COMMUNITY CONSTITUENCY INPUT TO THE NEDLAC ANNUAL SUMMIT 2001

Delivered by Petronella Linders

 27 October 2001

INTRODUCTION

South Africa's unique colonial and apartheid past and the continued marginalization of the black majority women and people with disabilities from the economic mainstream demands that the country beats a path to development that addresses their unique circumstances.

Seven years after South Africa's first democratic elections, the country is still experiencing low levels of fixed investment and economic growth. This has resulted in huge development backlogs and rising levels of unemployment and poverty. The massive job losses have reduced black participation in the economy and increased levels of inequality; the incomes of the poorest 40% have fallen by 20% between 1991 and 1998.

The country's rural areas are trapped in a cycle of underdevelopment, crushing poverty and dismal levels of new investment in social, physical and human capital, and black women are most acutely affected by rural conditions. The HIV/AIDS epidemic threatens to arrest further economic progress. Despite government's attempt in stabilizing the economy and creating an investor-friendly environment, private sector confidence remains low largely because of the continued poor levels of economic growth. In turn, low private sector investment in expansion, jobs, human resource development, small business and infrastructure reinforces the low growth cycle.

The challenge for government is to formulate and implement strategies in an international context in which perceptions-about race, the African continent and alternative theories of development- dictate the manner in which investors, domestic and foreign view the stability of government and its economic policies.

GLOBALIZATION AND FISCAL POLICY

Globalization is one of many concurrent processes that at present contribute to the ever- advancing social evolution of human communities. In this regard global economic integration necessitates a need for effective transnational policy coordination in fields such as the environment, financial market regulations and trade policies.

The democratic government has actively engaged globalization in many respects through meaningful trade processes at the levels of Southern African Development Council, (SADC) African Union (AU) and international trade bodies such as the European Union (EU) and the World Trade Organization (WTO).

Globalization has had both positive and negative effects in developing countries. The positive effects include increasing economic growth and generating fiscal revenue. The danger is that in a country like South Africa, globalization can have negative impacts on national priorities such as job creation and socio-economic development. Therefore, the challenge for Government is to strike a balance between participating in the world economy and realizing the national priorities as stated in the NEDLAC Annual Declaration 2000.

TRADE LIBERALIZATION IN SOUTH AFRICA

Government, inheriting an economy emerging from a recession lasting nearly two decades has made it a key priority since April 1994 to reverse the deteriorating position in an increasingly globalized economy.

Liberalizing trade has been one of the central and more visible elements of South Africa's drive to achieve accelerated economic growth, one symbol of its break with past economic policies. Over the past three years South Africa has substantially liberalized the economy through deregulating the agricultural sector and reforming the import regime.

Manufacturing is one sector that has more recently rebounded; output and exports have accelerated; and the export base appears to be broadening. However, stronger performance is required to meet the country's growth requirements. There is scope for diversifying exports and for increasing the role of small, micro and medium-sized manufacturers.

GLOBALIZAT10N AND THE SOUTH AFRICAN LABOR MARKET

The international context in which South Africa currently finds itself is very complex. The volume of international trade as a proportion of total output has risen dramatically. Strong and growing competition from low wage countries has placed serious constraints on countries undergoing trade liberalization today.

As capital moves ever more freely around the globe in search of profitable investment opportunities, labor costs are becoming increasingly important in determining comparative advantage. Low productivity sectors will migrate to low-wage developing countries, whereas more skilled intensive activities will locate in developing countries where low wages are matched by higher productivity. These conditions have reduced domestic demand for unskilled labour and widened the wage dispersion in South Africa.

THE COMMUNITY BASED PUBLIC WORKS PROGRAM AND THE COMMUNITY EMPLOYMENT PROGRAM

Globalization has a tendency towards uneven development and marginalization of vulnerable groups. These trends have to be countered by an active and intelligent government. The need for the government to reshape and direct the course of economic development to suit local conditions must be emphasized, especially in the face of growing inequalities.

One of South Africa's responses to overcoming the above was to introduce the Community-Based Public Works Program. The aim of the programme is poverty alleviation through job creation, skill training, and delivery of much needed assets and capacity building. Given the time frames projected for macroeconomic policies to have an impact, it is seen as a critical safety net program for vulnerable groups during the transition period. The main target groups are the rural poor, youth and disabled people.

Despite the implementation of this programme there are continued levels of unemployment and increasing poverty amongst communities. As a result, the country still has one of the most unequal distributions of income in the world.

GLOBALIZATION AND ITS EFFECTS TO COMMUNITIES

The democratic government has fundamentally transformed the country's political, economic, and social landscape. It has entrenched the values of equality and freedom and laid the foundations to chart a new path to economic development for other developing nations to follow.

