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ASSOCOM has been asked to make a submission to the Cabinet Committee on the political future of Urban Blacks. The Committee has now formulated a lengthy report, of which I pleasure to attach a summarised version. The report was considered by the ASSOCOM Executive Council which met in Johannesberg t.owards the end of May, Ig85 dud certain.3mendments were made.
ASSOCOM has been asked to make a submission to the Cabinet Committee on the political future of Urban Blacks. The Committee has now formulated a lengthy report, of which I pleasure to attach a summarised version. The report was considered by the ASSOCOM Executive Council which met in Johannesberg t.owards the end of May, Ig85 dud certain.3mendments were made.
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ASSOCOM has been asked to make a submission to the Cabinet Committee on the political future of Urban Blacks. The Committee has now formulated a lengthy report, of which I pleasure to attach a summarised version. The report was considered by the ASSOCOM Executive Council which met in Johannesberg t.owards the end of May, Ig85 dud certain.3mendments were made.
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ASSQCl1\TION or Cn.l1MBERS OF COMMERCE or SOUTH l!.FRICA SENIOR ASSOCIATE MEMBERS ASSOCIATE MEMBEns OF EXECUTIVE COONcn,. OF ALL CHAMBERS J f , I 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. Ice "rrh,,_ tmpi'"wegm""d. Owl 91261, htk 3000 0 (01]1125-5309 - 422497 :ij'ifi: '.""""",.,,,,"
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 li 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 I I1 I 1 1 ,1 1 1'1 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 18 19 21 21 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 46 46 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 l s 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 il 3 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 ! 11 , I !I ,I I I 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 ll 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 i! :1 11 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, 1 I ! I 1 1 .' I I I I ;\1 \i 1I \1 ! I1 I I I II 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 I 11 , ) I 'I !: :1< I I i I1 I 1 I I1 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 ll 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 l 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 9 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 ll of specialisation according to least comparative costs. the laws of rapid growth on the basis of savings and capHal accumulation. :1 " d 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 1l ) 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. '1 li
ll' t i I i 'I i I I I 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 11 I1 I I 11 11 il il 11 I' 1 or to seek employmento Freedom requires a competitive situation. In tUfll 9 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 ll (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
'i
" I1 !1 H il 'I I, il If I1 11 I1 11 I1 I1 I ,I 11 c;, r: I! I' I! 4 'I ' 1 I, i I 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. REfERENCES Boulle, L J. 1984. South Africa and the Consociational option. A consti- tutiona1 analysi s. 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