the importance of state-business relations in advancing developmental goals in south africa - a case...

684 685A.J. DialeVolume 47 number 3 | September 2012

Journal of Public Administration Journal of Public Administration

THE IMPORTANCE OF STATE-BUSINESS RELATIONS IN ADVANCING DEVELOPMENTAL GOALS IN SOUTH AFRICA

– THE CASE FOR CORPORATE SOCIAL RESPONSIBILITy

A.J. DialeDepartment of Public ManagementTshwane University of Technology

ABSTRACT

Contemporary South Africa is a state of contradictions. It is a country well-endowed with natural resources, relatively cheap labour and a well-established corporate/private sector. The political emancipation in 1994

was met with much fanfare and promises and expectations of economic free-dom. What escaped the political and economic discourse of the majority of the citizens was the damage inflicted by state-supported business practices on the most vulnerable of the society. The majority of the African poor had justifiable expectations that the state would provide sustainable services and opportuni-ties that were denied under the apartheid system, but the underlying ideology underpinning the reform initiatives had other consequences. Looking into the role the corporate sector and state could play to alleviate poverty, the relations that characterised the dawn of the democratic state was one of suspicion and mistrust (by the state) of established white business. The notion and practice of Corporate Social Responsibility (CSR) as a mechanism of business organisations to position themselves as socially responsible entities can be useful in assisting the state to achieve its developmental goals. This is due to the pressures brought about by globalisation and, in the developing world, the increasing burden faced by governments to provide comprehensive social services. This initiative, CSR, has received mixed reactions from various sectors of business practitioners and researchers, while governments globally have enhanced the environment within which business could explore this initiative. In South Africa, a sizeable number of business organisations are embracing it. The attempt of this article is to interro-gate whether CSR can play a meaningful role to enhance state-business relations in South Africa to assist in achieving developmental goals.

INTRODUCTION South Africa’s transition to a post-apartheid state manifested itself in a situation

wherein poverty still persists, distribution of income remains unequal and the pri-

vate sector remains largely in the hands of beneficiaries of the previous apartheid system, while the state and business sustained a stable reform coalition. In their article titled ‘State-Business relations and pro-poor growth in South Africa’, Seek-ings and Nattrass (2009:338-357) are of the view that relations between state and business in South Africa throughout the 20th century were framed by the coexis-tence of a strong state and powerful corporate capital. The state, as the argument goes, enjoyed considerable political autonomy from capital, but remained depen-dent on capital for continued economic growth. The outcome was often tense rela-tionships, as the state sought to push and bully capital into subordinate co-opera-tion, while avoiding genuine deliberations, and being careful not to undermine the very economic foundations of white prosperity. It is articulations such as these that demonstrate the quagmire that the post-apartheid state finds itself in, the results of a negotiated settlement wherein parties compromised on an unequal footing, with power relations not evenly distributed This article is an attempt to place the notion of Corporate Social Responsibility (CSR) among the mechanisms that could be accelerated to advance the developmental goals of post-apartheid South Africa. Firstly, the article will articulate on the role of the state in the general welfare of the community and the contestation thereof. Secondly, the notion of Corporate Social Responsibility will be dealt with reflecting on both sides of the argument. Thirdly, state-business relations will be reflected as per the findings of research initiatives. Secondary data will be largely used to reflect on the status of the topic. Lastly, some concluding remarks and recommendations will be advanced.

CONTESTED ROLE OF THE STATE IN GOVERNMENT-BUSINESS RELATIONS

The role and size of government in the economy and society in general has been and, continues to be, fiercely contested. This is due to the global wave of public sector reforms in the past three decades. This was due in part to the unrelenting challenge to the traditional ways of thinking about the role of the state, and efforts to refute the conventional wisdom on governance and public administration (Far-azmand, 2007; Diale, Maserumule & Mello, 2007; Caulfield, 2006). These efforts culminated in the emergence of reformist initiatives, coerced and self-initiated, such as ‘agencification’, privatisation, contracting-out, public-private partnerships and what Farazmand (2007) refers to as the orthodoxy of New Public Management (NPM). These initiatives are predominantly attributed to the neo-liberal revival in the 1970s after the economic crisis which followed the massive rise in oil prices (Batley & Larbi, 2004). This neo-liberalism paradigm was further expanded to the countries of the developing world through donor agencies, multilateral institutions like the World Bank (WB), the International Monetary Fund (IMF), the two main institutions which became the main propagators of the ‘Washington Consensus’, a panoply of precepts to do with the liberalisation, privatisation and stabilisation of



economies, and the reduction of the role and scale of the public sector. This led to the development and expansion of the notion of globalisation and global reforms, a global quest of multinational corporations to claim global leadership on western capitalism, a process which Farazmand (2007) refers to as ‘globalization of the corporate capitalism’.

