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Concerns over increased strikes risk

10 March 2020 Mashoto Lekgau

Finance Minister, Tito Mboweni’s pandora’s box from the treasury’s budgetary allocations has panned out to spook economy observers over the increased risk of public sector strikes, which are said to happen “more likely than not”.

During the tabling of the 2020 budget speech in parliament last week, the Minister said the treasuring is eyeing a public sector wage bill cut of R160,2 billion in the medium term, with a reduction of R37.8 billion in 2020/21, R54.9 billion in 2021/22 and R67.5 billion in 2022/23.

Mboweni’s announcement has been met with disdain by labour and according to some of the leading economic minds, the move poses a risk of triggering one of the most recurrent stunners of growth on the national economic front, in the form of public sector strikes and civil unrest.

To give perspective on the wage bill cut - in last year’s budget, the treasury projected a particular growth in the public wage bill and this year’s budget said the treasury is no longer going to give that growth but a slower paced growth in the wage bill allocation. Public servants’ personal wages will not grow at the earlier projected rate – however it’s not a cut in a sense that the public servants will see an absolute reduction in their income.

It is more likely than not

Alexander Forbes Investment Executive Chief Economist, Isaah Mhlanga told guests at the firm’s Hot Topics event in Johannesburg on Friday “as far as civil unrest is concerned, it is more likely than not. There is no-one that wants to see something that was negotiated, which was agreed, being taken away. It’s a possibility that can disrupt the functioning of the state.”

“But if you look at what National Treasury is trying to do, it seems that they are trying to change the quality of their spending. By that I mean, reducing the salaries and wage bill in favour of stabilizing the likes of Eskom and other State-Owned Enterprises in general so that we can build on that through investment, which has higher multipliers. The intention is good, but treasury officials are technocrats. They can do the numbers. Budgets are always quite easy to do but making the decisions to implement those budgets lies in the political space. Whether they are going to agree, is a different question.”

The indubitable risk

Giving the keynote presentation at the fourth annual South Africa Insurance Crime Bureau (SAICB) conference recently, Economist and member of the President’s Economic Advisory Panel, Dr Thabi Leoka warned of the potential risk on labour and backlash this may have on the already wonky economy.

“I thought the budget was horrible, but everyone was excited when they heard about the wage bill cut because it is a huge expense. The Minister of Finance said he wants to raise R160 billion from wage bill cuts. The biggest risk to that is (public sector) strikes. It’s going to be an interesting fight. I do not think public servants are going to capitulate” she said.

The economist, who also sits on the board of SA Express, cautioned against the considerable growth of the financial sector when stating that the financial sector is the fastest growing sector, “which is not necessarily a good thing because it is not labour intensive but requires specialist skills.”

Adding to that, the economy needs the mining and construction sectors to grow because the country needs jobs.

Insuring against civil unrest

Short term insurer, Sasria provides special risk cover to all individuals and businesses that own assets in South Africa, as well as governmental entities, covers against civil unrest, public disorder, strikes, riots and terrorism. This cover makes South Africa one of the few countries in the world to insure these risks.

The insurer’s Executive Manager for Insurance Operations, Fareedah Benjamin told FAnews “Sasria runs annual risk assessment on perils and scenarios that relate to Sasria. Based on these scenarios we remain well capitalised and have sufficient reinsurance with A rated companies.  This gives us the confidence to manage any claims that may arise.”

Sasria however could not give more detail on the findings of the risk assessment in relation to the increased risk of public sector strikes and civil unrest as a result of government’s stance to hack down on spending by placing the public sector wage bill on the chopping block.

Trade union reactions

The unemployment dynamics now dictate that one out of every three South Africans is unemployed, statistically of course.  With the limited resources being shared by those fortunate to have the ‘employed’ status next to their name, trade unions have already come out in contempt of the efforts by the government to cut down the negotiated wage bill growth.

The general secretary of the South African Federation of Trade Unions, Zwelinzima Vavi condemned the decision to cut the government’s wage bill and condemned “President Cyril Ramaphosa and big business for being so cold in the face of tribulations facing the working class and poor.”

“SAFTU and many others have condemned in the strongest terms the possible cutting of R160 billion over the medium term. Government has the gall to suggest that it even wants to pull out of the existing pathetic agreement it rammed down the throats of the public servants. Government goes further to make a statement that it won’t be employing more workers in the public service” he lamented.

The largest trade union in the country, Congress of South African Trade Unions have already come out saying that the government “can” find other ways of reducing state expenditure.

Writer’s thoughts:
Labour, the ruling African National Conference and the National Treasury need to sit down and find a compromise.  The economy is taking too many blows at once, and with the eminent downgrade by Moody’s, according to economists, it would be advisable to have a sit down as a public sector strike would add insult to injury. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts

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