assocom, removal of discrimination

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7 th J un e, 1985.

ASSQCl1\TION or Cn.l1MBERS OF COMMERCE o r SOUTH l!.FRICA

SENIOR ASSOCIATE MEMBERS

ASSOCIATE MEMBEns~ j z l R S OF EXECUTIVE COONcn, .

S E C R E T A R X ? ~ O F ALL CHAMBERS

Jf,I

Ref: L21/1

Reg: 23 6

buring th e c ou rs e o f l a s t year ASSOCOM was inv i ted by th e

Hin i s t e r or Cons t i t u t i ona l Development an d Planning , th e

Hono <r .C o Heunis, to make a submiss ion to th e Cabinet Committeeon th e pol i t i ca l fu ture of Urban B la ck s. S ub se qu en tl y t heSt.a te Pres i d en t an d othe r Cabinet Min i s t e r s have i ss u ed v a ri ou s

appeal s fo r c o ~ o p e r a t i o n from th e p r iv a t e s ec to r t o ensurepeace fu l change in South Afr ica .

Ice l - I " , , " , , _ I G ~ i m , , < M j i p ~ r k , "rrh,,_ tmpi'"wegm""d.Owl S " - ~ ~ ' _ " ' l r . ~ t , } I . " c ~ ] . ~ < J p ~ , " , ? 0 ~ 291261, A t , , , \ d ~ n d ht k 3000 0 ( 01 ]1 125 -53 09 - 4· 22 49 7 :ij'ifi: '.""""",.,,,,"~ ~ ~ -

In o rde r to d ea l w ith t h i s importan t but. complex matter ,

a sp ec i a l ASSQCOM Committee , unde r th e Chairmanship o f aPas t Presiden t , Mr Denis PaxtoD, wa s appoin ted to formulate

proposal s on t h i s v i t a l quest ion . To a s s i s t th e ASSOCOMCommittee in its t a s k , Professor. Ja n Lombard, of th e Bureaufo r Economic an d Pol icy Research a t th e Un iv e rs it y o f Pt '0tori_a,together with Pro fe s s o r JoA. dtl Pi san l e , were reques ted to

provide academic he l p . They at t ended meetings ot th e ASSOCOMCommi t t e e t o d is cu s s de t a i l s of th e br'oad approach to befo l lowed in the course o f t h i s exe r c i se . They have now

formulated a lengthy r epo r t , of which I h ~ v e p le a su re i n

a t t a ch ing a summarised version ,

This repor t wa s cons idered by th e ASSOCOM Execut i ve Counc i lw hi ch m et in Johannesbut -g t . owards th e en d of May, I g8 5 d udce r t a i n .3mendments were made. ThE' Ex ec u ti ve Co un ci l d e ci de dt ha t th e ASSQCOM v ie w on t he r ev is ed document i s a s fo l lows

DT



li2. 1 ASSOCOM support s th e need to formulate p r i ~ c i p l e s

and guidel ines to f a c i l i t a t e th e negot ia t ion - suchas th rough th e proposed Black Forum fo r Blackpa r t ic i p at i on i n th e po l i t i c a l system. A S ~ O C O Mcons iders t h a t t he b us in es s sec to r ha s a v i t a l s t ake

in th e s ucces s fu l outcome of such d i s cu s s i on s an dnegot ia t ions , in common with a l l groups Who genuinelYh ~ v e th e w elf ar e o f South Africa a t hea r t .

2. 2 ASSQCOM sees th e document - not as a bluepr in t - bu t

as a major c o n tr i bu t io n t o publ ic debate about

possible cons t i tut ional options , and be l i eves that it

deserVes se r iou s con s id e ra t i on . I t should be seenas a n " ag en da fo r neqot ia t ion". -

2. 3 ASSQCOM endorses th e view t ha t e conom ic f re edom andt he p rf vate e n t er p r is e e t h ic as wel l a s th e norms

with which they a re a ssocia ted a re bes t en t renchedin . a fu ture pol i t i ca l system embodying pr incip les ' o ffederal i sm or confederal i sm, I t is e s se n ti a l t h at

an y f ut ur e p o li t i<;al sys'tem in South Af ri c a p r ov i de s

.f..?E2 .3 .1 . th e necessary checks an d balances ;

2 .3 . 2 . safeguards bas i c human r i gh t s , an d

2 . 3 . 3 . th e p ro t ec t i on o f m i no ri ty JI.!:"oups aga in s t

domination . ",

'I'he document ha s been di s t r i bu t ed widely, inc lud ing to th e

S ta te P re si de nt . t he Cabinet , an d Black leaders .

chambers ar e urged t o c ir cu la te t h e c o nt e nt s o f th e documentto t he i r members,

A f u l l version of th e repor t i s ava i l ab l e upon request from

th e ASSOCOM of f i c e (Mr W a ~ r e n ) e

Yours f a i t h fu l l y ,

/l r



It is further suggested that the PHILOSOPHY BEHIND THE COMMON LAW NORMS which

currently govern the basic character of the private enterprise economic

system of South Africa. be extended to form the bas is f or the new POLITICAL

STRUCTURES within which blacks win participate on equal terms with other

citizens of the Repub lic o f Sou th Africa, Since the philosophy behind the

corrrnon law o f th e Republic of South Africa seems t o l ea d logically up to the

POLITICAL PRINCIPLES OF FEDERALISM. it is proposed that these principles be

properly investigated, with the view to their appl ica t ion in South African

circumstances. Possible reform of"local and higher authorities are d i s ~cussed 1n terms of federal principles.

NUTSHELL OVERVIEW OF A MEMORANDUM FOR ilSSOCOM

J A Lombard

J A au Pisanie

rtOOVJ\i Of DISCRIMINATION AGAINST BLA.CKS IN ruE POlITICJ\I... ECONOMY

Of THE REPUBLIC OF SOUTH AFRICA

It is suggested that these basic elements ar e to be found in the COMNON LAW

of South Africa. with particular reference to the norms governing (a) person-

al freedom. ib) freedom of property and contract. and (e ) personal culpabi-1ity. A DECLARATION OF RECOGNITION by al l negotiating parties o f t he se

norms would be a necessary condition for further progress ,in negotiations.

To these three common law norms should be added a formal recognition of {d}

the basic rules governing the maintenance of a sound national currency and

(e) the principles governing th e right to tax,

Believing that REFORM should be governed by (a1 adherence to sound PRINCIPLES

of statehood and I b) EVOLUTIONARY rather than revol utionary ctHlnges. it is

proposed that the acceptable basic elements of the eXisting order be identi-

fied, recognised, and extended,

On the assumption that t he con ti nued LEGITIMACY of the Republic of South

Africa. both internally and externally. depends on the (u,gent) removal of

rac1al discrimination in an affairs of state, i t is proposed that a particu-

la r AGENDA FOR NEGOTIATIONS be f o l 1 o w ~ c t .

J A Lombard

J A du Pisanie

1985

299931447

I

I1I1

1 ,

1

1'

111111 IIII I"

for Economic Policy and Analysis

UniversHy of Pretori a

IllHlllllltllIHUPIIIII/$UP8D002996

Bureau

SUlIllMrt"zed version o f a memoram1IJm fo r ASSOCOM

REMOVAl Of DISCRIMINATION AGAINST BLACKS IN TIlE POUTlCIIl

ECONOMY O F THE REPUBLIC OF SOUTH AfRICA



CONTENTS

Page Chapter 4 THE MONETARY AN D FISCAL ORDER

page

27

NUTSHELL OVERVIEW

CONTENTS

4. 1

4. 2

4.3

Introduction

The currency rule

The tax rule

27

27

30

Chapter 1 THE BASIC OBJECTS OF THE STUDY

CONCLUSIONS AND PROPOSAL

I6

Chapter 5 LOCAL AUTHORITIES 33

Chapter 2 BRIEF DEMOGRAPHIC PROFILE

Chapter 3 REAFFIRMATION OF HIE COMMON LAW FOUNDAtiONS OF THE

SOUTH AFRICAN PRIVATE ENTERPRISE ECONOMY

3.1

3.2

3.2.1

3.2.2

3.3

Explicit recognition. as a mat te r o f bas ic consensus.

of the validity of the common law of the Republic of

SQuth Afrka

The philosophical foundation of the South African

pr; vate enterpri se· economy

The prior removal of a misunderstanding

Returning to the rea l i ssue

The e c o n o m t ~ a l l y significant common law foundations

~ t , : , , ~ 3 ~ r n _ - t t f r " c a n civil law

T ~ ~ s ~ a t u s Of the individual: equali ty before the law

Private'pr9pexty and the, ri gh t of contract : freedom of

QpP9rfunf t.yLega l';·ctllpability of the individual

The recognition of col Jec tiYe bodies as lega.l p e r s ; o ~ s

Entrenchment of the fundamentai common law norms

IntrQf.lucti on

Procedures of entrenchment

Beyqnd fonna1 entrenchment

8

12

12

14

15

16

18

18

19

21

21

23

23

24

25

5.1

5.1.1

5.1.2

5.1.3

5.2

5.3

5.4.2

5.4.3

5.4.4

5.4.5

5.4.6

The basic approach applied to the status and functions

of local authorities

local authorities as extensions of the market system

An enabling ac t for the estab l1shment of local

authorities

The process of co-ordination among authortties

Present systems of local government in the RepUblic of

South Africa

Getting from here to there: The process of true devolution

of jJower

local authority finance

The question of viability: provision versus production

of services

Existing and proposed sources of revenue

A specific principle of development aid

Distribution and redistribution of revenue: subsidisation

of objects . persons and authorit1esRedistribution of income through allocation of functions

among authorities with larger and smaller areas of juris-

diction

The principle of fiscal equivalence

33

33

35

37

38

38

40

40

40

41

42

43

44



Chapter 6

6.1

6. 2

6. 3

6.4

6.5

6.6

6.7

6.8

REFERENCES

Table 1

REMOVAL OF DISCRIMINATION ON HIGHER LEVELS OF GOVERNMENT:

THE FEDERAL OPTION

Introduction

Two alternative systemsThe present s y s t e m ~ a unitary state

Possibilities for a fourth chamber in Parliament

The federal alternative

Possibilities fo r territorial federalism in South Africa

The possibili ty of c o m p l e m e n t a r Y . i n t e r r e g i o n a l ~ ethnicauthorities for own affa1rs

Power versus pd ncip1es: The po1Hi cal bottom H ne

Geographical distribution of the population of South Africa

Page

46

46

48

49

49

49

55

57

58

61

9

CHAPTER I

THE BASIC OBJECTS OF THE STUDY

Th1 s memorandum deal s wi th the bas ic issues whi ch, in our vi ew. have to ber esolved in order to allow the removal of al l racial d iscr iminat ion in the

laws and the implementation of racial equality before the law in the politi-

cal economy of the Republ ic of South Africa, so that blacks can enjoy equal

rights of economic choice and pol i tica l c i tizenship with whites in the Repu

blic of South Africa.

The political economy of a country is a coherent sys tem - albeit a complex

or compound rather than a simple system. That 1s to say that the function-

ing of the country's economy cannot be rigidly or completely isolated from

the func t ioning of it s pol1tical institutions. Nor can th e economic and pa-

l it i ca1 processes be r i 9idly or compl etely severed from t he soc ia l institu-

tions and proce sses i n t he count ry . In dealing with th e freedom and equal-

it y of people in South Africa it has to be recognised t h e r e f o r e ~ that freedom

is basically no t a completely diVisible value which can legitimately be

grant ed in some processes of th e s y s t e m ~ but permanently withheld in o t h e r s ~Although the focus of th i s memorandum happens to be on people's ri ghts and

responsibilities in economic affairs - because that happens to be Our field

of competence and interest - our suggest ions probably apply to the whole

spectrum of institutions private and public through which people in the Repu

blic make economically meaningful decisions.

In the field of private insti tutions our sugge st ions about racial equal it y

dea l withinsti tutions o f bas ic

importanceto th e

economy. suchas the common

law pert aining to p r o p e r t y ~ c o n t r a c t ~ culpability and means of paymen t. In

the field of l'publ i c l ~ , institutions our suggestions mainly concern people l s

po li t ic a l r ight s w i t ~ regard to economic affairs such as collective services

and taxes, no t only on t he l ev el of smaller groups, such as local authori-

t ies , bu t also on t he n at io na l l ev el of the Republic as a whole. To reite-

rate, we do not believe that the rights and obligat ions of people on one le -

vel can basically be seen independently of their rights on the other levels.



Our preoccupation with political rights stems from the fact that these rights

ar e nowadays regarded as the essential or primary element of individual free

dom and equality in society. It is recognised that no re al progre ss i n

stabilizing and normalising relations between people within South Africa or

between South Africa and other countries can be made unless legal racial dis

crimination is removed tn the poli ti cal inst i tu t ions of this country. The

f utur e l eg it imacy o f the Republicof

South Africa both internally and extern

ally depends upon this issue.

However, together with most conservatively minded people in the wor ld , and

probably a ver y 1arge segment of so-called "1 i bera15". we recogni se some very

serious dangers for the s tabi l i ty and growth of the Republic l s economy and

the mater ial well-being of it s people in processes of polit ical democrati

sation which bas ica l ly confl i ct with the principles of prhate enterprise

and effective competition upon which the South African economy rests, as

recognised in the preamble of t he p re se nt constitution of the R e p u b l i c ~

H t y m a y , ~ ( ! . , e i t h e r organic or cosmetic , that is . it may be th e

fQO:t f o r € e s ' i n t l ~ r e n t in t he natur e of a society itsel f, or

~ . ; y : t ' P Q ~ e d u p ~ n t h e society like a straight-jacket from

, 9 S ~ ; ; ~ f a c o ~ l 1 1 € t 1 c a l l Y stable pol i t i ca l system depends

1:t1e ;power 'f rOmabov.e. Like concrete. it will resist

rceptiblY'tJotHthe breaking point is reached, after which

ity simp1Y,dfslntegrates. The achievement of organic stabi1 it y in

ftiGiilsystem depends upon it s legitimacy and is an evolutionary

process towards i t

The rules governing legitimacy and evolution ar e different. As regards the

legitimacy of the s t a t e ~ it requires voluntary acceptance of th e order by the

people involved. The l eg it imacy o f democrat ic government does not arise

from the exe rc ise o f powerby it s administration. but by the acceptance of

the government by the body of the people. A primary fundamental law in

public affairs of this nature is that the maintenance of th e effectiveness

and stabili ty of the system rests upon th e loyalty and obedience of the

people to clear principles of behaviour, rather than upon th e power of the

state t o f or ce people to behave in certain ways. Effectiveness and stabili

ty rests upon generally accepted social norms rather than upon s t ru c tu res o f

il3

public administration. In fact, when a t tempts a re made by means of such ad-

ministrative structures to achieve certain political ends which do not square

with the norms by whi ch the peop 1e are governed, th e mai ntenance of the

system not only costs a great deal. but it s s ta b il it y i s sha l low, going only

as deep as the mechanical ability of the structure to suppress th e public's

propensity to disobey the law. On the other hand, if the aims of an admini-

stration accord withand

comma.nd the respect ofthe

people affected, theparticular administrative structures established to promote these aims are of

secondary importance and win require the minimum of scarce resources. In

so fa r as ou r submission must deal with structures, they are r egar ded a s

1Htl e more than t he se rv ant s o f socia1 pri od p1es to which the peap1e ar e

fundamentally prepared to adhere. The most expensive public administration

is one which a tt empts to maintain a sys tem which peopl e generally do not

want.

