Speech by Trevor A Manuel, MP and Minister in The Presidency: National Planning Commission, on perspectives on the role of parliaments/legislatures in long-term sustainable economic growth and development

14 May 2013

Programme Director;
Speaker of the National Assembly, Honourable Max Sisulu;
Chairperson of the National Council of Provinces; Honourable Mninwa Mahlangu;
Secretary-General of the Commonwealth Parliamentary Association, Honourable Dr William Shija;
Presiding Officers and Members of various legislatures;
Your Excellencies, Members of the Diplomatic Corps;
Distinguished Guests;
Ladies and Gentlemen:

I want to thank the legislative sector for convening the conference on this important topic of the Role of Parliaments in Economic Transformation and Development. I also want to thank the Speaker of the National Assembly for inviting me to address you here today. The recognition in the topic of this address is that sustainable growth and development is a long-term issue. This sets in train a series of questions about the adequacy of instruments used by Parliament for the evaluation of oversight of Executive proposals for development. These are exceedingly important issues as growth and development tend to create irreversible effects.

Pause for a moment and reflect on the South Africa of 20 years ago: A country on the brink of disaster with the promise of the first democratic election still at some future date; a country whose economy had stagnated - having contracted by 2.1% in 1992; a country with a gaping budget deficit.  In fact, the budget in 1993 was set against a fiscal deficit of -9.3% and -8.0% in 1994. Total public sector debt was 64% of GDP in 1994 and foreign reserves, were only enough for one month's import cover. The budget expenditures showed vast inequalities manifested in the example of a woman teacher in the Transkei Education Department earning a mere 46% of that of a white male teacher employed by the House of Assembly. Democracy could not countenance this and if the trajectory of that deficit of 9.3% had continued, then our debt to GDP ratio today would have been much higher than Greece and debt service costs already at 25% in 1994 would have been between 40% and 50%.

The intervention in macro-economic policy in 1996 was occasioned by a statement by the then-President Nelson Mandela that debt service costs could not be higher than what we were spending on education because debt service costs were of the past and education of the future. That statement by President Mandela laid the basis for an unresolved discourse in growth and development theory but that set the country on a very different trajectory.

At that point of our democracy, 19 years ago, the per capita GDP was R28 536, in real terms the per capita GDP today is R37 476. The challenge that continues to elude us in this context is employment creation. If indeed we could enlarge the cohort of the working-age population who are in employment, we would see a spectacular fall in our Gini coefficient. The point to be stressed about economic policy and its impact on growth and sustainable development is that the policy instruments need to be carefully selected because the consequences, both positive and negative, have long-range effects.

There has to be a simple logic to this - when we identify problems, or when our economic analysis reflects that there are either difficulties or opportunities down the track, do the maths, evaluate the results of that exercise against the agreed policy framework and, then take the decision. Policymakers should neither procrastinate nor prevaricate. Take the decision! The sooner the decision is taken, the better. Bear in mind these may often not be the most popular decision to take but it must be taken. It is a great asset if Parliament understands this logic and is able to back even an unpopular decision!

Let us look at the example of China when Deng Xiaoping 35 years ago called for economic policy reforms and declared that 'we will cross the river by groping the stones with our feet'. In 1980, China's economy was 7.3% the size of the US economy and is now the world's second largest economy. In the course of that journey, China lifted 700 million people out of abject poverty. China can now look forward to a position in 2030 where it will have more than 200 million college graduates, a figure larger than the total working population of the United States of America and as the document, China 2030 argues, these graduates would need to be employed in a growing and dynamic economy. The country must make the choices. The truth is that the choices for China 2030 were made in 1975!

We can also look at the example of Brazil and here I want to borrow from a presentation made by Joel Netshitenze, Executive Director of the Mapungubwe Institute and a commissioner on the National Planning Commission when he addressed the Cosatu Chris Hani Institute. In comparing the trajectories of South Africa and Brazil, he said:

If we were to draw parallels between South Africa and Brazil during the decade of the 2000s, it can be argued that we experienced roughly similar rates of economic growth; but our economy started to heat up even before the global economic crisis because it had surpassed its trend growth. The South African unemployment rate was reduced from 31% in 2003 to 23% in 2008 and access to social grants was massively expanded, thus increasing aggregate demand or buying power. But industrial policy did not adequately respond to this, as we continue to import the very goods that the mass of consumers need, such as toasters, microwave ovens, suitcases, TVs and cell-phones. While economic growth and social grants improved the standard of living of the poor, the living standards and wealth effect among the rich across the colour-line seems to have grown faster.

