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Policy  |  Submissions

Section 77 Notice: The slow pace of socio-economic transformation in South Africa

Section 77 Notice: The slow pace of socio-economic transformation in South Africa

11 December 2012

1. Introduction

The Congress of South African Trade Unions (COSATU) held its 11th National Congress from 16th-19th of September 2012. The congress was attended by more than 3000 delegates representing the more than 2 million members of COSATU. The congress assessed progress that has been made since 1994 to transform the economy in order to create a better life for the majority of our people who had been oppressed by the evil system of apartheid for many decades.

The congress noted that while in less than two years South Africa will be celebrating the second decade of democracy, the economy has not been radically transformed to benefit the majority of our people, the working class and the poor. The features of Colonialism of a Special Type remain intact. Though racial oppression has been constitutionally eliminated, racial domination continues to be reproduced. The exploitation has deepened together with the overall exploitation of workers and the oppression of women remains intact. The existing social order is completely incapable of resolving the problems that confront the vast majority of the people.

The mass of the employed working class is increasingly sinking deep into the conditions of the Lazarus-layers, pushed down by labour-brokers and rising precarious forms of employment, which are increasingly defining the low-wage, liberalised, colonial growth path of the economy.

The 11th COSATU congress accordingly took a resolution that the federation must embark on a socio-economic protest to demand a radical transformation of the economy in order to benefit the majority of our people as South Africa concludes the second decade of democracy. We therefore submit this Section 77 Notice with detailed grounds for our protest action which centre around the triple crisis of unemployment, poverty and inequalities, and, fundamentally, the failure to implement the Freedom Charter, as well as detailed demands to resolve the crisis.

2. Reasons for the Protest Action

Whilst 1994 marked an important breakthrough and a crucial turning point in the struggles of the working class in South Africa, the democracy that it has ushered in has yet to deliver tangible material benefits to the vast majority of the working class. The Freedom Charter declares that in a democratic South Africa, "There Shall Be Work and Security"! It further demands that: "The state shall recognise the right and duty of all to work". Yet, all the policies that have been adopted in the past 18 years have failed to deliver on the fundamentals: unemployment reduction, poverty elimination and the reduction of social and economic inequality.

2.1 The Unemployment Crisis

Between the fourth quarter of 2008 and the first quarter of 2012, the proportion of the unemployed that has been without work for more than a year rose from 61% to 68% of the unemployed, while discouraged work-seekers, who are now 2.3 million, increased by 100% over the same period. These facts show that most of South Africa`s unemployment is of a structural nature. They also show that while the economy may experience a cyclical downswing, the resultant job losses translate not into a cyclical unemployment; rather these losses assume a more permanent nature.

The poverty of the unemployed compels them to take poverty wages in desperation, whilst the pressure that the unemployed thereby generate on the already employed, compels those who are already employed to be subjected to all sorts of abuses: labour brokers, long working hours, no benefits, no access to legal protection, etc.

The vast majority of the unemployed, an estimated 72%, are young people between 15-36 years of age. Youth unemployment in particular, is caused by a combination of poor national human resource planning, weak management of the transition between the education system and the workplace, the structure of the economy which remains capital intensive and highly concentrated, the weaknesses of the education system, and the limited role of the state in service delivery, public infrastructure construction and maintenance. The structural features of the unemployed show that market-based incentives that rely on private-sector responses, such as wage subsidies, are likely to be ineffective in tackling the unemployment crisis.

On average, 400 000 young people do not proceed with their studies after writing matriculation exams every year. This pool of young people joins the unemployed and swells the ranks of structural unemployment, which takes the form of discouraged work-seekers. With 72% of the unemployed being young people, it makes sense that 95% do not have tertiary education because of the limited capacity of the tertiary sector to absorb them, among other problems.

2.2 The Poverty Crisis

The Freedom Charter states that: "Rent and prices shall be lowered, food plentiful and no-one shall go hungry".

The loss of jobs as a result of the Global Economic Crisis spells poverty for the working class, particularly given the fact that South Africa has no income protection or comprehensive social security system. Between 2009-2012 South Africa lost 744 000 jobs. Assuming an average R4 000 per month wage for a South African worker[1], these job losses amount to an average R107 billion loss in workers` income over the three-year period.

The Human Development Report (2010) states that 44% of workers in South Africa live on less than R10 a day, which is almost the same as the daily allowance on the child support grant. But this amount can barely pay for a loaf of brown bread a day, which cost R7.50 in 2010. In short 44% of workers in South Africa are working for a loaf of bread on a daily basis. South Africa`s economy is intrinsically a low-wage colonial economy. Despite having created an estimated 1.9 million jobs between 2002-2007, these jobs seem to have increased the levels of poverty rather than decreasing them.

The General Household Survey (2002) reports 18% of households had social grants as their main source of income, the 2007 General Household Survey reports this number to have increased to 22% and has remained at this level through 2011. Grants are the second largest source of income among South African households. Combining this with the fact that 44% of South African workers live on less than R10 a day, it is clear that there is widespread poverty in South Africa.

