Global Courant 2023-05-24 18:54:17
The government is faced with the challenge of making budgetary sacrifices to meet growing fiscal challenges, but it is unclear what should be cut.
Speaking on the national budget, Finance Minister Enoch Godongwana announced that this year’s budget included “tough compromises” that would require him to fund a further R37.5 billion in spending.
One of the most notable factors was wage growth in the public sector.
After civil servants took part in protests, the government and unions in the Public Coordinating Bargaining Council (PSCBC) reached a two-year wage agreement on March 31.
Under the deal, public sector workers will receive a 7.5% raise in 2023. Salary growth for 2024 will be determined based on the National Treasury’s consumer price index (CPI) forecast.
This Wednesday (May 24) Statistics SA released the latest inflation figures showing that core inflation is declining to 6.8% in April, down from 7.1% in March.
However, the national budget does not have enough to meet these demands without compromising elsewhere.
“In an environment marked by a rising cost of living, this represents a significant drop in civil servant salaries – and not for the first year. Nevertheless, the settlement far exceeded the Treasury’s budget, indicating a very difficult dilemma,” said Michael Sachs, a professor at the Southern Center for Inequality Studies.
Speaking at a PSG Think Big webinar, he said government should operate in a “give and take” framework, where difficult budgetary trade-offs affect public sectors such as education or healthcare.
Sachs added that over the past five years, government programs have been in conflict, creating uncertainty. He said that in this uncertainty, the national budget has become less credible.
The professor said that the budget is used more as a bargaining tool than as an indicator of the country’s future spending.
“But giving in to the demands of various factions in the economy poses a significant hurdle to making the tradeoffs needed to drive economic growth while addressing some of society’s most pressing problems,” said Sachs.
He said an important example could be the huge increase in spending on higher education, such as universities, which led to a trade-off in basic education funding.
In light of this, the decision to allocate more resources to higher education suggests that the state is prioritizing the needs of vocal constituencies, such as college students, as opposed to the needs of less vocal — and less empowered — elementary school and college students. childhood beneficiaries,” Sachs said.
“The state’s budgetary decisions are beginning to reflect the simple logic of politics, especially given the fast approach of the 2024 election.”
Sachs believes the budget suffers from a continued failure of political leadership to lead the country in a direction other than that simply dictated by populist impulses.
He said candid and clear information is needed about what budgetary compromises would mean for stakeholders, especially those in the private sector.
Read: Finally good news for inflation in South Africa
