Details Behind South African Social Compacting – By Khulu Mbongo

The lack of a broader vision that other social partners can buy into it and its ability to appeal to a cross-section of the population renders social compacting impossible due to social disconnect between leaders and the general population…Political power resides in the main with social groups (classes and strata) that were historically excluded from sites of governance, today complemented by an emergent (black) economic elite. On the other hand, economic power largely vests in the white business community and bands of professions, previously denied majority of the population.

by Khulu Mbongo: Former Overall Convenor of Nedlac Community Constituency

The concept of a social compact between social partners in government, business, and civil society as a basis for long-term socio-economic development and growth underpins economic models in many industrialised countries.  In his inauguration speech on the 25 May 2019, President Cyril Ramaphosa called on South Africans to forge a social compact predicated on growth and economic opportunity. A social contract that enjoins each of the stakeholders to contribute substantially to providing political, economic and social conditions for long term development.

This call is derived directly from the National Development Plan (NDP 2030), which advocates for social compacting to address socio-historical division that still manifest in exclusion, poverty and lack of opportunities. In its broadest sense, the aim of a social compact is to promote national unity, cohesion and nation building in which business, government, labour and civil society agree to work together to bring about future change.

A true social compact is possible where the distribution of power in society, conditions of the national economy and positions of various stakeholders in relations to the macro and micro-social environment is recognised and respected. It is both tactically and strategically important to know who the role players are, what power they possess, where their likely interests would be. It must also be appreciated that there will be a constant pull-and-push between the state of politics, the economy and the influence of transformational leadership, legitimacy and agency.

Such a social compact pivots around a need for an efficient, capable and ethical state that is free from corruption. And for companies that generate social value and propel human development. For elected officials and public servants who faithfully serve no other cause than of the public.

How social compact evolve

Many countries with social compacts establish such driven by a commonly perceived crisis. Experience around the world has shown that countries that effectively introduced social compacting have some form of social dialogue underpinned by social accord or contract, as opposed to bargaining.

Bargaining is negotiations between employers and workers or trade unions on remuneration, working conditions and workplace agreements. Social dialogue is negotiation, consultation, information or exchange of ideas and joint working amongst social partners on issues of common interest related to economic and social policy.

Domestic or global based structural crisis spurred countries to move swiftly towards a more formal compact. Today corona virus has become a global crisis which has devastated socio-economic conditions of many countries around the world including in South Africa. The guiding principles for any effective social compact must achieve a delicate balance between growth and equity as well as individual responsibility and social insurance.

International perspective

International experiences have shown what successes social compacting can bring in a country as well as its contribution to socioeconomic development and growth.

The application and adaptability of social compacting must equally appreciate the fact that there is no universal framework or template that can be used in each and every situation. But it is reliant upon each country’s dynamics as well as its own challenges which must be overcome at a given time.

Therefore, it is up to each country’s structural conditions, needs and socio-economic priorities which present differing prologues for implementation of a social compact.

Singapore

In Singapore social compact was formulated around policies and action programmes to unite the nation based on a common vision which combined some levels of authoritarianism and democracy. Key minimum programmes and agreement was forged with the establishment of the National Wages Council (NWC) as an instrument to build trust, cooperation, and compensatory benefits for both the government and social partners in this process.

It also produced industrialisation social pact to institutionalise a wages policy that provides for orderly and realistic bipartite adjustments at the enterprise level whilst setting minimum standards and measures for wage progression.

The outcome of this social compacting produced practical partnerships at a tripartite level involving Government, Labour and Business. The results produced economic competitiveness, harmonious labour-management relations and overall progress of the nation, something South African can learn from in the context of the debate about public sector wage bill and sometimes obscene remuneration structure of executives in State Owned Enterprises.

Ireland

In Western Europe, the so-called ‘Irish miracle’ of 2002 emerged primarily from social partnerships among political leaders, industry and trade unions to devise actions and commitments to reverse negative economic indicators in 1987. It comprised a government recovery plan that included proposals on new job protection, measures on insolvent private sector pensions, commitments to improve employment rights and greater protection for mortgage holders.

Irish partners set up the National Economic and Social Council (NESC) which included NGOs, to reverse chasm their country faced to arrive at a social compacting. It included measures to reduce the national debt, deferral of pay increases to civil servants and non-compulsion of multinational companies to negotiate with trade unions.

