Tuesday, November 23, 2010

Keynote Address Delivered by SACP General Secretary for Red October

Keynote address delivered by SACP General Secretary Cde Blade Nzimande at the launch of the 2010 Red October Campaign

3 October 2010, Kwaggafontien, Mpumalanga

Financing Development - with and for the workers and the poor

Comrades and friends, welcome to the launch of our 2010 Red October Campaign. Thank you for hosting the national launch of this very important annual SACP campaign here in Kwaggafontein, Mpumalanga.

2010 marks the 11th anniversary of our Red October Campaign. Since 1999, we have campaigned around a different Red October theme each year. We chose each theme because it was an issue around which we wanted to mobilise and organise workers and the poor in our communities. Themes have ranged from Land and Agrarian Transformation and Health Care for all, to Transport and the fight against crime and corruption.

Why Celebrate Red October?

In 1917 in the Soviet UNION, under the leadership of Lenin, the Bolsheviks won power and installed a communist government in that country. The years following where to witness one of the best periods in the development of the Soviet Union.

When they came into power this proved that another world is possible. We celebrate Red October to remind all and sundry that a world that is characterised by hunger, poverty, deprivation and want is not given – it is imposed on humanity by the system of capitalism, a system where the creativity of man is being used to enrich a few, which we must overcome.

Capitalism has failed humanity. It has left behind the majority of citizens of the world, women and children, victims of war, hunger and disease. In pursuit of higher profits our environment has been destroyed. This is why Socialism remains the only alternative to problems of humanity.

Some of the reasons why the Bolsheviks were able to achieve such a resounding victory is because they were properly organised, they had slogans that spoke to the people (Peace, Land and Bread; Power To the Soviets), they ran a successful propaganda machinery in the form of Pravda (Truth).

This challenges us to continue to build a strong SACP, with a cadreship that is highly political and disciplined – discipline was a key factor in the success of the Bolshevik revolution. We must continue to immerse ourselves within the masses as we take forward our resolutions to build voting district based branches. We must articulate the concerns of the masses like the Bolsheviks did. We must continue with our onslaught on neo-liberal and capitalist propaganda which continues to present the capitalist system as if it where pre-ordained for humanity.

Our theme for 2010!

Our theme this year is "Financing Development - with and for the workers and the poor". We have chosen this theme to focus attention on the following:

our five national development priorities - decent work, health, education, rural development and fighting crime;
who the beneficiaries of our development initiatives should be; and
how our ambitious plans in each of these priority areas can be funded.

The fundamental logic behind `Financing development` must be investment into productive activity and sustainable support to government`s five priorities. To link our funding of development and development finance to the priorities will integrate many of our past Red October Campaign issues. This includes investment into infrastructure for decent jobs, developmental investment of workers` retirement funds, funding of investments into rural development, including land and agrarian transformation, the establishment and funding of the NHI, as well as a housing subsidy regime for the workers and the poor, and mechanisms for funding higher education for the children of the working class, including for the `missing middle` - those who do not qualify for government assistance because they earn too much, yet do not qualify for education loans because they earn too little.

This theme also brings us back to the roots of Red October in 2000 when the theme was "Financial Sector Transformation - make the banks serve the people".

The time is right to revisit financial sector transformation - but with a new focus. We want to report back to all the people who have supported our campaign over the years; to assess what progress we have made and the challenges we still face; and to ask you to continue to stand firm with us as we include in our campaign a special focus on the role of public Development Finance Institutions in supporting our development priorities.

2002 Red October background

Our original Campaign resulted in the 2002 Financial Sector Summit, where Community, Labour, Business and Government came together and signed 13 Summit agreements, including commitments to:

Universal access to financial services
Legislation for co-operative banks
Regulation of credit bureaus
Infrastructure investments to address legacy of apartheid
DFIs to promote development
Ending discrimination on basis of redlining, HIV/AIDS

These 13 agreements were supposed to be implemented as a package that would transform the way the financial sector - both public and private - would work in future.

Achievements of the SACP led Financial Sector Campaign

First, let me report on some significant progress in achieving the 2002 Summit Agreements.

