Media statement by President JG Zuma following the report back by the leadership group of the framework response to the economic crisis, Presidential Guesthouse, Pretoria
3 December 2009
Good morning, ladies and gentlemen
In December 2008 the social partners that comprise the Presidential Economic Joint Working Group, namely organised labour, business and government, met to consider how South Africans should respond collectively to the more difficult economic conditions we face, largely as a result of the international economic crisis.
It was further agreed that it is the social partners’ collective responsibility to work together to withstand the crisis and ensure that the poor and the most vulnerable are protected as far as possible from its impact.
The “framework for South Africa’s response to the international economic crisis” was tabled and endorsed at a special Presidential Economic Joint Working Group meeting, joined by Nedlac’s community constituency, held 19 February 2009 at Tuynhuys in Cape Town. At the request of the President, the framework has been managed by Nedlac.
All the partners in this national effort have developed a greater level of insight as to the challenges faced and together have engaged in finding solutions that will be of benefit to the society, the economy and the constituencies. Government and our social partners have responded with a range of separate and joint measures to deal with the impact of the recession on sectors, workers, on companies and on communities.
Without these measures, the impact of the recession would have been more severe. These measures also form the basis for a better future, once the pressures of the current economic conditions are lessened. The leadership team reported on a range of key measures undertaken in 18 areas as well as their impact and challenges.
In line with the framework agreement, government has maintained a strong countercyclical fiscal and monetary policy stance. Government spending levels have been maintained in spite of a sharp drop in tax revenues.
In February 2009 government announced a R787 billion infrastructure programme. While monetary policy has been the subject of robust debate at the leadership team, interest rates have been reduced on four occasions by a total of 350 basis points. R11 billion has been set aside into activities designed to address the impact of the recession.
South Africa introduced its first ever training layoff scheme has R2,9 billion available for its implementation. The scheme is aimed at providing companies with an alternative to retrenching workers during a period of industrial slack caused by recession thereby enabling employees to have continued income, employment security and skills acquisition.
200 commissioners were briefed on the training layoff and 40 experienced commissioners were trained across South Africa to facilitate training layoff applications. The scheme has been actively promoted as an alternative to retrenchments. The Commission for Conciliation, Mediation and Arbitration (CCMA) incorporated the training lay-offs into a holistic approach to preventing job loss.
Through these proactive interventions at the CCMA 4 482 jobs have been saved from March to September 2009. A retrenchment action plan launched by the Manufacturing, Engineering and Related Services Sector Education and Training Authority (MARSETA) has approximately 7 000 workers in a programme based on the training layoff model. The other funds include the R6,1 billion set aside by the Industrial Development Corporation (IDC) as special loans for firms in distress, and R2 billion allocated by the Unemployment Insurance Fund to the IDC to be loaned to firms in distress.
The IDC’s approvals so far to distressed firms are estimated to have saved over 7700 jobs. The pipeline of projects currently has 33 applications with a potential value of around R2,053 million. The commercial banks and the development finance institutions have been developing an agreement that would allow them to help firms in distress by sharing relevant information and sharing risks.
In the state of the nation address we stated that we planned to create 500 000 job opportunities, as part of the Expanded Public Works Programme (EPWP). Phase two of the EPWP is being rolled out and as at the end of the second quarter 223 568 verified number of work opportunities have been created. Additional work opportunities have been created and will be announced by the Minister of Public Works once verified.
The leadership team has accelerated the development of regulatory measures to provide guidance on improved terms and conditions of employment for EPWP employees thereby furthering the objectives of the decent work. Sector packages have been developed through NEDLAC for industries in distress; the automobile, clothing and textiles, capital equipment, transport equipment and metal fabrication sectors.
Our interventions include, for example trade remedies, skills funding for employees, industrial support and improved access to finance for capital support. The task team agreed on strict conditions for businesses that use state funding to prevent abuse. The conditions include restraint in relation to executive pay, restrictions on retrenchment, commitment to local procurement and social dialogue between labour and business at the workplace.
Government has committed to a 30 day payment period for small businesses and launched a special hotline on 21 September 2009 to address complaints about slow government payments to small businesses. Nearly R3,7 million has been conveyed to small business so far as a result of the hotline. The private sector is also investigating mechanisms to improve the payment cycle to small, medium and micro enterprisers (SMMEs).
The leadership team also agreed that government local procurement will allocate 90% of the 10 percent or 20 percent discretionary points in the tender rules are allocated for local procurement. Business also committed to encourage its members to procure locally manufactured goods where possible. An application to the International Trade Administration Commission (ITAC) by the clothing and textile sector to increase 35 tariffs to their bound rate of 45 percent was approved and finalised in record time.
ITAC has also approved a decrease in tariffs through a rebate scheme for several textile items to encourage clothing manufacturing. Additional applications have been made to ITAC in capital equipment, transport and metal products in order to effectively use legal trade measures to address the short term crisis in vulnerable sectors. The task team tackled customs fraud and illegal imports vigorously. Government has set up a special team for this, initially focussing on the clothing sector.
South African Revenue Service (SARS) has seized 750 tons of clothing and textile products that have been smuggled into the country from raids on 88 premises conducted in a nationwide enforcement initiative. The effect of this heightened action against illegality is expected to offer support to local producers and an estimated 1 400 jobs have been saved as a result of these actions.
The child support grant is now being extended to 16, then 17 and the 18 year olds on an expedited basis, partly as a response to the crisis. Children who receive the child support grant over the age of 15 years are expected to be at school or college, and measures will be taken to monitor this. Food banks, as proposed in the framework agreement, have been established and further food banks are planned.
Although the economy is beginning to grow again, the crisis is still with us, especially for the poor and the working poor. We may still lose more jobs before we turn the corner on job creation. Nearly a million people have been cut loose by the crisis, and many of them have families that depend on them.
For this reason, we cannot yet say that the implementation of the framework agreement is complete. The team will continue to work to mitigate the effects of the crisis, and to lay the basis for more effective job creation in the future.