There is much resting on the relationship between the government and its more than 1-million public servants.

In February, finance minister Tito Mboweni pencilled in R160bn of cuts to the baseline wage bill over the next three years. In effect, this amounted to a wage freeze for 2020/2021 and increases lower than inflation for the year or two after. This was crucial to him meeting an already large budget deficit of 6.8%.

In June, with the entire world having changed, Mboweni pencilled in further ambitious reductions to the overall expenditure envelope in the region of R230bn over 2021/2022 and 2022/2023. Even that will not be the end of it. The Budget Review warned of further cuts in the 2023/2024 year too.

Should the proposed cut to the public sector wage bill not materialise, then the next three years will have to see even bigger expenditure reductions if SA is to bring down its budget deficit and contain its ballooning debt.

“Failure to achieve these reductions will require larger reductions to wages and other spending areas in the outer years of the spending framework, and higher revenue increase,” the Budget Review warned.

The current dispute over the implementation of the final year in a multi-term wage agreement is therefore critical.

The ballooning wage bill is the making of many years of above-inflation increases agreed on by the government, turning it into a behemoth that has been outgrown only by SA’s debt.

Payments on salaries have crowded out other expenditure items, directly affecting the goods and services budgets of departments, such as money spent on schools. The salary bill has also led to reductions of transfers to provincial and local governments, which in turn directly affects what is available for service delivery.

Dondo Mogajane, the Treasury director-general, said in an affidavit filed in the labour court that if the state implemented the wage agreement, the total bill would amount to about 60% of SA’s tax revenue for this financial year.

There is just no money for it, and in the context of the Covid-19 pandemic, which has led to severe job losses, Mogajane said demanding an increase was also not in solidarity with other workers.

He is emphatic that public servants suffered no prejudice, as there have been no retrenchments and salary cuts — as were seen in the private sector — in the face of the lockdown’s economic devastation.  

While trade unions have done their jobs by ensuring that their members get the best possible benefits over the years, a moral obligation now arises and should weigh heavily on them as they negotiate for the next wage agreement.

It will take an impressive act of patriotism for them to agree to forgo earnings in real terms. This is especially so as it is not teachers, nurses or police who landed the public finances in the dwang through maladministration and corruption but those in the executive who are now appealing to those who earn a tiny portion of what they do to tighten their belts.

In the short term it will be a sacrifice, but if the government were to begin to govern well, it could bear fruit in the long term as SA traverses the arduous path of economic recovery.

The IMF is now in the picture as well after it approved its first loan to SA on Monday. The loan does not come with conditions, but SA has made a number of commitments. Among them is that it will take measures to reduce the size of the public sector wage bill.

The next round of wage negotiations for the next multiyear agreement is just around the corner. Talks are expected to start in October, and we will need a happy resolution of this year’s dispute before then.

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