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Opinion: Social compacting as a facilitator of economic growth

2021-06-25  Staff Reporter

Opinion: Social compacting as a facilitator of economic growth
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The notion of a social compact between government, business and civil society as a basis for long-term economic growth and development underpins a possible economic model that will redefine our economic landscape for decades to come. 

A social compact can be seen as an agreement between organised capital societies and government which defines the rights and limiting of each. The state renders and ropes in more responsibility to businesses to assist it in defining and re-modelling our economic landscape towards growth. It is worth mentioning that it does not in any manner diminish the state`s capacity or responsibility to still lead and regulate business. 

Social compacts exist in various forms and are explicit
and implicit. The latter allows stronger social mobility for government to deliver on much-needed services and positions government to accelerate its social protection programs. Social compacts have ample opportunity to change and restructure our public enterprises. Our public enterprises have a key facilitation role in the economic resuscitation of our economy. 

There is a great need to form social compacts especially with public enterprises that cannot seem to get it right. Social compacts allow the public and private sectors the opportunity to draw strengths and capacity from one another. A compact focuses on identifying and supporting innovative, cost-effective funding mechanisms to reduce massive debts and restructure failing operations. 

A point in case, South Africa has been battling the same economic fight as Namibia and they are looking to add meaning to the term social compact through compelling SOEs to enter into workable, growth-centred, and output-based agreements. It must be made clear that this not some form of privatisation, but rather a form of putting together resources, a collective goal, and a team that can provide decisive leadership. It is important to note that social compacting is two notches above privatisation and equally avoiding junk status. The nature of these compacts reflects the relative initial strength of the various economic, social, and political interest groups, as well as the capacity to deliver.

Structural reforms can boost long-term growth and welfare but also underpin confidence and take some of the pressure off monetary and fiscal policies to buttress the recovery

Social compacting details that the starting point for decision-making should be more exact and ought to put the necessary pressure on the government to implement long-overdue structural reforms. Which we believe will be looked at in the long run. There further needs to be more literacy around the discussion of structural reforms and its ever-growing increase in economic discussions. The liquidation of Air Namibia remains a prime example. Structural reform advocates for an economic strategy based on fiscal responsibility and sound ` consistent investment. 

A point in case, the recent South African Airway (SAA) debacle where a well experienced and capitalised equity partner, Takatso Consortium was brought in as a means to turn around the fortunes, rebrand and relaunch a more competitive South African Airline. Despite the whole political drama around the compacting, it still is a good way to turn around failing SOEs. We must not shy away if we are not able to do something, the economic decisions that lie ahead are not easy and ought not to be conventional.  Partial privatisation is not the end, Government must use its buying power and influence to make sure that the 

Structural reforms take on obstacles to the fundamental drivers of growth by liberalising or rather modernising labour and service markets/delivery, thereby encouraging consistent job creation and sound investment and improving productivity. They are designed to boost an economy’s competitiveness, growth potential, and adjustment capacity.

We rely on economic commentary from IJG Research Namibia (2021) that Structural reforms are necessary for the simple reason that the expenditure framework is rigid and unable to cope with shocks to revenue. Without structural reforms, deficits remain large and debt costs become ever more unsustainable, eating into tax revenues that could be utilised to improve the lives of Namibians. 


The road to a strong recovery remains fraught with challenges but the above-mentioned analysis and measures have the potential to reduce the likelihood of a worst-case scenario. We have reached a point where bold and concerted action to get the right mix of macro and structural policies can make an upside scenario a real possibility. 

Furthermore, Understanding how social compacting and structural reforms drive economic growth is vital to explain Namibia`s relatively low growth rate and offer recommendations for policies to raise growth. 

This opinion piece aims to provide information and context on the quality of social compacting towards the economy, which implies that it could potentially lead to a greater understanding of the role of structural reforms in economic growth.

2021-06-25  Staff Reporter

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