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A development orientated growth path for the Western Cape - Draft Document

Since 1994 when South Africa became a non-racial democracy numerous Presidents and Prime Ministers have come to Cape Town to celebrate what they call "a miracle". We have welcomed Presidents Clinton, Mitterand, Chirac and Castro, Chancellor Kohl, Prime Minister Mahathir Mohamed, and numerous others. All have paid tribute to the remarkable peaceful transition. All have also recognised the difficulty of translating the political transition into a socio-economic transformation that will bring A Better Life For All.

But it is nevertheless necessary for the ANC government to be judged to what degree it has moved to bring that Better Life For ALL into existence.

THE EVIDENCE IS THAT:

  • all laws that discriminated against people in the past have been changed and new rights have been given to workers, farmworkers, women and disabled people. Welfare grants, pensions and health services are now given to everyone equally.
  • racially discriminatory practices in public life have been ended.
  • the harsh treatment of ordinary people by the police has stopped.
  • in the main civil servants treat people with respect.
  • services are now reaching many previously disadvantaged people for the first time.
  • fresh water is now being supplied to 23 million people.
  • telephones are being supplied to over 6 million households.
  • electricity is being supplied to 4,9 million households.
  • almost one third of our population are now in schools, universities or colleges.
  • around 400.000 new houses have been built and 700.000 housing subsidies have been allocated.
  • 500 clinics have been built and for the first time many rural areas have doctors.
  • 5 million children in need now get a meal at school every day.

So while much still needs to be done, a major beginning has been made. WE ALL LIVE IN A NEW SOUTH AFRICA FREE OF APARTHEID OPPRESSION. This has been achieved by the ANC National Government.

THE SITUATION IN THE WESTERN CAPE:

The Record of the Provincial Government

The NP makes much of the fact that over the past few years, the Western Cape provincial economy has performed marginally better than that of most other provinces. This is nothing new. The Western Cape is one of the two best resourced provinces in the country, and has historically performed better than most others.

The NP`s claims that this is somehow due the fact that it is the majority party in the provincial government is plainly absurd. The fact that the Western Cape economy has performed better in the past four years than it has done for decades is due (i) to the reversal under the ANC-led national government of the stagnation that had enmeshed the national economy for more than two decades of NP apartheid rule, and (ii) the re-insertion of our country into the global economy following the end of sanctions and the installation of a democratic government. It is the latter that has given a boost to tourism, wine and agricultural exports from the Western Cape as well as enabled us to bid (this time unsuccessfully) to host the 2004 Olympic games. Policies that have guided these developments, all of which were major boosts to the provincial economy, were largely due to the efforts of the ANC national government.

It is our contention that even though the Western Cape provincial economy may have grown at a rate slightly higher than that of other less resourced provinces, it has, in fact, significantly underperformed both in terms of growth and development in relation to its potential.

ACCORDING TO WESGRO:

  • The 3% average growth recorded in recent years "falls far short of what we think our region is capable of achieving".

  • Job creation has been below the 40.000 new jobs needed to absorb new entrants to the labour market, resulting in an increase in the numbers in "survival self-employment and unemployment" from 311.000 in 1994 to 331.400 in 1998.

  • There are still grave inequalities in household incomes, corresponding to the apartheid racial divisions of our people. In 1997 the average income per head of whites in the Cape peninsula was R 30.700,2,17 times that of coloured people which was R 14.102 and 3,45 times that of Africans which was R 8.876.

  • There remains a housing shortage in the province of 185.000, and many other social indicators are far from satisfactory.

These realities are, in our view, no cause for complacency. In part at least, they point to a failure of the NP-led provincial government to rise adequately to the challenge facing us to devise and implement a development-orientated growth strategy for the Western Cape.

Two elements, in our view, are essential in this regard. First, the re-integration into a rapidly changing and globalising world economy - while clearly yielding benefits to some of our sectors in the period since 1994 - must also be recognised as having posed major challenges and indeed potential threats to others. The greater openness of the world economy is subjecting many of our industries and service sectors to fierce challenges from foreign competitors. Such pressures are being felt in several industries that have historically been important sources of income and employment in the Western Cape, including clothing and textiles and wheat production. The problems created by these processes are, moreover, exacerbated by the uneven nature of the globalisation process, and particularly by the fact that agricultural goods from developing countries continue to encounter significant protectionist barriers in developed countries. Job losses have already occurred in the canning industry as a result of this.

