Crucial role to play in NDP for trustees of pension fundsComment on this story
It has been argued that pension funds, being a unique vehicle through which the interests of millions of South Africans come together, are the critical component to build a social compact on which the success of the National Development Plan (NDP) relies.
In the South African context, what is a social contract – who should be the parties to it and with what objectives?
I do not think there is a South African-specific definition of a social contract. It is a universal concept, premised on joint decision-making and a commitment to the decisions jointly arrived at, by stakeholders in an economy or society. It is also known as a social compact or accord. The terms are used interchangeably.
It can be described as an agreement among the members of an organised society, or between the governed and the government, defining and limiting the rights and duties of each.
While the definition will hold stable across space and time, differences across societies will be informed by their historic, political, economic and social contexts. These different circumstances may not change the definition, but they may influence how the objectives are arrived at.
The concept of a social contract is premised on an underlying understanding that the success of any government is rooted in its partnership with society and the upholding of the values and demands of society.
In principle, the modern understanding of social compacts is an attempt to address problems in the economy’s growth path that are best resolved through collective action and agreements among interest groups. Chief among these are the tripartite social accords in the Netherlands, Ireland and Spain.
South Africa embraced and institutionalised the relationship among social partners in the National Economic Development and Labour Council (Nedlac). Of course, there are other forums outside Nedlac with the same intention. The character of South Africa’s social “partnership” (note the deliberate use of the term) is its intention to deal urgently with issues of poverty, unemployment and inequality.
Parties to the compact should all be stakeholders in a society. This ranges from the government, to corporates, to organised labour, to non-governmental organisations and to households.
Why is there such emphasis on a social compact in the NDP? The NDP proposes critical solutions to big national issues, predominantly of a structural nature. These can be summarised as:
- Massive unemployment and the need for an economy that creates more jobs;
- Poorly located, insufficient and under-maintained infrastructure;
- The high incidence of poverty;
- Poor educational outcomes;
- A public health system that cannot meet demand and suffers from quality problems;
- A nation still often divided on racial lines (but also on resource lines, with “haves” versus “have nots”);
- A resource-intensive economy;
- Spatial patterns that marginalise the poor;
- Community safety issues;
- Rural development that is not unfolding fast enough;
- An economy characterised by sub-optimal competitiveness, domestically and globally; and
- The need to build a more capable state that is better equipped to improve public servicing and accountability.
The NDP proposes responses that will yield outcomes to:
- Push economic growth from the current 3 percent to 6 percent; and
- Reduce unemployment from the structural 25 percent to 6 percent.
These are with the aim of delivering “a better life for all”, combating poverty and inequality, and inculcating a psyche of long-term national development objectives. They will be underpinned by enhanced policy coherence and co-ordination.
With the magnitude and complexity of the task at hand, it is clear that the government, doing it alone, would never be able to deliver to South Africa’s satisfaction. This has to be a shared responsibility. Thus, the need for partnerships (and in the context of this subject, a South Africa social accord.)
However, the emphasis should be one that focuses society on the understanding that such a social compact cannot be ideas in a document somewhere. It has to be a compact that changes hearts, minds and the entire psyche of our society. It needs a society that has a sense of belonging, of ownership, and is ready to roll up its sleeves to be part of a long-term solution.
Therefore, the NDP is a call to action for all South Africans. We each need to identify our roles and commit ourselves to contributing to change, without looking up to the government to lead. We have to lead.
So, the success of the NDP lies entirely on a real and functional social compact.
What are the obstacles to a social contract? Through Nedlac, should it not already have been developed?
Nedlac, as an institution, is founded on the concept of a social compact. The questions are: how formalised is it? How committed are we to it? How effective is it?
To deliver on the NDP, answering these questions is critical. The triple crises of poverty, unemployment and inequality should swiftly spur us in the right direction and at the right pace towards a more formal and virtuous compact. In all countries that have dealt with and implemented social accords consistently, these processes were triggered by some form of crisis. But, of course, arriving at a compact without a crisis would be less painful.
What role could be played by trustees of pension funds in helping to bring it about?
Given the long-termist framework of the NDP and structural challenges we are faced with, pension fund trustees are critical in delivering against our hopes, as well as making effective a South African social compact. Trustees oversee the management of long-term money.
The nature of the mandates is such that they must make investments that have a long-term impact on the economy, rather than chasing short-term returns. This is key in tackling infrastructural backlogs that pull back the economy’s ability to grow faster and generate more jobs, to reduce poverty.
Increasingly, we need trustees who fully understand the relationship between the macro economy and the performance of the assets they manage. We need trustees who are able to invest in such a way that they influence the domestic economy positively and in a sustainable manner. With their strategic positioning in the economy, they are inherently key roleplayers in crafting and implementing lasting solutions, with patient capital in their control.
Having said this, it is essential to note that the NDP does not emphasise funding in turning around our fortunes. This is because the National Planning Commission believes the biggest challenges lie first and foremost in resource allocation.
The structural and behavioural changes are much more important for achieving the vision and aspirations of South Africans. Financial resources, on their own, will not deliver the vision.
We need to learn to achieve more with the resources at our disposal.
* Elias Masilela is a commissioner on the National Planning Commission and the chief executive of the Public Investment Corporation, which manages assets of the Government Employees Pension Fund. This article originally appeared in the latest edition of Today’s Trustee (www.totrust.co.za), a quarterly magazine mainly for trustees of retirement funds.