South Africa urgently needs social pacts at all levels between; government, business, and civil society. The social pacts serve to respond to the financial, social, and political crises caused by COVID-19.
A social pact is an agreement between social partners, such as government, business, organized labour, or civil society to jointly solve a development, social or economic problem (Promberger 2013; Guardiancich and Molina 2017). The pact describes the responsibilities, objectives, and timeframes to do so, of each signatory in the partnership.
Advantages of social pacts, during crises, are the ability to mobilises wider skill sets, resources, and ideas among the partners. The collaborative effort divorces the need to solely rely on the state, to solve complex problems. The engagement between government, trade unions, civil society, communities, and policy experts fosters consensus over how to tackle a crisis and results in quality policies that are more readily embraced by wider society. As a result of this execution, policies, become more effective. However, to achieve this, social pacts need to be more imaginative, innovative, and practical, than those tried before.
Examples of social pacts responding to in-country emergencies
Social pacts are often struck in national economic, social, and political emergencies (Promberger 2013; Guardiancich and Molina 2017; Baccaro and Galindo 2018).
During the 2007-2008 financial crisis many European countries, such as Germany, Sweden, and Finland struck social pacts with their stakeholders to deal with company closures, job losses and social breakdowns (Anxo 2017; Hedin 2019). Ireland struck a social pact in the 1980s when the Celtic Tiger plunged into an economic crisis, when unemployment rose to 15% and the national debt ratio spiralled to 115% (Guardiancich and Molina 2017).
In 1997, South Korea tried to put together a social pact after its economy was devastated by the Asian financial crises and it was forced to seek a country bailout from the International Monetary Fund (Baccaro and Galindo 2018). In 2012, Sweden saw a spike in youth unemployment in the country and responded by stitching together a Jobs Pact to quickly increase youth employment (Anxo 2017a, b).
Different types of social pacts
Social pacts can be struck at the national level between government, business, labour, and civil society, as has been the case in Ireland, Sweden, and the Netherlands during their economic crises’ pacts (Avdagic, Rhodes, and Visser 2011; Guardiancich and Molina 2017). They could also be struck at the provincial level, as was the case in Germany, where the state (province) of Brandenburg put together a regional social pact to increase investment, foster skills training, and regional development.
Social pacts could also be within a single industry or at a sector level (Avdagic, Rhodes, and Visser 2011; Guardiancich and Molina 2017). For example, during the 2007-2008 financial crises, Germany fostered a social pact in their metal and electrical industries to retain the competitiveness and sustainability of companies and secure jobs in a hard-pressed industry.
Furthermore, social pacts can be policy specific, for example, to rally social partners behind policies to foster new jobs. In 2013 this was the case in the Netherlands when the country fostered a social pact to soften labour flexibility which had increased job insecurity across many industries at a time when the country had the largest part-time economy in Europe (De Beer 2017; Dekker 2017).
Social pacts are also formed at a company level. For example, in Japan, South Korea, Germany, and Sweden, many companies have created social pacts. Such companies have involved employees in decision-making through joint management-labour structures which share company information, strategy, and direction (Thelen 2004; Akyuz, Chang and Kozul-Wright 1998; Drucker 1971).
Contributing factors for successful social pacts
In all successful social pacts, the government must have credibility among all social partners. A prerequisite of credibility is for the government to not be perceived as corrupt. A corrupt government undermines trust in its ability to be a power broker. Another requirement is for social partners to be inclusive in the broadest way possible. When the governing Social Democratic Party in Sweden turned hard left, in the late 1970s, the world’s most successful social pact went belly-up as organised business left the pact. Subsequently, the Social Democratic Party lost its power (Markus Promberger 2013).
In Ireland, civil society, community organisations, and the unemployed were represented in the social pact, its structures, negotiations, and decision-making. Another example of inclusion is when self-employed representatives formed part of the social pact in the Netherlands. In Sweden, representatives of professional organisations have been part of social pacts negotiations.
Dialogue forums, held for social pacts, must also include non-social partners. In Germany, it is compulsory to have independent experts, not associated with the government, business, or trade unions, as part of social dialogue forums, to get a perspective beyond the horizons of only those of the social partners.
It is not always necessary to have a dedicated social dialogue institution for a national social pact to be successful. Germany has no national tripartite social dialogue institution. Informal tripartite meetings between social partners are scheduled according to arising needs.
If a country does have a dedicated social dialogue institution, it must be seen as credible, as having the requisite capacity and competence. In the Netherlands, recommendations from the national dialogue agency, the Social and Economic Council (SER), are debated in Parliament (De Beer 2017; Dekker 2017). The Dutch Government is required to explain whether its advice will be followed or not, and the reasons for this. The SER also has an advisory role to Cabinet (De Beer 2017; Dekker 2017).
The SER has representatives from social partners, government, business, and trade unions as well as independent members, who are not aligned to the social partners (De Beer 2017; Dekker 2017). Furthermore, their business representatives are very broad, including representatives from big business, small business, and agriculture. Trade union representatives are from all national federations and the union for professionals. Recently, the self-employed have also received seats in the Dutch tripartite social dialogue institution (De Beer 2017; Dekker 2017).
