Gleneagles, yesterday and tomorrow

About five weeks after the publication of this edition of ANC TODAY, the G8 Heads of Government will hold their annual Summit Meeting at Gleneagles in Scotland. As with the previous five G8 Summit Meetings, African Heads of State and Government will meet with the G8 leaders to consider the African agenda and the global partnership to address Africa's challenges.

For us, as South Africans, and for our continent as a whole, Gleneagles occupies an important place within the context of the evolution of our struggle against apartheid. In a Preface to Sam Ramsamy's autobiography, we discussed the important role of the international campaign to boycott apartheid sport in the overall struggle to defeat the apartheid system.

The Commonwealth Heads of Government Meeting (CHOGM) held at Gleneagles in 1977 struck an important blow against apartheid sport, and therefore the apartheid system itself. That meeting effectively banned all sports contacts between apartheid South Africa and the rest of the Commonwealth.

Despite some rearguard resistance from the then Government of New Zealand, led by Prime Minister Robert Muldoon, this decision meant an end to sports contacts among the white Commonwealth countries. This related in particular to Australia, New Zealand, South Africa and the UK, with specific reference to rugby and cricket.

Given the importance of these sports codes to these countries, which had served to strengthen the bonds of friendship and solidarity among the white settler populations in Australia, New Zealand and South Africa, as well as between them and the UK, the Gleneagles CHOGM decision gave an enormous boost to the struggle against apartheid.

It forced the defenders of apartheid onto the defensive, signalling that sooner rather than later the international isolation of the apartheid regime would be all but complete. Any objective history of the anti-apartheid struggle would have to acknowledge that the 1977 Gleneagles CHOGM decision represented one of the high watermarks of that struggle.

As a result of the struggle that was waged inside and outside our country, including at Gleneagles in 1977, South Africa attained its liberation. That victory finally ended the system of colonialism and white minority rule in Africa, which had commenced with the arrival of the Portuguese half-a-millennium before.

As the countries of Africa gained their liberation, joining Ethiopia and Liberia, starting with Sudan in 1956, and then formed the Organisation of African Unity (OAU), there was no hesitation at all, and there could not have been, in deciding that one of the strategic tasks of independent Africa was the total liberation of the whole of the continent. And indeed Africa focused on this fundamental objective without relaxing, until the entirety of our continent was free of white minority rule.

When this objective was achieved with the liberation of South Africa, it then became possible for our continent to turn its united attention to other strategic tasks - the achievement of the objectives of peace and democracy, the eradication of poverty and underdevelopment, and the realisation of the dream of African unity.

Our first five years of liberation ended in 1999. By then it was clear even to the most sceptical, that there was no possibility to reverse the democratic victory in South Africa. The African struggle for national liberation had indeed effectively put the last nail in the coffin of the evil system of white minority domination in our country and continent.

At its Lome Summit Meeting in 2000, the OAU took two important decisions. One was to endorse processes that finally led to its dissolution and the formation of the African Union (AU). The other was to take the first step along the road that led to the elaboration and adoption of the development programme of the AU, the New Partnership for Africa's Development.

As a result of the decision taken at Lome, three of Africa's leaders met with their G8 counterparts in Tokyo in 2000, prior to the Okinawa G8 Summit Meeting. During this interaction it was agreed that Africa should have the possibility to address the next G8 Summit Meeting, to indicate its developmental priorities that it wished to engage, with the support of the peoples of the rest of the world.

This took place at the 2001 G8 Summit Meeting held in Genoa, Italy, with Africa's priorities having been agreed at the preceding and last Summit Meeting of the OAU. This latter meeting was held in 2001 in Lusaka, Zambia, just ahead of the G8 Summit Meeting, and adopted the programme ultimately named the New Partnership for Africa's Development (NEPAD).

Having analysed and accepted the NEPAD priorities and programme presented to the Genoa G8 Summit Meeting, the G8 countries then adopted their own programme of action to provide support for the implementation of NEPAD. This is the G8 African Action Plan (G8 AAP), adopted at Kananaskis, Canada in 2002, whose adoption marked the end of the first stage of the Africa-G8 process that had begun with the meeting in Tokyo.