In the case of both China and Brazil, decisions were taken based on sound analysis and assessment of their policy objectives. It is important that we appreciate that sustainable growth and development require policy stability. Changing policy too often has the effect of destabilising the bureaucracy and therefore not allowing policies to take effect and show results. Our performance as a country on this measure has been uneven, at best. It is worth pausing for reflection on why we faltered on something so self-evident.

After 1994, it was apparent through our policies that the government was aware that our people had high expectations. However, the performance of the public service did not reflect the improvements necessary to meet our policy objectives. Many of the failures had their root causes in the capacity of the state machinery inherited from apartheid - the corruption, the absence of a culture of public service, poor skills, among others. Instead of analysing the root causes of the performance failures and embarking on the painstaking process of institution-building, we resorted to changing policy each time we were dissatisfied with the results we were seeing.

We are not suggesting that the approach to policy be completely rigid either. On the contrary, existing policies do need to be reviewed on the basis of evidence and modified or even overhauled when necessary. Understanding the notion of policy as 'a course or principle of action adopted or proposed by an organization or individual' is crucial in this approach. Ultimately it is about keeping the policy objectives in sight while possibly modifying the route to attain those objectives. The policy objective in the case of economic transformation and development has to be to lift our people from poverty.

Too often, however, new policies are or were implemented in an unconsidered fashion, as new leaders seek to make their mark, or as a response to the latest international fad. Many of the problems with public sector performance have to do with deeply rooted systemic issues, and there is no 'quick fix' substitute for a long- term and strategic approach to enhancing institutional capacity.

Our experience of the past 20 years reminds us that social and economic change take place over a long period; and that change is not a linear process that can be planned with precision, in advance, as though it were factory production.

A long-term vision, which sets out the type of society we want to be, is important to guide our social and economic transformation programmes. Yes, there will be obstacles in the way that will threaten to derail our transformation programme; there may even be natural disasters and human-induced shocks that erode the resources we need successfully to implement our transformation programme.

Often these challenges will require a change in the tactics we employ. The presence of a long- term vision is important to ensure that the change of tactics does not result in the loss of direction. The complexity and unpredictable nature of how transformation happens means that Parliament cannot take a narrow annual view when it performs its oversight function. Parliament has a critical role to play in ensuring that all actions of the Executive take us in the direction of our long-term vision.

The National Development Plan is our long term vision and plan which provides overarching goals to be achieved by 2030; helps us to engage in dialogue to build consensus on the key obstacles facing us and specific actions to be undertaken; provides a common framework for detailed planning; and creates a basis for making choices about how best to use limited resources. The NDP outlines targets which are carefully calibrated milestones along a path to prosperity and equity for all.

When President Mandela made the statement that debt service costs could not be higher than what we were spending on education, he was making a choice. Sustainable growth and development is about setting priorities in expenditure and understanding that prioritising tomorrow above today has long-term positive outcomes. Today we face a choice between prioritising current expenditure or investment. Even in good times striking an appropriate balance between these two items of expenditure is a challenge. The present economic climate makes it even harder.

There are different levels to making choices. It is possible to receive popular support for making what is a morally just decision to reduce our carbon footprint and be opposed by the same citizens when taking decisions to give effect to the same commitment they applauded earlier. The recent electricity price determination debate is instructive. Measures to reduce emissions from cars are similarly unpopular even as citizens support the goal for cleaner environments. I raise these issues because no government derives any pleasure from the suffering of the citizens of its country and yet across the globe governments face making decisions that inflict pain on the citizens. Sometimes enduring some pain today may be necessary to secure a better future. Attached to this is the important role for balancing the need to protect the poor while pursuing goals that are in the long-term interest of everyone.

In certain instances, there are competing demands which manifest in different sectors; between protecting land for agriculture to ensure food security for the growing urban population and urban development; between mining and environmental sustainability; between exporting our produce and keeping it for domestic use. What is the role of Parliament in resolving these conflicts?

Members of Parliament have a legal and political obligation to work in the interests of the public - first. It is  with Parliament, that leadership, responsibility and accountability rests. And in terms of the long-term growth and development objectives of the country, it is in Parliament where the debates about what is in the best interests of the public should be raised and discussed.

Annually Parliament appropriates funds for each government department to implement programmes in line with its mandate. This responsibility alone places a huge burden on Parliament; acting on behalf of the citizens who are both taxpayers and beneficiaries of government services to ensure that resources are used correctly.

Long-term economic development starts with effective oversight of public finances, of policies and implementation. This oversight takes place within the chambers of Parliament, as well as during inspection out in the field, where projects are underway. If the public know that their elected officials are, actually, interested in their lived experiences, they have greater confidence in the state.

