EDITORIAL: Pay hike is pie in the sky

As if to highlight how out of touch it is, the Independent Commission for the Remuneration of Public Office-bearers has recommended to President Cyril Ramaphosa to hike by almost 4% the pay of public office-bearers such as MPs and ministers.  

The recommendation by the commission, set up in 1998 with a mandate to recommend pay and other benefit levels, was forcefully and rightfully opposed by the Treasury, which is in the midst of a punishing fiscal consolidation effort to pay down one of the heaviest debt loads in emerging markets.  

In 2020, the Treasury, then led by Tito Mboweni, announced a R300bn, three-year spending cut, a substantial figure that inflicted pain across the board, including on politically sensitive subjects such as housing, health and education. 

There are numerous examples of the pain across government departments: deep budget cuts in basic education have spurred activists to say it will deepen an already grossly unequal education system, especially in the public sector. Even funding for poor students through the National Student Financial Aid Scheme (NSFAS) was up for negotiation, taking an almost R7bn hit and resulting in disruptive protests at the beginning of each year at universities.  

The budget cuts are excruciating to watch in the lives of people on the ground, but there is consensus among economists, policymakers and business leaders that they are necessary. And the Treasury has something to show for its efforts. Enoch Godongwana has been presenting reassuring budgets both in terms of tone and numbers since he replaced Mboweni as finance minister in 2021.  

Debt relief

In February, Godongwana painted a picture of an improving fiscal outlook, pencilling in a debt-to-GDP ratio — widely watched by the ratings agencies to gauge the financial health of an economy — of about 72% in 2023/24, before rising slightly to 73.6% in 2025/26. Not long ago, the Treasury had been forecasting that the ratio would peak at just more than 87%, a figure then seen as unrealistic by some members of Ramaphosa’s economic advisory council. 

The numbers could have been better had it not been for tens of billions of rand in debt relief for Eskom, which is buckling under more than R400bn in borrowing racked up in a spending spree during the state capture project. Despite that extra burden, the Budget Review showed that the budget deficit is expected to decline from 4% in 2023/24 to 3.2% in 2025/26, much in line with the medium-term budget policy statement projections. The consolidated budget deficit for 2022/23 improves to 4.2% from the medium-term budget figure of 4.9%. 

Despite tangible results to show for Treasury efforts to put SA finances on a stable footing and recoup the highly sought-after investment-grade rating, there is still some way to go. The GDP ratio is high for an emerging-market economy, ask the IMF. Or watch in trepidation as 18c of every rand collected by the SA Revenue Service goes to paying down debt. That money could have been used to replace pit toilets, pay for tertiary education for poor students or buy hospital beds in one of the world’s most unequal societies.

According to data from the Pietermaritzburg Economic Justice & Dignity group, about 30.4-million people in SA live below the old upper-bound poverty line of R1,268. The entity estimates that 13.8-million people live below the food poverty line. SA also has one of the highest unemployment rates and is regarded by the World Bank as the world’s most unequal society.  

This is the context in which the Independent Commission for the Remuneration of Public Office-bearers recommended an almost 4% increase in ministerial wages. These ministers and other public office-bearers have failed in their mainstay job of raising the standard of living for South Africans. They presided over an economy that is trapped in the longest downward spiral since 1945, in which crime is rampant and power cuts frustrating. 

As to what Ramaphosa should do with the commission’s recommendation, it’s a no-brainer.