Cosatu’s September Commission calls for a larger civil service and a reformed tax system in the war against poverty, reports Sechaba ka’Nkosi
The Congress of South African Trade Unions (Cosatu) takes another swipe at government economic policy in the September Commission report. The union federation calls for a shift in spending to development, and a bigger civil service to generate employment.
The commission was appointed by the federation’s central executive committee last year to define the role of the trade union movement in South Africa. It is headed by Cosatu’s second deputy president Connie September, and its commissioners include four other members of the federation’s national office bearers, Deputy Minister of Mineral and Energy affairs Susan Shabangu and MP Phillip Dexter.
Cosatu criticises the targets set out in the growth, employment and redistribution (Gear) strategy as both ambitious and idealistic. It says emphasis on fiscal discipline has neglected to address the developmental needs of the country.
The federation says if Gear fails to meet its targets, as Cosatu suspects it will, the government will have two choices: to abandon the strategy and become more developmental, or to blame its failures onlabour and other forces opposed to it and, therefore, adopt harsher forms of economic reform.
To avoid this, Cosatu, led by Sam Shilowa, says redistribution must be fundamental in a war against poverty.
“The extreme contrast of wealth and poverty in South Africa makes redistribution a necessary condition for economic growth. A trade union strategy for state-directed redistribution is also a strategy for economic growth. The contrast between the blatant wealth of a minority and the desperate poverty of the majority will continue to tear apart the fabric of society, generating crime and social instability. This is hardly going to improve investor confidence,” argues Cosatu.
The federation says tax revenue is substantially lower than in comparable developing countries and advises the government to reform the tax system to target the wealthy and relieve the tax burden of lower- and middle-income groups. If deficit targets have to be met, taxes must be increased from 25,7% to 31% of gross domestic product to generate an extra R25-billion for the national coffers.
Another suggestion is for a substantial reduction in interest rates. Cosatu says lower interest rates would increase the purchasing power of consumers, facilitate the shift of capital from financial markets to productive investments and reduce the burden of public debt on the government.
The federation also calls for a review of the public service pension scheme as a means to reduce the Budget deficit. It says the government spends about R90-billion to top up the fund so that the fund can meet its obligations, putting a further strain on the economy.
Instead, government must introduce a pay- as-you-go system. This means the government should stop subsidising the fund and divert that money to servicing the Budget deficit.
This suggestion could put Cosatu in conflict with unions that favour government participation in the fund, and argue that the funds would not be able to meet their obligations if government pulled out.
However, a surprise element in the report is the federation’s rejection of a leaner public sector. Cosatu says the state has an obligation to extend the provision of basic services to those who were previously sidelined. The state needs to improve staffing levels, train civil servants and develop effective management to improve its institutional capacity.
“A reduced state cannot meet the needs of social transformation and development, and is inappropriate in a society with our levels of unemployment.
“We propose the goal of a public sector which is enlarged to the extent required to effectively deliver universal services to all our people,” the document states.
Cosatu concludes by advocating the regulation of the Reserve Bank and the financial markets.
“Policies should focus on producing more wealth and more and better job opportunities, meeting the needs of all citizens and allowing for the participation of workers to determine the conditions of their economy and priorities of economic policy,” says Cosatu.
The September Commission report is scheduled to be released soon to give enough time for discussions among members before the federation’s 6th national congress.