Unions are the economic elephant in the room
South Africa is like a terminally ill patient refusing to make life-saving lifestyle changes. Our most urgent crisis is that 9.75 million adults are without work, 6 million of whom are young people. Our unemployment and youth unemployment rates are both unnaturally high. Yet the necessary reforms that would bring them down to manageable levels are not happening, largely because the ANC is not prepared to stand up to trade union bosses who control key ANC constituencies.
The cozy symbiotic relationship between the ANC and trade union bosses is pulling South Africa into a debt spiral. We can have a bloated public wage bill and high unemployment, or we have broad prosperity. We cannot have both. To stay in power, the ANC is choosing the former.
Trade union bosses effectively run protection rackets, ensuring secure employment in return for monthly contributions. The labour system is designed to make these contributions practically compulsory. So bosses are selling workers down the road, effectively forcing them to pay protection money while ensuring their children will never find work.
The remedies to our dreadful financial and unemployment situation are obvious. We need to close SAA, cut our public sector wage bill, reduce the size of our government, privatise many SOEs including Eskom’s production component, and reform our labour regime.
But President Ramaphosa has made it clear. SAA will not be closed, never mind that to stay afloat it will need R21.7 billion in bailouts over the next three years. Public sector retrenchments are strictly off limits, never mind that we are borrowing money to pay an oversized public wage bill even as service delivery collapses under the weight of corruption and incompetence.
Why? Because the trade union movement is a key ANC constituency. Picture a nest of chicks, mouths gaping open screaming “feed me, feed me!” This is what the ANC sees when it looks at its constituencies. “You keep me fed and I’ll keep you in position” is the essence of the arrangement. And the hungriest chicks in that nest are union bosses.
In August, Ramaphosa’s government once again bowed to demands for above-inflation wage increases, which has left a R30 billion hole in our budget.
In his mid-term budget statement, Mboweni didn’t mince his words. Our national debt is now R2.8 trillion, 56% of GDP and set to rise to 60% over the next few years. Servicing that debt will cost R182 billion this financial year.
That is R500 million rand per day. This is the crippling debt Ramaphosa’s government is lumping on our children tomorrow to pay the salaries of public servants today and keep the ANC in power. Most of these public servants do very little to serve the public and many are rampantly looting the public purse.
Our public wage bill consumes over 30% of our budget, far more than our peer countries. As a result, government is underspending on the essential water, energy, transport and communications infrastructure we need to grow our economy and create jobs.
The SABC’s current predicament is a microcosm for the whole country. By cutting the wage bill, the SABC would increase the budget it can allocate to content. If it produces better content, it can attract larger audiences, which means it will be able to charge advertisers higher fees. This will ensure its financial sustainability.
Retrenching is tough and must be undertaken fairly and sensitively with an aim to minimizing the social pain. But it is a far better option than to put the entire organization at risk of collapse.
The alternative is ongoing government bailouts for SABC. As with so many other policies, the government is prevaricating. It remains to be seen whether political expediency will win the day as usual, as it has with Eskom.
Eskom is in deep financial crisis, which has put our whole economy at risk. It is caught in a debt spiral, meaning it is borrowing to service its debt. Meanwhile its credit status is rated as junk, meaning it pays a high interest rate on that borrowing.
Eskom’s headcount has grown from 32 000 ten years ago to 47 000 today, despite it producing less power now than it did then. The obvious answer is drastic cuts to its wage bill. But industrial action that sabotaged several power stations in July assured above-inflation wage increases for each of the next three years (7.5%, 7% and 7% respectively).
Political considerations also lie behind the government’s refusal to take the DA’s advice, which is to split Eskom into separate power production and distribution functions, privatise production and allow cities to buy power directly from private producers.
The public will pay the price in the form of higher electricity costs and slower economic growth and job creation, a price the ANC deems worth paying to placate a key constituency ahead of the 2019 elections.
Similarly, the ANC would rather deny 80% of our school children quality basic education than stand up to SADTU, its largest union.
The essence of responsible governance is to put public interests over those of specific groups, and to balance the interests of current and future generations. Experience around the world has shown that this is the route which leads to economic growth and job creation.
StatsSA’s recently released jobs stats show that in the past twelve months, over 50% of all jobs created in SA (95 000 out of 188 000) were created in the DA-run Western Cape, even though the province only accounts for 12% of South Africa’s working age population. Where the ANC favours organized labour, the DA favours job creation.