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Understanding the nature of reforms in the telecom sector in South Africa: A political economy perspective

Melvin Ayogu and James Hodge School of Economics University of Cape Town Cape Town, South Africa First submitted-March 2001 Revised August 2001

We thank two anonymous referees whose constructive comments have very much improved the content of the paper. All remaining errors are entirely our responsibility.

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1. Introduction To make sense of what may be seen as an unnecessarily slow pace of restructuring in the telecommunications sector in South Africa, we present a political economy perspective on the privatization and regulatory reforms taking place in that sector. Echoing the view (IFC, 1995, p.1) that “Privatization is always political,” we identify and analyze the political-economy foundations for a successful reform, and argue that the absence of such prerequisites in South Africa helps explain the slow pace, the sometimes apparently confused nature of the rules, and the limited scope of the reform process registered so far.

We begin by reviewing the objectives and policy context of the privatization programs in general, includin g the socio-economic milieu within which these programs are being implemented. Next, we review and draw from two strands of the theories of reform to examine the case of the telecom sector. The two strands that we adopt, and its compliment which we also review briefly, provide insi ghts into the nature of the inte rests that compete for control over public policy. They remind us of the importance of external forces—the milieu—in shaping both the reform process and the outcome.

2. Socio-economic context of privatization and regulatory reform In this section, we describe the social goals of the post-1994 government and the economic effects of some of the early fiscal, trade, labor market, and asset-restructuring reforms as set out in GEAR (the Growth, Employment, and Redistribution m acroecon omic strategy). The starting point for any analysis of privatization in South Africa is the democratic elections of 1994. Prior to this event, the apartheid government tried to launch a privatization program in the early 1990s, but was thwarted by political pressure from the African National Congress [ANC]. The ANC felt that the goal of such a program was to strip assets and place them in the hands of white proprietors before the change of government . The ANC also realized that these assets were key to making good on political promises contained in the Reconstruction

3 and Development Program (RDP)1. The democratic government inherited over 300 stateowned enterprises, with four of the firms accounting for 86 percent of aggregate turnove r, 94 percent of total incom e, 77 percent of all em ployment, and 91 percent of total assets (RSA, 2000). These key firms are from telecom munication (Telkom), power (Eskom), transportation (Transnet) and defense (Denel). To date there has been very little progress in the privatization program, while some analysts point to the slow pace of the program as an important cause of low growth in the economy.

The immediate concern of the post-1994 government was the correction of lagging infrastructure and other social services to black communities as well as of the skewed wealth distribution. Within the framework of the Recons truction and Development Program, the government set about chang ing fiscal priorities and implementing infrastructure projects to address the deficiencies in social services. However, economic growth was seen as the main tool for wealth redistribution because of its perceived role in job creation and in expanding fiscal resources for delivering social services (RSA, 1966). The peaceful transition to democracy contributed to the quick end of a period of econom ic stagnation th at afflicted the South African economy during the 1980s, and to an annualized long-term growth trend of 3 percent. Also, business confidence improved, inflation eased, capital inflows resumed and exports began to expand. However, it was clear that a higher growth rate was required if the hig h rate of unemployment and the backlog of deficient delivery of social infrastructure services were to be tackled.

The Growth, Employment and Redistribution (GEAR) macroeconomic strategy was introduced in 1996 with the goal of moving South Africa onto a high growth path. The GEAR strategy envisages the achievement of these goals through a major transformation of the South African economic environm ent, particularly through creating a competitive platform that encourages exports, a stable macroeconomic environment that encourages private sector investment, through restructuring the public sector to be more efficient in capital investment and social

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This was the pre-election manifesto of the ANC detailing an a pproach to addressing the inequalities of the past.

4 delivery, and through establishing greater labor market flexibility and enhanced human resource development. To achieve this transformation, GEAR sets out an integrated set of policies covering fiscal policy, monetary policy, trade and industrial policy, labor-market policy and public sector restructuring. Of more relevance to the present analysis are the fiscal, labor market, trade and asset restructuring components of the strategy, all of which portend significant job-loss effects.

Mindful that during fiscal year 1993/94, total governm ent debt reached 45 percent of GDP, while the budget deficit peaked at 7.9 percent of GDP, the fiscal policy component focused on both a rapid fiscal deficit reduction and a significant budgetary reform (SARB, 1994). The high debt profile was due to various factors, a major part of which was the combination of irresponsibly high deficit spending in the later period of apartheid, and a lax regime of tax collection. Deficit reduction was key to building local and foreign investor confidence and to keeping inflation and real interest rates under control. The policy successfully reduced the deficit from a peak of 7.9 percent of GDP in 1993 to 2.3 percent of GDP by 2000, and stabilized the debt-GDP level at below 50 percent (SARB, 2000). The downside of the policy was that it severely limited central government’s capacity to deliver social infrastructure services, thus placing greater reliance on the parastatals to cover the gap.

Nonetheless, Government did have some leeway through changin g the compos ition of its expenditure, away from apartheid priorities towards the new social goals. Government also wanted to reduce the level of recurrent expenditure in order to release funds for capital investme nt. The civil service was a natural candidate for cost reduction. Under apartheid system of government, the need to maintain separate civil service departments for each race group meant a bloated public service. Furthermore, the former “homeland” governance structures established under apartheid, and use d as a form of political side-payment to “keep the peace” was anothe r factor responsible for the big government. That also had to be rationalized. Together, 90,000 employees were retrenched by 2000, with muc h of the burden falling on the former “homeland” government employees [Table 1]. Overall, mainly the

5 blacks and colored employees in government service s uffered the job losses from the public sector. A post-apartheid transition agreement had imposed a five-year moratorium on the retrenchment of white employees of the state. Using h ousehold survey data, Bhorat (2001) estimates that within 1994/99 there were 145,000 job losses in the broader category of community, social, and personal services. In this category where government is the dominant employer of labor, the proportion of skilled workers in the pool of the employed increased, while predominantly black, low skilled workers lost 100,000 jobs.

The trade and industrial policy component focused on expanding exports as a means of overcoming unfavorable trade imbalances that would follow from trade liberalization under WTO commitments.

Historically, South Africa has followed an import substitution

industrialization path and so, its economy was characterized by a lack of competition. Therefore, trade liberalization was bound to not only generate balance of payments problems but also a temporary increas e in une mployment, as industries restructured. In fact, 475, 000 jobs were shed in the formal private sector within 1993/2000 and although not all of the job losses were due to trade reforms, the common perception is that they were.2 As expected, the job losses fell entirely on the low s killed workers. Edwards (2001) estimates that within 1993/97, skilled labor gained 3.1 percent while employment of semi-skilled and unskilled fell by 1.8 percent and 3.3 percent respectively.

