Policy Brief 1: an Economic Indaba for South Africa

South Africa’s perfect storm of structural crises

South Africa is experiencing a perfect storm of a number of simultaneously deep-rooted structural crises: political, economic and labour and social. At the same time, we are seeing rising public cynicism in the ability of the governing ANC –Cosatu-SACP tripartite alliance to turn things around. Government on its own may not have the capacity to resolve any of these crises, whether individually or collectively. South Africa’s economic governing circle will have to be widened.

The best solution for South Africa is for the country to cobble together a coalition for growth between all stakeholders – government, business, trade unions, which should agree to mutual compromises that could secure a united effort to overcome South Africa’s structural crises and unlock growth.  This means that South Africa will have to explore the concept of co-governing: business, organised labour, government and communities.

Realistically, a broad national coalition for growth between the country’s stakeholders to co-govern South Africa out of its problems may be at this moment too difficult to pull off. But fostering sector based growth coalitions between business, organized labour and governing, starting with the most distressed sectors, for example for the mining industry, or agriculture or manufacturing sectors, is a realistic option.

However, firstly, there is also a deep distrust between South Africa’s political, social and business elites – which undermines the country’s growth, economic and democratic development. Secondly, South Africa’s political, economic and social constituencies are stuck in log-jam – stuck in rigid blocks not cooperating with each other, to collectively solve South Africa’s problems and promote inclusive growth and prosperity. They are divided by distrust, racial and social animosity.

South Africa’s political, economic and social elites and constituencies stuck in a gridlock

By the time President Jacob Zuma took the leadership of the ANC at the party’s Polokwane national conference in 2007, the ANC’s support base was divided into five almost distinct broad social groups or constituencies. There were the black middle class working in both the public service and private sectors. There were two kinds of black business –big black business, is essentially political capitalists, who have often build their business out of the state through black economic empowerment; and small black business in the urban and rural informal sector. There was the black working class with manual jobs – who are mostly attached to trade unions. There were the millions of black poor, the unemployed and the intermittently employed in the urban and rural areas, and lastly; the black youth.

Predominantly white big business and the white middle class were not perceived to part of the ANC’s core constituencies. They were perceived to be aligned to opposition parties such as the Democratic Alliance. The white working class is to a smaller extent represented by the DA, but mostly aligned either to parties such as the Freedom Front Plus or to trade unions such as the Solidariteit-Mynwerkersunie.

Since 1994, the state, SOEs and law-making have been dominated by the predominantly black ANC political elite; and the private sector and professions, by the white elite. There has been failure to strike a coalition for growth between the black ANC political elite in control of the state, parastatals and law-making and the white elite controlled private sector, middle class and professions – so essential to foster inclusive growth.

Under the Jacob Zuma presidency the alliances between different black social groups under the umbrella of the ANC are being dramatically reconfigured, as a result of the combination of a stagnant economy, public service delivery failures and ineffective government, ANC and societal leadership. The black middle classes, especially those working in the private sector, struggling under difficult economic conditions, appear increasingly disillusioned with the ANC – and prominently white big business.

The black working class, similarly, also burdened by tough economic conditions, are starting to move away from the ANC. This can be seen by the formation and success of Association of Mineworkers and Construction Union (AMCU), and the splintering of key trade unions affiliated to the Congress of South African Trade Unions (Cosatu), the ANC governing ally.

NUMSA, which has recently announced it will not support the ANC in elections and form its own party in December 2014, will be the largest organized black manual worker breakaway from the ANC.

The black urban youth are also appearing to flee the ANC. Many have joined the Economic Freedom Fighters, led by former ANC Youth League, Julius Malema. Importantly, these traditional ANC constituencies – workers, youth – are not only increasingly disenchanted with the ANC government; they are also increasingly hostile to business. Until these new developments, all the social classes of South Africa’s black majority, had since 1994 been united under the ANC umbrella, but are now fracturing along new social and political lines.

Inequality has reached such a tipping point it is now about to change the country’s politics

The pattern of economic inequality before 1994 was between white and black South Africans. Now inequality is still the same, but many black South Africans have become wealthier, increasing inequality between wealthier and poorer black South Africans also.

South Africa’s levels of inequality between the small elite of haves and the majority have-nots may have reached a tipping point, where long-pent up anger among the poor black masses, may result in anger against the democratic and ‘legitimate’ institutions’ such as trade unions, political parties and civic organisations, for their seeming inability to reduce this inequality or protect them adequately.

