Mboweni and unions must agree on wage bill for the sake of all of us

When a minister of finance, who once was the minister of labour, proposes a huge cut to the government’s personnel budget, he surely goes into it with eyes wide open. So when finance minister Tito Mboweni this week took the unexpected step of pencilling a R160bn cut for the public sector into the budget, he cautioned that there would naturally be agreements and disagreements between the government and labour. But he hoped, he said, that “eventually government and the public sector workers will find each other … for all our sakes”.

SA had better hope that they do despite the strident and immediate strike threats with which Cosatu and the Public Servants Association (PSA) inevitably greeted Mboweni’s budget.

The gap between government spending and government revenue has been widening each year, requiring increased public borrowing. The government’s total debt, at almost R3-trillion, is four-and-half times what it was a decade ago and is heading towards R4trillion over the next three years. The interest that has to be paid on this debt now consumes 15c of every R1 the government collects in taxes — money that should be going to providing clinics, classrooms and roads.

There is no alternative but to slash spending. And the public sector wage bill, which makes up more than one-third of total spending, is the obvious place after years of cutbacks in everything from hospital linen to textbooks, as well as a freeze on hiring. Freezing posts may sound sensible, but most of the 1.3million government employees are teachers, nurses and police and cutting their numbers is not necessarily a good idea. Nor is the voluntary severance programme, which the government tried to implement without success a year ago. Such a programme would inevitably have led to some of the best and most experienced civil servants leaving.

Rather it is the wage bill that must be cut. In a bleak economic environment, private sector workers have been experiencing widescale retrenchments while public sector workers have continued to receive increases well above inflation — the cumulative real increase is 40% over the past dozen years — and have not had to face retrenchments.

The government is seeking to reopen the wage settlement for the coming year to take the increase down from above inflation to a percent or two below inflation. So it is proposing a much lower increase, not necessarily a pay cut in monetary terms.

Together with increases at or below inflation over the next couple of years, this would give Mboweni his R160bn. The credibility of his budget framework depends on it, as, most likely, does SA’s investment grade rating with Moody’s.

The unions need to be willing to talk about it, despite their public posturing. It is time they looked to the interests of SA’s 58-million people, especially its poorest, not just to their own interests.

Equally, public office bearers such as MPs and cabinet ministers must be willing to make sacrifices too, as Mboweni this week urged them to.

If it does come to a strike, President Cyril Ramaphosa and his cabinet must stand firm and face down the unions that have wielded ever more power in SA’s public life.

There are many dedicated and excellent public servants and we need more of them, not fewer. But we need them to get pay increases in line with what SA can afford.

It might be tempting to call on Mboweni to increase taxes instead, especially on the wealthy, but the evidence of recent years is that tax hikes have been unsuccessful in raising the desired cash and have damaged growth.

With the economy growing at 1% at best, SA can’t afford any more damage to its economy — or indeed to its public service delivery.

It is time [the unions] looked to the interests of SA’s 58-million