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COSATU Today  |  COSATU Speeches

The Social Economy: Africa’s Response to the Global Crisis

Bheki Ntshalintshali – COSATU Deputy General Secretary, 20 October 2009

COSATU is honoured by the International Labour Organisation’s invitation to address this important conference on the theme: “The Social Economy – Africa’s response to the Global Crisis”.

We appreciate the role that the ILO is playing in addressing the difficult challenges that the global crises has brought with it and we are looking forward to the outcomes of this conference. Many people are confidence the collective wisdom of all who are here will give some guidance on how to proceed in answering these difficult crises.

Africa has in the recent past organised a number of workshops and seminar under the African Union in collaboration with many United Nations agencies, including the ILO. The recent African Union/Labour and Social Affairs Commission in Ethiopia is one example of such efforts. It is clear to me that Africa has at her disposal knowledge on the economic crisis, lot of guidelines and know-how what she has to do. The difficult part is her inability to move forward in implementing those guidelines and valuable suggestions.

Let me start by saying that in our view this is not just a Global Financial crisis but a Global Economic crisis. It is important to characterise it as such because it is only a correct description of a phenomenon that will allow for the development of relevant intervention strategies.

In the wake of this crisis many analysts were optimistic that its impact on Africa would be negligible. Little did they know that what began as a bursting of the U.S. housing market bubble would balloon into a global economic crisis, leading to the most destructive global recession since the Great Depression in 1930s which actually started on 24 October 1929, a date that will go down in the history of the United States as the “black Thursday".

What we are actually experiencing is a fundamental crisis of capitalism, with collapsing markets and over-production, leading to mass unemployment and cuts in living standards across the world.

This crisis is caused by the inherent unsustainable logic of profit maximization in the capitalist system. What happens is that capitalists are constantly revolutionising production, throwing enormous amounts of commodities onto the world market, which periodically come into conflict with the limits of consumption caused by the exploitation of the masses that are unable to buy the goods they produce, having been robbed of the full fruits of their Labour by the bosses.

All countries across the world are affected by the deepest and most serious economic crises in at least the last 80 years. This crisis - caused by a range of factors, including gross imbalances and inequalities in the global system, the impact of the financialisation of economies, ineffectual regulation in several of the major world economies and poor business practices - has resulted in significant asset depreciation, closures of companies, rising unemployment and sharp slowing down of economic growth, with most highly industrialised countries entering a recession.

Africa, like other developing regions of the world that are strongly integrated into the world economy and significantly dependent on its good health, has been affected by the sharp fall in demand for its products and the fall in prices of key export commodities. In addition, the international credit crisis has meant that funds have become scarce and expensive and that portfolio investors are wary of emerging markets.

The result is that Africa growth expectations had to be sharply revised, downwards. The duration and depth of the downturn cannot be forecast with certainty, but growth is likely to be lower than previously expected.

In the spirit of the Africa’s response to economic crises as identified in the Ouagadougou Plan of Action which spells out the fundamental objectives and key priority areas in the promotion of employment and poverty eradication. The eleven areas identified are:

  • Ensuring political leadership and commitment to create an enabling environment of good governance for investment, development and poverty alleviation in the context of NEPAD and the attainment of the MDGs.
  • Promotion of the agricultural sector and rural development, sustainable management of environment for food security and development of support infrastructure.
  • Development of an appropriate framework for integration and harmonization of economic and social policies.
  • Improving and strengthening the existing social protection schemes and extending it to workers and their families currently excluded, as well as occupational safety, health and hygiene.
  • Empowerment of women by integrating them in the labour markets and to enable them to participate effectively in the development of poverty reduction strategies, policies and programmes.
  • Human and institutional capacity building for public and private institutions in charge of employment promotion and poverty alleviation, including the social partners and other relevant actors of the civil society.
  • Utilising key sectors with high employment potential to generate more jobs and allocate adequate resources for that purpose.
  • Building international cooperation, fair and equitable globalization, and partnership for an enhanced international support to Africa’s efforts towards achieving sustainable development, putting emphasis on the employment agenda, poverty alleviation, regional integration and a better participation in the globalization process.
  • Promoting regional and economic cooperation among the Regional economic Communities in order to expand economic space, intra and inter regional trade, markets and exploit the economies of scale.
  • Targeting and empowering vulnerable groups such as persons with disabilities, aged persons, migrants, children, youth and people infected and affected by HIV-AIDS, Malaria, TB and other related infectious diseases, internally displaced persons, refugees and working poor.
  • Mobilization of resources at national, regional and international levels.

This together with other interventions like the Employment and Poverty Alleviation in Africa, Social Policy framework for Africa, Impact of the global Crisis on employment and Labour Markets in Africa etc, clearly demonstrates that Africa has been discussing these matters and what is needed in to move to the level of implementing the many ideas on these challenges.

Core to Africa’s response are five key broad principles governing her response:

Firstly, Africa’s approach to the downturn is that low-income workers, the unemployed and the vulnerable groups can lose much through even a relatively brief economic shock, and the risk of unfairly placing the burden of the downturn on the poor and the vulnerable must be avoided. The potential of economic shocks to destabilize the welfare of the vulnerable, including their jobs, health and education, and to increase inequality and poverty, is widely recognized, is her first concern and will require active steps to ensure these outcomes are avoided.

