‘Foolish men reserve’ to finance Civil Servant salary increases

The Government wage bill represents the biggest budget shock says Jaco Leuvennink.

The business-as-usual mini budget and adjustments to the current 2015/2016 budget presented in parliament by Finance Minister Nhlanhla Nene on Wednesday will not inspire South Africans.

As if to confirm this, the rampant students outside parliament’s gates (some even got inside) were only interested in the increases in study fees. While they demanded action at parliament, they did not want to engage with politicians who tried to talk to them.

Nene’s rather conservative mini budget, with no real surprises or big new announcements, might be a safe option. He again stressed austerity by government and keeping spending in check. But in these days of economically battered and buffeted South Africans, we need some more imagination from government.

The biggest shock was that the complete contingency reserve (meant for disasters and other unforeseen acts of God – and foolish men) will be used for salary increases for an already bloated civil service.

Nene at least was cognisant of the realities of limited resources at his disposal and honest about the challenges. He appeared annoyed about the wage bill-deal (effective increase of 10.1% for this year). But he did nothing about it and, apart from the contingency reserve, it is not entirely clear how the shortfall it creates, will be paid.

Nene talked about savings by departments (mostly provincial where 70% of the wage bill goes), not filling vacant posts or doing new appointments. But as he admitted, it is not a sustainable solution.Nene is also correct that the big fly in the ointment is poor economic growth. But just to say that the private sector must come on board to help is not enough.

The government needs a dedicated programme to free the business sector from prescriptive constraints and being forced to help implement government policies and reach political goals.

You cannot have the fruits of free markets and simultaneously want to put political development goals at the centre of things. The same applies to state entities (including universities), which Nene all but admitted are in dire straits. The state must either budget properly to subsidise them sufficiently or they must free them from government control, political objectives, being employment creating entities and allow them to operate according to market forces.

Bad news for South Africans is that taxes will almost definitely be raised next year, although Nene, in an effort probably to appease already disgruntled South Africans, said that it will be done “with caution” and not if it is not absolutely the only option. Even the raising of VAT, politically a very unpopular move up to now, might be on the cards, Nene suggested.

In general, there is not really much specific to criticise in Nene’s presentation. He used all the right words as the theme of the mini budget indicates: “Sustaining progress in a low-growth world”

He put the emphasis on good fiscal planning and sustainable allocation of public funds, much like in previous budgets. But one got the inevitable feeling, with the noise of rioting students in the background, that it was all just words.

The government as a whole must really take note that real commitment to the betterment of South Africa and its people is not negotiable any more.

Jaco Leuvennink, Fin24

Editor: Wholesale increases year after year are certainly NOT the way to give South Africa’s Administrators their sexy back!