State‐business relations and pro‐poor growth in South Africa

By comparison with most African countries, post-apartheid South Africa appears to be characterised by growth‐oriented cooperation between state and business. Economic growth has remained weak, however, and income poverty persists as the economy continues down an inegalitarian growth path that fails to reduce unemployment and thus has little effect on poverty. This paper argues that the appearance of close state‐business relations is misleading: selectively pro‐market public policies have not reflected a pro‐business orientation on the part of the state. The governing African National Congress concurred with established business on the need for increased productivity and selective state interventions in a mixed economy. But most of the political elite overestimated the commandist powers of the state in the short‐term, viewed established South African business with deep suspicion if not hostility, and was unwilling to deliberate or negotiate on distributional issues in either formal bilateral or corporatist institutions, or even informally. The state sought to discipline and transform business, not work with it. Unable to sustain an active growth coalition, a pro‐poor, developmental coalition was far out of reach. The politics of the governing party precluded substantive concessions on labour market regulation and pushed it towards ever more interventionist ‘black economic empowerment’ policies. The result was that economic growth remained modest, and of little benefit to the poor. Copyright (C) 2011 John Wiley & Sons, Ltd.