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‘Essential foundation’

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‘Essential foundation’

25th May 2018

By: Terence Creamer
Creamer Media Editor

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In a new book published by the World Bank and UCT Press, President Cyril Ramaphosa’s plan for crafting a new social compact with business, labour and civil society is described as an “essential foundation” for overcoming the country’s legacy of racial exclusion, which remained the main cause of chronic poverty and worsening inequality.

Titled An Incomplete Transition: Overcoming the Legacy of Exclusion in South Africa, the 186-page book, which is available for purchase at bookstores, states: “Overcoming the legacy of exclusion requires a stronger social contract . . . This compact is an essential foundation on which to build the country’s future,” the book argues.

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During his February State of the Nation address, Ramaphosa announced that a series of conferences and summits would be held in an effort to forge a new social compact for ensuring an economic recovery.

The President announced subsequently that South Africa was targeting $100-billion in new investment over the coming five years and that, besides making South Africa an investment destination of choice, the social partners would be asked to make specific commitments for accelerating job creation.

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The World Bank report is the product of extensive consultations, over the past 16 months, with both government and nongovernmental organisations, including the National Planning Commission, which entered into a cooperation agreement with the bank on the project.

The book also doubles as the bank’s Systematic Country Diagnostic for South Africa, which means that its recommendations will be used to shape the institution’s upcoming Country Partnership Framework for the period 2019 to 2023.

World Bank senior economist Marek Hanusch, who is a key contributor, stresses that the report’s diagnosis of South Africa’s difficulties in dealing with poverty and inequality threw up few surprises. However, the analysis was able to distinguish root causes of the problems from symptoms.

The five “binding constraints” or causes of poverty and inequality in South Africa were identified as insufficient skills; the highly skewed distribution of land and productive assets; low levels of competition and integration into global and regional value chains; limited or expensive connectivity and underserviced historically disadvantaged settlements; and the risk of climate shocks.

The symptoms of these structural challenges, Hanusch argued, were the country’s low rate of growth, high levels of unemployment, currency volatility, policy uncertainty, protest action and even State capture.

The book provides yet more valuable content for the upcoming summits. It is now up to the social partners, led by government, to find a way to engage constructively with this diagnosis of South Africa’s most difficult challenges so as to craft a programme of action behind which all stakeholders can rally.

In the absence of such a political settlement, South Africa will continue to struggle to decisively address the scourges of dehumanising poverty and destabilising inequality. Indeed, it is not overstating things to suggest that a new social compact has truly become an essential foundation for making progress.

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