Funding the national democratic revolution: Harnessing our financial assets towards a new growth path
As we move towards the ANC's NGC in Durban beginning on 20th September 2010, it is absolutely important that we review progress made towards the implementation of the 2007 Polokwane resolutions, especially those relating to the absolute necessity of moving our economy towards a more inclusive growth path. The main task facing our revolution at this point in time is that of urgently putting in place measures to bring about a new economic growth path that radically breaks away from the current semi-colonial growth path on which our economy rests.
The SACP is firmly of the view that one of the most important measures that needs to be adopted is that of directing both our public and private financial sector resources towards investing their funds towards this new growth path. It is therefore for this reason that once more, our own SACP campaigning must refocus energies on the accelerated transformaiton of the financial sector, both public and private.
The financial landscape has seen some changes since our launch of the financial sector campaign in 2000, though much still remains the same since then. Powerful resistance exists to the kind of transformation that would lead to meaningful improvements in the lives of the workers and the poor. Our major financial institutions - banks, insurance companies, investment and asset managers - are still largely owned and controlled by white capital, driven by profit maximisation for shareholders. We have gone some way, but not nearly far enough, in achieving our campaign goal to "make the banks serve the people", reducing the number of unbanked people by six million and increasing access to finance for low-income housing, small black businesses and farmers.
Regrettably, the financial sector by and large interpreted sector transformation and black economic empowerment as concluding once-off, narrow-based BEE deals with a small number of aspirant black owners who were politically well connected at the time. We have seen some progress in other areas of transformation - skills development, employment equity, procurement from small black businesses. However, we have not seen fundamental changes in how the financial sector as a whole contributes to national development initiatives that will benefit the majority of our people.
It is also important to note that our financial sector campaign launched in 2000 contained within it both ‘consumer issues' (access to banking for all and regulation of the notorious credit bureaux) and much more fundamental issues about the ownership, investment priorities, and the radical transformation of the (class, race and gender) structure of the financial sector in our country. It is critical that we continue to focus on these two, but now with a much more increased focus on the broader developmental orientation and role of both the public and private financial sector.
Financing Development and Development Finance
One area that we identified in our original financial sector transformation campaign in 2000, but which we have in recent times neglected, is the transformation of the public Development Finance Institutions (DFIs) - those owned and controlled by government. The time is right to shine our transformation spotlight on the activities and investment mandates of the DFIs - the Public Investment Corporation, the Industrial Development Corporation, the Development Bank of Southern Africa (DBSA), the Land Bank, Ithala Bank, the Housing Finance Corporation, and a host of others. As we once more debate "Financing Development", we must have a special focus on DFIs.
Much as we need to intensify the pressure on the private sector to change the way it does business, we have a real opportunity at this juncture to succeed in our campaign to influence the way DFIs contribute to economic development. Indeed the transformation of the private financial sector is deeply interlinked with the role of the public finance institutions. Our efforts to force DFIs to play a more assertive and targeted developmental role are more likely to succeed in the wake of the global economic crisis, our own recession, the loss of over 1 million jobs and deepening poverty in our society that has shamefully become the most unequal in the world.
We must start the long-overdue national debate on whether the strategies and investment mandates of the DFIs promote the five priority areas of government's development programme - decent jobs, education, health, fightin crime and corruption and rural development. Or are DFIs still locked in the pre-Polokwane paradigm of trying to mimic commercial lenders, ignoring their obligation to finance development that benefits all our people, but often applying even more risk-averse strategies?
A brief look at the role of the Public Investment Corporation (PIC) illustrates the kind of issues that a renewed campaign should highlight. The PIC is wholly owned by the government and manages assets of R740 billion (March 2009), mostly on behalf on the Government Employees Pension Fund (GEPF).
Opposition to the corporatisation of the PIC in 2004 by Alliance partners was overruled in the drive at the time to corporatise, agentification and to privatise state entities and to use DFI resources in pursuit of GEAR objectives. Consequently in articulating its mandate in 2010, the PIC says: "Corporatisation has enabled us to structure our investment activities and operations in a manner comparable to that of private sector investment managers" and "......we benchmark our investment performance against market-driven indices, enabling our clients and shareholder to compare PIC's returns to those achieved in the marketplace."
In pursuit of the above mandate, the PIC's Property Portfolio has investments of R23,4 billion (March 2009 report) in properties all over the country. These include Sandton City, Cresta, Pavilion and other luxury shopping malls. Throughout our financial sector campaign we have argued that workers should get a return on the investment of their savings that allows them to live in dignity when they retire. But why should this prevent investment of their savings in infrastructure in their own communities during their working lives? Should the PIC be investing in Sandton City or should its resources be funding a national priority, our rural development programme or an affordable housing scheme for workers who neither benefits from the government's housing subsidy or the private banks' unaffordable bonds?
