‘New deal’ needed between government and business, economists say
The economists’ new deal will have to involve concessions to business, which, in return, will have to agree to limit excessive executive pay
A group of academic economists are arguing for a “new deal” over the economy between the government, business and labour to unlock the current logjam and promote investment in the productive capabilities of the country.
The economists agree that such a deal is needed as part of a planned transition to a more balanced, productive economy.
The call for a new deal comes in the wake of a series of high-powered indabas on investment and jobs, and of the initiative launched by President Cyril Ramaphosa to attract billions of dollars of foreign investment to SA.
Ramaphosa told delegates at Business Unity SA’s (Busa) economic indaba on Tuesday that the government and business has, through the new public-private growth initiative (PPGI), identified “inhibitors” that have constricted the economy over the past nine years.
The economists’ new deal will have to involve concessions to business in the form of taxes and incentives and its commitment to invest in the economy. In return, business will have to agree to limit excessive executive pay and give the assurance that retrenchments of workers would only be used as a last resort.
The localisation of procurement is also essential, the economists believe.
“There must be something for everybody,” Institute for African Alternatives director and former ANC MP prof Ben Turok said in a media briefing on the outcomes of an academic workshop. He believes the new deal should also involve infrastructure development in the townships.
The economists who participated in the workshop organised by the institute included economic professors Philippe Burger from the Free State University; Matthew Ocran from the University of the Western Cape; Vishnu Padayachee from Wits University; Fiona Tregenna from the University of Johannesburg; UCT’s industrial sociologist prof Ari Sitas, and adjunct prof Faizel Ismail; Wits University economist Gilad Isaacs; and strategic adviser to the department of trade and industry Nimrod Zalk.
There is a kind of a deadlock in the country. Things are not moving and there is frustration everywhere. We need a national dialogue, a national negotiationANC MP Prof Ben Turok
They agreed that a new deal has the potential to resuscitate the economy and place it on the path of sustainable structural transformation, which would make inroads into unemployment, poverty and inequality and accelerate black participation in ownership.
Turok said that a new deal would provide a window of opportunity to reconfigure policy and institutional arrangements and social relations, including state-business relations to ignite structural transformation. He said the economists agreed that SA is facing serious multiple crises that will be difficult to address. There is a logjam in which business, the former liberation movements and trade unions all feel very frustrated and are not able to see a way forward.
“There is a kind of a deadlock in the country. Things are not moving and there is frustration everywhere. We need a national dialogue, a national negotiation. The time has come for a new deal,” Turok said.
He stressed that a new deal would have to lead to structural transformation and enhance the productive capabilities of the country. The concern was expressed at the workshop that the foreign investment is either short term or being made in the financial sector rather than the productive sector.
“Historically, episodes of high growth, rapid employment generation and poverty reduction have involved structural transformation of developing economies and have been characterised by three facts: high investment as a percentage of GDP; a high share of manufacturing in GDP; and rapid growth and increasing sophistication of exports,” Turok said.
“SA’s post-apartheid economy has performed poorly on all three fronts. It has been characterised by low levels of fixed investment, limited structural and racial transformation, mediocre export growth and diversification, and extremely high unemployment and inequality.
“These weaknesses have undermined the legitimacy of the economic policy of the state and of dominant corporate business groups.”