Mandela announces modest start to RDP

Issue 

By Norm Dixon

JOHANNESBURG — "The government I have the honour to lead and, I dare say, the masses who elected us to serve in this role, are inspired by the single vision of creating a people-centred society [whose purpose] shall be the expansion of the frontiers of human fulfilment, the continuous extension of the frontiers of freedom. The acid test of the legitimacy of the programs we elaborate, the institutions we create, the legislation we adopt must be whether they serve these objectives." South African President Nelson Mandela outlined his government's vision for a new South Africa in his speech to open parliament in Cape Town on May 24.

Mandela said the "single most important challenge" facing the new government was to establish "a social order in which the freedom of the individual will truly mean the freedom of the individual ... Our definition of the freedom of the individual must be instructed by the fundamental objective to restore the human dignity of each and every South African."

Mandela explained that "we speak not only of political freedoms ... A people-centred society of liberty binds us to the pursuit of the goals of freedom from want, freedom from hunger, freedom from deprivation, freedom from ignorance, freedom from suppression and freedom from fear." These goals constituted the "true meaning, the justification and the purpose" of the Reconstruction and Development Program.

The RDP would begin to be implemented, Mandela announced, with the allocation of 2.5 billion rand (about A$1 billion), a modest 3% of the total budget.

Measures promised in Mandela's speech included:

* Children younger than six and pregnant mothers will receive free medical care at state hospitals;

* Nutritional feeding schemes will be introduced at primary schools;

* At least 350,000 houses will be electrified this year;

* Government will encourage financial institutions to more actively support black economic empowerment;

* A public works program would begin "to rebuild our townships, restore services in rural and urban areas, while addressing the issue of job creation and training, especially for our unemployed youth".

Beginning

These immediate projects were just the beginning, Mandela promised. The government was committed to the provision of clean water, the introduction of proper sanitation, addressing the "dire" housing shortage, and vastly improving the country's health system. He said that the needs of the aged and disabled, the youth and women and people in rural areas and informal settlements would be addressed.

Substantial investments in education and training would be made to meet the promise of free and compulsory education for a period of at least nine years.

Mandela said the government would ensure that the trade union movement and civic organisations are brought fully into decision making processes, "so that at no time should the government become isolated from the people".

The president said he had issued instructions to the government departments concerned to work out the necessary measures "which will enable us to empty our prisons of children and place them in suitable alternative care". Other categories of prisoners would also be released in an amnesty.

Mandela added that the "vexed and unresolved issue of an amnesty for criminal activities carried out in furtherance of political objectives" would soon be tackled. It is widely expected that indemnity will be granted to those who committed crimes in defence of apartheid in return for a public disclosure of the crimes.

Emancipation of women

Mandela made special mention of the new government's commitment to the emancipation of women. "It is vitally important that all structures of government, including the president himself, should understand fully that freedom cannot be achieved unless the women have been emancipated from all forms of oppression ... the objectives of the RDP will not have been realised unless we see in visible and practical terms that the condition of the women of our country has radically changed for the better and that they have been empowered to intervene in all aspects of life as equals."

The government would establish "organs of government" to "ensure that all levels of the public sector, from top to bottom, integrate the central issue of the emancipation of women in their programs and daily activities".

Throughout the speech, Mandela was at pains to reassure business that the RDP would be financed without "a permanently higher general level of taxation" and that "every effort" would be made to contain real general government consumption "at present levels". Mandela pledged to continue to fight inflation.

Business pressures

In the week prior to the speech, pressure from big business had mounted for the ANC to give assurances that the RDP would not result in higher taxes for business, increased borrowing or an increase in the budget deficit.

On May 19, the new government's economic team — former COSATU general secretary, now minister in charge of the RDP Jay Naidoo, finance minister in the previous government Derek Keys, and deputy finance minister Alec Erwin, a former COSATU official and senior member of the SACP — held a press conference to quiet business fears. They promised that the budget deficit, full details of which would be formally announced when the budget is handed down on June 22, would remain at around 6% of GDP.

Naidoo said that the RDP "will be implemented within existing principles of macro-economic balance and fiscal discipline. We shall maintain the objectives of reducing public debt and government consumption while delivering goods and services to our people."

Naidoo said the RDP's objectives would be met primarily by reorganising government expenditure rather than by increased spending. The ANC's initial estimate of the extra funds needed to fund the RDP was R39 billion. However, an ANC committee later revised this figure upwards to more than R80 million. Big business responded immediately by selling government bonds, driving up interest rates and buying US dollars, causing the value of the commercial rand to drop to an all-time low.

Mandela's speech repeated the assurances made by Keys, Naidoo and Erwin. He confirmed that Dr Chris Stals, the National Party-appointed governor of the Reserve Bank, would remain in his job. The president pledged that the new government would create "an attractive investment climate for both domestic and foreign investors, conscious of the fact that we have to compete with the rest of the world in terms of attracting in particular foreign direct investment".

Mandela added that the new government was determined to "systematically open the economy to global competition in a carefully managed process". As part of an effort to expand economic links with the rest of the world, South Africa would look very closely at enhancing South-South economic cooperation, he said.

Response

Following the speech, business representatives indicated that the government's vision as outlined did not seem to threaten their interests. South African Chamber of Business spokesperson Ben van Rensburg told Business Day that "the policy parameters which the president outlined are not ones to put the fear of God into those concerned that the government might abandon economic discipline".

A spokesperson for South Africa's largest company, Anglo American, said Mandela had struck the right balance between the goals of the RDP and the need for economic growth and an attractive foreign investment climate. The World Bank's South African mission chief, Sam Isaac, commented, "It was what we wanted to hear".

However, "dealers" quoted at the Johannesburg stock exchange remain nervous. Financial markets closed lower. One dealer told Business Day that Mandela's statements were "contradictory" in trying to maintain fiscal discipline "while at the same time provide a variety of improved services".

"Both local and offshore investors remain cautious and uncertain abut how government can maintain fiscal discipline while meeting its promise", said another.

Other big business commentators have expressed concern that Mandela's speech left open the possibility of increased taxes on the rich.

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