Cosatu president Sdumo Dlamini. Picture: PUXLEY MAKGATHO
Cosatu president Sdumo Dlamini. Picture: PUXLEY MAKGATHO

THE furious response of the Congress of South African Trade Unions (Cosatu) to the International Monetary Fund (IMF) report on why South Africa’s economy is trailing those of other emerging economies shows how out of sync our economic thinking is with that of the global environment in which we have to operate.

It also exposes the serious disconnection within the ruling alliance, for the Treasury welcomed the report even as Cosatu fumed and raged against it.

The IMF noted that South Africa’s poor growth rate was not due to the global recession alone, as President Jacob Zuma’s administration likes to contend, but also because of domestic weaknesses such as electricity supply concerns, excessively high wage demands, the effect of frequent disruptive strikes and low productivity. This meant we were unable to trade competitively and risked a reversal of capital inflows, resulting in a vicious cycle of increased unemployment and further labour and social unrest.

To remedy this, the IMF recommended a more flexible labour framework, greater policy certainty, scrapping plans to ban labour brokers, a "social bargain" between business and workers and, horror of horrors, getting on with essential reforms by implementing the National Development Plan (NDP).

All this has enraged Cosatu and sent its president, Sdumo Dlamini, into a state of apoplexy. Writing in the Sunday Independent, Dlamini dismissed the IMF as a "rabidly procapitalist, neoliberal organisation" that was intent on advocating more of its failed structural adjustment programmes that amounted to "lethal attacks" on workers’ living standards, union rights, labour laws, collective bargaining agreements and government intervention in the economy.

He concluded by urging the Zuma administration not to be misled by the IMF’s call but to "rather stick with the African National Congress’s (ANC’s) proposal for a radical economic programme for the Second Phase of the Transition".

What exactly that radical economic programme is, Dlamini did not say, but presumably it does not include implementing the NDP, which appears to be Zuma’s top priority at the moment. Or is it? And therein lies the rub. Behind all this flailing rhetoric, what exactly is the ANC’s economic policy?

Woolworths chairman Simon Susman called the other day for a fresh economic philosophy to ignite our true growth potential. That seems to presuppose that we have an economic philosophy that needs changing. I do not believe we do. What we have is a president who has no economic philosophy of any kind. He is a leader totally preoccupied with a continuing juggling act aimed at keeping all the conflicting factions in his ruling alliance in some kind of balance. That is not even consensus politics, for no consensus ever emerges. It is a perpetual balancing act that results in total immobility.

It is not that we do not have economic plans. Apart from the NDP, there is a string of others. We have green papers and white papers and papers of every colour of the spectrum. But none gets implemented, for to implement any one would upset the balance. So the juggling game continues indefinitely.

Small wonder, therefore, that BMW, which has suffered a steep drop in exports because of successive strikes, first by assembly workers then by component makers, has now put its plans to expand its operations in South Africa on hold. Future decisions on where new models are to be built would have had South Africa in the running, a spokesman said, but because of the present environment, we will definitely not be considered.

So much for Dlamini’s vision of a radical economic programme. Even the threat of it is killing jobs by the thousand.

One does not have to be an economic genius to see what kind of economic philosophy we should have.

It is not to be found in the romantic ideologies of past failures but rather by simply observing the practices of countries that are doing better than we are — countries such as Brazil, Peru and Chile, and even older economies such as Germany, Switzerland and the Scandinavian countries.

Yes, it is true that countries with huge income gaps and large numbers of poor, unemployed people need to establish sound welfare systems to support the disadvantaged. But that requires generating sufficient tax revenue to sustain such welfare systems, which in turn requires economic growth.

There is no way of increasing the Treasury’s funds without increasing economic growth, and there is no way of increasing economic growth without increased investment, both local and foreign. Nationalisation will not do it, first because it is notoriously inefficient, and second because nationalisation of itself does not generate any new investment capital.

What we know from practical experience around the world, particularly over the past century, is that private enterprise is the most effective generator of growth — and therefore of increasing the funds available to the Treasury through taxation.

That does not mean excluding the state completely from the economy, as the free-market fundamentalists would have it. The state needs to provide the essential infrastructure, such as roads and railways, water and electricity supplies and, of course, education, healthcare and other public services, none of which should be left to free-enterprise monopolies.

But it is incumbent on the state to ensure that all such public sector operations are run by a skilled, dedicated and above all stable public service. The present practice of "cadre deployment", or jobs for political pals, devastates efficiency, especially when staff turnovers take place not only when new political parties come into power but even when new factions of the same party do so, as happens with the ANC.

What such simple observation indicates, therefore, is that the best philosophy for a country such as ours would be to have a capitalist economy generating the revenue to sustain a state welfare system.

Nothing fancy about that, except that it seems unattainable because of a calcification of attitudes in the labour unions and a lack of political will in the national leadership.

The harsh reality is that our decrepit education system is disgorging about a million inadequately educated, unskilled young people into the labour market every year, counting the dropouts and those who fail even the downgraded 30% matric pass rate. We know we need a 7% growth rate every year for the next 10 to 20 years to stop the number of young unemployed people ballooning exponentially. The IMF says we are heading for growth of about 2% this year and 3%-3,5% next year, so we are looking at a rapidly compounding problem in the years ahead with all the attendant ills of drug abuse, crime and social unrest.

Most dangerous of all, we shall also face a possible threat to the very survival of our democracy with, as Agang SA’s Mamphela Ramphele has warned, the potential emergence of a demagogue able to exploit the emotions of desperate people, as happened in Europe in the 1930s. And we already have Julius Malema preparing for that role.

That is the future Dlamini’s "Second Phase of the Transition" has to offer. Alternatively, we can change our thinking from the shop floor to the boardroom and try to bring about some level of agreement on what is best for the country.

• Sparks is a former editor of the Rand Daily Mail.