SPEECH BY F W DE KLERK TO THE 2011 INSURANCE CONFERENCE, SUN CITY, July 26 2011

THE CONSTITUTIONAL REQUIREMENTS FOR SUSTAINABLE DEVELOPMENT

Your industry is built on risk assessment. Your actuaries are forever calculating the odds that will affect premiums and payouts in virtually any circumstances. It is accordingly appropriate for you to consider the whole question of sustainable development. This is because our ability to sustain the rate and type of development that the world has witnessed since the beginning of the industrial revolution, has become untenable. It will be the key issue with which our generation and subsequent generations will have to wrestle.

In South Africa, a critically important factor in determining our prospects for continuing sustainable development will be the political, social and economic environment during the coming years. My topic today is accordingly the constitutional requirements for sustainable development in South Africa.

I believe that a key requirement in this regard will be to maintain, protect and implement our Excellent Constitution. Our Constitution - and its predecessor the 1993 Interim Constitution - have served us very well during the past seventeen years. They have helped us to move from a place 25 years ago when we were a very poor insurance risk to the far, far better space that we now inhabit.

The fact that we South Africans were able to get together to negotiate one of the best constitutions in the world dramatically improved our national risk profile - and opened the way to economic growth and progress.

There is so much of which we South Africans can be justifiably proud:

• The resilience of our young democracy has once again been illustrated by the successful municipal elections in May. The elections were free and fair and were preceded by vigorous political debate. Sadly, the great majority of South Africans still voted according to their race. However, there are heartening signs that this is changing.
• Generally sound macro-economic management has assured seventeen years of uninterrupted economic growth - until the global economic downturn.
• We have the 27th largest economy in the world. We produce more than 30% of the GDP of sub-Saharan Africa with only 6.5% of its population.
• Our public debt is less than 36% of GDP - and external debt is only 16% of GDP.
• Our natural resources are legendary - including gold and diamonds, platinum group metals and abundant and inexpensive coal.
• Nevertheless, tourism now contributes 8.3% of GDP - considerably more than mining. We have superb game parks, mountains and beach resorts. Cape Town is one of the world's premier destinations.
• Automobile production now contributes almost as much to GDP as mining. In 2008 we produced 600 000 vehicles of which 170 000 were exported.
• According to the World Economic Forum's Global Competitiveness Report our auditing and reporting standards and regulation of securities exchanges are the best in the world. We are also in the top seven with regard to the soundness of our banks, financial services and the efficacy of corporate boards. The Report also gives us high marks for the quality of our management schools, our anti-monopoly policy and local supplier quality.
• South Africa has resumed its position as a respected and influential member of the international community - and has become a member of the exclusive BRICSA group.
• The magnificent success of the 2010 FIFA World Cup has shown the world what glories we South Africans can achieve when we all work together.

However, there are a number of developments that are causing national and international actuaries to pull out their calculators and to start reassessing our risk profile. 

They are concerned about reports of recurrent corruption by senior officials and political office bearers - without any convincing action being taken by government;

They are worried about irresponsible calls by Julius Malema for the nationalisation of mines and the seizure of agricultural land without compensation.

They are alarmed about the role of increasingly militant unions; and

They are exasperated by the growing dissonance, on the one hand, between public statements on the unacceptability of unemployment, corruption and dysfunctional education - and on the other hand the apparent inability or unwillingness to take firm and decisive remedial steps.

As a result of all these factors national and international actuaries are beginning to reassess the risks involved in extending cover to their South African client. Like concerned insurers everywhere they would like their client to go to a specialist for a check-up.

In South Africa's case, let us appoint the National Planning Commission as that specialist. Its assessment of the sustainability of our present national life-style is set out in its recently published National Diagnostic Report. In this diagnosis nine serious maladies have been identified:

• Unacceptable levels of unemployment;
• Substandard Education;
• Poorly located and inadequate infrastructure;
• Spatial challenges that continue to marginalise the poor;
• A growth path that is highly resource intensive and unsustainable;
• An ailing public health system;
• A poorly performing public service;
• Corruption that undermines state legitimacy and service delivery; and
• The fact that South Africa remains a society divided by race and class.

