Southern Africa must unite!

The last Ordinary Summit Meeting of the Southern African Development Community (SADC) held in Maseru in August resolved that our region was moving too slowly with regard to the objective of regional economic integration.

It therefore asked a Task Team made up of the SADC Trade, Industry, Planning and Finance Ministers to meet as a matter of urgency to make proposals in this regard, for consideration by an Extraordinary Summit Meeting of SADC. This Extraordinary Meeting took place at Gallagher Estate, Midrand, a few days ago, on 23 October.

After detailed discussions, the Summit confirmed previous SADC decisions that we should still aim to transform the SADC region into a Free Trade Area (FTA) by 2008. This means that products and services originating from within the region would be traded among the SADC Member States free of tariffs.

The Summit also agreed that we should still aim to create a SADC Customs Union (CU) by 2010. This would mean that in addition to the duty free tariff regime within the FTA, the SADC region would maintain a common external tariff with regard to goods and services originating from the rest of the world. This means that the customs revenues collected by the Member States would be put into a common pool and then shared out according to an agreed formula.

It is obvious that these developments, the FTA and the CU, would represent major steps forward towards the economic integration of the SADC region. Of course, we must make the point that this integration is not an end in itself.

It is an important part of the objective shared by the SADC Member States, as rapidly as possible to reduce poverty and underdevelopment, improve the lives of all our people and achieve balanced and shared growth and development for the countries of our region.

It therefore follows that the steps we must take along the path to integration cannot be measured just against technical indicators but by the extent to which they contribute to our shared developmental goals.

Regional integration is rightly being pursued not just in our own region, but across our Continent, as a critical instrument to boost economic growth and raise living standards. But we need to recognise that regional integration in the developing world has all too often been a graveyard of failed expectations. It is therefore important that our region carefully prepares the ground to make any integration steps it takes sustainable.

Currently available figures indicate that in the six or so years up to 2003, intra-regional SADC trade increased from 20% to 25% of total regional trade. Undoubtedly, this represents progress. But a critical question we must answer is - what is the pattern of this trade?

All indications suggest that much of it continues to be made up of exports of manufactured goods from South Africa to the rest of the region, with a much smaller volume of imports into our country from the rest of the region. In reality, the trade imbalance in our region remains virtually unchanged, despite the measures that have been taken to implement the 1996 SADC Trade Protocol that directed that we should create the FTA.

Why is this so? It cannot be fundamentally because of tariffs. This is because our country has, as a result of the implementation of our obligations under the SADC Trade Protocol, already removed duties on over 90% of goods originating from SADC countries.

Unquestionably, the fundamental reason for this imbalance is due to underdeveloped production capacity and inadequate infrastructure in the sister SADC Member States - in other words, the historically evolved supply side capacity constraints. (This underlines the importance of ensuring that as we work to promote the economic integration of our region, the obviously dominant position of the South African economy does not serve further to entrench the underdevelopment of the other SADC Member States.)

What this highlights is that any programme to promote greater trade integration in a region such as ours must be complemented by programmes of sectoral cooperation focused on the creation of the conditions that will enable producers to emerge in the SADC countries who would be able to take advantage of the additional market access opportunities that regional integration would create.

Practically, this means that we need to give clear guidelines for an FTA Work Programme to identify and implement a range of complementary programmes that are necessary to make a SADC FTA function effectively as a tool to promote equitable and mutually beneficial developmental economic relations among us.

Among other things we need to ensure that:

• we are on track to promote macro-economic convergence around agreed indicators;
• our infrastructure development cooperation programmes, Spatial Development Initiatives and sectoral programmes make the necessary progress;
• we begin to achieve some level of harmonisation of industrial development strategies and competition policies, as called for in the 1996 SADC Trade Protocol; and,
• in general, we carefully elaborate a detailed and realistic but muscular Activity Matrix necessary actually to create the FTA, with the processes in place to achieve the objective of balanced, mutually beneficial regional economic integration.

