By Cees Bruggemans
Social grants recipients and pensioners may average 5%-6% increases a year, the average wage settlement according to Andrew Levy Associates is nearer 8%. It sets the range, and the inflation momentum.
But then we have outliers that set different standards, offering example to emulate, in prices & earnings, none of it healthy.
A good job offer traditionally is accompanied by a sizeable jump in earnings, but that reflects increased responsibilities and use of talent, professionally or politically. That is added value that gets recognised.
What is new are these mega-sized jumps in prices or earnings related to nothing tangible, be they petrol, electricity or mine union settlements.
The world got lucky last year when oil prices halved to below $60, since then clawing back a small part of this windfall.
For SA consumers, the ride turned out somewhat differently, first the full benefit of the windfall lowering pump prices by nearly R4/l, only to reverse most of these gains since February by a combination of an oil price bounce, a sizeable Rand weakening (or Dollar strengthening really, far from our shores) and the Minister of Finance seeing an opportunity for some easy revenue raising.
But the upshot is still a bewildering hike in pump prices in three or four months.
The Eskom saga is far more ugly. Outright incompetence serially conducted has led to a situation where money has to be found to plug the holes. The non-payment culture of some is one feature, the costly mistakes of gas turbines and diesel use another, the costly overruns of new projects forever delayed yet another, the overcharging on coal contracts poorly executed. The list is endless, but not so the Treasury patience.
There is talk of privatizing assets to raise capital to meet some of these bills, and who knows something may come of it, even if ideologically there is much resistance. The easier route apparently is to levy directly on middle class payers and commercial users.
And thus the immediate request for another 23% electricity tariff increase.
What do these people think they are doing? They are inviting a wage/price spiral with their nonsense.
Petrol prices suddenly jumping 30%-40%, electricity doing something similar if taking the March increase with what is now looming. And if that is not enough, nature has dealt us a poor hand this year, with the maize harvest likely 30% down, and maize and food prices set to rise.
In this environment for the public sector to agree to a 7% wage increase would be responsible indeed, even if CPI inflation is still only 4% and assumed to average 4.8% this year (with peaking potential around 7% early next year on unfavourable base effects, before collapsing anew).
Different is the AMCU stand. Having confronted the platinum mining industry with a five month strike last year demanding a more than doubling of entry wages to R12 500 monthly, the same stance is now being followed in the opening gambit with the gold mines this year: a more than doubling from R6000 or bust.
These are outsized demands, inviting fundamental restructuring of economic activity. It favours the few, but adds to the state burden of having more unemployed to look after. And it sends a competitive signal to other unions and economic participants to demand more.
As if that can overcome our shortcomings. Instead, it invites higher price pressures, higher interest rates, greater hardship. For the unprotected. Which still means by far the greater majority.
It is not wise to allow events to drift into these mindsets and expectations.
