Local Government published in March 1998. The White Paper asserts that local government should be developmental, in the sense not only of promoting growth and development, but also in a manner that maintains and sustains the process (Mogale, 2003:229).

Moreover, Mogale (2003:229-230) accentuated that the White Paper recognises the local government sphere as primarily developmental in the sense of being:

Committed to working with citizens and groups within the community to find sustainable ways to meet their social, economic needs and improve the quality of their lives”. It also states that, “in order to assist local governments to meet developmental requirements and speed up service delivery to the poor, extensive resources acquisition in terms of funding, human resources, appropriate institutions and the adoption of key and enabling legislative measures become essential.

Local government, in other words, is legislated as the fulcrum of an ambitious developmental vision and programmes designed to address developmental backlogs, eradicate of poverty, and promote sustainable development (Mogale, 2003:229).

The White Paper on Local Government (1998) also provides the following set of capacities that are essential for effectively enhancing service delivery.

1. Strategic capacity – which refers to the ability to be open and flexible to new demands,

to prioritise carefully on the basis of a clear understanding of existing resources and

medium to long-term objectives, and to move quickly and effectively to meet demands

at the highest level of competence.

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2. Integrating capacity – which is to coordinate and integrate inputs from inside and

outside the administration to ensure developmental outcomes.

3. Community Orientation – which is the capacity to develop mechanisms to interact with

community groups, identify service needs and priorities as well as community

resources that can be unlocked and channelled for developmental ends.

4. Institutional or Organisational capacity – which refers to organisational structures,

processes, culture and management styles that influence the effective use of individual

competences, skills and resources (Mothae, 2008:247).

7.6.4 Municipal Systems Act of 2000

The Municipal Systems Act (MSA) of 2000 was passed by parliament to supplement

Constitutional provisions for local government. Its Preamble indicates that the Act was passed because there was a need to set out the core principles, mechanisms and processes that give meaning to developmental local government; and to empower municipalities to move progressively towards the social and economic upliftment of communities, especially the poor and disadvantaged (Roux, 2005:71).

The Preamble further states that a fundamental aspect of the local government system is the active engagement of communities in the affairs of the municipalities, of which they are an integral part, in planning, service delivery and performance management (Roux, 2005:71). The

Act was passed to enhance the powers of local government, particularly in the areas of roles and functions, intervention mechanisms and processes that would facilitate developmental local government.

7.6.5 The Municipal Service Delivery Record

According to the Department of Cooperative Governance and Traditional Affairs (COGTA),

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2009:43-50), many local authorities in South Africa are unable to provide municipal services to all citizens. In most cases, this is largely because of a lack of sufficient finance or local authorities’ inability to render services at an affordable cost. However, many other factors have been perceived as contributing to poor service delivery including a lack of skills and resources, poor policy implementation, corruption, nepotism, and political infighting within the ruling party.

According to (Southall, 2007:101), government’s own audit, conducted in 2004, revealed that of the total 284 municipalities:

1. 203 could not provide sanitation to 60 percent of their residents;

2. 182 were unable to remove refuse from 60 percent of the households;

3. 155 could not provide water to 60 percent of properties within their jurisdiction;

4. 122 could not provide electricity to 60 percent of the households;

5. 166 were unable to provide housing to 60 percent of their residents; and

6. 42 percent were generally incapable of performing 50 percent of their functions.

This general disaggregation of the state of municipalities highlights the enormous financial debt, with one estimated figure hovering around R40 billion, stacked up by municipalities

(Southall, 2007:101). It should be noted that financial problems are caused by price inflation by service providers on the procurement value chain, capacity constraints and citizens’ inability to pay for services, which in turn cripples municipalities to a point where they can no longer provide adequate services (Southall, 2007:101)

Infrastructure and services are introduced unevenly and sporadically, which attests to favouritism and a pervasive sense of unfairness. Hence, municipal protests often express a

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paradox in that they seem to stem less from an abject failure to provide services and entitlements than the partial success of those efforts. Very often services that are provided are of a poor quality due to a lack of proper upkeep and maintenance of infrastructure which is provided in an irregular and inconsistent manner where certain areas are preferred while others are neglected (Marais, 2011:458).

Moreover, COGTA stated that local governments and municipalities in particular are in distress; that the current model of local government is not working; and that many

“municipalities are not in a position to meet their developmental mandate” (Coetzee, 2010:21).

In its recent assessment of the performance and problems of municipalities and the state of local government in all nine provinces of the country, a range of problems and threats were identified. Besides poor service delivery, poor spatial conditions, poor governance with specific reference to leadership, institutional and organisational deficiencies, a lack of capacity and skills, poor monitoring and reporting, serious financial problems, poor inter-governmental relations, corruption, fraud and maladministration, the more pressing problem were political parties undermining the functioning of municipal councils, power plays and political infighting

(Coetzee, 2010:21). The report concluded that municipalities in South Africa are not in a position to meet their developmental mandate (Coetzee, 2010:21). Moreover, poor decision- making coupled with corrupt practices undermines service delivery.

If municipalities are to improve the standard of service delivery, they have to address the aforementioned challenges. But the question is: how? What follows is an examination of problems afflicting local government capacity and solutions.

7.6.6 Local Government Capacity

In order to improve municipal service delivery, there is a need to address capacity problems that seem to be compounding the backlog in services and fuelling protests.

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For municipalities to provide adequate services at an affordable price, they have to focus on building capacities to plan, implement and manage service delivery. According to Marais and

Kroukamp (2005:124), capacity problems facing municipalities range from a lack of skills to inadequate municipal delivery structures, processes and physical capacity such as technology and often outdated and obsolete infrastructure. There is also the issue of inflated pricing by unscrupulous suppliers who exploit the weaknesses and avarice of the procurement process rather than prioritise service delivery.

It is important to note that service delivery should not only be justified on moral and social grounds as a means to meet the basic needs of the citizenry and provide a better quality of life to the poor, but also the provision of infrastructure to enable previously disadvantaged communities to enter economic activities. Most municipalities have structures, processes and technologies that belong to the old order and are not usable today. The reliance on malfunctioning capacities has had a negative bearing on service delivery. In itself, aging infrastructure is a critical capacity constraint on the state’s developmental ambitions at local government level.

There is moreover a deficit of visionary leadership, nationalism, patriotism, and a strong meritocratic bureaucracy with close ties to business (Levin, 2011:252-253). New approaches to service delivery could include options such as public-private partnerships; outsourcing; and partnerships with Community-Based Organisations (CBOs) and Non-Governmental

Organisations (NGOs). Municipalities should take steps to facilitate service delivery by entering into those partnerships, and by designing and implementing policies that will improve human resource capabilities, thereby enhancing efficiency and decreasing the vulnerability of municipal citizens (Marais and Kroukamp, 2005:126). Six challenges, which have received little attention, deserve highlighting in this context. We turn next to how capacity challenge could be met.

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7.6.6.1 Embedded Autonomy

Partnerships with other role-players such as civil society organisations and the private sector imply what has been referred to as ‘embedded autonomy’, where the state is rooted in coalitions while maintaining its autonomous role of guiding and directly intervening where necessary by formulating and implementing relevant policies (Marais and Kroukamp, 2005:126). This presupposes local human and institutional capacities to prioritise the needs of the citizenry.

7.6.6.2 Coordinating Capacity

Municipal planning systems in many municipalities are struggling to function. The majority of municipalities in South Africa do not have dedicated departments responsible for development planning and development facilitation. As such, developmental planning and implementation are mostly done in a fragmented way by sector departments, thus making integrated planning across various sectors difficult (Coetzee, 2010:22-23). The challenge is that municipalities in

South Africa have non-functional planning systems. Fragmented and uncoordinated approaches to service delivery make it virtually impossible to facilitate an integrated development planning approach at municipal level. This lack of integration leads to wasteful expenditure and duplication of services, as well as competition and antagonisms between various departments and institutions of the state (Coetzee, 2010:22-23).

These considerations suggest that for the state to address municipal problems, it has to ensure that national and provincial government plans are integrated into municipal planning systems.

Strong coordinating capacities are required to plan properly across different levels of the state.

As things stand, a lack of involvement by national and provincial governments, being generally diffuse, runs counter to the idea of improving the capacities of municipalities to harness their service delivery capacities. The three spheres of government need to work in partnership and ensure that services are provided in an integrated manner (Coetzee, 2010:22).

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The solution to coordination does not lie in complete centralisation and decentralisation; rather, it lies in strengthening the planning responsibilities of municipal government so that national and provincial governments’ sectoral infrastructure initiatives are aligned with municipal plans.

7.6.6.3 Administrative Leadership

In South Africa, municipalities are mostly led and managed by inexperienced and incapable mayors, municipal managers or managers and local leaders who are neither trained nor equipped to perform developmental roles. Political appointments are often characterised by leadership with an explicitly partisan pedigree that focuses on specific agendas, geographic areas or limited timeframes rather than the bigger picture, longer-term goals or broader developmental objectives. Thus, if South African local government is to become developmental, it will have to recast leadership, not only at the top but at all levels and sectors of the state including community leadership (Coetzee, 2010:22).

The reality is that political and administrative leadership at municipal level has massive capacity challenges that are aligned to a lack of proper and relevant skills. People are appointed into positions of leadership due to nepotism and political affiliations rather than the expertise and skills required to execute tasks. Leadership tends to focus on short-term or limited timeframes rather than broader developmental goals. Accordingly, if South Africa is to become a successful developmental state, it has to change its leadership or appointment policy at all levels and across sectors.

