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Umsebenzi Online

Volume 8, No. 11, 1 July 2009

In this Issue:


Red Alert

Revitalise the Financial Sector Campaign to effectively respond to the current global capitalist crisis

Blade Nzimande, General Secretary

(Adapted from speech delivered during the Presidency Budget Vote in the National Assembly on Thursday 25 June,2009)

In response to the current global capitalist crisis, the social partners at NEDLAC – labour, communities, government and business – negotiated and finalised a framework agreement to minimise the impact of this crisis on the workers and the poor of our country.

In the "Framework for South Africa's Response to the International Economic Crisis", which was agreed in February this year, we correctly identified as the first principle of our approach that "low income workers, the unemployed and the vulnerable groups can lose much through even a relatively brief economic shock, and the risk of unfairly placing the burden of the downturn on the poor and the vulnerable must be avoided. The potential of economic shocks to destabilise the welfare of the vulnerable, including their jobs, health and education, and to increase inequality and poverty, is widely recognised, is our first concern and will require active steps to ensure these outcomes are avoided."

The social partners agreed that we were "particularly concerned about the impact of the slowdown on the poor and the most vulnerable" and it was for this reason that we agreed to the measures outlined in the Framework document. These measures "embrace elements that seek to promote economic growth and sustainable businesses, assist and protect workers and the vulnerable and help our country to meet its developmental objectives".

The Framework document also reflects our agreement that "Protecting and expanding decent work is at the core of our programmes. For this reason we are committed to various measures to reduce the possibility of retrenchments. Nevertheless, with existing high levels of unemployment and poverty, though they have reduced in recent years, the conditions of the poor and the vulnerable have to be addressed directly and in the shorter run, through employment creation programmes, promoting sustainable livelihoods, public investment, and effective social relief and support".

The SACP’s entry point on this crisis is that it is a crisis of capitalism, a crisis caused by a system based on greed and the exploitation of a majority by a minority. Therefore it should not be the workers and the poor who are made to pay for this crisis! The crisis - caused by a range of factors including gross imbalances and inequities in the global economic system, the impact of the financialisation of economies, ineffectual regulation in several of the major world economies and poor business practices - has resulted in significant asset depreciation, closures of companies, rising unemployment and a sharp slowing down of economic growth, with most highly industrialised countries entering a recession.

Like other developing countries which are strongly integrated into the world economy and significantly dependent on its good health, South Africa has been affected by the sharp fall in demand for its export products and the fall in prices of key export commodities. In addition, the international credit crisis has meant that funds have become scarce and expensive and that portfolio investors are wary of emerging markets, including South Africa.

While we should congratulate ourselves for engaging as social partners and reaching consensus on how to deal with the negative impact of the global economic crisis, there is unevenness in the manner in which sections of big business are responding to these commitments.

In particular we need to note, perhaps in hindsight, that the Framework Agreement did not give sufficient attention to processes of focusing on sectoral response plans, especially with regard to the role of the private financial sector in mitigating the impact of this crisis. The SACP is concerned that the banks in particular are not effectively responding to cushioning the impact of the crisis on consumers in general and on workers in distressed sectors of the economy in particular.

Since adopting the Framework in February, South Africa has formally moved into recession for the first time in 17 years and government revenue is already an estimated R10 billion lower than expected. This means that realising our commitments to providing decent work, healthcare, education, and to promoting rural development will be an even greater challenge than in the past, and all need to play their part.

It is important that, much as the current capitalist crisis is now engulfing the entire global economy, its most immediate origins were in the financial sector. The genesis of the crisis was the unregulated financial markets in the United States, crass materialism that sought to extract maximum returns from those who could least afford, starting in the sub-prime housing market. The burden and suffering have disproportionately fallen on the workers and the poor, with millions of job losses across the world.

It is for these reasons that we must not lose sight of the role of the financial sector in dealing with the fallout of the international financial and economic crisis and global recession in which we find ourselves.

