This is the more detailed version of a piece on a ‘three-pronged new deal’ for South Africa which appeared in The Conversation in early May.
The first few months since Cyril Ramaphosa became president have started “brilliantly”. However, unless the country’s citizens become convinced that the core challenge of constructing a more inclusive economy is being addressed effectively, the gains will prove ephemeral.
As the great development economist Albert Hirschman argued in the 1970s in the context of Latin America, to provide a platform for progress, society’s problems don’t have to be comprehensively solved. Rather, what is needed is a credible narrative that can kindle hope that the country’s pernicious collision between inequality, poverty and ethnicity is indeed being addressed. This article highlights three mutually-reinforcing pillars as central to a credible ‘new deal’ for South Africa:
- Strengthening ‘ladders of opportunity’ – enhancing the potential for upward mobility by the excluded middle of South African society;
- Providing the fiscal resources needed for the ladders of opportunity to be effective; and
- Active citizenship – as a key governance underpinning to enhance the effectiveness and legitimacy of the public domain.
Ladders of opportunity
In the quarter century since the demise of apartheid, South Africa has made significant progress in reducing extreme poverty – the proportion of the population who confront hunger on a daily basis declined from 27% in 1995 to 11% in 2010. However, it has been much less effective in addressing the challenges of inequality. As a paper I co-authored with Alan Hirsch and Ingrid Woolard details, relative to other middle-income countries (MICs), South Africa’s economy is extraordinarily dualistic – its citizens are either affluent or poor, with little in-between. The richest 10% accounts for a much higher share of spending than in other MICs; unionized white and blue-collar workers also do relatively well. But beyond these narrow segments, opportunities for upward mobility have been harder to come by.
How might this be turned around? The stale ideologically-driven discourses of the left (“beneficiation”) and the right (“liberalize labour markets”) are unhelpful. Focusing on ladders of opportunity offers a fresh, hopeful way forward. Here are some illustrations of what is doable. (Some already are part of the policy discourse, but with the wider purpose lost in inconclusive, ideologically-driven debates over the details.):
- Ladders of skills – the quality of basic education is an obvious area of continuing focus. Resources for schooling are in line with what is available other MICs, but with governance (on which more below) the critical challenge. However, as I detail further in the piece linked here, compared with other MICs, South Africa’s efforts turn out to be strikingly weak both earlier in childrens’ life cycle (ie early childhood development) and once adolescents leave school (especially in technical and vocational education). Much more needs to be spent on both – so long, that is, that it is spent effectively.
- Ladders of earnings opportunities – accelerated economic growth and private sector job creation obviously are a necessary part of what is needed. But equally obviously given South Africa’s toxic combination of inherited structural economic rigidities and endemic conflict between business and organized labor, a call to leave job creation to the market is not sufficient. Programmes to support entrepreneurship sound appealing, but have a very mixed track record. Public works programmes, and an employment tax incentive targeted at younger workers have shown some success. Both can and should be further scaled up – with the latter perhaps also targeted to attract manufacturing jobs moving offshore from China.
- Ladders of spatial wellbeing – overcoming the continuing bifurcation of South Africa’s cities. Skewed access to urban land and housing is one of the most pernicious legacies of apartheid. For poor South Africans, the costs of transport to-and-from work are the equivalent of 40% of their earnings.
- Ladders of physical wellbeing – as the foundation for learning, for work, and for a fulfilling life. Ambitious initiatives have been set in motion to expand access to health care – but scaling up barely has begun.
- Finally, to illustrate the range of what might usefully be considered, here is an example from Anthony Atkinson’s magisterial book, Inequality: “There should be a capital endowment paid to all at adulthood…A case can be made for imposing a degree of ‘prudence’ on its use…Possible permitted uses could include education or training….down payments on houses or flats, or the establishment of a small business.”
