COSATU statement on its Key Economic Interventions and proposals document

The debate around the future of SOE’s and the economy has become lively over the past couple of months and weeks, especially after the federation released its paper on how to fix the economy. COSATU welcomes this debate because there is a lot at stake and this country is crying for solutions and fast.

We already have R3 trillion worth of the overall public debt, some of which is denominated in US Dollars or other foreign currencies. This heavy debt burden can only balloon even more as long as the governance of most of the State-Owned Enterprises (SOEs) continue to deteriorate. This means that dealing with SOEs, in particular, has become paramount.

Failure to deal with this will result in IMF or World Bank inspired austerity that will not just see cuts in public spending but will lead to a massive reduction in all aspects of social and economic benefits to the people, in wages, retirement benefits and pensions, health and education and social welfare transfers.

The country is now more vulnerable to the policy dictates of these western institutions than before and this development will not only threaten the course of the NDR but actually undermine our national self-determination.

Workers taking control

The 13th National Congress of COSATU gave us the mandate to ensure that over the next five years, the federation ensures that the working class takes a lead, as we put into practice the concept of a developmental state.COSATU’s paper on Key Economic Interventions and proposals( available on our website) is just the beginning. We continue to encourage people and organisations to engage with the COSATU paper and we are happy that it has received endorsements by the ANC NEC Lekgotla and Trade union federations Fedusa and NACTU.  We appreciate the healthy and positive debate by so many and also note the passionate opposing views that are driven more by ideological preferences.

Proponents of privatisation are angry and worried about workers taking control of their monies (retirement savings). It does not help that currently, there is a huge ideological offensive directed at the progressive forces and the government policies that seek to change the current system to benefit the majority. All that is elevated as correct and sane in the political and economic sphere is that which reinforces the neo-liberal ideas.

This is nothing new though because we witnessed the same when COSATU successfully defended the nationalisation of workers provident funds by the government. We stopped the implementation of the Taxation Amendment Act of 2013 that was trying to nationalise the provident funds despite huge protestations from the DA, the National Treasury, and the pension lobby.

We saw the same passionate opposition to our push for workers to be represented in the PIC Board because many people have been using the asset manager as a piggy bank. The National Treasury and the Business lobby groups were threatening and blackmailing government, but we won. We have not forgotten lamentations and the reaction to our push for PIC to invest in Edcon and save about 144 000 jobs.

If it was not for COSATU, the UIF that currently has a surplus of R100 billion will have become another piggy bank. COSATU defended this money when it was being considered for things like free education because we argued that it belonged to workers and workers will need to have a say on how it is used.

SOEs should be fixed so that they strengthen the capacity of the state and not become a burden on the state. Their role is to help drive the government’s developmental agenda and central to this is the provision of affordable, good quality services to all South Africans.

The discussions around the SOEs and DFIs should be about building the Developmental State in a manner that encompasses them as part of a wider public sector that integrally and seamlessly works with public service. SOEs and Development Finance Institutions should be properly aligned and reoriented in terms of the planned investment targets and development objectives.

On prescribed assets policy

The Federation is consistent in its support in principle for the idea of a prescribed assets policy. Historically, the federation has always supported such progressive investments as they help the state to invest in public goods and infrastructure.  These public services form a key component of workers’ social wage.

We are aware that our members legitimately expect good returns from investments for the sake of their own future social security when retrenched or pensioned. This is the reason why we are making a distinction between bailing out Eskom and investing in it.

We expect worker’s pensions to be invested in areas where they will bring returns and currently the power utility as it stands does not inspire confidence. It will be reckless to allow workers money to be invested without first implementing some drastic changes to Eskom because workers’ pensions are not a substitute for good governance. Our proposal on investing in Eskom is conditional and we encourage everyone to read the paper and see the conditions set out.

The current risks placed on the workers’ savings in provident funds, is a reminder that all is not well in the private sector. There is an argument to be made for investing in strategic SOE’s like the proposed State Bank and other well managed and corrupt-free SOE’s.

