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Public sector wage bill might catapult the alliance into chaos

Could be the catalyst for Numsa and the EFF to rally behind Cosatu.
A case can be made that workers are not responsible for current economic conditions or rising government debt. Image: Moneyweb

There is simmering unsettledness within the tripartite alliance, thanks to Finance Minister Tito Mboweni’s announcement of public spending cuts in his budget and President Cyril Ramaphosa’s comments about trimming public sector wage bill.

Prior to the 2020 budget there had been little honest reflection within the (ANC, Cosatu and and SACP) alliance about the rising cost of civil servant remuneration relative to government spending and the declining tax base.

Mboweni’s delivery may have softened the incivility. We saw him tread carefully by couching his statements in the practicality of the struggling economy. But the way the Budget Review documented the hard truth in contextualising the crisis was unsparing.

“Civil servants’ salaries have grown by about 40% in real terms over the past 12 years, without equivalent increases in productivity,” it states.

“Growth in the wage bill has begun crowding out spending on capital projects for future growth and items that are critical for service delivery.”

The reality of the economy

South Africa’s crisis has erupted. GDP growth in Q4 of 2019 was a mere 0.2%, the lowest reading since the 2008 global financial crisis, while the overall economy contracted by 1.4% in the same period. Fast-forward to three months into 2020, and the economy is in a technical recession.

The unintended consequences of this low level of growth has manifested in two ways:

  • A substantial decline in revenue collection, with government expecting to collect R63.3 billion less revenue than projected; and
  • Increased state borrowing to fund operations, with debt servicing costs accounting for 15% of every rand the government collects.

Correspondingly, the incessancy of load shedding in first months of 2020 has worsened the grinding towards a halt of the economic machine. We can expect even weaker GDP and economic performance in the future.

Whichever way you look at it, we are in deep trouble. Unless action is taken.

Yes, I’ve previously alluded to bold action being required and having someone from the ruling party stand up and loudly declare that this can’t go on. I am therefore pleased that the finance minister has at last revealed himself ready to wage war from within the alliance. And it seems he has the backing of the president, for now.

Read: The ANC looks like a schizophrenic alchemist

Ruinous public spending

Already, the unions have raged against Mboweni and Ramaphosa’s announcements, warning government not to change or freeze the current public service wage agreement of 2018. The alliance politics can be made or broken here – specifically with regards to Cosatu’s relationship with the ANC because within the federation, public sector unions are now the prominent power and influence how issues are engaged within the alliance.

Now, those intentions were made known by government leaders. And retort from collective organised labour was given.

Will it be government or labour that blinks first?

The 2018 agreement, an extract from which is shown below (with the 2020 increases due to kick in on April 1) was signed by 66% of all parties represented.

Source: National Treasury

I for one support government’s stance of reining in the public sector wage bill as it seeks to reduce spending which, along with wages, has increased yearly.

For these reasons, in 2018, when the agreement was reached, government conceded that it had significantly exceeded the resources allocated for the compensation of employees in the 2018 budget. Furthermore, no provision was made for substantial improvements to salaries and other conditions of service that were agreed on. Simply put, government had to now find resources to accommodate the extra costs.

A case can be made that workers are not responsible for the current economic conditions or rising government debt that includes sustaining state-owned enterprises. However, a counter argument could be raised that government spending has increased for the very reason of sustaining compensation budgets that are increasing with each round of negotiations.

What all of this reveals is that taking appropriate government action on spending, servicing debt and maintaining a ballooning wage bill requires undoing what has always been done.

Therefore, the hard stance is necessary and most applicable to the current economic situation. However, to rescind on the already-in-action 2018 agreement would a bad move by government. It should let that stand.

Cosatu may appear to be a co-opted labour desk at the moment, but it still has the capacity to mobilise. Interestingly, this particular issue might be the catalyst for Numsa and the EFF to rally behind Cosatu. It might also draw other unions, even those outside the public service, into the discussion.

And so it begins. But how will it end, and who will have the last word? We watch the space.

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COMMENTS   17

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The government is “all talk”. Nothing will happen. The government will back down as the unions are effectively in control. But to renege on an existing contract is really “bad faith”. If the government knew that they did not have the funds necessary for the wage increases, why did they go ahead and be party to the contract?
We are witnessing incompetence at all levels of government from the top down. No integrity, no accountability, no planning ability, no management ability, no ….. , just a recurring plethora of unfulfilled promises, year after year.
Moody’s … are you listening?

“If the government knew that they did not have the funds necessary for the wage increases, why did they go ahead and be party to the contract?”

Votes.

As a government worker I would not mind taking one for the team and getting a 0% salary increase to save 160Bn over three years. But what leaves a bitter taste in my mouth is that over the same 3 years Eskom and SAA are to be bailed out to the tune of about R160bn.

