Aluta continua!

Recently Archbishop Desmond Tutu delivered this year's Nelson Mandela Lecture. Among other things, he called for rational discussion of the challenges our country faces, involving as many of our people as possible. I fully agree with this appeal and hope that many of us will participate in this multi-issue discussion.

Specifically the Archbishop said: "We should not impugn the motives of others but accept the bona fides of all. If we believe in something, then surely we will be ready to defend it rationally, hoping to persuade those opposed to change their point of view?

"We should not too quickly want to pull rank and to demand an uncritical, sycophantic, obsequious conformity. We need to find ways in which we engage the hoi polloi, the so-called masses, the people, in public discourse through indabas, town-hall forums, so that no one feels marginalised and that their point of view matters, it counts.

"Then we will develop a national consensus. We should debate more openly - not using emotive language.We should not be browbeaten by pontificating decrees from on high.It should be possible to talk as adults about these issues without engaging in slanging matches."

Again, we agree fully with the Archbishop with regard to the approach that should be taken as we all engage in rational discussion. We also agree that all the matters he mentions should be debated openly.

As he says, these issues include "affirmative action, transformation in sport, racism, xenophobia, security, crime, violence against women and children."

He also said, "What do we want our government to do in Zimbabwe?...What is black empowerment when it seems to benefit not the vast majority, but a small elite that tends to be recycled?...We should discuss as a nation whether a basic income grant is not really a viable way forward."

One of the fundamental requirements for the rational discussion suggested by the Archbishop is familiarity with the facts relevant to any matter under discussion, as well as respect for the truth. In this Letter we will mention some of the facts relevant to some of the issues mentioned by the Archbishop as possible subjects for discussion.

The first of these concerns the engagement of the masses in discussion.

From the very beginning of the democratic order, we insisted on the need for transparent and accountable government. We have therefore worked consistently to encourage and enable two-way communication between the government and the people.

As a first condition for the achievement of this objective, we have sought to ensure that the government communicates to the people as much information as possible. Some years ago we even thought that the public broadcaster should allow the government some broadcasting time on a weekly basis, to convey this information. Unfortunately this idea was shot down on the basis, which we could not understand, that this would compromise the independence of the public broadcaster.

Since then, we have resorted to other means to reach out to the people. These include Public Information Terminals at our Post Offices and Multipurpose Community Centres, public hearings in our legislatures, publication of draft legislation for public discussion before adoption by the Cabinet, izimbizo, and the Presidential Working Groups. Indeed even this publication, ANC TODAY, was started precisely because we wanted to ensure that our people have access to the views of the ruling party, directly from us, the public spokespersons of the ruling party.

Those interested to see how the government in all spheres interacts with those the Archbishop described as "the so-called masses", they should attend the Ward Committee meetings at local government level, and the izimbizo held regularly throughout our country by the provincial and national governments, the Deputy President and the President.

In all these encounters the people interact freely with the government, with no restriction whatsoever about issues they may raise. Media reports of these encounters would also reflect this reality and therefore the engagement of the masses of our people in the process of determining their destiny.

At no point during these interactions with the people has it ever been that either the people or the media observers communicated any message that anybody had "pulled rank" or "demanded an uncritical, sycophantic, obsequious conformity."

Currently there are at least seven Presidential Working Groups, which bring together the national government, led by the President, and a cross section of sectoral representatives. The sectors covered are Women, Youth, Trade Unions, Higher Education Vice Chancellors, Business, Commercial Agriculture and the Religious Communities.

The agendas for the meetings of these Groups are decided by agreement, and are not imposed by the government. The sectoral representatives are therefore free to place any matter on the agenda, which they have done without this causing any tension or conflict.

I mention these details to make the point that none of the leaders of our people with whom we interact in the Presidential Working Groups has ever said that anybody has "pulled rank" and "demanded an uncritical, sycophantic, obsequious conformity", or that they have been "browbeaten by pontificating decrees from on high." But, of course, others, such as the Archbishop, may have information to the contrary.

Evidently the Archbishop thinks there is something wrong with ANC members agreeing with ANC policies they have decided within the various forums of the organisation, including our National Conference. Thus respect for positions democratically agreed within the organisation are described as "unthinking, uncritical, kowtowing and party line-toeing". He contemptuously dismisses the members of our movement as "voting cattle of the party".

