RYK VAN NIEKERK: Business Unity South Africa, or Busa, released a comprehensive report regarding the public wage bill today [November 9, 2020]. The public wage bill is currently very contentious, as it is believed to be bloated and one of the reasons why South Africa is teetering on a fiscal cliff. Tito Mboweni, the Minister of Finance, has also proposed a salary freeze for all civil servants for three years to cut government spending.
Cas Coovadia, the chief executive of Busa, is on the line. Cas, thank you so much for joining me. Why did you commission this report?
CAS COOVADIA: Well, we commissioned the report because this is obviously a critical issue, and often debates are held without any objective data and objective reports on the table. We thus commissioned Intellidex to do an independent report based on National Treasury data, as well as data from the labour force survey by Statistics South Africa. We have put this in the public space as a document that can inform debate and discussion on this issue, and allow the debates and discussion to be based on independent data.
RYK VAN NIEKERK: I’ve read through the report, and it’s actually very unequivocal. It says the civil service is being paid too much. South Africa cannot afford it.
CAS COOVADIA: Yes. Look, there’s a comparison of about 43 countries by the IMF. The data shows that our civil service is paid too much compared to those countries. Having said that, we believe that we need to get together as stakeholders, first to try and agree that, on the base of the data, that is the situation.
And then, if we agree on that, to try and agree on how we actually remedy that over a period of time. These are difficult issues. They’re difficult decisions to make. But the reality is that we don’t have any money. We can’t sustain this sort of public sector wage bill. If we do not take the hard decisions, if we do not actually reduce that wage bill over a period of time, we go into further debt and then it becomes a financial crisis – and we know, we have had examples of what happened this year in financial crises.
The bottom line is we just don’t have the money to sustain this, even if we wanted to.
But the reality is that we have to ensure that we have a public service that is professional, that is productive, and that is appropriately paid on the basis of what they have to deliver and the productivity that they actually have. So that’s the discussion that we need to have.
RYK VAN NIEKERK: Is the reason for this inflated wage bill that there are too many civil servants, or that they are being paid too much?
CAS COOVADIA: The report indicates that the size of the civil service – there no real accepted template on what the size should be. And we accept that, given South Africa’s challenges, the social service delivery that is needed, the inequalities, the geographic spread of the services that need to be delivered, we probably have a civil service that’s not too bloated.
But the issue here is that they are very well paid compared to other countries. The issue is that we don’t have the money to maintain that sort of drain on the fiscus. And, if we don’t actually take the hard decisions to reduce public sector wage expenditure, we will go into a serious debt trap, which will then become the financial crisis, and we are on a hiding to nothing as a country.
RYK VAN NIEKERK: Does this apply for teachers, nurses, firemen, as well as to the more political positions within the civil service?
CAS COOVADIA: The report hasn’t gone into different categories of civil service employment. If we do engage between government, business and labour, I would think that part of the engagement is to start barrelling down and seeing which parts of the civil service are costing the most, Are they, for that cost, being productive enough? Should we be actually concentrating more on different parts of the civil service? Those are the sorts of discussions we need to have. The report hasn’t gone into that.
It has not gone into different sectors of the civil service. What it does recommend is that some sort of compact needs to be formed between businesses and government, where we start actually talking about this thing, barrelling down into this thing and seeing what we do about it.
RYK VAN NIEKERK: You’ve said that the wages our civil service receive are a lot higher than what we’ve seen in other countries. How do they compare to the South African private sector remuneration?
CAS COOVADIA: The report didn’t go into that. Just off of the top of my head, different parts of the private sector have different remuneration structures. But the difference here is that there are structures and processes in the private sector, because the private sector has to account its shareholders. There are structures and processes in place that ensure that there is productivity, and productivity for remuneration is tracked, and there’s a correlation between productivity and remuneration. So I think that’s the difference.
What’s happened in the public sector is that there seems to be no real mechanism to determine whether there is a correlation between wages and salaries paid and productivity. There seems to be no mechanism to ensure that taxpayers’ money is properly accounted for. But the report concentrated on public sector wages, and did not look at private sector wages.
RYK VAN NIEKERK: The report does not make recommendations, but what do you think is the message from this report to government? Cut the size of the workforce or cut salaries, or both?
CAS COOVADIA: Well, it could be both. And again, the report says that government, business and labour need to get together to see how best to address this. As we’ve said, the size of the civil service we’re not that concerned about. But I think all three stakeholders need to satisfy themselves that the size is what is needed, is optimal. If the size is optimal and we can all agree that we can’t reduce the size, then we’ve got to talk about reducing the wage bill. Those are discussions that we need to have.
What this report says is that certainly, from National Treasury data and Stats South Africa data, in comparison to 43 other countries our public servants are highly paid.
RYK VAN NIEKERK: Tito Mboweni, the Minister of Finance ,has already proposed a freeze of salaries for three years. It has not been well received by trade unions. Do you think Mr Mboweni and the President have the political capital to actually implement such a freeze, or even more aggressive cuts?
CAS COOVADIA: Well, I can’t answer that question. But what I can say is that we don’t have to manage …… We’re not in a situation where we have that luxury of choice. We are in a situation where even, if we move according to the medium-term budget’s framework, we’re going to have to raise more debt. We’re going to get further into debt. When we go into the market to raise the debt, we’re going in as a sub-investment grade rated country, which means we are not going to be able to compete with other countries for the cost at which we’re going to be able to raise funds. And it’s just not sustainable. That’s the bottom line.
Now, we can have all sorts of debates about that and all sorts of ideologies about that. The figures do not lie, and the figures say clearly that we are in a serious crisis. And if we don’t address these issues we will be knocking on the doors of the IMF or going looking at such options.
RYK VAN NIEKERK: Cas Coovadia is the chief executive of Busa.