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Shopsteward Volume 27 No. 3

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Media Centre  |  COSATU Speeches

Speech by Zwelinzima Vavi, COSATU Assistant General Secretary at the Them & Us Conference

Speech by Zwelinzima Vavi, COSATU Assistant General Secretary at the Them & Us Conference

26 August 1997, Durban

GEAR TODAY - GONE TOMORROW

Welcome to this year`s Them & Us Conference organised by COSATU. It is my pleasure to talk to you today on this topical but somehow cheeky subject of GEAR TODAY - GONE TOMORROW.

Under apartheid system, the South African economy developed structures which ensured a grossly unequal distribution of economic resources, distorted industrial development, widespread poverty, low living standards for the majority of South Africans, inefficient public service with a racially skewed pattern of delivery, and an extremely segmented labour market.

In the new South Africa the centres of economic power still remain relatively unchanged. Vast conglomerates continue to control most productive investment and financial activities. Land distribution remains as racially skewed as it was under the apartheid regime.

The sole major economic instrument in the hands of the progressive movement is the democratic state. However, our victory here is by no means assured for fundamental transformation . Large segments of the state machinery are still controlled by bureaucrats from the old order who are either unwilling or unable to develop and implement policies to meet the needs of the people of South Africa. At the same time, important aspects of government economic policy seem to be designed to downplay and undermine the state as a powerful instrument for transforming our economy and meeting the needs of the people.

The core of the current economic strategies of the ANC government islaid out in Growth, Employment and Redistribution strategy (Gear). Gear has few positive elements specified as the following:

  • the aim to increase efficiency of government expenditure;
  • improved revenue collection and clamp down on tax defaulters and customs evaders;
  • the emphasis on human resource development and training;
  • the emphasis on the need for public investment.

These elements are however, overwhelmed by Gear`s conservatism and right-wing aspects which are:

  • Government commitment to conservative deficit targets which mean real spending cuts;
  • Government`s commitment to ending exchange controls;
  • Government`s commitment to increasing interest rates as a means of controlling inflation, preserving the value of the rand and defending foreign exchange reserves;
  • Government`s push for a slim state and the threatening of 300 000 public sector jobs;
  • Its emphasis on privatisation;
  • The reference to labour market flexibility and wage moderation as a means to create jobs, and
  • The emphasis on the role of the market and `business confidence` in generating private sector investment as the engine of economic growth.

The results of the above-mentioned, is government economic policy`s main aim to meet the demands of financial capital and financial markets for conservative macro-economic targets.

It is for those reasons that I would pursue an argument that Gear is not in the best interest of the manufacturing sector or any other industry, except the financial markets. Social development targets set out in the Reconstruction and Development Programme (RDP) which are:- job creation, provision of standard services and public sector investment, are regarded as secondary issues. The intermediate objective of fiscal discipline has now substituted the ultimate objective of development. We are essentially back to the age of Adam Smith who believed in the "invincible hand of the markets". We are being asked as workers and the poor to tighten our belts as market will deliver in our life time.

These economic policies will likely lead to strengthening vested economic powers which have deepened their roots during the apartheid era. Which policies promise to strengthen capital, specifically its financial interests, and weaken labour. They promise very little redistribution of wealth and economic power to the majority of the people. The stark contrast between the blatant wealth of a minority and the desperate poverty of the majority will continue to tear apart the fabric of society, generating crime and social instability. I promise, this kind of approach by GEAR is hardly going to improve investor confidence!

If we are right, and Gear fails to deliver rapid economic growth and job creation, one of two courses of action will be open to government. The first, would be to abandon Gear and adopt more developmental strategies. The second, would be to blame Gear`s failures on `compromises` with labour and other forces, and move to the right wing direction in adopting harsher forms of Gear.

So instead of a situation of `GEAR today GONE tomorrow`, we could land up with a situation of GEAR today, GEAR TWO tomorrow! This we will fight double hard!

