What are the challenges faced by small business owners in this era of globalization?

NOTES*

According to the study, majority of small businesses (61 percent) considers finding and retaining qualified
workers as the most significant challenge to the growth and survival of their business. Other major
concerns of small businesses include: state and federal regulations (35 percent), economic uncertainty
(29 percent), keeping up with the technology (28 percent) and access to adequate capital (27 percent).

Interestingly, only 16 percent of small businesses consider doing business on the Internet as a threat. In
fact, half of the respondents of the survey (50 percent) intend to use the Internet as their key growth
strategy for the next 12 months. The report noted the growing acceptance of Internet as the driver for
growth, from only 33 percent last year to 50 percent this year. A vast majority of small businesses (85
percent) now uses the Internet, primarily for email (71 percent) and research (60 percent).

However, a mere 3 percent of small businesses surveyed indicate that e-commerce is an integral part of
their doing business. More than half of these businesses currently do not conduct e-commerce (54
percent) nor have plans to do so in the next year. Another interesting figure is the attitude of small
businesses toward e-commerce: approximately 42 percent of respondents view e-commerce as having
no impact on their businesses.

They cite the lack of time to plan or implement (82 percent), the cost of implementation (80 percent), and
the radically changing technology (77 percent) as top three main barriers to conducting e-commerce.
Other reasons cited are limited technical expertise (73 percent) and staff training needs (68 percent).

In terms of financing, three-fourths of those surveyed (76 percent) indicated that they were able to obtain
adequate financing. Credit cards top the list (50 percent) of sources of financing used by small
businesses to meet their capital needs, followed closely by commercial bank loan (43 percent). Only two
percent of the respondents were able to get funding from venture capital firms, while angel investors were
the source of funding for a fifth of the respondents (20 percent).

One interesting finding about the use of credit cards, though hardly surprising, is that small businesses
mix business on a personal credit card (49 percent). Despite being an expensive source of funds (only 36
percent pay off their bills each month), the use of credit card for business financing has been steadily
increasing for the last three years. Respondents cite its convenience (86 percent) as the main reason for
its continued popularity. Small business normally use credit cards for travel and entertainment expenses
(69 percent), day-to-day expenses (64 percent), large capital outlays (46 percent) and inventory purchase
(34 percent).

www.powerhomebiz.com

When we think of globalization, we tend to think of giants - of the GMs and the P&Gs that have the

depth of resources to project their presence anywhere in the world. But that's changing. Today, small

and medium-sized companies are going global as well. They are capitalizing on today's shortened

product lifecycles and extending their reach via new computer and telecommunications technologies

and a growing number of strategic alliances and ventures that let them pool resources to tackle large
and distant markets. And these companies are finding a lot of reasons to look beyond their own

borders, with overseas markets- and especially, emerging markets-offering the potential of high

growth rates and early-entry opportunities that can't be matched at home.

But these smaller companies also face significant challenges as they head overseas. Going global

means greater investments in technology. It places heavier demands on the time of CEOs and other

senior managers as they oversee far-flung operations and alliances. It requires specialized skills to

deal with complex tax and currency issues. And it requires greater care to avoid the pitfalls of doing

business in different legal and cultural environments.

For a smaller company, then, going global has the potential to stretch financial and human resources

to the breaking point. The trick, of course, is to plan and focus those resources where they can do the

most good. In international business, knowledge is power, and smaller companies can thrive by taking

the time up front to clearly understand the challenges, assess their own resources, and find the right

partners and markets. Once their international efforts are launched, they should be prepared to learn

and adapt, and apply a "heavy dollop of listening," says Timberland CEO Jeffrey Swartz.

In this Chief Executive roundtable, co-sponsored with Deloitte & Touche, much of the discussion

centers around the difficulties of working overseas, from collecting receivables in South America to

finding the right managers in Japan. But just as many, if not more, of the CEOs' comments center on

solutions and successful approaches to coping with such international challenges - and above all, on

the importance and inevitability of moving into international markets. By making a serious, long-term

commitment to going global, and "recognizing it for the really strategic step that it is," says Deloitte &

Touche's Jim Copeland, small and medium-size companies can play successfully in a global arena -

and find a world of new customers.

SMALL COMPANIES, BIG CHALLENGES

Margaret Mulley (Deloitte & Touche): On the surface, all the ingredients for success for small and

midsize companies going global are there. But it's not that easy; there are real challenges, and it

takes real discipline. Many smaller companies are not necessarily interested in introducing that much

discipline into their organizations and their decision making. And when you make a mistake in going

global, it can be costly, and smaller companies don't always have the financial wherewithal to

withstand those mistakes.

In our observations, these companies often underplan their entry into a market. We worked recently

with an investment firm that had decided to go into the brewing business in Eastern Europe and to
take their practices and ideas there. What's happened with great frequency is that the locals there will

lock out the foreigners who are coming to look after their investment and implement the changes

necessary' to move the business forward. It's been a disaster. They underestimated the difficulties of

the local business environment and failed to understand who and what they were up against.

William R. Berkley (W.R. Berkley): The biggest mistake I've seen is people thinking that the

customer's culture is the same as theirs. In reality, the things that we take for granted can be

unbelievably different. In some places, everyone pays their bills in cash. In Indonesia, a company

might have no general ledger until the end of the year, when they need to balance the books. There's

no electronic payment system any place in Asia that really works, except Hong Kong. The fact is that

the differences in the culture and in how businesses work are astonishing.

We sell insurance, and in one place we have messengers that go around house-to-house collecting

premiums. That's why we were a success there, because we collected the money. Two of our big

American competitors there thought that people would really come in and pay their bills. Just 22

percent paid their premiums to one of our competitors.

Harry E. Gould, Jr. (Gould Paper): You have to consider the culture's relationship to the financial

aspects. When I was a chief financial officer, I was looking at this major manufacturer we owned in

France. After the obligatory wining and dining and visiting the plants, I said, "Well, we need to look at

the books." And the French gentleman said, "Which books do you want to see?" I said, "How many do

you have?" He said, "Three - one for my family, one for the revenue collector, and the real one." I

said, "Let's start with the real one." [Laughter] Now, he didn't think anything about that. There's a

cultural mindset that has no bearing on the reality we are used to here in the United States.

http://findarticles.com/p/articles/mi_m4070/is_n137/ai_21200395

http://www.merck.com/corporate-responsibility/docs/Cultural_politics_ch28_p270.pdf

Business Process Management

Prof Michael Rosemann m.rosemann@qut.edu.au
A/Prof Michael zur Muehlen mzurmuehlen@stevens.edu
Dr Marta Indulska m.indulska@business.uq.edu.au

Business Process Management (BPM) includes methods, techniques, and tools to support the design,
enactment, management and analysis of business processes. Global analysts have identified BPM to
be the top priority for CIOs for the coming years, as companies strive to achieve efficiency gains in an
increasingly competitive business environment. Indeed, recent surveys show that organisations invest
increasingly in BPM. The market for Business Process Management tools alone is expected to reach
$1.1billion by 2009.

This evident demand for BPM is further stimulated by opportunities related to competitive advantage
gains from ongoing process performance improvement, and process outsourcing/off-shoring. While
many practitioner BPM conferences are now in existence, the continual demand for innovative BPM
solutions in organisations needs to stimulate high quality academic research, on which these solutions
may be based.

Accordingly, it is the aim of this track to encourage further research in the areas related to BPM and to
foster focused discussions in order to advance the field. The track encourages submissions using a
variety of research methodologies. The submissions of interest cover the following topics, however
other high quality submissions in related areas may also be considered:

• BPM approaches and critical success factors

• BPM governance
• Inter-organizational BPM
• BPM maturity and adoption
• Business process automation
• Business process innovation
• Business process reference models and reference model management
• Business process modeling and modeling languages
• Process performance measurement
• Integration of BPM systems with other technologies
• Management of embedded processes (e.g. in ERP, CRM systems)
• Industry Case Studies

The track chairs have secured a special issue on Business Process Management with the Information
Systems and e-Business Management journal for selected high quality papers from this track.

Environmental Sustainability of ICT

Dr Sandy Chong Sandy.Chong@cbs.curtin.edu.au
Prof Arno Scharl scharl@tugraz.at
Ms Barbara Roberts Barbara.Roberts@usq.edu.au

The Information Systems Board of the Australian Computer Society has announced a three-year
initiative to raise awareness and encourage action in response to the major environmental challenges
presented to Australia and its regional neighbours. A lack of environmental sustainability in our
Information and Communications Technologies (ICT) presents environmental risks to individuals,
society and ecosystems while representing an enormous waste of scarce resources.

Information networks and the transition to a knowledge-based economy enable new ways of
optimizing organizational workflows, building environmental communities, engaging groups in
participatory decisions, and supporting education and advocacy campaigns. But there is little
awareness about the scope and magnitude of related environmental problems, particularly in
Australia. European studies identify discarded ICT hardware as the fastest growing category of solid
waste. An estimated two-thirds of PCs are thrown into landfill sites within five years of purchase.
Hazardous chemicals leaching from e-waste include toxic heavy metals and hazardous chemicals. The
high level of electricity required to power and cool data centres also adds to environmental problems
as a major contributor of greenhouse gases.
Papers should clearly identify a specific problem area, cite relevant literature, and make an original
contribution. The track welcomes original work within the general theme of "Increasing the
Environmental Sustainability of ICT" (e.g. scoping the problem, examining the options, developing
strategies), as well as manuscripts that address specific areas of interest such as:

• Sustainability in Technology Acquisition and Adoption

• Whole of Life Costing, Life Cycle Analyses
• Sustainable Value Determination of IT (e.g. Triple Bottom Line)
• Disposal/Recycling of IT Hardware
• Using IS Management for Recycling Projects
• Sustainability in IS Industry & Employment
• IS Strategies for Sustainable Resource Management
• Creative Usage of IS Tools to Reduce Energy Consumption and CO2 Emissions
• IS/IT Support for Corporate Social Responsibility Initiatives
• Impact of Teleworking on Energy Consumption and Traffic Statistics
• Acquiring and Managing Environmental Knowledge
• Environmental Online Communication and Collaboration
• Virtual Communities on Sustainability and Environmental Protection
• E-learning Technologies for Building Environmental Awareness
• Environmental Web Portals (Carbon Trading, NGOs, Environmental Indicators, etc.)
• Environmental Applications of Geographic Information Systems

The IS Board of the ACS sponsors three awards for the best three papers on the topic of
Environmental Sustainability of ICT at ACIS 2007.

Health Information Systems

Professor Brian Corbitt brian.corbitt@rmit.edu.au
Associate Professor Jeffrey Soar soar@usq.edu.au
Dr Judith Symonds judith.symonds@aut.ac.nz

Health Information Systems is a growing area of research across the IS community. With significant
funding coming online in applications of IS principles and practice to all areas of health, it is important
to expose recent research to the Australian IS community. Papers are invited on topics such as
Laboratory Information Systems, Health Management Systems, Health Infomatics, Military Health
Information Systems, Information Systems in Nursing, in injury management, in sports management
and in hospital administration. New areas such as the application of IS for the collection of evidence
for medical practice and procedures or policy implications of government smart cards to manage
national health are also welcome.