The Archbishop has never been a member of the ANC, and would have very little knowledge of what happens even in an ANC branch. How he comes to the conclusion that there is "lack of debate" in the ANC is most puzzling. Rational discussion about how the ANC decides its policies requires some familiarity with the internal procedures of the ANC, rather than gratuitous insults about our members, based on a refusal to "accept the bona fides of all" for which he appealed.

With regard to the Archbishop's caution against "pulling rank" and "browbeating by pontificating decrees from on high", this matter has been raised by others before, perhaps using different words. These others have criticised some of our interventions in the public discourse, essentially to insist that we should not engage the national debate on any matter. To secure our silence, the argument has been advanced that we intervene in such debates to silence dissenting voices.

I have made this clear in the past that I, for one, will join the public debate on any matter, exercising the same right that any other South African has, to speak out on matters of concern to the nation. In this regard, I support the call once made in China - let a hundred flowers bloom: let a hundred schools of thought contend!

Quite correctly, the Archbishop argued against "black empowerment when it seems to benefit not the vast majority, but a small elite that tends to be recycled." This is the second of his concerns we want to address.

There are some in our country who regularly communicate the entirely false message that black economic empowerment (BEE) benefits almost exclusively a small elite composed of members of the ANC. The recent conclusion of an agreement between a private South African consortium and private foreign owners of Telkom shares seems to have provided an opportunity once more to spread this falsehood.

In this regard I must confirm, with no apology, that our movement and government are firmly committed to the pursuit of black economic empowerment. We will continue to promote the goal of the deracialisation of our economy as vigorously as possible. In this context, we will continue to pursue the goal of increasing the wealth and income in the hands of the black people of our country, as an inherent part of the continuing struggle to eradicate the legacy of colonialism and apartheid.

Black economic empowerment in our country has taken place and will take place through two separate processes - one private, and the other through public interventions. Any discussion of BEE must take this into account.

The "black business elite" that has been a focus of negative comment has made its progress through its own private initiative. None among its ranks has been funded or promoted by the government, enabling them to access such deals as they may have secured.

Regardless of anything that might be said by anybody, no "blame" of any kind attaches to the government for the successes that members of this "black business elite" might have achieved.

The last ANC Policy Conference held in 2002 discussed BEE. Its decisions were presented to our Stellenbosch National Conference held at the end of the same year. The National and Policy Conferences confirmed our approach in favour of broad-based black economic empowerment. Accordingly, our parliament has approved legislation in favour of such broad-based BEE, consistent with the approach of our movement and government in this regard.

In a speech earlier this year, our Secretary General, Kgalema Motlanthe said: "Another problem in the BEE process has been its narrow base, especially in respect of the transfer of ownership of assets to individual beneficiaries. In this respect, it seems that certain individuals are not satisfied with a single bout of empowerment. Instead they are the beneficiaries of repeated bouts of re-empowerment. We see the same names mentioned over and over again in one deal after another."

In this regard, the Secretary General was addressing the issue of the transfer of ownership of assets that we have seen in various private deals. He made the point, correctly, that black entrepreneurs should respond to the requirement to achieve broad-based empowerment, and should therefore not use their capabilities to focus exclusively on their own advancement, without bringing in others to participate in the acquisition of wealth through the transfer of ownership of assets.

In the same speech, discussing BEE, the Secretary General said, "All the government programmes to transform our society should provide the basic starting point for accumulation of capital by black people." This, indeed, is the focus of the government's BEE programmes.

But perhaps before we say something about these government programmes, we should reflect briefly on the recent Thintana (Telkom) agreement, whose nature some have dishonestly and deliberately sought to present in a negative light.

Contrary to everything that has been said about this agreement, some of the beneficiaries are the women members of the South African Democratic Teachers Union (SADTU), the nurses union, DENOSA, the women's advocacy group, POWA, and the YWCA. Other owners include the 18,000 women who founded WIPHOLD.

A third of the shares were deliberately reserved for other mass based groups. The successful consortium is currently discussing which groups to approach to take up these shares.

We have no doubt that this private transfer of assets will respond to the appeal of our Secretary General that even in this case, the black private business community should respond to the need to achieve the objective of broad based black economic empowerment.

In terms of the approach of both our movement and government, BEE includes such matters as ownership of wealth, participation in management, skills training and the occupation of responsible positions, and increasing the availability of opportunities to all black people to achieve the advancement denied by colonialism and apartheid.

