On the Economy: Jobs and Shared Prosperity

For most people, two decades of ‘freedom’ have meant very little.  Those who thrived under apartheid have continued to do so, joining them in the exclusive reserve has been a few black people who have, through sheer hard work  have achieved what is incomprehensible  for the majority and those who have used their political access to wheel and deal.  Many of our people are out of work, and those looking can’t find any. Eight million people are unemployed. About 17 percent have no prospect of finding a job ever. The future does not look bright for a significant number of South Africans – with most of the affected being black people particularly the youth and women.


Characterising South Africa are the following facts:

  • As a middle-income country, South Africa is the most unequal society in the world with a Gini Coefficient of 0.70. Income inequality has increased every year in the last 20 years. The legacy of apartheid exclusion continues unhindered.


  • Successive governments have failed to reduce poverty only reducing its impact. More than 30 percent of our people are hardest hit by poverty, getting by on R322 or less a month.  Food insecurity, particularly in rural areas, is rampant.


  • Whilst social grants provided temporary relief to 16 million people at a cost of R110 billion annually, they, however, are a potent indication of how successive governments have failed to provide sustainable livelihood for the people.


The above facts are clear evidence of how people’s lives have not changed for the better. Policies implemented by the government have not achieved much, due to their pre-occupation with satisfying the expectations of rating agencies and anonymous investors, vicariously living through several incarnations of pundits. In additions, poor policy coordination arising from intra-rulingparty policy discord, stand in the way of addressing the pressing needs of the people. This policy paralysis is exemplified quite strongly by the poor coordination of IPAP, New Growth Path and recently the New Development Plan.


Monetary policy, has been primarily concerned with price stability at the expense of other considerations such as employment and growth. The sole objective of monetary policy is narrowly defined as the inflation target of 3-6 percent. AZAPO strongly believes that the implementation of monetary policy should be undertaken flexibly. Further, it is our view that the central bank is best suited for strengthening oversight on the financial markets.


It is the view of AZAPO that the Reserve Bank’s heavy and sole reliance on adjusting the repo rate is not appropriate considering the challenges facing the country. With high reliance on credit for basic survival and high levels of indebtedness, an increase of the interest rate has dire consequence for the lives of people, their ability to repay debt and the economy as a whole. As a result, AZAPO is of the view that monetary policy practice should support the reduction of debt amongst others and improve the wealth of individuals and their children. An AZAPO government would therefore strongly encourage commercial banks to provide debt relief and forgiveness to debt-laden households.


On the fiscal policy front, the current government is already disengaging from providing consistent support to the flagging economy, a policy bound to have negative effects on growth, expenditure to deliver services and build and maintain infrastructure.  There is ample fiscal space to engage in expansionary policy and lowering the tax burden on individuals who contribute more tax revenue than the 19.5 percent contributed by corporates. Rather than reduce spending, the need is to seriously improve spending and accountability. An estimated R30 billion, according to the Auditor General, is lost annually as wasteful and fruitless expenditure, money that could be spent on service delivery.


South Africa’s economy is highly responsive to growth in fixed investment, which supports the view that there is a strong role for government to support long-term economic growth through clear and targeted action. An AZAPO government would prioritize and target spending on infrastructure development, and promoting entrepreneurship, especially amongst the youth. An AZAPO government would largely engage in ‘deficit-spending’ to support productive activity.


Trade liberalization since the early 90s has not helped increase the country’s global trade. In fact, it has led to increased losses of vital sectors of the economy, and thus reduced employment in textile and clothing. In the past twenty years very little has changed, South Africa’s exports are primary products (metals and agriculture) and South Africa still imports high-value products. An AZAPO government would support trade with other countries but would not be shy to support industries that are vulnerable.


The biggest challenge faced by South Africa in terms of industrial policy is to revive the manufacturing sector.  The past successive governments have, not only failed to revive the manufacturing sector, they have even failed to arrest the decline. The sector contributes less than 16 percent to the economy, compared to more than 19 percent at the start of the new democratic dispensation. A weak productive base increases the vulnerability of the country as it becomes dependent on foreign products. The growing reliance on imports means that South Africans are paying the wages and salaries of foreign workers as opposed to our own.


The revival of the manufacturing sector, in particular labour-intensive manufacturing, will be a priority of anAZAPO administration, and will be promoted by state-led programmes that promote and support investment, training and measures to improve productivity.


The choice of which sector andindustry to support seems arbitrary under the current government and lacking of any strategic focus. The focus on the role of SMMEs is weak and this sector has been declining in spite of government support. That is partly because the current governmentlacksclarity about integration of small business into the value chain of providing products.An AZAPO government will support industries based on their relevance in catering for: the real needs of the country and its people (e.g. food security, healthcare, energy security), beneficiation of South African exports , employment and the need of the region.


In short, an AZAPO government will:

  • Adopt policies that seek to improvethe lives of the people in a real sense by stimulating the economy, increasing employment, working to eliminate poverty, promoting shared prosperity and black economic control
  • Redirect fiscal policy to promote self-development and to provide strong incentives for citizens to take advantage of opportunities that integrate them into the mainstream economy.
  • Target the development and sustainability of SMMEs by amongst others reducing the red tape they face, improving access to finance and providing tax incentives.
  • Enforce tougher control and accountability measures to eliminate waste and inefficiency in the spending of public financial resources.
  • Strongly encourage banks to reduce the debt burden borne by many poor and working class household and promote the need for increased savings.
  • Set up a National Bank that will provide general banking services with a mandate to compete profitably and to have positive social impact
  • Review the scope and mandate of the South African Reserve Bank so that it is explicitly compatible with the long-term policies and plans aimed at addressing key pressing challenges of poverty, unemployment and growth.
  • Increase theimportance of the oversight role (especially capital requirement management) of the Reserve bank on financial markets in order to manage inflation in the long run.
  • Target and customise policy solutions for underserved areas such as townships, informal settlements and rural areas.
  • Prioritize the integration of black people, youth and women, through tailor-made policies, into strategic areas of the economy.
  • clamp down on monopolies, collusion and monopolistic behaviour.
  • revive the manufacturing sector, in particular labour-intensive manufacturing
  • Implement an industrial policy that is supportive of industries that cater for :the real needs of South Africans, the beneficiation of South African exports , growth and the needs of the region.
  • Implement a trade policy that seek to diversify South Africa’s trading partners and places special emphasis on trade within the region and the continent
  • Ensure better and productive labour relations between trade unions and capital through win-win social compacts that improve productivity,improveworking conditions and guarantee a living wage.
  • Incentivise the development or improvement of skills for the labour force.
    • Uphold progressive principlesthat guarantee the rights of working people to belong to trade unions of their choice and to engage in collective bargaining.


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