A Growth Path Towards Full Employment

1
A Growth Path Towards Full Employment

• Policy Perspectives of the Congress of South
  African Trade Unions
• Consolidating Working Class Power in Defence of
  Decent Work and for Socialism

2
Background Context

• Based on historical positions of the democratic
  forces
• Economic Policy for a Democratic South Africa
  (1990)
• COSATU Economic Policy Conference (1992)
• Ready To Govern ANC Policy Guidelines (1992)
• Making Democracy Work (MERG Report) (1993)
• Reconstruction and Development Programme (1994)
• Social Equity and Job Creation (1996)
• The September Commission (1997)
• Accelerating Transformation (2000)
• This demonstrates labours contribution to
  progressive thinking about economic policy
• Another contribution A Growth Path Towards Full
  Employment

3
The Six Pillars of the Growth Path

• The Creation of Decent Work
• A living wage, eliminate discrimination in the
  workplace, skills development and training,
  balance between work and family, social dialogue
• Redistribution of income, resources and economic
  power
• Redistribution of income decent wages
• Redistribution of resources quality healthcare,
  education and basic infrastructure and services
  to working class and poor communities
• Redistribution of economic power changing
  patterns of ownership and control of the economy,
  addressing monopoly domination, the power of
  conglomerates and colonial domination
• Industrial development Building downstream
  industries, increasing labour absorption, meeting
  basic needs, dealing with balance-of-payments
• Meeting Basic Needs
• Increasing access to quality healthcare,
  education, housing, basic infrastructure and
  services, public transport
• Addressing food security, sustainable
  livelihoods, combating hunger and malnutrition

4
The Six Pillars of the Growth Path...Contd

• Environmental Sustainability
• Mitigating the effects of climate changemoving
  towards a low-carbon growth path
• Conserving and protecting the environment
• Development of Southern Africa
• Building social and economic infrastructure
• Promotion of democratic processes and
  institutions
• Building economic linkages that promote the
  growth of downstream industries in the region
• Managing natural resources, protecting and
  conserving the environment and making sure that
  natural resources benefit the regional population
• Promoting fair and equitable trade between
  regional economies, including the promotion of
  worker rights

5
The GEAR Growth Path Has Failed

• Unemployment Rate Rose from 31 in 1995 to 35
  in 2010, Unemployment rate of Africans rose from
  38 in 1995 to 45 in 2005
• Poverty Using a benchmark of R322 a month,
  individual poverty declined from 52.5 in 1999 to
  48 in 2007
• Redistribution
• Gini Co-efficient Rose from 0.64 in 1995 to 0.68
  in 2009
• Workers Share Declined from 56 in 1995 to 51
  in 2009
• Expenditures 50 of the population lives on 8
  of national income
• Executive Pay Top 20 paid directors in JSE earn
  1728 times average workers
• Apartheid wage gap On average, Whites earn 7
  times more than Africans
• Concentration of economic power
• Blacks own 1.6 of JSE
• 50 of JSE accounted for by 6 companies
• More 80 of JSE is banks and minerals-energy-compl
  ex companies
• Persistence of high concentration in value-chains

6
The GEAR Growth Path Failed...Contd

• Control of the economy has not kept with the
  times
• 62 of all promotions and recruitments were White
  in 2008/09
• 45 of these accounted for by white males
• 13 African males and 6 African females
• Structure of the Economy Has Not Changed
• Economy still mineral dependent for exports
• Petro-chemicals, mining, basic iron and steel
  make up 69 of exports
• Imports are made up of sophisticated manufactured
  itemsfailure to break colonial production
  structure
• Health profile of the population has
  deteriorated
• Life expectancy declined from 62 years in 1992 to
  48 years in 2009
• With an average life expectancy of 71 years,
  whites expect to live 23 years more than blacks

