G Fraser-Moleketi: Graduate School of Business, UCT

17 August 2006

Director of the Graduate School of Business, Prof. Frank M Horwitz
Members of the Board of Advisors
The sponsor for today's event Deloitte and Touche
Distinguished faculty members and other staff of the University
Distinguished students and other guests

The topic initially provided by the organisers certainly provides food for
thought, especially since not everybody makes the very important connection of
the functioning of the public service and the economic growth we are capable of
achieving. I took the liberty to tweak the topic ever so slightly for this
presentation.

Before I focus on Public Administration challenges, allow me to engage with
some of the assumptions that lurk in an approach solely focusing on economic
growth rate as the indicator of societal well-being. As government, the
approach we choose to embrace has more nuance, we opt for a "shared growth"
approach in which some of the worst elements of an unqualified growth approach
is tempered and directed in a specific direction that will allow us to achieve
some of our other policy objectives as well. I would also like to have a
broader discussion contextualising the role of the developmental state in
ensuring a society within which such growth can be achieved, whilst protecting
the interests of those who were hitherto predominantly excluded from the
benefits of our growing economy, as well as those of future generations who do
not possess a voice of their own in the current policy debates. Only after
having dealt with these two larger and more strategic discussions will I
venture in outlining the challenges we see for the Public Service and
Administration portfolio.

The economic growth approach and some of its shortcomings

Conventional economics has for a long time elevated the indicator of Gross
Domestic Product (GDP) above all others. The fates of nations are influenced in
the corridors of power on the GDP that it manages to achieve and the changes
registered in terms of this single indicator. Consequently conventional
economics has a way of measuring success of societies in terms of its
purchasing power and its increase in consumption.

When one uses economic growth as indicated by change in the GDP of a country
you will agree with me that the success of Ireland during the 1990s and early
21st century has been phenomenal. An average of 6,8% growth in GDP over a
decade would be seen as indicative of a success story. Being ranked 4th highest
in the world in terms of purchasing parity, with a GDP per capita of over
US$33 000, is what others can only strive for. We could therefore expect
that students such as you would study the case of Ireland to see how we could
emulate that situation given that we are chasing a 6% growth in GDP. Right?

But if I share some additional information regarding Ireland you might
change your opinion, even consider a view that describes Irelands economic
growth rate as nothing else but a "Celtic Cancer".

During the high growth years of the Irish economy the following changes
occurred on the socio-economic level:
* working hours for the Irish increased notably, with less time for family,
personal development, social recreation, and so forth
* perception surveys regarding the Irish’s satisfaction with life in general
showed a drop in the level of those who felt satisfied with their lives
* analysis re division of disposable income clearly indicated a trend of the
rich getting much richer and the poor, even poorer. The top 20% in society
gained, with the top 10% gaining most, while the bottom 40% lost out
notable
* more poverty in old age became a fate that few could escape
* a higher death rate became evident, especially in terms of causes of death
that has known links with stress and life style, e.g. heart attacks,
circulatory diseases, cancers, suicides, etc
* a phenomenal increase in alcohol consumption (and bear in mind the Irish had
a high threshold from which it started out)
* the poor got sicker, measured in terms of number of times they accessed the
health system and engaged with it and finally
* the public’s confidence and trust in the nation’s institutions (both public
and private) fell through the bottom, with trust in honest and fair treatment
being eroded almost completely

From this case it should become clear that there is more at play than only
economic growth and GDP. The Chilean developmental economist, Manfred Max
Neeff, has formulated and tested a hypothesis to capture this phenomenon. He
calls it the "Threshold Hypothesis". Through conducting various country
studies, including Austria, Germany, Australia, the Netherlands, Sweden, Italy,
the United States of America (USA), the United Kingdom (UK) and his native
Chile he has proven the robustness of this hypothesis. The hypothesis is
structured as follows:

"For every society, there seems to be a period in which economic growth –
conventionally understood and measured – brings about an improvement in the
quality of life, but only up to a point – the threshold point – beyond which,
if there is more economic growth, quality of life may begin to
deteriorate."

What Max Neeff therefore argues, and what I would like to endorse, is that
as a responsible state we cannot fixate solely on the issue of a growth in GDP,
although that is what captures the minds of economists. We must look at other
indicators in combination in order to really ascertain the overall well-being
of society. Overall societal well-being for this and future generations is
after all the responsibility of government.

Role of the Developmental State

In the South African situation we will have to be double as vigilant to
ensure that economic growth as a policy goal does not displace some of our
transformational goals. As you know we are fresh out of a period that world
history has been regarded as one of the most unjust systems ever.

Overall we are still in a phase of transforming our society and therefore
transformation as a societal goal on every level – including the economy -
needs to be pursued relentlessly. The government of which I form part has
chosen to embrace multiple policy priorities of which an economic growth rate
of 6% by 2014 is but one. The policy aim of achieving 6% growth rate is
contextualised by a range of other policy aims that in terms of a policy
hierarchy is of a higher order.