In a developmental state, leadership is instrumental in ensuring that local government provides adequate services to communities. This point was highlighted by Dimock and Dimock

(2011:635) in their study of growth and complexity. They found that directional leadership is the principal means of overcoming programme fragmentation and correcting pathologies of

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bureaucracy in conditions of complexity (Nkuna, 2011:635). It is this footloose quality of feckless leadership in conditions of complexity that is in urgent need of redress: specifically, human resource empowerment in terms of skills and expertise, particularly in respect of translating policies, plans, programmes and strategies into developmental outcomes. The executive leadership of municipalities should be equipped to think strategically in a developmental context and the relationship between councillors and officials should be more productive, thereby benefiting local communities. Capacity enhancement should be at the political and administrative levels of municipalities. All officials in municipalities, both political and administrative, need to be creative and qualified in their responsibilities (Nkuna,

2011:635).

7.6.6.4 Managerial and Technical Capacity

South African municipalities lack the required political, management and technical capacity to discharge their developmental mandate (Reddy, 2010:70). In essence, municipalities do not have relevant leadership at all levels despite the fact that local government has been viewed as the engine of development and key to basic service delivery. According to Gumede, “for most township residents the most basic service of service delivery, getting the pavement fixed or the rubbish cleared that has piled up is a distant dream. Many communities are still not receiving water, electricity, housing and sanitation” (Reddy, 2010:81).

This is a clear indication that the South African developmental state suffers severe deficiencies in planning, project management and technical skills where it matters most. The problem of municipal incapacity that is seen to pose the greatest threat to delivery relates to a shortage of skills in key operational areas such as engineering, accountancy and planning. Poor decision- making and, in a significant number of instances, corruption on the part of office bearers is the net result (Kahn, Madue and Kalema 2011:213-212). Lack of management skills and poor technical know-how are common problems. It takes decades to address such skills gaps and

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create critical skills. There might be cause for alarm when one considers that skills scarcity is compounded by the private sector poaching technical skills from government, leaving the state worse off.

All of these problems have undermined the capacity of the South African state and, in turn, diminished its potential to meet the expectations of the electorate (Naidoo, 2011:37-38). For

South Africa to address the skills shortages would require investment in technical skills development on a massive scale. With South Africa experiencing a talent deficit, government’s resource mobilisation strategy might find comfort in external (foreign) recruitments to plug the gap. The other option is partnerships between the state and private sector organisations

(Naidoo, 2011:38).

7.6.6.5 Policy Implementation

In addition to best practice benchmarks for creating good historical legacies in health and education and developing the ability to serve the population as a whole, a successful developmental state must have a broader generic capacity to implement and administer policies in all sectors, to maintain an effective machinery of government, and to protect and grow a culture of honesty and effective performance in the public sector. As Levin observes, the evolution of the developmental state is “invariably dependent upon the strength, competency and coherence of those public servants who must convert stated developmental goals into reality” (Butler, 2010:191).

This involves planning in time, as well as understanding the service delivery needs of citizenry.

Local government and municipalities have to strengthen their capacity to translate plans into tangible programmes as well as manage such plans. For municipalities to improve their implementation capacities, including administrative capacities, would require the administrative capacity to interpret and implement policy within workable systems. The most

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manifest problem in this regard has been the failure of municipalities to allocate budgets and spend those allocations on time.

7.6.6.6 Deliberative Forums

For the country’s democratic institutions, including parliament and other democratic deliberative institutions, to be strengthened requires building deliberative forums at the community level to enable ordinary citizens to participate in development processes.

Conventional wisdom in developmental states indicates that the state local participation is but one rung on a ladder towards strengthening national institutions such as parliament as deliberative forums for building a national consensus based on the developmental agenda

(Edigheji, 2010a:30). The focus at local level should at least partly be on supporting democratic institutions that facilitate citizen participation in transformational processes. Since formal institutions are not always available at local level, informal deliberative forums could be compelling conduits towards consensual decision-making. In this manner, institutions need to be created and strengthened so that they are seen as institutions that strive to foster a developmental ethos of nation-building and cohesion (Edigheji, 2010a:30).

Accordingly, municipalities must find within themselves ways to make their engagements with the national developmental agendas more sustainable. For this to happen requires trust between individuals; and open and accommodative relationships between stakeholders. Conditions need to be created for applying local solutions to development. This finds expression in the

White Paper on Local Government (1998), which recognises community capacity as a necessary lever for building the kind of political leadership that is able to bring together coalitions and networks of local interests that cooperate to realise a shared vision. The said coalitions are responsive to problem-solving and committed to working in partnerships with business, trade unions and community-based organisations thus ensuring that knowledge and information are acquired and managed in a way that promotes continuous learning (Nkuna,

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2011:634).

7.6.6.7 The Local Government-Developmental State Nexus

If the South African developmental state is primarily concerned with integrating the dual economy by addressing the socio-economic needs of the entire population, especially the poor, the marginalised and the historically disadvantaged, it is at local government level that its essentially character finds concrete expression.

From a wholly contemporary vantage point, it has appeared that the necessity for a developmental state owes much to the manifestation of service delivery problems. Systemic problems in municipalities are coupled with structural dislocations in capacity and resource distribution at national and provincial government levels, thus throwing into sharp focus the need for programmatic and strategic orientations towards greater coordination across the country.

From a much longer historical perspective, such pressures are in fact acknowledged by the

ANC and government in both their policies and election manifestos. It is by now a matter of fact that the push for a developmental state in South Africa originated from the desire to address service delivery challenges alongside poverty and inequality. In advocating a developmental state, the government needed to achieve high levels of sustainable economic growth whilst at the same time maintaining high levels of social development and redistribution at local level

(Nkuna, 2011:634).

Part B of Schedule 5 of the Constitution, concerning functions falling concurrently within the national and provincial competence constituent units, identifies the following services that fall within the ambit of local government and its municipalities: water, electricity, town and city planning, road and storm water drainage; waste management, emergency services for example, fire-fighting, licences, fresh produce market; parks and recreation; security; libraries; and

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economic planning. Part B of Schedule 4 of the Constitution, listed as functions within the exclusive domain of provincial government, further identifies the following matters that are also the responsibility of municipalities: air pollution, building regulations, child care facilities, electricity and gas reticulation, local tourism, municipal airports, municipal planning, municipal health services, municipal public works (Koma, 2010:113).

Therefore, municipalities are required to play a meaningful role in respect of the attainment of developmental goals of the state. This is affirmed by the fact that a developmental state is a delivery state, and local government as the delivery arm of municipalities has an obligation to lend the developmental state legitimacy among communities.

Interestingly, developmental local government, in terms of the White Paper on Local

Government of 1998 (South Africa, 1998), is tasked with maximising social development and economic growth. Local development could thus be construed as a planned process and approach to the transformation of a society that allows a holistic development process to take place towards the eradication of poverty, inequality and uneven development or underdevelopment (Nkuna, 2011:630).

Based on the above assertion, local government should exercise its powers and functions in a manner that has maximum impact on the social development of communities, in particular meeting the basic needs of the poor, and on the growth of the economy. Similarly, economic growth refers to a positive change in the level of production of goods and services at local government level (Nkuna, 2011:631).

What all this means in the context of local government is that municipalities are, or should be, dynamic and progressive catalysts for the evolution of the developmental state. The notion of a developmental local government has become part of the South African Local Government dispensation. According to Koma (2010:112), the priority accorded to municipal service

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delivery signifies the national government strategic vision of assuming a central role in regard to intervening in a more pragmatic manner with a view to addressing poverty and inequalities affecting the majority of communities. In terms of the White Paper on Local Government

(1998), local government should be committed to working with citizens and groups within the community to find sustainable ways to meet their social, economic and material needs and improve the quality of life (Nkuna, 2011:629). According to Nkuna, (2011:622), the idea of developmental local government emerged from the fusion of the social interventionist goals of the Reconstruction and Development Programme (RDP) and market-driven economic strategies of the Growth Employment and Redistribution (GEAR) programme.

There is no doubt that the notion of developmental local government is complex, certainly within the context of a developmental state. In South Africa, the realm of a developmental state is explicitly used as an attempt to elaborate it by specifying its preconditions, characteristics or constitutive elements, a core component thereof being local government. It follows logically, then, that the manner in which developmental local government is conceptualised in

South Africa provides an institutional realm for shaping a developmental state. The point is that for the South African developmental state to assume a form and shape proportional to an effective state, it must be based on a contextualisation of developmental local government. Put differently, local government in South Africa is entrusted with the huge responsibility to deliver services to the citizenry, whereas the role of national departments is to intervene in a more programmatic manner with a view to harnessing local potentials to address poverty and inequality.

The notion of developmental local government is presented as having attempted to reflect the characterisation of what counts as “developmental” within the South African context. It is believed that the model will enable South Africa to operationalise its systems as a polycentric bottom-up approach in the process of mediating the contending interests between groups and

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levels of government towards the construction of a developmental state (Nkuna, 2011:622).

7.7 Conclusion

If one of the key problems in this study is that the structure of the economy has changed more quickly than the capacity of the public sector institutions responsible for delivering services, the result is a mismatch between the supply of skills and demand. Using official government figures since the department’s 2007 annual report, estimates reveal that they are in the region of 40 000 vacancies for all 26 national departments, most of them professionals and managers or an average of 10% of all posts, a lurch backwards from the 2005 vacancy rate of 30 000

(Ray and Lund, 2008:12). In other words, almost a fifth of all managerial and professional national government posts are empty (Ray and Lund, 2008:12).

