Cosatu: Reserve Bank should target employment

I agree!!!!!

You agree on what?

On principle!!!!! See, it has nothing to do with back/white but everything to do with what is best for the country!!!! Did I catch you offguard there Nkosi???????

It would appear that COSATU understands the economy even less than they understand Jobs which should be their core function.
When are they going to wise up and realise that the labour market in our country is over-regulated to the point of making it prohibitive if not down right impossible to offer employment. Who would take on staff when it is almost impossible to release them regardless of their ability to perform or even your ability or capacity to sustain their employment.
It is almost as if you have given birth to any employee and are required to nurture and provide for them through thick and thin regardless of the quality of work and any changes within your company. You gave birth to them; you are stuck with them.
And then we see the strikes with managers and their workers picketing and toy-toying together. How do you do this one week and then expect people to respect and obey them the next?
People seem to have little fear of losing their jobs and it shows in the quality of product and services that we have become used to accepting.
A fear of losing your job is the single biggest motivating factor that ensures absolute commitment and performance.
When you can employ and dismisss staff, with reasonable cause, you gain a flexible labour market. Ours is inflexible and a deterent to investment and employment opportunities.
COSATU needs to rethink radically in order to accomplish it's core mission of employment. The spinoff's for labour, business and the country would be enormous.

Take a chill pill Louise.. Its just a question.

Where the heck does Cosatu get off asking to "print money"?? I may have only done economics 101, but printing money will merely push up inflation rates without any real growth. Its not at all sustainable. Once this printed money is spent, there might be more money in the economy but due to inflation things cost more. Back to square one.

The media are going to have a field day with this. Challenging the venerable independence of the PRIVATELY owned but publicly named Reserve Bank! If they want to maintain their independence then they had better be socially useful. All this nonesense about liberalising capital flows has led to a mess and they are now saying the crisis is mitigated by the remaining controls THAT MANUEL and TITO wanted to ditch - can you believe that. They think that development will occur if you just have a good monetary policy - now it is all about how blunt an instrument it is. COSATU deserve credit for being sensible amidst all this neoliberal nonsense (or the Gospel Truth to National Planning) that has brought the US communism for the rich! Manuel and Tito must be lambasted for bringing the nation to this point - irrespective of what the mainstream media serfs say - the most volatile period in the Rand's history! And they take advice from that organisation Manuel is beholden to (the IMF) who says in their Consultation report that SA must use derivatives as insurance against currency volatility. The forget that at one point, one bank held speculative bets on the ENTIRE money supply of New Zeeland (with many many times our money supply). Idiot savants! And Manuel's instruction that SA liberalise (almost permanently derivatives) at the WTO still holds. The whole world is backtracking on derivatives but we are still viva! derivatives. In South Africa the most dangerous and opaque derivatives are unregulated - get it forget Fidentia etc - these receive little or no scrutiny - and all is well. It is almost as if the financial crisis did not happen (Manuel's denialism and rapprochement that he was over-confident about the crisis is about as close to a confession as one can get from that grandiose neoliberal feted by the rich and famous). Well done COSATU, if they don't listen, then like Japan and China, let us just nationalise the Central Bank. Ah but if we can't even get 36% of mining then, aish...

And remember BLACKS are good enough to own 36% of the mines, but no MORE THAN 10% of the financial sector (even China got more)... hahaha... if one reads Hillary Joffe's editorials at the time, it is laughable how obsequious her analysis was and how big words made it sound ok. This passes for analysis in South Africa from lead thinkers. And what did GCIS do about it? Go and look see...

They cannot be serious! Obviously they lack a few economic experts among them. In economic theory there is what is called the Philips Curve which was a theory put forward by an economist that shows, stated simply, the lower the unemployment in an economy, the higher the rate of increase in nominal wages in the short run.
As for printing money....you can print countless amounts of paper like Gideon Gono did in Zimbabwe but so long as what you want ot buy with that printed money is not found within your country, you will have to get the forex to buy the things you want. Your paper will become worthless. Take a lesson from Zimbabwe.....money printing has to be linked to production to give your money some worth. Otherwise it is just paper you are giving people but they can't buy stuff with it. This is the root cause of hyperinflation, as the currency struggles to keep up to date with foreign currency availability but is too weak to stand it's own ground.
If you want the rand to be equal to the dollar or close enough to that you increase production. You can't just wake up one day and declare it is now trading at 1 is to 1. It's like Mugabe stating he won the election...no one will listen, no one will salute or invite it in.