The General Household Survey (2010) estimates that 24% of South African households have inadequate access to food. In the 2011 Survey, this figure has shown some improvement, with 21% of household having inadequate access to food. This roughly translates into 10 million South Africans who suffer from inadequate food access. This can be explained by the fact that 6 million workers live on less than R10 a day. These workers in turn support on average an additional 4 people in the household.

2.3 The Income Inequality Crisis

The Freedom Charter states: "The People Shall Share in the Country`s Wealth"! The Charter further demands that: "Men and women of all races shall receive equal pay for equal work".

Recent estimates suggest that the top 5% earners take 30 times what the bottom 5% earners take[2].

In our Growth Path document, we reported that the Gini coefficient stood at 0.64 in 1995 and it increased to 0.68 in 2008[3]. The top 10% of the rich accounted for 33 times the income earned by the bottom 10% in 2000[4]. Approximately 20% of South Africans earned less than R800 a month in 2002, the situation is worse for Africans. Even the Minister of Finance has acknowledged that 50% of the population lives on 8% of national income in South Africa[5].

In 2010, we reported that the top 20 directors of JSE-listed companies, the overwhelming majority of whom are still white males, earned an average of R59 million per annum each. We further reported that on average, each of the top 20 paid directors in JSE-listed companies earned 1728 times the average income of a South African worker. Furthermore, on average, between 2007 and 2008, these directors experienced 124% increase in their earnings[6], compared to below 10% settlements that ordinary workers tend to settle at. Hefty increases were also seen in state-owned enterprises. The top 20 directors in SOEs experienced a 59% increase in their earnings, collectively raking in R132 223 million. This amounts to R6.6 million per director, which is 194 times the average income of the South African worker.

The PriceWaterhouseCoopers Report (2010) on Executive Pay in South Africa showed that more than half of executives in large JSE-listed companies earned more than R10 million per annum: "The lowest paid workers have monthly salaries of around R3 500, which equates to R42 000 per annum. This equates to a pay gap in the order of 250-300 times. Many question the morality of paying one human being 300 times more than another for an honest day`s work", although of course the PWC Report exaggerates the monthly earnings of the lowest paid workers, as will be seen in the discussion on the labour market.

The share of workers in national income declined from 55% in 2000 to 49% in 2008. During the crisis, the workers` share increased from 49% to 52% between 2009 and 2010, and has since fallen below 50%. We called this fall in workers` share reverse redistribution from the poor to the rich. But at the risk of being thrown into absolute abject poverty, workers continue to sustain working by either walking to work, using wood for cooking and electricity for lighting, staying in a shack, collecting water from the nearest school, etc, whilst the rate of exploitation and poverty steadily increase.

Income inequality has moved in opposite direction to the one demanded in the Freedom Charter. The people do not share equitably in the country`s wealth. Inequality is still very much defined along racial lines. The demand that "men and women of all races shall receive equal pay for equal work" is yet to be realised, almost 20 years into democracy.

2.4 Labour Market Performance

Key elements of worker rights are succinctly enshrined in the Freedom Charter: "All who work shall be free to form trade unions, to elect their officers and to make wage agreements with their employers; there shall be a forty-hour working week, a national minimum wage, paid annual leave, and sick leave for all workers, and maternity leave on full pay for all working mothers; miners, domestic workers, farm workers and civil servants shall have the same rights as all others who work; child labour, compound labour, the tot system and contract labour shall be abolished".

A recent study has shown that 44% of employees were violated and received sub-minimum wages in 2007. The depth of the shortfall is also quite significant. The study reports that workers were paid on average, 35% less than the legislated minimum wage in South Africa. The study further reports that non-compliance with the minimum wage is highest within the "security sector, with worryingly high estimates reaching nearly 70% in some areas in 2007, followed by the farm and forestry sectors (55% and 53% respectively)"[7]. The average minimum wage in South Africa was R3 336 in 2010. The minimum wage violations therefore imply that approximately R16 billion per month is being extorted from low-paid workers. In addition, these minimum wages are reported by the Labour Research Service Report on Bargaining Indicators (2011) that they are 19% below the living wage level of R4 105. Therefore the call for a national minimum wage in the Freedom Charter is yet to have effective meaning for 44% of the workforce.

The Freedom Charter states that: "The state shall recognise the right and duty of all to work and to draw full unemployment benefits". However the Unemployment Insurance Fund does not cover 43% of workers and 49% of women in the workforce are not covered by the UIF. In terms of social protection, we have seen that, according the General Household Surveys, 77% of the unemployed rely on employed workers for survival. In addition, given the fact that minimum wages are widely violated in South Africa, this legislative intervention is also not effective in providing strong income protection for the lowest paid workers. The other social protection is social grants, particularly Child Support Grants which, despite being grossly inadequate, are meant to cover the well-being of children. In short, social protection of families in South Africa is extremely weak if non-existent.

