Economic debate pits allies against each other

2010-09-11 16:32

Cosatu and the ANC are not seeing eye to eye on economic policy ahead of the ANC’s forthcoming national general council next week.

On Friday Cosatu criticised the ANC’s economic transformation document, saying that it was “poor” and did not take crucial ­debates forward.

It highlighted a lack of clarity in areas such as the creation of decent work, the promotion of social and economic equity and the role of state-owned enterprises and development finance institutions.

In advocating for more worker- friendly policies, the union said the ANC-led government should focus on redistribution of income and power in favour of the working class.

It wants economic policy to move away from favouring business through its focus on lowering the costs of doing business.

Economist Mike Schussler objects to state intervention in the economy.

“Cosatu’s proposals are at least two decades late. Rich countries are rich because the state is not involved in the economy,” he said.

“China is getting rich because its government is slowly getting out of the economy.”

Cosatu’s opposition to the ANC document is likely to form the basis of a heated policy debate where nationalisation of parts of the economy is likely to dominate.

Cosatu’s public outcry over the economic policy appears to be an ­attempt to gain the upper hand in the debate.

Already, the ANC Youth League (ANCYL) is backing a policy proposal made by Cosatu for the creation of a state bank which will finance state intervention and introduce competition to the sector.

“The state bank should be responsible for offering finance for housing, cars and any other things in a better way than is currently being done by the commercial banks,” said ANCYL spokesperson Floyd ­Shivambu.

He said the state bank would be responsible for financing the country’s industrial development programme and mining projects, ­including the beneficiation of ­minerals.

The deputy chair of the economic transformation subcommittee of the ANC’s national executive committee, Enoch Godongwana, dismissed the concept: “Why should there be a state bank when the ­government already owns the Post Bank?”

He argued that the Post Bank should instead be strengthened to ­offer more services.

Shivambu opposed this: “We want an institution that will operate fully like any other commercial bank and be bankrolled by the ­Reserve Bank.”

Cosatu president Sidumo Dlamini concurred with Shivambu on the creation of another state-owned bank: “We need to look at whether the Post Bank, in its current form, will be able to satisfy the needs of the poor.

But I think that in addition to the Post Bank we need more state banks that will help the poor to access finance.”

Dlamini said the bank would ­redress the economic imbalances in the country.

“The bank will have a duty to help empower those who cannot access funding from commercial banks because they may be listed by the credit bureau or unable to own houses because their salaries are too little.”

Dlamini said the poor would ­become poorer if such a bank was not created.

“When the commercial banks refuse to grant loans to people with bad credit records, the individuals end up going to loan sharks who charge them interest rates of at least 30%,” he said.

Azar Jammine, the chief economist at Econometrix, said the creation of a state bank made good economic sense.

“If you talk about the nationalisation of entities (like mines), it makes good sense to have a state bank.”

“It is also a good idea because the government, unlike companies who owe their allegiance to shareholders, can easily make funding available.

“The state bank could relax its lending criteria and provide loans to people who do not have fantastic credit profiles,” Jammine said.

The bank could also afford to incur losses that private financial institutions could not.

“But taxpayers would have to pay for any losses made by the state bank from bad debts.”

Jammine said it would not be a bad idea to use the Post Bank as a vehicle to run the bank.

He said it was not necessary for the bank to receive funding from the ­Reserve Bank because the state had the capacity to cover all expenses.

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