DRUID: Cosatu should stick to what it knows best, which is suckering poor workers into believing that they can actually do something useful - and keep quite about economics, which they clearly do not understand very well.

Bashar --

China got "more" of the financial sector because they did not have to make highly leveraged deals which diminished in value due to the global financial crisis to get it.

The structuring of these BEE deals makes no sense to me. Pay in cash, not with convoluted financial arrangements not exactly unlike those which brought the whole house of cards down in "the West". If they can't pay in cold hard cash, then "equity" targets will just have to wait. Plain and simple.

What part of that is so hard to understand, exactly?

Basher, you beauty, and here I was just sending my normal vitriol out thinking there was nobody really out there that actually knows the truth. But it sounds like you might just be in step with the beat. Quickly, before somebody thinks I am an intllectual. You are absolutely right about both Cosatu and the deriv situation. (Although, I have no doubt you could spend days wroting about this) Manuel, Mboweni and our latest greatest Lady of the bank, can do absolutley Jack without being completely on sides with the IMF, BIS but more importantly with thier shareholders.
Good one dude.

The Reserve Bank's responsibility is for financial stability, and while benefiting the poor leaves one with a heart-warming and fuzzy feeling, the monetary stability of the nation should take presence.

The monopolistic behaviour regarding Eskom is easy to address - give them some competition.

And for an economist to ask "Why borrow when we can print money?" shows a certain naivety.

But in principle the interest rates are too high in order to keep the Rand low against foreign currencies and so make it easier for us to export. If the Rand strengthened due to a lower interest rate, many people will loose their jobs.

I have a suspicion that Prof Malikane's views were greatly simplified in this article as this is a very delicate matter that cannot be dealt with through broad strokes.

concerned citizen:

a degree of protectionism is necessary to bring people out of poverty. you can play with the currency, you can play with the mandate, you can play with the access to the rest of the world.

you have to do at least *one* of those things [all three would be best].

the strength of the rand is not related to anything at all within the south african economy, except for the fact that we have the easiest gold to extract. yes, the gold is 2000m down, but you don't have to worry about floods, mosquitoes, or relatively speaking, a dodgy electricity supply. so when china, the arab gulf, and india buy as much gold as they can to hedge against their dollars, the rand goes up, despite the fact that the internal south african economy writ large would command a much different exchange rate [somewhere between 9 and 10 to be honest; probably even more].

outside of the mines, the south african economy is pretty pance [and even with them, it's not particularly all that hot, either]. there hasn't been that much real change since the anc looked at the books back in 1993 and said "we thought it was better than this. oops."

the "growth" over the last 16 years has largely been cadre-led.

Toku, very insightful, I agree, a degree or protectionism, actually, a rather large degree, is required. unfortunately due to global interdependance this would be rather difficult I suspect. Your point about the strength of the rand is not related to anything inside the economy confirms my point. Based on the current gold hedging we can expect the rand to rocket?? I also agree with your situation comment of the SA economy being Pance, (Interesting word usage). So what alternatives, agri, other minerals, ??? Or are we doomed to be the whipping boys for Russia and or China

@ Concerned Citizen - I agree with some of your diagnosis, but your prescription sucks. Warm fuzzy feeling for helping the poor - in a country where some live in Canada (ala living standards) and too many live like in Brazzaville? Lets look at the record of stability and see where it has gotten us. If the proof of what you are saying is markedly different from what HAS been going on, then I am sure that you will have a VERY good explanation of why the THEORY did not work. The magic of the markets, and the financial sector in particular, is now confirmed mainly speculative and largely socially useless (and now systemically and almost fatally destructive). Given we can disagree on the latter arguing for more of the same will need much more than assertions of faith. Even a shallow answer to Ce Bono (who benefits) will show that the proportion of GDP (and capital allocation) benefits the financial sector (or more like the FIRE - fin, insurance & real estate).
Why promote the market when you yourself say that there are imperfections (how about making Merriwether make ours efficient?)!
The reasons for our currency being "mispriced" are manifold - but that requires a departure from the principle of rational markets. So the prescription that rely on that principle need different justification. Why no mention of productive capacity? Why joblessness when we import low tech goods that can be locally made? Why is there so much money but such shoddy allocative decisions? And to finance our credit card deficit of course we need high interest rates to attract hot inflows to pay the bills - while this decimates productive capacity.
Even the London School of Economics has said that much of their analysis on the crisis was blinded by wishful thinking and hubris. So lets cut to the chase, who benefits from your prescriptions and why is it the best way to develop?

