Government should tax the “super rich” and play a more “aggressive role” in the economy, the Congress of South African Trade Unions (Cosatu) suggested in its new growth path for South Africa.
Cosatu general secretary Zwelinzima Vavi said on Tuesday that the country was in crisis, and a new growth path was needed to rescue the “dysfunctional” economy.
“We continue to hang political freedom around our necks, but the reality is we have hardly touched the structural crisis at the economic level,” he said launching the federation’s discussion document at the University of Johannesburg.
“Unemployment has been worsening … the cold reality is that we are sitting with a worsening crisis not an improving situation. A quarter of the population lives on social grants that the government provides … we should move out of the situation where most of the people have to rely on government to survive … it’s a crisis pointing to the dysfunctionality at the core of our economy.”
The document suggested “redistributive tax interventions” which included the introduction of a tax category for the “super rich” and a “solidarity tax” to cap the growth of the earnings of the top 10% and accelerate earnings of the lowest 10%.
It also proposed a higher tax on imported luxury items, a land tax to “aid” the process of land redistribution and a zero rating of basic foodstuffs, medicines, water, domestic electricity, and public education.
‘Transformative taxes’
Export taxes on strategic minerals, metals and other resources to “support down-stream industries” and promote value, investment tax credits to encourage local procurement of machinery and equipment and tax on financial transactions including a capital gains tax above a certain minimum threshold were among the “transformative taxes” Cosatu proposed.
A transformative tax should also be imposed on companies who were “stubborn in closing the apartheid wage gap”.
Fiscal and monetary policy should focus on employment.
“Employment will be the primary target of monetary policy, whilst price stability plays a subordinate role. Monetary policy will support industrial development,” said Cosatu’s fiscal and monetary policy coordinator, Christopher Malikane.
He said it was “urgent” that the role of the state in the economy be “reconsidered”.
“We are saying that a state is developmental not by declaration but by what it does,” he said.
The state should “mobilise national savings to fund development”, have a progressive tax and levy system, it should “directly” employ people, play a leading role in stimulating industry, have aggressive targets and punitive measures for addressing transformation and should remove the “profit motive” in the delivery of goods and services such as water and housing.
Nationalisation
Cosatu in its discussion document proposed nationalisation be looked at in the context of the strategic role the state should play in key sectors of the economy.
“If you read the documents in relation to all the areas we propose the state must take a strategic interest in, they relate to the economy where there are existing monopolies which we need broken up,” Vavi said.
Cosatu believed that through state intervention, resources could be “liberated” to be used in delivering services.
“In relation to the area of mining … we are not necessarily calling for nationalisation of all the mines in South Africa. We don’t think that’s a realistic proposal. But we do say that we need a state that can have a company that can intervene in the strategic minerals.”
He said the steel and platinum industries should be considered for state intervention. This had to be strategic and should not be aimed at complete ownership.
Malikane said South Africa needed a “mixed economy” with privately- and state-owned entities.
Strategic sectors where state intervention was necessary included mines, metals fabrication, petrochemicals, pharmaceuticals, forestry, construction and finance.
Cosatu’s proposal included a state-owned bank, pharmaceutical company and construction company.
Vavi said state-owned entities should be viewed in terms of the benefits for South African society as a whole, instead of “narrowly from an investors perspective”.
“This is not a mad document, it is a well-considered document.”
Cosatu had long attempted to influence its alliance partner, the ruling African National Congress, on the country’s economic trajectory.
Vavi himself said he was like a “battered woman” when asked what he would do if the federation failed to get buy-in from the ANC on
its bid to radically transform the economy.
Using a medical metaphor, he likened the economy to a patient who had very successful “operation” but “regrettably the patient has died”.
This was in reference to government’s stance on its macro economic policies.
“We need a new direction and we need a comprehensive strategy that hangs together in order to ensure development.”
ANC national executive committee member and deputy chairperson of the ruling party’s economic development committee Enoch Godongwana sat in the audience. The economy was often at the root of the battles between the allies.
Godongwana was also deputy minister of public enterprises.
Cosatu president S’dumo Dlamini said Cosatu had always been chastised for failing to provide an “alternative”. He said in launching the discussion document, that Cosatu was answering that call.
The federation would discuss the document with its partners in the ruling alliance and welcomed “engagement’ on it among the civil
society and the public. – Sapa