This meant that there was now a commonly agreed programme for the development of Africa, based on determinations we had made as Africans. Indeed NEPAD was then accepted by other international institutions as the Africa development programme that they had to support. These institutions include the UN, the Non-Aligned Movement, the European Union, the International Monetary Fund and the World Bank, the Organisation for Economic Co-operation and Development, Association of Southeast Asian Nations, and others.

Determined to move to the next stage of the Africa-G8 process, the 2003 G8 Summit Meeting held at Evian in France undertook a review of the steps that had been taken to implement the G8 AAP since its adoption the previous year.

It resolved that the next Implementation Report of the G8 AAP would be presented at the 2005 Gleneagles G8 Summit Meeting, to allow for sufficient time to begin the effective implementation of the agreed programmes.

Accordingly the 2004 G8 Summit Meeting held at Sea Island, Georgia, USA, undertook a broad review of the Africa-G8 process to ensure that the Implementation Report that would be tabled at the 2005 G8 Summit Meeting would contain all the salient points highlighted by both NEPAD and the G8 AAP.

These included debt relief and increased financing for development, increased access for African products into the markets of the developed countries, diversifying the African economies, improving the governance capacities of African governments, implementing specific projects in the identified priority areas, including agriculture and infrastructure, and enhancing Africa's capacity to promote peace and stability on the continent.

Quite correctly therefore, the Africa Commission established by UK Prime Minister Tony Blair focused on these and other matters. It gave specific indications of the resources that are required to move these various matters forward, to ensure that indeed the partners act together to implement the NEPAD Programme and the G8 AAP.

From the very beginning of the G8-Africa partnership, the partners accepted the principle of mutual accountability. Accordingly, both partners, and not just Africa, will have to report at the Gleneagles Summit Meeting as to what they have done to implement the agreed programmes.

Many people make the mistake of thinking that when we speak about a Partnership for Africa's Development, we refer merely to a partnership between Africa and the developed world. However, from the very first day, we visualised this partnership as starting within our countries and continent in the first instance.

Even outside the context of our interaction with the G8, we therefore have a responsibility to assess the progress we have made to strengthen partnerships within our continent, since the 2001 OAU Summit Meeting adopted the NEPAD programme. Naturally, we will also reflect on this matter at the Gleneagles Summit Meeting.

The Gleneagles meeting will take place a mere two months before the UN General Assembly meets at the highest level to review the progress made towards the realisation of the Millennium Development Goals (MDGs) decided at the UN Millennium Summit in 2000.

It is common cause it will not be possible anywhere in the developing world to achieve these goals unless significantly larger resources are urgently made available towards this end. It is equally common cause that Africa represents the most pressing challenge with regard to the resource requirements related to the MDGs.

We expect that the UN Secretary General, the President of the EU Commission, and the leaders of the Bretton Woods institutions will also attend that Africa session of the G8 Summit Meeting. By this time, we will also have consulted our other development partners, especially in Europe, who are ready to exceed the commitments made by the G8, understanding Africa's urgent needs.

The Gleneagles G8 Summit Meeting will inevitably assume greater global significance because of the various matters we have discussed, namely, that:

• it will be the first time since the 2003 Evian G8 Summit Meeting that, by decision of that Meeting, both the G8 member states and Africa will have the possibility to report on, and jointly assess what progress has been achieved to implement the agreed programmes, especially as reflected in the G8 AAP;
• it will provide an opportunity for Africa and the G8 to interact with the other development partners, such the UN, the EU, the IMF and the World Bank;
• it will have the possibility to determine the practical steps that must be taken to give meaning to the Africa-G8 decisions to ensure that we achieve progress with regard to the implementation of both the NEPAD programme and the G8 AAP; and,
• its decisions will indicate whether the will exists to engage the NEPAD process in a manner that will ensure that Africa achieves the MDGs, and therefore determine whether the UN General Assembly (UNGA) assessment of progress with regard to the MDGs in September will be characterised by a spirit of hope or one of despair. To this extent we can say that the success or failure of the UNGA Millennium + 5 Summit Meeting in New York in September will be determined by what is decided at the Gleneagles Summit Meeting in July.

For all these reasons it seems critically important that everybody concerned should work together very closely and seriously between now and July to ensure that the Gleneagles Summit Meeting does indeed produce the practical results that the peoples of Africa and the rest of the world expect.

