Africa-Press – South-Africa. The deputy chair of the Finance and Fiscal Commission which advises the government, Michael Sachs, says the fact that National Treasury did not budget for public-sector wage increases this year wasn’t realistic or credible.
Speaking at the PSG Think Big Series, Sachs – also a professor at the University of the Witwatersrand – said he disagrees with the National Treasury’s claim that the public wage bill will result in an additional R37.4 billion expense it didn’t foresee.
Treasury warned in March that the 2023/24 and 2024/25 wage deal signed by the Public Sector Co-ordinating Bargaining Chamber (PSCBC) earlier that month would require that significant trade-offs be made.
The wage deal includes a 7.5% increase for 2023/24 and a CPI-linked wage increase for 2024/25. Treasury said it would cost the government an additional R37.4 billion in the current fiscal year because it was not inked in and increase into the February budget.
This was because Finance Minister Enoch Godongwana did not want to preempt the wage bargaining process.
But Sachs believes that for Treasury to term this as an “additional” or unbudgeted expense, it implies that it factored a zero percent increase in salaries of all public servants in a high inflation environment.
“I don’t think that was ever realistic or ever credible,” said Sachs.
He said the National Treasury is increasingly using the budget as a negotiating tool instead of an actual estimate of what the government will spend each year. He also cautioned that the 7.5% figure only amounted to an increase of 3% as 4.5% of the increase replaced the non-pensionabe gratuity that workers had received for the past two years:
Sachs said that while Treasury might say that the increase in 2023 is significantly above what it budgeted for, public servants have faced a persistent real fall in their income since 2020. And for three to four years now, public doctors, teachers, nurses and police in SA have been worst off.
He said that while R37.4 billion might look like a lack of discipline from a fiscal point of view, the conversation should be about how SA can balance its belt-tightening without punishing these essential public sector employees.
“So, how do we bridge that gap? How do we have a discussion that balances those interests? That’s the nature of all the trade-offs we face. The underlying and fundamental issue here is that the economy has been in decline and stagnation for more than a decade,” said Sachs.
Sachs believes that these trade-offs will become even more acute as SA’s economy deteriorates. And this will stretch the country’s annual budget in a way many have never seen. Sachs pointed out that because the country’s revenue collection depends on economic growth, even economic experts are struggling to predict what will happen in the next few years.
So, the only thing within SA’s control is expenditure. But while the National Treasury preached belt-tightening, the government’s programmes in the last five years have increasingly conflicted with what the public purse controller is trying to achieve.
“There are many different policies moving in many different directions. There’s a lot of uncertainty, not only about the economy but about what the government’s policy programme is. In that uncertainty, the budget has become less and less credible,” said Sachs.
And given the run-up to the 2024 national elections, many policies are unlikely to support fiscal consolidation right now. For instance, Sachs doesn’t see the government withdrawing the Special Covid-19 Social Relief of Distress grant anytime soon. But he’s hopeful that SA will not see other sudden and irrational populist policies because of the looming elections.
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