These realities require an active policy response. In the context of our province, where we have a rapidly growing service sector, this must reach beyond industrial policy, narrowly conceived, and result in the development of sectoral strategies for all significant sectors, potential as well as actual. These should aim to raise the competitiveness of the province`s industries and sectors by encouraging technological upgrading, training of workers, the introduction of new management methods and styles of workplace relations and market re-positioning.

The second fundamental requirement is to recognise that achieving sustainable economic growth will not be possible without addressing critical developmental challenges. The approach of the RDP, to which we re-commit ourselves, is that in the conditions prevailing in South Africa the challenges of promoting growth (an increase in the output of goods and services) and development (an improvement in the human condition) required an integrated development orientated growth strategy. As well as addressing such issues as investment and the restructuring of productive activity, this should necessarily involve strategies to address evident social backlogs as well as transform inherited ownership patterns and workplace relations. Without improving housing, education and training, as well as promoting ownership among a broader group of previously excluded people and more participatory styles of management-labour relations, the social conditions for sustainable economic growth will not be created.

When ANC was in charge of Ministry of Economic Affairs and the RDP important first steps taken. The Ministry was involved in devising and implementing, in co-operation with national government:

  • Programmes for the promotion of Small, Medium and Micro-Enterprises in the province.
  • The initiation of Local Economic Development programmes in several areas.
  • The West Coast Corridor Spatial Development Initiative.
  • An investigation of the problems facing the fruit canning industry.
  • Programmes to promote Black Economic Empowerment.
  • Encouraging a shift to the more participatory management styles prevailing in world class firms.

Since end of GPU, it has become clear that the Western Cape provincial government has become a force blocking transformation.

  • It has become noticeably lukewarm on SMME and BEE promotion, clearly not seeing these as a major priorities.
  • It has become uncooperative with national government on major initiatives.
  • It has undertaken no significant new industrial policy or sectoral policy initiatives, while signalling its intention to focus only on a limited range of what are called "growth sectors".

The NP-led provincial government does not have a coherent and integrated development strategy. The provincial Ministry of Trade and Industry and Wesgro have economic development and investment strategies. The provincial Development Council, a statutory government strategy, which brings together stakeholders from business, labour, local government and the NGO sector, has developed an inclusive Provincial Growth and Development Strategy. However, thus far the provincial Cabinet has not adopted or endorsed this strategy. Provincial plans for public works (Asset Management), transport, housing and social services are not located in an integrated framework. In addition to this, other important initiatives such as the Metropolitan Spatial Development Framework, adopted by the Metropolitan Council, and which impacts profoundly on the character of urban spatial development and industrialisation min Cape Town has not been endorsed by the provincial government.

The NP-dominated Western Cape Cabinet has not implemented the Ten Point Procurement programme. It is the only province that has not done so. The plan ensures that all tenders for government supply contracts favour emerging companies. In this province that means African and Coloured owned small and medium suppliers. Emerging companies are favoured by a list of criteria which ensure that not only the large white owned companies, which have more infrastructural capacity and capital and can undercut small companies, get government contracts. The Ten Point Plan provides for emerging companies to get access to tender information, that advice on tendering is made available, that surety requirements are waived, that tender submission requirements are simplified and that early payment cycles are introduced. International experience shows that government procurement contracts are one of the most important start up mechanisms for emerging companies. In addition it creates the kind of competition which has been missing from the economy in the past, where only the large white owned companies were awarded government contracts. By not implementing the Ten Point Plan, the Western Cape provincial government has denied emerging businesses in our province access to an important benefit.

The NP has been prevented from passing its Development Planning Bill in its original form only because of a massive public outcry and the unconstitutionality of its proposals. In its original form the Bill was premised on keeping apartheid planning in place and affording the provincial Minister arbitrary and discretionary powers to overrule local government integrated development planning. Property development at Oudekraal, Camps Bay, Rooi Els among others, clearly demonstrate the NP`s practice of favouring white developers, intent on short term gain, often at the expense of the environment and sustainable development. Pious claims to be balancing development and environmental concerns are not matched by job creation figures or commitment. On the contrary, the proposed Oudekraal development was even financially unsound as evidenced by the fact that the development was put on hold when the developer ran out of cash.

