Cosatu has radical plan for directing economy Cosatu wants a state bank to have “control and ownership” over the balance sheets of the Reserve Bank, so that it can direct economic policies. MARIAM ISA Published: 2010/09/15 06:17:38 AM
THE Congress of South African Trade Unions (Cosatu) yesterday proposed a radical overhaul of SA’s monetary and financial policy , calling for controls over commercial bank loans and capping gold exports to increase national reserves. Cosatu says in an economic strategy paper that it also wants a state bank to have “control and ownership” over the balance sheets of the Reserve Bank, so that it can direct economic policies. Cosatu will present a range of interventions it says will boost job creation and economic growth, as well as redistribute both income and power, at the African National Congress (ANC) national general council next week. The federation is calling for a tax on capital inflows to curb the appreciation of the rand, a measure which is being considered by the Treasury and Reserve Bank. The rand rallied to its strongest in more than two and a half years at R7,05 to the dollar yesterday, undeterred by the talk and driven mainly by capital inflows into SA and other emerging markets. Cosatu also wants foreign exchange controls to be tightened, to stem the capital outflows which could spark depreciation in the currency — a step which is at odds with official policy. The federation toned down calls for the Bank’s inflation targeting mandate to be scrapped, but said it must be secondary to employment targeting. “The Reserve Bank must pay primary attention to the cycle and long- term trend of employment growth,” Cosatu said. “This does not mean that price stability is not taken into account.” Economists were alarmed by the suggestion that the Bank should lose its independence, which is enshrined in the constitution. They also said it was not clear that price stability could be achieved if the authorities doubted the “clout” of a strong inflation- targeting framework. Standard Chartered’s regional research head for Africa Razia Khan said it was not clear there was anything a central bank could do about job creation with interest rates as its only tool. Cosatu said it did not believe that “credible monetary policy is essential for a new growth path and more job creation”. The federation also said the Reserve Bank must “monitor and enforce quantitative controls on commercial banks to ensure that a certain fraction of their loans goes to priority sectors that drive the growth path ” of the economy. “Control over commercial bank loans suggests that profitability and ability to repay will not be the key criteria for lending decisions,” said Ms Khan. “If realised — and this is doubtful — this could potentially be disastrous.” The question was how much political clout the unions had in convincing the ANC to adopt their new strategies, economists said. Political analyst Steven Friedman said the chances of these becoming ANC policy soon were zero. “The left don’t have a majority in the ANC ... this has been demonstrated time and time again,” he said. Cosatu had probably drawn up the document because they had often been accused of being articulate about what they were against, but not what they were for. Another point was that next week’s meeting would not take policy decisions, which could only happen at the national conference. There has been much talk of nationalising the mines, but eyebrows were raised at Cosatu’s proposal to impose a “heavy quota on gold exports” and increasing public ownership of mines. By doing this SA could “begin a process of gold reserve accumulation, which can be used to purchase critical inputs that we need for industrial development.” Nedbank economist Dennis Dykes said SA lacked savings, so had no choice but to attract foreign capital. “If we go the route of nationalising and confiscating, this would exclude any foreign participation. That is not the way successful countries have gone — including China.” Citigroup economist Jean-Francois Mercier said Cosatu had a point in saying capital had been “misallocated” to financial transactions rather than production. i...@bdfhttp://www.businessday.co.za/articles/Content.aspx?id=120996m.co.za -- News is something someone, somewhere doesn’t want to read. The rest is PR.— Claud Cockburn www.kwelaxpress.co.za -- You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. You can visit the group WEB SITE at http://groups.google.com/group/yclsa-eom-forum for different delivery options, pages, files and membership. To UNSUBSCRIBE, please email [email protected] . You don't have to put anything in the "Subject:" field. You don't have to put anything in the message part. All you have to do is to send an e-mail to this address (repeat): [email protected] .