COSATU believes that the explicit aim of government economic policy should be to overcome poverty both for the employed and unemployed. This means reclaiming redistribution as the fundamental goal of economic policy. Redistributive policies should focus on three goals namely: increased productive activity, meeting the needs of all our citizens and economic democracy.

We at COSATU, see the state as a key economic agent, the biggest employer, consumer and investor in the economy. It must therefore be sure to lead the way to growth through redistribution and adopting an activist developmental role, rather than the minimalist role envisaged in GEAR. The apartheid state must be transformed into a developmental state.

Part of this economic transformation must be the transformation of the Reserve Bank. For over a year now COSATU has argued that the Reserve Bank should substantially reduce interest rates in order to create the scope for increased economic activity. Furthermore, the Reserve Bank should be restructured to ensure greater policy co-ordination between monetary policy and the country`s developmental goals.

Suddenly, the economists who advise the captains of industry have woken up to COSATU`s suggestions and have realised that the economy has a lot to gain if it can be released from the Reserve Bank`s high interest rate strangle-hold. Over the past three weeks more and more economists have called on Reserve Bank governor Chris Stals to lower the cost of investment by lowering the interest rates. Plant managers has long realised that high interest rates are the single most threat to our economic growth. SACOB, a leading employer association, has in the recent weeks came to realise that the real reason for the economic slow down is the high interest rates advocated by the Reserve Bank and previously by themselves (SACOB) too. Even authors of GEAR are now arguing that the Reserve Bank is GEAR`s greatest enemy.

The Reserve Bank has maintained the same policy of high interest rates since 1979. The election of the new government, the adoption of RDP as the government overarching policy and to define the transformation priorities, did not convince the Reserve Bank to adopt its discriminatory policies to the new situation. Just like a thief caught red handed stealing, the Reserve Bank blames workers for demanding higher wages for the economic slow down. It pushes millions of workers to live below the minimum living levels and to face poverty of the worst kind. The Reserve Bank like a super glue, stark to its strategic goal of keeping inflation at single digits through maintaining high interest rates, no matter what the consequences might be.

Statistics has revealed that wages of South African workers, in particular the poorly paid, has begun to fall. In March 1997, the wages of blue collar workers dropped by 7% and Dr. Chris Stals is aware of this. While wages are falling, the levels of productivity has increased by 4%. At the same time companies have been spending less and less on capacity building, that is through training and enskilling workers. Despite all these negative impacts of the Gear strategy, it is further calling on workers to accept lower wages, to tighten their belts and to accept labour market flexibility. The authors of Gear (the eight white males) were quite aware of the International Labour Organisations (ILO) study in 1996 that revealed that South African labour market was already flexible if not too flexible. They ignored this because they, as right wing economists want more flexibility and the maintenance of the apartheid structural weaknesses in our labour market.

The 1997/1998 budget began to show what Gear`s agenda is really all about. The expenditure was cut by between 4,5% to 5,0%. The education budget could not survive the push for lower deficit target as it was cut by 6,2%. We suspect that if this strategy if not abandoned will continue to force the government to cut the expenditures as it rushes down to the bottom in meeting its castrophic deficit. Where will be the RDP objectives at that time is an obvious question.

As time passes more people begin to realise the ideas of poverty which are presently holding the state hostage, they will call for a scrapping of GEAR and they will call for the state to play a more active and developmental role. The state must devise strategies which allow it to lead the way in boosting economic development, particularly in providing infrastructure such as roads, electricity, sanitation, transportation and telecommunications to the society. It is such infrastructure which will increase productivity and `crowd-in` investment as real increase, rather than theoretical opportunities created for the private sector.

As COSATU, we have also emphasised that GEAR is not an adequate response to the transformation of the South African labour market inherited from apartheid. Not only does the history of apartheid discrimination mean that we have inherited an inability to create conditions of full-employment, but also it has left us with a legacy of a large number of jobs which fail to pay a living wage. Not only are wages low, but for many workers, particularly in marginal sectors like domestic workers, cleaners, farm workers and security guards, face appalling conditions which need to be improved through effective implementation of minimum standards legislation.