The GEAR policy on the labor market recognizes that previous (apartheid) policies on labor and on education resulted in a strong race-skill overlap that left blacks predominantly unskilled and semi-skilled, with negative conseq uences on the average productivity growth in the economy. It calls for a greater degree of “flexibility” in the market in order to encourage employment, for a levy system to fund training to upgrade skills as part of the redistribution strategy, and as part of the strate gy to promote productivity growth. The labor policy is partially a response to the widely held belief that the wage-productivity ratio in South Africa is relatively high for a developing country, a situation that is often attributed to what is perceived to be

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See Edwards (2001) for an analysis of the source of job losses.

6 an “inflexible” labor market. Nonetheless, labor market policy remains the area where it is felt that the GEAR strategy has been most deficient in implementation. Furthermore, the introduction of the Labour Relations Act (1995), the Basic Conditions of Employment Act (1997), and the persi stence of centralized bargaining are viewed as exacerbating the unsatisfactory unemployment record. A survey contained in a study by Bhorat, Lundall, and Rospabe (2001)found that of more significance than wage factors in inducing labor market rigidities, “was the growing 'hassle factor' associated with hiring employees….” The study notes that the Department of Labor has responded to these concerns by proposing amendmen ts to the problematic laws.

The asset-restructuring component focuses on how privatization of state-owned enterprises can be used both to augment public revenue, and to improve economic efficien cy. The extra revenue from privatization would enable deficit reduction, allow social expenditure levels to be sustained,and generally reduce the pressure for expenditure compression. Furthermore, the improved delivery of social services that comes with competition and privatization (market reforms) means more value for money channeled into social expenditure. And of course, a more competitive market could lead to a higher path of economic growth. Notwithstanding its expected huge contribution to GEAR, the asset restructuring program had between 1996 and 1999 only produced sundry divestitures and the sale of a 30 percent equity stake in both the telecommunications operator, and the airports company. And none of the firms in the government designated “key enterprise sectors”—energy, transportation, telecommunications, and defense—has been completely reformed. A complete reform m eans the implementation of the gamut of structural changes necessary to totally internalize the expected benefits from the restructuring. This may range from ownership restructuring (whether through commercialization, corporatizati on, or outright sale) to the introd uction of a competitive market (through regulation, entry conditions, or a combination of both). The puzzle is, why has the pace of reforms not kept faith with the apparently huge expected benefits?

3. Explaining the puzzle: the case of the telecom sector

7 3.1. Why privatize or restructure? All over the world, the reasons for restructuring vary, ranging from (i) fiscal crises or a lack of adequate capital to improve infrastructure, (ii) the desire to acquire technology and managerial expe rtise, (ii i) the desire to improve service delivery, to (iv) a combination of the above factors. According to one view (ITU, 1998), there is a correlation between the performance of a country’s economy and her sequencing of reforms, with either privatization or liberalization preceding the other. Countries facing economic difficulties are forced to privatize first while countries enjoying a healthy growth are more likely to open various segments to local competition, but deferring to a later time, the question of when to divest from the national network carrier or when to introduce competition to that segment? The explanation is that liberalization of the dom estic mark et will tend to undermine the potential market value of the carrier, whereas undertaking privatization first will typically entail a request by investors for a time-bound exclusivity in the local market, thereby delaying the potential benefits of competition.

Our view is that while the above reasons are important, the matter goes beyond them, to include concerns about equity, about impact on the poor (all of which relate to distributional consequences), and as well about power struggles. The power component of the process implicates governments in Africa and elsewhere, that continue to rig m arkets as part of the repertoire of devices employed to secure political control over their population and retain power. For while imposin g collective deprivations , governments thus confer selective benefits (to particular groups of the polity). 3

The political struggles and the eq uity issue c an be addres sed by one theory of the process of reforms that high lights the welfare enhancing roles of technocrats and the public-interest characteristics of economic institutions which we shall call the public interest theory. Another theory of the proces s of reforms emphasizes the partisan component of politics, and the

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Bates (1983) ana lyzes the nature and origins of agricultural policies in pos t-independence Africa and highlights the roles of market int ervention a nd political control as well as that of divisibility and political disor ganization in understanding the nature of the policies.

8 distributive impact of policy reform—the partisan theory. We shall rely on both strands of theories to understand the pace of economic reforms in the telecommunications sec tor.

3.2.

The public interest theory

Technical constraints on the production and delivery of telecommunication services make clear that the way in which competition evolves, post-liberalization, will d epend on the nature of regulation. For instance, some segments of the telecommunications industry are, technologically, natural monopolies. Within such segments, production is either by one operator or by a limited number of operators (such as dominant national carriers). These segments can be subject to (traffic)congestion. Potential bottlenecks mean that inte rconnection policies (the set of legal, tech nical and economic arrangements between network operators) are a key factor in the development of competition, as well as in the long- run growth and maintenance of installed capacity. Again, as an example, “the absence of certain regulatory measures, such as mobile number portability, is leading to less than effective competition” in cellular services (ITU, 1999, p.8). Furthermore, in m any countries, leased line bandwidth prices have been kept artificially high by incumbent network operators to forestall the development of competitive value-added services, and so on.

However, of even more importance is the overall issue of the pricing of services on digital networks. Efficient pricing schemes in networked industries are particularlyimportantbecause of network externalities, lock-in effect, and other peculiar characteristics. Network externalities means that the effect of using the good extends beyond the benefits to the immediate parties involved in the transaction. So, the price paid (reflecting private or individual valuation) for such a product may not reflect the social value. Consequently, too little may be produced or demanded relative to what would be ideal in that society. Lock-in effectsignals the presence of switching costs whereby customers who subscribe to a particular service may incur a non trivial cost to transfer to another supplier either due to system incompatibility, high set up costs, or other implicit costs that may arise, such as when a phone number is not portable across providers or E-mail addresses have to change. Ex ante, the customer may face a

9 competitive environmen t yet ex post he/she could becom e a captive customer to a de facto monopolist. The dynamics of competition in the industry (such as in product deve lopment) may also be tippy in the sense that the “winner keeps all.” In such a contestwhere a competitive outcome is not guaranteed, governing the price profile in the market becomes crucial to the competitive process.

