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r:ontdj.

7th June, 1985.


ASSQCl1\TION or Cn.l1MBERS OF COMMERCE or SOUTH l!.FRICA
SENIOR ASSOCIATE MEMBERS
ASSOCIATE MEMBEns
OF EXECUTIVE COONcn,.
OF ALL CHAMBERS
J
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,
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Ref: L21/1
Reg: 236
buring the course of last year ASSOCOM was invited by the
Hinister or Constitutional Development and Planning, the
Hono <r .Co Heunis, to make a submission to the Cabinet Committee
on the political future of Urban Blacks. Subsequently the
St.ate President and other Cabinet Ministers have issued various
appeals for from the private sector to ensure
peaceful change in South Africa.
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In order to deal with this important but. complex matter,
a special ASSQCOM Committee, under the Chairmanship of a
Past President, Mr Denis PaxtoD, was appointed to formulate
proposals on this vital question. To assist the ASSOCOM
Committee in its task, Professor. Jan Lombard, of the Bureau
for Economic and Policy Research at the University of Pt'0tori_a,
together with Professor JoA. dtl Pisanle, were requested to
provide academic help. They attended meetings ot the ASSOCOM
Commi ttee to discuss details of the br'oad approach to be
followed in the course of this exercise. They have now
formulated a lengthy report, of which I pleasure in
attaching a summarised version,
This report was considered by the ASSOCOM Executive Council
which met in Johannesbut-g t.owards the end of May, Ig85 dud
certain .3mendments were made. ThE' Executive Council decided
that the ASSQCOM view on the revised document is as follows
DT
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2.1 ASSOCOM supports the need to formulate
and guidelines to facilitate the negotiation - such
as through the proposed Black Forum for Black
participation in the political system.
considers that the business sector has a vital stake
in the successful outcome of such discussions and
negotiations, in common with all groups Who genuinelY
the welfare of South Africa at heart.
2.2 ASSQCOM sees the document - not as a blueprint - but
as a major contribution to public debate about
possible constitutional options, and believes that it
deserVes serious consideration. It should be seen
as an "agenda for neqotiation". -
2.3 ASSQCOM endorses the view that economic freedom and
the prf vate enterprise ethic as well as the norms
with which they are associated are best entrenched
in. a future political system embodying principles' of
federalism or confederalism, It is essential that
any future poli ti<;al sys'tem in South Africa provides
.f..?...E
2.3.1. the necessary checks and balances;
2.3.2. safeguards basic human rights, and
2.3.3. the protection of minority JI.!:"oups against
domination...",
'I'he document has been distributed widely, including to the
State President. the Cabinet, and Black leaders.
chambers are urged to circulate the contents of the document
to their members,
A full version of the report is available upon request from
the ASSOCOM office (Mr
Yours faithfully,
/lr
It is further suggested that the PHILOSOPHY BEHIND THE COMMON LAW NORMS which
currently govern the basic character of the private enterprise economic
system of South Africa. be extended to form the basis for the new POLITICAL
STRUCTURES within which blacks win participate on equal terms with other
citizens of the Republic of South Africa, Since the philosophy behind the
corrrnon law of the Republic of South Africa seems to lead logically up to the
POLITICAL PRINCIPLES OF FEDERALISM. it is proposed that these principles be
properly investigated, with the view to their application in South African
circumstances. Possible reform of"local and higher authorities are
cussed 1n terms of federal principles.
NUTSHELL OVERVIEW OF A MEMORANDUM FOR ilSSOCOM
J A Lombard
J A au Pisanie
rtOOVJ\i Of DISCRIMINATION AGAINST BLA.CKS IN ruE POlITICJ\I... ECONOMY
Of THE REPUBLIC OF SOUTH AFRICA
It is suggested that these basic elements are to be found in the COMNON LAW
of South Africa. with particular reference to the norms governing (a) person-
al freedom. ib) freedom of property and contract. and (e) personal culpabi-
1ity. A DECLARATION OF RECOGNITION by all negotiating parties of these
norms would be a necessary condition for further progress ,in negotiations.
To these three common law norms should be added a formal recognition of {d}
the basic rules governing the maintenance of a sound national currency and
(e) the principles governing the right to tax,
Believing that REFORM should be governed by (a1 adherence to sound PRINCIPLES
of statehood and I b) EVOLUTIONARY rather than revol utionary ctHlnges. it is
proposed that the acceptable basic elements of the eXisting order be identi-
fied, recognised, and extended,
On the assumption that the continued LEGITIMACY of the Republic of South
Africa. both internally and externally. depends on the (u,gent) removal of
rac1al discrimination in an affairs of state, it is proposed that a particu-
lar AGENDA FOR NEGOTIATIONS be
J ALombard
J A du Pisanie
1985
299931447
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111111' III
"I I"
for Economic Policy and Analysis
UniversHy of Pretoria
IllHlllllltllIHUPIIIII/$UP
8D002996
Bureau
SUlIllMrt"zed version of a memoram1IJm for ASSOCOM
REMOVAl Of DISCRIMINATION AGAINST BLACKS IN TIlE POUTlCIIl
ECONOMY OF THE REPUBLIC OF SOUTH AfRICA
CONTENTS
Page
Chapter 4 THE MONETARY AND FISCAL ORDER
page
27
NUTSHELL OVERVIEW
CONTENTS
4.1
4.2
4.3
Introduction
The currency rule
The tax rule
27
27
30
Chapter 1 THE BASIC OBJECTS OF THE STUDY
CONCLUSIONS AND PROPOSAL
I
6
Chapter 5 LOCAL AUTHORITIES
33
Chapter 2 BRIEF DEMOGRAPHIC PROFILE
Chapter 3 REAFFIRMATION OF HIE COMMON LAW FOUNDAtiONS OF THE
SOUTH AFRICAN PRIVATE ENTERPRISE ECONOMY
3.1
3.2
3.2.1
3.2.2
3.3
Explicit recognition. as a matter of basic consensus.
of the validity of the common law of the Republic of
SQuth Afrka
The philosophical foundation of the South African
pr; vate enterpri se economy
The prior removal of a misunderstanding
Returning to the real issue
The significant common law foundations
civil law
Of the individual: equality before the law
Private'pr9pexty and the, ri ght of contract: freedom of
QpP9rfunf t.y
Legal';ctllpability of the individual
The recognition of col JectiYe bodies as lega.l
Entrenchment of the fundamentai common law norms
IntrQf.lucti on
Procedures of entrenchment
Beyqnd fonna1 entrenchment
8
12
12
14
15
16
18
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19
21
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23
23
24
25
5.1
5.1.1
5.1.2
5.1.3
5.2
5.3
5.4.2
5.4.3
5.4.4
5.4.5
5.4.6
The basic approach applied to the status and functions
of local authorities
local authorities as extensions of the market system
An enabling act for the establ1shment of local
authorities
The process of co-ordination among authortties
Present systems of local government in the RepUblic of
South Africa
Getting from here to there: The process of true devolution
of jJower
local authority finance
The question of viability: provision versus production
of services
Existing and proposed sources of revenue
A specific principle of development aid
Distribution and redistribution of revenue: subsidisation
of objects. persons and authorit1es
Redistribution of income through allocation of functions
among authorities with larger and smaller areas of juris-
diction
The principle of fiscal equivalence
33
33
35
37
38
38
40
40
40
41
42
43
44
Chapter 6
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
REFERENCES
Table 1
REMOVAL OF DISCRIMINATION ON HIGHER LEVELS OF GOVERNMENT:
THE FEDERAL OPTION
Introduction
Two alternative systems
The present a unitary state
Possibilities for a fourth chamber in Parliament
The federal alternative
Possibilities for territorial federalism in South Africa
The possibility of ethnic
authorities for own affa1rs
Power versus pd nci p1es: The po1Hi cal bottom Hne
Geographical distribution of the population of South Africa
Page
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48
49
49
49
55
57
58
61
9
CHAPTER I
THE BASIC OBJECTS OF THE STUDY
Th1 s memorandum deal s wi th the bas ic issues whi ch, in our vi ew. have to be
resolved in order to allow the removal of all racial discrimination in the
laws and the implementation of racial equality before the law in the politi-
cal economy of the Republic of South Africa, so that blacks can enjoy equal
rights of economic choice and political citizenship with whites in the Repu-
blic of South Africa.
The political economy of a country is a coherent system - albeit a complex
or compound rather than a simple system. That 1s to say that the function-
ing of the country's economy cannot be rigidly or completely isolated from
the functioning of its pol1tical institutions. Nor can the economic and pa-
l iti ca1 processes be ri 9i dl y or compl etely severed from the social institu-
tions and processes in the country. In dealing with the freedom and equal-
ity of people in South Africa it has to be recognised that freedom
is basically not a completely diVisible value which can legitimately be
granted in some processes of the but permanently withheld in
Although the focus of thi s memorandum happens to be on people's ri ghts and
responsibilities in economic affairs - because that happens to be Our field
of competence and interest - our suggestions probably apply to the whole
spectrum of institutions private and public through which people in the Repu-
blic make economically meaningful decisions.
In the field of private institutions our suggestions about racial equal ity
deal with institutions of basic importance to the economy. such as the common
law pertaining to culpability and means of payment. In
the field of l'publ institutions our suggestions mainly concern people
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political rights regard to economic affairs such as collective services
and taxes, not only on the level of smaller groups, such as local authori-
ties, but also on the national level of the Republic as a whole. To reite-
rate, we do not believe that the rights and obligations of people on one le-
vel can basically be seen independently of their rights on the other levels.
Our preoccupation with political rights stems from the fact that these rights
are nowadays regarded as the essential or primary element of individual free-
dom and equality in society. It is recognised that no real progress in
stabilizing and normalising relations between people within South Africa or
between South Africa and other countries can be made unless legal racial dis-
crimination is removed tn the political institutions of this country. The
future legitimacy of the Republic of South Africa both internally and extern-
ally depends upon this issue.
However, together with most conservatively minded people in the world, and
probabl y a very 1arge segment of so-call ed "1 i bera15". we recogni se some very
serious dangers for the stability and growth of the Republic
l
s economy and
the material well-being of its people in processes of political democrati-
sation which basically conflict with the principles of prhate enterprise
and effective competition upon which the South African economy rests, as
recognised in the preamble of the present constitution of the
organic or cosmetic, that is. it may be the
fQO:t in the nature of a society itsel f, or
society like a straight-jacket from
stable pol iti cal system depends
1:t1e;power'frOmabov.e. Like concrete. it will resist
rceptiblY'tJotHthe breaking point is reached, after which
ity simp1Y,dfslntegrates. The achievement of organic stabi1 ity in
ftiGiilsystem depends upon its legitimacy and is an evolutionary
process towards
The rules governing legitimacy and evolution are different. As regards the
legitimacy of the it requires voluntary acceptance of the order by the
people involved. The legitimacy of democratic government does not arise
from the exercise of powerby its administration. but by the acceptance of
the government by the body of the people. A primary fundamental law in
public affairs of this nature is that the maintenance of the effectiveness
and stability of the system rests upon the loyalty and obedience of the
people to clear principles of behaviour, rather than upon the power of the
state to force people to behave in certain ways. Effectiveness and stabili-
ty rests upon generally accepted social norms rather than upon structures of
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public administration. In fact, when attempts are made by means of such ad-
ministrative structures to achieve certain political ends which do not square
with the norms by whi ch the peop1e are governed, the mai ntenance of the
system not only costs a great deal. but its stability is shallow, going only
as deep as the mechanical ability of the structure to suppress the public's
propensity to disobey the law. On the other hand, if the aims of an admini-
stration accord with and comma.nd the respect of the people affected, the
particular administrative structures established to promote these aims are of
secondary importance and win require the minimum of scarce resources. In
so far as our submission must deal with structures, they are regarded as
1Htl e more than the servants of soci a1 pri odp1es to which the peap1e are
fundamentally prepared to adhere. The most expensive public administration
is one which attempts to maintain a system which people generally do not
want.
This is not to say that the particular nature of political structures and ad-
ministrative procedures are of no consequencei" politics. On the contrary.
given the existence of basic Civilized norms of social behaviour to which
substantially all people in a society subscribe and which they respect, poli-
tical structures and administrative procedures have a vital role to play to
secure the applicability of those norms in In this respect there
are indeed good and bad systems of government. But the primary prerequisite
for pol Hical stabil Hy in a democracy remains substantial consensus among
the people when creating the state about the basic rules of the game.
The worst possible fate that could befall South Africans in the present
search for norms and structures that could sustain legitimacy, stability and
growth. woul d. accordi ngly. be a complete 1ael< of consensus among peopl e
about basic principles of individual rights and responsibilities in inter-
personal associations. The danger of such a fate obviously increases with
the diversity of cultural backgrounds among the members of a One
of the essential elements of our approach is, accordingly, recognition of the
fact that substantial consensus about basic political principles and proce-
dures may lie deep and may be hard to discover.
The political principles suggested in the following pages do arise from the
realities of South Africa. They do not descend from the heights of an ab-
stract ideal, arbitrarily imagined by some political phi1qsopher. Insofar
as some of these principles may be seen as universal - such as the principle
of individual freedom itself or the rights of minorities - the fact is that
the realities of South Africa basically share certain characteristics with
corrmunities in other parts of the world, In fact, an important hypothesis
iil this report is that, while the details of social affairs in South Africa
certainly differ greatly from those of other countries, the fundamental
issues in our society are by no means $0 unique that our political structure
cannot share the heritage of enlightenment which have come down through the
ages of civilized society in the world.