@ Olowokandi on the first one, I suspect you are violently agreeing with me. I understand about leverage, but I cannot understand black people settling for 10 percent of one of the MOST important components of the economy and failing to even identify it as important. Comprende?
On the second - your guess is as good as anyone's on the exchange rate, especially in a period of strategic devaluations. Hurrah deflation? And don't worry our idiots will make sure that the remaining controls on capital will continue to be BYPASSED with derivatives (remember the Rand Commission cover-up?).
@ Apoc Now - why pick on Russia and China when they are just new kids on the block? The Europeans and Americans have been standing by SA even through sanctions. On our specialisation, the same reasoning that gets Concerned Citizen into a lather about fuzzy feelings is the reason why in ACTUAL terms we are specialising in raw materials. This is the glorious growth that is called cadre-led. What cadre's? Sips of gravy and blacks enjoy state power? Breaking up national champions so that foreign champions can beat us to a pulp in the markets? Get real, countries mainly succeed because of manufacturing and increasing their productive capabilities. Face it, even market access they talk about to the EU is only about 30% of their combined GNI. SEVENTY PERCENT is internal. And we rely on the US-veto controlled World Bank to rate openness and private credit ratings agencies to benchmark us. And we know what a useless bunch of idiot savants we are. Come on, lets get the debate out of the toilet and talk national interest!

bashar - derivatives are an essential and critical part of risk management, been around for centuries and aren't going away anytime soon. which derivs in particular are you railing against so vehemently?

printing money, as cosatu here proposes, is what destroyed the zim dollar.

but increasing employment - good. increasing our manufacturing capacity instead of exporting raw materials - good.

if only the people in power would try to actually do something for the country instead of concentrating on how much they can personally feed their greed.

cosatu is a bit mixed up, it seems. call for the things that really will help the country, guys.

Cosatu and SAPC running the country, with Malema as leader, countdown.....

Basher, Your comment, "Why no mention of productive capacity? Why joblessness when we import low tech goods that can be locally made? Why is there so much money but such shoddy allocative decisions? We are unable to compete in the labour market when up against China, for example. We are too expensive and far to unionised. I picked on these two in particular beacause they are and most notably china are sitting on tons of reserves. In china's case about 1.2 trillion dollars. With the dollar on its way down and no way really to stop it without causing grotesque social problems, China are and have to find somewhere for thier mountain of cash so as not to allow further depraication due to dollard losses. This they have decided to put mostly into the ground (Buying lots of gold) in various African countries, not least SA. I am not sure I understood your "so much money but shoddy allocation decisions". Actually there is not allot of cash and banks are not leanding, both commercially and privately, due to percieved risk and wanting to horde reserves for a further weakening debt book. Either they know something we don't (Expecting things to get far worse, or they are being over cautious)

toks, you're scarce these days.

you are, as always, spot on. [pance. ha ha ha.]

cynical: printing money isn't what destroyed the zim dollar. the lack of investor confidence due to the "land reform" and other indigenisation efforts led to decreased investor confidence. *that* is what destroyed the zim dollar.

you need to look at the USD's performance against other major gold-producing countries. since january, the dollar has actually significantly appreciated against the ghanaian cedi, and, overall, is slightly up against the papuan kina. [that said, the kina dropped sharply in march-april and then has recovered back to january levels near the end of october.]

i picked the cedi and the kina because these are two major gold producers. ghana has started to spend money on its people [ie social programs], which is weakening the currency. if south africa paid teachers [and medical professionals] what they're worth in addition to give them decent facilities and adequate supplies, it would weaken the rand somewhat.

more importantly, they need to pull out of the wto. a major reason that china did not join is because they needed to get their economy to a point where it could competitively deal with the outside world. in order for south african workers to be able to compete with chinese workers, we need an exchange rate of roughly R17 *and* adequate health facilities in the rural areas, so there won't be as much aids [and other disease]-related turnover.

even if the reserve bank were to print money, china and india's gold hedge would artificially boost the rand. there is going to have to be a major intervention in the currency markets or with interest rates. and to be honest, interest rates won't even do it. it's going to have to be the exchange rate.

in addition, coming out of the wto would also mean that the national government could subsidize a lot of things that would need to be subsidized [like fuel, and staple foods]. this would sink the exchange rate to the extent that investors would still want to invest for the medium and long term [despite crap interest rates]. but if they actually do something constructive about the educational system, and the cost of telecoms came down significantly, potential entrepreneurs who would be either tsotsis or corporate yes-men under the current economic setup would be having small businesses. .... which is pretty much what happened in south korea and malaysia.