First of all, a growth of 6% in the GDP has to be obtained in a manner that
embrace development as a guiding principle, therefore it will place people and
their development central to the process and expect the economy to serve the
people, rather than the other way round. As such it could favour labour
intensive growth, rather than jobless growth. We have qualified the idea of
growth and stated that it must be shared growth. We cannot tolerate a situation
where the wealthy gets wealthier and the poor suffer even more. 6% growth where
the yawning gap between rich and poor is forever deepening and growing bigger
will not be good enough. Along the same lines we cannot ignore the social
injustices of the past and allow a growing economy to further entrench the past
patterns of only whites benefiting. Growth in the economy has to be achieved
while we transform it at the same time. For this purpose policy priorities such
as achieving employment equity have been put in place and will not be
sacrificed in the interest of achieving the 6% growth rate we have set as a
target. We are not facing an either – nor situation, but has to achieve both
goals simultaneously. The same can be argued with respect to the asset
distribution that underpins wealth creation, e.g. land holdings.

In addition, our Constitution is underpinned by a strong human rights
culture. For example, labour enjoys certain rights of association and
protection vis-à-vis the employer and we will not compromise on these. The same
could be said in terms of issues such as exploitation of children or other
vulnerable groups. As a society we are not prepared to sacrifice the advances
we have made in terms of safeguarding human rights on the alter of achieving a
specific economic growth rate.

But more so, the constitution bestow some socio-economic obligations on the
state to provide basic services such as water, sanitation, health services and
so forth to its citizens. The constitution therefore determines that where all
else fails, for example with respect to groups of citizens where the free
market mechanism fails and cannot operate due to a cashless economy or abject
poverty, the citizen has a right to turn to the state and the state must be in
a position to directly provide. This of course is qualified to a degree,
specifically with regard to the so-called third generation or green rights.

In addition, we must remember that South Africa is very prominently
associated to the international agenda of environmental sustainability. We have
been the hosts of the World Summit on Sustainable Development and have attached
the name of our biggest city to the declaration that came out of that
conference. We are signatories of the Kyoto Protocol and other international
agreements regarding the protection of our environment. As part of our African
heritage we have inherited a deep sense of the interconnectedness of
generations of people and the land and other natural resources. We would
therefore also not embrace an economic growth pattern that is set to destroy
the policy objectives we have an in terms of environmental sustainability.

In order to ensure that the State can protect all these other policy goals,
while at the same time creating an environment within which the private sector
can flourish and deliver a 6% economic growth rate, we need a State with
certain capabilities and characteristics. In its broadest form, we need a state
that can co-ordinate and integrate a complex web of policy goals, priorities
and allocate state resources accordingly. We need the capacity to monitor and
evaluate the successes we achieve, or the unintended consequences we unleash in
the process. We need a state that can regulate in order to protect various
interests and to reign in transgressors where necessary. For this we need
sanctioning power. We need a state that can on significantly large scale
deliver directly to citizens those services that are either priority in terms
of the human development agenda, such as health and education, or those where
we know the market is not doing well in, or even directly excluding some, for
example, in terms of energy and housing. We need a state that can leverage
resources and negotiate partnerships that can creatively co-create desirable
policy outcomes, e.g. toll roads and large infrastructure projects. We need a
state that can open doors for South African internationally and facilitate her
taking her rightful place on the African continent and globally both on
diplomatic, but also economically. We need a state that can provide security to
our citizens and contribute to the creation of global peace.

Challenges faced by Public Administration

I would say, by any stretch of the imagination, this is a tall order for any
government. This is the single biggest challenge that we experience as the
portfolio for public service and administration: To have available this diverse
and highly demanding capacity and capability spread. To make it more difficult
we need to have this range of capacity and capability in the right quantities,
but also distributed geographically across the country in an optimal way.

When you contemplate the challenge we are facing, take into consideration
the history we come from. Bear in mind the educational deprivation we have
deliberately inflicted on the largest majority of people in this country.
Consider how through Bantu education we have depleted and stunted the
intellectual capital of this country and how we now have to compete as
employing sectors for capable human resources that can potentially change the
profile of employment from a very small pool.

As a government we are prioritising this particular issue around the
capacity challenges. Our twice-yearly Lekgotla agendas provide generously for
discussion on how to attend to this challenge. President Mbeki has taken a
personal interest in this issue. His State of the Nation Addresses and Budget
Vote speeches over the past few years bares testimony to this fact. In
addition, the Accelerated Growth Strategy for South Africa (AsgiSA) – also give
prominence to the issue of skills development in the public service.
Accordingly a joint initiative with the private sector has been developed for
scarce skill acquisition. Prioritised in this is project and programme
implementation management capability.

The capacity discussion is also influenced by the fact that we are in an era
in which the discipline of Public Administration globally is in flux and
undergoing a radical re-think and reform. This is far-reaching in that we
re-look at how the State can conduct its work within a context of constraints –
both in terms of resources, but also diminishing trust and loyalty from its
citizens. Developments in information and communications technology has also
introduced a wide range of new possibilities and made it unavoidable that
administrative practices will be overhauled in a fundamental manner. It also
makes possible new modes of organisational structuring and service delivery
that hitherto has not been possible or contemplated. Public administrations
have also become a knowledge base industry, placing new demands on those who
work in the sector. These are not South Africa specific dynamics. They have
influenced the discipline of Public Administration and as a global community we
are facing this challenge of trying to work out how the Public Administration
of the future will operate and look.

