Date: 09/03/2011
Source: Congress of South African Trade Unions
Title: Cosatu: Vavi: Address by the general secretary, on the Growth path, at the Barometer SA debate, Johannesburg

Facilitator, Comrade Tim Modise

Fellow speakers

Ladies and gentlemen

Thank you for the invitation to take part in this important discussion.
We live in interesting times. The newspapers and airwaves are full of highly controversial debates, provoked in part no doubt by the forthcoming local government elections. It is all the more important therefore to use a discussion like this to look behind the headlines and identify the fundamental issues and challenges we face as a country 17 years into democracy.
The core problems which underlie all others are South Africa’s levels of unemployment, poverty and inequality, whose effects seep into every corner of our national life. Unemployment remains higher than in any comparable country - 25.3% at the official level without those who have given up looking for work, 36.6% by the more realistic, inclusive definition.
Millions of South Africans are condemned to poverty, squalor and disease. Nearly two million families still live in shacks. The poor majority have no access to adequate levels of education for their children in our public schools, or decent healthcare in our public hospitals, while a small, mainly while elite can pay for world-class educational and healthcare services.
Inequality is now greater than in any country in the world and still growing. The workers’ share of national income was 56% in 1995 but by 2009 had declined to 51%. There is no official poverty line for South Africa, yet Comrade Pravin Gordhan has acknowledged that 50% of South Africans live on 8% of our national income.
Meanwhile the country’s 20 richest men enjoyed a 45% increase in wealth in 2010, and the number of billionaires nearly doubled, from 16 in 2009 to 31. Pine Pienaar, CEO of Mvelaphanda Resources, made R63 million in 2009, 1875 times as much as the average worker.

This problem may seem obvious, yet not long ago we were battling to convince the then government that South Africa’s levels of unemployment and poverty constituted a national crisis. Last month’s State of the Nation Address suggests that we have won that debate. There is now a clear national consensus that unemployment is indeed a national crisis and that creating jobs, eradicating poverty and reducing inequality has to be the top priority for everyone.
This must be the starting point for government, business and labour and we welcome the publication of the Industrial Policy Action Plan from the DTI and the New Growth Path from the EDD. The ad for tonight’s meeting ask whether the NGP is just “another case of wishful, pie-in-the-sky thinking, or does it have the full spectrum of government, business and labour support required to ensure successful implementation?”
My answer is that there is much in the NGP which we can welcome. We fully support the ambitious aim to move away from the over-dependence on the export of raw materials to an economy based on manufacturing industry, and for the creation of five million new, sustainable jobs by 2020.
There are many good short-term proposals; we have already met with government and business through Nedlac on 8 February, to start implementing some of its immediately deliverable proposals, including such relatively simple tasks as filling vacant positions in the public service, and employing young workers to fill pot-holes.
Business has committed itself to expand its training schemes for apprentices and interns, with the mining sector alone talking of training an additional 3000 workers a year. All agreed on the need for improving the services delivered by the SETAs and will be working in the task team set up by Minister Patel to look into training.
There is also consensus on the potential to create many jobs in pursuance of a Green Economy, an example being the rapid installation of solar water geysers.
COSATU however has serious concerns about the achievability of the NGP’s longer-term targets, concerns which were reinforced by the recent Budget. One problem is the absence in both the NGP and the budget of any clear indication of how government departments will be equipped to implement the far-reaching proposals and for measuring and monitoring the ambitious targets being set.
COSATU insists that any strategy must be truly an overarching developmental plan that seeks to address all the structural fault lines of the apartheid economy. It must ensure, as the Freedom Charter demanded, that the wealth of the country is shared! Therefore the focus of this programme should be on developing a new growth path that seeks to defeat the three pre-eminent challenges facing our society; high levels of unemployment, deepening poverty and growing inequality. Employment creation must be central to our economic transformation programme.
Any strategy that does not seek to systematically address the following apartheid economy fault lines will simply fail to deliver.
I. The means of production and power remain concentrated in white capitalist hands: Crucial sectors of the economy continue to be dominated by a few large conglomerates with cross directorships. These conglomerates are vertically integrated and therefore limit entry into the economy by smaller firms. In addition, there has been a rapid increase in foreign ownership of these conglomerates.
II. The structure of the economy remains mineral-dependent and is now finance-led: The economy is still very much reliant on mineral exports for foreign exchange earnings. Although some have found that manufacturing exports have increased, surpassing minerals, such exports remain driven predominantly by the core minerals-energy-complex. Petrochemicals, mining and basic iron and steel make up 69% of total exports, and are highly capital and energy intensive.
III. Control of the economy is still in white hands: Top management and senior managers continue to be predominantly drawn from the white population. This perpetuates historical networks that determine the probability of promotion and recruitment, and reinforce the colonial character of the control of the forces of production in our economy.
Further to this, the social crisis we face remains a massive challenge, despite progress registered in the past 16 years.
a) The health profile of the population has deteriorated:
b) The crisis in education persists and the quality of education is declining
c) The housing challenge is still persistent
d) Progress has been registered in meeting basic needs but affordability remains a problem
COSATU insists that our growth path must, in a comprehensive manner, seek to address these structural challenges facing the economy.
Whilst government can always claim that it has programmes to tackle all these challenges, we insist that as long as they are not seen to be one of the same broad packages of inter-related challenges that must be seen as one package that must be effectively coordinated centrally.
Further the more fundamental problem, revealed in both documents, is the glaring contradiction between their ambitious, developmental goals, which would transform the socioeconomic landscape, and the very conservative macroeconomic policies which they both continue to advocate. We believe these will ultimately sabotage the overall strategy.
These policies, implemented since 1996 by both government and the Reserve Bank, based on inflation-targeting, a strong rand and high real interest rates, have been one of the main reasons for the crisis of unemployment. Yet conservative fiscal and monetary policy stance is now expected to be a key component of a policy to end the crisis! This will simply not work.
COSATU is engaging with government and the ANC to try to convince them that we have to change to a radically different macroeconomic strategy, based, among others, on lower interest rates, a weaker rand, and more tariff protection for vulnerable industries identified by IPAP2 and NGP as potential job drivers.
It must also give a much bigger role to the state in directing investment into the sectors where jobs can be created, and intervening directly through the state-owned enterprises to create jobs.
The history of GEAR shows that we cannot rely on the private sector, and market forces, to drive economic growth, in the hope that wealth thus created will ‘trickle down’ to workers and the poor. This is the discredited theory of the ‘Washington Consensus’, which was a major cause of the 2009 global economic crisis.
Even the most developed countries are now abandoning this pro-market approach and taking quite drastic action to try to discipline the private sector, particularly the banks. How much more do developing countries need to build a strong, dynamic, but also democratic public sector and developmental state to drive the agenda of the NGP?
I hope that tonight’s meeting will help to clarify these issues and set us on the road to full employment and a more fair and equitable society.

Thank you.