COSATU'S expectations from the MTBP statement
The Congress of South African Trade Unions congratulates the new Minister of Finance, Comrade Nhlanhla Nene, on his appointment and looks forward to his first major ministerial speech, the Medium-Term Budget Policy statement.
COSATU hopes and expects that his mandate will be based on the progressive policies adopted by the ANC's 2012 Mangaung Conference and contained in the 2014 Election Manifesto, in particular the commitment to a radical economic policy shift to bring about the second phase of the transition.
He should definitely ignore ‘advice' from ratings agencies, the World Bank and IMF, and the army of capitalist analysts, commentators and ‘experts' who are bombarding him with instructions to move in exactly the opposite direction to the ANC. They want him to prioritise policies to reassure business investors that their profits are secure and that they can continue with business as usual.
It is precisely such policies which lie at the root of the crisis which the ANC government is committed to resolve - the triple challenges of high levels of unemployment, poverty and inequality, and the ANC's solution, which was summarised in the five key priorities set by government in 2009 - decent jobs, education, health, rural development and fight against crime and corruption - which are all still as relevant today.
Whilst much has been done, government is still far in reaching these goals, particularly the creation of decent work, and the minister must see his mandate as to pursue fiscal and monetary policies which will speed up their implementation.
The rate of joblessness is still far too high. In the second quarter of 2014, the official unemployment rate - which counts only people actively looking for work - rose to 25.5%, up by 0.3% from 25.2% in the first quarter, the highest level since the first quarterly labour force survey in 2008, when the rate was four points lower - 21.5%.
The more realistic expanded rate of unemployment - taking into account people who have given up looking for jobs - rose to 35.6% in the second quarter, up from 35.1%. The number of discouraged jobseekers increased by 64 000.
The Minister must do everything possible to spur job creation and find genuine ways to bring down this figure, unlike his predecessor's misguided Employment Tax Incentive scheme which has only benefitted employers, particularly labour brokers, and, because of the lack of government monitoring, there is still no evidence that it has made any dent in the shocking youth unemployment figures. Government does not know if the 213 000 claims are for new or existing jobs or how many workers were displaced.
Such levels of unemployment inevitable lead to related problems of poverty and hunger, which was highlighted by a recent report by Oxfam, "Hidden Hunger in South Africa: The Faces of Hunger and Malnutrition in a Food Secure Nation".
Even though SA is supposed to be ‘food-secure', one in every four people - that's 14 million people - go to bed hungry every night and half the population is at risk of hunger, despite the country producing more than enough food. A further 15 million are on the terrifying verge of joining the ranks of the chronically hungry.
Rashmi Mistry, Oxfam's economic justice campaign manager, asks: "How can this possibly be true in this day and age, in 2014, in South Africa, one of the richest countries in Africa? It is a national scandal that South Africa is a food-secure country, yet the stomachs of so many - particularly women and children - were empty. Hunger strips away people's dignity and perpetuates people's problems."
Oxfam's figures expose a humanitarian crisis, but also an economic crisis, which is why it should be on the minister's agenda. If a quarter of South Africans cannot even afford to buy enough food to escape from chronic hunger, they cannot possibly be purchasing other more expensive items and thus contributing to the economy, let alone be paying taxes.
Oxfam's statistics explain why there is such a low level of aggregate demand for goods and services, which in turn leads to our sluggish rate of growth and sky-high unemployment, all made even worse by the Reserve Bank's insistence on high interest rates.
This is why the minister and government as a whole must recognise that a national minimum wage and a comprehensive social security system are not just necessary from a humanitarian point of view but a vital means to empower our poorest citizens, make them economic role-players and tax-payers.
Conservatives' argue that we cannot afford these reforms. The reality is that we cannot afford not to reduce poverty, and follow the lead of Brazil, and a growing number of other South American countries, who have proved in practice that raising the incomes of the poorest is not only morally necessary, but also economically advantageous, by increasing demand, which then increases production, which creates more jobs for workers who also become consumers and sets in motion a virtuous cycle of growth.
A report on hunger by various UN agencies notes that the policies put in place over the last decade "by countries like Bolivia and Brazil", in the fight against hunger, "are achieving very positive results."
We hope the minister, having agreed to delay the introduction of his department's hasty and ill-researched changes in retirement funds, will take the opportunity to urgently take forward the long-standing commitment to introduce a comprehensive social security system, which will free all South Africans from poverty and hunger. Comrade Nene must ensure that meaningful negotiations take place on this next year in time for 2016.
The Oxfam report also points to the need to speed up land reform in South Africa, not only to redress the past crimes of colonialism and apartheid and transform the lives of farm workers and dwellers, but also to increase food production, so that we can be genuinely ‘food-secure', and move as quickly as possible to the entirely realist target of no South Africans going to bed hungry.
The minister can also use the tax system to reduce the levels of income inequality which are still amongst the highest in the world. On average, each of the top 20 paid directors in JSE-listed companies earned 1728 times the average income of a South African worker.
All sectors of the economy, the financial, manufacturing, machinery and equipment, pharmaceuticals and mining are highly concentrated and dominated by a few companies, which in many instance are foreign owned, and in a growing number of cases have been found guilty of collusion and price-fixing.