A second fundamental law of stability recognised in this memorandum calls
evolutionary. rather than revolutionary processes of reform, There is, ac-
cordi ngly.a need for conti nulty in the sense that the prQcess of reform
should take as its point of departure a of what vs good in the
existing system and extend upon it, This seems a very 1mportant point to
respect in the processes of consultation and negotiation between the Govern-
ment and leaders of the black communities concerned, A major contention of
the present report is that the removal of racial and the
active promotion of equaHty can be best squared with the aspirations of eco-
nomic growth and material advance by affirmation of the norms of the existing
common law of South Africa.
It may be noted that Cl 't conflict of law" may exist betweeD the common law
normally applied in South Africa and recognised in the Mrmal courts of the
RepubHc
t
on the one and the common law governing those blacks who
recognise the laws of their particular tribes or nations,
The objection may. accordingly. be raised that the recognition of the common
law base of the present l'white" legal order reflects a prejudh:e against the
common law systems of blacks. Why should llwhites" not recognise the common
law of blacks as the basis of the New Democracy? The matter should at least
be the subject of negotiation with black leaders!
Such an objection would be totally unrealistic and would. if acted upon.
steer the negotiations. as it into a blind alley imrohing a costly
waste of time and goodwill. Quite apart from the conflict between the
several legal traditions among the various black nations, the argument in
favour of the general recognition of the currently operative common law of
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South Africa has little to do with the pecuHarities of the particular kind
of people who brought this system to South Africa, of an with the fact.
that they were tfwhite
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Their common law recommends itself as the framework
within which power sharing must be negotiated for different reasons, reasons
which reflect the interests of blaCKS as much as those of whites in this
country. These reasons, as developed in this and subsequent chapters are
(a) the principle of evolutionary reform. taking from the existing system
what is good and bUilding upon it. (b) the fact that the achievements of the
market economy rest upon the recognition of these common law norms and !e)
the fact that these norms do indeed seem to reflect the aspirations of blacks
who insist upon full and undiscriminatory participation in the political
economy of South Africa.
Although we do not wish to speak for blacks (or whites for that matter. but
only for a principle). it is quite clear that the basic aspirations of blacks
revohe around the three issues of eiti zenshi P. freehold ri ghts to property
and freedom of contract 9 which involves the dismantling of influx control on
blacks. We suggest that these three basic issues fn the process of the
removal of discrimination and the sharing of power. relate directly to
respectively the law of the law of property and the law of contract
in the present South African common law.
There may. of course. be many other matters wlli ch the negoti at'! ng parti es
wish to settle in principle before agreeing to sit down at the negotiating
table. The present submission stresses certain basic elements of the South
African common law (and two other basic points relating to the status of the
national currency and the limits to taxation) because these matters are
fundamental to the protection of an economic system characterised by personal
freedom. private enterprise and open competition. Another reason why it is
desirable to distil1 the non-negotiable points of departure to the older
common law norms is that, unlike more recent Acts of Parliament. they are
free from racial discrimination against Blacks. Prior consensus over these
common law norms (see Chapter 3) are fundamentally important and, having
reached such consensus. it would be advisable to consider the way in which
these norms may be entrenched fn the constitution of the Republic. so as to
invalidate any act of a future Parliament which attempts to reintroduce any
form of discrimination between persons on the grounds of language, race.
creed or colour.
The process of evolutionary reform, with due respect for the need for conti-
nuity. should then {a) focus on the removal of all discriminatory legis-
lation or regulations which conflict with these norms {as discussed in
Chapter 3} and (b) extend these same nonns as far as possible into the
field of political institutions and public law (as discussed in Chapters 5
and 6). graftlng new norms onto them only to the extent that they do not suf-
fice to establish a polHical system ill which full citizenship of the Repu-
blic can be extended to Blacks. It will at the same time be an important
function of these poUtical institutions to provide the greatest possible
protection in the processes of political and administrative action for these
norms against bureaucratic erosion"
The argument so far focus sed on the legal foundations in both private and
public law of a stable and prosperous economic order in which Blacks and
Whites can live in peace with one another without specia] privileges to any
Pilrticular group. To these legal foundations (as discussed ill Chapter 3)
the basic noms of sound monetary and fiscal practice {as dis-
PoHtical and social stability are in modern societies
closely bound up With ecorr:omic stability. It is generally recognisee! that a
into a state of chaos by irresponsib1e monetary and
legal protection of property and contractual rights may be
hyper inflation or confiscatory
CONCLUSIONS AND PROPOSAL
Our submission is that the negotiations for the establishment of a new poli-
tical order in which racial privileges and discrimination do not exist.
should commence with an Agenda for Negotiation. on which the first point for
consideration should be a Declaration of Recognltion of the acceptable
mental elements of the eXisting order.
From the point of view of retaining the best of the market orientated econo-
mic order in the future constitutional dispensation the Declaration of Recog-
nition should include the basic noms of the eXisting South African common,
law. with particular reference to THREE issues. namely la) Personal
Cb) Freedom of Property and Contract. and le) Personal Culpability. In addi-
tion to these three issues of common law. TWO further issues should be
cleared. namely {d} the basic ru1es about the standard of value of the
national currency. and (e) the principles of taxation.
Once initial consensus about the validity of these FIVE basic elements of
South African civilization has been reached. the negotiators should proceed
to consider {aa} the procedures required to remove racial discrimination from
the statutes of the Republic. {bb) the procedures required to entrench these
norms so that future governments cannot re-introduce rules that offend
them, and {cc) the extension of the philosophy behind these norms into public
(or political) institutions on the local, regional and central levels of
government.
CHAPTER 2
DRIEF DEMOGRAPHIC PROFILE
Probably the most important characteristic of the population of South Africa
(i .e. the Republics of South Africd
s
Transkei. Venda, and
Ciskei) is its cultural plural ity. The large number of groups shown in
table 1 testify to this. While the black population is shown by major
1anguage group (01 ne 1anguages are disti ngui shed) I the whi tes coloureds and
Asians are shown as such. They too can be further dfsaggregated by major
language group. Whites and coloureds mai n1y use Afri kaans and Engli sh.
while about one third of the Asians use English as their home language and
the rest use several Indian langu?ges.
Table 1 also shows the four independent national states mentioned above. the
six sel f-governing national states and the remaining portions of the pro-
vinces that formed the Union of South Africa in 1910.
The Xhosa have two national states or homelands. viz. Transkei and Ciskei"
While the North-Sotho and the North-Ndebele share the homeland lebowa. In
general, it is clear from the table which national unit goes with each
national state" It is equally however. that 1arge numbers of these
national units live outside their homelands. Majorities of the South-Sotho.
the Swazi. the the the Shangailn/Tsonga and the
Tswana live outside their- homelands" OnlY per cent of the South-Sottlo
and only 14.1 per cent of the Swazi were present in their ilational states
IQwaqwa and Kangwane respectively} at the time of the 1980-censtlso
Blacks outside their national states live mostly in the immediate vicinity of
their national states and in the PWY-region. Appreciable numbers of the
black groups are found in the PWV-reglon. All other have
a mUch lower degree of plurality than South Africa as a wholeo In the Cape.
for instance. only four groups are found in appreciable numbers. viz.
coioureds. Xhosa (in the Eastern Cape) and Tswana (in the North-Eastern
Capel. All four groups are well represented in the Cape
Basically three groups reslde in the viz. Asians
and Zul u. The As fans are largel y conn ned to Durban. Pi etermarltzburg and
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/lr1cinity. The area of the South-Eastern Transvaal .and Kangwane is mainly
the North-Eastern Tt"ansvaal together wHh Gaza:okulu mostly
accommodates the while the far Northern Transvaal together
with ifenda accommodates a large proportion of the Venda-speakers. Lebowa
together with the North- and North-Western Transvaal is inhabited mostly
by the North-Sotho and North-Ndebele. The Tswana find themselves mostly in
Bophuthatswana. the Northern Cape and the Western Transvaal. i.e. apart from
those in the PIN-region. The South-Sotho is mostly found across the Orange
Free State as wen as in the PIN-region.
The absence of many blacks from their homelands is mainly the result of the
process of urbanisation that commenced at the time of the discovery of dia-
monds and gold and gained momentum during the Great Depression of the early
'thirties and especia]ly in the process of industrialisation since the Second
World War. This process of urbanisation mainly took place outside the
national states.
The rest of this chapter concentrates on characteristics of blacks outside
the national as tmey are the focus of the enquiryo
Urban blacks outside the national states mostly work in the sectors "com-
socia1 and personal (including domestic service in which
especially female blacks are concentrated); "manufacturing"; and J'corrrnerce.
catering and accommodatfon,e Their counterparts in non-urban areas mostly
work in the sectors forestry and fishing"; 'lmining and quarry-
and "community. social and personal services", Whereas more than 61
per cent of the flon-urban blacks were not economically acth'e (Le. women.
children and aged persons) in 1980, the corresponding figure was less than 51
per cent In the case of those in urban areas 1982a) 0
One rea.son for the low percentage of economically active persons among the
blacks is the fact that many of them are children. About 27.8 per cent of
the urban blacks outside national st,ates were under the age of 15 in 19800
The comparable figure for their non-urban counterparts was 41,4 per cent
1982b). These figures also imply that many blacks are Hliing outside
the national states on a permanent basis and that many black children are
Doni and brought up outside the statutory homeiandso
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By occupation economically active blacks outside the national states are
mostly production and related workers. labourers and service workers. In
non-urban areas 'many are farm workers (RSA. 1982a). It logically follows
that these low skilled jobs produce 10lfl incomes. Of the economically
active blacks in urban areas outside the national states 82,6 per cent earned
less than R 2 400 per year in 1980. The corresponding figure for non-urban
blacks was 92,6 per cent (ibid.). Another reason for the low incomes of
blacks ouside the, national states is their generally low level of education.
About 83,9 per cent of them had qualifications lower than Standard 6 fn
1980. The figure was 74,5 per cent in urban areas and 94,4 per cent in
other areas (RSA, 1982b).
CHAPTER 3
REAffIRMATION OF TIlE COMMON lAW FOUNOATIONS OF THE SOUTH AFRICAN PRIVATE
ENTERPRISE ECONOlff
301 EXPLICIT RECOGNITION, AS A MAnER Of BASIC CONSENSUS, OF THE VAlIOITY
OF THE COMMON lAW OF THE REPUBlIC Of SOUTH AfRICA
The thrust of this chapter is to suggest that the first point on the agenda
of the newly ueated Forum for consultation between the Government and black
leaders 'in the Republic should be the reaching of a formal consensus on the
recognition and entrenchment of the bastc norms of the common law of South
Afri ca, as the foundati on of the ri ghts and respons i bi 11 ti es of i ndivi dua is
in the economy of the RepUblic.
"Common law" is understood to mean non-statutory law, the legal norms
developed by society and by the case law of the courts in response to parti-
cular conflicts and other problems requiring a ruling. Rulings which turn
out to be of general practicabil ity become 1aw. Thus the common 1aw of a
community grows "organically" as the character'istics of social life develop.
as associations between individual members of society become increasingly
complicated, as new experiences and new institutions arise. While the civil
law of the Republic is ostensibly dominated by statute laW'. created by Acts
of the fundamental characteristics of our civil hw must be
sought in the basic norms of the common law. Acts of Pad fament governing
civil affairs should not as a rule introduce legal principles which oppose
these basic law norms.
The core of the common law of South Africa is the so-called Roman-Dutch Law -
a system of justice developed in the States of Holland some centuries ago on
the basis of the Roman laws, as a model of wisdom and equity, and the
particular customs of the Netherlands. As such, it became accepted in the
Cape Colony, Natal the Boer republics and Southern Rhodesia. When the four
South African colonies merged into a Union in 1910. Roman-Dutch law continued
to be the basis of the countryi s common law. supplemented and modified over
the year'S by vari ous 1egi s1 atures. Si nce the mi ddl e of the 19th. century
these Roman-Dutch norms were amplified by English jurisprudence,
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particularly in regard to the concept of joint stock companies as legal
entities, instruments of financing commerce, and industrial labour relations.
Over the past two centuries or more, the black communities of South Africa
a1so developed Common 1aws whose ideas di ffered in many respects from the
norms of Roman-Dutch and English jurisprudence. In the case of the Zulu, for
instance, these principles have been codified and given legal force in terms
of the so-called Natal Code. Since large numbers of blaCks are migrating
from social systems governed by such codes. to the cosmopol itan areas of
economic activity" governed by Roman-Dutch and English concepts, a conflict of
law may exist, if not in the formal sense of recognition in the courts,
then in the minds of the newly urbanised migrants who have to adjust to the
rules of the new society.
Seeking prior consensus in the Forum on the recognition of the Republic's
existing common law principles. i.e. before negotiating the extension of
citizenship of the RepUblic to millions of people who came from social
systems in which these principles were not known or recognised. is therefore
by no means a fanciful notion. Moreover, it affords an essential opportunity
for the clarification and reaffirmation of these basic norms. not only for
the benefit of the newly accepted dtizens of the but also of the
present whose notions about these matters are not very articulate,
probably because they have never been strongly and explicitly challenged in a
broad political context.
