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We will soon approach yet another milepost in the history of our country. This will happen in a month or three when the Constitutional Assembly adopts our final constitution.

At this stage, we should be allowed to congratulate ourselves for what we have already achieved. We have come through the first phase of our transition with flying colours. What we have done in the two years since 27 April 1994 far surpasses even the most optimistic scenarios of the most erudite pundits a few years ago. Who would have imagined that:

the ANC, the National Party and the IFP would be working together relatively effectively within a Government of National Unity;

the Government would have adopted broadly responsible economic policies; that economic growth would be in the region of 4%; that we would have achieved a relatively substantial inflow of foreign capital; that we would have abandoned the financial rand and committed ourselves to the total abolition of exchange controls; and that inflation would be at the lowest level in more than two decades?

Who would have predicted the goodwill that has characterised relations between our communities during the past two years and the progress that we have made towards reconciliation.

These are remarkable achievements and should be borne in mind when we consider the challenges that lie ahead. We must never forget that we have already proved that we have what it takes to be a winning nation.

However, as we approach the next stage of our national journey we should look realistically at the challenges that now confront us. We dare not rest on our laurels.

The patterns that will determine developments in our country for decades to come are now beginning to emerge. They are being defined in the intense debates on key issues within the Constitutional Assembly itself. They are also emerging from equally important debates and interactions outside Parliament - in the economy, in our educational system and in our social institutions.

These debates centre on a number of key questions that will deeply affect the nature of our future society - questions such as:

whether we will withstand pressures and continue to adhere to the responsible economic policies and approaches that have thus far been followed by the Government of National Unity;

whether South Africa will accommodate its inherent plural nature in a meaningful way or whether we will fall prey to rising tension and confrontation; and

whether our country will develop as a genuine multi-party democracy or whether we will become a de facto one party state.

Obviously this list is not exhaustive. Other pressing questions such as the high crime rate, continued political violence and the need for a cohesive foreign policy also face us. However, time does not allow me to deal with them all.

As far as the economy is concerned, we have made a good beginning. There is a general acceptance, also within the ANC, that we will not be able to achieve our long term objectives if we cannot assure sustained economic growth. Despite former ideological preferences there is agreement that such growth will be achieved only if we can promote an investor-friendly climate. This in turn requires us to adhere to the kind of monetary, fiscal and trade policies that have succeeded in promoting growth throughout the world.

As the recent budget again shows, the Government of National Unity has, by and large, adopted and implemented such policies. Nevertheless, there are some causes for concern:

We must ensure that we meet our goal of reducing the deficit before borrowing. We dare not allow our national debt to continue to rise at the rates we have seen in recent years. At R256 billion, it already constitutes more than half of our GDP. Interest payments now account for 19,1% of the budget. Clearly, if we do not reduce the deficit in a rather dramatic way, we will be confronted with the prospect of falling into a debt trap from which we will not easily be able to escape.

There are only three ways that the deficit can be addressed: through extra taxation; by utilising assets generated through privatisation; and most importantly, by reducing state expenditure.

The Government has rejected the first option. It realises that our tax rates are already high and that any further increases would detract from the overall objective of creating an investor-friendly climate. That leaves privatisation - or the reorganisation of state assets - and the reduction of state expenditure.

The Government must proceed as rapidly and effectively as possible with privatisation. The assets released should not be used to finance current spending, but should be allocated to reducing the deficit or on necessary capital projects.

Coupled to this, the key to reducing the deficit lies in more effective control over government expenditure. Government consumption spending now amounts to 20,5% of GDP. This is substantially higher than the figure in most first world countries, let alone the 12-15% achieved by many of our middle income competitor countries.

We all know that the main reason for our unacceptably high government consumption spending is the size of our public service. Almost 40% of the budget is spent on salaries. When one considers that another 19% is allocated to interest payments on existing government debt, it leaves relatively little for the other pressing needs that the government must try to meet.

At the moment the public service includes 1,25 million employees at the
first and second levels of government. The Government has already announced plans to reduce the public service by 100 000 people. This should, however, be seen as simply the first step in right-sizing the public service and in generating value for money. One of our key success factors for the future will be our ability to develop a smaller, cost effective and more efficient public service.

