The economic growth path outlined by the Congress of South African Trade Unions (Cosatu) was “out of touch” and an “impractical wish list of discredited ideas”, the Democratic Alliance (DA) said on Wednesday.
“The most serious problem with Cosatu’s document is that it paints a picture of a world without trade-offs, where it is possible to force interest rates lower without driving inflation, where governments can run larger deficits without incurring debt, and where taxes can be raised infinitely without deterring investment,” DA trade and industry spokesperson Tim Harris said in a statement.
Cosatu responds: Cosatu’s Patrick Phelane responded to Tim Harris’s statement in a letter to the M&G. Click here to read it
“Cosatu’s growth-path document is an impractical wish list of discredited ideas that would scupper South Africa’s fiscal and monetary policy stability, and undermine investment and job creation.”
The union federation and ANC ally released its plan for rescuing South Africa from its current economic “crisis” on Tuesday. It proposed wide-ranging reforms, including tax reforms, a more aggressive role played by the state and boosting industrialisation. Employment creation formed the centre of its strategy.
Harris said many of the ideas proposed by Cosatu had been “tried and failed” in other parts of the world, citing Venezuela as an example.
“… State intervention, nationalisation of private assets and irresponsible fiscal and monetary policy have driven inflation to 30% and shrunken the economy by 5% a year [in Venezuela],” he said.
Signalling Cosatu’s “out of touch” thinking was its identification of “strategic nationalisation”, with mining specifically targeted.
Harris said the one example of a South African state-owned mine, Alexkor, was “nothing short of an absolute disaster”.
“It has continuously lost money year in and year out, reducing its ability to employ people or attract any sort of further investment in the Alexander Bay community area.
“South Africa has already seen a lack of growth in the mining sector in the past decade, despite growth figures in other mining sectors internationally.”
Blocking fundamental reforms
Harris blamed “clumsy state intervention” through the Mineral and Petroleum Resources Development Act for this, and its failure to maintain a basic transport infrastructure. He added that nationalisation would be the “death knell” for the mining sector, South Africa’s main growth and employment vehicle.
Harris blamed Cosatu for blocking fundamental reforms that were part of the Growth, Employment and Redistribution (Gear) strategy, including flexibility in collective bargaining, scaled-up privatisation, increased use of tax incentives and an overhaul of training programmes. Similar reforms had driven growth in Chile and Brazil and could have worked locally, if Cosatu had not opposed them, he said.
“Cosatu continues to block practical new policies to tackle unemployment. They have held up Finance Minister Pravin Gordhan’s practical youth wage subsidy proposal for almost six months on ideological grounds that they fail to flesh out in this document.”
South Africa’s attempt to join the Bric (Brazil, Russia, India and China) countries would be accomplished if the country followed their model of rolling back state intervention.
‘Erroneous impression’
Meanwhile, Cosatu has never implied that the African National Congress Youth League (ANCYL) is a “demagogue”, the trade union federation said on Wednesday.
“Some media … have given the erroneous impression that Cosatu was implying that the youth league were demagogues,” Cosatu spokesperson Patrick Craven said in a statement.
“The federation has made no such insinuation. Demagogues are an element that can be found in all walks of life and it was never the intention to suggest that the youth league itself is guilty of demagoguery.”
Craven was responding to media reports that suggested that the union’s general secretary, Zwelinzima Vavi, had implied that the ruling party’s youth wing was a demagogue.
The reports stemmed from the federation’s growth-path, document which was launched in Johannesburg earlier this week.
It included a debate on the nationalisation of mines.
“Vavi, in response to questions at the launch … mentioned that the youth league has been the main proponent of the nationalisation of South Africa.
“He [Vavi] later said: If we let the demagogues win the discussion which is based on a singular, narrow focus on the mines instead of looking at the state broadly and nationalisation broadly, then we can only give rise to the criticism that … all these people are interested in is to lay their hands on the mineral resources for accumulation,” Craven quoted Vavi as saying.
He said the media had been erroneous in seeing that as implying the youth league was a demagogue.
At the launch, Vavi said South Africa was in crisis, and a new growth path was needed to rescue the country’s “dysfunctional” economy.
He said government should tax the “super rich” and play a more “aggressive role” in the economy. — Sapa