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The Congress of South African Trade Unions has noted with great concern the report that shows that South Africa’s economy as measured by the GDP has shrunk by a massive 51% during the second quarter of the year.  Unfortunately, beyond these figures is a reality that sees more people sliding into poverty and unemployment in this country.

We are not shocked by these numbers because we warned government that adopting a regressive and contractionary policies that only focus on cutting social expenditure and weakening the capacity of the state are misguided. Government’s outright reduction of spending in an environment of depressed private sector investment and household spending can only worsen things. If you want to resuscitate something, you cannot suffocate it. 

These numbers also prove right our assertion that President Ramaphosa’s initial R500 billion stimulus was inadequate and underestimated the economic threat facing the country. This failure to inject new demand into the economy failed to deliver the desired multiplier effect. 

Even the R200 billion loan guarantee scheme that was meant to help businesses under distress has seen 37% of applicants rejected because of a strict lending criterion adopted by the banks. 

We are not shocked that manufacturing is down by 75% because government has failed to support and encourage South Africa’s local manufacturing by buying local, starting with PPEs. About 65% of our imports are manufactured goods and this high import penetration is dislocating domestic firms and killing the sectors.

SARS needs to ensure a massive expansion of its customs enforcement capacity. The government should put measures in place to encourage local businesses to increase local production and stimulate job creation.

The economic interventions introduced by government so far lack a coherent industrial strategy that plans in detail what sectors should grow, and how as the basis for job creation. We need an industrial strategy that will be good for the workers and communities by creating quality jobs and meeting the basic needs of the people.

We need a plan that will help save jobs that already exists and help us create new quality jobs. We need government to ensure that people have access to wealth, including housing and land, and through co-ops.

The current interventions have only been focused on dividing the cake that is there and has not focused on baking a bigger and bigger cake that will ensure that there is enough cake for everyone.

The failure to force banks and other lenders to extend loan repayment holidays to struggling consumers and businesses and debt forgiveness for those consumers who have lost wages and jobs and businesses has led to many workers losing their houses, cars and other assets. These workers will be backlisted and their participation in the economy will be greatly diminished.

The Construction sector has shrunk by 77% and Transport crashed by 68% this calls for government to expedite the Infrastructure Programme and  focus on investments that can create jobs and unlock economic activity in these sectors, ports, freight and passenger rail, etc.

Mining fell by 73% and this is a reminder of the impact that load shedding is having on the economy.  The urgent adoption of the Eskom Social Compact and Implementation Plan by the Presidential Working Committee is long overdue. The economy cannot grow without reliable and affordable energy supply.

But another big problem that will continue to hinder economic growth is corruption. According to the State Security Agency nearly R80 billion passes through the country’s points of entry illegally every year, putting South Africa as one of the countries on the continent with high illicit financial movements. The South African economy has been affected negatively by decades of transfer pricing and other forms of illegal capital flight by multinational companies

According to Minister Ebrahim Patel -Corruption costs the SA gross domestic product (GDP) at least R27bn annually as well as the loss of 76 000 jobs that would otherwise have been created. 

A World Bank study on competition in SA noted, for instance, that in the case of four cartels in maize, wheat, poultry and pharmaceuticals – products which make up 15.6% of the consumption basket of the poorest 10% – conservative estimates indicate that around 200 000 people stood to be lifted above the poverty line by tackling cartel overcharge.

The Auditor General pointed out that municipalities spent R1.26 billion on consultants for financial reporting services and in the process, they lost R32 billion to corruption and wastage. 

We need a political will to fight corruption. Aggressive prosecution is the only dependable vaccine to cure the virus of corruption. There is no economy that can grow with these leakages. To deal with corruption, the government needs to introduce an online, transparent single public procurement system for all organs of state, e.g. national, provincial, and local government, public entities and SOEs.

The Federation hopes that this will jolt the policymakers and decision makers into action or else our worst-case scenario of a deep economic depression is likely to come true.

Issued by COSATU