Worryingly, we hear that the most vulnerable workers are taking retrenchment packages because it is the only hope they have of paying off debts. This last resort is being taken particularly by workers who have been on short-time for a while, maybe working only three days instead of five, and taking home only three fifths of an already low wage.

Efforts to keep these vulnerable workers in jobs through initiatives like the planned training layoffs currently being negotiated in terms of the Framework Agreement with the National Skills Fund and the Sector Education and Training Authorities (Setas) could come to nothing if workers are being hounded to pay off debts and are being threatened with repossession of their goods. A wage packet of R500 a week may be enough for a family to live on but when it shrinks to R300, and the breadwinner cannot afford to meet his or her most basic financial obligations such as paying off a housing loan, a retrenchment package may seem like a viable, if short-term, solution. As well as bailing out distressed industries, we need a national agreement on bailing out distressed and vulnerable workers.

We hear reports of the banks repossessing 6 000 cars and thousands of houses a month. The newspapers are full of auctions of properties, many of them in townships. What are the banks doing to ensure that workers who are retrenched do not lose their homes? We do not hear of banks engaging the National Union of Metalworkers about the financial plight of auto plant retrenchments in the Eastern Cape or the National Union of Mineworkers about workers affected by mine closures in the Free State or negotiating through their federation, Cosatu. Why can we not have a moratorium on repossessions of houses of workers affected by the global crisis? Banks claim they don't want to repossess workers' houses, but they go ahead and do it anyway! Banks hide behind the flimsy excuse that they fear they will be prosecuted for collusion by the Competition Commission if they talk to each about a rescue package for workers unable to pay their debts due to the economic downturn. We see this for what it is - an excuse for banks to do nothing to help, but everything to carry on fiddling while Rome burns. Banks are certainly not engaging in the Financial Sector Charter Council with the Nedlac Community and Labour constituencies on how to mitigate the effects of the global crisis on vulnerable workers and the poor who are losing their homes as well as their jobs. It is therefore important that the Financial Sector Charter Council is revamped and transformed as a critical platform to ensure that the financial sector does play its role.

Community organisations and trade unions claim many of their members are in trouble because of credit that was extended during the wave of reckless lending by banks immediately before the National Credit Act came into effect in 2007. The National Credit Regulator (NCR) supports this view and has been forced to go to court to seek a declaratory order on the National Credit Act's provisions for restructuring the debt of overindebted individuals because of a refusal by the banks to co-operate in agreements brokered by debt counsellors. The NCR has received over 80 000 (eighty thousand) applications for debt counselling and, while we wait for the court to issue the order, is continuing to receive them at a rate of seven thousand five hundred (7 500) a month. Sixty percent (60%) of those include debts for mortgage bonds from banks averaging R500 000, meaning that R16 billion in mortgages is affected by debt counselling, yet banks are obstructing the debt counselling process.

The Governor of the Reserve Bank recently expressed his frustration at the interest rates charged by all our banks. In last year's Competition Commission's Banking Enquiry, community and labour groups called for an investigation not only into excessive bank charges but also into high interest rates and the apparent lack of competition on these between the banks.

It was the global banks and financial institutions that got us into the financial mess we are in. Should we not be looking more closely at how our own banks are conducting themselves in dealing with the impact of this crisis, and at how their conduct is being supervised?

And what is the role and conduct of credit bureaus in this credit crunch and economic crisis? Credit blacklisting appears to be going on as if it is business as usual, with no acknowledgement that retrenched workers, and the families and communities into which they have to be reabsorbed, will suffer all the more if they are blacklisted. Should we not be having a national debate on the need for a moratorium on blacklisting of those directly affected by the recession?

It is indeed very urgent that our provincial structures reinvigorate the provincial structures of the SACP-led Financial Sector Campaign Coalition (FSCC). It is important that we convene peoples’ and workers’ Red Forums to analyse and plan a mass-driven response to all the challenges in the financial sector. The workers and the poor must not pay the price for the latest crisis of capitalism!