Time for unions to take the austerity bull by the horns

Public sector ‘retrenchments’: It’s time for unions to take the austerity bull by the horns

New Finance Minister Enoch Godongwana has promised a change in style from his predecessor, Tito Mboweni. But when he assures the public that there will be no ‘retrenchments’ in the public sector, he is spinning matters in the same fashion as Mboweni did.

Dick Forslund | DailyMaverick Opinionista | 29 August, 2021

The conflict between the state employer and the public sector unions about the 2018 wage agreement continued last week in the Constitutional Court. Had the Alternative Information and Development Centre (AIDC) application to be a friend of the court been permitted, the AIDC would have argued that the courts cannot take sides in the economic policy debate, as did the Labour Appeal Court (LAC) in a judgment that the unions have appealed. 

The LAC explicitly agreed with the Treasury that the 2020/21 wage increase for the public sector employees, if allowed, would have a negative impact on socioeconomic rights, including healthcare and social security. The AIDC argued in its legal paper that this is a false dichotomy, as explained in this article. 

We will see what the ConCourt will decide. 

But during the conflict over the 2018 agreement, a new one-year wage agreement was signed in July by the majority of public service unions. The agreement increases wages by 1.5% across the board. This is done by extending to all staff the average cost for a 1.5% pay progression normally benefiting some four out of five employees, but capping it at exactly 1.5% for this year. The additional cost for this is about R2-billion. 

Added to this is a temporary non-pensionable cash increase averaging about R1,360 per month, depending on pay grade. The cash increase will be regarded as if it doesn’t exist when starting the negotiations next year.

The deal seems to contradict the declared “wage freeze”. In reality, however, as opposed to the spin surrounding the issue, the “wage freeze” is a drastic labour cost cut. 

Table 7 in the 2021 Budget Review shows that a 9% cut in “Compensation of Employees” is planned in real terms over three years compared with the 2020/21 financial year, or from R637-billion to R579-billion in 2020/21 prices, if using Treasury’s inflation forecast. 

Such a drastic cut cannot only be about wage levels, especially as the employer cannot avoid the pay progression agreement initiated by the employer 15 years ago, which relies greatly on the number of years an employee has worked.  

Such a cut must also deal with the “head count”. To calculate the “public sector wage bill” for any month we must multiply the average labour cost for one worker by the number of people employed. 

There has been a deafening silence about this mathematical fact in the business press. But the formula “A times B” goes to the heart of a key structural reform pushed by Treasury; a “reform” that inevitably will lead to more “public-private partnerships”, procurement, tenders and privatisation, besides causing more chaos in public sector classrooms and hospitals. 

Opposing the AIDC’s application in the media, the State Attorney argued that the AIDC hadn’t provided “extensive evidence about the rationale underpinning the government’s chosen policy agenda”.  However, in response, we would argue that the ideologically infested and controversial rationale of Treasury is that the public service sector has to shrink as a share of the whole economy, in the belief that this will lead to economic recovery and growth.

This rationale has been absent in the economic policy debate, but it means that the public sector unions are facing two problems. They faced both of them this year and will face both problems again in March 2022, whether they go public about it or not. If there is a new one-year wage agreement they will face both problems again in March 2023. 

The first problem is to defend the real wages of employees against inflation felt on the ground and to sustain the morale of the workforce. The second problem is how to defend public sector employment as such. This should concern the unions and the public. 

There are three facets:

1. The work situation in public services is becoming increasingly unbearable (as explained in this article about the Eastern Cape) when vacant posts are not filled. As far back as 2018 the Presidential Health Summit acknowledged 37,000 vacant posts in the public health system.
2. A majority of  nurses and assistants, doctors, teachers, administrative staff etc who have finished their education will not be employed because of the moratorium on filling vacant posts in public service. 
3. Already, before the pandemic, student nurses, doctors and assistant nurses had been put to work in understaffed hospitals as if they were fully trained. 

Our new finance minister, Enoch Godongwana, has promised a change in style. But when he assures us that there will be no “retrenchments” he is spinning matters, just as his predecessor did.  

For example, a circular titled “Interventions to Curb Excess Expenditure on Compensation of Employees” from the Eastern Cape Department of Health, issued on 2 December 2020, exemplifies how this works. The circular says:

“The approvals that have been made to fill all vacant posts, including posts where interviews have been conducted but the appointment letters have not yet been issued, posts that are to be advertised or have been advertised, are withdrawn with immediate effect.”

For direct employees of national departments, the planned job cuts are detailed in the “2021 Estimates of National Expenditure” approved by the Parliament in March 2021, vote by vote: 

• SAPS: “The number of personnel is expected to decrease from 181,344 in 2020/21 to 162,945 in 2023/24, due to natural attrition.” SAPS will be reduced by 18,399 officers over three years – more than 10%.
• Correctional Services: In our overcrowded prisons, “Contracts for non-essential personnel will be terminated and natural attrition will be allowed to take place.” The staff will be reduced by 1,027; “from 37,836 in 2021/22 to 36, 809 in 2023/24.”

Practically all national departments will have job losses over three years. 

• Home Affairs: 834 jobs (-8.5%)
• Ipid (supposed to investigate police officers accused of crimes): 59 jobs (-13%)
• Statistics SA: 146 jobs (-6%)
• The judiciary: 815 posts (-4%) (754 posts in the court services)
• SANDF: 352 jobs (-0.5%)

The provinces can decide themselves how to deal with the head count, but have to respect total cost ceilings. The overarching three-year trajectory for “Compensation of Employees” in the 2021 national Budget is 2.11%, 0.86% and 0.5% increases over three years (Table 7); the 2.11% increase is repeating the figure of the previous year, which reflects the “freeze”. 

The average public service salary reported in the 2020 mid-term Budget, the inevitability of pay progression and the above percent trajectory tell us that the three-year plan will reduce public sector employment by about 60,000 over three years. A total of 22,000 jobs under national departments are detailed above. The rest of the job losses will hit basic education and public healthcare services. This is where the majority of employees in Group 1-12 are employed by the provinces.

Treasury costed the 2021 non-pensionable cash increase, called a “sweetener”, at R18-billion. Based on December 2019 official “Persal” data in our possession, the cash increase ought to have cost some R20-billion. The R2-billion difference corresponds to about 5,000 less people being employed today than in December 2019, either because of going into retirement, or by finding a private sector job, or because they have died and not been replaced.

To the lowest paid employees in groups 1-4, the non-pensionable cash increase added 15% and more to their wages, but will be treated as non-existent when negotiations start next year. And this is the financial year when the labour costs in public service must increase by “0.86%”, according to the plan. 

It is time for union leaders to inform their members and the public what is at stake and to take the austerity bull by the horns. The future of public services, as well as public sector unionism, is at stake.