State, Business and Growth in Post-Apartheid South Africa

Paper prepared for the DFID-funded Research Programme, Institutions and Pro-Poor Growth (IPPG). The authors are grateful to DFID for the funding that made this research possible. The views expressed in this paper are entirely those of the author and in no way represent either the official policy of DFID or the policy of any other part of the UK Government. Material published by the IPPG may be reproduced free of charge in any format or medium provided it is reproduced faithfully, not used in a misleading context and properly attributed to the author(s). Copyright exists in all other original material published by members of the Programme and may belong to the author or to the University of Manchester depending on the circumstances of publication. Enquiries should be sent to the editor at the above address. 2 ABSRTACT This paper explores the relationship between 'state-business relations' (SBRs) and pro-poor growth in South Africa. It provides a history of business organization and the role of the large corporations in facilitating the democratic transition and creating a momentum for the development of post-apartheid tripartite negotiating institutions notably the National Economic, Development and Labour Council (Nedlac). Nedlac, however, failed to live up to its promise as a forum for forging consensual socioeconomic policies. We suggest that this was because the Congress of South African Trade Unions (Cosatu) was in an alliance with the ruling African National Congress (ANC) and thus could bypass Nedlac altogether and pursue its labour-market policy objectives directly with the Ministry of Labour. Whilst the Treasury promoted business-friendly policies, the Ministry of Labour promoted pro (organised labour) policies; a policy incoherence which exacerbated the post-apartheid unemployment crisis. This undermined collective action on the part of business – as did subsequent black economic empowerment (BEE) policies which incentivised the emerging black business elite to pursue individual rather than collective agendas with government. This undermined the collective action required for a genuine social accord or tripartite consensus necessary for the emergence of a development coalition for pro-poor (i.e. employment-oriented) growth. 3 CONTENTS PAGE 1. Introduction and summary 4 1.1 The challenge 5 1.2 The inheritance 6 1.3 The transition 6 1.4 State and business in practice 7 1.5 The other priority: Black economic empowerment 8