Why Finance Minister Tito Mboweni is sure to enrage the nation
June 23, 2020
Finance Minister Tito Mboweni’s revised budget is the last nail in the coffin of a poor majority already doomed to hell
June 25, 2020

SAFTU response to mass unemployment that has become a pandemic

We are mired in a Great Depression, and workers are again taking the greatest pain. StatsSA released its Quarterly Labour Force Survey (QLFS) on June 23, indicating that in mid-March, just before the Covid-19 catastrophe began, the narrow definition of unemployment had risen to above 30%. That does not include at least three million South Africans who are so frustrated, they have simply given up looking; adding those compatriots (known as discouraged work seekers) puts the rate at just under 40%. Considering that there are more than 2 million working-class women classified as homemakers who say they would prefer a decent job, in reality the level of unemployment was closer to 50% just before the lockdown.

During the Great Depression the United States unemployment rate reached record levels of 25%, this was considered to be a national crisis. Yet, in South Africa, obscene levels of mass unemployment are seen as normal by a government that plainly does not care about its masses.

Of sixty million people in South Africa, there are nearly forty millions of working age, of whom a relatively low 23.5 million are considered to be within the formal labour force. Before the Covid-19 catastrophe unfolded, there were 10.8 million unemployed South Africans, an increase of 400 000 in the first quarter of 2020. About 4.9 million people have become unemployed since December 2008, when the global financial meltdown was underway.

The race and gender biases are obvious: unemployment amongst Africans is now 44% and amongst African women, 48%. The unemployment rate in the Eastern Cape is now 49%, and seven of South Africa’s nine provinces have an unemployment rate of more than 40%.

More than two-thirds of the unemployed are young, and as many have never had a formal job in their entire adult lives. This mass unemployment has caused the world’s highest levels of income inequality. It can be blamed, as well, for many of our deepest socio-economic problems, such as the extreme violence particularly against women and girls, as well as drug and alcohol abuse that afflicts so many of our communities.

Before the Covid-19 crisis, there was a terrible crisis! It was the product of land dispossession, apartheid-capitalism and three decades of neoliberal macro-economic policies cemented by the African National Congress government with its GEAR policy in 1996.

Capitalism, neoliberalism and austerity has dismally failed! It is time to consider alternatives.

All of economic life must be reorganised on the basis of a global, planned economy, removing the obstacles of private property and the profit motive, which have prevented capitalist leaders from solving these human threatening crises.

The trade liberalisation import of capital-intensive machinery, and financialisation of the South African economy was all meant to promote competitiveness and an export-oriented growth path. Soon our manufacturing sector was decimated, falling from more than 20% to just 12% of national output.

Rather than re-industrialising the South African economy with labour-intensive and ecologically-sound production systems, so as to produce the goods desperately required by society’s mass, low-income market – textiles and clothing, footwear and leather goods, appliances, electronics and other daily needs, the ANC government allowed a neo-colonial economy to emerge. Our manufacturing sector was reduced to highly-subsidised metals and luxury auto-exports. Our mining sector pumped out commodities – especially gold, coal, iron ore and the platinum metals group – that were mainly unprocessed, and whose prices rose and fell at the whims of a chaotic world economy. Our financial sector doubled in size and the stock market soared to the highest national level ever recorded as a share of GDP (the ‘Buffett Indicator’), even though the real economy withered and unpayable levels of consumer debt rose.

The deindustrialising of the South African economy, amplified by parasitical activities like high finance, caused the exceptionally levels of unemployment. And now with the 4th Industrial Revolution, even those financial and service-sector jobs are being automated, leaving us with a vast population of angry, alienated workers. The hoped-for Foreign Direct Investment has mainly been ‘phantom’ in nature, according to the UN Conference on Trade and Development, which suggests multinational corporations ‘invest’ in South Africa using intra-company lending gimmicks so as to ‘arbitrage’ (take advantage of) the very high interest rates on offer. (Only Turkey pays foreign creditors a higher rate, among countries in the international bond markets.)

The latest QLFS statistics were gathered before the Covid catastrophe began; StatsSA pulled its field staff on 19 March for their safety. So the new statistics are already useless. What we have been told by pro-capitalist economists is that we should expect the April-June quarter to record between one and seven million workers who joined the unemployed as a consequence of the country going into lockdown.

To help our society survive this catastrophe, the South African government announced a stimulus package. It is now evident that the tokenism and smoke-and-mirrors data distortions have let the society down, no matter how hard our workers attempted to engage in social distancing and hygienic practices. Instead, the conservative nature of the Treasury – after adjustments – is a stimulus of just R71 billion, or 1.4% of GDP, according to SAFTU-aligned economists. Adding the Reserve Bank’s monetary measures – but excluding half of the loan scheme because it has not yet been allocated – the stimulus will be R211 billion, or 4.1% of GDP. As it is accepted that a Covid-19 stimulus package must be at least equal to the expected shock to the economy – which could rise to a 17% decline in GDP – South Africa’s effort falls far short of this benchmark. (See Duma Gqubule’s article in New Frame for more details: https://www.newframe.com/sas-covid-19-stimulus-package-falls-far-short/ )

An emergency public works programme, based on meeting the vast needs of society, is long overdue. Of course, the mainstream press will raise concerns about rising debt costs, but more unemployment will result in even lower economic growth which in turn raises the debt-to-GDP ratio. Moreover, as we have said before, we need a public audit of the debt in order to assess what debts are corrupt and therefore illegitimate, before we continue to service any debt. This includes more than R150 billion in two loans – the 2010 World Bank loan to Eskom for Medupi and the 2018 China Development Bank loan for Kusile, both riddled with Hitachi’s bribery of the ANC through Chancellor House – which South Africans continue to pay, without our permission. We demand the repudiation of all such Odious Debts, and we strenuously oppose returning to the Bretton Woods Institutions or the BRICS to get new foreign-denominated, hence extremely expensive loans, to cover for the ruling party’s corruption and mismanagement.