There has been a failure by the South African state to deliver effective public services, such as quality public healthcare, education, transport, basic amenities and housing, widely, evenly and equitably to the black majority – which was supposed to reduce the inequality. One can call such public services a ‘social wage’. This means during hard times, the South African state and institutions have not been capable of providing a cushion through such a ‘social wage’.

As the state fails in delivering effective public services, and the ‘social wage’ declines, workers’ wages are increasingly spend on alternatives to poor or non-existent public services. As the state failure increases and the ‘social wage’ shrinks, workers have been and will try to secure higher wags from their employers, to compensate for a decreasing ‘social wage’ (and therefore the cost of living) – to pay for rising public transport, education, housing and so on.

It also appears that many ordinary people have – or are starting to, also lost faith in the ability of the institutions and social contract arrangements that underpin the post-1994 South Africa social contract, such as Parliament, the collective bargaining system, the National Economic Development and Labour Council (Nedlac), to address inequality.

Furthermore, it appears that the traditional “legitimate” institutions and leaders, such as political parties, certain civic organisations, trade unions and business organisations – and their leaders, are similarly increasingly losing legitimacy. Such institutions are increasingly experienced by ordinary citizens as not responsive, accountable or even relevant anymore – and seen either as only serving the privilege elite, or unable to reverse the crippling impact of inequality.

 Systemic unfairness and relative deprivation

Two new social phenomena – driven by the high levels of inequality, appear to threaten to change South Africa’s social landscape. There is a pervasive sense about of systemic unfairness among poor black South Africans, at their poverty relative to that of richer blacks and whites.

The anger and violence accompanying many of the community and labour market protests is an expression of the pervasive feeling of systemic unfairness experienced by many poor black South Africans over poor material conditions while they perceive a small politically-connected minority are ‘unfairly’ getting fabulously richer using taxpayers money, or on the back of old apartheid-era money or social privileges.

There is a feeling that some lucky black South Africans appear to be doing very little, yet trading on their struggle credentials get them the most lucrative jobs, government tenders and BEE shares in private companies. And that some lucky white South Africans can trade on their social capital, wealth and education obtained during the apartheid years to prosper in the democratic dispensation. Similarly, there appears to be a perception among ordinary black workers that CEOs of large companies are getting extraordinary huge salaries, also for not much effort, while they believe employees get very little and are often retrenched to increase profits.

It appears that many poor black South Africans are increasingly, in what has been described in the phenomenon of  ‘relative deprivation’[1], comparing the economic disparity in their own well-being to that of pre-1994 former black comrades who are now doing well and white South Africans who are better off. Whether these perceptions are true or fair or not, they colour the actions, decisions and attitudes of multitudes.

 The ANC’s loss of persuasive power

The ANC, in spite of its electoral power, having won the May 2014 national elections with 62%, appear to be losing its persuasive power – which is largely due to a decline in the party moral credibility, based on its uneven public service delivery record, and the uneven distribution of the economic dividends of the democracy since 1994. The Marikana labour crisis symbolizes the point where it appears the ANC government’s ‘struggle’ credentials and past exemplary struggle record, may not be enough anymore to persuade its own (changing) constituencies to follow one or the other action.

This is quite important, because it means that key government leaders may not be able anymore – like former President Nelson Mandela did – to persuade strikers during protracted strikes to return to work for the good of the country or the economy. Appeals by ANC government leaders to black workers or may also in the future not always heeded, because workers may argue that former comrades now in government are also unfair economic beneficiaries of the post-1994 democratic dispensation.

For another, this means going forward business may not be able to always persuade workers to abandon strike actions on the basis of the good of the factory, mine or the broader economy – because workers increasingly feel that the ‘good’ of the company, mine or factory are being ‘unfairly’ distributed to only the executives and shareholders. For another, if inequality persists, any no credible attempts are made by social partners to be seen – and to tackle the problem, South Africa may see the rise of populism, with increasing calls for nationalization, land grabs, and the undermining of key democratic tenets and institutions.

 If only for self-preservation, social partners should negotiate a new deal

South Africa’s social partners or stakeholders – government, organised business, and organised labour – are all individually under the most intense pressure since the country ended apartheid in 1994. Yet, this is the right moment to attempt to secure sector-based growth coalitions to bypass institutions that are increasingly losing their credibility.

