State-Business Relations

State-Business Relations, Economic Growth and Firm Performance in Mauritius

Mauritius, known as the African Tiger, is reputed not only for its economic success but also for stability and racial harmony among its mixed population of Asians, Europeans and Africans. Mauritius enjoys a stable political system based on a multiparty democratic republic: legislative power is vested in the National Assembly, which comprises of 62 elected and up to eight designated representatives. The four main current political parties in Mauritius: the Labour Party (PTR), the Movement Mauricien Militant (MMM), the Mauritius Socialist Militant (MSM) and Parti Mauricien Xavier Duval (PMXD). In the general elections of 11 September 2000, a coalition of the Movement Militant Mauricien (MMM) and Movement Socialist Militant (MSM) won. This was the first time that Mauritius experienced a sharing of power between two parties in one mandate, thus demonstrating the stability of Mauritius' democracy. In 2005, the Labour Party, the PMXD and few other small parties made a coalition and won the election.

Although the governing philosophy, vision and strategy of different governments in Mauritius have been different, there has always been considerate co-operation between the state and the market sector through two-way flow of relevant information and trusts (te Velde (2007) calls this 'good SBR'). Such effective 'synergy between state action and market functioning' is very impoartant for sustained poverty-reducing growth. Recently, this remarkable relationship was seen during the attempt to restructure the sugar sector (through EU accompanying measures), following the fall in guaranteed sugar price exported to the EU.

Mauritius is a good case study for successful/effective (the degree of which is yet to be measured) state-business relationships and can be used as a benchmark in the African region, setting the pace for some other African countries to follow. Sen and te Velde (2007) found that Kenya, Senegal, Tanzania and Uganda have witnessed a decline in both inequality and poverty while Mali, Nigeria and Zambia have witnessed an increase in both. Effective SBRs lead to a more optimal allocation of resources in the economy, including an increased effectiveness of government involvement in supporting private sector activities and removing obstacles (Qureshi & te Velde, 2007).

State-Business Relations and Economic Growth in South Africa

Most interaction between state institutions and business organisations are not motivated by a primary concern with economic growth. State institutions seek to fulfil their obligations with respect to regulation, taxation and expenditure, and more occasionally planning, whilst businesses seek to sustain or open up new opportunities for private profit. Consequently, the relationship between SBRs and growth is complex. SBRs can help solve co-ordination failures between businesses, between business and labour, and between business and the state. They can also improve policy effectiveness by facilitating information flows and by mobilising tax and industrial policy in support of agreements between labour and capital; but SBRs are also inherently political and can undermine growth when 'captured' by political and economic interests that promote the objectives of particular capitalists potentially at the cost of better co-ordination between capitalists and at the cost of economic growth and development. Futhermore, their institutional architecture varies depending on the level of operation (international, national, sub-national and industrial), their economic function and particular history.

A case study of South African SBRs is thus best conducted through an explicitly historical lens that is sensitive to both current political pressures, specific function and to the different levels of operation of SBRs. We propose to start off with an historical account of the political provenance of SBRs and an introduction of the broad institutional architecture of SBRs in South Africa. The main body of the report will comprise of studies of SBRs at different levels, discussing, inter alia, the formal and informal institutional and organisational forms in both public and private sectors and the relations between these and the economic functions of SBRs; and will identify and discuss specific instances of effective and ineffective SBRs in terms of economic performance. We will draw on available policy documents and other secondary sources, conduct interviews and analyse economic data where available.