South Africa

The economy: between the IMF, the NDP and a hard place

By Stephen Grootes 3 October 2013

On Tuesday the International Monetary Fund, that old capitalist Bretton Woods, US-dominated, structural adjustment programme imposer, told South Africa that our unions are too strong, demand too much, and stand in the way of economic growth. It also said that we need real structural change to our economy, and that government should implement the National Development Plan forthwith, immediately, and without delay. Clearly they spend more time talking to our economists than our politicians. Because Cosatu simply isn't going to let it happen. Or is it? By STEPHEN GROOTES.

Of all the debates we have in South Africa, whether it be about what the Alliance calls the National Question (and the rest of us call race-based quotas in cricket teams), or whether Heyneke Meyer should just give up and put Pat Lambie in the starting line-up for Saturday’s Test against the All Blacks [how did that reference to rugby get in there? – Ed], the debate about unions, job creation, and economic growth is the most important.

If the economy is booming, everything else becomes more manageable. People stop fighting about affirmative action if everyone is getting a job. Even losing to the All Blacks is somehow easier [There it is again! – Ed], if you can buy an extra brandy and coke (so long as the referee doesn’t speak French, actually watches the game, and doesn’t send anyone off this time).

Which is why the IMF’s prescription is so important. Essentially, it believes our unions, particularly with their demands for higher than inflation wage increases, are stopping our economy from growing, because companies aren’t employing more people. It’s an old argument; they’ve said it pretty much on an annual basis for a while now.

The addition this time is that they believe the immediate implementation of the NDP would help things a bit, because that would provide policy certainty. At least we’d all know the temperature of the pot we’re in.

So, in the IMF’s world, if the unions were brought to heel, in a Thatcheresque way, the ANC affirmed a long-term policy and followed the NDP, we would be the land of milk and honey.

The unions, led, for the moment at least, by Cosatu, see things differently. Due to the, uh, troubled nature of the federation, their usual heavy artillery, Zwelinzima Vavi is unavailable for comment. At least if you get to speak to him, economic policy is not that high on the agenda.

Which means that their reliable eight-pounder, Patrick Craven, is the person who gets to hit back.

People often underestimate Craven. But you won’t find a better debater among any spokespeople this country. He is not only able to give you the pithy sound byte, but is also able to decide, off his own bat, whether or not something deserves a comment from Cosatu. Not everyone has that ability, nous, and authority. There’s a reason why he received an award at Cosatu’s last conference that saw much of the hall rise to applaud him.

His answer to this quite pointed criticism is to first, in good old-fashioned union style, point out that the IMF is, you know, conservative and capitalist. He is also quick to mention that actually, in South Africa, most workers still live in poverty.

He has the facts about the “social wage”, the number of people dependent on each salary at his fingertips, and, if he needs it, has the final answer in the arsenal: That we live in the most unequal country in the world, and if you look at the money made by bosses, and the money made by workers, it’s clear workers still need more money.

Nick Holland, that R45mn you made last year was probably great for you, but doesn’t help the capitalist argument much.

Where Craven starts to get more interesting is in the economic argument. He points out that if you look at South Africa’s economy, the demand side of things is low. And that if workers were paid higher wages, that demand would increase, and thus stimulate the economy.

So, if workers received more money, more of them would buy goods made and sold in South Africa, and thus the economy would grow, and more jobs would be created.

It’s not a bad argument. It’s something that might well have those Harvard chaps from the IMF stopping for a moment. But probably only a moment. Before they say “yes, but…”

Because it’s not really clear whether that would work or not. And we know, from the Asian experience, and quite frankly, the Industrial Revolution itself, that workers are badly paid for a while, and then the entire situation changes. The rising tide lifts all the boats.

Normally, we would say that’s not going to happen here. Cosatu is simply too strong, the role it plays in the Alliance is too important, and the ANC is just not going to let it happen. And thus, in a way we’ve suggested many times before, this “policy lock” on our economy is going to continue for many years to come.

However, the imminent break-up of Cosatu seems to change things. While there would still obviously be pressure on government, and the ANC to keep things as they are, some of that pressure will surely lessen.

The figurehead of Cosatu, its heavy artillery, will be removed from battle. And say what you like about S’dumo Dlamini, he’s not quite the same in a public political fight. He’s certainly unlikely to take on President Jacob Zuma and Pravin Gordhan in the same way as Vavi has.

Already, Gordhan has tabled what looks, and quacks like a Youth Wage Subsidy on the Parliamentary table.

Remember, Cosatu under Vavi threatened thermo-nuclear war over this, and created a little Fukushima of its own last year, when the DA dared to take its support for the proposal to Cosatu House. One wonders if even Gordhan would dare such a thing, should Vavi not be weakened at the moment.

While it’s tempting to think of Cosatu’s current situation as just being about Vavi and Dlamini, and possibly support for Zuma, it’s really about something much deeper than that. The fact is, and I do firmly believe it to be a fact, you cannot have a union movement within government.

You cannot have an alliance that includes unions that represent workers for whom the employer is government. It is simply unworkable. You can muddle along for a while, as has happened, with all sorts of compromises, and patronage. But it cannot, and will not last forever.

What we’re seeing now is really the tail end of this process. The break-up was always going to be messy, that was a given. Break-ups always are. But if they are inevitable, then it’s best to get them over with, so that one can adjust to one’s new life as quickly as possible.

And once the break-up is over and done with, life starts anew. Possibly with a Youth Wage Subsidy. And possibly, maybe, hopefully, with more jobs being created. DM

Photo: A policeman (R) keeps watch as angry COSATU supporters chant slogans during a march by the Democratic Alliance (DA) in Johannesburg May 15, 2012.

Grootes is the host of the Midday Report on Talk Radio 702 and 567 Cape Talk, and the Senior Political Correspondent for Eyewitness News. He’s been part of the political hack pack since before the Polokwane Tsunami, and covers politics in a slightly obsessive manner. Those who love him have recommended help for his politics addiction. He quotes Amy Winehouse.