Our point here is to underscore that any meaningful discussion of market reforms in this sector must begin with the question of creating a credible and efficie nt regulatory mechanism—the role of technocrats. In fact, many observers remain sk eptical about the ability of a bureaucracy to deliver (Bos, 1993, Willig, 1994). According to Bos (1993): “A priori, it is not clear why the state, failing to run the firms as well as owner, should now suddenly become an efficient reg ulator.” To us, the explanation lies in recognizing that as regulators are often political actors themselves or serve at the behest of those in political office, the basis for a credible regulator mus t itself lie in politics. The question then becomes, under what conditions these technocrats become powerful?

According to Bates and Devarajan (1999), they become powerful when the Executive aligns with them in the political strug gle with in the Cabinet or Agencies, and /or when the incumbent politicians regard it as in their interests to empower these agencies of restraint, and so encourage the executive (branch) to employ its power to limit the distribution of public benefits. As argued by these authors, the political circumstances leading to the empowermentof technocrats can arise through a collective sense of crisis that may not necessarily be an economic one. Rather, the crisis is more likely to be a political one such as when incumbents realize that to continue to use the gove rnment to distribute economic benefits is to undermine, rather than to enhance, their security in office. The empowerme nt of technocrats therefore represents the transformation of the political game in an effort to enhance the political security of the incumbent regime. Viewed through this lens, the solution to the empowerment question thus challenges the often-heard prescription that bureaucratic agencies should be de-politicized to make them effective (Sharon, 2000 for instance). The expected outcome is not economic decisions that are apolitical. Rather, the outcome ought to be economic decisions that enhance

10 the political prospects of politicians.

Thus, the first part to strengthening the technocrats runs through the collective interests of all incumbents. A second emphasizes partisan interests. Together, they imply that the preferences of regimes regarding the economic power of their technocrats will depend upon the composition of their partisan base. To be effective, policies must be credible. To be credible requires that the policies be politically and economically sustainable. It must be in the government’s political interest to support the technocrats. Such will be the case when the political fortunes of the regime are enhanced by implementing the policy and weakened by failing to do so. Therefore, contrary to popular perception, the route to credibility is not through being apolitical. Instead it lies in the nature of their (technocrats’) policies.

3.3. The Partisan theory The other strand of the theories of reform highlights the partisan component of politics and the distributive impact of policy reform. The theory highlights the relationship between technocrats and interest groups. Acc ording to this pers pective, econom ic institutions are “created not to enhance the political life chances of all members of an incumbent regime but rather to privilege the economic and political fortunes of particular segments of the polity: interests that are better served by new kinds of economic policies” (Bates and Krueg er, 1993, p. 465. See also, McCubbins, Noll, and Weingast, 1987, 1989).The role of economic institutions, according to this partisan theory, is to institutionalize (i.e., protect the reform against the winds of political change) so as to “stabilize the fortunes and protect the political triumph of particular interests.” This interpretation of the origin of technocratic power makes sense of why rather than remain above politics, technocrats particularly in the case of apparently successful reforms, deeply involve themselves with organized interests.4 They engage in “constituency service and build support for their programs and the institutions that implement them” (see Wilson 1989 for an elaboration of this theme). This idea has been developed

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For examples from Chile, Ghana, and Korea, see respectively, Stallings and Brock (1993), Leith and Lofchie (1993), an d Haggard, Cooper and Chung-in Moon (1993).

11 furthest in the literature on macroeconomic policies. Several articles in Persson and Tabellini (1994) comprise a detailed analyses of these issues.

Partisan theory implicates distributive struggles for benefits in the public dom ain and suggests to us that efforts at economic reform should includ e attempts to restruc ture the pattern of interest-group representation. And/or include programs that could “forestall protectionist reaction against liberalizingpolicychanges.” Many developing c ountries, and all of the countries in sub Saharan Africa, lack such programs and have fewer instruments to counter protectionist demands. So, we must turn to the structure of political institutions to impose restraints on the struggle for distributive benefits.

On this, Garrett and Lange (1989) argue that the greater the span of interest groups, the less their capacity to widely distribute the costs of fulfilling their deman ds. Olson (1982) restates the same basic idea in saying that the more encompassing the interests, the more the costs of redistribution approach the benefits, so that a “consociational” structure of interest groups appears to promote restraint in the compe tition for benefits from the public domain. Studies of labor and the politics of social welfare in industrialized c ountries (Rogowsk i, 1987, 1989) indicate that when organized into national level, peak associations, trade unions can act as agencies of restraint, reducing the re-distributive demands of their members. How successful this particular theory will be in explaining the governance dynamics in the different sub Saharan countries could depend on the way labor views the distribution of the benefits and the costs of the necessary reforms.

3.4. Complimentary theories The two strands of theories featured above constitute the framework for analyzing the ongoing reforms in the telecom sector in South Africa. The gist of the framework which goes as far back as Olson (1965), and which was given a prominent account in Williamson (1989) who labeled it “client politics” must be part of the analysis (of reforms), but it is not complete and leaves room for other (complimentary) forces and theories. So, the additional theoretical analysis we review below is in the spirit of deepenin g the analytical framework with out,

12 hopefully, additional confusion.

Based on the idea of credibility, Dixit and Londregan (1995), expoun ded in Dixit (1998) provide such a complementarity. In particular, Dixit (1998) offers a clear example of this complimen tary approach which he labeled the transactions-cost politics framework. He argues by example that workers in an industry that experiences a negative shock because of technological shifts face the prospect of lower incomes over the next several years. An economically efficient solution would be to compensate them for the capitalized value of these losses in a lump sum, and then leave them to find and take their best alternative opportunities. The political process is not going to offer such capital sums up front, because the recipients cannot credibly promise their votes over the next several elections that span the duration of their prospective income loss. Therefore, any compensation will have to be gradual. Then the question of credibility switches to the other side. Political candidates and parties can become time-inconsistent if that becomes politically advantageous in the future. The workers know that their receipt of compensation in the future will depe nd on their future political power, not on the economic choices or sacrifices they make. The refore their incentives to make sacrifices by relocating jobs etc., are blun ted. Instead, they em ploy their political power to demand and get help in their current occupation. If the political process could make a binding contract ini tially, then an outcome could be designed in which some people gain but nobody loses—that is, a Pareto-superior outcome could be designed. Dixit argues that unfortunately such long term contracts are not feasible; any promises to reward efficient economic reloc ation choices, or equally, any threats to withhold benefits to those who fail to make such choices, are not credible. A more general discussion of efficiency and inefficiency in political equilibria is in Besley and Coate (1994, 1995). Their latte r work embodies a related dynamic model based on infeasibility of commitmen t.

