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Job cuts are not an option, Minister Mboweni

But freezing public sector wages is.

The South African government is faced with a dilemma: public servant wages are the fastest-growing expenditure item in its budget, but with the unemployment rate at over 29%, retrenchments and salary cuts are not in favour.

In the first half of 2019 the average annual wage per civil servant increased by 10.4%, compared with 2.1% in the private sector. On average their salaries have continued to increase above the inflation rate over the past decade.

As indicated in the graph below, remuneration has widened about 40% in real terms over the past decade.

Public service versus rest-of-the-economy remuneration

Source: Statistics SA

The combination of lower revenue and increased spending will widen the budget deficit to an average of 6.2% over the next three years.

Government’s income compared with its spending has not resulted in long-term growth, and increasingly undermines confidence, pushes up interest rates and reduces the space for new priorities.

In October last year, the Medium-Term Budget Policy Statement (MTBPS) noted that the South African economy needed R150 billion to achieve its fiscal target over the medium term.

A bleaker fiscal outlook

However, based on the International Monetary Fund (IMF’s) statement at the end of January, SA faces a “somewhat bleaker fiscal outlook” than the one presented in the MTBPS.

In its recommendations, the IMF noted that government plans to decrease the public sector wage bill.

“To this end, the authorities plan to stabilise and improve the fiscal position through several measures, including reducing the public sector wage bill and additional revenue measures,” the statement reads.

It adds that the government is “committed to prudent fiscal policy and fiscal sustainability, while creating the required space for large infrastructural projects”.

The fiscal deficit is projected to increase to an average of 6.2 % over the next three years from 4.3% in 2018.

This recommendation leaves an assumption that in the upcoming 2020 budget speech, Minister of Finance Tito Mboweni may have a ‘surprise’ on how the government plans to ‘cut down’ on this vexing expenditure.

Because what is certain is that South Africa needs the public wage bill to align with productivity in the country. However, labour analysts are not in favour of job cuts.

The alternative, Mr Minister

Mining and labour analyst Mamokgethi Molopyane suggests that government put a cap on public servants’ wages for three to five years.

“The government is really in a tough place, as it cannot continue to increase government employee wages year on year at the rate it is doing now,” she says.

The alternative is that it comes to an agreement with employees for the next couple of years, she adds, acknowledging that this is a tough one for government as it is in an alliance with Cosatu.

“But eventually someone in government needs to be the tough guy and cap the wage bill,” says Molopyane.

“If it is not capped, the unions run the risk of the government saying we are going to stop extended public works [programmes] and we are going to freeze some of the positions in the public sector and we are going to reduce the number of people employed – which is an even worse outcome than putting a cap on the wage bill.”

Another labour analyst, Terry Bell, says the best place to start to cut public wages is in the cabinet. “[South Africa] still has the largest cabinet that you can find anywhere … it is huge. So if they want to set an example, perhaps that is where they should start.”

Although President Cyril Ramaphosa has reduced the number of ministers by eight, South Africa’s executive remains the largest.

India has a population of about 1.4 billion, and its cabinet is smaller than that of SA, despite our considerably smaller population of over 56 million.

SA has the largest cabinet in the world

Source: Citibank

Downsizing the cabinet would result in substantial cost savings. It consists of 64 members – including the president, deputy president, ministers and deputy ministers.

And according to Africa Check, deputy ministers earn more than R1.9 million a year, ministers R2.4 million, and the president and his deputy earn over R2.8 million. These figures excludes benefits such as free housing, travel and domestic staff.

Bell adds that once government has downsized the cabinet, it can focus on Eskom, but in the same breath, he says workers should not be the ones to suffer.

“We have over-staffing in places such as Eskom, but who is responsible for that?

“I think labour unions are right when they ask ‘Why is it that the workers always have to pay for the incompetence and mismanagement caused by corruption?’”

Bell says cutting the public sector wage bill is not an option because this would increase resentment and cause greater instability in the country.

“What is needed is to look at trade and income policies right across the board, and at what the IMF and World Bank say we should do,” he says.

Roelof Botha, economic advisor at Optimum Investment Group, says although it is debatable, the bulk of government employees add no value to the GDP in the country.

