FINANCE Minister Pravin Gordhan yesterday defied Cosatu by sticking to the Thabo Mbeki administration's unpopular inflation targeting policy - and in announcing new public-private partnerships in hospitals.

Gordhan gave journalists a copy of a letter he sent to Reserve Bank governor Gill Marcus on Tuesday in which he tells Marcus to "continue to pursue a target of 3 to 6percent inflation".

Cosatu and its powerful affiliate, the National Union of Metalworkers of South Africa, (Numsa), staged marches against the previous Reserve Bank governor Tito Mboweni, demanding that he should drop inflation targeting.

They say inflation targeting has a negative effect on the poor and small businesses - because as soon as inflation becomes higher than the target, the Reserve Bank raises interest rates to make inflation go down.

Gordhan also announced that the government would "broaden the use of public-private partnerships (PPPs) in the health sector" - another move likely to anger Numsa and the National Education, Health and Allied Workers Union (Nehawu).

Numsa's Castro Ngobese warned President Jacob Zuma - after he spoke about PPPs in his State of the Nation Address last week - that they were "vehemently opposed to the suggestions by Zuma that private hands have a strategic role to play in rebuilding our public health system, through the private-public partnership".

In a move sure to anger Nehawu even more, Gordhan also warned that the Occupation Specific Dispensation increases given to public servants last year had "overstepped the mark".

"We are appealing to everyone concerned that in the next year or two we need more moderate settlements that take into account that we are emerging from a recession, and emerging very slowly," Gordhan said.