The Freedom Charter further calls for a 40-hour week. It states that all those who work shall have paid annual leave, and there shall be sick leave for all workers and maternity leave on full pay for all working mothers. As of 2012, 85% of the workforce was working for more than 40 hours a week. In particular, 30% of workers (3.4 million workers) work for more than 45 hours a week. Only 32% of all those who work had medical aid benefits, 71% of those employed were not unionised, 43% of workers (5.8 million workers) had no access to paid maternity/paternity leave, 31% (4.2 million workers) had no access to paid sick leave and 35% (4.7 million workers) were engaged in contract and other short-term type of employment, 50% of workers (5.7 million workers) have no access to a pension or retirement fund and 33% of workers (4.4 million workers) do not have access to paid annual leave. Significant gaps therefore still exist, almost twenty years into democracy, towards fully realising these aspects of the Freedom Charter.

2.5 Ownership and Control of the South African Economy: Inequality in Economic Power

The Freedom Charter states that, in a democratic South Africa: "The national wealth of our country, the heritage of South Africans, shall be restored to the people; the mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole; all other industry and trade shall be controlled to assist the wellbeing of the people".

The financial sector (banking and insurance) is a monopoly industry: Dominated by 4 large privately owned banks (ABSA, Nedbank, FNB and Standard Bank), two of which have significant foreign ownership. Insurance and re-insurance is dominated by Mutual and Federal, Old Mutual, Sanlam, Chartis, Santam, Swiss Re-insurance, Africa Re-insurance, Munich Re-insurance, Chartis, etc. ABSA is 56% foreign-owned whilst Standard Bank is at least 40% foreign owned. The Reserve Bank is also privately owned and has foreign ownership too.

The wholesale and retail trade sector is a monopoly industry, dominated by two firms: Shoprite and Pick ‘n Pay, which constitute 66% of the market share. Massmart (soon-to-be Walmart) is 60% foreign-owned, Shoprite is 35%, Truworths is 50%, Foschini is 40%, JD Group is 40%, Lewis is 30%, Pick ‘n Pay has less than 10%, Spar under 20% and Mr Price and Woolworths 20%[8]. The state does not play any role in this sector.

Manufacturing is dominated by two sectors, within which there are monopolies: petro-chemicals and basic iron and steel, which are dominated by Sasol and Arcelor-Mittal. Sasol is about 30% foreign-owned and Arcelor-Mittal is 65% foreign owned. More than 80% of the Johannesburg Stock Exchange is accounted for by the large banks and the few companies in the traditional sectors: mining and energy. All these companies are white, private, capitalist-owned and they are increasingly being foreign-owned.

The Forestry sector is also monopolised by two major players, Sappi and Mondi, with the state, through Safcol, playing a minor role. These firms are integrated with sawmills, and feed into the highly monopolised furniture sector downstream. The entire paper, pulp and wood production in the country relies on these few firms.

The cement sector is also dominated by 4 players (PPC, Alpha, Lafarge and Natal Portland), in which each player has significant pricing power. The sector depends on quarrying, which exploits a natural resource. Quarries must naturally be democratised through state ownership.

The construction sector is also monopolised, dominated by four players: Murray & Roberts, WBHO, Aveng and Group 5. We proposed in 2010 that the state should directly deliver basic goods and services. This means that it should build its capacity to construct infrastructure, public housing, hospitals, schools, clinics, roads, dams, bridges, etc., through a state construction company.

Machinery and equipment is a diverse sector, however it is crucial for the state to control heavy equipment production such as earth-moving machinery for construction and mining. The state should by now, have led the process of manufacturing of a South African made automobile, in line with the RDP. Currently, the sector is dominated by foreign companies primarily through the major import fronting company in South Africa, Barloworld. The major equipment players are Caterpillar, John Deere/Bell, Komatsu, Manitou SA and Thyssen-Krupp. All these are foreign owned companies that play a strategic role in the country`s capital equipment supply.

In the telecommunications sector the state plays a significant role through Telkom. However the experience of private and foreign ownership of Telkom has shown the dangers of privatisation of strategic sectors. The Thintana Deal in 1997, which led to massive job losses in Telkom from 67 000 to 25 000, has left the country poorer and in a worse socio-economic position. This was not helped by the further sale of Telkom shares in Vodacom to Vodafone. By and large, the telecommunications sector is not in the state`s hands, despite control measures through ICASA. The massive profits that are appropriated in the sector go mainly in the pockets of individuals, a significant number of whom are foreigners.

The pharmaceuticals sector is also brimming with profits, in the context where the state has no power at the point of production. This too is a jungle that is ruled by foreign companies: Aspen, Adcock-Ingram, Sanofi, Pfizer, Norvatis, etc. have all significant foreign-ownership, if not some of them are foreign companies to begin with, and feed profits on the burden of disease in South Africa. That is why we insist on a 100% state-owned pharmaceutical company, so that it is not mixed up with profit-maximisation at the expense of our people`s lives.