This is not to say that the particular natur e o f political structures and ad

ministrative procedures are of no consequencei" politics. On the contrary.

given the existence of basic Civilized norms of social behaviour to which

substantially all people in a society subscribe and which they respect, poli

tical structures and administrative procedures have a v it al r ole to play to

secure th e applicability of those norms in p r a c t l c e ~ In this respect there

are indeed good and bad systems of government. But the primary prerequisite

fo r pol Hical s tabi lHy in a democracy remains substantial consensus among

the people when creating the state about t he b as ic r ul es of the game.

The worst possible fate that could befall South Af ri ca ns i n the present

search fo r norms and structures that could sustain legitimacy, stability and

growth. woul d. accordi ngly. be a complete 1ael< of consensus among peopl e

about basic principles of individual rights and responsibilities in inter

personal associations. The danger of such a fate obviously increases with

the diversity of cultural backgrounds among the members of a c o m H l u n i t y ~ One

of the essential elements of our approach is , accordingly, recognition of the

fact that substantial consensus about basic political principles and proce

dures may li e deep and may be har d to discover .

The political principles suggested in the following pages do arise from the

realities of South Africa. They do not descend from th e he igh ts o f an ab-

stract ideal, arbitrarily imagined by some political phi1qsopher. Insofar



as some o f t he se principles may be seen as universal - such as the principle

of individual freedom i tse lf or the rights of minori ties - the fact is that

the realit ies of South Africa basically share certa in charac teris t ics with

corrmunities in o ther par ts of the world, In fact, an important hypothesis

ii l this report is that, while the details o f s oc ia l affairs in South Africa

cer ta in ly d i ff e r greatly from those of o ther coun tr i es , the fundamental

issues in our soc ie ty a re by no means $0 unique that our political structure

cannot share the her it age o f enlightenment which have come down through the

ages of civilized s oc ie ty in th e world.

A second fundamental law of stability recognised in this memorandum calls f O t ~evolutionary. rather than revolutionary processes of reform, There is , ac

cordi ngly .a need for c on ti n ul ty i n th e sense that the prQcess of reform

should take as it s p oi nt o f departure a ~ e C o 9 n i t i o n of what vs good in the

existing system and extend upon i t , Thi s seems a v ery 1mpor ta nt p oi nt t o

respect in the processes of consultation and negotiation between the Govern-

ment and leaders of the black communities concerned, A major contention of

the present report is that the removal of racial d i s c l " ~ m i n a t i O f l and the

active promotion of equaHty can be best squared with the aspira t ions of eco

nomic growth and material advance by affirmation of the norms of the existing

common law of South Africa.

It may be noted that Cl 'tcon f l i c t of law" may exist betweeD the common law

normally applied in South Africa and recognised in the Mrmal courts of the

RepubHc t on the one h a n d ~ and the common law governing those blacks who

recognise the laws of thei r pa rt i cu lar t r ibe s or nations,

The objection may. accordingly. be raised that the recognit ion of the common

law base o f t he p re se nt l'white" l egal o rder reflects a prejudh:e against the

common law systems of b lacks. Why should llwhites" not r ecogni se the common

law of b lacks as the basis of the New Democracy? The matter should a t l ea st

be the subject of negotiat ion with black leaders!

Such an objection would be totally unrealistic and would. if acted upon.

steer the negotiations. as it w e r e ~ into a blind alley imrohing a costly

waste of time and goodwill. Quite apart from the conflict between the

s everal l ega l traditions among the var ious black nations, the argument in

favour of the general recognit ion of the currently operative common law of

!

11, I

!I,I

II

South Afr ica has l i t t le to do wit h t he pecuHarities of the particular kind

of people who brought this system to South Africa, ~ e a s t of an with the f ac t.

that they were tfwhitell

• Their common law recommends i tse lf as the framework

within which power sharing must be negotiated for different reasons, reasons

which reflect the interests of blaCKS as much as those of whites in this

country. These reasons, as developed in this and subsequent chapters are

(a) the principle of evolutionary reform. taking from the existing system

what is good and bUilding upon i t . (b) the fact that the achievements of the

market economy rest upon the r ecogni tion o f these common law norms and !e )

the f ac t t h at these norms do indeed seem to reflect the aspirations of blacks

who insist upon full and undiscriminatory participation in the political

economy of South Africa.

Although we do not wish to speak fo r blacks ( or w hi te s f or that matter. bu t

only fo r a principle). i t is quite c le a r that the bas ic aspirations of blacks

revohe around the three i ssue s of ei t i zenshi P. freehold ri ghts to property

and freedom of contract 9 which involves the dismantling of influx control on

blacks. We suggest that these three basic issues fn the process of the

removal of discrimination and the sharing of power. relate directly torespectively the law of p e r s o n s ~ the law of property and the law of contract

in the p resen t South African common law.

There may. o f cou rs e. be many other matters wlli ch the negoti at'! ng parties

wish to settle in principle before agreeing to s it down at the negotiating

table. The present submission stresses certain basic elements of the South

African common law (and two other bas ic point s relating to the status of the

national currency and the limits t o t ax at io n) because t hese m at te rs a re

fundamental to the protection of an economic system characterised by personal

freedom. private enterprise and open competition. Another reason why i t is

desirable to distil1 the non-negot iable point s of departure to the older

common law norms is that, unlike more recent Acts of Par l iament. they are

free from· racial discrimination against Blacks. Prior consensus over these

common law no rm s (see Chapter 3) are fundamental ly impor tant and, having

reached such consensus. it would be adv is ab le to conside r the way in which

these norms may be entrenched fn the const i tu t ion of the Repub li c. so as to

invalidate any act of a future Parliament which a tt empts to r eint roduce any

form of discrimination between persons on the grounds of language, race.

creed or colou r.



The process of evolutionary reform, with due respect for the need for conti

nuity. should then {a) focus on the removal of al l discriminatory legis

lation or regulations which conflict with these norms {as discussed in

Chapter 3} and (b) extend these same nonns as fa r as possible into the

field of poli ti c al inst i tu t ions and public law ( as discussed in Chapters 5

and 6) . graftlng new norms onto them only to the extent that they do not suf

fice to establish a polHical system ill which fu ll c it iz ensh ip of the Repu-

blic can be extended to Blacks. It will at the same t ime be an important

f unct ion o f these poUtical institutions to provide the greatest possible

protection in the processes of political and administrative action for these

norms against bureaucratic erosion"

The argument so fa r focus sed on the l egal f oundat ions in both private and

public law of a stable and prosperous economic order in which Blacks and

Whites can live in peace with one another without specia] privileges to any

Pilrticular group. To these legal foundations (as discussed ill Chapter 3)

m u s t b ~ a d d e d the basic noms of sound monetary and f iscal p rac ti ce {as dis

C U $ S e d , i ~ s ~ a p ~ e r , 4 } ~ PoHtical and social stability are in modern societies

closely bound up With ecorr:omic stability. I t is generally recognisee! that ac o u n t r Y _ ~ , a , n , ' ~ , e : t ~ r ( J W n into a state of chaos by irresponsib1e monetary and

f i s c a l _ p o l i ~ i e ~ 9 legal protect ion of property and contractual rights may be

n U l f i H ~ d - b y hyper inflation or confiscatory t a x a t 1 o n ~

CONCLUSIONS AND PROPOSAL

Our submission is that the negotiations fo r the establishment of a new poli

tical order in which rac ia l p r iv il eges and discrimination do not exist.

should commence with an Agenda for Negotiation. on which the first point for

consideration s houl d be a Declaration of Recognltion of the acceptable f u n d a ~mental elements o f t he eXi st in g order.

From the p oin t o f view of retaining the best of th e market orientated econo-

mic order in the future constitutional dispensation the Declaration of Recog-

nition should include the basic noms of the eXist ing South African common,

law. with particular reference to THREE issues. namely la) Personal F r e e d o m ~Cb) Freedom of Property and Contract. and le) Personal Culpability. In addi-

tion to these three issues of common law. TWO further issues should be

cleared. namely {d} the basic r u1es about the standard of value of the

national currency. and (e) the principles of taxation.

Once initial consensus about the validity o f t he se FIVE basic elements of

South African civilization has been reached. the negotiators should proceed

to consider {aa} the procedures required to remove racial discrimination from

the statutes of the Republic. {bb) the procedures required to entrench these

norms so that future governments cannot r e- in t roduce rules that offend

them, and {cc) the extension of the philosophy behind these norms into public

(or poli t ic a l) inst i tu t ions on the local, regional and central levels of

government.



CHAPTER 2

DRIEF DEMOGRAPHIC PROFILE

Probably the most important characteristic of the population of South Africa

(i .e . the Republics of South Africd s Transkei. B o p h u t h a t s w a n a ~ Venda, and

Ciskei) is it s cultural plural ity. The large number of groups shown in

table 1 testify to this. While the black populat ion is shown by major

1anguage group (01 ne 1anguages are disti ngui shed) I the whi te s coloureds and

Asians are shown as such. They too can be further dfsaggregated by major

language group. Whites and coloureds mai n1y u se Afri kaan s and Engli sh .

while about one third of the Asians use English as their home language and

the rest use several Indian langu?ges.

Table 1 also shows the four independent national states mentioned above. the

six se l f -governing nationa l states and the remaining portions of the pro

vinces that formed the Union of South Afr ic a in 1910.

The Xhosa have two national states or homelands. viz. Transkei and Ciskei"

While the North-Sotho and the North-Ndebele s ha re t he homeland lebowa. In

general, it is clear from the table which national unit goes with each

national state" It is equally c l e a r ~ however. that 1arge numbers of these

national units live outside their homelands. Major it ie s o f the South-Sotho.

the Swazi. th e S o u t h ~ r 1 d e b e l e ~ the N o r t h - N d e b e l e ~ the Shangailn/Tsonga and the

Tswana live outside their- homelands" OnlY 6 ~ per cent of the South-Sottlo

and only 14.1 per cent of the Swazi were present in their ilational states

IQwaqwa and Kangwane respectively} at the time of the 1980-censtlso

Blacks outside their national states live mostly in the immediate vicinity of

their national states and in the PWY-region. Appreciable numbers of the

black groups ar e found in the PWV-reglon. A ll other r e g i o n s ~ h o w e v e r ~ have

a mUch lower degree of plurality than South Africa as a wholeo In the Cape.

for instance. only four groups are found in apprec iable numbers. viz. w h f t e s ~coioureds. Xhosa (in t he Eas te rn Cape) and Tswana (in the North-Eastern

Capel. All four groups are well represented in the Cape P e n i n s u ~ a .Basically three groups reslde in th e N a t a l ~ K w a z u l u - a r e a . viz. w t r l t e s ~ Asians

and Zul u. The As fans ar e largel y conn ned to Durban. Pietermarltzburg and

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ " ! . ~ ~ .,...O O O ~ O O O _ O _ J O O O~ M ~ ~ $ N O O ~ M ~ ' ~ __ e

M

~ ~ , ~ ~ ~ ~ ~ d ~ 6 ~ ~ ~~ ~ $ ' ~ ~ ~ m ~ g ~ N ~ ~ W

"">"1. . . , . . . f t ~ " 1 . ~ " " ; . « I " . m . . " ! . N . O ,~ ~ @ @ N O O _ O O O O ' M~ ~ ~ ~ ~ ~ M M ~ ~ ~ _ ~ ' m



/lr1cinity. The area of the South-Eastern Transvaal .and Kangwane is mainly

S w a z i - c o u n t r y ~ the North-Eastern Tt"ansvaal together wHh Gaza:okulu mostly

accommodates the S h a l 1 g a a n / T s o n g a ~ while the fa r Northern Transvaal together

with ifenda accommodates a large proportion of the Venda-speakers. Lebowa

together with the North- and North-Weste rn Transvaa l is inhabited mostly

by the North-Sotho and North-Ndebele. The Tswana find themselves mostly in

Bophuthatswana. the Northern Cape and the Western Transvaal. i .e. apart from

those in the PIN-region. The South-Sotho is mostly found acros s the Orange

Free State as wen as in the PIN-region.

The absence of many blacks from their homelands is mainly the result of the

p rocess o f urbanisation that commenced at the time of the d is covery o f dia

monds and gol d and gained momentum dur ing the Great Depression of the early

' thirties and espec ia ]ly in the process of industrialisation since the Second

World War. This process o f u rban is at ion mainl y t ook p lace out side the

national states.

The rest of this chapter concentrates on characteristics of blacks outside

the nationals t a t e s ~

as tmey a re t he focus of the enquiryo

Urban blacks outside the national states mostly work in the sectors "com

m u n i t y ~ socia1 and personal s e r v i c e s r ~ (including domestic s er vi ce i n which

especially female blacks are concentrated); "manufacturing"; and J'corrrnerce.

catering and accommodatfon,e Their counterparts in non-urban areas mostly

work in the sectors " a g r i c u 1 t u r e ~ forestry and fishing"; 'lmining and quarry

l n g ~ ' ; and "community. social and personal services", Whereas more than 61

per cent of the flon-urban blacks were not economically acth'e (Le. women.

children and aged persons) in 1980, the corresponding figure was less than 51

per cent In t he c ase of t ho se i n urban areas ( R S A ~ 1982a) 0

One rea.son for the low percentage of economically active persons among the

blacks is the fact that many of them are children. About 27.8 per cent of

the urban blacks outs ide national st,ates were under the age of 15 in 19800

The comparable f ig ur e f or their non-urban counterparts was 41,4 per cent

( R S A ~ 1982b). These f igu res a l so imply that many blacks are Hliing outside

the nat iona l states on a permanent basis and that many black children are

Doni and brought up outside the statutory homeiandso

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By occupation economically active blacks outside t he n at io na l states are

mostly production and related workers. labourers and service workers. In

non-urban areas 'many are farm workers (RSA. 1982a). It logically follows

that these low skilled jobs produce 10lfl incomes. Of the economically

active blacks in urban areas outside the national states 82,6 per cent earned

less than R 2 400 per year in 1980. The corresponding f ig ur e f or non-urban

blacks was 92,6 per cen t ( ibid. ) . Another reason for the low incomes of

blacks ouside the, national s ta te s i s t he ir generally low l eve l o f education.

About 8 3,9 per cent of them had qualifications lower than Standard 6 fn

1980. The figure was 74,5 per cent in urban areas and 94,4 per cent in

o the r a reas (RSA, 1982b).



CHAPTER 3

REAffIRMATION OF TIlE COMMON lAW FOUNOATIONS OF THE SOUTH AFRICAN PRIVATE

ENTERPRISE ECONOlff

301 EXPLICIT RECOGNITION, AS A MAnER Of BASIC CONSENSUS, OF THE VAlIOITY

OF THE COMMON lAW OF THE REPUBlIC Of SOUTH AfRICA

The thrust of this chapter is to suggest that the f irst point on the agenda

of the newly ueated Forum for consultat ion between th e Government and black

leaders 'in the Republic should be the reaching of a formal consensus on th e

recognition and entrenchment of the bastc norms of th e common law of South

Afri ca , as the foundati on of the ri ghts and respons i bi 11 t i es of i ndividua isin the economy of the RepUblic.

