The South African Federation of Trade Unions (SAFTU) notes that President Cyril Ramaphosa has used his presidential letter to the public to explain his controversial State of the Nation Address (SONA) claim, “We all know that government does not create jobs. Business creates jobs.”
Now his 14 February Letter reveals a desperate attempt to do damage control, with the President remembering his party has always been supportive of a ‘mixed economy’ and that “We need a capable developmental state.” And he brags, the “Presidential Employment Stimulus has supported more than 850,000 opportunities in just 16 months.”
SAFTU rejects with contempt this pretentious somersault. The ANC is still committed to neoliberalism and trickle-down ideology. Ramaphosa’s honest remark reminds of the way the neoliberal finance minister Trevor Manuel explained the state-shrinkage philosophy more than twenty years ago: “I want someone to tell me how the government is going to create jobs. It’s a terrible admission, but governments around the world are impotent when it comes to creating jobs.”
What this rhetoric evades are promised social-democratic policies envisioned in the Reconstruction and Development Programme (RDP), in which economic growth was meant to be driven through the redistribution of wealth, so that low-income people’s local consumption in turn generates demand for locally-produced goods.
Specifically, the 1994 promise was that “The RDP integrates growth, development, reconstruction and redistribution into a unified programme. The key to this link is an infrastructural programme that will provide access to modern and effective services like electricity, water,telecommunications, transport, health, education and training for all our people. This programme will both meet basic needs and open up previously suppressed
economic and human potential in urban and rural areas.”
This mandate is vital to renew, given the urgency of an overdue post-Covid “Build Back Better” strategy, much faster industrial localisation to substitute for imports, increasingly vital “Just Transition” planning to decarbonise without local economic destruction and to climate-proof our infrastructure, and job creation as the unemployment rate nears 50%.
As one example, it was a valid effort to supply the school system with more than 500 000 young workers in 2021, if the President is to be believed, because Covid-19 ravaged the ranks of teachers, made learning much more difficult, and thus cemented South Africa’s record as having one of the world’s most ineffective school systems – so lowering the learner/instructor ratio by introducing these assistants, is one small step towards
rebuilding our schooling capacity, and should be made permanent with decent wages.
Likewise there are vast opportunities to enhance public works so municipal stormwater drainage systems that have been failing during the intense recent rains, are rebuilt and expanded as part of not only Just-Transition decarbonisation but also climate-proofing South Africa. All such initiatives require an urgent reversal of the government’s commitment to state shrinkage.
In his Letter, President Ramaphosa is now using deceptive, banal sentiments about the role of a developmental state, when in reality the ANC is pursuing market-oriented neoliberal policies in which the state is reduced to a mere creator of a “conducive environment for business” to maximise profits. The mistaken view underpinning this trickle-down approach is that once the pockets of the top one percent are full, they will start overflowing for the benefit of the poor.
The reality is; since 1995 when Nelson Mandela declared that “privatisation is a fundamental policy of the ANC,” the ruling party has created a conducive climate for business.
Yet we now hear from the president that this conducive climate is still being sought, especially when every one of their policy frameworks since the 1996 Growth, Employment and Redistribution policy have demonstrated they are pro-business and have created a conducive environment for business.
In reminding the working class that since taking power in 1994, the ANC has embarked on the same “trickle down” neoliberal policies that have created a conducive condition for business, we briefly review their policy trajectory.
1. Privatised many state-owned enterprises, which included bus companies that used to provide vital services to the rural communities. If there wasn’t a strong union movement then, Eskom and other SOEs would have long been privatised, and the crisis of unaffordable electricity would have been much worse.
2. Removed exchange controls – for example, the Financial Rand in March 1995 – to permit mainly-white capitalists to move money generated through the sweat of black South African workers, anywhere in the world.
3. Allowed companies to list their companies in New York, Britain and Australia, which from 1999-2001 led to flight by many of the largest firms listed on the Johannesburg Stock Exchange (Anglo, DeBeers, Old Mutual, SAB, Investec, etc).
