ANC-affiliated trade union warns of strike against proposed economic reforms in South Africa

The economic reforms announced by the National Treasury would weaken labor rights and advocate for the privatization of state-owned enterprises and export-led growth

September 03, 2019 by Peoples Dispatch
south africa trade union
Economic reforms proposed by finance minister Tito Mboweni in a paper published on August 27, are being opposed by trade unions, with a call to strike on October 7.

Trade unions across South Africa have manifested their rejection to the plan presented by the National Treasury for economic ‘revival’ in the face of one of the most severe economic crises in the country’s recent history. Even the Congress of South African Trade Unions (COSATU), which is affiliated with the ruling party African National Congress joined the public condemnations of the neoliberal plan and warned of a strike action on October 7, if it is not withdrawn.

The proposed reforms were published on August 27 by finance minister Tito Mboweni, without any consultations with other ministries. In his paper, after recognizing the severity of the economic crisis in South Africa, Mboweni offers ‘solutions’” which the left-wing South African Federation of Trade Unions (SAFTU) criticizes as “a long list of all the old right-wing capitalist policies which have brought [the crisis] about in the first place!”

The policies being advocated include severe austerity measures, the privatization of state-owned enterprises (SOE), increasing the presence of private players in strategic sectors and a focus on export-led growth. The paper proposes the exemption of Small, Medium & Micro Enterprises (SMMEs) from labor regulations, in particular, the collective bargaining of wages and adherence to the national minimum wage standards.   

“The document is trying to exploit our economic crisis by pursuing a right-wing agenda that was defeated in several ANC conferences,” said deputy secretary-general of COSATU, Solly Phetoe. 

COSATU has criticized the finance minister for releasing the paper without first placing it before the National Economic Development and Labour Council (Nedlac), which offers a platform for discussions and negotiations over such economic policies to workers and businesses.

Meanwhile, the South African Communist Party (SACP), a traditional ally of the ANC which has lost credibility in the eyes of many on the left, has also criticized the proposals on the grounds that they advocate for the very same policies which have “plunged the world” into economic turmoil. 

South Africa is currently suffering under the longest economic slump it has experienced since 1945. Unemployment has reached 29%, which is the highest since the 2008 financial crisis. When “discouraged work seekers” are included in this category, the unemployment rate increases to over 37%.

An open attack on labor rights

One of the measures dealing with unemployment advocated in the finance minister’s paper, is the dilution of labor laws that provide some protection to those who remain employed. The paper also recommends “full or partial exemptions for SMMEs from certain kinds of labor regulations”, arguing that “rigidities in labor market institutions and regulations raise costs for SMMEs”. 

They claim that collective bargaining by workers can result in an increase in “labor costs without concomitant increases in productivity” which they argue “reduces the global competitiveness of South African workers and may inhibit the long-term sustainability of SMMEs and contribute to rising youth unemployment.”

Also under attack is the national minimum wage, which the finance minister alleges “could potentially have an adverse effect on small businesses who cannot afford the increase [in wages].” While acknowledging that exemptions are already available for small and micro enterprises, the paper states that “having to apply for this exemption introduces additional red tape”, thus recommending a blanket exemption.

This attack on labor rights is being justified on the grounds that while large corporations can afford the costs of compliance with labor regulations, SMMEs are disadvantaged by a disproportionate burden. However, SAFTU in its statement condemning the plan, points towards the fact that the paper uses the “plight of SMMEs to justify policies which are in fact demanded by the big monopoly employers.” 

“[I]n fact, the biggest problem small businesses face are monopoly big business which conspires to exclude them from the mainstream economy, while ANC and other councils evict them from their business sites and xenophobic demagogues who incite people to loot their premises,” the statement adds.  

“Far from labor rights being the main obstacle to SMME growth”, SAFTU maintains, “the biggest problems they confront are lack of access to affordable credit, and lack of access to markets, because of (the) stranglehold of the monopolies.” It is not the labor rights but the “[Finance Minister’s] friends in the boardrooms of monopoly big business, the international financial institutions and the credit ratings agencies, who are responsible for the unsustainable economic trajectory.” 

The proposed dilution of labor laws “is a barely veiled attempt to reduce even further the laws which are supposed to protect workers and their unions from exploiting employers, who are already waging war on collective bargaining and demanding exemption from having to pay even the poverty national minimum wage. SAFTU will fight tooth and nail against any such moves,” the statement reads.