Mining is a monopolised sector too, in all its varied aspects because of the various minerals under it. Iron-ore, so crucial to steel production is dominated by Kumba Iron-Ore, which is majority foreign-owned. Manganese production is dominated by Samancor, which is a joint venture of foreign-owned mining houses, Samancor Chrome, is also a majority foreign-owned entity, vanadium is controlled by Vanchem also foreign owned, coal production is majority owned and controlled by foreign companies (with Exxaro`s exaggerated black ownership being among them), etc. In short all minerals in South Africa are majority foreign-owned and controlled.

The ownership and control aspects of the Freedom Charter have, admittedly, not been pursued. The impact of this excessive foreign ownership has serious macroeconomic implications, because profits made are repatriated to foreign owners, creating balance of payments problems that limit the capacity of the economy to finance development on the basis of domestic resources. Consequently, and contrary to the RDP, South Africa becomes increasingly reliant on foreign direct investment for development.

2.6 The Land Question

The Freedom Charter states that: "The land shall be shared among those who work it". It furthermore states, among other clauses, that all the land re-divided amongst those who work it to banish famine and land hunger; the state shall help the peasants with implements, seed, tractors and dams to save the soil and assist the tillers". The year 2013 will mark 100 years of systematic land dispossession, which gave effect to the concept of the Union of South Africa. Land dispossession turned the majority of South Africans into wage-slaves, they were forced to live in under-developed areas and suffered super-exploitation by the white colonialist who formed the Union called South Africa. The Land question is about property relations; who owns the land, land use-the land is used for what purposes and addressing the question of rural under-development.

Agricultural land-ownership also remains concentrated and colonial. Estimates are that Black people own between 13-16% of agricultural land in South Africa. Only 10% of the 30% land earmarked for land restitution has been transferred to black farmers, the target date for the 30% is 2014.[9] Efforts at land redistribution have largely been unsuccessful because of lack of post-reform support to beneficiaries. It is estimated that more than 70% of redistributed land became unproductive after the reform process. In this regard, the Department of Rural Development and Land Reform and the Department of Agriculture, have joined forces to ensure physical infrastructure and skills development support for reform beneficiaries.

Whilst de-racialisation of the rural areas is an important part of the NDR, it is also important that the productive forces that are embedded in large-scale farms be operated within the context of more progressive social relations. It is true that small-scale farms must be supported. However the reality is that large-scale farms define power relations in agriculture. It is large farms that supply the bulk of the food and other products. The issue is what do we do with the continued monopolisation of these large-scale productive forces by a few white monopoly capitalists?

2.7 Macroeconomic Policy

South Africa has just been accepted to join the BRIC countries. These countries have fast-growing economies with low unemployment. Historically, they tend to follow unconventional policies to support national development. These countries are well known for their interventionist states. They have state-owned central banks, state banks that operate at the same level as ordinary commercial banks and they use trade and industrial policy instruments that would ordinarily be rejected off-hand here in South Africa. Although, like any other country, each claims to be concerned about inflation, this is not their overriding concern. Their central banks subordinate inflation concerns to employment, industrial development and economic growth. In short, when it comes to policy tools, these countries embody almost everything that South Africa rejects.

India has made a choice of embarking on fiscal expansion in order to maintain its growth rate, and moderately runs a current account deficit by putting in place measures to limit exchange rate appreciation, and to ensure job-protection, through its state-owned banking system, by a sufficient supply of credit to productive sectors. Brazil is imposing taxes on speculative capital inflows and thereby raises revenues to finance long-term development. South Korea has a battery of restrictions and taxes and is considering new ways of taking advantage of capital inflows. All the BRIC countries are actively engaged in aggressive multi-instrument interventions to limit exchange rate appreciation.

There has been refusal on the of side policymakers in South Africa to deploy tools in order to intervene in currency markets. There has been reluctance to introduce a tax on short-term capital flows, and no measures to regulate financial sector activity in order to limit the excessive and corrosive growth of financial speculation to the detriment of industrial expansion. Instead, there has been further relaxation of exchange controls. This reluctance is an expression of the interests of finance capital, the hegemonic class force that continues to dictate policy in the South African state. It also very much expresses the failure to break beyond the principles of macroeconomic management learned from GEAR.

There is no movement towards 100% public ownership of the Reserve Bank. What has happened instead is the tabling of the Reserve Bank Amendment Bill, which is primarily aimed at dealing with so-called "rogue" shareholders, who "can both divert the central bank`s time and resources and raise uncertainty about its role and motivation". The Reserve Bank Amendment Bill now allows for broader representation in the Board of the Reserve Bank, including representations for labour and civil society. Nevertheless, this broadening of representation, while a welcome development, represents a classic bourgeois-democratic effort to resolve internal problems within the bourgeoisie, in relation to the governance of the Bank, under the guise of democratisation. The fact that the Bill does not remove the underlying concern of private ownership of the Reserve Bank remains a problem.

2.8 Access to Quality Education

The Freedom Charter states that: "The government shall discover, develop and encourage national talent for the enhancement of our cultural life; All the cultural treasures of mankind shall be open to all, by free exchange of books, ideas and contact with other lands; The aim of education shall be to teach the youth to love their people and their culture, to honour human brotherhood, liberty and peace; Education shall be free, compulsory, universal and equal for all children; Higher education and technical training shall be opened to all by means of state allowances and scholarships awarded on the basis of merit".

