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1. South Africa currently faces a structural crisis which has been set in motion by the global financial crisis. The manner in which this crisis affected the South African economy exposed the fact that ours is still very much a resource-based economy. It has failed to beneficiate raw materials over the past 15 years and there has been no clear industrial policy and growth was concentrated in capital intensive non-traded sectors.

2. COSATU has long argued for a new growth and development path that breaks the economy away from mineral export dependence towards the development of a dynamic capital goods sector that is integrated with other sectors of our economy. COSATU's perspective has always centred around the creation of decent work, combating social and economic inequality, promoting investment through a state-led programme and moving our economy away from a mineral-dependent growth path. This approach has been endorsed by the ANC in its Manifesto Policy Framework: "The ANC is committed to building a more equitable, sustainable and inclusive economic growth path, centred on the creation of decent work opportunities and sustainable livelihoods. We need to ensure that the majority of our people benefit meaningfully from economic growth". The ANC has further clarified the concept of decent work that should underpin all state interventions in various spheres.

3. In the light of this commitment, the ANC further clarified the macro-economic policy stance that government must adopt in order to realize such a growth path. In its Policy Framework, the ANC says: "State-led industrial, agricultural and trade policies will underpin the development of a macroeconomic framework that supports growth and employment". In addition, the ANC further stipulated that "Our fiscal and monetary policy mandates including interest rates and exchange rates need to take into account employment considerations, economic growth and other developmental imperatives".

4. This is what Polokwane enjoined all of us to promote. It is a mandate that the ANC received from the masses of our people, who are now sick and tired of being bystanders, whilst some pillage the wealth of their country of birth under the cloak of macroeconomic stability. COSATU and the Tripartite Alliance affirm that we need a growth path that addresses the triple challenges of unemployment, income inequality and poverty. Any growth path and policy stance that does not advance this goal will face opposition from our people, the working class and the youth that now swim in the sea of poverty, unemployment, lack of education and poor service delivery.

5. We are not oblivious of the fact that a crisis has occurred in the global economy. A crisis that was in part due to COPE-type policies and DA-type approaches to the economy. The crisis was exacerbated by the deregulation that was ushered in the 1980's by Margaret Thatcher and Ronald Reagan. The DA and COPE now urge the ANC to increase the decent work deficit in our country by allowing "self-regulation" of modern slave-drivers, the labour brokers. They want our country to be built on the basis of the most brutal forms of exploitation as a means to get out of this recession. They want the working class, after it has been robbed billions of Rands in the past 15 years, as evidenced by the worsening share of workers in national income, to once again offer themselves as cannon-fodder for a recovery that would once again benefit the very same forces that are responsible for the current crisis.

6. This Medium-Term Budget Policy Statement (MTBPS), the first to be delivered by Minister Gordhan, will signal to us whether the Polokwane conference has been taken seriously by state bureaucrats and the political leadership of government. This is the first real budget speech after Polokwane, and we expect it to address the question of poverty, income inequality and unemployment. We expect it to signal a shift in policy thinking. We also expect it to be informed by the Policy Framework of the Manifesto of the ANC, which clearly argues that all our policies should place decent work at the centre. We expect this MTBPS to signal change, faster change, to arrest the carnage that is taking place in the real sector of our economy.

7. In just 6 months, our economy lost 475 000 jobs, experienced 6% decline in GDP and continues to decline as we speak. These sharp losses in such a short space of time remind us of the vulnerable path that colonialism has left behind. This path draws people into volatile and unsustainable employment and further stifles the potential of our economy to grow in the long run. Faced with such challenges, many countries, not least the capitalist centres of the world, have changed gear and are directly protecting jobs. They see the crisis as an opportunity to change failed policies informed by neo-liberalism and the Washington Consensus.

8. This MTBPS will indicate whether government has gotten over the intellectual inertia that has condemned the vast majority of our people to poverty. We are in the midst of structural crisis, and COSATU is keenly watching whether we are not going to be served with yet another GEAR under the pretext of stabilization. We expect a properly considered budget that takes into account the existing macro-imbalances, especially in relation to what is happening to the current account deficit and the massive misalignment between fiscal and monetary policy as a response to the current recessionary situation. A failure to address this policy misalignment will spell disaster for our economy in the year ahead. The MTBPS must signal a decisive shift from the austere view that held our movement hostage to the workings of the economy. This MTBPS must show decisively that decent employment is now the overriding objective of macro-policy.

