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THE NEXT DECADE Perspectives on South Africa’s growth and development This study has been funded by the Ford Foundation, the Open Society Foundation for South Africa, the Charles Stewart Mott Foundation, the Friedrich Naumann Foundation, SABMiller, DaimlerChrysler, and Shell South Africa. THE NEXT DECADE Perspectives on South Africa's growth and development Edited by Ann Bernstein and Sandy Johnston Johannesburg November 2005 Published by The Centre for Development and Enterprise Pilrig Place, 5 Eton Road, Parktown, Johannesburg, South Africa P O Box 1936, Johannesburg 2000, South Africa Tel 27-11-482-5140 • Fax 27-11-482-5089 • [email protected] www.cde.org.za Cover photograph: A community road worker directs traffic at a construction site near Qunu in the Eastern Cape. Lori Waselchuk / South Photos / The Bigger Picture The views expressed in this volume do not necessarily reflect those of the project's funders. All rights reserved. The material in this publication may not be copied, stored, or transmitted without the prior permission of the publishers. Short extracts may be quoted, provided the source is fully acknowledged. ISBN 0-9584697-5-X CONTENTS About the editors 4 About the contributors 4 Introduction 7 Part 1 Reflections and narratives Chapter 1 Reality and perception ten years on 23 Marion Edmunds Part 2 Can the social fabric sustain growth? Chapter 2 Family, young people, and the social fabric 49 Peter Delius Chapter 3 The effect of crime on business 68 Jeff McCarthy Part 3 Mobility and inequality Chapter 4 Inequality in post-apartheid South Africa 93 Jeremy Seekings, Nicoli Nattrass, and Murray Leibbrandt Chapter 5 South Africa's new middle class 112 Lawrence Schlemmer Chapter 6 Black economic empowerment 141 Kevin Davie Part 4 Economic policy: GEAR and after Chapter 7 Growth in South Africa 165 Merle Holden Chapter 8 Going for growth: the ANC government’s economic policies 189 Greta Steyn Part 5 The extended growth agenda Chapter 9 Social delivery in South Africa 209 Servaas van der Berg and Ronelle Burger Chapter 10 Welfare and development 228 Stefan Schirmer About the editors Dr Sandy Johnston is a senior research and project executive at CDE with responsibilities for conceiving and managing research projects, as well as writing and editing reports. Prior to join- ing CDE he was professor of political science and head of the school of undergraduate studies at the University of Natal, Durban. He has published widely on South Africa’s politics and interna- tional relations. Ann Bernstein is the founding executive director of CDE. A leading proponent of the impor- tance of economic growth in promoting democracy and sustainable development strategies in South Africa, she previously served as an executive director of the Urban Foundation. She has also been a board member of the Development Bank of Southern Africa, and a visiting profes- sor at the University of Cape Town. She has published extensively on business, democracy, development, and policy-making in South Africa, and is one of South Africa’s leading policy analysts. About the contributors Ronelle Burger is a researcher in the department of economics at the University of Stellen- bosch. Her work is focused on service delivery and poverty alleviation. Kevin Davie is a journalist and editor specialising in business issues. He is a contributing edi- tor to the Mail & Guardian. Dr Peter Delius is a professor of history at the University of the Witwatersrand. He has done extensive work on the impact of colonialism and urbanisation on African rural societies, and has undertaken numerous research and policy projects for public and private sector bodies. He is a senior consultant to CDE. Marion Edmunds is an investigative journalist and broadcaster. She is currently a producer and presenter of the M-Net programme Carte Blanche. Dr Jeff McCarthy is a consultant on development research and strategy. He has held professo- rial posts at the universities of Natal and Durban-Westville. He has undertaken major research projects for public and private sector institutions. He is a senior consultant to CDE. Dr Merle Holden is a professor of economics and head of the School of Economics and Man- agement of the University of KwaZulu-Natal, Durban. She serves on the Board of the Trade and Industry Policy Strategies, the Competition Tribunal of South Africa, and the Financial Markets Advisory Board. ABOUT THE CONTRIBUTORS ■ Dr Murray Leibbrandt is a professor of economics at the University of Cape Town, and the director of the South African Labour and Development Research Unit. Dr Nicoli Nattrass is a professor of economics at the University of Cape Town. She has pub- lished widely on macroeconomic policy, inequality, and unemployment. Dr Jeremy Seekings is a professor of political studies and of sociology at the University of Cape Town. He is also the director of the social surveys unit in the Centre for Social Science