The crisis in education persists and the quality of education is declining. The poor`s children remain trapped in inferior education with wholly inadequate infrastructure. According to an OECD report, 70% of (matriculation) exam passes are accounted for by just 11% of schools, the former white, coloured, and Asian schools. What is of major concern is that 12-year olds in South Africa perform three times less than 11-year olds in Russia when it comes to reading and 16-year olds in South Africa perform three times less than 14-year olds in Cyprus when it comes to mathematics. Furthermore it is estimated only 3% of the children who enter the schooling system eventually complete with higher grade mathematics, 15% of grade 3 learners pass both numeracy and literacy, 70% of our schools do not have libraries and 60% do not have laboratories, 60% of children are pushed out of the schooling system before they reach grade 12 and 24% of learners finish schooling in record time.

In 2010 42% of schools depend on boreholes, rainwater or have no access to water on or near site, 61% of schools have no arrangement for disposal of sewage, 21% of schools have no toilets on site or have more than 50 learners per toilet, of those with toilets 36% depend on pit latrines, 16% have no source of electricity on or near site, 41% of schools have no fencing or the fence is in poor condition, 93% of schools have no libraries or libraries are not stocked, 88% of schools have no laboratories, or laboratories are not stocked and 81% of schools have no computers or more than 100 learners share a computer. It is clearly very difficult, though not impossible, to discover and enhance national talent under these conditions.

The Department of Basic Education in its Macro Trends Report (2011) mentions that 40% (8000 schools) have class sizes above 40 learners and 2 800 schools had an average of more than 50 children in a class. Limpopo and Mpumalanga had the highest percentage of classes that accommodate more than 40 learners (51% and 50% respectively). The overcrowding in classrooms also has a racial dimension. The average number of learners per teacher in a class is estimated to be 31 in African schools, whereas it is 24 in White schools.[10]

One of the major achievements that we should celebrate is the increase in the number of no-fee schools. In 2007, 20% of people ages 5 years and above who attended education institutions did not pay fees. By 2010, this figure had increased to 55%! This is due to the increase in the number of no-fee schools. This figure has since slightly increased to 55.6% in 2011. The General Household Survey (2012) reports that "provinces with the highest proportion of non-payers were Limpopo (89.7%) and Eastern Cape (71.8%)". Another improvement that is worth mentioning is the expansion of the school feeding scheme. In 2009, 66% of learners benefitted from the feeding scheme and this number had improved to 74% in 2011. In Limpopo 95% of learners benefit from the scheme, in the Eastern Cape 85% benefit and in the Northern Cape 87% of the learners benefit from the scheme. The aspect of the Freedom Charter that education shall be free is clearly being vigorously implemented.

However, inequalities in basic education also show themselves in terms of outcomes: 70% of matriculation passes is accounted for by 11% of the schools, which are historically White, Indian and Coloured[11]. The pass rate in African schools is 43%, while the pass rate in White schools is 97%. Schools with fees that are less than R20 per year have a pass rate of 44%, and those with fees that are greater than R1000 per year have a pass rate of 97%[12]. These figures show the close relationship between class and race inequalities in the education system. The performance of the education system of course differs from province to province. But there is a clear correlation between performance in the province and the province`s socio-economic performance, more often reflecting the historical legacy of apartheid under-development.

2.9 Access to Quality Healthcare

The Freedom Charter states that: "A preventive health scheme shall be run by the state; free medical care and hospitalisation shall be provided for all, with special care for mothers and young children". The RDP calls for the creation of single national health system, driven by the primary health care approach. Furthermore, the entire health system is supposed to be located within the context of rising standards of living through improved wages and income-earning opportunities, improved sanitation, water supply, energy sources, and accommodation. All these provisions ensure that material conditions exist to shift the national health system from the catastrophically expensive curative mode to the preventive mode.

The scale of the health crisis in South Africa is still large. In 2010, we reported that maternal mortality has increased from 81 per 100,000 to 600, between 1997 and 2005. The MDG target is 38. Child mortality has been on the decline, but remains high at 68 (per 1000 live births)[13], yet a comparable country, Brazil, has reduced this figure from 58 in 1990 to 22 in 2007. There are 1000 AIDS-related deaths per day (and another 1,450 people becoming HIV infected each day) and 70% of the case load in the public health system is now taken up by HIV/ AIDS cases, crowding out the capacity to treat other medical conditions. Moreover, while we seem unable to treat more than half the 800 000 needing anti-retroviral treatment, that number is going to rise to 5.5 million within five years (these are people already HIV infected who will reach full-blown AIDS).

