A leading International Monetary Fund (IMF) official last week urged South Africa’s social partners of government, labour and business to pursue a “broad national bargain” to overcome the prevailing structural impediments to higher growth and employment.

Speaking in Pretoria at an event hosted by the South African Institute of International Affairs, first deputy MD David Lipton said that, while there were external factors both supporting and constraining growth in the economy, South Africa needed to “do more on its own” to overcome a number of “home-grown” limits to faster economic expansion.

The call for a new social compact came against the backdrop of a subdued growth outlook for Africa’s largest economy, with the IMF forecasting that the economy will expand by only 2.8% in 2013, from 2.5% last year. Sub-Saharan Africa, by contrast, was expected to grow by 5.4% this year and 5.7% in 2014, from 5.1% in 2012.

In fact, he acknowledged that the IMF’s official position of a three-speed recovery – where emerging markets continued to grow strongly, the US recovered at a fast pace and Europe struggled – did not take into account those middle-income emerging economies, such as South Africa and Brazil, that were in a low-growth phase. Therefore, a “four-speed” recovery might provide a more appropriate definition of the current state of the global economy, which the IMF expected would expand by 3.3% in 2013.

Part of the remedy for South Africa could lie in a broad bargain framed by a commitment from all the social partners to “invest, invest, invest” – government should invest to improve the investment climate, labour should invest in the future by showing greater flexibility to support competitiveness, while businesses should agree to invest in a way that expanded jobs and output.

“South Africa’s got a competitiveness problem, [which is] manifest in a growing trade deficit and the lack of dynamism in exports,” he said, adding that power and transport bottlenecks remained a drag on the economy.

The corporate sector was performing relatively well, but was not investing because the investment climate is not sufficiently encouraging. Structural rigidities in the labour market meant that the collective bargaining system was not serving the interests of the entire labour force. And a lack of competition in product markets was resulting in higher prices and undermining the creation of new businesses, particularly job-rich small and medium-sized enterprises.

The call for a new social contract gelled with remarks made recently by Finance Minister Pravin Gordhan, who argued that the National Development Plan (NDP) provided the platform for the creation of a “unique deal” for turning around the country’s economic fortunes.

Following the recent IMF and World Bank meetings in Washington DC, Gordhan called on government, business and labour not to focus on the “narrow points of difference” with the NDP, but rather to act together to ignite growth and deal with its problems of poverty, unemployment and inequality.

Lipton said the NDP contained a “thoughtful and broad blueprint” for addressing deficits in infrastructure, education, healthcare and public service delivery.

“Now is the time for concrete action,” he said, warning that failure to address the structural problems would weaken growth prospects and hamper efforts to reduce unemployment and inequality.

“It could also trigger a decline in confidence and a pullback of capital flows. In the long run, failure to deliver inclusive growth poses a risk to social stability. Structural reforms are the key to unlocking South Africa’s potential.”