7
The Post-1996 Growth Path Failed...Contd

• Education
• 70 of matriculation passes accounted for by 11
  of schools
• Only 3 of children who enter the schools get out
  with higher grade maths
• 24 of learners finish schooling in the record
  time of 12 years
• On average 400 000 learners who write
  matriculation exams do not proceed with further
  studies, this was 89 of those who wrote in 2008
  2009
• Housing
• Progress has been registered 74 of households
  live in brick structures
• But 46 live in dwellings of no more than 3
  rooms average household size is between 4 and 5
  people
• 55 of Africans live in less than 3-room houses
• 50 of whites live in no less than 4-room houses

8
The GEAR Growth Path Failed...Contd

• Access to basic services
• Progress has been registered
• Electricity access 51 to 73 between 1994 and
  2009
• Households with no water Fell from 36 to 4
  between 1994 and 2009
• Access to sanitation Rose from 50 to 77
• But, there are problems
• 5 million people experienced water cut-offs due
  to non-payment
• The cost-recovery system and insufficient amount
  of free basic services to blame
• Unemployment and low wages account for this
• The above facts motivate for a radical shift in
  policy which should include
• A re-think of the role of the state
• Transformation of the industrial structure
• A shift in economic policy
• Taking social policy seriously, as both
  redistributive and transformative
• Transform economic power relations, deal with
  concentration of ownership

9
Focus Areas of the COSATU Proposals

• Role and Character of the State
• Economic Policy
• Industrial
• Skills
• Rural
• Labour market
• Macro
• Social Policy
• Ownership and Control
• Southern Africa

10
Role of the State

• Build 4 key capacities
• Extractive capacity To extract social surplus,
  mobilize national resources in order to fund
  social and economic development
• Redistributive capacity To deal systematically
  with the history of dispossession and the
  failures of neo-liberalism
• Transformative capacity To change the industrial
  structure and lead the process of social
  transformation
• Administrative To drive efficiency in the state
  apparatus and the economy, improve quality and
  pace of service delivery
• A state is developmental based on what it does
  develops capacities to address the terrible
  legacy of apartheid and capitalism
• A need to have medium to long-term perspective to
  guide economic activity

11
The Four State Capacities

• Extractive Capacity
• Mobilization of national saving to fund
  development
• Regulations on credit allocation by financial
  sector improve intermediation
• A progressive tax and levy system
• Redistributive Capacity
• Access to basic goods and services
• Social protection measures for those that are
  vulnerable
• Deal with directly unemployment, promote decent
  work directly
• Promote collective forms of ownership, increase
  support for SMMEs
• Transformative Capacity
• Production and allocation of strategic inputs
• Localization, increase labour intensity of
  production
• Research and development of new technologies
• Aggressive targets and punitive measures to
  address social transformation
• Remove the profit motive in the direct delivery
  of basic goods and services

12
The Four Capacities of the State...Contd

• Administrative Capacity
• Aggressive human resource development of public
  servants across all spheres
• Career-paths in the public service
• Closing the pay-gap between public and private
  sectors
• Improve education and training, set targets for
  tertiary education
• Increase the strategic developmental role of
  SOEs and Agencies
• Fill and create new strategic posts to meet
  developmental needs
• Efficiently and effectively utilize existing
  capacities
• Aggressive measures to fight corruption increase
  public awareness of consequences, naming and
  shaming lists, strengthen watchdogs and civil
  society organizations

13
Economic Policy

• Industrial Policy
• Rural Development
• Employment Policy
• Skills Development and Training
• Macroeconomic Policy

14
Industrial Policy

• Goals of Industrial Policy
• Decent work
• Meeting basic needs
• Address balance of payments problem
• Expand production for domestic and Southern
  African regional market
• Its Features
• Build backward and forward linkages
  Supply-Demand linkages
• Strategic inputs must be available downstream at
  affordable prices
• Build technological capabilities, support RD for
  targeted sectors
• Procurement for localization, support the
  linkages
• Factors to be considered when targeting sectors
• Labour intensity
• Skill intensity
• Value-addition
• Export-Import orientation
• Redistribution
• Water and Energy Intensityenvironmental
  sustainability considerations

