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Budget cuts: Cosatu to meet urgently with government

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JEREMY MAGGS: Overnight, the Congress of South African Trade Unions [Cosatu] rejecting National Treasury’s proposed cost-cutting measures, saying they are, and I quote, shocked and dismayed. The measures include a freeze on advertising new appointments and procurement contracts for all infrastructure projects.

With me now from Cosatu is Matthew Parks leading today’s programme. Matthew, you’ve described Treasury’s cost cutting measures as reckless attempts. Can you elaborate on what specifically you find so upsetting about these proposals?

Read: SA budget deficit target at risk as wages rise, tax receipts fall

MATTHEW PARKS: Sure. I think first what’s really quite worrying is a couple of points. One is that treasury is looking for a shortcut to addressing much deeper issues facing the fiscus and the economy. Sure, it’s easy, it’s administratively very easy just to go and cut the wage bill because that’s something you can control is pressing a button on a computer. But the reason why we’re in a crisis, including on the fiscal front, is because the economy’s not growing. The economy’s not growing because Eskom has been limping for years due to corruption, mismanagement and, hence, load shedding.

Similarly with Transnet, which is critical to the mining, manufacturing and agricultural sectors. Freight rail is under siege because of cable theft and so on, corruption and so on. The ports have been neglected and need to be badly modernised. Similarly, you can make the same argument for Prasa [Passenger Rail Agency of South Africa], which is critical to urban economic productivity in terms of transporting ten million commuters to work and so forth.

So tinkering with the wage bill, what you’re paying nurses and police officers, is not going to resolve Transnet and Eskom, etc. Yes, it might reduce the fiscal pressures for a year, but you’ll be back in the very same crisis the following year. So for us, a much more sustainable approach to stabilising the fiscus, even paying down the debt, because we support the need to manage the debt, is deal with the real fundamental obstacles to the economy. But tinkering on the sidelines is not going to address anything. In fact, it’s just going to prolong matters, and that’s what we don’t have, we don’t have the luxury of time.

JEREMY MAGGS: Do you think then as a result of that, we really do have the luxury of a sustainable approach as you are suggesting? Or doesn’t the economy need a shock, such as is being suggested?

MATTHEW PARKS: A shock can be a good thing, but let the shock be in the right place so it gets the right result. So a shock can be let’s fix Eskom. So that’s why we had proposed in 2019 a similar kind of idea of a big shock that let’s take the debt burden off of Eskom’s shoulders so it could focus on investment in maintenance and new generation capacity. The government, unfortunately, it took four years-plus to come around to that idea, even though they had agreed to it.

So we think similarly, shocks around Transnet, around Metorail, urgent interventions to stabilise, rebuild them. You could even argue around for shocks in some of these dilapidated, dysfunctional municipalities too would make sense. But I think here is that they’re going for a shock, but they’re going to the wrong solution.

The wage bill has been stable at 35% of the budget since 2009. So that’s not the issue. The issue is that the economy is declining because mining companies can’t get the mineral exports through the ports to the destinations overseas in time. That’s a big forex and a revenue generator for the state, for example. So we’re dealing with the wrong issues. Basically, we’re giving people a Panado when the person’s got a broken arm, let’s rather fix a broken arm as opposed to just simply dispensing Panado.

Read: Public sector wages cost R37.4bn more – Godongwana

JEREMY MAGGS: So how are you going to approach this with government because inevitably there is going to be a clash here.

MATTHEW PARKS: So we are meeting with government, including the presidency, tomorrow, as organised labour, to get a better understanding of them, of what exactly are they proposing and to raise our fears that actually all you’re going to do is to weaken the state’s capacity to provide the public service that everybody needs, workers, businesses and so on.

Let’s rather look at a more sustainable approach. What are the things that we can do to help grow the economy. What are the things we can do to help stabilise the state. We have been proposing actually on the wage front for years that we should actually have a single wage regime for the entire state. For example, instead of having just 800 000 public servants under the PSCBC [Public Service Co-ordinating Bargaining Council], let’s have all 1.2 million employees of the state under the single wage negotiation processes. Let’s have a single wage regime.

But I think also politically, if government wants to be taken seriously by anybody, it needs to lead from the front. That includes cutting the size of Cabinet, what politicians earn and so on. It’s a bit galling for treasury this week to say, well, we need to reduce the headcount of public service by 200 000. Let’s ignore the fact that we have long queues at hospitals and Home Affairs. The police headcount has been declining for years. But just two weeks ago they gave an increase for councillors and that makes no sense. It’s either we have money, or we don’t have money, but government needs to be a bit more consistent if it wants to have some political credibility in society.

JEREMY MAGGS: Matthew Parks, whichever way you look at it, these plans that are being proposed by treasury are worrying. It’s almost a tacit admission that South Africa, or the government at least, is running out of money.

Read: SA’s unions, government agree 7.5% wage hike

MATTHEW PARKS: We’ve been feeling that very scenario since about 2019 when we felt in the medium-term budget statement at that time when Tito Mboweni was Finance Minister that we’re heading towards this direction. If we don’t turn things around quickly, we’re going to end up going to the IMF [International Monetary Fund]. That’ll be the worst-case scenario because the IMF will just simply say, we’ll give you the money for a bailout, but in exchange you’ll make such drastic cuts that it’ll be devastating to society.

For example, they’ll say cut your social grants, your social wage, the public health subsidies, subsidised transport, RDP [Reconstruction and Development Programme] housing, NSFAS [National Student Financial Aid Scheme] and so on, which are really quite critical to rebuilding the country. Because for them [IMF] they wouldn’t care, they wouldn’t have any vested interests like we as society would have.

So I think for us it’s about let’s fix things when we have the time. Let’s not procrastinate, but at times you just find the government is just an endless procrastination, which makes no sense. Also, some of the silly issues are not helpful. We’ve had increased load shedding partly because Eskom hasn’t had sufficient supplies of diesel. That’s a logistical issue that should have been resolved.

About a week ago, Transnet’s freight rail capacity declined by two-thirds because they hadn’t charged the batteries for the locomotives. So some of these are really silly own goals, which just require competent management to also be appointed in these institutions so that they can be rebuilt and not constantly engage in firefighting.

JEREMY MAGGS: Just a quick answer, if you please, as we end this conversation, are you optimistic that anything will come out of your meeting tomorrow?

Read/listen: Public servants set to accept revised pay increase offer

MATTHEW PARKS: Yes and no. We don’t expect miracles overnight, but I think with all these discussions it’s about constantly pushing the issues forward. We would love to be in a scenario like a Singapore or China where you make a decision with the leadership of government, and it’s implemented the day after. Unfortunately, we don’t have that political will in South Africa, but we have to keep pushing. I think for us, hopefully we can make progress.

We are pleased, for example, in the treasury proposal, they recognise a need to retain the SoD [State of Disaster] grant, to retain the [Presidential Employment Stimulus] to see how that can be enhanced. That’s critical. There are a lot of long-term things you want to do in a society. But critical for the short and medium term is to help the most poor survive and help provide labour market experience for young people to enable them to find jobs permanently afterwards.

JEREMY MAGGS: Matthew Parks, I’m going to leave it there and thank you very much for joining me on Moneyweb@Midday.

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