Ramaphosa seeks lower wages, investment commitments to revive economy

‘Regardless of the objections from any of the stakeholders, the commitment towards attaining a social compact remains,’ says presidency spokesperson Vincent Magwenya.
President Cyril Ramaphosa is seeking a social compact between government, labour and business. Image: Bloomberg

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.

Read: Government can’t save economy and create jobs alone: Ramaphosa

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.

Read: Transnet sees green shoots despite another challenging year

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 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.”

Read:
Arab-Spring warning spurs Ramaphosa to tout growth-plan progress
SA’s Mbeki sees danger of Arab Spring-like protests
The workers have spoken and we must listen: Ramaphosa

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.

© 2022 Bloomberg

COMMENTS   1

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

Thabo Mbeki said “There is no national plan to address these challenges of poverty, unemployment, inequality — it doesn’t exist.”

Even if there is a plan… that is all that the ANC ever does…draw up plans. It is not plans that result in positive results it is actions and actions with solid understanding of the issues.

“Enforce the use of locally made products” – the use of the word “enforce” is not compatable with a constitution where freedom of choice is guaranteed in the constitution.

“Strengthening job security” is the real source of the high unemployment rate. It is only once business can easily get rid of non performers and workers with entitlment attitude that opportunities for employment will open up

Worker representatives on boards is like inviting a talkshop to every micro decision to be made by a company – a sure recipe to kill the economy

South Africa will lose all the taxpayers that it has if it grows the welfare payments, it is time that citizens takes responsibility for their own economic future.

Improve accountability and security, send ALL corrupt polticians to jail and then and only then can we even talk about some compact.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: