State-Business Relations and Pro-Poor Growth in South Africa Nicoli Nattrass and Jeremy Seekings

1. State-Business Relations and Pro-Poor Growth in South Africa Nicoli Nattrass and Jeremy Seekings

2. The challenge of poverty • The inheritance: SBRs under apartheid • SBRs during the transition to democracy • State and business in practice in post-apartheid South Africa • The other priority: Black Economic Empowerment • Some lessons for SBRs and pro-poor growth

3. 1. The challenge of poverty • Poverty is widespread in post-apartheid SA • 24% of population have per capita incomes < US$1/day taking into account purchasing power • 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 • Due to severe inequality in distribution of income • Gini coefficient for distribution of income ≈ 0.7 • 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 • Poverty rooted in landlessness and unemployment • Unemployment rate peaked at 40% (by broad measure) in early 2000s • 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

4. 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

5. 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)

6. 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’

7. 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 pathnot = a topic for substantive deliberation • 1998 Jobs Summit and 2003 Growth and Development Summit = cosmetic

8. 5. The other priority: Black Economic Empowerment (BEE) • Close links between political elite and new black economic elite • Patrice Motsepe (top right) = 2nd richest person in SA (after Nicky Oppenheimer) • 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 • preferential public sector procurement • Sectoral charters specify targets for transfer of ownership and control • E.g. mining houses must transfer 15% of shares by 2014 to retain mining rights • And sourcing from BEE companies • BEE deals • 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 one-half of the share owned by white South Africans • Corruption is very widespread

9. 6. Some lessons • Is SA an example of a strong or healthy SBR? • E.g. Taylor points to a state-business ‘growth coalition’ in SA • Not as strong or healthy as is generally argued • 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 • 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 • Little likelihood of a sustainable, developmental or pro-poor growth coalition • = e.g. of path dependence? If so, why?