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Media Centre  |  COSATU Speeches

Notes for an input to the SANGOCO Conference by Neil Coleman, COSATU Parliamentary Office on the Economics of Poverty and Inequality

18 September 1998

"Strategies for creating a pro-poor social, economic and development environment"

In the past, when you started to talk economics, many people switched off. They tended to believe that economic issues were only for technocrats and economic experts. But increasingly people are coming to realise that, far from being technical issues, these are profoundly political questions, involving policy choices, which have a daily impact on peoples lives. We therefore welcome the decision of the SA NGO Coalition to focus this Conference on the ‘Economics of Poverty and Inequality’. This is an important step towards our people asserting their right to direct fundamental areas of policy, which determine our destiny as a country.

Key elements of a Strategy

This brief input will outline eight elements of a strategy for creating a pro-poor social, economic and development environment.

  1. Developmental macro-economic policy - current international developments vindicate what COSATU, SANGOCO, and many others have been saying. That without an appropriate, developmental macro-economic environment, the best social policies will be unable to deliver. This requires fiscal and monetary policies which are shaped by the needs of development. Not the other way round. There is virtually no institution, no matter how conservative, which can still credibly argue for the IMF formula: the recipe of squeezing state spending, deregulation of financial markets, contractionary monetary policy and the rest of the package which has become so familiar, and so disastrous for the world economy. Even the IMF is beginning to argue for the imposition of capital controls in S Korea, although it was IMF insistence on deregulation of the financial sector in East Asia in the first place, which was a key factor in their economic crisis.

    For South Africa, this means having the courage to fundamentally review externally imposed macro-economic strategies which will continue to frustrate our ability to fight poverty and inequality. We have done what 'the markets' have told us to do, and we have been punished as our reward. It is now time to say that putting the interests of our people first means implementing macro-economic policies which are guided by the imperatives of reconstructing our country. This means that while we accept the need for fiscal responsibility, we reject a formula which simply says 'cut back', regardless of the critical need for massive expansion in expenditure on housing, health, and employment creation. It means that while no South African wants hyper-inflation, we reject Thatcherite monetary policies which throttle our economy, and at the end of the day also makes our currency worthless. It means prioritising productive and social investment, and rejecting policies which make us hostage to the whims of 25 year old bankers, gambling in Wall Street, London or Tokyo. We believe that there is an alternative, and we have put forward a series of concrete proposals for developmental policies.

  2. Defending national Sovereignty But this requires the political will, not only by government, but by society as a whole, to assert and defend our national sovereignty- the right to implement policies which meet our needs, and to take forward the mandate given by the electorate, even if it means ruffling the feathers of powerful international institutions, and power blocs. There was encouraging evidence in the views expressed by our leaders at the Non Aligned Movement Summit that there is now the recognition that such an approach is required if we are going to move forward
  3. Building state capacity, and progressive civil society - To do this requires a strong developmental state, as well as strong organisations of civil society. Contrary to the conservative consensus that you need a weak state, which withdraws in favour of the market, international experience shows that there has not been a single successful reconstruction project in the twentieth century, without being led by a strong state. This requires development of the capacity of the state, not its running down. It also requires the mobilisation of strong organisations of civil society mobilised in support of development, and what SANGOCO calls a pro-poor agenda.
  4. Pro-poor budgets- One of the critical instruments required to develop this capacity, is an appropriate budget, which reflects the needs of society. In order for the budget to address these needs, requires meaningful input particularly by constituencies which have historically been excluded, and the representatives of the people in parliament. The unfortunate reality is that conservative bureaucrats in the Department of Finance are primarily concerned with what they regard as being the imperatives of fiscal discipline. If development gets trampled in the process, they probably would not be able to recognise this, let alone make the necessary adjustments. This is why we have been so insistent on the introduction of legislation to implement the constitutional obligation to give parliament oversight of the budget process. It perhaps should not surprise us that the Department entrusted with producing legislation which will subject it to scrutiny, nearly one year after its initial draft was rejected by parliament, has still failed to produce a Bill. Nor that undertakings to publish a white paper on budgeting have not materialised, despite the indecent haste with which GEAR was produced over two years ago, without public participation.

    We call on this Conference to renew demands for participatory budgeting. It is not helpful to have a mechanism such as the MTEF, which otherwise would be an important planning tool, if the parameters of the medium term budget are totally inappropriate to the needs of our society.

