Developments in Specific Areas

This section provides selected information on the four broad areas in which Nedlacworks. These are:

• Labour market.
• Trade and industry.
• Public finance and monetary policy.
• Development.

Labour market

The South African labour market has been the subject of intense debate over the last year, especially in the context of the new LRA. This section looks at a number of labour-market issues, and provides information on conditions and recent developments.

1. Industrial councils and wage determinations

The agreement on the new LRA has brought about a new era in labour relations. One of the areas most likely to be affected by the new Act is the way in which collective bargaining takes place. At present, there is a system of centralised bargaining in some sectors, while in other sectors workers and employers bargain at the company, enterprise or plant level. In those sectors where centralised bargaining takes place, it is usually through a registered industrial council. Some industrial councils operate nationally, while others operate in certain regions only. There are also sectors that are subject to wage determinations. Registered industrial councils are listed below:

Registered industrial councils: national

• Building industry.
• Furniture manufacturing (including bedding).
• Explosives and allied industries.
• Clothing.
• Textiles.
• Worsted textiles and knitting.
• Local authority undertaking.
• Electrical contracting industry.
• Entertainment industry.
• Hairdressing trade.
• Optical industry.
• Sugar manufacturing.
• Tyre and rubber manufacturing.
• Motor industry.
• Iron, steel, engineering and metallurgical industry.
• Leather industry.
• Diamond cutting.
• Transnet.

Registered industrial councils: regional

• Commercial distributive trade.
• Bag manufacturing.
• Canvas goods industry (Cape and Transvaal).
• Contract cleaning industry (Natal).
• Jewellery and precious metals (Cape).
• Millinery trade (Transvaal and Cape).
• Ladies stockings and knitwear industries.
• Laundry, cleaning and dyeing industries (Gauteng, Western Cape and Natal).
• Liquor and catering trade (Border, southern Natal, Pietermaritzburg and Cape).
• Meat trade (East London and Wits).
• Motor transport undertaking-goods (Gauteng).
• Passenger transportation trade-bus services (Durban).
• Sweet-making (Cape Town and Johannesburg).
• Tearoom, restaurant and catering trade (Wits and Pretoria).
• Biscuit-manufacturing.
• Grain cooperatives.
  Source: Department of Labour

Specific wage agreements are made at the various industrial councils. These vary according to different skill levels, and in some cases different geographical areas. Table 4 shows a selection of wage levels agreed at industrial councils in 1995. These figures cover the unskilled category.

In addition, there are some bargaining councils (such as the one in the mining industry) that act effectively as industrial councils but are not registered as such.

Future bargaining levels will depend on how the parties choose to respond to the provisions of the new Act, and, in particular, the extent to which employers and unions in different sectors opt to establish bargaining councils.

In addition to the industrial-council system, wage determinations are made in certain industries. These are made by a body appointed under the Wage Act of 1957, and cover specific geographical areas. Table 5 shows a selection of wage determinations for the lowest wage applicable to the unskilled category in 1996.

The future of the Wage Board system will depend on the outcome of the current negotiations on minimum labour standards. 

1. Strike activity

1. Training

There is a major shift occurring in the nature and form of worker training in South Africa. New institutions and frameworks are being put into place to create a training system which is more comprehensive, more flexible, more closely related to the needs of the economy, and which provides workers with skills that are integrated and portable. The process of establishing a new training system is being driven by the Department of Labour, in cooperation with the NTB, the various industry training boards, private-sector representatives, and organised labour. Several studies are being conducted under the auspices of Nedlac to determine the best ways to finance and govern the new training system.

A wide spectrum of organisations are currently involved in formal and informal worker training. As yet there is no reliable data on the extent of training done by all these organisations. However, a study to determine the levels of training and the current cost of such training is also being conducted under Nedlac.