Currently, worker retirement savings are captive to unscrupulous assets managers, who would rather deploy large chunks of retirement savings in betting on market movements of some stocks, bonds or currencies (including against the Rand). In some instances, these assets managers do not exercise the required fiduciary vigilance – which is why there have been numerous incidents of disastrous outcomes, including the recent Steinhoff saga (with public service workers’ money in GEPF through PIC). It is notable that the former CEO of Steinhoff was former DA leader Musi Maimane’s Sugardaddy, while all this was taking place, this says a lot about the DA and its priorities.   

The current SOEs were built using the policy of prescribed assets that allowed for a minor portion of pensions to be invested in productive and strategic economic sectors. What we currently propose as an investment by PIC to Eskom is less than 8% of its assets. The state cannot outsource its developmental agenda to the private sector because it has not worked. We want the government to restore the system of prescribed assets as have been done in many developing economies.

We reiterate our demand for the following for this policy to work:

·    Institute a forensic audit to look at all transactions, deals and contracts.

All companies, municipalities and government departments that are not paying Eskom should be forced to pay.

All managers, businesspersons and politicians who looted from Eskom, other SOEs, including Steinhoff must be charged, prosecuted and if found guilty sent to prison. 

·      The stolen funds from Eskom, other SOEs, the state, including Steinhoff must be confiscated and returned to the state. 

·        There must be no retrenchment of workers in the SOEs or the state.

·        Stop recycling SOE managers; cut their wages and bonuses.

·        Make SOE’s more transparent and efficient.

On Eskom

Eskom is a strategic institution that holds key to the future of our economy. A collapse of Eskom will have a ripple effect on the entire economy. Our position. is that Eskom has a bright future and should not be privatised. Electricity or the energy sector cannot be monopolised by the private sector- All the sectors where the private sector has a monopoly, they create havoc and exploit workers and the poor. Selling Eskom is not just bad for the poor, but it is selling a family silver-the future of the country. Workers have already invested R104 billion with PIC being owed R95 billion and UIF R9 billion. This means that workers have a responsibility to safeguard and rescue their investment.  


UIF is a strategic fund that takes care of workers during the intervals of unemploymentUIF is dependent on worker contributions and if many workers are retrenched because Eskom has collapsed the entire economy, UIF will be overdrawn and collapse. It is therefore prudent for UIF to take an interest in the fate of Eskom by releasing a percentage of its money towards rescuing. Eskom. This will not be a donation but a strategic investment to secure UIF’s own future.


PIC is exposed at Eskom to the tune of R95 billion. Any intervention at Eskom by PIC is about securing the money that has already been invested there. Public servants have a huge stake in Eskom and the economy as a whole. An economy that has collapsed cannot raise revenue and therefore cannot afford Public Servants salaries and their benefits. If the IMF takes to charge it will not just cut public spending but will lead to a massive reduction in all aspects of social and economic benefits to the people, in wages, retirement benefits and pensions, health and education and social welfare transfers

Eskom Investment Conditions

The investment in Eskom is conditional because we acknowledge that we cannot put the worker’s retirement savings on the power utility without some drastic steps being taken first, including workers sitting on the board and a forensic investigation being instituted. Workers have to be involved in the decision-making process. We need to remove the toxic culture of incompetence, corruption, mediocrity, lack of transparency, and exorbitant salaries and bonuses.

Developmental State and Economic Transformation

While we all have an urgent assignment of fixing these state entities; we also need to focus on the transformation of the economy and improving the capacity of the state. COSATU is clear that going forward we want the next SONA and Budget Speeches to focus on both fixing and transforming the economy.

The last two decades have shown us that all of this cannot be left at the hands of the market. Our dire economic situation calls for strong, visionary and decisive leadership. We need an economic development model that will dismantle the current colonial and apartheid economic and social policy paradigm. We need an economic trajectory that will ensure that there is a proper redistribution of income and that more people are allowed to participate in the economy.