In this case, the private sector was positioned to play a leading and dominant role in the public life of any state, regardless of its political, social, economic or cultural imperatives (Minogue, 2003). This view is further articulated by Handley (n.d.:36) in which she posits that the advent of the 1980s is synonymous with the turn towards neo-liberal economic policy. The course of that decade and the collapse of the Soviet Union which followed, according to this author, presaged a radical reassessment of the role of the public and private sectors respectively in generating economic growth and development The argument goes further to state that across much of the developing world, many of those sympathetic to the programmes of the international financial institutions (IFIs) argued that the private sector, as the presumed avatar of market forces, ought to be given a more promi-nent role in shaping economic outcomes, while the role of the state should be drastically curtailed.

In the quest for adjusting the role of the state in developing countries, some critical aspects come to bear; they are: (1) the question of ownership – who con-ceives, drives and supports reform? (2) the uniformity of application – the main tenets of state withdrawal and adjustment first developed to adjust to fiscal crisis in advanced welfare states, were applied to countries with very different circum-stances whose only common feature was debt and, (3) the adjustment has often been implemented in an unbalanced way, leading to deeper crisis and poverty at least in the short term, (Batley & Larbi, 2004; Minogue, 2003).

The fundamental points of relevance to administrative reform are several but, according to Faranzmand (2007, 364) the most important is a globally implemented comprehensive set of reforms which should (a) facilitate the process of change and continuity in world capitalism towards a more cohesive and well-coordinated global organisation of corporate capitalism, (b) shrink the size and reduce the func-tions of the state and governments worldwide, while at the same time, expand the role, functions, and scope of activities of the business-private sector dominated by the corporate organisational arrangements; (c) position societies/countries for favourable operations of the global corporate capitalist systems by deregulations of environment, relaxation of labour laws, and deregulation of workplaces, (d) dismantle the welfare administrative state and replace it with the corporate welfare state; (e) establish a system of global corporate dependency through ‘agencifica-tion’ – outsourcing and contracting; (f) establish a global corporate hegemony with power concentrated in the West.

It is in the context of the above exploration that energy was not invested in

the global reform movement for the last three or so decades on the pretext that state organs were incapable (inefficient) of delivering, in the best possible manner, those goods and services for the general welfare of society. Instead, every effort was made to ensure that the initial ideological claim of inefficiency by the state apparatus was to be extended to even the core and heart of governments around the world, a situation described by Monbiot (2001) as The captive state wherein the entire public sphere has been taken over for profit and capital accumulation by corporate business organisations. But as also alluded by Handley (n.d.:36), by the early 1990s the new government of South Africa appeared to be likely supporters of neo-liberalism, and the IFIs enjoyed little policy leverage.

Moreover, the state had little inclination to regard business as a policy-making partner but instead regarded business with some degree of hostility. This view is further articulated by Seekings and Nattrass (2011:340) who state that the rela-tionship between the state and business in post-apartheid South Africa appears broadly cooperative, where-in government ministers emphasise the importance of the private sector in a mixed economy, and have implemented selected pro-market or neo-liberal reforms, and courted foreign capital. In addition, during the first 15 years of democracy, South Africa’s economic growth performance has been impressive, although income poverty and inequality persist. The following section is an attempt to illustrate what actually constitute state-business relations, its defin-ing features and what makes it work.

STATE-BUSINESS RELATIONSState-Business relations, according to North (Sen and Te Velde, 2009), can be

seen as a set of interactions between states and the business sector whether through formal channels such as meetings of bureaucrats with business associations or through more informal channels such as phone conversations and dinner parties. The overarching assertion is that effective state-business relations can mitigate both the market failures and government failures which are pervasive in most develop-ing countries and by doing so, bring about an increase in economic growth. This view is held against the backdrop of literature in both political science and politi-cal economy that collaborative state-business relations can be growth-enhancing. This argument is advanced in view of the evidence that sustained economic growth has occurred in contexts where the state has intervened in the economy so as to provide incentives to private capital and to discipline it (Handley, n.d.; Sen & Te Velde, 2009:1268).