Research at the same university. Dr Stefan Schirmer is a senior lecturer in economics at the University of the Witwatersrand. His research interests are agricultural and rural development, the history of the South African economy, and African development. He is a consultant to CDE. Prof Lawrence Schlemmer is the director of the Helen Suzman Foundation, and a director of the strategic social research company MarkData. He has held several senior academic posts, and consults widely as a sociologist and political analyst to both the public and private sectors. He is a senior consultant to CDE. Greta Steyn is a journalist specialising in finance and business issues. She is an associate edi- tor of Finance Week. Dr Servaas van der Berg is a professor of economics at the University of Stellenbosch. He has published widely on income distribution, poverty and social policy. He consults widely to pub- lic and private sector organisations in South Africa and overseas. 5 ■ INTRODUCTION here is no ideal vantage point from which to take stock of South Africa’s progress since its T transition to democracy, and the challenges facing it during its next phase of development. Elections provide a five-yearly opportunity to do so, but in a context distorted by the anxiet- ies of political contest, even in an electoral system as uncompetitive as our own. Anniversaries such as the first ten years of democracy in 2004 will always be important for a democracy such as ours, which has its origins in foundation rather than evolution. But the ink on the anniver- sary report cards had hardly dried when events surrounding the succession to ANC leadership threatened to alter the political landscape significantly, and demonstrated how unpredictable the state of our nation could be. Oblivious to both anniversaries and political headlines, the long-term trends in society and the economy that shape and define South Africa’s challenges continue to unfold. The purpose of this publication is to highlight those trends, and identify those challenges. However, it is neither a state-of-the-nation panorama, nor a snapshot of a historical moment in the life of a democracy. It is guided by selection and priorities, and above all by the acceptance that our progress as a nation is ragged and uneven. Trends may be out of step with each other, contradictions may abound, and synthesis may be very difficult. Difficulty is no excuse for defeatism, however, and in this spirit CDE commissioned research in those areas which we believed to be particularly important. Our starting point was the belief that economic growth is central to all of the country’s chal- lenges. We regard economic growth as the only way to create a context in which poverty and persistent economic, social, and political divisions can be tackled. Two things in particular shape and condition this belief in growth. The first is that relations between state and market are fundamental to the prospects of economic growth, and that this rela- tionship is more complex and nuanced than can be captured by slogans about ‘the Washington Consensus’ and ‘neoliberalism’. Secondly, we understand the prospects of economic growth to be determined by a wider range of influences than simply economic policy, narrowly defined. In par- ticular, the state of the social fabric – encompassing issues such as family structures, social mobility, and inequality – provides (or fails to provide) essential ‘soft’ growth factors such as confidence, trust in the system, independence of thought, and entrepreneurial qualities such as innovation and risk- taking that complement the ‘hard’ policy-driven conditions for growth. It is out of these and other concerns that the research agenda took shape, and the menu of challenges developed. REFLECTIONS AND NARRATIVES To place this agenda in context, CDE commissioned a survey of opinion-makers’ views on the first ten years of inclusive democracy from Marion Edmunds, an edited version of which appears as ■ INTRODUCTION chapter 1. It confirms how difficult it is to pull everything together, and hope for a South African synthesis. The best device for communicating the varied and nuanced assessments of the inter- viewees was to compose them into narratives. While they reflected different perspectives, and emphasised different elements, they overlapped to a significant degree. This overlap perhaps reflects the tendency of opinion-makers to cluster around the centre and the consciousness of the need for nation building, which guides almost all constituencies of opinion in South Africa today. The prominence given in the various narratives to questions of economic management and growth draws attention to one important aspect of South African politics and policy-making: that the government’s handling of the economy is more warmly approved by those who are out- side its natural constituency – or even compete with it for office – than those with whom it is in alliance and on whom it relies for support.