It is again a known fact that South Africa is one of the 22 High Burden Countries that contribute approximately 80% of the total global burden of all TB cases, the seventh highest TB incidence in the world. Unfortunately the incidence of tuberculosis has increased during the past ten years, in parallel to the increase in the estimated prevalence of HIV in the adult population. This has resulted in increasing recognition of the problems posed to public health by TB. Generally TB control is facing major challenges. Co-infection with Mycobacterium Tuberculosis and HIV (TB/HIV), and multi-drug-resistant (MDR) and extensively drug resistant (XDR) tuberculosis in all regions, make prevention and control activities more complex and demanding.

In terms of health insurance, almost 25% of South African households have at least one member who belongs to a medical aid, only 17% of individuals have medical aid scheme coverage and 90% of households do not belong to a medical aid scheme because they do not have money to pay for it. Only 9% of the African population belong to a medical aid scheme whilst 74% of the white population do[14] . This is reflected in the imbalance in terms of life expectancy. A white person born in 2009 expects to live for 71 years, whereas an African born in the same year expects to live for 48 years. This means that white people expect to live 23 years more than Africans. These facts had not changed by 2011.

At an institutional level, we reported that there is a disconnection between national policy and the allocation of resources, management information systems are insufficient for decision-making, and decision-making powers are generally incorrectly located (a hospital CEO doesn`t meaningfully control staff, budget or procurement). Furthermore, there is under-regulation of the private health sector and over-concentration of resources in the hands of the private healthcare providers.

An important policy development in the health sector is the formulation of the 10-Point Plan of the Department of Health, which COSATU welcomed and supported. Part of our proposals is the need for government to regulate the private healthcare sector. Government has since moved in this direction to initiate a process to review the fees that are charged in private healthcare facilities and by private healthcare practitioners. Government has moved to initiate a process to review the pricing of medicines. Perhaps the most encouraging part on healthcare is the implementation of the NHI, which is now on a pilot stage.

3. COSATU Demands

3.1 On Strategic Nationalisation

Nationalisation is a fundamental strategic intervention that is required to truly transform the South African economy. Strategic nationalisation should meet three objectives: a) stimulate economic growth, b) to determine the strategic direction of the economy and c) to enlarge available resources. One criterion for selecting industries or companies to be nationalised is that certain areas that may have to be addressed would require resources that are under "natural monopolies", which the apartheid state had started privatising. But this does not preclude the state from identifying strategic industries and sectors through which it can influence the direction of the economy, in line with the framework of a genuinely new growth path which would direct us from a less extractive to a more productive and sustainable economy. We propose the following sectors for strategic nationalisation: a) banking, b) petrochemicals, c) forestry, d) cement, e) metals fabrication (especially steel), f) construction (to address infrastructure backlogs), g) pharmaceuticals, h) machinery and equipment i) telecommunications and j) mining.

3.2 On Macroeconomic Policy

  • Government must develop a growth and development path framework document, to which macro, micro, spatial and rural development policy must hang;
  • The Reserve Bank must abandon inflation targeting and target economic growth and employment targets;
  • The SARB must intervene in the foreign exchange markets, or announce its intentions to do so;
  • Move towards a 100% state owned Reserve Bank, completely independent from the undue influence of capital through its shareholding and participation in the governance and policy making bodies of the bank;
  • Reinstatement of capital controls to prevent the asset stripping of South African industry;
  • Introduction of redistributive tax interventions through:
    • Progressive tax system, with an introduction of a tax category of the super rich;
    • Solidarity tax, whose aim is to cap the growth of earnings of the top 10% and to accelerate the earnings of the bottom 10%;
    • Tax on both domestically produced and imported luxury items, but a higher tax on luxury items which are imported;
    • Increase in the secondary tax on companies to encourage re-investment, job-creation and to reduce the financialisation of company assets;
    • Imposition of a land tax to aid the process of land redistribution;
    • Zero-rating of basic foodstuffs, medicines, water, domestic electricity and public education;

Introduction of the following transformative taxes to support industrial development:

  • Export taxes on strategic minerals, metals and other resources to support downstream industries and to promote value-addition;
    Investment tax credits to encourage local procurement of machinery and equipment;
    Tax on financial transactions including capital gains tax above a certain minimum threshold to limit short-term capital flows and to encourage productive investment, and speed pumps on short term capital flows to discourage hot money;
    Tax on firms that are stubborn in closing the wage gap.

3.3 On Employment Creation

We call for expansion of the FET sector to accept 1 million learners per annum by 2014, compared to the current 400 000 per annum. This will in turn reduce the youth labour force, by extending their stay in the education and training system, so that they acquire basic and high-level cognitive skills (as the Germans and now the Australians are doing). Then state-owned enterprises, agencies and departments must stand ready to absorb these young people into practical training and provide work experience, especially given the massive infrastructure backlogs and maintenance that has to be done. The private sector can do the same, without being given wage subsidies, but policies must be in place to support industrialisation and agriculture.

The state must have capacity to plan and forecast the numbers of young people who enter the post-school system and exit it, and ensure that no one falls through the cracks. The state must phase out the use of tenders and it must directly absorb the unemployment in the delivery of a range of basic services, including the building and maintenance of infrastructure. In so doing, the state is supposed to support local supplier industries through targeted procurement and to build and broaden industrial linkages in order to increase the labour absorptive capacity of the economy.

