Jacob Zuma speaks on the economic situation

Address to the Alliance Economic Summit October 17 2008


Deputy President of the ANC, Comrade Kgalema Motlanthe;
Secretary General of the SACP, Comrade Blade Nzimande;
General Secretary of COSATU, Comrade Zwelinzima Vavi;

Comrades and Friends .

Comrades, we are meeting here today at an interesting time in the history of our country, our movement and the Alliance. We are also meeting at a time when the world is going through an extremely tough economic period and, as it always happens, the poor and the vulnerable are the most affected by these tough times.

This Economic Summit was agreed upon by the Alliance Summit of May 2008. We were supposed to deal with issues of economic development there, but as comrades are aware; we all agreed that it would be best to focus on issues of the functioning of the Alliance and other topical matters. We further agreed that we will have a specific summit on economic issues and agreed that the Alliance will develop a common programme on certain issues.

Comrades, have tried to have as inclusive a process as possible in preparing for this Summit. This process has been uneven as some areas, such as planning and employment, have been the subjects of widespread discussion in our Alliance, whereas other areas such as the reform of Development Finance Institutions have not been discussed as widely as they should have been.

The idea behind this inclusivity was to ensure that we do not come here to fight one another, but that we come here to actively engage on how best to implement the resolutions that we took at the Polokwane Conference.

The two key aims of the Alliance Economic Summit are to develop concrete proposals to give meaning and effect to the Polokwane Resolutions and also to identify key themes and messages for the ANC manifesto.

The Polokwane Resolution on Economic Transformation is very clear in asking the state to develop a planning centre that will be capable of giving effect to the strategic developmental priorities that guide the government. The Freedom Charter, the Reconstruction and Development Programme and our common, objective analysis of the conditions in which our people live inform these strategic development priorities.

Our overriding common vision is to create a unified, non-racial, non-sexist and prosperous South Africa. The key strategic developmental priorities are the creation of decent jobs and sustainable livelihoods; the transformation of our health and education systems; the overhaul of the criminal justice system and a concrete programme of agrarian reform and rural development.

Achieving our developmental goals will require an integrated and coherent system of planning that does not micro-manage all aspects of government. It should rather be one, which acts as an effective system of ongoing co-ordination, monitoring and evaluation of the implementation of government programmes and projects.

This Summit must address the issue of proper location of the institutional centre for government wide economic planning. There are currently several proposals that are being discussed; amongst these is the creation of a Ministry of Planning that may be located in the Presidency.

Another proposal is to significantly expand the Policy Co-ordination and Advisory Services (PCAS) in The Presidency through the creation of a Planning Commission in The Presidency.

The most pressing challenge, which the creation of an integrated planning authority seeks to address, is the lack of co-ordination and "silo-approach" to executing government programmes that currently exist. It is argued that this situation is exacerbated by the size and functioning of the current cabinet.

Proposals have been put forward to address this challenge and this Summit is asked to evaluate these proposals and recommend ways of addressing the issue. The most pressing challenge in South Africa is that of unemployment. Significant proportions of our people do not have jobs or are in very low-paying jobs. Government must address this problem immediately.

Several proposals are brought to this Summit in order to deal with the systemic challenges underlying unemployment and to expand government's role in the direct creation of job opportunities.

The central question is thus; how do we create decent jobs and promote sustainable livelihoods? In answering this question, we must at all times remember that Polokwane rightly says that creating decent jobs must be the cornerstone of all economic policies.

One area that will require specific attention from this Summit is the area of quality education and training. Where people are not suitably educated or skilled; the chances are very high that they will forever remain trapped in low-wage, exploitative jobs or not get any jobs at all. Thus reproducing poverty from one generation to another. The importance of quality education can thus not be over-emphasised.

It is also important that the State takes a direct interest in creating job opportunities through the extension of the Expanded Public Works Programme (EPWP) and the creation of special employment programmes and scaling up public sector employment.

Of course, such scaling up of public sector employment should not be done in a vacuum; it must be combined with improved service delivery to the public and also, improvement of conditions of service of doctors, police and nurses.

Of course, the macro-economic path we choose to follow significantly affects whatever decisions we take for the advancement of a prosperous society. We have to answer questions about the appropriate fiscal and monetary policies to pursue. This area has been the subject of considerable debate within the Alliance and also within broader society.

It becomes even more critical taking into account the current economic climate. One area of significant interest is inflation targeting; its appropriateness, the commitment to a certain inflation targeting band and the use of interest rate hikes to control inflation rates.

This raises a more important question about the overall mandate of the central bank and also, whether the bank is currently paying enough attention to the developmental aspects of their mandate.

We must also be realistic about what it is that macro-economic policy can do and what micro-economic measures are required. These could include improved education, employment creation initiatives and other measures. Polokwane asks us to develop an integrated approach to rural development, land reform and agrarian change.

