COSATU’s Summarized Response to Treasury’s Economic Strategy
September 17, 2019
COSATU acknowledges the National Treasury’s Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa document. The Federation in principle is open to discussing any contributions from government, business, and all other social partners that seek to find ways to address our economic crisis. We are the biggest proponents of growing the economy and creating decent work for all South Africans.
We have been engaging with government and business at Nedlac to find a uniquely South African developmental economic framework before and after the Presidential Summits. We thought that we were making progress and that two Summits gave everyone a chance to make their submissions, discuss contentious issues and find common ground. The fact that after eleven months of reaching a consensus, we are being presented with a new economic paper that walks back all the recommendations of the summits and reopen the discussions again is deeply disappointing.
The National Treasury is proving to be an unreliable partner and it negotiates in bad faith. COSATU is extremely concerned with regards to several fundamental aspects of Treasury’s paper. These centre upon but are not limited to the following key areas:
Cabinet
COSATU is not sure as to the exact status of the Paper since it does not appear to have been processed nor adopted by cabinet. The problem with this is that it speaks to the roles and responsibilities of virtually all departments. This paper walks back the President’s State of the Nation Address and this creates policy uncertainty and confusion.
What is also troubling is that the paper appears not to be well informed about the work of other departments e.g. the Department of Communications & Digital Technology, the Department of Trade & Industry and the Departments of Mineral Resources & Energy. This makes it very difficult to engage with the government when it intentionally presents factually contentious proposals and some cabinet members are distancing themselves from but also when some Ministers are challenging its coherence.
The National Treasury does not seem to fully appreciate that the Nedlac Act requires that all socio-economic and labour market legislation and policies must be tabled at Nedlac for engagement. The paper undermines the very significant engagements that government has had at Nedlac on measures to turn the economy around.
All social partners, including the President on behalf of the government, signed the Jobs Summit Agreement and plan. There is a post-Summit Nedlac task team charged with overseeing the implementation of the Jobs Summit Agreement. Recently it was established that there will be meetings on the first Monday of each month, that the leadership of social partners at the highest levels will meet at Nedlac to discuss specific sectoral interventions and the implementation of the Jobs Summit Agreement. These meetings are convened by the President and National Treasury is part of these processes. The Paper directly contradicts, conflicts with, confuses and undermines these collective approaches. Many of the issues raised in the Paper are being discussed in these Nedlac processes.
Alliance
COSATU is of the view that government is led by the elected majority party, the ANC. This paper is reintroducing the divisive approach that destroyed the Alliance under President Thabo Mbeki. The AND and the Alliance cannot be told to simply make a written submission to bureaucrats at the National Treasury. This is how the toxic and failed GEAR policy was introduced and this is why the ANC is fast losing the support of the people. Either the ANC is in charge or it is not, the Alliance cannot afford to have ministers who treat our economic challenges and policy formulation as a popularity contest and a Public Relation exercise. Minister Mboweni is only happy to see that some unaccountable editors who are steeped in toxic capitalist culture of their funders and owners approve and does not care that his own cabinet colleagues disapprove.
National Minimum Wage and Labour Market
The paper proposes the creation of one million jobs with no clear deadline. The NDP that we also opposed made these same extravagant claims, when it was rammed through the people of this country. We need to be creating on average 100 000 jobs per month if we intend to reduce our dangerously out of control levels of unemployment.
One of the most contentious aspects of the Paper is its proposals to exempt SMMEs from having to pay workers at least at the level of the NMW and to abide by the nation’s various labour legislation.
COSATU rejects this proposal in and will never agree to its implementation. It is amazing that a former Minister of Labour has agreed to such an attack on the hard-won Constitutional Rights of workers to be paid above a minimum wage.
It is an act of bad faith and an extreme provocation for National Treasury to participate in Nedlac engagements, where the NMW and labour legislation were agreed upon, including by the President on behalf of the state, and then renege on it after eight months.
Treasury proposes that SMMEs be exempt but they do not disclose that government’s definitions of SMMEs include companies employing 200 persons and less in the manufacturing sector for instance. This constitutes more than 90% of employers in certain sectors. It also includes all companies where workers are paid the NMW and this will completely collapse the NMW. To blame the NMW which only came into effect 9 months ago for our economic crisis, 40% unemployment rate is nonsensical and silly. These are problems that have been built up over decades. This proposal is also not based on any research because the National Treasury has not engaged the NMW Commission tasked with assessing the impact of the NMW or the Department of Employment and Labour. Economic growth will not be based upon paying workers poverty wages, otherwise, South Africa would long ago have achieved 100% employment levels.
