Critics of organised business have long argued that it needs to be more hard-nosed and strategic in its approach. For years it has allowed itself to become preoccupied with drafting technical plans and compacts in the hope that these acts of good faith would shift SA in the right direction.
Well, the gloves are finally off. Not only has Business Unity SA (Busa) made a strategic play in releasing a shocking report benchmarking SA’s bloated public sector wage bill against international norms, but it regrets that “business hasn’t been firm enough on government’s unsustainable fiscal stance”.
Busa’s Cas Coovadia and Busisiwe Mavuso pulled no punches in releasing the report last week, warning that SA was “well on its way to becoming another failed African state” if it didn’t tackle the wage bill.
The report shows that between fiscal 2006 and 2018, the wage bill exploded from R154bn to R518bn — a compound annual average growth rate of 10.5% — almost entirely due to outsize wage increases.
Though SA’s public service is not unusually large, it is unusually well remunerated, with teachers earning nearly 50% more than the Organisation for Economic Co-operation and Development (OECD) average and public servants better paid than the median SA taxpayer at every point of the income distribution, bar the 95th percentile.
As a share of state spending, SA has the worst score of the 46 countries surveyed, with more than 35% of the budget devoted to paying salaries, a third higher than the international average of 26.1%. And at 11.6% of GDP, SA’s wage bill was about 25% higher than the global norm of 9.4% in 2017.
Busa wants the social partners to hold an urgent debate on the wage bill, saying it has become a “critical impediment” to SA’s economic recovery. It is unapologetic about not offering up any quid pro quo, such as tempering executive remuneration, to try to grease the wheels of a social compact.
The message is that SA is tumbling down the fiscal cliff and the only way to soften its landing is to confront 'the real issues' by creating a competitive, business-friendly environment to boost growth, while slamming on the spending brakes breaks to avoid a fiscal crisis.
The message is that SA is tumbling down the fiscal cliff and the only way to soften its landing is to confront “the real issues” by creating a competitive, business-friendly environment to boost growth, while slamming on the spending brakes to avoid a fiscal crisis.
Essentially, Busa is asking the government to make hard, evidence-based decisions. This is what finance minister Tito Mboweni did in the medium-term budget by stipulating a three-year wage freeze to keep the debt ratio from breaching 100%. But successive finance ministers have failed to keep the wage bill in check because their power pales in the face of SA’s collective bargaining system. Why should it be any different now?
SA is one of the few countries that still conducts collective bargaining at a sectoral level. Bargaining councils have their roots in the multiemployer bargaining system that prevailed in Europe and the UK in the early 20th century. The concept influenced early labour legislation in several Commonwealth countries, including SA.
Since the 1970s, however, in response to globalisation, developed nations have rolled back the gains made by labour. The upshot has been a shift towards workplace bargaining where the trade-off between higher wages and/or benefits and job security is more apparent, except in SA, where sectoral bargaining is encouraged by the Labour Relations Act (LRA).
Several studies of SA’s labour market have shown that while central bargaining achieves its goal of raising wages, it does so at the expense of jobs. Except, of course, in the public sector, where the headcount and wages have mostly risen together because preserving jobs is sacrosanct.
The time for a course correction is long overdue. Busa has finally woken up and taken a hard line, but it’s far from clear whether the country has the maturity to achieve a social compact on wages or whether the ANC government can unilaterally impose the wage freeze and survive politically.
It’s a case of damned if you do and even more damned if you don’t.
• Bisseker is a Financial Mail assistant editor.
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