Parliament has to do a thorough cost - benefit analysis of all proposals and plans. Every proposal, no matter how trivial has a cost and a benefit. If a department says that they will be investing a programme to help ten people to get work; ask what the cost of the programme is, ask what the overheads are, ask where the money will come from, ask how will we measure success, ask who will implement the programme and how will it be implemented, through which agency and so forth. Remember that money is not printed by SARS. It is collected from tax payers. If taxes are raised, then the individual or firm does not have that money to spend or invest. Every rand spent by government has an opportunity cost. Every rand raised in taxes could have other uses. Are we using it more productively than it would have been used? This is a question that you have to ask constantly.

Let me use education as an example. It may seem like a slightly unusual place to start when addressing economic development but education has the power to disrupt and break established patterns poverty and exclusion. Without education, children of rural citizens, of informal settlement dwellers, of farmworkers will grow up to be poor adults; they will earn income far below the national average; will have a very short life expectancy; they will be victims of food insecurity and inadequate nutrition; and, in general will have a precarious existence. More than that, not only will they lack the skills required to be either employable or to be entrepreneurs but they will be dependent on the state for social grants. Faced with these conditions, the children of these citizens will automatically be disadvantaged thus continuing the cycle of poverty.

Making sure that all young people receive education of the highest quality is exceedingly important for long-term economic development and Parliament has both the power and the constitutional and legal instruments to influence change in the quality of the education our young people receive.

We can only grow and develop our country if we take a broader view. We cannot focus on a single aspect like education without taking into account the realities being faced by too many of our youth. I wonder how many of us would continue to attend school under circumstances where we have to walk long distances to school and back due to a lack of transport services because the department's budgeting was inadequate. Or when we did get there, the building was falling apart and there was no running water because the tender for maintenance was given to someone's friend or family. Or when we got back home, there were no libraries because it was burnt down in the last round of service-delivery protests or the electricity was cut again due to cable theft.

If we want to develop the skills that are crucial for growing the economy, then improving the lives of our people, in every respect, must get equal attention from those of us elected to protect the interests of the masses.

Long-term sustainable growth and development are necessarily inclusive projects that require consistent and critical engagement and oversight. Whether it is the reduction of public debt and the release of funds towards social spending or oversight of implementation of the long-term goals of the NDP, it is Parliament that has the responsibility to ensure that government keeps its promises to the people.

To ensure sustainability of economic growth and development it is important that we get the sequence right; starting with design, adoption, implementation, monitoring, to evaluation, Parliament has a key role to play. In terms of monitoring, Portfolio committees must, necessarily, go into the field to inspect projects and report back to the house.

But it cannot be snapshot assessments. It is fundamentally important that Parliament and legislatures take a long-term view of the plans and policies being presented to it. While it may sound incredibly impressive every time a Member of the Executive announces sweeping changes and extensive plans, these must be evaluated against all that has gone before. Does it build on previous work done or is it a new policy direction? Is it similar to a previous announcement, possibly with a new name? And most importantly, is there continued congruency with the adopted long-term plans of the country.

The responsibility of budgetary oversight must be in the context of the broader departmental five-year strategic Plans as well as the Medium term Strategic Framework and the long-term plan for the country. The question that we need to resolve is how we make oversight of long-term plans meaningful under 5-year electoral cycles. How do we prevent short-term thinking and acting by both the Executive and the legislatures? How do we deal with the need to leave a legacy? To a large extent, these issues are dependent on vigilant Members supported by a strong administrative system. Who checks that the Executive has responded to requests for reports? What sanctions exist for non-compliance? How seriously are constitutional responsibilities taken?

In conclusion, let me reiterate the fact that policies have long-run effects and that is why the legislative sector should be concerned about the choices exercised. This raises a number of important questions - does our legislative sector have the instruments to evaluate the impact on long-term growth and development of choices. This question takes on a very particular form especially at a time when Parliament is debating budget votes. Is it required to look at the long-term impact of any decision?

Does Parliament pause to reflect on previous decisions it had supported or countered and evaluate? Are Members of Parliament left to their own devices? Are Portfolio Committees sufficiently supported when these decisions are taken?

Democracies are only effective systems to promote economic growth when they can combine a strong accountability chain with competent administrative and managerial systems of public service. The accountability chain is built from Parliament down to the people. You have a critical role to play in strengthening the accountability chain, raising the quality of analysis demanded and in requesting clear evidence of performance.

I thank you.

Issued by The Presidency, May 14 2013

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