Papers submitted to this track will be further reviewed for possible inclusion in a special issue of the
electronic Journal of Health Informatics (eJHI) http://ejhi.net/ojs/index.php/ejhi

ICT Governance, Strategic Alignment and Service Management

Dr Aileen Cater-Steel caterst@usq.edu.au
Professor John Gammack j.gammack@griffith.edu.au
Dr Keith Sawyer wkeithsawyer@hotmail.co.uk
There is growing awareness of the need to provide management processes that specify decision rights
and provide an accountability framework to encourage desirable use of information and
communications technology (ICT) in organisations. Many organisations are now adopting ICT
governance frameworks to clearly define three elements of corporate IT management: a list of
decisions for effective IT management; identification of the people responsible for the decisions; and
methods of controlling and monitoring the decisions. Associated with ICT governance is the
management of IT services provision. Organisations are grappling with the challenges of improving
incident and problem management for business-critical applications while improving service levels,
reducing support costs and lowering incident resolution times.
This track welcomes papers related to the following topics:

• Implementation of frameworks including:

o de facto standards such as CobiT—Control objectives for information and related
Technology and ITIL—IT Infrastructure Library
o Australian standards such as AS 8015—Corporate governance of information and
communication technology and AS 8018—ICT Service Management
o International standards such as ISO 20000—IT Service Management and ISO 17799—
IT Code of practice for information security management
o Industry specific governance frameworks (e.g Health).
• Research related to IT Service Management, IT operations and organization structure of IT
service (centralized, decentralized, outsourced)
• Formulation and implementation of IT Service Level Agreements (SLAs)
• Human Resource change management issues associated with ICT governance and IT service
management
• Role of CEOs, CIOs, IT Operations Directors, Problem Managers, Service Desk Managers, IS
Auditors in ICT Governance
• Management issues associated with IT risk and security
• IT asset management and problem/incident resolution management.

Papers submitted to this track will be further reviewed for possible inclusion in a special issue of the
International Journal of Services Technology and Management www.inderscience.com/ijstm/ and a
special issue of the journal, Information Systems Management.

Information Management
Professor Amanda Spink ah.spink@qut.edu.au
Professor Paula Swatman paula.swatman@unisa.edu.au

This track brings together a range of related issues which were formerly scattered across a wide range
of disciplines, including: information science, information retrieval, library studies, records
management, archiving and security. The management of information is an importance area of
research in the 21st century. Information management includes consideration of the technical user
and organizational aspects on collecting, organising and accessing information.

Topics relevant to this track include:

• Management of information
• Information behavior
• Information/Web retrieval
• Managing / preserving digital resources - within and across organisations
• Knowledge management; knowledge communities
• Digital libraries
 • Electronic access to information
• Personal information management
• Digital rights management
• Ethics in information access and use
• Security and privacy of information

Revised and extended versions of papers submitted to this track will also be considered for possible
publication in the Journal of Theoretical and Applied Electronic Commerce Research
http://www.jtaer.com/.

Information Quality
Dr Latif Hakim hakim@usq.edu.au
Professor Andy Koronios Andy.Koronios@unisa.edu.au

“…. Poor data quality is like dirt on the windshield. You may be able to drive for a long time with
slowly degrading vision, but at some point, you either have to stop and clean the windshield or risk
everything”
Ken Orr (November, 2000), Cutter Consortium
The Good, the Bad and the Data Quality.
Information Quality has been rated as a top concern to data and information consumers and has been
reported as a major factor affecting the success of information systems. We are honoured to establish
the Information Quality Track within the AIS 2007 Conference. The Information Quality Track
encourages the submission of quality papers, panel, tutorial and workshop proposals dealing with (but
not limited to) the following topics:

• IQM strategy, policies and standards

• IQM concepts, measures, and tools
• IQM theory, models and methodologies
• Costs of IQM and cost/benefit analysis of IQM improvements
• IQM research directions
• Metadata quality problems
• Information mapping and information sharing
• Information quality in the era of Internet and e-business
• Success factors affecting IQM
• Empirical research in fields of IQM
• IQM Applications and case studies

Papers submitted to this track will also be considered for possible publication in the International
Journal of Information Quality.

Information Systems, Culture and Society

Dr Laurel Dyson Laurel.E.Dyson@uts.edu.au
Dr Marie-Christine Deyrich mc.deyrich@wanadoo.fr

Cultural and social issues are now recognized as significant factors in IS design, implementation and
adoption. In the era of globalization, with many organizations doing business beyond national borders,
culture can no longer be ignored. Moreover, the cultural diversity of the workforce within the
organization and the increasing diversity of many societies raise questions regarding the effective
deployment and use of information systems. In addition, there is growing concern over the ethical
implications of information systems for work and society as they extend their reach more and more
into areas of modern life.

Possible topics include but are not limited to:

• Cultural and social issues of IS design, implementation and practice

• Information systems for managing cultural diversity in the workforce
• The impact of information systems on cultural groups and the role of systems in revitalizing
communities
• Ethical issues and moral responsibility in IS
• Cultural presence and intercultural dialogue on the world wide web
• Cultural issues in interface design and use

Information Systems Education

Assoc Prof Kathy Lynch KLynch1@usc.edu.au
Dr Ravi Seethamraju r.seethamraju@econ.usyd.edu.au

Volatility of business environments, increasing outsourcing of IT infrastructure and business processes,

increasing demand for multi-disciplinary and cross-functional soft skills, decline in interest for IT/IS
courses generally, and a higher dependence on international students' market, are some of the factors
forcing universities to review their curriculum and rethink the design and delivery of their courses.
Given the rapid evolution of educational technologies and business conditions, pressures on
universities for funding, and demands on universities to align their curriculum with industry
requirements, updating the curriculum and delivery methods is a perennial challenge.

In spite of several innovative teaching and learning strategies designed and implemented by
universities in Australia, the gap between the industry requirements and what universities could offer
is still growing as per the industry reviews and reports. The challenge for IS education in this
environment is enormous.

The track on IS education will present many of these challenges and offer strategies or examples for
the future of IS education.

Possible topics for this track, though not exclusive, include:

• Curriculum design and models

• Aligning curriculum with industry requirements
• e-Learning in IS education
• Impact of IT outsourcing on curricula and pedagogy
• Business process management education
• Cross-disciplinary courses serving other faculties
• Integration of curriculum across various business disciplines using IS curricula
• Enterprise systems education
• Group work in IS education
• Experiential learning

The track chairs have secured permission to publish enhanced versions of suitable papers in the
Journal of Informatics Education Research. This journal is sponsored by the Association of Information
Systems Special Interest Group on Education (AIS SIG ED: IAIM), International Academy of
Information Management. The web site for the journal is www.iaim.org and the editor is Prof Mary
Granger from George Washington University.

Information Systems Security & Privacy

Dr Jianming Yong yongj@usq.edu.au
Prof. Ed Dawson e.dawson@qut.edu.au
Dr Michael Lane lanem@usq.edu.au
Professor Gerald Quirchmayr gerald.quirchmayr@univie.ac.at

Organizations depend on their information systems for their business. More and more individuals are
using the Internet to manage their personal finances. Information security and privacy are significant
concerns in both these situations. This track aims to address the security and privacy challenges that
businesses and individuals face as they seek to accomplish their respective goals when developing,
using or evaluating systems. Papers are called for from researchers, practitioners and government
officers on topics related to information security and privacy. Topics include but are not limited to:

• Social, legal and ethical issues of information security and privacy

• Strategy development, implementation and evaluation for information security and privacy
• Policy development, implementation and evaluation for information security and privacy
• Organizational risk management
• Digital identity security and privacy
• Information security and privacy modeling and analysis
• Information forensics
• Network security and analysis
• E-commerce/business security
• M-commerce security and privacy
• Access Control for IS
• E-learning security
• IS assurance and auditing
• E-health security and privacy
• Trust issues in information security technology
• Information security management
• Application of security and privacy in information systems
• Design architectures for information system security and privacy
• Information system security and privacy in the SME (Small and Medium Enterprises) sector
• Information standards for security and privacy
• Operational level information security and privacy
• Governance of information security and privacy

Selected high-quality papers from this track may be invited to be further developed and published in
journals such as the Journal of Information System Security http://www.jissec.org/, and the Journal
of Theoretical and Applied Electronic Commerce Research http://www.jtaer.com/.

Information Systems and Small Business

Assoc Prof Julie Fisher julie.fisher@infotech.monash.edu.au
Dr Craig Parker craig.parker@deakin.edu.au
It is widely recognised in the literature that small and medium enterprises (SMEs) and small
businesses in particular play an important role in many national economies throughout the world. The
contribution of small businesses to these economies is dependent, in part at least, on whether small
firms can respond effectively to ongoing pressures from globalisation, price competition and supply
chain streamlining. This track will provide a platform for exploring how Information Systems (IS) can
help small businesses to address these pressures, and the associated IS issues and challenges they
face.

The objective of this track is to solicit quality papers from multiple disciplines and from around the
world which, among other things, could include:

• identifying potential or novel uses of IS by small businesses

• examining the current use of IS by small businesses across all areas of business
• exploring the issues faced by small businesses in advancing with IS
• scrutinising the role of universities, governments, consultants, solution providers and larger
trading partners in facilitating effective IS use by small businesses.

High quality extended versions of papers in this track may be considered for publication in the Journal
of Information Systems and Small Business (JISSB).

Information Systems Supporting Mobile Work & Leisure

Professor Christopher Lueg christopher.lueg@utas.edu.au
Dr Nicola Bidwell nicola.bidwell@jcu.edu.au
Mr Dean Carson dean.carson@cdu.edu.au
Professor Gerhard Schwabe schwabe@ifi.unizh.ch

We are interested in research exploring information technology support for mobile and typically
information-intense activities. These may range from work activities that require moving around (eg
parking enforcement officers, tour guides) to more leisurely activities including touring and
backpacking.

Networking and Virtual Organisations

Dr Latif Hakim hakim@usq.edu.au
Assoc Prof Nilmini Wickramasinghe nilmini@stuart.iit.edu

The current era is associated with two main interrelated trends in the global market that have brought
the concepts of networking, virtual organisations and virtual teams to the forefront of management
attention:

• Widespread and successive waves of technology-driven innovations in information and

communication technologies (ICT);

• A constant increase in customer demands in areas of product and service cost, quality,
delivery, technology, and cycle time brought about by increased global competition.

Customer demands force organisations to concentrate on core activities and outsource other activities
to those with specialised expertise, capable of taking advantage of economies of scale. On the other
hand, new innovative information technologies such as the Internet, electronic commerce, World Wide
Web (www) and mobile commerce bring with them ubiquitous connectivity, real-time access and
overwhelming volumes of data and information. The virtual organisation is a network of
organisations, legally separated but operationally interdependent companies, each contributing a key
component of the overall set of processes that result in the delivery of the product and the service.
Virtual team may refer to almost any association of people who are linked, not by face-to-face
relationship but by sharing information through an electronic network.

Papers are called for on topics including but not limited to the following:

• Virtual organisations (VO) / virtual team (VT) concepts, theory, and measures
• Networking strategy, policies and standards for VO/VT
• Network models for VO/VT
• Cost/benefit analysis of VO/VT
• Trust and information flow / sharing for VO/VT
• The role of IT innovations (e-commerce, e-collaboration, etc.) in success of VO/VT.
• Success factors affecting VO/VT
• Empirical research in fields of VO/VT
• VO/VT applications and case studies

Papers submitted to this track will be further reviewed for possible inclusion in a special issue of the
International Journal of Networking and Virtual Organisations www.inderscience.com/ijnvo/

Theoretical and Philosophical Foundations of Information Systems

Dr Deborah Bunker d.bunker@unsw.edu.au
Professor Tanya Castleman tanya.castleman@deakin.edu.au
Dr Darryl Coulthard dwcoulth@deakin.edu.au

This track expands the theme of a panel that was held at ACIS 2004 in Hobart.

