State-Business Relations and Pro-Poor
Growth in South Africa
Nicoli Nattrass and Jeremy Seekings
1.
2.
3.
4.
The challenge of poverty
The inheritance: SBRs under apartheid
SBRs during the transition to democracy
State and business in practice in postapartheid South Africa
5. The other priority: Black Economic
Empowerment
6. Some lessons for SBRs and pro-poor
growth
1. The challenge of poverty
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Poverty is widespread in post-apartheid SA
– 24% of population have per capita incomes < US$1/day taking into account
purchasing power
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Lower than rest of Africa, but high in relation to GDP per capita, and
despite economic growth
– Poverty rate = 50% in Kenya, 15% in Chile, 5% in Malaysia
– GDP per capita in 1994 = > 6 times higher than in 1930
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Due to severe inequality in distribution of income
– Gini coefficient for distribution of income ≈ 0.7
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Under apartheid, inequality was highly racialised
– In 1994, average income per capita for ‘white’ people was 12 times that of
‘black’ people
– Life expectancy at birth was approximately one decade longer for white
people than for African people
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Poverty rooted in landlessness and unemployment
– Unemployment rate peaked at 40% (by broad measure) in early 2000s
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But poverty is mitigated by highly redistributive welfare system
– Social assistance programmes amount to 3.5% of GDP
•
Pro-poor growth requires expanding demand for unskilled labour
1. The challenge of poverty
• The context was promising:
– 1994: first democratic elections
– African National Congress (ANC) won votes of almost all
poor citizens
– ANC election slogan = “A Better Life For All”
– ANC committed to mixed economy
– Long period of sustained economic growth
• Outcomes have been disappointing
– Unemployment rates have risen
– Poverty rates rose then fell (and are surely rising again now)
– The main reason why poverty fell was increased public
expenditure on social assistance, not pro-poor growth
2. The inheritance: SBRs under apartheid
• Business at the end of apartheid:
– Ownership and control concentrated in white South
Africans
– Highly concentrated:
• 1985 Anglo-American controlled >½ of capitalisation
of Johannesburg Stock Exchange
• Top 5 corporate groups controlled >80%
– Harry Oppenheimer (top right): Anglo-American,
based in mining
– Anton Rupert (bottom right): Rembrandt,
beneficiary of apartheid government patronage
• = a “hierarchical market economy”: co-ordination
problems solved through concentrated and
hierarchical ownership (Schneider)?
• No:
– Underestimates roles, power and autonomy of state
– Capital = largely reactive, operating within but not
challenging constraints (with some capital
subservient to state to benefit from patronage)
3. SBRs during the transition to
democracy
• In 1980s, capital defied the state and made overtures to ANC in
exile
• Consultative Business Forum worked with pro-ANC leaders
inside SA, and after 1990 with the ANC
– Facilitated Peace Accord between apartheid government and ANC
• Institutionalisation of business-labour relationship
• Negotiations over industrial disputes led to
– National Economic Forum (NEF), which provided the basis for,
after 1994, the
– National Economic, Development and Labour Council (Nedlac) =
tripartite and corporatist
• Some ANC leaders began to appreciate the weaknesses of the
state
– Mandela at Davos, 1991
• But resilient view within ANC that business needed to be
‘transformed’
4. State and business in practice after
apartheid
• Formally:
– business appears well-organised:
• Business South Africa; Business Unity South Africa
– Bilateral institutions provide for state-business dialogue
• Presidential ‘working groups’ with South African and global capital
(under Mbeki)
– Trilateral, corporatlist institutions provide for dialogue
• Esp. Nedlac
• In practice:
– institutions and relationships are very uneven
• Relationship good between business and National Treasury
• Relationship bad between business and presidency (under Mbeki),
business and labour department, etc
– Institutionalised SBRs are focused on big business
– Informal SBRs are uneven
• The growth path not = a topic for substantive deliberation
– 1998 Jobs Summit and 2003 Growth and Development Summit =
cosmetic
5. The other priority: Black Economic
Empowerment (BEE)
•
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Close links between political elite and new black
economic elite
Patrice Motsepe (top right) = 2nd richest person in
SA (after Nicky Oppenheimer)
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wealth in mining primarily
net worth (after financial crash) of US$1.3 bn
One brother-in-law is a senior member of the
government;
another brother-in-law is Cyril Ramaphosa (bottom
right), former ANC general-secretary and himself a
very wealthy businessman
BEE promoted through
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preferential public sector procurement
Sectoral charters specify targets for transfer of
ownership and control
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–
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And sourcing from BEE companies
BEE deals
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E.g. mining houses must transfer 15% of shares by 2014
to retain mining rights
worth $15bn in 2007:
Black South Africans, through BEE deals and pension
funds, now own approx. 20-25% of shares listed on the
Johannesburg Stock Exchange, or approximately onehalf of the share owned by white South Africans
Corruption is very widespread
6. Some lessons
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Is SA an example of a strong or healthy SBR?
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Not as strong or healthy as is generally argued
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E.g. Taylor points to a state-business ‘growth coalition’ in SA
SBRs in SA are, in general, fragile and superficial
They are highly racialised: no embedded autonomy; social distance between state and
economic elite
Little substantive deliberation between state and business, because state has not
wanted to listen to white business elites
Strong SBR re ANC <> black businessmen.
Not pro-poor: a growth coalition (perhaps), but not a pro-poor growth coalition
Pro-poor growth requires reducing unemployment among mostly unskilled
workers, i.e. a growth path that is more intensive of unskilled labour
ANC government has little incentive to challenge its ally, organised labour
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The state pays some attention to growth, but little to pro-poor growth
ANC = party of (dependent) black business, also party of organised labour, also party
of urban and rural poor
The state throws its weight around in terms of regulating some aspects of business
(esp. employment relations and BEE)
Business = largely reactive to the ANC, just as before 1994 it was largely reactive to
the National Party
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Little likelihood of a sustainable, developmental or pro-poor growth coalition
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= e.g. of path dependence? If so, why?