Only growth can pull SA out of its economic nosedive
The public wage bill is dire: for every R100 the government raises in taxes, it spends about R46 on salaries, and this is not sustainable
As finance minister Tito Mboweni prepares to deliver his medium-term budget policy statement (MTBPS) in parliament on Wednesday, he may consider the full text of a letter left by one outgoing British chancellor to his successor, as a useful summary of our predicament: “I’m afraid there is no money”.
Our national fiscal hole is, frighteningly, even deeper than that, because there is also no room to raise taxes on already overburdened working families, and no room to raise more debt.
That’s why Mboweni’s number one priority must be to prevent a blow-out of the deficit and to stabilise the national debt. This will require deep spending cuts.
This must be the primary goal of the speech if the government is to retain (and hopefully, reclaim) creditworthiness and the credibility that is a prerequisite for investment and growth.
Growth, and only growth, can pull SA out of this economic nosedive. Despite all the lip service paid to a “growth agenda”, President Cyril Ramaphosa has essentially pursued a strategy of delaying hard decisions for as long as possible by borrowing more money. Procrastination works for a while, but it is now starting to have appalling consequences. For as long as borrowings grow, so do interest payments, and that crowds out basic service delivery spending.
It is indefensible to continue to bail out zombie state-owned entities (SOEs) and support a bloated public sector while cutting spending on healthcare, education and social support. The crisp choice is this: more money for SAA, or more money for hospitals and clinics. Mboweni would carry the support of the whole country if he were to send a loud and unmistakable shot across the bow of every zombie SOE by announcing that SA Express is to be shut down forthwith, and that SAA is to be put into business rescue.
But the real elephant in the room is the public wage bill. For every R100 the government raises in taxes, it spends about R46 on salaries. At this rate by 2022 the public salary bill will be R713bn. This is not sustainable.
For too long the government has avoided a difficult discussion with public-sector unions about the cost and composition of the public wage bill. This discussion, and some resolution of it, is no longer avoidable. It is time for decisive action in the interests of the country.
Earlier this week, the DA presented a credible plan to stabilise the deficit and the national debt over the next three years. The plan would ensure that the deficit does not go beyond the 4.5% level announced by the minister in February.
The centre of the DA’s proposal is a deep cut to the public wage bill. The party has done detailed work on this proposal to best ensure essential frontline public services are not affected, and as many jobs are saved as possible.
Our proposed cut is achieved by reducing the number of the highest paid head-office management staff in the public service by 9,200 posts, saving R29.4bn, and with a three year wage freeze on all nonfrontline wages, saving R138.6bn. This means that the true frontline heroes of the public service — nurses, doctors, teachers, social workers and the like — will not be affected.
To save the essential services on which the public-at-large and particularly the poor rely, this cannot be delayed. The government must act in the interests of the whole country by cutting the public sector wage bill, ending zombie bailouts and reining in the national debt.
• Hill-Lewis is a DA MP and shadow finance minister.