“Doublethink means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them.”
These words from George Orwell’s dystopian novel 1984 perfectly encapsulate the approach that is required to navigate South Africa’s fiscal realities today.
We are facing a fiscal crisis on an unprecedented financial and human scale, in no small part due to the unaffordable and centrally concluded national wage deal that provincial governments are now expected to magically fund.
In the Western Cape, only a shift to doublethink can achieve this impossibility because, in reality, there are simply no resources to do so – and national government is borrowing on an outrageous scale.
From the get-go, South Africa could not afford the centrally negotiated and agreed-to public sector wage deal, despite every attempt by unions and national government to say that this could be so.
The haunting words of Finance Minister Enoch Godongwana from February 2023 are ringing painfully true today: “Unaffordable public service wage bill settlements are a major risk to the fiscus.”
This fiscal crisis comes at a time when the country should be carefully planning for the next budgetary cycle.
Those plans should be focused on growing our economy by facilitating investments in a stable and clear policy environment, expanding export markets using a reliable and efficient logistics and port network, and creating jobs that will lift many millions of people out of poverty.
But right now there is no certainty about how budgets will be funded, even in the current financial year. We are now halfway through the current financial year – the same year in which the wage deal is already in effect.
South Africa’s National Treasury is still trying to figure out how this deal should be funded, and it seems to be settling on a position that it should be the provinces – who had no role in the wage deal negotiations – who should bear the brunt of it and do so while already being grossly underfunded.
What this means practically is that here in the Western Cape, key frontline services in education, health and social development are in for drastic cuts in the current financial year, the scale of which is unprecedented.
Further constitutional mandates that keep the province working across infrastructure, safety, mobility, environmental management and more are also facing budget cuts that will devastate South Africa’s growth potential.
The full quantum of these cuts is not yet known for this current year and over the three years of the Medium-Term Budget Expenditure Framework.
National Treasury is expecting to be able to cover 78% of the wage increases in education and health, but again this requires a doublethink. Even this portion does not exist in reality. We can only conclude that it, too, must be borrowed at great expense, or is being euphemistically hidden in so-called trade-offs – a phrase National Treasury and the minister of finance appear to think excuses them of blatantly reckless appeasement of organised labour in the public service at the cost of those most desperate for critical government services such as health, education and social services.
Education and health are not the only services that we deliver. Where must a province find the additional 22% for these two departments at our financial year’s halfway mark?
Over and above that, where must a province find the remaining funds to cover the application of the wage deal in other departments that were agreed to without our involvement, consent and available budget?
Provinces are not empowered to generate revenue at levels that would enable them to cover their bottom lines, yet national government seems to take solace in the approach of passing the buck.
National Treasury has advised that provinces should make up for this massive shortfall by trimming headcounts and curtailing travel and catering.
For the Western Cape, the amount that must be “thought” into existence is R1.1-billion – just for this financial cycle.
However, we have been diligently applying austerity measures for many years now; well in advance of any official warnings and based on prudent fiscal management to extract maximum value from every allocated rand.
Our priority has always been to do the most we can where it matters for the people of the Western Cape.
We have the most efficient cost-to-personnel ratio in the country, and our travel and catering budgets were cut to the bone years ago. In the Western Cape, where bloated salaries, lavish events and frequent flying are not the order of the day, there are no savings to be gleaned
And so, any suggestion that National Treasury’s funding of 78% of the increases for just two departments is generous is a deliberate distortion of reality.
What is also not being said is that departments like education and health, where some contribution to the wage deal is on the table from national government, are still seeing significant cuts in grant funding for critical items like building and maintaining schools.
There is no upside, no matter how one looks at it.
What all of this means is that the double whammy of a low-to-no-growth economy, a ballooning sovereign debt burden, combined with the time bomb of the wage deal, must now be confronted head-on.
The brutal reality is that the consequences of a politically expedient but fiscally impossible and hence recklessly concluded wage deal by national government means that the livelihoods and prospects of the province’s schools, teachers, learners, nurses and patients, as well as the social development services that support our communities, are under unrelenting pressure.
It is time that National Treasury called the most recent adjustments’ budget what it is: a very flimsy plaster on a shredded and bloodied public purse, brought about by the seeming insistence of national government to repeat its mistakes as happened with the 2018 wage agreement.
National government had to get the Constitutional Court to set this particular wage agreement aside, lest the country be finally kicked over the edge of the fiscal cliff.
As the Western Cape government, we are exploring every available avenue to ensure that the people of our province get what they deserve: a government that thinks twice before it commits to the impossible, and faces challenges with data-led policy choices that enable economic growth and job creation so it can deliver frontline services for the benefit of all residents, especially our most vulnerable. DM