Among the most important institutions in the provision of training are the industry training boards. These boards provide industry-specific training on behalf of the companies active in the specific industry. The following training boards are currently in operation:

• Aerospace Industry Training Board.
• Amalgamated Beverage Industry.
• Automobile Manufacturers Industry Training Board.
• Bellville City Council.
• Building Industry Training Board.
• Civil Engineering Industry Training Board.
• Clothing Industry Training Board.
• Dairy Industry Training Board.
• Defence Force Training Board.
• Electrical Contracting Industry Training Board.
• Eskom and Allied Industry Training Board.
• Footwear Industry Training Board.
• Furniture Industry Training Board.
• Hairdressing and Cosmetology Industry Training Board.
• Hospitality Industries Training Board.
• Information Industry Training Board.
• Krygkor Training Board.
• Local Authorities Industry Training Board.
• Maritime Industry Training Board.
• Metal and Engineering Industries Training Board.
• Motor Industry Training Board.
• Plastics Industry Training Board.
• Printing, Newspaper, Packaging Industry Education and Training Board.
• Textiles Industries Training Board.
• Transnet Training Board.
• Road Transport Industry Training Board.
• Sugar Industry Training Board.

Another critical component of the training system is the apprenticeship system which operates under the auspices of the Department of Labour. The national apprenticeship system allows students to work towards artisan status through a combination of practical and theoretical training. Although formal artisan skills are by no means the only skill requirement in industry, they remain an important part of the skills base. They are the only category of training for which official statistics are available. Figure 23 shows the number of contracts of apprenticeship registered and completed, and Figure 24 shows the number of trade tests administered and passed between 1990 and 1995.

Figure 23 shows that the number of apprenticeships registered and completed has declined in the past two years, and Figure 24 shows a similar decline in the number of trade tests administered and passed. This coincides with the upturn in the economy and is cause for concern, given the expansion of the economy and the related requirements for skilled personnel. This situation lends even greater urgency to the need to restructure the training system.

1. Hours of work

 

Trade and industry

In Sections 1 and 2 we examined trade patterns and reviewed a number of developments in the industrial sector. This section provides information on export trends in manufacturing, and examines recent developments in trade and industry policy.

South African trade and industrial policy is in a process of fundamental restructuring. This entails a shift away from a highly protected, relatively closed economy which emphasised self-sufficiency and strategic investments, towards a more open economy emphasising the need to compete internationally. There is also a shift away from a subsidy approach and towards a set of industrial policies which emphasise the restructuring of production to realise South Africa's potential competitive advantage. These shifts in South African policy take place in an international climate in which there is ever-increasing pressure to liberalise and open economies to global competition. South African industrial and trade policy is attempting to steer a path between greater openness and a greater capacity to compete on the one hand, and a process of industrial restructuring which seeks to maintain existing jobs and productive capacity.

2.1. Manufacturing exports

In Section 2 we noted the need to increase South Africa's manufacturing exports in order to be able to support our current level of imports, especially in light of declining gold exports. Some subsectors of manufacturing have increased their export levels substantially in recent years. This is illustrated in Figure 25 .

Figure 25 shows that there have been particularly large increases in basic iron and steel and Industrial chemicals. All five sectors, however, show sustained increases, especially after 1992.

TRADE POLICY

2.2. Southern African regional trade arrangements

The SACU is a key trade arrangement in the southern African region. The SACU is based on an agreement between South Africa, Botswana, Lesotho, Namibia and Swaziland which sets a common trade system for the five countries. In terms of the SACU, the countries have agreed that there will be no tariff barriers between them, and that they will share a common external tariff. South Africa has the strongest industrial base among the SACU countries and sets the tariff levels. Revenue from the tariff system is shared between the countries on the basis of a revenue-sharing formula. However, there has been protracted debate over the efficacy of the revenue-sharing system and the SACU agreement as a whole. For this reason, the new government has entered into a process of renegotiating the SACU agreement with our neighbours. However, it is likely that the principle of the free movement of goods between SACU countries will remain intact.

The SACU negotiations are taking place in the context of a series of trade discussions in the SADC, of which South Africa is now a member. Various SADC countries are members of a variety of regional trade agreements (of which the SACU is one), and there are now attempts to structure a single set of trade relationships for the region as a whole.

2.3. Market access

In addition to the SACU and SADC, the new government has entered a process of bilateral discussions with a number of trading partners to secure greater access to key markets. There are currently bilateral discussions taking place with a number of countries, and these are at various stages of progress. They include:

• Bulgaria.
• Cuba.
• The EU.
• Malaysia.
• The Philippines.
• The People's Republic of China.
• Thailand.
• Zimbabwe.

Some progress has been made in the discussions with the People's Republic of China and the EU. The Trade and Industry Chamber of Nedlac has received regular updates about these discussions and, in the case of the EU, a Nedlac committee provides advice and information to the negotiating team.