South Africa may have entered a tipping moment where because all the stakeholders are intensely vulnerable, they may and should be more open to negotiation than any other time since 1994, simply for their very own self-preservation. A continued downward spiral of a failing economy is off course not good for business. Continued state failure, meaning a decrease in the “social wage” will mean employees will increasingly demand from business to subsidize such failure.

However, trust between South Africa’s major social partners is at unprecedentedly low levels – between business and government, business and trade unionists, trade unionists and business and even between government and trade unionists. Although all intensely vulnerable, SA’s stakeholders appear to be locked in their fixed positions, with no single social partner appearing to want to reach out to their opposing sides. Yet, in order to build growth coalitions, pragmatism is needed. In many cases the cultural divide between business leaders, labour leaders and ANC leaders are too wide. There is not regular interaction – whether formal, informal or social interaction between leaders of social partners.

The problem in SA is that the leaders of the country’s social partners do not share the same outlook, are not familiar with each other and never had the same socialization. There is also the deep legacy of racial suspicion. South Africa’s government, business and civil society elite do not share the same schooling, culturalisation and socialization, like any other countries, which makes it difficult for them to share a common SA Inc. outlook.

Right now, one social partner will have to take an active role in overcoming the stand-off between government, organised business and labour. For pure self-interest, business will have to more pro-active, and will therefore have to pro-actively take the first step of ‘reaching out’. In fact, business may at this moment be the only social partner able to initiate a process to cobble together social pacts. Business are under pressure to “prove” (whether fairly or not) that they have the best interests of society at heart. Business is currently seen – by many black constituencies – as the villain, rightly or wrongly.

Business ideally positioned to pro-actively take the lead

 Organised business will have to pro-active, and may at this moment be the only social partner able to initiate a process to cobble together sector based growth coalitions. In order to be seen as an “honest” broker, organised business may have to pro-actively do ‘something’.  Organised business could organize a nati0nal economic indaba of big business leaders under the auspices of BLSA to look at what business can collectively do to tackle South Africa’s structural crises. The intention of such an economic indaba will be to give a ‘signal’ to society, that not only is organized business concerned, but acting on South Africa’s economic challenges. But it would also be to get a core group of business leaders to agree on a set of self-imposed deliveries from business to deal with South Africa’s structural crises.

 A key focus of the economic indaba would be on inequality – and what business can do to address it. Although it would be a BLSA event, the BLSA could invite individuals who have credibility firstly among a wide range of stakeholders among the BSLA membership, but also importantly among all South African social partners. These could either be credible and popular experts on inequality, or former leaders of other countries, whether developed or developing, who have credibility address inequality in their countries, or who have successful brought together government, labour and business, during periods of distrust, to encourage growth.

This could include former Dutch Prime Minister Jan Pronk, or former Brazil President Lula da Silva. Global experts on inequality, such as Thomas Piketty could also be invited to address the business leadership; or Bert Rurup, former Chairman of the German Government’s Council of Economic “Wisemen”. Alternatively, the BLSA could bring CEOs/Chairman of large corporations, and the equivalent trade union leaders, and government leaders from countries where there is a successful cooperation between government, business and labour at the sector or local company level.

[1] Crosby, F. (1976). A model of egoistical relative deprivation. Psychological Review, 83, 85–113.

doi:10.1037/0033-295X.83.2.85; Guimond, S., & Tougas, F. (1994). Sentiments d’injustice et action collective: la the´orie de la privation relative [Feelings of injustice and collective action: The relative deprivation theory]. In

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232). Paris: Margada; Smith, H. J., Pettigrew, T. F., Pippin, G., &Bialosiewicz, S. (2012). Relative deprivation: A theoretical and meta-analytic review. Personality Social Psychology Review, 16, 203–232. doi:10.1177/1088868311430825

 

William Gumede is Associate Professor, School of Governance at the University of the Witwatersrand. He is Executive Chairperson of Democracy Works Foundation and former Deputy Editor of The Sowetan newspaper.

During the anti-apartheid struggle, Gumede held several leadership positions in South African student, civics and trade union movements. He was a political violence mediator and area coordinator for the National Peace Committee during the multiparty negotiations for a democratic South Africa and was seconded to South Africa’s Truth and Reconciliation Commission. He is the author of several number 1 bestsellers. His more recent books include: Restless Nation: Making Sense of Troubled Times (Tafelberg); and South Africa in BRICS – Salvation or Ruination (Tafelberg).

To read publications by William Gumede on our website please click here.

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