1. In response to our call for universal access, banks introduced the Mzansi account and more than 6 million of the previously R19 million "unbanked" people opened accounts. However, only 2,5 million Mzansi accounts are active because it does not include features we wanted, such as no bank charges and loans. We have not achieved the goal of providing affordable finance for essentials such as housing, education and other big expenses. Redlining and HIV/Aids discrimination has ended.
2. In the 5 years from 2004-2008, financial institutions invested R64,6 billion in Targeted Investments i.e. low-income housing, black-owned SMEs, resource-poor black farmers, transformational infrastructure. However, this was below the target of R73,5 billion.
3. One target was vastly exceeded. The target for Finance for BEE deals was R50 billion but the actual investment was R101 billion. Many financial institutions regrettably saw transformation and BBBEE as concluding once-off, narrow-based BEE deals with a small number of aspirant black owners who were politically well connected at the time. They do not share our perspective that BBBEE is an end-goal, not a single deal.
4. Skills development, employment equity, procurement from small black businesses, and so on, have also achieved, but the targets were low.
5. Other Summit agreements have resulted in far-reaching changes which we demanded:

The passing of the National Credit Act in 2005, which regulates credit providers and bureaus.

The Co-operative Banks Act, was passed in 2005, following the Co-operatives Act. Some savings co-ops now preparing to be licensed as co-operative banks.

The Competition Commission inquiry into our very high bank charges and access to the National Payments System (even though its recommendations have hardly been implemented.

Overall, and despite these, our assessment is that we have not made enough progress to say we have achieved our goal to "make the banks serve the people”. Banks, insurers, investment managers and other sector players remain driven by maximising profits for shareholders and on the whole, resist transformation that improves the lives of the workers and the poor.

Our experience in 10 years of campaigning for a financial sector committed to our national development goals raises the question: can we transform the financial sector through voluntary agreements? Isn`t it time for our elected policymakers and lawmakers to use the power given to them by the people they serve, to pass laws to "make the banks serve the people"?

We are a developing country, dealing with the legacy of apartheid, massive unemployment, deepening poverty and growing inequality, should we not have laws that not only request but that require banks to reinvest in the communities from which they make their profits? Shouldn`t we have conditions attached to banking and insurance company licences that require them to provide affordable, appropriate services in rural areas?

Our Red October 2010 call is for the Community Reinvestment law to be updated and re-introduced in Parliament. The draft Community Reinvestment Bill was withdrawn from Parliament in 2002 in the hope that the voluntary Financial Sector Charter would deliver equal, if not better, investment and access. The establishment of the Financial Sector Charter Council, on which Community, Labour, Government and Business, oversee transformation initiatives, has implemented certain of the 13 agreements, but not others. We want to keep the voluntary Charter, but our experience shows that we need laws and not only voluntary agreements, to make the financial sector meet our transformation and development needs.

We also call for conditions to be attached to bank licences - just as they are in other countries - to force banks to provide adequate and appropriate services to all our people, especially those in both densely populated and rural areas.

Financing development

Let me now come to the issue of how we fund our development priorities in a responsible and sustainable way. In the 2002 Financial Summit agreements, we identified the developmental role that Development Finance Institutions (DFIs) need to play. However, these institutions remain either largely untransformed or dominated by elite elements who see them as sources of cheap, easy money for enriching themselves.

The current juncture presents an opportunity to succeed in our campaign to ensure DFIs play a more assertive, targeted developmental role. We are more likely to succeed in the wake of the global economic crisis, the South African recession, a million job losses and deepening poverty.

We need to acknowledge the work undertaken by government in some of its intervention including the Industrial Policy Action Plan 2, the discussion on the new growth path and the work undertaken by the Economic Development Ministry on realigning the DFI`s.

Red October 2010 must start the long-overdue national debate on whether the investment mandates and strategies of our DFIs promote the five priorities in government`s development programme. One of our questions is whether the DFIs are still locked in the pre-Polokwane paradigm, trying to mimic commercial lenders, ignoring their obligation to finance development that benefits the workers and the poor?

What investments have the DFIs made in the past 10 years and have these investments benefited the majority of South Africans?

Where has the Industrial Development Corporation invested its billions in the past 10 years? How many jobs were created? Were its investments responsible and sustainable? More importantly, is the mandate of the IDC aligned to the government`s 5 development priorities?

Where has the DBSA invested its funds since 2000? Is it involved in infrastructure projects that make a positive difference in the lives of our people?

