Volume 10, No.2 - March 2001

We're part of the union

Job Sector Summits

By Neva Makgetla, COSATU Fiscal, Monetary and Public-sector Policy Coordinator

A "growth path" is a way to highlight the main drivers of growth in an economy. The key dimensions of a growth path are:

• The relationships between the main economic sectors;
• The nature of the main markets - does the economy focus on exports or domestic needs, on luxury goods or basic necessities?
• Class and economic power - that is, the nature of ownership and control;
• The role of the state; The South African growth path Until the middle of the 1980s, South Africa's growth path was shaped by minerals exports and apartheid.

Sectors: Exports of gold and other minerals financed the growth of manufacturing and infrastructure. South Africa was a classic resource-based economy, using rich minerals and energy - and low-paid workers - to produce exports, without creating many jobs.

Markets: Gold and other minerals were exported internationally. Mass poverty limited domestic sales. Manufacturing produced mostly for the high-income group throughout southern Africa.

Class power: Mining-based economies usually display capital intensity and big inequalities. Apartheid made this situation worse. Mining and agriculture relied on cheap labour generated through the migrant labour system and the impoverishment of black rural areas.

A few big companies dominated the economy. State-owned enterprises played an important role in big new manufacturing and minerals ventures, and provided infrastructure. Commercial agriculture also enjoyed state support. Foreign investment was large compared to the rest of Africa, especially in mining and the financial sector. The state: State action largely built this growth path.

The state provided cheap labour, investment, cheap infrastructure and energy, and tariff protection for domestic manufacturers.

This growth path ran into trouble from the mid-1980s. Gold mining faced a decline at least from the early 1980s. In 1985, foreign banks withdrew their loans, leading to a big outflow of capital. A few years later, as apartheid ended, foreign companies began to increase their sales in South Africa. From the 1980s, and especially after 1994, the state ended or reduced support for (white) capital, including infrastructure, tariff protection, laws that suppressed labour, and agricultural marketing.

Adjustment to the new environment has seen big drops in employment and generally low investment. Agriculture, mining and the state sector have lost hundreds of thousands of jobs.

Manufacturing also lost jobs, especially in equipment and clothing production. Faced with new political and economic realities, business cut investment. In the 1990s, investment remained below 20 per cent - far too low to bring about rapid economic growth or job creation.

So what do we do?

Through the sector job summits, COSATU wants to begin to define a new growth path for South Africa, one that will create jobs, meet the basic needs of all our people, and ensure stable economic growth. Experience from around the world demonstrates that economic expansion needs more equitable distribution of incomes and wealth. This is what the RDP meant when it said growth and redistribution must go hand in hand.

Sectoral strategies must lead to increased investment in relatively labour-intensive industries, rather than the production of refined minerals for export as in the past. Today, minerals make up just over half of all our exports. But minerals production creates few jobs and strengthens big business. Over the long run, our industrial strategy must support investment in industries that generate more employment and open space for smaller-scale production.

Jobs can be created by both potentially competitive activities, that can produce for export or to replace imports, and non-tradable sectors - that is, activities that are inherently limited to domestic production and consumption.

The competitive industries include food production and processing; manufacturing using minerals and chemicals; many services, including tourism and communications; and cultural industries.

Non-tradable sectors cover construction of housing and infrastructure, basic food and services and commuter transport. But the government currently does not see production of basic necessities for the poor as important for growth.

In terms of markets, COSATU wants a shift toward meeting the needs of the poor. True, South Africa must sell to world markets because we have to import important inputs, including petroleum and many capital goods. But international markets remain unstable, speculative and subject to unfair trade practices. Investing more to produce basic goods and services should set up a more stable basis for the economy.

At the same time, it should gradually lower the cost for most South Africans of food, infrastructure, transport and household appliances. We also need to find ways to expand trade with neighbouring countries in ways that strengthen their development without undercutting South African workers.

In terms of class power, the new growth path must begin to establish new centres of capital and build a more skilled labour force with far higher levels of employment.

We need to expand collective ownership through the state sector and co-ops, as well as supporting small and micro enterprise. We must review current proposals to restructure state-owned enterprises and municipal services.

These policies aim mostly to increase competition and bring in private partners. They will likely improve infrastructure for the top end of business and the rich, but make it harder to get infrastructure to the poor. We also need to establish a framework to support producer and consumer co-ops.

Finally, we must accelerate land reform and transform the banking sector. For growth to benefit the majority of our people also requires the establishment of a high-productivity, high-wage labour force. This is only possible in the long run if the economy is restructured to expand employment on a mass scale, with broad-based skills development. The new growth path requires a strong developmental state.

The sector job summits must define how government should intervene in each major industry. Government can support restructuring through:

• Helping to develop a shared vision for major sectors with business and labour, with specific commitments on that basis;
• Skills development programmes geared to new sectoral developments;
• Increased funding of sectoral activities or investment, through incentives and/or tax relief, as well as measures to cut the cost of credit - possibilities include community re-investment rules, institutional changes in the financial sector, and, labour suggests, directed credit of some kind;
• Expanding markets through government procurement, tariff policies and "Proudly South African" campaigns, as well as improved marketing systems and strategies;
• Measures to reduce production costs by re-organising work and upgrading management, and by increasing State investment in infrastructure and production;
• To ensure that sector job summits support the establishment of a new growth path, we must find policies to ensure that each sector;
• Protects and creates decent employment;
• Meets basic needs better, by cutting prices or improving quality of goods used by the poor;
• Contributes to rural and regional development, and improves the position of women
• Supports greater equity in ownership and skills development.