We also need to question the use of GEPF monies in funding narrow BEE deals through the PIC's Isibaya Fund. Last year the PIC lost R1,3 billion of GEPF funds through financing the R6,8 billion purchase of shares in the Holcim cement company by the Eltie Links Afrisam consortium. Previously the PIC drew the wrath of workers when it funded billions to the infamous Elephant Consortium to buy shares in Telkom. Should the deferred wages of government employees - who, as I write, are on the streets fighting for a wage increase of 8,6% and a monthly housing allowance of R1 000 - be used to fund narrow-based BEE deals for politically connected consortiums? Is this not another form of tenderpreneurship that undermines development, stealing from the poor to give to the rich, and which we must expose and oppose?
Transforming the mandate of our public and private financial institutions: A call for an urgent national financial sector summit!
Our renewed focus this year and beyond must pay particular attention on these critical questions. One of our immediate calls for must be for an urgent convening of a national summit of both public and private financial sector institutions around the funding of the five priorities of government, a new growth path and the Industrial Policy Action Plan (IPAP) 2. At such a summit we should also call upon the private financial sector to report on progress since the signing of the financial sector charter in 2003.
DFIs, on the other hand should tell us of their funding activities since 1994, as well as their plans going forward. But going forward must be guided by the necessity to fund development in our country, principally linked to government's five priorities. Culminating in a summit on "Financing Development", this should involve an intense debate on how our development priorities can be financed in a transparent and accountable way by both public and private financial institutions. It will mobilise both public and private financing towards agreed economic and other development goals. It will define how performance in financing development is to be measured, monitored and evaluated.
Intensifying the struggle for a radical increase in the social wage
Linked to the above must be an intensified struggle for a significant increase in the social wage of the working class in South Africa, which should form part of the transformation and strengthening of our social security system to effectively cover both the workers and the poor. Such a social wage must include a housing financing programme, financing for access to higher education, and the implementation of the National Health Insurance Scheme (NHI). But the fundamental logic behind ‘funding development' must be investment into productive activity and sustainable support to government's five priorities.
How is the above integrating our past campaigns? To link our funding of development and development finance to the government's five priorities will integrate many of the SACP's past Red October Campaign issues. This includes investment into infrastructure for decent jobs, developmental investment of workers' retirement funds, funding of investments into rural development, including land and agrarian transformation, the establishment and funding of an NHI, as well as a housing subsidy regime for the workers and the poor, as well as mechanisms for funding higher education for the children of the working class, especially those who ‘fall through the cracks'.
What could a focus on the five priorities of government also practically mean for the working class? On decent work - which cuts across and must inform the rest of the other four priorities - this must include a revitalised and focused investment into infrastructure, including the extended public works programmes.
Such investment into infrastructure must include a struggle towards the dissolution of the township/surburb contradiction, as well as significantly narrowing the developmental gap between town and countryside. But within the countryside itself we must seek to do away with the contradiction and gap between the ‘white' countryside, and the former bantustan rural areas. Such investment into infrastructure must also include a renewed call for community re-investment legislation, reviewing the financial sector charter, and refocusing of DFIs into these priorities.
In addition we must intensify the struggle to address the situation of that section of the working class that does not benefit from government's current assistance on housing and financing of access to higher education. It is perhaps only in South Africa - as compared to other countries at the same level of development - that an employed working class is unable to afford decent housing and access to higher education for itself and its children.
It is completely misleading to argue that such a focus would be elevating the status of a ‘labour aristrocracy' against the poor, or the very poor. The fact of the matter is that children of employed workers in our country continue to swell the ranks of the poor because, amongst others, they do not have access to post-school education. A claim of a ‘labour aristocracy' bias, would also ignore the deeply intertwined relationship between the employed working class and the poor.
In South African conditions today, focusing on the employed working class simultaneously addresses the conditions that reproduces poverty in our country. This should by no means undermine specific measures to address the poorest of the poor, but that this cannot be effectively addressed unless we address, at the very least, the wages, housing and higher education needs of the working class. Addressing the needs of the poorest is ameliorative, whilst addressing just the twin challenges of housing and access to higher education for the working class, can be done in a manner that is transforming of the whole of South African society.
Such a focus will also complement and strengthen COSATU's planned re-launch of an intensified campaign for a living wage. It is our duty as the SACP to also factor into such a campaign the possibilities and necessity of an increased social wage, rather than a one-sided emphasis and reliance on direct wage and salary increases. For instance, use of new funding models and methods to finance housing for the workers and the poor, as well as viable methods for financing the higher education fees for the working class, will go a long way in relieving worker's ordinary wages from paying for these essential social services.
As we move towards the ANC's NGC, it is of absolute importance that we heighten and escalate working class mobilisation towards the funding and financing our key developmental objectives.
Asikhulume!
This article by SACP General Secretary, Blade Nzimande, first appeared in the Party's online journal Umsebenzi Online
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