Decisive state intervention to address inequalities and expand infrastructure and quality basic service provision (education, health, housing etc.) and a change in patterns of ownership and control of the economy, as identified by the Freedom Charter, so that the resources that are embedded within the monopolies such as the mines, Sasol, Arcelor-Mittal, etc. are directed by the state to build domestic industries which would create real, productive jobs and to train workers and young people in general to meaningfully participate in the social, political and economic development of our country.

3.4 On Land Reform

We call for state ownership of all the land in this country. This will empower the democratic state to break the power of white capital, strengthen the capacity of the state to regulate land use and to abolish speculation. Once the state owns the land, it can then decide on a lease basis as to who should use it and for what purposes. Land should be the heritage of all South Africans, owned by the democratic state and shared in use, not in ownership, among those who work it. This is the best way in which the state can secure food security and reduce land under-utilisation. Thus the question of defining property rights to land ownership falls away. What remains is the administration of land use and allocation, including the determination of rent that should be paid to the state for land-use.

Other interventions should include:

  • Increase the target for black commercial use of land: 30% percent is a completely inadequate target for land redistribution given the demographics of South Africa`s population. Even if it is impractical to expect the state to achieve a higher target by 2014, there should at least be a higher target in the longer term. This is important to push forward, because in recent years, programmes specifically designed for poor households have been curtailed and there has been a greater emphasis on developing a new class of commercial farmers.
  • Dramatically increase the funds allocated for land reform: Land reform is not about land transfers alone. Sufficient funding must be allocated to reform support programmes that can ensure the success and sustainability of land reform beneficiaries. The Comprehensive Agricultural Support Programme launched in 2004 is inadequate to meet these needs. The Land bank must play the active role. It must be able to support agricultural activities mostly for poor communities. Part of the problems with the massive failure of the land reform programme in the past 18 years has been inadequate infrastructure on the land, lack of access to markets, finance and skills. Consequently more resources should be made available to address this problem through, among other things, capacitating the Land Bank within the context of an overarching state-controlled financial system.
  • Use expropriation powers more aggressively: Government has announced the rethinking on the "willing buyer-willing seller" policy that has limited its options in the past. COSATU welcomes this move, although government does not seem to be prepared to use its expropriation powers aggressively, as resolved in the 52nd Conference of the ANC. The new Proactive Land Acquisition Strategy (PLAS) does not give provincial DLA offices sufficient direction on expropriation; as a result there are large variations in how the policy is being applied. The dominant model is to conclude leases with an option to purchase in the expectation that in 3-5 years successful farmers can be given an opportunity to purchase their land from the state with their LRAD grants or at a concessionary price. This is problematic, since this strategy is premised on private ownership of land.
  • Pay more attention to the needs and interests of marginalised groups: Targets for the inclusion of women, youth and disabled people in land reform programmes are widely ignored. Communal tenure reform, in particular, must be implemented in a manner that protects the rights of women. We need to debate the impact of the Communal Land Rights Act, which is likely to worsen the position of women.
  • Halt the process by which the state relinquishes land in order to make up for land redistribution, whilst racial, gender and class concentration of ownership of land still persists.
  • Make available un-used state land to be productively used by co-operatives.
  • Develop a policy to deal with expropriation of unused or unproductive land, including land currently used for game-farming, golf-estates and land held for speculative purposes.
  • Abolish foreign ownership of land, and encourage productive, job-creating foreign investment in agriculture.
  • Ensure that the state expropriate land for the purposes of meeting basic needs, including laying down infrastructure and housing.

3.5 On the Labour Market

  • Ban labour brokers;
  • Enforcement of an upper limit of a 40-hour work week across the board;
  • Taxation of firms that pay below the statutory minimum wage, and the distribution of such tax proceeds back to the workers concerned;
  • Tax reform to target executive pay and to set targets to close the apartheid wage gap;
  • The Department of Labour must set targets and timeframes to extend maternity leave and all other leave benefits to all workers, taking into account the fact that we are almost two decades into democracy;
  • Extend social protection and ensure that there is an income floor below which no South African worker or household should fall;
  • Set targets for the reduction of "low-wage" employment, through the introduction of solidarity measures in wage formation. This should be an integral part of realising our demand that the income gap between the highest paid and the lowest paid should be 16:1;
  • ·Link skills development and training with career-pathing as part of the employment equity

3.6 On Education

The provision of university education, though excessively dominant, remains weak in South Africa. The building of universities in Mpumalanga and Northern Cape should be speeded up, with definite timelines in place. There is also a need to consider the use of existing old Bantustan Offices that are idle, so as to increase schools and sites for existing universities. In addition, there should be biased focus in establishing new commerce, science, engineering and medical faculties in the new universities so as to support broad based industrialisation and social development.

