The 2021 budget can only be described as debt-consolidating at its strictest in recent years.
Finance Minister Tito Mboweni has put his foot down, boldly declaring to labour that the public service wage increase tap has been closed.
But who will emerge the victor in the long run?
Will the Congress of South African Trade Unions (Cosatu), now dominated by public-sector unions, accept this expansionary austerity?
I think so, mostly because of the federation’s faded power and the economic reality of life in the pandemic. Besides, organised labour’s most potent tool of protest is impacted by the continued enforced restrictions on large gatherings and crowds, even with the move on Monday to lockdown Level 1.
A problem in need of a solution
As for expansionary austerity, the upshot of Mboweni’s speech is that the country’s substantial – and growing – debt is a problem that needs to be addressed, and this means sharply reducing government spending.
Does he have a point?
When his argument is considered from the fiscal perspective – yes, he does. He even makes a compelling argument.
According to National Treasury’s 2021 Budget Review document, a three-year inflation-linked agreement would raise the total shortfall to R112.9 billion by 2023/24 – while an agreement similar to the one achieved in 2018, one percentage point higher than inflation, would create a compensation shortfall of R132.7 billion (or 2.2% of GDP).
Effectively imposing austerity measures intended to reduce the growing public service wage bill, in a year of wage negotiations, is reminiscent of the (Thabo) Mbeki administration’s ability to challenge organised labour on their showboating or call their bluff by putting calculable evidence on the table.
Now, as it was then, the unions came up short and were reduced to unhappiness.
For example, last week Cosatu lamented the budget as being disconnected from the experiences and lives of ordinary South Africans in this time of the coronavirus.
Where is the unions’ counter-argument?
Beyond its disappointment however, the federation is yet to advance a counter-argument that is supported by evidence on why the budget has failed the workers and their members in the public service.
It could be that unions are still licking the wounds inflicted by the December 2020 Labour Appeal Court ruling that dismissed public sector unions’ application to compel government to implement the 2018 wage agreement that would have seen an increase ranging from 4.4% to as much as 6% depending on the job grade.
In many ways, the same ruling emboldens Mboweni’s stance on the public service wage bill; beyond debt consolidation, he reminded public servants and unions that while the government aims to fulfil its role as the employer, Treasury’s main role is to safeguard public finance.
While the markets loved and rewarded the boldness of the 2021 budget, there is no doubt that Mboweni has put himself in the path of the unions’ wrath.
Within the alliance his budget remains a highly debated topic, since it is perceived as pro-business while punishing the workers and the poorest in our society.
Consequently, this could mark the end of the honeymoon period between Cosatu and the current administration.
I say that because, as a tool that shapes political debate, the 2021 budget has framed fiscal consolidation as the main focus, identified spending on growing wages as the problem, and set the agenda as one that supports a quick return to economic growth as outlined in the economic recovery plan.
I am inclined to wonder if there exist institutional arrangements that will see what has been tabled in the budget and what exists in the recovery plan being implemented.
Moreover, is austerity on the public service wage bill going to slow down public spending and debt?
The predominant view seems to hold that it will.
It’s all in the framing
I am of the view that in these extraordinary times of the pandemic, where ‘the usual or normal’ can never be used again, the greatest service a public servant can render is to shift what austerity means to them by focusing not on the micro – but the macro.
In other words they should curb entitlements, because a growing national debt means a darker future for all as it creates a legacy of debt for the next generation.
Listen to Ryk van Niekerk’s interview with Busa CEO Cas Coovadia (or read the transcript here):