The study has shown, based on rough estimates from the Department of Public Service and

Administration (DPSA), that the number of skilled and highly skilled professionals needed for the state to run efficiently has averaged 42 300 annually since the late 1990s. The vacancy rate for mainly professional and managerial posts throughout departments in the provinces is up to

30%, despite massive under-spending across a wide range of delivery platforms (Ray and

Lund, 2008:12). According to Ray and Lund (2008:4) of 231 municipalities in 2008/09, 79 had no civil engineers, technologists or technicians, 42 had only one civil technician, 38 employed technologists and technicians under the age of 35 and only 45 had any civil engineers. Of 47 district municipalities, four had no civil engineers, technologists or technicians, six only employed technologists under the age of 35 and only 25 had any civil engineers (Ray and

Lund, 2008:14). By contrast, it appears that the engine room of the State sector, Public Service and Administration, has had scant grasp of exactly what skills it has required and where. Yet the total vacancy rate across departments and levels of government, according to one estimate in a recent study conducted by Pan African Advisory Services (PAAS) Chief Executive (CE)

Iraj Abedian, could be perilously close to 300 000. Adding that to under-spending in areas such

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as transport and capital expenditure, this decade could witness the progressive run-down of the government’s capacity to deliver even the most basic services.

Can the state turn its fortunes around? For now, the prognosis is on the downside. In fairness, the National Treasury has allocated budget increases in recent years to departments within the ambit of the State in charge of economic services and infrastructure. But even when the current

Finance Minister Nhlanhla Nene and Former Minister’s Pravin Gordhan and Trevor Manuel have delivered their budget speeches, questions have been multiplying: How would the money be spent; what would the implications be for the country’s growth target; what systems of accountability; and based on what strategy?

However much is allocated by Treasury, the quality of spending is the vexing issue. These are some of the issues the government will have to confront. The discussion has already begun, initially on a single public service with cross-cutting responsibilities across departments and levels of government, and lately around issues of capacity, productivity and accountability in the public sector. This chapter has demonstrated that the provision of a strong centre that is able to deploy skills throughout different spheres of government is an innovative plan, however, it still falls short of availing a tangible lever on the capacity problem. Dwelling on a long list of administrative and legal changes does not get to the essence of the crisis. Even the latest proposals to prioritise outcomes over inputs and outputs leave the number and quality of human capabilities and institutional capacity intact.

There is, however, a way forward that is crucial to the reform process: it lies partly in harnessing capacity, partly in reconciling competing interests in the public sector to the national interest. This, it must be understood, is a process of engagement, often beyond formal institutions and organisational forms, in the realm of informal institutions at local government level – the site of forming a social contract involving all stakeholders as a basis for a common discussion on a national consensus around the role of the developmental state.

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There are, ultimately, no magic pointers. But unless the problem is properly diagnosed, no amount of engagement will aggregate to anything qualitatively different to the status quo. The problem, to reiterate a well-worn point in this chapter, is the shape, form and scale of the public sector: a well-managed and democratic state that builds its legitimacy on its capacity to simultaneously foster productive economic activities and economic growth, as well as qualitatively improve the living conditions of its people and reduce poverty (Koma, 2010:113).

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CHAPTER 8

LEARNING FROM MITI IN JAPAN

8.1 Introduction

In the eight years or so since the African National Congress (ANC) and government declared the country a developmental state, South Africa has learned some painful lessons about state- building under conditions of economic inequality and rising expectations for more rapid service delivery. The initial approach by the post-apartheid government to economic development and transformation, necessitated by conditions of extreme economic vulnerability inherited from the apartheid era, represented a different model of development, with the state constituting a light approach to interventions, and the market a much heavier one.

However, the long-term goal of the ANC and government was more or less consistent since

1994: the stabilisation, growth and transformation of the economic structure from a racially prohibitive and insular past to a deracialised, equitable, globalised and prosperous future. Post- apartheid South Africa can thus be said to have manifested two very different models for managing economic reconstruction since 1994. The state first used strictly macro-economic means, interest rates and inflation targeting, in pursuit of ambitious economic stabilisation and growth objectives, and sought wherever possible to offload responsibilities onto private sector actors. Having achieved some of its core objectives and failed in other areas, mainly the entrenched legacy of two racially distinct economies, the shift to the second approach reorientated economic policy towards an essentially state-led developmental path, having designed and committed to deploy strictly developmental policies in the service of very ambitious socio-economic objectives, with an emphasis on state control of as much of the developmental effort as possible.

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The South African state thus moved, in effect, from its initial light footprint approach to a somewhat heavier one in 2004, demonstrating that it was capable of learning to some degree from past shortcomings. Whether this mid-course adaption in the evolution of the post-1994 transition is enough to salvage the situation is the subject of this chapter. The government, in effect, declared a developmental state at a propitious moment when conditions seemed ideal.

The phenomenon of economic dualism was fanning municipal level protests against non- existent or shoddy service delivery, and massive budget surpluses for a new expansionary phase had been built up since 1996.

Ironically, the immediate prospects for significant progress look bleak. Despite policy declaratives, there seems to be weak political commitment to address huge challenges, including persistent racial inequality in the distribution of wealth and resources, economic elitism, corruption, mismanagement and maladministration of state resources, and human and institutional capacity deficiencies at all levels of government (Dassah, 2011:601);(Maphunye,

2011:614-616).

The overarching enquiry is: Could the declaration by the ANC and government of South

Africa as a developmental state in 2004 be construed as the appropriate passage into a new era

– the entire preceding period having been a chronicle of neo-liberal policy lapses, and the ensuing period to date a mere formality? Despite major strides, the challenge of institutional reform and capacity, as we shall see, remains substantial.

8.2 The Historical Necessity of a Developmental State in South Africa

Developmental states, as both institutional and ideological constructs, have arisen in economies and regions attempting to catalyse domestic growth and distribution, and internationalisation. The rise of these states, with meritocratic bureaucracies exercising authority over economic growth and social justice, was made possible by the historical

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necessity of nurturing nascent industries and consolidating an ethos of solidarity and patriotism between interest groups in and across countries within geo-strategic regions.

According to Doner, Richie and Slater (2005: xxxi), the political origins of developmental states are located in conditions of systematic vulnerability, or the simultaneous interplay of three separate constraints: broad coalitional commitments, scarce resource endowments, and severe security threats. They argue that conditions of systematic vulnerability are both necessary and sufficient for developmental states, and that unless political leaders are confronted by all three of these constraints simultaneously, they will find less challenging ways of staying in power than constructing a developmental state. Developmental states in this sense are anything but quintessentially economistic; they are strongly political with a vast scope of economic activity. Neither for that matter is the political path undertaken by developmental states universally applicable from one state to another.

It therefore makes sense that the South African Constitution of 1996 embedded an enabling mechanism for the adoption of a developmental state as a necessary policy and institutional approach to the challenge of overcoming inherited inequalities and underdevelopment.

Concrete steps towards its realisation can be said to have begun in earnest in 2004. Former

Minister of Finance Trevor Manuel (Dassah, 2011:601) defined the mission of such a state as

“the removal of poverty and tyranny, the expansion of economic opportunities and extension of public services to the poor”. The essence of stateness is, in other words, historical redress: an adaptation of peculiar challenges of racialised poverty to the universal rights of citizens and access basic services and economic opportunities as outlined in the Bill of Rights of the

Constitution.

8.3 Recasting the South African Developmental State

According to Joel Netshitenzhe, the former head of the policy and coordination advisory unit

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in the presidency at the Presidency and current Chief Executive Officer (CEO) of the

Maphungubwe Institute for Strategic Reflection (MISTRA), asserted that the declaration by

South Africa political leadership of a developmental state is a noble enterprise. Drawing on political scientist Professor Linda Weiss, Netshitenzhe (2011:7), wrote:

South Africa has set itself the unusual and challenging goal of becoming a developmental state. In principle, this is a unique and noble enterprise: unique in so far as no state has ever self-consciously set out to become a developmental state; and noble in so far as such a project brings in inspiration from the experience of certain countries that achieved shared growth –growth with equity.

Essentially, Netshitenzhe was indicating that the policy path of government is exceptional in the sense that no country has ever declared itself a developmental state; it is gracious in the sense that it provides South Africa an opportunity to share with and learn from other countries that have followed a developmental state path or trajectory. But Netshitenzhe (2011:7) cautioned that the idea of declaring South Africa a developmental state was perhaps premature.

In his view, there is considerable evidence that there is increasing awareness of the challenges within the state, but a lack of responsiveness on the side of the state. At a macro level, to be sure, the South African state post-1994 faces challenges of vast income inequalities worsened by distorted settlement patterns which trap poor communities in peripheral urban townships and remote rural areas. For example, whilst services have been extended in some sectors, other sectors are in semi-crisis mode (Hemson, Carter and Karuri-Sebina, 2008:168). This point is magnified by the fact that the rate of service delivery is not rising in many sectors and provinces, and targets are not being met due to a lack of capacity and accountability systems.

At the level of institutions and processes, the South African state is seized by serious service delivery backlogs and major problems of planning, budgeting and implementation capacity

(Hemson and Carter and and Karuri-Sebina, 2008:168).

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To clarify this point, one needs to look at the characteristic features of two types of states: on the one hand, a “strong state”; on the other, a “weak state”. A strong state has been characterised as one led by a purposeful and determined developmental elite or political leadership which establishes its legitimacy through its ability to achieve sustained economic growth. Such a state is supported by a technically competent and capable administration which implements economic policies wisely and effectively. Conversely, a weak state has been defined as one that has neither the political ability nor the administrative capacity to forge ahead with its developmental agenda (Gumede, 1998:180). The question whether South Africa is a developmental state could thus be interpreted within this binary.

8.4 Determinants of a Developmental State in South Africa

According to Southall, (2005:xvii), if the South African government is to transform the state into a developmental state, it would have to meet three challenges: first, the state would have to confront major deficiencies in capacity, notably those resulting from skewed human resource patterns inherited from a racialised past; second, whereas the developmental pattern of classic Asian developmental states were structured by propitious post-Second World War conditions which facilitated their growth, contemporary South Africa operates in a highly globalised production system in which the capacity of individual states to steer their own economic fortunes has been massively eroded; and third, whereas the governments of developmental states were able to trade high rates of growth for low levels of democracy, the relatively high levels of popular mobilisation and low levels of social coherence which South

Africa has inherited from the struggle against apartheid would require that the ANC seeks to combine development and democracy (Southall,2005:xvii).

