In the full horror of Wednesday’s medium-term budget policy statement (MTBPS), most observers were drawn to one overwhelming conclusion: finance minister Tito Mboweni has no plan to get us out of this mess.
That is not the case. Mboweni does have a plan and it is very ambitious. He wants to extract the lion’s share of the R50bn a year he needs in savings on the budget from the public sector wage bill. It is a huge ask. In case the stakes are not high enough, as SA’s debt-to-GDP ratio hurtles towards 80% over the next decade and the fiscal deficit hits 6%, it is the only plan on the table.
The government has already cut infrastructure budgets to the bone, which will affect important areas of economic and social development such as housing, municipal infrastructure for water and roads, and school building. Over the past five years, the government cut its housing delivery targets by 100,000.
The Treasury has also put an enormous squeeze on government departments. Since 2012, when it imposed an expenditure ceiling, departments were forced to make do with their baseline allocations even when compensation budgets were rising more than had been budgeted. The result was that budgets for goods and services — hospital linen, medicines, schoolbooks and so on — were compressed as wages ate up an ever larger share of departmental budgets. This strategy has also run out of road.
Sensible target
This makes the wage bill the least damaging place to look for savings. Added to this is the enormous rise in public sector wages over the past decade, which have risen by 66%, a real increase of 3.5% a year.
For the most part these gains were the result of large adjustments made for professionals — such as doctors, nurses and teachers — between 2009 and 2011. While this raised the baseline, average annual growth across the board has consistently been above inflation. Cost-of-living adjustments are almost always CPI plus something and public servants also get an annual increment of 1% as a reward for years of service.
Ian Stuart, the head of the budget office, now says the government envisages freezing the annual years of service increment, pushing increases below inflation and renegotiating some of the special dispensations for professionals.
But the government and public sector unions are two-thirds of the way through a three-year agreement. Mboweni, who says that he wants a new settlement in place by the time he tables the budget in February, intends to do the unthinkable and open negotiations before the agreement expires.
“We are in October and we have a few months to go before February,” he said on a press conference on Wednesday. “We have some time for a very serious conversation that is patriotic, country-loving, shows awareness of the difficulties and involves no grandstanding.”
There is agreement across the government that the aim is not to reduce the headcount as that would damage service delivery, but to rather arrest the upward trend in wage growth.
Trade unions, though, are in no mood to make wage sacrifices, patriotic or not.
Prison warders and police are already patriotic, says Cosatu’s parliamentary officer, Matthew Parks, putting their bodies on the line for the country every day. So are doctors, nurses and teachers — all university graduates — who have chosen to work in the public sector, mostly in very unpleasant conditions.
Workers also see nothing fair in being the ones to take the hit for government corruption and mismanagement while those who created the problem — politicians — feel no pain, says SA Democratic Teachers Union general secretary Mugwena Maluleke.
A wage freeze for cabinet ministers — who earn salaries of R2.4m — and other top officials imposed by Mboweni, is not very meaningful.
“Now they are telling the people who are struggling every day that they are the problem,” says Maluleka.
The National Education, Health and Allied Workers’ Union, which is already planning to join a march with the National Union of Mineworkers on the ANC headquarters to protest against the splitting up of Eskom, also came out fighting, saying that they plan to mobilise widely against the government.
Union members are angry over the missed opportunities to cut wastage and the costs of the government. They point to bailouts for state-owned enterprises, the failure to pursue and arrest those responsible for corruption, President Cyril Ramaphosa’s failed commitment to cut down the size of the government, the lack of consequences in municipalities for failure and corruption and even the layer of provincial government, which could be removed with few consequences for service delivery.
Maluleka, who has seen three huge public sector wage strikes since 1994, two of them lengthy, says he cannot see a smooth resolution to this conflict. The cabinet at large seems united and resolved that this is the route it plans to follow, he says. The same impression is shared by the Treasury, which has been surprised at the level of support from cabinet ministers after many years of kicking the can down the road.
But war talk is one thing and a strike quite another. In 2007 and again in 2010 workers and the government bled heavily as the strike ground on for three weeks. For workers that is a long time to go without pay and the gains at the end were small, a matter of half a percent in 2010 and 2% in 2007. For the government it is a long time to go without teachers in front of schoolchildren, cleaners in hospitals and mayhem on the streets.
For the government the risk of a full-blown strike is enormous. Apart from the disruption to services, with so much social disaffection in the atmosphere there is every chance that a large and heated strike will become a magnet for violent protest. Several big strikes have taken on these characteristics as disaffected community members, as well criminals and opportunists, take to the streets with workers.
There is also the EFF and the SA Federation of Trade Unions to consider. While leaders of Cosatu unions have open channels with the government and the ANC, the EFF, which is likely to support a strike and has impressive mobilising abilities, could make things ugly quickly.
But it may not come to that and quite possibly the showdown may come to nothing at all.
Though Mboweni is up for the patriotic fight, his boss, Ramaphosa, may not be. The president has twice crumbled in the very presence of unions, even before negotiations got going, promising public servants and Eskom workers there would be no retrenchments. Now everyone is watching to see which way he will fall. He has not come out to support Mboweni, replying to a question in parliament on Thursday in his usual non-committal way.
“We have had [salary] increases above inflation and other benefits and ... we will look at it with labour. We will find solutions,” said Ramaphosa, adding his standard line that the country has previously resolved intractable problems.
Well here is a big one for him to tackle and there is no more time to kick it down the road.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.