"Common law" is understood to mean non-s ta tu to ry law, the lega l norms

developed by society and by t he case law of the courts in response to parti

cular conflicts and other problems requiring a ruling. Rulings which turn

ou t to be of general practicabilit y become 1aw. Thus the common 1aw of a

community grows "organically" as the character'istics of social life develop.

as associations between individual members o f soc ie ty become increasingly

complicated, as new experiences and new institutions arise. While the civil

law of the Republ ic is ostensibly dominated by statute laW'. created by Acts

of P a r H a m e n t ~ the fundamental characteristics of our civil hw must be

sought in the b as ic norms of the common law. Acts of Pa d fament governing

civil affairs should not as a rule introduce legal principles which oppose

these basic c o n ~ o n law norms.

The core of the common law of South Africa is the so-called Roman-Dutch Law

a system of justice developed in the States of Holland some centuries ago on

the basis of the Roman laws, as a model of wisdom and equity, and theparticular customs of the Netherlands. As such, it became accepted in the

Cape Colony, Natal • the Boer republics and Southern Rhodesia. When t he fou r

South African colonies merged into a Union in 1910. Roman-Dutch law continued

to be the b as is o f the countryi s common l aw. supplemented and modified over

the year'S by vari ous 1egi s1 atures. Since the mi ddl e of the 19th. century

these Roman-Dutch norms were e x t e n s i ~ e l y amplified by English jurisprudence,

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particularly in regard to the concept of joint stock companies as legal

entities, instruments of financing commerce, and industrial labour relations.

Over the past two centuries or more, the black communities of South Africa

a1so developed Common 1aws whose ideas di f fe re d in many respects from the

norms of Roman-Dutch and English jurisprudence. In the case o f th e Zulu, f or

instance, these principles have been codified and given legal force in terms

of the so-called Natal Code. Since large numbers of blaCks are migratingfrom social systems governed by such codes. to the cosmopol itan areas of

economic activity" governed by Roman-Dutch and English concepts, a conflict of

law may exist, if not in the formal sense o f recognition in the courts,

then in th e minds of the newly urbanised migrants who have to adjus t to the

rules of the new society.

Seeking prior consensus in the Forum on the recognition of the Republic's

existing common law principles. i .e. before negotiating the extension of

citizenship of the RepUblic t o m il li on s of people who came from social

systems in which these principles were not known or recognised. is therefore

by no means a fanciful notion. Moreover, i t affords an essential opportunity

fo r the clarification and reaffirmation of these basic norms. n ot on ly fo r

the benefit of the newly accepted dtizens of the R e p u b 1 i c ~ bu t also of the

present c i t i z e n r y ~ whose notions about these matters are not very articulate,

probably because they have never been strongly and explicitly challenged in a

broad political context.

The question arises on what l ev el o f detail such a formal recognition should

tak e p la ce . Deta ile d recognition raises the suggestion of codification of

the South Afr ;can common 1aw. Many juri sts. fo 11 owi n9 the em;nent Chief

Justice Wessels. who raised this issue as early as 1 9 2 0 ~ regard codification

as th e most advisable way of not only saving a great deal o f energy. time and

money in lega l procedures, but a ls o of protectingthe

mature body of commonlaw against superficial 1nterpretation by barristers who nowadays no longer

read the a u t h o r i t i e s ~ bu t rely on superficial primers for guidance. However.

i t seems that most juri st s i nc 1udi og most academi cs. believe that codi fi

cation would seriously undermine the remarkable ability of the South Afr ican

civil law to move soundly with changing circumstances in the capable hands of

the judges of the South African supreme court. Be that as it may. for the



purposes of consensus in the Fm"'um" t he l ev el of recognit ion of the commo!'!

law need not be nearly as detailed as would be required by codification,

while it ShOUld be much more articulate than a simple reference to lithe

common law of the countryl'. The instrument of recognition must accordingly

make it s impact on the general level of p o l i t i c s ~ or public l a w ~ rather than

on th e level of the interpretation of t he de ta i ls of civfl law by the courts.

For the blacks. the r ea ff ir ma ti on o f t he b as ic norms of individual freedom

underlying and permeating the jurisprudence of the common 1 a w ~ holds the very

great advantage that the Government publicly subjects i tse lf to objective

criteria by which discriminatory laws and regulations in civil affairs can be

identified. Such a document might p rovide the Magna Carta in civilian

affairs fo r the removal of such laws and regulations. For the whi te s the

document could become th e b as ic p ro te ct io n o f their legitimate interests as

individuals or groups in civil affairs when. some time in th e future. their

political power becomes much less absolute than i t has been hitherto.

The precise nature of such a Document of Recognition to be put forward in the

Forum for Negotiation will be a matter for careful considerat1on with respectto all the fields of interpersonal and intergroup associations 1n South

Africa. In the next section of this chapter a discussion of the common law

basis of only the South African economy is presented. The notions expressed

are by no means or i g1 na 1. They a re c ul ied from the u!ilversa1 body of po1i -

ti ca l philosophy in economic a ffai rs $upporti ve of the market od entated

rather than the centrany planned economi es < The dlsCUSS t on presented may

provide some of the mater ia l fo r the drafting of a Document of Recognition.

In the f in al s ec ti on of this chapter further thoughts or. meaningful methods

of entrenchment will be put forward. The aim is to prevent t he e ro sion of

the foundation-s over time. both by temporary political majorities in future

governments and by hostile prejudices in future public administrations.

3.2 THE PHILOSOPHICAl fOUNDATION OF THE SOUTH AFRICAN PRIVATE ENTERPRISE

ECONOMY

We speak of the economy of the Republic of South Afr ic a a s basically a f r e e ~private and competitive enterprise system. We refer- officially to the

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Umarket orientated policies" of the present Government. These and other re -

lated descr iptions of the way economic behaViour in our society is conducted

also serve to juxtapose our system with centrally planned socialist sys tems

to which there is widespread opposition among the present c i ti zens o f the Re

pUblic. Why is i t so fundamentally important that the characte r o f this eco-

nomic system does not change radically towards a centrally planned socialist

democracy? And in what way is the basic character of our present system be

ing preserved by the fundamental norms of our common law? Before we proceed

to state our case on these two points s it is necessary to call attention to a

grave mi sundel"'standi 1'19 wni ch s if not cl eared up properly. wi11 prevent a

meaningful debate with b la ck s a bou t t he preservation o f th e foundations of

the market economy.

3.2.1 THE PRIOR REMOVAL OF AMISUNDERSTANDING

While most white citizens of the R e p ~ b H c oppose soc ia l ism. there is among

the prospective b la ck cH i zens of the Republic on th e contrary. wi despread

suspicion of . and opposition to th e prevailing economic system in South

Africa. This antagonism is lending itsel f to vaguely articulated bu ts tr on gl y h el d s up por t f or socialism as if t h at po li ti cal philosophy is the

necessary alternative to the kind of game r ul es o f economic behaviour blacks

currently have to face in South Africab Socialism is thus seen by many

blacks as the true harbinger of economic security. freedom and prosperity.

Had these antagonistic conceptions among blacks been wen founded. their

entry into the political processes of th e RepUblic would unl ea sh a straight

forward and politically destructive battle between th e ideologies of indivi-

dualism versus socialism. reinforced by al l the traditional socia l c leavages

between the new entrants and the rest. This basic conflict would have made

black participation in the politics of the Republic a practical impossibili

ty .

However i t is obvious that what blacks in the South African economy ex-

perience as " th e r ul es of the game ll is the antithesis of a free. private

enterprise economy! There is no need to substantiate this point by a l is t

of the almost innumerable restrictions on their economic freedom in South

Africa. It is , however. not sufficiently recognised that these restrictions



do not arise from the principles of the market economy but frQm the complete

ly different ideology of flstatutorily enforced separate development", deroga

torily referred to as "Apar theid" 0

The explicit identification of the true and pure principles of the market

orientated, competitive economy wil l enable blacks to base their c as e f or the

removal of statutory discrimination on these princip les rather than on those

of socialismo It seems to be vitany important to chrHy the political

climate on this leve]. i . e ~ to remove the grave misunderstanding among most

b lack s about what the two opposing i deol og ie s o f t he market economy versus

socialism stand for and to make i t clear that neither in any way supports the

ideologies of statutorily enforced separate d e v e l o p m e n t ~ Only then will i t

be at al l possible to proped}' addl"ess the real lssue. namely the preferabi

lity of the decentralized market economy over centrally plannea socialism as

a sys tem of regulation of people l s economic behaviour.

3.2.2 RETURNING TO THE REAL ISSUE

Why is it so fundamentally important that the character of this private

enterpri se market economy of South Africa. havi 09 rid 1tseif of di scrHni

nation against b]acKs 9 does not change radically towards a centrally planned

socialist democracy?

The short answer to this question is that central economic planning fn South

Africa win not worL The ldea might have ·worked badlY in a fairly homo-

geneous cOlmmnity of Whites. bu t it will no t work at all ll'i ill heterogeneous

community of al l South Af ri ca ns. Seri ous a tt empt s at centl"i;'d planning of

the production and distribution of income in South Afdc,ffi would produce

disasterous results. as 1t has patently done in so many other African com-

munities. Even the ex]sting degree of Government intervention and partici

pat ion in the South African economy has become highly p r o b ~ e m a t i c o

However. there 1s 1Htl e in the bas f c macro-economic laws of productivity,

stabili ty, growth and dis tr ibution tha t necessarily favours the market system

over the centrally phnned system. The laws of lloptimum allocation of pro

ductive resourcesll

• of specialisation according to least comparative costs.

the laws o f r ap id growth on the basis of savings and capHal accumulation.

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and the mi ni mi s i rig of the costs of 'lgnorance. ul'lcertainty and ri sk al l appi y

in both systems with equal f o r c e ~ The superiority of the market economy

over the centrally planned economy does not li e in these laws, but in the

philosophical outlook and jurisprUdential approach which prevail in the com-

munity and which give rise to the former rather than the latter economic

system. It is . accordingly. fundamentally important to us that the market

economy system be preserved in the Republic of South Africa, but not because

it serves superior economic laws of production and income distribution.

Centra 11 y planned systems must perforce serve the same economic 1aws. But

they serve them badly. The market economy is the product of human nature

and the politico-economic system patronis ing the market economy is based on a

more realistic and consequently superior understanding of human nature. The

superiority of the market system in the production of income stems from this

basic realism about human nature; the competitive processes of the market are

better able than the bureaucratic processes of central planning to minimise

the c ost of fa Oi ng s of human beings while maximising the value of their

excellence.

The perceptlofl of human nature implled in market orientated political con

stitutions is that of individuals who tend to pursue their own ob jec tives in

the light of their OWl! knowledge and to the best of their own abili t ies.

Market orientated constitutions leave people basically free to do so , subject

onl y t o the maxim that the limits to one man's freedom is the recognition of

that of ano ther . What is basically recognised in this perception is the

essen ti a l subj ect iv lt y o f people's interests and the inevitable limits to any

individual's knowledge about the complex details of the whole of s o c i e t y ~

from this perception arose a theory of society a s one in which people become

spontaneously bound t ogethe r i n voluntary associations such as trade and

industry. each participant serving his own e n d s ~ but al l in fact contributing

to the improvement of the performance o f s oc ie ty as a who]e. This theoryaccounts fo r most o f t he o rd er which we find in human affairs as the unfore

seen spontaneous results of individuai actions. The style of government

policy inspired by this view is . accordingly, also that o f l im it ed inter

vention with the opera tion o f these spontaneous processes.



That the market economy copes with social pluralism in a way centrally plan

ned systems cannot possibly emuiate. 1s obviously doubly important in the Re-

pub1i c of South Africa where the h et er og ene it y o f th e v ari QUS popul at i on

groups is the outstanding s o c i o ~ p o l i t i c a l characteristic of the country .

These philosophical foundations of our economic system find practical expres

sion in the system of civil law. The exceptional power of the law to

restrain and guide the behaviour of people in soc ie ty der ives from the fact

that the 1aw is the se t of behaviol/ral rules acknowledged by the soverei 911

and enforced by i L That is why the fi rs t act in the search for consensus

with black leaders about black participation in the Government of the Repu

blic must be a Declara t ion of Recognition of t he b as ic principles of South

African common ~ a w o

3.3 l1It ECONOMICALLY SIGNIFICANT COMMON LAW rOUIIDATIONS Of 50Ull1 IIFRICAN

CIVIL LAW

1t 1S important that these essentials be so drafted that the Document could

become an integra.] part of the Declarat ion. What is offered here must beseen as no more than an illustration of what we have in mind,

3.3,1 THE STATUS OF THE INDIVIOUAL: EQUALITY BEFORE THE LAW

The essential cha ra ct er o f t he common law of the Republic is it s emphasis on

the legal status of t he individual as a person. as an owner of both material

and i m m a t e r i a ~ property. and as a p ar ty t o binding contracts and other volun

tary agreements giving rise to rights and o b 1 i g a t i o n s ~ These common law

nm"l1!S constitute the "Bi ll of Rights'l of personal freedom in South Africa.

The common law 10 South Africa protects the fundamental right of the indivi

dual to exist (the I1right to l i fe 1l) and t o a cqui re other rights. It

detennines his competence to ent-er in to obligat ions and to defend h is r ig ht s

in a cou rt o f law. It is the touchstone of his status as a c it iz en o f the

state. The citizenship issue begins at this point. The basic p rinc ip le i s

that such competences rest on the degree of responsib i li ty that can be

expected of individuals. T h u s ~ minors can acquire r i g h t $ ~ bu t cannot enter

in to certa in obligat ions.

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According to "Friedr ich van Hayek. a famous phi losopher o f the idea of

l iberty as developed in European cultural history. Hliberty and responsibi

lity are inseparable" {Hayek. 1972. p. 71J, and the greater p ar t o f t he moral

philosophy, as well as the jurisprudence in this field of rights, is concern

ed w it h the nature of individual responsib i l ity , ra ther t han wi th freedom as

such. In this connection, the importance is stressed of a proper general

education for every person, before he seeks industrial or professional train

ing in a specific o ccu pat io n. Th is primary emphasis on the individual does

not. however, exclude the legal r ecogni tion of collective entities such as

th e family, joint-stock companies in trade and industryj municipalities, etc.

Common law regards the family as a special s oc ial unit under the author ity of

the paternal and marital powers of the husband as head of the family. His

wife and children are placed in a subordinate position. respectively. with

regard to mat te rs affecting the interests of the common househo ld . a nd , as

fa r as hi s mi nor chil dren are concerned j even thei r parti cul ar interests.

Provisions exist to take care of cases in which the male head of the family

is deceased or not in a position to exercise his functions. The family as fAso d a1 unit is . however confi ned to th e narrow defi niti on of husband and

wife and their children. No special rights, ob ligat ions o r other ]egally

recognized t ie s e xi st outside this narrowly defined unit. The rights and

obligations between husband and w ife a s such also emerge from the idea of a

special type o f con trac t between them. which can be dissolved only under

prescribed conditions.