It is clear that there are some in our country who do not want the truth to be known about what our government and the public sector as a whole are doing to implement broad based BEE. Let us now give some examples in this regard.

In the period 1998 to the end of 2004, the state electricity company, Eskom, will have spent R26.6 billion on BEE. This expenditure includes the three areas of procurement, community development and rural development. This BEE programme has included all the elements of our government's broad based black economic empowerment that we have mentioned.

In this regard, Eskom has given support to many black entrepreneurs outside the well known "black elite", which, in any case, is not part of Eskom's BEE programme. Eskom has also vigorously taken up the challenge to increase the number of highly skilled black people especially in mathematics and engineering.

Since April 1997, Telkom has spent nearly R24 billion on BEE. During the 2004 financial year, the company procured 57.8% of its supplies from BEE suppliers, none of them being necessarily part of the "black elite". The equivalent figure for Vodacom is 60%, amounting to R1.3 billion.

When Telkom was listed, over 100,000 individuals bought shares, the overwhelming majority being black. The company's Enterprise Development Programme has trained 905 small companies in business management, many of them black, to enable them to do business with Telkom.

Transnet set itself the objective to spend at least 50% of its discretionary funds on BEE by 2005. This objective was achieved during the 2003 financial year. As an example, during 2003, Transnet announced that it would secure 60% of its fuel from BEE enterprises. The contract was worth R2.4 billion.

As at the end of September 2004, Isibaya Fund Investments, fully funded by the Public Investment Commissioners, had subscribed about R180 million to funds established to finance small black business groups. Altogether Isibaya has R6 billion invested in ventures related to BEE. These are not necessarily linked to the so-called "black elite".

The preceding account excludes funding and other BEE support given by government departments and other entities such as the DTI, Agriculture and Land Affairs, Environment and Tourism, Social Development, Provincial and Local Government, the IDC, the Land Bank, Umsobomvu Fund, and others.

During the coming year, the Apex Fund will begin to extend micro loans to support small and family businesses. This will signify the completion of the spectrum of the public funding profile of BEE, covering businesses of all sizes, from the smallest to the biggest, achieving the goal of broad based empowerment. Factually, the assertion that all that BEE amounts to is benefiting a "small elite that tends to be recycled" is entirely false.

Arguing for a discussion on the proposal for a basic income grant, the Archbishop says, correctly, "We cannot, glibly, on full stomachs, speak about handouts to those who often go to bed hungry." This is the third of the Archbishop's concerns we would like to address.

Earlier this year, on November 18, Minister of Finance Trevor Manuel addressed the matter of our social expenditure in a manner far removed from what can be described as being glib. He said:

"We are currently stepping up our expenditure on social security, partly to meet continued growth in numbers of child support, disability grant and foster care grant beneficiaries. These social assistance programmes, amounting to some 4,5 per cent of GDP - represent one of the largest non-contributory income redistribution programmes amongst developed or developing countries."

Put simply, this means that, compared to even developed and therefore richer countries, our national budget and economy are reaching the limit of what we can spend on social security. Whatever anyone of us with a full stomach may think about the basic income grant, we must answer the practical question where the additional funds would be found to finance a basic income grant.

We have, in the past, asked those who campaign for this grant to answer this question rationally, "without engaging in slanging matches", and without "impugning the motives of others, but accepting the bona fides of all", avoiding the accusation of cynicism with regard to others with whom they disagree.

In this regard I must say that the populist argument that we should have chosen butter before weapons is nothing more than a populist argument. We have a constitutional obligation properly to equip the National Defence Force.

Decisions taken in this regard followed an extensive process of consultation with civil society, including our religious communities, as we conducted the seminal Defence Review. In any case, funds immediately available to fund the defence acquisition would not necessarily be available to finance social expenditure.

As in all other instances, it would be good that those who present themselves as the greatest defenders of the poor should also demonstrate decent respect for the truth, rather than indecent resort to empty rhetoric.

The assertion that our movement and government intervene in the public discourse to suppress open and free debate is false. Nobody can produce one shred of evidence to disprove this statement.

Our government is pursuing a broad based BEE programme focused on benefiting "the vast majority" of our people. Nobody can produce one shred of evidence to contest this statement.

In his Nelson Mandela Lecture, Archbishop Tutu said all of us need to engage one another in rational discussion, "hoping to persuade those opposed to change their point of view". He said that through such discussion, we should "develop a national consensus".

