3.5 Industrial strategy and economic policy-making
This Ninth National Congress notes:

1. The adoption of an Industrial Strategy and economic policy for COSATU takes into consideration the main demands arising from COSATU ’s Central Committee on industrial strategy (as articulated in Book 6 of 2006 Congress documentation); as well as COSATU’s position on the Growth and Development Summit (GDS); and government’s Accelerated Shared Growth Initiative (ASGI-SA)

Therefore this Ninth National Congress resolves:
1. The main demands of COSATU on industrial policy include the following:

The developmental state. The state must absolutely prioritise sustainable employment creation, which combines economic development with an expansion in decent work. Moreover, the state must have structures that can drive development through a combination of discipline and resourcing for capital. At the same time, it must ensure broad participation in policy development, especially by organisations representing working people.
Fiscal and monetary policy. Fiscal policy must become more expansionary. Interest and foreign-exchange rates must be designed to support increased investment and growth in exports. In particular, targets for the Reserve Bank should include the current employment and growth targets. That generally requires a reduction in real interest rates to levels comparable or lower than South Africa’s main trading partners. The state must do more to make development finance institutions, especially the IDC, support its initiatives.
Skills development. While the national skills strategy sets a crucial framework for skills development on a mass scale, it has not succeeded in ensuring that lower-level workers have access to qualifications and career paths. We need a stronger analysis to understand the reasons for these shortcomings.
Unionisation. To ensure growth brings about decent work requires that workers entering newly created jobs also join unions. The labour laws never work primarily through government inspections, but rather through union monitoring and action. Government must do more explicitly to support organisation in vulnerable sectors, rather than relying only on its own power to set standards.
Sector strategies. COSATU has long argued that specific sectoral strategies are needed to restructure the economy toward more equitable, job-creating growth. This is a long-run process. It takes at least five to ten years to change the sectoral structure of the economy substantially. Effective interventions must be geared consistently and systematically toward the new growth path.
2. Sector strategies must ensure, as far as possible, that every major economic sector:

a. Protects and creates sustainable and decent employment
b. Meets basic needs better, by cutting prices or improving the quality of goods used by the poor
c. Ensures adequate exports to obtain necessary imports, which means continued diversification in mining, and an active beneficiation strategy remains critical
d. Contributes to development in the former homeland areas and in neighbouring countries
e. Supports more collective ownership, especially through the public sector, a strong co-operatives movement and enhanced worker and community control.

3. A critical task is to identify industries that are both relatively labour intensive and sustainable – that is, able to grow substantially for the foreseeable future. Generally, considerable state support will be required to help these industries take off while achieving more equitable outcomes.
4. This approach differs from the current government strategy in that:

a. It sees the domestic market as an important source of growth for labour-intensive production, rather than focusing narrowly on export industries.
b. It does not glorify high-tech production, rather arguing that production of basic goods for the poor in South Africa and the region at least may provide an important source of employment growth.
c. By extension, it requires a low exchange rate as well as measures to reduce the cost of living in order to make possible competition with Asian suppliers who typically undervalue their currencies and subsidise key goods and services.

5. Critical structural changes for this industrial policy include:

a. A substantial expansion in agriculture and food processing for both the domestic and regional market and, especially through horticulture, for overseas export. To ensure decent work and greater equity in the sector, a major land reform and agrarian development based on marketing co-ops would have to form a central part of this sectoral strategy.
b. To maintain export revenues and technological capacity, mining would have to continue to diversify with conscious efforts to diversify the associated industries and services, both upstream – essentially capital equipment, electricity, construction materials and chemicals – and downstream (beneficiation and manufacture of mining products).
c. Strong support systems would be needed to grow light manufacturing, especially food processing; appliance assembly; crafts; plastics (based on local inputs); furniture; publishing and clothing. In each case, sources of local inputs should be identified and expanded. Growing these sectors will require an overhaul of the retail sector as well as some tariffs, in order to ensure access to domestic and regional markets. Co-ops and state agencies must play a role in providing inputs and marketing.
d. Both public and private services should grow in ways that create employment. The main public services are understaffed. They also have to review all their programmes to ensure they contribute more to employment creation, both by enhancing local procurement and by improving the capacity of working-class households to engage with the economy. The private services – for instance, restaurants, childcare and hairdressing - are dominated by micro-enterprises, but provide an important source of employment especially for women.

The GDS

1. The GDS was concluded at NEDLAC in June 2003, just before COSATU’s Eighth National Congress. Key gains for labour included a reaffirmed commitment to tripartite sector strategies geared to growth creation, agreements to expand skills development, support for co-operatives, and restructuring of the financial sector, and a commitment to ensure increased investment to transform the economy and meet community needs.
2. Evaluating the impact of the GDS is not easy. For one thing, it remains difficult to link specific actions by government and business to implementation of their GDS commitments. We can, however, identify some important outcomes of the GDS. They include the Financial Sector Charter; the emphasis in ASGI-SA on increasing public investment and sector strategies; the new legislation for co-ops; the changes in BEE strategies to avoid a narrow elitist approach- although these remain inadequate; and the pressure to improve the functioning of the SETAs.
3. Particular concerns for labour remain the lack of commitment on investment and the generally slow and unsystematic progress in all areas.