Such an approach should be based on the call in the Freedom Charter that the land belongs to all who work it. This resolution holds that the main aim of agrarian reform is to improve conditions for poor people in rural areas, both smallholders and farm workers, and especially women.

The economic proposals centre on holistic support for smallholders, including through large-scale schemes and land reform. This requires strong government leadership combined with programmes to strengthen community organisations and civil society and a commitment to improvement in rural infrastructure. For effective rural development to take place, one of the first areas to be addressed is the comprehensive improvement of the rural transport system.

The cornerstone of every country's economic development must be an integrated and well-resourced industrial policy. South Africa is no different. The Polokwane resolution rightly calls for an industrial policy that is aimed at 'diversifying our industrial and services base, pursuing an active beneficiation strategy, building sustainable export industries and expanding production for domestic and regional consumption.'

As said before, industrial policy must be supported and integrated into other strategies, for an example, skills development and trade policy. It is also important that there be co-ordination between the different government departments in giving effect to industrial policy strategies and a strong planning entity and capacity is thus vital.

The approach to tariff policy and international trade negotiations will be guided by the Polokwane Resolution, which states that: "In general, industrial policy should lead our overall approach to sector development, whilst trade policy should play a supporting role and be sensitive to employment outcomes".

Sector strategies, emerging from consultative Industrial Policy processes, will determine our positions on any autonomous tariff policy changes and on positions we adopt in multilateral and bilateral trade negotiations. The approach to the multi-lateral trade negotiations in the World Trade Organisation Doha Round is to reclaim the developmental content of the mandate that has been diluted in the negotiations.

South Africa must insist that those countries that subsidise and distort agricultural trade to the disadvantage of developing countries must make meaningful commitments to cut subsidies and open their markets to agricultural products from the developing world.

Developmental needs must prevail over commercial interests.

The historical injustice that saw South Africa classified, as a developed country in the Uruguay Round must be recognised. We must not, therefore, be compelled to take unfair obligations that will jeopardize jobs in vulnerable industries and restrict our industrial policy space.

We will strengthen our relations with developing country groups in the WTO.

All South Africans lived through an electricity crisis at the beginning of the year and we are all aware that our energy supply is under severe pressure. Just recently, Eskom announced that South Africans must once again brace themselves for further incidents of 'load shedding.' It has also been suggested that Eskom's generation expansion project will be affected by the current financial crisis in that it will become more expensive for Eskom to raise capital on the international markets. This may have implications for the ordinary consumer.

Questions about the price of electricity must be answered in the context of whether electricity is a public good or not? This was raised by the ANC at the Energy Summit in May. If the answer is yes, what is the extent of the State's duty to provide the people with affordable access to energy and what would be the implications for the fiscus?

South Africa's water supply is under pressure as it currently stands, but the situation has not yet reached a crisis point. However, concerted action is required to ensure that it does not reach that point. Particular attention must be paid to the effects of mining on water supply and in particular, the potential implications of mining in wetlands areas.

In the period leading to the ANC's 2007 Policy Conference, there was extensive consultation with all stakeholders on the appropriate economic policies for South Africa.

One consistent complaint that emerged from these consultations was that our development finance institutions (DFIs) are not responding to the needs of our people. A further complaint is that there is a lack of co-ordination between DFIs at central government level, in several instances, there seems to be tension between the different DFI performance measures, especially in responding to developmental needs and financial sustainability.  

One of the proposals that this Summit must consider is the establishment of a Development Finance Systems (DFS) Council that will co-ordinate and guide DFI, prevent overlap and review mandates. It is envisaged that the planning centre or entity will chair this DFS Council.

Comrades will see how important it is that we get the composition and location of this "planning centre" right. Comrades. the traditional 'concept of social security' has its origin in the assumption that formal sector employment is the norm. In our country social security is regarded as a 'safety net' for the protection of the economically active population experiencing a temporary hardship or 'loss of income' (formal wages), due to unemployment, ill health, and other contingencies. In addition, the State typically provides assistance to those considered unable to work for reasons of age or disability.

However, in developing countries, such as South Africa, where there are high levels of unemployment and poverty, the risk of 'no income' is greater than the risk of temporary loss of income. Consequently, the concept of social security must be broadened to include those who face both short-term temporary and long-term structural adversity.

This understanding of social security recognises that people and communities structurally excluded from normal participation in society will not benefit from measures directed at temporary forms of assistance.

Comprehensive social protection should comprise an integrated package of measures focused on alleviating and reducing income, service and asset poverty. This Summit is therefore requested to give content to such an 'integrated package' bearing in mind the levels of poverty and resource constraints of our country. The social protection package would then comprise a basket of services from income support to access to education, health care, housing and many other social services.

We trust, Comrades, that some serious attention will be paid to issues of mining and the broader question of how to exploit or utilise our strategic mineral resources to the social and economic advantage of ordinary South Africans. This is a serious Summit and the country and the world eagerly await the outcome.

We wish all delegates well with their deliberations.

I thank you.

Issued by the African National Congress October 17 2008