Moe (1990) argues that benefits conferred on an interest group by one political party may be overturned if the othe r party or even a new faction comes to power. This uncertainty concerning “political property rights” leads the groups to make political compromises and

13 develop economically inefficient mechanisms that are less prone to such reversals. Policies that are enacted and bureaucracies that are formed to implement them embody some concessions to the current losers. These can include fragmented authority, checks and balances, delays, and procedures that give the opposition opportunities to participate and influence the results. Moe argues that the result is delay, ineffectiveness, and failure of decision making.

Laffont and Tirole (1993) and Tirole (1994) amplify this argument. At any given time the government is controlled by one political party or another, favoring one special interest or another. If the incumbent government were allowed to lock in the policy by a long-term commitment that exceeds its own expected life, this may preclude changes that would be demanded by future majorities. Thus constitutional provisions that preclude such commitme nts may serve a useful purpose. Since Moe’s argume nt points to inefficiency as one of the outcomes of the accommodative policy, it is useful to emphasize the poin t in Wilson (1989) which essentially is that when there are multitask, multi principal agencies, the concept of efficiency must recognize the divergent interests of these principals. The process and its outcomes may look inefficient from an economist’s viewpoint, but they may be the best feasible ways of serving othe r legitimate interests such as accountability and horizontal equity. We now turn to the telecom case study.

4. Making sense out of the reform process so far 4.1. Background inform ation on telecom restructuring since 1994 The momentum towards restructuring the telecommunications market in South Africa came in the late 1980s when the previous government investigated the option of having the public telecommunications managed as a commercial enterprise. After Telk om was incorporated in 1990, a study by Coopers & Lybrand was initiated to examine the policy options for restructuring the industry in order to unlock and maximize the potential economic and social benefits in such a strategic industry. Some of these benefits include an increase in the number of people with access to telephone services, user fees that are affordable, and an improved quality of services. Following the report, Government in 1993 opened to competition, the value-added network services [VANS] and customer premises equipment markets. Next,

14 in June 1994, it issued mobile licences. However, the major revamp of the regulatory regime was not to be until both the change in government and a process of broad consultation through a Green/White Paper process.

When the White Paper eventually emerged, it set very clear, although in some cases apparently conflicting goals for the sector: •

Promote universal and affordable provision of telecommunication services.

•

Encourage ownership and control of telecommunication services by persons from historically disadvantaged groups.

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Encourage investment and innovation in the telecom munication industry.

•

Encourage the development of a competitive and effective telecommunications manufacturing and supply sectors.

•

Ensure fair competition within the telecommunication industry.

The outcome of this policy process was the Telecommunications Act (Act 103 of 1996) and the sale of a thirty percent share of Telkom to a consortium of USA and Malaysian telecommunication investors. The Telecommunications Act set forth the telecommunications policy for the next 6 years. The most important structural elements of the Act comprise, •

a five-year exclusi vity for the incumbent operator Telkom, against an obligation to roll out 2.81 million new lines over this period. Two-thirds of the connections will occur in under-serviced areas and for priority customers. And at least one m ore operator would be licenced before 2003.

•

The establishment of an independent regulatory body— the South African Telecommunications Reg ulatory Authority [SATRA].

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To explore the possible licencing of a third mobile operator.

In March 2001 the Minis try of Communications announced a proposed policy for the postexclusivity period. The most important structural aspects of the draft policy include: •

The licensing of only one additional national network operator that would have

15 to include an empowerment (affirmative action) partnerand the telecommunication subsidiaries of both Transnet and Eskom. •

The granting of an international carrier licence to another state enterprise, Sentech.

In response to mounting pressures from the international telecommunication community, from the Departmen t of Trade and Ind ustry, and from the Competition Commissi on, to “install a pro-competitive market structure,” the post-exclusivity draft policy was revised to include a third national operator, the issuing of broadband licences, and the rapid introduction of number portability. A combination of events forced Government to re-revise the draft policy and very recently to issue a final policy that accommodates only one additional national operator for a total of two incumbents, instead of three. Furthermore, the matter of broadband licenses is off the agen da for now, while number portability is d elayed until 2005.

These events include the counter-pressure mounted concurrently by both Telkom and M-Cell, and market reaction to the announcement of a third national operator. That reaction translated into a drop in the market value of M-Cell by 6 billion rand, or 15 percent of its market capitalization within 24 hours (Sunday Times, 2001). M-Cell is the holding company of MTN (South Africa’s second largest cellular network operator) and of Orbicom (a satellite communications company operating in 13 African countries), is part of a black empowerment grouping (which holds 9.5%), is widely expected to become the licensee for the second national network operator, and is partly owned by the government (24.1%) through Transnet’s stake in M-Cell.5

4.2. Effective regulatory institution? Our application of the theory begins with SATRA.6 SATRA is the acronym for South African Telecommunications Regulatory Authority, created along with the passing of the Telecommunications Act 103 of 1996. 7 Although the Telecommunications Act provides that funding 5

See www.M-Cell.co.za The institutiona l detail on SATR A draws on Sharon (2000). 7 Prior to the passing of the Telecommunications Act, the Department of Pos t, Telecommunications and Broadcasting regulated telecommunications and the radio frequency spectrum. In 1991, Telkom was created to handle telecommunications as a distinct activity from postal services. This move formed part of the commercialization of

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16 to SATRA will come from parliamentary budget, the agency was nonetheless tied to the Executive through vesting the Minister of Communications with the power to determine the remuneration of agency staff. Furthermore, empowering the Minister under the Act to “amend, withdraw, or substitute” the decisions of SATRA, could be seen as a mechanism to filter the econom ic decis ions of the agency so that they advance the political fortunes of the politicians.8 The creation of SATRA may well represent a classic case of institutional restructuring a l4a Bates and Krueger (1993, p.467) who conclude that “Institutional restructuring thus represents an attempt to transform the process of economic policy making in ways that render it not only economically but also politically sustainable.”

According to the theories reviewed here, the first part to strengthening the technocrats runs through the collective interests of all incumbents. A second emphasizes partisan interests. Together, they imply that the preferences of regimes regarding the economic power of their technocrats will depend upon the composition of their partisan base (the structure of the political institutions). In South Africa, the partisan composition m ore likely depends on the class base of political parties rather than in regional differencesamong the party membership. The ruling national government is a tripartite alliance between the African National Congress [ANC], the Congress of South African Trade Unions [COSATU], and the South African Communist Party [SACP]. These bodies are distinguishable by class rather than by regions.