The Archbishop proposed what our nation needs to do to determine its agenda. But as we have said in this Letter, to succeed in this task, all of us must educate ourselves about the reality of South Africa today, internalise the facts about our country, and respect the truth.

Together we must avoid the resort to populism and catchy newspaper headlines that have nothing to do with the truth and everything to do with the pursuit of self-serving agendas. Rational discussion also demands that we should take the effort to think, rather than submit to the dictates of a reassuring herd instinct.

Whatever the intensity and sincerity of a shared desire to produce national consensus, all of us will have to understand that the rational debate correctly demanded by Archbishop Tutu is about setting the national agenda.

Like everything else in our country, the setting of that agenda means struggle. Because we originate from different political and ideological backgrounds, and diametrically opposed social experiences, it will not be easy to arrive at the national consensus that the Archbishop desires.

The effort to reach such consensus only means that the struggle continues to define what our country will look like tomorrow and the day after. Time will tell whether this struggle can be engaged without resort to slanging matches.

It is however clear that, whatever its form and its gentility, politeness or otherwise, this is a struggle about who shall set our national agenda and what that agenda shall be. In this regard, inevitably, the struggle continues - Aluta continua!

Approaches to Poverty Eradication and Economic Development VII

Transform the Second Economy

In 2003, to prepare for our First Decade of Democracy in 2004, our government published the major study, 'Towards a Ten Year Review'. Among other things, the Review said: "One of the major consequences of the change in the structure of the (South African) economy is that 'two economies' persist in one country. The first is an advanced, sophisticated economy, based on skilled labour, which is becoming more globally competitive. The second is a mainly informal, marginalised, unskilled economy, populated by the unemployed and those unemployable in the formal sector. Despite the impressive gains made in the first economy, the benefits of growth have yet to reach the second economy, and with the enormity of the challenges arising from the social transition, the second economy risks falling further behind, if there is no decisive government intervention."

In his well known book, 'Development as Freedom', the Nobel Prize winner in economics, Amartya Sen says: "Development requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as intolerance or overactivity of repressive states. Despite unprecedented increase in overall opulence, the contemporary world denies elementary freedoms to vast numbers - perhaps even the majority - of people. Sometimes the lack of substantive freedoms relates directly to economic poverty, which robs people of the freedom to satisfy hunger, or to achieve sufficient nutrition, or to obtain remedies for treatable illnesses, or the opportunity to be adequately clothed or sheltered, or to enjoy clean water or sanitary facilities. In other cases, the unfreedom links closely to the lack of public facilities and social care, such as the absence of epidemiological programmes, or of organised arrangements for health care or educational facilities, or of effective institutions for the maintenance of local peace and order. In still other cases, the violation of freedom results directly from a denial of political and civil liberties by authoritarian regimes and from imposed restrictions on the freedom to participate in the social, political and economic life of the community."

He contrasts what he calls "growth mediated" with "support-led" development, expressing preference for the latter. He writes: "In contrast with the growth-mediated mechanism, the support-led process does not operate through fast economic growth, but works through a programme of skilful social support of health care, education and other relevant social arrangements."

In this context he argues that "Despite their very low levels of income, the people of Kerala (in India), or China, or Sri Lanka enjoy enormously higher levels of life expectancy than do much richer populations of Brazil, South Africa and Namibia, not to mention Gabon (with wealth measured by GNP per capita).An income-centred (GNP) view is in serious need of supplementation, in order to have a fuller understanding of the process of development."

Everything Sen says indicates the challenge we face as we work to transform the Second Economy. Fortunately we no longer have the burden of the "unfreedom" imposed by tyranny and the denial of political and civil liberties by an authoritarian regime. Nevertheless the Second Economy in our country is characterised by many of the "unfreedoms" that Sen wrote about.

Contrary to what was stated in the 'Ten Year Review' the challenge we face extends beyond "(economic) growth" and relates to the complex of "unfreedoms" mentioned by Sen. The very fact of the existence of the Second Economy side by side with the First argues against a simple focus on growth.

In his article "Paradoxical Growth" in the book, 'The Post-Development Reader', Serge Latouche, Professor of Economics at the University of Paris XI, wrote: "In a World Bank report of 1991, we read: 'During its first two decades of existence, the World Bank tended to identify development with economic growth. The benefits of growth were assumed to trickle down, the poor automatically benefiting from the creation of jobs and the increase in goods and services.'"