Topics may include (but are not limited to):

• Positivism versus relativism in IS research

• Development of normative models and frameworks in IS
• Understanding IS research traditions and their influence on our research directions
• Epistemological positions in IS
• Critical and postmoderm perspectives in IS
• Theoretical models and frameworks in IS
• Contemporary developments in foundation disciplines that may be relevant to, or inform
debate in the IS field

This track welcomes theoretical and empirical papers as well as those that seek to explore ideas and
philosophy in IS by expressing a position.

Women and Information Systems

Dr Lorraine Staehr L.Staehr@latrobe.edu.au
Ms Charmaine Ryan ryan@usq.edu.au
Information systems (IS) impact on all aspects of life in society today. There is evidence to suggest
that in the western world men and women use IS to a similar extent overall, although they may be
affected differently by them. The developers of information systems (IS) are predominantly men due
to the low participation rates of women in the IS workplace. Moreover it is disturbing to note that this
situation is unlikely to change in the immediate future due to the low proportion of women currently
enrolled in IS higher education programs.

This track invites original research papers that address issues related to gender and IS. Possible topics
include (but are not limited to):

• gender and IS as an ethical issue

• gender and the IS workplace (e.g. retaining women, improving women’s work environment, IS
career pathways for women)
• gender and IS development
• gender and IS education (e.g. increasing the enrolment, retention, and/or progression rates of
women in higher education)
• the role of gender in human interaction with IS

http://www.aspeninstitute.org/atf/cf/%7BDEB6F227-659B-4EC8-8F84-
8DF23CA704F5%7D/CALI-REPORT.pdf

leadership^

The New Wave of Globalization

Our economy is undergoing a profound transformation. Although the individual elements feel familiar, the
combined contours are unprecedented — in scope, speed and scale.

China is successfully pursuing a growth strategy that is export-led and foreign direct investment fed — at
a scale that has never been seen before. As a result, its rise is sending waves to the farthest reaches of
the global economy — swelling the coffers of resource producers and becoming deeply embedded in
global manufacturing supply chains. No economy has been left untouched.

India's concurrent economic emergence has greatly added to the scale and scope of the new wave of
globalization. While India has pursued a growth strategy more reliant on domestic consumption and
investment than China, nonetheless its success in exporting higher skilled "knowledge" services, such as
software programming has led to a stunning expansion of the scope of globalization.

Many American businesses large and small are thriving on the new opportunities created by breathtaking
growth of more than 9 percent for the two most populous nations in the world — along with strong growth
in other developing economies around the world — and the entry of hundreds of millions of consumers
into the middle class.
But other American businesses are confronting foreign competition at an intensity and scale they have
never experienced before. They are faced with the choice of moving over or moving up the value chain,
concentrating on functions such as R&D or marketing that have unique advantages here, or diversifying
their geographic base. In addition, many businesses in the services sector are confronting the reality of
low wage foreign competition for the first time, and that number will grow substantially over the next
decade.

While it may feel familiar, the current episode of global integration dwarfs previous episodes. An economy
with a labor force of 1.7 billion has been abruptly confronted with absorbing a labor force of 1.2 billion --
with wages as much as 90 percent lower. The entry of India and China amounts to a 70 percent
expansion of the global labor force. That is more than three times bigger than the globalization challenge
of the 1970s and 80s associated with the sequential advances of Japan, South Korea, and the other
Asian tigers.

Textbook economics would predict a squeeze on wage earners until capital and technology investments
adjust. Indeed, the data suggests inequality is once again on the rise in many of the world's richer
economies. In the United States, profits are capturing a larger share of income and wages are capturing a
lower share than at any time in the last 50 years.

The Role of Small Business in a Global Economy

As the most dynamic and flexible stratum of the economy, small business is on the front lines of this new
wave of globalization. As a microcosm of the overall economy, there is enormous diversity within this
group of businesses. Many small businesses are encountering unprecedented growth opportunities
associated with the new wave of globalization and are rapidly integrating into global supply chains.
Meanwhile, others are struggling to compete with low wage foreign competitors for the first time.

The old product life cycle model predicted that businesses would first grow and mature in their own
markets before moving overseas. But this linear model no longer fits the high tech, high speed, highly
global economy of today. It should come as no surprise that many entrepreneurs are identifying new
markets overseas early in their growth and quickly moving to explore them. It is well known to this
committee that small businesses account for 97 percent of all exporters and nearly a third of total U.S.
export value. In the wake of NAFTA, Mexico and Canada became the top two markets for small business
exporters in value terms. Now we are seeing record numbers of U.S. small and medium enterprises
(SMEs) making forays into China's market with the result that China is now the highest growth market for
SME export transactions.

Because they are so often on the front lines of globalization — both in taking advantage of opportunities
and in facing adjustment pressures — small businesses have a disproportionate stake in the policies
affecting globalization. But by the same token, small businesses face higher transactions costs relative to
their size as they venture abroad and as they seek to influence the policy environment in comparison with
large companies and especially multinationals.
On the export opportunity side, small business has an enormous stake in the establishment of transparent
trade and investment rules — and in their enforcement. Most small businesses simply do not have the
scale or resources of the major multinationals to spend long months and even years identifying and
getting to know the foreign officials who have bureaucratic jurisdiction over their exports and investments.
Nor do they have the internal resources to study the minutiae of widely varying trade and investment
provisions for each new market. As such, small businesses have a disproportionate interest in the
establishment of a clear rules-based system with clear enforcement of intellectual property rights,
nondiscriminatory standards, predictable customs procedures, and accessible distribution channels
whether direct or electronic. They also benefit from easily accessible export promotion services when
contemplating opportunities in unfamiliar markets.

Similarly, when an unanticipated surge of foreign competition causes injury to domestic producers and
their employees, small businesses may have less internal wherewithal to cushion the blow, so that
government remedies and adjustment programs become all the more important. But it may be difficult for
small businesses to secure relief in a timely and effective manner if the eligibility process is time-
consuming and daunting and there are high transactions costs to establish industry-wide injury, for
example.

Wherever small businesses find themselves on the spectrum of opportunity and adjustment, it is
important to emphasize that the vibrancy of our small business sector will remain a key comparative
advantage for the United States in the global marketplace. Rates of entrepreneurship remain significantly
higher in the United States than in other advanced economies — and this is especially true for so-called
"high expectation" entrepreneurship. America's sophisticated financial markets remain unequalled globally
in providing risk capital to high-growth potential entrepreneurs. The ease of starting up and expanding a
business are enormous advantages that are now recognized the world over through the annual
publication of the World Bank's Doing Business report. So as we think about how to help America's small
businesses thrive and adapt in an increasingly competitive marketplace, it is important to start from the
foundation of ensuring a favorable environment here at home.

Helping Small Business Compete Effectively

Maintaining America's preeminence in the global economy while supporting rising living standards and
easing adjustment to the bracing winds of global commerce requires a seamless web of forward-looking
policies — not a patchwork of uncoordinated policies that address yesterday's challenges. While the key
elements of an effective national competitiveness strategy are likely to be the same for businesses of all
size, programs within each pillar must be tailored to address the special challenges and strengths of small
businesses. A truly effective set of policies would include three pillars:

1. Investments in Competitiveness

Investments in 21st century education, innovation, and infrastructure will be critical to ensure that
America remains the most attractive economy in the world to produce high-value goods and services.
On innovation, this means increasing funding for basic R&D and prizes to reward innovation,
 sustaining a well-designed tax credit for innovative activity, and allocating research funding against
national challenges, such as energy and climate security. It means strengthening programs like the
NIST Manufacturing Extension Program, which supports the competitiveness of U.S. based
manufacturing by helping small businesses incorporate new technology and best practices. It also
means improving broadband access. These measures are particularly critical to those small
businesses whose core strength is as innovation incubators.

On education, it means improving the teaching of science and engineering and making these fields
more attractive to students through fellowships and industry linkages. While America will never win at
the numbers game, we can do a better job of systematically emphasizing innovation and problem
solving in our educational system mdash; skills where America must continue to excel in order to
remain at the commanding heights of the world economy. It also means improving America's
attractiveness in an increasingly competitive worldwide market for talent. Finally, attention must
extend to lifelong learning so that American workers can upgrade their skills as frequently as they are
likely to change jobs.

2. Strong International Rules

Small business more than any other segment depends centrally on the negotiation and enforcement
of strong, transparent international rules to compete effectively in foreign markets. U.S trade policy
can benefit small business not just by securing lower tariff and nondiscriminatory standards across
services, agriculture, and manufacturing but also by working towards customs procedures that are
predictable, fair, and not unduly burdensome, and improving intellectual property enforcement. It is
also critical that the U.S. work actively to prevent sustained exchange rate misalignments, such as
the undervaluation of the Chinese yuan.

While small business as a group may have disproportionately high interests in the enforcement of
strong trade rules, it is difficult for small businesses to actively monitor and seek to influence the
priorities of our negotiators. The special consideration that this committee has asked the agencies
responsible for trade negotiations, export promotion, and trade remedies to give small business is
thus entirely appropriate. The special financing provisions that are available to small business
through ExIm, OPIC, and SBA are also critical to help small businesses with more limited financing
options penetrate foreign markets.

3. Adjustment Assistance

For small businesses and their workers who find themselves on the front lines of the new wave of
globalization, strong adjustment programs are critical. Improving Trade Adjustment Assistance (TAA)
to better meet the needs of small businesses and their employees calls for making the time
consuming and excessively burdensome eligibility determinations faster and more automatic —
triggered for instance by sector-wide adjustment — and tied to globalization broadly, not just trade
agreements. Some of the changes under consideration in the context of TAA reauthorization this year
have important implications for small business. Given the importance of small business in the
services sector and as suppliers to large companies competing in the global marketplace, it is critical
to extend the coverage of TAA to the services sector and make the provisions for secondary impact
more effective. Improving TAA for firms so that adjustment policies are proactive and forward-looking
is also critical for helping small businesses to adapt and survive, as are rapid response programs for
community adjustment. TAA benefits should be flexible so that starting a small business becomes a
viable option for more dislocated workers. Finally, TAA should be strengthened to provide for
affordable health insurance during transitions and a flexible combination of income support during
periods out of work, wage insurance to cushion against significant wage losses during reemployment,
and training opportunities that are flexible, accessible and attuned to the marketplace.

As we navigate the turbulent waters of this new era of intensified globalization, America's vibrant
small business sector will remain a critical comparative advantage. Many of America's small
businesses will thrive as they take advantage of exciting opportunities in foreign markets, while many
others will face challenges as they confront competition from lower wage economies. Execution of a
strong national competitiveness strategy built on the pillars of innovation investments, trade and
currency rules, and adjustment assistance will be critically important for the small business sector. It
is important for policymakers to make sure the small business community is heard in the design of
these policies and special emphasis is placed on ensuring programs are accessible.

1. Introduction

The COSATU Central Executive Committee Lekgotla endorsed this document in May
2000. It aims to initiate a discussion in COSATU and the democratic movement as a
whole on the state of the transformation and our progress in taking forward the National
Democratic Revolution (NDR). This process should inform the development of
resolutions for COSATU’s Seventh National Congress.

The years since the transition to democracy in 1994

have seen fundamental shifts in the political economy
of South Africa. These shifts present new challenges
for COSATU and the democratic movement as a
whole. To address them requires reflection on the
basic trends in society and our strategies for pursuing
the National Democratic Revolution (NDR).

This document first reviews progress and setbacks in

achieving these goals since the transition to
democracy in 1994. In that context, it explores current
attempts to rewrite the aims of the NDR. Above all,
some groups want to redefine the NDR merely to
provide equal opportunities for all, irrespective of
race. This tendency would stop the NDR before it
 achieves more fundamental reconstruction and development toward a non-racial, non-
sexist society on the basis of democratisation of the state and the economy.