Everything we know from global experience, our actual regional reality, as well as general economic postulates, has convinced us that only by laying a solid basis for a properly functioning FTA will we be in a position to advance towards a Customs Union (CU).

Without establishing a proper basis for duty free trade within the SADC region, and putting in place programmes that will boost the capacity of our partner SADC countries to produce tradable goods, resulting in better trade balances within our region, a common Customs Union external tariff would be meaningless.

The Summit agreed to authorise a study to identify an "appropriate model" for a SADC Customs Union. Necessarily, the study will have to canvass thoroughly all issues and options. Obviously, afterwards, we will have to allow time and space for all our countries to participate in the elaboration of a practical programme of action for the creation of a SADC Customs Union, based on the necessary analytical rigour to ensure that we do not make a false start.

Inevitably, among others, these negotiations will have to answer such questions as:

• how do all of us disengage from all regional economic structures outside SADC;
• how do we relate to all other extra-SADC trade and economic agreements into which we might have entered; and,
• how do we ensure that the Economic Partnership Agreements currently being negotiated with the European Union (EU) by all SADC Member States except South Africa, do not serve as an obstacle to the envisaged SADC Customs Union?

Once again, a series of complementary measures in areas of sectoral cooperation and macro-economic convergence would need to be identified and implemented to achieve the developmental objectives of a SADC Customs Union.

The timeframes we set ourselves earlier, relating to the FTA and the CU, were based on our estimation of the time it would take us, based on perceived objective reality, to achieve these outcomes. It is only logical that our experience, or dynamic objective reality mediated by practice, will serve as our teacher, telling us whether the circumstances necessitate any changes in our target dates.

With regard to the CU, because of our commitment to balanced and shared economic development in our region, our government acknowledges and accepts the need for an asymmetrical distribution of the common customs revenues that would accrue to the Customs Union, using, inter alia, such new institutions as a development fund to enhance the trade capacity of all our Member States, especially the most disadvantaged.

To avoid unnecessary tension and conflict among ourselves in future about such compensation for various Member States as may be necessary as a result of the establishment of the SADC CU, it would be important that the Member States agree upfront that these costs would be shared among the Member States on an agreed basis, and strictly defined in terms both of timeframes and relative dimension, taking into account the interests of all Member States.

Fundamental to our approach with regard to all the issues we have discussed, we must also emphasise that we would prefer options that would allow us to maintain the unity of SADC. In this regard, we can never forget that SADC was forged in struggle for freedom from colonial and apartheid rule, among a group of countries that have been part of one region that has had meaning in more than a mere geographic sense since, at least, the third quarter of the 19th Century.

It is clear that we have major tasks ahead of us, to elaborate and implement the organically related measures that will enable us to achieve the critically important, balanced and equitable regional integration that is a fundamental condition for:

• the sustained and sustainable development of the SADC region;
• our shared success in freeing the ordinary working people of our region from the scourges of unemployment, poverty and underdevelopment;
• creating a firm basis for our region successfully to respond to the challenges of globalisation, including strengthening South-South relations of equitable and mutually beneficial cooperation;
• the creation of the possibility for us to make our necessary contribution as a region to the vitally important project of African integration and unity; and,
• our related capacity to contribute to the emergence of a new world order that would fully restore Africa and the African Diaspora to their rightful place among the world community of nations.

Our regional organisation, SADC, faces the critically important task to respond to these historic challenges. I am certain that our regional leadership will not fail our peoples and the peoples of our Continent and the African Diaspora in this regard, as it did not fail them in the difficult struggle to defeat colonialism and apartheid.

Centrally, success in this regard must also include the development of our own indigenous regional capacity, including in the SADC Secretariat and other structures of the Community, actually to help us design and implement correct and realistic programmes, setting ourselves realistic timeframes, determined as we have always been, to achieve regional and continental integration and unity as speedily as possible.