These levels of inequality and monopolisation are behind many of the angry protests and strikes and the minister can help to narrow this wealth gap through an overdue reform of the tax system.
COSATU has welcomed the setting up of a Tax Committee to review the system and reiterates its call for the following steps to ensure that the tax system is progressive and provides the state with the necessary resources to transform the economy and provide basic services to the majority of our people:
A progressive tax system, with a category of the super rich
A solidarity tax, whose aim is to cap the growth of earnings of the top 10% and to accelerate the earnings of the bottom 10%
Tax on both domestically produced and imported luxury items, but a higher tax on luxury items which are imported
Increase in the dividends tax on companies to encourage re-investment, job-creation and to reduce the financialisation of company assets
A land tax to aid the process of land redistribution
Zero-rating of medicines, water, domestic electricity and public education Introduction of export taxes on strategic minerals, metals and other resources to support downstream industries and to promote value-addition
Investment tax credits to encourage local procurement of machinery and equipment
Increased tax on financial transactions including capital gains tax above a certain minimum threshold to limit short-term capital flows and to encourage productive investment, and speed bumps on short term capital flows to discourage hot money Introduction of tax on firms that are stubborn in closing the wage gap
The reinstatement of capital controls which have been dismantled, to prevent the asset stripping of South African industry, which is affecting the economy negatively.
Export taxes on strategic minerals to catalyse beneficiation which will strengthen manufacturing industries, increase exports of more value-added goods and thus address the balance of payments deficit the country is facing, create decent jobs and cushion the economy from volatility of global commodity prices.
The minister must also look at some of the social problems we face, in particular the two-tier levels of service in areas like education and healthcare.
The crisis in education persists. The poor's children remain trapped in inferior education with inadequate infrastructure, with class sizes of above 40 learners. We therefore expect the Minister to increase the education budget substantially, to ensure that the infrastructure is improved, all text books are delivered and we finally eradicate all mud schools.
COSATU also expects the Minister to allocate more resources to expand and improve the FET sector, which will in turn reduce the youth labour force, by extending their stay in the education and training system, so that they acquire basic and high-level cognitive skills.
The federation hopes to hear the Minister announce that he is to allocate more funds towards the reopening of the nursing and teachers colleges. The improvement of quality public health and education depends on in part on narrowing the nurse-patient and teacher-learner ratios respectively.
In the public health sector there are many challenges ranging from the shortage of staff to equipment and medicines. The Minister must release the long-awaited details on funding models for the National Health Insurance scheme and the health budget must be increased substantially to enable its speedy implementation.
The minister's speech must address all these issues and announce programmes which will complement other government economic restructuring policies like the Industrial Policy Action Plan and the National infrastructure Plan which are already in place but moving ahead too slowly. He must play his part in ensuring that the third decade of democracy must be dedicated to radical economic transformation.
We would also like to hear the Minister to make a bold announcement on the funding of the road infrastructure in the light of the failure of the unjust and increasingly unworkable system of e-tolling in Gauteng. We repeat our call to move away from the iniquitous ‘user-pays' principle to fund the road infrastructure, which is a basic public service and not a commodity, and at the same time to provide more funds to improve our public transport services.
We also expect the Minister to announce steps to make sure funds are available for the implementation of the national minimum wage as promised in the ANC elections manifesto, the details of which are to be thrashed out at a Nedlac Indaba, chaired by the Deputy President on 4 November.
COSATU repeats its demand on the Minister and the Reserve Bank to abandon inflation targeting as a priority and instead target economic growth and employment.
We expect and insist on a recommitment to the fight against corruption, tax evasion and the waste and mismanagement of public resources. The Nkandla debate has brought to the fore again the intolerable amounts of public money filling the pockets of individuals and for example, the R35 billion of wasteful expenditure at the Department of Public Works.
On average about R80 billion earmarked for infrastructure expenditure is not spent and thus rolled over. More money is wasted by a new government trend towards subtle forms of privatisation e.g. agencification, outsourcing etc., such as Home Affairs outsourcing visa applications to VFS.
This all adds to and new opportunities for corruption and more public money being wasted, which certainly must not be used as an excuse to deny public servants' fully justified wage increases.
The AIDC estimates we lose about R80 billion per annum through tax evasion by millionaires. Comrade Nene should pledge that he will fully investigate the latest allegations against Lonmin. Another problem the Minister needs to tackle is Government departments' non-payment of service providers within 30 days, which has a crippling effect on small businesses.
The federation also hopes for clarity on how the reported nuclear energy deals will be financed; COSATU remains opposed to nuclear energy because of a myriad of problems associated with it, including its demands for massive amounts of resources. We do not need a repeat of the Pebble Bed Modular Reactor, a nuclear energy project which COSATU was opposed and was abandoned after a lot of resources were wasted into it.
The new Minister must reject the advice pouring from the mouths of big business and make it clear in his statement that his mandate and responsibility is to advance the national democratic revolution and implement the Freedom Charter, which promised that "the people shall share in the country's wealth" and that "the national wealth of our country, the heritage of South Africans, shall be restored to the people".
Statement issued by Patrick Craven, COSATU national spokesperson, October 22 2014
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