An austerity budget for public servants

Is the closing of the wage-increase tap about curbing entitlement or quashing reasonable expectations?
The author believes the greatest service a public servant can render at this point is to shift what austerity means to them by focusing on the bigger picture. Image: Moneyweb

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.

Pro-business?

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.

Read: Public sector wage bill might catapult the alliance into chaos

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):

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Unions suffer from a dreadful identity crisis which is reminiscent of an adolescent transitioning into adulthood. They adopt a political party persona and abandon that only to become a union again. They have neither the prudent knowledge nor the strategic leadership to navigate themselves through the contemporary, complex and dynamic economic factors at play in the broader commercial spectrum of South Africa.

The human resource constituents of the the private sector took pay cuts and some of the very resources were decommissioned from private labour. Yet unions demand salary increases for their workers. Their level of entitlement is repulsive at best.

The kind of labour they are offering or representing is not as valuable as 20,30,40 years ago. There are bots and machines with a processing power that can render hundreds of thousands of workers obsolete, easily!
Retired United States Army, General E. Shinseki said it best when he said, ‘If you do not like change, you will like your irrelevance even less.’
Unions are becoming irrelevant by the day.

From what I can see most ” public Servants ” are grossly overpaid compared to their dismal performance. Most of them would not be able to hold a similar paid position in the private sector some not any position at all.

There will be much talk and much debate however at the 11th hour government will bend to the unions demands. That’s what happened last time. Ask Pravin.
Anyway they need the votes and the 5.8% will pay. Easy-peasy stuff.

For the sake of the country I hope you are wrong but, based on past performance it is likely that is what will pay out. The ANC regime’s pouring billions into SAA at the expense of the poor tends to confirm the suspicion. Time will tell.

The public sector grant recipients (I won’t call them workers) are the core of the ANC’s herd of vote cattle. They will not be upset.

Let’s face it – the salaries of most public workers, especially the Cosatu-aligned unionised workers and teachers, are nothing more than glorified social grants. When we compare the costs to the benefits for taxpayer, it is clear that 60% of the public sector wage bill is a donation, and not a salary.

We have way too many parasites in the system. From the politician in Luthuli House who consumes value, to the BEE parasite with his loaded tenders, the municipal councillor with his sideline business, the government employee who colludes with the tenderpreneurs, the SADTU teachers who fail the students, the municipal worker who sells the sewerage pumps as scrap metal and the ward councillors who destroy jobs by organised riots and protest action.

The situation in South Africa resembles a farm without an owner. There is no boss in control. No accountability and no business plan. It is a feeding frenzy of the workers. Every man for himself until everything has been looted. Eventually, when the party is over, the workers will turn on each other, as shown at the Zondo Commission.

Succinctly and eloquently drafted comment on the dire state we find ourselves in.
Sadly as many people espouse – if you don’t like the current situation – change it. Problem is, how does 5,8% of the tax paying populace change anything against 80% leaches??

Strongly agree with your first paragraph, other than to suggest that the benefit against which costs should be measured is not the benefit to the taxpayer, but rather the benefit to the all country’s inhabitants (legitimate or otherwise, human or legal persona, taxpayer or not, voter or not) who rely (often in vain) on the public service.

To take your ‘glorified social grant’ point further, in the interests of equity and fairness should these glorified social grants be quantified, ringfenced and then be be more equitably distributed to those who currently qualify for the real grants, possibly extending the net further to catch others in need, including educational needs?

I support the social grant if it is affordable. The debt/GDP ratio and the budget deficits tell us that we cannot afford the government employee social grant. We are bankrupting the nation, stealing the food from the table of our children, to enrich the obese and lazy Cosatu members.

Where is the social justice in that?

Finance Minister Tito Mboweni has put his foot down, boldly declaring to labour that the public service wage increase tap has been closed.

Sounds very promising, but then he said the same about funding the SAA.

The outcome of the this year’s public sector wage claims is a tipping point: A wage freeze as proposed by Mboweni et al gives some hope that SA will emerge from its debt crisis at some point, but if the unions get their way this time there is no hope at all.

The brilliant economist, Russell Lamberti, together with Philip Haslam described in their book, “When Money Destroys Nations”, how the economy goes down a series of “waterfalls” on the way to hyperinflation. Every waterfall is a point of no return. Things cannot improve, or go against the current, once it goes over the waterfall.