Does the Land Bank support black farmers, or have its funds been used to develop golf courses and game farms for the rich?

Noting the corruption which has tainted the bank in the past, what is its mandate going forward? Is the bank aligned with our rural development priorities, or is it proceeding with too much caution, careful not to upset "the market" and the status quo?

Where are the projects funded by the National Empowerment Fund, Khula, SAMAF and other institutions whose purpose is to facilitate development?

Do we get value for money from our many provincial development corporations - MEGA, Ithala and others? Do they create jobs and fund productive investments? Or are they preoccupied with tenderpreneurs and narrow BEE deal making at the expense of the very workers and the poor that they were set up to develop? Are the mandates of the provincial development corporations aligned with our 5 priorities? Their investments should be in responsible, sustainable projects that create decent jobs, develop skills, provide infrastructure in our schools, colleges, clinics and other public facilities.

Last but not least, is the mandate of the Public Investment Corporation appropriate and developmental? The PIC says: "...we benchmark our investment performance against market-driven indices, enabling our clients and shareholder to compare PIC`s returns to those achieved in the marketplace." In pursuit of this mandate, the PIC`s Property Portfolio has investments of R23,4 billion (March 2009 report) including luxury shopping malls like Sandton City in Gauteng and the Pavilion in Durban. Throughout our financial campaign we have argued that workers should get a return on the investment of their savings that allows them to live in dignity when they retire. But why should this prevent investment of their savings in infrastructure in their own communities during their working lives? Should the PIC be investing in Sandton City or should its resources be funding a national priority, such as our rural development programme in Mpumalanga?

Why can`t the PIC address the problem of the ‘missing middle` in both housing and finance for higher education? It is perhaps only in South Africa – as compared to other countries at our level of development - that an employed working class is unable to afford decent housing and access to higher education. Children of employed workers in our country continue to swell the ranks of the poor because they do not have access to post-school education. In South African conditions today, focusing on the ‘missing middle`, is simultaneously focusing on the poor and transforming the conditions that reproduce poverty in our country. It is significant that the issue of housing affordability is currently at the centre of working class struggles.

These are just some of the questions and issue we will raise during Red October. Of course, some DFI information is in the public arena and we are aware that the government is working to align the DFIs with government priorities. During Red October, we will engage with government departments which are responsible for the DFIs and will gather information on development projects as we hold Red Days throughout the provinces.

Our Red October call is for DFI mandates to be comprehensively reviewed and aligned to the 5 key priorities. In line with this, infrastructure investment must focus on:

backlogs in schools, colleges, universities - including sports facilities
health facilities as part of building the NHI
rural access roads, bridges, dams, water
police stations in townships and rural areas
DFI funding must be for job-creating investments, not narrow BEE deals. We must also use this campaign to deepen our fight against corruption. In pursuit of narrow BEE enrichment and equity funding, our DFI have experienced serious corporate governance challenges. Just like many SOE`s their duplication has been used to dispense patronage in some instances – it is monies from some of these institutions that is now finding its way back into the movement to finance activities that are mainly anti- communist in nature.


It is important for this campaign to be rooted in the real concerns of the workers and the poor in our communities. While common issues face our people throughout the country, there are also issues specific to each province. Here in Mpumalanga all of the 5 key priorities present huge challenges, but we will highlight just one: rural development. We were shocked to learn that a development project to bring irrigation to parts of Moutse - provided by the democratic government - has since been diverted so that the people no longer have water to grow food. Restoring water to the small farmers of Moutse is just one example of what we must address during Red October to ensure that development is "with and for the workers and the poor".

During the month, each province will focus on provincial development initiatives and their outcomes. We will announce developments in the campaign throughout the month. The Red October closing rally will be held at the end of the month in Pietermaritzburg, KwaZulu Natal.

Comrades, in closing, our Red October call is for a National Summit on Financing Development to be held early in 2011. A Summit will give all stakeholders the opportunity to assess progress in implementing the 2002 Financial Sector Summit agreements. We will also be able to formulate how all financial institutions, including DFIs, should contribute to government`s key priorities. The Summit will provide a platform for institutions created to promote financial transformation to report their progress. The time is right for a follow-up National Summit - this time with a focus clearly defined by our 5 development priorities.


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