After considering these issues, the document explores changes in the balance of power, in
terms of the political arena, the nature of capital, international developments, the state
and the Alliance. Finally, it points to some implications for the development of
transformatory programmes by COSATU and the Alliance.

2. Assessing six years of democratic rule

The ANC-led alliance has, over many decades, deepened, refined and consolidated its
understanding of its fundamental strategic objective – a national democratic revolution.
Among the key programmatic statements of our understanding of the NDR are the
Freedom Charter (1955), the Strategy and Tactics document from the ANC’s 1969
Morogoro Conference, and more recently the RDP (1993/4). Each of these documents,
and many others that enrich the debate around the NDR, reflect the concerns and
limitations of the particular moment when they emerged. But they all share the following
core vision:

1. Democratising the State and Society, through participatory democracy,

ensuring greater consultation and openness. Strategies to this end must
focus on empowering working people, the poor and women by assisting
them with resourcing, organisational support, and information about
government. Otherwise, groups with more resources – big business and
the rich – will dominate consultative forums.
2. Meeting Basic Needs, with vastly improved social and municipal services,
housing and social security, especially for historically disadvantaged
communities. These programmes should raise living standards directly,
assist in establishing a more productive labour force, and help change the
dynamic of the family to liberate women.
3. Developing Our Human Resources, through the equalisation and
improvement of education, the implementation of a National
Qualifications Framework, and government support for arts and culture.
There should be ten years of compulsory education as well as a substantial
expansion in pre-school and adult basic education.
4. Building the Economy, above all by integrating reconstruction and
development. Key measures would democratise the economy by
developing new centres of economic power, especially in the state sector
and through other forms of collective and democratic ownership, as well
as small and micro enterprise. These new systems must empower black
people, especially women, on a mass scale. Strategies include land reform,
government direction of credit and investment, the restructuring of the
financial sector, and progressive trade and labour policies.
5. Progress since 1994

The 1994 elections were a watershed moment, representing an irrevocable break

with the past. With them, the democratic movement achieved a central aim of the
NDR. White minority rule was defeated and replaced by a national democratic
state based on the will of the majority of the people.

South Africa adopted one of the most progressive constitutions in the world, with
specific protection for the rights of workers and the poor. The constitution-making
process taught the historical lesson that unity of the progressive forces does not
require that the partners ignore their own principles. COSATU successfully
agitated for more progressive provisions and defended the interests of its
members.

The establishment of elected local governments was a further important step

toward true democracy. For the first time, South Africa has unitary cities and
towns, which should permit more equitable municipal services.

The new labour legislation was a major victory. Despite endless protest from
employers, the democratic state put in place legislation that defends workers’
basic rights and supports skills development. These laws represent a huge
advance, especially because discriminatory and repressive labour laws formed the
core of the apartheid system.

On the social front, the democratic state ended open discrimination in laws and
government services. State institutions could no longer impose racist or sexist
rules on the public, and school curricula were rewritten to meet the needs of
democracy. Government redirected the budget to improve services in historically
black communities. For the first time in South Africa’s history, it prioritised
services for the poor and not the privileged.

COSATU’s 1999 elections booklet, Why Workers Should Vote ANC, gives more
detail on the gains of workers and the poor after 1994. But progress in
overcoming historic oppression in the state and the workplace was limited by the
adoption, especially after 1996, of conservative fiscal, monetary and trade
policies. Economic strategies sought mostly to attract foreign investment. In the
process, they stifled domestic growth and undermined efforts to reconstruct the
economy and society.

Budget cuts combined with high military spending threaten to reverse the modest
gains achieved in the first term of the democratic state. They mean government
departments cannot afford many progressive policies. This has become obvious in
health, education, police and the justice system, land reform, public works and
 social security. It emerges in proposals to start charging children for schoolbooks
and in limitations on treatment for people with HIV.

The fiscal strategy combined with pressure from domestic and foreign capital to
initiate a strategy of cutting down on the public sector. It risked undermining the
state to the point where it would not have the power to carry out core strategies of
the NDR. In effect, it sought to minimise the capacity of the state while increasing
the power of management in the public sector (see Box 1 below).

Box 1. Restructuring for a minimalist, managerialist state

The process of minimising the state has taken place through cuts in the
budget and measures to downsize the public sector.

As the following table shows, since 1996/7 government spending fell

behind inflation, reducing the real power of the state. With the population
growing at over 2 per cent a year, the decline in spending per person was
even greater.
 1999/2000 –
billions of rand

% of total
expenditure

Real change,
1997/8 -
1999/2000

Education

47,800

20%

-9.0%

Health

29,900

12%

-3.4%

Welfare

19,700

8%

-2.0%

Police
To compensate for budget cuts, government agencies tried to bring in private
capital by raising fees to the public and entering partnerships with companies.
This strategy gave capital more influence over government.

Restrictive monetary policies further undermined the aims of the NDR. They led
to extraordinarily high interest rates, apparently primarily to attract short-term
foreign investment. Throughout the 1990s, real interest rates stayed about 10 per
cent above inflation. Mostly for this reason, estimates put the cost of capital in
South Africa at close to 20 per cent a year, far above the international norm. High
interest rates restricted growth and economic restructuring. They had a
particularly harsh impact on small-scale producers and low-income homebuyers –
two groups that the RDP expected to spearhead structural change in the economy.

In 2000, the introduction of an inflation target of 3 to 6 per cent for CPIX (the
inflation rate if we take out interest costs) seemed likely to bolster restrictive
monetary policies. By the middle of 2000, this target required a decline in
inflation of over 2 per cent – which, if the Reserve Bank wanted to reach its
inflation target, could cause further hikes in interest rates, with disastrous
implications for economic growth and development.

Finally, the government did not articulate a clear industrial or trade policy to
restructure the economy toward greater equity and growth. There was no explicit
strategy to address the decline in mining and agriculture and grow manufacturing
and services. The Skills Development Act was one of the few measures that
pointed toward a more pro-active approach to development.

The government did establish a firm commitment to liberalising trade. To that

end, it reduced tariffs faster than required by international agreements. Inefficient
and ineffective Customs operations added to the problem. In the absence of
concerted measures to help producers adapt, these developments cost tens of
thousands of jobs.

The combination of restrictive macroeconomic policies and unrestricted trade

fuelled an investment strike. Investment remained far below the 25 per cent of
GDP needed for sustained development. Private investment actually fell 7 per
cent between 1997 and 1999. In the twenty years to 1990, only substantial state
investment programmes had stimulated private investment; by cutting down on
both the budget and state-owned enterprise, the government ruled out this
strategy.

As the government implemented conservative economic policies, massive job

losses occurred. The level of employment fell to that of the late 1970s, and
unemployment rose to almost 40 per cent. The rate of unemployment was highest
for black people - close to 50 per cent for African women overall, and in the
Northern Province and the Eastern Cape.
 The shift to conservative economic policies had important implications for
governance. Officials developed and implemented these policies (including the
GEAR itself, fiscal policy in general, and the determination on small-scale
enterprise in terms of the BCEA) with little consultation outside government or
even with Parliament. They could not afford to encourage inputs from the
traditional constituencies of the NDR – working people and the poor – because
that would lead to big changes in their proposals. Similar factors lie behind the
pressure to weaken NEDLAC, either by keeping issues out of it or replacing it
with forums that do not require negotiations. It is clear that government is not
willing to open economic policy to broader debate and consultation, despite
agreements to that effect in the Alliance and the Presidential Job Summit.

In sum, after 1994 the NDR made important advances in establishing a

democratic system, investing in human-resource development, and addressing
basic needs. But conservative economic policies threatened to reverse these gains.
On the one hand, they led to cuts in government services. On the other, to
maintain unpopular economic policies, government had to limit mass participation
in developing programmes and carrying them out.

6. The Alliance

The environment in which the Alliance is operating has changed greatly since
1994. We need to take the time to reflect on the implications of these new
conditions for each of our organisations. One partner - the ANC - is in
government, while the SACP and COSATU are not. In theory, this should mean
the Alliance is in power; in practice, COSATU and the SACP are not, since they
have little or no say in government policy. To understand the implications, we
here assess how the Alliance has functioned in the last six years.

After 1996, the Alliance did not go much beyond broad statements on shared
objectives, with limited influence on what actually happened in government. It
fundamentally failed to develop a strategy to implement the RDP. This space was
utilised by capital and conservative forces within the state to drive through their
programmes. The failure of the Alliance to function properly often forced
COSATU to compete with other formations in society to influence the ANC
government. This is untenable and against the spirit of the Alliance.

Between 1996 and 1999, the Alliance fell into a reactive mode of managing crisis
and resolving tensions when they grew too great. It did not assert hegemony over
policy development within government. Too often, it was used instead to get the
democratic movement to agree to policies that originated within the bureaucracy
or business. Government presented major proposals, especially on the economy,
as faits accomplis, in some cases with no effective consultation. It expected the
Alliance partners automatically to understand the constraints it faced and the
compromises made.

There was widespread expectation that the unity of purpose achieved in the
campaign for the June 1999 elections would initiate a qualitative improvement.
COSATU expected an Alliance agreement on a new style of governance, with
ANC and Alliance structures as the driving force behind the formulation,
implementation, and monitoring of government policies. To this end, it thought
the Alliance would sit down and thrash out a programme for social transformation
based on the RDP and the Election Manifesto. This expectation was consolidated
by the release of a joint document called Accelerating Change: A Framework for
Our Second Term of Governance.

As time has passed since the election, these hopes have receded. The Alliance is
back to its old mode of mediating disputes. It is increasingly marginalised from
strategic decisions. Government has not even tried to implement much of the
ANC Election Manifesto.

The Alliance has still not held discussions to reflect collectively on the way
forward. The summit scheduled for August 1999, which was to focus on the
unemployment crisis and develop a programme for the next five years, has been
postponed indefinitely. An extended meeting of Alliance National Office Bearers
(NOBs) in December 1999 attempted to establish a political centre to ensure more
constructive and pro-active strategies. It set up a new structure comprising the
Secretariat of the Alliance and the ANC Presidency. But almost a year later, this
structure has not yet met.

The relationship between government and the Alliance is dangerously undefined.

There is no mechanism to ensure that government implements Alliance
agreements. Some in government seem uncomfortable about consulting the
Alliance partners on major policies. They adopt the refrain that "government must
govern." In part, this slogan reflects the reality that consultation cannot delay
decisions forever. But it effectively undercuts the principles of participatory
democracy. It may have four negative results:

1. It can lead to low-intensity democracy, where the people are reduced to

electing leaders every five years or so. That gives big business more
opportunities to influence government.
2. By imposing limits on consultation, especially with the main
constituencies of the government, it leads to less well-informed policy-
making.
3. It reduces popular buy-in on policies, making it hard to mobilise
communities and mass-based organisations to implement them. It then
becomes harder to carry out policies in the face of resistance from
opponents of the NDR.
 4. It supports a Western-style democracy where parties do not have clear
principles but instead align their election manifestos with public-opinion
surveys – and after the elections, ignore them at will.

Against this background the Alliance is heading toward a crisis. The reasons
include the failure of its structures to function effectively and consistently and the
absence of a link between Alliance agreements and what is happening in
government. Yet the Alliance partners agree that the major shortcoming in the
post-1994 period was the failure to drive policy and processes of governance.

7. The ANC and Government

A critical obstacle to the work of the Alliance is the lack of decisive control by the
ANC as a party over policy development and implementation by the state. As a
result, the Executive is isolated as the dominant voice in deciding on government
actions. This situation set the stage for the shift to the right in economic policies
after 1996.