Discussions on negotiating a new trade arrangement with the EU have been underway for some time. In September 1994, South Africa was granted access to the Generalised System of Preferences although with limited access to the agricultural component. South Africa originally argued for access to the Lome, Convention. The EU agreed that South Africa could have access to Lome, but that the non-reciprocal trade preferences would be excluded. The European Union then proposed the establishment of a free-trade area between the EU and South Africa. South Africa agreed to this on the understanding that it will support South Africa's transition to democracy and that it facilitates regional development within southern Africa. The General Affairs Council of the EU approved a trade mandate on 25 March 1996, and negotiations are due to begin as soon as the South African mandate has been finalised.

In early 1996, some progress was made with regard to market access to the People's Republic of China. The People's Republic of China has for some time enjoyed what is effectively most-favoured-nation status regarding access to the South African market. South Africa, on the other hand, has been subject to additional duties when entering the People's Republic of China market. Negotiations between South Africa and the People's Republic of China in early 1996 resulted in an agreement on a Note of Exchange stating that South Africa will now enjoy most-favoured-nation status in the People's Republic of China market and will no longer be subject to additional duties. In addition, the Note of Exchange provides for consultation between the parties in the event of trade-related problems. Further discussions will, however, need to take place in order to establish full cooperation on trade-related matters.

2.4. Restructuring of the anti-dumping system

For some time there has been concern about the efficacy of the anti-dumping system in South Africa. Local producers and trade unions have been anxious that if and when goods are "dumped" or imported unfairly into South Africa, government should be able to take effective action to provide relief for local producers. Until now, however, a range of problems have often prevented effective action from being taken.

In response to this problem, the Board on Tariffs and Trade is currently in the process of restructuring the anti-dumping and countervailing system. The Minister of Trade and Industry has launched a formal investigation which will make substantive recommendations relating to the restructuring of this system. The new system will be required to:

• Ensure compliance with the rules of the WTO.
• Take forward the proposals of a previous study conducted by the then NEF.
• Transform the dispensation into a system that is credible, efficient, professional and equitable.

There is also a process underway to enhance the capacity of the anti-dumping unit within the Board on Tariffs and Trade. This process is informed by the objective of finding a balance between providing speedy and effective relief to local producers against unfair imports on the one hand, and, on the other, avoiding the use of the anti-dumping system as a protectionist mechanism. The Trade and Industry Chamber of Nedlac will receive ongoing reports about progress with the investigation.

INDUSTRIAL POLICY

In line with the overall restructuring of trade and industry policy, government is in the process of restructuring incentives and support measures. In particular, there is a move away from the subsidy-type arrangements embodied in Geis and towards the introduction of supply-side measures. There is also a process underway to restructure the RIDP.

2.5. Phasing out Geis

Government is in the process of phasing out Geis, which was introduced in 1989. Geis aimed to encourage South African companies to export by paying the company a portion of the value of its exports depending on the value-added embodied in the product. There were four Geis categories, each reflecting the level of value added. The higher the level of value added, the higher the incentive. Although Geis is widely regarded to have encouraged exports, it required large funding commitments from government. There are also questions about the extent to which the scheme led to increased exports, and the extent to which those increased exports are sustainable. Most importantly, perhaps, the scheme does not comply with the regulations of the WTO, and South Africa's WTO commitments therefore require that it be phased out.

Between 1992 and 1995 a total of more than R4,4 billion was disbursed under Geis to companies in 96 sectors. Figures 26-28 give a breakdown of the 10 largest disbursements (by sector) in each year. In 1994-95 a total of R1,36 billion was disbursed. Of this total, R828 million, or some 60% of the total, was disbursed to the 10 sectors shown in Figure 26 .

A similar pattern emerges when we look at Geis disbursements since 1992. A large proportion of the total has gone to the top 10 sectors. In 1992-93, 67% of the payments went to the top 10 sectors. In 1993-94 the top 10 received 61%. The iron and steel sector alone received R789 million over the three-year period.

This suggests that the benefits of Geis were strongly concentrated in a small number of sectors. For those sectors the benefits were substantial and will hopefully translate into a strong long-term capacity to export goods with higher value added.

