The minister of finance is determinedly looking on the bright side of the economy, no matter what the unions say
Drew Forrest
The gulf between the government and the Congress of South African Trade Unions on the economy is starkly highlighted by an upbeat briefing document presented by Minister of Finance Trevor Manuel to the African National Congress’s top leadership.
The document, leaked to the Mail&Guardian, is an overview of the developments in the world and domestic economy over the past 12 months. It was presented to the ANC’s national executive committee last month.
Manuel says the ANC should take “full and collective credit for the achievements of macro-economic stabilisation … these achievements are nothing short of remarkable”. He argues that macro-economic stabilisation has protected South Africa from a “Bretton Woods structural adjustment programme” and has placed it in a much better position to weather a world downturn than other emerging economies.
The document is in graphic contrast with a recent conference paper by Cosatu official Neva Makgetla, which provides perhaps the clearest statement yet of the federation’s economic outlook. Makgetla holds that the economy has already been through a “home-grown” structural adjustment programme, involving restrictive fiscal targets, privatisation and deregulation, and has been gradually sliding into “a deep structural crisis” over the past three years.
Manuel says financial sustainab- ility means that “we have the resources to support strong growth in government spending … for the long term. We have strongly increased government spending on infrastructure [and] social spending.”
Listing macro-economic achievements, he says rates of growth in gross domestic product (GDP) and investment have improved since 1994, inflation has declined and fiscal stability has been achieved. This had reduced uncertainty and provided the basis for sustainable growth.
For the first half of the year, Manuel says, South Africa had the second-fastest-growing rate of exports in the world, behind China. Since January, exports had risen at a much faster rate than imports.
He points to GDP growth of about 3% a year – while conceding that 3% this year is “perhaps too optimistic in the aftermath of the recent global crisis” – inflation reduction and significant gains in public finance management as “gains that flow directly from macro-economic stability”.
Money supply targets had been achieved, and with a lower interest rate level “we expect to see a pick-up in gross fixed capital formation, in preparedness for a global rebound”.
Manuel argues the standard government case that having achieved macro-stability, the next step is micro-economic reform depending “on the active engagement of both business and labour, under the leadership of government”.
“The next stage is, therefore, dependent on active partnerships, perhaps even on the negotiation of a national framework accord, but definitely requires that we strengthen the hegemony of the ANC government.”
Makgetla argues that South Africa’s self-imposed structural adjustment programme has led to a crisis marked by “cuts in social services without stemming the rise in unemployment that started in the 1980s”.
The gulf between the authorities and Cosatu is clearest over unemployment. Manuel sees “stability in overall employment levels”, with a declining trend in the old formal sector and the new formal sector – including the service industry – showing increased employment.
Using Statistics SA figures, Makgetla estimates that unemployment has climbed from 16% in 1995 to 25% now. Formal job losses were heaviest in mining, manufacturing, the public service and agriculture, while “the growth in the informal sector promised neither to raise national productivity nor to support most workers in the sector”.
Attacking the government’s growth, employment and redistribution (Gear) policy, she asserts that only its fiscal and tariff targets have been reached. Real private sector investment growth had been 1,2% in the Gear period (11,7% was targeted); GDP growth was 2,4% (4,2% was targeted), and 125000 jobs were lost (a gain of 270000 was projected).
Makgetla says investment has languished persistently at below 20% of GDP, and last year fell to 14,9% – the lowest level since 1993.
Between 1994 and 2001, she says, foreign direct investment in South Africa totalled R45-billion, while foreign direct investment out of the country came to R54-billion.