ANALYSIS | State's plan to slash public sector wage bill sets up showdown with unions
What particularly angers Cosatu is that after a few informal ‘talks about talks’, they were met with one-two punch this week, writes Jan Cronje
Facing lower-than-expected tax revenues due to anaemic economic growth and an ever-rising bill for debt interest repayments, Finance Minister Tito Mboweni on Wednesday announced that the state would cut the public-sector wage bill by R160 billion over three years.
"For the credibility of our fiscal stance, that R160 billion or so needs to be found," Mboweni told journalists at a pre-Budget briefing.
When times were tough families need to rein in their spending, he said.
There will be less steak and more canned pilchards on the menu until things look up again.
The R160 billion in savings - should it materialise - will not alone solve SA's financial problems.
Gross debt is still expected to grow to R4.38 billion, or about 71.6% of GDP - in 2022.
And given that Treasury has for years been over-estimading the country's future growth prospects, the real figures may be even more dire.
While some form of cut to the state's wage bill was largely anticipated by analysts - the state's previous efforts to bring down the public-sector wages by incentivising early retirement had largely failed - the scale of the proposed cuts were unexpected.
"Tito throws kitchen sink at unions," wrote Peter Montalto, an analyst at Intellidex.
The cuts were a "strong statement of intent," he said, but at the same time were unlikely to be executed as planned, especially in the first year.
While Mboweni said his Cabinet colleagues were firmly behind him, Montalto warned that if the proposed cuts fall short, Treasury and President Cyril Ramaphosa - whose backing is key - may face a significant credibility problem.
The day after Tito Mboweni tabled the 2020 Budget, Minister of Public Enterprises Pravin Gordhan was asked whether it went far enough in addressing SA's challenges of poor economic growth and rising debt.
"If we are all willing to make sacrifices of one kind or another, depending on the constituency we are dealing with, then now is the time to do that," said Gordhan.
But the initial reaction from the ANC's union federation ally Cosatu was to question why only its members appeared to be the ones needing to make sacrifices.
The state had attempted to "dump the bill for industrial-scale looting on public servants", it said.
The South African Federation of Trade Unions, meanwhile, said the wage cuts were a "declaration of war on the working class," while the Federation of Unions of South Africa was only slightly more diplomatic.
"The issue of the public sector wage bill cannot be unilaterally decided by the Minister of Finance alone on Budget Day," it said.
Due to the abruptness of the announcement - unions say they only got wind of the cuts on Tuesday evening - they will need time to meet and plan responses.
Discussions will then commence in the Public Service Bargaining Council, and each side has much to lose.
For the state, the credibility of Mboweni and Ramaphosa's plans to enact the reforms they believe are necessary for economic growth may be at stake.
In the early days of Ramaphoria, the president announced an ambitious plan to boost investment by R1.2bn over five years and kick-start the economy.
And while Ramaphosa has said the target is on track, SA's already-low GDP growth has only weakened further, while unemployment is at a record-high.
Unions, meanwhile, will be arguing with one eye on the future.
Leaders cannot be seen to submit too easily to government demands.
And yielding now may make it easier for the state to start to roll back other cherished benefits in the future.
What particularly angered Cosatu was the fact that after a few informal discussions, they were met with one-two punch this week.
The day before the budget, they were presented with a 10-page document outlining the precarious state of SA's finances.
"The state cannot afford the last leg of the 2018 wage agreement," its last page states.
The following day the union heard of R160 billion in wage cuts over three years as a fait accompli. Such radical changes would usually be hashed out over months.
Announcing significant wage cuts in the Budget as a fait accompli undermined established collective bargaining processes, said Cosatu president Zingiswa Losi.
It was a cavalier attitude to an alliance partner, said the labour union federation’s parliamentary coordinator Matthew Parks.
"What really provoked our members was the slipping under the door at the public service bargaining council on Tuesday afternoon a note from government saying we want to withdraw form this year's wage agreement," said Parks.
Still, he said, the union doesn't have a choice but to engage with government. "We are in a huge crisis, we have to find each other."
Mboweni used similar language on Wednesday .
"Eventually," he said, "government and public service workers will find each other".
- Jan Cronje is Fin24's Deputy Editor