Cees Bruggemans shocked: State imitates private sector – sincerest flattery

In usual Cees Bruggemans style, he sums up a session in parliament in the most simple terms, yet cuts to the heart of the discussion, no holds barred. He reflects on a recent decision Finance Minister Nhlanhla Nene made with regards to public sector wages. Government had agreed to increases but the maths was incorrect and a 7 percent increase was in fact 11.5 percent after benefits. But given this miscalculation, the budget wouldn’t allow for all involved to be privy to it, so Nene announced job reductions, something the private sector knows too well – not the retrenchment element but rather keeping within budget. One could argue that given the job creation mandate within government this decision may not be consumed too well around senior government dinner tables. – Stuart Lowman

South African Finance Minister Nhlanhla Nene

*by Cees Bruggemans

I did not expect to see the day, but the state is imitating the private sector, in one of the most sensitive of political arenas (public service)? Surely not?

Yet there was Finance Minister Nene in parliament last week, answering uncomfortable opposition questions, in writing. About the unthinkable.

Cees Bruggemans
Cees Bruggemans

For consideration. A private business confronted by excessive wage and benefit demands it could not possibly refuse (for it can’t afford prolonged strikes), yet which it plainly can’t afford either in today’s tightened circumstances, does the only sensible thing: it manages the wage bill.

Read also: Work, wages and economic woes

In other words, the union gets more than it should get from a purely commercial point of view, but this is limited to a shrinking number of employees. For the business balances the books, squares the circle, by reducing head count (cutting jobs, letting people go, pink slips).

This has been going on for years in large parts of the private sector, even as the public sector has been adding layer upon layer upon thickened layer.

Until now.

There it was in black and white. Government had agreed to far too much (7% wage deal but after adding back benefit increases, it really amounted to 11.5%), eating away all budgeted leeway, and then some.

Read also: Public sector wages showdown: this time it’s got to be different

Yet there would be no slippage on budget reduction promises. There would also be no deflection from capex or social delivery expenditure. Instead, last Friday, in writing, Finance Minister Nene suggested he would be doing what hasn’t really happened before to our gold-played public sector.

Head count shrinkage. Freezing of positions. Reductions in head count where possible. Unthinkably, performance bonuses compromised. Performance bonuses? Where do they get the audacity to start with?

Anyway, the state is shrinking numbers while expanding pay, staying within tight budget lines. In the private sector, the market rules. In the public sector, blame the rating agencies. A credit rating is a powerful lever. Use it!!!

*Cees Bruggemans, Chairman, Bruggemans & Associates, Consulting Economists

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