15
Proposed Baseline Industrial Structure
16
Proposed Policies to Support Industrial
Development

• Regulation of exports
• Raw minerals and materials
• Metals, Scrap Metal and Steel
• Industrial financing and state investment in
  target sectors
• Link state support with local procurement and
  job-creation
• Wholesale and retail sector must carry 75 local
  content
• Codes and targets for SMME and co-operative
  support
• Sharpen the national innovation system around
  target sectors
• Change South Africas corporate culture
• A strategic approach to foreign ownership
• Measures to reduce energy and water intensity of
  production
• Recycling Formalized, regulated and promoted
• Environmental sustainability Pollution and waste
  disposal systems
• Competition Policy Monitor value-chains
  associated with targeted sectors

17
Rural Development Our Vision

• Provision of Decent Work
• Large-scale land reform
• Non-Farm activities agro-processing, light
  manufacturing
• Reduce income and asset inequalities
• Eradicate poverty and improve food security
• Access to basic goods and services

18
Rural Development Proposals

• Leading role of SOEs and SETAs skills
  development and training
• Extension of public transport, ICT and other
  economic infrastructure
• Revitalizing irrigation systems, water
  catchments, etc.
• Improve access to healthcare, education, housing,
  safety and security
• Establish a Rural Development Agency A technical
  arm to drive the states programme of agrarian
  transformation, support for land reform
  beneficiaries
• A regulatory authority to deal with the food
  value-chain, opening access for SMMEs,
  co-operatives and small-scale farmers
• Review the capacity, financing and loan criteria
  of the Land Bank
• Improving access to industrial inputs by the
  agricultural sector Linking industrial
  development and agrarian transformation

19
Labour Market and Employment Policy

• Goals of Labour Market and Employment Policy
• Full Employment
• Redress
• Skills Development and Training
• Workplace democracy
• Address the Apartheid wage gap
• Address executive pay gap

20
Labour Market and Employment Policy Proposals

• Employment GuaranteeELR
• Direct way of creating employment
• Scope to expand skills development of workforce
• Productive use of human resources
• Stabilizing the economy in a progressive way
• Youth Unemployment
• Address the leaks in the schooling system
• Expand the FET sector
• Strategic role of SOEs, Agencies and Departments
• Aligning curriculum content manage supply and
  demand
• Re-skill unemployed graduates, fill vacant posts
  in public service, to improve service delivery
• Support youth development SMMEs and
  Co-operatives

21
Labour Market Policy Proposals...Contd

• Wage Policy
• Target executive pay
• Mandatory base drift to close the apartheid wage
  gap
• Wage solidarity measures

22
Skills Development and Training Proposals

• Challenges
• Incursion of profit-driven service providers
• Poor quality education from schools
• Very high functional illiteracy
• Lack of focus on ABET and RPL
• Government departments
• Scarce and critical skills now exceed 1 million
• Proposals
• Align skills development and education system
• Skills development integral to EE/scorecards
• ABET universally available
• Apprenticeship training
• Skills levy increased to 4 of payroll
• ABET teachers must be permanent
• SETAs must link with HETs and FETs

23
Macroeconomic Policy

• Fiscal Policy Goals and Elements
• Goals
• Full employment
• Redistribution
• Social and economic transformation
• Environmental sustainability
• Core Elements
• Stabilize employment over the cycle and increase
  employment in the long-term
• Influence changes in income distribution
• Influence the structure of the economy
• Balance social and economic infrastructure

24
Macroeconomic Policy...Contd

• Elements
• The primary target Employment
• Industrial development
• Foreign exchange controls
• Exchange rate management
• Support expansionary developmental fiscal policy
• A broader framework for fiscal-monetary
  co-ordination

25
Social Policy Proposals

• Education
• Universal free education
• Early Childhood Development
• Infrastructure and resourcing backlogs
• Reduce class sizes
• Teacher development
• Healthcare
• Focus on HIV/AIDS
• Community Care Workers
• State-led training of nurses and doctors
• Increase the Nurse/people ratio from 4 to 8
• State pharmaceutical company
• Capacity for clinics