To cushion material pain from these sacrifices, inclusive welfare provision was made to cushion the poor from dehumanising effects of abject poverty and unemployment. Lessons and relevance of this type of social compact for South Africa is very clear. In SA we already have Nedlac as an institution of social dialogue to drive programmes of job creation with clear sector targets and by industry arising from the Jobs Summit.

President Ramaphosa announced South Africa’s Economic Reconstruction and Recovery Plan in October 2020 as a basis for social compact among social partners. It contains a set of extraordinary measures to restore confidence in the economy.  Its main objectives being job creation through aggressive infrastructure investment, as well as re-industrialisation through growing small business, while strengthening medium and large businesses.

Social compacting in the context of this recovery plan is based on four priority interventions. Namely, vast infrastructure development rollouts, rapid expansion of energy generation capacity, employment stimulus as well as rapid and sustained industrial growth.

Similarly, the Netherlands also benefitted from a social compact forum in the form of an advisory body called the Sociaal-Economische Raad (or Social and Economic Council [SEC]). It was founded in 1950 to promote full employment, sustainable economic growth, fair income distribution which was also responsible for labour market innovation, environment and social security.

The innovative 1982 Agreement of Wassenaar still stands as a model of social compacts in the Netherlands. Its initial focus on aspects of an employment policy and wage restraint set standards for social dialogue between social partners. South Africa is at that crucial point in its development with attendant challenges of ever growing inequalities with a clear manifest of racial characteristic 26 years after democracy.

In the same way as in Netherlands, our country is at that point where there should be an agreement in wage moderation.  Wages were kept lower while productivity increases, and working time was reduced through measures such as job-sharing. In South Africa, this will bring more young people and many unemployed people into productive economic activities.  In the process make an important breakthrough in employment creation and stimulation of productivity that can potentially increase investment levels.

SA Experience

In the South African context, the concept of social compacting is part of processes of a transition to democracy during negotiations in the 1990s that was practiced with the establishment of the National Economic Forum (NEF) which comprised of business, government, and labour. This evolved into NEDLAC which has played an important role in ensuring social dialogue on complex issues of socio-economic policy.

However, a prevalent view from many quarters is that NEDLAC has become less effective due to several valid and some perceived realities which damages its process and erode trust.

These considerations vary from fractured or fragmented organised business formation at times; labour constituency’s exclusion of other unions; legitimacy, weak leadership, and mandating processes of the community constituency. There is increasing juniorisation of delegations and representations; constituencies approach discussions with “frozen” mandates; perceptions of politico-ideological posturing and the fact that Government is perceived to be in cahoots with one of the constituencies through their political alliance.  The absence of a national vision hampered social compacting processes. This made agreements and initiatives taken in the past to collapse due to ease with which social partners could pull out of some agreement(s).  The biggest failure has been the reluctance to communicate compromises to constituencies, as well as jettisoning compacting processes and structures when new leadership takes over, particularly in Government after elections.

These weaknesses have, over time, damaged goodwill, compromised parties involved, let to lack of trust in the processes including agreements reached as well as undertakings made.

Diagnostic Analysis

The culture of dialogue and its democratic dividend have provided a platform for maturity of spaces for dialogue in South Africa. This includes the type of macro-organisational capacity (polity) needed to realise the vision and institutions which would monitor implementation of plans.

South African government is legitimate and is an indispensable partner in fostering social partnerships and managing application as well as outcomes of shared agreement in such partnerships. As experience elsewhere highlights, these partnerships – between the state, labour, capital and civil society – provides a bedrock to the notion of a developmental state. In a situation where there are inefficient social partnerships with poor inputs from diverse sectors of society, what prevails is a mentality driven by narrow self-interest. This induces high levels of resentment among the middle class, the poor, increases incidences of corruption, social tension as well as individualistic attitudes which eventually prove unproductive for society.

The lack of a broader vision that other social partners can buy into it and its ability to appeal to a cross-section of the population renders social compacting impossible due to social disconnect between leaders and the general population.

Political power resides in the main with social groups (classes and strata) that were historically excluded from sites of governance, today complemented by an emergent (black) economic elite. On the other hand, economic power largely vests in the white business community and bands of professions, previously denied majority of the population.  Both these socio-political groups have the capacity to influence the direction of governmental policy owing to their common identity with the political elite or their access to resources the country needs to advance.