In the Joint Statement we issued at the end of our discussions with President George W. Bush on 1 June 2005, we said we "reaffirm our joint vision for African economic growth and development, a vision built around the principles of good governance and accountability established both in the New Partnership for Africa's Development (NEPAD) and the 2002 Monterrey Consensus...

"We also look forward to a positive outcome of the upcoming G8 Summit, reaffirming the G8's commitment to support Africa's efforts to address the challenges and realise the opportunities the continent faces."

I am pleased to say that we were indeed truly inspired by President George W. Bush's determination to help ensure that the Gleneagles Summit Meeting produces a positive outcome. It is also highly encouraging that we have heard all the other G8 Heads of Government to whom we have spoken express the same determination to produce a positive outcome at Gleneagles.

Twenty-eight years ago, for a few but important days, Gleneagles hosted a meeting whose historic decisions took us a giant step forward towards the liberation of South Africa and the eradication of the system of colonialism and white minority rule in Africa. That victory opened the door to our continent to unite for peace, democracy and development.

After a few weeks, for a few but important days, Gleneagles will host another meeting whose decisions may help us as Africans to take a new giant step forward towards the realisation of the common African dream of unity, peace, democracy, and a better life for all our peoples. Time will tell whether the forthcoming G8 Summit Meeting at Gleneagles will emulate its predecessor by taking yet other historic decisions that will help radically to change Africa for the better.

We know that everybody who will gather at Gleneagles understands both the common challenge of African development and what needs to be done. I am certain that all the participants "also look forward to a positive outcome of the upcoming G8 Summit". I would like to believe that all these participants are committed to work together to achieve that outcome.

Development and underdevelopment

Learning from experience to overcome the two-economy divide

When the ANC was elected into office in 1994 it inherited an economy characterised by huge inequalities and increasing poverty, rising unemployment and unsustainable government debt.

Despite this legacy, the ANC-led government has made great progress over the last decade. It has ensured high levels of confidence, certainty and stability; lower government debt and inflation; substantial growth in exports of manufactured goods; generally rising productivity and improved skills; a sharper regional and continental focus; increased empowerment opportunities for black people, women and the poor; and labour-market reforms that have greatly improved labour relations.

While still not high enough, the growth of the economy has moved onto a higher trajectory. The economy is creating more jobs than before. Lower government debt and good management of the budget has enabled a shift towards a more expansionary macroeconomic stance. Government will also massively increase its own investment in the economy over the coming years.

Great challenges remain, however. These include high unemployment, with continuing job losses in the formal sector and rising joblessness especially among the youth; low growth, low savings and low levels of investment; and continued mass poverty and deep inequalities.

Addressing these challenges requires a broadly accepted developmental approach that will underpin sustained reform and transformation of major sectors, regions and key domestic economic markets. Such an approach rests on a correct understanding of some of the successful efforts to defeat poverty and underdevelopment in the last half of the twentieth century. In all these cases, a central component of success was the ability of government to act as a 'developmental state'. This means creating the capacity at every level of the state to mobilise and direct social, economic and political resources where they are needed most.

Learning from experience

In the period since the Second World War, the world has experienced three successful development programmes specifically and consciously aimed at the eradication of poverty and underdevelopment. These were the Marshall Plan to reconstruct war-ravaged Europe, the East Asian growth and development programme, and the European Union integration programme.

Each of these programmes was successful. They demonstrated it is indeed possible to eradicate poverty and underdevelopment and create an economy capable of self-generated, independent economic development. In each of these cases, however, this success required the necessary political will on the part of the wealthy and industrialised nations of the world.

At the dawn of the twenty-first century it is commonly agreed that Africa constitutes the biggest challenge in the global struggle against poverty and underdevelopment. What can Africa, and South Africa in particular, learn from these historic experiences?

There are a number of factors common to all these programmes:

• Each grew out of a powerful strategic consensus, which translated into political will on the part of the affluent to act decisively to overcome conditions of poverty and underdevelopment. This political will resulted in a conscious, purposeful and determined response that involved the allocation of vast amounts of resources.
• Each was based on the understanding that the regions concerned were too poor to generate the savings and capital they required for their development, and that the extent of poverty and underdevelopment made it impossible to attract significant volumes of private capital.
• Accordingly, public sector grants, soft loans and other forms of aid constituted the bulk of the funds allocated for development in each case. This assistance was augmented, in one case or another, by preferential and asymmetric market access agreements, the deliberate engineering of undervalued currencies, the creation of rents linked to performance, and other measures that required substantial government intervention.
• Each programme was premised on the understanding that development could not be left to the market alone, and it would be critical for the state to be directly involved, through, in particular, the planning and implementation of detailed and comprehensive development programmes.