The phasing out of Geis will mean substantial losses for some sectors, and government policy will need to pay close attention to alternative support measures, both for those sectors that are losing Geis benefits and for those sectors that did not benefit from Geis. The introduction of supply-side measures is especially important in this context.

2.6. The Regional Industrial Development Programme

The RIDP consists of a series of incentives to industries in non-urban areas. Before 1991, RIDP incentives were associated with the decentralisation policies of the previous government and with the industrial-development efforts of the former homelands. In 1991 the scheme was redesigned to include market-related criteria such as profit, output and comparative advantage. At that stage it was decided that the scheme could apply to any area in South Africa except the major three metropoles (the PWV, now Gauteng, the Durban Functional Region and Cape Town). In addition, a simplified programme was introduced in 1993 to enable smaller investors to gain access to the scheme.

The current RIDP incentive scheme consists of two elements:

• A two-year establishment grant based on the asset value of the venture.
• An output-based incentive for a further three years, based on taxable profits.

Relocation incentives are also paid under the RIDP.

Between January 1991 and April 1996 a total of 1 824 projects were approved under the RIDP. Together these projects represent an investment of R21,6 billion and employ 101 986 people. Between 1993-94 and 1995-96 a total of R612,6 million was disbursed under the RIDP.

The RIDP scheme is currently being evaluated through the JGF under the auspices of Nedlac, and the study will inform the future of this programme. Its future is also closely related to the industrial development efforts of the provinces.

2.7. Supply-side measures

The idea of introducing supply-side measures to support industrial development in South Africa has been part of the economic debate for some time. The idea behind supply-side measures is to provide support measures for industries which go beyond influencing the price of goods and services (for example, through tariffs and subsidies) by supporting improvements in the production or supply of goods and services. In November 1995 government released a document setting out a series of proposals on the introduction of a programme of supply-side measures. The document sets out a proposed package of support measures for industry which covers the following areas:

• Investment incentives.
• Training and human resource development.
• The RIDP.
• Industrial-development finance.
• Support for SMMEs.
• Technology enhancement.
• Productivity improvement.

The document notes that the measures should be able to respond to different needs, including:

• New industry development.
• Revitalisation of sensitive industries.
• Investment in internationally competitive industries.

Ideas on supply-side measures have also been put forward by business and labour, and these ideas are currently under discussion at Nedlac. The supply-side-measures programme will also have to be coordinated with the programme of cluster studies and specific cluster support measures currently under discussion in the Department of Trade and Industry. In this way, it may be possible to create a set of support measures for industry, some of which focus on specific sectoral/cluster issues and others which provide broader generic support for industry as a whole.

 

Public finance and monetary policy

3.1.Government revenue

The bulk of government revenue accrues from taxation, and is therefore closely related to the pace of economic activity. Trends in revenue should therefore be evaluated in the context of economic growth and the business cycle.

As would be expected, the extremely poor performance of the South African economy until 1993 had a significant negative impact on the level of government revenue. According to the SARB, tax revenue declined as a percentage of GDP for four successive years to 23,2% by 1992-93. After rising in 1994-95, tax revenue then declined to an estimated 24,6% of GDP in 1995-96. A small rise is envisaged in 1996-97.

Direct taxes remain the most important contributor to total revenue, accounting for an estimated 57,5% of the total in 1996-97. Within this category, personal income tax is the single most important tax-revenue source. There has, however, been a notable shift towards indirect taxation over the last 10 years ( Figure 29 ). In particular, the introduction of value-added tax (Vat) in September 1991 has boosted revenue from this source substantially, particularly after Vat was raised to 14%. The fuel levy which was introduced in 1988 has also made a contribution to revenue of close to 2% of GDP since 1993.

Over the last 10 years, indirect taxation increased from 33% of total revenue in 1985-86 to 38% in 1995-96. Many consider Vat to be a regressive form of taxation, given that its level does not vary according to income. However, some goods are zero-rated and this cushions the impact on the poor to some extent. In addition, the 1996-97 Budget raised income-tax thresholds in order to assist lower income groups. Whether or not Vat is regressive also depends on how the proceeds are used, and whether they contribute to higher levels of government spending on the poor.

