SACP Statement on economic reconstruction and recovery plan ahead of President Cyril Ramaphosa’s address to the joint sitting of the National Assembly and National Council of Provinces

15 October 2020

The South African Communist Party (SACP) is waiting with great anticipation for President Cyril Ramaphosa’s address to the joint sitting of the National Assembly and National Council of Provinces scheduled to take place on Thursday, 15 October 2020, at 14h00, on “South Africa’s Economic Reconstruction and Recovery Plan”. The President’s address should go to the root of the matter. To be meaningful, the address should decisively tackle not only the effects, but also the causes of, and the economic and broader social development problems that South Africa faces.

In line with the Strategy and Tactics document of the ANC, the President’s address must unambiguously place the interests of the working class and poor and their voice at the centre. The intransigent fact is that on the receiving end of the multiple crises created by the system of labour exploitation by capital are the economically exploited and low paid workers and the poor in general, the unemployed, those at the coalface of capitalist inequality, women, the youth, people living in overcrowded townships and squatter camps and undeveloped/underdeveloped rural areas—and chiefly the black people – the same majority population that was oppressed under successive colonial and apartheid regimes.    

Endemic system crisis

South Africa has been in a capitalist economic system crisis before Covid-19. From January to March, South Africa had a population of 10 million, 7 hundred and 97 thousand unemployed people. The macroeconomic framework that South Africa followed up until now has failed to solve the problem of crisis-high unemployment, poverty, and inequality. The business-as-usual macroeconomic framework with neoliberal characteristics is, therefore, not the way forward.  

To deal with economic system and structural problems and weaknesses, there must be systemic and structural economic policy change. This has to start with the failed macroeconomic framework, but must be premised on the strategic perspective to advance a second radical phase of our democratic transition – as committed in the ANC’s May 2019 general election manifesto drafted in consultation with the tripartite Alliance and endorsed by the Alliance formations and the decisive majority of the electorate through a vote.

Covid-19 has worsened the chronic crisis before the crisis

Under the impact of Covid-19, the crisis-high rates of unemployment, poverty and inequality have worsened. Furthermore, the pandemic has exposed the persisting legacy of apartheid unequal spatial development patterns. Our people living in densely populated townships, squatter camps, and undeveloped/underdeveloped rural areas, and many without access to running water, sanitation, quality healthcare, and other essential services, found themselves under more difficult Covid-19 conditions.

From April to June 2020, 2.2 million South Africans lost their jobs. Statistics South Africa is yet to release its Quarterly Labour Force Survey for the third quarter, covering the months of July, August, and September. However, all indications are that unemployment has worsened, along with poverty, hunger, and inequality.

There is no way South Africa will solve these systemic problems of capitalism without an overhaul of our economic policy and radical structural transformation. Neoliberal prescripts, whether copied or conveyed from the OECD in Paris, France, the IMF in Washington D.C., the United States, ratings agencies representing foreign finance-monopoly interests, among others, will not liberate our people. On the contrary, in addition to interfering with our democratic national sovereignty, including the democratic policy space, in terms of which we saw the National Treasury release its neoliberal economic policy paper devoid of its key mandate of a successful macroeconomic policy in August 2019 without consultation, such prescripts will maintain the paradigm of exploitation and dominance by imperialist forces.

How we wish the President’s address will decisively and clearly spell out the road map toward the goals of the Freedom Charter! South Africa must jealously guard its democratic national sovereignty, as well as defend, advance, and deepen the path towards complete liberation and social emancipation.

Agreement with the President, but emphasis on clarity

The SACP agrees with the President that we need a programme commensurate with the economic damage caused by the Covid-19 pandemic. We want to add, however, that we cannot return to the crisis before the crisis!

Therefore, South Africa needs a programme commensurate with the combined impact of the damage caused by the Covid-19 pandemic and the chronic crisis before the crisis, including the crisis of social reproduction. By social reproduction, we mean the entrenched problem of the inability of many households to support life itself because of unemployment, poverty, inequality, and other consequences of the system of capitalist exploitation. How we wish the President will quantify the scale/amount of the radical economic reconstruction and development programme that South Africa needs and employment it will create, clearly spell out the fiscal/revenue and monetary policy changes to fund it, and take the nation into his confidence on the timeframes for its implementation.

The radical economic structural transformation and development programme that South Africa needs requires a spending big push – focussing initially on a massive infrastructure programme, economic and social, linked to public employment. A stance of austerity, code-named fiscal consolidation, will curtail these programmes to below the scale required and risk choking off recovery as it did in many countries after the Great Recession of 2008–2009. By austerity we mean cuts to social and other development spending, prioritising the achievement of pre-ordained fiscal numbers above all else.

Austerity often creates a vicious cycle – cuts are made to reach contractionary fiscal targets, with austerity contractionary, meaning revenue collection is constrained, leading to yet more cuts reaching into more important programmes. A return to the so-called “fiscal consolidation” will suffocate inclusive economic growth through such cuts on the expenditure. This will worsen the situation now when the performance of the economy is at a level even below that of the crisis before the Covid-19 pandemic.

Fighting corruption and state capture

The government must clamp down on undue influence on the state and state officials, and entities and public representatives. In line with capitalist values, such influence is destined for private income generation and private wealth accumulation and involves private sector elements.    

