President should re-examine idea that state does not create jobs – SACP

Party says the state, including the government in all spheres, is an employer of note in South Africa

SACP initial response to the State of the Nation Address

11 February 2022

The President said the South African economy benefited from a clear and stable macroeconomic framework in 2021. However, it was in the third quarter of 2021 when unemployment in the country rose to its highest level in our democratic dispensation, since 1994. The lowest unemployment rate in terms of the official definition that excludes discouraged work-seekers was in 1995. However, that was a whopping 16.5%. Unemployment increased to crisis-high annual rates of above 20% starting in 1996, the year in which the government adopted the economic policy called Growth, Employment and Redistribution (GEAR).

Since then, South Africa consistently failed to create employment to reduce the official unemployment rate to 20% and further down towards securing the right to work for all. Throughout, the bigger picture of unemployment represented by the expanded definition that includes discouraged work-seekers was consistently higher than the narrowly defined official unemployment level. When the expanded unemployment rate sky-rocketed to 46.6% in the third quarter of 2021, it affected a population of approximately 12.5 million active and discouraged unemployed work-seekers.

This is a disaster, a societal crisis and a hotbed of many of the social and political problems the country experienced. The immense majority of those affected are black, with Africans the overwhelmingly hardest hit. In terms of gender, at 51% unemployment rate for women is 8.2% higher than the unemployment rate for men at 42.8%. In terms of age categories, the youth is the most affected at 77.4% for those aged 15 to 24 and 55.3% for those aged 25 to 34.

Fundamental change

The SACP has been campaigning for a fundamental change in our economy. We therefore welcome the President’s acknowledgement of the need for it. However, there must be no policy space or instrument left without critical examination and scrutiny. If economic policy is based on science, no one can disagree that the unemployment crisis affecting the increased millions of the unemployed population reflects the failure of the macroeconomic framework enforced since 1996 as well as its continuing legacy.

There can be no fundamental change in the economy without a fundamental change in the macroeconomic framework under which South Africa experienced an increase in unemployment levels to crisis-high rates of above 20%, 30% and 40% since 1996.  This should be a key aspect articulated in the social compact the President said should include all South Africans.

To be fundamental, the change that South Africa needs must go to the root of the matter. This must include a major review of key policy areas or instruments, such as international trade and industrial policy, and cross-border capital transactions, monetary and fiscal policies. In industrial policy, it is crucial to strengthen sectoral master plans, especially their employment impact, and to consolidate a comprehensive industrial policy and strategy, to drive industrialisation. This needs infrastructure support, but without an enabling macroeconomic framework, industrialisation will more likely face the failure it has seen since 1996. Instead of industrialising, South Africa has been experiencing de-industrialisation.

While infrastructure development is crucial, it must be pioneered in sustainable ways, including finance. Financialisation of infrastructure will create problems, while the sections of finance capital that will benefit from it will laugh all the way to the bank.

The SACP wishes to stress its stance for adequate set asides for the state and public institutions to fulfil their constitutional obligations and developmental mandate regarding the high frequency broadband spectrum. We therefore reiterate our reservations and warning against wholesale privatisation of the broadband spectrum.

The state is a key economic actor and can contribute more to employment creation

The President should re-examine the idea he asserted, that “We all know that” the state does not create employment. Besides the fact that the “We” is definitely not inclusive, but in fact refers to the category of individuals who believe in that fatally flawed assertion, it is important to build a capable developmental state with organic capacity to serve the people diligently and capably.  

Why are we saying the neo-liberal assertion that the state does not create employment is fatally flawed?

First, let us acknowledge that there is significant private sector employment in South Africa. However, workers find work in profit-driven private sector companies only so long as their labour increases capital for accumulation by their owners. This is one reason the private sector has also created and increased unemployment through retrenchments in pursuit of profitability and profit maximisation. It is also one reason inequality, both wealth and income inequality, is systemic under capitalist relations of production. Except wages, to the capitalist employers a cost they seek to curtail, workers receive nothing from the value that their labour creates in the process of production.   

That said, it is a fact there is a vast tract of the private sector whose business analytically alert South Africans can either trace to the state or which serves as an extension of the public sector through state procurement, tenders, contracts and so on. There are just so many private sector firms performing or depending on work contractually awarded to them by the state, state institutions, other public entities and the government in all spheres.

That comprises work not only performed in the private sector and delivered as products or services to the state for payment, but work performed right in the public sector by private sector firms. In fact, there is indisputable evidence that supports this observation of reality in the State of the National Address the President delivered. The employment flowing from that work is state created employment.

Besides, the state, including the government in all spheres, is an employer of note in South Africa, an underdeveloped country characterised by uneven development and noticeable de-industrialisation under the macroeconomic policy enforced since 1996 as well as its continuing legacy. State employment is not only in public service and administration but also in public entities such as Eskom, Transnet, Development Finance Institutions, and many others. By turning around public entities, dealing with corruption and expanding the publicly owned sector, the state can make a more direct contribution to employment creation and build an advance to the right to work for all.

