This might come as a surprise to many in the government, but it is its own ideological and concomitant policy choices over many years that have left it “teetering on a fiscal cliff” (“Government is broke, says minister in defence of state’s 0% wage offer“, April 22).
Public service & administration minister Senzo Mchunu’s comments, on public sector wages specifically, were brave and serve to indicate the corner in which the government finds itself. Across various sectors of the SA economy and society, the growing power of the unions has increased pressure on the government — and prevented meaningful improvements in “state-funded” services, most notably education.
The closely intertwined links between unions and the governing party have both raised barriers to competition and lowered the standards by which to measure accountability. Through ideologically viewing itself as at the centre of all possible economic and societal progress, and the only vehicle through which people can improve their lives, the state has taken on necessarily-increasing responsibility.
The government’s current incredibly difficult-to-manage situation is completely of its own making. Bailout after failed bailout has not saved any of the country’s state-owned enterprises (SOEs); the billions poured into SAA and Eskom especially could have been much better allocated to service delivery improvements for low-income citizens.
No-one expected a global pandemic in 2020, but the country could have been in a much stronger position if billions had not been poured into SOEs over the years, and further if the state had not tried to keep power by giving unions everything they demanded in the past.
In the latest budget delivered by finance minister Tito Mboweni cuts were made to areas such as education and healthcare, and those funds reallocated to yet another doomed bailout for SAA.
At the current trajectory, the state’s debt-to-GDP ratio will breach 100% within the next few years. With the country’s junk status credit rating, repaying debt becomes more difficult — and adds more weight to the urgency with which meaningful structural reforms must occur.
If the current government is as concerned with fiscal stability — and, more importantly, the debt burden that will be left to future South Africans — as we are told, it must simply swallow the necessary, bitter medicine now and radically cut spending. Voluntary, private sector innovation, expansion and job creation will be more than adequate to cover those spaces where the state steps back.
Chris Hattingh is Deputy Director at the Free Market Foundation. He sits on the Foundation’s Executive Committee and Health Policy Unit.
First appeared in Business Day.