That is the diagnosis. We still need to find a national remedy that will ensure long-term sustainable development. I would modestly like to suggest the following treatment:

Firstly, cut out the ideology from the national diet. Our point of departure should be our Constitution and the realities of the world. It should not be some or other ideological model of how the world should be and how people should behave.

Ideologists always try to force reality and human beings to conform to their models - and in doing so always cause immense damage and human suffering. Just think of Stalin, Hitler, Mao tse Tung and Pol Pot. We South Africans should remember the enormous disruption, deprivation and humiliation that previous governments caused when they tried to force South Africans to comply with the ideological model of separate development.

We will not succeed if we revert to a model where race, and not merit and development, once again becomes the central consideration in our society.

We will not cure the divisions in our society for as long as dominant ideologies continue to pit race against race and class against class.

We have the dubious distinction of having some of world's last true believers in Marxism Leninism. Only a few weeks ago the President of our largest trade union federation proclaimed his commitment to Marxism-Leninism and to the "struggle for socialism".

Secondly, cut out the denialism; President Zuma, Zwelinzima Vavi and the National Planning Commission are quite right when they identify unemployment as being one of our biggest national challenges. Unemployment levels of 75% among our youth and almost 40% among black South Africans make sustainable development impossible. Unemployment is the main cause of continuing poverty and inequality in our society and is a major contributor to crime.

However, we must stop denying that rigid labour laws and the irresponsible behaviour of trade unions are the main cause of unemployment. How can we expect to attract foreign and local investment in job creation when we are rapidly developing a reputation as a country with one of the worst labour relations records in the world? According to the World Economic Forum's assessment of the competitiveness of 139 countries throughout the world South Africa comes

• 135th when it comes to hiring and firing regulations;
• 132nd in labour-employer cooperation;
• 131st with regard to the flexibility of wage determination; and
• 112th when it comes to pay in relation to productivity.

We simply cannot continue to lose more than 25 million man days in strikes every year and support wage increases double the rate of inflation in an environment of static or declining productivity. Why should national and international companies invest in job-creating industries when the labour movement with which they must deal rejects their legitimacy and makes no secret of its wish to destroy the free market system by which they operate?

Denying the role of labour law rigidity and trade union irresponsibility, in helping to create our unsustainable levels of unemployment, is the labour market equivalent of denying that unprotected sex causes HIV-AIDS.

The third part of the treatment is that we should really work together to improve our education system. According to the Constitution education and training should be playing a crucial role in empowering previously disadvantaged people. This is key to the promotion of equality and the creation of job opportunities. But it is not happening. Quality education is a prerequisite for human dignity, which the Constitution also seeks to promote. But it is being neglected.

The simple fact is that of the 1.67 million children who began their school education in 1995 only 565 000 (34%) wrote matric in 2007. Of them, only 368 000 (22%) passed matric - but only 85 000 (5.2%) received exemption. A bare 25 400 were able to pass maths at the higher grade. Only 15% of the 278 000 black matriculants were functionally literate. This means that more than a million children from each class since 1995 have been falling out of the education system - and that a high percentage of those who did pass matric have very little chance of competing successfully in the modern world.

South African pupils at all ages fare badly in comparative studies of school performance in most other countries. In fact, we do worse than 6

many other much poorer African countries. According to a survey in Newsweek South Africa holds the 97th place in the area of education out of the 100 countries that were considered.

The problem is not a shortage of funds - because education has consistently received the largest slice of the budget cake. This year it is almost 6% of GDP and more than 18% of the national budget. The education budget is R165 billion rand - in other words more than R 12 000 for every child and student in the system.

The problem, throughout, is that we have taken the wrong decisions and have allowed our core management systems to collapse.

In its Diagnostic Report the National Planning Commission quotes a study that reveals that almost 20 percent of teachers are absent on Mondays and Fridays. It also states that teachers in black schools teach an average of only 3,5 hours per day compared with 6,5 hours a day in former white schools. This is clearly unsustainable - and we will be in denial until firm and credible action is taken to remedy the problem.