The question arises on what level of detail such a formal recognition should
take place. Detailed recognition raises the suggestion of codification of
the South Afr; can common 1aw. Many juri sts. fo11 owi n9 the em; nent Chi ef
Justice Wessels. who raised this issue as early as regard codification
as the most advisable way of not only saving a great deal of energy. time and
money in legal procedures, but also of protecting the mature body of common
law against superficial 1nterpretation by barristers who nowadays no longer
read the but rely on superficial primers for guidance. However.
it seems that most juri sts i nc 1udi og most academi cs. bel i eve that codi fi-
cation would seriously undermine the remarkable ability of the South African
civil law to move soundly with changing circumstances in the capable hands of
the judges of the South African supreme court. Be that as it may. for the
purposes of consensus in the Fm"'um" the level of recognition of the commo!'!
law need not be nearly as detailed as would be required by codification,
while it ShOUld be much more articulate than a simple reference to lithe
common law of the countryl'. The instrument of recognition must accordingly
make its impact on the general level of or public rather than
on the level of the interpretation of the details of civfl law by the courts.
For the blacks. the reaffirmation of the basic norms of individual freedom
underlying and permeating the jurisprudence of the common holds the very
great advantage that the Government publicly subjects itself to objective
criteria by which discriminatory laws and regulations in civil affairs can be
identified. Such a document might provide the Magna Carta in civilian
affairs for the removal of such laws and regulations. For the whites the
document could become the basic protection of their legitimate interests as
individuals or groups in civil affairs when. some time in the future. their
political power becomes much less absolute than it has been hitherto.
The precise nature of such a Document of Recognition to be put forward in the
Forum for Negotiation will be a matter for careful considerat1on with respect
to all the fields of interpersonal and intergroup associations 1n South
Africa. In the next section of this chapter a discussion of the common law
basis of only the South African economy is presented. The notions expressed
are by no means ori g1 na 1. They are culi ed from the u!ilversa1 body of po1i-
ti cal philosophy in economic a ffai rs $upporti ve of the market odentated
rather than the centra ny planned economi es < The dlsCUSS t on presented may
provide some of the material for the drafting of a Document of Recognition.
In the final section of this chapter further thoughts or. meaningful methods
of entrenchment will be put forward. The aim is to prevent the erosion of
the foundation-s over time. both by temporary political majorities in future
governments and by hostile prejudices in future public administrations.
3.2 THE PHILOSOPHICAl fOUNDATION OF THE SOUTH AFRICAN PRIVATE ENTERPRISE
ECONOMY
We speak of the economy of the Republic of South Africa as basically a
private and competitive enterprise system. We refer- officially to the
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Umarket orientated policies" of the present Government. These and other re-
lated descriptions of the way economic behaViour in our society is conducted
also serve to juxtapose our system with centrally planned socialist systems -
to which there is widespread opposition among the present citizens of the Re-
pUblic. Why is it so fundamentally important that the character of this eco-
nomic system does not change radically towards a centrally planned socialist
democracy? And in what way is the basic character of our present system be-
ing preserved by the fundamental norms of our common law? Before we proceed
to state our case on these two points
s
it is necessary to call attention to a
grave mi sundel"'standi 1'19 wni chs if not cl eared up properly. wi 11 prevent a
meaningful debate with blacks about the preservation of the foundations of
the market economy.
3.2.1 THE PRIOR REMOVAL OF AMISUNDERSTANDING
While most white citizens of the oppose socialism. there is among
the prospecti ve black cHi zens of the Republi c on the contrary. wi despread
suspicion of. and opposition to the prevailing economic system in South
Africa. This antagonism is lending itsel f to vaguely articulated but
strongly held support for socialism as if that political philosophy is the
necessary alternative to the kind of game rules of economic behaviour blacks
currently have to face in South Africab Socialism is thus seen by many
blacks as the true harbinger of economic security. freedom and prosperity.
Had these antagonistic conceptions among blacks been wen founded. their
entry into the political processes of the RepUblic would unleash a straight
forward and politically destructive battle between the ideologies of indivi-
dualism versus socialism. reinforced by all the traditional social cleavages
between the new entrants and the rest. This basic conflict would have made
black participation in the politics of the Republic a practical impossibili-
ty.
However it is obvious that what blacks in the South African economy ex-
perience as "the rules of the game
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is the antithesis of a free. private
enterprise economy! There is no need to substantiate this point by a list
of the almost innumerable restrictions on their economic freedom in South
Africa. It is, however. not sufficiently recognised that these restrictions
do not arise from the principles of the market economy but frQm the complete-
ly different ideology of flstatutorily enforced separate development", deroga-
torily referred to as "Apartheid" 0
The explicit identification of the true and pure principles of the market
orientated, competitive economy will enable blacks to base their case for the
removal of statutory discrimination on these principles rather than on those
of socialismo It seems to be vitany important to chrHy the political
climate on this leve]. to remove the grave misunderstanding among most
blacks about what the two opposing ideologies of the market economy versus
socialism stand for and to make it clear that neither in any way supports the
ideologies of statutorily enforced separate Only then will it
be at all possible to proped}' addl"ess the real lssue. namely the preferabi-
lity of the decentralized market economy over centrally plannea socialism as
a system of regulation of people
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s economic behaviour.
3.2.2 RETURNING TO THE REAL ISSUE
Why is it so fundamentally important that the character of this private
enterpri se market economy of South Africa. havi 09 rid 1tseif of di scrHni-
nation against b]acKs
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does not change radically towards a centrally planned
socialist democracy?
The short answer to this question is that central economic planning fn South
Africa win not worL The ldea might have worked badlY in a fairly homo-
geneous cOlmmnity of Whites. but it will not work at all ll'i ill heterogeneous
community of all South Africans. Serious attempts at centl"i;'d planning of
the production and distribution of income in South Afdc,ffi would produce
disasterous results. as 1t has patently done in so many other African com-
munities. Even the ex]sting degree of Government intervention and partici-
pation in the South African economy has become highly
However. there 1s 1Htl e in the bas f c macro-economic laws of productivity,
stability, growth and distribution that necessarily favours the market system
over the centrally phnned system. The laws of lloptimum allocation of pro-
ductive resources
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of specialisation according to least comparative costs.
the laws of rapid growth on the basis of savings and capHal accumulation.
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and the mi ni mi si rig of the costs of 'l gnorance. ul'lcertai nty and ri sk all appi y
in both systems with equal The superiority of the market economy
over the centrally planned economy does not lie in these laws, but in the
philosophical outlook and jurisprUdential approach which prevail in the com-
munity and which give rise to the former rather than the latter economic
system. It is. accordingly. fundamentally important to us that the market
economy system be preserved in the Republic of South Africa, but not because
it serves superior economic laws of production and income distribution.
Centra11 y planned systems must perforce serve the same economic 1aws. But
they serve them badly. The market economy is the product of human nature
and the politico-economic system patronising the market economy is based on a
more realistic and consequently superior understanding of human nature. The
superiority of the market system in the production of income stems from this
basic realism about human nature; the competitive processes of the market are
better able than the bureaucratic processes of central planning to minimise
the cost of faOings of human beings while maximising the value of their
excellence.
The perceptlofl of human nature implled in market orientated political con-
stitutions is that of individuals who tend to pursue their own objectives in
the light of their OWl! knowledge and to the best of their own abilities.
Market orientated constitutions leave people basically free to do so, subject
only to the maxim that the limits to one man's freedom is the recognition of
that of another. What is basically recognised in this perception is the
essential subjectivlty of people's interests and the inevitable limits to any
individual's knowledge about the complex details of the whole of
from this perception arose a theory of society as one in which people become
spontaneously bound together in voluntary associations such as trade and
industry. each participant serving his own but all in fact contributing
to the improvement of the performance of society as a who]e. This theory
accounts for most of the order which we find in human affairs as the unfore-
seen spontaneous results of individuai actions. The style of government
policy inspired by this view is. accordingly, also that of limited inter-
vention with the operation of these spontaneous processes.
That the market economy copes with social pluralism in a way centrally plan-
ned systems cannot possibly emuiate. 1s obviously doubly important in the Re-
pub1i c of South Africa where the heterogeneity of the vari QUS popul ati on
groups is the outstanding characteristic of the country.
These philosophical foundations of our economic system find practical expres-
sion in the system of civil law. The exceptional power of the law to
restrain and guide the behaviour of people in society derives from the fact
that the 1aw is the set of behavi ol/ral rul es acknowledged by the soverei 911
and enforced by i L That is why the fi rst act in the search for consensus
with black leaders about black participation in the Government of the Repu-
blic must be a Declaration of Recognition of the basic principles of South
African common
3.3 l1It ECONOMICALLY SIGNIFICANT COMMON LAW rOUIIDATIONS Of 50Ull1 IIFRICAN
CIVIL LAW
1t 1S important that these essentials be so drafted that the Document could
become an integra.] part of the Declaration. What is offered here must be
seen as no more than an illustration of what we have in mind,
3.3,1 THE STATUS OF THE INDIVIOUAL: EQUALITY BEFORE THE LAW
The essential character of the common law of the Republic is its emphasis on
the legal status of the individual as a person. as an owner of both material
and property. and as a party to binding contracts and other volun-
tary agreements giving rise to rights and These common law
nm"l1!S constitute the "Bill of Rights'l of personal freedom in South Africa.
The common law 10 South Africa protects the fundamental right of the indivi-
dual to exist (the I1right to life
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) and to acquire other rights. It
detennines his competence to ent-er into obligations and to defend his rights
in a court of law. It is the touchstone of his status as a citizen of the
state. The citizenship issue begins at this point. The basic principle is
that such competences rest on the degree of responsibility that can be
expected of individuals. minors can acquire but cannot enter
into certain obligations.
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According to "Friedrich van Hayek. a famous philosopher of the idea of
liberty as developed in European cultural history. Hliberty and responsibi-
lity are inseparable" {Hayek. 1972. p. 71J, and the greater part of the moral
philosophy, as well as the jurisprudence in this field of rights, is concern-
ed with the nature of individual responsibility, rather than with freedom as
such. In this connection, the importance is stressed of a proper general
education for every person, before he seeks industrial or professional train-
ing in a specific occupation. This primary emphasis on the individual does
not. however, exclude the legal recognition of collective entities such as
the family, joint-stock companies in trade and industryj municipalities, etc.
Common law regards the family as a special social unit under the authority of
the paternal and marital powers of the husband as head of the family. His
wife and children are placed in a subordinate position. respectively. with
regard to matters affecting the interests of the common household. and, as
far as hi s mi nor chil dren are concerned j even thei r parti cul ar interests.
Provisions exist to take care of cases in which the male head of the family
is deceased or not in a position to exercise his functions. The family as fA
soda1 unit is. however confi ned to the narrow defi niti on of husband and
wife and their children. No special rights, obligations or other ]egally
recognized ties exist outside this narrowly defined unit. The rights and
obligations between husband and wife as such also emerge from the idea of a
special type of contract between them. which can be dissolved only under
prescribed conditions.
3.3\2 PRIVATE PROPERTY AND THE RIGHT OF CONTRACT: FREEDOM OF OPPORTUNITY
The character of the law pertaining to private ownership in the South-African
conmon law was established in Roman times and it came down to present times
with its essentfals relatively unscathed. In principle. the owner of a
thing, whether immovable (such as land). movable (such as a book). or immate-
rial (such as a man's reputation). may treat such a thing as he likes - pro-
vided his actions do not unduly constrain or interfere with other rights in
that thing or in other related things possessed by other people, While
ownership is the most important recognized right in things. there are also
other rights. such as the right of succession. the right of servitude and the
right of pledge or mortgage.
Next to these fights in things, the common law of South Africa recognizes $0-
ca n ea persona'i ri ghts from woi ch personal 1i abi 1iti es or ob1i gat; ons a150
necessarily arise, The more general and economically most important per-
sonal rights and obligations are those arising from transactions given the
force of law in the form of contracts. All such contracts derive their
validity from the mutual and free consent of the contracting parties, and
contracts may be declared invalid if certain requirements pertaining to such
free consent havE not been met. Persona1 obligati ons are cl early di sti n-
gUlshed from punishments resulting from the rules of the criminal law as
such.
These legal ideas of personal rights of ownership and personal contractual
claims {assetsl. made possible the "tremendous upsurge of material output and
income generation by means of private enterprise. mobility of people between
occupati cns, i ndustri es and i ndustri al regi ons that characteri sed the 1He of
European cummunHi es over the past tWQ centuri es. and ! He in South Aft', ca
since the beginning of the present century. This system of impersonal law
not only provided the necessary assurance to the enterprising person that his
personal claims to the values created by his initiative and husbandry wll be
protected by the state in terms of the law. but also allowed the private ac-
cumulation and mobilization of the material resources that were so important
to the financing of the capital-intensive production functions of the modern
technological age. Thus. the joint-stock company and the laws of property
and contract became the main instruments of rapid economic growth at compound
rates of expansion.
The recognition of personal property rights is also regarded by philosophers
of civilization as an essential element of freedom in general. The
famous anthropol ogi st. Mali nowsk i, ma i nta i ned that 11 the roots of property as
a legal principle which determines the physical relationships between man and
his environmental setting, natural and artificial, are the very prerequisites
of any ordered action in the cultural sense" (Malinowski. po 132-3 as
quoted by Hayek, 1972, p, 140),
The important idea in thi s connection is not that every si ng1 e. competent
member of society must own property to support the principle of freedom.
Hayek shows that what is important is that everyone has Cl right to own
property and that the ownership of property is sufficiently dispersed to en-
sure that "the individual is flot dependent upon particular persons to trade
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or to seek employmento Freedom requires a competitive situation. In tUfll
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the system of competitive trade (including the selling of skills or labour),
requires the legal framework of the law of contracts. The whole network of
rights created by contracts is as important a part of Our protected sphere .
as any property of our own
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(Hayek, 1972. p. 141).