3.3\2 PRIVATE PROPERTY AND THE RIGHT OF CONTRACT: FREEDOM OF OPPORTUNITY

The character of the law pertaining to private ownership in the South-African

conmon law was established in Roman t imes and it came down to present times

with it s essent fa ls re lat ively unscathed. In principle. the owner of a

thing, whether immovable (such as land). movable ( such a s a book) . or immate

rial (such as a man's reputation). may treat such a thing as he likes - pro

vided h is ac tions do not unduly constrain or interfere with other rights in

that thing or in other related things possessed by other p eopl e, While

ownership is the most important recognized right in t hi ng s. t he re ar e a lso

other rights. such a s the right of success ion. th e right of servi tude and the

right of pledge or mortgage.

Next· t o t he se f ig ht s in t hi ng s, th e common law of South Africa recognizes $0-



can ea persona'i ri ghts from woi ch per sona l 1i abi 1i t i es or ob 1i gat;ons a150

necessarily arise, The more general and economical ly most important per

sonal rights and ob ligat ions a re those arising from transactions given the

force of law in the form of contracts. All such contracts derive their

validity from the mutual and free consent of the contracting parties, and

contracts may be declared invalid i f certain requirements pertaining to such

free consent havE not been met. Persona 1 obligati ons are cl early di st i n

gUlshed from punishments resulting from the rules of the criminal law as

such.

These legal i dea s of personal rights of ownership and personal contractual

claims {assetsl. made possible the "tremendous upsurge of material output and

income generation by means of private enterprise. mobility of people between

occupati cns, i ndustri es and i ndustri al regi ons that characterised the 1He of

European cummunHi es o ver t he p as t tWQ centuri es . and ! He in South Aft', ca

since the beginning of the present century. This system of impersonal law

not only provided the necessary assurance to the enterprising person that hi s

personal c la ims to t he value s created by hi s initiative and husbandry wl l be

protected by the state in terms of the law. but a ls o allowed the private ac

cumulation and mobilization of the mater ia l r esou rces that were so important

to the financing of the capital-intensive production functions of the modern

technological age. Thus. the joint-stock company and th e laws of property

and contract became the main instruments o f r ap id economic growth at compound

rates of expansion.

The recognit ion of personal property rights is also regarded by philosophers

of civilization as an essential element of p ~ r s o n a l freedom in general. The

famous anthropol ogi st . Mali nowsk i , ma i nta i ned that 11 t he ro ot s o f p ro pe rt y as

a legal principle which determines th e physical relationships between man and

hi s environmental setting, natural and art i f ic ial , are the very prerequisites

of any ordered a ct io n i n the cultural sense" (Malinowski. 1 9 4 4 ~ po 132-3 as

quoted by Hayek, 1972, p , 140 ),

The impor ta nt i de a i n th i s connection is no t that every si ng1 e. competent

member o f s oc ie ty must own property to s uppo rt t he principle of freedom.

Hayek shows that what is important is that everyone has Cl right to own

property and that the ownership of property is sufficiently dispersed to en

sure that "the individual is flot dependent upon particular persons t o t ra de

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or to seek employmento Freedom requires a competitive situation. In tUfll9

the system of competitive t rade ( including the selling of skills or labour),

r equ i res the legal framework of the law of contracts. The whole network of

rights created by contracts is as impor tant a p ar t o f Our protected sphere •• .

as any property of our own ll (Hayek, 1972. p . 141 ).

The fact is that in the course of this century the legislature has interfered

considerably with the freedom of persons to enter into contracts. This

interference has been politically justified on various g rounds such as the

protection of the interests of s ec tions of the community who are particularly

vulnerable to exploi ta t ion . Whatever the merits Of demerits of these in

roads into the freedom of contract may be. blacks will be able to chanenge

the validity of regulations'preventing the operation of the informal business

sector and even the practice of influx control through t he i nv al id at io n o f

employment contracts involving persons from non-scheduled areas.

3.3.3 LEGAL CULPABILITY Of THE INDIVIDUAl

The idea of indivfdual responsibility and of rights and obligations anslngfrom i t extends to obligations arising from wrongful acts by persons which

harm th e interests of other members of the cOITmunity. Various remedies in

volving appropriate compensation to the persons who sustained the losses are

proVided in the Law of Oelicts. which extends beyond civil law to include

damages from violations of criminal law as w e l l ~

The public attitude towards the working of the soc ia l o r d e r ~ public approval

or disapproval of the manner in which the order determines the relative

posi t ion o f different i n d i v i d u a l s ~ is closely t ied up with the pUblic' s views

about responsibility. When men are allowed to ac t as they see f i t . they

must also be held respons .ible fo r the r e su lt s o f their actions. In so fa r

as these ideas have also been incorpo ra ted in to the criminal law, clear tests

are r equi red to dec ide when a person 's act ions m ak e him liable to punishment

and create an obligation. Thus every crime presupposes t he exi st en ce o f a

law. If none e x i s t ~ a c rime is ou t of the question (Juta. 1920 . p. 104).

3.3,4 THE RECOGNITI0N Of COLLECTIVE BOOIES AS LEGAL PERSONS

"A principal contention in this submission is that the COllIDlon law of South



be r ej ec te d o r eroded by future governments without substantial consensus of

the population groups who originally reached consensus on t ~ e i r recognition.

There appear to be several ways of going about this.

The danger of a total or categorical rejection of these fundamentals of the

South Afrtcan economic system by temporary, simple majorities in any future

parliament of the Republic is obv ious ly not ver y real under the p resen t con

stitution of the Republic. The ext en t o f the d a n g e r ~ may. however, have to

be reconsidered once the terms of black participation in politics are clear.

This is so s imply bec ause 'I t will take some time before t he majo ri ty o f

blacks come t o f irmly embrace the private and competitive enterprise economy

as the natural expression also of the ir ideas of human dignity, etc. Should

the forces of national and international politics in the meantime bring about

the kind of constitutional changes that allow unlimited. simple majoritarian

Government of South Africa. these foundat ions of the private enterprise eco-

nomy will obviously be exposed to rejection. Under these circumstances it

would be highly desi r ab le for those inhabitants of the Republ le who continue

to value the se f oundat ions to be able to fan back on th e p ro te ct io n o f a

specific clause or clauses in the constitution that explicitly prevent

Government from acting in ways which deny the validity o f t he se foundations.

3.4.2 PROCEDURES OF ENTRENCHMENT

The most obvious constitutional procedure would be to expand t he p re sent

references in the preamble to the constitution of the RSA to include specific

r ef er ences to these fundamental norms of the common law. However, although

such pre ambl e has a certain political v a l u e ~ it has no decisive legal signi-

ficance. since i t plays no role in the interpretation and application of the

c o n s t i t u t i o n ~ To acquire such direct constitutional meaning these

principles would have to be t aken up as specific articles of the constitution

itself. Such articles could be seen as a "Bill of Rights" and could beentrenched, e.9. by the two-th1rds major ity procedure at present app11 cable

to th e official languages of the Republic (articles 89 a.nd 99(2}). To give

proper effect to these intentlons to entrench these common law n o r m s ~ i t will

p rob ab ly al s o be necessary to exp ress ly entrench the independence of the

judiciary and the principle of equality before the l a w ~

Another passibil it y is to ent rench thes e pri nciple s in important economi c and

'i! ~"

I1

!1H

il'II,ilIf

I111I111I1

I1

I,I11c;,rI!

II!

4''

1I,

iI

social legislation. In tllis connection, a precedent exists in the Act on a

National Policy fo r General Educational Matters. No 76 of 1984. Article

2{l)(d} of this Act lays down eleven policy principles that has to be follow-

ed by the Minister in administering the rest of the Act. Such a framework

of policy principles is of g rea t s ign if icance i n t erms of administrat ive law,

and will greatly support the legitimacy of the future adminis trat ion of edu

cation in the Republ ie . Thi s p rocedure c an be expanded to i nt roduce the

common law principles into the most important pieces of legislation dealing

with economic and social affairs. Entrenchment can be effected by the

express st ipulat ion that such principles can only be changed or removed from

the acts by al l three houses of Parliament.

Entrenchment of common law principles in particular pieces of legislation may

be accompanied by the expansion of judicial contro l . It may at this stage

not be feasible to provide the cour t s with a general control competence, bu t

it seems quite imaginable that the courts could be given such competence with

regard to speci fiC important pieces of legislation in the economic and social

fields. This competence might extend not only to the r ev is ion o f admini

strative actions in terms of the acts concerned, bu t also to the validity of

subsequent amendments. should such amendments impinge upon or negate the

common law prlncfples. South African constitutional law already recognises

the principle of judicial control of legislation in the case of the entrench-

ed language rights.

3.4.3 BEYOND FORMAL ENTRENCHMENT

Whether such a procedure provides any real protection in practice is a moot

point. with Illost competent commentators on t he s id e o f s cept ic ism. Under

circumstances in which a hostile parliamentary majority moves towards a total

confliet with the entrenched values protecti ng the pol itican y powerl ess

m i n o r i t y ~ these values have l i t t le chance of being upheld. The most t he d e-

prived minority could make of the situation is to have it declared a "revolu-

t io n aga in st t he state" bu t s ince the revolut ion would be perpetrated by the

majority. backed by the military and administrative powers of their- govern

ment, the "revolution" will most probably simply be condoned by international

opinion.

The chances that those values of indiv idual freedom! property and contractual



CHAPTER ..rights may be upheld by the bhck citizens of t11€ future Republ'ic of South

Africa will be considerably enhanced if this Republic could rest on federal

constitutional foundations. The "federal option" fo r South Africa at the

level of th e national g o v e r n m e n t ~ and the principle of the separation of

political power and suvereignty, will be dealt with in chapter 6.

I!

4.1 INTRODUCTiON

TIlE 'KlNETARY AND FiSCAl ORDER

Even under a federal constitution, given the economic, social and political

rea 1i ti es of Sou th Afr i ca , as they probably wi 11 rema 1n ove r t he n ex t decade

or two, entrenchment of the common law fo un datio ns of th e economy will

probably not suffice. To reliably protect these foundations against catego-

rical rejection by hosti le pol i tical majori t ies , even in the context of fede-

ral political and administrative structures, a much more sophisticated pro-

JlTammr.. not only of legal reform, bu t also of educational enlightenment and

economic assistance will be required.

It was argued in chapter 1 that the most rigorous constitutional protection

of individual property and contractual rights in an economy of private enter-

pr ise can be nu 11 i fied by hyperi nfl ation o r co ofi scatory taxati on. These

disasters have, in fact, befa l len qu it e a few private enterpr ise economies in

whi ch po1i ti ca1 power fell into the hands of parties wl th engrandi sed pro-

gramnes of welfarism through government act ion ra the r than individual effort.

In fact, South Africa i t sel f has in recent years begun to experience the ero-

si on of i odividua1 s ecu ri ty o f property and contract values through i nfl at i on

and high taxation. Thus even without the added consideration of an impend-

ing political reform which is bound to introduce more pressure for government

expenditure of the country1s resources, i t has become necessary fo r South

Africans to consider the recognition and entrenchment of t he bas ic principles

governi ng the ma i ntenance of sound currency practices and theavoi dance of

excessive taxation in this country.

As was done in the previous chapter wi th r ef er en ce t o t he pr inc ip les o f per-

sonal freedom opportunities and responsibility, our t re atment o f the prin-

ciples of sound currency and legitimate taxation win be mainly "notional".

No a tt empt w il l be made at a comprehensive treatment of the substance of

these two matters. The main argument at this stage is aga in the need fo r a

formal recognition by the negotiating p ar ti es o f the fundamental importance

of adherence to certain broad principles of the existing order by the new

institutions of the Republ ic . (I t bears repetition to add that such a demand

for adherence has become necessary in any c as e, i .e o whether political reform

takes place or not).

4.2 THE CURRENCY RULE

Of the many faces'of inflation. the most alarming is the decline;n t he pur -

chasing power of the rand as a standard of value and a s to re o f wealth. Even

more alarming than t he actua l decline in it s value is the public's expect-

ations of fu rthe r decl ines , and collapse of pUblic trust in the currency.



When such a "flight from t Il e C U I ~ r e n c y " ta.k\:?s phce, it is tantamount to a

lOSS of confidence in the polit'ieal order generally.

litany causes of such a disaster may be put for wa rd, b ut a s a general rule such

a state of affairs can only arise In th e wake of a very large oversupply of

money by the banking system on th e basis of cash reserves suppl led to them by

t he Cen tr al Bank, directly or through c ov er in g t he b ud ge t def'icits of the

State TreasufY. The reason for such bUdget deficits is clear: the unwil l ing

ness of the government to c on fr on t t he pub li c with the cost of it s expendi-

. ture programmes. The reasons fo r direct central bank credit to the banking

system are less obvious, bu t they are ~ a fond equally political in nature,

namely the desire to avoid confr on ti ng the pub li c expli.citly with the costs

(higher interest rates) of political failures ( or o th er extraneous mishaps

like droughts and international conditions for which the government allows

i tself to be held r-Bsponsible by th e public.

Before the establishment of central banks and tile abolition of the gold

standard of value fo r national currencies, governments could no t create

,Honey on a scale which l''/Ou1d set<iously undermine the stahility of the cunen

cy as the nationa l s tandard of value. It is indeed worth noting that the

primary cause for the intl'oduction of formal cent ra' ! banking, mos tly in th"is

century. was not a need to maintaln or restore t he p eopl e' s t r t /s t in the

natioJHI currency as th e common s ta nd ar d o f v al ue , b ut , on the contrary, to

protect the publ le against unsound practices of private banks, in which the

public could lose their money. As fa r as t rus t in t he v al ue o f the currency

is conce rn ed , t he central bankf> of most countries unfortunately later on

became lJa rt o f the problem r'(l 'ther tha.n th e solution.

The main reason fo r this faillwe of central banks to protect their national

currencies against publtc mistrust is the fact that the objective discipline

of th e gold standard was replaced by the subjective "disciplines" of poli t i

cal control. Under the international gold standard, countries ..,hich created

too much domestic money simply l os t th eir gold r es er ve s t o their trading

partners. The fundliiTlenta I di sc i P1i ne therefore 1ay in compet i t i on between

countries in sound monetary policy practices. l11111e the so-called Bretton

Hoods system of international agreement on exchange rate management -lasted

11946-1972), this political control at least contained the discipline of

international political commitment. S ince th e breakdown of that system,

national £.urrencies have become completely subject to the policies of th e

national governments, whether good or bad.

The major exceptions to this statement are the curr enc ie s o f those countries

whose consti tutf ons al l Oh' thei r central banks to ma i nta i n complete. i n d e " ~pendence from the government of the ctaz. !he mos t important cases are the

Bundesbank in the Federal Republ ie of West Germany and the Federal Resel 've

System in the United States of America. It should be noted that the poli t i

ca l structures of both these countries are feder'ally constituted, with p a r t i - ~Gular €mphasis on the decentralisation of pOlltical po\>!ertowards t he p eopl e

and the sepa ra ti on of powers in the central government. The principle of

central bank independence 1s dearly in close harmony with these federalist

doctri nes.