There is a well-known and apparently contradictory Latin saying - festina lente! - make haste slowly! With regard to the strategically and historically important matter of the economic and other integration of the SADC region of Africa we must, wisely, consciously, and on a sustained basis, make haste slowly, consistent with our firm determination to realise the objective of regional unity.

After a fruitful and focused discussion, informed by this perspective, the SADC Extraordinary Summit Meeting directed that the Ministerial Task Team should continue its work and prepare the necessary and realistic work programmes to advance both the FTA and the CU, as well as the related areas, making certain that our region carefully prepares the ground to make any integration steps it takes sustainable.

Undoubtedly, all participants at the Summit Meeting will always remember it for the important contribution it has made to respond to the shared desire to accelerate the process of regional integration, and thus put in place one of the critical building blocks we need to achieve the historic objective of African unity.

SA economy

Longest period of sustained economic expansion

South Africa is in the midst of its longest sustained economic expansion. Robust economic growth, supported by strong consumer spending and rising investor confidence, has created over one million jobs in the past three years.

While unemployment remains our most pressing social and economic challenge, for the first time in a generation, the economy is creating jobs faster than new entrants are joining the labour force. Though it is too early to claim victory in the battle against unemployment, we can already see how growth and development work together to reduce poverty and improve livelihoods, how the policy choices we made a decade ago are bearing fruit.

The key challenges we face as a country are to sustain this growth, broaden participation and extend opportunities to all. We must strengthen our industrial capacity and deepen the quality of social development. We must accelerate growth and share its benefits.

In celebrating the solid performance of our economy, we must continue to be mindful that there are still too many South Africans who go to bed hungry, too many who stare at the fragile walls of their shacks and far too many for whom disease makes life a daily struggle.

In the past four years, our economy has expanded by an average of 4.2% a year, with growth reaching almost 5% last year. Some indicators of economic activity suggest that the economy may in fact be growing faster than the preliminary data suggests. But we know that more needs to be done. Sustained and broad-based growth depends on more rapid progress in our industrial sector, on export growth and trade performance and on improving education, skills and productivity.

Over the past five years coordinated fiscal and monetary policies have helped bring down inflation and interest rates to historic lows. Rising global commodity prices, solid growth in the domestic market, low interest rates in developed countries and continued inflows of foreign capital have created buoyant financial conditions and a favourable environment for investment.

The expansion of the social security system has contributed to poverty reduction and reduced the vulnerability of many households. At the same time, real income tax relief for low and middle-income earners has raised disposable income. People have purchased more durable goods such as televisions, fridges, furniture and cars. We have seen an acceleration of consumer spending, an unprecedented rise in house prices - and steadily rising household debt.

At the same time, many companies have taken advantage of the low interest rate environment and relatively strong currency to retool - to invest in new machinery and technology to expand their businesses. Boosted also by rising public sector infrastructure spending, the construction sector has boomed, growing by 10.7% a year in the past three years. The pace of fixed investment has surprised many of the upstream input sectors. As a result, we are now experiencing periodic shortages of cement, steel and refined fuel.

In some instances, these shortages have led to price increases. In others, we have seen imports to meet excess demand. But over time, these are the signals that lead to investment decisions and business expansions. Investment leads in due course to jobs, training, exports, earnings, and further investment.

The supply side of the economy takes time to respond to rising demand. But the response is clearly underway - companies are increasingly confident that the present boom is not just a temporary surge, but represents a structural shift in our economic trends and prospects.

Just as production takes time to respond to demand, so also domestic savings lags investment growth. As incomes have risen, and taking advantage of more favourable credit conditions, South Africans have chosen to spend rather than save. This has left much of the investment to be financed from foreign capital. While this is appropriate for a country at the level of development as our own, it does increase the potential risks to the economy. We are integrally linked to global financial markets and are therefore able to attract and retain foreign capital inflows, but we must also raise our export performance and savings rate over time.

