DOCUMENTS

Economic challenges should be used to leverage structural change - SACP CC

Party also says corruption must be dealt with not just in theory but practically

South African Communist Party

Hoisting the Red Flag!

Thirteenth Congress Central Committee

Thirteenth Plenary Session, Johannesburg, 28-30 August 2015

Press Statement: Sunday, 30 August 2015

The SACP Central Committee met in Johannesburg over the weekend of 28-30 August. The CC was meeting in the context of serious storms gathering around the South African economy, notably in the mining and steel sectors. We have now experienced a single quarter of negative growth with the possibility of an impending recession.

These issues, their relationship to the problematic structural features of South Africa’s political economy, the ongoing global capitalist crisis, and the impact of all of these on our society were, therefore, the central focus of reports discussed in the CC. Comrade Bheki Ntshalinthsali, acting COSATU general secretary, also presented a document on the state of the labour federation and the challenges faced by the working class.

We must deal with corruption not just in theory but practically

While the scourge of corruption is not by any measure the main cause of the economic crises we are confronting as a country, corruption fragments the democratic state and our movement, and opens up space for regime-change agendas. If we are to respond effectively to the economic challenges, then it is absolutely essential that as a movement we deal decisively with corruption and corrupt individuals. In engaging with our allies in the coming period we intend to raise this matter forcefully.

There is a wide-spread impression that congress and conference resolutions on fighting corruption are watered down in practice, and the recommendations of structures like the integrity committee are bypassed. Lip-service to fighting corruption without action, or with half-hearted and selective action, simply compounds the problem. It is important that those within our movement who are aware of bribes passing hands, or membership fraud should actively open up criminal cases, rather than simply repeat allegations.

Eskom

Clearly part of our current economic challenges have their roots in domestic problems and strategic mistakes, and notably on the electricity front. It would be a grave mistake to be in denial about these.

The SACP has consistently argued that our present energy challenges are mainly the consequence of an ideologically misguided belief in the early 2000s that privatising Eskom would assure us of continued ample, cheap electricity. The resulting failure to embark on a major re-capitalisation of Eskom at that time has now cost us dearly.

Compounding these problems has been predatory behaviour in the supply chain management of Eskom. We welcome decisive measures to eradicate corruption in the entity, as well as the belated but important major investments in Eskom generation capacity now underway. Unit 6 of Medupi power station comes on stream today and will be providing an additional 794 megawatts into the grid.

The current economic storms largely originate from outside the country

However, our current economic challenges largely originate from outside of the country. These challenges need to be traced back to the 2008 global financial crisis which quickly developed into a wider economic crisis, the most serious since the Great Depression of the 1930s. Between 2009 and 2012, as with several other resource rich economies, the South African economy was partly shielded from the worst of the fall-out by continued export at record prices of primary commodities to China.

However, in response to the global capitalist crisis which has seen a slow-down in demand for its exports, China has shifted its strategy away from being a mineral resource absorbing, export-led growth economy. It is now focusing on stimulating domestic demand and moving away from its commodity intensive growth path. The previous global commodity super-cycle, driven by China’s huge imports of primary commodities, is now definitively over.

This has seen prices of our major mining exports – iron ore, coal, platinum and gold – fall by an average of 50% from 2011. In the last few years to June 2015, the international iron ore price fell by 67%, coal prices by 54%, platinum by 39%, and gold by 13%. These four sectors employ 425 000 mineworkers in South Africa, and they account for one-quarter of our exports. With the collapse in commodity prices, 40% of South Africa’s platinum mines, and 30% of our gold mines are now not profitable.

But South Africa is not alone. The end of the global commodity super-cycle is having a dramatic impact on other economies with major mining industries. Some 20,000 jobs are under threat this coming year in Australia, whose growth rate is also projected to decline. In the US, the mining sector lost 15,000 jobs in April alone – the fourth straight monthly loss in the sector. Canada has lost 19,700 jobs in its resources sector.

The commodity storm is impacting on the other primary commodity rich BRICS partners, Russia and Brazil, both of which expect to be in recession this year. The former South African but now trans-nationalised Anglo American has recently reported a $3 billion loss – mainly due to its flagship iron ore project in Minas Rio in Brazil. Many oil-exporting African countries, Angola and Nigeria among them, are also suffering major losses. The IMF last month downgraded growth projections for sub-Saharan Africa by almost a full percentage point.

It is important to remind ourselves of this wider global reality – not in order to evade our own national challenges or responsibilities – but rather to more lucidly understand the challenges we are confronting, in order to develop adequate and strategically sustainable responses. 

