Dear Cde Dominic,
Whilst I'm preparing a response to the article you sent me, allow me
to forward to you a discussion document that I presented to a party
branch meeting with a view that it would be developed to a fully
fledged green paper on an alternative economic policy document.
I wouldn't mind if it would be thrown to the discussion group for
critical analysis. Let me frankly say that I wouldn't appreciate any
pat on the back but a robust and vibrant debate on the issued that I
raised.
Comradely regards,
Xoli
National Integrated Development Strategy (NIDS): An Ingredients
Approach to economic development.
NB: This is but a kernel draft. Sectoral policies as well as policy
co-ordination components have been omitted.
Foreword
South Africa is in a strategic inflection point. It is either we
achieve a strategic breakthrough that will see us attaining the true
objectives that are enshrined in the Freedom Charter or we continue
with maintain the Colonialism of a Special Type (CST) development
path. The economic model that will be adopted from now henceforth
whether it be the neo-classical Gear or the herein proposed
developmental NIDS will be the key in determining the economic trends
for the decades to come. “It is now, or never”.
South Africa is a capital-poor country as regards as regards both the
supply of capital goods and means to finance additions to the capital
stock. Many capital goods such as heavy or specialized machinery and
equipment, cannot be manufactured locally, and therefore have to be
imported.
Our future performance will depend largely on the ability to reduce
country’s dependence on imported capital goods and services, the
export performance, the level of access to international financing and
direct foreign investment on Rural Development at the least.
Table.1 gives a comparison between the Neo-classical Gear or the
developmental NIDS.
Table1: Comparing the NIDS Recommendation with Gear.
NIDS Recommendation Gear
1. Agriculture and rural development
2. Infrastructure
3. Priority production system (selective industrial policy)
4. Continental development strategy
5. Poverty alleviation
6. Environment protection
7. Human resources and education
8. Health and medical care
9. Women in development
Gear
1. Fiscal discipline
2. Political expenditure priorities
3. Tax reform
4. Financial liberalization
5. Exchange rates equalization
6. Trade liberalization
7. Foreign Direct Investment Liberalization
8. Privatization
9. Deregulation
The two approaches will be too hard to compare. NIDS will be results
oriented and will not care much about concrete measures, whilst Gear
is oriented on principles and concentrates on the ‘framework’ for a
market economy.
The ‘ingredients approach’ will be the used approach as it the
commonly used approach for models which are action oriented.
“ The ‘framework’ represents rules of the games according to which
economic agents make decisions and take actions in a given economy. In
the framework approach […] an economy is conceived in terms of the
functions of institutions and mechanisms (the invisible hand), and its
performance is evaluated in light of the extent to which the rules of
the game are established among key economic agents. In contrast, the
‘ingredients’ refer to tangible organizational units such as
enterprises, official bureaus, and industrial projects and their
aggregation such as industries, sectors or regions […] The ingredients
approach conceives the economy as a collection of these components” (
Yanagihara, 1998:70-71).
The Gear or framework approach is concerned with leaving the
fundamentals right and leaves the rest to the market. This includes
the task of wealth distribution which is only assumed to be
automatically taken care of by the likewise ‘assumed job creation’.
Job creation is not necessarily an effect of the growth cause,
particularly in a country like ours where we have a historic task of
addressing the persistent Colonialism of a Special Type (CST) legacy.
In contrast, the ingredients approach is rather flexible in use of
measures-intervention in sectoral compositions or industrial
organization are explicitly permitted- only outcome matters.
Another matter that needs to be highlighted is the dire need for a
selective industrial policy where industries or sectors of strategic
importance to the society: petrochemicals, pharmaceuticals, and basic
foodstuff production processing, steel and cement, need to be
established or acquired if necessary so that they can be incubated in
line with maintaining price stability.
1. Introduction
Vision
The programme seeks to:
Drastically and systematically transform our persisting colonial
growth path that continually reproduces racialized poverty and
inequality.
Core principles/ Mission
Growth through redistribution.
Mandatory employment.
