The Importance of State-Business Relations in Advancing Developmental Goals in South Africa - A Case of Corporate Social Responsibility

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. Diale
Department of Public Management
Tshwane University of Technology
ABSTRACT
C
ontemporary 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 RELATIONS
State-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 RESPONSIBILITY
Jamali 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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Ybstract

The Importance of State-Business Relations in Advancing Developmental Goals in South Africa - A Case of Corporate Social Responsibility

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