We need to start taking the right decisions.

We must make sure that teachers are at their posts;

We must develop sensible curriculums that can assure that our children receive a firm grounding in numeracy and literacy;

We must provide every school in the country with basic facilities, including electricity and toilets;

We must teach children in their mother tongue - in a language that they can understand - at least for the first six years of their schooling careers. This will make it easier for them to switch to a second language in high school;

We must develop and expand programs to train a new generation of principals - since they are the key factor in the education process;

We must accelerate the re-opening of teachers training colleges and the reinstitution of the apprenticeship system.

Government is already beginning to do many of these things. We all have a duty to help where we can.

Finally, the remedial treatment that I would like to recommend is that South Africa should return to the tried and tested regimen of the Constitution.

I believe that the degree to which we abide by our Constitution will be a critical factor in assuring sustainable development for our country. It is, after all, the foundation of our society. It articulates the goals for which we should all strive and the values that should guide our behaviour. Those values include equality, human dignity, non-racialism, non-sexism and the enjoyment by everyone of fundamental human rights.

The Constitution also defines the kind of society we wish to be and how we want to be governed. It proclaims that in our society the Constitution and the law are supreme - and not the government of the day. It states that we shall have a multi-party system of democratic government, with universal franchise and regular elections - a system that is based on openness, accountability and responsiveness. It defines and protects a vast array of rights for all South Africans.

All South Africans should work together to achieve the vision set out in the Constitution. Sustainable development depends on our ability to transform our society to the benefit of all our people. All of us have a fundamental interest in promoting genuine equality; in achieving fair and sustainable land reform; and in removing any barriers that might remain to black advancement in the economy or in any other sector of our national life.

All South Africans need to engage government in reasoned debate on how we can all work together to achieve these goals. We need to talk with one another in the frank and constructive way that we did during the negotiations of the 1990s.

At the same time it is essential for all people of goodwill to actively support our Constitution.

The media and civil society have an impressive track record in defence of the Constitution:

• the TAC successfully pressured the Government to change its disastrous approach to AIDS;
• in 2006 civil society persuaded the Mbeki presidency to withdraw the Constitution 14th Amendment Bill that would have seriously undermined the independence of the judiciary;
• in 2008 civil society actions led the government to shelve an expropriation bill that would have made it possible for government to expropriate property without payment of court-approved compensation;
• currently, civil society and the media are combating the Protection of Information Bill and proposals for a Media Appeals Tribunal;
• a single citizen, Hugh Glenister, succeeded in the Constitutional Court in having the government's abolition of the Scorpions declared illegal;
• I am confident that civil society together with NEDLAC will be able to stop, or greatly ameliorate, the worst excesses in the labour and land reform bills that are currently before Parliament.

But it will not be an easy process. The defence of liberty has always been a hard and difficult struggle. However, the future sustainable development of South Africa depends on it.

In closing, I would like to put this question to the representatives of the insurance industry who are gathered together at this conference.

All of us are aware of the need to insure against the risks that face us in virtually every area of our lives.

We are happy to pay several hundred rand a month to insure our cars and our household contents.

We willingly pay to cover our homes against the risks of fire, flood and natural disasters.

We take out insurance to provide for our families in the event of untimely death.

We insure ourselves against loss of limb and livelihood.

We are prepared to pay good money every month to cover ourselves against all these risks. But what are we prepared to pay to uphold the Constitution, on which virtually everything else depends? 9

The media, civil society and opposition parties will need all the support they can get from people of goodwill inside South Africa and in the international community to continue to play their role.

My message to the Insurance Industry today, when you are considering the sustainable development of our country, is this:

• ●Think about - and actively support - ways of promoting the vision in our Constitution of genuine equality, non-racialism and a better life for all our people;
• Consider the concrete steps that you can take to support the work of NGOs - like our own Centre for Constitutional Rights - that are fighting night and day to protect our Constitution - and your own fundamental rights.

I can assure you that our prospects for sustainable development as well as the future happiness, prosperity and security of everyone in this country - depend on it.

Issued by the FW de Klerk Foundation, July 26 2011

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