Why does President Cyril Ramaphosa need a new social compact to grow the economy when he hasn’t delivered his side of the old one?
Opening his two-hour-long catalogue of the nation on Thursday, the president told us SA needed a “new consensus”. The social partners — government, labour, business and community — were working on it. A social compact to grow the economy, create jobs and combat hunger would be finalised within 100 days, he said.
His words echo those of his ANC January 8 statement, which listed a social compact as one of the party’s five key priorities for the year. His diagnosis of the economy’s malaise seems to be that we just aren’t playing nicely together, but a new consensus can fix that.
It sounds good, except there is already a compact between the social partners. It was agreed on 18 months ago at the National Economic Development & Labour Council (Nedlac). The partner not doing its part is the government. And the government is not simply one partner among equals.
If the government does not deliver the reforms the partners have agreed to enable the private sector to invest and “unleash the dynamism of the economy”, as the president put it last week, the private sector cannot do so. And as long as the government itself does not function effectively businesses, large and small, will continue to find it tough to do business in SA, compact or none.
It is worth going back to what happened in the run-up to the Economic Recovery & Reconstruction Plan (ERRP), which the president finally announced in parliament in October 2020. As SA’s economy was crashing, organised business invested an extraordinary amount of time and expertise in a comprehensive economic plan, which it brought to Nedlac in July 2020. Organised labour presented its own plan too, as did the ANC. And there was one from the government itself.
Ramaphosa met with the social partners at Nedlac in August and asked them to come up with a single, agreed plan. That they did, hammering out consensus on a focused Nedlac economic recovery action plan that they would work together to implement. That certainly sounded like a social compact, one that included the government since it sits at the Nedlac table as one of the partners.
In theory, Ramaphosa should simply have announced it in parliament. In practice, he treated it as just another input to the far less focused economic plan he announced in October. Business and labour supported it nonetheless. A joint oversight team was put in place.
It’s dispiriting to look again at the deadlines Ramaphosa set in that plan, most of which have whizzed by. But it’s even more dispiriting that after all that time, effort and consensus seeking, the ERRP rated just a single mention in Thursday’s speech. And now he wants a new consensus.
What might he hope to gain? He spoke more than once of the need to recognise that business, not the government, creates jobs, and of the need for the consensus to recognise that the state’s role is to enable the private sector to do the investment and job creation the economy needs. That’s a narrative that plays well in the markets, even if it’s not clear that the ANC really believes it.
Ramaphosa has to be as frustrated as anyone at the fact that there’s no sign that the 2-million jobs lost to the pandemic will be regained any time soon, and investment spending is still way below even its sub-par pre-pandemic level. But cynics might well wonder whether the president is not just setting the private sector up as a scapegoat to blame for what is essentially the government’s serial failure to create an enabling environment.
It was a state of the nation address that only got to the issues people wanted to hear about — the basic income grant and the government’s responses to the Zondo commission and July unrest — two thirds of the way in, and then largely dodged them. A chunk of the speech was devoted to a random recital of initiatives, from rural bridges to hydrogen to scrap metal, reflecting the usual tussle within the government over who gets a mention for their pet project.
The irony, in a way, was that it was such a poorly crafted piece of messaging that one could have missed the fact that this was a year in which the government did make some hard-won advances on the reform front, however late and limited. Those included breaking the logjam to allow electricity generation of up to 100MW without a licence, as well as announcements on corporatising Transnet’s ports — and even an apparent breakthrough on the spectrum auction, which is now due in three weeks.
Ramaphosa did announce action on a couple of long-promised reforms — the publication of a new critical skills list and of draft amendments to the Electricity Regulation Act and Transnet’s intention to open slots on its railway lines for private operators among them, even if the timing was noticeably last minute.
Those reforms could help unlock private investment and make the economy more efficient. But it’s no good inking in institutional and regulatory reforms unless there are supportive, responsive and competent people in the ministries and departments that actually have to make these happen.
Tech people talk of “workarounds”, where instead of tackling the problem you work around it in some suboptimal way. The president is increasingly doing this as he tries to address the dysfunction and resistance within his own government. He is adding new advisers and new task teams into a more centralised presidency in his effort to do so, including highly regarded mining boss Sipho Nkosi, who has been appointed czar of a new red-tape team that aims to lighten the regulatory burden on business, particularly small business.
In the end, however, it’s the line ministers who have to sign off on regulatory reforms, and their officials who have to implement them. And they have the power to make things difficult and unpredictable even if they do sign off. If the president’s men and women can’t negotiate buy-in from those officials and ministers, the reform programme won’t happen in any form or time frame that will make a meaningful difference to SA’s anaemic economic prospects.
Nor is it just about changing rules or policies: as long as the government itself doesn’t work properly, it will remain difficult to do business in SA. Ramaphosa might lighten the regulatory burden on the lady selling home-made dog toys on the side of the road, but it won’t help her much if she can’t rely on policing that safeguards her stall from criminals or an electricity supply that powers her sewing machine.
The president doesn’t need a new compact with his social partners. He needs to forge one within his own government.
• Joffe is editor-at-large.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.