Investment growth is projected to grow by about 10% a year to 2010. Though household consumption is expected to moderate, the economy is expected to record growth of about 4.5% next year, rising to about 5.5% percent by 2009. Inflation, as measured by the Consumer Price Index (CPIX), is likely to rise further over the next six months, but should moderate thereafter, averaging 4.8% over the next three years.

More resources for development

Over the next three years, government is in a position to add R80 billion to the spending plans tabled in February. The major priorities for additional spending include:

• investment in stadiums and public transport to ensure a successful 2010 FIFA World Cup
• stepped up investment in the built environment in the form of housing, electricity, water, sanitation and community facilities;
• contributing to improved economic efficiency through investment in roads, rail, research and development, energy and skills development;
• strengthening the criminal justice sector, with particular emphasis on visible policing and improving court case flow;
• improving the quality of education, health and welfare services through additional resources and targeted interventions to improve public administration.

In 2001, government began increasing spending on social and economic infrastructure. Sustainable, vibrant communities require houses, but also safe neighbourhoods, parks, street lighting, quality schools, roads, clinics and access to public transport.

As the economy grows, one of the constraints to broader economic participation is poor public transport networks across our major cities. The challenges facing the commuter rail system are particularly acute. Trains are often late, security is poor and there are safety concerns. Ageing signalling systems and deteriorating rolling stock contribute to unreliable and inadequate service. Additional resources are therefore recommended for both municipal transport systems and public transport relating to the 2010 FIFA World Cup.

In the 2006 Budget, we announced that we expect government and public enterprises to spend about R370bn on infrastructure over a three-year period. We now expect spending on public infrastructure to grow by about 15% a year, to reach about R150bn a year by 2010. These investments are focused on social and household services and infrastructure that expands economic capacity. The proposed budget framework provides R28bn of additional funds for spending on electrification, roads, commuter rail, housing, bulk infrastructure and research and development.

Bringing down crime requires a combination of social and economic programmes designed to improve community livelihoods, and requires a strong partnership between communities and government. However, the direct efforts of our criminal justice sector are critical to making our country safer.

The 2007 Medium Term Expenditure Framework (MTEF) proposes to add further resources to support the fight against crime. We make provision for a further 10,000 people to be employed by the South African Police Service, raising overall policing levels to 193,000 by 2010. We also make provision for more people to be employed in the legal system, mainly to improve court case flow management. Spending on justice, policing and prisons will grow by 9.4 percent a year over the medium term.

Major infrastructure projects over the next three years include the Gautrain rapid rail link, King Shaka Airport, the de Hoop Dam on the Olifants River and the Vaal River augmentation project. Most of these projects use a combination of public and private sector funding and all are designed to complement and encourage private business investment or, in the case of the De Hoop Dam, open an entire area to new mining ventures. Much of the investment by state owned enterprises is also designed to facilitate greater export performance.

Improving economic performance and broadening economic opportunities cannot happen without further improvements in our investment in human capital. The 2007 MTEF proposes significant additions for enhancing the development of skills. A major step up in spending on adult literacy is proposed. Further additions are proposed for higher education, including resources for infrastructure investment at universities.

There are many components of the civil service that work well, where departments deliver services of a high quality and citizens are treated with respect and dignity, many schools where effective learning takes place and many millions of people served by our clinics. However, there are also clear inadequacies. As public spending has accelerated in the past five years, government is becoming increasingly concerned that in many cases, increased resources have not translated into increased outputs. And so the public has not always seen the benefit of the significant rise in public spending.

The budget framework makes provision for increased salaries for certain categories of professions, especially in the health and social welfare sectors. It also makes provision for higher staffing levels in health, police, justice and social welfare. These are much needed improvements.

The solid performance of our economy, in particular the creation of job opportunities and rising household incomes, allows us to turn the dreams of ordinary people into new realities. The expansion of infrastructure investment and the sound management of our public finances provide us with the capacity and resources to improve the services we provide to our people, to build hope and expand opportunities.

