X

This is not a paywall.

Register for free to continue reading.

We made a promise to you that we’ll never erect a paywall and we intend to keep that promise. We also want to continually improve your reading experience and you can help us do that by registering with us. It’s quick, easy and will cost you nothing.



Nearly there! Create a password to finish up registering with us:


Please enter your password or get a login link if you’ve forgotten


Open Sesame! Thanks for registering.

First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

S&P sees South Africa’s wage bill and SOEs as challen...

Business Maverick

BUSINESS MAVERICK

S&P sees South Africa’s wage bill and SOEs as challenges to economic recovery

(Photo: Twitter / South African Tourism)

S&P Global Ratings said on Wednesday it was ‘constructive’ on South Africa, but the credit firm, which ranks SA’s sovereign debt three levels below investment grade, is concerned about the country’s low levels of per capita economic growth and the slow pace of fiscal consolidation.

After holding fire in late May and leaving SA’s credit score at BB-, with a stable outlook, S&P is searching for signs of a faster rebound in GDP (gross domestic product) growth and proof that the National Treasury has the authority and political heft to deliver on its promise of massive expenditure cuts – especially the cleaver it wants to take to public sector wages.

“We do see the fiscal trajectory improving, but it doesn’t, unfortunately, stabilise debt levels, and that’s a concern. But… at the moment, we’re quite constructive. Our growth numbers are actually higher than what the government had in the Budget,” said S&P analyst for emerging markets, Ravi Bhatia, during a web conference.

S&P forecasts GDP growth of 4.2% for South Africa in 2021, against Treasury’s 3.3%. Treasury is aiming to cut the budget deficit by about a third, to a gap of 9.3% from the record deficit of 14% of GDP in the previous fiscal year.

The actual budget deficit for the Covid-19-affected 2020/21 year is probably closer to 12%. South Africa’s tax revenues at the tailend of 2020 were boosted by the boom in global commodity prices, with the final tax collection of R1.2-trillion about R100-billion more than the Treasury had targeted in October. However, that has done little to tame debt levels, which are threatening to break the 90% of GDP level seen as a red line by ratings agencies.

“We don’t see a stabilisation of debt in the short term,” said Bhatia. “We do see some fiscal stabilisation, but not as aggressive as what the government is planning. There’s literally been a decade of stagnation in GDP per capita. South Africa hasn’t managed to pull up growth rates, despite all the talk of reforms.”

Wage bill danger

In his February Budget, Finance Minister Tito Mboweni vowed to freeze runaway public sector wages increases and save the government around R200-billion over the next three years, while also slashing or redirecting spending on social services like police, education and health in a bid to narrow the yawning budget deficit and bring down debt.

The wage freeze did not go down well with public sector wage unions, many of which are part of the governing African National Congress alliance via the trade union federation Cosatu. 

Insults were hurled and strike action threatened, but a combination of strict Covid-19 lockdown measures and thinning public sympathy for state employees, who typically earn more than the median working-class salary and are sometimes seen as the face of woeful service delivery, has resulted in less fractious negotiations than expected.

Bhatia said S&P still sees the government struggling to hold the line on public wages. 

“With the strong trade union presence, will Treasury actually manage to get the wage savings they are expecting?” he asked.

On Monday the government sweetened its offer to trade unions representing 1.3 million public servants. On top of a 1.5% increase, the government is also offering public employees a monthly cash bonus of between R1,220 and R1,695.

Bhatia added that state-owned enterprises (SOEs), especially Eskom, and the constant demand for bailouts, remained a risk to SA’s credit rating. The recent proposed sale of its stake in South African Airways and the splitting of Eskom into three distinct entities was a good sign.

“We know that the whole SOE issue is a big drag on the fiscus… but potentially privatisation would lead to some easing of these contingent liability issues,” said Bhatia. 

“There is a big political debate about this and… South Africa traditionally has this view of itself as a developmental state. Now there’s a slight change of mindset on that. And wider privatisation could lead to higher growth.” DM/BM

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

No Comments, yet

Please peer review 3 community comments before your comment can be posted