Also urgently needed are exchange controls to keep money in the country, prosecution of illicit financial flows, a wealth tax and higher income taxes on the rich and corporations. Along with Reserve Bank financing of the state – as is now the norm across the world (but resisted by backward South African monetary managers) – a genuinely pro-people government would pay for much better-quality, affordable public services, a Basic Income Grant, and the creation of decent work, especially as we enter climate and other ecological crises that desperately require a Radical Green New Deal strategy. South Africa is fortunate not to suffer a balance of payments crisis (especially if we can tighten exchange controls), and we have vast pools of domestic financial resources at our disposal that – instead of being gambled in a Johannesburg Stock Exchange utterly out of touch with reality and itself stricken with corrupt firms – should be harnessed and directed towards meeting the majority of people’s needs.

What the StatsSA revelations make clear is the need for a shift in it’s the macro-economic mandate, away from inflation-targeting to employment-targeting, and away from the dictates of the New York credit rating agencies, to the desperately suffering South Africans. Government must become the employer of last resort and guarantee all our citizens the right to gainful work. Everyone willing and able to work should have that opportunity and be paid a living wage.

There are many jobs to be done. For example, the pandemic has given us an indication of how unfit our health sector is – whether public or private – to deal with the care-giving required. Now more than ever, we need a real National Health Insurance, and we need to expand to ensure effective, free health care for all.

The pandemic has also once again shown that in South African townships, residents find it nearly impossible to practice social distancing or basic hygiene. The lesson is that instead of overcrowded, undignified mjondolos with no ablution facilities or even running water, we desperately need the state to build dignified housing near economic opportunities for all.

A just transition that will rapidly shift from coal to socially-owned renewable energy, with worker self-management and community control, so that decentralised solar and wind power is available to everyone, and a national grid with strong storage capacity stands ready to redistribute from surplus to deficit sites. Retrofitting our housing is vital, to ensure insulation and passive-solar geysers are available to all. We need decent water systems – not just the band aid tanks that government has slowly begun to roll out – and state-subsidised nutrition, especially grown in local gardens and farms (not by agribusiness) to ensure food sovereignty.

These are but a few of the essentials the majority of the people in this country are Xcluded from, thanks to the neoliberal character of the state, whose only concession to the catastrophe is a temporary expansion of social grants – still miserly in size – and an unworkable emergency R350/month grant to a small fraction of those millions who need it.

Providing these essentials, as well as reasonably-priced locally-produced manufactured goods, can also provide work.

There are easily enough resources in South Africa. To begin, the Reserve Bank and Treasury must immediately implement more stringent exchange rate and capital controls, in order to lower interest rates without fear of capital flight, and to reduce our dependence on financial inflows to offset the current account deficit that is cause by tens of billions of rands in illicit financial flows in the form of dividends, interests and repatriated profits to non-resident financial “investor’s”. Additional resources for fighting mass unemployment can be raised by taxing the rich. Each year transnational corporations shift hundreds of billions of rands out of the country in order to avoid paying taxes and wages. Combating profit-shifting and wage evasion can raise the state in excess of R100bn each year, as well as provide the resources for these companies to improve working conditions, resource their social labour plan obligations as well as pay workers decent wages. Lastly, the SA Reserve Bank should fulfil its actual role as the bank to government, instead of acting as the bank of private investors, and purchase bonds directly from the primary bond market as is being done in many countries in the world – where Reserve Banks show even greater independence. By doing this the SARB can “print money,” and thus raise at least an additional R20bn per week. These are but a few of the many options available to government.

Now is the time to act. There are no real barriers to taking these much needed bold decisions, except for the balance of forces in our society – which we intend to change. We aim to start by exposing and opposing government’s dogmatic belief in anti-poor macroeconomic policies justified by the need to ‘keep inflation in check.’ We are tackling the Treasury’s recent violation of the state’s contract with public sector workers (in the R161 billion 2020-22 pay cut) along with the longer-term hollowing out of state capacity through outsourcing key areas of work to private consultants, and the reduction in public sector budgets such as Treasury’s R3.9 billion cut to the health budget in February, just as Covid-19 was looming. We aim to reverse declining public investment, as well as fight public-sector corruption (judged by Transparency International as 70th worst in the world in 2020).

But we are also acutely aware of systemic private-sector corruption (judged by PwC as 2nd worst in the world in 2020), and we are resolutely opposed to a profit-driven system which not only threatens our lives in the immediate term by a too-hasty return to work in an economy suffering rapidly-spreading Covid-19 infection. This system also threatens our lives through worsening climate chaos, and even more so our future generations and neighbours across Africa who did so little to cause these problems, but who bear the brunt of our generation’s and our South African elite’s mistakes.

Across the world, the last months of 2019 witnessed a quarter of the countries (45) in revolt. The March-May lockdown in most places halted outright protests. The murder of George Floyd and so many other incidents of race, class, gender and sexual-identity oppression have brought even the wealthiest countries’ angry populace back onto the streets, expressing their anger. We will not be far behind unless this government and the corporations it serves makes an immediate U-turn.