However, as was argued in prev ious chapters. pr'otection of m inor it ie s against

po"li tieal domi nati on cannot depend upon structures <11 one. The most

important condi ti on " s the recogn 1ti on by t he g ene ra l pub 11 c of has i c

principles of constraint on the freedom of a ct io n o f pol Hiea l i n st it u ti ons ,

In the absence of such generally accepted pr-inC"iples. independence of thecentral bank is no guarantee against persistent pol Hieal pre ssur e to usurp

th e c urr en cy as an ea sy pol Hieal escape fo r the government from economic

I ~ e a 1it i es .

For reasons s uch a s these, anti-socialist economists have al'gued in favour of

the int roduct ion of a monetary rule into the constitution of the state. Tfle

essent"Ja,l object of such a rule would be to prevent the authorities from

expanding the domestic money supply, or it s cash base, at a faster rate than

t he r ea l economic growth r at e of the economy. This particular version of Q

currency rule is put forward by the so-called "monetarist" school of thought

in economics. The genera1 idea is , of course, to re-i ntroduce a workab1e

objective constraint upon the power of governn1cnts to increase the Quanti ty

of money in circulation similar to the automatic constraint imposed by the

gold standard before i t was abolished"

The possiblities of proposing the monetar is t "money r ul e" f or general accept

ance in South Africa was discussed and rejected by the Commission o f Inqui ry

into the Monetary System iInd i'1onetiiry POlicy in South Africa. The reasons

fo r the rejection -were. however, related to matters of local banking

structure rathE::'r than principle.



the mere

the law

30

An alternative approach to t he mat te r may be to fa) in cl ude i n t he consti

tution of the Republ ic an entrenched clause binding governments to "maintain

monetary stability" at al l times, tb) to include into the charter of the

R e s e r y ~ Bank a clause instructing the Bank to r egula te the money surly to

this end, and {cl to provide the Bank with effective powers to car ry out it s

functions without interference from the political executive of the day.

Since the money supply is the most important operational variable in the pur

suance of monetary stability, the discipline on the central bank will be pro

vided by pUblic debate. led by economic opinion makers in the medi a and

elsewhere, on the efficiency with which the central bank is pursuing monetary

stabil it y through it s control over the money supply.

This approach is unfortunately somewhilt more complicated or sophi st ica ted

than a straight forward monetary rule as the monetar is ts propose. but a

number of s t ruc tu r al charac ter i stics of the South Afrlcan econol11.Y might

demand something o f t ha t nature.

It is . of course, not necessary for the steering corrmittee of the Forum for

Negotiat ion to resolve this matter in substance. The primary issue is to

gain consensus among tile negotiating parties, as a precondition to proceed

with the reform process that the integrity of t he n at io na l c ur re nc y as a

means of payment. a standard of value and a store of wealth win be safe

guarded by suitable means as the process of reform progresses. {One of the

most rewarding side-effects of such further study and deliberation on the

most suitable means of giving effect to the bas ic po in t of departure might

wen be the insights gained by the negot iat ing part i es into the working of

the South Afr i can economy and it s monetary mechani sms. )

4.3 THE TAX RULE

The other major threat to the economic survival of minor i ties under a poli t i

ca l dispensa tion which places no constraints on the freedom of government. is

that o f c on fi sc at or y l ev el s of t ax at io n. As in the ca se of the money

s u p p l y ~ the classical d iscipl ine over governments in their tax practices was

con ta ined in the compe ti ti on between Ta.x l or ds f or tax paying subjects and

objects as well as their comprehension that overtaxing their subjects or

objects of trade in t h ~ i r domain could become counterprQductive. A

princ'\p1e of vertical c q u l t y ~ i .e . how much tax a subject could legltlmately

be expected to pay over to his government never really developed in the poli

t ical experience of western civilisation from which the tax philosophy preva

lent 1n South Afr ica derlved. I n s t e a d ~ the principle of consent and repre-

• Th,"s principle was at the c en tr e o f the constitutionalsentat10n arose. .h is to ry o f Britain. as well as other major s t at e s l ike France and the Unlted

States,

The principles of competition, income elasticity and consent. were, however,

increasingly watered down with the rise of nationalism in the 17th century

and particul ad y it s Y'e-emergence in the form of economic nat;ona1i srn and

1 1. i the 20th century Indirect representation in the central

centra p anmngn· " 0

government together with t he p ar ty system greatly weakened the orestra'li1W9

influence of ordinary members of parl1ament on the propens1ty of the

executive to increase the burden of taxationo

h fl t < of the size of governmentThe burden of taxat ion is au fond t e re ec lOO

expenditure and consequently of the functions the. g o v e r n m 0 n ~ assumes •. 1 I this respect t o o ~ the p e o p ~ e ' s representatives 10 the natlOoa'l par!FI.!1en",

have throughout the 20th century almost completely lost the competence. to

control t he t ax burden by means of withholding their consent to the expanslon

of government expenditures.

This relentless increase in the tax burden through the expansion of g o v e r r t ' ~ment expendi tures in most western democracies is largely a function of _t ~ weakening status of parliaments vis-a-vis their executives. Moreover. thlS

constant devaluation of the role of the law making sector of government and

the upgrading of the executiv€ is . in turn a reflection of the growth of the

doc tr ine o f cent ra l economic management. When the pUbl le sees the processes

of government in essent ia lly deistic terms with one seat of power . s u r ~ o u n ~ i n ~a s ingle hierarchical administrat ive system, the status of an 1nstltut10l

L

"th' the orbit of this leviathan takes on the appearance ofand persons Wl 1n ,

" "As the cenual government assomes more and m oremean1 ngl ess anacromsms.

functlons in society which require ceaseless management rather than

laying down of b asic rules of private b e h a v i o u r ~ parlhment. as

maker. itself becomes relatively toothless.



CHAPTER 5~ lOCAL AUTHORITIES

In section 5.1 the baslc approach as se t ou t in chapters I and 3 ls applied

to the status and functlons of loc.l authorities. In s ec ti on 5 .2 p re se nt

systems of local government in the Repobl ie of South Afric, are described

with special reference to the r espec ts i n which i t corresponds to and differs

from the principles se t out in section 5.1. The process of moving from the

exi st in g t o the proposed system o f lo ca l authorities - the p rocess o f true

devo lu tion of political power _ i s t re at ed i n s ec ti on 5.3. loca l au thori ty

finance and the probiem of development ,i d 10 a devoluted system of local

a u t h o ~ i t i e s is discussed in sect ions 5.4 abnd 5.5 respectively.

5.1 TIlE EMIt APPROACH APPlIED TO THE STAllJS ANO fUNCTIONS OF lOCAL

AUTHORITIES

[Th is sec tion stresses the fact that th e rationale for the exis tenCe of local

authorities is t he p ro du ct io n o f collective goodS, i .e . goodS and services

that people want but which th e pr iva te s ecto r of the economy w ill n ot produce

due to t he ir c ha ra ct er is ti cs l e. g . street lightS). Consequently, 10c.l

authorlties may be regarded as l o gi ca l ext en tl on s o f the market System prin-

ciples ~ n t o the publ]c sectoro

5.1.1 LOCAL AUTHORITIES AS EXTENSIONS OF THE MARKET SYSTEM

As stated previouslY, this and th e following chapter explains how those norms

o f the common law of South Africa that a re b as ic to the market economy can be

extended into the field of pol it lcal inst itu t ions and public law. This en

ta l ls the grafting of new normS onto the exlstin9 pol it ical inst itu t ions and

public law, to the extent that they do not suffice to establish a political

system in which fu ll c i ti zenship of the Republic can be extended t o b la ck s.

The suggested appr hac to the introduction 0&t o i nc re as e t he tax burden is 0 I I constraints on the government.. once agaln two fold 1a baslc principle, namely that of . ' name Y. (a) the r ev iv al o f

eve opnent of an insti t t ' ] P .sentatlon, and {b) th ei U lona structure that 1

pr nciple, namely that of feder 1. · " · · wou d best sprve that

lscussed in Chapter 51 and th . 0 ocal government (as6) e centra 1 government (as d"l scussed in Chapter

Federalism is f0 course, no impenetrable sh" "as taxpayers in federations s h leld agalnst excessive taxationh uc as Germany Ca d 'aye experienced. Even" th ' na a and the United States

i 1n e se count ri es stro in favour of the introduction . t ng VD ces have been raissed1 " 10 0 the constitution f

ru e that would constitutionall ] 0 a so-called ufiscalt" y imlt the l ev el o f t "

ra 10 of , for example the . axatlon to a particular

1

' gross domestic produ tpo nted out that unl ike the co c. It must however bed mmon law norms of

an respons i bi 1i ty and the t persona i freedom. opportunitymane ary norm of real l' .

means of payment. t he s oc ia l d lmlts to the creation ofW or er of South Afr" .estern civllisation know no th "" lca and lt s integrals inth 0 e r p nn cl pl e of co t 'at of consent and representati "llS ra ln t on taxation than

1ft" 1 . onQ The lntroduct"l$ca ruleR, whatever Hs econom f . . 1011 of a quantftative

P

oUt" " c merits would ha tlea1 wnova ti on i n t h t ' . , . ve 0 be regarded as ae radltions of the South Afr,'can order.

Once again i t .1S not necessary tway in which the to. 0 reach agreement on the particulars f

ax prlnclple is en t 0 theCOl1stltutional negotiation _ renched as a preconc!.ltion to further

a broad norm and a suppo t" e: 9Q ~ such a quanti tat ive rules or by means of. r lng iostltutional st r t

agaln to gain consensus among the uc ure. The primary issue is

entrenchment of some const . t negotiatlng. parties about the need f or th eraln as a precondit"

the road of pol it1cal reform. lon to proceed further along

Extracts of the main points made in the chapter are as fOllows:]



The norms of private property ownership and freedom o f i nd iv idua1 dec is i on

making on the allocation of production factors, embodied in South African

common l a w ~ are the cornerstones ef the free market economy. A free market

can provide packageable goods and services most efficiently. Some goods and

services, however, cannot be packaged and sold to particular individuals to

the exclusion o f o thers . Such goods ar e commonly referred to a s pub li c or

collective goods.*

The f ac t t ha t public goods are not packageable {or marketable} require their

provi si on by some kind o f autho ri ty with coercive powers. Such coerci ye

powers are needed to force people receiving benefits from pubi le goods to

help pay fo r the provision of the goods. They ar e discussed more

extensively in subsection 5.1.2.

Whi 1e many pUb li e goods cannot be packaged and sol d to i ndividua 1 persons

households o r f inns . the benefits from their p ro vi si on a re l im it ed t o a group

of persons consisting of a much smaller number than th e al l people in the

country. The benefits might accrue ma f oly to the re s i dents of a town or

city. A local authority with coercive powers 1imHed to the boundaries of

the town or city would be quite competent to p rovi de t he pub li c goods con

cerned.

Once established. local authorities take part in market transactions just

like households and firms. A system o f l oc al au tho ri ti e s i s an extension of

the market system. A local authority has coercive power over it s constitu

ents, but so does the head of an household and th e management of a firm.

The coercive powers of household heads and firm managements have their origin

1n voluntary contracts which are enforced by the law. People can therefore

leave households and firms should they become dissatisfied with the way.the

household head o r firm management treats them 4 T he s am e principle applies

t o l oc al authorities. By taking up residence or buying property in the areaof juri sdi ction of a 1oca 1 authority, a person subjects itself to the

coercive power of the local authority, jus t as a p er so n taking a job with a

firm subjects him- or herself t o t he c oe rc iv e power of the management. Both

a ct io ns a re t he result of voluntary decisions on the part of the person join

ing the group. In both cases the coercive power of the managing body ar e

* Other classes of goods (externalities and common pool resources) have Slml-

la r characteristics and create simi lar problems. See f or i ns ta nc e S is h,1983, p. 22-7,32-3.

limited by l a w ~ In b oth cas es the managing body becomes obliged by law to

treat the person joining the group i n c er ta in ways. And in both cases the

latter person can l eave the group. local autnor1ties can thus be regarded

as firms in a municipal services industry.

5.1.2. AN ENA8LING ACT FOR THE ESTABLISHMENT OF LOCAL AUTHORITIES

Given the above, local authorities could function in terms of the principles

of South African common law . as se t o ut in the previous chapter. They could

be established by groups of in terested persons in much th e same way as compa-

nies or industrial councils ar e established.

As was mentioned in Chapt er 3 (section 3.304) the Companies Act, No 61 of

1973 and the Labour Relations Act. No 28 of 1956 state which persons are

allowed to create companies or industrial councils, under which circumstances

they can do so and what procedure should be followed in order to obtillin

jurist ic s tanding for the entity being estabiishedo The Companies Act also

s ta te s f or what purposes companies can be formed, to what formal requirements

the name and statutes must conform and what kinds of companies may be formed.

and con ta in s var ious other requ1 rements to prevent damage to UrJ-- or mi s

informed shareholders or other parties dealing with the company. In other

w o r d s ~ a company o r i ndus tr ia l council can be formed by any group of persons

confonning to a se t of objective requirements that may be tested in a court

of law. No Qi"scretion to allow or n ot t o a now t he e st abl ishme nt o f a com-

pany or i n d u s t r ~ a l council conforming to the ob jec ti ve requirements is

afforded a minister o r o th er government o f f i c l a l ~ Furthermore. the group of

persons forming a company decide themselves who the directors w111 be. what

line of business they win undertake. what internal rules they will follow

and what transactions they w'lll enter into with other parties. Umited only·

by general rules of the ]aw and the powers afforded the company i n t erms of

the reievant ac t and it s own statute.

As in th e c ase o f companies and industrial counc il s. th er e is no need to have

different systems of local authorities fo r different race groups. In keep

ing with t he b as ic approach in this memorandum. uniform rights t o est ab l i s h

local governmen ts c an be ext ended to an persons. irrespective of race.

Thi s c an be done by promulgating an enabling ac t comparable to the Companies



Act. This ac t should lay down uniform and object ive ru les or criteria for.

the establishment and operation of a local authorlty by any group of persons

( i .e . whites, coloureds. Asians and/or blacKs). It should contain a l is t of

possible forms and a lis t of obligatory and optional functions from which a

statute or constitution for a parttcular local authority (including composite

local authorities such as r eg iona l services councils) may be compiled by the

persons establishing t he local authority. not by some higher authority*. The

procedure to be followed and the minimum r equi rement s to which the statute

must conform, win naturally have to be se t o ut i n t he ena bli ng act. Such

an ac t will also have to provide for a register of local authorities serving

as proof of the existence and legal status of the local authority, as in the

case of companies, co-operatives. financial i n s t i t u t i o n s ~ and other legal

persons.

The operation of a local authority d o e s ~ however, differ from the operation

of a business in one important respect. All people in the geographical area

of jurisdiction of t he l oc al authority will receive benefits from the autho

rH y B s actions. I f thei r contrl butions to the cost o f t he se acti ons ar e

completely voiuntary in the same sense that no individual can be compelled by

a company to become a shareholder or a client of that company, many people

will elect to be "free-riders".

Ways a nd mean s to compel an residents or property owners in the area of

jurisdiction of a local authority to contribute to the cos ts of it s a c t i o n s ~is obviously needed, as is the case in the existing system.