It is our contention that the NP is fundamentally incapable of promoting the development-orientated growth path in the Western Cape that is essential to ensure sustainable rising living standards for all of our people. Its real interest base remains established white professional and business interests. It has no real commitment to small business promotion, black economic empowerment or job creation. It fails to recognise the imperative to fundamentally transform enterprises and sectors, and is lukewarm or resistant to suggestions that this also requires introducing more participatory management styles and actively seeking to raise the human resource potential of our people. Its call for "labour market flexibility" amounts to a call to remove protection from many of the most vulnerable workers, and takes no account of the important contribution that labour legislation introduced by the ANC national government have made to ensuring a high degree of labour market stability.


THE APPROACH OF AN ANC-LED PROVINCIAL GOVERNMENT

An ANC-led provincial government will pursue a two-track economic policy.

First, we will strengthen existing economic structures in the province by actively encouraging restructuring and transformation so that our established industries and sectors are better able to confront the challenges facing them.

Second, we will broaden the base of the economy by facilitating the emergence of small business, training and productive activity among previously disadvantaged people and in historically disadvantaged areas. Apartheid prevented the townships and residential areas of the poor from developing any economic life. We intend to reverse that by encouraging all forms of economic activity in those areas to:

  • retain purchasing power locally, instead of people spending their money in rich shopping centres.
  • bring skills training of all kinds to those areas, especially small business skills.
  • create scope for small workshops and factories which will provide productive jobs so that workers will not have to travel to work elsewhere.
  • assist with the emergence of service related jobs such as local branches of banks, insurance companies etc.
  • encourage local authorities to provide services by labour intensive methods employing local labour.

Through these and numerous other methods we will build local skills, provide jobs and make services available where people live. All this will require full consultation and participation by the community to ensure that all benefit.

In addition an ANC Ministry for Economic Affairs and the RDP will:

PLACE EMPLOYMENT CREATION AND BROADENING THE BASE OF THE ECONOMY AT THE CENTRE STAGE OF ITS ECONOMIC POLICY

In co-operation with national government, an ANC-led provincial government will review, with the aim of significantly extending, programmes aimed at short term job creation, including labour intensive public works and infrastructural development projects at both provincial and local government level. We will also seek to extend training programmes, particularly but not only for unemployed youth. We will seek to engage both the private sector and labour in the province to identify the contribution these social partners can make to creating employment for our people.

As far as long term job creation is concerned, our industrial and sectoral policies will give priority to industries and sectors with current or potential high labour absorption capacity. We will promote employment creation as the fundamental economic challenge facing us, and make it a key test of all other policies and programmes we pursue in the province.

RECOGNISE THE NEED FOR ACTIVE INDUSTRIAL, SECTORAL AND LABOUR MARKET POLICIES.

On coming to office an ANC-led provincial government will engage with stakeholders in a comprehensive review of the situation in all major sectors of the provincial economy. The aim of this will be to evaluate and refine strategies for transformation of our major sectors, and identify which of the Department of Trade and Industry`s various support measures can be utilised to facilitate transformation, and what new measures and forms of government support may be needed.

We will act to encourage new economic activity and new job creation in sectors like tourism, high tech industries like Capricorn, auto component manufacture and other steel sectors, down stream industries linked to Saldanha and agricultural sectors among others. But we will also as far as possible act to defend jobs in vulnerable sectors. Unlike the current NP-led provincial government, we will not focus only on so-called "sunrise" sectors. The potential of sectors that are facing difficulties, but in which many jobs are at stake, will also be assessed with a view to devising strategies to achieve a sustainable transformation of those sectors.

The Western Cape has a relatively diversified regional economy, in which a number of sectors are of strategic importance. They include agriculture and agro-processing industries, manufacturing, tourism, service industries and knowledge-based high-tech activities. Our policies will aim to build on and enhance strengths in currently important sectors, address weaknesses in others and develop new capacities.

We will actively promote the province among both domestic and potential foreign investors. A one stop office for investment promotion and enquiries will be set up in the provincial Department of Economic Affairs and the RDP.

