Bloomberg News

South Africa Cosatu Says State Stalls Economic Policy Change

June 27, 2011

(Updates with Cosatu comment in tenth paragraph.)

June 27 (Bloomberg) -- The Congress of South African Trade Unions, the country’s largest labor grouping, accused the government of reneging on promises to change economic policy, undermining the fight against unemployment and inequality.

“It is a choice between reform and revolution,” Cosatu President Sidumo Dlamini said in his opening address to a meeting of the federation’s leadership in Johannesburg today. “The class battle lines have been drawn.”

Cosatu has been a member of the African National Congress- led ruling alliance since South Africa’s first all-race elections in 1994. Alliance relations have been strained by the federation’s calls for the government to raise the budget deficit, nationalize fuel company Sasol Ltd. and steel producer ArcelorMittal South Africa Ltd. and weaken the rand to help address the 25 percent jobless rate.

Cosatu played a leading role in helping President Jacob Zuma win control of the ANC from Thabo Mbeki in 2007. The ANC is due to hold leadership elections in December next year, and Zuma has said he will stand for a second five-year term.

Dlamini said Cosatu will have to assess whether to make its support for any candidate conditional on them implementing policy changes.

Rand Strength

“The ANC does not defer to Cosatu the way it does to some business interests when it comes to some crunch decisions,” said Keith Gottschalk, a politics lecturer as the University of the Western Cape in Cape Town.

In a document prepared for the conference, Cosatu criticized the government’s reluctance to introduce a tax on short-term capital flows to weaken the rand or limit currency speculation.

The rand has gained 36 percent against the dollar since the beginning of 2009, undermining the competitiveness of the country’s exporters and discouraging them from hiring.

“Policy makers in South Africa are effectively sitting on their hands, half-heartedly intervening in foreign exchange markets solely by buying dollars at a very cautious pace so as not to upset the inflation applecart,” Cosatu said. Some members of the ANC are “hell-bent on material gain, corruption and looting,” it said.

Zuma called for unity within the ruling alliance and for any differences over policy to be debated internally.

“All ANC and government economic policies remain valid and are being implemented,” he told delegates. “We have made substantial progress, but there are still many challenges to deal with, given the legacy of colonial oppression and apartheid.”

Unemployment

South African companies fired more than 1 million workers after the global financial crisis hit, and the country entered its first recession in 17 years. Zuma’s administration has made job creation its top priority.

“We reiterate that political emancipation without economic freedom is incomplete,” Zuma said. “The economy is recovering, but not in the manner that will enable us to quickly regain lost jobs or quickly create scores of new ones.”

Zuma pledged to ensure more of the country’s minerals are processed within the country and that more land is distributed to the black majority.

“Land reform is urgent but requires careful handling and consultation and must be conducted within the confines of the constitution,” he said.

--Editors: Philip Sanders, Ben Holland.

To contact the reporters on this story: Gordon Bell in Johannesburg on gbell16@bloomberg.net; Mike Cohen in Cape Town at mcohen21@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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