The trouble with the president’s social compact aspirations is not so much that he has missed his own 100-day deadline, but more that the whole concept is fundamentally flawed. And the draft compact document, which has been widely leaked, just serves to highlight those flaws.
First of these is that the partners to the proposed compact are not equal. That is, some of them matter a great deal to the economic outcomes President Cyril Ramaphosa says he is trying to achieve; some of them don’t. He speaks of the grand compact he has in mind in the context of the need “to turn our economy around and create the millions of jobs needed”, as he put in his weekly newsletter last week.
The chances of success on those growth and jobs outcomes depend materially on whether business ups its investments in new capacity that expands the economy and creates new jobs. The chances depend even more on whether the government reforms its own policies and practices to make it easy and attractive for business to make such investments.
However, it is going to make little difference to investment and job creation if the community sector and broader civil society engage in humanitarian activities and forge partnerships with traditional leaders, as the draft document commits them to do, worthy as such activities may be. And while labour can make some difference to outcomes by, for example, agreeing not to block reforms to the state-owned enterprises, it can’t directly influence investment decisions.
That’s the province of the executives, boards and shareholders of the private sector companies that account for about 70% of fixed investment in the economy and by far the bulk of employment. Business by its nature seeks to grow profits, and to do that sustainably it needs to invest more, with more jobs the likely by-product. So, it’s not some kind of unpalatable trade-off (in the rather unfortunate language of the social compact) for business to invest. It would love to, with no investment conferences or compacts needed. But it can do so only if the enabling environment is there and the returns on investment are worthwhile. And that is largely in the province of the government, which has the power to legislate and regulate the bureaucracy through whose hoops investments have to jump.
Organised business has repeatedly made it clear to the government what would be required to ensure that. It has a shortlist of six critical areas — the obvious ones such as fixing electricity and transport, rolling out infrastructure, fixing the state’s own bureaucracy and strengthening law enforcement. It wants to assist and support the government in tackling these, and has the resources of human and financial capital to do so. Business Unity SA met the president at the start of this to outline the critical issues and offer its assistance. As it has said publicly, its view is it needs to work with the government directly to move the needle on growth and investment. And the work needs to focus on the critical issues that will move the needle.
A social compact, certainly the version set out in the draft document, would be fuzzier and more lowest-common-denominator. It includes a lengthy list of proposed commitments, most of which feature nowhere on business’s list of what is required to remove constraints to investment and get SA’s economy to grow faster. Which is why business is pushing for the focus to be on bilateral not multilateral talks with the government, even though it has also expressed support for a compact. And it’s why the business and government partners to the compact matter more to economic outcomes than the other partners, however good their inclusion would be in other respects.
A second flaw is in the content of the “grand compact”, which covers almost everything and could therefore risk delivering nothing. The successful social compacts the documents offer as examples were often focused, short-term, wage and price or employment accords, such as those in Europe in the 1980s. They could be negotiated between labour, the government and business and delivered.
A third, and fundamental, flaw relates to mandates. A social compact must be signed by representatives of all the social partners — the government, business, labour and community. There is the practical problem of how those representatives gain a mandate from broad and fragmented constituencies (who really represents “community”, for example?), and the document wants to make them even broader than the partners as they are represented at Nedlac.
But there is a real problem of principle too, particularly for organised business. The draft includes on business’ list items such as “explicit and clear commitments in meeting the R1-trillion investment target” and explicit percentage targets for localisation across sectors, along with narrowing the wage gap between highest and lowest paid workers and enabling worker representation on company boards.
Individual companies may be perfectly willing to do some or all of this. But there is no way an organised business body can make explicit commitments on their behalf. Indeed, some could be illegal if they override the executives, boards or shareholders who are responsible under the law for such decisions. Business has already privately pushed back on some of the items on its list; labour is pushing back, too.
The bottom line is that if the government really wants these things to happen it must be bold enough to legislate them. Instead, it’s trying to arm-wrestle labour and business into volunteering. And the only commitments it’s planning to make are to actions it has long promised anyway.
David Lewis has argued, compellingly, in these pages that rather than seeking a social compact, the government needs to take the lead and govern (“Just do it! Social compacts rely on far too much consensus”, August 3). And one has to wonder why Ramaphosa is pushing for this compact now, and in this way. He has until now bypassed Nedlac, SA’s established social compacting forum, though it is there that the compact will have to be signed.
The compact document was reportedly drafted for the government by the Mapungubwe Institute for Strategic Reflection. The leaked version is draft six, which apparently hardly differs from draft one, even after a series of bilateral consultations between the government and its social partners. So, is this a genuine attempt at policymaking by consensus, or more a piece of political theatre?
If he gets the partners to agree Ramaphosa will be able to say he has got everyone to raise their hand to grow and develop the economy. The danger is that if it fails the compact might provide the excuse some in government want to blame business for not coming to the party.
• Joffe is editor-at-large.
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