Ramaphosa’s plans for economy pact slammed by business and labour

The leading South African business and labour-union organisations criticised both the content and tardiness of a plan by President Cyril Ramaphosa to form a so-called social compact to revive the ailing economy.

The Congress of South African Trade Unions said it won’t accept the weakening of workers’ rights and the head of Business Unity South Africa, or Busa, said the organisation was dismayed by how long it had taken the government to put together the plan.

In his February state-of-the-nation address, Ramaphosa said a social compact would be achieved within 100 days as he would seek to bring together the government, business, labour and civil society to chart a path forward for an economy that’s been languishing for over a decade. Unemployment is at a near-record high, sovereign debt is climbing and a litany of corruption scandals have eroded faith in the government.

“We are absolutely gutted that the deadline that the president set for himself, and by definition the country, was not met,” Bonang Mohale, the president of Busa, said in an interview on Thursday. “The reason the deadline was not met is because of lack of delivery from the side of government, we must be clear on that. As business we were ready to proceed and we don’t know why the target was not met.”

The reaction of both groupings adds to an earlier attack on Ramaphosa’s plans by Thabo Mbeki, a former president. At a memorial for a senior member of the governing African National Congress this month, he warned of an Arab Spring-like moment for South Africa unless the government addressed poverty and inequality. He said, to an audience that included Ramaphosa, that despite the current president’s pledge, “nothing had happened.”

Still, the “Framework for a Social Compact in South Africa,” a 32-page document authored by the government this month and seen by Bloomberg, was distributed to business and labour leaders. The proposals made by government have angered both groupings.

Those recommendations include lower entry-level wages and a reform of labour laws. Business has been asked to set firm investment pledges, moderate executive pay, improve job security and agree to “revenue measures” to expand the social welfare net.

“While Cosatu supports the principle of a social compact, we will not support one that sacrifices the hard-won rights of workers, be it protecting from unfair labour practices or the right to have their wages protected from erosion by inflation,” the group said in a response to queries. “Paying workers poverty wages and treating them like slaves will not grow an economy.”

Work on reaching an agreement on the social compact is still under way, and differences and their resolutions 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,” he said.

Cosatu said the government should focus on ending power cuts and theft and arson that has crippled freight and passenger rail operations. It should also fix collapsing municipalities, improve basic services and tackle state corruption.

Mohale’s said business’s concerns are around the government’s lack of ability or resolve to implement its plans.

The plan “does not have tight timeframes, systems and processes, to make sure that we deliver at the time we said that we would,” he said. “It will be yet another conversation, but with nothing to show at the end of it.”