Personal income tax has been rising steadily, from 7% of GDP at the end of the 1980s to over 10% in 1995-96, with an estimated increase to 10,3% of GDP in 1996-97. In contrast, direct company tax has declined. While direct tax on companies other than mining is projected to increase from 2,8% of GDP in 1995-96 to 3,4% in 1996-97 (as a result of higher expected profit rates), it will still be much lower than the previous peak in 1989-90 of over 4% of GDP.

There has also been an overall loss of revenue from taxes on international trade following the abolition of import surcharges on 1 October 1995. However, the revenue component from customs duties has risen slightly, as the impact of the decline in tariff rates has been more than offset by an increase in the volume of international trade.

3.2. Government expenditure

The last four years of the previous government saw large increases in expenditure and borrowing. Non-interest expenditure rose steadily from 1988-89 to reach 32,3% of GDP in 1992-93. As a result of increased government borrowing in previous years and higher real interest rates, interest expenditures also rose, to 18,8% of expenditure in 1995-96 as compared with 16,8% the previous year. In 1996-97 the cost of servicing state debt is expected to be R34,4 billion or nearly 20% of total national government expenditure. This cost may rise further as a result of the current increase in interest rates and the depreciation of the rand.

The new government has attempted to restrain its spending at the same time as reorienting expenditure in line with RDP priorities. This has included an attempt to improve the wages of the lowest-paid sections of the public service and to eliminate race and gender-based discrimination in pay practices. The cost of improving conditions of service in 1996-97 is estimated at R7,45 billion. Remuneration of employees, which accounts for the major share of current expenditure, rose in 1993-94 and then declined in rand terms in the following year as rationalisation of the public service proceeded. Remuneration has been budgeted to fall from 38,1% of total consolidated expenditure in 1994-95 to 36,1% in 1995-96. However, this item will rise in 1996-97 as a result of the improvements in conditions of service.

In line with development priorities, the share of social services in the 1995-96 consolidated Budget increased from 44% to 46% of total expenditure. However, given the overall restraint on expenditure, this represents a fall in relation to GDP. In terms of the overall social-services budget, spending on education is by far the largest item. While the share of education in the total Budget remained constant in 1995-96, the amount allocated to tertiary education increased at the expense of pre-primary, primary and secondary education. The shares of general government services, protection services and economic services all declined ( Figure 30 ). The most substantial individual decrease occurred in the defence budget.

In 1996-97 current revenue is expected to exceed non-interest current expenditure by R17,5 billion, while the cost of servicing state debt is projected at R34,4 billion. This change reflects overall fiscal restraint as well as an increased allocation of public funds to capital expenditure. As a percentage of GDP, capital expenditure by government is estimated to rise to 2,7% in 1995-96 and 2,5% in 1996-97, as compared with 1,9% in 1994-95.

3.3. Budget deficit and government debt

By 1992-93 the Budget deficit (excluding transfer payments) had increased to 7,9% of GDP from 0,6 % in 1989-90. This was largely the result of a burgeoning government debt and stagnating economy. The new government faced a situation in which it had to service the inherited debt at the same time as being conscious of the spending implications of the new political dispensation. Pressure to curb the deficit has come from many quarters, and in the projected 1996-97 Budget, the government has committed itself to reducing the deficit to 5,1 per cent of GDP. This is illustrated in Figure 31 .

3.4. Reform of the budgetary process

Reforms are currently being introduced to the budgetary process in order to improve the efficiency of government activities and ensure consistency with national goals. The concept of zero-budgeting has been introduced whereby budgets will be compiled from a zero base rather than through incremental changes that encourage the persistence of inherited priorities. The intention is that the process should incorporate the contributions of major stakeholders and ensure greater transparency. In conjunction with these reforms a medium-term expenditure framework is being developed to set long-term government objectives within a macroeconomic context. This will inform the annual budgetary process and will be employed in the preparation of the 1997-98 Budget.

3.5. The South African Revenue Service

There has been some concern in recent years about the efficacy of government revenue services. A number of parties have suggested that enormous gains could be made by having a more efficient service. The first interim report of the Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa recommended that the commissioners for inland revenue and customs and excise have the flexibility and freedom to employ competent and experienced staff, and to use suitable equipment and facilities which are essential for a modern tax administration.

