Job cuts are no option to reduce budget deficit

The South African government is faced with a dilemma: public servant wages are the fastest-growing expenditure item in its budget, but with the unemployment rate at over 29%, retrenchments and salary cuts are not in favour.

In the first half of 2019 the average annual wage per civil servant increased by 10.4%, compared to 2.1% in the private sector. On average, their salaries have continued to increase above the inflation rate over the past decade.

Lower revenue and increased spending will widen the budget deficit to an average of 6.2% over the next three years.

Government’s income compared with its spending has not resulted in long-term growth, and undermines confidence, pushes up interest rates and reduces the space for new priorities.

SA needs the public wage bill to align with productivity in the country. However, labour analysts are not in favour of job cuts.

Mining and labour analyst Mamokgethi Malopyane suggests that government put a cap on public servants’ wages for three to five years.

“The government is really in a tough place, as it cannot continue to increase government employee wages year on year at the rate it is doing now,” she says.

The alternative is that it comes to an agreement with employees for the next couple of years, she adds, acknowledging that this is a tough one for government as it is in an alliance with Cosatu.

“If it is not capped, the unions run the risk of the government saying we are going to stop extended public works [programmes], we are going to freeze some of the positions in the public sector and we are going to reduce the number of people employed – which is a worse outcome than putting a cap on the wage bill.”

Another labour analyst, Terry Bell, says the best place to start to cut public wages is in the cabinet: “[South Africa] still has the largest cabinet that you can find anywhere. If they want to set an example, perhaps that is where they should start.”

Bell says cutting the public sector wage bill is not an option because this would increase resentment and cause greater instability in the country.