A second factor that will determine our future economic success will be our ability to create a more flexible labour system. One of our great weaknesses at the moment is that despite the fact that the economy has been growing at more than 3%, it has not been generating new formal sector jobs. This is happening at a time when the creation of new jobs should be one of our highest national priorities in our struggle to alleviate poverty. Our rigid labour practices and Northern European employment standards are simply pricing labour in the formal sector out of the market and are undermining our efforts to compete in global export markets.

As Kenneth Clarke, the British Chancellor of the Exchequer, pointed out to me last Monday, the British economy, with its flexible labour approach is creating jobs at the same time that unemployment is rising in European countries with rigid labour systems. Our ability to reach reasonable agreements with the trade unions on a more flexible labour system - particularly for smaller businesses - will therefore also be a key success factor. Experience has shown throughout the world that such an approach is also in the long term interest of the unions themselves.

A third area that will determine our future economic success, will be the ability and willingness of the government to maintain a coherent, consistent and comprehensive approach to the economy. This will require the acceptance of the right economic policies, not only at the macro-economic level, but in all facets of government activity. It means that all the government's major policy initiatives,particularly in the area of social and labour policy and the implementation of the RDP, should comply with the requirements of fiscal discipline, effective management and affordability. It will also often require the Government to take strong and unpopular stands in holding the line against pressure from its own constituency to adopt populist and unaffordable programmes.

As the South Africa Foundation pointed out in its recent proposals for the promotion of economic growth, the Government must do the right things across the board and not only in the sphere of macro-economic policy.

The second question that will define the nature of the future South Africa is the current debate on whether South Africa will become a plural or a unitary society.

Despite the safeguards for minority, cultural and provincial rights that have been built into the present constitution and the constitutional principles that it contains, it is clear that there are strong forces in our society that have a radically different view of the kind of country that we should become.

These elements envisage a centralised state in which the provinces and local authorities will simply be the agents for the implementation of the policies and programmes of the central government.

They also envisage a society which, while paying lip service to minority cultural rights, will effectively impose the majority's agenda and identity on all sectors of our society. It is elements such as these that, under banner of "representivity and transformation", seek to

do away with single medium schools;

transform universities, such as Stellenbosch, to such an extent that it will lose its ethos and character as a bastion of Afrikaans culture; and

withdraw state subsidies from all institutions, such as old-age homes, that do not comply with unreasonable representivity and transformation criteria.

The other view, which I strongly support, is that South Africa should develop as a plural society. We want a South Africa in which

each of our cultural communities, if it so wishes, will have sufficient breathing space to maintain and promote its own culture and language;

where parents will have the right, if they so wish, to educate their children in the language, religious and cultural traditions of their choice;

where power will be devolved to provinces, local authorities and communities, to the lowest level at which it can be effectively exercised; and

where the institutions of civil society will enjoy substantial autonomy and freedom from interference by the State.

All of this should take place on the basis of three clear principles:

there should be a clear prohibition of any form of racial or ethnic discrimination;

all South Africans should be entitled to the same basic assistance and subsidy from the state; and

the promotion of cultural and minority rights should also be consistent with the development of an over-arching multi-cultural national identity and patriotism.

It would be suicidal for us as a nation to deny the plural nature of our society. Another key success factor for the future will, accordingly, be the degree to which we can develop and nurture institutions that will accommodate our rich cultural and linguistic diversity.

Finally, the third factor that will determine our future success as a nation is whether South Africa will develop as a genuine multi-party democracy or whether we will become a de facto one party state.

The time has come for us to break out of the ethnic political patterns of the past. Our main parties were established during another age, with agendas that dealt with problems that have now, to a large extent, been resolved.

The liberation struggle is over. All our main parties should now reposition and redefine themselves with regard to the challenges of the present and the future. We all have a duty to the electorate to spell out our policies and programmes clearly - so that voters will know what they are voting for.

We need a system in South Africa in which people will be able to vote according to their political preferences and value systems - as they do in most successful democracies - rather than according to their ethnic origin. The greatest challenge currently facing our young nation is the establishment of a strong and resilient multi-party democracy which would offer voters the full spectrum of options present in advanced democracies throughout the world.

My Party and I have dedicated ourselves to the promotion of such a democracy in South Africa.

I am convinced that, together with the importance of continuing to follow the right economic policies, and the promotion of a genuinely plural society, this will be a key factor for our future success.

I am equally sure that, just as we have succeeded in astonishing the world with the success of our transition during the past two years, we will continue to astonish the world - and ourselves - with our ability to meet these challenges as well. Therefore, let us get going. The job of building a new South Africa is only half finished.

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