SA URGENTLY NEEDS SOCIAL PACTS BETWEEN GOVERNMENT, BUSINESS & SOCIAL SOCIETY - William Gumede
South Africa urgently need social pacts at all levels between governments, business and civil society, to quickly overcome the financial, social and political crises caused by Covid-19.
A social pact is an agreement between social partners, whether government, business, organized labour or civil society, to jointly solve a development, social or economic problem. The pact describes the responsibilities, objectives and time-frames to do so, of each signatories in the partnership.
Social pacts are usually struck in national economic, social and political emergencies. During the 2007-2008 financial crisis many European countries, such Germany, Sweden and Finland struck social pacts to deal with company closures, joblosses and social breakdowns. Ireland struck a social pact in the 198os when the Celtic Tiger plunged into economic crisis, with unemployment rising to 15% and the national debt ratio spiraled to 115%.
South Korea tried to put together a social pact after its devastation by the 1997 Asian financial crises when it was forced to seek a country bailout from the International Monetary Fund. In 2012, when Sweden saw a spike in youth unemployment the country stitch together a Jobs Pact, between social partners, to quickly increase youth employment.
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 pacts. 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, foster skills training and regional development.
Social pacts could also be at a single industry or sector level. During the 2007-2008 financial crises for example Germany fostered a social pact in their metal and electrical industry to retain the competitiveness, sustainability of companies and secure jobs in a hardpressed industry. But social pacts could also be policy specific, for example to rally social partners behind policies to foster new jobs. This was the case in 2013 in the Netherlands, when the country fostered 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.
But social pacts could also be at the company level. For example, in Japan and South Korea, Germany and Sweden, many companies have created social pacts at the workplace level, where employees are involved in decision-making, companies have joint management-labour structures to share company information, strategy and direction and where employees share in profits.
The advantages of social pacts during crises is that it mobilises a wider set skills, resources and ideas, not only that in the state, to find solutions to complex problems. The engagement between the government, trade unions, civil society, communities and policy experts foster 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.
There are some lessons of the core ingredients of successful social pacts. For national social pacts it is very crucial that moderates in government, business, labour and civil society prevail to cobble together pact. That has been behind the success of Ireland’s 1980s and 1990s social pacts which turned the country into an economic miracle.
When the governing Social Democratic Party in Sweden in the late 1970s turned hard left, the world’s most successful social pact went belly-up, when organised business left the pact. The Social Democratic Party would soon thereafter loose power also.
In all successful social pacts, the government must have credibility among all social partners. A prerequisite of government credibility is the fact that it must not be seen as corrupt, which undermines trust in it to be a power broker. Furthermore, social partners must be inclusive in the broadest way possible.
In Ireland, 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 pacts negotiations.
But social dialogue forums must also include non-social partners. In Germany, it is compulsory to have independent experts, not associated with government, business or trade unions, as part of social dialogue forums, in order to get a perspective beyond the horizons of only those of the social partners.
It is not always absolutely 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, as 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. Government is required to explain whether or not its advice will be followed, and if not, why not. The Dutch SER also has an advisory role to Cabinet.
The Dutch SER, not only has representatives from social partners, government, business and trade unions, but also have independent members, not aligned to the social partners. Business representatives are very broad, including representatives from 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 pacts at all levels of South African society, forging partnerships between the public sector, business, labour and civil society is going to be crucial rebuild the post-Covid-19 economy, social order and politics. The state one its own cannot overcome the Covid-19 crises. The state simply lacks the capacity, leadership and ideas to do so.
In a country crisis, such as the multiple crises caused by Covid-19, it is even more crucial, when the state lacks capacity, resources and leadership, because it brings non-state skills, ideas and resources to help tackle the calamity. Partnerships not only bring goodwill, they bring skills, resources and wider buy-in for policies, decisions and delivery.
Attempts at cobbling together national social pacts in the post-1994 period has mostly been unsuccessful in South Africa. Sectoral or industry-based social pacts have fared moderately better.