In October 1995 Cabinet approved the reformulation of the inland revenue and customs and excise services into an autonomous revenue service to be known as the South African Revenue Services (SARS). The SARS was established in terms of the Public Service Act, and a steering committee was formed under the Minister of Finance to drive the reform process. Cabinet indicated that the required degree of autonomy and flexibility should be sought within the disciplines and control of the public service. The SARS was launched in April 1996.

The main aim of the reform process is to achieve effective and efficient revenue collections that will reduce fraud, corruption, money laundering, tax avoidance schemes, costly court cases and illegal trade. This is expected to benefit the southern African region as a whole.

 

Development

In Section 1 of this report we analysed levels of inequality in South Africa and notedthat South Africa has rates of inequality that are among the highest in the world, andthat millions of South Africans lack access to basic infrastructure and services. In thissection we look in more detail at social conditions.

4.1. The distribution of poverty: some recent findings

A number of recent studies have provided valuable data on the nature and distribution of poverty in South Africa. This information is invaluable to the policy-making process, and is briefly reviewed here.

In Section 1 we noted the differences in income between the various provinces, and saw that the burden of poverty falls on the non-urban areas, especially those in which the former homelands were located. More information on the distribution of poverty is provided in the "Key Indicators of Poverty in South Africa"; study, conducted by the World Bank for the RDP office. This study defines the "poor" as the poorest 40% of households, which currently comprise 53% of the population. The study notes that South Africa is a "middle-income" developing country with a gross national product per capita of US$2 670 in 1994. This is about the same level as Brazil and Malaysia, and more than eight times that of Kenya and Nigeria. However, poverty rates are much higher in South Africa than in comparative countries, especially when measured by access to infrastructure and services. According to the study, poverty in South Africa has a strong regional dimension. Of South Africa's poor, 75% live in rural areas, with 69% in the former homelands. Two-thirds live in the Eastern Cape (24%), KwaZulu-Natal (21%) and the Northern Province (18%). In the Eastern Cape, 78% of the population are poor, while 77% of people of the Northern Province are poor. Africans comprise 94,7% of the poor, and another 5% are Coloured.

The study shows that 32% of the poor rely on a regular wage (including farm work) as their primary source of income, and 18% rely on remittances from an employed relative. A further 29% rely on a social pension, while the remainder rely primarily on casual wages, subsistence agriculture, self-employment or other sources. This suggests that unemployment is an important factor in explaining poverty, but it is not the only factor to take into account. Extremely low wage levels in certain areas are also a factor.

The study conducted a survey, asking poor people which three things the government could do that would be most helpful to them: 55,9% mentioned jobs, 40,6% piped water, and 34,1% food aid. For the rural poor, piped water, job creation, electricity, clinics and roads were seen as particularly important.

Another important study on poverty is the "Children, poverty and disparity reduction" study conducted by the National Institute for Economic Policy (NIEP) for the RDP office. The study analyses the position of children in South Africa and the changes that would be needed to ensure that South Africa is able to fulfil the obligations of the United Nations Convention on the Rights of the Child. We now briefly review some of the study's key findings.

The health of infants and children is not only a key area of concern in relation to children themselves, but is also an indicator of social well-being. There are varying estimates on infant mortality or the number of children who die before they are one year old. Unicef puts the figure for South Africa at 71 per 1 000 live births, while the South African Medical Research Council puts it at over 70 (depending on the group) with rates of 94 for rural households and 86 for African households. The Department of Health has lower estimates of 52,8 for Africans, 28 for Coloureds, 13,5 for Indians and 7,3 for Whites.

On malnutrition, the study estimates that some 2,5 million South Africans (including adults) are malnourished, and that 30% of black children suffer from protein energy deficiency. An estimated 28% of African children are stunted, and this is closely related to malnutrition, especially between the ages of 6-18 months.

According to the study, early childhood education and care facilities are in short supply in most areas. In 1991 only 9% of pre-school children had access to formal pre-school programmes, and only 3,2% of children aged 0-6 were in government programmes. This is cause for concern in the light of strong international experience on the importance of early childhood learning in children's social and educational development.

The report also shows that South African children suffer a high degree of psycho-social trauma, including family violence and political violence. One study showed that 75% of black adolescents displayed at least three stress-related symptoms, and 67% had experienced at least one traumatic incident which they cannot forget. Another cause for concern is that there are approximately 250 000 street children in South Africa, and about 16 000 youths (under the age of 20) are in jail.

