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Shrinking economy – a catastrophe for workers and poor

The South African Federation of Trade Unions, since its founding Congress in April 2017, has been warning of a deepening economic catastrophe. Today’s report by Statistics SA confirms the truth of SAFTU’s assessment beyond any doubt.

It shows that the economy shrank by 2.2% in the first quarter of 2018 compared with the final quarter of last year, mainly due to a 24.7% plunge in the agricultural sector as well a fall of  9.9%  in mining and a 6.4% in manufacturing.

The capitalist ‘expert’ economists had forecast that growth would accelerate towards 2%, amid improved global economic conditions and positive sentiment emanating from SA’s escape from full junk status. They were all wrong, while SAFTU was right – in its forecast that President Ramaphosa’s ascension to power would bring no change for the better.

This is the biggest quarterly fall since the second quarter of 2009. The rand immediately and dramatically weakened by about 10c against the dollar.

There was a tiny rise in gross domestic product compared with the first quarter in 2017, but only by 0.8% – well below economists’ forecasts of 1.9%.

The decline in the manufacturing sector was largely due to the petrochemicals and metals sectors. The only sectors to grow were government services by 1.8% and financial services by 1.1%. But this was overshadowed by huge 9.9% drop in mining, 6.4% in manufacturing and 1.9% in construction.

This economy will remain for ever in the doldrums until we address these structural fault lines:

  • The dependence on the export of minerals,
  • The domination of the economy by four big banks, the broader financial sector and the heavy engineering and chemicals industries.
  • The dysfunctional education and healthcare services for the poor majority
  • The lack of access to land and property by the majority.
  • Austerity budgets which combine lower corporate taxes with increases in VAT and other non-progressive taxes on the poor.


In particular there will be no economic growth while the South African economy is dragged backwards by the extent of unemployment and poverty, underpinned by a low wage structure, which the R20 to R11 poverty national minimum wage will make even worse. More and more people have less and less money to spend and are effectively excluded from the country’s  economy

This crisis of poverty will deepen further from the latest fuel price rise, on top of the seven percent rise in VAT, increases in the fuel levy (which is tied to the fuel price and so will now go up even further), the road accident fund levy and the “sin taxes” on liquor and cigarettes. The next rise will be the planned sugar tax and likely increases in electricity tariffs. These will lead to lower spending on goods and services and even more retrenchments.

At the heart of the crisis is the overall capitalist mode of production and the theft of the surplus wealth created by the workers by a super-rich capitalist elite, who then refuse to reinvest that surplus in productive, job-creating businesses but spirit it away into tax havens.

Unless these structural deficiencies are addressed we are going to see even higher unemployment, poverty and inequality and more quarters of negative growth.

This is why SAFTU wants to build a network with grassroots organisations to fight back against the neoliberal attacks by monopoly capital and the ANC government, the VAT increase and e-tolls and for free education at all levels, proper service delivery and free healthcare under a national health insurance scheme, etc.

SAFTU is calling on all formations of the working class to attend. We have invited over 80 Civil Society formations and are in the process of inviting every trade union, including COSATU, FEDUSA and NACTU.