Eskom
Eskom is the single biggest threat facing the state and the economy. The only proposal emanating from the Paper is to privatise Eskom through the back door by auctioning its coal assets. No logical evidence has been provided by the Paper as to why anyone would pay R450 billion for Eskom’s coal assets. This also directly undermines the President and the ANC’s commitment not to privatise Eskom. Even the Minister responsible for energy is opposed to this, as he clearly stated that his will risk the collapse of Eskom’s ability to supply the economy with a stable supply of electricity.
Macro-Economic and Fiscal Policy Matters
The Paper is oddly silent on the key policy crisis that is undermining economic growth. There are no new macro-economic policies or interventions and it only focusses on improvised and piecemeal departmental interventions or micro-economic issues. Does Treasury seriously expect the economy to grow without any macro-economic policy changes? After 25 years of the same policies and a resultant 40% unemployment rate, any properly adjusted person cannot argue for the retention of these same macro-economic policies.
Government loses approximately 10% of the fiscus to corruption, wasteful expenditure each year. The State revenue is gradually plummeting and our key SOEs are on the verge of collapse. Yet the Paper does not address these fundamental impediments to stabilising the state and SOEs and growing the economy. It would have been a better use of our time if the Paper could have spoken simply to the SOE’s alone.
It does not speak to local procurement and the long-delayed Public Procurement Bill, which will be central to driving local demand and boosting our manufacturing sectors.
Key Departmental Interventions
Many areas requiring intervention are highlighted in the Paper. COSATU agrees that many of these are in need of interventions. These include the fuel price structure, linking education to the 4th industrial revolution, dealing with the collapse of the state’s law enforcement capacity etc. However, the Paper is silent on practical proposals on exactly how these will be fixed. The Paper instead simply meanders onto the next policy area.
Strangely, again the paper is silent on the collapse of Metro Rail and PRASA, yet these entities are critical to getting workers to work on time and growing the economy.
The paper is silent on customs fraud, the lack of enforcement of customs duties, corruption in SARS and at customs etc. This directly undermines the massive investments the state has put into the clothing industry for example by exposing it to a flood of illegal cheap subsidised imports. It directly undermines the commitments of the President and the SONA. The silence on customs fraud is especially curious as it is a direct responsibility of Treasury and one in which it has dismally failed.
Way Forward
The author(s) of this paper is either fundamentally dishonest or innocently delusional and either way we deserve better as a country. The entire government is either willfully blind or recklessly indifferent to the potential chaos that this paper will create. This paper only succeeds in introducing policy uncertainty and potential labour market conflict.
The Paper undermines the very policy certainty that investors, government, the rating agencies, unions, business have been calling for. This can only jeopardise the social dialogue and compacts that are the glue to move the economy forward.
The economic crisis that we are facing happened on the watch of the same National Treasury and they should not delude themselves into believing that we will allow them to use us as their experimental guinea pigs again. The results have shown us that the bureaucrats at National Treasury do not have a clue as to what they are doing because if they did, we would not be in this mess.
Both GEAR and NDP were introduced with much fanfare to an eager public and we warned that both theses documents were flawed and we have since been vindicated.
COSATU is not going to repeat the detailed economic and other interventions that it tabled during the Nedlac Jobs Summit engagements and several other previous engagements with the state and the legislature on the economy. The numerous papers in the Jobs Summit process, for instance, were made available to Treasury’s Nedlac team. This includes the Presidential Jobs Summit Agreement which captures most of COSATU’s key economic proposals.
This paper has exposed fault lines in the cabinet and this does not inspire confidence at all. A cabinet that does not have a relationship of trust amongst colleagues and that is engaged in territorial internecine power struggles will not fix our economic problems. This will only leave the public unsure of whether the centre is holding or not. The question now is whether do we have a cabinet with a plan or we have a collection of individual departments vying for power chaired by a powerless president?
