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 labour’s 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...Cont’d • Environmental Sustainability • Mitigating the effects of climate change—moving 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-complex companies • Persistence of high concentration in value-chains

6. The GEAR Growth Path Failed...Cont’d • 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 items—failure 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...Cont’d • 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...Cont’d • 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 SMME’s • 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...Cont’d • 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 SOE’s 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 R&D 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 Intensity—environmental 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 Africa’s 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 SOE’s and SETA’s; 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 state’s programme of agrarian transformation, support for land reform beneficiaries • A regulatory authority to deal with the food value-chain, opening access for SMME’s, 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 Guarantee—ELR • 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 SOE’s, 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; SMME’s and Co-operatives

21. Labour Market Policy: Proposals...Cont’d • 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 • SETA’s must link with HET’s and FET’s

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...Cont’d • 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...Cont’d • 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. COSATU’s Critique of Govt’s 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 document’s 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 SOE’s 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 DFI’s • 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 SOE’s, 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 SOE’s 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 • GEAR+ESF+ASGISA+IPAP2=New 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!