Providing the requisite fiscal resources
Building effective ladders of opportunity will not come cheap. Strikingly, notwithstanding almost three decades of effort to reverse South Africa’s legacy of extreme historical injustice, relative to many other middle- and high-income countries the country is not highly taxed. At 28%, 2014 revenue collection as a percentage of GDP was in the mid-range among MICs, well below Brazil (34%) and Turkey (36%) – or for that matter the high-income United States (32%), Australia (34%) and Germany (45%). Taxes on wealth are relatively low. In its 2018 budget South Africa increased its maximum inheritance tax on wealth from 20% to 25%. By contrast, from the mid-1930s until the early 2000s, the top inheritance tax rate in the United States consistently was in excess of 50%.
Though there may thus be (arithmetic) tax capacity to absorb the costs of strengthening ladders of opportunity, tax compliance depends importantly on the broader legitimacy of government. Given recent history, many South Africans are deeply skeptical of new government initiatives. There are credibility challenges to address – credibility that resources will be well spent, and credibility that the South African Revenue Service (SARS) is effectively collecting those taxes which are due under the current set of rules. Addressing these challenges will require new action on the governance front. Here, too, business as usual won’t do.
In his inaugural State of the Nation address, Cyril Ramaphosa invited South Africans to embrace the late, great trumpeter Hugh Masakela’s call of‘Thumi mina’ – ‘send me’. In so doing, he was bringing renewed attention to a participatory strand of the country’s political discourse. As the 2012 National Development Plan puts it:
“To build an inclusive nation, the country needs to find ways to promote a positive cycle, where an effective state, inspirational leadership across all levels of society, and active citizens reinforce and strengthen each other”.
This engaged approach goes against the grain of the hierarchical (“government should deliver”) perspective as to how the public sector should work with which most South Africans are imbued (drawing variously from colonial, apartheid, ‘democratic centralism’ and patriarchal discourses – all deeply-rooted, all hierarchical). However, as experience from many countries underscores (see here, here, here, and here), focusing narrowly on the management of public bureaucracies is insufficient to turn around weak public performance.
Building on recent research in South Africa and elsewhere, here are some concrete ways in which an active citizenry can contribute to the efficacy of efforts to strengthen ladders of opportunity:
- Leveraging the energy of parents and communities to strengthen educational outcomes. As shown by the experience of Kenya and many other countries (and, indeed, some notable school-level success stories in the Eastern Cape), supporting parents and communities to take on their roles more effectively can have a powerful positive influence. The South African Schools Act gives school governing bodies (SGBs) substantial decision-making authority. However, outside of schools which cater to elites, no systematic effort has been made to give life to these formal arrangements. On the contrary, the focus of recent policy proposals has been on scaling back their authority.
- Leveraging the energy of non-governmental organizations to strengthen early childhood development. Many South African NGOs are doing extraordinary work to improve ECD. There are abundant opportunities to achieve gains at scale through pro-active partnerships between these NGOs and government. But in practice government-NGO collaboration has been difficult.
- Partnering with the private sector to strengthen work-related acquisition of skills. Opportunities range from support for technical colleges, for apprenticeships, and for sectoral training authorities (SETAs) – indeed the governance structure of SETAs initially was structured around formal partnerships, including with trade unions. As the all-too-often dismal experience with SETAs signals, this potential barely has begun to be tapped. The recent YES initiative is a promising sign that things may be beginning to change (provided it continues to move beyond the realm of flashy public relations).
- Building inclusion into the fabric of urban development. In many parts of the world, vibrant urban development combines commercial, upscale and social housing as part of an integrated whole – with developers sometimes mandated to incorporate some social housing alongside their more lucrative upscale investments. South Africa’s dismal history of forced removals and apartheid geography makes especially compelling the case for doing this – and, more broadly, for reaching collective agreement on how to make land available for thriving, multi-class urban neighborhoods. Yet so far the discourse between local governments, activists and developers largely has been a dialogue of the deaf.
As the above examples suggest, a successful ‘new deal’ will require renewed commitment from all South Africans – not only as taxpayers, but also as citizens. Comfortable nostrums which deflect blame and shift responsibility for action somewhere else will no longer suffice.
A bill is coming due. The question is: how will it be paid? Through a downward spiral, with an assertion of equal dignity which comes at the cost of diminished material well-being for (almost) everyone? Or through sustained efforts to invest in building a thriving, inclusive economy and society? Which it will be remains a matter of social and political choice, at least for now. But free rides don’t last forever.