@ Ian mcintosh - thanks for the inquiry on which derivatives. My problem relates to their social utility - and even at a conservative level - those that ASSIST price formation given risk. There is no clear answer, derivatives have been around for ages, but Over the Counter ones mainly - that are complex, may pose systemic risk AND which are primarily designed to bypass regulation and/or evade tax. But lets be clear, even the derivatives of (options on futures - in the technical sense are D's) have been found to be too concentrated in everything from wheat to silver - as approved by regulatory agencies particularly in the US. With such concentrated positions, and far more supply of "paper" than annual total production, it is difficult to see their social utility except for the speculators. Farmers, particularly in Africa get saddled with crappy prices - how is this useful?
more importantly I am railing against us giving away virtually permanently our right to regulate these potentially WMDs at the WTO and other agreements - when it should be clear that regulation is needed no matter how many people these sophisticated investors bribe legally! We have a sophisticated financial system - that can assist the WHOLE of Africa - are we going to be a Wall Street junkie financial system or a more prudent one (not by much, but better) like Canada's? This is the choice - and the idiot savants in charge want to milk every penny in short term gains to be like Wall Street. If the Reserve Bank (nor its shareholder or government) cannot be sensible, well then they are just like the monkeys at LSE - blinded by wishful thinking and hubris. Our financial sector is well developed and we should nurture it for the long term and NOT cave into greedy pigs.
@ cynical - I take it then then you would agree for every 1 rand you deposit it is okay for the private banks (who also own the reserve bank) to create 10 rands? I that okay? If not then I cannot buy your argument for want of consistency. And this is related to allocative decisions that AN raises.

@Apocalypse Now - by shoddy allocative decisions I mean the nett amount of productive investment that lead to higher wages and higher profits (the Schumpeterian Virtuous Circle) as opposed to the neoliberal theory of barter that benefits the strong and focuses on lowering prices for consumers. Allocative decisions are needed that boost productive capacity - and Wages are important, given the decade long preference for profits and corporates having preference.
@ ursa negro - some of views I fully agree with. Lets start simple bearing in mind @cynical and @ hurst's comments. THERE IS NO PLAN, except gimme gimme gimme as much as you can. We do need a plan (all successful Asian countries had one, and it sounds like a nice idea), GEAR Is not a plan (it is imported IMF/WBank cloth with Made in SA on it) - it is a theology. THERE IS NOT OVERWHELMING EVIDENCE TO SUPPORT FACTOR PRICE EQUALISATION (at best it is a tendency) NEITHER IS There support for the efficient Market Hypothesis. We have PERVERSE BACKWASHES - capital flows from where it is needed to where there is surplus. Now you can ignore the evidence, but that is reality. So these pendantic pedestrian arguments based on these theories that contradict evidence are just no good. But hey, why let reality mess up a nice sounding argument?

AND IT IS VERY AMUSING that those who rely on FPE and efficient market hypothesis actually think the rand is "wrongly" valued. If you can't see the humour in this, well then good luck... hahahaah

Generally, many are railing against COSATU - but they are really an isolated group that looks at the evidence, and seek evidence based decision making. And the savants for whom the crisis was a theoretical impossibility continue to with hubris talk. Comical at best...

Prof Malikane is unconvential but not naive in his analysis. Printing money does not necessarily cause inflation, the first round effect is to boost demand. Government can print money to accomodate the growth of real output without causing inflation. If demand is boosted without causing excessive demand, then inflation would not be severe with this type of quantitative easing. In these times, demand has fallen such that it is possible to increase money supply without creating inflation. It is about boosting the economy yet doing it in a well calculated manner and testing the sensitivity of variables such as the exchange rate, exports and the real sector to the change in money supply.