Fatal embrace: How relations between business and government help to explain South Africa’s low-growth equilibrium

Abstract

South Africa has experienced slow growth and growing unemployment in recent years. This article argues that the slow growth outcome is in significant part a result of the form of the compromise achieved between government, business and labour at the time of the political settlement in the 1990s. A commitment to open markets for goods, services and capital and a tightly structured labour market resulted in an arrangement where firm owners, government and organised labour are in the words of Sandeep Mahajan, ‘locked in a continual, rambunctious public tussle over the distribution of the rents generated under the system’. A further outcome has been the internationalisation of business and a growing gap between business and the state. The ‘political settlement’ will need to be reconstituted if South Africa is to embark on a growth-oriented employment generating growth path.