In the Discussion Paper Series (# 23), the document titled ‘Analyzing the eco-nomics of state-business: A summary guide’, Te Velde (2009:5) asserts that, good state-business relations are based on a benign collaboration between business and the state with positive mechanisms that enable transparency, ensure the likelihood of reciprocity, increase the credibility of the state among the capitalists, and estab-



lish high level of trust between public and private agents. They provide a transpar-ent way of sharing information, lead to a more appropriate allocation of resources, remove unnecessary obstacles to doing business, and provide checks and balances on government intervention. The elements of effective state-business relations, as articulated by Sen and Te Velde,(2009:1269), comprise the following: transparency – the flow of accurate and reliable information, both ways, between business and government; reciprocity – the capacity and autonomy of state actions to secure improved performance in return for subsidies; and credibility – when capitalists are able to believe what state actors say.

The discussion around these aspects as indicated above, according to this Dis-cussion Paper Series #23, is linked to the literature on good governance, the four aspects of which are the following: (i) the rule of law, (ii) predictability, (iii) trans-parency and, (iv) accountability. This governance structure assumes that the gov-ernment needs to be fully accountable and needs to provide a sound institutional environment in which a rational private sector maximises profit. Handley (n.d.:36 - 37) refers to this state of affair as constructive contestation – the instance where business and the state respectively display high levels of capacity to engage in a robust and sustained set of exchanges concerning policy. In this case, policy pro-cesses are strengthened where the state is forced to engage in considered inclusive consultation with important social actors, business in this case, and for long-term development prospects; it is ultimately the home-grown interactions which are cru-cial. In addition, the Discussion Paper (pp. 5-6) and Sen and Te Velde (2009:1269-70) highlight the following as the main economic functions of state-business rela-tions on which the following building blocks rest:• There are market failures (the market alone cannot achieve an optimal alloca-

tion)• There are government failures (the state may not be able to address market

failures on its own)• Effective SBRs address market and government failures.• In affecting economic growth, the state-business relations take, among others,

the following routes:• Addressing market and co-ordination failures (through skills development,

infrastructure provision, technological development and capital markets)• Addressing government failures – (lack of perfect information and foresight,

moral hazard problems, misallocation and rent-seeking behaviour)• Reducing policy uncertainties – (uncertain environment, risk and resource

shortages).The balance of power is key to sustainable state-business relations in that it is

unlikely to occur where business is so weak that the state can unilaterally act as it chooses or where business is so strong that the state simply rolls over and does as business wants. The next section will attempt to interrogate the notion of Corpo-rate Social Responsibility (CSR) in view of the challenges as experienced by South

Africa’s lack of meeting its developmental goals and pro-poor growth.

CORPORATE SOCIAL RESPONSIBILITyJamali and Mirshak (2006) postulate that Corporate Social Responsibility (CSR)

received heightened interest as a result of the advent of globalisation and interna-tional trade, which reflected in increased business complexity and new demands for enhanced transparency and corporate citizenship. This concept among others has attracted the following expressions: it is the commitment of business to contrib-uting to sustainable economic development, working with employees, their fami-lies and the local communities (Blowfield & Frynas, 2005:501), the fundamental idea being that business corporations have an obligation to work towards meeting the needs of a wider array of stakeholders. CSR, according to these authors, is founded on a stronger recognition of the role of business as an active partner in a world of scarcity and dwindling resources (Jamali & Mirshak, 2006:244).

The notion of CSR has not been uniformly embraced, with lingering diverg-ing views about its potential usefulness and applicability. This is mainly because government, civil society and business all to some extent see CSR as a bridge connecting the arenas of business and development, and increasingly discuss CSR programmes in terms of their contribution to development (Blowfield & Frynas, 2005, Jamali & Mirshak, 2006:244). The discussion on CSR reveals that it is not the homogeneous, coherent concept that it is often presented as being. Indeed, one concern is that the use of the term has become so broad as to allow people to inter-pret and adopt it for many different purposes (Fi, 2005; Banerjee, 2008; Windsor, 2006). This vagueness, according to Blowfield and Frynas (2005), restricts CSR’s usefulness both as an analytical tool and as a guide for decision makers. However, an inclusive definition as an umbrella term for a variety of theories and practices recognises the following: (a) that companies have a responsibility for their impact on society and the natural environment, sometimes beyond legal compliance and the liability of individuals; (b) that companies have a responsibility for the behav-iour of others with whom they do business; and (c) that business needs to manage its relationship with wider society, whether for reasons of commercial viability or to add value to society.