Price stability
Favourable Balance of Payments.
Recent developments
The globalized economy is in a deep crises which manifests itself in
three distinct areas namely:
The financial crises
The economic system crises as well as,
Confidence crises.
What further strategically aggravates the situation is the way that it
is being resolved- massive multi-trillion dollar bailouts with printed
money that has simply been printed out without any foreseeable
corresponding structural arrangements that are meant to absorb the
looming massive money supply. The Zimbabwean Governor of the Reserve
Bank was so excited when he heard the announcement about the stimulus
package and he made mention of the fact that he was actually glad that
the whole world had eventually learnt from Zimbabwe with regards to
printing money. What is actually alarming is that seemingly it has not
dawned in our minds that there is an unprecedented inflation looming.
According to our qualitative projections, the massive implies a 2 to 3
trillion dollar budget deficit that is going to be largely money
financed by printing more money as is always the case. The obvious
aftermath is hyperinflation as well as a protracted restrictive
monetary policy that will restrict the American consumer. This will
have an adverse on the whole world economy as China and India will not
be able to export to the US as before. In a nutshell, the present
world economic woes seem to be far from over. On a formative level,
not unless the Obama administration can begin restructure its economy
in the Japanese kereitsu way with commercial banks in the centre of
the massive bailouts. What is evident is that the present world
socio-economic formation is solving one crises with another. Even in
some very influential investment circles in the US, there is a view
that the time for the world export oriented developing economies is
over. The US consumer cannot seem to bear the weight of supporting the
world economic development. His or her disposable income is being
eroded as he or she has to find alternative means of funding his or
her lifestyle and moreover, posted recorded job losses are the order
of the day.
Discrepancies in the South African economy
The modern neo-classical economics is obsessed with the inflation
fetishism. It is a new found religion such that it is almost
impossible to imagine the world without one and yet it continues to
bring misery to ordinary people through its erosion of disposable
income. What further aggravates the situation is our mandatory
monetary policy regime which further erodes the consumer’s disposable
income through the repurchase agreements raise to banks. There is
nothing fundamentally wrong with the present monetary policy except
for its lack of alignment to the overall development objectives of the
economy. On a formative level, where a conflict exists between curbing
inflation and our development objectives, the latter should prevail.
Environmental Revolution
The imminent environmental implosion that the world is facing cannot
be overemphasised. A new economic policy without a overtones on
environmental preservation measures as well as sustainable development
would be futile.
This economic policy will amongst other things seek to come with
strong sectoral measures that will begin to address our environmental
concerns.
Points of departure
South Africa can never be a normalized democracy that promotes
individual freedom, equality, and social justice if it doesn’t’ have
mass participation in the economy as well as act drastically to
redress the social and spatial imbalances which are an effect of the
apartheid model-type of neo-classic capitalist development.
Real sustained growth requires an economy that begins to be
inward-oriented and begins to address:
Vast income discrepancies,
Rural-Urban economic imbalances,
Workplace stakeholder marginalization, and
Human needs in an equitable manner.
The strategy outlined below addresses the above and also:
Attains Real GDP Growth of 6,7% per annum for next coming 5 years
Containment of inflation within the 3 - 6% target range in the next
coming 5 years
Create 12 000 000 mandatory jobs in the next coming 5 years
Have a favourable Balance of Payments that is going to begin to
address the external inflationary pressures.
Strategic objectives
Have a full swing flying geese African revolution with South Africa on
the lead echelon within 10 years.
A very diversified balanced economic portfolio within the coming 10 years.
A democratized economy that is going to begin to treat all
stakeholders with dignity and respect.
Make a mark in the world economy within the coming 10 years.
Strategies
1. There will be a two-tier interlinked approach to our development
with institutional arrangements largely remaining as they are except
for:
Minor changes in the banking system to cater for the Co-operative banks,
Changes in the monetary policy to cater for the development objectives
of our economy.
Fresh mandate for SOEs to begin to foster the new values that are
going to outlined in the economic programme.
Sourcing of the right human resources to man the SOEs.
