The Congress of South African Trade Unions has noted the latest gross domestic product (GDP) figures, by Stats SA, that show that the economy contracted by 1.4% in the fourth quarter of 2019, which follows a contraction of 0.8% in the third quarter of last year. Unfortunately, we are vindicated because we previously warned that load seeding, job losses, and voluntary austerity measures in the context of declining private sector investment will plunge the economy into a recession.
Job cuts in both the public and the private sector have worsened our unemployment rate, despite our calls for a moratorium on retrenchments during the Job Summit. High unemployment reduces savings and spending, therefore, depressing growth and thus increasing the likelihood of a recession.
The state of the economy at any given point in time reflects the considerable influence of previous decisions taken by the authorities and in this regard the influence of the Treasury and the South African Reserve Bank (SARB) with regard to their Neoliberal macroeconomic policies has been decisive.
So, in our account of the deepening socio-economic crisis that is currently engulfing South Africa, we attribute it to the misguided macroeconomic policy framework that has been implemented over the years, especially over the span of the recent fifth democratic dispensation.
The fact that at the beginning of the sixth democratic dispensation the country is facing economic stagnation accompanied by worsening unemployment, inequalities and poverty, manifesting at the macroeconomic level in rising public-debt, budget-deficit, debt-service costs, and revenue shortfalls – in part reflects the abject failure of the Medium Term Strategic Framework 2014-2019 as inaugurated with the fiscal policy stance outlined in the MTBPS 2014.
In other words, the fiscal austerity measures (cuts in the rates of spending growth) that was implemented throughout the fifth democratic dispensation have entrenched stagnation amidst the persistent low private investment.
In 2014 the fifth democratic dispensation adopted the Medium-Term Strategic Framework (MTSF) as “government’s strategic plan for the 2014-2019 electoral term.” This five-year framework was set out as part of government’s implementation of long-term planning pursuant to the 2030 vision of the NDP.The MTSF set out as its targets to decrease of the official unemployment rate from 25% in the first quarter of 2013 to 14% in 2020. The increase of the rate of investment to 25% of GDP by 2019 and the rising share in the income of the poorest 60% of households from 5.6% in 2011/12 to 10% in 2019. All of this never materialised.
The sixth democratic dispensation is set to release the third MTSF, which like the MTSF 2014-2019 of the fifth democratic dispensation, would also be put out under the guise of long-term planning in terms of the NDP. It is perverse that government is formulating a new strategic framework without evaluating the effectiveness and failures of the macroeconomic policies that were implemented in the MTSF 2014-2019. So far, what has been considered are the macroeconomic aggregates, whilst the macroeconomic policy framework remains cast in iron – it is not subject to scrutiny or review.
It is saddening to see that while South Africa finds itself bogged down under the weight of the rising debt-burden and a sluggish economy, both the Minister of Finance, Tito Mboweni and President Ramaphosa seem hellbent on ramming through the “structural reforms” imposed by the IMF, Organisation for Economic Cooperation (OECD) and the rating agencies.
It is obvious that the government has clearly not thought through the rationale of a public sector wage cut and its unintended consequences for the health of the economy. This technical recession will only get worse and might deteriorate into an economic depression.
The latest GDP figures prove once again that the National Treasury’s neo-liberal capitalist trajectory will not solve our economic challenges. The numbers are a reminder that if the government does not change direction, we are likely to see more and more people sliding into poverty in this country.
Issued by COSATU
Sizwe Pamla (Cosatu National Spokesperson)
Tel: 011 339 4911
Fax: 011 339 5080
Cell: 060 975 6794