ASGI-SA

1. The government developed ASGI-SA toward the end of 2005. Key elements include:

a. A substantial increase in public investment, primarily in electricity generation, rail transport and, at provincial level, in roads and community infrastructure. These investments have not yet been initiated, but should have some impact in the coming years. This proposal takes forward COSATU demands in some respects, but the scope and targeting of this investment is not agreed in some areas, and requires further discussion (e.g. the Gautrain).
b. Improvements in education and skills development, based on establishment of a Joint Initiative for Priority Skills Acquisition (JIPSA) with high level participation by government, business and labour representatives. Labour has been under-represented on JIPSA but has nonetheless managed to have a significant influence on its activities in the past few months. Government has now agreed to address labour’s under-representation.
c. Sector strategies geared to employment creation. ASGI-SA’s sector strategies have tended to focus on limited employment-creating activities, such as outsourced back-office processing, rather than interrogating how major sectors can do more to support sustainable job creation.
d. An effort further to reduce fiscal dis-savings and maintenance of the current inflation-targeting regime, with some efforts to ensure a competitive rand through increased reserves. This approach could lead to a more conservative fiscal and monetary regime, which COSATU opposes.
e. Support for selected “second-economy” activities and deregulation for SMMEs. This section of ASGI-SA remains underdeveloped, and has encouraged suggestions that labour laws be weakened.

2. The ASGI-SA framework identifies an important problem – slow and inequitable growth – and points to some key reasons rooted in the inherited economic structure. While many of the proposed solutions have considerable merit, they do not adequately reflect the overall aim of inclusive, shared growth, and taken together seem inadequate to achieve the desired aims. This means we must locate ASGI-SA clearly and narrowly as a commitment to shared growth, rather than as a statement of consensus on how to get there.
3. The lack of a broader strategy that can mobilise the Alliance must be urgently addressed. We identify some areas in the course of this document which we believe need to be prioritised if a practical strategy to promote equity and redistribution is to be placed at the centre of ASGI-SA.

4. We agree that:

a. The commodity price boom and prospects for a more expansionary fiscal policy, in particular, support accelerated economic expansion. In this context, ASGI-SA should seek above all to ensure prioritisation of shared growth. In other words, it must send a clear signal that growth on the historic path, which enriched only a relative few, is not acceptable. We cannot have growth for some, and pain and misery for the core constituency of the ANC and the liberation movement.
b. While the document may be seen as an improvement in some respects, it largely continues the existing ad hoc, inconsistent, and sometimes contradictory approach to key strategic challenges. The absence of a coherent strategy to deal with the critical issues of inequality, unemployment and poverty bedevils the good intentions of ASGI-SA.
c. The Growth Strategy pays lip service to the issues of redistribution and inequality, but lacks any systematic attempt to ensure that growth of whatever figure – 6% or more - doesn’t perpetuate the current growth path of inequality - i.e. it doesn’t address the critical question of how to ensure that the beneficiaries of growth don’t continue to be largely the same suspects. (There is no deliberate strategy of redistribution in ASGI-SA; chasing of growth or employment targets is not specifically biased towards a deliberate impact on the poor; e.g. there is no mention of decent work, combating casualisation etc. to ensure that rising employment figures are not accompanied by a growth in the working poor- in fact the proposals in relation to textiles would achieve precisely this result). Strategies to address the economically marginalized, second economy etc. tend to be add-ons, to a largely market-driven strategy- although there are some tentative shifts in the direction of a more interventionist role for the state.
d. We can ensure more equitable growth through measures that ensure growth is combined:
e. Employment creation, on a enough large scale drastically to reduce the level of unemployment, which requires a shift in the structure of production
f. Combating casualisation of labour which is building a large army of working poor
g. More equitable ownership, for instance through aggressive agrarian reform that will ensure faster and widespread land redistribution, food security and livelihood support programmes in the rural areas. We require more social protection funded through the progressive tax system. We need a deliberate strategy to change patterns of ownership through empowerment of the majority through a much more aggressive development of co-ops and such other scheme that promotes collective ownership of the economy.
h. Investment in human capital – education, skills development and healthcare. We need a more deliberate strategy for employment equity to ensure promotion of black people, women and people leaving with disabilities.
i. ASGI-SA identifies only some programmes to achieve these aims. Moreover, COSATU cannot agree with the details of some of its proposals.
j. As agreed at the last Alliance Summit, the Alliance must still develop a more comprehensive vision that will guide long-run development to build a more dynamic and equitable economy.

5. COSATU is only able to support ASGI-SA if agreement is reached that:

a. ASGI-SA needs to be fundamentally designed to ensure that our common commitment to shared, rather than inequitable, growth runs through all its programmes;
b. Proposals to introduce reduced rights for workers in small businesses, weaken the scope of centralised bargaining and possibly use regulatory impact assessments to review and attack labour rights, are removed;
c. The specific proposals in the document, for instance on sectors and infrastructure projects, require much more work to secure alignment around a common developmental vision;
d. The Alliance will set in place a practical programme to develop a common understanding of the broader growth trajectory, identifying the role in all the major sectors and social programmes in establishing a more equitable economy;
e. While we appreciate the important contribution a programme such as ASGI-SA could make, without a broader development strategy it will be measured against the Alliance commitment to a transformatory growth project, and found be wanting. Indeed, parts of it could be used to erode the commitment to a better life for all.