JAUNDICED EYE

The government has just been saved from having to stump up a vast sum of money it doesn’t have, to give to people who don’t deserve it. Cue a government sigh of relief, as well as delight among the majority of South Africans who struggle to make ends meet.

The Constitutional Court, endorsing an earlier Labour Appeal Court decision, has delivered what Business Day describes as a “huge win” for President Cyril Ramaphosa’s government. A supposedly cash-strapped Treasury — which just a week ago was disposing of a R200bn tax revenue windfall — has been excused from having to implement the last leg of the three-year public service wage agreement, which would have cost R29bn. 

The unanimous full-bench Constitutional Court judgment lashes the public service unions for greed and “unjustifiably enriching” themselves for two years from “illicit increases” procured at the expense of the poor. Acting Justice Mjabuliseni Madondo said that if implemented, the collective agreement would “precipitate a fiscal crisis” that would detract from the state’s ability to alleviate the plight of the “poorest of the poor”.

In the light of the unexpected fiscal demands caused by the pandemic, the deal would have plunged the government into “substantial excess debt”. The nub of the state’s argument was, first, the Public Service Act stipulation that the government could enter into an agreement only if there was a “realistic calculation” of costs in both the current and subsequent fiscal year, as well as that it didn’t conflict with Treasury rules. Second, that it had to have the resources to meet the terms of the agreement. ___STEADY_PAYWALL___

“The state contends that these mandatory requirements were not satisfied before it entered into the impugned collective agreement, and it is therefore unlawful and unenforceable,” said Madondo. The state also contended that enforcing the agreement would cost R29bn, which it did not have because of worsening economic conditions precipitated by the Covid pandemic. 

In other words, the government wanted the courts to vindicate its reneging on an agreement it had negotiated because it now realised that it hadn’t properly considered the financial implications of what it was doing. It is an astounding admission of the incompetence of the ministers who negotiated the deal and of the Cabinet that approved it.

The second leg of the state’s case was that even if the agreement had complied with regulations, it then became unaffordable because Covid damaged the economy. It’s an opportunistic argument.

Try selling that line to your bank when you renege on your bond agreement. In the commercial world, an unexpected global calamity might buy you some leeway, but not the right to tear up the agreement.

In any case, the South African government was not plunged by Covid into financial trouble only in the final year of the agreement. As much of the ConCourt judgment recounts in detail, in 2017 when it started negotiating the agreement and in the following year when it signed it, the Treasury was already in the financial dwang and everyone in government knew that there weren’t the funds required. 

And if the Cabinet had any doubt about their recklessness, there was no shortage of others telling them. Scores of observers, including international financial institutions, warned that the proposed wage agreement was unaffordable. But hey, 2019 was an election year and 1.3m contented union members would be good to have.

While it is true that Covid imposed extra fiscal strain, far worse in their impact have been the African National Congress’ skewed priorities, vanity projects, lack of fiscal discipline, and a failure to punish or even rein in corruption. Now claiming Covid-induced impecuniousness is a poor defence against what amounted to wilful recklessness. 

For example, the government didn’t have to waste R14.6bn — half the cost of the public sector wage agreement — in trying to relaunch a lame-duck national airline. That was only one of its many pie-in-the-sky indulgences.

In December, the Auditor-General said the auditing process, by its very nature a limited exercise, had identified at least R6.7bn of “fruitless and wasted” expenditure in the past three years. Over 20 years, the finance minister told Parliament, the government had spent R187bn bailing out failed state-owned entities.

Nor was Ramaphosa’s government compelled to mismanage the billions allotted to Covid relief. Last month, the Special Investigations Unit reported on the plundering of the government’s emergency Covid relief funds — those funds, Ramaphosa solemnly promised the nation on television, of which “not a cent” would be stolen. 

The SIU  has, so far, examined only a tenth of the R152bn spent. Almost two-thirds of these contracts were fraudulent and more than half of the money, some R8bn was stolen. 

The SIU also has in its sights another R179bn of tenders but needs presidential approval to extend its investigation to these. Two months on, our keen-as-mustard anti-corruption president remains silent on giving the go-ahead.

The speciousness of the state’s Covid body blow argument is further exposed by the massive infusions of cash the government has had as a direct result of the pandemic. The Solidarity Fund raised R3.4bn from South African institutional donors and wealthy families. 

In January, South Africa borrowed, on extremely generous terms, R11.5bn from the World Bank. In 2020 it got about R170bn from the International Monetary Fund.

While the ConCourt was indulgent, but misguided, in rescuing Ramaphosa’s government from its own foolishness, it did not spare a cosseted civil service from withering scorn. In demanding the final tranche of payment from what was, in fact, an illegal agreement, the unions seemed to ignore the fact that the state had already expended a “huge sum of money at the expense of poor citizens”, said Madondo.

During bad and worsening economic circumstances, public service employees “had their jobs secured and received year-on-year salary increments … outstripping inflation and outperforming the private-sector salary increases”. “The state must discharge its obligations to the poor and vulnerable by stretching its resources to assist them”, said Madondo, as opposed to having to honour an agreement,  “which would place a strain on the state’s capacity to fulfil its constitutional obligations while benefitting a comparatively small group of public servants who are guaranteed a job and a salary”.

Econometrix chief economist Azar Jammine says the judgment is “very favourable” for South Africa’s long-term fiscal position because it will enhance the Treasury’s ability to rein in public expenditure. It will make the unions “more reluctant” to contest the government’s wage proposals and “more determined” to reach an agreement, rather than approaching the courts.

While that might be the case, it arguably might instead make the unions less willing to enter into long-term agreements, since they clearly aren’t worth the paper they’re written on. Instead, each wage round will be a bitter and bloody battle, characterised by militant industrial action. 

The subtext of the ConCourt judgment is that the public service union members are cosseted, overpaid brats. A stern judicial rebuke will not change that reality. Only a government willing to engage in root and branch reforms could do so.

A Ramaphosa facing a leadership conference in nine months can’t and won’t. An ANC facing a general election in two years' time can’t and won’t.

Follow WSM on Twitter @TheJaundicedEye