South Africa: Social Pacts More Vital Than Ever As State Lacks Capacity

analysis

Social partners involved in SA's social dialogue have not been diverse enough, and so decisions often do not have broad societal buy-in.

Social pacts between all levels of government, business and civil society could be a means for SA to quickly overcome the financial, social and political crises causes by Covid-19. But they will have to be more imaginative, innovative and practical than those tried before.

A social pact is an agreement between social partners, whether government, business, organised labour or civil society, to jointly solve a development, social or economic problem. They have the potential to play a catalytic role in rebuilding the post-Covid-19 economy, social order and politics. The reality is the state on its own cannot overcome the multiple Covid-19 crises. It simply lacks the capacity, leadership and ideas to do so.

In a country crisis such as the multiple crises caused by Covid-19, social pacts may be even more necessary when the state lacks capacity, resources and leadership, because they bring non-state skills, ideas and resources to tackle the calamity.

Social pacts are typically struck in national economic, social and political emergencies. Ireland struck a social pact in the 1980s when the Celtic Tiger plunged into economic crisis, with unemployment rising to 15% and the national debt ratio spiking to 115%.

Social pacts could be struck at the national level between government, business, labour and civil society, as has been the case in Ireland, Sweden and the Netherlands during their economic crises. It could also be at provincial level as in Germany, where the state (province) of Brandenburg put together a regional social pact to increase investment and foster skills training and regional development.

Social pacts could also be at a single industry or sector level. During the 2007-2008 financial crisis Germany fostered a social pact in the metal and electrical industry to retain the competitiveness and sustainability of companies and secure jobs in a hard-pressed industry.

But social pacts could also be policy specific, for example to rally social partners behind policies to generate new jobs. This was the case in 2013 in the Netherlands, when the country secured a social pact to soften labour flexibility, which had increased job insecurity across many industries, when the country had the largest part-time economy in Europe.

Social pacts could be forged at company level too. In Japan, South Korea, Germany and Sweden many companies have created social pacts in the workplace, where employees are involved in decision-making, companies have joint management-labour structures to share company information, strategy and direction, and employees share in profits.

The advantages of social pacts during crises are that they mobilise a wider set of skills, resources and ideas to find solutions to complex problems. Engagement between the government, trade unions, civil society, communities and policy experts promotes consensus over how to tackle a crisis. Not only are better-quality policies brought about, they are more readily embraced by wider society and therefore execution becomes more effective.

However, most social pact efforts in SA since 1994, especially national attempts, have failed, to such an extent that it is not easy to generate enthusiasm for new ones. This is because SA has fallen short with regard to some core ingredients of successful social pacts, especially that important stakeholders cannot be left behind.

When the governing Social Democratic Party in Sweden in the late 1970s turned hard left, the world's most successful national social pact went belly-up. trade unions wanted to marginalise organised business and co-govern with their left-governing party ally. Organised business left the national compact and the celebrated Swedish national social pact collapsed.

Inclusivity in its broadest sense has been at the heart of Ireland's spectacularly successful 1980s and 1990s social pacts, which turned the country into an economic miracle. There, civil society, community organisations and the unemployed were represented in the social pact structures, negotiations and decision-making.

In the Netherlands, representatives of the self-employed were also part of the social pact arrangements, to make it as inclusive as possible. In Sweden, representatives of professional organisations have been part of social pact negotiations.

Including representatives of nonsocial partners is crucial for broader society's buy-in to solutions. In Germany, it is compulsory to have independent experts not associated with the government, business or trade unions, as part of social dialogue forums, to get a perspective beyond the horizons of the social partners.

In all successful social pacts, the government must have credibility among all social partners. A prerequisite of government credibility is that it must not be perceived as corrupt, not seen as governing in the interests of only small constituencies rather than that of the whole country, and be seen as an honest broker.

It is not always necessary to have a dedicated social dialogue institution for a national social pact to be successful. Germany has no national tripartite social dialogue institution. Informal tripartite meetings between social partners are scheduled according to need.

If a country does have a dedicated social dialogue institution it must be seen as credible, having the requisite capacity and competence. In the Netherlands, recommendations from the national dialogue agency, the Social and Economic Council (SER), are debated in parliament. The government is required to explain whether its advice will be followed, and if not, why not.

The Dutch SER also has an advisory role to cabinet. It not only has representatives from social partners, government, business and trade unions, but also independent members that are not aligned to the social partners. Business representatives are broad, including big business, small business and agriculture. Trade union representatives are from all national federations, and from the union for professionals. Recently the self-employed have also received seats in the Dutch tripartite social dialogue institution.

Social partners involved in SA's social dialogue have not been diverse enough, meaning decisions often do not have broad societal buy-in. Since 1994, SA's trade union make-up has changed dramatically, yet many new trade union federations are not included in the current social dialogue forums, undermining the legitimacy of any social pact.

SA's social dialogue forums also do not include nonsocial partners. Professionals, as a separate constituency, are not included in social dialogue forums, unlike in Sweden. Nor are the self-employed, as they are in the Netherlands. And, despite the reality that in SA more people are out of work than in employment, unlike the Netherlands and Ireland the unemployed are not represented in national social dialogue.

SMMEs are also not specifically included in social dialogue efforts in SA. Most South Africans are employed are in the informal sector, yet it is not included as an important constituency. The "community" and "civil society" groups in Nedlac are not representative of the vast sector.

Distrust between SA's social partners remains deep. The apartheid divisions remain entrenched between mainly white business and the black trade union movement. Black and white businesses are often also not able to collaborate because of racial divisions.

SA social partners also appear too rigidly ideological, often seeing the world in terms of fixed ideological lenses, which makes compromise, so crucial to successful social pacts, difficult to achieve.

In addition, because of a perception of incompetence, lack of quality leaders and corruption, the SA government also lacks the credibility, authority and trust to be seen as an honest social dialogue host. At the heart of successful national dialogues in other countries has been governments that are seen as reasonably honest, capable and governing in the widest national interests; not in the interest of just the governing party or its leaders.

SA's national social dialogue institution, the National Economic Development & Labour Council (Nedlac) has for some time lacked credibility. One of the reasons is that not all of the critical social partners are included in Nedlac, making the organisation insufficiently representative. Nedlac also lacks independent members who are not aligned to social partners, unlike the Dutch SER for example.

Nedlac is also often marginalised by government itself. Some government leaders wrongly believe government can go it alone, or send policy directives by diktat, and social partners and wider society will just magically fall into line. Again, this is unlike in the Netherlands, where recommendations from the SER are debated in parliament. Nor is there an obligation in SA for government to justify a failure to accept Nedlac recommendations.

Rebuilding Nedlac's capacity, giving it an advisory role to cabinet and parliament, and broadening its constituencies, will be crucial if it is to remain as institution hosting meaningful national social dialogue in the post-Covid-19 era.

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