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Organised labour is crucial to ‘clean’ parastatals and reinvestment

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Professor Thandika Mkandawire. Picture: Nigel Stead
Professor Thandika Mkandawire. Picture: Nigel Stead

The government has to force business to reinvest its profits in the country but it first needs to get its own house in order.

This is according to academic, Professor Thandika Mkandawire who delivered the Alice Amsden Memorial Lecture, themed income distribution as industrial policy, at the Industrial Development Corporation (IDC) campus in Sandton this week.

Mkandawire said the government needed to first clean up parastatals and that organised labour could play an important role in ensuring that “capital behaves”.

Addressing the audience, which included postgraduate students of the African Programme on Rethinking Development Economics, policymakers and civil society representatives, as well as those from Cosatu and the South African Communist Party, Mkandawire said organised labour was in a tight position but remained very important.

“Since South Africa does not have a system to ensure capital reinvests its profit, Cosatu is in a difficult position and can’t tell the workers to keep their demands down,” he said.

In an interview with City Press shortly after the event, Mkandawire said there were several ways the state could discipline capital, one of which was more state involvement in the financial sector.

He said current mechanisms, such as preferential procurement through taxing were just some of the ways the state could ensure capital toed the line.

“One more important thing is for the state to be more active in the financial sector,” he said.

The state could become a big player in the financial market if it used current mechanisms, such as the Public Investment Corporation and the IDC.

“First you have to clean up the parastatals to become big players. If they are seen as broke all the time and the state bails them out, it’s not good. As long as parastatals are weak, corrupt and nonprofitable, of course you undermine the state’s leverage. It is strong parastatals that are being used in Korea, China and Taiwan that make the state a big player and force capital to behave,” he said.

Mkandawire, a former director of the United Nations research institute for social development, said organised labour was probably the only actor that could force state-owned enterprises to be efficient.

“If the capitalists know they cannot move without some collaboration with parastatals, they will behave,” he said, adding that labour should also insist on clean governance in parastatals.


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