In conjunction with national government, we will highlight and campaign for fairer arrangements in international markets for our products. In particular, we will continue to press for better treatment for our agricultural products in the European Union and US markets, and for adequate safeguard measures to be implemented to counter the effects of subsidies on products from developed countries.

ACT TO ENSURE A MORE VIGOROUS PROMOTION OF SMMES

As soon as possible after taking office an ANC-led provincial government will convene a summit of SMME service providers, financial institutions, representative bodies of small business and other interested parties to identify ways in which the provincial government can become more effective in supporting SMMEs. We also pledge to maintain regular ongoing contact with the sector.

We will review provincial tendering procedures, implement the national Ten Point Plan (which the present NP-led provincial government has rejected) and actively monitor all provincial tenders to ensure that SMMEs owned by historically disadvantaged people have a significant opportunity to participate in contracts awarded. We will actively encourage more extensive sub-contracting to SMMEs in major projects. Our investment promotion programmes will give particular attention to encouraging joint venture and other partnership arrangement with SMMEs.

An ANC-led provincial government will also put its own bank account out to tender. Tenderers will be required to submit details of their record in providing support to small business and low income housing, and criteria will be devised to ensure that the awarding of the contract for the provincial government`s bank account becomes an instrument to encourage more effective involvement of the private banking sector in SMME financing.

BECOME AN ACTIVE FORCE SEEKING TO IMPROVE CONSUMER PROTECTION.

Apartheid South Africa had a very poor record of consumer protection and much remains to be done in this area. It is our view that this area has been neglected by the present NP-DP provincial government. Consumer protection is an area of provincial legislative competence, and an ANC-led provincial government will investigate ways of improving protection for the consumers of our province, including by establishing a strong provincial Consumer Protection Committee and encouraging the emergence of stronger community-based consumer bodies.

ENCOURAGE THE EMERGENCE OF NEW MANAGEMENT STYLES AND MORE PARTICIPATORY FORMS OF WORKPLACE ORGANISATION

International experience has convincingly demonstrated that the most competitive and effective enterprises are those that have replaced authoritarian top-down management styles with those based on a teamwork approach, which draw on workers` knowledge and experience. Many of our key industries and sectors still have a long way to go in making this transition. An ANC-led provincial government will closely monitor the results of the pilot phase of Nedlac`s workplace challenge, which includes a programme in the Rooibos tea industry in our province, with a view to actively encouraging similar initiatives in other sectors.

MAXIMISE THE TOURISM POTENTIAL OF OUR PROVINCE

An ANC-led provincial government will take active steps to boost tourism in our province. Tourism is a major driver for economic growth with enormous potential to create employment and income for our people. In order to maximise this potential it is necessary to develop all forms of tourism. These include tourism based on:

  • the scenic beauty of the region;
  • its cultural heritage;
  • the potential of our province to emerge as a world renowned eco-tourism destination given that we have one of the richest floral kingdoms in the world.

This development will not happen only by promoting tourism abroad. It will also require a concerted programme of product development in our region. While CAPTOUR and its national counterpart SATOUR focus on the promotion of tourism, no agency directs focused attention on the development of the tourism product at community level.

An ANC-led provincial government will review all existing programmes with a view to extending the potential of our province in this area, as well as broadening the access to the industry by historically disadvantaged people. We will aim both to improve promotion and address the key challenge of product development by encouraging and promoting:

  • training and mentoring programmes at schools and tertiary institutions;
  • incentives for SMMEs working in the tourism sector;
  • monitoring and evaluating standards in the industry with a view to providing support for emerging businesses;
  • tourism awareness programmes directed at schools and community organisations;
  • easing access for tourism entrepreneurs to licences and permits.

It is our view that much remains to be done to realise the potential growth of eco-tourism. Apart from the fact that the sector is labour intensive and will create jobs, a strategic approach is vital to managing and protecting a highly vulnerable resource. The present provincial government has tabled no plans for a strategic approach to this sector, other than an announcement that it will transform the Cape Parks Board into a statutory instrument. The reality is that the infrastructure and services at many of our eco-tourist destinations are below international standards. An AND Ministry of Economic Affairs and the RDP will move swiftly to commission a study on eco-tourism in the Western Cape to provide a framework for the development of the sector and encourage direct foreign investment and joint ventures with Western Cape companies.


