The State of the Nation address is the government’s first major policy statement following the election. The Congress of South African Trade Unions (Cosatu) central executive committee assessed it against the commitments the African National Congress made during the campaign. From this standpoint, the address continued the prioritisation of job-creation and fighting poverty. The government still seems dedicated to addressing the main problems Cosatu members face.
Its position contrasts with the pressure from some business commentators and multilateral institutions to focus narrowly on maximising the growth rate, with the false promise that this will solve all our ills. But while the government has moved some way toward meeting workers’ needs, a lot more needs to be done.
The progressive shift in government policies over the past few years has emerged from:
Cosatu welcomed President Thabo Mbeki’s argument that dealing with poverty and unemployment requires ”encouraging the growth and development of the first economy, increasing its possibility to create jobs”; ”implementing our programme to address the challenges of the second economy”; and ”building a social-security net to meet the objective of poverty alleviation”.
This approach represents great progress after the tendency of some government officials at last year’s Growth and Development Summit to ignore the need for restructuring in the formal sector. These officials acted as if only the poor and unemployed need to change their ways.
The address did not, however, spell out what kind of structural changes are needed in the formal sector. Its key proposals are:
Cosatu has long supported the government’s emphasis on improving the education and skills development systems. But the proposals in the address do not yet add up to a strategy for restructuring the formal sector to create large-scale employment.
Cosatu’s research demonstrates that, since 1994, the fastest-growing sectors have also been the most capital-intensive ones — aluminium, platinum, heavy chemicals, telecommunications and financial services.
Between 1994 and 2002, sectors growing more than 5% a year averaged a R500 000 investment per job. In contrast, the slower-growing industries, which expanded less than 3% a year, required only a quarter of the capital for each job. Cosatu has long called for sector strategies to reverse this trend toward more capital-intensive production.
These strategies, based on engagement between the government, business and labour in each industry, would focus on ensuring that every major industry does more to contribute to employment creation and equity. Some progress has been made in mining, clothing and textiles, IT, the financial sector, auto, metals and chemicals. At the growth summit it was agreed to extend this process to additional industries. But to succeed, the sector strategy process needs more vigorous government support, with a clearer focus on employment creation. Unfortunately, the State of the Nation address did not reflect on the state’s commitment to sector strategies, although they featured in the ANC’s election manifesto.
Another major concern remains the commitment in the address to accelerating free trade agreements with China and India. Light industry has been able to take strong advantage of agreements with industrialised countries. But the benefits of free trade with these two countries (with their very low wages and undervalued currencies) are less obvious.
Any trade agreements would have to be carefully structured to avoid harming employment. Moreover, they must be linked to more active use of safeguard measures, as permitted by the World Trade Organisation.
The address did not refer to land reform. Cosatu’s estimates suggest that reaching the manifesto’s target will require a tenfold increase in the land-reform budget. Nor did the address incorporate the manifesto’s promises on the security of casual and outsourced labour.
Finally, the address was notably silent on macroeconomic policy in general, and monetary policy in particular. In contrast, the ANC’s manifesto made a strong commitment to lowering interest rates. South Africa’s interest rates are now exorbitantly high by world standards, despite very low inflation. High interest rates have slowed economic activity directly and have contributed to the overvaluation of the rand. The hope of a revitalised export drive, also included in the address, seems doomed to failure unless this problem is addressed urgently.
Cosatu’s executive committee agreed on the need to continue to engage with the government on these issues, while supporting the overall development effort. Our work will continue to be guided by our 2015 Programme, adopted at our eighth national congress last year. The programme identifies the following key areas for policy work:
The committee saw the election and the State of the Nation address as moments in the longer-term process of engagement about the direction of our revolution after 1994. It has seen great progress in the past four years, and expects to make further gains for workers and the poor in the future.
Bheki Ntshalintshali is deputy general secretary of Cosatu