The Minister of Finance’s medium-term budget policy statement (MTBPS) provoked a variety of responses to South Africa’s political economy challenges. The recommendations to potentially revive economic development cover various areas in macro- and micro-economic policy planning.

One prominent view is that trade unions need to be constrained as their activities are impeding economic development. Informing this view are ideological biases and a reductionist approach to the country’s wage debates.

Recent articles on prominent financial and business media platforms exemplify these beliefs. The writers believe all South Africa’s economic problems will be resolved through systemic wage reduction (especially in the public sector) and by overlooking trade union policy recommendations. These sentiments might be popular among supporters of free-market or orthodox economic systems, but they are not suitable for South Africa’s post-apartheid economy because of the following reasons:

First, trade union bashing erodes the legitimacy and implementation of social compacts. President Cyril Ramaphosa has initiated several social compact interventions aimed at resolving economy challenges. These include jobs and investment summit commitments that were produced in tripartite discussions between social partners: labour, business and government. All these stakeholders concur that consensus between social partners is the main catalyst for attaining higher levels of economic development.

This broad acknowledgement encourages each social partner to contribute towards national development by overlooking narrow sectarian economic or political interests.

Public statements after the MTBPS, attributing all political economy challenges to trade union agency or wages are not helpful for social compacting. These statements will entrench divisions among social partners and move them towards traditional ideological policy stances.

This trend is articulated in the Mapungubwe Institute for Strategic Reflection (Mistra) Social Compact Report (2014), which identifies “an attachment to ideological fundamentalisms as the sole wisdom to progress, on the part of the compacting agents” as an obstacle for social compacting.

The second limitation of trade union-bashing is the simplistic view on wage trends in both public and private sectors. Trade union critics believe that wages in the country undermine economic development and South Africa should follow a low wage-based development path. This logic ignores empirical evidence that illustrates how post-apartheid wages, among low- and middle-income earners, continue to decline.

The Department of Planning, Monitoring and Evaluation’s 25-Year Review highlights how the share of wages in the national income has been decreasing since 1994. A recent Reserve Bank Quarterly Bulletin revealed that private-sector wage growth reached an “all-time low of 1% in the first quarter of 2019”. These findings are not new and were articulated in different submissions made during policy debates on the national minimum wage.

The conventional approach to the public sector wage bill has also been very limited. It does not appreciate differentiation within the public sector workforce and how this affects the wage bill or service delivery. This explains the calls for a blanket moratorium on additional public sector employment and job cuts.

World Bank and Institute for Economic Justice (IEJ) research reports refute many of the claims about the state wage bill. They show that South Africa’s public sector employment is low when compared with other countries. The findings also highlight the necessity of disaggregating public sector wage trends before introducing systemic or uniform policy interventions. Evidence in the IEJ reports shows that high-level bureaucratic jobs account for most wage increases in the public sector. So, it is not accurate or useful to propose policy solutions that are based on generalisations that ignore complexities in public sector employment.

Proponents of the conventional approach to public sector employment restructuring overlook service delivery challenges. Several reports highlight employment shortages in critical human development areas such as education, health and social infrastructure. The contemporary proposals on decreasing public expenditure on human resources will exacerbate this challenge and produce negative impacts on service delivery.

The third shortcoming of reducing South Africa’s economic challenges to trade union strength is underestimating deeper structural barriers. Economic growth requires sufficient demand, which is essential for reviving inclusive development. This structural impediment cannot be resolved through decreasing employment, income and social service delivery. Furthermore, political economy research identifies broader macro-economic factors causing South Africa’s economic stagnation and persistent inequalities.

The research reports cite the following trends: high mark-up costs in product markets, corruption, over-financialisation, energy security challenges and uneven spatial development.

Evidence-based policy interventions will address these structural barriers. The ideological biases, which attribute all economic problems to trade union agency, are not conducive for producing evidence-based policy recommendations. More importantly, they erode the effectiveness and legitimacy of social compacting in the country.

Thandika Mkandawire, a leading political economy scholar, explains that “regimes which repressed labour on behalf of business without demanding anything in return from business ultimately ended up managing predatory pacts”. DM

Khwezi Mabasa is senior researcher at the Mapungubwe Institute for Strategic Reflection (Mistra).