COSATU statement on the latest GDP figures
30 June 2020
The Congress of South African Trade Unions has noted of the latest gross domestic product figures released by the Statistics South Africa showing that South Africa’s economy shrank by 2,3% in the first quarter of 2020.
The Federation is not shocked at all by these numbers and we expect the situation to only get worse from here. These numbers have nothing to do with the outbreak of the Covid-19 virus but in part reflect the abject failure of the Medium-Term Strategic Framework 2014-2019, as inaugurated with the fiscal policy stance outlined in the MTBPS 2014.
The fiscal austerity measures, cuts in the rates of spending growth, that were implemented over the last five years have entrenched stagnation amidst the persistent low private sector investment.
This is exactly what you get when you persist with the misguided macroeconomic policy framework that has been implemented by National Treasury over the years. Things can only get worse from here because the Supplementary Budget has entrenched an austerity mode at a time when we need economic stimulus.
Without any meaningful injection of new money into the economy, this economy does not stand a chance. Now more than ever, government needs to intensify its investments and infrastructure drives in the economy. Job creation is the only way to spur and sustain economic growth and to ensure the redistribution of wealth in a meaningful way.
Economic relief given to employers must be conditional upon them retaining their workers and they must be incentivised for job creation.
A bold stimulus plan is needed more than ever. Tinkering on the sides and hoping for miracles will see workers’ pay the price with millions losing their jobs and meagre salaries.
Statistics South Africa pointed out that mining contracted by 21.5% in January-March while manufacturing shrank down to 8.5%. This is a reminder that the government does not have a plan to support manufacturing where there is real value creation. A mass buy local campaign is critical to saving the economy.
There is also an urgent need to resolve the Eskom crisis because the mining sector paid a big price, as a result of load shedding earlier in the year. COSATU has presented a well-regarded proposal on Eskom that now needs government to take action to ensure that the power utility is saved, so that we can have a reliable electricity supply.
But the long-term solution to our economic woes is for the government to act to address the neo-colonial structure of the economy. This means acting decisively to counter the private sector strategy of investing less and mechanising more. The country needs to explore the viable alternatives of breaking free from this hostage situation and the blackmailing tactics of big business. These include a range of proposals to discipline and regulate capital.
The withdrawal strategy by the private sector as characterised by the ongoing capital flight or investment strike calls for the government to be decisive and bold. The government needs to tax businesses that are refusing to invest their profits in the productive investment, as well as introducing tighter capital controls to discourage the continuing capital flight.
Issued by Sizwe Pamla, National Spokesperson, COSATU, 30 June 2020