The fact is that in the course of this century the legislature has interfered
considerably with the freedom of persons to enter into contracts. This
interference has been politically justified on various grounds such as the
protection of the interests of sections of the community who are particularly
vulnerable to exploitation. Whatever the merits Of demerits of these in-
roads into the freedom of contract may be. blacks will be able to chanenge
the validity of regulations'preventing the operation of the informal business
sector and even the practice of influx control through the invalidation of
employment contracts involving persons from non-scheduled areas.
3.3.3 LEGAL CULPABILITY Of THE INDIVIDUAl
The idea of indivfdual responsibility and of rights and obligations anslng
from it extends to obligations arising from wrongful acts by persons which
harm the interests of other members of the cOITmunity. Various remedies in-
volving appropriate compensation to the persons who sustained the losses are
proVided in the Law of Oelicts. which extends beyond civil law to include
damages from violations of criminal law as
The public attitude towards the working of the social public approval
or disapproval of the manner in which the order determines the relative
position of different is closely tied up with the pUblic's views
about responsibility. When men are allowed to act as they see fit. they
must also be held respons.ible for the results of their actions. In so far
as these ideas have also been incorporated into the criminal law, clear tests
are required to decide when a person's actions make him liable to punishment
and create an obligation. Thus every crime presupposes the existence of a
law. If none a crime is out of the question (Juta. 1920. p. 104).
3.3,4 THE RECOGNITI0N Of COLLECTIVE BOOIES AS LEGAL PERSONS
"A principal contention in this submission is that the COllIDlon law of South
Africa, having been recognised by the sovereign, also cOfistrains the sove-
reign from interfering with the rights of the individual under this common
Jaw. That South African parliaments have in the past often broken this Rule
of Law is true, but that is one of the main reasons why this Question of the
formal entrenchment of true rules should be addressed. In general. however,
it is still the case in South Africa that the government does not have the
right to interfere arbitrarily with the individual in the management of his
own affairs. With regard to his UinternalUaffairs. e.g. his own property
{and in a family context with regard to his wards) he is an autonomous,
quasi soverei gn entity. Wi th regard to hi s extet'nal re1at; OOS he is pro-
tected as well as constrained by the legal system.
This protection by the rule of law also extends to groups of individuals who
constitute themselves into bodies recognised as legal persons in terms of the
provisions of the legal system. Perhaps the most commonly known example is
the joint stock company with l1m1ted liability. The Companies Act, No 61 of
1973, is an enabling charter for the creation of companies as legal persons.
but once a company exlsts. it can c1aim the same protection against inter-
ference by government under the Rule of law as any natural person.
The legitimacy of collections of individuals acting as a body with limited
liability of each participant, was one of the major contributions of English
practice to the South African civil law. Designated as persons 'I
these "corporations" (the American term) or joint-stock ltcompanies" (the
South African term1 have competences in respect of the ownership of property
and the making of similar to those pertaining to individuals.
This institution of the joint_stock company was a necessary condition for the
mobilisation of capital {from individual savings) required by the. technologi-
cal revolution of production functions in the 19th and 20th century. It
would have been virtually impossible for individuals as such for example.
develop the sugar-milling industry or the mining industry without the instru-
ment of the joint-stock company.
What is basically important about the legal personality of the incorporated
company is that it retains the fundamental motives (profit maximization).
principles (calculation of profit possibilities). and competences (ownership
of property and freedom of contract) of the individual in the economic
system. Its economic power in the form of assets may, of course. be much
greatero It is probably true to say that. outside the dominant
personality in the making of economic decisions is the incorporated company.
The common law also recognized other, non-profit-seeking legal persons, such
as incorporated social clubs and even ecclesiastic and clvic authorities en-
trusted with the provision of community services. In the latter case, how-
ever, the right to impose taxes had to be obtained from the soverei9n {often
by special charter). In principle, these public-service authorities may be
said to be legal persons whose status and functions arose basically from the
social and economic system and the common law. rather than from the rights
and responsibilities of the sovereign.
Another major exampl e of a suo-system of conecti ve bodi es. with internal
autonomy and external status in law, whose right to exist and to function has
had to be recognised by the sovereign. are the trade unions and the in-
dustrial conciliation councils. on which trade unions are represented. In
terms of the Labour Relations Act. No 28 of 1956. an industrial 1s an
autonomous body, with 1ega1 status externaHy. i. e. towards the rest of so-
ciety, and with autonomous powers internally. i.e. over those matters about
which agreements were reached between its members, the representatives of the
workers and; the employers 1n the industria! sector or the occupation concern-
ed. It is a notable feature of this system that the government has no right
to interfere with the process of collective bargaining conducted under the
auspices of an industrial council 0 This system of industrial councils which
has worked so well in the maintenance of industrial peace in South Africa. is
a good example of the political philosophy of roots autonomya. The
contention of chapter 5 is indeed that this philosophy can be further extend-
ed into the public sector. particularly on the level of the fonnation and
functioning of ioca] authorities.
3.4 EIITRENCHMEIIT OF THE fUNOAMENTIIl COIfilN lAW NORMS
3.4.1 INTRODUCTION
It is submitted that the fundamental common law norms referred to in the
previous section should not only be recognised by all parties to the process
of political reform in the Republic. but that they should also be so
entrenched in the constitutional character of the Republ ic that they cannot
be rejected or eroded by future governments without substantial consensus of
the population groups who originally reached consensus on recognition.
There appear to be several ways of going about this.
The danger of a total or categorical rejection of these fundamentals of the
South Afrtcan economic system by temporary, simple majorities in any future
parliament of the Republic is obviously not very real under the present con-
stitution of the Republic. The extent of the may. however, have to
be reconsidered once the terms of black participation in politics are clear.
This is so simply because 'It will take some time before the majority of
blacks come to firmly embrace the private and competitive enterprise economy
as the natural expression also of their ideas of human dignity, etc. Should
the forces of national and international politics in the meantime bring about
the kind of constitutional changes that allow unlimited. simple majoritarian
Government of South Africa. these foundations of the private enterprise eco-
nomy will obviously be exposed to rejection. Under these circumstances it
would be highly desirable for those inhabitants of the Republ le who continue
to value these foundations to be able to fan back on the protection of a
specific clause or clauses in the constitution that explicitly prevent
Government from acting in ways which deny the validity of these foundations.
3.4.2 PROCEDURES OF ENTRENCHMENT
The most obvious constitutional procedure would be to expand the present
references in the preamble to the constitution of the RSA to include specific
references to these fundamental norms of the common law. However, although
such preamble has a certain political it has no decisive legal signi-
ficance. since it plays no role in the interpretation and application of the
To acquire such direct constitutional meaning these
principles would have to be taken up as specific articles of the constitution
itself. Such articles could be seen as a "Bill of Rights" and could be
entrenched, e.9. by the two-th 1rds majority procedure at present app11 cabl e
to the official languages of the Republic (articles 89 a.nd 99(2}). To give
proper effect to these intentlons to entrench these common law it will
probably al so be necessary to expressly entrench the independence of the
judiciary and the principle of equality before the
Another passibil ity is to entrench these pri nci ples in important economi c and

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social legislation. In tllis connection, a precedent exists in the Act on a
National Policy for General Educational Matters. No 76 of 1984. Article
2{l)(d} of this Act lays down eleven policy principles that has to be follow-
ed by the Minister in administering the rest of the Act. Such a framework
of policy principles is of great significance in terms of administrative law,
and will greatly support the legitimacy of the future administration of edu-
cation in the Republ ie. This procedure can be expanded to introduce the
common law principles into the most important pieces of legislation dealing
with economic and social affairs. Entrenchment can be effected by the
express stipulation that such principles can only be changed or removed from
the acts by all three houses of Parliament.
Entrenchment of common law principles in particular pieces of legislation may
be accompanied by the expansion of judicial control. It may at this stage
not be feasible to provide the courts with a general control competence, but
it seems quite imaginable that the courts could be given such competence with
regard to specifiC important pieces of legislation in the economic and social
fields. This competence might extend not only to the revision of admini-
strative actions in terms of the acts concerned, but also to the validity of
subsequent amendments. should such amendments impinge upon or negate the
common law prlncfples. South African constitutional law already recognises
the principle of judicial control of legislation in the case of the entrench-
ed language rights.
3.4.3 BEYOND FORMAL ENTRENCHMENT
Whether such a procedure provides any real protection in practice is a moot
point. with Illost competent commentators on the side of scepticism. Under
circumstances in which a hostile parliamentary majority moves towards a total
confli et with the entrenched values protecti ng the pol iticany powerl ess
these values have little chance of being upheld. The most the de-
prived minority could make of the situation is to have it declared a "revolu-
tion against the state" but since the revolution would be perpetrated by the
majority. backed by the military and administrative powers of their- govern-
ment, the "revolution" will most probably simply be condoned by international
opinion.
The chances that those values of individual freedom! property and contractual
CHAPTER ..
rights may be upheld by the bhck citizens of t11 future Republ'ic of South
Africa will be considerably enhanced if this Republic could rest on federal
constitutional foundations. The "federal option" for South Africa at the
level of the national and the principle of the separation of
political power and suvereignty, will be dealt with in chapter 6.
I!
4.1 INTRODUCTiON
TIlE 'KlNETARY AND FiSCAl ORDER
Even under a federal constitution, given the economic, social and political
rea1i ti es of South Afri ca, as they probably wi 11 rema 1n over the next decade
or two, entrenchment of the common law foundations of the economy will
probably not suffice. To reliably protect these foundations against catego-
rical rejection by hostile political majorities, even in the context of fede-
ral political and administrative structures, a much more sophisticated pro-
JlTammr.. not only of legal reform, but also of educational enlightenment and
economic assistance will be required.
It was argued in chapter 1 that the most rigorous constitutional protection
of individual property and contractual rights in an economy of private enter-
pri se can be nu 11 i fied by hyperi nfl ation or coofi scatory taxati on. These
disasters have, in fact, befallen quite a few private enterprise economies in
whi ch po1i ti ca1 power fell into the hands of parties wl th engrandi sed pro-
gramnes of welfarism through government action rather than individual effort.
In fact, South Africa itself has in recent years begun to experience the ero-
si on of i odi vidua1 security of property and contract values through i nfl ati on
and high taxation. Thus even without the added consideration of an impend-
ing political reform which is bound to introduce more pressure for government
expenditure of the country1s resources, it has become necessary for South
Africans to consider the recognition and entrenchment of the basic principles
governi ng the ma i ntenance of sound currency practi ces and theavoi dance of
excessive taxation in this country.
As was done in the previous chapter with reference to the principles of per-
sonal freedom opportunities and responsibility, our treatment of the prin-
ciples of sound currency and legitimate taxation win be mainly "notional".
No attempt will be made at a comprehensive treatment of the substance of
these two matters. The main argument at this stage is again the need for a
formal recognition by the negotiating parties of the fundamental importance
of adherence to certain broad principles of the existing order by the new
institutions of the Republ ic. (It bears repetition to add that such a demand
for adherence has become necessary in any case, i.eo whether political reform
takes place or not).
4.2 THE CURRENCY RULE
Of the many faces'of inflation. the most alarming is the decline;n the pur-
chasing power of the rand as a standard of value and a store of wealth. Even
more alarming than the actual decline in its value is the public's expect-
ations of further declines, and collapse of pUblic trust in the currency.
When such a "flight from tIle ta.k\:?s phce, it is tantamount to a
lOSS of confidence in the polit'ieal order generally.
litany causes of such a disaster may be put forward, but as a general rule such
a state of affairs can only arise In the wake of a very large oversupply of
money by the banking system on the basis of cash reserves supplled to them by
the Central Bank, directly or through covering the budget def'icits of the
State TreasufY. The reason for such bUdget deficits is clear: the unwilling-
ness of the government to confront the public with the cost of its expendi-
. ture programmes. The reasons for direct central bank credit to the banking
system are less obvious, but they are fond equally political in nature,
namely the desire to avoid confronting the public expli.citly with the costs
(higher interest rates) of political failures (or other extraneous mishaps
like droughts and international conditions for which the government allows
itself to be held r-Bsponsible by the public.
Before the establishment of central banks and tile abolition of the gold
standard of value for national currencies, governments could not create
,Honey on a scale which l''/Ou1d set<iously undermine the stahility of the cunen-
cy as the national standard of value. It is indeed worth noting that the
primary cause for the intl'oduction of formal centra'! banking, mostly in th"is
century. was not a need to maintaln or restore the people' strt/st in the
natioJHI currency as the common standard of value, but, on the contrary, to
protect the publ le against unsound practices of private banks, in which the
public could lose their money. As far as trust in the value of the currency
is concerned, the central bankf> of most countries unfortunately later on
became lJart of the problem r'(l'ther tha.n the solution.
The main reason for this faillwe of central banks to protect their national
currencies against publtc mistrust is the fact that the objective discipline
of the gold standard was replaced by the subjective "disciplines" of politi-
cal control. Under the international gold standard, countries ..,hich created
too much domestic money simply lost their gold reserves to their trading
partners. The fundliiTlenta I di sci P1i ne therefore 1ay in compet i ti on between
countries in sound monetary policy practices. l11111e the so-called Bretton
Hoods system of international agreement on exchange rate management -lasted
11946-1972), this political control at least contained the discipline of
international political commitment. Since the breakdown of that system,
national .urrencies have become completely subject to the policies of the
national governments, whether good or bad.