Feels like government workers are paying for all the corruption and incompetence. To top it all Eskom and SAA workers will probably still get their increases.

If the R160Bn saving were used to bring down government debt the taste in my mouth would be sweet.

Taking one for the team?

I work in the private sector. I am highly qualified in a professional field and have loads of experience. I have not had a salary increase since 2016. Before 2016, my and my colleagues’ salary increases averaged 2% per year. Bonuses? What’s that? Haven’t had one in more than a decade. And my story is the same all across my industry.

So let me help you here: here in the private sector, we’ve been taking ones for the team every single year for decades. The public alleged service are spoiled rotten.

Lulu, your comment is not fair. There are many extremely competent government workers out there, they take pride in their work and keep government together. But there are a lot of deadwood and useless government workers as well. Lots.
I take my hat of to Steven.

Amen. The public service has traditionally offered lower-paying jobs because of the benefits and security of service unparalleled in the private sector.

But now they want jobs for life AND buckets of cash? I can think of several responses to that, none of which would pass Moneyweb’s comment filter.

Dear Govt worker – All Govt workers are vastly overpaid and their productivity is zero. I deal with a lot of them on a daily basis. The TAXPAYERS in the private sector is paying for the bailouts -not you. The TAXPAYERS in the private sector is also paying your salary so you are not losing anything.

The Alliance is what is keeping SA backwards. Communists (in word but not deed) in bed with labour, in bed with central (corrupt) govt.

South Africa is a welfare state that is running out of income. The public sector wage bill is merely a disguised social grant. Most government workers are incompetent, unproductive, arrogant and militant. They produce nothing, they generate no income, they consume what has been produced by the private sector. The economy is shrinking because the private sector is shrinking. The government is consuming the private sector. The government entities compete with the private sector and use their tax contributions to gain the upper hand over them.

Business-friendly labour laws are the only viable protection for jobs. No government on earth can protect jobs because no government generates its own income. It merely consumes and redistributes the income that was generated by private businesses. Only the private sector can “create” jobs, and they can only do this if they are free to change their business models and fire workers as they like. This is the only road to job security. The choice is simple – we can have strong labour unions and a tripartite alliance and high unemployment, or weak labour unions and no tripartite alliance with lot of employment opportunities.

South Africa has reached the end of the road for socialism, we can take the free-market capitalist turn that Margaret Thatcher took to save GB, or we can take the road to fascism that Mussolini, Idi Amin, Mobutu Sese Seko, Francisco Macías Nguema and the Rwandan Hutu fascist political party took on their way to ruin and genocide. We are at the crossroads, and Luthuli House is smack bang in the middle of it.

Spot on. The other contributing factor is BEE. Just like apartheid was a failed attempt at social engineering, BEE is also a failed attempt at social engineering. Both theories started in the academic world, only to be turned into an unmitigated disaster in practice. Years from now, when researchers tally up the total, they will confirm that BEE failed and cost the country billions in Rands (not to mention the damage to the already tenuous racial relations).

The alliance is in total and utter chaos held together by history. Tito and Blade in the same cabinet? The ancient Jamnadas of SACP fame and Zupta CFO still trying to influence the President, SAA, Eskom etc like soviet style politburo!

I do however feel for Cosatus lower paid people-they get hammered due to THEFT by senior alliance members . Remember the two causes of SOE failure was THEFT and EMPLOYMENT OF INCAPABLE FOOLS..and some boilermaker gets nailed for this!

I hear the ANC is quite spendthrift with the idea that pensions can be used for pretty much anything. Pule Mabe addressing the Black Business Council telling them how pensions can be used for funding small enterprises, infrastructure and so on.
Public sector workers can kiss their pension goodbye as it looks like the ANC is poised to raid the funds.

I’m for that gov. employees must take a salary cut. But however be very careful. Government want to change a contract that they had already signed. If it happens once, it will happen again in future.

When has the alliance been in any other state but chaos?

of course the EFF ever ready to open its legs…

Cosatu did not speak out against the State Capturers until very late.

Neither did they object to the artificial job creation by the ANC.

Cosatu is yet to agree to productivity clauses.

The million Cosatu members receive exorbitant salaries compared to the small grants of the 8 million unemployed.

What is worrying about the Ramaphosa-Mboweni “solution” is how off the mark it is.

If one looks at the delivery/productivity of the public sector in, say, education, policing, health, then any cent spent on salaries is a grudge. If public sector (including SOE) salaries were linked to productivity, producing quality matrics, reducting crime, etc, such remuneration would be celebrated.

Similarly, regulatory officials at SARS, municipalities, Home Affairs and the like appear to be on a go-slow or actively obstructing citizens. It is imnpossible not to feel resentful and wish for some #MaggieThatcher karma.

Of course the inflated obscenities awarded to top-level ANC loyalists (D-Gs, special advisors, etc) is another sore.

End of comments.

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