#4 Summer 2015

How to bridge the business-state divide


Anti-corruption march in Cape Town. Photo by Retha Furguson.


National Union of Metal Workers of South Africa (NUMSA) members during a protest march in Durban, 1 July 2014. © Rogan Ward 2014
As South Africa struggles to address its triple challenge of unemployment, poverty and inequality and halt the decline of the economy, a growing rift between government and business is not helping the situation.

The South African economy is under grave threat. In the past year, the value of the rand has declined precipitously. The economy has been plagued by high and persistent current account and budget deficits, coupled with long-run inflation and high government and household debt. In 2014, protracted strikes on South African mines, particularly in the platinum sector, damaged output resulting in hundreds of millions of rands in lost company sales and worker wages. The energy crisis has continued unabated, while deep concerns have been raised about the progressive hollowing out of public institutions.

Economic growth has declined since its peak prior to the 2008 global financial crisis. South Africa’s growth rate is well below what is required to alleviate the pressing triple challenge of unemployment, poverty and inequality. The economy has been unable to absorb thousands of new entrants into the labour market, and young people have borne the brunt of high joblessness.

South Africa is underperforming compared to its peers on the African continent and other emerging markets. The causes of this underperformance are largely internal rather than external: they have to do with weak leadership, poor decision-making and policy paralysis.

Regrettably, progress in realising our country’s economic potential has been stunted by deepseated mutual suspicion and distrust between business and government in South Africa. This has been evidenced by a growing distance between business and government leaders, even as the need for the two sectors to work together to solve South Africa’s economic problems could not be more pressing.

This is not a new phenomenon. It follows a history of tension between government and business since South Africa’s first democratic elections in 1994, especially during former president Thabo Mbeki’s tenure. The ANC government has frequently berated the business community for criticising policies and publicly voicing concerns about political leadership and risk in South Africa. Mbeki, for example, openly accused Sasol of “bad mouthing” the government’s Black Economic Empowerment (BEE) policies, after Sasol had highlighted BEE as a potential risk factor in a filing to the New York Stock Exchange. Mbeki also publicly chided Tony Trahar, former Anglo American chief executive, for remarks he made in the Financial Times about political risk in South Africa.

The tension between business and government has worsened since the onset of President Jacob Zuma’s administration in 2009. Under Zuma’s leadership, only a chosen few business leaders have enjoyed access to him, owing to their political affiliations rather than their standing in the South African business community. As such, there remains a great deal of tension and mutual distrust between business and government in South Africa.

Many business leaders deplore the quality of leadership in government and simply do not trust government officials to understand the needs of the South African economy and to act in its best interests. In 2012, for example, Reuel Khoza, chairman of Nedbank, incurred the wrath of the African National Congress (ANC) for voicing unhappiness at the government’s governance track record. Moreover, the discord between government and business was amplified by the ‘You Can Help Campaign’ launched by First National Bank in January 2013, which featured a series of online videos in which youths called for change in South Africa to combat the country’s myriad economic and socio-economic challenges. The campaign was viewed by the ANC as a thinly veiled political attack on the leadership and the capabilities of the ANC government. In a hard-hitting rebuke of the campaign, ANC spokesperson, Keith Khoza, described it as “disingenuous” and labelled it an “attack on the president, his ministers and the government as a whole”.

These views have been echoed in other situations in which the Zuma administration has castigated the business sector for a perceived lack of patriotism, and for not caring enough for the communities in which it operates.

The mutual distrust between business and government has fuelled the distinct lack of a constructive dialogue between these two key societal actors in South Africa. Instead of working together to address the all-important objectives of growing the South African economy and addressing the pressing social and economic problems facing the country, the business and government sectors have opted to go it alone, often operating at cross-purposes to each other.

The South African government has sometimes developed policies with long-term implications without necessarily conducting proper and sufficient consultation with the business sector, which is pivotal to the successful implementation of the government’s policy decisions. And, to compound the difficulties, all too often South African business has not provided a much needed counterbalance to the government’s policy discourse. In many instances, the business sector’s stance on policy issues has been defensive. Furthermore, the business sector has tended to display an arrogant and know-it-all attitude towards the government.

What needs to be done? Visionary and effective leadership from government, coupled with strong support from the business sector, labour unions and broader civil society, is required to reverse South Africa’s economic underperformance and to ensure that South Africa achieves its considerable economic potential. Moreover, bridging the trust gap between the government and business will ultimately hinge on successfully rebuilding the shattered trust between the two.

This will require the cultivation of new and meaningful relationships between business and government decision-makers. These relationships should be built on a mutual acceptance that both government and business have different but complementary strengths that need to be harnessed together in order to address the present-day challenges confronting South Africa. In practical terms, what is needed is a mechanism to bring together business (large multinational corporations, as well as medium-sized and small businesses) and key government departments to engage in constructive dialogue and idea-sharing with a view to working together to achieve the growth and development objectives of our country. This mechanism should facilitate strategic and systematic management of
the interactions between government and business. In particular, it should focus on the following objectives:

  • Build trust and develop new relationships between South African business and government.
  • Develop a tangible sense of common purpose between government and business that centres on the pursuit of national interest.
  • Facilitate agreement between government and business on a national vision of South Africa’s future.
  • Develop agreement between government and business on strategies to be pursued, and trade-offs and compromises required, in order to achieve the desired vision for South Africa.
  • Facilitate the development of a more coherent, nuanced and inclusive policy process on key developmental issues.
  • Identify areas of joint interest, particularly related to newly emerging issues such as energy security, food security and climate change, in which government and business can work together to mitigate socioeconomic risks for South Africa.
  • Foster the development of a social contract that will serve as the foundation for raising South Africa’s global competitiveness and tackling the country’s pressing social problems of unemployment, poverty and inequality.
  • Forge an agreement on the obligations of government and business in terms of providing public goods, especially in respect of building human capital and expanding South Africa’s skills base.
  • Establish an agreement between government and business on regional development objectives and strategies in Southern Africa and elsewhere on the African continent.

If managed wisely, structured and purposeful interactions between business and government in South Africa can provide a vital platform to generate the level of cooperation that is needed to address the daunting challenges currently besetting our country.

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