COSATU statement on the latest GDP numbers

The Congress of South African Trade Unions has noted the report that shows that South Africa’s economy, as measured by the GDP has shrunk by 3, 2% during the first quarter of the year. According to Stats SA, the 3.2% decline is the biggest quarterly fall in economic activity since the first quarter of 2009. We will be lying if we were to say that this is shocking because there is nothing drastic that has been done to kick-start the economy.

The country is reaping the rewards of the National Treasury’s dogmatic adherence to the neo-liberal capitalist trajectory of the late 20th century. It is now clear that the neoliberal policies based on “market forces” and international competitiveness are not going to solve our economic problems. These policies have seen more and more people sliding into poverty in this country.

Unfortunately, the South African government is continuing to adopt regressive and contractionary policies that only focus on cutting social expenditure and weaken the capacity of the state. The deceleration of fiscal spending since 2014 and now the outright reduction of spending continues to plunge the economy deeper into a depression in an environment of depressed private sector investment and household spending.

The Foreign Direct Investment (FDI) that President Cyril Ramaphoa has been focusing on will not cure all our economic ills. FDI in fact sometimes worsens the situation by encouraging external dependency and stifles economic transformation and undermines the expanded reproduction of capital and savings through the massive repatriation of profits.
This does not augur well for an economy that is struggling with the real unemployment rate of 38%, with close to 10 million people struggling to get jobs. This is a crisis considering that the NDP projected that the economy will create 11 million jobs by 2030. In order to achieve this, the economy would have to grow by 5.4% per annum, with unemployment of 6% per annum in 2030.

This will not happen as long as the private sector is continuing with their investment strike, with more than R2,1 trillion of their cash reserves sitting in bank accounts instead of being invested back into the economy. This situation also calls for strong and decisive leadership at a political level. If SA is to industrialise, we need to transform the economy and move away from the colonial economy of exporting raw goods on the basis of cheap labour.
Fixing what is wrong with the South African economy will require a collective effort from all social partners and bold and decisive leadership from the government. We expect the state to use a variety of economic and other levers at its disposal, to regulate and channel investment in the job intensive areas of the economy. Our macroeconomic policies need to be radically overhauled in line with the radical economic shift that is needed at this time of crisis. The future is in promoting investment in rural areas and in the economy of the townships because economies are made up of people.

Both government and the private sector must be held to account for their failures to implement the progressive commitments of the 2018 Presidential Jobs Summit. They have failed to move swiftly to implement the many progressive commitments to protect and create jobs, to nurture existing and grow new economic sectors. Instead, thousands of workers have been subjected to retrenchments and job freezes in the private sector e.g. banking, auto-manufacturing, agriculture etc. but now too by the State-Owned Enterprises and even in the public service.

The Federation wants the government to expedite the creation of a state-owned retail bank and also allow for the creation of more regional, provincial banks and local-not-for-profit banks that will focus on productive lending for productive purposes, helping small businesses to expand and grow jobs. The Reserve Bank needs to impose quantitative controls on commercial banks to ensure that a quarter of their loans go to priority sectors that drive the growth path and create jobs on a larger scale.
COSATU will continue to push for a developmental model that will be based on meeting our countries economic and social needs first. Our production of goods and services should be geared primarily towards the domestic and regional market with export playing a secondary, supplementary role.

COSATU wishes the new Ministers of Trade and Industry, and Employment and Labour well; however, there is no time for a honeymoon. They need to urgently intervene before this quarter’s massive retraction becomes another recession that workers cannot afford. They must meet with business and labour urgently and ensure that both the private sector and business implement the Jobs Summit Agreement and undertake the necessary interventions to get the economy growing.

Issued by COSATU

Sizwe Pamla (COSATU National Spokesperson)
Tel: 011 339 4911
Fax: 011 339 5080
Cell: 060 975 6794