Change of the incentive structure including the procurement system to
induce the envisaged new value system.
The National Integrated Development Strategy (NIDS) is the new
development strategy and is essentially composed of:
A Rural Development Strategy, and
An Industrial Development Strategy.
At the core of NIDS is the Priority Production System (PPS) where
sectors and companies of national priority in realising our
development objectives should be incubated by the state.
The Rural Development Strategy
The basic production factor in rural development is land. The 75% of
the South African population resides in 15% of the land of the country
whilst 14% resides on 86%.
An average South African african adult consumes 180kg of grain per
annum and there is an average 22 000 hectares of land per rural Local
Municipality that is usable and yet arable. On the other hand there is
vast land in the same magnitude that is used for leisure. There is
even a 22 000 hectare very arable golf course . The present land
restitution mechanism falls short of making any meaningful progress in
supporting the new proposed rural development programme. However our
Constitution states that land can be taken from a private owner if
that would be for the benefit of the society at large. It should
however be stated that the proposed Rural Development Programme will
be for the benefit of the society and will seek to:
Ensure food security in line with the vision of the UN.
Ensure food safety
Alleviate poverty in terms commanding sufficient resources to satisfy
basic needs.
Drastically redress the economic imbalances of the CST development path.
Create an appropriate rural-urban balance
Expansion of small-scale, labour intensive rural industries
Choosing appropriate labour-intensive technologies of production
Modifying the direct linkage between education and employment
Reduce population growth through reductions in absolute poverty and inequality.
The Development Model
Pillars
Public Corporations (South African kereitsu model)
Social Production Units (Production Co-Operatives)
Co-Operative Banks
Rural development is a national priority high impact programme that
cannot be thrown to the mercy of the market. It has to be incubated by
the government through establishment of dedicated rural development
public corporations or transformation of already existing food
production entities such as AsgiSA EC and so on.
The public corporation shall be modelled a South African kereitsu
formation with a Co-Operative Bank at the centre. These are the
typical business units will comprise the Public Corporation:
Crop Production Unit
Maize Production
Soya Bean Production
Canola
2. Poultry Unit
Chicken Rearing
3. Tannery Unit
4. Wool Washing Unit
5. Poultry Abattoir Unit
6. Livestock Abattoir Unit
7. Maize Milling Unit
8. Soya Bean Value addition Unit
9. Feed Manufacturing Unit
10. Co-Operative Bank Unit
The above mentioned business units will be the basic units of the
Public Corporation and will have its foundations at Local Municipality
level. Every voting station, ward, ploughing field should breathe
these structures. It should be the lifeblood of the rural communities.
Although these Business Units will operate individually, they will
form a synergetic whole as they will be under one corporate structure.
They will operate provincially as independent structures which are led
by he GCEO (Group Chief Executive Officer) who will report to the
Board of Directors. The GCEO will lead a team OF CEOs who will
subsequently lead their own functional area managers. The Public
Corporation will be a systematic organisation whose mandate will be
to:
Foster growth
Create employment
Stabilise employment and
Economically empower the poor.
The Public Corporation’s core value shall be:
individual freedom,
equality, and
social justice
This might sound contradictory given the public nature and control but
these will be fostered through the procurement system. The reason for
this stance is the nature of national priority of the Rural
Development Programme.
Of the 10 strategic business units, 2 namely;
The crop production and
The Co-operative Bank,
will be a partnership with the land owners who will provide land for
cultivation. These two business units will share their profits with
individual landowners according to the yield in their individual
fields.
At Local Municipality level, the Crop Production Unit will generate a
revenue of R 2.2 billion and a net profit of R 700 million within a
year. This amount will be shared between landowners and the Public
Corporation. For every operation at local municipality level, a 10%
levy on gross profit should be charged by the local municipality as a
means of generating revenue for the local municipality concerned.