According to Banerjee (2008), CSR is nothing other than an emancipatory rhet-oric, defined by narrow business interests and serves to curtail the interests of exter-nal stakeholders. It is an ideological movement that is intended to legitimise the power of large corporations. The argument is that, whereas the primary relationship between business and society has been and continues to be an economic one, with rising public concern about the social and environmental impacts of their business activity, this discourse represents and constructs the relationship between busi-ness and society based on corporate interests, not on a societal ones. In any case, Banerjee (2008:61) maintains corporate rationality dictates the nature and scope



of acceptable CSR practices, engineering the inevitable compromise of making a business case for corporate social responsibility. Further, the rhetoric of corporate social responsibility also seems to confuse democracy with capitalism in that mul-tinational corporations have assumed the role of ‘carrier of democratic values’ and have often taken the role of governments in the countries of the third world as in the case of Shell in Nigeria (Banerjee, 2008). The following section is an attempt to unpack the intents, purpose and outlook of corporate social responsibility, the South African version.

STATE AT THE MERCy OF CORPORATE INDIFFERENCE OR PANA-CEA FOR DEVELOPMENT

The case of South Africa is an interesting one. Prior to the 1994 democratic dispensation, the business sector (in particular mining and agriculture) was at the forefront of the upkeep of the now defunct apartheid system of government in areas of the migrant labour system, dehumanising single-sex hostels, the racial division of labour and discriminatory salary systems, among others. The sector had an uninhibited free ride in conducting its business eschewing the social, moral and ethical imperatives as per the prescripts of the corporate social responsibility agenda. As Fig (2005:599-600) further points out, big businesses helped out in sanctions-busting operations, received subsidies and paid taxes to the apartheid state and provided services, technologies and weapons directly used for oppres-sion of the majority black population and any other grouping that was considered unfriendly to the regime at the time. If one were to use the analogy of corporate social responsibility punting big business to be moral and responsible agents, as outlined by Carroll (1979) and Wood(1991), out of their own free will, then moral-ity and responsibility defining corporate social responsibility should be having a different connotation to that of South Africa’s big business of the time.

Or alternatively, as some would want the world to believe in the post-1994 miracle of the Mandela presidency, has big business undergone a radical trans-formation to depict the image as described within the literature and discourse of corporate social responsibility? The answer to this question is a complicated one, but an attempt will be made to get an evasive answer. It needs to be pointed out that the post 1994 democratic government under the African National Congress (ANC), was prepared and coached for the management of the country by the very corporate sector/big business that propelled the apartheid government. Maseru-mule (2011:308) further alludes to the fact that the ANC was tricked into believing that its negotiation for a democratic South Africa was conducted within the param-eters of the principles of transition by displacement. This entails a paradigm that propounds that democratisation is the outcome of the joint actions and efforts of the government and the opposition (Maserumule, 2011: 306; 308).

Literature abounds in this regard where in big business, having realised

the inevitability of the demise of apartheid system, began consultations with the ‘government-in-waiting’ in Lusaka and elsewhere in the world regarding the pros-pects of economic direction under their rule (Fatton, 1984; Andreasson, 2006; Fig, 2005). What is evident is that South Africa under the ANC rule has not shed much of the neo-liberal and capitalist orientation as it existed under the apartheid system and the business community which made profits on the back of human rights viola-tions was unconditionally embraced and absolved of any culpability, without the victims being compensated. What was more shocking and baffled even the worst of skeptics, any litigation by victims of corporate injustices was met with opposi-tion from the post-apartheid government.

The neo-liberal and capitalist orientation referred to above could be observed from the cosmetic transformation initiatives on the economic front. This could be seen from: (a) the abandonment of the Reconstruction and Development Pro-gramme (RDP), a development-oriented redistribution programme, in favour of the Growth, Employment and Redistribution (GEAR), a monetary programme intro-duced by the world’s financial sector; (b) the introduction of Broad-Based Black Economic Empowerment (BBBEE), which facilitated the creation of the few black capitalists, the majority of whom are politically connected to the ruling elite; (c) sweeping privatisation; (d) deregulation and; (e) trade liberalisation. As Moeletsi Mbeki succinctly puts it in his 2009 book Architects of poverty – Why African capi-talism needs changing,

