Tuesday 19 September 2006
Cosatu instincts not as far from Asgi-SA drafters’ as may seem
THE socioeconomic report contained in Congress of South African Trade Unions (Cosatu)
general secretary Zwelinzima Vavi’s report to the trade union federation’s congress bears
careful reading.
Inevitably, the debate about it is probably going to be more about politics than about policy.
But Cosatu’s analysis of the economy, of industrial and development policy, and of
government’s growth strategy (Asgi-SA) opens up some core policy issues for debate.
Cosatu’s critique of Asgi-SA, the accelerated and shared growth strategy, makes it clear the
federation wants the focus on the shared, rather than the accelerated. But there’s more in
common between Cosatu’s economic policy instincts and those of Asgi-SA’s drafters than
there might seem. And they have shared flaws.
Finance Minister Trevor Manuel commented recently that “economic growth as a policy
objective, and creating the conditions that make more rapid growth possible, were always
going to be somewhat contested terrain”. And the Cosatu report certainly reveals that the
contest continues. The trade union federation broadly supports most of the main Asgi-SA
interventions, such as public investment in infrastructure, improving skills and education, and
sector strategies geared to job creation. It also tends to agree with Asgi-SA’s analysis of the
constraints to growth.
Where it parts company, however, is in its call for Asgi-SA, essentially, to be another kind of
strategy — centring on “equity and redistribution” rather than on economic growth as a policy
objective in its own right. Cosatu argues there is no deliberate strategy of redistribution in
Asgi-SA, whose growth and employment targets are not specifically designed to help the
poor. But Cosatu’s counterproposals on what Asgi-SA should look like are rather abstract and
vague.
Not that some of Asgi-SA isn’t also vague. And that highlights a key tension within the AsgiSA process. On the one hand, it aims to bring about a growth acceleration in SA’s economy
by identifying the most serious constraints to growth and removing them. On the other, it
seeks to achieve other objectives at the same time — including those Cosatu wants to see at
the centre. The danger is that instead of tackling a few priority areas, Asgi-SA ends up being
diluted and less effective. Politically, it has to be a balancing act. Cosatu doesn’t like the
balance.
But in some key areas of economic policy, Cosatu is closer to those within the presidency
who drafted Asgi-SA than one might think. Take the rand. Top of Asgi-SA’s list of constraints
to growth is “the volatility and level of the currency”. The growth strategy avoids any
suggestion that government has a particular exchange rate in mind or might intervene in forex
markets. Cosatu is not cautious. It wants a cheaper rand and lower real interest rates and in
effect it opposes inflation targeting, which, it says, “encouraged high interest rates and an
overvalued rand, both of which slowed economic expansion and job creation”.
Support for a more “competitive” rand and more flexible inflation targeting is not a million
miles away from the thinking in the presidency, where Asgi-SA resides. How it goes down in
the Reserve Bank or the national treasury is less clear.
Then there’s the issue of sectors and growth. Like Asgi-SA, Cosatu tends to blame SA’s
dependence on some economic sectors for some of its woes. Those driving Asgi-SA want to
see reduced dependence on commodities. The Cosatu report blames relatively slow
employment creation on SA’s reliance on metals and mining, heavy chemicals and the auto
industry — aggravated by soaring commodity prices. But the federation has long argued for a
more interventionist industrial policy that will promote the development of job-creating sectors.
And it wants “quality jobs”, not just any jobs. It is critical of Asgi-SA’s rather random picking of
the outsourcing and tourism sectors, and it criticises the vagueness of the trade and industry
department’s draft industrial policy document.
Where Cosatu really sees itself parting ways with government industrial policy approaches is
that it wants to see a policy shift towards industries supplying domestic demand, rather than
exports, and it wants more attention to lower-tech, labour-intensive sectors that could create
jobs and provide basic goods and services for poor households. This is important stuff for the
job-creation debate.
But it’s not clear where it might lead Cosatu: low-tech labour intensive industries in the
services sector, for example, are good at creating jobs. But those often tend to be exactly the
poor quality, casual, nonunionised jobs that Cosatu is trying to fight. And there’s the question
of whether growing those sectors would generate the economic activity and export revenue
that SA needs for sustainably higher growth rates — and without those, we’re unlikely to have
the resources to redistribute. So there’s an important debate here about what kinds of jobs
are wanted, as well as what kind of growth, and how much. Put the politics aside and there
are some thought-provoking policy issues.
•Joffe is chief leader writer