The South African Economy: Polarisation Paralysis and the Struggle for Equity

By Ebrahim-Khalil Hassen · 1 Sep 2009

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Picture: Trevor Samson - World Bank
Picture: Trevor Samson - World Bank

An emerging description of the South African economy is captured in the words "polarisation paralysis." The term has several renderings and different emphasis across academic disciplines, with important nuance and extensions. Another rendering is that it might provide a metaphor for the first 100 days of the Jacob Zuma Presidency, but also sets the challenge for this term of government. Two features prefigure the shadow boxing over economic policy since the start of the Jacob Zuma Presidency. 

First, inequality is the main driver of a polarised society with networks of disadvantage and advantage that cut across income, educational, racial and other dimensions. Second, that power in society is configured in such a manner that no one grouping is powerful enough to be dominant in setting a public policy agenda. An example is that strong trade unions with high union densities, sit in the same space with powerful multinationals. This depiction harks back to a Marxist version of polarisation between two classes equally, but unlike the description in the Communist Manifesto the workers are unable to overthrow the bosses. In fact, the usage of paralysis to describe this polarisation suggests that power in society is equally matched between two contending classes. Then the most likely outcome is that South Africa will continuously be trapped in a 'high unemployment, high inequality' scenario. 

The dominant response is establishing the 'democratic developmental state'. A major conceptual foundation of the idea of the developmental state is that of 'embedded autonomy'. This means that government is proverbially in the thick of things, embedded in social relations. However, government retains some autonomy from societal pressures and is capable of taking action usually with the support of social actors, but if needed, able to take the difficult decisions in what it determines to be the best interests of the country. Yet, for government decision makers the process of building consensus must be akin to 'herding cats', and we are not speaking of the domestic variety either, as the powerful actors in South Africa are more like ferocious felines. 

The proverbial pounce back into the public policy fray by organised business demonstrates an intensification of the need to influence national decision-making. It has done this implicitly through the scenario process called the Dinokeng Scenarios, which has attempted to reconfigure the public policy discourse on the merits of deepening democracy without effectively developing a scenario of economic inclusion. As such, the scenarios have justifiably been criticised for failing to configure its scenario of ‘working together’ in the sense that a functioning and stable democracy will require greater levels of equity. 

More explicit, has been the development of a policy platform by large business, organised under Business Leadership, which argued for significant amendments to the labour law, which they argue stifles employment creation. Overall, big business’ attempts to influence the public policy debate have been effective with significant funding available for promotional activities and a reinvestment of time by senior business leaders on economic policy. However, neither do the proposals adopt a stance aiming for consensus, nor do they provide a hardnosed account of the obvious priority that equity should be given in all policy proposals. Unfortunately, important proposals on which economic sectors to target as well as scalable training schemes were drowned out, as the proposals were seen to represent a return to an ideologically rooted position, possibly aimed at reducing the influence of the trade unions. 

More developmental proposals will emerge from business, but not from the ‘commanding heights’. Rather these will emanate from entrepreneurs and small business owners. Potentially, if trade unions are able to strike an alliance with ‘progressive business’ it could nudge South Africa towards breaking its paralysis on economic policy. 

Perhaps this possibility of a multi-class alliance is not so far fetched. Trade unions have for instance been muted in their responses to proposals by organised large business. Traditionally, the calls for relaxation of labour laws brought furious reactions from trade unions, especially COSATU. However, despite a renewed call from business for relaxation of labour laws, trade unions offered very little public response to the proposals. In some senses, the muted response to business proposals suggests that organised labour sees not only the possibility of stalemate based on polarisation, but rather a situation where the ‘working class a whole’ becomes ascendant. More than an ideological pipedream, the evidence from “service delivery” protests and strike activity suggests a base, waiting to be mobilised. 

COSATU, and to a lesser extent all the union federations, feel that their voices are not only being heard but that they have a voice on public policy. This unusual position for labour has, for instance, seen a stronger focus from trade unions on industrial policy and competition policy.  In these areas, the focus is on improving prospects for economic participation, which is an important rallying point in a still largely unorganised small business sector. 

However, the focus on government policy might be linking a workers agenda to the dominant political party. In an apparent answer to these warnings, organised labour has managed to sustain a series of strike activities, which includes the public sector, suggesting that mass mobilisation remains central to trade union demands. 