  • FETs must be linked to SETAs to ensure the allocation of funds to poor learners and scarce skills must be prioritised by FETs;
  • The teacher-learner ratio must be reduced to achieve quality learning and teaching;
  • The education infrastructure must be improved; the mud schools must be eradicated and that there should be no teaching under the trees;
  • The education budget must be increased such that it exceeds 20% of the budget or 6% of the GDP;
  • Government must establish its own publishing company to eliminate corruption in the procurement of books;
  • There must be proper recognition of African languages in education to restore African dignity and African languages must also be used in science subjects;

Further issues for policy consideration include:

  • The development and use of African languages;
  • Need to set guidelines so as to strike a healthy balance between international students and local students in South African tertiary institutions;
  • The need to debate the scaling down of private higher education providers and to end public subsidisation of private higher education institutions;
  • The need to formulate a benchmark for student fees in order to deal with the current differentiated scenario;
  • The design of a mechanism to ensure that students in the scarce skills areas like medicine and engineering are funded through the public purse and are contracted to the country to halt the current tide of skills flight.

3.7 On Health

  • Integrate the following proposals in the implementation of the 10-Point Plan;
  • A heavy focus on HIV and AIDS, TB and silicosis; in collaboration with the Departments of Basic and Higher Education;
  • Integrate Community Care Workers into the public service;
  • The state should lead the process of training, particularly the training of nurses and doctors and resist the incursion of the profit motive in the process;
  • Ensure that the Department of Health establishes a Nursing Directorate nationally and provincially to drive the implementation of the Nursing Strategy, co-ordinate and manage nursing services and to strengthen the South African Nursing Council to be an autonomous professional institute;
  • Increase the Nurse/people ratio from 4 (per 1000 people) to 8 per 1000 and the ratio of physicians to 1000 people to 1 over the short to medium term from the current 0.69, which would require at least 200 000 additional nurses and at least 15 500 additional physicians. This excludes the need to build additional clinics and hospitals;
    • The National Health Insurance Fund must be a single payer and must be publicly administered. There must be no outsourcing of administration;
      There must be no public private partnerships in the delivery of health care in the public sector;
      The NHI must be funded via general revenue, payroll linked progressive contribution tax and contribution by employers. No additional levies must be made through VAT to fund the NHI;
    • There should be no further investigation of a multi payer system, as it is not going to lead to universal access to health insurance;
      The creation of the NHI and the broader transformation of the health system in terms of the 10-point plan of government must be prioritised as one of the 5 priorities of the manifesto;
      We call for Treasury to release the Discussion document on the funding or financing of the NHI;
      Government with the consultation of labour and other stakeholders must develop the guidelines for monitoring and evaluation the pilots;
    • The state-owned pharmaceutical company must be 100% owned by the state.

4. Respondents

Chamber of Mines
5 Hollard Street

Business Unity South Africa
3 Gwen Lane

Department of Finance
Department of Mineral Resources
Department of Agriculture, Forestry and Fisheries
Department of Human Settlements
Department of Rural Development and Land Reform
Department of Trade and Industry
Department of Economic Development
Department of Basic Education
Department of Higher Education
Department of Health
Department of Energy
Department of Public Enterprises
Department of Labour
Department of Rural Development and Land Reform

5. The protest action

If there is no firm commitment in addressing above demands, COSATU will have no option but to mobilise its members for a protest action which will take the form of marches, demonstrations, pickets and stay-aways.

Patrick Craven (National Spokesperson)
Congress of South African Trade Unions
110 Jorissen Cnr Simmonds Street

Tel: +27 11 339-4911 or Direct: +27 10 219-1339
Mobile: +27 82 821 7456
E-Mail: patrick@cosatu.org.za

[1] See Monthly Earnings of South Africans (2010) for an idea of the average wage in South Africa.
[2] See Monthly Earnings of South Africans, Statistics South Africa, 30 November 2010.
[3] Development Indicators 2009, The Presidency, p.25. These are based on Income Expenditure Surveys.
[4] Human Development Report: Fighting Climate Change-Human Solidarity in a Divided World, 2007/08, p.283.
[5] In the Budget Speech 2010, the Minister of Finance notes that in South Africa "income inequality is among the highest in the world; and half of our population survives on 8% of national income". Nevertheless, the policy proposals that are contained in the Budget Review 2010, completely fail to address this problem.
[6] McGregor`s Who Owns Whom, 30th Edition, 2010, p.45.
[7] Bhorat H. et.al. (2011): Minimum Wage Violations in South Africa. DPRU Research Paper. University of Cape Town.
[8] See The Timeslive, Local Retailers` Share Prices Surge, 2 May 2010.
[9] Department of Rural Development and Land Reform Annual Report 2009-2010, p. 27.
[10] H. Bhorat and M. Oosthuizen. 2006. Determinants of Grade 12 Pass Rates. DPRU, University of Cape Town.
[11]G. Barnard. 2009. Realizing South Africa`s Employment Potential. OECD Working Paper 662.
[12]Servaas Van der Berg. 2007. Apartheid`s Enduring Legacy: Inequalities in Education. Journal of African Economies 16, No.5.
[13] See Development Indicators 2009, the Presidency.
[14] General Household Survey, 2009.