The famous trickle-down effect

He continues: "The claim of economic growth to be the basic objective of human society is therefore mainly based on the famous trickle-down effect, magnified by the euphoria of the myths of modernity. However, this seductive formulation cannot stand up to a serious examination. So many paradoxes beset the reasoning that the miracle effect, in fact, turns out to be the mirage effect.What invalidates the whole ideology of growth is the fact that the trickle-down effect is an imposture.At the planetary level, the mechanism never functioned anyway. Between 1950 and 1987, according to the World Bank's own statistics, while the world's revenues multiplied by 2.5, the gap between the richest and the poorest fifths of the population grew from 30:1 to 60:1." ('The Post-Development Reader', compiled by Majid Ranhema & Victoria Bawtree: David Philip, Cape Town, 1997).

The First and Second Economies in our country are separated from each other by a structural fault. The Second Economy emerged during the long period of colonialism and apartheid as a result of the deliberate imposition of the "unfreedoms" described by Sen. This process aimed to achieve the enrichment of the white minority at the cost of the impoverishment of the black majority.

That process of impoverishment included ensuring that the white economy had access to unlimited supplies of cheap unskilled black labour, and that this economy did not waste any money on the development of the localities in which the black workers lived. This did not even allow for the possibility of improving the lives of the oppressed majority through the "trickle-down effect".

Accordingly, what we now have is the reality described in the 'Ten Year Review', of a "mainly informal, marginalised, unskilled economy, populated by the unemployed and those unemployable in the formal sector".

The Second Economy is caught in a "poverty trap". It is therefore unable to generate the internal savings that would enable it to achieve the high rates of investment it needs. Accordingly, on its own, it is unable to attain rates of growth that would ultimately end its condition of underdevelopment.

It does not have the internal means to effect the "support-led" development Amartya Sen spoke about, resulting in targeted improvements in the health, education, training and social development of those imprisoned within the Second Economy, despite its low level of economic development as measured by per capita GDP.

It is linked to the First Economy by the extent to which it can still supply the cheap, unskilled labour this economy may require. It survives on money transfers sent by family members who have been able to secure regular or occasional employment within the First Economy, as well as social grants and elements of the social wage provided by the democratic state.

It is also linked to the First Economy by the goods, equipment and services it purchases with the meagre resources at its disposal. Those resources also make it possible for the Second Economy to maintain an informal economic sector of small traders, artisans and service providers.

Such positive trickle-down effects as would result from the higher earnings of family members who would benefit from higher incomes in the First Economy, as well as individual and social transfers by the state, would not be sufficient significantly to raise the standard of living in the Second Economy, or close the ever-widening wealth and development gap between the two economies.

The market economy, which encompasses both the First and the Second economies, is unable to solve the problem of poverty and underdevelopment that characterises the Second Economy. Neither can welfare grants and increases in the social wage. The level of underdevelopment of the Second Economy also makes it structurally inevitable that the bulk of such resources as flow into the Second Economy will inevitably "leak" back into the First Economy.

Such public and private interventions as may be made producing a positive outcome in the First Economy cannot have any strategic impact on the Second Economy because it constitutes the structural periphery of the former, inherently positioned to remain on the periphery. Its internal objective reality in terms of the forces of production and their interaction makes it impossible for it to respond to the impulses that drive the growth and development of the First Economy.

All this makes decisive government intervention imperative, as the 'Ten Year Review' said, which would "set the preconditions for market-led economic growth". Fortunately, in this regard, we have the possibility to draw on the positive examples and lessons of the Marshall Plan, the post-war development of the Asian Far East, and the EU Regional Policy. We can also learn from the negative examples of the ACP-EU Lome and Cotonou Agreements and the implementation of the policies of the "Washington Consensus".

Reliance on domestic resources

One of the lessons from these experiences is that we should, to the greater extent, finance the transformation of the Second Economy relying on domestic resources. These should be made available through the state in the form of grants. This does not rule out accessing commercial loans by the state, or equity participation funds, to finance economically viable projects that have the possibility to generate profits that would be used to finance debt.

Necessarily, therefore, decisive government intervention in the Second Economy requires that the government should have the resources to make this intervention.

The successful management of the macro-economy, coupled with policies that have resulted in the growth of the First Economy, have enabled the government to generate these resources. These results must therefore rank among our most important achievements during the First Decade of Freedom, precisely because they create the possibility for our country seriously to confront the challenge of the Second Economy.

