South Africa was facing a “ticking time bomb” due to high employment, racialised economic disparities, massive income inequality and a failure by the state to redistribute wealth effectively.
Zwelinzima Vavi, Cosatu general secretary, who addressed finance portfolio and select committees of parliament on Wednesday, also questioned whether Economic Development Minister Ebrahim Patel's new growth path - which focused on creating millions of jobs in the next 10 years - was integrated into all aspects of governance including monetary and fiscal policies.
He nevertheless said that Cosatu's job creation trust had about R120 million available for job creation.
It had created about 40 000 jobs with seed capital of R90 million some years ago, but the fund had been poorly managed for a spell. He believed it now could make a contribution to the jobs drive in the country.
Questioned about Cosatu's opposition to inflation targeting by MPs, he said Cosatu proposed an alternative monetary policy. “We are saying in rejecting inflation targeting, we are saying the government must adopt employment targeting monetary policy.”
All monetary policies should be designed to recognize the need to address “the crisis of unemployment”.
Policies of exchange control should support domestic industrialization, he said. “Exchange rate management should be one of the pillars of the policy framework and … must be aligned to our developmental mandate.”
Vavi pointed to China's stable currency which was not allowed to fluctuate uncontrollably, making planning for industrialists more effective.
Questioning South Africa's relatively low budget deficit compared to countries in Europe, Vavi argued that South Africa always tried to be “the good boys”, obeying international rules of engagement which did not necessary suit the challenge on the ground. South Africa, unlike most countries in Europe, had an unemployment rate of near 40 percent and an even higher level for young South Africans.
While he did not spell it out, he was suggesting that a bigger budget deficit should finance developmental spending to create jobs even if this meant that the state had to borrow more to finance this initiative.
Urged by the World Trade Organisation to liberalise trade tariffs, SA had over compensated by lowering them even further than required, he argued.
Much had been said about SA's policies being “business unusual” but he said the budget was the normal conservative one of the past. “The budget is business as usual,” he said.
Consecutive budget since 1994 - when the ANC came to power - had failed to redistribute the nation's wealth effectively. The share of employees of the GDP “has been declining consistently… we have not started to redistribute wealth from the rich to the poor and inequalities have grown”.
The inequitable VAT (value added tax) hit the poor the hardest. Everyone knows that the poor spend most of their limited income on food, which was taxed. It was immoral, he argued, to fund the proposed national health insurance system through such a regressive tax. - Donwald Pressly