4.2. Infrastructure and services

A key part of the development process is the delivery of infrastructure and services. This section briefly examines the provision of some key services on a sectoral basis.

4.2.1. Housing

The RDP base document showed that in 1993 there was a backlog of some three million units (including hostels and rural areas). The RDP set an objective of providing 300 000 houses per year, or at least one million within five years. This is in contrast to the 50 000 houses built in 1992. The "Key Indicators of Poverty" study showed that 35% of all poor households live in shacks or traditional dwellings, with an average of two people per room.

As Table 8 shows, the average value of the existing housing stock is R50 000, which suggests a shortage of very low-cost housing.

The Department of National Housing aims to eliminate the existing housing backlog within seven years, and to provide one million subsidies of R15 000 per house over the next five years. The Department of National Housing cannot act alone, however, as housing is closely linked to the provision of municipal infrastructure.

Housing is to be financed through a combination of:

• Household savings.
• Mortgage credit.
• End-user capital subsidies (R15 000).
• Local authority subsidised land.

Institutions aiming to assist low-income consumers with access to credit are in the process of being established. Responsibility for the construction of housing is primarily being given to developers acting in compacts with communities.

Current housing policy attempts to deal with the difficulties of very low-income housing consumers. The combination of subsidies and community/developer-driven housing construction may fall short of the requirements of the poor and very poor. The reasons for this are the difficulty of very low-income consumers in supporting a mortgage bond, and the reluctance of developers to build very low-cost houses. One of the attempts being made to deal with this problem is the recent launch of the People's Housing Process, which aims to establish housing support centres which would help the poorest housing consumers to access advice, training, materials and other assistance. The Cosatu comments on the recent housing white paper call for a more direct approach which entails immediate provision of public housing targeted at those who are unable to afford mortgage finance.

By February 1996, 272 475 project-based subsidies were approved but only 27 461 had actually been paid out. The remainder are in the pipeline and this reflects delays in the actual building of houses.

4.2.2. Water and sanitation

The RDP base document estimated that 12 million South Africans lack access to clean drinking water, and 21 million lack access to toilets and refuse removal. The "Key Indicators of Poverty" study found that of the poorest 40% of South African households, only 27% had piped water and only 18% a flush toilet or improved latrine. The study also found that rural people spend an average of 190 minutes a day fetching water. In the rural areas, backlogs for water are estimated at 65% and 95% for sanitation.

In light of this, the principal goal of the Department of Water Affairs and Forestry, as set out in the white paper on water and sanitation, is to provide a minimum of 25 litres of water per person per day within 200 metres, and an adequate sanitation system.

In the last two years significant progress has been made in delivering piped water. This has been achieved through a number of presidential lead projects under the RDP office, as well as through the community water-supply programme of the Department of Water Affairs and Forestry. Two projects approved under the RDP fund will enable water to be brought to 3,5 million people over the next few years. These projects together cost a total of R588 million. However, if the enormous need for community water supply is to be met, more resources will need to be allocated in the future. According to the 1996 RDP infrastructure investment conference, between 2,5 million and 3,5 million water connections are expected in the next five years, depending on levels of funding.

4.2.3. Education

The RDP base document notes the high degree of illiteracy in South Africa, the low level of education among the African majority, and the inadequacy of the present educational system to meet the needs of the nation. This is despite the fact that educational spending as a percentage of GDP is relatively high in South Africa when compared with other middle-income countries. According to the "Key Indicators of Poverty" study, some 39% of South African adults are illiterate compared, for example, with 10% in Thailand, 7% in Chile and 31% in Kenya. According to the study, of the poorest 40% of our people, 21% have no education, 28% have incomplete primary education, and only 6% have complete secondary education. The lowest rates of education are among the poor in the rural areas, 53% of whom have either no education or incomplete primary education.

According to the CSS 1994 October Household Survey, almost all children aged between six and 15 attend school, and 83% of those between 15 and 19 attend. The "Key Indicators of Poverty" study shows that of the poorest 40% of children aged between six and 12, 87% attend primary school, and of those aged between 13 and 17, 57% are currently enrolled in secondary education. This shows a higher drop-out rate after primary school among the poor than in the population in general.