Under the inherited system, Cabinet members have virtually total control over
their portfolios. Although Cabinet is supposed to act as a collective, it rarely
requires changes in departmental measures. Cabinet members do not have to
consult within the ANC or the Alliance on policy proposals. Moreover, the ANC
as a party has neither its own technical expertise nor policy-making processes that
involve its mass base. That makes it difficult for the ANC to assess official
proposals or offer alternatives.

In these circumstances, public-service management has largely determined

national policies, often with little consultation with stakeholders. Indeed, many
policies now espoused by government - including massive military procurement,
privatisation and fiscal policies - were first drafted in the bureaucracy long before
1994.

True, after 1994 many progressive officials joined government. But many have
been separated from the democratic movement by the dogma that officials must
be apolitical. Their isolation made them vulnerable to lobbying by capital, past
beneficiaries of apartheid programmes, and foreign donors. In contrast, in
countries like the U.K., Ministers have teams of openly partisan policy advisors to
design and monitor their departments’ policies.

Despite these structural problems, many Ministers and high-level public servants
are still trying to realise the basic goals of the NDR. But budget cuts, lobbying by
the beneficiaries of apartheid programmes, and resistance from old-line
bureaucrats hamper their efforts.
 Democratic government requires creative tensions between the executive and
parliament on the one hand, and within the Alliance on the other. These debates
are necessary for a vibrant culture of debate and accountability. Otherwise,
unmanaged divisions between the executive, the legislature and the mass base of
the ANC may cause fragmentation.

In short, after 1994 the Alliance did not establish hegemony over policy making
and implementation. That meant that government did not act consistently to
implement the RDP, and ultimately permitted a retreat to the right on economic
policy.

3. The conceptual framework of the NDR

The NDR arose as a reaction to the way colonial capitalism distorted South Africa’s
society and economy. That system combined national, gender and class oppression. The
NDR addresses this heritage by demanding radical moves toward democracy and equity
in both the state and the economy.

The national liberation movement, the ANC and its allies, characterised the South African
system of colonialism as a system of "internal colonialism" or "colonialism of a special
type." In every important respect, the features of classic colonialism marked the relations
between the black majority and the white minority. The South African situation was
special only because there was no spatial separation between the colonising power (the
white minority state) and the colonised black people.

While less obvious than racial tyranny, gender oppression was central to apartheid.
Apartheid laws set out limited and impoverished roles for African women. In particular,
as they enforced migrant labour, they defined the role of African women in society and
the economy. At the same time, the colonial system in South Africa, as throughout the
continent, greatly intensified the gender oppression found in pre-colonial systems. The
combination of colonial and customary oppression denied women basic social and
economic rights in the family and the community. Many women were barred from living
in cities, owning land, family planning, inheriting, borrowing money or participating in
political and social struggles. The system led to widespread abuse of women, both inside
and outside the family.

The racial and gender form of colonial domination masks its underlying economic logic -
the exploitation of the black working class. Race and gender oppression are not about
mere prejudice, but ultimately about using power and control in the interests of capital.
The colonial system introduced the pass laws, hut taxes, influx controls, single-sex
hostels and a plethora of other oppressive measures, which were perfected under
apartheid. They worked to force the indigenous people off their land and establish the
migrant labour system, with its oppressive gender roles, in order to generate cheap black
labour. That system supported capitalist accumulation, especially on the mines and farms.
(1)

It follows that apartheid was not opposed to capitalism, as business often claims. Rather,
it was the form capitalist accumulation took in our colonial setting. Attempts to separate
apartheid and capitalism ignore the fact that capital in South Africa grew out of the
expropriation of land and labour power by the armed might of the colonial state.

Under apartheid, the dominant centre of capital became an interconnected group of huge
companies based in mining and the related financial sector. Directly and indirectly, these
companies command most investment. To this day, Anglo American controls over half of
the assets on the Johannesburg Stock Exchange, while four banks own most of the
financial sector. These giants worked closely with state capital in the parastatals, which
gave them critical support in the form of energy, credit and infrastructure.

In sum, the NDR represented a united response to the common subjugation faced by the
majority of South Africans, which joined class, race and gender oppression. This history
shaped its main aims and objectives.

1. Nature of the NDR

The form of oppression prevalent in South Africa meant that the fundamental
objective of the NDR is the liberation of black people in general and African
people in particular from national domination and economic exploitation. In this
context, it must address the particular forms of oppression faced by women.

The NDR is national in the sense that it unified a broad spectrum of class forces
to defeat oppression. It is democratic in that it seeks to replace an undemocratic
system of white minority rule and construct a popular democracy in which people
have a say in shaping their destiny. It is revolutionary because it aims to
transform society in favour of the working class and the broader democratic
movement.

In political terms, the NDR’s radical democracy includes both representative and
participatory democracy. The NDR is not about low-intensity, formal democracy -
the right to vote in periodic elections. People must participate in every stage of
decision-making that affects their lives. Our democracy must deliberately open
the space for the majority of the people to participate directly in the
transformation process and shape policies geared towards uplifting their lives.
That means transforming the relationship between government and the people,
and transforming the relationship between the Alliance and government
structures.

Popular participation should not be conceived as a burden on democracy, creation

of dual power, or an obstruction to effective governance. Rather, it is a critical
instrument in breaking the monopoly of the former ruling block. The experience
of the last six years demonstrates that without the countervailing power of the
progressive movement, people’s representatives become vulnerable to pressure
from the reactionary forces.

Radical transformation of society is essential to ensure that the bulk of the

oppressed majority benefit from liberation. As the ANC 1969 Strategy and Tactics
Document emphasises,

"In our country – more than any other part of the oppressed world - it is
inconceivable for liberation to have meaning without a return of wealth and the
land to the people as a whole. It is therefore a fundamental feature of our strategy
that victory must embrace more than formal political democracy. To allow the
existing economic forces to retain their interests intact is to feed the root of racial
supremacy and does not represent even the shadow of liberation."

As the following table suggests, in its economic and social policy, the NDR
essentially embodies a radical social democracy tailored to meet the needs of the
majority of South Africans. It is not socialist, because it accepts the continued
existence of large-scale private capital (2). But it cannot afford to let the mining-
finance centre continue to dominate the economy and society. To succeed, it must
build up new sites of economic power. To that end, it must strengthen the public
sector and support other forms of social capital such as ownership by organised
labour and co-operatives, as well as small and micro enterprises. These new
relationships must increase the power of the historically oppressed majority –
black people, and especially black women.

The NDR also aims to improve income distribution and eliminate poverty through
a qualitative improvement in government services and social security for
historically disadvantaged communities. This process should help change the
position of women in the family by reducing the burden of household labour and
giving them new productive resources.

The NDR requires the use of state power to transform economic power and uplift
communities over time. But delays in restructuring of the economy have let
resistance by capital undermine it.

Specifically, in a pattern found throughout Africa, the state has had obtain funds
primarily from the rich – ultimately, from capital itself – through taxes and
borrowing. Yet the centres of capital do not see greater economic or social
equality as in their own interests. They have reacted by lobbying for cuts in
government spending and activities, opposing policies aimed at democracy and
equity, and avoiding new investment and job creation.

Table 2: Social and economic aims of the RDP

 Situation in
South Africa Radical social
today democracy Socialism
Owner- Domination of the Continued private The state and other
ship economy by inter- ownership of forms of collective
linked mining and substantial parts of ownership dominate
finance interests; large-scale large-scale production
extreme inequa- production, but a
lities in wealth; stronger public sector
co-option of some and other forms of
black leaders into collective ownership
big business as well as SMMEs
Income Improvements in Expand social Collective ownership
distribu- social security and services and social as the basis for
tion government security plus large- equality in incomes
services for scale job creation and wealth plus job
majority largely through industrial creation; expanded
stopped by budget policy, public social services,
cuts; huge job investment universal social
losses cause rising programmes, vibrant security and skills
inequality SMMEs and skills development
development
State Low-intensity Open government, Democratic social
democracy (3) mobilising mass- organisation, under the
based organisations to leadership of the
design, implement working class, based
and monitor policies. on popular democracy
The aim is a people- and social ownership
centred, people- of the means of
driven society production (4)
Resour- Restrictive fiscal Expansionary fiscal State owns productive
cing of policy with lower, and monetary policies assets, and funds
policies less progressive and more progressive social security and
taxes taxes services from
enterprise revenues.
Risks Resistance by poor Rising government Attacks by national
and ob- majority; debt; resistance by and foreign capital
stacles persistent existing centres of may undermine the
economic capital leading to economy and the
stagnation investment strike and ability to maintain the
pressure to reverse system
policies
2. Struggles around class, race and gender in the NDR

In resisting apartheid, the democratic movement forged broad alliances that

included at least fractions of classes beyond the working class. The NDR is the
product of those alliances, which reflected the common oppression and
deprivation of all Africans, and especially African women. With the achievement
of political and human rights in 1994, however, class differences within the
majority have grown, and the alliances that led to democracy have suffered new
strains.

As a result of these developments, the position of the working class in the NDR
has come under attack. Opponents argue either that the NDR is a waste of time
and a detour from class struggle, or that it does not require leadership by the
working class. The first approach ignores the realities of power in South Africa;
the second misrepresents the central social, economic and political role of labour.
To assess these arguments, we first define the relationship between the class
struggle, race and gender in the NDR.

3. Class struggle in South Africa

By class struggle we mean the battle between contending class forces for control
and ownership of the means of production. The concept of class defines social
groups in terms of their relationship to the means of production and consequently
their role in the economy. In any class society, the major class distinction lies
between those who both own and control the means of production, and the "non-
owners" who must work for them in order to earn a living. The contest of these
classes for economic, political and social power led Marx and Engels to conclude
that "the history of all hitherto existing society is the history of class struggle."
(Selected Works, p. 35)

The possibility of class alliances arises where in addition to the dominant classes,
other classes exist, such as peasants or intellectuals. It may also emerge because
no class is fully homogenous. In each of the dominant classes there are "fractions"
with divergent interests and strategies. For instance, in South Africa today, the
capitalist class broadly comprises those who own and control the means of
production. But within that class, different perspectives on social and economic
strategies vary by sector (mining or manufacturing, for instance), the race and
gender of management, and the scale of production.

In any society, the specific form of the class struggle accords with its concrete
conditions. That means that the content of class struggle does not remain fixed in
perpetuity. Nor can it be confined to those rare moments when the attainment of
socialism is on the immediate agenda. In most periods, the class struggle takes the
form of battles to protect workers’ direct interests, combined with campaigns for
broader social and economic transformation. In most periods, these general
campaigns require an alliance with other classes and fractions of classes –
typically small-scale farmers and entrepreneurs, and professional groups inside
and outside of government.

A class alliance for progressive ends does not mean the class struggle has faded
into the background. Lenin castigated the idea of a "pure class struggle." Such a
position, he wrote, would expect every social revolution to produce two neatly
labelled armies:

"So one army lines up in one place and says ‘we are for socialism’ and another,
somewhere else, says, ‘we are for imperialism,’ and that will be a social
revolution!.. Whoever expects a ‘pure’ social revolution will never live to see it.
Such a person pays lip service to revolution without understanding what
revolution is." (Collected Works, Volume 22, pp.355-6)

In South Africa, the history of oppression on the basis of race and gender created
the conditions for a broad alliance of all oppressed people. In this alliance, the
working class played a central role. But apartheid created almost equal
deprivation of wealth and rights across the classes within the black community,
providing the grounds for unity with small-scale farmers and entrepreneurs,
young people and students, women and professionals. Before 1989, at least, there
were few class divisions in objective terms within the liberation movement. Class
conflict in the democratic movement emerged more in political disagreements,
less in economic power, income or lifestyle.