• The advancement of the youth has been identified as a national priority. The government established a National Youth Commission. The South African Youth Council represents non- Government institutions comprising youth, research, resource, civil, political, cultural, sporting and recreational organization not directly connected to government.
• It has implemented various policies to develop the country's human resources through restructuring the education system and implementing a skills development strategy.
• Opportunities have been creates and institutional support provided for black entrepreneurs and workers through strategies aimed at promoting small, medium and micro-enterprises, workplace equity and labor standards.
• Laws have been introduced to protect the rights of women and disabled people in the political, economic and social spheres. A program of action, referred to as the National Machinery for the Advancement of Gender Equality is composed of a variety of structures aimed at mainstreaming of gender equality. In addition the Office of the Status of Women as well as the Office on the Status of Disable Persons have been set up in the Presidency. Women and people with disabilities are represented on various national bodies and structures in Government.

Let me highlight facts known concerning the present effect of globalization on communities:

"Globalization has not succeeded in making markets work for all. The benefits of globalization have been unevenly distributed both between and within nations. At the same time a host of social problems have emerged or intensified. As a result, the present form of globalization is facing a crisis of legitimacy resulting from the erosion of popular support."

Various NGOs have long recognized the interdependence of economic and social policies. The backlash of globalization has strongly reinforced the need for action because:

" Integrated problems of sustainable economic growth and social development cannot be tackled with sectoral solutions."

Extending the logic to the situation experienced by many disabled people, the multilateral system of international organizations is under-performing. Disability needs to be built into the interrelationships between the economic and social aspects of development. For a start, we want to see greater policy coherence, including the elimination of disincentives to employment (such as mans testing in social assistance), which must guide an integrated approach to an increasingly integrated world economy.

A job is the first step out of poverty. A job is the key to creating wealth and distributing it equitably. Meaningful work can mean a positive social identity, a means to acceptance into the life of a community. A job can mean independence, enhanced self-esteem, and stronger families. Disabled people -often branded as "different," therefore, ostracized - know better than most the extraordinary "value" of a job.

Our aim is to see those NGO's involved in disability programs create public/private partnerships with Government to realize the above.

Globalization's failure to deliver a steadily increasing number of productive, paying jobs is the result of inadequacies in international and national policies. The solution must recognize that improved financial system architecture cannot replace the need for domestic policies that work. Disabled people should, if they choose to, become workers with disabilities - a simple economic fact. Solutions will achieve greater acceptance when the social and economic costs of fostering dependency on national institutions are factored in. Nations can ill afford to create situations, which drain away resources that might otherwise stimulate fragile economies.

RECOMMENDATIONS TO NEDLAC WORK SCHEDULE

In reaffirming the last year NEDLAC Declaration we recommend the following in line with NEDLAC Work Schedule for the coming year.

1. NEDLAC must now take the necessary steps to facilitate the participation ofthe community constituency in all the Chambers, if the following points are to be successfully implemented as stated in priority number four in the 2000declaration:

• Promoting and mobilizing investment and creating decent work for all.
• Ensuring economic empowerment for all especially for black people, workers, people with disabilities, women and youth.
• Eradicating poverty and addressing the legacy of under-development
• Strategically engaging globalization to the best advantage of the country.

2. We recommend that before the Financial Sector Summit can take place, a Seminar within NEDLAC must be convened to look at the areas of negotiations on the issue of the role of the Financial Sector. The Seminar should take place before the end of November 2001. The Summit must take place three months after the process of intense negotiations.

CONCLUSION

The employment performance of the formal sector over the last 25 years has been dismal. The poor job creating record of the formal economy is of course the key reason for the present high levels of unemployment in society. The influence of trade flows on employment indicates that between 1970-1995 all occupations, race groups and education cohorts gained in employment terms from export and import movements in the economy. However there was differentiation again, as those in higher skill groups or in higher education categories gained significantly more than those in the bottom level. As the liberalization continues, it cannot be doubted that this labor demand patterns will remain. In this environment the future and long -term job generating capacity of the economy will be skewed towards those with high levels of human capital and thus more comprehensive government policies will be required to deal with the job losses experienced in the economy.

In opting to protect unskilled wages from the forces of international competition, European labor market policies have paid the price in terms of higher unemployment. In Europe this is the product of a clear social choice in favor of a narrower wage distribution and higher taxation to provide income support to the unemployed.

If South Africa had an adequate social safety net in place to support unemployed people (and was prepared to pay the price in terms of higher taxation), then the impact of trade liberalization would be more equitable, as in the case of Europe. As things stand, unemployment insurance is limited (in monetary value and duration) and social protection for unemployed people is virtually non-existent. Those who lose their jobs as consequence of South Africa's European mix of trade and labor market policies are cast into deep poverty, often in marginalized and desperate areas.

Unless adequate social security is provided for the unemployed, this outcome is inequitable. South Africa needs to make some clear choices. If the existing labor market and trade policies are to stay in place, then the welfare (and tax) regime must change. If the welfare system is to stay as is, then either trade liberalization should be slowed down or wage setting made more flexible -or both.