According to Leftwich (1995:405-421), such conditions point to the importance of the following socio-political and administrative factors in determining state capacity which, in turn, impact on economic development:

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1. A Determined Developmental Elite: a developmental state needs a core elite

(especially senior politicians and bureaucrats) to guide a developmentally-orientated

economic policy. However, a South African public service plagued by corruption at

all levels does not inspire confidence.

2. Relative Autonomy: it is important that the state is able to formulate and implement

policy in the national interest rather than for specific groups. South Africa at present

lacks a definite developmental vision for the country and a coherent policy programme

(Leftwich, 1995:405-421); (Luiz, 1998:9-10).

3. Competent Economic Bureaucracy: it is essential that the state bureaucracy, which

has to execute government policy, is competent and insulated from capture by interest

groups. The South African state has pockets of inefficiency which do not fit this

criterion (Luiz 2011:140).

According to Luiz (2011:140), the major challenge in South Africa is not policy but a bureaucracy engulfed by incompetence and corruption. Until the publication of the NDP, the state lacked a developmental vision and rational programme.

According to Sangweni and Diseko (2011:29), the South African public service is “groping in the dark, muddled culturally divided, lacking loyalty to the service, poorly trained and excessively mobile and reward-orientated”. The capacity challenges are both technical and political in the sense that the state lacks meta-level skills to reconfigure its own organisational and accountability systems. The situation is compounded by the fact that meritocratic recruitment and promotion are difficult to establish in circumstances where the state has become the locus of historic class and contemporary political power struggles. Thus, for instance, employment equity strategies cannot be reconfigured because of intense animosities by labour unions in COSATU.

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Butler (2010:193) succinctly captured the problem thus:

A prevalence of muddled understandings of the challenges facing the nation, cultural and political clashes between officials; the lack of a common ethos; the absence of uniform training; limited loyalty in the service; little commitment to excellence; failures of proactive or anticipatory governance; high mobility of public officials in pursuit of senior positions, resulting in limited institutional memory; and exclusively rapid turnover of DGs and Heads of Departments (HODs), training, malfunctioning mentoring and competence assessments systems.

Moreover, national and provincial public service capacities are nothing like the ‘high performance machinery’ that the developmental state would seem to require. It is not bound by common developmental grammar, idiom, astuteness, capacity, agility and single- mindedness, and driven by a strong nationalism to do its best in the country. Neither does it demonstrate the meritocratic selection process, long-run career rewards and corporate coherence that are essential for the emergence of state autonomy (Butler, 2010:193). A related problem is that of not acknowledging much-needed skills and expertise, which creates confusion among graduates – certainly when their academic performance is often undermined.

This is compounded by ineffective training, mentoring and competence assessment systems.

In some instances, employees are not rewarded for good performance because that would threaten the security of mediocre managers and supervisors.

According to Hemson, Carter andKaruri-Sebina, (2008:152), the overall determinant of a developmental state in South Africa is the achievement of economic growth and transformation. Certainly, if South Africa is to become a developmental state the key measure of success should be outcomes that are visible in terms of improved service delivery and greater state responsiveness to basic needs. In fact, service delivery, including the delivery, maintenance and smooth operation of supporting infrastructure, is the final measure of capacity and maturation towards the developmental state (Hemson, Carter and and Karuri-Sebina),

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2008:152).

Having sketched the conditions for a developmental state in South Africa, it is reasonable to enquire: What prospects for a developmental state in South Africa? In discussing how to move forward, we will first explore some of the lessons of East Asia, with special emphasis on Japan.

8.5 The East Asian Experience: Lessons from Japan

The East Asian miracle has shown that there is more to governing an economy than good intentions and policies. There is, more fundamentally, the distinction in developmental states of strong and capable coordinating strategies and institutions that promote institutional convergence around a national development plan. It is akin to a symphony of instruments that harmonise around a set piece. The point is that it was not the state as such in East Asian countries that determined outcomes, but the efficacy of the policy instruments, institutional and human capabilities to advance national goals and objectives. Here, instruments of intervention are predetermined; there is little room for adjustment which may account for the greater appeal of short-term macro-economic policy settings lacking string states.

But the very opposite was the case in East Asia where industrial policy was itself constantly changing along with industry. The point to emphasise is that East Asian successes rested on dynamic industrial policies and perhaps, more than anything else, on the ability of policy- making authorities to harmonise interventions and mobilise savings and interventions and promote their deployment for both economic activities and service delivery. This capacity for coordinated and strategic responses to economic conditions and challenges, as we shall see, is perhaps best captured in the case of Japan.

8.5.1 East Asian Interventionist Policies

The approach to the developmental state in East Asia has essentially been that the private sector

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could not single-handedly stimulate economic growth. The concept of state intervention in the economy arose on the understanding that the state intervenes in the economy with the aim of creating a conducive environment for domestic or national markets to compete at an international level. State intervention was also about economic reliance on governmental and institutional networks, with state agencies, parastatals and private sector conglomerates playing a significant role. Considerably, in the East Asian developmental state, development was aimed at speeding up growth, while at the same time enhancing opportunities to participate in modern economies most commonly through the expansion of public services such as education and health (Fritz and Menocal, 2007:533).

In varying forms and degrees, the most successful capitalist East Asian countries have developed powerful government agencies charged with the task of planning, guiding and coordinating industrial policies. However, the most well-known government institution of this kind, indeed the one that served as a model for South Koreans, Taiwanese and Singapore, is

Japan’s Ministry of International Trade and Industry (Chan, 1990:59).

According to Ibadan (1993:15), East Asian economies used a combination of fundamental and interventionist policies to achieve rapid accumulation of human and physical resources.

Fundamentals included such traditional government obligations as providing adequate infrastructure, education, and securing financial institutions. Interventionist policies included mild repression of interest rates, state capitalism, mandatory savings mechanisms, and socialisation of risk. In Japan, there were six specific areas in which local government played an important role:

1. Provision and supervision of local infrastructure such as roads and rivers, tap water

provision and sewerage disposal, port facilities, functions important in the monitoring

of existing industry and attracting new industry which both provides employment for

local residents and increases the tax revenue of the authority;

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2. Welfare facilities for the elderly, the handicapped and care for the elderly has become

an increasing concern in rural areas as many younger people have left for jobs in the

city leaving no one to care for their parents. Provision of home-helper’s, day care

centres and communal facilities has become a priority;

3. Education and cultural services, whose focus was not only on the provision of

compulsory education but also facilities for adult education, libraries, swimming

pools, museums and art galleries, and halls for public performance;

4. Public Health and Environment Administration focus was on supervision of public

health standards, collection and treatment of garbage and consumer protection;

5. Administration and promotion of local industry, forestry, agriculture or fishing which

focused on the promotion and sale of local produce in the municipality, prefectural

capital or further afield, and the creation of plans for the development of local industry;

6. Citizen services with focus on the supervision of the family register system,

registration of residents and foreign nationals, issuing certificates relating to national

insurance and pension entitlement, and produce statistics for national government

Ibadan (1993:15).

8.5.2 The Japanese State Bureaucracy

According to Preston (2000: 38), Japan’s government has not intervened in the economy from outside but has been an integral part of it. In other words, in a manner that has enabled the government to identify unplanned consequences in the economic and national direction, the government has had the capacity to make choices and offer direction in terms of interventions through the implementation of programmes.

According to Preston (2000:38), the policy mix of the Japanese developmental state has had

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two variables: a political approach to economic matters and the key role of the state. The two have converged on a process where political leaders have directed the economic goals as well as strategic responsibility of state planning. In the fulfillment of this requirement, the state has encouraged knowledge production and the necessary skills befitting a contemporary industrial economy at an early state. The government did so through investment in education by sending students overseas for training; it also recruited foreign experts to teach in Japanese schools.

The idea behind all this was to contribute to the introduction of a new political-cultural project that would enable the formation of a highly educated bureaucracy with a common understanding and approach to doing things.

8.5.2.1 The State Driven Economy

Preston (2000:107) has identified four basic features of Japanese government interventions: the notion of the state economy, which asserts that the state must secure the general interest of the community; integrated policies for growth; equity and welfare; constituent public authorities and a collective bond between planners and market (Preston, 2000:107). The notion of the state economy is based on the understanding that the state has the legitimate right to intervene in the economy in order to satisfy basic needs. Japanese interventionist approaches and methods have been based on integrated policies for development: they are well- coordinated across a range of interventions and institutions in both the private and public sector towards the realisation of set objectives.

8.5.2.2 Key Pillars of State Intervention

Economic competition has required competent and impartial referees - that is, strong institutions. Thus, a high-quality public service that has the capacity to monitor performance and is insulated from political intrusion has been essential to competition between economic actors in Japan (Ibadan, 1993:1). Here the attributes of a professional bureaucracy with the capacity to monitor performance independent from political meddling has played a major role

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in winning legitimacy in business or the private sector. At a very early stage in the 1950s

Japan’s state planners saw the need to confront coordination problems by establishing institutions and putting mechanisms in place that would enable competing groups to benefit from growth. Thus the prime strategic pillar of the Japanese interventionist state was building state institutions and populating the bureaucracy with a competent and honest technocratic cadre (Ibadan, 1993:14).

8.5.2.3 The Regulation Thesis

The extraordinary scope of Japan’s post-war economic recovery was underpinned by new economic thinking that became known as the bureaucratic regulation thesis. In the case of the

Japanese state, this meant that the economic bureaucracy, particularly the Ministry of

International Trade and Industry (MITI), would play a significant role in directing the development of the economy. There is of course another perspective: that of the market regulation thesis which argues that Japanese development was the result of market forces; government activity provided, at most, a favourable environment for industrial expansion by manufacturers who were responding primarily to market demands (Friedman, 1988:3). It is worth looking more closely at each perspective in turn.