Black Economic Empowerment (BEE) has not, however, proved to be the fatal blow to South Africa’s oligarchs that Nelson Mandela and black nationalists of his era once envisaged. In fact, it strikes a fatal blow against the emergence of black entrepreneurship by creating a small class of unproductive but wealthy black crony capitalists made up of ANC politicians, some retired and others not, who have become strong allies of the economic oligarchy that is, ironically, the caretaker of South Africa’s de-industrialization. (Mbeki, 2009:61)

This was a clear indication by the government that, contrary to initial policy positions of redistribution, the private sector was assured that that was not likely to happen. It is no wonder that even the notion and practice of corporate social responsibility was and continues to be redefined and informed by global trends and attitudes (see ‘Corporate Social Responsibility – As practised by South African and German Companies’, a document published by the Department of Social Devel-opment). To give a glimpse of the CSR in South Africa, it would be worthwhile to give a prelude to such efforts as postulated by the Southern African–German Chamber of Commerce and Industry (n.d.). The document does not even have a concise definition of what CSR means, but instead, an array of views are expressed including those of the European Commission (EC) and the International Standards Organization (ISO). The emphasis is on “a balanced approach for organizations to address economic, social and environmental issues in a way that aims to benefit



people” (Boddenberg & Aletter, n.d:12). The system as applied in South Africa is completely voluntary. This means that

companies are not compelled to have CSR policies. If they do have such policies, they will determine the principles which companies follow and the programmes they have put in place suitable to their own specific criteria. These can take a vari-ety of formats and may address any issue. The abysmal history of corporate South Africa during apartheid and the subsequent years of the new dispensation as Fig (2005, 601) puts it, eschews the notion of ‘corporate social responsibility’, despite the wide usage of this term among practitioners and in the literature. Instead, it favours concepts such as ‘corporate social investment’ and ‘corporate citizenship’, concepts that ask no questions about legacy, memory, history, justice or moral and ethical responsibilities.

According to Banerjee (2008:62-63), the concern is that corporate citizenship discourses could have the effect of reducing governmental scrutiny of corporate practices because they promote a particular form of self-governance, which has the potential of opening what is referred to as ‘pathways to greed’, given the enor-mous power that large multinational companies wield. What has also become a regular practice for some companies whose actions the environment has been at the receiving end of, is ‘green-washing’ which has been perfected by, for example, Sappi, Mondi, (see Fig, 2005:599-617). Sappi, for example, has a reputation as green-oriented because of the resources it devotes to widely distributed nature publications and other numerous environmental projects.

It is in the light of the above exposition that in a country like South Africa, with its history of social, political and economic discrimination, propelled by the corporate sector, there is a need for a thorough examination and interrogation of the expected role by the corporate sector to bring about genuine change to the communities that bore the brunt of their indiscretion. The role of the state cannot be over-emphasised in this case since most of the reform initiatives are to a greater extent informed by private sector interests in their quest for global economic domi-nation. Regardless of the varied views on what fundamentally constitutes a socially responsible private sector, the reality on the ground is that the vocabulary of cor-porate social responsibility will remain. As the practice is currently unfolding, the power-relations between the state and the private sector are skewed and unbal-anced in favour of the corporate sector. As Handley (n.d.:40) succinctly puts it (quoting Atul Kohli):

a key feature of a developmentally effective modern state is a well-established public arena that is both normatively and organizationally distinguishable from private interests and pursuits, and similarly, a developmentally effective business community operates within a well-established private arena that is both norma-tively and organizationally distinguishable from the interests and pursuits of the state and the ruling party. (Handley, n.d.:40)

CONCLUDING REMARKS The contention of this article is that Corporate Social Responsibility (CSR) can

and has the potential to create healthy and sustainable state-business relations, provided it is not utilised for narrow political expediency by the ruling party or rent-seeking and culling for favours by the private sector. As the exposition has attempted to show, South Africa with its chequered history, will require tremen-dous effort to bring the corporate sector on board for its developmental agenda. As espoused by Handley (n.d.:42), African states, in this case the South African state, can and should pursue and negotiate a relationship characterised by construc-tive contestation and similarly, the South African business community, in unison, should negotiate a productive interaction with their modern-day state., For this exploration to make a meaningful contribution to the body of knowledge on CSR and public administration, an empirical study to gauge and determine the extent of commitment by private business toward the developmental goals of South Africa and its people, is necessary.

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the importance of state-business relations in advancing developmental goals in south africa - a case...

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