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The Federation of Unions of South Africa (FEDUSA) is calling on Finance Minister Pravin Gordhan to introduce measures that will accelerate the implementation of the nine-point plan when he delivers his Budget Speech on Thursday.

FEDUSA believes that the plan, first announced by President Jacob Zuma in his State of the Nation Address in 2015, remains the finest blueprint for stimulating inclusive growth and creating much needed jobs.

Statistics gathered domestically last year demonstrate the stark need for reinvigorating the nine point plan as growth was stuck in the lower rungs, and forecast to recover by a mere zero point eight percent this year. Although the unemployment rate has dropped from 27.1 percent in the third quarter to 26.6 percent in the fourth quarter of 2016, it is still unacceptably high.

These bleak numbers are reinforced by the International Monetary Fund (IMF) concerns about threats of political instability, falling commodity prices, policy uncertainty and an economy that it forecasts will grow only by one percent at most in 2017.

FEDUSA would like Minister Gordhan to underscore the importance of the investment component of the nine point plan which calls for the establishment of an investment of clearing house that will eliminate administrative impediments and provide greater policy clarity.

The union federation believes that the launch of the InvestSA facility announced by President Jacob Zuma on the eve of his SONA 2017 constitute such an investment clearing house and should be supported by all social partners leaders.

“Our government needs to ensure policy certainty and clarity, and a regulatory environment that does not make it cumbersome for companies to make profits, create jobs and hire new people,” says FEDUSA General Secretary Dennis George.

“For its part businesses should work tirelessly to raise capital for investments from domestic markets, to drive higher inclusive growth and employment creation. Labour leaders need to understand the importance of creating a stable and harmonious industrial relations environment by embracing the balloting of members before embarking on strikes, ensuring that their members adhere to picketing rules, and do not resort to violence and damage of property during strikes. Workers also need to link their wage demands to inflation increases and productivity improvements”.

George says eliminating structural impediments will necessarily involve decentralising the economy, which currently excludes any meaningful participation by black people.

“After more than 20 years of democracy, FEDUSA believes that economic opportunities in our country should not continue be enjoyed by a few privileged families and individuals but rather that it is time that government moves with speed to remove structural impediments that constrain the broader participation of black companies and communities in the economy,” says George.

“Specifically, the business models of most, even not all lucrative food and retail fuel franchises in South Africa today are highly monopolistic and have put up stiff and rigid barriers for entry by black companies and individuals in the form of prohibitive unencumbered cash requirements, demands of track records spanning many years, in addition to heavy shopping mall rentals of more than R30 000 a month”.

These sentiments were corroborated by President Zuma last week during the InvestSA luncheon:
“After two decades since democracy, the black majority still remains largely outside of the mainstream economy. Social justice cannot be achieved if we allow the status quo to persist,” President Zuma remarked.

FEDUSA would also like Minister Gordhan to seriously consider lowering the tax burden for the manufacturing sector, a sector with a high potential of job creation for young people and unskilled adults but one that investors currently find unattractive because of onerous tax obligations.

According to the latest Word Bank country report, “there has been a significant deterioration in the South African economy’s capacity to direct private investment toward sectors with growing economic potential, manufacturing sectors in particular since 2008”.

On comparing the tax regime in manufacturing with those of other sectors in South Africa such as mining and construction, the Bank concludes that:

“Lower marginal tax rates for the mining and construction sectors make private investment in these more remunerative despite much lower growth and job creation returns for the economy at large. Nonetheless, by reducing the tax burden of firms, investment tax incentives have encouraged additional investment in agriculture, construction, manufacturing, trade, and other services.

“Furthermore, the existence of large employment multipliers brings the fiscal cost of job creation to a fraction of total labour costs, especially in the manufacturing sector. Investment tax incentives have thus contained job destruction in industrial sectors, and explanations for industrial contraction since democracy must be found elsewhere, possibly among insufficient skills and infrastructure, policy uncertainty, a volatile rand, and complicated labour relations,” the Bank concludes.

Issued by FEDUSA