Finance Minister delivers the 2020 budget in Parliament, Cape Town on Wednesday. Picture: ESA ALEXANDER
Finance Minister delivers the 2020 budget in Parliament, Cape Town on Wednesday. Picture: ESA ALEXANDER

Where President Cyril Ramaphosa is reluctant to tread, finance minister Tito Mboweni drags him along nonetheless. On Wednesday during his budget speech, Mboweni did what had to be done and what the president should have done a year ago: draw a line in the sand on government wages, even if it sparks a war with trade unions.

In all, Mboweni said he planned to slash R261bn from the government’s spending bill — but the thorny part of this is that it entails a R160bn cut in the salary bill for civil servants.

BUDGET 2020 | "It is a slap in the face" - Cosatu

The finance minister is no fool, and spent a good deal of time bending over backwards to stress (no doubt for the benefit of the unions) just how the government had helped workers over the past decade. “Working with the public sector unions, we have over the past 15 years sought to improve the lot of public servants. We have committed significant resources for compensating them every year even as we have tried to increase their numbers in recognition of their demanding workloads,” he said.

The problem is, the salaries of civil servants, especially managers, have risen far quicker than the pay packages of people in the private sector. The number of government employees earning more than R1m climbed from fewer than 10,000 in 2006/2007 to 29,000 people now.

But, Mboweni said: “We cannot go on like this.” He claimed, however, that “organised labour understands where we are”. This seems unlikely. Cosatu’s spokesperson Sizwe Pamla, for one, says the unions won’t accept Mboweni’s reforms. “We’re not going to allow that to happen,” he vows.

This sets the stage for a long-overdue clash between the ruling party and its alliance partner, Cosatu. Many are sceptical about whether it will happen quite the way Mboweni wants. This is the “credibility gap” between what the ANC says on one hand, and what it ultimately does later, after making political concessions.

Still, this was the best Mboweni could have done. Certainly, it was the most pro-business budget you could have hoped for: cutting costs to stabilise debt, given the absence of growth. Or at least a please-don’t-downgrade-us budget.

Whether it did the trick on this score we’ll know soon enough. Within weeks, Moody’s will pronounce on whether it will join the other two ratings agencies, Fitch and S&P, in downgrading SA to “junk” status.

Marc Wainer, founder of SA’s second-largest property company, Redefine, says it’s now “50/50” on whether Moody’s will downgrade SA.

Nedbank CEO Mike Brown, speaking to SABC journalists, agreed that “it’s going to be really close”. Moody’s will not only consider the budget deficit (which is set to reach a 25-year high of 6.8% of GDP this fiscal year ) but, crucially, the trajectory of our debt, which is set to rise from 56% now to 71% in 2023. “Somewhere, debt needs to consolidate or reduce. And right now it’s going up, which is a problem.”

But at least the penny has finally dropped in the government that you’ll only get debt under control if SA starts growing.

This was evident from the fact that rather than hike taxes, Mboweni actually cut them.

For the country’s sake, let’s hope Mboweni’s reforms end up being implemented. But the very fact that he left the podium to a round of applause from his own party is positive at any rate.

Politically, it’s a sign that Ramaphosa’s fiscal reformists may have finally gained the ascendancy over the ANC’s economic klutzerati, who seem to believe the citizenry is nothing more than a piggy bank from which they can withdraw however much they want at will.

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