COSATU was launched in De cember 1985 after four years of unity talks between unions opposed to apartheid and committed to a non-racial, n on-sexist and democratic South Africa. At the inaugural, it represented less than half a million workers organised in 33 unions. The the activities of these parastatals. 8 The independence of agencies creates its own questions: How can these agencies be protected from capture by the very interests they are supposed to regulate, and from abusing their powers? Attempting to constrain the agencies in order to a ddress these problems diminis h their independence and ca lls into the question, policy credibility. These ideas are developed and illustrated for United States, by Noll (1989), McCubbins, Noll, and Weingast (1987), Wilson (1989), and Levy and Spiller (1994). Noll lists the mechanisms of political control that restrain such agencies to include appointment power, control of agency’s budget, and direct requirements. Levy and Spiller (1 994)dis cuss the ro le of the judiciary in this. Th ey find that countries in which regulatory excesses have been checked tend to have “independent and well regarded” judiciaries with “a record of hearing regulatory disputes and resolving them impartially.” Nonetheless, these authors find sufficient variation in their data to warrant the conclusion that there is no unique path to succes s in coping with tra nsaction costs; answers can be specific to the context.

17 union currently claims more than two million workers, of whom at least 1.8 million are said to be in good financial standing.9 SACP, found ed in 1921, is described as being in the forefront of the struggle against imperialism and racist domination. ANC on the other hand is the majority party in South Africa’s government. Both COSATU and SACP have been averse to the privatization initiatives. The opposition is forcefully made in a recen t commentary on privatization by Terry Bell (2001): It is rank idiocy to imagine that one form of ownership is inherently more or less efficient than another. That, in blunt terms, is the perfectly logical view of most of the trade union movement.…Above all efficiency should not be confused with private sector profitability. Such profitability is only a measure of how efficient an enterprise is at creating wealth for its owners.

According to Bell, “This is the essence of ‘trickle down’ economics: the theory that the richer the rich become, the more wealth will trickle down to the poor. That there is little evidence anywhere that this has happened has not deterred its supporters—to the chagrin of the trade union movement.” What he presents as e specially troubling for the union is the unwillingness of the government to create policy programs that socialize the risks of ec onomic adjustment. 10 “Most unions, and certainly those organized in the Cosatu and National Council of Trade Unions (Nactu) federations, therefore oppose privatization while supporting the c oncept of efficiency. This is the basis for the Cosatu threat of a general strike against privatization.”

As part of understanding the evolution of telecom reforms, we also note that a ranking COSATU member (Jay Naid oo) was the Minister of Communications during the drafting of the Telecommunications Act 103 of 1996. Therefore, it comes as no surprise that writin g for the 4th South African Internet Services Survey 2000, Sharon (2000) concludes that, “SATRA has been ridiculed as an ineffective and largely powerless body th at is subject to government, as well as the Minister of Communications. It has little or no credi bility with regard to its

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www.cosatu.org.za/docs/aboutcos.htm. Katzenstein (1985) studies several s mall European countries with a special focus o n their international trade policies. H e found that they had evolv ed a very success ful system to cope with the prob lems and opp ortunities that the changing world trade environment brings. The common underlying themes are, adaptation to changing economic circumstances is inevitable, and the costs o f such adaptation s hould be shared by the whole nation using so me form of social insuran ce. The autho r observ es that the implementa tion of these idea s differs widely, with laissez-faire Switzerland on the one end, and the more socialist Austria at the other end. He suggests smallness and heterogeneity as critical factors that enable them to cope with transaction costs in a way that would be difficult for a larger or more heterogenous country to achieve. 10

18 independence or its decision making process.” The author concludes that, “If South Africa is to succeed… it requires a highly credible, fast moving standards body that is able to make regulations, have the authority and means to enforce them and not hampered by political or commercial interference.” The author is correct in suggesting that institutions need to be credible. However, contrary to popular perception, the route to credibility is not through being apolitical. Instead as the public interest theory prescribes, it lies in the nature of their policies.

To be effective,policies must be credible. To be credible requires that the policies be politically and economically s ustainable. It must be in the g overnment’s political in terest to support the technocrats. Such will be the case when the political fortunes of the regime are enhanced by implementing the policy and weakened by failing to do so. Sophisticated technocrats appreciate the significance of politics and therefore strengthen their position by educating leaders in the private sector concerning their programs and the resources that they possess to implement them. When technocrats wax powerful, it is often because they possess the backing of the ruling elite, have cultivated political interests, and thereby constructed political defenses for their policyprograms. To become powerful, these technocrats embed their programs in structures of interests that they have often helped to fashion.

However, either through political naivete 3, through neglect, or for other unknown reasons, SATRA did not embrace the above strategy and s o not only embarrassed the government through its handling of some key issues that came before it, but definitely in furiated the private sector. Sharon (2000) chronicles the Agency’s battles which became its proving ground for how much backing of the ruling elites it had, of how much political interests it had cultivated, or of how much defense it had mustered for its policy programs? These encounters include the challeng e from the South African Call Back Association, SATRA’s role in the contest between the network operator, Te lkom an d the Internet Service Providers Association, the controversies in the process of awarding a third cellular license, and an anticlimactic veto by the Ministry of Communications, of SATRA’s guidelines on Interconnection and Leasing.

19 As these events are not only illumin ating but as we ll are open to several interpretations, we summarize the highlights. The first act was pursuant to a complain from Te lkom, the network carrier over IP Telephony being offered by Call-Back Operators, to which SATRA responded by attempting to shut down the offending activities. This decision was challenged on grounds that SATRA acted ultra vires. The regulator backed down and admitted through its attorneys, that its enforcement powers in fact were quite circumscribed.

