KWANELE NGOGELA: Challenge for GNU is reconciling economic growth with social protection

The governing party losing its majority is the ultimate stress test for our democracy. The public discourse is dominated by commentators and free-market proponents who predictably warn against election outcomes and co-governing arrangements that might be unfavourable to the markets and detrimental to economic growth.

However, what is fundamentally flawed in this logic, derived from the aphorism that “a rising tide lifts all boats,” is the presumption that if the incoming multiparty government prioritises the markets and growth everything else will naturally fall into place. 

The prioritisation of market-friendly conditions in SA has left behind the poorest and most vulnerable, particularly low-income workers. This is evident in areas related to labour law reforms and social protection. The National Development Plan emphasises that many people face different forms of vulnerability in our society and are "...at risk of falling into poverty as a result of insufficient wages, unemployment, and other conditions that may threaten their livelihoods and dignity.” 

Low-income workers have not seen real wage increases sufficient to enable themselves and their families to afford decent living standards in years, as companies focus on stronger bottom lines, generous executive compensation and handsome shareholder returns. 

The true challenge for the seventh administration therefore lies in reconciling market efficiency and economic growth with social protection and human wellbeing. This entails addressing the deepening inequalities and deteriorating conditions in our labour markets to facilitate equitable distribution of productivity gains with workers.

A continued focus on appeasing markets, which often disregard exploitation and labour rights while prioritising maximising profit margins through labour cost containment, will continue to adversely affect the most vulnerable workers, including those in informal, low-skilled positions and those in insecure forms of employment. 

The laissez-faire policies in SA, predicated on unwavering confidence in free markets as prerequisites for sustained growth and human progress, have failed to grow the economy sufficiently. These market-friendly policies have not made significant inroads into reducing high unemployment, inequality, poverty, economic exclusion and short-termism. 

The World Economic Forum’s Global Competitiveness Index (GCI) series, last published in 2020, tracks the performance of nearly 140 countries based on 12 pillars of competitiveness: macroeconomic environment, infrastructure, institutions, health, primary and higher education and training, goods and labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.

SA consistently scored poorly in the category of economic transformation, particularly in areas related to labour laws and social protection for its evolving workforce. Key issues covered under this category include inadequate social protection coverage, lack of guaranteed minimum income benefits, limited accessibility to healthcare services, and inequality-adjusted access to education.

In addition, the country falls short in providing sufficient housing allowances, implementing active labour market policies, enforcing minimum wage laws, regulating overtime adequately, and protecting workers’ rights relative to other economies covered in the GCI. The effects of the online gig economy on working conditions and employment opportunities for low-skilled workers further exacerbate these challenges. 

SA also scores poorly in the category relating to directing financial resources towards long-term investments in the real economy and expanding financial inclusion. This highlights a significant divergence in the country’s markets from long-term thinking and objectives to promote economic inclusivity, which are central to facilitating meaningful participation of low earners in the economy.

The focus on short-term gains and insufficient investment in sustainable economic growth underscores the need to challenge the promarket and growth-only paradigm, which often lacks societal context and relegates human and environmental wellbeing priorities as secondary to profit accumulation. 

While acknowledging SA’s participation in global capital markets, we must recognise the country’s unique circumstances. The overt pro-market emphasis, advocating for a coalition government and a regulatory regime that overprioritises market-friendly conditions amid widespread poverty and severe income inequality in the labour market, is politically and economically unsound and dangerously unsustainable.

We need a balanced approach that considers both investment-led economic growth and social equity, ensuring that the benefits of a robust economy are shared more broadly and fairly. Prioritising human wellbeing alongside market performance is essential for a fairer society and a healthier democracy. 

This understanding was evident when SA emerged from the apartheid era and entered the democratic dispensation through the government of national unity (GNU) in 1994. There was an urgent need to complement political liberation with sustainable economic growth that would benefit the entire population. The GNU’s flagship policy, the Reconstruction and Development Programme (RDP), recognised that the country’s newfound openness to global trade and investment needed to be balanced with efforts to address deep-seated social issues. Economic policies should not solely focus on market conditions but also consider the welfare of all citizens. 

At its core, the RDP aimed to address the widespread poverty and severe inequality affecting nearly every aspect of SA society. For those who had been disenfranchised by the injustices of apartheid, this transition brought a renewed sense of hope and possibility, centred on human wellbeing. The RDP emphasised the need to steer the SA economy towards high and sustainable growth, which can be interpreted as pursuing regenerative and distributive growth that harmonises environmental preservation with human wellbeing. 

At this critical juncture in our body politic where market failures are apparent and we see the profound effects of short-termism coupled with digitalisation on employment and workers’ rights, particularly for those in the lowest deciles of employment, the focus should not be on constituting market-friendly co-government arrangements. Instead, those who assume the responsibility of governing must orientate the market economy to focus on capital flows into the real economy and sustainable investment-led growth. 

Their role includes not only ensuring stable financial markets and a sound financial system but also expanding access and inclusion. This entails creating financial incentives for the markets to engage in sustainable and inclusive practices and investments, rather than prioritising markets above all else. 

• Ngogela is a senior inequality analyst at Just Share.