Moreover, an important agreement preceded the official start of the Jacob Zuma Presidency. Social partners at NEDLAC agreed to a wide-ranging response to the global economic crises. 

Trade unions will however be wondering if government will live up to its promise of "faster change." The global economic crisis has already had a major impact on tax revenue, with a significant drop in revenue already pencilled into budget forecasts. In fact, Minister Pravin Gordhan has readied South Africa for a higher deficit, but has been undertaking a cost cutting exercise as well. 

Across the economic ministries, there has been a sense of reorientation of departments. Most notably, the Trade and Industry department has projected a vision of a stronger focus on employment creation as its major policy objective. Similarly, the economic development department has focussed its limited capacity and budget on a response to the global economic crises. This has resulted in agreements reached in NEDLAC reaching implementation. However, across all the economic departments there has been a tentativeness to overtly clarify policy objectives and in particular the instruments to reach these objectives. 

Clarity was of course made more difficult, given the depiction of the economic ministries being led by 'minorities'. Curiously, there is close alignment between this depiction and a lobby within black empowerment circles signalling that they are worried that they will be left out by the new administration. These signals have been overt with key empowerment players questioning the Zuma government’s commitment to BEE. Government has responded that a stronger focus on enterprise and employment creation to widen economic participation would be a top priority. 

Whilst, it is too early to connect the BEE lobby to a depiction of Ministers as 'minorities', there seems to be fertile ground for recasting the economic policy debate away from systemic inclusion, towards a narrow agenda. Yet, going forward it can be expected that the debate on the economy will return to questions of race every so often and that the debate will be become more fractious. 

Importantly, will new linkages emerge between black business on the one hand, and a “populist” grouping in youth and other structures of the ANC? The danger is commonly known, business elites with strong political connections and a ‘base’ are capable of securing support for policies that are not optimal to supporting mass economic participation. More than just an analytical possibility, we have already seen this in South Africa in several BEE deals.

Yet, the deeper question of how "blacks in general, and Africans in particular" will participate in this polarised economy needs to be asked, and answered. The question however requires greater nuance, as gender remains important and the feminisation of the workforce into decent work is possibly the most important route to reaching our developmental objectives. Similarly, we cannot equate a polarisation in society based only on race or class, but rather a multiplicity of identities. Public policy interventions in a new range of redistributive mechanisms internationally have attempted to target policy on a wider measure of the ‘excluded’, or at life stages.  

The first 100 days of the Zuma presidency saw the launch of a Medium Term Strategic Framework that does an adequate job of linking the ANC’s election manifesto to government programmes. However, despite depictions of a leftist shift, the policy package remains modest and inadequate in two senses. 

First, there are limited policy instruments focussed on directly supporting economic inclusions. Instruments such as savings accounts for children and state led funding for new venture creation remain peripheral in the South African context, despite several implementations internationally. Second, despite the remodelling of the Cabinet structure, the coordination structures remain blunt. For instance, greater precision on a set of measurable objective for clusters is needed, or even more ambitiously, focussing on fewer goals, such as youth unemployment and school performance.

In other words, operational performance in our context will be enhanced with taking tough decisions to focus on a limited set of objectives, which will have the widest impacts. For that to happen, government needs to embed itself more closely in societal relations because one route to solving the economic challenges we face is through reaching a societal consensus on what will work. Yet, any agreement on the economy will have to challenge the very basis of polarisation in our society, if, at the next elections we are not to conclude that government was itself 'paralysed' into inaction. 

Hassen is the founder of Zapreneur and Proposal Desk, both websites aimed at answering the question, "Can the Internet help South African small business?"

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Rory Short
4 Sep

Economic Equity

In South Africa we have a massive, and tragically wasteful of human potential, unemployment problem. Many actors across the social spectrum are rightly deeply concerned about the resolution of this problem. However even if their actions could bring about a reduction in unemployment they would merely be bringing more people into a formal economic system that is highly inequitable in how it allocates income to those in employment. We have got get this right and we do not have to wait until the unemployment problem is fixed either.

My suggestion is that for starters the Gini Coefficient should become a meaningful factor in salary negotiations between labour unions and employers. I say

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Ebrahim-Khalil Hassen
7 Sep

Re: Economic Equity

Dear Rory,

Thanks for writing. Interesting ideas. I think it widens the current focus on wage differentials, to a wider measure of inequality. But, you are correct, more employment does not necessarily mean a more equal society.

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