This apparent clashing power dynamic from these groups, results in diverse and often inconsistent policy approach on the part of government, reflected in a desire to satisfy widely divergent needs and aspirations.  The attempt to attain such balance is itself not inherently negative. It could in fact lay the basis for broad consensus on the direction the country should take to deal with its social challenges.  It is for this reason the central question of transformational leadership comes in: the ability of the contending forces to appreciate the long-term common good and actions required to make compromises in the short-term to attain that common good.

The adoption of the National Development Plan (NDP) of 2012 is the most important step to put the country on a new and qualitatively higher pedestal of social compacting since it enjoyed support within society. The NDP identifies infrastructure programmes, interventions to facilitate manufacturing, green economy, a mature industrial cluster for mining and revitalisation of agriculture as key drivers of economic growth.

Agreement and compacting around these elements can raise each of these sectors to a higher level of growth and job-creation to build a prosperous future, as we move the economy to a higher growth trajectory and tackle triple challenges of unemployment, poverty and inequality which weigh heavily on the country’s socio-economic progress.

A social compact is an important instrument to address implementation priorities.  Not only those listed in the NDP, but even other agreements emerging from new realities arising from practical situation such as the global pandemic of Covid19.

Pillars to anchor Social Compact in SA

In the context of South Africa, pillars of a social compact should primarily be anchored around a basic framework of macroeconomic policies and interventions. It must address patterns of ownership of land and the economy; ethical leadership and capacity of the State; redistributive policy and social wage, and inflation policy that deliberately also addresses the cost of living for the poor.

Such pillars must also look at the revision of sector charters so that they align with NDP objectives; innovative broad base empowerment programme to broaden participation in mainstream economy; incomes policy and minimum wage(s); spatial justice and integrated communities; cost of transport for the poor; implementation of sectoral and ‘mini-compacts’ on youth, gender and skills; and safety and security issues.

Framework and programme of action for each of the proposed pillars or themes should be decided and working groups established on each work stream which must be launched publicly.

Quo-Vadis SA?

Social compacting in SA would require lot of trust re-building as well bona fide of social partners and integrity of the process whose implementation can be reported publicly every year.

The work must happen within multi stakeholder working groups comprising of senior leaders from social partners whose work should filter into parliamentary processes to ensure seamless and captivating policy development, implementation and monitoring.

In terms of institutional arrangements, Presidency as a lead, would be the right pitch and confidence builder for driving social compacting. NEDLAC with improved and supported capacity, should still be a secretariat.

However, Nedlac need to reinvent and position itself for this enormous responsibility to be a home of social dialogue, working group facilitation, consensus building. It must devise acceptable deadlock breaking mechanisms. It must assist with selection of optimal interventions and formation of broad policy frameworks to accelerate investment, increase employment, and improve efficiency and productivity as well as attain a fairer distribution of economic opportunities and a more equal society.

NEDLAC must contribute with research output that guides the formulation and implementation of relevant policy and prepare annual reports on the progress or lack thereof based on agreed pillars. Legislative roles must be decided upon but must ensure there is necessary agility and flexibility that is required to avoid stalling critical parliamentary processes.

5. CONCLUSION

The role of a social compact is to unite society’s stakeholders to facilitate buy-in to a common developmental agenda where all parties contribute towards the greater good to provide fair living standards to all who are party to the agreement.  A working and effective social compact for South African as well as the lessons of large-scale corruption has revitalised a need for partnerships with social partners and compelled a need for governments to be more transparent as well as accountable.

Business should realise that it has a larger role within society which extends further than its immediate shareholders. Its role extends to creation and preservation of social value to all stakeholders including its workers and consumers.  Civil society has gained its voice around issues of service delivery, corruption and increasingly demand transparency and accountability.  This is a voice that needs to be consolidated and brought into formal consultative processes.

Trade unions need to appreciate their role and contribution as active participants in the long-term national development of the economy beyond a mere extractive representative for a narrow constituency.   Wage demands need to be accompanied by a commitment to productivity gains and wage moderation that is alive to current challenges in the economy strongly butted by Covid 19. The labour market must reflect conditions of the overall labour market environment and not just best organised groupings (which create insider-outsider scenarios).

Any effective social compact relies on reciprocal obligations. There is increasingly no substitute to social compacts because the alternative will see rising instability and policy vacillations as governments reflect underlying tensions and competition for a winner takes all scenario.

Finding ways to bring about more inclusive development and ways to compensate those who are not making the transition successfully to this new economy is a function of a social compact which will see a more stable social order arise.

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