These procedural ideas are not new or foreign. to democratic societies. In

the USA the procedure for establishing a local authority follows these lines

almost exactly. The existing procedures for estab li shing local authorities

in South Africa a re o ft en very similar, as set out in section 5.2.1. The

major difference is that in South Afr ica the prOVincial administrator or aminister has discretion as to whether a local authority should be established

in response to an application and i f established. whether t he a re a of juris

diction. form and powers of the authority will be as se t out in the applica-

* Of course, this does not e xc lu de t he possibi li ty that a higher authoritymight publish a standard statute to serve as a guideline for people establishing a local authority.

J/

tion. The authority is not automatical ly established, provided only that

stated, objective criteria are conformed to.

5.1.3 THE PROCESS OF CO-ORDINATION AMONG AUTHORITIES

[This section emphasizes th e important point that co-ordination and co··ope

ration between individual local authorities, however sman. can be organised

by the automatic market otientated discipline of voluntary contracts just as

well as or better than by cent ral d i rec tions from the government . There ts

no need to nmit the freedom o f i nd iv id u al cOllT11unlties by centra l d i rec t ives

as is t he case at p re se nt . E xt ra ct s from the section follow.]

Co-ordination among local authorities can in principle be effected by means

of either central control or voluntary contracts between two or more local

authorities. Creation of regional bodies consisting of representatives of

local authorH'ies 1n t he reg io n can also be classif1ed under either of the

f o r m e r h e a d i n g s ~ depending on whether' t he r eg iona l bod ie s are estab1ished

through di rectives from above or through vo] untary contracts among parUd -

pating local authorities. In the latter case. local authorities need to be

empowered to enter into such contracts. Such empowerment in a centra

government ac t does oot necessarily imply central control. The relevant act

might simply be an enabling m e a s u r e ~ such as an ac t enabling private persons

to form companies for business purposes.

The distinction between provision and physical production of goods and ser

vices is important in this regard. Local councils clearly have two quite

distinct functions. namely on th e one hand to articulate the demand of the

cOTI111unity they represent for various municipal services. and on the other

hand to provide s ervices to meet the demand. Once t he l oc al cOl.wcH has

decided which municipal s ervice s are to be provided. several possibilities

ar e open to it . These options provide ample opportunities for co-ordination

among' local authorities without any interference by higher authorft1es.

Hrl s u sua11y occurs in 1arge urban or metropol i t an a re as in whi ch several

local authorities operate in dose proximity to one another.



5.2 PRESEtlT SYSTEMS OF LOCAL GOVERNMEtlT IN THE REPUBLIC OF SOUTII AFRICA

[This section is not summarized here. It s purpose is to expose the

important differences between the principle of local autonomy fo r sUb

national communities in South Africa and the present, centrally directed

system.

Co-ordination among local authorities in South Africa has hereto been effect

ed mainly by means o f c en tr al control and voluntary contracts between local

authoriti es. Co-ordi natl on between 1oca1 and hi gher authorities have taken

place basically through centr al control . Local authorities are often

obliged through central government acts or provincial ordinances to perform

particular functions on behalf of higher authorities. These functions are

often refe rr ed to as agency funct ions and local authorities are sometimes

compensated for their expenses in r es pe ct o f the functions. These "agency"

relationships do not, h o w e v e r ~ result from negotiation by local and higher

authorities on an equal footing, as would be the case between finns in the

private sector.

Recent developments in th e fi e1d of co-ordioat; on between 10eal authori ti es

entail the creation of national and regional bodies consisting of representa

tives of local authorities. namely the Council for the Co-ordination of Local

Government Affairs and regional services councils. These developments also

seek the creation of a un ifo rm system o f l oc al government f or wh it es .

colourects. Asians and presumably blacks throughout the country.]

5.3 GETTING FROM HERE TO THERE: THE PROCESS OF TRUE OEVOlUnOH O F POWER

[This sect ion points to the disadvantages of central direction and uniformity

with rega rd to the s tandards and behaviour of local authorities throughout

South Africa. and stresses the advantages of freedom for local authorities to

behave according to the circumstances, social, physical, political and econo

mic, in their own "back yards". It links this contrast between current

ideas of uniformity and proposed ideas of freedom to diversify with the poli

tical philosophy of unitary government 1n South Africa.

It proceeds to expose the ambivalence in current offic ia l po li t ical thinking

between centralisation and devolution of power.]

Probably the most important reason for continUing centralisation by a govern

ment who has s et H seH on devolution, is the underlying political philosophy

mostly adhered to in South Africa. This philosophy presumes that there must

be some singles ultimate centre of authority in any society. The alterna

tive philosophy accepts that the government sector may be polycentric in

structure with s e v e r a l ~ concurrent sources of power. each limited to particu

la r fields of competence. We ar e in fact putting forward this alternative

philosophy as the means to f inding a so lu t ion to the problem of organis ing in

South Africa a jus t society in which al l minority groups are protected from

dominance by the majority.

In order to implement this p h i l o s o p h y ~ true devolution of political power

from the central government to ! o c a ~ authori ties is essential. Oevo"jution

of administrative p o w e r ~ which we prefer to call delegation. will not

suffice, because H does not ehange t he l oc at io n o f the ult imate centre of

authority in the society. Any group who can capture that single source of

power. wil1 of necessity dominate the rest.

[The section continues to examine more fully the meaning of the termI!devo1l.ltiofll of political power" and to show to what extent exercises in this

p r ~ c e s s has already occurred within the cont ext o f t he po li cy of independent

blatk states. It concludes that the process of devolution will necessitate

changes to the 1983-constitution.]

The South African government can delegate freedom to take decisions or. parti

cular functions without changing the constitution, but it will then retain

the ultimate responsibility for the performance of the functions as wel] as

the right to revoke the freedom of decision unilateraliy. A person or group

who is dissatisfied with the way in which the delegated functions is handled

on the $ubnational level, will certainly put pressure on the national goyern

ment to intervene or even to revoke the function - and this may happen even

before the dissatisfied party has exhausted it s influence in local politics.

Moreover. a change in the South Afr1can constitution in order to ?ss ign one

or more government funct ions to a subna tional l evel win not necessari ly

amount to devol ut i on in the true Sense of the word 0 One reason is that the

national Government can change the constitution on it s own, without having to

solicit the agreement of any subnational unit of government. Secondly! no



legislation by the South African Government is subject to revision by a court

of law. Consequently. in the f in al a na ly si s no subnational government has

any constitutional right t o p rev en t t he n at io na l Government from revoking a

delegated funct ion, even if such delegation took place by means of a change

in the national constitution. The national Government can simply change th e

constitution again.

True devo1ut i on of some (as opposed to all) government functions requ; re achange in the very nature of the constitution. It requires that the consti

tution be changed in such a way that future changes to i t will be sub jec t to

agreement by the subnational government institutions to which political power

is devoluted and i t requires that the latter must i n f ut ur e have recourse to

a court of law. should the national Government unilaterally change the

constitution in order to revoke the del/oluted functions. In fact, it means

that th e very sovereignty of the national Government win be diVided. It

will have sovereign power o ver t he fu nc ti on s i t retains in terms of the

constitution, but the subnational governments will have sovereign power over

the functions which will have been devoluted to them. In other words, South

Afr lc a w il l no longer hav e a uni -t ar y system of government. bu t Cl federal or

confederal one. The implications of this are d is cus sed in chapter 6.

5.4 lOCAl AUTHORITY FINANCE

5.4.1 THE QDESTION OF VIABILITY: PROVISION VERSUS PRODUCTION OF SERVICES

[Thls section explains that small local governments need no t be n o n ~ v i a b l e if

they understand that local authorities need no t undertake the production of

an the services they have to provide. Much of these- services can be

acquired from p ri va te con tr ac to rs o r o th er authorities, The possibilities

of lowering the average fixed costs of running local authorities are

d iscussed in t h is sect i on . ]

5.4.2 EXISTING ANO PROPOSED SOURCES DF REVENUE

[This section reviews exiSting sources of income fo r th e different kinds of

local authorities in South Africa. The inadequacy not onl y of t he f or ns of

taxation bu t a ls o t he revenue base available to non-White local authorities

le d the Government to propose two new sources of income, viz. a regional

services levy and SI iregional estab!i ~ h m e n t levy. The ertV lsaged re-giOM !

services councils wili be responsible for the collection and distribution of

the new sources of revenue.

The establishment of the regional services councils and the introduction of

the new sources of revenue by the central government rather' than through

negotiation among the corrrnunities invoived. are obviously in confl ie t wHn

the principles of devolution of power se t out in this memorandum,]

5 .4 .3 A SPECIFIC PRINCIPLE OF DEVELOPMENT AID

As long as the basic gaps in soda] and economic conditions between people

eXist. the stabHHy of the order 'In the country will be i n q ue st io n.

Assistance by 1ead1ng individuals and groups to their lagging associates in

socfety 1s as much a mat te r o f enHghtened self-interest. a.s it may be the

. manifestation of altruistic mothes" When. however . t he initiative in

dosing the gap is ta.ken by the poor by means of nothing 'more than using

political power intra- or extra-constitutionally to- simple coerce a redistri

bution of produced i n c o m e ~ the- outcome will be a serious deterioration of the

productivity and the stabi1ity of the entire economy.

A strategy of fun participation of an South Africans in the opportunities

of the economic system of the country shoul d. accordi I1g1 y. be r eg arde d a s

much more than it mat te r o f occasional charHYG It should be a fundamental

element of the character of relationships on ail levels of public (and indeed

even private) a f f a i r s ~ beginning with the metropolitan levelo

The institutions required for this strategy of development co-operation must

emerge from a proper definition of the form of assistance and! t he f unct ions

to be performedo

The pdnci pl es t ha t should guide the system of development c o - o p e r a t f o n ~should harmonize with those discussed! above. In other words, the aim of

development co-operation should be to promote If} among people as widespread

ill distdbution of priva te economic power as p o s s i b l e ~ iOl sense of personal

responsibility among as many South Afr ic ans a s poss ib le " and an ability and a

propensity to economize among as many economically active people as possible.

and {iO amonq regions or smaller areas a baiance of economic activity in



'"

keeping with the relative SQcial and political s ignif icance of the region or

area 9 but with due regard fo r the limits to effective i nterventi on in the

market processes of indust ria l locat ion.

Finally, the participation by the people concerned in the p ol ic ie s o f the

development agencies is a ma tt er o f fundamental importance. Where the

agencies ar e ordinary private persons or corporations, the participation by

recipients of ass istance should ideally be couched as a private contractual

r el at io nshi p. P ri va te c ha ri ty b la ta nt ly administered does not improve the

self" ·respect of the recipient. Where the relationship cannot 9 by nature, be

contractual in the commercial sense, but must be handled as a "collective

good". such as bas ic heal th and education or the improvement of the physical

infrastructure, the institutions responsible should be the creation of al l

parties concerned. As soon as development assistance is presented as on€!

way charity. wh"lch a is not. rather than as two-way c o . . ; o p e r a t l o n ~ it must

lose the g re at es t p ar t of it s potential strength.

5.4.4 DISTRIBUTION AND REDISTRIBUTION OF REVENUE: SUBSIDISATlON OF OBJECTS,

PERSONS AND AUTHORITIES

Demarcation of local authority areas on the basis of ethnicity results in

different local a .u thor it ie s possessing vastly different fiscal resources.

Even if", they an had access to the same foms or sources of l n c o m e ~ it is

clear t ~ a t the u lt imate source of income is the relevan t community. There

fore. a standardised enabling ac t f or l oc al authorities wil l not d im in ish the

need fo r income redistribution from high-income communities to low-income

communi t ies.

I t is important 9 however, to pay close attention to the differential effec ts

of various methods of income redistribution. Grants t o l oc al authorities.

for in stance , have vast ly d i ff e r en t effects than grants to deprived indivi

duals.

Every community. no matter how low it s average level of income and wealth,

w il l inc lude h i g h - i n ~ o m e persons and families. This is clearly applicable

to black: local authorities in South Afrlca as well. To the ext en t t ha t

wealthy blacks with in b lack local authorlties possess property, t hey migh t be

the people capturing the benef it s o f intergovernmental grants - a n c ~ not the

poor for whom the relief ]$ intended. The argument is that the grantswll1

enable the local au tho ri ty to provide better services while keeping taxes and

user fees to it s cvtizens constan t o r even to lower t he t ax es and user fees.

This will cause property prices to rise. so that those who already own pro

p er ty w il l receive a one -t ime b en ef it t o t he d et riment o f those who stH!

have to purchase property (See Bish. 1983, po 122-5 for a more extensive

treatment) .

Similar effects occur when objects rather than persons are subsidisedo Many

wealthy people daily receive subsidies on bread in South Africa - whil e the

subsidy is dearly intended to assist the needy. The same app!'les to

housing s ub si di es o r SUbsidised house r en ts . t ra nspo rt r at es and medlcal

fees 9 which are common in black townships.

The conclusion is , that it would be much better to 5ubs tdise the expenditure

by persons in low-income groups on certain goods by means of tax allowances.

vouchers or direct cash grantso Such vouchers or cash grants received from

regional iWthorities Oir the national government could be used to pay fo r

local authority services thereby supplementing their fiscal resources without

unintended effects on lncome distribution within the local c o m m u n i t i e s ~

5.4.5 REDISTRIBUTION OF INCOME THROUGH ALLOCATION OF FUNCTIONS AMONG A U T H O R r ~TIES NITH LARGER ANO SMALLER AREAS OF JURISOICTION

Appreciable redistribution of income is infeasible in local authority a r e a s ~because those being taxed may leave. The local authority may consequently

be lef t wi th an even less adequate fiscal base than before. At the same

time. peop le e l i 91 1>1 e fo r recei pt of redi stributed funds or benefits wintend to move into local authority areas where substantial redistribution of

income takes place. This wi1] obviously aggravate the situation. In f a c t ~

a situation of "unstab le equilibrium" win result. The locala u t h o r i t y ~ s

f inancial pos it ion wil] go from bad to worse . as has happened in the case of

th e CHy of New York.

Should red1stdbution of income be r egarded as d e s i r a b l e ~ it must of neces

sHy take place in reiat1vely large regions or preferably nationally. 50 that

the cost -of leaving becomes at least as high as; t he t ax burden. (Note that

the possibll it y of out-migration places an e f fec ti ve l fm it on the extent of

taxation. provided that freedom of movement exists.)



Spat ia l f i scal equivalence means that people in the geographic area where the

benefits of a pUblic project are concentrated, should pay for the projecL

Given that the benefits of different projec ts extend over different geo

graphical a r e a s ~ spatial fiscal equivalence can be attained by the simultane

ous use o f l oc al regional state and national authoritieso Some of thesemay best be functionally specialised. large. consolidated local authorities

can hardly meet the requirement of spat ia l f i scal equivalence, unless rates

may be differentiated by neighbourhood within it s area.

Redistribution of income cou ld t ake p lace by means of regional or metropoli

tan authoriti es responsi 01 e for pravi si on of regi on:wi de infrastructure and

with the power to impose region-wide taxes. Such authorities will obviously

receive most of it s tax income from the more affluent c o r r r n u n i t i e s ~ bu t will

be able to spend it to the benefit of 1ess affl uent communi ti es as we11

Redistribution does not necessarily imply direct cash grants to persons or

local authorities in the area of the regional or metropolitan authority.

5.4.6 THE PRINCIPLE OF FISCAL EQUIVALENCE

One of the most desi rable features of the market system is it s self-correct

ing behaviour. When shortages or surpluses o c c u r ~ prices rise or fall,

thereby indicat ing quickly and efficiently how buyers and producers should

respond.

