Compromise on civil servants’ pay is crucial for the whole country
Ayear ago finance minister Tito Mboweni tabled a budget that pencilled in R160bn worth of savings on the public sector wage bill to cut the rapidly climbing debt burden, projecting a deficit of just under 7%. One pandemic later, the deficit has doubled, debt is spiralling towards 100% of the size of the economy and the minister has tabled a budget that relies on a total of R303bn of savings in the public sector wage bill to evade an imminent debt crisis.
But now the rubber is about to hit the road, and with public sector wage negotiations starting tomorrow, Mboweni’s budget projections are set to be tested. The outcome of these talks will be crucial for the budget, which was generally welcomed by a market that was encouraged that Mboweni is holding the line on plans to cut spending and stabilise the debt burden. He is doing so even though tax revenues are looking less terrible than they were at the time of October’s midterm budget.
The consistency was seen as important — so too was the fact that healthier tax revenues mean the government can reduce the enormous amount of borrowing it’s doing on the market, making a debt crisis that much less likely. As important was that the planned spending cuts didn’t prevent Mboweni allocating money to what matters — paying for the vaccine programme, the single most important thing needed for an economic recovery. That there wasn’t much space to spend more on lives and livelihoods — which is more of a problem than ever at a time when so many people have lost jobs and the economic recovery is so fragile — is in part because the public sector wage bill now consumes 41% of government revenue. The ever-increasing interest bill and the debt account for about another 20%.
There’s a strong case for tackling the wage bill. The strong public sector unions — now by far the largest bloc within alliance partner Cosatu — have over the past dozen years consistently seen their pay packets increase way ahead of inflation and generally well ahead of the private sector. And now, after a pandemic year in which so many in the private sector have lost jobs or had their salaries and bonuses slashed, it seems entirely inequitable that public servants have held on to their jobs and their full salaries — and are asking for more.
The savings the budget projects would require a wage freeze over the next three years — in other words, no cost-of-living increases for public servants — as well as a reduction in headcount (through voluntary packages and attrition rather than retrenchments). The government is clearly hoping that its hand will have been strengthened by its victory in the Labour Appeal Court, which upheld its decision to save R38bn by not honouring the final wage increases of the three-year agreement reached in 2018. But the unions have challenged that court ruling, so the outcome is yet uncertain. So too, obviously, is the outcome of the negotiations starting tomorrow.
The unions have rejected the planned pay curbs, so this could prove to be a divisive budget. It could be divisive too in its (inexplicable) intention of keeping social grant increases below inflation, and cutting the social grants budget overall. This doesn’t seem quite the time to do that.
Indeed, one can’t help wondering if Mboweni is hinting not so subtly to the public sector unions that if they are not prepared to compromise, the government will have to resort to cutting stuff that’s really important to the most vulnerable in our society.
Clearly a social compact is needed to find a wage accord that works for everyone, including public servants, some of whom are working very hard to save lives and get SA through its worst crisis in living memory. We can only hope that sense prevails and compromises will be made.
Meanwhile, it’s too soon to say if this was a good budget or a bad one — the test will be in the delivery.
A compact is needed to find a wage accord that works for everyone