The major exceptions to this statement are the currencies of those countries
whose consti tutf ons all Oh' thei r central banks to ma i nta i n complete. i
pendence from the government of the cta
z
. !he most important cases are the
Bundesbank in the Federal Republ ie of West Germany and the Federal Resel've
System in the United States of America. It should be noted that the politi-
cal structures of both these countries are feder'ally constituted, with
Gular mphasis on the decentralisation of pOlltical po\>!ertowards the people
and the separation of powers in the central government. The principle of
central bank independence 1s dearly in close harmony with these federalist
doctri nes.
However, as was argued in previous chapters. pr'otection of minorities against
po"li tieal domi nati on cannot depend upon structures <11 one. The most
important condi ti on "I s the recogn 1ti on by the general pub11 c of has i c
principles of constraint on the freedom of action of pol Hieal institutions,
In the absence of such generally accepted pr-inC"iples. independence of the
central bank is no guarantee against persistent pol Hieal pressure to usurp
the currency as an easy pol Hieal escape for the government from economic
1iti es.
For reasons such as these, anti-socialist economists have al'gued in favour of
the introduction of a monetary rule into the constitution of the state. Tfle
essent"Ja,l object of such a rule would be to prevent the authorities from
expanding the domestic money supply, or its cash base, at a faster rate than
the real economic growth rate of the economy. This particular version of Q
currency rule is put forward by the so-called "monetarist" school of thought
in economics. The genera1 idea is, of course, to re-i ntroduce a workab1e
objective constraint upon the power of governn1cnts to increase the Quantity
of money in circulation similar to the automatic constraint imposed by the
gold standard before it was abolished"
The possiblities of proposing the monetarist "money rule" for general accept-
ance in South Africa was discussed and rejected by the Commission of Inquiry
into the Monetary System iInd i'1onetiiry POlicy in South Africa. The reasons
for the rejection -were. however, related to matters of local banking
structure rathE::'r than principle.
the mere
the law
30
An alternative approach to the matter may be to fa) include in the consti-
tution of the Republic an entrenched clause binding governments to "maintain
monetary stability" at all times, tb) to include into the charter of the
Bank a clause instructing the Bank to regulate the money surly to
this end, and {cl to provide the Bank with effective powers to carry out its
functions without interference from the political executive of the day.
Since the money supply is the most important operational variable in the pur-
suance of monetary stability, the discipline on the central bank will be pro-
vided by pUblic debate. led by economic opinion makers in the media and
elsewhere, on the efficiency with which the central bank is pursuing monetary
stabil ity through its control over the money supply.
This approach is unfortunately somewhilt more complicated or sophisticated
than a straight forward monetary rule as the monetarists propose. but a
number of structural characteri stics of the South Afrlcan econol11.Y might
demand something of that nature.
It is. of course, not necessary for the steering corrmittee of the Forum for
Negotiation to resolve this matter in substance. The primary issue is to
gain consensus among tile negotiating parties, as a precondition to proceed
with the reform process that the integrity of the national currency as a
means of payment. a standard of value and a store of wealth win be safe-
guarded by suitable means as the process of reform progresses. {One of the
most rewarding side-effects of such further study and deliberation on the
most suitable means of giving effect to the basic point of departure might
wen be the insights gained by the negotiating parties into the working of
the South Afri can economy and its monetary mechani sms. )
4.3 THE TAX RULE
The other major threat to the economic survival of minorities under a politi-
cal dispensation which places no constraints on the freedom of government. is
that of confiscatory levels of taxation. As in the case of the money
the classical discipline over governments in their tax practices was
contained in the competition between Ta.x lords for tax paying subjects and
objects as well as their comprehension that overtaxing their subjects or
objects of trade in domain could become counterprQductive. A
princ'\p1e of vertical i.e. how much tax a subject could legltlmately
be expected to pay over to his government never really developed in the poli-
tical experience of western civilisation from which the tax philosophy preva-
lent 1n South Africa derlved. the principle of consent and repre-
Th,"s principle was at the centre of the constitutional
sentat10n arose. .
history of Britain. as well as other major states like France and the Unlted
States,
The principles of competition, income elasticity and consent. were, however,
increasingly watered down with the rise of nationalism in the 17th century
and parti cul ad y its Y'e-emergence in the form of economic nat; ona1i srn and
1 1
. i the 20th century Indirect representation in the central
centra p anmng n " 0
government together with the party system greatly weakened the orestra'li1W
9
influence of ordinary members of parl1ament on the propens1ty of the
executive to increase the burden of taxationo
h fl t
< of the size of government
The burden of taxation is au fond t e re ec lOO
expenditure and consequently of the functions the. assumes . 1
this respect the representatives 10 the natlOoa'l par!FI.!1en",
have throughout the 20th century almost completely lost the competence. to
control the tax burden by means of withholding their consent to the expanslo
n
of government expenditures.
This relentless increase in the tax burden through the expansion of
ment expenditures in most western democracies is largely a function of _
weakening status of parliaments vis-a-vis their executives. Moreover. thlS
constant devaluation of the role of the law making sector of government and
the upgrading of the executiv is. in turn a reflection of the growth of the
doctrine of central economic management. When the pUbl le sees the processes
of government in essentially deistic terms with one seat of power
a single hierarchical administrative system, the status of an 1nstltut10l
L
"th' the orbit of this leviathan takes on the appearance of
and persons Wl 1 n ,
" "As the cenual government assomes more and more
mean1 ngl ess anacromsms.
functlons in society which require ceaseless management rather than
laying down of basic rules of private parlhment. as
maker. itself becomes relatively toothless.
CHAPTER 5

lOCAL AUTHORITIES
In section 5.1 the baslc approach as set out in chapters I and 3 ls applied
to the status and functlons of loc.l authorities. In section 5.2 present
systems of local government in the Repobl ie of South Afric, are described
with special reference to the respects in which it corresponds to and differs
from the principles set out in section 5.1. The process of moving from the
existing to the proposed system of local authorities - the process of true
devolution of political power _ is treated in section 5.3. local authority
finance and the probiem of development ,id 10 a devoluted system of local
is discussed in sections 5.4 abnd 5.5 respectively.
5.1 TIlE EMIt APPROACH APPlIED TO THE STAllJS ANO fUNCTIONS OF lOCAL
AUTHORITIES
[This section stresses the fact that the rationale for the existenCe of local
authorities is the production of collective goodS, i.e. goodS and services
that people want but which the private sector of the economy will not produce
due to their characteristics le.g. street lightS). Consequently, 10c.l
authorlties may be regarded as logical extentlons of the market System prin-
ciples the publ]c sectoro
5.1.1 LOCAL AUTHORITIES AS EXTENSIONS OF THE MARKET SYSTEM
As stated previouslY, this and the following chapter explains how those norms
of the common law of South Africa that are basic to the market economy can be
extended into the field of politlcal institutions and public law. This en-
talls the grafting of new normS onto the exlstin9 political institutions and
public law, to the extent that they do not suffice to establish a political
system in which full citizenship of the Republic can be extended to blacks.
The suggested appr h oac to the introduction 0&
to increase the tax burden is 0 I I constraints on the government
.. once agaln two fold 1
a baslc principle, namely that of .' name Y. (a) the revival of
eve opnent of an instit t' ] P . sentatlon, and {b) the
i U lona structure that 1
pr nciple, namely that of feder 1." wou d best sprve that
lscussed in Chapter 51 and th . 0 ocal government (as
6) e centra1 government (as d" . lscussed in Chapter
Federalism is f , 0 course, no impenetrable sh" "
as taxpayers in federations s h leld agalnst excessive taxation
h uc as Germany Ca d '
aye experienced. Even" th ' na a and the United States
i 1n ese countri es stro i
n favour of the introduction . t ng VD ces have been raissed
1 " 10 0 the constitution f
ru e that would constitutionall ] 0 a so-called ufiscal
t" y imlt the level of t "
ra 10 of, for example the . axatlon to a particular
1
' gross domestic produ t
po nted out that unl ike the co c. It must however be
d mmon law norms of
an respons i bi 1i ty and the t persona i freedom. opportunity
mane ary norm of real l' .
means of payment. the social d lmlts to the creation of
W or er of South Afr" .
estern civllisation know no th "" lca and lts integrals in
th 0 er pnnclple of co t '
at of consent and representati "llS ralnt on taxation than
1ft" 1 . onQ The lntroduct"
l$ca ruleR, whatever Hs economf. . 1011 of a quantftative
P
oUt" " c merits would ha t
lea1 wnovation in th t' .,. ve 0 be regarded as a
e radltions of the South Afr,'can order.
Once again it . 1S not necessary t
way in which the to. 0 reach agreement on the particulars f
ax prlnclple is ent 0 the
COl1stltutional negotiation _ renched as a preconc!.ltion to further
a broad norm and a suppo t" e:
9
Q such a quantitative rules or by means of
. r lng iostltutional str t
agaln to gain consensus among the uc ure. The primary issue is
entrenchment of some const . t negotiatlng. parties about the need for the
raln as a precondit"
the road of pol it1cal reform. lon to proceed further along
Extracts of the main points made in the chapter are as fOllows:]
The norms of private property ownershi p and freedom of indivi dua1 deci s i on
making on the allocation of production factors, embodied in South African
common are the cornerstones ef the free market economy. A free market
can provide packageable goods and services most efficiently. Some goods and
services, however, cannot be packaged and sold to particular individuals to
the exclusion of others. Such goods are commonly referred to as public or
collective goods.*
The fact that public goods are not packageable {or marketable} require their
provi si on by some kind of authority with coercive powers. Such coerci ye
powers are needed to force people receiving benefits from pubi le goods to
help pay for the provision of the goods. They are discussed more
extensively in subsection 5.1.2.
Whi 1e many pUblie goods cannot be packaged and sol d to i ndivi dua1 persons
households or finns. the benefits from their provision are limited to a group
of persons consisting of a much smaller number than the all people in the
country. The benefits might accrue ma f oly to the res i dents of a town or
city. A local authority with coercive powers 1imHed to the boundaries of
the town or city would be quite competent to provide the public goods con-
cerned.
Once established. local authorities take part in market transactions just
like households and firms. A system of local authorities is an extension of
the market system. A local authority has coercive power over its constitu-
ents, but so does the head of an household and the management of a firm.
The coercive powers of household heads and firm managements have their origin
1n voluntary contracts which are enforced by the law. People can therefore
leave households and firms should they become dissatisfied with the way.the
household head or firm management treats them4 The same principle applies
to local authorities. By taking up residence or buying property in the area
of juri sdi ction of a 1oca1 authority, a person subjects itself to the
coercive power of the local authority, just as a person taking a job with a
firm subjects him- or herself to the coercive power of the management. Both
actions are the result of voluntary decisions on the part of the person join-
ing the group. In both cases the coercive power of the managing body are
* Other classes of goods (externalities and common pool resources) have Slml-
lar characteristics and create similar problems. See for instance Sish,
1983, p. 22-7,32-3.
limited by In both cases the managing body becomes obliged by law to
treat the person joining the group in certain ways. And in both cases the
latter person can leave the group. local autnor1ties can thus be regarded
as firms in a municipal services industry.
5.1.2. AN ENA8LING ACT FOR THE ESTABLISHMENT OF LOCAL AUTHORITIES
Given the above, local authorities could function in terms of the principles
of South African common law. as set out in the previous chapter. They could
be established by groups of interested persons in much the same way as compa-
nies or industrial councils are established.
As was mentioned in Chapter 3 (section 3.304) the Companies Act, No 61 of
1973 and the Labour Relations Act. No 28 of 1956 state which persons are
allowed to create companies or industrial councils, under which circumstances
they can do so and what procedure should be followed in order to obtillin
juristic standing for the entity being estabiishedo The Companies Act also
states for what purposes companies can be formed, to what formal requirements
the name and statutes must conform and what kinds of companies may be formed.
and contains vari ous other requ1 rements to prevent damage to UrJ-- or mi s-
informed shareholders or other parties dealing with the company. In other
a company or industrial council can be formed by any group of persons
confonning to a set of objective requirements that may be tested in a court
of law. No Qi"scretion to allow or not to anow the establishment of a com-
pany or council conforming to the objective requirements is
afforded a minister or other government Furthermore. the group of
persons forming a company decide themselves who the directors w111 be. what
line of business they win undertake. what internal rules they will follow
and what transactions they w'lll enter into with other parties. Umited only
by general rules of the ]aw and the powers afforded the company in terms of
the reievant act and its own statute.
As in the case of companies and industrial councils. there is no need to have
different systems of local authorities for different race groups. In keep-
ing with the basic approach in this memorandum. uniform rights to establ ish
local governments can be extended to an persons. irrespective of race.
This can be done by promulgating an enabling act comparable to the Companies
Act. This act should lay down uniform and objective rules or criteria for.
the establishment and operation of a local authorlty by any group of persons
(i.e. whites, coloureds. Asians and/or blacKs). It should contain a list of
possible forms and a list of obligatory and optional functions from which a
statute or constitution for a parttcular local authority (including composite
local authorities such as regional services councils) may be compiled by the
persons establishing the local authority. not by some higher authority*. The
procedure to be followed and the minimum requirements to which the statute
must conform, win naturally have to be set out in the enabling act. Such
an act will also have to provide for a register of local authorities serving
as proof of the existence and legal status of the local authority, as in the
case of companies, co-operatives. financial and other legal
persons.
The operation of a local authority however, differ from the operation
of a business in one important respect. All people in the geographical area
of jurisdiction of the local authority will receive benefits from the autho-
rHy B s acti ons. If thei r contrl buti ons to the cost of these acti ons are
completely voiuntary in the same sense that no individual can be compelled by
a company to become a shareholder or a client of that company, many people
will elect to be "free-riders".