All workers, including marginalised workers, need to be given the protection of improved employment standard legislation. Therefore, COSATU`s campaign for paid maternity leave, a 40 - hour working week and a rejection of mechanisms to vary standards downward is a crucially important pillar in the transformation of the apartheid labour market we have inherited.

The question of unemployment is a concern of every caring South African. But to workers, in particular African workers, this matter is not some theoretical issues that they thought of when they fear that their houses may be broken into by the unemployed person whilst they are at work. To workers, the unemployment is the direct burden that they must face every day. It is generally acknowledged that workers support up to twelve members of their families with the meagre wages. On top of this, it is workers who buy bananas and cut their hair on the street corners. It is them who support the entire informal sector. Those who continuously accuse workers of being elite conveniently ignore this fact in pursuit of ideological onslaught on COSATU

Poverty is in fact a combination of the unemployed poor and the working poor. Both low wages and unemployment contribute to poverty in South Africa. Surveys conducted by SALDRU point to the fact that workers have always known that a high percentage of the poor is made up of regular wage earners. Policies aimed at reforming the labour market and creating new job opportunities must take this dual source of poverty into account. Our challenge is not just creation of jobs, but jobs that will afford workers a decent standard of living. COSATU knowing this reality, in particular the absence of social wage, has long argued for a high wage employment strategy.

Creating new employment opportunities along with higher wages requires a long-run industrial and labour market strategy . This depends on the successful accumulation of productive investment in sectors of the economy which produce jobs, transformation of the apartheid-era labour market.

COSATU has two main tests for an economic policy. Firstly, it should create jobs, secondly, it should lead to the redistribution of wealth and income. Using these two tests alone, Gear has already failed dismally. On the job creation, instead of us seeing at least meeting of the conservative employment creation targets, we saw a decline of existing jobs by 171 000 last year. In the first quarter of 1997, the economy shed a further 42 000 jobs. There has been no redistribution of wealth and income. The wage gaps between the lowest paid and senior managers continue to rise. As stated above, workers` real wages are on the decline. There is a trend to want to `window dress` the otherwise white male dominated economy by few black faces. The housing backlogs remain extremely high as the private sector strategy is dismally failing to deliver. We have not seen massive infrastructural development in the scale envisaged by the RDP.

Just as COSATU has lead the way in showing that the Reserve Bank has got its policies wrong if we are hoping for wealth redistribution, development and job creation, COSATU is in the same manner, is leading the way in rejecting GEAR as an appropriate economic framework for the new South Africa.

I wish to conclude today, by clarifying one important issue that despite press reports to the contrary, no recommendation has been made by the September Commission that COSATU needs to form an independent socialist party in order to defeat government`s right turn on economic policy and its adoption of GEAR .

COSATU has no plan to launch an independent party. We are involved in an ongoing process of discussing GEAR and economic policy with our alliance partners in the ANC and SACP. We would not enter such discussions if we did not believe that we could make progress in these discussions. The comradeship of years of struggle together with mutual respect for the openness and integrity of all the leaders of the alliance, leads us to believe that COSATU has much to gain by pursuing a process of dialogue and a series of Alliance Summits with our alliance partners.

There are so many people who would wish to see our alliance falling into pieces: captains of industry who would rather deal directly with government than have to be concerned with trade unionists and communists, conservative international forces who want to see the running down of government in order to open new markets for private capital, and last but not least, excitable journalists who long for something interesting to write about, even if it means forming up a story.

None of these actors will be able to break up the alliance that fought so long and hard for the liberation of this country. Especially at the very time that the leaders of the alliance are putting their heads together in order to try and agree on how best to use the freedom that we have achieved to transform our country and eradicate poverty caused by the apartheid system.

While COSATU still believes that it should be `GEAR today, GONE tomorrow`, we have no doubt that its `ALLIANCE today, ALLIANCE tomorrow`.

I thank you and wish you all the best!

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