At the same level, the corporation will need 500 tractors to cultivate
the afore mentioned hectares. The tractor manufacturers will be
companies who are prepared to comply with the terms of the procurement
policy of the corporation. They also have to agree with the fact that
they will have to establish their assembly production units in every
Local Municipality with maintenance points in the farmers’ support
centers. This will lead to massive rural spin-offs with still-makers,
rubber manufacturers as well plastic manufacturers investing in these
endeavors. Preferably, Denel will have to transform some of its
business units to cater for this need. However, other manufacturer
will be welcome on condition that they are prepared to change their
production relations so as to align them to the corporation’s
procurement policy. Every effort should be made to ascertain that the
procurement policy is applied along the value chain.
The Maize Milling Unit has a potential of generating R 99 million per
annum at local municipality level and the revenue will and all other
surplus funds belong to the corporation surplus fund.
Among other responsibilities, the public corporation will have a
social responsibility of making sure of existence of clinics in every
5 kilometer as per the UN requirements. These clinics should be fully
sponsored by the public Corporation.
There will be 9 farmers’ support centers that will be nodal areas for
future development at municipality level with 3 in every town.
One of the main motives behind concentrated expressions on Rural
Development is to curb rural-urban migration. In this regard, the
Government should open a State groceries store that will operate only
in the rural areas (preferably from the farmers’ support centres) so
as to market the corporation’s items as well as sell foodstuffs at
affordable prices.
The Public Corporation Procurement Policy
At the core of the procurement policy of the public Corporation shall
be Social Production Enterprises (SPEs) which will begin to ensure
stakeholder equality through state, collective, or mixed ownership of
means or factors of production.
Social Production Enterprises are, “economic entities dedicated to the
production of goods or services in which work has its own meaning,
without social discrimination nor privileges associated with one’s
position in a hierarchy, in which there is substantive equality
between its members, planning is participatory and operate under
either state, collective, or mixed ownership.” In order to qualify as
an EPS and thus for preferential treatment for low-interest credits
and state contracts, companies must fulfil a list of requirements,
such as to, “privilege the values of solidarity, cooperation,
complementarity, reciprocity, equity, and sustainability, ahead of the
value of profitability.”
Because of the two-tier system nature and the development economics
approach to the proposed programme, there should be an extensive use
public finance institutions to fund the programme. State development
finance institutions should be remodelled to cater for these new
societal needs. Initially, the Rural Development Programme should be
funded through Public Finance mechanisms with special emphasis on the
extensive use of Zero-Coupon or Revenue Bonds for risk management.
With time, the Co-Operative Bank should take over to fund the process.
This implies that there should be changes in the Banks Act of 1990, so
as to unlink Co-operative Banks to a major bank and actually allow the
Co-Operative Bank to take over a commercial bank but not the other way
round. Secondly, the Co-Operative Bank Bills(COBBs) should be among
the money market instruments that qualify as liquid assets in terms of
prudential banking requirements.
Thirdly, the Co-operative Bank should be given immunity to soul rights
to daily issue and underwrite Euro-commercial papers and 25% of the
proceeds should be redirected to infrastructural development in rural
areas.
The Co-Operative Bank must be owned by the landowners and workers. In
this note it is important to emphasise the importance of a drastic
land restitution programme so as to expand the beneficiary base.
Furthermore, with the funds that will be sourced from the financial
markets, the state institutions, it should be of utmost priority that
the infrastructure development should be of utmost priority before
even thinking about ploughing any piece of land.
Lastly, the borrowed funds should be recouped from the revenues that
will be generated from the operations of the Public Corporation.
Environmental and lending Policy
One of the most critical concerns of a Rural Development strategy of
this magnitude ( cultivation of 10 million hectares of redundant land)
is the accompanying environmental implications.
In this regard together with a need for a structural approach to price
stability, there shall be a 6 year extensive production programme and
7th year rest arrangement. It is only the state institutions and the
Co-Operative Bank that will be allowed the right to lend to the
co-operatives. When co-operatives lend to one another, it should be
only solidarity basis on strictly short-term or money market
instruments without interest costs . The lending policy of the
Co-Operative Bank shall be no more than 6 years to maturity. In
actual fact, it should prudentially correspond with the 6 year
cultivation mechanism. The interest rates should be structured to
decrease with the time towards the sixth year.