9. We are of the view that the MTBPS should have the following key features:

a. Fiscal policy needs to adhere to the principles set out in the national framework agreement response to the crisis

b. COSATU supports the drive to root out wasteful expenditure, standardize procurement procedures across government spheres and departments and to fight corruption in the process. Building a school in one province should not reflect radically different costs from building a school in another.

c. This MTBPS must signal a decisive shift in macro-policy, in line with the dictates of the ANC and its Alliance. These shifts should take the following form:

i. Tight monitoring of procurement processes

ii. An introduction of a new scorecard that rewards those firms that procure services and supplies locally, and a scorecard that rewards firms that comply with the ANC definition of decent work

iii. We expect that those sectors that have been identified by the DTI as distressed will be benefitted by this MTBPS and that concrete measures will be reflected in this MTBPS to support them

iv. Decent employment will now be placed as the first variable in the performance of all project managers of government

v. Local procurement will be at the heart of the new MTBPS, as this is necessary to support the development of local productive capacity in the light of the current crisis

vi. The MTBPS will signal the use of fiscal instruments to support those firms that are re-investing their profits productively in accordance with the framework agreement. If the public sector is to maintain its planned infrastructure investment spending, then the private sector should likewise be expected to contribute as much as possible.

d. We need a bold approach to combat speculator-driven exchange rate appreciation: It will be a huge omission if the issue of the exchange rate does not feature in the MTBPS. COSATU consistently argued for a consistent macro-policy framework to support job-creation. When government spends, we need to ensure that each Rand supports the domestic economy as much as possible. However, the strength of the exchange rate, driven by speculative capital inflows, dims hopes that much can be achieved by maintaining planned infrastructure spending. What we need now is a weaker exchange rate to ward-off imports and to ease pressure that is now being felt by our local producers, especially those firms that are exporting and those that are competing with imports. Some firms are left with barely a few months before they are forced to shut down because the exchange rate makes them unsustainable.

e. Fiscal policy needs to be expansionary, but monetary policy needs to ease: COSATU has called for a more aggressive cut in the interest rate. But the Reserve Bank is not concerned about the blood-bath that is happening in the labour market. We have lost 475 000 jobs in just 6 months. When economies all over the world are shifting gears to protect jobs and livelihoods, our Reserve Bank decides to maintain high interest rates, so that only financiers rake in profits at the expense of real producers and employment. Once again, COSATU says it will be a huge omission if this MTBPS does not address this major policy misalignment with our Polokwane mandate.

High interest rates only serve to attract speculators who strengthen the currency and destroy the local productive base. High interest rates also tighten credit market conditions and impose a heavy interest burden on firms and households. Finally a high interest rate environment also constrains fiscal policy because resources are diverted towards paying high interest on public debt. In order to allow for more fiscal space, COSATU argues that the interest rate should be at a maximum of 3%. The timid response of the Reserve Bank is condemning our economy to a very long recession.

f. Supporting productive capacity and employment requires a co-ordinated fiscal-monetary response: A low interest rate will weaken the currency, block the output adjustment of the current account, and stimulate domestic demand. The current stance, which is still informed by the need to target inflation, should be urgently replaced by a stance that makes decent employment the overriding objective of policy. This means a management of the exchange rate, and low interest rate to stimulate domestic investment and to discourage speculative capital flows, that fuel the financing of non-essential consumption.

g. Tax on non-essential consumption imports: Fiscal policy should tax non-essential consumption imports to ease pressure on the current account, and to lift the burden of adjustment from output and employment. This will support national saving and ease the current account deficit.

h. No compromise on social commitments: This MTBS must make bold statements to pursue social development objectives. Specifically the NHI and the broadening of social safety nets need to be placed on the agenda. No family in this country should go to bed without food. Those social commitments also extend to areas such as education and safety and security. We expect that students and institutions of education will be appropriately funded so that when we emerge from this crisis we have a better workforce, to build a better society.

i. NEDLAC: The misalignment in policy will be subject of discussion at NEDLAC. The current economic crisis has been sparked by global factors, but its propagation is influenced by policy choices. Bad policy co-ordination will plunge our country into further depths of poverty. We need an urgent alignment of policy for us to get out of this crisis. This is a matter that we will table in the coming months at NEDLAC.