The 2004 Budget Review of our National Treasury makes a number of important observations in this regard. It says:

"Greater impetus to economic restructuring began in 1996, with a macroeconomic strategy (GEAR) that emphasised improved industrial competitiveness, inflation reduction, gradual relaxation of exchange controls, strengthened funding of training, tax incentives to stimulate investment, deficit reduction and budget reform focused on the redistributive thrust of expenditure. Having laid these secure foundations, a more expansionary fiscal policy stance could be adopted in 2001.

"Against the background of the fiscal consolidation achieved over the past decade - expenditure reprioritisation, a lower budget deficit, improved management of the public debt, lower interest rates and a buoyant tax structure - the 2004 Budget aims to invigorate the recovery evident in the last quarter of 2003 while continuing to build firm foundations for long-run growth and development.

"Prudent fiscal management has resulted in public debt levels falling within manageable limits, lowering debt service costs and freeing resources for more important socio-economic programmes, including infrastructure development, job creation and social security. Enhanced management and governance, together with improving delivery capacity, ensure that this expenditure contributes meaningfully to economic growth and development."

In the context of the success of the post-1996 macro-economic policies resulting in "freeing resources for more important socio-economic programmes", various policies and programmes have already been decided. The Integrated and Sustainable Rural Development and Urban Renewal Programmes are central to the success of our response to the Second Economy. They must focus on addressing the "unfreedoms" mentioned by Sen, and not just the goal of economic growth.

Similarly, we also have to ensure the success of our Expanded Public Works, the Human Resource Strategy, and Comprehensive Agricultural Support Programmes, all of which relate directly to the transformation of the Second Economy.

Other interventions in other areas, ranging from the Municipal Infrastructure Grant to the development of e-government through the use of modern information and communication technologies, must, in part, be geared towards ensuring the success of the major programmes we have mentioned, specifically directed at the transformation of the Second Economy.

With regard to all these interventions in both the First and Second economies, on 26 October this year, Minister of Finance Trevor Manuel said:

"Our policy agenda focuses on both growing the formal economy and expanding the economic opportunities of those who are marginalised, those who, without direct policy interventions, will not benefit from the fruits of a growing economy. Reducing this social exclusion through drawing in the millions who find themselves trapped in the second economy is a fundamental principle of our policy stance. To achieve this objective, we will have to intervene directly in the way in which the fruits of economic growth are shared, in the way in which economic opportunities are parcelled out.

"South Africa's development challenge is to build a single and integrated economy that benefits all, encompassing both growing, competitive relations with the global economy and a caring, inclusive network of social services and support for the disadvantaged. This is, on a larger scale, the central challenge also of international relations - the struggle for modernisation and solidarity against deeply embedded inequalities, conflict and prejudice."

As with the European Union (EU) Regional Policy, we must aim to achieve:

• productive investment to create and safeguard sustainable jobs;
• investment in infrastructure which contributes to development, structural adjustment and creation and maintenance of sustainable jobs, or, in all eligible regions, to diversification, revitalisation, improved access and regeneration of economic sites and industrial areas suffering from decline, depressed urban areas, and rural areas;
• development of the endogenous potential by measures which support local development and employment initiatives and the activities of small and medium-sized enterprises; such assistance should be aimed at services for enterprises and cooperatives, transfer of technology, development of financing institutions, direct aid to investment, provision of local infrastructure, and aid for structures providing neighbourhood services;
• Investment in education and training and health.

We must also take note of the observation made by the EU that "the dynamic effects of EU membership, coupled with a vigorous and targeted regional policy, can bring results".

Success in the First Economy

We must fully understand that the success of our own vigorous and targeted interventions in the Second Economy is also dependent on the success of the First Economy and building the structural links between these two economies. In the end, as was the objective of the Marshall Plan, those currently caught within the Second Economy should ultimately be able to grow and develop without the need for exceptional outside interventions.

This means that even as we pay concentrated attention to the Second Economy, we must not reduce our focus on the growth and development of the First Economy.

