NEWS & ANALYSIS

‘Technical recession’ alarming – SAFTU

Federation says economy remains the worst legacy of a colonial past

SAFTU alarmed and disgusted at ‘technical recession’

5 September 2018

The South African Federation of Trade Unions has noted with alarm and disgust the Statistics SA report that the country's real gross domestic fell by 0.7% in the second quarter of 2018, following a 2.6% decline in the first quarter.

To try to minimize the appalling consequences of having two consecutive quarters of ‘negative growth’, the government and business have tried to window-dress this a a ‘technical recession’. But for millions of poor South Africans this is not some minor technicality, but a sentence to life imprisonment in more lost jobs, deeper poverty and even worse public service delivery.

Farm workers are likely to be the biggest victims, after a huge 29.2% reduction in production, mainly of field crops and horticultural products.

Proof that this recession is hitting the pockets of the poor is that for the first time since 2016, households’ consumption expenditure decreased by 1.3% for the quarter, with the biggest cuts on spending on transport, food and drinks, according to Stats SA. The increases in VAT and the fuel levy and the resulting increases in prices have forced millions of the poor to struggle to survive on less and less.

Not just individual families but the poorest communities are paying the price for the economic catastrophe, as the impact of austerity budgets is cutting  spending on service delivery to the bone, leading to even worse delivery of services and angry community protests across the country.

While one of the few positive trends was that exports grew by 13.7% for the quarter due to increased trade in precious metals, mineral products and vegetable products, imports also increased by 3.1% with more imports of mineral products, prepared foodstuffs, beverages and tobacco and vehicles and transport equipment, all areas in which local jobs are disappearing or threatened.

South Africa has already claimed the shameful record for being the most unequal society in the world. 

Now, a right-wing, pro-business economist, Mike Schussler, has identified a new and equally shocking record - that “the world’s biggest unemployment crisis is right here in South Africa‚ in which the number of unemployed had increased from 6-million in 2001 to 9.6-million in 2018. This is a 60% increase in the broader rate of unemployment‚ which had had a devastating effect on inequality and poverty in the country”.

He reveals the outrageous statistic that “South Africa is one of the few countries in the world where there are more adults not at work than adults at work”!

Delivering UASA ’s 17th South African Employment Report, he added that “The magnitude of the crisis is the single biggest crisis facing South Africa. South Africa is the only country that our research finds has had a 20% plus unemployment rate for over two decades”.

If these statistics are true, it confirms beyond any doubt that Cyril Ramaphosa’s ‘new dawn’ is now exposed as a dark night of misery for the majority of the people. 

SAFTU can justifiably say “we told you so”, after repeatedly warning that his policies, and those of his ANC predecessors, are dictated by the interests of the giant global capitalists, the World bank and International Monetary Fund and their enforcers, the credit rating agencies.

His priorities are to make South Africa an attractive destination for investment, by assuring the rich that their money will be safe and their profits assured by a program austerity budgets and curbs in the rights of trade unions. 

Ramaphosa says he wants his Jobs Summit in October to find solutions to the massive level of unemployment, but SAFTU cannot take seriously a president who talks about the unacceptable level of unemployment at the same time he is getting rid of 30 000 jobs in the public service.

He is cutting these jobs despite a report in July 2018 from the Public Service Commission that government departments and provincial governments has failed to fill 129 306 unfilled vacancies in the public service.

At a time when there is  desperate need for more public servants to deliver the services that are desperately needed in poor communities, it is outrageous that the government wants planning to get rid of 30 000 posts when there are already nearly 130 000 unfilled vacancies. 

The R4 billion budgeted to get rid of these jobs must immediately be reallocated to employ more staff to fill all the vacancies and to out them to work so we can begin to rescue services, particularly our public hospitals and schools, which are sinking towards total collapse.

The recent Working-Class Summit was absolutely clear that capitalism is responsible for the crisis and that we need a mass working-class movement to fight for a new society which creates employment, pays all workers a living minimum wage and abolishes poverty through a basic income grant for all. 

If this structural crisis is not resolved South Africa will not get out of the low-growth trap which is characterized by the fact that the economy remains the worst legacy of a colonial past.  

24 years down the line, since 1994, we remain trapped in a neocolonial structure based on extraction of raw minerals imported to the former colonizing countries with no beneficiation or building of the value chains for all our minerals. As a result we remain trapped in an economy dominated by the mining, finance and heavy chemicals complex. 

The adoption of the Industrial Policy Action Plan (IPAP) has not made any meaningful difference. Industrialization has not taken off and instead we are deindustrialising at an alarming rate. The clothing, textiles, leather, footwear and steel industries are being decimated. 

The reason why the economy will not grow enough to resolve the crisis of unemployment, poverty and inequality is not only that we are on a wrong growth path but that, despite the government’s own heralded new growth path, both it and IPAD are trapped in the overarching economic strategy which started with GEAR and the National Development Plan that are underpinned by inappropriate fiscal and monetary policies.

We are paying the price for neoliberalism which dictated that we drop trade tariffs and open our economy to the chilly winds of international competition as Trevor Manuel and Alec Erwin argued during their brief and disastrous spell as the Ministers of Trade and industry. The privatization of Iscor is one of the most stupid decisions we took at the time when we needed cheap local steel for the construction and development of our country.

The tax regime should shift the burden back on to the shoulders of the private firms. New taxes, such as the wealth, solidarity and land taxes should be considered and the current VAT increase should be reversed.

There must be an end to the obsession with inflation targets, in favor of measures to create jobs, reduce poverty and drive inequality down to build an egalitarian society.

But our government is not scared by the voters but by the ratings agencies and the Washington bullies who are telling the government to proceed with the current path of neoliberal approaches to development.

Because education and health remain a crisis we are not aggressively building a human-resource base so critically needed for a developing country. 

The only way to change this is the implementation of the economic clauses  of the Freedom Charter, which said:

- The national wealth of our country, the heritage of South Africans, shall be restored to the people;

- The mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole;

- All other industry and trade shall be controlled to assist the wellbeing of the people;

Unless we have a political will, driven by a working-class party, we will not get out of this low-growth trap. The exploitative capitalist system has to be replaced by a new democratic socialist order, in which the wealth created by the labour of the working class is owned, controlled and shared by the working people and not a super-rich elite.  

Issued by Patrick Craven, SAFTU Acting Spokesperson, 5 September 2018