A great deal of local public commentary is shallow and parochial in the extreme. For instance Peter Bruce argues there is “no leadership” in the country, and proposes economic policy should be handed over to businessmen who know only the mantra of profit maximisation. The DA’s threadbare and amateurish “5-point” programme in response to the current job losses calls for government freebies to the private sector, like committing R500-million of public money to purchase “industrial size generators for manufacturing enterprises”.

The DA programme also calls for class war on the trade union movement by arguing for a more “flexible” labour market. As Comrade Ntshalintshali pointed out, less than 30% of South Africa’s working class is unionised (the majority of the unionised now being in the public sector) – while informalisation, casualisation and labour brokering have accelerated dramatically. Just how much more flexible does the DA want the labour market to be? 

The steel glut

The slow-down in Chinese demand has also contributed to a glut of steel in global markets, and the dumping of steel products from China into other economies, including South Africa. South Africa’s two major steel manufacturers are now also in trouble.

In this context, the CC welcomed government’s initiatives to meet with the steel producers and the trade unions in the sector. The imposition of a protective tariff on steel imports and the consideration of a further anti-dumping duty are important immediate responses to the crisis. The CC in particular saluted the role being played by Minister of Trade and Industry, Comrade Rob Davies and Minister of Economic Development, Comrade Ebrahim Patel. As both ministers have emphasised, the crisis must now be leveraged to address the deeper structural challenges within our economy.

Immediate state interventions to bring relief to the mining and steel manufacturing companies must now be linked to our strategic beneficiation and re-industrialisation objectives. A tariff and anti-dumping duty relief to steel-manufacturers must have as its conditionality that the price of steel to local down-stream manufacturers is not hiked up.

This is a demand that has been resisted in the past by Arcelor-Mittal in particular with its disastrous import parity pricing business practices – now that it needs state assistance that assistance cannot be a freebie, it must come with conditionalities. We must not only save jobs in the steel foundries, but also save and indeed create jobs in downstream manufacturing.

The importance of re-industrialisation in order to address the structural problems within our economy

The down-turn in mineral prices and the global glut of steel are not likely to be short-term cyclical features. We are witnessing a fundamental restructuring of the global economy, itself the response to the prolonged global capitalist crisis. What this ongoing global crisis has laid bare is South Africa’s persisting colonial-type political economy and its excessive vulnerabilities.

Between December 1993 and December 2014, 5% growth was achieved in only 17 of the 84 quarters. This growth was driven by two factors – credit-driven consumption reliant on import intensive sectors; and the commodity price super-cycle. The commodity price super-cycle is now definitively over and it is unlikely to return any time soon, if ever. The credit-driven consumption reliant on imports has resulted in excessive financialisation, high levels of household debt, and de-industrialisation, affecting primarily our manufacturing and agro-processing sectors.

We must actively use the current challenges to leverage structural change within our economy - a fundamentally patriotic process of making our political economy more robust and sheltering it from the excessive frailties and vulnerabilities from which it currently suffers. A critical component of such a strategy must be the scaling up and intensification of our Industrial Policy Action Plan (IPAP).

There is a great deal of cynicism in some parts of the business media in regard to industrial policy programmes. Yet significant real progress has been made in at least two sectors. In the auto sector R25,7-billion investments have been made – the highest ever level in South Africa. These investments are not just in car assembly, but also in minibuses, buses and heavy vehicles, as well as in an expansion of the components sector.

Six years ago, South Africa’s clothing and textile sector was in free-fall and close to extinction. Thanks to state, trade union and management engagements, and thanks to a shift in incentives that now focus on credits for competitive-enhancing investment there has been a remarkable turn-around, with 68,000 jobs saved and a further 6,900 new jobs created.

In short, it is possible to make significant progress in difficult circumstances. We now need to scale up our re-industrialisation efforts, with a particular emphasis on labour intensive sectors like agro-processing. These are among the key perspectives we hope to carry forward into the ANC’s important National General Council in October.

Taking forward the financial sector campaign

A core feature of the problematic structure of South Africa’s political economy is its excessive financialisation. South Africa is an extreme case among middle income economies in terms of the relative proportion of short-term speculative investments (equity) relative to fixed direct investment (bonds). Between 1994 and 2002, inflows into the South African stock market relative to GDP were ten times the norm for middle income economies.

Internationally, South Africa is also exceptional in terms of the size of the JSE relative to GDP. Of the 118 countries that reported on market capitalisation in the World Bank’s World Development Indicators for 2010, only in Hong Kong did stock market capitalisation exceed the value of the GDP by more than South Africa.

We have a bloated, top-heavy financial sector, dominated by four banks (accounting for 84,1% of total banking assets at the end of 2011). What is more, half our banking shares are foreign owned. The financial sector has exerted huge influence on post-apartheid, macro-economic policy, and it has been behind the problematic, credit-fuelled consumption led growth path over the past two decades. Our over-financialised economy results in the misallocation of finances into speculative activity at the expense of productive investment. Financialisation and de-industrialisation are two sides of the same coin.