Even as we do so, given the continuing imperative for our economy to create jobs, we should pay attention to an empirical observation made by the German Bundesbank. Commenting on the impact on growth of foreign direct investment (FDI), on 24 February 2003 its International Relations Department said: "FDI can act as a significant impetus to growth but only if the level of human capital has crossed a certain threshold. The intuition behind this result is that the more advanced technologies can be fruitfully put to use only after the required human capital has been acquired. Should the technology, however, exceed the absorptive capability of the host country, no trickle-down effects will ensue. Similarly, it can be argued that the products of MNEs (multinational enterprises) may often be too capital intensive for the needs of the host country. The effect may then be to create 'dual economies', with one modern sector and distinct from it a backward domestic sector with only limited overlap. FDI of this kind might consequently result in an excessively capital-intensive production process, leading to a less favourable development of the overall employment situation."

This emphasises the need for us to pay very close and sustained attention to the success of our Human Resource Development Programme to prepare our people to have the vocational and professional skills required by the modern global economy, which includes our First Economy.

In this regard, we have to be aware of the increased global mobility of skills, which results in skilled people being drawn to other countries because of higher pay and opportunities for professional development. This also gives us the possibility to meet our skills shortages by improving immigration of the right people into our country.

We must also ensure the success of the interventions to gain access to private capital for targeted investments, as visualised by the Growth and Development Summit, and properly to utilise the capital available to the government and the public sector Development Finance Institutions.

Given the responsibilities that fall on the democratic state with regard to the development and transformation of both the First and Second Economies, we have to ensure that the state machinery is so organised, empowered and motivated that it can discharge its responsibilities effectively. We must also mobilise the people to participate in the eradication of the "unfreedoms" imposed on them by a long history of colonialism and apartheid.

Simultaneously, we have to maintain the social expenditures targeted at providing a social security net for the poor and disadvantaged, as well as social development to achieve higher levels of education, better health and nutrition, and other outcomes to improve the quality of life and empowerment of all our people, including the women and the youth in both urban and rural areas.

However, the democratic state will have to take great care to ensure that expenditure on social security does not lead to such misallocation of public resources that there is nothing to direct to the fundamental task of the transformation of the Second Economy. In this regard, on 26 October this year, Minister of Finance Trevor Manuel, said: "We need to acknowledge that our social security net is under severe strain. Rapid growth in disability and foster care grant applications indicate both rising income support needs and apparent deficiencies in administrative systems. A sustainable social security system must balance bringing in everyone who is entitled to grants and keeping out everyone who is not entitled to them."

From all this we can draw the following conclusions:

• We must understand the irrationality of depending on "market mechanisms" and/or private investment to advance the Second Economy to reach its takeoff point.
• The Second Economy is too poor to generate the savings and capital it needs for its development. Its levels of poverty and underdevelopment make it impossible for it to attract significant volumes of private capital.
• Accordingly, public sector transfers must constitute the bulk of its development funds.
• However, it will also be possible to use private sector capital to finance profit making ventures within the Second Economy. Some public sector funds should also be devoted to the development of such ventures on a recoverable basis.
• Contrary to arguments about minimal state intervention in the economy, we must proceed on the basis of the critical need for the state to be involved in the transformation of the Second Economy.
• This state intervention must entail detailed planning and implementation of comprehensive development programmes, fully accepting the concept of a developmental state.
• The government must commit the necessary human and material resources to ensure that the state machinery is able to discharge its development responsibilities. Among other things, this must entail the necessary progress with regard to the government's efforts to achieve an integrated system of government, affecting all the national departments and the three spheres of government.
• The government must ensure the success of its interventions with regard to the development of small, medium and micro business within the Second Economy.
• As part of the process of monitoring and evaluating its interventions in the Second Economy, the government should set some benchmarks against which to measure the success of these interventions. These could include the reduction in the relative share of social welfare spending within the national budget, caused by the increase in numbers of people dependent for their income on productive employment.

Taken together, the interventions in the Second Economy should, as Sen said, ensure "the removal of major sources of unfreedom: poverty.poor economic opportunities as well as systematic social deprivation, neglect of public facilities.", responding to a view of development that goes beyond a narrow "income-centred (GNP) view" of development.

** This is part seven in a special series of articles about global approaches to poverty eradication and economic development. Next week, in the final part of the series: 'Empty bellies have no ears'.

More Information

• I : Beware of the Natives!
• II : Rescued by the Marshall Plan
• III : The Truth & the Asian Miracle
• V: Bridging the EU development gap
• V : The ACP and the philosophy of development
• VI : Despair and the Washington Consensus

16 Days of Activism

Men have a leading role in changing attitudes

One of the tasks facing the country as it campaigns to end violence against women and children is to mobilise men to take the lead in challenging the attitudes which give rise to domestic abuse, rape and other forms of gender violence.