  5. Unlocking financial resources: The stick which has most been used to beat the opponents of conservative economic policy has been the lack of financial resources, in particular the debt we inherited from apartheid. The TRC has revealed some of the strategies of repression devised by the previous regime. What has not been revealed are the economic strategies devised by that regime to tie the hands of a future democratic government. Most important amongst these was the deliberate policy of inflating the debt, to deny the new democracy the ability to implement policies of reconstruction. At the same time as De Klerk was planning political reforms, a decision was taken which would place a massive obligation on society. In 1990 the public service pension fund was restructured in a manner which was largely responsible for inflating the debt from about R90 billion then to nearly R400 billion today. This debt is now being used not only to justify cutbacks in spending on social services, but also to retrench the very public servants in whose name this unilateral action was taken. SANGOCO has played an important role in highlighting this fraud, and together with other organisations, we need to continue pressing for the release of resources through the restructuring of this fund. This is one of the financing proposals COSATU has placed before the Job Summit preparatory process.

    Another important area which we believe could unlock up to R50 billion for social investment is the imposition of prescribed assets on retirement funds, requiring investment of a stipulated portion of funds in bonds dedicated to social investment and employment creation. As with the GPEF (civil service fund) restructuring, prescribed assets were extensively used by the previous regime (for financing amongst others Armscor) but these were abolished before democratisation, to deny society access to these resources. We think that broader civil society should also look at the impact of such a proposal.

  6. Regional development Current developments in our region and beyond hammer home the point that South Africa cannot hope to sustain an isolationist development policy. A country racked by inequality and poverty, surrounded by even worse poverty, is a recipe for conflict. The horrific recent train attack on Southern Africans in the name of ‘protecting local jobs’, shows the danger of neo-fascist movements exploiting a crisis of regional poverty. The growing xenophobia at home should make us all wake up to the need for an urgent reorientation of our society to the realities of the region. While regional development projects such as the Maputo Corridor are a contribution to rebuilding the regions infrastructure, a far more intensive focus is needed on a Southern African reconstruction agenda. This needs to go beyond current initiatives by SADC, and involve a broad range of civil society organisations concerned with development in the Region.
  7. Fighting unemployment: Labour has placed a range of proposals, in alliance with the community constituency, into the Job Summit, aimed a shifting our economy onto an employment generating growth path, which at the same time combats poverty and inequality. This requires a range of measures which ensure expanded investment in the productive sector of our economy, particularly in ways which generate and retain new jobs; provide support for the unemployed and the poor; help to formalise the informal sector; stem job loss in the economy; and target particularly vulnerable groups such as youth, women and the rural and urban poor for job creation programmes. To this end labour has proposed 21 programmes, and a range of financing mechanisms, which attempt to address the core structural problems facing our economy, as well as providing short-term relief for those facing poverty and destitution.
  8. Labour's proposed programmes can be clustered into 5 broad areas: Firstly, a public works programme aimed at building infrastructure, particularly in the rural areas, and a mass public housing programme, focussing on rental stock. This is complemented by a proposal for youth brigades. Secondly, public policies to promote domestic investment and demand, expansion of delivery by the public sector, and other public instruments to expand and improve employment. Thirdly, measures aimed at stemming job loss in the economy, including a productivity agreement linked to investment in employment, and narrowing of inequality, and the expansion of training. Fourthly, restructuring of our industries, employment-generating trade policy, beneficiation, and sectoral strategies to promote employment. Finally, support measures for the unemployed, including a proposal for a basic income grant particularly aimed at those living in poverty and the unemployed.

    Up till now, the Job Summit discussions have tended to take place behind closed doors. It is important for civil society, particularly those representing constituencies of the poor, to begin to be more vocal about the issues they feel need to be raised in the Job Summit.

  9. Asserting the leadership of progressive civil society- SANGOCO can continue to play a critical role, together with other progressive formations, in asserting a pro-poor agenda, by challenging the agenda of institutions representing the old order. Representing COSATU on a daily basis in parliament, I am struck by the extent to which the space created by our new democracy continues to be dominated by those representing the old elites. Our parliamentary committees, as well as those driving policy and legislation in Departments, continue to be flooded by those representing business and other conservative interests. With one or two exceptions, our organisations have not developed their capacity to begin to engage effectively in these processes. This shortcoming must be addressed if we are going to begin to reap the rewards of our new democracy; contest and reshape problematic policy; and act as a force to drive through progressive areas of transformation being embarked on by government.