The quality of schooling is, however, very weak in many areas, with many schools lacking basic infrastructure, libraries, textbooks and other educational resources. A lack of qualified teachers and appropriate textbooks is also a problem. According to the "Children, poverty and disparity reduction" study, in 1993, 27% of teachers in African schools had not completed Standard 10 and only 0,6% had degrees. Funding is still distorted by race. In 1993, according to the study, white pupils attracted per capita spending of R4 700 each and African children between R1 000 and R2 000 each depending on their locality. Current policies are, however, in the process of eliminating this disparity.

The education white paper outlines the direction of policy change and emphasises the need to achieve equity with regard to teacher-pupil ratios, to improve the quality of teaching and to deracialise and rationalise education provision. Various education policy documents have laid out objectives including:

• Universal enrolment within five years.
• Introduction of one year of pre-primary education.
• Elimination of the backlog of 50 000 classrooms.
• Rehabilitation of schools within five years.

The RDP investment infrastructure documentation shows that although the major cost driver in education is the employment of teachers, capital investment is also critical in order to address the backlogs, particularly in the provision and repair of classrooms. The documentation argues that the proposed one year of pre-primary education may be difficult to implement at envisaged levels of funding.

4.2.4. Health

The RDP base document noted that while South Africa's overall spending on health service as a percentage of GDP is relatively high by international standards, the level of service is extremely low, particularly in the rural areas. According to the "Children, poverty and disparity reduction" study, South Africa has 6,5 doctors per 10 000 people and 43 nurses per 10 000. This compares favourably with other middle-income countries, especially those in Latin America. However, more than half of South Africa's doctors provide fee-for-service medicine, and doctors in the public service are extremely overstretched. There are also regional disparities-the number of doctors per 1 000 people is nearly 10 times higher in the Western Cape as it is in the Northern Province. Access to health services in the rural areas is especially difficult. According to the CSS, 56% of the rural population live more than five kilometres from the nearest medical facility, and transport is often a barrier. According to the "Key Indicators of Poverty" study, 22% of the poorest 40% of the population reported that they had not sought treatment for their most recent illness, citing the high cost of transport and treatment as reasons. Average travelling time to treatment was found to be more than 90 minutes, with another 45 minutes waiting time.

The current policy of the Department of Health is to reallocate spending towards the poorer provinces based on a formula that allocates funds on the basis of weighted per capita provincial income with a further provision for the support of academic hospitals. In addition to the current policy of providing free health care to children under six and pregnant and lactating mothers, the Department of Health has identified the following as key objectives:

• Eliminate under-nutrition within three years.
• Ensure that 90% of women receive adequate antenatal care within two years.
• Train 50% of district health personnel in the primary health care approach by 1997.
• Provide free health care for the aged, disabled, unemployed and needy students within five years.

A primary aim of the health programme is to extend primary health care facilities. This will entail an increase of both current and capital expenditure on new primary health care facilities.

4.2.5. Electricity

The RDP base document showed that only 36% of households in South Africa had access to electricity, and that up to 86% of schools lacked electricity. The RDP set an objective of providing electricity to an additional 2,5 million households by the year 2000, which would bring the total number of households covered to 72%. The "Key Indicators of Poverty" study showed that only 21% of poor households had access to electricity, and 48% relied on wood as their main source of fuel for cooking. According to the study, rural people in general spend an average of 80 minutes per day fetching firewood, and the poorest 40% of South Africans spend 87 minutes a day on this activity.

The overall energy strategy entails making use of a variety of energy sources, including a biomass initiative and an attempt to promote the use of low-smoke coal. This is especially important in areas which are difficult to connect to the national electricity grid. The centrepiece of the strategy, however, is an ambitious electrification programme which entails connecting over one million households to the electricity grid over a five-year period.

Eskom is currently aiming for 300 000 connections per annum. Table 9 shows Eskom electricity connections since 1991. In addition, between 1 January and 8 May 1996, 69 147 connections were made. Eskom expects to meet the annual target again this year.

The majority of these connections were made by Eskom and the remainder by municipalities. These figures include electrification of farmworkers' houses, which totalled nearly 17 000 in 1994. In addition, Eskom has a programme to electrify schools and in 1995, 540 schools were connected in addition to the number of households shown above.

According to the RDP infrastructure investment conference documentation, between 1,4 million and three million electricity connections are expected over the next five years, depending on funding.