26
Social Policy Proposals...Contd

• Housing
• Minimise profit motive in housing delivery
• Set up a Housing Parastatal
• Strengthen the NHFC
• Establish housing brigades
• Expropriate land to address housing backlog
• Break down apartheid geography, increase
  densification, housing close to work
• Basic Infrastructure
• State directly deliver infrastructure
• Mobilize communities
• Link to sector development
• SMME and co-operatives
• Scrap cost-recovery and promote
  cross-subsidization
• Review the quantity of Free Basic Services

27
Ownership and Control

• Building a mixed economy
• Private ownership
• Social ownership
• Public ownership
• Sectors
• Mining
• Metals Fabrication
• Petrochemicals
• Pharmaceuticals
• Forestry
• Cement
• Construction
• Finance

28
COSATUs Critique of Govts New Growth Path

• The Tools are either Absent or not Firmly
  Proposed
• Analytical Framework The Pillars
• The Role of the State What of Tenders
• Industrial Policy Where are the instruments?
• Rural Development Very thin
• Labour Market Policy Where is transformation?
• Macroeconomic Policy Continuities more than
  change (old instruments)
• Social Policy Absent
• Ownership and Control Absent (weird proposals on
  BEE)
• Development of Southern Africa Narrow

29
The Policy Tools

• It is not what the document wants to achieve
• It is not what the document mentions
• The most critical issue is the set of policy
  tools, instruments, that are proposed
• The set of tools marks a break, or continuity of
  policy
• Policy without tools is empty
• Examples
• Macroeconomic Policy (p.16)
• Industrial Policy (p.17)
• Labour Market Policy (p.23)
• Developmental Trade Policy (p.24)
• Resource Drivers (p.27)

30
Analytical Framework

• The pillars are not clearly spelt out
• Theoretical basis, perspective of the New Growth
  Path not spelt out
• Interrelationships between pillars leads to
  perceived trade-offs
• No clear strategy

31
Cosatu Proposals on Analytical Framework

• Pursuing a strategy of redistribution of income,
  wealth, economic power and resources
• Creating productive, decent work for all South
  Africans
• Pursuing a strategy of industrialization
  identifying sectors and building linkages between
  sectors
• Meeting the basic needs of the people housing,
  water, energy, education, healthcare and social
  protection
• Promoting fair and equitable trade, industrial
  and social development across the Southern
  African region
• Promoting an environmentally sustainable social
  and economic development strategy

32
Role of the State

• The NGP document is obscure about the role of the
  state in the new growth path
• On institutional drivers, building the
  developmental state is inadequately treated (in
  one page)
• The NGP documents view of what the developmental
  state should do is very high-level, and fails to
  elaborate the perspectives of the 52nd Conference
• Shape the key sectors of the economy through
  strategic interventions
• Ensure that our natural resources are used to
  maximize national development
• Ensure that SOEs and other state-aligned
  agencies respond to a clearly defined public
  mandate and act in terms of an overarching
  industrial policy and economic transformation
  objectives
• The role of the private sector in a mixed economy
• The state is expected to create only 2 of the 5
  million projected jobs by 2020

33
Cosatu Proposals on the Role of the State

• Contain a separate section that deals with the
  role and character of the state in the economy
• Outline steps to build the required
  state-capacities as identified in the 52nd
  Conference and in the Cosatu document
• Clarify the bias of the state in line with
  clarifying the class, race and gender character
  of the new growth path
• Clarify the role of the state in directly
  building infrastructure and providing basic
  services
• Elaborate on the role of the state in shaping key
  sectors such as the minerals-energy complex,
  natural resource-based industries, etc. in line
  with the 52nd Conference resolutions
• Re-think the role of the state in directly
  absorbing the unemployed, in line with proposals
  contained in the Cosatu document and in the 52nd
  Conference resolutions

34
On Macroeconomic Policy

• This deals with fiscal and monetary policies and
  their co-ordination
• At the core of any development strategy because
  it generates sources of financing the development
  strategy
• In order to understand the macroeconomics of the
  NGP document, we have to backtrack and recall the
  macroeconomics of GEAR
• Inflation control as the overriding concern
• A tighter fiscal stance to aid anti-inflation
• A social agreement to facilitate wage-price
  moderation
• A stable, competitive exchange rate
• Low real, but positive, interest rates
• Budgetary re-prioritization
• All these are contained in the New Growth Path
  Low inflation, retrained fiscal policy,
  wage-price moderation to deliver low interest
  rates and stable competitive exchange rate
• No change in macroeconomic policy