If we are to learn from other countries that demonstrably build state participation in their economies on behalf of their people as a whole, it will take a few seconds to notice that the Forbes List of Global 2000 in 2021 has a state-owned financial services provider at the top spot, the Industrial and Commercial Bank of China (ICBC). Alone, the ICBC employed 434, 798 workers in 2021. The ICBC holds 20.1% shareholding in the Standard Bank of South Africa, a country whose state does not have its own bank primarily because of neo-liberal ideological dominance in its policy landscape.

Number four on the list is another state-owned financial services provider, the China Construction Bank, which, alone, employed 347, 156 workers. There are many other cases of successful state ownership, management and governance of financial services and productive sector entities.

Therefore, the neo-liberal assertion that the state does not create employment is fatally flawed in terms of international experiences as well.

Extension of the COVID-19 Social Relief of Distress Grant and the National Health Insurance

The SACP welcomes the extension of the R350 Social Relief of Distress Grant. This grant must be transformed into a foundation on which to build a universal basic income guarantee for unemployed South Africans. Therefore, the government should extend the grant again beyond the end of March 2023. This must be linked with a consideration to gradually increase it to establish a universal income guarantee, as part of our wider effort to build a national comprehensive social security system.

The full introduction of the National Health Insurance is long overdue. We need to see an increased momentum towards ensuring quality healthcare for all through the National Health Insurance.

Land redistribution

The SACP welcomes the commitment to move towards the approval of the Expropriation Bill to make expropriation a policy instrument available to the government to speed up land redistribution. Inherently, expropriation is not an exchange relation. To give effect to this, the Bill must clearly spell out the terms for the nought compensation.

It is important to transform and diversify ownership and participation in the agricultural sector. This should include pioneering agro-processing as part of our national industrialisation programme. However, it is crucial to recognise that agriculture is not the only sector in the political economy of land. Therefore, the government should lead a process towards a comprehensive transformation strategy covering all sectors in the political economy of land, including integrated human settlement.

Vaccine manufacturing

The SACP welcomes the commitment to increase the government’s efforts to develop Africa’s ability to manufacture vaccines. We therefore welcome South Africa’s participation in the manufacturing of COVID-19 vaccines. Notably, this includes participation by Biovac, a partnership entity which includes the public sector.

However, it is important to note the limitations of contract manufacturing in Global Value Chains. Therefore, South Africa should rigorously pursue upgrading to build domestic vaccine Research, Development and Innovation (RDI), as well as other medicine RDI, including through genetic engineering and biotechnology capacity building. The government should draw lessons from China and Cuba in the Global South. The two countries did not enter the COVID-19 vaccine strategy as procurers. They entered with their own domestic vaccine RDI, which is essential.

Cuba’s capacity in this field is led by its state-owned Centre for Genetic Engineering and Biotechnology. Taking its cue from Cuba, South Africa should increase public investment in this field, to, among others, build its state-owned pharmaceutical company.

Gender-based violence in particular, violence in general, and criminality in our communities

The SACP welcomes the pronouncement, albeit belated, that the government will take steps this year through law enforcement and other measures to stop the looting and vandalising of public infrastructure such as railways. The state must hunt down and hold those responsible to account.

South African and foreign national criminal networks, including those whose actions bear the hallmarks of economic saboteurs, have destroyed our railways in many areas across the country. This has rendered passenger rail transport impossible in the affected corridors through the theft of cables, rail tracks and other railway related components. Linked with this are illicit scrap metal sector activities, including illegal exports of the stolen materials.

In the same vein, the state must take firm action against gender-based violence in particular, violence in general, and criminality, including drug dealing. These scourges are ravaging our communities.

Dealing state capture and other corruption a blow

The SACP welcomes the measures announced by the President to study the complete State Capture Inquiry Report once it is finalised and present a detailed plan of action in response to its recommendations by no later than 30 June 2022. We will do likewise ourselves as the SACP and publish our comprehensive response. The response to the report must lead to the dismantling of state capture and its material basis. It must ensure that the phenomenon does not rear its ugly head again.

We must tackle corruption on all fronts. The government must ensure full implementation of the recommendations made by the Special Investigating Unit in its investigative report regarding COVID-19 related procurement corruption allegations. To succeed in the battle against corruption, we need to build a widest possible patriotic front, to ensure that those involved in corrupt acts or related wrongdoing are accountable, and to safeguard public resources.

The SACP notes the President’s statement regarding the expert panel report concerning the July 2021 counterrevolutionary offensive. What South Africans want is to see the main culprits who planned, co-ordinated and directed the execution of the counterrevolutionary offensive arrested and held to account.

Issued by Alex Mohubetswane Mashilo, SACP Central Committee Member: Media & Communications, 11 February 2022