Ramaphosa seeks lower wages, investment commitments to revive economy

South Africa’s government sought a series of commitments by labour unions and business, ranging from lower entry-level wages to an agreement to boost investment, as part of a plan to revive the nation’s struggling economy.

The proposals angered both parties because they contain stipulations they aren’t willing to meet and want the government to do more to confront immediate problems such as power outages and state corruption, according to people familiar with the matter who asked not to be identified because the talks are private.

The “Framework for a Social Compact in South Africa,” a 32-page document authored by the government this month, is a step toward President Cyril Ramaphosa’s commitment in his state-of-the-nation speech in February to forge such an agreement. The document, seen by Bloomberg, concedes that previous commitments between the parties have not achieved the desired results.

“Failure on the part of the social partners to confront these issues will yield the same results as previous compacting efforts,” the government said in the document.

Work on agreeing the social compact is still under way, and differences and their resolution are part of that process, presidency spokesman Vincent Magwenya said in response to a request for comment sent by text message.

“Regardless of the objections from any of the stakeholders, the commitment towards attaining a social compact remains.

Text messages seeking comment from spokesmen at the Congress of South African Trade Unions, the country’s biggest labour group, and Business Unity South Africa, the main business association, weren’t immediately answered.

News24, a South African news website, reported on the document earlier.

Ramaphosa initially promised a social compact within 100 days of his speech on February 10.

Earlier this month, Thabo Mbeki, who beat Ramaphosa in an intra-party fight for the right to lead South Africa after former President Nelson Mandela stepped down, criticised Ramaphosa for failing to deliver the plan. He warned the country faces Arab Spring-style protests because of growing inequality, unemployment and poverty.

“Nothing has happened, nothing,” Mbeki said July 21. “There is no national plan to address these challenges of poverty, unemployment, inequality — it doesn’t exist.”

The document shows that for its part, the government “commits to create a safe environment for investment, ensure efficiency and good governance.”

Business was also asked to agree to targets to enforce the use of locally made products, to strengthen job security at large companies, moderate executive pay, put worker representatives on boards and help the government boost welfare payments “funded through revenue measures.”

Labour unions are expected to agree to multi-year wage deals, reforms to labor laws and measures to boost productivity, the document shows.

The government pledged to accelerate structural reforms, improve governance of state companies and municipalities, and to protect infrastructure against sabotage.

Those commitments come with South Africa in the 14th year of an electricity-supply crisis, with many municipal governments in a state of near collapse and rampant sabotage that’s triggered power cuts and interrupted the shipping of export commodities such as coal to ports.

Government suggestions that a basic income grant be implemented have drawn criticism from business groups that say such a plan would cripple the economy. More than a third of South Africans are unemployed and interest rates and inflation are surging.

Labour union’s won’t countenance lower wages or weaker labour laws, the people said.

The government said it expects a final agreement in January.