By contrast, the 'Washington Consensus', which emerged in the 1990s, was a package of policies based on assumptions that development of the poorest countries should largely be financed through private capital rather than public sector funds. Conditions for overcoming poverty and underdevelopment could best be established by reliance on the market, and that minimal state intervention was required. To secure the benefits of market-led developments, these countries should become fully integrated within the global economies, interacting with all other countries through unfettered free trade and relying on the global capital markets for the investments they require.

This developmental model has not produced sustained development with any success. Despite the efforts of developing countries to meet the requirements the developed countries set as pre-conditions for economic take-off, this has not happened.

While the 'Washington Consensus' has few overt supporters among the global decision makers today, it has not been replaced by any serious programmes that seek to replicate the examples of successful development that preceded it.

South Africa's 'two economies'

South Africa is fully integrated within the global economy. It is therefore open to the pressures imposed on all medium-sized middle-income countries of the South by the process of globalisation. At the same time, South Africa itself has 'two economies'. The first is an advanced, sophisticated economy, based on skilled labour, which is becoming more globally competitive. The second is mainly an informal, marginalised and unskilled economy, populated by the unemployed and those unemployable in the formal sector.

Despite the impressive gains made in the first economy over the last decade, the benefits of growth have yet to reach the second economy. 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.

The market economy, which encompasses both the first and 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 resources which flow into the second economy will inevitably leak back into the first economy.

Public and private interventions that may produce a positive outcome in the first economy cannot have any strategic impact on the second economy because it is structurally positioned to remain on the periphery. These problems make decisive government intervention imperative. This intervention would set the preconditions for market-led economic growth.

The experiences of the successful interventions described above provide a number of lesson on which South Africa can draw.

South Africa should, as far as possible, finance the transformation of the second economy through 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 profit that would be used to finance debt.

Necessarily, therefore, 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, has enabled the government to generate these resources.

Using these resources, and applying the lessons of other successful development approaches, our interventions must focus on:

• productive investment to create and safeguard sustainable jobs;
• investment in infrastructure which contributes to development, structural adjustment and the creation and maintenance of sustainable jobs;
• measures which support local development and employment initiatives and the activities of small and medium sized enterprises. This 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.

The success of interventions in the second economy is dependent on the success of the first economy and building the structural links between these two economies. Therefore, 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. Successful interventions in the second economy can in their own right impact positively on our overall economic growth objectives.

The state machinery therefore needs to be organised, empowered and motivated to discharge its responsibilities effectively. 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.

South Africa's strategy has to be to raise the level of investment and economic activity, while reforming the labour market so more labour is absorbed, the fruits of economic growth are spread more evenly, and the second economy is empowered to generate higher levels of growth itself and in collaboration with the first economy.

The two elements of this strategy entail reducing the cost of capital and allowing for a more competitive currency aimed at raising investment and exports, while at the same time allowing for labour demand to be expanded through more appropriate labour market policies.

The ANC's vision has always been one of a prosperous, equitable, stable and democratic society. In the economy, our vision has been one of decent work and living standards for all, in the context of qualitatively improved equity in ownership, management skills and access to opportunities.

Our growth strategy must therefore aim to balance the need to raise investment and increase economic growth with the need to meaningfully share the benefits of economic growth to a wider group of people. This strategy requires policies that will increase investment while allowing for a strong state to direct the dividends of growth towards raising the human capital potential of the poor and maintaining a social security net for certain vulnerable groups. It is a strategy aimed at growing the first economy, growing the value addition of the second economy, while building staircases between the two economies.

** This is an edited extract from a discussion document prepared for the ANC National General Council (NGC) being held in Tshwane from 29 June to 3 July.

These documents are currently being distributed to ANC branches for discussion, and are available on the ANC website at: www.anc.org.za/ancdocs/ngcouncils/2005/index.html.

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