Selling the strategic sector to private companies

One of the most controversial parts of the paper which has outraged the unions, is the treatment of state-owned electricity company Eskom. Reeling under a heavy debt burden, the company is in urgent need of a bailout.    

However, instead of having a revival plan for Eskom, the paper proposes that it “should sell coal-fired power stations, possibly through a series of auctions. Through these auctions, Eskom would sell the power station itself, all its power station-specific obligations (staff contracts, coal-supply contracts, supplier contracts, environmental obligations, etc.), together with a power purchase agreement (PPA) at a predefined, power station-specific tariff.”

SAFTU has opposed the privatization of the public enterprise and blames rampant corruption for the current state of affairs. Instead of privatization, SAFTU has demanded “lender liability”, questioning whether the foreign lenders, including the World Bank, the African Development Bank and the China Development Bank deserve to be repaid, given that they extended a loan of USD 6.6 billion to Eskom between 2008 and 2018, being “fully aware of the extreme corruption there”.

SAFTU also opposed the use of the “national budget to increase the support to looted and indebted SOEs.” According to SAFTU, a more progressive way to finance the rescuing of Eskom would be to tap into the resources of the Public Investment Corporation (PIC), a state-owned entity which manages around USD150 billion worth of assets and also invests in the Government Employees Pension Fund (GEPF). SAFTU argues that shifting “GEPF’s investments away from shares to bonds specifically made to deal with the SOE debt crisis is critical to saving Eskom (and other SOEs) from privatization and austerity.”  

In addition to advocating the sale of Eskom’s assets to private companies, the finance minister’s paper has also suggested the opening up of strategic sectors to private players. Noting that “there are indications that state-owned companies (SOCs) in telecom space will be tasked with the government’s broadband roll-out,” the paper proposes that “the private sector’s proven capability in broadband infrastructure development could also be leveraged.”

Furthermore, high transport costs have been attributed to the very “presence of state-owned companies in the sector”. The paper goes on to suggest that “[g]ranting third-party access to the core rail network is crucial for promoting private sector participation in rail and concessioning of branch lines”.

Export-led growth or export-led decline?

While identifying the export sector as the key potential driver of growth, the paper states that “South Africa needs to promote export competitiveness and actively pursue regional growth opportunities in order to leverage global and regional value chains for export growth”.

In order to access foreign markets for exports, the paper recommends negotiations for preferential trade agreements with foreign countries. Deeming Nedlac an often “unsurmountable” hurdle in reaching these agreements, the bypassing of this institution has been suggested. 

Such policies are an application of the recommendation of a 2014 World Bank report to focus on exports as a key driver of the economy. However, SAFTU has criticized this policy, arguing that the reality of the global economy shows otherwise.

They point to the imminent global recession and potential global capitalist crisis, the current Chinese economic slowdown, the shrinkage of global value chains from 28% to 22.5% of exports, the worsening debt crisis in Africa and recent devaluation of the South African rand as making regional export growth far less feasible.

Rather than placing South Africa in a position to rely on exports to grow the economy, such policies would lead to an economic decline. The increasing costs of long-distance trade due to high shipping and airline carbon tax, Trump’s trade war and the impact of Brexit on South Africa’s exports are some of the other factors that have rendered the country “extremely vulnerable to export-led decline”.

Instead, SAFTU has demanded that the government announce “a real stimulus package.. at least of R500 billion rands to save the situation from getting worse in the third and fourth quarter.” Current monetary policies should be scrapped and replaced with “more expansionary fiscal and monetary policies”, allowing the government to reduce the interest rate by 3% and making way for higher investment activity.

SAFTU has also demanded the introduction of a wealth tax, the increase of corporate tax up to 45%, searching for “creative ways of effectively taxing incomes gained in the financial markets” and utilizing the resources thus raised for social spending.

“The federation calls upon all workers, communities and civil society to demand that the ANC government reject Mboweni’s outrageous political strategy and join together in a mass campaign for a democratic socialist South Africa,” its statement concludes.

While both SAFTU and COSATU have taken strong positions against the proposed plan, the National Treasury and Finance Minister nonetheless found an ally in the right wing opposition party, the Democratic Alliance (DA), which has for long been advocating such neoliberal measures. 

DA’s shadow finance minister Geordin Hill-Lewis claimed that, “The proposed reforms are pro-growth and pro-jobs, and should be implemented as soon as possible. Now is the time to stare down the radical forces”, while assuring the finance minister that “he will have our support in doing so.”