Fighting state capture and corruption is indeed also essential – but must be seen as an integral part of building state and public sector capacity to lead a radical economic transformation and development programme, not as an excuse to abandon this quest in favour of unrealistic expectations that profit-seeking private capital can fulfil this role.

Key elements from the social dialogues process

The SACP welcomes the following key elements emerging from social dialogue at the National Economic Development and Labour Council (Nedlac).

An aggressive infrastructure investment, including social infrastructure and water security.

Employment-orientated strategic localisation and re-industrialisation, and the promotion of export programmes.

Secure affordable energy and a just transition to a lower carbon economy.

Mass public employment: Our SACP documents, produced between April and June in response to Covid-19 and the crisis before the pandemic, included in this category the Expanded Public Works Programme, the Community Works Programme, the Community Health Workers Programme, and the Community Development Workers Programme. All these must be guided towards decent work and, in line with the Freedom Charter, securing access to the right to work for every person.  

Initiatives on skills development, local economic development, and co-operation to fight corruption and criminality.

However, so far, many of these proposals are advanced at a high level of abstraction, with little indication as to how they differ from similar proposals in previous plans, or how their implementation will advance. This is true, also, of long-standing commitments taken over from previous programmes, such as the levying of a tax on the export of scrap metal or the rollout of broadband infrastructure.

Regarding the broadband spectrum, the SACP strongly supports the provision of free Wi-Fi, particularly to low-income, historically disadvantaged communities. Rather than conveyed to capture by private corporations for their profit, the state should leverage the broadband spectrum in strategic ways, as public property, for developmental purposes.

Concerning tax on the export of scrap metal, important as it is, the state must clamp down on the looting of public infrastructure, such as the rail network tracks and overhead cables and other components and parts that have been looted unabated in areas such as Gauteng Province. Scrap metal must be genuine and not stolen public property. The thieves behind the theft and vandalising of public property must be hunted down and held to account and the state must protect, develop, and expand public property.      

Regarding the other programmes, the SACP is concerned at the lack of detail on funding and no mention of macroeconomic policy review or any recognition that the circumstance we find ourselves in requires a move beyond neoliberal austerity. There remains an unresolved tension in government policy between relatively progressive policies emerging from processes of social dialogue and a strong push towards austerity.

The “aggressive infrastructure investment”, which the Nedlac partners have correctly agreed needs to be prioritised, provides little detail on funding. Other presentations have, however, indicated that government envisages that a major driver will be “blended finance” rather than, for example, investments by public institutions, prescribed assets, and/or strategic purchase of state bonds by the South African Reserve Bank. Financialisation will not resolve our economic and broader social transformation and development challenges. Blended finance, for instance, is an arrangement in which project proposals are packaged into financial products like securities that are then on sold to profit-seeking financial investors. Experience elsewhere has pointed to this being a “high cost low yield” model that has raised very little additional funding to support, for example, the Millennium Development Goals or the Green economy. Why this should be different in South Africa is something those proposing this model will need to answer. 

Nor is there any sign of an intention to adopt a stimulatory fiscal stance to support radical structural economic transformation and development.

The stranglehold of austerity will constrain the impact of any economic reconstruction and development programme at a level that will fall short of that commensurate with the economic damage caused by Covid-19, let alone taking us to a better place than the chronic crisis before the crisis.

Decisive state leadership

The following programmes based on decisive state leadership to drive a radical economic structural transformation programme are crucial.

- Building public healthcare capacity and resolutely advancing towards the National Health Insurance (NHI) to ensure access to quality healthcare for all.

- Integrated human settlements planning and development, geared towards eliminating the legacy of apartheid unequal spatial development and therefore anchored in equalising development through a massive infrastructure expansion covering underdeveloped/undeveloped and historically disadvantaged areas. This must include running water infrastructure, sanitation infrastructure and other basic amenities for all.

- The use of prescribed assets requirements (‘impact assets’ or ‘developmental investment assets’ requirements, in terms of the Alliance Covid-19 framework document).

- A wealth tax and/or solidarity tax.

- Addressing short-term needs through a minimum income guarantee. This must include a universal basic income grant covering the unemployed, and grants to encourage productive activity, anchored in a development-oriented poverty and hunger eradication programme. Therefore, the Covid-19 Social Distress Relief Grant MUST be continued towards a universal income guarantee programme and a comprehensive social security. True to history, this will concretise the commitments made in the ANC May 2019 general election manifesto. 

- A highly partisan discourse on the need to ‘shorten supply lines’ of medical equipment and critical food supplies to drive more ambitious and higher impact localisation programmes.

- Transformation of the financial sector, in particular de-monopolisation, diversification, including robust support for co-operative banks, and building a developmental state banking sector to take care of national development imperatives.   

- A high valued added, diversified, and expanded industrialisation, and, linked with it, infrastructure development (can support re-industrialisation through drawing inputs from manufacturing), as well as agriculture and food security.

- Tight regulation of cross-border capital transactions/flows and clamping down on illicit capital flows. 

Issued by Alex Mohubetswane Mashilo, Central Committee Member for Media & Communications, 15 October 2020