Cosatu concerned at economic slowdown 30-08-07

 

COSATU concerned at economic slowdown

The Congress of South African Trade Unions is alarmed at the slowdown in economic growth - from 4,7% a year in the first quarter of 2007 to 4,5% in the second quarter. This trend could have devastating consequences for workers, the unemployed and the poor.

The really shocking statistic is that growth in the manufacturing sector fell from 4,7% to a mere 0,5%, its slowest rate since 2003. Mining – another key sector for employment – actually recorded a fall in output for the second quarter in succession, which means that it is officially in a recession. Growth also slowed down in wholesale and retail trade and in hotels and restaurants, from 5% to 4,4% — the fourth quarterly decline in a row.

These are all key sectors for creating jobs and increasing living standards.

Even growth in the booming construction sector fell from 21,3% in the first quarter to 14,4% in the second.

These are the sectors which are key to meeting the government's ASGI-SA target of raising economic growth to 6% by 2010, and halving unemployment and reducing poverty to less than one-sixth of households by 2014.

The only sectors to record increased growth are finance, real estate and business services, up from 5,7% to 7,6%. This prevented an even worse drop in the overall rate, but these are not areas which create the most jobs.

COSATU has no doubt that the stringent, conservative economic and monetary policies of the Government and the Reserve Bank are the main reason for these alarming trends, in particular the relentless increases in interest rates which, as COSATU has repeatedly warned, were bound to lead to a slowdown in growth. It gives us no satisfaction at all to have been proved right.

Even T-Sec economist Mike Schussler has concurred that "the 2.5% point increase between June last year and June this year could have contributed to the failure of manufacturers to expand, by making borrowing more costly". And Stanlib economist, Kevin Lings, is quoted as saying that "lower sales of
passenger vehicles, clothing and textiles, furniture and paper products could have been in response to higher interest rates".

These trends will shatter the hopes of the unemployed that their years of poverty could be at an end, and will make workers who are still employed fearful for their survival of their jobs.

We demand that the Government and Reserve Bank immediately scrap their disastrous inflation targeting policy, which is based on the false belief that inflation and excessive consumer spending are the major problems we face, and that these justify the interest rate hikes.

Our biggest problems are not inflation but the massive levels of unemployment and poverty. Our biggest challenge is to grow the economy at a rate which will speed up job creation and start to reduce poverty. Otherwise the ASGI-Sa targets will never be turned into reality for the millions of
the unemployed and the poor.