Ways and means to compel an residents or property owners in the area of
jurisdiction of a local authority to contribute to the costs of its
is obviously needed, as is the case in the existing system.
These procedural ideas are not new or foreign. to democratic societies. In
the USA the procedure for establishing a local authority follows these lines
almost exactly. The existing procedures for establishing local authorities
in South Africa are often very similar, as set out in section 5.2.1. The
major difference is that in South Africa the prOVincial administrator or a
minister has discretion as to whether a local authority should be established
in response to an application and if established. whether the area of juris-
diction. form and powers of the authority will be as set out in the applica-
* Of course, this does not exclude the possibility that a higher authority
might publish a standard statute to serve as a guideline for people esta-
blishing a local authority.
J/
tion. The authority is not automatically established, provided only that
stated, objective criteria are conformed to.
5.1.3 THE PROCESS OF CO-ORDINATION AMONG AUTHORITIES
[This section emphasizes the important point that co-ordination and coope-
ration between individual local authorities, however sman. can be organised
by the automatic market otientated discipline of voluntary contracts just as
well as or better than by central directions from the government. There ts
no need to nmit the freedom of individual cOllT11unlties by central directives
as is the case at present. Extracts from the section follow.]
Co-ordination among local authorities can in principle be effected by means
of either central control or voluntary contracts between two or more local
authorities. Creation of regional bodies consisting of representatives of
local authorH'ies 1n the region can also be classif1ed under either of the
depending on whether' the regional bodies are estab1 ished
through di rectives from above or through vo] untary contracts among parUd-
pating local authorities. In the latter case. local authorities need to be
empowered to enter into such contracts. Such empowerment in a centra
government act does oot necessarily imply central control. The relevant act
might simply be an enabling such as an act enabling private persons
to form companies for business purposes.
The distinction between provision and physical production of goods and ser-
vices is important in this regard. Local councils clearly have two quite
distinct functions. namely on the one hand to articulate the demand of the
cOTI111unity they represent for various municipal services. and on the other
hand to provide services to meet the demand. Once the local cOl.wcH has
decided which municipal services are to be provided. several possibilities
are open to it. These options provide ample opportunities for co-ordination
among' local authorities without any interference by higher authorft1es.
Hrl s usua11 y occurs in 1arge urban or metropol i tan areas in whi ch several
local authorities operate in dose proximity to one another.
5.2 PRESEtlT SYSTEMS OF LOCAL GOVERNMEtlT IN THE REPUBLIC OF SOUTII AFRICA
[This section is not summarized here. Its purpose is to expose the
important differences between the principle of local autonomy for sUb-
national communities in South Africa and the present, centrally directed
system.
Co-ordination among local authorities in South Africa has hereto been effect-
ed mainly by means of central control and voluntary contracts between local
authoriti es. Co-ordi natl on between 1oca1 and hi gher authorities have taken
place basically through central control. Local authorities are often
obliged through central government acts or provincial ordinances to perform
particular functions on behalf of higher authorities. These functions are
often referred to as agency functions and local authorities are sometimes
compensated for their expenses in respect of the functions. These "agency"
relationships do not, result from negotiation by local and higher
authorities on an equal footing, as would be the case between finns in the
private sector.
Recent developments in the fi e1d of co-ordi oat; on between 10eal authori ti es
entail the creation of national and regional bodies consisting of representa-
tives of local authorities. namely the Council for the Co-ordination of Local
Government Affairs and regional services councils. These developments also
seek the creation of a uniform system of local government for whites.
colourects. Asians and presumably blacks throughout the country.]
5.3 GETTING FROM HERE TO THERE: THE PROCESS OF TRUE OEVOlUnOH OF POWER
[This section points to the disadvantages of central direction and uniformity
with regard to the standards and behaviour of local authorities throughout
South Africa. and stresses the advantages of freedom for local authorities to
behave according to the circumstances, social, physical, political and econo-
mic, in their own "back yards". It links this contrast between current
ideas of uniformity and proposed ideas of freedom to diversify with the poli-
tical philosophy of unitary government 1n South Africa.
It proceeds to expose the ambivalence in current official political thinking
between centralisation and devolution of power.]
Probably the most important reason for continUing centralisation by a govern-
ment who has set HseH on devolution, is the underlying political philosophy
mostly adhered to in South Africa. This philosophy presumes that there must
be some singles ultimate centre of authority in any society. The alterna-
tive philosophy accepts that the government sector may be polycentric in
structure with concurrent sources of power. each limited to particu-
lar fields of competence. We are in fact putting forward this alternative
philosophy as the means to finding a solution to the problem of organising in
South Africa a just society in which all minority groups are protected from
dominance by the majority.
In order to implement this true devolution of political power
from the central government to authorities is essential. Oevo"jution
of administrative which we prefer to call delegation. will not
suffice, because H does not ehange the location of the ultimate centre of
authority in the society. Any group who can capture that single source of
power. wil1 of necessity dominate the rest.
[The section continues to examine more fully the meaning of the term
I!devo1l.ltiofll of political power" and to show to what extent exercises in this
has already occurred within the context of the policy of independent
blatk states. It concludes that the process of devolution will necessitate
changes to the 1983-constitution.]
The South African government can delegate freedom to take decisions or. parti-
cular functions without changing the constitution, but it will then retain
the ultimate responsibility for the performance of the functions as wel] as
the right to revoke the freedom of decision unilateraliy. A person or group
who is dissatisfied with the way in which the delegated functions is handled
on the $ubnational level, will certainly put pressure on the national goyern-
ment to intervene or even to revoke the function - and this may happen even
before the dissatisfied party has exhausted its influence in local politics.
Moreover. a change in the South Afr1can constitution in order to ?ssign one
or more government functions to a subnational level win not necessarily
amount to devol uti on in the true Sense of the word 0 One reason is that the
national Government can change the constitution on its own, without having to
solicit the agreement of any subnational unit of government. Secondly! no
legislation by the South African Government is subject to revision by a court
of law. Consequently. in the final analysis no subnational government has
any constitutional right to prevent the national Government from revoking a
delegated function, even if such delegation took place by means of a change
in the national constitution. The national Government can simply change the
constitution again.
True devo1uti on of some (as opposed to all) government functions requ; re a
change in the very nature of the constitution. It requires that the consti-
tution be changed in such a way that future changes to it will be subject to
agreement by the subnational government institutions to which political power
is devoluted and it requires that the latter must in future have recourse to
a court of law. should the national Government unilaterally change the
constitution in order to revoke the del/oluted functions. In fact, it means
that the very sovereignty of the national Government win be diVided. It
will have sovereign power over the functions it retains in terms of the
constitution, but the subnational governments will have sovereign power over
the functions which will have been devoluted to them. In other words, South
Afrlca will no longer have a uni-tary system of government. but Cl. federal or
confederal one. The implications of this are discussed in chapter 6.
5.4 lOCAl AUTHORITY FINANCE
5.4.1 THE QDESTION OF VIABILITY: PROVISION VERSUS PRODUCTION OF SERVICES
[Thls section explains that small local governments need not be if
they understand that local authorities need not undertake the production of
an the services they have to provide. Much of these- services can be
acquired from private contractors or other authorities, The possibilities
of lowering the average fixed costs of running local authorities are
discussed in this section.]
5.4.2 EXISTING ANO PROPOSED SOURCES DF REVENUE
[This section reviews exiSting sources of income for the different kinds of
local authorities in South Africa. The inadequacy not only of the forns of
taxation but also the revenue base available to non-White local authorities
led the Government to propose two new sources of income, viz. a regional
services levy and SI iregi onal estab!i levy. The ertVl saged re-gi OM!
services councils wili be responsible for the collection and distribution of
the new sources of revenue.
The establishment of the regional services councils and the introduction of
the new sources of revenue by the central government rather' than through
negotiation among the corrrnunities invoived. are obviously in confl iet wHn
the principles of devolution of power set out in this memorandum,]
5.4.3 ASPECIFIC PRINCIPLE OF DEVELOPMENT AID
As long as the basic gaps in soda] and economic conditions between people
eXist. the stabHHy of the order 'In the country will be in question.
Assistance by 1ead1ng individuals and groups to their lagging associates in
socfety 1s as much a matter of enHghtened self-interest. a.s it may be the
. manifestation of altruistic mothes" When. however. the initiative in
dosing the gap is ta.ken by the poor by means of nothing 'more than using
political power intra- or extra-constitutionally to- simple coerce a redistri-
bution of produced the- outcome will be a serious deterioration of the
productivity and the stabi1ity of the entire economy.
A strategy of fun participation of an South Africans in the opportunities
of the economic system of the country shoul d. accordi I1g1 y. be regarded as
much more than it matter of occasional charHYG It should be a fundamental
element of the character of relationships on ail levels of public (and indeed
even private) beginning with the metropolitan levelo
The institutions required for this strategy of development co-operation must
emerge from a proper definition of the form of assistance and! the functions
to be performedo
The pdnciples that should guide the system of development
should harmonize with those discussed! above. In other words, the aim of
development co-operation should be to promote If} among people as widespread
ill distdbution of private economic power as iOl sense of personal
responsibility among as many South Africans as possible" and an ability and a
propensity to economize among as many economically active people as possible.
and {iO amonq regions or smaller areas a baiance of economic activity in
'"
keeping with the relative SQcial and political significance of the region or
area 9 but with due regard for the limits to effective i nterventi on in the
market processes of industrial location.
Finally, the participation by the people concerned in the policies of the
development agencies is a matter of fundamental importance. Where the
agencies are ordinary private persons or corporations, the participation by
recipients of assistance should ideally be couched as a private contractual
relationship. Private charity blatantly administered does not improve the
self"respect of the recipient. Where the relationship cannot
9
by nature, be
contractual in the commercial sense, but must be handled as a "collective
good". such as basic health and education or the improvement of the physical
infrastructure, the institutions responsible should be the creation of all
parties concerned. As soon as development assistance is presented as on!-
way charity. wh"lch a is not. rather than as two-way it must
lose the greatest part of its potential strength.
5.4.4 DISTRIBUTION AND REDISTRIBUTION OF REVENUE: SUBSIDISATlON OF OBJECTS,
PERSONS AND AUTHORITIES
Demarcation of local authority areas on the basis of ethnicity results in
different local a.uthorities possessing vastly different fiscal resources.
Even if", they an had access to the same foms or sources of it is
clear the ultimate source of income is the relevant community. There-
fore. a standardised enabling act for local authorities will not diminish the
need for income redistribution from high-income communities to low-income
communi ties.
It is important
9
however, to pay close attention to the differential effects
of various methods of income redistribution. Grants to local authorities.
for instance, have vastly different effects than grants to deprived indivi-
duals.
Every community. no matter how low its average level of income and wealth,
will include persons and families. This is clearly applicable
to black: local authorities in South Afrlca as well. To the extent that
wealthy blacks within black local authorlties possess property, they might be
the people capturing the benefits of intergovernmental grants - not the
poor for whom the relief ]$ intended. The argument is that the grantswll1
enable the local authority to provide better services while keeping taxes and
user fees to its cvtizens constant or even to lower the taxes and user fees.
This will cause property prices to rise. so that those who already own pro-
perty will receive a one-time benefit to the detriment of those who stH!
have to purchase property (See Bish. 1983, po 122-5 for a more extensive
treatment) .
Similar effects occur when objects rather than persons are subsidisedo Many
wealthy people daily receive subsidies on bread in South Africa - while the
subsidy is dearly intended to assist the needy. The same app!'les to
housing subsidies or SUbsidised house rents. transport rates and medlcal
fees 9 which are common in black townships.
The conclusion is,that it would be much better to 5ubstdise the expenditure
by persons in low-income groups on certain goods by means of tax allowances.
vouchers or direct cash grantso Such vouchers or cash grants received from
regional iWthorities Oir the national government could be used to pay for
local authority services thereby supplementing their fiscal resources without
unintended effects on lncome distribution within the local
5.4.5 REDISTRIBUTION OF INCOME THROUGH ALLOCATION OF FUNCTIONS AMONG
TIES NITH LARGER ANO SMALLER AREAS OF JURISOICTION
Appreciable redistribution of income is infeasible in local authority
because those being taxed may leave. The local authority may consequently
be left with an even less adequate fiscal base than before. At the same
time. people el i 91 1>1 e for recei pt of redi stributed funds or benefits wi n
tend to move into local authority areas where substantial redistribution of
income takes place. This wi1] obviously aggravate the situation. In
a situation of "unstable equilibrium" win result. The local
financial position wil] go from bad to worse. as has happened in the case of
the CHy of New York.
Should red1stdbution of income be regarded as it must of neces-
sHy take place in reiat1vely large regions or preferably nationally. 50 that
the cost -of leaving becomes at least as high as; the tax burden. (Note that
the possibll ity of out-migration places an effective lfmit on the extent of
taxation. provided that freedom of movement exists.)
Spatial fiscal equivalence means that people in the geographic area where the
benefits of a pUblic project are concentrated, should pay for the projecL
Given that the benefits of different projects extend over different geo-
graphical spatial fiscal equivalence can be attained by the simultane-
ous use of local regional state and national authoritieso Some of these
may best be functionally specialised. large. consolidated local authorities
can hardly meet the requirement of spatial fiscal equivalence, unless rates
may be differentiated by neighbourhood within its area.
Redistribution of income could take place by means of regional or metropoli-
tan authoriti es responsi 01 e for pravi si on of regi on:wi de infrastructure and
with the power to impose region-wide taxes. Such authorities will obviously
receive most of its tax income from the more affluent but will
be able to spend it to the benefit of 1ess affl uent communi ti es as we11-
Redistribution does not necessarily imply direct cash grants to persons or
local authorities in the area of the regional or metropolitan authority.
