The Congress of South African Trade Unions has noted the report that shows that South Africa’s economy, as measured by the GDP has seen a third-quarter growth of 66,1% from the 51% decline in the second quarter.
Contextually, these numbers reflect the effects of the reopening of an economy after an extreme lockdown of the previous quarters. This is a reminder that avoiding an overwhelming second wave of coronavirus infections is paramount if the economy is to be stabilised.
While these numbers show the positive signs of reopening the economy, they hide the fundamental reality of an economy that still does not have a reliable electricity supply and that is seriously underperforming.
The overly hasty government austerity programme, including wage freezes and the ongoing retrenchments are going to continue to greatly reduce the purchasing power of many South Africans and this will devastate an economy that derives 60% of its capacity from consumer spending.
We hope that the government’s preoccupation going forward will not just be on attracting Foreign Direct Investment (FDI) as an engine for growth but will also be about unlocking the domestic investment. Despite the myriad of incentives given to the domestic capital, there has not been any reciprocal response from the private sector, in particular from the banking and investment sectors.
The government cannot afford to continue to limit itself to the provision of traditional public goods such as security, infrastructure, and social services. The government needs to identify the commanding heights of the economy over which it will take control or play a leading role. This will enable the state to take key developmental initiatives, which cannot be left to the market. The state must promote development by redistributing growth and upgrading and restructuring the economy.
It was the general government services, which played a key role in pulling the economy out of the recession in 2009 and in sustaining at least some positive economic results between 2010 and 2016. The fact that this has been gradually contracting as a result of the austerity measures that were introduced in 2014 has negatively affected aggregate demand in the economy.
We need a developmental model that will be based on meeting our country’s 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.
It is sad that government is still strangling this economy with its ill-advised austerity strategy in the public service and talk of the privatisation of state assets. An economy cannot be stimulated by cutting off funds.
The government-led infrastructure development programme should help in strengthening local industries by increasing local content of the infrastructure development projects. Now more than ever, the government needs to intensify its investments and infrastructure drives in the economy.
Job creation is the only way to spur and sustain economic growth and to ensure the redistribution of wealth in a meaningful way. The jobs bloodbath that is continuing in all the sectors of the economy and the rising cost of living is recipe for disaster.
Government should help small businesses to deal with the high administered prices such electricity, transport costs, and the non-availability of cheap finance.
The government also needs to become serious about tackling corruption as this is the at the heart of the collapse of key SOEs, state organs and the unavailability of badly needed funds for essential public services.
Issued by COSATU
Sizwe Pamla (Cosatu National Spokesperson)
Tel: 011 339 4911
Fax: 011 339 5080
Cell: 060 975 6794