The gold crisis in late 1990s, saw a reasonably successful social pact between goldminers and trade unions, to safeguard the sustainability of the mines, the competitiveness of the industry and preserve job security.
In mid-2000s, trade unions and industry came together with a social pact strategy to rescue the textile and clothing industry, ensure its global competitiveness and secure job – government supported the strategy. It is important to observe that in both the gold and textile crises, the social pacts were initiated by business and trade unions – who then brought government on board, who supported it.
There have been no attempts to foster provincial-based social pacts. There has been no attempts to foster social pacts at municipal level either.
Neither have company-based social pacts been widely attempted in South Africa, except for a few farm-based ones, some with reasonable success.
Both provincial-based, municipal-based and company-based social pacts offer great potential to find post-Covid-19 economic, political and social solutions to seemingly intractable problems.
What have attempts at national social pacts been so difficult in South Africa? Social partners involved in South Africa’s social dialogue have not been diverse enough, meaning decisions therefore often do not have broad societal buy-in. Since 1994, South Africa’s trade union make-up have changed dramatically. Yet, many trade union federations are not included in the current social dialogue forums, undermining the legitimacy of any social pact.
South Africa’s social dialogue forums do not include non-social partners. Professionals, as a separate constituency are also not included in social dialogue forums, unlike in Sweden. The self-employed are also not included, like in the Netherlands. Also, unlike, the Netherlands and Ireland the unemployed are not representative in national social dialogue. Yet, in South Africa, more people are out of work, then in employment.
SMMEs are not substantially included in social dialogue efforts in SA. Most South Africans employed are in the informal sector; yet the informal sector is not included as an important constituency. Civil society are also not included in social dialogue, like in Ireland.
Distrust between South Africa’s social partners are remain deep. Unlike in the Netherlands say, where social partners can set aside their deep-seated opposition to each other, it appears very difficult to do so in South Africa. The apartheid divisions remain entrenched between mainly white business and the black trade union movement. However, black and white businesses are often also not able to collaborate because of racial divisions.
But South African social partners also appear too rigidly ideological, often seeing the world in terms of fixed ideological lenses, making compromise, so crucial to successful social pacts, rather difficult.
But South Africa’s government itself, because of the perception of incompetence, lack of quality leaders and corruption also lacks the credibility, authority and trust to be seen as honest social dialogue host. At the heart of successful national dialogues in other countries have been governments seen as reasonably honest, capable and governing in the widest national interests; not seen as governing in the interest of the governing party, leaders or for self-interest.
If a country does have a dedicated social dialogue institution, it must be seen as credible, as having the requisite capacity and competence.
South Africa’s national social dialogue institution, the National Economic Development and Labour Council (Nedlac) for long periods lacks credibility. One of the reasons of course is that not all the critical social partners are included at Nedlac, making the organization not representative enough. Nedlac also lacks independent members, who are not aligned to social partners, as is the case in the Dutch SER.
But Nedlac is often marginalized by government itself. Some government leaders often wrongly belief that government can go it alone, or send policy directives by diktat and social partners and wider society will just magically fall into line. Nedlac does not have the requisite authority. Unlike say in the Netherlands, where recommendations from the national dialogue agency, the Social and Economic Council (SER), are debated in Parliament, this is not the case for recommendations from Nedlac.
Furthermore, in the Netherlands, the government is required to explain whether or not the advice of its Social and Economic Council will be followed, and if not, why not. There is no such an obligation in South Africa for government to answer Nedlac recommendations. The Dutch SER also has an advisory role to Cabinet. This is not the case for Nedlac in the South African context.
But Nedlac have been criticized in recent years for lacking the capacity to lead complex social dialogue negotiations. It was mired in allegations of corruption, undermining the credibility of the institution. Rebuilding Nedlac’s capacity will be crucial of it is to remain as institution hosting national social dialogues in the post-Covid-19 era.
William Gumede is Associate Professor, School of Governance, University of the Witwatersrand; and author of South Africa in BRICS (Tafelberg)