Trade union federation Cosatu is pushing for a series of economic interventions, alongside its plan to help stabilise the finances of beleaguered power utility Eskom.
These include increased wealth taxes; reductions in the public sector wage bill — including through wage caps for parastatal management; the expansion of the Reserve Bank’s mandate; and broader discussion on using prescribed assets to support industrial strategy.
The proposals — critically the plan to save Eskom through a debt rescue package led by the Public Investment Corporation (PIC) — were put to the ANC’s national executive committee (NEC) to garner “broad political support” for the package ahead of President Cyril Ramaphosa’s state of the nation address and the upcoming budget.
Cosatu took a swipe at the Treasury’s economic strategy document championed by finance minister Tito Mboweni, calling for the removal from it of “antiworker” proposals, such as extending collective bargaining agreements to small businesses.
As Eskom’s operational and financial challenges have mounted, the growth prospects for an already flagging economy have dimmed and raised the stakes ahead of Mboweni’s budget in February.
Debt package
Ratings agencies — including Moody’s Investors Service, the last agency to rate SA at investment grade — have warned that a failure to show credible steps to reduce debt and rein in spending on public wages and cash-strapped state-owned entities (SOEs), particularly Eskom, could cause SA to be downgraded.
Cosatu wants “the giant in the room”, Eskom, to be dealt with urgently, parliamentary co-ordinator Matthew Parks told Business Day. It is proposing a debt package to reduce Eskom’s debt from R450bn to R200bn through a special-purpose vehicle backed by the government, the PIC and development finance institutions such as the Development Bank of Southern Africa (DBSA) and the Industrial Development Corporation (IDC).
The “social compact” would be in the vein of the rescue package secured for retailer Edcon, Parks said. In terms of that deal, the Unemployment Insurance Fund (UIF), through the PIC, extended R2.7bn to Edcon to remain open for the next three years while it turns around its operations.
Cosatu wants to see a range of other steps introduced that it believes will help address economic growth, unemployment and the state’s dire fiscal position.
Parks conceded that its broader proposals have not progressed at the same rate at which its plan for Eskom has moved. But he said it hopes that if it gets an in-principle agreement in place on Eskom by the time of the state of the union address, it will help “build momentum on other ticking time bombs”.
Salaries capped
On the public sector wage front, Cosatu wants all public sector wage negotiations, including those for SOEs and other public sector agencies, to be placed under the Public Service Co-ordinating Bargaining Council (PSCBC). Certain state agencies are excluded from the Public Service Act, and despite relying on government funds can negotiate their own wages and benefits.
It wants the “bloated” executive and management posts and packages to be cut, including those provided through the ministerial handbook. It suggests that the wage gap in the public service and SOEs be reduced and that salaries for the management in public sector entities and SOEs be capped.
Cosatu reiterated calls to expand the Bank’s mandate to focus on growth, job creation and combating illicit financial flows. The central bank has, however, repeatedly stressed that the constitution already makes provision for this by specifying that its mandate is to “protect the value of the currency in the interest of balanced and sustainable economic growth”.
It also wants the Bank to ease its inflation targeting regime to the upper band of its 3%-6% target, rather than the “de facto” 4.5% midpoint.
Cosatu proposes tax increases aimed largely at higher-income earners such as hikes in inheritance tax, estate duties, personal and company taxes, and increased VAT on luxury goods.
These would have to come with more support for the SA Revenue Service (Sars), the capacity of which was hollowed out under former commissioner Tom Moyane. This includes “investment in additional resources and personnel for Sars customs enforcement to raise the current 5% inspection rate to 100% for all imports entering ports and borders”, according to Cosatu’s proposal.
The federation moreover wants a discussion between the government, the PIC, labour and the retirement industry on the use of prescribed assets to support investment in public goods and infrastructure, particularly industrial strategy.
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