Given the nature of the state machinery inherited from the apartheid system, it is inevitable that transformation of the state should be one of the central issues of democratic governance. At the core of the debate is the question of how to use state power to drive a transformation agenda, something which has increasingly become open to different interpretations.

Corruption aside, it is now obvious that the democratic government cannot rely on an unreconstructed apartheid state machinery to transform society and provide services to historically under-served communities. The state structure inherited from apartheid, including the public service, the homeland administrations, local governments, and parastatals have not been completely restructured and that is the reason why we have failed to address the apartheid legacy.

Historically, apartheid state had been anything but minimalist; it intervened massively in shaping society, at a political, economic and social level. Despite this scale of intervention, the state was however geared to meet the needs of a minority of “citizens” and to control the majority of “non-citizens” and deny them access to services.

Opposition to the attempts to transform the state is not ideologically neutral. The apartheid beneficiaries and those who have been co-opted to the system after 1994 are bitterly opposed to any idea of fundamental changes in the ownership patterns of the economy.

In the last quarter of a century, economic orthodoxy has trumpeted the victory of global capitalism and faith in the social benefits of the free markets (unfettered by state intervention). This has meant that the state’s role in the economy had to be rolled back. In order to trim down the state, a set of policy measures, including privatisations and shrinking the size of the public service have been prescribed and treated like common sense.

A powerful alliance of transnational capital and international finance institutions (World Bank and IMF) has sold this outlook that the free market knows best and the private sector does best, that the state’s main task in economic and social development is to minimise impediments and maximise inducements to private capital accumulation. Privatisation, commercialisation and deregulation have become the watchwords of those promoting this vision of public sector reform in South Africa.

The Federation envisages a developmental state which plays a significant role in the economy and society in general. COSATU pushes for the vision of an active developmental state. We believe that the state can play a dynamic developmental role as a key economic agent. The state is the biggest employer, consumer, and investor. Through its fiscal and monetary policies and the composition of its budget, it exerts tremendous economic influence. Through its education, trade and industrial policies, it shapes the country’s industrial development.

An active interventionist state is necessary if we want to achieve our goal of economic development- in other words, to overcome poverty and redistributive power, wealth, income and economic opportunity from a small minority to the majority of the citizens. A developmental state will marshal resources towards the building of an efficient, dynamic economy. The implication of this approach is that the size of the state cannot be predetermined but should be informed by the magnitude of the program the state has to implement. 

International experience

Experience elsewhere demonstrates the economic value of particular types of state intervention. Japan, Korea, and Taiwan intervened strongly and systematically in markets with industrial, trade and financial sector policies., to advance economic expansion, productivity, and growth and export performance. Even Singapore, Malaysia, and Thailand previously used, and China today uses, active industrial policy measures by the state to influence the pattern and rate of economic activities. The reconstruction of post-war Europe would not have been successful without an active state. As such, the experience is widespread and not confined to the developing world. Most states have at a given moment played an active role in shaping economic development.

In conclusion

Markets have been inadequate in responding to the social needs of human beings- in setting decent wages and fair standards, in protecting the poor and the marginalised, in correcting imbalances of wealth and inequality. Unfettered free markets have led to the development of major inequalities and poverty in societies and defeated the purpose of economic policy.

South Africa cannot afford the conversion of basic needs into commodities. The brutality of capital makes it impossible to delegate the responsibility of delivering basic needs to big business

COSATU is already working with other progressive organisations to deal with the hotly contested budget process because of the state of our economy. COSATU wants to see greater transparency and more debate before the budget is presented. The budget should be progressive and should be judged by the extent to which it moves the tax burden away from the poor to the rich.

The government needs to rethink the various tax concessions to promote economic and industrial growth because this does not happen. Businesses just keep putting the money into the stock exchange and not into a direct investment such as new factories.

This is a moment of national crisis and we need social compact on how to save Eskom and the economy. We all need to contribute and compromise if we are to succeed in fixing our problems.


Issued by COSATU
Sizwe Pamla (Cosatu National Spokesperson)

Tel: 011 339 4911
Fax: 011 339 5080

Cell: 060 975 6794