THE PROVINCIAL GOVERNMENT BUDGET

For much of its term of office, the outgoing NP-provincial government was well known for its opportunistic complaints about its allocation of nationally-collected revenue. In the present (1998-99) budget year, however, it decided not to apply for a share of the additional funding offered to the provinces by national government - apparently because it feared that it would be subject to national government conditionalities. This decision deprived the people of our province of several hundred million Rand.

The NP`s constant complaints about its national allocation - apart from being based on the untenable proposition that one of the best resourced provinces should command a greater proportional share of nationally collected revenue indefinitely - distracted attention from two glaring defects of the NP`s management of the province`s finances:

  • · There has been little serious reprioritisation in favour of the needs of the poor;
  • · There has been little attempt to develop own revenue sources.

The NP nationally tries to portray itself as the party of fiscal discipline and sound financial management. Yet in the one provincial government it controls, the NP has shown itself to be squandering scarce resources on unproductive activities, and, in past years, as unable to operate within its budget.

The NP`s priorities were shown in the debate around the provincial Constitution, which ultimately resulted in the ending of the GPU and the ANC`s exit from provincial government. The NP wants to spend taxpayers money on additional MECs and provincial commissions on the environment and children, which largely duplicate the work of national commissions operating in similar areas. The NP also wants to waste money on symbols: flags and coats of arms for the province, all of this at the same time as it is closing hospitals.

An ANC-led provincial government`s approach to the budget will be based on the national reforms linked to the Medium Term Expenditure Framework and the move towards performance based budgeting. We will therefore:

  • engage in a process of developing our key policy objectives and priorities after reaching consensus as a government on the outcomes we would like to achieve;
  • identify areas for the reprioritisation of spending towards meeting the basic needs of the disadvantaged people of our province;
  • place emphasis on social spending - education, health and welfare - as opposed to spending on a top heavy administration;
  • conduct a systematic audit of all spending programmes to ensure that they are in line with our policy objectives and delivery plans;
  • reform the budgetary process making it more inclusive by including the legislature at early stages in the process as well as holding public hearings on the budget for key stakeholders;
  • improve access to information about the budget as well as provide more detailed information about the delivery impact of departmental budgets, a gender and geographical/spatial impact analysis;
  • interrogate the budget to identify possible areas of saving;
  • encourage the legislature`s Standing Committee on Finance to act as a mechanism to maintain oversight over the executive;
  • investigate options for revenue generation and maximising the efficient use of resources, material and human.

The first priority in the provincial budget will be given to education and health. In reprioritising the education budget we will look to redress backlogs in disadvantaged schools. In the medium term this will require developing a formula which will distribute school subsidies on a sliding scale based on providing the most to the neediest. In reprioritising the health budget we will continue with the policies developed by the previous ANC MECCA for Health, in terms of which resources were shifted in a manageable way from tertiary towards primary health care. This will result in health care becoming more accessible to the poorest of our communities. We will in general strive to allocate more than the nationally agreed minimum percentage to education and health, and that any cuts that may be necessary will fall elsewhere.

We will also give high priority to safety and security, welfare and economic services and seek to load the burden of any cuts to sectors with lower priorities. Within each sector, we will in accordance with the principles of zero budgeting insist on strict output and performance-related motivations that demonstrate how particular programmes contribute to growth and development. We will ensure that as far as possible priority sectors are fully resourced.

It is our contention that the NP`s ineffectiveness in re-prioritising expenditure in favour of the poor is indicative of the fact that although certain categories of poor people may have voted for its real interest base remains certain strata of the established white business and professional community that historically benefited from apartheid and remain resistant to associating themselves with the challenge of transformation. The same reality, in our view, explains why the NP provincial government has been so ineffective in developing own revenue sources. Its constituent base cannot see the necessity for effective programmes of service delivery to the poor, and is therefore resistant to having to make its contribution to these through taxation.

An ANC-led provincial government will, in consultation with the national Department of Finance and the Finance and Fiscal Commission, actively explore the options for raising additional revenue within the province. Our aim will not be to significantly increase the tax burden on individuals earning wages and salaries, but to apply principles of progressive taxation and particularly ensure that businesses and enterprises that benefit from public assets or resources make a fair contribution to the public purse.

1 October 1998

ANC Western Cape