Secondly, to ensure that all of her activities that are aimed at strengthening the capacity of the economy to grow and create descent jobs in the future, are protected and supported as far as possible. By decent work we mean the need to increase the level of employment as well as improve the quality of jobs. There is a need to address the constraints to growth and development through programmes to increase public investment in economic infrastructure, to deepen the joint stakeholder commitment to skills development and to act urgently on the commitment to introduce effective industrial or sectoral strategies.

In addition to the above, our continent has to seriously consider the following:

1. There must first be an acknowledgement and acceptance that the problem is inherent in the system of capitalism and those solutions that do not seek to tamper with the fundamental elements of the system that gave rise to this crisis in the first place will not be sustainable.

2. The world must jointly seek to generate new development models that will mark a fundamental departure from those which emerged in the cold war era and which continues even today. The USA can no longer be a model of development!

3. We are noting with concern that during this crisis we are being called upon to pursue a dream to be like the so called “developed world”. We cannot pursue a development model that has led the world to both economic and ecological catastrophe.

In this context we call on G20 countries to live by the commitments they made in the G-20 Summit in Pittsburgh on September 25 in which, among others they committed to:

a) A recovery to turn the page on an era of irresponsibility and to adopt a set of policies, regulations and reforms to meet the needs of the 21st century global economy.

b) Growth without cycles of boom and bust and markets that foster responsibility.

c) Act together to generate strong, sustainable and balanced global growth in which there will be durable recovery that creates the good jobs our people need.

d) Establish a pattern of growth across countries that are more sustainable and balanced, and reduces development imbalances.

a) A shift in International Monetary Fund (IMF) quota share to dynamic emerging markets and developing countries of at least 5%

b) To sustainable economic development in order to ... reduce poverty.

4. Any response to this crisis must concurrently ensure commitment to sustainable development.

In this context we will argue for interventions that address visible risks concerning food and economic security, particularly in regions and sectors based on agriculture.

22% of the global population work in agriculture, a sector where most of the world’s poor is concentrated. Because of its impact on agricultural livelihoods, climate change poses a major threat to the realization of the UN Millennium Development Goals (MDGs).

We call for focused investment in adaptation to climate change which has a potential to offer significant employment and income opportunities in areas such as extending coastal defences, reinforcing buildings and infrastructure, renewable energies, water management and harvesting.

Energy efficiency gains have historically been one of the biggest contributors to reductions in emissions and have a significant potential to create new employment. Examples of such green jobs include the hundreds of thousands of new employment opportunities created in wind and solar energy production which is already being done in countries such as Germany and Spain, in the programme to make existing buildings more energy efficient in Germany and in the Brazilian bio-energy programme.

5. Employers must stop to see the retrenchment of workers as the first variable to be tempered with when the companies are in distress. More evidence is coming up that most of the companies are using the economic crisis as a smokescreen to declare themselves insolvent and rob workers of what is due to them. In South Africa with our NEDLAC framework agreement on the economic crisis we have vigorously raised this matter and have put, measures to address these possibilities.

6. Those African governments who have entered into joint programmes with labour and other sections of the society to find joint solutions to the crisis must do so with honesty and must lead from the front, including being vigilant against narrow selfish interests by business which include using the crisis to argue for the scrapping of certain labour legislations. The crisis must not make governments to compromise the decent work agenda including acceding to pressures of not banning labour brokers. Decent work cannot coexist with labour broking and other atypical forms of employment!

7. African governments must draw lessons from the past on how to deal with the space provided by debt relief programmes. It is noted with concern that despite the significant benefits that the debt cancellation have brought, many countries are drifting towards additional borrowing, often for social investments, thus creating the potential for another accumulative debt crisis in the future.

Research is showing that among the 20 countries that have reached Completion Point in the HIPC process, eleven are now facing high to moderate risk of debt distress through re-accumulation (ONE/DATA Report, 2009). As the effects of the global financial crisis unfold in Africa, this figure is likely to increase further. This should be prevented by increasing the amount of development assistance given in the form of grants rather than loans and to create a framework of legal standards to ensure that new debt is used to spark economic growth, and establishing a fair and transparent process for orderly debt workouts.

At the same time, African governments need to restrict their borrowing and maintain macroeconomic prudence in order to ensure debt sustainability.

Finally, you recognise that I have not spoken about the social economy and its integration to the formal economy and the role that such economy can play in addressing the global economic crisis. It is deliberate as I would want to wait and learn from the different experts present to this conference. What I do know is the fact that in finding a lasting solution Africa has to take social dialogue very serious. Labour, Business and Governments have a critical role to play in addressing these crises from food, climate change to economic crisis. We have the potential to address but we need to plan and move with the speed needed.

When Fidel Castro delivered his speech to the South African Parliament, in Cape Town, September 4, 1998 he ended by saying “great crises have always delivered great solutions”, we strongly believe that out of this crisis shall emerge lasting and sustainable solution that will take the African continent and the world in a new and sustainable growth path.

Wishing you a very successful conference.