State pensions holiday ‘an option’
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The government must consider implementing a three-year payment holiday on the public servants’ pension fund to raise the money it needs to pay public sector wage increases, economist Duma Gqubule told the Public Service Coordinating Bargaining Council at the weekend.
The government must consider implementing a three-year payment holiday on the public servants’ pension fund to raise the money it needs to pay public sector wage increases, economist Duma Gqubule told the public service co-ordinating bargaining council (PSCBC) at the weekend.
After the parties hit a deadlock during wage negotiations at the PSCBC on April 23 the parties agreed to embark on facilitated negotiations.
On Monday night the parties were still locked in a marathon facilitation process, where the unions hoped the employer would table a revised offer, “but nothing has happened so far, we are still waiting to hear what the employer’s offer will be”, Public Servants Association of SA assistant general manager Reuben Maleka said on Monday night.
Speaking to Business Day on Monday, Gqubule, who made a presentation during a facilitation meeting at the bargaining council on Sunday, said the payment holiday was the “least bad option” and would negate the need for austerity.
“The wage bill must not be looked at in isolation. Austerity will decimate the public sector, which is in a bad situation now, and make it difficult to deliver basic services.
“We should look at means and ways to solve the issue,” said Gqubule, a founding director at the Centre for Economic Development and Transformation.
The unions have rejected the state’s formal offer of a 0% cost of living adjustment for the 2021/2022 financial year. The unions, which have already taken the government to court for defying earlier wage agreements, are demanding a wage increase of the consumer price index (CPI) plus 4% across the board for 2021/2022 — above the 3.2% inflation rate recorded in March and also higher than the 4.3% average the Reserve Bank expects for 2021.
Public service & administration minister Senzo Mchunu has said the government is broke and heading towards a fiscal cliff.
The Government Employees Pension Fund (GEPF) is Africa’s largest pension fund with more than 1.2-million members and assets worth about R1.61-trillion.
Gqubule said a sovereign state that issues its own currency cannot fail to meet its obligations in its own currency “unless it chooses to do so”.
He said the Bank could finance government spending and Eskom debt at no cost or on favourable terms. “The Bank of England contributed 92% of the UK’s £350bn Covid response [and] 18 emerging markets implemented QE [quantitative easing] for the first [time] during the crisis — including Ghana, Guatemala and Indonesia. The IMF said there was no capital flight or depreciation and encouraged other countries to do the same,” said Gqubule.
Other options, said Gqubule, were to reduce the Public Investment Corporation’s (PIC) funding to 50%, write off state and state-owned enterprises’ debt of R722bn, use cash of R140bn to fund fiscal stimulus and release assets of R1-trillion. He said the PIC accumulated surpluses of R416bn between 2013 and 2020, which equates to about R60bn a year.
Proposed reductions to the wage bill, as highlighted in the 2021 Budget Review, amount to R303.4bn from 2020/2021 to 2023/2024. The proposed reductions consist of the R160.2bn announced in the 2020 budget and an additional R144.2bn over the medium term. The wage bill will account for R1.97-trillion, or 32%, of consolidated government expenditure over the medium term.
Gqubule said SA needs an alternative macroeconomic policy to finance increased employment in the public service. “High GDP growth results in higher government revenue and spending. Between 2002/2003 and 2008/2009, the wage bill as a percentage of government spending declined to 32.6% from 36.4% as rapid GDP growth and bumper government revenues and spending increases allowed the public service to comfortably absorb 128,217 new workers,” he said.
“However, the government’s current macroeconomic policies will result in an increase in the public sector’s share of national output and government spending, even if the planned R160.2bn cuts to the public sector wage bill are implemented.”
This is because the “unprecedented levels of austerity will exacerbate and prolong the Covid-19-induced economic depression and the collapse of government revenues”.
“The result will be a collapse in state spending. With a lower denominator, the bottom part of the public service wage bill to government spending ratio, the share of the public sector wage bill will increase. This will then start a never-ending cycle of collapsing government revenues being used to argue for more austerity and cuts to the public sector wage bill,” he said.
“Second and third rounds of austerity will then result in lower GDP growth, a collapse of state revenues and more cuts to the public sector wage bill. The end game will be a failed state.”