4. Dropped corporate taxes from 52% at their pick in 1992 to 27% today.
5. Increased the VAT to 15% as part of the strategy to distribute wealth from the poor to the rich.
6. Introduced an ‘inflation-targeting’ policy with a 3-6% band, to justify using high interest rates as a blunt instrument to reward the already-rich with financial assets.
The top 1% of the population lies next to their swimming pools, still ‘earning’ a 4% profit from their money in the banks.
7. Introduced labour reforms to make it very difficult for workers to embark on a strike action.
8. Liberalised trade so that merchant capital would thrive, at the expense of deindustrialised clothing, textiles, footwear, appliances, electronics and other labour-intensive sectors where South Africa was once strong, thus driving manufacturing value added as a share of GDP from 21% in 1990 to 12% today.
Instead of reciprocating this conducive business environment since 1995 with more investment, the greedy corporate sector has been on capital strike, refusing to put money into new plant and equipment, and instead either speculating on the record-breaking JSE or moving their money offshore as fast as possible, all the while demanding more concessions.
The business sector, together with their political tool, the Democratic Alliance (DA), were pleased by the pro-business SONA, hence DA leader John Steenhuisen’s remark that Ramaphosa took the speech right out of the DA playbook.
Instead of investing in the creation of jobs, business has embarked on a programme to:
1. Cut millions of jobs, leading to the point where the unemployment rate is by far the worst amongst the industrial and industrialising countries, with more than 12.5 million people without jobs, and amongst the youth, an unemployment rate above 76% (and a rate for black women of over 50%);
2. drive stagnation of wages for workers, as reflected by the fact that the share of wages to GDP has been declining since 1991, and that executive wages are now at obscene levels, driving the world-leading inequality rate;
3. engage in the longest investment strike in South African history, while hoarding R1,4 trillion in investable cash;
4. move an estimated 3-7% of GDP – close to R400 billion – out of South Africa annually through illicit financial outflows and mis invoicing;
5. looting government procurement contracts through obscenely-inflated prices leading to the state losing 35-40% of due to this fraud, according to a lead Treasury official;
6. dodging their responsibility to pay tax, which according to Judge Dennis Davis is a very conservatively-estimated R50 billion annually;
7. They have turned the Johannesburg Stock Exchange into a casino where hot money has broken all previous records as they gamble our future away, driving the JSE’s index from its April 2020 low of 34 000 to current levels of 76 000 – while the economy has shrunk over the same period.
SAFTU insists that instead of making more concessions to the business sector, the government should embark on the following measurers:
1. Introduce a wealth tax or solidarity tax to target the R1,4 trillion hoarded by the filthy rich class, with ‘prescribed asset’ funds redirected to build vitally-needed infrastructure;
2. Stop financial outflows by building capacity to track down individuals and firms now escaping with R400 billion annually, and redirecting such funds to rebuild our manufacturing sector, to introduce a universal Basic Income Grant and to fix Eskom, Transnet and Denel others.
3. Stop corruption and ensure every cent of our procurement budget reaches its intended beneficiaries, the poor masses of the working people, instead of further fattening the pockets of the billionaire class and the aspirant bourgeoisie, who use the state as a site of accumulation.
4. Stop tax-dodging schemes so that the R50 billion can be used to expand the public sector wage bill, to enable schools, clinics, prisons and police stations to fill and create new vacancies, and restore and increase special infrastructure grants to local government, and the housing, water, education and health departments.
5. In line with the demands of the ANC adopted Freedom Charter, Nationalise the mines, banks, factories and expropriate land for public ownership and worker control, to ensure redistribution for residential and economic activities that will lead to greater levels of participation of the marginalised black majority in the economy.
A government doing this will then be developmental in character. This is what the ANC would have envisaged by a developmental and active state, prior to their capture by the corporates.