JOHANNESBURG-- The Congress of South African Trade Unions (COSATU), the largest labor federation in the country, says it is losing members because of high unemployment and an internal financial crisis.

This development was revealed as COSATU heads for a showdown with the government over national economic policies, which include tight control of social spending and the privatization of state-owned enterprises.

The labor federation wants government to spend more on social and economic development programmes and put an end to privatization.

COSATU is planning to push for major changes to government economic policy at the Growth and Development Summit (GDS), where government, business and labor are planning to hammer out a way to kick-start economic growth and job creation in South Africa. The summit is scheduled for the beginning of June.

But the labor federation is facing an organizational and financial crisis. At a meeting of its central committee, held in Johannesburg last week, COSATU officials reported that its affiliates owed it $667 million. More worrying, one of its biggest affiliates, the National Education, Health and Allied Workers Union (NEHAWU) is $1.5 million in the red.

In his address to the Central Committee, COSATU President Willy Madisha acknowledged that the federation had lost over 100,000 members during the past three years. He blamed a national unemployment rate of between 30 and 40 percent of the working population.

The federation's membership now stands at around 1.7 million. "These trends place a three-fold burden on unions: we lose members; we face new organizational and financial stresses; and we have to deal with the very hard issues that arise from workplace restructuring," said Madisha.

On the financial difficulties the federation is experiencing, he said: "We are still managing our work, but only with great difficulty."

Despite these pressures, Madisha made it clear that the federation was steadfastly opposed to the government's economic policy and would push for changes at the Growth and Development Summit. The summit is likely to see some hard talking between the government and COSATU.

The quarrel with the government is ironic because COSATU, along with the Nelson Mandela's African National Congress and the Communist Party, led the long and bloody fight that ended apartheid and brought about Mandela's election as the nation's first black president.

Although the government agrees with the labor federation that unemployment is the major problem facing the country, it has different ideas about how best to tackle the problem. In its proposals to the summit, government - in a position paper drafted by a team headed by the director-general of the South African Department of Labor, Rams Ramashia - "admits that despite gains the country made in the last few years much remains to be done".

Government wants to increase the rate of foreign investment in the country; provide more opportunities for employment and enterprise development and accelerate the pace of change in the economy.

Madisha is critical about government's proposals. "There are some good things in these proposals. But government's proposals fall far short of a coordinated strategy to restructure the economy. A few more programmes to support small and medium enterprises and create learnerships won't be enough," he said.

Madisha also warned against the splintering of the labor movement in the country. He mentioned the formation of the Confederation of South African Workers Union (CONSAWU), the country's fourth labor union, late last year.

"One of the most potent weapons in the hands of South African capital is the splintering of the labor movement. The creation of yet another labor federation is bad news for workers. Instead of working towards one single national and even more powerful federation, the unions that have affiliated to CONSAWU have chosen to further fragment the workers voice and increase the power of capital," he said.