JABULANI SIKHAKHANE: Lack of trust hinders creation of a social pact

SA needs a more effective way of achieving a collective understanding of the causes of what ails the country’s economy, an agreement among social partners on the solutions, and who bears what proportion of the costs of implementing the required changes. 

A social pact whereby the country’s political, labour, business and community institutions reach agreement on these issues has often been put forward as the solution. President Cyril Ramaphosa promised such a pact, only to throw his hands up in the air a few years later because he could not get agreement among the parties. 

But such a pact is not possible because of the internecine war between labour and business. A trade unionist once described the sacrifices expected of labour and business by using a melodramatic analogy of a pig and a chicken: labour was being asked to contribute bacon to breakfast and business, eggs. 

Then there is a lack of trust between business and the government and the receding trust in the government by communities. Organised labour’s trust in the government has declined markedly over the years. 

The need for a social pact and the challenges of creating one are set out in a recent paper published by the SA Reserve Bank, which says poor economic growth and high unemployment “have led to deteriorating social cohesion and increasing political instability”. Hence the urgent need for SA to find ways to get some collective agreement on the way forward. 

The Bank’s paper cites cases elsewhere in the world where social partners reached a pact — “the collective agreements meant to improve aggregate economic outcomes” for all — to co-ordinate the economic changes the country needed to deal with its challenges. It quotes Ireland’s 1987 example, which resulted in the moderation of wages through centralised wage bargaining agreements, in return for tax cuts that increased workers’ net incomes. 

“Although the impact of the pacts is contested, there is broad consensus that they reduced workplace conflict; less so that they encouraged wage moderation.” 

The authors of the paper, which include Christopher Loewald (the head of the Bank’s economic research department and a member of its monetary policy committee), say that a high-level pact in SA could include “concertation around the broad contours of active labour market policies” and how these could be implemented in a way that maintains existing jobs as they help increase new ones. Concertation refers to co-operation, especially among opposing parties, aimed at achieving concerted action. 

The International Labour Organisation describes active labour market policies as publicly funded interventions aimed at improving the functioning of a labour market by bringing about changes in labour demand and supply, as well as the process of matching workers and potential employers. 

The authors of the Reserve Bank paper, the other two being Nic Spearman and Andreas Wörgötter, add that policy concertation could also include fast-tracking corporate tax reforms, the introduction of collective ownership schemes, public works programmes and social grant reforms, as well as the prioritisation of public infrastructure projects. 

There’s a snag: the causes are both institutional and ideological. Few of the possible concertation objectives “are clearly articulated in SA’s bargaining forums”, and past efforts at negotiating a social pact through the National Economic Development and Labour Council (Nedlac) have delivered nothing. 

The authors argue that critical economic relationships in the economy have become the “subject of political conflict” rather than being informed by evidence-based or best-practice analysis. 

“Without some basic common understanding of what specific policies do and how they achieve larger economic goals, it is difficult to see how greater focus on the process of compromise, reciprocity and commitment can on its own further narrow the gap in perspective.” 

The key to narrowing the “common understanding gap”, the authors argue, is to ensure that any process to reach a pact includes “all economic actors affected by the relevant agreement”. This bringing of all voices around the table is important because of the more pronounced “insider-outsider dynamics” in SA. 

To the Reserve Bank’s literature one might add the critical role of SA policymakers in creating an environment conducive to social compacting. Policymakers must, in the words of the Commission on Growth & Development (2008), come up with “a growth strategy, communicate their goals to the public, and convince people that the future rewards are worth the effort, thrift and economic upheaval”.

Policymakers’ efforts will succeed only if their promises are “credible and inclusive, reassuring people that they or their children will enjoy their full share of the fruits of growth”. 

Where Ramaphosa has failed is in spelling out the sacrifices needed and convincing South Africans that they are worth making for the common good. 

• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.