With the achievement of political democracy, the unity of the majority that led to
national liberation faces new challenges. On the one hand, some sections of the
oppressed are able to join the capitalist class, both by using positions in the state
and by co-option directly into big business. On the other, once political freedoms
have been achieved, underlying differences in long-term economic and social
interests emerge. These class dynamics means that some in the movement have
already met their basic interests, and argue the NDR is completed.

To understand the changes since 1994 calls for an analysis of shifts in class
formation. There has been no basic change in the nature of the dominant fraction
of capital, which remains centred in mining and the financial sector. But new
classes have emerged among those oppressed under apartheid. Above all, a few
have managed to progress rapidly in business and the state machinery, in some
sectors achieving considerable economic power and political influence. For the
majority, in contrast, the period after 1994 brought a range of freedoms and some
social services, but changed little in their economic position. The job-loss
bloodbath, particularly for low-paid workers but more recently also for higher-
skilled people, undermined many of the gains won by labour. (See Box 2 below).
 In these circumstances, it becomes important to define more clearly the role of the
working class in the NDR.

Box 2: Data on class formation in the 1990s

Class formation in the 1990s reflected two contradictory forces: the loss of
hundreds of thousands of jobs in mining, agriculture, manufacturing and
the public sector; and the increase in high-level opportunities for blacks
and women with the necessary competencies.

A study of income distribution by WEFA Southern Africa shows that the

poorest 40 per cent of black households saw a drop of 20 per cent drop in
income between 1991 and 1996. This decline reflected, above all, the fall
in formal employment. In the same period, the proportion of black
households among the richest 10 per cent of households in South Africa
more than doubled, from 9 per cent in 1991 to 22 per cent in 1996.

In the same period, Reserve Bank figures show that the share of labour in
the national income fell steadily. By implication, in the aggregate the rise
in employee incomes lagged behind the growth in productivity, increasing
returns to capital. The relative drop in labour incomes continued a trend
that lasted from 1992 until 1998. In 1992, labour received 57,5 per cent of
the national income. Its share fell to 54,8 per cent in 1997, although it rose
to 55,4 per cent in 1998.

According to the October Household Survey, between 1996 and 1998 the
economy lost 300 000 formal jobs, and gained about the same in the
informal sector. But job security and earnings in informal employment are
far lower and less stable than those from formal work. Meanwhile, workers
in formal employment have been subjected to the intensification of
exploitation through casualisation, piecework, outsourcing and other
repressive measures. The working class has therefore suffered substantially
from the restructuring of the economy.

At the same time, the October Household Survey also suggests, although
Africans experienced a fall in overall formal employment, they were able
to retain more skilled positions. Most job losses affected elementary
employment. The main increase in employment for Africans, especially
African women, occurred in the professions. This pattern largely reflected
the increase in employment of teachers and nurses in the period. Between
1995 and 1997, the share of African employees reported in elementary jobs
declined from 40 to 35 per cent, with a compensating increase in more
skilled positions.

A similar pattern emerged for women. Employment appears to have

declined more slowly for women than for men overall, especially in
elementary jobs. This probably reflects the relative stability of domestic
labour. But women saw an increase in professional positions.

Black economic empowerment has failed to dent South Africa's highly

concentrated ownership to create new centres of economic power. Instead,
it has been limited to advancing a minority of well-connected black
individuals, mostly using white capital. It is still very much concentrated in
the mining-finance complex. One study suggests that Afrikaner capital was
the main beneficiary of economic restructuring, reflecting the maturation
of this fraction of capital. In contrast, the share of black-controlled
companies in the Johannesburg Stock Exchange dropped from 3,8 per cent
in January 1999 to 2,9 per cent in March 2000.

4. Attempts to take the class struggle out of the NDR

As a result of developments in class structure, the position of the working class in

the NDR has come under attack. This attack has taken two forms - the argument
that the NDR is a waste of time and a detour from class struggle, and the
contention that the NDR is not a project of the working class, but rather aimed
only at national liberation or the poorest of the poor. These positions essentially
converge in the demand that the state support black business in both the private
and public sector, and drop measures to transform society more fundamentally.

This attempt to reinterpret the NDR goes hand in hand with the emergence of a
new ideological current that represents the interests of capital and conservatives
across the political divide. This new view – which the SACP defines as "afro-
neoliberalism" (5) - represents the interests of capital and conservative forces
within the democratic movement. The neo-liberal variant spearheads the
"modernisation" and "liberalisation of the economy," while the Africanist variant
articulates the sectoral interests of an emergent/aspirant black bourgeoisie by
inserting black economic empowerment into the neo-liberal discourse. This
nascent ideology is a reflection of the realignment of class forces whereby white
capital works to co-opt elements of the black bourgeoisie, both inside and outside
of the state.

A central part of the afro-neoliberal argument is that the organised working class
is in fact a labour aristocracy. By extension, the class struggle will only benefit an
already privileged minority. Instead of ensuring benefits for the majority, then, the
NDR should seek to uplift only the poorest of the poor – essentially small-scale
entrepreneurs in survivalist enterprise, including peasants, and the unemployed.
The belief that organised labour forms a privileged group derives in part from the
fact that unions are particularly strong in manufacturing and the public service.
Employees in these sectors fall into the top third of income-earners in the labour
force as a whole. This view ignores the fact that unions are strong in other sectors,
such as mining, that have relatively poor conditions. In any case, better conditions
in organised industries resulted from long years of struggle. The "labour
aristocracy" view also arises in part from a (mistaken) impression that unions
have blocked transformation in the public service. (6)

The perception that organised labour forms an aristocracy threatens both political
and economic mobilisation to transform the economy.

In economic terms, measures to equalise incomes by taking from the organised

working class merely distribute resources from the poor to the very poor. The top
10 per cent of households in South Africa control over 40 per cent of the national
income, and a far higher share of the national wealth. In contrast, the next 40 per
cent of households – which includes virtually all of organised labour – receives
only its proportional share of national income (that is, around 40 per cent) (7).
Then, through remittances to rural areas, workers provide critical support for even
poorer households. Unemployed people depend on support from their employed
relatives.

In political and social terms, focusing on the poorest at the expense of workers
effectively deprives the NDR of coherent progressive leadership. Marx and
Engels saw the working class as the motive force for change, not because it was
the most oppressed and poor, but because of its strategic position in large-scale
production, which supported strong, progressive organisation. Even now, the
organised working class provides a critical basis for maintaining the power of the
Alliance in all areas of society, including through the elections.

Efforts to deny the central role of the working class end up by stripping the NDR
of its progressive content. In essence, they would reduce reconstruction and
development to:

Using state power to give more opportunities to the minority of black

people and women with the skills and luck to enter the centres of state and
private capital, and
Promising – and sometimes delivering – improvements in services to
remote rural areas. But the poorest of the poor have, by definition, little
political or social power. Experience elsewhere in Africa suggests, then,
that unless they have the support of the working class, government will
not meet its commitments to them in the longer run.

In short, in the current conjuncture, while the democratic state still represents the
class forces originally allied against apartheid, it cannot seek merely to mediate
between class interests. Rather, it must implement measures that will ensure
 transformation biased towards the working class and the poor. The NDR is not
about redistribution from the "poor" to the "poorest" but from the rich to the poor.
It is about democratisation of economic and social power on a broad scale, which
needs workers as the best organised class.

2. The NDR and the socialist transformation

"The wealth of the other explains the poverty of another" (Adams Oshiomhole:
Nigerian Labour Congress President)

Socialism is a transitional social system between capitalism, as well as other

systems based on class oppression and exploitation, and a fully classless,
communist society. It is characterised by four core features: democratisation;
equality; freedom; and the socialisation (social ownership) of the dominant part of
the economy.

For COSATU and the SACP socialism is not just a vision, an ideal located in
some distant future that we can only dream. We seek actively to build capacity for
socialism, momentum towards socialism, and elements of socialism, here and
now.

South Africa has a relatively advanced capitalist economy and proletariat. A

democratic and legitimate government is in power and enjoys wider popularity
among the electorate. The existence of a Communist Party with a rich history of
struggle is also a source of strength. As the NDR matures, depending on the
trajectory that the democratic movement pursues, the conditions for a socialist
transformation can be increased.

Some observers argue that, because the NDR does not aim explicitly to socialise
the commanding heights of the economy in the short run, it is a detour from the
struggle for socialism. This argument ignores the fact that the NDR must create
the social, political and economic preconditions for the transition to socialism. It
overestimates the ability of the working class succeed without its traditional allies.

In addition, capitalism has considerable resilience and hegemony in the current

conjuncture. Thus, it survives even in societies that seem ripe for social
revolution. Internationally, after all, the capitalist system has failed to resolve
basic human problems. It is marked by the co-existence of growing concentration
of wealth and technological progress with deepening poverty and inequality. For
the overwhelming mass of people, the reality is far removed from the idyllic
picture drawn by free-market ideologues. Yet no serious rupture has occurred.
Socialists must collectively try to understand this paradox.
These realities define the main form and content of the workers’ struggle at the
present historical moment, as well as the alliances needed to advance working
class objectives. For the NDR as we understand it to succeed, the working class
has to maintain broad support for the progressive agenda. By rejecting alliances
and trying to go it alone, the working class would surrender leadership of the
national struggle to capital.

In these circumstances, developments that take the name of the NDR will not
automatically further the interests of the working class. Labour must use its power
to ensure that other forces do not strip the NDR of its radical content. In
particular, the black middle and upper classes who take part in the broad
liberation alliance jostle for hegemony and attempt to present their narrow
interests as benefiting all Africans.

In practice, the NDR prepares for socialism in several ways.

Democratisation of the state reduces the power of capital and gives

working people more strength to bring about a socialist transformation.
The provision of basic amenities such as health, education, water and
social security irrespective of the ability to pay rolls back the market and
limits the commodification of production that is typical of capitalism.
Democratising the economy weakens the stranglehold of the mining-
finance complex and strengthens socialised capital, including through the
state and co-operative sectors.
Taking progressive positions in international forums helps shape the world
climate needed to build socialism over time.

Over the past six years the democratic state has begun to address some of these
issues, sometimes in an inconsistent and contradictory manner. But the gains
achieved in the first term of governance are under threat from a concerted
campaign by capital to subvert the struggle for transformation and wean it of its
radical content.

Socialism is not a book exercise. Therefore, workers’ and community struggles

must be woven into a socialist strategy. They should help build a broad coalition
of forces for socialism. As a matter of importance, the ANC and the democratic
government must be integrated within these struggles. To leave them out would
give away the vehicle and leverage to build the momentum for socialism. That
means labour must push consistently for progressive strategies to implement the
NDR.

The Balance of Power

"A proper understanding of a given balance of forces is critical in defining the tactics
that the liberation movement should adopt at each stage of transformation. To ignore this
would be to fall victim to voluntarism and a revolutionary militancy that has nothing to
do with revolution. Such ‘populism’ can in fact lead to the defeat of the revolution itself…
On the other hand, a fixation with balance of forces as an immutable phenomenon results
in malaise or statis, and it can in fact become the swan song for indecision, and even
reaction, to preach caution where bold action is required. Objective circumstances are
not carved in stone. Any balance of forces is dynamic, influenced by changing
endogenous and exogenous factors." (ANC, Strategy and Tactics, 50th National
Conference, p. 4)

The ANC won both national elections by huge margins. That provides a strong popular
base to carry forward social transformation. But we need also too look at the balance of
forces in social and economic terms. To that end, we here consider the nature of capital
and the state, the international situation, and some of the strategic challenges facing
COSATU.