35
Cosatu Proposals on Macroeconomic Policy

• The proposed macroeconomic policy packaged be
  abandoned it is not in line with the
  perspectives of the Alliance and will not advance
  economic transformation
• The principles of fiscal and monetary policy be
  clearly outlined, and the mandates be clearly
  formulated so that in both policies employment,
  redistribution and economic transformation become
  the central focus, in line with the resolutions
  of the 52nd Conference, the 2009 Manifesto and
  the perspectives of the Alliance
• Instead of using the inflation target as a
  coordinating device between fiscal and monetary
  policies, the NGP document should use
  employment-targeting to co-ordinate both policies
• Rather than exploring tools, the NGP document
  should outline the policy tools that should be
  used to achieve the goals of macroeconomic policy
  e.g. concrete proposals on progressive taxation,
  regulation of short-term capital flows, foreign
  exchange controls, public procurement, etc. all
  geared to support industrial and social policy
  imperatives
• Mechanisms to regulate the financial sector,
  especially the banking system, so that it
  channels financial resources to targeted sectors
  and advance clearly defined developmental goals.

36
Microeconomic Reforms

• The NGP document fails to move beyond AsgiSA in
  its microeconomic reforms monopoly pricing,
  costs of doing business, exchange rate, etc.
• Based on 3 pillars
• Competition policy, targeting monopoly pricing on
  wage goods and industrial inputs,
• A review of administered prices to ensure that
  they do not increase above inflation
• Interventions to contain other volatility of
  costs of necessities (NGP, p.17).
• A more progressive position that the document
  could have advanced is for the role of the state
  in the direct production and distribution of
  essential items and critical inputs.
• SASOL produces essential chemicals for both
  industrial and household use SASOL in turn
  requires massive amounts of electricity and
  relies on natural minerals for its production
  processes
• Arcelor-Mittal Steel depends fundamentally on
  iron-ore production, coke, electricity and other
  chemicals from SASOL, and coal
• Eskom relies on water and coal, but also requires
  metals such as copper and steel for cables,
  construction and machinery.
• Price regulation is insufficient, especially when
  NGP is located within the context of the NDR as a
  form of class struggle

37
Cosatu Proposals on Microeconomic Reforms

• Pricing of industrial inputs and its control be
  integrated into the discussion on industrial
  policy and/or the role of the state
• Skills development be treated in a detailed
  fashion, and be incorporated into the discussion
  on labour market policy
• Measures to support competitiveness and
  innovation must be incorporated in both labour
  market and industrial policy
• The section on microeconomic reforms must
  therefore be removed and whatever is said in this
  section be incorporated in the relevant section
  of the document, e.g. measures to deal with
  monopoly pricing can be incorporated in the
  section on competition policy

38
Cosatu Proposals on Industrial Policy

• The goals and principles that underpin industrial
  policy be clearly outlined
• Targeted industries must be clearly identified,
  structural linkages between them must be
  presented, building on proposals in IPAP 2
• Targeted industries must be linked to specific
  infrastructure and critical outputs, help the
  focus of the IPAP 2, direct DFIs
• Outline the future industrial structure, based on
  an analysis of 8 indicators
• The NGP document must dedicate special attention
  on the transformation of the wholesale and retail
  sector
• Industrial policy measures to support targeted
  industries must be clearly outlined, e.g. local
  procurement, regulation of raw materials etc.
• Given the need to reduce carbon emissions,
  specify concrete ways in which the state will
  intervene to ensure that industrial processes
  optimize the use of energy

39
Labour Market Policy

• This section of the NGP document is also
  problematic
• It is not clear what the goals of the labour
  market policy of the NGP document are
• The direct role of the state in employment
  creation is not mentioned
• absence of ideas on how the South African economy
  can realize and guarantee the goal of full
  employment in the NGP document
• A national productivity accord supplemented by
  sector and workplace productivity agreements
• The wage policy of the NGP document is still
  stick in the old GEAR mode