“There are too many people in this country who go to work in the morning and go home in the evening and have not added a single cent of value to the economy,” Botha says.

How Mboweni plans to reduce the wage bill will remain a mystery until February 26, when he delivers his budget speech. But one thing is certain: the speech will be scrutinised – not least of all because the IMF suggested government put forward recommendations to achieve both fiscal consolidation and reprioritisation of expenditure, to ensure the stabilisation of debt by 2025/26.

It does however acknowledge in its statement that “implementation of the proposed wage bill measures and economic reforms require politically difficult decisions”.

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Either cut the government wage bill or privatize SOEs or government needs to get rid of assets such as land and buildings or government has to cut maintenance or bonuses or refinance debt. But those are the only realistic options … or cut the number of government employees.

So the incredible pain is coming unless something is done to avoid a credit downgrade. SA’s debt and unemployment and weak economic growth and inflation will grow exponentially worse unless government cuts back. 29,000 government employees earn over R1 million.

Google Party almost over for government’s 29,000 millionaires

Where’s the mentality?
Our tax money is used to pay overstaffed Parastatals and a useless Government when all the time service delivery is lagging

“Comrades,”think like business people not like backward uneducated Civil Servants that you are

Surely someone amongst you is enlightened and educated enough to realize an overstaffed Government and Municipalities ARE NOT SUSTAINABLE!!

Ask your Minister of Education who cannot count. It’s a lesson taught at school, which forms part of the curriculum

Think and think again or pretty soon the IMF will be thinking for you!!

Either cut the government wage bill or privatize SOEs or government needs to get rid of assets such as land and buildings or government has to cut maintenance or bonuses or refinance debt. But those are the only realistic options … or cut the number of government employees.

So the incredible pain is coming unless something is done to avoid a credit downgrade. SA’s debt and unemployment and weak economic growth and inflation will grow exponentially worse unless government cuts back. 29,000 government employees earn over R1 million.

Google Party almost over for government’s 29,000 millionaires

At last our country has reached the point of no more easy money, but more job losses will continue. Whatever will be done to rectify our finances will be wrongly done, simply because of a total shortfall to comprehend the true implication of mismanagement over 25 years.
Our dear minister Mboweni, like all things in life, if the money is finished, you can say what you want, you will starve just like Zim and Ven. Good luck on the promise of no job losses, someone in the private sector will loose their job first, but eventually it will catch up to government employees, even if they do not like it, just like next door to the north (if lucky R2000/month).

At last our country has reached the point of no more easy money, but more job losses will continue. Whatever will be done to rectify our finances will be wrongly done, simply because of a total shortfall to comprehend the true implication of mismanagement over 25 years.
Our dear minister Mboweni, like all things in life, if the money is finished, you can say what you want, you will starve just like Zim and Ven. Good luck on the promise of no job losses, someone in the private sector will loose their job first, but eventually it will catch up to government employees, even if they do not like it, just like next door to the north (if lucky R2000/month).

Everybody had a job in the old Soviet Union, and for exactly this reason, its economy was not sustainable. The state cannot give work to everybody, or even to the numbers of public servants we have in South Africa, and have a successful economy. Employers have to be able to hire and fire at will, as in the United States. Job cuts in the public-alleged-service are not only an option, it is the only remedy that can save SA.

Yes, our Cabinet does need drastic cutting. But how can you then have an SAA needing 200 people to do the same job as 100 people in other airlines? Ridiculous. Same with Eskom: 66% overstaffed. Sorry, Melitta and Terry Bell, but to save South Africa, workers’ jobs will have to be cut too. Just trimming the Cabinet ain’t gonna do it.

“I think labour unions are right when they ask ‘Why is it that the workers always have to pay for the incompetence and mismanagement caused by corruption?’”

I think taxpayers are correct to say that labour unions cause anarchy if they don’t get their way while turning a blind eye to corruption.

