/ 2 October 2013

Cosatu dumbfounded by IMF report

Cosatu Dumbfounded By Imf Report

Cosatu is shocked by the International Monetary Fund's (IMF) latest report on South Africa, spokesperson Patrick Craven said on Wednesday.

"It lays the blame for the poorly performing economy of South Africa, on 'the government's poor record in controlling the wage bill and potential spill-overs from high wage demands in other sectors represent downside risks'," he said.

"It is thus blaming the world capitalist crisis, brought about by the IMF's own neoliberal 'free-market' capitalist policies, and the shocking levels of unemployment, poverty and inequality which this has caused in South Africa and elsewhere, on the main victims of that crisis – the workers and the poor."

The IMF released its Article IV report on South Africa on Tuesday. It was compiled after consultations between the country and the IMF between May 22 and June 4. The IMF holds bilateral discussions with its members every year. In the report, it raised issues about the economy, growth and job creation. The report called for social bargaining, which should include "wage restraints" in return for hiring commitments, measures to enhance product market competition, and improved public services.

Craven said: "This in essence, means an 'egg and bacon' agreement, where the business 'chicken' commits to lay eggs for breakfast and calls on the worker 'pig' to lay down its life to supply the bacon." This would lead to a downward spiral of the already meagre living standards of most workers, bringing lower levels of demands for goods and services, which would lead to more jobs being lost.

Craven said the IMF's view was at odds with research done by the International Labour Organisation, which argued in favour of a wage-led growth strategy which was likely to generate a more stable growth regime for the future. Cosatu urged the government not to be misled by the IMF's policies.

"Rather stick with the ANC's proposal for a radical economic programme for the second phase of the transition, and engage with the economic proposals tabled at the recent alliance summit, on which there was considerable agreement between Cosatu, the ANC and SACP," said Craven.

Treasury
Meanwhile, the national treasury said issues raised by the IMF in its latest report on South Africa are already being addressed in government policies and programmes.

"The August Cabinet lekgotla agreed that the focus of government, business and labour must be on accelerated implementation of domestic plans to grow the economy in an inclusive way and also to create jobs, as well as to seize opportunities in the region," the treasury said.

"One of these issues is the implementation of the National Development Plan [NDP], which government believes will make a significant contribution to the longer-term effort to address both historical and new challenges confronting the South African economy."

Cabinet agreed that the country's economy could no longer rely heavily on the global economy to reignite growth and create jobs.

The IMF released its Article IV report on South Africa on Tuesday. It was compiled after consultations between the country and IMF between May 22 and June 4. The IMF holds bilateral discussions with its members every year.

Structural problems
According to the report, South Africa's economy had made important strides over the past two decades, but in recent years the structural problems holding back growth and job creation had come to the fore.

The country had under-performed compared to other emerging markets and commodity exporters, increasing the already high-levels of unemployment and inequality.

This coupled with declining competitiveness and counter-cyclical fiscal policy had led to rising fiscal and current account deficits, which made South Africa vulnerable to a prolonged reversal of capital inflows and a further repricing of risk premia.

The rand had also been one of the worst performing emerging market currencies in 2013.

Treasury said responding to the domestic political economy and improving performance in the public sector was an ongoing process, which needed a wide range of measures and interventions.

Labour relations
Steps were being taken to improve labour relations in key sectors and processes were being strengthened to improve service delivery and public accountability.

Measures to reignite economic growth included resolving energy constraints, increasing investment in infrastructure, improving the regulatory environment, stimulating agricultural development, increasing prospects for youth employment, and intensifying support for small businesses development.

"We remain committed to fiscal consolidation and the need to rebuild fiscal space," the treasury said.

"Fiscal policy remains grounded by the three principles of counter cyclicality, debt sustainability and inter-generational equity." – Sapa