** Trevor Manuel is a member of the ANC National Executive Committee and Minister of Finance. This is an edited extract from his speech to the National Assembly on the tabling of the 2006 Medium Term Budget Policy Statement , 25 October 2006.

More Information:

• Medium Term Budget Policy Statement 2006

Anti-Corruption

Fighting graft in local government

The launch of the Local Government Anti-Corruption Strategy (LGAS) represents an important development in the national drive to entrench the ethic of good governance in our country. It is yet another milestone in the upward progression, building as it does on a process whose effective roll-out was started last year with the implementation of the Local Government Anti-Corruption Programme in five provinces, each represented by a sample of municipalities.

As a country, we come from a past in which the predatory attitude had become the habitual and accredited spiritual attitude. It is a past in which the erstwhile rulers of our land had created an administrative and political climate that is uncongenial to the ethic of service to the people. So opaque and intimidating was the climate that prevailed at the time that reporting incidents of corruption was a life-threatening undertaking. Corrupt practices involving political and administrative incumbents were not an unexpected pattern of behaviour. They were not a deviation from the norm.

The content of this strategy is influenced by the realisation that if we are to deal effectively with the problem of corruption, we will have to familiarise ourselves with the circumstances in which interaction between the state and various sectors of society tend to produce unethical behaviour. Consistent with other elements of our general approach to the question of governance, this strategy treats individual residents, corporate citizens and local authorities as moral agents with duties and responsibilities to one another.

We believe that we already have government arrangements as well as mechanisms for government-citizen interaction that give us the unprecedented possibility to minimise the scope for corrupt practices. Indeed, there is a fairly strong prima facie case attesting to the growing effectiveness of the measures that were introduced by government since the advent of democracy.

In mainstream discourse that is conveyed through newspaper editorials, the problem of corruption is projected as the hallmark of the new dispensation. The false notion that the new dispensation is menaced by soaring levels of corruption presumes a past innocent, corruption-free age when things were better. Yet the truth is that such exposure of corruptions as there was, has taken place because the oversight mechanisms that we have put in place are proving to be an effective antidote to corruption. These include mechanisms such as the Auditor-General's office, the Directorate of Special Investigations and the Independent Complaints Directorate. In addition to these, we have introduced legal steps designed to clarify the separation of roles between those to be performed by politicians and those by the administration in tender adjudication processes.

As local government practitioners, our primary task is to direct our energies towards activating constituencies that suffer most from corruption. We must create anti-corruption alliances between such constituencies and the political and administrative cadreship of our municipalities. These partnerships can best be promoted by heightening public participation in the Integrated Development Planning (IDP) processes, the activities organised by Ward Committees as well as in the presidential, ministerial and mayoral izimbizo.

To establish such a movement and to propel it forward, it is indeed necessary for all our local authorities to keep their focus on the main task of making welfare-enhancing interventions in their areas of jurisdiction. At the same time, we must neutralise the sharp demarcation between the state as preeminent rule maker and society as the recipient of those rules. We must get our people to own the decisions pertaining to the development plans that affect them, and to take joint responsibility for mobilising resources that are needed to operationalise those plans.

In this way, we shall be buttressing the progressive changes that are already taking place in our country. The change to the nature of state-society interaction that is taking place in our country is definitely altering the balance in favour of good governance for sustainable development. The continuous spreading and deepening of this thrust will certainly nudge our country towards the pinnacle of democracy.

The systematic phasing in of this strategy will take place over a five year period in line with the 'Local Government Strategic Priorities', which were adopted by the entirety of our government. We must see this strategy as a tool for the empowerment of our communities in their quest for a better life, and an instrument used by us as we discharge our obligations to our people. Let us popularise the strategy among our people and to mobilise them to work with us for its successful implementation.

** Sydney Mufamadi is a member of the ANC National Executive Committee and Minister of Provincial and Local Government. This is an edited version of remarks at the launch of the Local Government Anti-Corruption Strategy, 24 October 2006.

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