We have no more time, but the ANC thinks we do

There are 94 days, weekends included, until finance minister Tito Mboweni delivers his 2020 national budget. I’m presuming that will be on Wednesday February 19. Before that, President Cyril Ramaphosa gets to deliver an annual ANC statement on January 8, and a state of the nation address around February 5 or 12. By then, promised Mboweni in his medium-term budget policy statement in October, he will have found R50bn (R50,000,000,000.00) to cut out of the public sector wage bill, the first of three similar cuts designed to show our creditors how seriously we take the fiscal promises we make when we borrow money from them.

Mboweni was emphatic. “Now is the time,” he declared. “We cannot wait any longer … This year, the national debt exceeded R3-trillion. It is expected to rise to R4.5-trillion in the next three years. Our problem is that we spend more than we earn. It is as simple as that. How will we fix our problem?

“To stabilise debt, government will target a primary balance by 2022/23 … we will need to find additional measures in excess of R150bn over the next three years, or about R50bn a year. How will we do this? We will need to deal with the challenges of the wage bill, state-owned companies, executive (SOE) remuneration and benefits and fiscal leakages.”

Of the 94 days left, about 30 are holidays. Does Mboweni or anyone else around him seriously think they can suck R50bn out of the pubic sector unions right in the middle of a generous three-year wage deal in so little time? Moody’s, which downgraded its “outlook” on our last investment-grade rating from “stable” to “negative” hours after Mboweni stopped speaking, made it very clear that is precisely what it expects. If not, it’s junk immediately.

I’d be amazed if Mboweni gets anywhere close. Between speaking to journalists ahead of his budget and the actual speech, he raised the limit on ministerial cars from R700,000 to R800,000. Then last week Business Day ran a story headlined “Treasury says wage agreement with public-sector trade unions not urgent”.

The Great Backslide had begun. “The acting head of the Treasury budget office, Ian Stuart,” said the report, “said in an interview after a briefing to parliament’s two finance committees that if no agreement is reached by February, the reduction in the growth in the wage bill could be factored in at a higher level in the two outer years of the medium-term expenditure framework.

“I don’t think we can credibly have a new settlement by then [February],” Stuart said. “The discussions will have to be around what could credibly be put into the medium-term expenditure framework in terms of the rate of growth of the wage bill.”

Try another one, Ian. You have less than 90 days or everything people like you have fought for since Jacob Zuma appointed Des van Rooyen back in 2015 goes up in smoke. You lose your investment rating.

There are already “analysts” saying the rating doesn’t matter, that people will still buy our debt. And officials will say there are many ways to rein in R50bn in spending. We will see. But the rating does matter. Big time.

A senior Investec economist, Nazmeera Moola, has brilliantly grasped what the government cannot — that our finances are literally out of control, and putting off difficult decisions until “the outer years” is Treasury talk for a three-year policy holiday. Not going to happen.

Moola tracks how our 10-year sovereign bond yields (the margin required to attract buyers) have grown against emerging market peers. Pre-2015 we were paying about 1.5% more than, say, Mexico or Vietnam, to raise money in the markets. Today we’re paying 3.25%. More than double. It means that since December 2015 the extra interest on our debt has risen by R26.5bn. Over the whole life of the debt it will cost an extra R228bn.

And if there’s no progress in making cuts by February that only gets worse and we become a more expensive place to live in. We become poorer.

“The only option,” Moola writes in the Daily Maverick, “is to address the wage bill,” which has grown by R364bn since 2006 without any improvements in service delivery.

The South African Airways strike won’t have put the unions in a negotiating mood but, she warns, “we cannot promise cuts in 2021 and hope for the markets to give us time”.

And that is the tragic point. We have no more time but the ANC and its government think we do. It is out of time and out of touch.

It lives in the outer years, where nothing is ever urgent. As of today, it is 177 days since the last CEO of Eskom resigned.