Debate On The Finance Mid-Term Budget Review Resolutions
By Dr LPHM Mtshali MPL

Kwazulu-Natal Legislature Pietermaritzburg: Friday, 26 November 2010  

Honourable Speaker


I have said this before and I will say it now: the provincial Treasury deserves praise from all political parties represented in this House for the progress it has made in the reining in of the fiscal deficit through implementation of its Provincial Recovery Plan. We fully support the declared intention to implement the cost-cutting measures across the entire provincial government on a permanent basis and we only wish these measures will survive the inevitable impulse to spend indiscriminately as the 2011 local government elections draw closer.


We are pleased that this year’s mid-term review resolutions address, in a transversal way, the cost of the latest drawn-out public service strike to the fiscus of the province and the delivery of services by government departments. It has been estimated that the cost of the strike to the South African economy ran at somewhere between 300 and 350 million rand per day. The impact in KwaZulu-Natal would have been substantial given the size of our public sector wage bills and the challenges we face in terms of service delivery requirements and backlogs.


The long-term fiscal implications of the public servants’ strike are even more serious than the immediate cost to the economy. Figures from the national Department of Public Service and Administration have suggested that the final settlement could eventually cost the fiscus close to R22.9-billion during this financial year and then at least the same amount annually from next year onwards. This estimate was based on the Public Service Association’s demand of an 8.6 percent salary increase and a housing allowance of R1000 per month. The housing allowance alone would be equal to about one percent of all government spending.


The 2007 public service wage agreement still resonates in our memory for its introduction of the occupation specific dispensations (OSDs) for certain categories of civil servants that put in place new employment classifications, promotions and grading systems. While OSDs have clear benefits in that they allow for salary scales to be reviewed, provide career paths that help keep the best available public servants in critical positions and introduce internships, the cost of the scheme to the fiscus is overwhelming.


In addition, OSDs have created a new layer of unfunded mandates which continue to constrict the finances of individual provinces. In KwaZulu-Natal, specifically, OSDs for medical staff have made it all the more difficult to balance the precarious books of the Department of Health while OSDs for teachers have deepened the challenge of underfunding for the Department of Education. Both departments are having to finance the shortfalls of OSDs from their own - non-existent - fiscal reserves.


Then there is the prospect of inflated wage offers to striking public sector workers leading to increased state borrowing which may further destabilise our public finances and even put the country’s sovereign credit rating under threat. If the government ends up borrowing money to pay wages and debt-service costs, this practice will soon prove unsustainable with future generations having to pay for our current spending.


Whereas some of the costs of the public servants strike, such as wage increases more than double the inflation rate, are limited to the fiscus, others, such as disruptions in service delivery, have even more serious implications for the future of the province and the country. It is a well-documented fact that the strike of medical staff led to serious neglect of patients and even unnecessary deaths. Similarly, the Treatment Action Campaign warned that the fact that the supply of medicine to people living with HIV had been interrupted in five of the nine provinces as a result of the strike, has created the danger of resistance to antiretroviral treatment developing.


On the educatithat we are most probably heading for poor matric examination results due to the endless disruptions in the classrooms during the strike, has several implications for skills levels and the employability of this year’s crop of matriculants. The lawlessness that accompanied the strike and manifested itself in violence, recklessness and destruction of property, particularly on school premises, is likely to further undermine the culture of selfless service and accountability that we are trying so hard to instil in our public sector.


Some of the indirect costs are, however, less obvious and we are unlikely to quantify them by way of departmental responses to the relevant transversal resolution. One area relates to future job creation in the public service which is bound to aggravate already serious critical staff vacancies. Unrealistic wage increases create a distinct possibility that all vacant posts in the public service will periodically be frozen as part of austerity measures to help pay for ever increasing remuneration costs of the current employees.


It is our hope that a wholesale attempt to quantify these losses through direct engagement with government departments will go some way towards mitigating the impact of future public service strikes on both our finances and service delivery.


I thank you.


Contact: Dr Lionel Mtshali, 078 302 0929