Issued by COSATU
Sizwe Pamla (National Spokesperson)
Tel: 011 339 4911
Fax: 011 339 5080
Cell: 060 975 6794
COSATU acknowledges the National Treasury’s Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa document. The Federation in principle is open to discussing any contributions from government, business, and all other social partners that seek to find ways to address our economic crisis. We are the biggest proponents of growing the economy and creating decent work for all South Africans.
We have been engaging with government and business at Nedlac to find a uniquely South African developmental economic framework before and after the Presidential Summits. We thought that we were making progress and that two Summits gave everyone a chance to make their submissions, discuss contentious issues and find common ground. The fact that after eleven months of reaching a consensus, we are being presented with a new economic paper that walks back all the recommendations of the summits and reopen the discussions again is deeply disappointing.
The National Treasury is proving to be an unreliable partner and it negotiates in bad faith. COSATU is extremely concerned with regards to several fundamental aspects of Treasury’s paper. These centre upon but are not limited to the following key areas:
Cabinet
COSATU is not sure as to the exact status of the Paper since it does not appear to have been processed nor adopted by cabinet. The problem with this is that it speaks to the roles and responsibilities of virtually all departments. This paper walks back the President’s State of the Nation Address and this creates policy uncertainty and confusion.
What is also troubling is that the paper appears not to be well informed about the work of other departments e.g. the Department of Communications & Digital Technology, the Department of Trade & Industry and the Departments of Mineral Resources & Energy. This makes it very difficult to engage with the government when it intentionally presents factually contentious proposals and some cabinet members are distancing themselves from but also when some Ministers are challenging its coherence.
The National Treasury does not seem to fully appreciate that the Nedlac Act requires that all socio-economic and labour market legislation and policies must be tabled at Nedlac for engagement. The paper undermines the very significant engagements that government has had at Nedlac on measures to turn the economy around.
All social partners, including the President on behalf of the government, signed the Jobs Summit Agreement and plan. There is a post-Summit Nedlac task team charged with overseeing the implementation of the Jobs Summit Agreement. Recently it was established that there will be meetings on the first Monday of each month, that the leadership of social partners at the highest levels will meet at Nedlac to discuss specific sectoral interventions and the implementation of the Jobs Summit Agreement. These meetings are convened by the President and National Treasury is part of these processes. The Paper directly contradicts, conflicts with, confuses and undermines these collective approaches. Many of the issues raised in the Paper are being discussed in these Nedlac processes.
Alliance
COSATU is of the view that government is led by the elected majority party, the ANC. This paper is reintroducing the divisive approach that destroyed the Alliance under President Thabo Mbeki. The AND and the Alliance cannot be told to simply make a written submission to bureaucrats at the National Treasury. This is how the toxic and failed GEAR policy was introduced and this is why the ANC is fast losing the support of the people. Either the ANC is in charge or it is not, the Alliance cannot afford to have ministers who treat our economic challenges and policy formulation as a popularity contest and a Public Relation exercise. Minister Mboweni is only happy to see that some unaccountable editors who are steeped in toxic capitalist culture of their funders and owners approve and does not care that his own cabinet colleagues disapprove.
National Minimum Wage and Labour Market
The paper proposes the creation of one million jobs with no clear deadline. The NDP that we also opposed made these same extravagant claims, when it was rammed through the people of this country. We need to be creating on average 100 000 jobs per month if we intend to reduce our dangerously out of control levels of unemployment.
One of the most contentious aspects of the Paper is its proposals to exempt SMMEs from having to pay workers at least at the level of the NMW and to abide by the nation’s various labour legislation.
COSATU rejects this proposal in and will never agree to its implementation. It is amazing that a former Minister of Labour has agreed to such an attack on the hard-won Constitutional Rights of workers to be paid above a minimum wage.
It is an act of bad faith and an extreme provocation for National Treasury to participate in Nedlac engagements, where the NMW and labour legislation were agreed upon, including by the President on behalf of the state, and then renege on it after eight months.
Treasury proposes that SMMEs be exempt but they do not disclose that government’s definitions of SMMEs include companies employing 200 persons and less in the manufacturing sector for instance. This constitutes more than 90% of employers in certain sectors. It also includes all companies where workers are paid the NMW and this will completely collapse the NMW. To blame the NMW which only came into effect 9 months ago for our economic crisis, 40% unemployment rate is nonsensical and silly. These are problems that have been built up over decades. This proposal is also not based on any research because the National Treasury has not engaged the NMW Commission tasked with assessing the impact of the NMW or the Department of Employment and Labour. Economic growth will not be based upon paying workers poverty wages, otherwise, South Africa would long ago have achieved 100% employment levels.