1. The second democratic election

The second democratic elections in June 1999 gave the ANC an overwhelming
mandate to continue with social transformation. The massive electoral victory
opened the space for implementation of a far-reaching transformation programme.
Armed with an almost two-thirds majority, intense popularity among the
electorate and international support for the struggle against apartheid, the ANC-
led government has considerable power to counterpoise to that of the opponents
of the NDR.

Despite attempts to frame the elections in terms of reactionary issues such as

capital punishment and abortion, the vast majority voted for social transformation.
Factors behind the ANC victory include:

Its popularity amongst a large section of the population;

Organisational work by the entire Alliance, with COSATU shop stewards
playing a central role; and
The Elections Manifesto, which called for the acceleration of social
change, with more effective strategies in areas such as the economy, job
creation and crime.

The massive ANC electoral victory left the opposition benches in disarray. The
National Party (NP) suffered major setbacks nationally and a plunging majority in
the Western Cape. Marginal improvement in the position of the Democratic Party
(DP) was at the expense of the NP. The IFP’s ambitions of being a national force
have failed to materialise. It barely retained its majority in Kwa-Zulu Natal. The
new parties such as the UDM have no hope of shaking the ANC majority. The
 UDM can no longer claim to be a major challenger. The PAC also saw a severe
drop in its parliamentary fortunes, and AZAPO barely managed to scrape a single
seat.

The electoral victory removes the threat that opposition parties will be able to
block progressive measures through the legislative process. Still, they will
certainly profit from indecisiveness or a failure to drive through a progressive
agenda.

In particular, the DP represents two realities, which are both congruent and
contradictory. In some respects the DP has moved into terrain into which the NP,
hampered by its shameful past, dares not tread. Thus, for electoral purposes, it has
shamelessly nurtured the racial phobias of white and other minority
constituencies. At the same time, it advances a fundamentalist neo-liberalism,
which favours the formation of a "non-racial" new elite, but will perpetuate
racialised poverty and unemployment, and deprive workers of hard-won rights.

The electoral victory is a major source of strength. But power over the state does
not guarantee the NDR. Economic power still resides primarily with conservative
elements of capital.

2. The counteroffensive: The role of capital

The economy - and to a large extent the discourse on economic policy - is still
dominated by the mining-finance complex. It has been backed up by international
capital, including the multilateral institutions. Their political agenda is to wean the
NDR of its radical content. Indeed, the GEAR is a milder version of the Growth
for All economic strategy sponsored by the big business complex in 1995.

The disproportionate power of the mining-finance complex has important

implications for economic development and interactions with business.

First, the mines and big banks see themselves primarily as part of
international capital. Faced with a domestic crisis, they seek foreign
investments and list abroad, rather than diversifying the local economy. In
contrast, in countries where economic power centres in manufacturing and
agriculture, as in South Korea, capital has proven more willing to accede
to vigorous policies to restructure the economy.

Second, the dominant segments of capital tend to be conservative on

labour issues. The mines still have a history of oppressive working
conditions, with a high degree of migrant, often foreign, labour. The
financial institutions do not employ large numbers. They often maintain an
 ideological commitment to reactionary labour practices that larger
employers have had to outgrow.

Finally, the Chamber of Mines and the big financial houses dominate as
spokespeople for business. They employ more economists and
communications experts than other companies. They do not, however,
articulate the views of more progressive sections of capital.

Despite the adoption of a business-friendly macroeconomic strategy and a host of

incentives to stimulate investment, this part of capital has refused to reward
government and the country with increased investment or job creation. On the
contrary, it demands further liberalisation of the economy and the reversal of
gains made by labour laws. Through continual lobbying of political leadership
and high-level officials, as well as through the media, it tries to build support for a
conservative consensus, and bully those who propose alternatives. Its attack tries
to splinter the democratic camp by isolating those who propose radical measures
and showering praise on those that big business considers "pragmatic."

The concessions given to capital since 1996 suggest its leverage over the
democratic state. Since the adoption of GEAR, business confidence and
bargaining strength has increased.

It would be folly on our part, however, to paint business with a single brush.
There are significant differences between fractions of capital, based on sector,
size, and race. Some of fractions of capital – particularly manufacturing industry
and small-scale producers – have suffered greatly from the current forms of
economic adjustment, including trade liberalisation, restructuring the state and
ending subsidies, and stringent fiscal and monetary policies. But the fact is that
the dominant mining-finance complex has largely drowned out or stifled the
voices within business that question the conservative economic strategy.

3. The state

Analysis of the balance of power requires an understanding of who controls

policy development and implementation within the State. The fundamental task of
a revolution is to capture state power and use it to transform economic and social
power relations.

The critical role of State power in the NDR means that we have to reflect on the
nature of the State. In Marxist theory, the State is ultimately an instrument of the
ruling class. It emerges from the society, but presents itself above the society. It
defines certain class interests as the national interest, and labels those interests
that do not conform with its programme as sectionalist, reactionary, and so on.
In transitional periods – for instance, with liberation from colonial rule, in South
Africa and the rest of Africa - political and economic power may diverge. In these
periods, the new masters of the State can intervene to change the nature of
economic ownership and power.

This process is risky and uncertain. The democratic State is itself a site of
contestation between capital and the progressive forces. Capital exerts tremendous
pressure to modify the objective interests and ideology of the political leadership
in its own interest. If it succeeds, it establishes a unified ruling class where the
State machinery aims primarily to advance and protect the interests of capital.

For this reason, we must maintain a strong progressive movement inside and
outside the state. The state must continuously be put under pressure to prevent
one-sided pressure from capital.

In much of post-colonial Africa, the contestation over the state led to the
emergence of a bureaucratic bourgeoisie. We define the bureaucratic bourgeoisie
as a class that uses its control of the resources of the state – both assets and the
bureaucracy - to maintain its own power and privileges. Ultimately, the interests
of the bureaucratic bourgeoisie lie in stronger social, economic and ultimately
political links with private capital.

In effect, in the rest of Africa, colonial rule made it almost impossible for Africans
to take part in capital accumulation. After colonialism, then, the new bourgeoisie
emerged largely amongst those could use state power to catch up.

In South Africa, under apartheid, government leaders and top officials were
closely linked with big business, despite differences on tactical issues. The
management of state-owned enterprise, in particular, formed an integral part of
capital, with a host of common economic and political interests. But the top
officials in the bureaucracy were also part of the ruling class, with social, political
and economic linkages with white business.

With the transition to democracy, this situation changed. Our state today can be
described as a national democratic government presiding over a largely
unreconstructed state machine in a capitalist system. Its task is to restructure both
the state system and the economy. In principle, the Alliance consensus is that the
NDR requires an active, interventionist developmental state biased towards the
interest of the working class and the poor. In practice, as discussed above, this has
not happened. Instead, since 1996 budget cuts and restructuring toward a minimal
state have undermined government’s capacity.

Various factors could lead to the emergence of a new bureaucratic bourgeoisie.

Capital launched massive assaults on ANC cadre in government. It used

two main weapons – vicious public attacks on progressive measures,
 combined with endless and intensive lobbying, wining and dining, and
even corruption in order to sway individual leaders.
In this context, inadequate systems to ensure Executive accountability to
the Alliance released government leaders from consistent oversight and
support. It created conditions for the politics of patronage and careerism -
a great threat to internal organisational democracy and the NDR, and a
critical source of strength for the bureaucratic bourgeoisie.
The Alliance did not end the inherited system of high incomes and
privileges granted top officials and other leaders in government. Public
service managers and Ministers now belong to the highest 1 per cent of all
income earners in South Africa. No limits were placed on leaders joining
business straight out of government or investing in enterprises, which
increases the potential for lobbying by capital. Senior officials still do not
need to declare their assets and investments.

Preventing the development of a bureaucratic bourgeoisie requires that collectives

exercise power, rather than individuals. High-level government personnel,
including officials, must be re-integrated systematically into the work of the
democratic movement. Ministers must have collectives of policy advisors who
understand the aims of the NDR. Public accountability and openness must ensure
monitoring and review. In the absence of consistent support of this kind, power
can and will corrupt.

COSATU public sector unions, as a detachment of the working class and

revolutionaries, must lead struggles to transform the state. The resolutions of the
2000 Service Delivery Conference help show the way forward.

In addition, to carry out the tasks of the NDR demands a high degree of planning
and co-ordination. Otherwise, the Government cannot redirect resources or
maintain a strategic line in the face of strong opposition from capital. But
government co-ordination has been undermined by various factors. The inherited
state did not have a clear co-ordinating centre except for the security apparatus.
No new co-ordinating centre has been established since the RDP Office was
closed. The creation of cabinet clusters aims to create more integrated policy
development and implementation, but it is too soon to judge its success.

In the absence of a dedicated planning agency, the Department of Finance has

expanded its power and competency as the only agency able to regulate other
departments. Leaving co-ordination to Finance has proven highly problematic.
After all, the department is charged with maintaining a stable fiscal regime, not
with overall development. It has tended to push restrictive fiscal policies at the
cost of improvements in services and economic restructuring.

In sum, the radical reorganisation of the state to ensure openness and democracy
remains far from complete. Instead, the inherited structures have tended to give
individuals excessive power, without ensuring that they function as a part of the
 democratic movement. The delegation of effective planning to the Department of
Finance has tended to put development needs in second place behind fiscal
restrictions. In these circumstances, the danger exists that a bureaucratic
bourgeoisie will begin to use the state in its own interests.

4. The international situation

Social transformation in South Africa is occurring in a hostile international

environment. The dominance of capitalism and neo-liberal economic orthodoxy
has imposed constraints on the ability of the democratic state to forge ahead. But
these constraints are not as rigid as capital makes out. Big business invariably
exaggerates the global constraints in order to blackmail the state into supporting
its policies.

The most important change in the international situation in the 1990s was the
entrenchment of the hegemony of the United States and the capitalist world
system, and with it the power of multinational companies. Europe and Japan are
still challenging the dominance of the United States, but remain behind it in
influence.

In this context, capital has the power and flexibility to find ever-cheaper sources
of imports and to force down trade barriers. It gained both politically and
economically from the opening of Eastern Europe and the former Soviet Union.
This situation has fuelled rapid growth in the U.S. and to a lesser extent in Japan
and Europe, at the cost of most of the developing world.

Box 3. Integration into the world economy after 1994

After 1989, the decline and end of apartheid opened the South African
economy to new forms of international trade. South Africa has always
depended on exports of gold and other commodities to fund imports of
fuel, machinery and consumer goods. In the 1990s, government lowered
tariffs and foreign companies showed new interest in South African
markets, forcing substantial restructuring in manufacturing. At the same
time, the stagnant gold price increased the pressure to find new sources of
foreign-exchange earnings.

Foreign trade picked up rapidly after 1994, with total receipts on exports of
goods and services growing twice as fast as in the previous four years.
Exports grew by 30 per cent in real terms between 1994 and 1998. Imports
grew even faster, but were still smaller in value than exports. Exports
climbed to 26 per cent of the GDP, from a low of 18 per cent in the late
1980s. Even in 1998, when overall growth slowed, exports and imports
grew by 2,5 per cent. The increase in exports occurred despite the gradual
decline in gold earnings over the period, from 4,9 per cent to 3,5 per cent
of the GDP.

Foreign investment grew substantially, but mostly took the form of short-
term and therefore dangerously variable inflows. Moreover, investment
abroad by South African companies increasingly offset capital inflows.

