Much of the reason why South Africa is locked in a low-growth high-unemployment trap is the ‘social partnership’ between organised big business, big unions, and government. For some time, social partnership has acted as a brake on reform and policy initiatives.
Unions and much of the private sector fundamentally differ on the desirability of key reforms to labour laws, and on their approach to state enterprises. Yet, miraculously, organised big business and labour are able to come out with agreements to which the government gives serious consideration.
The immediate interests of unions would be adversely affected by key changes in labour legislation and the minimum wage, as well as the privatisation or liquidation of state-owned enterprises. These changes are key to job creation and jobs.
A section of the private sector, organised big business, is highly cautious about overstepping a political line and shows signs of trying to entirely avoid the key economic issues. Soon after the Covid-19 lockdown began, organised business, in the form of Business For South Africa, came up with a proposal for liberalising the economy, to an extent, but its political traction is not evident.
There is a political equilibrium in South Africa between organised big business, the unions, and government that is killing the economy. Part of the institutional mechanism that upholds this equilibrium is the National Economic Development and Labour Council (Nedlac), the statutory body set up soon after the election of the African National Congress (ANC) in 1994. Nedlac has the stated aim of promoting economic growth and striving for a consensus, and has the role of advising on key economic policies before they are presented to Parliament.
The body brings together three central players in the South African economy – big business, big labour and government, and a grouping called ‘community’. It has shown an almost complete lack of initiative in getting to grips with our problems, although it boasts of having reached multiple accords.
Interests of the big players
Fundamentally Nedlac is more about protecting the interests of the big players than seizing the chance to take initiatives that might address the country’s problems. It costs the Department of Labour about R40m a year to run and provides jobs for cadres and insiders who have made careers out of ‘social dialogue’.
Pared down to its basics, the South African political equilibrium allows big business and big labour to reach agreements on a range of issues that protect their interests while avoiding the basic reform issues.
Through Nedlac, the big unions have effectively been granted a veto on the issues which most affect them, such as changing the labour laws to allow for greater flexibility or a change in the minimum wage dispensation. Big business is at ease with this dispensation as it effectively amounts to a cost barrier against competition from smaller players, who are without seats at the table.
Since its inception, Nedlac has become a cheerleader for lowest common denominator accords between the big three. It is upheld by its membership and government as a means of building democracy through social dialogue, but it is profoundly undemocratic due to a narrow and self-serving membership.
Business at Nedlac is made up of organised big business with, for example, the Steel and Engineering Industries Federation of South Africa only representing about 1 000 companies of the 10 000 in the industry. Around the world, business is disunited by their basic interests, small vs large, sector vs sector and much else. To claim any position reached by organised business at Nedlac as the broader position of business cannot be true.
Not represented
Small business, the informal sector, and the unemployed, and many other groupings, are not represented at Nedlac. The ‘community’, which consists of youth and women’s groups, is a bit of an aberration, as there are millions who are not members of those official groups.
Due to Nedlac’s narrow membership, its legitimacy in coming up with ‘social accords’ that are taken with such seriousness by the government has to be questioned.
Albeit from another angle, elements on the Left are also frustrated with Nedlac’s failure to address South Africa’s problems. In ‘Nedlac is nothing more than an insider’s talk shop for the well heeled‘, Gavin Hartford takes aim at the body’s ‘cosy insider club nature’ and failure to address the country’s ‘racial and class’ divides.
If the notion of a political equilibrium between the big three insiders appears simplistic and conspiratorial, take a look at Nedlac’s latest initiative, ‘The Social Partners’ Economic Recovery Action Plan’. Last month President Cyril Ramaphosa was presented with this plan by the ‘social partners’. It will now be taken up by the government to come up with a new economic initiative.
Few details
The plan supports much of what the government has already planned. There is no call for a new approach to state-owned enterprises that might include privatisation. It only asks for the modernising and reforming of network industries and gives few details.
And, despite the expanded unemployment rate for the second quarter of this year rising to 43 percent in the second quarter of this year, there is no new substantial initiative to change the job-killing policy environment. There are only calls for new infrastructure programmes and for more people to be taken up by a public works programme. Allowing the private sector to pay the same minimum wage as the government pays in its public works programme is not on the agenda. This Nedlac proposal is all too politically easy and amounts to an inelegant sidestepping of a basic issue.
There is no warning in the plan of the economic dangers of expropriation without compensation or of prescribed assets, two threats that hang over private investor confidence in the country. Yet the plan calls for more private investment. There are calls for greater attention to be given to small businesses, but it is difficult to see these as anything but boilerplate clauses to rebut potential criticism of the plan.
Nedlac’s immediate origins lie in the good intentions that prevailed during the heady days of the transition, when social dialogue had a definite role to play in building trust between key players.
‘The golden triangle’
In the early 1990s, the then Finance Minister, Derek Keys, who first served under the National Party, set up the National Economic Forum, an informal body to bring together what he called ‘the golden triangle’ of unions, business, and government to discuss economic issues. Later, the idea was seized upon by the unions and the labour relations constituencies within big businesses to create a permanent body to allow social dialogue.
Today we are left with a self-serving bureaucracy that acts as a brake on reform and a filter for government on key economic policies. Nedlac grants large interests a role at the policy negotiation table and so allows a type of corporatism that has been a key component of many undemocratic governments.
Even without Nedlac, big business and labour would have easy access to government. But there is no reason to give them the power of veto and delay.
[Picture: Clker-Free-Vector-Images from Pixabay]
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