The next battle was over IP-related services which the dominant carrier Telkom was contending as being a part of its exclusivity agreement with the regulator. SATRA is said to have rejected this argument, whereupon the matter became tied up in court for over six months which among other things apparently complicated the budget of the agency without a corresponding reward. This complication is an application of the “deep pocket” argument (Telser, 1966) to public agencies. The potential for such a war of attrition between government agencies and their constituencies is part of every regulator’s nightmare.11

In another m atter conc erning the award of a third mobile license, SATRA’s controversial decision was regarded by a critic as constituting regulatory excesses (for details of the allegation, see Sharon, 2000). The named winner of the license was widely considered not to have merited it on the basis of the pre-announced selection criteria. Sharon reports that these licensing controversies were taking place in the wake of the release of an investigative report, by the Parliamentary Portfolio Committee on Communications, into alleged irregularities within SATRA. But by far the “slam dunk” was the veto of its Interconnection, unbundling and collocation rules by the Minister of Communications. These rules that were gazetted in order to inject some certainty and reclaim credibility for the embattled regulator were also a response by SATRA to the criticism th at it needed to provide guidance in the ever evolving sphere of the digital world, particularlyin the areas that were not anticipated in the Telecommunications Act of 1996.

11

These authors are aware that the Competition Commission of South Africa is very concerned about the strain on agency budget occasioned by exhaustive due process involving corporations with “deep pockets.”

20 Having said that SATRA’s experiences are open to several interpretations, we argue that it is also consistent with the view that the ruling elites presently have no interestin empowering the agency. Some of the issues for which the presence of a strong regulatory oversight is crucial do not appear to be of immediate concern.12 Besides, it could be argued that as this was a relatively new institution, the inefficiency (Moe, 1990) from a weak, or an accommodative regulator can provide the government an exit mechanism and as well a means of testing “ new waters.” In line with the argument in Wilson (1989), it (the process and outcomes) allows government to serve other legitimate interests.

The following description of the existing telecom industry configuration is illustrative of the structure of interests that th e regulator needed to come to terms with, and as well cultivate in order to construct political defenses for its regulatory policy programs. That it failed to engage in such effort may be partially responsible for its subsequent fate . The Government of South Africa owns 67 percent of Telkom wh ile 30 percent is held by two strategic equity partners through an investment holding company (RSA, 2000). Approval has been granted for an initial public offering of the enterprise in late 2001 and the g overnment expe cts to maximize all the possible benefits from this exercise.13 Currently, Telkom has monopoly grant over local and long distance telecommunications services, exchanges, international services and public payphone services for a finite period. It is licensed to operate the public switched telephone network [PSTN] and the public switched data network [PSDN] for the period of exclusivity. Telkom also has a 50 percent stake in Vodacom , the larger of the two cellular phone companies currently operating in South Africa, with a 57 percent market share in cellular services, and the second largest Internet Service Provider [ISP] in the country. Telkom also has a strong Internet presence through Intekom , the third largest ISP in the country. Furthermore, Telkom’s operating license provides that “Telkom can obtain an additional year of exclusivity if it achieves 90 percent of the targets set by the end of the fifth

12

An indication of some of these issues is given in Sections 3.1 and 3.2 where respectively we review Public Interest theory and discuss Why Privatize/restructure? 13 A recent policy statement is that a strategy of market timing would be appropriate for the IPO. Government would sell when it is auspicious, hence the date for the exercise has become contingent.

21 year” (RSA, 2000, policyframwork08.htm, p.9).

The possibility of a second network provider is in the works but the preference appears to lie in exploring the feasibility of consolidating and taking advantage of the telecommunications capability identified in two of the four key state enterprises enumerated previously, namely Eskom and Transtel. This preference appears in the 1996 White Paper on Telecommunications Policy which “advoc ates com plementarity in the use of the facilities of Telkom and the parastatals, Transtel and Eskom” (RSA, 2000, p.8). According to the current legal and regulatory framework, a line ministry, Department of Telecommunications retai ns responsibility for advising the Minister on policy matters, including issues of competition, while ICASA [Independent Communications Auth ority of South Africa] as the “regulatory watchdog” gets the power to issue licenses and monitor compliance with the terms of the licensing. Although lacking credible enforcement mechanisms, ICASA nonetheless is nominally responsible for rectifying noncompliance.

In 2000, SATRA was merged with the IBA [Independent Broadcasting Authority] to form ICASA. The ostensible reason was to capture any potential regulatory synergy in digital convergence—the fusion of broadcasting, computing , and telecomm unication (RSA, 2000a). But as well, it provided an opportunity for government to “cleanse” the agencies of undesirable elements (political liabilities). In one case, IBA may have embarrassed the government when its councillors were embroiled in allegations of abusing the agency’s expense accounts. That ICASA did not acquire any additional independent standing in comparison to its predecessors calls for speculation about th e purposes for the restructuring. In fact, ICASA has been quite vocal about its lack of resources for proper functioning.

Retrospectively, one can easily be tempted to form the opinion that as there has to be a regulator, government has perfunctorily given one. Even the subsequent restructuring of SATRA through its merger with the Independent Broadcasting Authority to form the Independent Communications Authority of South Africa [ICASA], left an Agency that still remains under the oversight

22 of the Department of Communications, presumably to keep it political. What lesson do we take from this chronicle? It is either that the technocrats must cultivate the clout they need to perform creditably—actively participate in designing the congruence between the policymakers’ incentives and the agency goals (Persson and Tabellini, 1994)—or that they must wait for the government to increase the power and discretion of the technocrats. The latter can happen when it advances the political fortune of the incumbent regime to do so, or when the government succeed s in restructurin g “the relationship between governments and economic interestgroups, as by: Creating corporatist forms of interest group bargaining; creating policy programs and administrative capabilities that socialize the risks of economic adjustment” (Bates and Krueger, p. 467). We now turn to these last two issues.

4.3. Distributive struggles (public goods nature of the reforms) Studies of labor and the politics of social welfare in industrialized countries have found that when organized into national level, peak association s, trade unions can act as agencies of restraint, reducing the redistributive demands of their members. Why has this not been the case for South Africa, even though labor is clearly a peak association? More than that, labor is part of the tripartite coalition that is the present government of South Africa.

The reason may lie in the way labor views the distribution of the be nefits and th e costs of both the telecom and the other ongoing reforms. The benefits of the reform are widely distributed, some lying in the present and some in the future. Those that lie in the future while uncertain also constitute the source of expected benefits to labor and to th e poor. The immediate benefits go to strengthen “informatics” including e-commerce, and other high-tech industries requiring h ighly skilled labor. The se groups are not the dominant constituency of COSATU, but are largely the same g roups who have benefitted from the past perverse system of apartheid. By contrast, the distribution of the costs of the policy reform is concentrated, the costs impact more on “general” (the unskilled, the low skilled, the uneducated and difficult-to-retrain) labor, occurs in the present, and is certain.

