Minister Patel has highlighted the idea of a social compact as a key area of engagement in his recently released New Growth Path. In light of the call for a social compact and the mistrust that exists for government, can we take the implementation of a developmental state seriously?

South Africa faces serious challenges which continue to constrain its ability to deliver on the minimum targets it has set itself. The overall state capacity needed to define and realise a national agenda seems to be unattainable at present. The quality of leadership which is required to successfully drive the process forward is sorely lacking, evidenced by the myriad scandals around corruption, party factionalism and a breakdown in the ability of local government to deliver.

The idea of the "developmental state" came to the fore during the presidency of Thabo Mbeki. However, it was only post Polokwane that the ANC articulated what it understood the "developmental state" to be.

• The developmental state should be one of strategic orientation, where sustained development, based on high growth rates and a restructuring of the economy to include those who are socio-economically excluded, would be people-centred and people driven;
• It should have the capacity to lead in the definition of a common national agenda, and have the ability to mobilise the whole society to take part in its implementation. There should, therefore, be effective systems of interaction with all social partners;
• It should have organisational capacity. Its structures and systems must facilitate the realisation of a set agenda, including the macro-organisation of the state;
• And it must have technical capacity in order to ensure that it can translate broad objectives into programmes and projects to be implemented.

The term was coined in academia to explain the phenomenal rise of the South East Asian economies. None of those countries developed along pure free market principles like the US did, yet they were undeniably successful. What was their recipe?

Chalmers Johnson wrote the classic work, MITI and the Japanese Miracle, explaining the concept behind the developmental state. He described it as such: a state driven by an ideology of development where it does all it can to promote and facilitate growth and social development.

Several Latin American governments proclaimed themselves to be "developmental" even though repression and military juntas, rather than growth and development, were the order of the day.

The idea behind the developmental state has a very distinct place in history and emerged from a wholly different context as to where South Africa finds itself in 2010. In light of the technical and capacity constraints South Africa faces, how implementable an approach is the developmental state model?

Some of the instruments available to government are its State Owned Enterprises (SOEs). These Parastatals should be at the strategic centre of the developmental programme. However, the evidence suggests they are unable to deliver on their mandate for a number of reasons:

• party factionalism
• capacity constraints and cadre deployment
• mismanagement of resources and lack of clear operational direction
• regulatory issues

The concern being, that if this state of affairs continues, it may very well compromise South Africa's long term competitiveness and indeed its sustainability. Eskom, Transnet, Denel, SAA, Telkom and the SABC have all been the subject of investigation by the media for failing to deliver, mismanagement of funds and boardroom antics which have eroded these institutions' ability to perform. It is therefore not surprising that the President has instituted a Review Committee tasked with examining the future role of SOE's in South Africa.  

Transnet is "the largest and most crucial part of the freight logistics chain" in South Africa. The decline in Transnet's ability to perform its key operations began well before democracy came to South Africa. Pre-democracy South Africa had the tenth largest rail network in the world and represented about 80 percent of Africa's total. However, the rail services were so inefficient that only 13 percent of freight was done by rail.

At present, reports indicate that its new Multiproduct pipeline has doubled in cost. Economists argue this could lead to 30 cents per litre increase in fuel costs in 2011. Notwithstanding this, however, the most recent removal of both political and operational leadership surely means that South Africa's logistics network will continue to be underutilised if a solution is not arrived at quickly.

Clearly, if issues of governance remain unresolved then the tools by which the Government would like to implement its developmental state remain severely blunted, adding further pressure to an already over extended taxpayer. Unfortunately, these inefficiencies only increase the cost of business. As a bulk exporter of minerals South Africa cannot afford these inefficiencies. These are not the characteristics of a ‘developmental state' which fully understands its priorities.

A view which has become more and more persuasive is that the Parastatals are the private reserve of patronage doling party political appointees. This is a far cry from an experienced practitioner with a long term view of the requirements necessary for South Africa to lead the next phase of competitive development throughout Africa. The regulatory environment is not conducive to the efficient and effective operating of these enterprises.

The New Growth Path makes some persuasive recommendations for the easing of the regulatory environment. However, it places the state at the centre of this process, when the state lacks the overall capacity to deliver on the mandate. Surely, it would make more sense for government, big labour and big business to work more closely together, in search of this social compact. At the moment no party wants to give an inch.

Fuelling this already precarious situation is the dire state of the education system which bedevils South African youth. In order to grow a country one needs an educated and healthy workforce. South Africa has consistently ranked at the bottom of the Trends in International Mathematics and Science Study (TIMSS), even though its education spend, relative to its emerging market peers, is amongst the highest in the world.

Efforts to create a developmental state in South Africa face serious challenges:

• high growth rates and socio-economic inclusion must be central. Both of which have eluded South Africa due to a number of poor policy decisions and inadequate leadership in key segments of the government;
• effective systems of interaction between all social partners must be revitalised. The government is hamstrung because it is constantly fighting factional battles for position, the governing alliance is riddled with animosity and which often display a deep mistrust of the market. Elements within the alliance seem intent on state capture to serve their narrow political and economic interests which further negates the state's ability to deliver;
• implementation organs of state are beset with corruption which destroys its capacity to deliver goods and services to an increasingly hostile populace. Proper training, orientation and leadership of the public service has been poorly administered. The public service has become a ‘jobs for party loyal cadres', and the poor service delivery and politicisation of the public service render it incapable of delivering even the minimum of what is required for a developmental state model to work.    

If the Government is serious about implementing a developmental state model it needs to pursue an aggressive reform programme aimed at rooting out corruption at all levels and instilling a sense of professionalism into the state organs of implementation. There are a number of broad measures it could begin with:

• depoliticise the public service and enforce accountability throughout the service. This will allow quality goods and services to be delivered;
• aggressively fight corruption at the expense of party unity. Instil professional standards of operation for public servants;
• deregulate sections of the economy which will enable business to create jobs. A particular focus should be on small and medium sized businesses.
• Enforce accountability across the entire spectrum of government. This will go a long way in achieving the type of social contract crucial to building the developmental state.

The SOE's represent a useful tool for the development agenda of South Africa and need to be managed better. However, they are currently in a state of misuse and decline which indicates that South Africa is closer to being a non-developmental state than a developmental one.

Tim Kenny is a researcher at the Helen Suzman Foundation

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