The trouble with social compacts

ANTHONY BUTLER: Cyril Ramaphosa’s compacts damage the social fabric

Business and labour incumbents are entrenched at a huge cost to the economy

 BL PREMIUM

21 APRIL 2022 – 15:29

President Cyril Ramaphosa raised eyebrows in his state of the nation address in February when he announced that a “comprehensive social compact to grow our economy, create jobs and combat hunger” would be finalised in 100 days.

This suggests a grand agreement will be struck on or before May 21, though presidential spin doctors may push this back to the start of July by insisting only weekdays should be counted because social partners need to rest at weekends.

Ramaphosa’s commitment to a grand social compact should be taken with a pinch of salt. When the National Economic Development & Labour Council was launched in 1995 it resembled a European-style corporatist body nominally entitled to scrutinise social and economic policy proposals. It quickly became clear trade union and business inputs would be ignored.

Capital and labour are deeply fragmented in SA, and quite unable to sustain binding deals. They each exercise power directly — through the “tripartite alliance” mechanism of the ANC on the unions’ part, or through BEE co-option and party funding transactions on the side of business.

Ramaphosa knows business and labour well; he is fully aware that there is no institutional basis in this country for a sustainable and benign grand social compact. Current corporatist mechanisms are built on shaky foundations; they exclude non-unionised labour, small business and the unemployed, and they damage the welfare of the wider citizen body.

Ramaphosa likes to describe pretty much anything that has worked in the past as a social compact. In 2016 he reflected that, “by adopting a new democratic constitution nearly 20 years ago, South Africans from all walks of life entered into a social compact to build a new nation”.

Later that year he told a trade union conference in Boksburg that even the Freedom Charter was a “social compact to create a more human society that protects the most vulnerable among us”. At Davos in December 2018 he argued that “the Reconstruction & Development Plan … was a social compact, because a number of people participated in it”.

Sent by Jacob Zuma to troubled Western Cape farms in October 2014, the then deputy president called for a “farm social compact” that included a “moratorium” on farmworker evictions. Equally pragmatically, he campaigned for a restroom social compact, describing the Sanitation Appropriate for Education (SAFE) initiative to build decent school toilets as “a social compact that is greater than the sum of its parts … Let us act in solidarity with the children of this country.”

Though the president today deploys the language of social pacting primarily in the context of solving specific problems, the good works of presidential advisory councils, and summits for jobs and investment, his usage is far from harmless.

Existing social compacts in SA today have been struck over decades between big business and big labour. New “sectoral master plans” and localisation deals will continue to benefit these incumbents at huge cost to the wider economy, to non-unionised workers and to small businesses that will never grow — or even be born.

Ramaphosa has touted various valuable social compacting reforms — reduced red tape for small business, long overdue changes to labour laws, and an end to the bargaining council system — but current big “stakeholders” are being invited to veto these reforms if they choose.

Other issues Ramaphosa wants addressed in the social compact framework, such as income support for the unemployed, are matters about which an elected government should take a decision in the national interest.

The idea of social compacting unfortunately perpetuates the veto that vested interests have long enjoyed. Worse still, it encourages Ramaphosa’s personal tendency to prevaricate and avoid hard decisions.

• Butler teaches public policy at the University of Cape Town.

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