By Norm Dixon
"South Africa will emerge more vigorously as an investment destination with a promising return. We are open for business", declared South African deputy president Thabo Mbeki at a meeting of European business leaders in Cannes on June 17. Mbeki was selling the South African government's new economic strategy, presented to parliament by finance minister Trevor Manuel on June 14.
The "Macro-economic Strategy for Growth, Employment and Redistribution" document is unashamedly conservative, relying on business to invest increased profits productively to create 270,000 jobs a year for four years. It predicts that South Africa's annual GDP growth rate will rise to 6.1% in 2000 as a result of drastic reductions in government spending, privatisation, tax concessions for business, encouragement of export-orientated manufacturing, real wage decreases and a "flexible labour market".
Manuel told parliament that the government's budget deficit would be reduced from its current 5% to 3% within 4 years, suggesting that no new far-reaching programs to tackle the legacies of apartheid. Manuel conceded that some programs will have to be cut back "in the short term". The deficit will be cut to 4% in the next 12 months.
Real wages in the private sector will not grow more than 1% per year for the next four years. Manuel opposed the introduction of a national minimum wage.
The acceptance of a "flexible labour market" matches big business demands for a two-tier wage system in which new workers would be forced to work for lower wages and poorer conditions. This would make the rapid elimination of poverty and apartheid-created wage differentials unlikely.
Such a system would increase South Africa's alarmingly high levels of poverty. A recent survey found that, in the absence of a social security system, almost half the unemployed survive with the help a wage earner in their household. At least 50% of the black population is unemployed or outside the formal economy.
Restructuring
The emphasis on restructuring to boost exports will cause job losses through rapidly reduced tariffs and industry rationalisation and automation. The document singles out the clothing, textile, and car industries for "accelerated tariff reform".
Government spending cuts will also cost jobs. Public service minister Zola Skweyiya has already announced that 300,000 public service jobs will go by 1999. It is likely that sold-off government utilities will also move to slash their work forces.
Big business lauded the strategy. The South African Chamber of Business called it "a major step in the right direction ... it responds to recent business calls for economic leadership by government and for greater predictability in economic policy."
The Financial Mail, a mouthpiece of big business, described Manuel's package approvingly as "cautious Thatcherism". "The importance of this new plan is that it provides a medium-term economic strategy that is based on economic reality, market logic and experience elsewhere. It is not a nebulous expression of social intent and public works (the essence of the Reconstruction and Development Program) that can be manipulated by trades union leaders to their own purpose", it editorialised.
"The overall direction [of the plan] remains encouraging" despite "the failure to take a bold stance on privatisation", said Dave Mohr, chief executive of the insurance giant Old Mutual.
The Financial Mail echoed this reservation but noted that the document promised "opportunities for equity investment in public corporations by foreign partners". A firm statement on privatisation to was needed to eliminate "the impression that the government is still more concerned with appeasing organised labour than encouraging foreign investment", the newspaper advised. Manuel obliged, while in Cannes, when he told European investors that a commitment to partial or complete privatisation was a key plank of the plan.
The package was also backed by South Africa's main capitalist parties. National Party finance spokesperson Theo Alant told parliament the plan had the NP's "critical support". Democratic Party finance spokesperson Ken Andrew described it as "encouraging".
Union fears
The Congress of South African Trade Unions issued a statement on June 14 expressing "serious reservations over conservative fiscal policies that the document intends to implement. A number of its prescriptions fly in the face of labour's proposals. These prescriptions do not take into account the state of development of the economy and the need for massive spending on infrastructure and development." It also noted that the document's "call for wage moderation sits uneasily with COSATU's policy of targeting the [apartheid] wage gap".
Zunaid Moolla, a left-wing economist from the National Institute for Economic Policy, said that the government's economic package would "make a mockery of redistribution as spelled out in the Reconstruction and Development Program. The standard mantras of education, health and welfare services, housing, land reform and infrastructure are mentioned in their usual rhythmic cadence. But they are nowhere made to appear as the core of a reconstruction program with the vital force that they each possess for rejuvenating the economy and setting it on a long-term sustainable path."
Moolla said it was an "optimistic assumption" that export earnings would be reinvested in the country. It was more likely that South African big business would invest offshore and spend a good portion on imported luxury consumption items. "What the new macro-economic strategy lacks most is a sense of urgency about what needs to be done to break the cycle of poverty in an otherwise wealthy country."
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