40
Cosatu Proposals on Labour Market Policy

• The section on labour policies be expanded and
  given more depth. It should have a separate
  section.
• The goals and principles of labour market
  policies must be clearly spelt out, e.g. full
  employment, redress, workplace democracy,
  apartheid wage gap and executive pay, skills
  development, etc.
• The NGP document must propose a concrete way to
  guarantee full employment
• There must be a clear statement on the banning of
  labour brokers and concrete measures to regulate
  contract and other forms of non-permanent
  employment
• There must be clarity on how to deal with youth
  unemployment
• The role of the state, especially SOEs, in
  skills development and training needs to be
  strengthened and co-ordination with FET colleges
  must be improved
• Respond to the proposals in the Cosatu document
  on labour market policies, skills and human
  resource development
• The NGP document must abandon its proposed
  conventional wage-price controls and instead
  focus on progressive and active taxation policy
  set targets to close the apartheid wage gap, set
  targets for executive pay gap and use taxation to
  achieve this, etc.

41
Cosatu Proposals on Social Policy
42
Cosatu Proposals on Rural Development

• Re-assert the pillars of rural development and
  transformation Land reform, agrarian
  transformation and rural development
• Take a stand on land ownership, e.g. foreign
  ownership, what to do with under-utilized land,
  the conversion of productive land to golf estates
• What mechanism should the state adopt to
  intervene in land markets, now that the 52nd
  Conference
• Outline ways in which facilities such as banks,
  colleges, clinics and hospitals can be delivered
  in rural areas
• The role of SOEs in rural development should be
  outlined
• The role of agriculture should be strengthened,
  obstacles to access to agricultural inputs such
  as water, fertilizers, pipes, etc should tackled
• The role of the state in the agriculture,
  especially food, value chain must be spelt out
• Re-look at the 52nd Conference resolutions on
  Rural Development, the Comprehensive Rural
  Development Strategy and the Cosatu document

43
Ownership and Control of the Economy

• 52nd Conference says a mixed economy is one where
  the state, private capital, cooperative and
  other forms of social ownership complement each
  other in an integrated way to eliminate poverty
  and foster shared economic growth
• The SACP resolved to build a developmental state
  that should have capacity to compel and/or
  expropriate the means of production for
  development purposes (12th Congress)
• The NGP document does not raise the question of
  patterns of ownership and control of the economy
• The NGP envisions an economy in which private
  capitalist enterprises dominate
• In 1990, it was noted that natural monopolies and
  strategic industries that are crucial for
  national development must be brought under state
  ownership
• Should public entities be categorized as black
  empowered?

44
Cosatu Proposals on Ownership and Control

• The NGP document in its clarification of the role
  of the state, should take a stand on the
  nationalization of strategic companies such as
  SASOL and Arcelor-Mittal and those engaged in the
  forestry sector
• The document must be clear on the nationalization
  of the mines, and the role of the state in
  beneficiating raw materials
• The NGP document must take a stand on the
  continued dominance of critical sectors such as
  cement, construction and finance by monopolies,
  to deal with unequal power relations in the South
  African economy and is an obstacle to economic
  transformation
• The NGP document must be clear on the need to set
  up a state-pharmaceutical company
• In general the document must identify the range
  of interventions from nationalization to
  regulation, where the state can decisively play a
  role in shaping economic and social development
• We propose that the NGP document engages with the
  proposals contained in the Cosatu document

45
Concluding Remarks

• A synthesis of ANC, COSATU, SACP and SANCO
  perspectives is required
• Need a confident and strong lay out the policy
  path and the tools in a clear and coherent way
• GEARESFASGISAIPAP2New Growth Path
• Fails to take us forward, hence Cosatu position
  that this document falls far short of a new
  growth path framework
• Call for the overhaul of the NGP framework
  document
• Way forward since NGP unveiled Cosatu engaged in
  NEC January 2011 Lekgotla
• Still awaiting a more detailed engagement on the
  policy framework through ETC of the ANC and
  Alliance Economic Summit

46
Thank you

• An Injury to One is an Injury to All!