It has been argued in the above that local authorities are extensions of the

market system. If the local authority system is to be self-correcting. the

p r i n c i p ~ e of flfiscal equivalence" { O l s o n ~ 1969, as quoted by Bish. 1983, p.

116} must apply. This principle requires that those who decide, benefit and

pay should be the same group of people. The citizens who make decisions on

programmes (or di rectly i nfl uence representati yes who ac t on thei r be ha I f)

w111 be those who benefit from the programme and those who pay the cost of

the prograTlllle ( B i s h ~ 1983, p . 116 ).

Fiscal equivalence is usually self-correcting because the dec is ion makers

consei oU51y compare benefits with costs i nmak i og deci si ons because both

accrue directly to them. At the same time, fiscal equivalence may be con

sidered equitable because beneficiaries pay the cost of obtaining their bene

fits rather than shifting the c os ts t o third parties { i b i d ~ , p 117).

When the activities of government involve providing products or services toidentifiable individuals 9 such as water s u ~ p l y or public transit , the fiscal

1y equivalent way to f inance such ac tivi t ie s i s through user charges {ibid.,

p. Ell .

Temporal fiscal equivalence require that capital expenditures, from which a

benefit stream occurs in the future, should be f inanced from borrowed funds

with benefici ar ; e s r ep ay; og th e debt over the 1He of the project. Ope-

rating expenditures" in contrasts

balanced budget (lbid., p. 118 !.

should be f]!1anced from n",", annually



CHAPTER 6

REMOVAL OF DISCRIMINATION ON HIGHER LEVELS OF GOVERNMENT:

THE FEDERAL OPTION

6.1 INTRODUCTION

It may be useful, before cons ider ing the question of reform in South Africa

at the highest levels of government. to restate the gist of our approach.

The imnediate reason for the reform is the fact that racial discrimination

against blacks has to be removed from the cha ract er o f the state. i .e . both

in the dictates of private law as well as public law, i .e . both 1n the legal

framework of both private associations such as the economy. and public asso

ciations, part icularly on the poli t ic a l l eve l.

We have assumed that the refonn will be evolutionary, i .e . that the govern

ment of the existing order 1s strong enough, and the existing order itself is

cohesive enough to prevent the process of transformation from exploding into

a revolution. This memorandum does no t deal with that fine political ar t of

moving fast enough to prevent a revolution towards the lef t . but no t so fast

as to spark of f a successful revolt o f t he r ig ht q

One characteristic of a healthy evolution is that it retains the best ele

ments of the old order and a tt empt s t o expand upon them to meet the chal

lenges of the new situation. In this connection we proposed that the basic

common law norms underlying the economic o r d e ~ of South Africa be identified,

recognised by the negotiating parties and extended into our public law as th e

legal basis of South African politics.

We bel ieved that by doi ng so the economic and pol itical ch ara cte r of the

soc ia l o rder in South Africa will change to the extent required to anow that

in order no t only to become fu l ly legit imate , meaning that blacks will become

citizens of the RepUblic with equality b efo re th e law and equality of

opportunity in the economy. bu t also to remain politically stable and econo

mically viable.

Our position in chapters 3 and 4 has focussed mainly on the general prin-

ciples involved. with only scant reference to the part1cular structures that

might arise in South A f r i c a ~ We have said even less about exactly how this

process of legal equansation of blacks as individuals should in practice

a f fe c t thei r nves. How their incomes might be affected. or how they might

vote in municipal elections. We have not even at tempt ed t o exp res s an

opinion about the pos sible r ecep tion of our proposals by t he var ious poli

tical factions among blaCKS. But we did not r eg ar d t ho se important matters

as part of our brief at this stage. Ail we do claim is that these generallegal princip]es ~ i s c u s s e d in chapt er 3 and 5 are quite capable of accommo-

d at in g t he l eg iUma te claims o f b hc ks in the economy and t il e structure of

local a u t h o r ~ t i e s of South Africa.

In the pr-esent chapter we have arrived at t he u lt im at e l eve l of national

pol i tics where democra:tic partici patioro in t he centra1 government " s at

issue" The expectation was expressed earlier that what was learned about

the. appHcation of the principles of individual freedom and responsibOay.

and of c o n t r ~ c t u a l co-operation among individuals to the politics o f l oca l

authorities may be useful in approaching the problem of co-operation among

citizens at the highest ]evei of government" Ttlis was partly the case.

Local authorities turned out to be little more than extentlons of the market

economy and this is only p ar tl y t ru e o f central g O \ f e r f l m e n t s ~ even those that

endorse socialist ideo]ogyc

Central government ' h South Africa m a ' y ~ accordingly present us wi th diffi

culties for whtch the phi1osophy behind South African common law norms do not

have the f u l ~ answers. Nevertheless t we ourselves were genuinely surprised

to note the great extent of harmony between these basic principles of i n d l v i ~dual freedom underlying our common law. and the principles of federaHsm &s

enunciated by some of the greatest poHtical philosophies in the Western

civiHza'tlono

Once agaha. we have no t taken the argument much beyond basic principles and

we cannot even present a full examination of these" The history and philQ

sophy of f ederal ism is fa r too I"'ich to make such an exercise possible in

these pages. The main object of this chapter is to emphasize and to H

lustrate the very close l og ic al l in k between th e jurisprudence of South Afri

can) common law and t il e political philosophy of f e d e r a 1 i s m ~ and to suggest

that t h solution t;o the prob]ems of central government in a plural South

African democracy may be fQund 1n that d i rect ion .



The existing unitary system was originally designed by the founding fathers

of the Union of South Africa mainly fo r two purposes. The f irst was to im-

prove the pub li c f inance s of the participating colonies and to create a

strong common market basis fo r the economy, within the British empire. The

second was t o u ni te the two "races" of Afr ikaners and Eng1 is h speaking South

Africans after the Anglo-Boer War of 1899-1902. The federal alternative was

considered to be too weak to achieve these objectives. The great black

chiefdoms of the time were excluded from the political exercise.

Now. three qua rt ers o f a century later. the legitimacy of the unitary state

without t he participation o f t he bl ac ks has come under serious attack. both

internally and externally. Had this fate been recognised in 1910. the Fede

ral Alternative would surely have been given much more serious attention.

6.2 TWO AlTERNATIVE SYSTEMS

The philosophy underlying the present system of government in the Republic of

South Africa presumes that there must be some single. ultimate centre of

authority in any soc iety : the central gove rnment . Such a government in fact

has unrestricted monopoly power. In the Republic of South Af ri ca t he

central government holds the final legislative and executive authority.

While the judicial power is effectively separated from the legislative and

executive powers. no legislation by the central government - not eVen legis

lation altering the national constitution - is subject to r evi sion by a court

of law. The practical impi i ca ti on o f this is that any group who has cap

t ur ed t he central and single source of authority can legitimately dominate

the whole society - by exercising ultimate control ove r each and every sub

national uni t o f government in the whole country.

The alternative philosophy accepts that the government sector may be poly

centric in structure with several concurrent and competing sources of power.each limited to particular fields of competence by a constitution or sodal

contract which is enforceable by the cou rt s o f law. The re levant fie lds of

competence IWY be defined 1n terms of funct ions, geographical areas and /o r

groups of p e r s o n s ~ while legislative. executive and judicial powers would

ideally be separated on an level s of government. The practical implication

of th is is that no single group would be able to dominate the whole society,

unless it captures each and eve ry unit of government in the whole country.

This is th e Federal Alternative.

[This section summarizes the main unitary characteristics of the present R e public of South Africa. The summary serves to highl ight the difficulties In

the way of accommodating b la ck s i n that system. At the same time it shows

up the "logistic" problems which will have to be faced in moving to a federal

or confederal constitutiQn.]

6.4 I'OSSlBlllllES FOR 1\ FOURTIl I;HI\HBER IN PAALIJ\MENT

The t heore ti ca l poss ib li ty o f accommodating blacks in a fo ur th chamber of the

present Parl "lament does no t appear to be a viable optiOl'L I t has no

champions in the Government. th e parliamentary oppositions or among the

political movements among th e blacks. It s logical outcome must be the

eventual domination of Parliament by the major ity party in the black c h a m b e r ~and with no protection for minority groups.

6.5 THE FEDERAl AlTERNIITIVE

This section deals with the basic principles of federalhm as formulated by

various authorities. Those familiar with these principles w il l fi nd ]ittle

new fn the textQ The main purpose of the t ex t i s to i l lustrate the r e m a r k ~able harmony between the bas ic principles of South African common law and the

basic federal principles of pub lic law"

The federai system of government finds it s inteUectual origins in the teach

ings of Judaic-Christhn theology, Greek phHosophy and Roman 1aw { O s t r o m ~1983, p . 1281.

Perhaps the liIDst basic principle on which federalism is b u i 1 t ~ is that the

individual 15 Ilthe best and sole jUdge of hi s own private interest. and thatsociety has no right to control a man 's actions unless they are prejudicial

to the common weal or u nl ess t he common weal demands his help" (De Tocque

' ; f i n e ~ 1945. po 6 7 origh1aHy published in 1835}o This maxim follows from

the beHd that the individual "'is free 0 and respons1ble to God a lo ne , f or

a ll t ha t concerns himselfn {loco cito}o



The principle ef individual freedom of decision-making already implies that

al l forms of co-operation among indiv idual s w il l neces sa r ily flow from agree

m e n t s ~ contracts or covenants among individuals. In fact, the term "fede

ra 1" is deri ved from the Lati n term " fo edus " meani og to covenant (astrom',

1983, p. 129; Kriek, 1978, p. 1891. De Toequeville 110e. eit . ) eloquently

explained the relationship between the individual and government 150 years

ago: illn the nations by whi ch the sovereignty of the people is recognized,

every individual has an equal share of power and participates equally in the

government of the state. Why then. does he obey society. and what a re t he

natural limits of this obedience? Every individual is always supposed to be

as well in fo rmed . a s virtuous. and as strong a s any of his fellow citizens.

He obeys soc iety. no t because he is i nferi or to those who conduct it or

because he is less capable than any other of governing himself. bu t because

he acknowledges the utili ty of an association with hi s fellow men and he

knows that no such association can exist without a regulating force."

Cormnuni ties establ i shed by means of covenants or social contracts among

individuals can themsellles e nt er i nt o contracts with one another to form a

coTItrlunityofcommunities. In the same sense that the freedom and different

personalities of individual persons can be preserved within a community, the

autonomy and diversity of individual cQrrrnul1ities can be preserved within a

community of communities.

Ostrom {1983, p. I27} point s out a further princip le underlying the covenant

al concept of community:

"Fashioning a COTllllunity of communities which allows fo r autonomy and diversi

ty depends. in some fundamental sense. upon a s har ed conception of right.

Human societies that a sp ir e t o be self-governing can only be constituted 1n

relation to moral principles of self respect and mutual respect for one an

other.. • Peopl e must share some fundamental understand'! ng about pr i nCl P1es

for the right ordering of human relationships; and, as Alexisde Tocquevil1e

has p ut it . some basic idea of right. Ther e can be no shared communities of

interest unless those diverse interests comprising such a community possess a

s ha re d i de a of f i gh t as it is re l evant to poli ti cal experi ence" (our

emphasis).

Needless to say. definitions of federal ism abound in political-science l i te-

rature. One of the weakest definit ions is that of Riker {1964. p. II I which

has only three elements, namely that a federal state is one in which {I) at

least two levels of government exist; {2j each government level has at least

one area of functional jUrlS'diction 'In which it is autonomous; and {3) a

guarantee exists that each government can act autonomously in it s own sphere

of jurisdiction {Krlek s 1978 9 p. 190}.

FederaHsm is a logical alternative when dHferent communities have CO!i1ll0n

interests as wen as interests which they regard as their own. Kriek

(ibid., p. 192) points out two basic preconditions for- the ex'lstence of a

federal state: F irstly . the communi ties involved must have a strong need to

manage their common affairs COllectively. S e c o n d l y ~ an equally strong need

must exist to manage the own affairs of the cOl11'fll1nities separately. If the

first need does no t exist. no association will be established (or an existing

association might cfwi1ble and eventually disappear). I f the second need

does no t exist. li centralised union rather than a federat ion will be e s t a . ~blished.

In order to accommodate both needs in a federat ion. those affairs Which are

common to an the f edera t ing !.mHs may be entrusted to the federal govern

ment. whi le mat te rs r eq ui re d f or t he maintenance of an own identity wi n be

left to the lllldhidual units 0 This means that the very sovereignty of the

state win be d i v f d e d ~ The federal government wiH be sovereign 'In respect

of the mat te rs entrusted to "i t and the federating units will be sovereign in

their a re as o f j u r 1 s d i c t i ~ m (ibid. po 191. See also po 66 of this memoran-,

dum),

These f ie ld s o f sovereignty ar e agreed to in a written const i tu t ion or social

contract between the federating units. As a buyer and seller may be irrevo

cably bound to 3; contract between t h e m ~ so the different units. of government

are 1 r r e v o c a b ~ y bound to the constitution. As private persons entering intoa contract has to recQgntse the arbitration of the courts when disputes

a r i s e ~ 50 the d if fe re nt u ni ts o f government must subject themselves to an ob

jective arbiter. usually the supreme court, The arbiter t hen ha s the juris

diction to test the decis ions and legislation of the federal government as

well as the federat ing units against the constitution and to declare them as

nun and void should t hey be i n c on fl le t with the constitution. II'! unitary

s ys tems, such as the RepUblic of South Africa, the c;purts may only declare



legislation as null and void if the government officials failed to follow the

procedure laid down in the constitution. They have no jurisdiction t o r ul e

on the contents of the legislation, except when the constitution expressly

makes provis ion for such control by the supreme court, as in the case of the

entrenchment of the two official languages.

It follows from the above that another principle of federal ism is that the

federating units would have the right to be involved in the process of amend

ing th e federal constitution. The procedure fo r such amendment is one of

the most impor tant elements of the contract between the federating units.

Changes in the constitution need not necessarily require the consent of each

and every federating unit. Amendments maYt for instance, require- the con

sent of the federal government plus the consent of the governments of a

stated number or a certain proportion of the federating units.

As pointed out p reviously (p. 81) the federat ing units can have a territorial

or a corpora' te base (o r a combination of both). Their jurisdiction may be

def ined in terms of geographical areas so that they will have authority over

al l persons within the geographical area. A corporate base means that the

jurisdiction of the federating units is defined in terms of a particular

group of p e r s o n s ~ irrespective of where they may happen to be in geographic

space9

pri ncip e is p,oporti ana1Hy of poi i t ical repres€ntati on. d vH S€i'v"ke ap

pointments arid the anocation of public funds. When the segments are of

highly unequal size. small minorities may be afforded special protection: by

means of overrepresentation or parity of representation {ibid., p. 29-301<

It i s c le ar from the above that a. consociatioo need not necessarily conform

to the covenantal concept of community and the underlying principles of indi

VIdua li sm and a shared conception of right which form the basis o f f edera

lism, nor t o t he re suHf ng principles of the ult imate authority of the con

stitution as fnterpreted by the courts and partlclpatlon by al l levels of

government in constitutional amendments. Furthermore. corporate federations

need not conform to the principles of mutual or minodty veto or p r o p o r t i o n a i ~l1ty in respect o f civil service appointments and the allocation of public

funds.