In the process of such large scale change, superimposed on our own
transformational agenda, it should have been expected that some things would be
neglected or slipped through the cracks. We are in general agreement that we
might have neglected during the past ten years some of the more basic issues re
administration on the scale that is involved with government. We might have
been concentrating on the "big picture" issues of transformation at the
detriment of the more detail, but necessary aspects, such as basic
administrative skills, record keeping of decisions and processes, management of
file archives, et cetera, et cetera. We might have assumed that the formation
of a unifying new workplace culture will happen automatically when we change
the composition of the public service and after we have inserted a Code of
Conduct in the Public Service Act. But these were erroneous assumptions on our
side. We will have to in the near future give much more dedicated attention to
the issue of forming a joint and shared culture within the new and democratic
public service. We will have to strengthen the normative and values basis from
which our public servants operate, and we will have to spread this through the
entire public sector.

In this context I would also like to refer to the issue of corruption and
corrupt officials. The definition of corruption is one that ties the deed to
holders of public office and therefore makes corruption a public sector issue.
However, as the saying goes, it takes two to tango. For every corrupt official,
there is somebody who is prepared to pay the bribe – either in their individual
capacity or as agents of private businesses. Corruption is therefore a societal
issue and needs to be dealt with wider than only within the public service.
Never before has South Africa’s anti-corruption initiatives been so strong
across the board. The existence of the National Anti-corruption Forum and its
programme of action are symbolic of this. Of course all our anti-corruption
initiatives also result in the perverse effect that reporting and publicity of
corruption is higher and more prominent, and the impression is therefore
created of an escalation of the phenomenon, rather than a situation where it is
brought into the open and acted upon. We are thus facing a massive education
and communication challenge in this regard.

Co-ordination and integration in large and multi-faceted organisations are
perennial problems, and one which the public sector the world over and in
perpetuity has suffered from. With the greater structural complexity that I
have already alluded to that marks all administrations in the 21st century the
challenge of achieving effective horizontal and vertical integration both
within the public service and public sector, but also in the wider governance
framework with community and private sector role players is massive.
Information and Communication Technology (ICT) does offer some solutions in
this regard, but we yet have to exploit this fully. In the meantime the human
element remains within organisations. Petty competitions for scarce resources,
insecure ego’s and so forth still serve as stumbling blocks for us to achieve
the levels of integration that is required to take forward our very big task to
achieving 6% growth under the conditions I have highlighted.

We have also dabbled with some of the new instruments and techniques of
public administration and management that have become available
internationally. In this regard we have had mixed successes. We should keep an
open mind to the issue whether or not all of these are appropriate for the
developmental setting. However, in some instances we have not given the
necessary attention and support to overcoming problems associated with
implementation.

A further challenge we face is the issue of achieving the right balance
between regulation and deregulation. Of having sufficient and appropriate
administrative processes in place for what the state needs to do, without
inadvertently and unnecessarily stifling the operational environment of private
enterprise – either for big corporations or micro and small enterprises. To
this effect we have been driving from my Ministry an initiative that has as its
aim the removal of unnecessary Red Tape. In addition, cabinet has tasked other
departments such as National Treasury and the department of trade and industry
to also look into administrative practices that serves as obstacles to us
creating and protecting an environment within which business can flourish and
delivery the 6% growth rate we are seeking.

In addition to the above challenges we are operating in a democracy, a young
democracy in which the institutions are still being established. However, one
of the key features of a democracy is the issue of accountability,
accountability to the people directly and to its representatives. Given that we
are experimenting with new service delivery mechanisms and altered public
sector structures, e.g. more arms-length institutions and greater
decentralisation, it is to be expected that we are constantly considering what
would constitute appropriate accountability frameworks for different actors in
the governance and service delivery landscape. For example, how does one
structure accountability for a public entity which has a board that takes
strategic decisions and to who the Chief Executive Officer (CEO) reports, but
at the same time that public entity resides within the portfolio of a Cabinet
Minister and has to account via a Departmental Accounting Officer to Parliament
for the budget it is voted by Parliament? What happens to the old concept of
Ministerial accountability when Directors General account directly to
parliamentary structures and even where the population is baying for direct
accountability to them in terms of performance and non-performance?

In conclusion

Our challenges are plentiful – both for us in the public service, but also
for yourselves. Neither of us comes to the effort of achieving the 6% growth
rate without shortcomings. But I can give you the guarantee that we are seeking
ways on how to overcome our challenges and how to be a more effective partner
to the private sector on a daily basis.

Our role is, however, different and more varied than only that of looking
out for the private sector and allowing an unfettered market economy to dictate
the future. We have taken up, on the insistence of the people of this country,
the mantle of the developmental state. As a state we shall not shy away from
intervening with and tempering the free market when it threatens, undermines or
poorly serve the larger goals of this society. As a government we will use the
machinery available do this, and the public administration remains our biggest
machinery to this effect. I trust that you will also see the necessity for this
position.

Issued by: Department of Public Service and Administration
17 August 2006