COSATU statement on Moody’s decision to downgrade South Africa to below investment grade
27 March 2020
The Congress of South African Trade Unions (COSATU) has noted Moody’s decision to downgrade South Africa to below investment grade or junk status. This is not surprising because our economy has been stagnant for some time and nothing has been done to fix the problem. Clearly, this is going to have a painful effect on the economy because it will further squeeze our already scarce public funds out of the state towards debt repayment. It’s also likely going to deter international investments, in particular pension funds, from investing in our economy.
In the midst of this crisis, this is the right moment to start sorting out the ills bedeviling our economy. We have an economic firestorm heading our way and bold and decisive leadership is needed to fix our economic problems.
Because of Covid -19, consumers with money are worried and they will stop spending, while some will stop spending because they do not have money. Businesses will struggle and retrench workers and retrenchments will worsen the situation because many people will stop spending because of lack of resources
We need a serious recovery package to fix this and kick-start the economy. The country needs to focus on employment creation by making funds available for clean energy, technology, and infrastructure projects
Short-term, we need a serious stimulus plan to kick start the economy. A three (3) month loan payment holiday for all loans will represent the largest stimulus package that can be injected into the economy.
The Reserve Bank needs to cut interest rates by a further 100 basis points in April. The UIF needs to ramp up its capacity to roll out relief to workers now on unpaid leave.
Government through the PIC, DBSA, IDC, Setas, state banks; and the private sector through the banks, investment, and pension funds need to urgently release funds to cushion and grow the economy. Fragile economic sectors battered by Corona need to assisted and those sectors that have the potential to grow also need support.
We can no longer afford to delay fixing the economy. Business needs to come to the party in a decisive manner through impact investments in key economic infrastructure e.g. ports, rails, transport, energy, education, etc. Our stagnant economy is at the heart of our fiscal crises.
The other cause of our fiscal mess is that we lose 10% of our public funds to looting and wasteful expenditure. Too little has been done to stop this daylight robbery of the state. Very few of those implicated have seen the inside of a prison or their assets attached. Until the culprits are dealt with, we will not be able to fix the state.
The government cannot dilly dally when it comes to fixing Eskom and modernising the electrical grid. Eskom should be fixed so that it can be a leader in creating green jobs that will put people back to work and make us more energy independent in the future
The government needs to focus on upgrading our crumbling infrastructure and also improve public transit and rail system. There is a need to extend broadband services to under-serviced communities across the country
The Federation calls on the national Treasury to rethink its austerity approach and implement the signed 2020 public service wage agreement. Poorer regions of this country rely disproportionately on public service employment. Such regions lack the job creation potential of provinces such as Gauteng and Western Cape, which have a greater capacity to absorb cutbacks. These cuts in the public service will intensify poverty and regional inequalities in South Africa and the economy will never recover.
If the government is really serious about reducing wasteful expenditure, then it should have the courage to agree to Cosatu’s demand for the salaries and perks of Ministers, Deputy Ministers, and the senior management of the SOEs, state entities and public service and municipalities to be slashed.
There can be no reason why former MPs and their spouses are afforded at taxpayers’ expense, free plane tickets for life. And then we wonder why the economy is bleeding.
We need to urgently begin addressing the mismanagement, corruption and structural crises destroying our SOEs, in particular the most critical economic SOEs like Eskom, Transnet, Prasa, SAA etc.
Equally, whilst the work to clean up SARS has begun, much more remains to be done to stop illegal imports and illicit financial flows out of the country.
An active, interventionist state is necessary if we want to achieve our goal of economic development- in other words, to overcome poverty and redistributive power, wealth, income and economic opportunity from a small minority to the majority of the citizens.
The developmental state should marshal resources towards the building of an efficient, dynamic economy. South Africa needs a set of active policies, which builds a partnership for growth between the public and private sectors.
Experience elsewhere demonstrates the economic value of particular types of state intervention. Many countries have their governments taking the lead in fixing their economies during this crisis.
The reconstruction of post-war Europe would not have been successful without an active state. As such, the experience is widespread and not confined to the developing world. Most states have at a given moment played an active role in shaping economic development.
The Federation has already tabled clear proposals on how to address the key challenges facing the economy. We hope the government will now begin to engage labour and business on how to achieve this.
Issued by Sizwe Pamla, National Spokesperson, COSATU, 27 March 2020