Eskom
Eskom is the single biggest threat facing the state and the economy. The only proposal emanating from the Paper is to privatise Eskom through the back door by auctioning its coal assets. No logical evidence has been provided by the Paper as to why anyone would pay R450 billion for Eskom’s coal assets. This also directly undermines the President and the ANC’s commitment not to privatise Eskom. Even the Minister responsible for energy is opposed to this, as he clearly stated that his will risk the collapse of Eskom’s ability to supply the economy with a stable supply of electricity.
Macro-Economic and Fiscal Policy Matters
The Paper is oddly silent on the key policy crisis that is undermining economic growth. There are no new macro-economic policies or interventions and it only focusses on improvised and piecemeal departmental interventions or micro-economic issues. Does Treasury seriously expect the economy to grow without any macro-economic policy changes? After 25 years of the same policies and a resultant 40% unemployment rate, any properly adjusted person cannot argue for the retention of these same macro-economic policies.
Government loses approximately 10% of the fiscus to corruption, wasteful expenditure each year. The State revenue is gradually plummeting and our key SOEs are on the verge of collapse. Yet the Paper does not address these fundamental impediments to stabilising the state and SOEs and growing the economy. It would have been a better use of our time if the Paper could have spoken simply to the SOE’s alone.
It does not speak to local procurement and the long-delayed Public Procurement Bill, which will be central to driving local demand and boosting our manufacturing sectors.
Key Departmental Interventions
Many areas requiring intervention are highlighted in the Paper. COSATU agrees that many of these are in need of interventions. These include the fuel price structure, linking education to the 4th industrial revolution, dealing with the collapse of the state’s law enforcement capacity etc. However, the Paper is silent on practical proposals on exactly how these will be fixed. The Paper instead simply meanders onto the next policy area.
Strangely, again the paper is silent on the collapse of Metro Rail and PRASA, yet these entities are critical to getting workers to work on time and growing the economy.
The paper is silent on customs fraud, the lack of enforcement of customs duties, corruption in SARS and at customs etc. This directly undermines the massive investments the state has put into the clothing industry for example by exposing it to a flood of illegal cheap subsidised imports. It directly undermines the commitments of the President and the SONA. The silence on customs fraud is especially curious as it is a direct responsibility of Treasury and one in which it has dismally failed.
Way Forward
The author(s) of this paper is either fundamentally dishonest or innocently delusional and either way we deserve better as a country. The entire government is either willfully blind or recklessly indifferent to the potential chaos that this paper will create. This paper only succeeds in introducing policy uncertainty and potential labour market conflict.
The Paper undermines the very policy certainty that investors, government, the rating agencies, unions, business have been calling for. This can only jeopardise the social dialogue and compacts that are the glue to move the economy forward.
The economic crisis that we are facing happened on the watch of the same National Treasury and they should not delude themselves into believing that we will allow them to use us as their experimental guinea pigs again. The results have shown us that the bureaucrats at National Treasury do not have a clue as to what they are doing because if they did, we would not be in this mess.
Both GEAR and NDP were introduced with much fanfare to an eager public and we warned that both theses documents were flawed and we have since been vindicated.
COSATU is not going to repeat the detailed economic and other interventions that it tabled during the Nedlac Jobs Summit engagements and several other previous engagements with the state and the legislature on the economy. The numerous papers in the Jobs Summit process, for instance, were made available to Treasury’s Nedlac team. This includes the Presidential Jobs Summit Agreement which captures most of COSATU’s key economic proposals.
This paper has exposed fault lines in the cabinet and this does not inspire confidence at all. A cabinet that does not have a relationship of trust amongst colleagues and that is engaged in territorial internecine power struggles will not fix our economic problems. This will only leave the public unsure of whether the centre is holding or not. The question now is whether do we have a cabinet with a plan or we have a collection of individual departments vying for power chaired by a powerless president?
Issued by COSATU
Sizwe Pamla (National Spokesperson)
Tel: 011 339 4911
Fax: 011 339 5080
Cell: 060 975 6794
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