COSATU's response to the State of the Nation Address

The Congress of South African Trade Unions congratulates President Jacob Zuma on his 2011 State of the Nation Speech and welcomes his commitment to continue to base government policies on the five priority policy areas contained in the ANC's 2009 election manifesto.  

There are however many areas where much more detail will be required before we can make a comprehensive assessment of the government's programme.

COSATU fully supports the declaration that 2011 is the "year of job creation, through meaningful economic transformation and inclusive growth", and the placing of job creation as the top priority of government. We warmly welcome his assurance that government is "working within the premise that the creation of decent work is at the centre of our economic policies". This should finally lay to rest the suggestion that government is abandoning its decent work agenda.

He was absolutely right to insist that "parallel to the job creation incentives, we will also undertake policy reforms related to improving the lives of our workers".

We welcome the fact that there was no reference to a youth wage subsidy, which would merely act as a subsidy to employers to replace older workers with younger workers, and deepen the problem of dual labour markets. We trust that the Minister of Finance will not reintroduce this issue in the budget, and rather call on government to engage with us on our proposals to address youth unemployment, through current discussions with social partners on the New Growth Path.

The federation supports strongly that every sector and every business entity must focus on job creation, and that all government departments, national, provincial and local, will align their programmes with the job creation imperative.

We hope that they will now implement the president's commitment that "Government must fill all funded vacant posts. There should be a transparent audit of the numbers involved, and areas of current shortage. Further we welcome the pledge that employment will be expanded in areas which are critically short of front line staff, such as health and education.

We also agree that "State Owned Enterprises and development finance institutions should also be more strongly aligned to the job creation agenda".

We welcome the establishment of a jobs fund of R9 billion over the next three years to finance new job-creation initiatives, and that "the Industrial Development Corporation has set aside R10 billion over the next five years for investment in such economic activities with a high jobs potential". We also commend the R20 billion in tax allowances or tax breaks to promote investments, expansions and upgrades in the manufacturing sector.

But we will need more information on who will receive this money and get the tax breaks. We must ensure that they are tightly linked to conditions relating to jobs, local procurement etc. and that the government builds the capacity to efficiently monitor and audit their roll-out. We have to be confident that the businesses who benefit from all these concessions really do use the money to create jobs and not just boost their profits.

We welcome the proposed merger of Khula, the South African Micro-Apex Fund (Samaf), and the Industrial Development Corporation's (IDC) small business funding initiatives into a single small business funding body.

COSATU agrees with the President statement that "the mineral wealth of our country is a national asset and a common heritage that belongs to all South Africans, with the State as the custodian." We welcome the decision to endorse the creation of the African Exploration, Mining and Finance Corporation as a state-owned mining company, that will undertake the mining of minerals of strategic significance.

This is a very significant move towards the idea that it should be the people and not private businesses who benefit from the exploitation of our mineral wealth.

We also support the adoption of the beneficiation strategy as the official policy of government, "so that we can start reaping the full benefits of our commodities". That is fully in line with the federation's call for an economy based primarily on manufacturing rather than the export of raw materials and we shall engage on the detailed implementation of this policy.

We welcome the commitment to ‘strengthen the Competition Act to open the market to new participants'. The introduction of measures proposed in the NGP on competition policy need to be urgently expedited, especially in the light of recent shocking revelations exposing collusion in the construction sector, which indicate that such practices are rife in nearly every sector of our economy.

Proposals for the development of the agricultural sector are welcome, and need to be spelt out further as part of a comprehensive rural development strategy.

The federation also applauds the intention to turn the Post Bank into a fully fledged public bank which we hope will provide a real alternative to the cosy cartel of the ‘big four' and remain state-owned. However we need to ensure that's it primary mandate remains developmental, and that it doesn't adopt the profit-driven logic of the private sector banks.

On service delivery COSATU is pleased that the President linked the need to provide infrastructure and basic services to creating jobs, recognising that the construction industry is a known driver for work opportunities. However, we call on the President to urgently address the problem of declining government expenditure over the last two years in rolling out the infrastructure programme, as revealed in statistics released by the SA Reserve Bank.

While pleased that the Expanded Public Works Programme aims to create 4, 5 million work opportunities, and that more than a million opportunities have been created already since the beginning of Phase 2, we must caution that, valuable as it is, for example in repairing potholes, the EPWP is no substitute for the creation of proper, decent jobs.

We applaud the promise that by 2014, 400 000 of the 1.2 million households living in the country's 2 700 informal settlements should have security of tenure and access to basic services.

We welcome the commitment that the Government Position Paper on Social Security Reform will be released this year for discussion, but point out that this is years overdue, and require an undertaking that Treasury will not continue to block progress on this matter, as they have in the past.

We are disappointed about the renewed commitment to a declining budget deficit in the medium term, to as low as 3-4% by 2013, given the huge challenges the country is currently facing.  This will considerably constrain the ability to address existing service delivery challenges, as well as the investment needed to make the New Growth Path succeed.

We are also disappointed about the emphasis on exchange control reforms, which will likely increase risks of currency speculation and capital flight.  We want to see government introduce capital controls, and other measures to control the currency.

Broadly this reflects a fundamental disagreement COSATU has with the government's macroeconomic policies reflected in this speech and the New Growth Path. There can be no real and deeper change of our economic fortunes if we remain prisoners of inappropriate fiscal and monetary policies that simply carry forward elements of the hated GEAR strategy.

On education we welcome the commitment to "continue investing in teacher training, especially in mathematics and science", the focus on expansion of access to higher education for children of the poor and the promise that "students in Further Education and Training Colleges who qualify for financial aid will be exempted from paying fees".

The federation notes that work has continued to develop the National Health Insurance policy and implementation plan and looks forward to the Government soon-to-be-released policy document for public engagement. We hope that no government department will be allowed to undermine, or block, this absolutely crucial policy.

We welcome the President's plan to revitalise 105 nursing colleges countrywide, to train more nurses.

COSATU congratulates the government on the reduction in crime and welcomes the recommitment to the fight against corruption and is keen to see what action is taken to root out this cancerous growth in our society.

Our biggest concern though is government's capacity to drive through all these programmes. We are worried that the President did not utter a word on the need to develop the capacity of the government to implement its policies. He missed an opportunity to address our growing concerns.

These were further deepened by the announcement by the Human Settlements DG that R58 billion is required to fix RDP houses built by fly-by-night companies who should have not won the tenders to provide shelter to the poor people desperately dependent on government to provide them with houses. This money is bigger than what government will spend to create jobs! 

Further the President should have announced that as part of improving efficiency, government will move towards zero budgeting. This means all departments, in particular health and education, will start by budgeting and then trace every cent spent to ensure there is no leakage.

Many studies have revealed that our country is spending more resources on health and education than many other developing economies, yet we perform worse than they do. This means there are leakages in our system that need to be addressed.

All of the government priorities, in particular job creation, depend on the efficiency of the government and changing the culture of the public sector as a whole, so that all, in particular those responsible for approving tenders, must appreciate that every cent of government resources comes from the workers, including mineworkers who daily risk going deep down in the belly of the earth. We must end this culture of just spend and spend without ensuring that results are consistent with every cent spent.

Statement issued by Patrick Craven, COSATU national spokesperson, February 11 2011

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