5.4.6 THE PRINCIPLE OF FISCAL EQUIVALENCE
One of the most desirable features of the market system is its self-correct-
ing behaviour. When shortages or surpluses prices rise or fall,
thereby indicating quickly and efficiently how buyers and producers should
respond.
It has been argued in the above that local authorities are extensions of the
market system. If the local authority system is to be self-correcting. the
of flfiscal equivalence" 1969, as quoted by Bish. 1983, p.
116} must apply. This principle requires that those who decide, benefit and
pay should be the same group of people. The citizens who make decisions on
programmes (or di rectly i nfl uence representati yes who act on thei r beha If)
w111 be those who benefit from the programme and those who pay the cost of
the prograTlllle 1983, p. 116).
Fiscal equivalence is usually self-correcting because the decision makers
consei oU51y compare benefits with costs i nmaki og deci si ons because both
accrue directly to them. At the same time, fiscal equivalence may be con-
sidered equitable because beneficiaries pay the cost of obtaining their bene-
fits rather than shifting the costs to third parties 117).
When the activities of government involve providing products or services to
identifiable individuals
9
such as water or public transit, the fiscal-
1y equivalent way to finance such activities is through user charges {ibid.,
p. Ell.
Temporal fiscal equivalence require that capital expenditures, from which a
benefit stream occurs in the future, should be financed from borrowed funds
with benefi ci ar; es repay; og the debt over the 1He of the project. Ope-
rating expenditures" in contrasts
balanced budget (lbid., p. 118!.
should be f]!1anced from n",",
annually
CHAPTER 6
REMOVAL OF DISCRIMINATION ON HIGHER LEVELS OF GOVERNMENT:
THE FEDERAL OPTION
6.1 INTRODUCTION
It may be useful, before considering the question of reform in South Africa
at the highest levels of government. to restate the gist of our approach.
The imnediate reason for the reform is the fact that racial discrimination
against blacks has to be removed from the character of the state. i.e. both
in the dictates of private law as well as public law, i.e. both 1n the legal
framework of both private associations such as the economy. and public asso-
ciations, particularly on the political level.
We have assumed that the refonn will be evolutionary, i.e. that the govern-
ment of the existing order 1s strong enough, and the existing order itself is
cohesive enough to prevent the process of transformation from exploding into
a revolution. This memorandum does not deal with that fine political art of
moving fast enough to prevent a revolution towards the left. but not so fast
as to spark off a successful revolt of the rightq
One characteristic of a healthy evolution is that it retains the best ele-
ments of the old order and attempts to expand upon them to meet the chal-
lenges of the new situation. In this connection we proposed that the basic
common law norms underlying the economic of South Africa be identified,
recognised by the negotiating parties and extended into our public law as the
legal basis of South African politics.
We bel ieved that by doing so the economic and pol itical character of the
social order in South Africa will change to the extent required to anow that
in order not only to become fully legitimate, meaning that blacks will become
citizens of the RepUblic with equality before the law and equality of
opportunity in the economy. but also to remain politically stable and econo-
mically viable.
Our position in chapters 3 and 4 has focussed mainly on the general prin-
ciples involved. with only scant reference to the part1cular structures that
might arise in South We have said even less about exactly how this
process of legal equansation of blacks as individuals should in practice
affect their nves. How their incomes might be affected. or how they might
vote in municipal elections. We have not even attempted to express an
opinion about the possible reception of our proposals by the various poli-
tical factions among blaCKS. But we did not regard those important matters
as part of our brief at this stage. Ail we do claim is that these general
legal princip]es in chapter 3 and 5 are quite capable of accommo-
dating the legiUmate claims of bhcks in the economy and tile structure of
local of South Africa.
In the pr-esent chapter we have arrived at the ultimate level of national
pol i tics where democra:ti c partici patioro in the centra1 government "'I s at
issue" The expectation was expressed earlier that what was learned about
the. appHcation of the principles of individual freedom and responsibOay.
and of co-operation among individuals to the politics of local
authorities may be useful in approaching the problem of co-operation among
citizens at the highest ]evei of government" Ttlis was partly the case.
Local authorities turned out to be little more than extentlons of the market
economy and this is only partly true of central even those that
endorse socialist ideo]ogyc
Central government South Africa accordingly present us with diffi-
culties for whtch the phi1osophy behind South African common law norms do not
have the answers. Nevertheless
t
we ourselves were genuinely surprised
to note the great extent of harmony between these basic principles of
dual freedom underlying our common law. and the principles of federaHsm &s
enunciated by some of the greatest poHtical philosophies in the Western
civiHza'tlono
Once agaha. we have not taken the argument much beyond basic principles and
we cannot even present a full examination of these" The history and philQ-
sophy of federalism is far too I"'ich to make such an exercise possible in
these pages. The main object of this chapter is to emphasize and to H-
lustrate the very close logical link between the jurisprudence of South Afri-
can) common law and tile political philosophy of and to suggest
that solution t;o the prob]ems of central government in a plural South
African democracy may be fQund 1n that direction.
The existing unitary system was originally designed by the founding fathers
of the Union of South Africa mainly for two purposes. The first was to im-
prove the public finances of the participating colonies and to create a
strong common market basis for the economy, within the British empire. The
second was to unite the two "races" of Afrikaners and Eng1 ish speaking South
Africans after the Anglo-Boer War of 1899-1902. The federal alternative was
considered to be too weak to achieve these objectives. The great black
chiefdoms of the time were excluded from the political exercise.
Now. three quarters of a century later. the legitimacy of the unitary state
without the participation of the blacks has come under serious attack. both
internally and externally. Had this fate been recognised in 1910. the Fede-
ral Alternative would surely have been given much more serious attention.
6.2 TWO AlTERNATIVE SYSTEMS
The philosophy underlying the present system of government in the Republic of
South Africa presumes that there must be some single. ultimate centre of
authority in any society: the central government. Such a government in fact
has unrestricted monopoly power. In the Republic of South Africa the
central government holds the final legislative and executive authority.
While the judicial power is effectively separated from the legislative and
executive powers. no legislation by the central government - not eVen legis-
lation altering the national constitution - is subject to revision by a court
of law. The practical impi ication of this is that any group who has cap-
tured the central and single source of authority can legitimately dominate
the whole society - by exercising ultimate control over each and every sub-
national unit of government in the whole country.
The alternative philosophy accepts that the government sector may be poly-
centric in structure with several concurrent and competing sources of power.
each limited to particular fields of competence by a constitution or sodal
contract which is enforceable by the courts of law. The relevant fields of
competence IWY be defined 1n terms of functions, geographical areas and/or
groups of while legislative. executive and judicial powers would
ideally be separated on an level s of government. The practical implication
of this is that no single group would be able to dominate the whole society,
unless it captures each and every unit of government in the whole country.
This is the Federal Alternative.
[This section summarizes the main unitary characteristics of the present
public of South Africa. The summary serves to highlight the difficulties In
the way of accommodating blacks in that system. At the same time it shows
up the "logistic" problems which will have to be faced in moving to a federal
or confederal constitutiQn.]
6.4 I'OSSlBlllllES FOR 1\ FOURTIl I;HI\HBER IN PAALIJ\MENT
The theoretical possiblity of accommodating blacks in a fourth chamber of the
present Parl "lament does not appear to be a viable optiOl'L It has no
champions in the Government. the parliamentary oppositions or among the
political movements among the blacks. Its logical outcome must be the
eventual domination of Parliament by the majority party in the black
and with no protection for minority groups.
6.5 THE FEDERAl AlTERNIITIVE
This section deals with the basic principles of federalhm as formulated by
various authorities. Those familiar with these principles will find ]ittle
new fn the textQ The main purpose of the text is to illustrate the
able harmony between the basic principles of South African common law and the
basic federal principles of public law"
The federai system of government finds its inteUectual origins in the teach-
ings of Judaic-Christhn theology, Greek phHosophy and Roman 1aw
1983, p. 1281.
Perhaps the liIDst basic principle on which federalism is is that the
individual 15 Ilthe best and sole jUdge of his own private interest. and that
society has no right to control a man's actions unless they are prejudicial
to the common weal or unless the common weal demands his help" (De Tocque-
1945. po origh1aHy published in 1835}o This maxim follows from
the beHd that the individual "'is free 0 and respons1ble to God alone, for
all that concerns himself
n
{loco cito}o
The principle ef individual freedom of decision-making already implies that
all forms of co-operation among individuals will necessarily flow from agree-
contracts or covenants among individuals. In fact, the term "fede-
ra1" is deri ved from the Lati n term "foedus" meani og to covenant (astrom',
1983, p. 129; Kriek, 1978, p. 1891. De Toequeville 110e. eit.) eloquently
explained the relationship between the individual and government 150 years
ago: illn the nations by which the sovereignty of the people is recognized,
every individual has an equal share of power and participates equally in the
government of the state. Why then. does he obey society. and what are the
natural limits of this obedience? Every individual is always supposed to be
as well informed. as virtuous. and as strong as any of his fellow citizens.
He obeys soci ety. not because he is i nferi or to those who conduct it or
because he is less capable than any other of governing himself. but because
he acknowledges the utility of an association with his fellow men and he
knows that no such association can exist without a regulating force."
Cormnuni ties establ i shed by means of covenants or social contracts among
individuals can themsellles enter into contracts with one another to form a
coTItrlunity of communities. In the same sense that the freedom and different
personalities of individual persons can be preserved within a community, the
autonomy and diversity of individual cQrrrnul1ities can be preserved within a
community of communities.
Ostrom {1983, p. I27} points out a further principle underlying the covenant-
al concept of community:
"Fashioning a COTllllunity of communities which allows for autonomy and diversi-
ty depends. in some fundamental sense. upon a shared conception of right.
Human societies that aspire to be self-governing can only be constituted 1n
relation to moral principles of self respect and mutual respect for one an-
other.. Peopl e must share some fundamental understand'! ng about pri nCl P1es
for the right ordering of human relationships; and, as Alexisde Tocquevil1e
has put it. some basic idea of right. There can be no shared communities of
interest unless those diverse interests comprising such a community possess a
shared idea of fi ght as it is rel evant to poli ti cal experi ence" (our
emphasis).
Needless to say. definitions of federalism abound in political-science lite-
rature. One of the weakest definitions is that of Riker {1964. p. III which
has only three elements, namely that a federal state is one in which {I) at
least two levels of government exist; {2j each government level has at least
one area of functional jUrlS'diction 'In which it is autonomous; and {3) a
guarantee exists that each government can act autonomously in its own sphere
of jurisdiction {Krlek
s
1978
9
p. 190}.
FederaHsm is a logical alternative when dHferent communities have CO!i1ll0n
interests as wen as interests which they regard as their own. Kriek
(ibid., p. 192) points out two basic preconditions for- the ex'lstence of a
federal state: Firstly. the communities involved must have a strong need to
manage their common affairs COllectively. an equally strong need
must exist to manage the own affairs of the cOl11'fll1nities separately. If the
first need does not exist. no association will be established (or an existing
association might cfwi1ble and eventually disappear). If the second need
does not exist. li centralised union rather than a federation will be
blished.
In order to accommodate both needs in a federation. those affairs Which are
common to an the federating !.mHs may be entrusted to the federal govern-
ment. while matters required for the maintenance of an own identity win be
left to the lllldhidual units 0 This means that the very sovereignty of the
state win be The federal government wiH be sovereign 'In respect
of the matters entrusted to "it and the federating units will be sovereign in
their areas of (ibid. po 191. See also po 66 of this memoran-,
dum),
These fields of sovereignty are agreed to in a written constitution or social
contract between the federating units. As a buyer and seller may be irrevo-
cably bound to 3; contract between so the different units. of government
are bound to the constitution. As private persons entering into
a contract has to recQgntse the arbitration of the courts when disputes
50 the different units of government must subject themselves to an ob-
jective arbiter. usually the supreme court, The arbiter then has the juris-
diction to test the decisions and legislation of the federal government as
well as the federating units against the constitution and to declare them as
nun and void should they be in confl let with the constitution. II'! unitary
systems, such as the RepUblic of South Africa, the c;purts may only declare
legislation as null and void if the government officials failed to follow the
procedure laid down in the constitution. They have no jurisdiction to rule
on the contents of the legislation, except when the constitution expressly
makes provision for such control by the supreme court, as in the case of the
entrenchment of the two official languages.
It follows from the above that another principle of federalism is that the
federating units would have the right to be involved in the process of amend-
ing the federal constitution. The procedure for such amendment is one of
the most important elements of the contract between the federating units.
Changes in the constitution need not necessarily require the consent of each
and every federating unit. Amendments maYt for instance, require- the con-
sent of the federal government pl us the consent of the governments of a
stated number or a certain proportion of the federating units.
As pointed out previously (p. 81) the federating units can have a territorial
or a corpora'te base (or a combination of both). Their jurisdiction may be
defined in terms of geographical areas so that they will have authority over
all persons within the geographical area. A corporate base means that the
jurisdiction of the federating units is defined in terms of a particular
group of irrespective of where they may happen to be in geographic
space9
pri ncip e is p,oporti ana1Hy of poi itical represntati on. d vH Si'v"ke ap-
pointments arid the anocation of public funds. When the segments are of
highly unequal size. small minorities may be afforded special protection: by
means of over representation or parity of representation {ibid., p. 29-301<
It is clear from the above that a. consociatioo need not necessarily conform
to the covenantal concept of community and the underlying principles of indi-
VIdualism and a shared conception of right which form the basis of federa-
lism, nor to the resuHfng principles of the ultimate authority of the con-
stitution as fnterpreted by the courts and partlclpatlon by all levels of
government in constitutional amendments. Furthermore. corporate federations
need not conform to the principles of mutual or minodty veto or
l1ty in respect of civil service appointments and the allocation of public
funds.