South Africa is joining the rest of the world in marking 16 days of activism to end violence against women and children from 25 November to 10 December. The 16 days begins on the International Day for the Elimination of Violence against Women on 25 November and ends on International Human Rights Day on 10 December. Before being designated by the UN General Assembly in 1999, 25 November was marked in Latin America as a day against violence against women. It was the day in 1960 when the three Mirabel sisters were assassinated in the Dominican Republic during the Trujillo dictatorship.

In a campaign being organised by government and civil society groupings, South Africans are being asked to help raise awareness, show their support, work to change attitudes, and provide support to women and children who have experienced or are vulnerable to violence.

They are encouraged to sign postcards available at 500 participating post offices countrywide to pledge support for the 16 Days of Activism. The postcard campaign is being used to raise funds for organisations dealing with violence against women and children. Transnet has promised to donate R1 for each of the first 250,000 signed postcards received. The money will be distributed among non-governmental organisations fighting against women and child abuse.

South Africans are also being asked to wear white ribbons for the duration of the campaign, and to participate in the many local activities taking place over the 16 days.

The campaign also includes an initiative, called cyber dialogue, which uses information technology to bring together people from across the country in discussion about issues related to the 16 days campaign. Interactive discussions taking place in different parts of the country will be linked to a central hub at national level where experts and decision-makers will be available at a fixed time each day to answer questions in a live "chat room"

. The concept includes a bulletin board to which individuals can post messages and a daily exchange of information between countries in Southern Africa, as well as a video link up between all those who participate on the last day of the campaign.

This initiative aims to empower citizens, and especially women, in the use of new technologies. It aims to encourage citizens to air their views and speak out against violence and abuse; make 'e-governance' work for gender justice; and link people across provinces and across borders in a common cause.

While not all instances of domestic violence or child abuse are perpetrated by men, this is the case in most reported instances. To effectively tackle violence against women and children it is therefore necessary to focus attention on the role men and boys have to play in tackling behaviour which seems closely linked to the nature of gender relations and notions of manhood and masculinity in society.

At a media briefing this week, Correctional Services Deputy Minister Cheryl Gillwald said the campaign would attempt to convince men of the essential and positive role they have to play in the eradication of this form of abuse: "The exposure and eradication of violence should be tackled in conjunction with gender oppression as a whole."

She said that while much had been achieved in the first decade of freedom in safeguarding the rights and dignity of women, much remained to be done: "Not only the laws need to change - we need to change the structures and cultures within which the law operates. We must change attitudes and behaviour through awareness and education."

A document prepared for the cyber dialogues draws attention to the need for a better understanding of gender roles and relations. It cites a United Nations report, 'The role of men and boys in achieving equality', which says that "gender based violence is influenced by the socialisation of boys and men. Many men come to believe that violence against women is part of masculinity and the subordinating and undervaluing women is a mark of manhood".

The document also refers to a study emanating from the University of KwaZulu Natal which shows that many elements of masculinity - such as promiscuity, risk-taking, and the desire for superiority over women - transcend race, culture and class. It suggests that involving fathers in their children's development may inhibit the development of anti-social behaviour and may promote positive values and civic engagement among men.

Yet while socialisation and attitudes of male dominance may fuel violence against women and children, the majority of men are not abusive in their relationships. It is important that the voices of the majority of men be heard on this matter, and that efforts be made to challenge notions of 'manhood' which condone violence and abuse.

It is also important that the work to end violence against women and children forms part of the broader effort to tackle violence and criminality within society. This, argues Gillwald, should not only be for moral reasons, but because violence hinders development: "Societies that experience high levels of violence almost inevitably suffer from underdevelopment. The presence of violence - even just a threat of violence - reduces people's chances of achieving their full human potential."

And while the connection between crime and poverty is well established, less mentioned is the connection between poverty and vulnerability to crime. "Poor women and children are more likely to be victimised because they enjoy fewer protections, less privacy and fewer resources," she said.

Speaking at the launch of the campaign, President Thabo Mbeki said: "We need to make each one of us understand that human development and especially the development of women and children is in the best interests of all - men and women alike. Together we can and must defeat the demon of woman and child abuse. This we will do, if we stand together and work together, not pointing figures at one another."

More Information:

• WomensNet 16 Days of Activism page

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