What is the Treasury's job actually? It's a fundamental question raised by the public sector wage debacle that played out around the Labour Appeal Court this week. The public sector unions had taken the government to court over its refusal to implement the final year of the three-year wage deal done in 2018. Finance minister Tito Mboweni had declined to pay because the state could no longer afford the R37bn increase. But his colleague Senzo Mchunu, who as public service & administration minister is responsible for negotiating wages, effectively tried to cave in, making the unions a R27bn settlement offer that raided the Government Employees Pension Fund to give civil servants a once-off cash bonus. The Treasury had not agreed to the settlement offer.
In the event, the unions rejected the offer, and the court's ruling will be closely watched. It's not the outcome for this year so much that matters - ratings agency Fitch, for one, has already assumed that the government will lose the case. Rather, it's the ramifications for the new three-year wage agreement that the government and unions have to negotiate from next year.
Mboweni's plan to arrest the spiralling debt burden and prevent a sovereign debt crisis rests almost entirely on a huge cut in the public sector wage bill, and that in turn assumes unions agree to an unprecedented three-year wage freeze. Achieving this was always unlikely anyway, but if the cabinet is already divided there's almost no chance. That in turn puts big question marks over the authority of the Treasury, and of the budget.
It's easy to personalise the problem, as many have done. Mboweni is an absent and somewhat reluctant finance minister. The Treasury has lately lost some good people and its capacity is not what it was. But the issue is fundamentally about the institutional framework in which budget decisions are made, not about personalities. First, it is about the politics, and specifically the relationship between the finance minister and the president. Is the president willing to back the minister against the rest of the cabinet? Mboweni's problem is that he can't rely on Ramaphosa's support.
— The issue isfu ndamental lyabout thei nstitutionalfram ework
Jacob Zuma was given to overriding his finance minister, committing to spending - memorably the R67bn on free higher education - without regard to the budget. But Ramaphosa may be allowing other ministers to override the budget, without forcing them to get approval from the Treasury.
The second fundamental issue is about the constitutional position of the Treasury and the budget. It's one Mboweni's counsel in the wage case, Jeremy Gauntlett, touched on in court; and a constitutional court case on this one may be just what SA needs. Only the finance minister can introduce money or tax bills. But beyond that the position is murky. Does the budget have primacy, setting parameters with which the rest of the government must comply? Or is it just another expression of government policy that gives the Treasury no special authority - in which case, it is the presidency that should arbitrate spending plans, leaving it to the Treasury simply to sort out the Excel spreadsheet, as it were.
Mboweni has recently emphasised the "sanctity of the fiscal framework", insisting it can't be overridden. And previously, the government has stuck to the framework, forcing the Treasury to slice and dice within the budget to accommodate items such as free higher education. But if next year's wage talks bust Mboweni's budget framework, there is no way of accommodating the cost. Plans for fiscal consolidation will likely be derailed. The fiscal credibility SA has carefully nurtured will be blown out of the water. The response from investors and ratings agencies will not be good. Constitutional clarity is needed. But in the end, it's the politics of a rather dysfunctional government that need sorting.
• Joffe is Business Times contributing editor
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