The challenge of poverty

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The challenge of poverty

  • The challenge of poverty

  • The inheritance: SBRs under apartheid

  • SBRs during the transition to democracy

  • State and business in practice in post-apartheid South Africa

  • The other priority: Black Economic Empowerment

  • Some lessons for SBRs and pro-poor growth

1. The challenge of poverty

  • Poverty is widespread in post-apartheid SA

    • 24% of population have per capita incomes < US$1/day taking into account purchasing power
  • Lower than rest of Africa, but high in relation to GDP per capita, and despite economic growth

    • Poverty rate = 50% in Kenya, 15% in Chile, 5% in Malaysia
    • GDP per capita in 1994 = > 6 times higher than in 1930
  • Due to severe inequality in distribution of income

    • Gini coefficient for distribution of income ≈ 0.7
  • Under apartheid, inequality was highly racialised

    • In 1994, average income per capita for ‘white’ people was 12 times that of ‘black’ people
    • Life expectancy at birth was approximately one decade longer for white people than for African people
  • Poverty rooted in landlessness and unemployment

    • Unemployment rate peaked at 40% (by broad measure) in early 2000s
  • But poverty is mitigated by highly redistributive welfare system

    • Social assistance programmes amount to 3.5% of GDP
  • Pro-poor growth requires expanding demand for unskilled labour

1. The challenge of poverty

  • The context was promising:

    • 1994: first democratic elections
    • African National Congress (ANC) won votes of almost all poor citizens
    • ANC election slogan = “A Better Life For All”
    • ANC committed to mixed economy
    • Long period of sustained economic growth
  • Outcomes have been disappointing

    • Unemployment rates have risen
    • Poverty rates rose then fell (and are surely rising again now)
    • The main reason why poverty fell was increased public expenditure on social assistance, not pro-poor growth

2. The inheritance: SBRs under apartheid

  • Business at the end of apartheid:

    • Ownership and control concentrated in white South Africans
    • Highly concentrated:
      • 1985 Anglo-American controlled >½ of capitalisation of Johannesburg Stock Exchange
      • Top 5 corporate groups controlled >80%
    • Harry Oppenheimer (top right): Anglo-American, based in mining
    • Anton Rupert (bottom right): Rembrandt, beneficiary of apartheid government patronage
  • = a “hierarchical market economy”: co-ordination problems solved through concentrated and hierarchical ownership (Schneider)?

  • No:

    • Underestimates roles, power and autonomy of state
    • Capital = largely reactive, operating within but not challenging constraints (with some capital subservient to state to benefit from patronage)

3. SBRs during the transition to democracy

  • In 1980s, capital defied the state and made overtures to ANC in exile

  • Consultative Business Forum worked with pro-ANC leaders inside SA, and after 1990 with the ANC

    • Facilitated Peace Accord between apartheid government and ANC
  • Institutionalisation of business-labour relationship

  • Negotiations over industrial disputes led to

    • National Economic Forum (NEF), which provided the basis for, after 1994, the
    • National Economic, Development and Labour Council (Nedlac) = tripartite and corporatist
  • Some ANC leaders began to appreciate the weaknesses of the state

    • Mandela at Davos, 1991
  • But resilient view within ANC that business needed to be ‘transformed’

4. State and business in practice after apartheid

  • Formally:

    • business appears well-organised:
    • Bilateral institutions provide for state-business dialogue
      • Presidential ‘working groups’ with South African and global capital (under Mbeki)
    • Trilateral, corporatlist institutions provide for dialogue
      • Esp. Nedlac
  • In practice:

    • institutions and relationships are very uneven
      • Relationship good between business and National Treasury
      • Relationship bad between business and presidency (under Mbeki), business and labour department, etc
    • Institutionalised SBRs are focused on big business
    • Informal SBRs are uneven
  • The growth path not = a topic for substantive deliberation

    • 1998 Jobs Summit and 2003 Growth and Development Summit = cosmetic

5. The other priority: Black Economic Empowerment (BEE)

  • Close links between political elite and new black economic elite

  • Patrice Motsepe (top right) = 2nd richest person in SA (after Nicky Oppenheimer)

    • wealth in mining primarily
    • net worth (after financial crash) of US$1.3 bn
    • One brother-in-law is a senior member of the government;
    • another brother-in-law is Cyril Ramaphosa (bottom right), former ANC general-secretary and himself a very wealthy businessman
  • BEE promoted through

    • preferential public sector procurement
    • Sectoral charters specify targets for transfer of ownership and control
      • E.g. mining houses must transfer 15% of shares by 2014 to retain mining rights
    • And sourcing from BEE companies
  • BEE deals

    • worth $15bn in 2007:
    • Black South Africans, through BEE deals and pension funds, now own approx. 20-25% of shares listed on the Johannesburg Stock Exchange, or approximately one-half of the share owned by white South Africans
  • Corruption is very widespread

6. Some lessons

  • Is SA an example of a strong or healthy SBR?

    • E.g. Taylor points to a state-business ‘growth coalition’ in SA
  • Not as strong or healthy as is generally argued

    • SBRs in SA are, in general, fragile and superficial
    • They are highly racialised: no embedded autonomy; social distance between state and economic elite
    • Little substantive deliberation between state and business, because state has not wanted to listen to white business elites
    • Strong SBR re ANC <> black businessmen.
  • Not pro-poor: a growth coalition (perhaps), but not a pro-poor growth coalition

  • Pro-poor growth requires reducing unemployment among mostly unskilled workers, i.e. a growth path that is more intensive of unskilled labour

  • ANC government has little incentive to challenge its ally, organised labour

    • The state pays some attention to growth, but little to pro-poor growth
    • ANC = party of (dependent) black business, also party of organised labour, also party of urban and rural poor
    • The state throws its weight around in terms of regulating some aspects of business (esp. employment relations and BEE)
    • Business = largely reactive to the ANC, just as before 1994 it was largely reactive to the National Party
  • Little likelihood of a sustainable, developmental or pro-poor growth coalition

  • = e.g. of path dependence? If so, why?

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