The bureaucratic regulation thesis holds that the state provided domestic procedures with the support and guidance they needed to achieve competitive advantages in global markets. One view simply points to subsidies or trade barriers as the source of success, Japanese costs were artificially or unfairly reduced through intervention. Most sophisticated accounts contend the economic bureaucracy set up production allocation plants or sanctioned cartels that led to a more rational and hence lower cost industrial system. Bureaucratic regulation proponents believe that the state, especially the MITI, effectively planned and directed the transformation of the Japanese economy from its comparatively backward, war-torn condition in the late

1940s to its present status as an industrial giant (Friedman, 1988:3).

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Another argument of the regulation thesis was that the state’s role in the Japanese economy has been to provide national regulations and procedures and offer support and guidance needed to achieve competitive advantages in the international environment. This thesis limited state intervention to subsidies or trade barriers as the source of success. It argues that Japanese costs were synthetically or unfairly reduced through a protectionist style of intervention. This is contrary to the bureaucratic regulation thesis which argues that it was the economic bureaucracy that has set up production allocation plants or sanctioned interest groups that led to a more rational and hence lower cost industrial system (Friedman, 1988:3).

In the bureaucratic regulation thesis, MITI’s postwar economic policies came in several stages: first was a strategy of financial support. MITI directed funds towards key sectors from the mid-

1950s to the late-1960s to build the nation’s industrial base. Moreover, the focus was on the establishment of production and other performance targets for specific industries through the use of planning documents that stipulated concrete objectives. From the 1960s onward, MITI switched to a policy of consolidation (Friedman, 1988:71). The bureaucratic regulation thesis is informed by the view that state intervention in the economy came as a result of MITI’s capacity to direct funds towards key sectors. It also came as a result of MITI’s capacity to build the nation’s industrial base with its focus on the establishment of production and performance targets for certain sectors of industries through the use of planning documents that stipulate concrete objectives. This approach was given momentum in the 1960s onward when the MITI moved to a policy of strengthening the capacity of industries. During this period, the bureaucracy felt that consolidation was the only effective means of preparing domestic producers for what was expected to be severe foreign competition in Japanese markets. To accomplish consolidation, MITI set up a special loan to reward auto firms that emerged according to plan (Friedman, 1988:2004).

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8.5.2.4 The Ministry of International Trade and Industry (MITI)

In 1982, Chalmers Johnson asserted that Japan was a capitalist developmental state. Johnson’s argument was that under the regulation thesis, powerful national bureaucratic ministries such as the Ministry of International Trade and Industry (MITI) and Ministry of Finance operate in a symbiotic relationship with corporate conglomerates in Japan to develop an economic strategy and formulate national industrial policies. Johnson argued that a corporate developmental state is a system in which the state interferes in the operations of individual enterprises with measures intended to improve those operations. In Johnson’s view, the principal function of the developmental state is not the setting of rules or regulations, but the setting of substantive social and economic goals (Wang, 1994:100).

Johnson characterised MITI and the MOF in Japan as super ministries which have operated in unison with business multinationals in the development of economic plans and formulation of national industrial policies. “[A]n elite bureaucracy, a political system in which the bureaucracy rules and the legislative branch is restricted in power, the perfection of market- confirming methods of state intervention in the economy and a pilot institution like MITI”

(Wang, 1994:100).

Accordingly, Japan has, firstly, assigned to the bureaucracy the tasks of planning, constructing, and supervising industry. Secondly, Japan has established a political system to support the bureaucracy. Thirdly, when the government needs to intervene in the market, it is allowed plenty of scope for interventions in private enterprises (Pekkanen, 2004:364); (Abe, 2006:9).

8.5.2.5 The MITI Bureaucracy

According to Chan (1990:60), the bureaucrats of MITI played a vital role in developing an industrial vision and helping to realise this vision by encouraging cooperative behaviour by consumers, producers and elected officials. Whether owing to their political culture or

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tradition, these government officials have been generally able to avoid fragmented interests and disjointed decision making processes. Instead, MITI has been instrumental in facilitating seamless information exchange and a shared outlook between the Japanese public and private sectors. The role played by this agency was fundamental in the sense that it assisted in the development of an industrial plan and ensured the attainment of set goals.

There has moreover been an impressive selection of policy tools at their disposal: the power to regulate foreign exchange, to screen foreign investment, and license foreign technology (Chan,

1990:58). According to Johnson, the MITI model comprised a set of key characteristics of which continuity and autonomy of the bureaucracy have remained a constant feature. The priorities of MITI have ranged from policy formulation and implementation to economic growth, productivity and competiveness. With these priorities, the Japanese state has been able to target economic growth that would result in employment creation and a reduction of poverty and hunger as key service delivery elements.

Export markets were also targeted on productivity-enhancing measures in sectors that would facilitate growth in the economy. The state set competitiveness as one of its strategies, in the sense that it wanted the Japanese business sector to compete with international companies at a global level. MITI bureaucrats have thus determined which companies would participate at various stages of development and on the basis of set criteria.

8.5.2.6 MITI’s Administrative Guidance

The case of MITI serves to highlight the extent to which a state pilot agency can showcase success in the delivery of integrated services at all spheres, aquarelyon the strength of its bureaucratic capacity to understand societal challenges, commitment on the side of the state as well as understanding of the strategic intentions and national interests of the country. For this reason, MITI has been called Japan’s official doorman or gatekeeper. Its goal has been to foster

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national autonomy in vital industries such as steel, energy, computer, and telecommunication

– or to put it another way, to avoid foreign penetration and domination of these sensitive sectors. MITI officials were also able to influence the availability and cost of bank loans, the relaxation of antitrust bans, the geographic locations of particular plants, the supply of direct government subsidies, and the allocation of export quotas. Through these interventions, they have sought to bring about measures or collaborations amongst firms in order to reduce competition, limit production, and pool resources (Chan, 1990:60).

MITI officials thus have had the power to issue advisory directives called administrative guidance that attempted to steer firms toward and prepare them for tomorrow’s ‘sunrise’ industries, and at the same time to persuade them to shed yesterday’s ‘sunset’ industries.

Administrative guidance employs either threats of adverse consequences should a private party refuse to conform to a ‘suggestion or recommendation or alternatively, rewards’ to those that adhere to administrative guidance (Chan, 1990:60); (Ibadan, 1993.186). In the end, the administrative guidance concept emerged as a powerful tool for MITI in its role of directing the private sector to conform to the strategic requirements of the developmental state.

8.5.2.7 Strategic Thinking and Policy-Making Capacity

The strategic thinking and policy-making capacity of the state is pertinent. According to

Johnson, (1999:48), MITI has been more than a think-tank; it has been a powerful government agency that controls Japan’s industrial policy. The scope of such control encompassed the

‘protection of domestic industries, development of strategic industries, and adjustment of the economic structure to meet possible internal and external changes in order to safeguard the national interest, as understood only by MITI bureaucrats. MITI has thus served as a forum for corporate executives, scientists, academicians and politicians to develop consensus and unified strategy for industrial policy (Johnson, 1999:48).

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In developmental terms, ideational capacity is central and can be enhanced by think tanks and research agencies aligned to the state. MITI has played significant roles aimed at guiding, planning, intervening, and monitoring activities as part of a realignment of the economic structure towards national and international dynamics. It has also served as a strategic point of engagement and planning between private sector executives, scientists, academics and politicians in order to develop a coherent and amalgamated plan for industrial development.

8.5.2.8 Understanding the Japanese Bureaucrat

It is important to note that a Japanese bureaucrat is not a public servant in the Western sense.

Politicians shield and protect bureaucrats by not interfering or meddling in policies enabling bureaucrats to formulate innovate policies and strategies to keep Japan’s economy stable and in continuous prosperity reference. Entrance to the higher levels of the bureaucracy was by competitive examination among bright young graduates, typically dominated by one or two prestigious institutions such as the University of Tokyo (UT).

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Chapter 9

CONCLUSION: PROSPECTS FOR A DEVELOPMENTAL STATE IN SOUTH AFRICA - CHALLENGES AND RECOMMENDATIONS

9.1 Introduction

If the Japanese experience is a reasonable proxy, the South African developmental state is an evolutionary adaptation to social and economic challenges of the day. But it is still a long way off from the requirements of a capable developmental state based on the strength, competency and coherence of public servants necessary to convert developmental goals into reality.

Capable states, as Japan has demonstrated, must strike an appropriate balance between macro- economic policies and people-centred developmental micro-economic adjustments. The test of a genuinely capable developmental state is whether a government has been able to effectively transform society within set timeframes that are relatively short and agreed in contracts with people through election manifestos.

9.2 The Role and Identity of the South African Developmental State

If the measure of developmental states is exemplified by visionary leadership, nationalism, patriotism, a strong meritocratic career bureaucracy, a dominant political class, close ties between government and market, protectionism, paternalism and a massive investment in social infrastructure, then post-apartheid South Africa has displayed several of these features.

In defining the core characteristics of the South African developmental state, the country’s history of colonialism and apartheid are both constraints on economic development and challenges of the national development project. It is plausible to view the national development

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plan as a product of unevenness and economic dualism featuring advanced industrialised centres and marginalised peripheries where the majority of the population lives in poverty.

Spatial inequalities continue to take a racial form, while social inequality is acute, and unemployment hovers around 25 percent—the highest of any middle income country. High levels of concentration and monopolisation in the economy undermine competiveness and industrialisation and impact negatively on consumers (Levin, 2011:255). Skills shortages continue to constrain economic development. Taken together, the developmental state as both a political construct and economic agent necessarily has to be shaped and moulded by these legacy issues.