One of the unintended consequences of the 2005 National Credit Act was a massive increase in unsecured lending. In seeking to regulate unsecured lending in the informal sector, the Act opened up unsecured lending to the mainstream financial sector. The banks themselves became mashonisa (loan sharks) and they worked in tandem with retailers like Ellerines and Lewis Furniture Stores (who themselves increasingly drew profit not from mark-ups on furniture, for instance, but on selling credit, insurance, etc.). Unsecured lending ballooned from R40bn in 2008 to R172bn in 2014. In March 2015 45% of South Africa’s 23-million credit-active consumers were three or more months in arrears.

As researcher David Neves has remarked, the business models for credit provision to South Africa’s low-income market, in particular, have been based less on the borrower’s ability to repay, and more on the creditor’s ability to collect. An extensive machinery of debt collection and of repossessions has, accordingly, mushroomed and, along with it, all manner of abuses.

The recent Western Cape High Court case, for instance, exposed grave predatory irregularity behaviour by debt collectors, credit providers, and magistrate courts, using emolument attachment orders (EAOs) – “garnishee orders”. The court found that EAOs were granted illegally by magistrate courts distant from where those affected live and work. Amounts deducted sometimes amounted to over 80% of the earnings, whereas the law requires judicial oversight to ensure affordability. These and other practices appear to be widespread.

Another symptom of the crisis of excessive financialisation is the tsunami of home repossessions and evictions. It is estimated that there are now over 10,000 evictions a year in South Africa – a figure which is comparable to the numbers affected at the height of the apartheid-era group areas removals. Here again there is much evidence of abusive practices with clerks of the court, Red Ants, unscrupulous estate agents, and even staff within the major banks working collusively to illegally evict thousands of families. SACP activists in Johannesburg, working with community members, have actively been taking up these issues, and plan soon to take up a housing class action case. The SACP, in taking up these issues will also seek a meeting with relevant sections of the criminal justice system, including the judiciary, to raise some of our concerns in this regard.

This is the context in which, as a key pillar of this year’s Red October Campaign, the SACP will be working with its alliance partners and a wide range of social movements and community based formations to revitalise the Financial Sector Campaign. We are calling for a second NEDLAC-convened Financial Sector Summit. The first summit in 2003 resulted in a Financial Sector Charter in which, amongst other things, the financial sector institutions committed to significant community investment, including into affordable housing. Most of the commitments made in that Charter were to be realised or achieved by 2015. A second summit will need to assess the degree to which commitments have actually been implemented.

In the build-up to a Financial Sector Summit, the SACP and its allies will intensify mobilisation against housing evictions, unjust credit bureau listings, bank charges, reckless lending, abuse of garnishee orders, and the abuse of loan sharks especially of social grant beneficiaries. As part of the campaign, we will also call for the stabilisation of the SA Post Office and the allocation of a full banking licence to the Post Bank.

On COSATU

The CC congratulated COSATU on the convening and outcome of its Special National Congress at a difficult time for the federation. In the light of all of the above challenges, a militant and independent COSATU, working together with its alliance partners, has an absolutely critical role to play. We call on all affiliates to focus on re-building active trade unionism that services members and to work for working class unity. It is also essential that the historical policy capacity of the Federation and its affiliates in critical areas like industrialisation is once more actively revived. Without a united and capacitated COSATU, it is the working class in South Africa that will become the main victims of the present capitalist crisis.

Capitalism is in crisis

While it is imperative to develop short-term interventions to save jobs, to address crisis levels of house-hold indebtedness, and much more, we must never lose sight of the deeply embedded structural features of the current capitalist crisis both within South Africa and globally. Since 2008 the epicentre of the global capitalist crisis has shifted from Wall Street to Iceland, from Ireland and Portugal, to Greece and Puerto Rico, to the Chinese stock markets.

One “solution” after another simply results in further knock-on crises elsewhere. Everywhere the rural poor, the working class, and vast stretches of the middle strata globally are suffering, while a one-percent rentier class becomes ever more filthy rich. The scandalous deaths of tens of thousands of desperate refugees in the Mediterranean and in Europe – fleeing poverty and imperialist inspired destabilisation in Syria, Libya, and elsewhere – is another manifestation of the deepening crisis of capitalism.

Capitalism is in crisis – our task is not to save capitalism from its crisis, but to save humanity and the planet from capitalism

The CC conveys its condolences to the families and friends of the 109 victims of three terrible road accidents in the Eastern Cape and Swaziland over this weekend.

Statement issued by the SACP Central Committee, August 30 2015