To people who have been brought up in it country with a unitary system of

government. federat ions of ten seem disorderly. Federal systems necessarily

consist of multiplicities of government units that have overlapping juris

dictions and that have to resort tu contra.cting and. other market-Hke means

of co-ordination amongst t h e m s e l v e s ~ T h ~ s contrasts sharply with the seem

ingly neat, tda:ngu1ar structure of command in a unitary system (Ostr-om.

1983, po 146) 0

However. i n the case o f f eder al sys tems . o r d e r ~ like b e a u t y ~ 1s in the eye of

the beholder. Amarket system seems utterly disorderly. In fact. i t took

a philosopher of the staturE of !\dam Smith t o d is ce rn o rd er in the market

placeo Similarly. a federal system possesses an order which may not be con

s p i c u o u s ~ but the existence of which cannot be denied.

Economists have devised concepts and methods t o d is ce rn and analyse market

structure. conduct and performance in the priva te sector. Similar conceptsand methods are being deVised to d i sce rn and analyse the structure 0 conduct

and performance of public-sector industries such as t he pol ic e i ndus tr y. t he

water industry. the education industry. the weHare industry and the health

industry tOstrom. 1 9 8 3 ~ p. 146-7).

Corporate f edera tions a re o ften referred to as consociations. According to

Lijphart 0980, p. 29-41) this is not necessarily the case. Consociations

occur i n p lu ra l societies and rest on four p r i n c i p l e s ~ al l of which deviate

from the Westminster model of major i ty rule. The two most important, com

plementary pri od ple s are grand coal it i on and segmental autonomy. Grand

coal ition means that the political l eade rs o f al l the segments of a pI ural

society jointly govern the count ry and may also be called the principle of

power sharing. The principle of segmental autonomy means that deci s10nmaking authority is delegated to the separate segments to the maximum extent

possible. The idea is that each segment rules itself in an matters that

are not of common interest and are therefore not decided upon jointly by the

segmentsl leaders. The third consociational principle is the mutual o r

minority veto, which may be either a formal or an informal rule. The purpose

of this is to p rovide a guarantee that no segment can be outvo ted on the

central political level when it s vi ta l in te re st s are at stake. The fourth

A point related to the problem of o r d e r ~ 15 the idea

authorities necessarily have to be controlled from above"

that subnational

Many South Afri-

54



cans s imply accept that local authorities have to be controlled by t he p ro -

v incial counc il s o r the central government and the provincial councils by the

central government. Thi s i de a is foreign to federations. Each authority

in a federal system is sovere ign in r e spec t o f i ts functions and is not con-

trolled from above, bu t from below. ,Each authority is contrOlled by it s own

cH i zens through thei r contact with representati ves, through the ball at box

and through cour t ac tion.

Sceptics argue that "federations do no t work in Afr ica", and to support their

view they can, or cou rs e. refer to a number o f fa il u re s in Central, East and

North Africa. But when the reasons for these fail ures are stUdied. it

transpires that the particular federal structures imposed fa lled precisely

bec ause t hey were imposed from above upon the people in ten ns of the last

wills and testaments of colonial power s, and not negotiated inter vivos by

the domestic vested interests. At the same time federal principles of

government stood in the way of the total itarian ambitions of the newly

emergent domestic leaders. These post colon ia l l eaders would j u st if y t h ei r

totalHarian ambitions in terms of ideals such as "building one nation" or

"building a socialist order", etc. - aims which ap pe ar to require a concent ra ti on o f power at the centre. Whether these motives were genuine or not.

is not irnp.ortant. What is important is that these power seeki ng 1eaders

commanded enough support fo r their aims among the people to secure possesion

of the inst ruments of government.

In other words, t he re al alternative to federalism i n A fr ic a was not the

Westminster system of Parl iamentary Democracy. Nor wat it a South African

style separat ion of political power in independent states within an economic

union. The real a lt e rna ti ve to federa1fsm was total itarian dictatorship.

Insofar as people in Africa naturally applied and voiced f eder al i de as in the

organisation of their social l ife at t he g ra ss roots level, these tendencies

were adamantly suppressed from above.

Are these experiences good r ea son t o believe that federal structures will

also fail in South Africa? On the contrary, precisely because t he re a re

such powerful political fo rc es i n SOlJth Africa which refuse to submit to

totalitarian government, whether in the form of a majoritarian government in

a unitary system, or a dictatorship in a non-system, t he f eder al alternative

to them as the basic principle of government is fa r s tronger in South Africa

than anywhere else on this continent.

Federal principles have always applied to a hos t o f the most important i n s t i ~tutions in the soc ia l system of South Africa. In the field of labour rela-

tions, the system of industrial conciliation was quoted earlier as typically

federal. In s p o r t ~ most governing bodies are federally constituted, in -

cluding the South Afrlcan Rugby Union. So 'is the governing body of the

Dutch Reformed Church. The system of primary and secondary education at

least among Whites has a strongly federal governing principle•. Even the

National Party is governed on federal principles.

Finally, i t must be emphasized that the p ri nc ip le s o f f ederal ism in

government should no t be confused with the principles of uni t ary government.

As was suggested in the ear ly par ts of this chapter. these two systems are

conceived in two totally different theories of government,

In view of the above. it ~ w n l probably be necessary to decen tr a li se the

police and the nat iona l b roadcast ing station along with political power.

should the RepUblic of South Africa be federalised. This will provide con

crete pro tec tion agains t the possibility that some smaU group mig ht in

futuregain

c on tr ol o ver t hewhole

countryby simply

taking controlof

the

corrmand centres. o f t he se two institutlons and thereby being able to ignore

the constitution and the courts.

In conclusion. it should be pointed ou t that aH the pdnciples se t out in

the above a re app li ca bl e t o f ed er at io ns as well as to confederations. The

most important difference between the two i s th at confederating units retain

the right to withdraw from the confederat ion unlhteral1Yr; while federating

units do not 0

6. 6 POSSIBILITIES FOR TERRlTORl1Il ITDEllJ\llSll IN SOUTIl AfRICA

The historical fact that the var10us great black chiefdoms were excluded fromthe National Convention of 1909. which led up to the foundat ion of the Union

in 1910. was alluded to in the int roduct ion to this chapter. While the

whites t rekked an over the subcont inent of Southern Africa. the b la ck na

tions each settled in a geographically more or less def inab le a rea in the re -

g10n, the Xhosa in the Eastern Cape. the Zulu: i n N at al . the South-Sotho if!

and around the highlands of the MalutiS. the North-Sotho north of the t·laga-

lies mountains in the Transvaal. and the Tswana in the Northern Cape and

56



Western Transvaal. The territorial base of the Sotho, Swazi and Tswana

peoples were in fact po li t ica lly split up by the decision of the British c o 10nia1 office in the late 19th cen tu ry to g rant crown colony status to the

chiefdoms o f the se nat ion s in territories that did not fully embrace the

whole a rea o f settlement of al l the tribes belonging to these nations.

The remarkable fact is t ha t t hi s geographic distribution of the black popu

lation is st i l l more or l es s i nt ac t (see table I, page 9) . Over the past

three- q u ar te rs o f the century considerable migration of people ou t ·of these

flhomelands'l took place. particularly to farms and towns around these home

l a n d s ~ but 31 so on a very large scale to the so-called PWV' (Pretoria-Wft

watersrand-Vereniging) industrial metropolis on the Transvaal High' /e ld . and

on a much smaller sc al e t o the industrial metropolis of the Cape Peninsula.

Migration of ZUlus to the Durban metropolitan area was equally heavy, if not

more so than in the other cases. bu t like the migration of Xhosas to Port

Elizabeth , the movement may be regarded as having taken place within the 5ub

regional base o f the particular nation.

The coloured and Asian populations of South Africa also have relatively cleargeographic bases. The coloureds are 1argely conf; ned to the Cape proY; nee

and the PWV region. and the Asians to Natal and the PWV region.

While the whites have spread into al l parts of the RSA. they have respected

the national states as the exclusive domain of the black nations. They tend

to concent ra te in the PWV region to a grea ter extent than any other g r o u p ~but because of their minority status in the total p o p u l a t i o n ~ they are also a

minority in this region. In fact, the whites do not form a ma jor it y in any

sub-region of South Africa, save in white municipal areas.

It is clear that while the var ious ethnic groups in South Afr ica each have a

relatively clear geographical base. some deg ree of ove rl ap o f the geograph i

cal a reas where different groups are mostly found. occur . Should r eg iona l

authorities on the basis of one man one vote be estab1ished in any se t of re

gions Which are bigger than individual municipal areas. a single group would

obviously dominate political processes in most of such regions. The whites

would not form a majority in any of such large regions. Nor would the

Asians.

It fol lows thi lt the political problems associated wan the pll iral1sm of the

South African society as a whole would also Occur in each of such large

regions. Should territorially b-ased federal states be established in South

Africa. it is clear thatlocai authorities with extensive powers c o v e r i n ~many cUlturally sensitive government functions as possible. wi n be most

important in safeguarding the auton?my and self-determination of the var ious

population groups. The federal principles governing the relationship

between the national government and the state governments wi n have to be

made app11 cab1e to the rel at i oflsn1 p between al l state governments and thei r

local authorities. Should this rule not apply . 110 guarantee would exist

that local communities wou ld be able to maintain their autonomy.

Another p o s s i b i l i t y ~ which may be utilised concurrently with the maximum de

volution of political power to the local authorities {in the sense defined on

p. 39) is to organise the state governments on a bas is s imi la r to the

present central government. In other WOl"d5, a state government consisting

of hous€s fo r the ethnic groups present in appreciable numbers may be formed

to manag€ their own affa irs separately and the genera] affairs: jointly.

Ethnic groups need not be def ined tn terms of race. but could be defined by

means of uther c r i t e r 1 a ~ eog. hume language and religion"

Areas of ju ri s:d ic tio li o f pos sib le state governments wHi have to be decided

at the negot1ating table. Whether negotiators win seek t o combine vr to

divide existing regions such as provinces and national states. will obviously

depend on the structures negotiated for the states in t he f ed er at io n o r con

federatjofl. Should they consist of houses for different ethnic grDups.

rather large states might be a c c e p t a b l e ~ even to negotiators stressing seif

determination of groupso I f not? SL!ch negotiators: wil l obv ious ly opt for

smaller states with more homogeneous populationso

6.7 mE POSSIBILITY !Jf COMPlEMElffAR¥, IIlTERREGlONJ\t, ETHNIC J\UTfiORIHES FOR

OIlM IIffAlRS

Whatever r eg ions a re to become states in a federat ion or confederation. i t is

c le ar t ha t members of ill s]ngle ethnic group win probably be spread over a

number of the states, They might think that they need an interregional

ethnic authority to handle their common, culture-related interests in more

than one state, In order to p rovide Zulu primary schools t o a high p er-



centage of the Zulu populat 'ion of South Afr 'lca , the major ity of Zulus might

be convinced that they need a Zulu primary school board operating in several

states. A 1 t e r n a t i v e l y ~ the major ity of Zulus might be satisfied with a

separate Zulu primary school board in each of the s ta te s t ha t might be

formed. A third possibility is of course that the relevant states might

each have a single department of education providing primary schools with si

milar curricula but different languages of instruction for al l population

groups of significant s ize within it s area of jurisdiction. Yet another

possibility might be that special local authorities or school boards provide

education in areas of jurlsdiction that may be much sma ller than the areas of

jurisdiction of the states and which may have populatfons that may be practi

cally homogeneous in respect o f c u lt u r e.

It is quite possible that the legal competence of state governments consist

ing o f chambers fo r th e most important e thnic groups in the geographica l area

of each could be l imited to decis ions on general affairs, taken on the basis

of consensus among the chambers. An own affairs could then be taken care

of by complementary, i n t e r r e g i o n a l ~ ethnic authorities, each representing al l

members of the e thnic group concerned. The members of the ethnic authorities could be chosen independently of the members of the chambers in the ter

ritorially-based government units. The seat of each ethnic authority would

probably be in the state where most members of the group concerned are con

centrated. They would, however. be allowed to opera te il1 other states as

wel l. but obviously only Within the limits of the func tions allotted to them

by the constitution.

6.8 POWER VERSUS PRINCIPLES: lHE POLITICAL BOTTOM LINE

The approach to pol ittcal reform proposed in this memorandum stresses the

reliance on people1s automatic respect for basic principles. That is why i t

was regarded as so important to rediscover those basic norms by Which the

social order in South Africa and those of most other states in western

civilisation have been guided for the pas t three centuries "

It cannot, however. be denied that a widespread scepticism about the validity

of such an approach to political stability in a democracy exists, particular

ly with reference to Black African democracies. How reliable is the respect

f or the Rule of law among the people of South Afr ica? The sceptics suggest

that, on the contrary. people basically respect power - economic power and

political power. Under these circumstances political stability in South

Africa wil l ul timate ly reqUire a dictatorship of one kind or another . but it

is obvi QUS that such an outcome will be preceded by tremendous di srupti on.

including a great deal of bloodshed.

Unfortunately. we know of no authoritative examination of the extent to which

this important precondit ion for a stable democracy is already present among

the masses of South Africa. We must. accordingly. express the view that i t

would obviously be unwise to dismantle the existing political power structure

in one fell swoop without any idea of the nature of the power s t ru c tu r e t h at

would take it s place. or the way in which the battle for power would be

waged.

Evolutionary change from the existing political dispensat10n to a f ul ly l eg i

timate new dispensation therefore requires that the ex.lstfng power structure

should only be gradually dismantled as power car l fairly safely devolve upon

new structures supported by the people involved" We have emphazised

throughout this memorandum that the political bottom line of the stability of

th e o rd er is a bal ance of powers in the s y s t e m ~ so tha t th os e groups of

people who insist upon government according to the common law norms of t h i s

c o u n t r y ~ r e m a ~ ~ in a suf fi cien tlY st rong pos it ion to keep the enemies of the

system from destroying it ,

To c o n c l u d e ~ the maintenance of f ed eraHsm in t he s oc ia l order of society

depends upon a number of c o n d i t i o n s ~ the most important of which are (I) the

peoplels respect for the Rule of Law. il ) the competence of the supreme court

to reView acts of parliament in the light of the const'ltut1on. (3) the

vertical decentralisation of power to authoritfes of sub-national communi-

ties. i4} the horizonta l separat ion of political power between the executive

and parliament. and (5) the maintenance of a balance of phys.ical (milHary}and economic power among the different political groups who agreed to enter

into the f e d e r a ~ p o li t i ca l c on t ra c t.

The fifth condition may be regarded as a last-ditch cond it ion fo r the

protection of t h e f e de r al cha racter of the state" It might be said that 'i f

matters have degenerated to the point where thlscondition has, in fact, to

be relied upon, the surviva l of the federat ion has b ~ c o m e que$tionable. On



" h d the mere fact that pOllier can, if necessary. legitimately bethe ot"er an . ntexercised by a constituent of the f eder at ion against the central governme

t i t tOn may 90 a 100g way to prevent matters from dege-

to protect the cons U 10 •

nerating tha t far .

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