Much like post-war Japan, then, South Africa faces reconstruction challenges that cannot be left to the ‘invisible hand’ of the market to reallocate resources in the economy (Gumede,

2009:43-44). Because inequality is structural, the developmental state has to be actively involved in driving development in a manner that guides the direction, pace and goals of post- apartheid reconstruction. It is a state that has to be visible, its interventions geared towards prioritising the needs and aspirations of the people. It must thus be an active and not a passive state (Gumede, 2009:44).

9.3 Key Challenges in Pursuance of a Developmental State

According to Itumeleng Mahabane, President Thabo Mbeki’s 2005 State of the Nation address emphasised a shift to a transformative and developmental state aimed at entrenching the principle of shared growth (Southall, 2005:xvii-xviii). Arguably, this is the ideal basis for selective interventions and key decision-making processes that foster a unity of purpose.

For if the developmental state’s strategic mission is to ensure that all citizens are afforded an opportunity to participate in the mainstream economy, which would enable them to have access to employment opportunities and all other service delivery requirements, a strategic vision that

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mobilises sectional interests across historical and contemporary divides is a prime strategic challenge.

According to Southall, 2005:xxv):

A developmental state requires an intellectual, cultural, and philosophical shift that South Africa has not yet made...A technocratic and meritocratic civil service would be fired not only by the ambition of achieving economic growth, but also of promoting national interests as defined by the administrative elite.

Mahabane therefore makes a valid point: South Africa needs to move away from its past and yet, he argues, it seems not ready to make such a strategic shift.

Yet, the very fact of persistent inequalities directly related to the legacy of apartheid, means the developmental state is necessarily an identity construct rooted in the past. In some respects the ANC since 1994 has attempted to build a matrix of institutional arrangements in its urgent drive to normalise the state far too quickly and without cognisance of the peculiar structural challenges the country faces. In 1994, the ANC believed that the bureaucracy had first to be transformed before it could be an effective tool to drive a South African developmental state.

In one sense, this is perfectly consonant with current challenges. But in 1994 this meant that critical developmental reforms were postponed because the state was deemed unable to implement them at that juncture. The transformation of the public service, under former

Minister of Public Service and Administration Minister Geraldine Fraser-Moleketi, from apartheid into a developmental one, involved transforming the values and ethos, skills profile, systems and procedures, transparency and accountability, as well as efficiency and effectiveness of the state, perhaps too rigorously and, once again, without due regard to the dialectical relationship between the past and present in what has been called the ‘transition’.

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Instead, the government sought procedural solutions to the problem. According to a 2007 PSC report (Gumede, 2009:56), the public service is facing serious challenges in performing the functions of a developmental state and fulfil the Constitution’s demands. The Commission indicated that coordination within and across government departments remains poor, communication between government departments inconsistent, and that there was a lack of prioritisation of important developmental goals. The report lamented that there are no clear targets set in terms of government’s core developmental goals for each department or sphere of government. Accordingly, the report concluded that government departments operate without clear delivery and implementation goals (Gumede, 2009:56).

Thus, as ANC economic planners viewed the inherited public service as bloated, ineffective and expensive (Gumede, 2009:55), they failed to see the construction of the developmental state as a process of modernising the transformation agenda. In other words, there is in the challenge facing the government a larger question of strategy and sequence.

For the South African state to become developmental, it has not only to transform its public service to meet the demands of a developmental state but transform the public service on the basis of its culture and philosophy as was the case in Japan.

Having outlined the broad context for the South African developmental state, we can now zoom in on solutions.

9.3.1 Vision 2030: A Strategic Review

According to the ANC (2005:8), addressing the developmental challenges facing the country, including growing the economy and high rates of poverty, inequality and unemployment, as well as improving the livelihoods of South Africans, is a mammoth task that requires a developmental state that is democratic and inclusive, and that has the capacity to intervene to achieve the goals set by the government (ANC, 2005:8). Specifically, the ANC at its National

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General Council (NGC) in mid-2005 committed itself to constructing a developmental state that will intervene to restructure the South African economy (Edigheji, 2010a: 1).

In the view of the ANC, the potential to advance such an agenda and vision is enormous: for starters, South Africa is a democratic dispensation that presides over an inclusive society which is able to take into consideration the views of the poor and disadvantaged in formulating and implementing its developmental goals. In this context, the democratic state has the potential to make selective interventions based on the interests of the people and desire to bring about development.

It is on the basis of the above that, the ANC at its 52nd national conference in 2007, and in its manifesto for the 2009 general election, pledged to build a developmental state that will play a central and strategic role by “directly investing in under-developed areas and directing private sector investment” and also play a critical role in addressing the problems of high unemployment, poverty and inequality, as well as “accelerated economic growth” and address

“the skewed patterns of ownership and production”.

Thus the ANC Conference resolution linked the imperatives of economic growth to social challenges. The resolution states that, “whilst acting effectively to promote growth, efficiency and productivity, the developmental state must be equally effective in addressing the social conditions of the masses of our people and realising economic progress for the poor including through creation of descent work” (ANC, 2007a:22). In addition, the ANC in its 2009 Election manifesto indicated that, “The developmental state will play a central and strategic role in the economy, by directly investing in under-developed areas, directing and promoting public and private sector investment to support a sustainable and labour-intensive growth path” (ANC,

2009:10).

The ANC also resolved that the state would focus on actions that will guarantee large-scale

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investment in the productive sectors of the economy; public investments in creating and maintaining strategic economic and social infrastructure; the improvement of human resources through investments in skills-development, education and health; engaging in trade negotiations for reforms that support development objectives; and establishing and strengthening institutions to support innovation, research and development and agricultural activities” (ANC, 2009:10). This was a declaration of policies that would foster a developmental state agenda.

However, there was lacuna in the deliberations: the question of galvanising long-term strategic agenda and vision. Thus it was that the government, in its desire to become a developmental state, developed a National Development Plan (NDP) Vision 2030. The development of Vision

2030 was in line with the perception that a developmental state is a visionary state. Vision

2030 followed the Diagnostic Report of the National Planning Commission (NPC), released in

June 2011, which underscored the successes and challenges of the democratic era. Above all, it emphasised the fact that the country has made significant improvements that now make a developmental state possible and necessary.

In the view of the NPC Diagnostic Report, addressing these challenges was not going to be a quick-fix solution but required sustainable interventions by a developmental state.

9.3.2 The Problem of Poverty and Inequality

The NPC, through the NDP Vision 2030, has identified poverty and inequality as the key target towards building an active and intervening state. It outlined the purpose of developing a national development plan as that of declaring a war against the scourge of poverty and inequality, whilst at the same time creating an offensive chapter of developing and enlarging opportunities, building potentialities, reducing poverty and ensuring citizens participation in the decision-making processes, as well as in the development of their own communities. This

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is intended to ensure that the people’s living-standards improve for the better. Through partnerships, it is believed that the state would be able to create favourable conditions and an atmosphere that would necessitate high levels of public and private investment to create jobs and ensure rising incomes. The plan seeks to stimulate and expand economic opportunities through investment in infrastructure development and modernisation, private investment and industrialisation.

9.3.3 Partnerships in the Eradication of Poverty and Hunger

To this effect, the NDP advocates partnerships between all role-players and stakeholders towards building self-reliance and a greater field of opportunities for individuals and thus economic growth with social equity. For this to be realised, South Africa needs to develop and establish strong leadership at all levels, build a national consensus, premised on social solidarity forums mobilised around the national priorities and economic direction of the state

(The Presidency, 2011:2).

Such an approach in turn is based on a vision of an active citizenry receiving services from the state, one in which government intervenes to develop people’s capacities to lead the lives they desire (The Presidency, 2011:2). This latter approach to development and poverty reduction is founded on an approach which affords people need opportunities to actively participate in decision-making processes. It is also based on the approach that acknowledges the state’s active role in addressing past injustices.

Thus, the state has the responsibility to build people’s capacities by promoting high economic growth and higher investment and employment, raising the standard of education, health care and introducing effective social protection interventions. State interventions in the economy would here be aligned to social and economic strategies for the redistribution of state resources to all. In short, the new approach was conceived as the construction of an active state engaged

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in building effective and capable institutions, as well as promoting public-private partnership at all levels of government and the economy (The Presidency, 2011:3).

9.3.4 State Capacity to Deliver the RDP Mandate

By highlighting past failures of the state to deliver and provide services as a problem of capacity, NDP moved closer to the nub of the challenge: policy gaps created problems of coordination within government, which have made it difficult for departments to coordinate their efforts. The problem of coordination also existed between the public, private sector and the civil society. The document commits the state to a strategy of stimulating and expanding economic opportunities through investment in infrastructure development and modernisation, private investment and industrial development. The idea is that these kinds of intervention would facilitate economic investments in employment and, consistent with the RDP, stimulate demand and growth. More inclusive growth was proposed as a model for expanding opportunities (The Presidency, 2011:5).

9.3.5 Human Capacity

The South African state’s priority over a period of 30 years is to expand employment and entrepreneurial opportunities, a task which requires a deepening of the productive base in the area of agriculture, mining, manufacturing and services. To this effect, the plan emphasised the need to develop skills in order to match the demands of the economy. Interventions would be made in terms of tax subsidies to companies with the aim of reducing the cost of hiring and skilling new entrants to work opportunities. Subsidies would also be provided to placement centres in order to encourage them to identify, prepare and place young people in employment opportunities. Other initiatives include the need to extend the Expanded Public Works

Programme (EPWP) with the intention of encouraging the non-profit sector to contribute to job creation. The expansion of learnership programmes in order to facilitate the training of new entrants to the labour market is another component of the plan. Consistent with this approach

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is the promotion of life-long learning by enabling linkages between various educational levels as well as the implementation of an occupation-based educational system. The state would also relax its labour policies in order to attract foreign skills necessary or relevant for economic development in the country (The Presidency, 2011:112-113).