The Unions are fools. They do not complain while receiving their inflated salaries while not working. No complaints about the R 88 000 average bonus per employee in 2018 and R10 000 after tax for each of the 46 000 employees in 2019-thanks to the largesse of the corrupt ANC by voice of Cde Gordhan who seem to run with the hares and hunt with the hounds- or when receiving generous housing loans of about R9 billion. Waste of time to say this though because the same meaningless drivel appear on ME every week.Africa do not listen to sense.

No job cuts no solving the problem. Capish?
The government will have to get their heads out of their buts.

I think labour unions are right when they ask ‘Why is it that the workers always have to pay for the incompetence and mismanagement caused by corruption?

Who did they vote for? Who do they, through their labour federations support year in and year out?

Based on the fundamental rule of democracy, “you get who you vote for” I can’t see anyone else but the worker pay for incompetence. Their unemployed comrade has been paying for a number of years already for their voting decisions.

“I think labour unions are right when they ask ‘Why is it that the workers always have to pay for the incompetence and mismanagement caused by corruption?’” The answer is that they benefited from the incompetence and mismanagement by getting a job that they shouldn’t have had in the first place. Also, it is criminal to correct two wrongs by ultimately forcing taxpayers to pay for the incompetence of management, workers and the ANC government.

To say ‘Job cuts are not an option’ is foolish.

There must be wage cuts and job cuts.

The last 25 years have been ONE BIG PARTY for the ANC, who for the first time, got their hands on the public purse. Obviously it quickly turned into one massive orgy of self-enrichment and irresponsible spending. It is evident that the big party is about to end and the hangover will be a painful throbbing headache with a lot of throwing up and regret about the wild night before. And it is not going to be pretty.

It always surprises when you hear an individual or grouping insisting on having their cake AND eating it. And then demanding more cake, or others’ cake, or apportioning blame to unrelated parties for the lack of cake. Insisting that there is more cake but to just be patient for delivery.

And then the old adage rings true: This. Is. Africa.

I think everything should be “an option”. You seem to be saying that cuts should begin elsewhere first, but just cutting the top management won’t be close to enough. It is common sense that if expenses are out of control, one has to cut back, not merely cease further absurd increases!. Unfortunately, political expedience will once again trump common sense so in fact there will be not only no cuts but no freeze either. (Perhaps some window dressing such as inflation plus 1% only, and any strikes only allowed during workdays :)).

The ANC is the one major reason why our unemployment figure is at record-highs and still rising. Their communist policies cause mass unemployment. Luthuli House is the driver of unemployment, the decimator of job opportunities, the enemy of the unemployed.

The Tripartite Alliance represent the parasitic political elite who extort jobs for themselves and who constantly steal a bigger slice of a shrinking cake. When they say that job cuts are not an option, they are referring to their own jobs, because everybody else has lost their jobs already.

The deplorable crowd in Luthuli House are frantically clinging to their own privileged positions because they realise that they actually are unemployable themselves. Here we have the unemployable leading the unemployed in a search for jobs. What a circus!

“I think labour unions are right when they ask ‘Why is it that the workers always have to pay for the incompetence and mismanagement caused by corruption?’”
They have to pay because they voted the corrupt ANC regime into power – that’s why!

Payments to surplus Government, Eskom and other SOE staff are just another form of social grants. A talented person would back their skills and find a job in another sector but anyone not this bunch. All this does is entrench useless people and their ways.

Well, I applied for early retirement and sadly, the rumours do the round that government doesn’t have money to fund the non-penalisable early retirement.

I went and calculated the government’s contribution, up to retirement date,
pro rata 13th cheque, plus I included a severance package. The state would still save R1.50 for every R1.00 paid to “get rid of me”. I did not include the current scarce skills allowances, danger pay or housing allowance. The saving for the state will therefore be actually higher than the calculated R1.50 saving. I doubt whether they have made that calculation, though.

It’s actually for every R0.50 paid, it’s R1.50 saved, excluding fringe benefits.

Rubbish! Hard as it may be – SOE’s need to shed jobs that were not there to begin with.

Solutions:

First verify ghosts by way of a good old payroll audit. You want to get paid? Sometime in March a visiting team at your offices will let you present the Feb payslip and sign in with facial and fingerprint recognition.

Then let’s get at least 80% of the non-ghost workers to do 80% of what they are paid to do. (baby steps).

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