Ajoint declaration was recently released by a group of manufacturers, the Manufacturing Circle, and the three main South African trade union federations – the Congress of South African Trade Unions, the National Council of Trade Unions and the Federation of Unions of South Africa.

The declaration, titled Industrial and Eco-nomic Policy Interventions Needed to Create Decent Jobs, comes at a time when there has been a decline in the manufacturing sector and significant job losses. The declaration states that urgent interventions are required to prevent further loss of productive capacity in South Africa. The signatories say that they strongly support the new Industrial Policy Action Plan (Ipap2), which puts in place a programme to support industrial development. Ipap2 also says that the macroeconomic envi- ronment has to be supportive of industrial development.

The declaration by the Manufacturing Circle and the trade union federations asks government for macroeconomic interventions that will support manufacturing investment and jobs. The parties call for government action to reduce the volatility of the exchange rate and to deal with the overvaluation of the exchange rate. They also want lower interest rates for industrial production.

When employers and workers unite in this manner and call on government to act, we can be sure that they are not lobbying. They face a crisis. The strange thing about the declaration is that it asks government to make the necessary policy changes to support government’s own plans. The signatories must recognise the tensions within government over macroeconomic policies.

It appears they are providing support to those in government who want economic poli- cies that promote the deepening and diversifying of South Africa’s industrial base. Therefore, one can infer that much of their declaration is directed at the Minister of Finance and the National Treasury to change macroeconomic policies. They seem to be saying that they want to work with government to implement its industrial policies but that macroeconomic policies have contributed to the loss of produc- tive capacity and will hinder successful implementation of industrial policy.

Our country is losing productive capacity. High interest rates cause a misallocation of capi- tal to speculation and away from productive investments. Volatile and overvalued exchange rates hurt the South African economy and lead to firm closures and job losses. I believe that the declaration is a wake-up call to government to act on its stated commitment to building a developmental State. Government must align its economic policies for the sake of industrial and economic development.

Unfortunately, current macroeconomic policies support the status quo. Their main purpose is to signal to people in domestic and global financial markets that South African macro- economic policy is credible. South Africa is committed to low inflation and low government Budget deficits. Further, they say that the South African government will ensure market-orien- tated policies and deregulation of financial markets. They have caused the State to retreat from markets and ensure that markets set prices, including exchange rates. While these policies have been a disaster for industry, they have been a boon for finance. The financial sector in South Africa has become significantly profitable and has grown disproportionately to the rest of the economy.

In a world where financial markets have grown out of control, the approach taken by the National Treasury creates significant risks for South Africa’s economic developmental project. In fact, the National Treasury’s market-orientated approach is not that of a government that wants to build a developmental State but is more suited to a country that has already achieved a high level of development and even dominance in global markets.

The joint declaration by manufacturers and trade unions starkly reminds government that we are not a developed economy and that we have lost ground in terms of our industrial deve- lopment and employment over the past decades. The role of the National Treasury should not be to solicit credibility in global financial markets but to protect the South African economy from the craziness, destabilising capital flows, financial crises and contagion we face from financial markets. We need developmental economic poli- cies, including developmental macroeconomic policies.