23 In the second section of this paper that deals with the policy context of the reforms, we noted that the fiscal policy component of GEAR required an urgent reduction in the recurrent expenditure, and that operationally, this translated into a reduction in the size of public sector employment. Furthermore, that the burden of this restructuring fell on blacks because of the commitme nt not to retrench white employees of the state during a five-year period. The trade policy component of GEAR equally generated more retrenchment in the industrial sector, where the retrenchment inevitably fell more on the low skilled workers who were rendered redundant when firms restructured in response to the opening up of the South African economy to more foreign competition. The labor market component called for a greater degree of flexibility, construed broadly as the freedom for employers to hire and fire at will, a wider latitude to rent scarce skills from outside national boundaries, and to make wage offers considered profit-maximizing. In the face of the race-skill ove rlap that find black workers predominantly unskilled and semi-skilled, this spelled more troubled times ahead. The labor market policy also calls for a levy system to fund training of the labor force but evidently this does not impress the unions. Simply said, GEAR did not provide a way of socializing the risks of the adjustment. As well, the unions have not made secret of their anger over this issue (Bell, 2001 for instance). In this historical perspective, it becomes clearer why des pite labor being organized into a national level, peak association, such a structure proved insufficient to restrain the demands of their members over redistribution.

Moreover, labor understands that it can influence the policy choices of government because of its strategic location within the structure of political competition (it pivots between political alliances, and so can make or break the political fortunes of national political elites). As outlined under the complimentary theory, there is also a time-inconsistency problem in attempting to strike a deal between the government and the losers. Both side s simply are unable to credibly commit (for an elaboration of this theme, see Besley and Coate, 1995, and Dixit and Londregan, 1995). Therefore, government unable to create policy programs that socialize the risks of economic adjustment, has chosen “restructuring” over privatization. In its Policy Framework document that lays out the future of privatization in South Africa,

24 the government says that: “In summary, the Government’s policy with regard to State Owned Enterprises is more properly referred to as a restructuring program, and not in the more simplistic terms of privatization. …. Thus res tructuring refers to the matrix of options tha t include the redesign of business management principles within enterprises, the attraction of strategic equity partnerships, the divestment of equity either in whole or in part where appropriate, and employment of v arious immediate, turnaround initiatives” (RSA, 2000, p.4).

5. Summary and concluding remarks In this paper, we presented the objectives and policy context of privatization in South Africa. Drawing on theories of institutional reforms and applying them to the socio-econom ic context within which the reform is ongoing, we find the policy choices of the government towards telecom reform to be consistent with the preferences of the pivotal interest groups, and by extension the government’s political fortune. Our analysis was predicated on the importance of empowering technocrats in order to build strong regulatory agencies, and of social programs in resolving the distributive conflicts from economic reforms. Building a strong regulatory institution by empowering te chnocrats req uires a comm itment to both privati zation and to competition. However, a level playing field in the public utility sector reduces the franchise value of the state-owned enterprises, and by implication the potential revenue from privatization. Therefore, on this s core, presently em powering the technocrats could work against one of the immediate goals of privatization/restructuring.

Also, full-scale divestiture may not occur soon since Government lacks the wealth to resolve the immediate opposition that will arise from taking such a comprehensive reform measure. The immediate benefits (in the form of enhanced high-tech services) from such an extreme measure do not accrue to the swing voters. But more bluntly, delaying the reforms do not undermine the politicians’ security in office. Therefore, we predict that continuing the reforms in a manner that enhance s the political fortunes of the ruling elites can generate the following two outcomes: (1) A continued weak regulatory authority, and (2) a strategy of partial divestment.

The government will continue to extract social benefits in the form of excess employment

25 from the state-owned enterprises, with the situation possibly revisited upon a positive turnaround in the unemployment rate in the country, and/or the “wealth of the nation.” Put another way, the government can attempt to restructure the relationship between it and the economic interest groups (i.e., a structural adjus tment of politics) or given the current resource-need imbalance, secure an external aid to socialize the economic cost of the reform (a structural adjustment with a “human face”). Either way, we find support for the view in the literature that the “impact of reform efforts on the structure of politics” is a key question surrounding policy reforms all over the world (Bates and Krueger, 1993, p. 460).

In closing, we call attention to the Policy Framework document on the reforms of public enterprises, which the Government of South Africa describes as “a dynamic process that will require careful monitoring and constant evaluation. As implementation unfolds, … there will be areas that may require revisiting. We do not wish to cast in stone timetables and procedures that are proved inappropriate later through the experience of action on the ground” (RSA, 2000, p.4). An optimist could interpret the above as government’s commitment to implemen t reforms in ways that permit emerging difficulties to be resolved by further policy steps. The telecom sector certainly stands at the “epicenter” of South Africa’s reform quakes. A different view could be to assume, “ politics as usual.” To which this paper has suggested two ways in which business could become “unusual” if a different reform trajectory is to emerge: Through the structural adjustmen t of politics, or through a microeconomic adjustment “with a human face.”

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6. References Bates, R. (1983). “The nature and origins of agricultural policies in Africa.” In Essays On The Political Economy of Rural Africa. Los Angeles: University of California Press. ———, and A. Krueger (1993). “Generalizations Arising from the Country Studies.” In Political and Economic Interactions in E conomic Policy Reform: Evidence from Eight Countries. Ed. R. Bates and A. Krueger. Cambridge Massachusetts, and Oxford, U.K.: Black well, pp. 444—472. ———, and S. Devarajan (1999). “Framework Paper on the Political Economy of African Growth.” Mimeo. Bell, T. (2001). “Government will have to come up with an alternative to privatization,” Opinion & Analysis (Inside Labour), Business Report, Friday, May 4 2001, p.2. Besley, T., and S. Coate (1994). “An Economic Model of Representative Democracy,” Working Paper, Princeton University, December. ————(1995). “Efficient Policy Change in a Representative Democracy: A Dynamic Analysis,” Working Paper, Princeton University, May. Bhorat, H. (2001). “How many and what type? An analysis of employment trends in the post-apartheid South Africa.” Mimeo. ———, P. Lundall, and S. Rospabe (2001). “The South African Labour Market in a Globalising World: Economic and Legis lative Considerations,” unpublished report for ILO. Bos, D. (1993). “Privatization in Europe: A comparison of Approaches.” Oxford Review of Economic Policy 9: 95—111. Business Day, 26 August 2001. “Shift shows strength of industry's vested interests.” COSATU. http://www.cosatu.org.za/docs/aboutcos .htm Dixit, A. (1998). The Making of Economic Policy: A Transaction-Cost Politics Perspective. 1996; rpt. Cambridge, MA: MIT Press. Dixit, A., and J. Londregan (1995). “Redistributive Politics and Economic Efficiency,” American Economic Review 89(4): 856–866. Edwards, L (2001). “Globali sation and the Structure of Occupational Employment in South Africa.” South African Journal of Economics 69(1), forthcoming. Garrett, G., and P. Lange (1989). “Government Partisanship and Economic Performance.” Journal of Politics 51(3): 675—693. Haggard, S., R. Cooper, and Chung-in Moon (1993). “Policy Reform in Korea.” In Political