The non-implementation of austerity measures is such a waterfall. Previous waterfalls were labour unions determining state policy through the Tripartite Alliance, cadre deployment, BEE laws, the Mining Charter, Eskom debt, SAA debt, Denel debt, the bankruptcy of most municipalities, combined with the state guarantees to all the institutions.

The Polokwane conference was another important waterfall moment for the country. The GEPF is the last waterfall between our economy and the vast ocean of worthless currency. Treasury has recently put the GEPF “in control of the special purpose vehicle” that owns the bad debt of Eskom.

Ramaphosa is fighting against the current, trying to manoeuvre back up the waterfalls in his leaking inflatable dingy with the sputtering 20cc outboard motor.

It is time to inflate your life vest, my compatriot!

As experienced many, many times before, the ANC say one thing, then do the opposite. We’ll witness a host of “get tough” statements about the public service wage bill, but after the dust has settled, we’ll find that the ANC relented and awarded the public servants a CPI plus 3% increase. Also, as with the Escam episode two years ago, they’ll also get a R10,000 tax free bonus as an inducement for them (public servants) to refrain from torching infrastructure.

This is what I will do

1. Cut their holidays to 20 days
2. No more ‘housing’ allowance
3. Lifestyle audit on each and everyone
4. Illegal to engage in any business with the regime on any level including spouses/partners
5. Vigorous performance reviews annually
6. No more increases

People have lost their jobs, their homes and tremendous number of pets abandoned yet these regime workers are lazy, overpaid and many are involved in corruption!

No more medical aid. Let them go to govt hospitals.

The private sector should be so lucky. Take the Hospitality Industry. Those that were not terminated, retrenched, whatever; had to in many cases take pay cuts or face termination.

Covid-19 provided an opportunity for ruthless employers to trim their workforce and get rid of unproductive people. All those nearing retirement age found themselves out on the street (really) and high paid executives either got an increase or a pay cut. Increases this year in the private sector are a no-no.

The public sector should really get down on its knees and thank the good Lord that they still have jobs never mind an inflationary increase.

According to a graph that was printed in some gazette South Africa has one the highest paid civil servants in the world so, I do not see that public spending or debt will slow down.
If the unions had their way and the spoiled workers pay was increased substantially the inflation rate would have increased considerably which would have left the workers in the private sector suffer as the workers in the private sector are lagging behind as far as remuneration is concerned.

A start would be to smoke out all the ghost workers (central and local government). The same applies to social grant and pension recipients by the way.

Once every few months come sign for your salary. The signature exercise includes a fingerprint scan and facial ID scan.

60% of public servants need to be fired, so an austerity budget for public servants is just the start.

So all government workers are useless and lazy? You forget those useless lazy government workers nurse you back to health, educate your children. You phone them in the middle of the night when a criminal is breaking into you house or stealing your cattle. Some even phone you from their private cellphones because there is not enough airtime on their official cellphones. You forget they have a wife and children who can never be sure if they will see him again tonight because a trigger happy criminal may just open fire just because he wears a uniform while he was responding to you, to keep you, your family and belongings safe. Many of those government workers spouses\partners lost their jobs in the private sector, but they still have families to keep, debts to pay and also have to deal with increased petrol and food prices, just like you. They are men and women, not robots to make life easier for you. You think government workers earn huge amounts of money? Does R22 000 after 26 years of service sounds huge to you? Do not assume you know how they work, do not assume you know anything about their lifestyles and don’t marginalize. It is above me how educated people still think the wage bill is high because of presumably high salaries, and has nothing to do with corruption. Put yourself in a proud, hardworking, diligent policeman’s shoes (also a government worker, remember), and tell me again he is not entitled to a raise (or a medical aid).

You are spot on that the hardworking , diligent Policeman deserves a raise :The Problem is that his Fellow Goverment Employees in other Branches are overpaid Leeches who are effectively stealing his prospects .
There are simply too many Money Suckers of the Govt Payroll and Taxpayers have had enough.
Employ half the civil service and pay them well. Singapore is your perfect example , but we simply have too many unproductive Leeches practicing the Communist collective ideal: so we all suffer incl those who deserve more .

End of comments.

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  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products Mar 2021 2.90%
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