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Johannesburg - Labour union federation Cosatu called on Tuesday for a reversal of measures taken to relax exchange controls and for taxes on short-term capital flows.
The positions laid out in an economic policy paper put pressure on the African National Congress to reconsider its foreign exchange and economic policies when it holds a major strategy setting session next week.
"Due to relaxation of capital controls, (company) profits were repatriated in the form of dividend payments ... The outflow of funds increased South Africa's dependence on short-term capital flows to finance expenditure," it said.
Cosatu, a powerful vote-gathering machine for the ruling party, has been fighting for increased influence on economic policy, disappointed that the ANC has so far rejected its left-leaning proposals.
Cosatu and the ANC held high-level talks on Monday to repair rifts in the alliance brought about by a three-week strike by state workers and what the labour group sees as growing cronyism in President Jacob Zuma's government.
The ANC has maintained investor-friendly policies, but rising unemployment and entrenched poverty, along with Cosatu's influence among the poor, is piling pressure on the party to show its policies are worth pursuing.
In a document that outlines its economic proposals, Cosatu said removing exchange controls robbed the country of much-needed resources for investment.
Cosatu's idea on exchange controls is at odds with the National Treasury's plans for further relaxation, with details due in next month's medium-term budget policy statement.
Foreign exchange management
At its policy meeting next week, the ANC will discuss Cosatu's idea of taxing short-term capital flows in an effort to limit gains of the rand currency.
The rand has this year added to gains of about 30% to
the dollar in 2009, closing firmer than the key 7.15 per dollar level on
Monday for the first time since January 2008.
Cosatu wants the rand much weaker at 10.00 to the dollar to help support the manufacturing sector, hard hit by last year's recession - the first since 1992.
"The Reserve Bank must resist pressures on the real exchange rate to appreciate," Cosatu said, calling for more aggressive reserves accumulation.
South Africa's net liquidity position has increased steadily since 2004 but lags other emerging economies.
Cosatu said a non-inflationary way to build reserves would be for South Africa to accumulate gold from the mining companies, which it wants to nationalise.
Employment
At the heart of Cosatu's gripes with ANC policies is high unemployment. More than a million jobs have been lost since the beginning of 2009, trapping millions in poverty and stoking social unrest.
Cosatu said employment creation should be the Reserve Bank's primary role, with price stability - the current thrust of monetary policy - a secondary consideration.
Cosatu said a narrow focus on price stability has kept the bank from cutting interest rates aggressively to help stimulate growth.
The central bank has cut interest rates by a cumulative 600 basis points since December 2008, but has signalled there's limited room for further easing because it is worried about high wage demands and settlements spearheaded by Cosatu.
"We ... do not subscribe to the view that inflation targeting is a necessary policy to build credibility," Cosatu said.