To people who have been brought up in it country with a unitary system of
government. federations often seem disorderly. Federal systems necessarily
consist of multiplicities of government units that have overlapping juris-
dictions and that have to resort tu contra.cting and. other market-Hke means
of co-ordination amongst contrasts sharply with the seem-
ingly neat, tda:ngu1ar structure of command in a unitary system (Ostr-om.
1983, po 146) 0
However. in the case of federal systems. like 1s in the eye of
the beholder. A market system seems utterly disorderly. In fact. it took
a philosopher of the staturE of !\dam Smith to discern order in the market
placeo Similarly. a federal system possesses an order which may not be con-
but the existence of which cannot be denied.
Economists have devised concepts and methods to discern and analyse market
structure. conduct and performance in the private sector. Similar concepts
and methods are being deVised to discern and analyse the structure 0 conduct
and performance of public-sector industries such as the police industry. the
water industry. the education industry. the weHare industry and the health
industry tOstrom. p. 146-7).
Corporate federations are often referred to as consociations. According to
Lijphart 0980, p. 29-41) this is not necessarily the case. Consociations
occur in plural societies and rest on four all of which deviate
from the Westminster model of majority rule. The two most important, com-
plementary pri od ples are grand coal iti on and segmental autonomy. Grand
coal ition means that the political leaders of all the segments of a pI ural
society jointly govern the country and may also be called the principle of
power sharing. The principle of segmental autonomy means that deci s10n-
making authority is delegated to the separate segments to the maximum extent
possible. The idea is that each segment rules itself in an matters that
are not of common interest and are therefore not decided upon jointly by the
segmentsl leaders. The third consociational principle is the mutual or
minority veto, which may be either a formal or an informal rule. The purpose
of this is to provide a guarantee that no segment can be outvoted on the
central political level when its vital interests are at stake. The fourth
A point related to the problem of 15 the idea
authorities necessarily have to be controlled from above"
that subnational
Many South Afri-
54
cans simply accept that local authorities have to be controlled by the pro-
vincial councils or the central government and the provincial councils by the
central government. This idea is foreign to federations. Each authority
in a federal system is sovereign in respect of its functions and is not con-
trolled from above, but from below. ,Each authority is contrOlled by its own
cHi zens through thei r contact with representati ves, through the ball at box
and through court action.
Sceptics argue that "federations do not work in Africa", and to support their
view they can, or course. refer to a number of failures in Central, East and
North Africa. But when the reasons for these fail ures are stUdied. it
transpires that the particular federal structures imposed falled precisely
because they were imposed from above upon the people in tenns of the last
wills and testaments of colonial powers, and not negotiated inter vivos by
the domestic vested interests. At the same time federal principles of
government stood in the way of the total itarian ambitions of the newly
emergent domestic leaders. These post colonial leaders would justify their
totalHarian ambitions in terms of ideals such as "building one nation" or
"building a socialist order", etc. - aims which appear to require a concen-
tration of power at the centre. Whether these motives were genuine or not.
is not irnp.ortant. What is important is that these power seeki ng 1eaders
commanded enough support for their aims among the people to secure possesion
of the instruments of government.
In other words, the real alternative to federalism in Africa was not the
Westminster system of Parl iamentary Democracy. Nor wat it a South African
style separation of political power in independent states within an economic
union. The real alternative to federa1fsm was total itarian dictatorship.
Insofar as people in Africa naturally applied and voiced federal ideas in the
organisation of their social life at the grass roots level, these tendencies
were adamantly suppressed from above.
Are these experiences good reason to believe that federal structures will
also fail in South Africa? On the contrary, precisely because there are
such powerful political forces in SOlJth Africa which refuse to submit to
totalitarian government, whether in the form of a majoritarian government in
a unitary system, or a dictatorship in a non-system, the federal alternative
to them as the basic principle of government is far stronger in South Africa
than anywhere else on this continent.
Federal principles have always applied to a host of the most important
tutions in the social system of South Africa. In the field of labour rela-
tions, the system of industrial conciliation was quoted earlier as typically
federal. In most governing bodies are federally constituted, in-
cluding the South Afrlcan Rugby Union. So 'is the governing body of the
Dutch Reformed Church. The system of primary and secondary education at
least among Whites has a strongly federal governing principle . Even the
National Party is governed on federal principles.
Finally, it must be emphasized that the principles of federalism in
government should not be confused with the principles of unitary government.
As was suggested in the early parts of this chapter. these two systems are
conceived in two totally different theories of government,
In view of the above. it probably be necessary to decentralise the
police and the national broadcasting station along with political power.
should the RepUblic of South Africa be federalised. This will provide con-
crete protection against the possibility that some smaU group might in
future gain control over the whole country by simply taking control of the
corrmand centres. of these two institutlons and thereby being able to ignore
the constitution and the courts.
In conclusion. it should be pointed out that aH the pdnciples set out in
the above are applicable to federations as well as to confederations. The
most important difference between the two is that confederating units retain
the right to withdraw from the confederation unlhteral1Yr; while federating
units do not 0
6.6 POSSIBILITIES FOR TERRlTORl1Il ITDEllJ\llSll IN SOUTIl AfRICA
The historical fact that the var10us great black chiefdoms were excluded from
the National Convention of 1909. which led up to the foundation of the Union
in 1910. was alluded to in the introduction to this chapter. While the
whites trekked an over the subcontinent of Southern Africa. the black na-
tions each settled in a geographically more or less definable area in the re-
g10
n
, the Xhosa in the Eastern Cape. the Zulu: in Natal. the South-Sotho if!
and around the highlands of the MalutiS. the North-Sotho north of the tlaga-
lies mountains in the Transvaal. and the Tswana in the Northern Cape and
56
Western Transvaal. The territorial base of the Sotho, Swazi and Tswana
peoples were in fact politically split up by the decision of the British
10nia1 office in the late 19th century to grant crown colony status to the
chiefdoms of these nations in territories that did not fully embrace the
whole area of settlement of all the tribes belonging to these nations.
The remarkable fact is that this geographic distribution of the black popu-
lation is still more or less intact (see table I, page 9). Over the past
three- quarters of the century considerable migration of people out of these
flhomelands'l took place. particularly to farms and towns around these home-
but 31 so on a very large scale to the so-called PWV' (Pretoria-Wft-
watersrand-Vereniging) industrial metropolis on the Transvaal High'/eld. and
on a much smaller scale to the industrial metropolis of the Cape Peninsula.
Migration of ZUlus to the Durban metropolitan area was equally heavy, if not
more so than in the other cases. but like the migration of Xhosas to Port-
Elizabeth, the movement may be regarded as having taken place within the 5ub-
regional base of the particular nation.
The coloured and Asian populations of South Africa also have relatively clear
geographi c bases. The coloureds are 1argel y conf; ned to the Cape proY; nee
and the PWV region. and the Asians to Natal and the PWV region.
While the whites have spread into all parts of the RSA. they have respected
the national states as the exclusive domain of the black nations. They tend
to concentrate in the PWV region to a greater extent than any other
but because of their minority status in the total they are also a
minority in this region. In fact, the whites do not form a majority in any
sub-region of South Africa, save in white municipal areas.
It is clear that while the various ethnic groups in South Africa each have a
relatively clear geographical base. some degree of overlap of the geographi-
cal areas where different groups are mostly found. occur. Should regional
authorities on the basis of one man one vote be estab1ished in any set of re-
gions Which are bigger than individual municipal areas. a single group would
obviously dominate political processes in most of such regions. The whites
would not form a majority in any of such large regions. Nor would the
Asians.
It follows thilt the political problems associated wan the plliral1sm of the
South African society as a whole would also Occur in each of such large
regions. Should territorially b-ased federal states be established in South
Africa. it is clear thatlocai authorities with extensive powers
many cUlturally sensitive government functions as possible. win be most
important in safeguarding the auton?my and self-determination of the various
population groups. The federal principles governing the relationship
between the national government and the state governments win have to be
made app11 cab1e to the rel ati oflsn1 p between all state governments and thei r
local authorities. Should this rule not apply. 110 guarantee would exist
that local communities would be able to maintain their autonomy.
Another which may be utilised concurrently with the maximum de-
volution of political power to the local authorities {in the sense defined on
p. 39) is to organise the state governments on a basis similar to the
present central government. In other WOl"d5, a state government consisting
of houss for the ethnic groups present in appreciable numbers may be formed
to manag their own affairs separately and the genera] affairs: jointly.
Ethnic groups need not be defined tn terms of race. but could be defined by
means of uther eog. hume language and religion"
Areas of juris:dictioli of possible state governments wHi have to be decided
at the negot1ating table. Whether negotiators win seek to combine vr to
divide existing regions such as provinces and national states. will obviously
depend on the structures negotiated for the states in the federation or con-
federatjofl. Should they consist of houses for different ethnic grDups.
rather large states might be even to negotiators stressing seif-
determination of groupso If not? SL!ch negotiators: will obviously opt for
smaller states with more homogeneous populationso
6.7 mE POSSIBILITY !Jf COMPlEMElffAR, IIlTERREGlONJ\t, ETHNIC J\UTfiORIHES FOR
OIlM IIffAlRS
Whatever regions are to become states in a federation or confederation. it is
clear that members of ill s]ngle ethnic group win probably be spread over a
number of the states, They might think that they need an interregional
ethnic authority to handle their common, culture-related interests in more
than one state, In order to provide Zulu primary schools to a high per-
centage of the Zulu populat'ion of South Afr'lca, the majority of Zulus might
be convinced that they need a Zulu primary school board operating in several
states. the majority of Zulus might be satisfied with a
separate Zulu primary school board in each of the states that might be
formed. A third possibility is of course that the relevant states might
each have a single department of education providing primary schools with si-
milar curricula but different languages of instruction for all population
groups of significant size within its area of jurisdiction. Yet another
possibility might be that special local authorities or school boards provide
education in areas of jurlsdiction that may be much smaller than the areas of
jurisdiction of the states and which may have populatfons that may be practi-
cally homogeneous in respect of culture.
It is quite possible that the legal competence of state governments consist-
ing of chambers for the most important ethnic groups in the geographical area
of each could be limited to decisions on general affairs, taken on the basis
of consensus among the chambers. An own affairs could then be taken care
of by complementary, ethnic authorities, each representing all
members of the ethnic group concerned. The members of the ethnic authori-
ties could be chosen independently of the members of the chambers in the ter-
ritorially-based government units. The seat of each ethnic authority would
probably be in the state where most members of the group concerned are con-
centrated. They would, however. be allowed to operate il1 other states as
well. but obviously only Within the limits of the functions allotted to them
by the constitution.
6.8 POWER VERSUS PRINCIPLES: lHE POLITICAL BOTTOM LINE
The approach to pol ittcal reform proposed in this memorandum stresses the
reliance on people1s automatic respect for basic principles. That is why it
was regarded as so important to rediscover those basic norms by Which the
social order in South Africa and those of most other states in western
civilisation have been guided for the past three centuries"
It cannot, however. be denied that a widespread scepticism about the validity
of such an approach to political stability in a democracy exists, particular-
ly with reference to Black African democracies. How reliable is the respect
for the Rule of law among the people of South Africa? The sceptics suggest
that, on the contrary. people basically respect power - economic power and
political power. Under these circumstances political stability in South
Africa will ultimately reqUire a dictatorship of one kind or another. but it
is obvi QUS that such an outcome will be preceded by tremendous di srupti on.
including a great deal of bloodshed.
Unfortunately. we know of no authoritative examination of the extent to which
this important precondition for a stable democracy is already present among
the masses of South Africa. We must. accordingly. express the view that it
would obviously be unwise to dismantle the existing political power structure
in one fell swoop without any idea of the nature of the power structure that
would take its place. or the way in which the battle for power would be
waged.
Evolutionary change from the existing political dispensat10n to a fully legi-
timate new dispensation therefore requires that the ex.lstfng power structure
should only be gradually dismantled as power carl fairly safely devolve upon
new structures supported by the people involved" We have emphazised
throughout this memorandum that the political bottom line of the stability of
the order is a balance of powers in the so that those groups of
people who insist upon government according to the common law norms of this
in a sufficientlY strong position to keep the enemies of the
system from destroying it,
To the maintenance of federaHsm in the social order of society
depends upon a number of the most important of which are (I) the
peoplels respect for the Rule of Law. il) the competence of the supreme court
to reView acts of parliament in the light of the const'ltut1on. (3) the
vertical decentralisation of power to authoritfes of sub-national communi-
ties. i4} the horizontal separation of political power between the executive
and parliament. and (5) the maintenance of a balance of phys.ical (milHary}
and economic power among the different political groups who agreed to enter
into the political contract.
The fifth condition may be regarded as a last-ditch condition for the
protection of the federal character of the state" It might be said that 'if
matters have degenerated to the point where thlscondition has, in fact, to
be relied upon, the survival of the federation has que$tionable. On
" h d the mere fact that pOllier can, if necessary. legitimately be
the ot"er an. nt
exercised by a constituent of the federation against the central governme
ti t t
On may 90 a 100g way to prevent matters from dege-
to protect the cons U 10
nerating that far.
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