Net foreign investment (total capital inflows less capital outflows)

contributed 17 per cent of gross fixed capital formation between 1994 and
1998. If we subtract net repatriation of earnings from foreign investment,
the share of foreign capital falls even further, to 6 per cent of total fixed
investment. Loans from other governments (8) constituted about a fifth of
all foreign investment.

Three quarters of foreign investment in South Africa in 1994-’98 was in

portfolio form – that is, non-controlling investment through the stock
market and loans. These holdings could (and did) fluctuate greatly. In
contrast, despite economic policies geared to attracting foreign capital,
South Africa did not get much stable, direct foreign investment. Financial
crises resulted in 1996 and 1998. In 1996, capital outflows and the
consequent collapse of the rand led directly to the adoption of the GEAR in
an attempt to reassure foreign investors.

Multilateral institutions and donors essentially articulate the pressure of

international capital. Despite some wavering in light of recent world financial
crises, these agencies still have a clear agenda. They demand

Cuts in tariffs by developing countries, often without matching reductions

by industrialised economies;
Strong copyright protection for multinational companies, which raises the
cost of technology and medicine;
Restrictive fiscal and monetary policies, with a slim state and privatisation
of state-owned enterprise; and
An end to exchange controls.

The deepening of globalisation has produced perverse social outcomes in both the
developed and developing countries. It has increased the wealth and power of
industrialised countries and a few developing nations. But even in these countries
inequalities and insecurity have deepened. Moreover, massive and unpredictable
fluctuations in international capital flows leave all developing countries
vulnerable to economic crises, as in 1996 and 1998. Most people in developing
countries, and especially in Africa, are marginalised and impoverished.
 As the social damage of the new world order has become increasingly obvious,
resistance has grown from interests straddling different social strata around the
world - organised workers, the landless, environmentalists and students. The
conflicts around the World Trade Organisation meetings in Seattle in 1999
became a visible expression of this alliance in opposition to neo-liberal orthodoxy.
National battles, such COSATU’s campaign against job losses, the Korean
struggles against labour market reforms, and the fights by Brazilian and French
workers, point to a broader struggle against the dominance of the global economy
by capital.

What these struggles have lacked is a strong political centre. Most left-leaning
parties have shifted to a market-oriented approach, and the union movement,
although undoubtedly the best organised of the groups involved, does not globally
have a programme to lead these struggles. The motley collection of formations
seen in Seattle has not coalesced around a common platform. The relative
weakness of the left internationally means there is no overall leadership to sustain
the struggles of workers and other social groups. Without leadership and
resources, these campaigns could either be co-opted, or become a constant and
meaningless sideshow to the summits of global capitalism.

Within the international trade union movement, the ICFTU has emerged as the
dominant confederation of trade unions. It has affiliates spread throughout the
world, with Russian unions due to affiliate shortly. It has substantial resources,
mostly from affiliates in developed countries. Despite some weaknesses, it can
and should be used to campaign for restructuring the world economy. As a
minimum, its campaign to globalise workers’ rights is an important dimension in
the struggle to transform the world economy. It must be backed by a sustainable
programme of action that includes measures to reform the global financial
architecture, extend workers’ protection throughout the world, and so on.

Three groupings of countries – the southern African region, the Non-Aligned

Movement and the G77 – could provide a platform for changing the rules of the
world economy. These groups represent the common interests of developing
nations in challenging the current form of globalisation. But again, these alliances
are not uncontested. Some of the countries involved want to compete for foreign
investment by suppressing labour rights, pay and conditions. The recent G77
Summit in Havana, for instance, rejected the inclusion of workers’ rights and
environmental protection in the world training system. Because of this
contestation, these forces could arrive at an unacceptable equilibrium. That would
lead to a race to the bottom, as each developing country competes for foreign
investment. It is therefore important that South Africa to take the lead in ensuring
that these groupings take a progressive role.

5. Organisational challenges facing COSATU

COSATU has emerged as the most organised and vocal social force in post-
apartheid South Africa. The success of the recent stayaway demonstrates the
ability to mobilise large sections of society. COSATU has a track record of
articulating its members’ interests within the broader context of the NDR. It has a
depth of experience and leadership expertise, derived from its rich shop-steward
tradition. Almost all our general secretaries started as shop stewards.

Like the other components of the Alliance, COSATU has had to operate under
new conditions. It, too, must address the challenges arising from political and
economic transformation. The critical challenges include:

Changes in employment relations,

Disagreements with government on policy,
The impact of changes in economic structure of individual industries, and
The potential for the emergence of careerism and opportunism within the
trade union movement.

The downsizing of formal manufacturing, mining and government threatens

COSATU’s membership base. In addition, employers are trying to move workers
into forms of employment that are more difficult to organise – informal, home-
based, small-scale and/or casual labour.

In these circumstances, COSATU increasingly confronts the challenge of reaching

non-unionised workers in agriculture, the informal and the domestic sectors, as
well as in new forms of casual and contract labour, whites and skilled employees.
Efforts to reach these workers require creative organisational strategies.

To deal with the restructuring of the economy, COSATU must both

Intervene at government level to translate its mass power into policy

victories, and
Support members in individual industries and companies that are
undergoing restructuring.

These challenges require both increased technical back-up, and ways to

communicate difficult issues to members. Unions must develop progressive
positions in response to management plans, which often requires technical
expertise. Even then, leaders must make risky and difficult choices. Some
agreements to adapt to changes or transform the state impose unavoidable
sacrifices on members. For instance, the equalisation of education required the
redeployment of 15 000 teachers, often at considerable personal cost. In these
cases, reactionary forces attack COSATU leaders for agreeing to any change at
all.

Meeting these challenges requires, first and foremost, the ability to organise and
use mass power to back up positions at both policy and enterprise level.
 Negotiations on policy, whether national or enterprise, will succeed only where
labour can back up its policy proposals with its strength. COSATU must continue
to combine labour power with the technical sophistication needed to find
constructive measures to manage change. We cannot hope to achieve our ends by
relying exclusively on political work within the Alliance, or by looking only to
power. Rather, we must develop an appropriate combination of these tools.

Affiliates must meet the new challenges while maintaining the basic elements of
union work – ensuring adequate services to workers and leadership accountability.
Not all unions have reached the same level in fulfilling these goals.

In taking forward the NDR, COSATU must combine the Job Crisis Campaign and
other actions with creative work within the Alliance to develop specific proposals
for democratising the state and the economy. But work within the Alliance must
not lead to short-run compromises on principle. Otherwise, we run the risk of
misleading our Alliance partners on our positions, leading to greater conflict
thereafter.

It is critical that all COSATU members play an active role in the ANC and the
SACP. Only then can we ensure that, in practice, the working class leads the
NDR.

At the same time, COSATU must guard against new forms of opportunism. If the
labour movement is not vigilant, individuals may use it only as a stepping stone to
careers in government and business.

An Alliance programme for transformation

COSATU remains firm in its commitment to the Alliance as the only social force able, in
South Africa today, to carry forward transformation. This has been confirmed by a
number of COSATU Congresses. But the Alliance must improve its operations in order to
continue, not as a historical symbol, but as a structure that can drive a common
programme.

1. Developing a programme for transformation

In 1997, COSATU’s CEC adopted a proposal that the Alliance develop a

programme to implement the RDP. It was raised again during the work around the
Election Manifesto in 1999.

This proposal reflects the urgent need for a common understanding of the Alliance
strategy for social transformation in the current context. It should ensure that the
 Alliance is at the centre of policy development and drives the agenda for change
in a consistent manner.

The Alliance programme should provide a platform to mobilise a broad spectrum

of progressive social forces under its leadership. The programme and mobilisation
around it can play a significant role in reinvigorating the mass democratic
movement and reconnect the ANC with the full range of progressive forces.

The programme should identify strategic areas and concrete measures to take us
forward in areas such as:

Democratisation of the state and the role of the public sector,

Economic development, especially aligning all economic policies to
enhance job creation and bring about greater equality in incomes and
wealth,
The expansion of social services and social security, and
The development of strategies to drive a progressive agenda
internationally, including around the financial sector.

The programme should revolve around standing commissions of the Alliance that
take forward specific areas of work. The commissions will develop Alliance
approaches on policy questions and monitor their implementation by government
and Alliance structures. They should have capacity to obtain research from
appropriate experts both inside and outside of government.

To be effective, the programme must include a mechanism to translate Alliance

agreements into government policies. That means reviewing the relationship
between the ANC as a party and the government executive at national, provincial
and local-government level. The presidency’s strategic role should be defined as
ensuring government departments implement ANC and Alliance programmes.
This approach should ensure that bureaucrats and fiscal policy no longer drive
national strategies. It should dilute the influence of capital over government as a
whole.

COSATU must decide what levers it can use to ensure that the Alliance develops a
common programme and mechanisms for its implementation. The Jobs Crisis
Campaign may assist in this regard, since it helps focus the Alliance on the urgent
need to address the issues facing working people.

2. Building socialism

The crisis of capitalism cannot translate into gains for socialism without a
conscious programme. The Socialist Commission has to be tasked with
 developing an analytical framework on the current situation and the prospects for
socialism. Some of the questions include

The nature of socialism,

Our collective assessment of the current political conjuncture and the
prospects for socialism,
The elements of a socialist strategy in the context of the NDR, and
The implications for Alliance formations.

All these questions indicate that building socialism is a complex and difficult task.
We must invest resources and energies to tackle it.

The CEC can play an important role in defining terms of reference and
timeframes for the Socialist Commission. Ideally, the Commission should table a
discussion document on this question at Congress.

Footnotes:

1. In the words of Magdoff and Sweezy, the South African system of racial segregation and
repression was “a veritable paradigm of capitalist super-exploitation. It has a white
monopoly capitalist ruling class and an advanced proletariat.” Cited in John Saul and
Colin Leys, 'Sub-Saharan Africa in Global Capitalism'.
2. In this connection, the RDP is less radical than the Freedom Charter, which called for
nationalisation of the mines and banks in order to return the wealth to the people.
Although the RDP indicates that nationalisation might be acceptable in some cases, it
does not call for any specific measures.
3. This form of government conflicts with commitments in the Constitution to establish
participatory democracy.
4. In countries that have attempted to build socialism, the commitment to democracy was
often undermined by the need to resist the concerted onslaught from foreign powers.
5. SACP, 2000. Consolidate Working Class Power for the Eradication of Poverty, p.19.
6. Certainly the historically white staff associations, which still essentially represent
medium and high-level officials from the previous government, have sought to block
major changes. To that end, they often entered an effective alliance with reactionary
managers. But the Cosatu affiliates – the largest unions in the public service - generally
support transformatory initiatives, while trying to minimise the cost to the workers
concerned.
7. Figures on household income distribution calculated on the basis of the CSS Household
Expenditure Survey. Analysis by Whitehead and van Seventer of the 1991 and 1996
Censuses led to similar conclusions. In their analysis, in 1996 the top 10 per cent of
households received 53 per cent of the national income, and the lowest 40 per cent
received 3 per cent. (WEFA, 1999)
8. That is, debt securities provided by public authorities
Business Definition for: Globalization

• the creation of international strategies by organizations for overseas

expansion and operation on a worldwide level. The process of globalization
has been precipitated by a number of factors, including rapid technology
developments that make global communications possible, political
developments such as the fall of communism, and transportation
developments that make traveling faster and more frequent. These produce
greater development opportunities for companies with the opening up of
additional markets, allow greater customer harmonization as a result of the
increase in shared cultural values, and provide a superior competitive
position with lower operating costs in other countries and access to new raw
materials, resources, and investment opportunities.

Wiktionary Definition for: Globalization

• alternative spelling of globalisation

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