Way forward
Merger of the already existing rural development entities and adoption
of the above mentioned model.
Engagement of local municipality ward councillors so as to involve the
landowners.
Change the existing legislation.
NB. The above mentioned strategy knows no boundaries. If it can be
harnessed with zeal and passion it is an economic tsunami that is
ready to unleash an African Revolution.
The Industrial Development Strategy
South Africa remains at the forefront of industrial and general
economic progress of the African Continent. The idea is to adopt a
flying geese approach to continental industrial development with us
heading the geese on flight formation followed by other geese or
economies within the continent.
The flying geese (FG) model intends to explain the catching-up
process of industrialization of latecomer economies from the following
three aspects:
Intra-industry aspect: product development within a particular
developing country, with a single industry growing over three
time-series curves, i.e., import (M), production (P), and export (E).
Inter-industry aspect: sequential appearance and development of
industries in a particular developing country, with industries being
diversified and upgraded from consumer goods to capital goods and/or
from simple to more sophisticated products.
International aspect: subsequent relocation process of industries from
advanced to developing countries during the latter's catching-up
process.
This implies that all of our nation’s efforts should be directed
towards harnessing the existing technologies within our boundaries and
begin to ask such questions as : Is it worth compromising our
economic policies to opening our economy if we cannot harness the
foreign technologies and begin to develop proprietary technologies to
impact on our developmental path. Are our academic institutions loose
formations with no national cause. If they have one , how do we begin
to measure that against its peers like China, India and Brazil?
Minerals and Mining
Our imposed CST developmental state continually makes us very
vulnerable to crude oil fluctuations. What’s frustrating is the price
mechanism that is based on a unilateral legalised cartel and
speculation on financial markets. What’s even more frustrating is the
failure to understand how Sasol with different technology altogether
should use the same pricing mechanism as that of crude oil. The point
however is that oil remains the main driver of external inflation in
our country, and as such its production is and remains of strategic
interest as before the 1994 elections, and as such it needs to be
acquired back by the state as a matter or urgency. Furthermore, we
need to increase its capacity use serve the country. This means we
need to build more National Refineries so as to cater for our national
needs. We also need to increase our efforts to source alternative
sources of energy.
Platinum is the future source of fuel and we have the world’s largest
reserves followed by Zimbabwe. This implies that we need to tap in
those technologies as well as bring them under urgent government
incubation.
We also need to encourage a massive commercialisation of the pure
science research papers in our Universities. At the core of this will
be a trade union that will strike a deal with the government to open
an angel fund so as to pilot these researches in order for the trade
union to own the technologies. That is how we can be assured that our
technologies will remain our closely guarded possession in future.
This will start National Research Council working closely with that
trade Union so as to immediately tap into all the research papers in
universities.
On that same note, the government should begin to instruct the trade
union concerned to begin to take over redundant factories in the
pre-1994 Industrial Development Zones (IDZs). The factory floors
should be modelled around the afore mentioned Social Production
Enterprises (SOE) . The government should through its development
financiers fund the process.
The government should also start to instruct the incoming SOE agency
to designated a few SOE that will pilot co-management of state
institutions. This is important because , not until we have adopted
the Japanese Joint- Labour-Management committee micro-economic model
will we ever see heightened worker productivity in our country.
On 10/4/09, Dominic Tweedie <[email protected]> wrote:
>
> Here, atached, is Lenin's “Petty-bourgeois and Proletarian Socialism” in
> MS-Word format.
>
>
>
>
>
>
> Dominic Tweedie wrote:
>>
>> Dear Cde Xoli,
>>
>> My researches for this series have brought me to discover a most direct
>> reply to your assertion that “In South Africa, the most fertile ground for
>> the seeds of socialism will be the rural areas.”
>>
>> It is the following, from Lenin’s “Petty-bourgeois and Proletarian
>> Socialism”. I will also attach the full document. I
>
>
>
> >
>
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