27 and Economic Interactions in E conomic Policy Reform: Evidence from Eight Countries. Ed. R. Bates and A. Krueger. Cambridge Mass achusetts , and Oxford, U.K.: Blackwell, pp.294–332. International Finance Corporation (1995). Privatization: Principles and Practice. IFC Lessons of Experience Series 1. Washington D.C.: The World Bank and International Finance Corporation. ITU (1998). General Trends in Telecommunication Restructuring 1998: World. Volume 1. Geneva: ITU. ———(1999). “Executive Summary,” Trends in Telecommunication Reform: Convergence and regulation 1999. Geneva: ITU. Katzenstein, P. (1985). Small States in World Markets. Ithaca, New York: Cornell University Press. Laffont, J., and J. Tirole (1993). A Theory of Incentives in Procurement and Regulation. Cambridge, MA: MIT Press. Leith, J., and M. Lofchie (1993). “The Political Economy of Structural Adjustment in Ghana.” In Political and Economic Interactions in Economic Policy Reform: Evidence from Eight Countries. Ed. R. Bates and A. Krueger. Cambridge Massachusetts, and Oxford, U.K.: Blackwell, pp.225–293. Levy, B.,and P. Spiller (1994). “The Institutional Foundations of Regulatory Commitm ent: A Comparative Analysis of Telecommunications Regulation,” Journal of Law, Economics, and Organization 10(2): 201 -246 M-Cell. http://www.M-Cell.co.za McCubbins, M., R. Noll, and B. Weingast (1987). “Administrative Procedures as Instruments of Political Control,” Journal of Law, Economics and Organization 3(2): 243 - 77 ———(1989). “Structure and Process, Politics and Polity: Administrative Arrangements and the Political Control of Agencies,” Virginia Law Review 75(2): 431 -82 Moe, T. (1990). “The Politics of Structural Choice: Toward a Theory of Public Bureaucracy.” In Organization Theory. Ed. O. Williamson. N ew York: Oxford University Press, pp. 116–153. Noll, R. (1989). Economic Perspectives on the Politicsof Regulation.”In Handbook of Industrial Organization, Volume II. Ed. R.Schmalensee, and R. Willig. Amsterdam: North-Holland. Olson, M. (1965). The Logic of Collective Action. Cambridge, MA: Harvard University Press. ———(1982). The Rise and Decline of Nations. New Haven and London: Yale Uni versity Press. Persson, T., and G. Tabellini (1994). Monetary and Fiscal Policy: Vol I: Credibility. Cambridge, MA: MIT Press. Republic of South Africa (1996). “Telecommunications Act (Act 103 of 1996).”

28 ———(1996). “Growth, Employment, and Redistribution: a Macroeconomic Strategy,” Ministry of Finance. ———(2000). “An Accelerated Agenda Towards the Restructuring of State Owned Enterprises: Policy Framework.” Min istry of Public Enterprises , August 2000 . www.dpe.gov.za/docs/policyframework01.htm ———(2000a). “ICASA Act 2000.” Government Gaze tte No: 21154. Notice No: 462, 5 May 2000. ———(2001). “Telecommunications Policy Directions: Market Structure for Telecommunications Services,” Ministry of Communications, March. ———(2001). “Policy Directions Issued by Minister of Communications,” Minis try of Communications, 26 July, 2001. South African Reserve Bank [SARB], Quarterly Bulletin, various issues 1993–2000. Rogowski, R. (1987). “Trade and Variety of Democratic Institutions,” International Organization 41(2): 203–223. ———(1989). Commerce and Coalitions. Princeton: Princeton University Press. Sharon, Michael (2000). “Pulling the Teeth of the SATRA Watchdog.” In The 4th South African Internet Services Survey, 2000. Ed. A. Goldstuck, and M. Sharon. Johannesburg, South Africa: Media Africa.com and Acuity Holdings. Stallings, B., and P. Brock (1993). “The Political Economy of Economic Adjustment: Chile 1973–90.” In Political and Economic Interactions in Economic Policy Reform : Evidence from Eight Countries. Ed. R. Bates and A. Krueger. Cambridge Massachusetts, and Oxford, U.K.: Blackwell, pp. 78–122. Sunday Times (2001). “The lines are Down.” Sunday, 29 July 2001 Telser, L. (1966). “Cutthroat Competition and the Long Purse,” Journal of Law and Economics 9: 259—277. Tirole, J. (1994). “The Internal Organization of Government,” OxfordEconomic Papers 46(1): 1–29. Williamson, O. (1989). “Transaction Cost Economics.” In Handbook of Industrial Organization vol. I. Ed. R. Schmalens ee, and R. Willig. Amsterdam : North Holland, pp. 135–182. Willig, R. (1994). “Public versus Regulated Private Enterprise.” Proceedings of the Bank Annual Conference on Development Economics 1993: Supplement to the World Bank Economic Review and The World Bank Observer: 155—178. Wilson, J. (1989). Bureaucracy: What Government Agencies Do and Why They Do It. New York: Basic Books.

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Table 1: Employment changes in South Africa, 1993-2000 Public Sector General government Business Enterprises Private Sector Agriculture Mining Manufacturing Construction Trade Financial institutions Other Total

1993 1789822 1566210 222774 4297212 868600 616399 1491288 369359 759081 192485 135,339 6,087,035

2000* 1,638,376 1,476,842 160,892 3,822,023 822,643 419,651 1,278,030 221,827 883,322 196,550 110,203 5,460,399

Change -151,447 -89,368 -61,882 -475,189 -45,957 -196,748 -213,257 -147,532 124,241 4,065 -25,136 -626,635

notes: “*” means that the figures are for the first quarter of 2000 with the exception of agriculture, where the latest available figure was 1998. source: SARB Quarterly Bulletins, 1993–2000.