“Tito’s business unusual” – Our FM article on #Budget2020

tito

  • by Nic Spaull & David Carel

In the SONA it’s easy for the President to promise everything to everyone. A Sovereign Wealth Fund for you, a State Bank for you. You get a car, you also get a car, everyone gets a car. The budget speech is different because you now have to pay for all those cars. If you can’t find the money, you can’t spend it. And in this year’s budget the message came across loud and clear: we have reached the end of the road.

Minister Mboweni showed the courage to wake us up from the political twilight zone we have been in for too long: “We cannot go on like this. Classroom sizes are growing, hospitals are getting fuller and our communities are becoming increasingly unsafe.” We are close to a recession (economic growth in 2019 was 0,3%), debt is spiralling, and there are serious unresolved existential risks, such as Eskom. There is no more business as usual.

Government has finally decided to confront what it has been speaking about for a decade: reducing public sector wages. Mboweni announced that over the next three years government will cut the public sector wage bill by a colossal R160-billion. For the last ten years the public sector wage bill has been increasing much faster than inflation, much faster than economic growth and much faster than government’s ability to collect new revenue to pay for it. Those chickens have now come home to roost.

The 2020 allocation to Basic Education has decreased from R250,2-billion to R248,6-billion, falling R12-billion short of what was needed just to keep up with inflation. Because Basic Education is still the largest single line item in the budget and is also the largest employer in the country (with over 400,000 teachers on payroll), it provides the perfect case study of rising public sector wages and the crowding out of other essential expenditures. Over the last ten years teacher salaries have risen 45% faster than inflation, outstripping increases in budget allocations and hobbling provinces.

The two biggest consequences have been rising class sizes and the imposition of hiring freezes across provinces. The government’s own analysis shows that Learner:Teacher ratios have been consistently rising since 2010. Nationally representative independent studies (PIRLS) show that between 2011 and 2016 average class sizes at the Grade 4 level increased from 40 to 45 learners per class. For the poorest 60% of learners, who feel these increases most acutely, the increase was from 41 to 48 learners per class over the same period.

This is the outcome of above-inflation wage increases since there is always a trade-off between head-counts (the number of teachers employed) and salaries (what you pay them). That means larger class sizes and fewer personnel when wages rise in the face of capped budgets. The way provinces hire fewer teachers and save costs is by implementing hiring freezes, which virtually all have had to resort to (see KZNDoE circular 3 of 2018). Government payroll data from 2012 and 2016 shows that there was a 16% decline in school managers employed countrywide despite there only being 2% fewer schools (school managers are more expensive than teachers). There were double digit declines in the number of principals employed in the North West (-12%), Limpopo (-13%), and the Free State (-14%). In Limpopo alone there were 2,996 principals employed on payroll, yet there are 3,867 schools in the province. That is to say 23% of schools in Limpopo have no employed principal.

What’s clear is that this budget has drawn the lines along which factional battles will be fought over the coming year, both within the ANC, and between the ANC and COSATU. It is wrong and simplistic to see confining public sector wages as anti-poor. As we’ve seen with rising class sizes and withering school leadership teams, large wage increases in a time of almost no economic growth has real consequences for schools — especially for the poorest government schools.

We will soon see if the last decade’s crisis in political leadership will continue unabated or if the President has the leadership and backing to broker the needed compromises and new social compacts to move us forward. Minister Mboweni claims support from Cabinet and the President in confronting the wage bill. The big question now is whether the ANC will actually implement these policies, renegotiate already-signed wage agreements, and withstand the considerable heat that will be coming from COSATU. This will be the President’s biggest test to date and we should throw the full weight of our support behind him.

//

Dr Nic Spaull and David Carel are researchers in the Research on Socioeconomic Policy (RESEP) group at Stellenbosch University.

This article first appeared in the Financial Mail on the 27th of February 2020 with the title “Tito’s business unusual”

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