The topic of the optimal size of the public sector is a difficult and complex one, as witnessed by the intense debate on development issues during the 1980s and early 1990s (Toye, 1993). Nevertheless, an attempt is made throughout this book to distinguish between this theme and questions related to the desirability of macroeco nomic stability as measured by standard indicators such as the budget deficit, the inflation rate and the balance of payments. Public sectors can certainly over-expand, and in the past have frequently done so, causing economic instability. Yet, whether public expansion is possible without crowding out private activity and causing macroeconomic problems is an empirical question, which needs to be analysed rather than assumed. If space is, in reality, available, or can be created through government and private sector activity, it had better be used actively, provided of course that government is indeed committed to furthering the development process. The economic, social and political opportunity costs of not doing so may turn out to be very high in countries plagued by poverty and inequality. This thesis is particularly relevant to South Africa, which is the country case we are examining. As background, South Africa’s economic and social characteristics are reviewed in Chapter 2, which also sets out in some detail the competing strategic policy frameworks, which influence policy making.