State needs to cut its public sector wage bill, not increase it, says Busa’s Cas Coovadia
State needs to cut its public sector wage bill, not increase it
● Cas Coovadia, the CEO of Business Unity SA (Busa), has appealed to the government not to use the $1bn (R14.5bn) it has borrowed from the New Development Bank to create more public sector jobs.
Announcing the emergency loan last week, the Brics bank said it would be used to create and support about 700,000 jobs in the public sector as part of the Presidential Employment Stimulus.
“The critical issue in this country at the moment is to increase the confidence of investors to invest, and on the back of that to achieve sustainable growth that will create full-time jobs,” says Coovadia.
Any money the government borrows must be utilised to bring about economic growth, create businesses and broaden the tax base.
“If we don’t use additional debt in that way then what we’re doing is increasing the debt burden but not getting economic growth going or getting tax revenues in to enable us to service that debt properly.”
What SA needs is not a larger public sector but a more effective public sector, he says.
“The public sector wage bill is one of the biggest albatrosses around our necks when it comes to managing our expenditure and putting strain on the fiscus, so an increase in the public sector is not in our view the way to go, either to create confidence or get investment going.”
He says he can’t explain why, in spite of ratings agencies all saying the government needs to cut the public sector wage bill, it seems it intends to do the opposite.
“The ratings agencies have been absolutely clear about the public sector wage bill, and they’ve been absolutely clear about our fiscal situation.
“Borrowing money to increase the public service without any clear indication that this will lead to economic growth will lead to very difficult discussions with the ratings agencies and investors.
“It continues to demonstrate that we just don’t seem to be getting what we need to do to promote investment and growth.”
Has the message to the government that infrastructure investment is key to economic growth landed?
Coovadia says he thinks so.
“Government continually refers to that. They’ve got the infrastructure investment office in the presidency.
“Our appeal would be that instead of looking at the plethora of 150 or so potential infrastructure projects the office talks about, we should be identifying four or five projects that are absolutely necessary to promote growth, and then working together in some sort of public-private partnership to ensure that those come to market as quickly as possible.
“Like, finally, the issuing of the RFP [request for proposals] for the next tranche of renewables that will release significant private sector investment, as we’ve seen in previous tranches.”
The understanding that infrastructure investment is important seems to be there, he says, but there needs to be a direct link between the types of infrastructure being prioritised and economic growth.
Business’s message to the government about all this has been consistent, he says.
The question is to what extent it’s being communicated at the right level.
Busa engages with the government and
other social partners through the Nedlac labour, business and civil society forum, but there is a need for more bilaterals between them, he says.
“Just as we know government has bilaterals with labour, they also need to have highlevel, structured engagements with business.”
The partnership between the government and business has not extended beyond Covid-related issues to the extent business hoped it would.
“On the economic recovery stuff, we haven’t had sufficient high-level bilaterals with government.
“We need a small team from business and a small team from government to sit down and thrash through the critical issues related to investment and growth, and take some hard decisions related to those.”
Business has been pushing for this for eight months since handing the government its comprehensive but largely ignored accelerated economic recovery strategy.
But Coovadia thinks Operation Vulindlela, a joint project by the National Treasury and the presidency to address structural impediments to economic growth,
is a move in the right direction. “It’s an excellent initiative. It has a small team of capable people focusing on a small set of critical deliverables. They’re concentrating on that and they appreciate the need to work with the private sector to implement those.”
Even in the context of fighting the pandemic, the government-business partnership Coovadia talks about has been nonexistent in some key areas.
Nowhere is this more glaringly illustrated than in a recent study showing that the government’s catastrophic shutdown of the liquor industry had no factual basis and was entirely unnecessary.
Business has constantly urged the government “to give us sight of the data you’ve used as the rationale for your positions related to the alcohol industry, so that we know that the decisions being taken are databased and fact-based, and so the industry can proactively address issues that the data shows up,” says Coovadia.
“That data has not been forthcoming.” The study says that interventions like the curfew and limitations on mobility have a far bigger impact on reducing trauma cases and freeing up hospitals to deal with Covid cases, which the government cited as its motive, than banning alcohol.
The study was industry funded, but Coovadia says he’s satisfied that the study, which was peer reviewed by top University of Cape Town statistician professor Graham Barr, was independent.
The 19-week industry shutdown cost 200,000 jobs, R27bn in lost taxes and billions of rands in lost investment.
“The damage has been done, but the report demonstrates that, going forward, we need to do things differently. In taking decisions like this in future, all available information and data must be put on the table and shared transparently so that we all have confidence that decisions are being taken on a factual basis,” says Coovadia
He says the kind of partnership business needs to have with the government “must involve the government sharing information it has with its social partners, including business, proactively”.
He says he hopes that as a result of the report the National Coronavirus Command Council “will be more transparent in the way it works, and utilise facts and data when making the decisions that it makes”.
We just don’t seem to be getting what we need to do to promote investment and growth
CEO of Business Unity SA