20100914
africanews

JOHANNESBURG (Reuters) - South Africa's powerful labour federation called on Tuesday for more exchange controls and a capital flow tax to ease unemployment, further fraying an alliance with the ANC government amid mounting social unrest.

The leftist proposals by the COSATU bloc will pile pressure on the African National Congress to prove that its pro-investor policies are worth pursuing with an ANC policy meeting on tap next week and a COSATU-ANC summit later this year.

In an atmosphere soured by a three-week public sector strike and union grievances about alleged cronyism in high government office, President Jacob Zuma has found himself caught between the need to placate his old anti-apartheid comrades and reviving growth in the African continent's largest economy.

COSATU, which wants unions to have a greater say in policy formation, said last week its traditional alliance with the ANC and the South African Communist Party faced paralysis and may even break up over policy differences.

Upping the ante on Tuesday, COSATU released an economic policy paper with proposals calling for a tax on short-term capital flows, a reversal of steps to relax currency controls and a nationalisation of some mines.

COSATU said that South Africa's cutting back of exchange controls had robbed the country of much-needed resources for investment. The idea clashes with the National Treasury's plan for further tempering of the controls, with details due in next month's medium-term budget policy statement.

The ANC will discuss taxing short-term capital flows to limit the gains of the rand currency at next week's meeting.

But COSATU wants the rand much weaker at 10 to the dollar to shore up manufacturers battered last year by South Africa's first recession since 1992. The rand has risen about six percent against the dollar this year. It gained some 30 percent in 2009.