Mixed successes of social pacts in South Africa
In South Africa, attempts at cobbling together national social pacts, in the post-1994 period, have for the most part been unsuccessful. However, sectoral and industry-based social pacts have fared moderately better (Gumede 2009).
An example was the gold crisis in the late 1990s. It saw a reasonably successful social pact between gold miners and trade unions, to safeguard the sustainability of mines, ensure the competitiveness of the industry and preserve job security (Gumede 2005, 2009).
In the mid-2000s, trade unions and industry came together with a social pact strategy to rescue the textile and clothing industry. This was done to also ensure its global competitiveness and secure jobs – the government supported the strategy (Gumede 2005, 2009). It is important to observe that in both the gold and textile crises, the social pacts were initiated by business and trade unions – who then brought the government on board, for support.
There have been no attempts to foster provincial or municipal-based social pacts. Neither have company-based social pacts been widely attempted in South Africa, except for a few farm-based ones, some with reasonable success.
Provincial, municipal-, and company-based social pacts offer great potential to find solutions to post-COVID-19 economic, political, and social problems.
Why implementing social pacts in SA is a challenge
Social partners involved in South Africa’s social dialogue have not been diverse enough, often decisions do not, have broad societal buy-in. Since 1994, South Africa’s trade union make-up has changed dramatically. Yet, many trade union federations are not included in the current social dialogue forums, undermining the legitimacy of any social pact.
In addition, South Africa’s social dialogue forums do not include non-social partners. Professionals, as a separate constituency, are not included in social dialogue forums, unlike in Sweden. The self-employed are also not included, like in the Netherlands. In addition, unlike, the Netherlands and Ireland the unemployed are not representative in national social dialogue (De Beer 2017; Dekker 2017). Yet, in South Africa, more people are out of work, than in employment.
Small Medium and Micro-Enterprises (SMMEs) are not substantially included in social dialogue efforts in SA. Most South Africans who are employed are in the informal sector, yet the informal sector is not included as an important constituency. Civil society is also not included in social dialogue, as is the case in Ireland.
Distrust between South Africa’s social partners remains deep. Unlike in the Netherlands, where social partners can set aside their deep-seated opposition to each other, it appears very difficult to do so in South Africa. The apartheid divisions remain entrenched between mainly white businesses and the black trade union movement. However, black, and white businesses are often also not able to collaborate because of racial divisions.
South African social partners also appear too rigidly ideological, often seeing the world in terms of fixed ideological lenses, making a compromise, so crucial to successful social pacts, rather difficult.
South Africa’s government also lacks credibility, this is because of the perception of the incompetence of governmental leaders, who are also viewed as lacking quality leadership skills and closely associated with corruption. This compromises the government from being viewed as an honest authority and contributor to the social dialogue.
At the heart of successful national dialogues in other countries, governments have been seen as reasonably honest, capable, and governing in the widest national interests. In South Africa, the government is seen as governing in the interest of the governing party, leaders, or for self-interest.
If a country does have a dedicated social dialogue institution, it must be seen as credible, having the requisite capacity and competence.
For long periods, South Africa’s national social dialogue institution, the National Economic Development and Labour Council (Nedlac) has lacked credibility. One of the reasons of being that not all critical social partners are included, making the organization not representative enough. Nedlac also lacks independent members, who are not aligned to social partners, as is the case in the Dutch SER (De Beer 2017; Dekker 2017).
Nedlac is often marginalized by the government itself. Some government leaders often wrongly believe that government can do it alone or send policy directives by diktat and social partners and wider society will just magically fall into line. Nedlac does not have the requisite authority. Unlike the Netherlands, where recommendations from the national dialogue agency, the Social and Economic Council (SER), are debated in Parliament, this is not the case for recommendations from Nedlac (De Beer 2017; Dekker 2017).
Furthermore, in the Netherlands, the government is required to explain whether the advice of its Social and Economic Council will be followed, and if not, why not. There is no such obligation in South Africa for government to answer Nedlac recommendations. The Dutch SER also has an advisory role to Cabinet. This is not the case for Nedlac in the South African context.
Nedlac has been criticized in recent years for lacking the capacity to lead complex social dialogue negotiations. It was mired in allegations of corruption, undermining the credibility of the institution. Rebuilding Nedlac’s capacity will be crucial for it to remain the institution that hosts national social dialogues in the post-COVID-19 era. It should be given an advisory role to Cabinet and Parliament. Furthermore, broadening its constituencies will be crucial for it to remain as an institution hosting national social dialogues in the post-COVID-19 era.
Social pacts are crucial for SA’s COVID-19 recovery
Social pacts at all levels of South African society have an opportunity to forge partnerships between the public sector, business, labour, and civil society. This would result in them potentially playing a catalytic role in rebuilding the post-COVID-19 economy, social order, and politics. The reality is that the state on its own cannot overcome the multiple COVID-19 crises. It simply lacks the capacity, leadership, and ideas to do so.
In a country crisis, such as the multiple crises caused by COVID-19, it is even more crucial to form social pacts, when the state lacks capacity, resources, and leadership, because it brings non-state skills, ideas, and resources to help tackle the calamity. Partnerships not only bring goodwill, but they also bring skills, resources, and wider buy-in for policies, decisions, and delivery.
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