9.3.6 Infrastructure Development as a Means to Strengthen State Capacity

A focus on infrastructure and network services as part of growth acceleration forms the next strategic pillar of NDP. By linking infrastructure development to support for traditional industries such as the mining and agriculture, and newer dynamic industries and associated linkages, domestic costs would be reduced and a substantial improvement in the economy- wide efficiencies realised. Such focus would assist promotion of an accelerated and sustained growth rate. Specifically, the nature of infrastructure development programmes should seek to minimise transport costs and the real cost of communications network services (The

Presidency, 2011:105).

9.3.7 Trade Investment

Improvements in foreign trade are advanced as a basis for stimulating areas where there is a competitive advantage and growing global demand. The idea is that South Africa needs to identify areas in the global market that establish a niche with the potential to contribute to economic growth and job creation in the local or domestic market. Therefore, there has to be a link between the state capacity to produce at the local or domestic market and external demands of the products (The Presidency, 2011:106). For this happen, the state should be able to intervene in the allocation of incentives, direct and guide the procurement of goods and services, research and development, and infrastructure investments with a view to providing the right type of skills (The Presidency, 2011:107).

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9.3.8 Equitable Employment Opportunities

The plan acknowledges that slow economic growth weakens levels of employment. It advocates new labour policies to ensure equitable employment opportunities and attract investment, as well as address obstacles to skills development and career mobility (The

Presidency, 2011:111). This intervention is advanced in partnership with the business sector committing to high domestic investment and labour absorption levels.

9.3.9 Entrepreneurial Skills for Youth

The plan also emphasises the need for early-stage entrepreneurship training targeted at youth.

The view is that artisan training and practical experience would lead to the creation of new companies and the expansion of the economy (The Presidency, 2011:119). The need to match skills with the demands of the economy and society in one generation is thus highlighted. What this means is that skills production should be informed by economic expansion, thus enabling the creation of employment opportunities on a sustainable growth path (NPC, 2011:120).

9.3.10 The Role of the State and Institutional Capability

The South African state’s major economic growth constraint is poor coordination and integration across state institutions, multiple priorities that are not even aligned or integrated.

The other constraint is unidentified hierarchies among the superfluity of government departments (NPC, 2011:133). Furthermore, poor investment decisions commit the state to costs and subsidies that hinder other priority investment and ultimately constrain economic growth (NPC, 2011:137).

The NDP has recognised that South Africa has the challenge of clearly outlining the roles and responsibilities between the three spheres of government: that is, national, provincial and local government. It calls for national government to intervene in addressing policy and service delivery gaps through the devolution of powers to an institution that has greater responsibility

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in service delivery: local government. It highlights that capacity at the level of municipalities needs to be strengthened through the appointment of well-trained, skilled and capable officials

(NPC, 2011:366).

9.3.11 The Role of Public Servants and Politicians

The plan also emphasises the need to demarcate the roles of public servants and politicians.

The close relationship, it is said, between politicians and bureaucrats has the potential to undermine service delivery. The document acknowledges that at the moment there is no clear demarcation of responsibilities which seem to be manipulated by individuals through political interference in the administrative functions of the state. There have been instances, for example, where government officials were appointed on the basis of political connections with those in power, and with no necessary experience and expertise to do the job. In some instances, services are provided on the basis of political affiliations, which leaves those with no political connections marginalised (NPC, 2011:366-367).

South African institutions are also affected by the high turnover which has a negative effective on the administrative leadership and policy approach of the state. Most leaders of South

African state institutions have moved to the private sector which has left a skills vacuum at these institutions. The lack of administrative leadership and stability at the level of state bureaucrats has negative implications for the delivery of services. The other factor is inconsistent reporting lines. In particular the appointment of Directors-General (DG) and

Deputy Directors-General (DDG)needs to be redefined with more power allocated to the

Ministers, and not Cabinet, as the current system has made reporting problematic and cumbersome. This would assist in stabilising the political-administrative interface (NPC,

2011:367).

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9.3.12 The Public Service Commission

The role of the Public Service Commission (PSC), according to the NDP, needs to be strengthened to promote norms and standards as well as monitor appointments. But there is a caveat: that the PSC should not be given a direct role in recruitment. The plan also proposes the establishment of an Administrative Head of Public Service (NPC, 2011:367). Accordingly, the South African state needs to ensure that the public service is comprised of professionals.

This, it is proposed, could be done through the application of a hybrid approach to top appointments, in which a selection panel could be established under the PSC and

Administrative Head of Public Service (AHPS). The selection panel would be responsible for a short-list of suitable candidates from which political principals would select suitable ones.

This would ensure that officials with capable skills are appointed in critical or strategic positions (NPC, 2011:369-370).

9.4 Recommendations towards Better Strategic Coordination

If the first part of building a developmental state in South Africa is to grow the economy, the second part requires building a capacitated administrative machinery and institutional architecture capable of delivering services to the poorest of the poor. The point is that the model developmental state, amongst them the most industrially dynamic and highly coordinated market economies, attests to state adaptiveness and to the increasing salience of coordinating capacity. Certainly in the light of the East Asian experience, it appears that state capacity for industrial transformation is alive and well, at least in those countries where post- war development has occurred under the aegis of developmental states. It is certainly the case that in spite of a more integrated world economy, the high performance industrial economies

(Japan, Korea, Taiwan and Singapore) are in a relatively strong position – especially compared with uncoordinated market economies of Anglo-America–to mobilise interventions and investment required to sustain growth and development. One further implication is that as the advantages of coordinated market economies continue to be highlighted, potential adaptors of

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the Asian model are more likely to emerge than blind followers of the neo-liberal model of capitalism. South Africa is one such example.

Thus, if there is a single lesson to be learned from East Asia it is that industrial transformation and service delivery in South Africa should be left in the hands of professionals within institutional arrangements who are clear about their objectives and have the technical expertise and strategic coordinating capacity to deliver (Munslow and Mc Lennan, 2009:8).

But how exactly is such an ideal-typical set-up to emerge? In failing to marshal state resources towards tangible delivery outcomes, policy-makers have, until recently, put blinkers to an important possibility: that far from being incompatible, the devolution of responsibilities to local government and centralisation of administrative and coordination capabilities in the NPC are responsive to the dual challenge of strategic coordination and ground-level delivery outputs.

Certainly, institutions in successfully developmental states such as Japan, mandated with the responsibility to deliver services or guide the state towards strategic priority outputs, are established as a planning agency. In South Africa’s context such an agency is consituted by the NPC. Yet how the NPC deploys its architecture across different tiers and spheres of government is a complex matter which depends on additional reforms.

Based on some of the lessons of East Asian development states, Japan in particular, and the analysis of the National Development Plan document, this study will next set out some recommendations in the final strand of this study towards enhancing the strategic coordinating capacity and institutional efficacy of the South African state.

9.4.1 The Role of Policy and Coordination under the Mbeki Presidency

In June 1997, former President Thabo Mbeki transformed the Coordination and

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Implementation Unit into the Policy Co-ordination and Advisory Services (PCAS), which drafts, scrutinises and vets new policies tabled to Cabinet. The PCAS was directly accountable to the President. Mbeki also introduced clusters to tackle national priorities and get Cabinet

Ministers whose functions overlapped and to work cooperatively with their main responsibility of ensuring the alignment of policies and partnerships across government structures. New centres called presidential working groups were introduced for economic policy-making, which directly reported to the Presidency (Gumede, 2009:52).

The key role of the PCAS was to develop critique and evaluate new policies before they were enacted into laws. In essence, the PCAS would advise Cabinet and various Cluster Committees on policy formulation and implementation issues with a view to improving service delivery.

This was a clear indication not necessarily of how Mbeki managed to centralise power in the

Presidency, but his attempt to galvanise and harmonise selective interventions.

9.4.2 Coordination Challenges

However, despite all these efforts, clusters of state departments had not worked optimally

(Gumede, 2009:53). According to ASGISA’s first annual report, the Presidency complained about the lack of coordination between government departments, but partly blamed this on turf wars. Government departments appeared to work in silos, with little cooperation, the report noted. Moreover, there were challenges with regard to information flow from top to lower levels of implementation and between the different tiers of government – national, provincial and local. According to policy analyst Neva Makgetla, the early failure to establish coherent and unambiguous transformative objectives for the economic departments was working against coordination (Gumede, 2009:54).

The introduction of clusters, in an effort to ensure coordinated development, had its own hiccups. There was always a concern that the cluster system had failed to address problems of

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coordination of service delivery across government. The key factor identified was the problem of territorial protection from one department to the other. Silo mentalities, as we have noted, between departments resulted in one department squabbling over its own programme being shared with other departments, which in the end resulted in a lack of visibility or over- utilisation of its resources in the programme. The lack of coordination also created problems between Ministers as they often disagreed on policy and service delivery matters, particularly in terms of varied approaches by the departments or institutions involved. Inter-Ministerial conflict was also a result of power struggles over which departments had a primary role in as far a programme or project was concerned.

Coupled with these problems was a lack of vertical and horizontal communication—from top to bottom and from one department to the other. As Neva Makgetla put it, these problems were a result of a lack of coherent and coordinated objectives across government which made it difficult for government to work towards the attainment of a common strategic agenda

(Gumede, 2009:54).

There was, by the end of the Mbeki Presidency, a strong view that better coordination and a more cohesive hierarchy was needed.

9.4.3 The National Planning Commission

It was in response to the challenge of coordination that President Jacob Zuma established the

NPC. The latter operated from within the Cabinet and was made up of selected government

Ministers, senior civil servants and outsiders. Like the PCSA under Mbeki, the NPC reports directly to the President. Its functions are defined as the promotion of alignment of government budgets with national developmental planning, setting broad targets through medium-term and long-term plans, conducting strategic risk assessments, and acting as a secretariat to the council of state (Gumede, 2009:53-54).

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As a macro planning tool, there is now common acceptance in government that the NPC is a timely innovation towards the establishment and deployment of the state’s administrative and political apparatus to ensure the effective provision of services such as education and training and health care. In most developmental states, such institutions are sometimes referred to as super-ministries. It is in fact axiomatic that states that have aspired to become developmental have established a planning agency of some sort. Most of these agencies are located within the office of the Head of Government (HOG), the very nerve centre of development planning and policy-making. The establishment of planning agencies in developmental state is thus partly necessitated by the need for the state to have in-house capacity to generate and analyse information on the basis of which it formulates its national development plan (Edigheji,

2010b:18;26-27).

9.4.4 Recasting the National Planning Commission

To the extent that the South African state is seeking to adapt and reconstitute itself as a catalytic state, an essential planning agency like the NPC should be about enhancing the technical and organisational capacities of the state, rather than outsourcing government planning capacity and authority to external experts. Indeed, the Green Paper on the National Strategic Plan (NSP) which is a blueprint for the establishment of the NPC, is worrying in the sense that it is focused more on contracting out government planning capacity rather than building an in-house capacity. Perhaps unwittingly, then, the NPC has been steeped in the ideology of anti-state intervention, and hence may fail to strengthen the capacity of the state to coordinate and integrate its policies and programmes (Edigheji, 2010b:30).

The important point to note is that the commitment by South African political leaders to build a developmental state before strengthening coordinating capacity of institutions such as the

NPC raises serious problems with regard to the effectiveness and autonomy of the state. That

NPC should have focused on the enhancement of technical and organisational capacities of the

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state is a point advanced by Peter Evans in his comparative study of political economy in third- world states. Evans articulated the notion that the strategic coordinating and implementation capacity of the state should be founded upon a set of institutions which simultaneously insulate the economic bureaucracy from special interests and establishes cooperative links between bureaucrats and organised business. He observed that states which are more effective in achieving their transformative goals tend to be not merely sufficiently autonomous to formulate their own goals, but also sufficiently embedded in particular industrial networks to implement them (Weiss, 1998:35).

The work of MITI in Japan as an agency of state instrumental for driving the Japanese economy forward prompted Peter Evans to highlight the importance of independent public servants as a necessity for effective or successful developmental states. Evans went further to outline the significance of state coordinating capacity in the sense that it was through that capacity that

MITI bureaucrats in Japan managed to formulate and implement policies and establish partnerships with the right institutions, in particular between public servants and the private sector. Evans concluded that states that are successful in achieving their developmental goals in the manner that Japan did exemplify a classic case of strategic institutionalised coordination embedded in partnerships and industrial networks (Weiss, 1998:35). If the NPC is to function optimally, it must not only expand its reach but facilitate the institutionalisation of partnerships.

9.4.5 Institutional Coherence

Part of the challenge of strategic coordination is institutional coherence. In this regard, the bigger hindrances are fragmented and incoherent authority structures, the nebulous positioning of managerial authority and fudged lines of accountability. Attempts to impose a remote but overweening authority from head office level do not help matters. The result is managerial inefficiency and bureaucratic inertia (Marais, 2011:351).

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These problems emanate from a lack of or non-existence of proper structures. Due to this apparent institutional and policy vacuum, corruption and mismanagement are escalating to a point where the system has become weak and ineffective. Morale in the public service has also deteriorated due to a lack of strategic coordinating capacity. As a result, a culture of arrogance imposed by the national government is emergent, resulting in managerial inefficiencies and bureaucratic apathy.

To deal with the problem in the absence of a normative and institutional base for strengthening capabilities, means coming to terms with the limits and potential of the relative autonomy and authority of the NPC. The overriding architecture and institutional design could lend greater coherence to different tiers and spheres of government.

9.4.6 Technical Capacity

One can add a second priority intervention of technical capacity to provide complex services.

The National Development Plan is revealing in this regard: the focus of service delivery has tended to be more on those services that are easy to roll out, such as grant payments and providing water and electricity whilst more complex and strategically important services such as education, employment and housing tend to be neglected. If anything, this is a typical example of a deformed developmental state agenda (NPC, 2011:5).

Part of the success of the Japanese developmental state lies in the fact that its educational system is of a high standard. The Japanese educational system focuses on building comprehensive knowledge instead of specialized education. Solid academic subjects such as mathematics, biology, general science, foreign languages and world history are taught at high school level. General education in most cases serves as preparatory courses for college education (NPC, 2011:5).

In stark contrast, knowledge production in South Africa is not evenly distributed and does not

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square with innovation. The knock-on effect is a lack of critical skills such as specialist technical skills, making it difficult for South Africa to advance its infrastructural development ambitions. In order for the state to address this challenge, the focus needs to be on building experience and expertise at all levels (NPC, 2011:365-363). For if lower living costs could be realised through targeted microeconomic reforms in transport, telecommunications, food and spatial planning; and better quality public services, technical capacity is crucial (NPC,

2011:92-93).

9.4.7 Towards a National Innovation System (NIS)

Consistent with ethical skills production is the deployment of technology. Three considerations seem relevant. First, new technologies place a premium on fixed costs (equipment, machinery and so on), while reducing the importance of variable costs such as wages and raw materials.

While certain types of labour–especially knowledge-intensive labour – tend to be treated increasingly as a fixed cost, the general effect of this overall transformation is to reduce the cost savings to be gained by moving to low-income sites.

Second, new production methods emphasise the importance of physical proximity between producers and suppliers of services. These methods privilege local supplier networks, thus driving a trend towards the constitution of local instead of global sourcing networks. A third factor underscoring the critical importance of technical competencies is the advantage of public-private partnerships to enterprise development and service delivery: national institutional frameworks which would enmesh business in support relationships with business and financial institutions, and national and local government. In sustaining this institutional framework, one of the most important of these support systems is the relationship between government and business, which could underpin the national innovation system. Being generally exclusive rather than open to all, support partnerships of this kind could culminate in a competitive advantage.

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9.5 Conclusion

Let us conclude by recapping some of the salient issues in this chapter. First, the desire for the developmental state in South Africa is that it is seen as a panacea for the country’s social, economic and institutional problems. However, the capacity of state to provide basic goods to citizens and thereby put an end to the spate of service delivery protests relates to a structural problem and barrier to the full realisation of the National Development Plan. Yet, the fact that

South Africa possesses weak state capacity is not an excuse but rather a motive for constructing a developmental state (Edigheji, 2010b:3). The relevance of the developmental state, in other words, is partly a consequence of weak capacity and the challenge of addressing the peculiar socio-economic problems in the country. It is seen, in other words, as a way and manner in which the government could effectively construct the capacity of the state and meet its constitutional obligation to provide basic services.

Secondly, the major challenge is to address frontally the issue of the state’s strategic coordination and institutional capacity to not only deliver services but forge a social contract

(Edigheji, 2010b:3). This point was highlighted by former Minister of Planning Trevor Manual thus, “Implementation will not be realised unless we can transform public servants into a first- line cadre of development activists. Some actions from our present and recent past leave so much to be desired in the conduct of public servants. If our public servants are not transformed, our ability to weave formal and informal networks of collaboration will not be realised and any notion of patriotism will fall by the wayside” (Plaatjies, 2011: xxxi). It is now clear that developmental states are characterised by a very high degree of embedded bureaucratic autonomy and insularity (Saloojee and Pahad, 2011:1). The improvement of public service capacity is thus dependent on professional conduct and ethics, efficiency and effective coordination of resources across all levels of government.

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Thirdly, the current crisis of the South African public sector is deeply embedded in a general economic duality: the moment thrown up by the dual challenge of economic development and redistribution is more than just another test case for government policy; it signals the necessity for a significant change in the overall transition from institutionalised apartheid. Given the moral and racial issues involved, not to mention the economic interests at stake, it is bound to engage the emotional commitments of a large number of players, chiefly labour and civil society.

It would seem that the impending choices confronting the government and policy-makers are between expediency and efficiency; between the interests of a nation and the interests of others as sectional groups; and between the claims of the black majority and the counterclaims of the well-off. In seeking to attune the State’s commitments and responsibilities to the theme of human rights and social transformation it becomes all the more clear what the practical implications of these choices are: they may be informed by principles that are not shared by society as whole.

Indeed, in the South African public sector the pathways to development and social transformation are tortuous and strewn with countless obstacles. The end is not yet in sight.

Seen through the fog of competing interests and social contradictions, the first step to understanding the prospects for a resolution of the problem facing the State is to recognise that there are no easy wins.

The National Planning Commission Diagnostic Review (NPC, 2011, 27) has noted that the

State’s constitutional requirement to provide the basis for restoring the dignity of all South

Africans logically translates into an institutionalised process of “setting aside differences to work together for a progressive, noble vision of equity, non-racialism and non-sexism that is within our grasp”. Here it is expected that a meaningful consensus envisaged in South Africa would build on the explicit social contract embedded in the Constitution, and be anchored on

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mutual sacrifice and mutual benefit in order to make real the aspiration embodied in the

Constitution: healing the divisions of the past and establishing a society based on democratic values, social justice, fundamental human rights and an active, responsible and accountable citizenry. Certainly, the many successful societies that eradicated poverty in a short space of time used a social compact of some sort through which those at the bottom end of the income pyramid together with all others have enjoyed a steady rise in living standards.

The question, then, becomes: what room is there for a social pact? Specifically, what strategic options are ranged before the government?

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