A Dose Of Fiscal Medicine
The message from Finance Minister Nhlanhla Nene when he delivered his mid-term Budget policy statement last week was clear: Let's take the pill now or risk an economic disaster later. It is accepted wisdom that when times are tough, we have to take our medicine. We must commend Nene for telling us what we need to hear. After all, the road to recovery starts with a proper diagnosis and the doctor telling the patient the truth.
There are times when I feel that, as South Africans, we do certain things in the naive belief that there will be no consequences. But that is like living in a fool's paradise. We will be punished, sometimes severly for the economic and, dare I say, policy choices we make. If we go on spending as though the country has a bottomless pit of money, there will be consequences.
If, as individuals, we continue living beyond our means that will catch up to us. Life is not made up of only expenditure. There is also an income or revenue side to take care of. If the two don't always balance then you are heading for trouble. And trouble is exactly where we are if you listen to Nene carefully.
And if you don't believe the finance minister, do your own reality check and assess the state of your finances as an individual or of your own business if you have one. How did we get here, one may ask. To be fair to ourselves, we are not an exception in the world. Many countries face the kind of difficult economic situations we do. Governments the world over are battling to strike the balance between what thier countries require and what they can afford.
Part of our woes has to do with sluggish economic conditions in the countries we trade with, particularly China and some European countries. But there are constraints that have been occasioned by our own actions. Take the issue of the public-service wage bill, as an example. Ours is said to be considerably higher than that of many developing nations in a similar position as us.
At more than 35 percent of government spending, our publiv-sector wage bill is too high and no doubt cutting our other spending. And, of course, the question is being asked about whether society is getting its money's worth in terms of the public sector's productivity. If you factor into that what public servants may be owing in terms of municipal and other services provided by the state (which the government can recover if it were serious), it becomes obvious that the public service is a significant contributor to our challenges.
For this reason, we (society in general, public servants and their unions included) must support Nene in his call for wage increases that are aligned more closely to inflation. It is a sacrifice that must be made in the interest of the country. But if we expect public servants to cut their coat according to their cloth, it will have to start at the top.
We welcome the austerity measures imposed and implemented by the government, but society needs to get the sense that the executive is itself willing to walk this journey. It does not inspire confidence when an impression is created that while we are all expected to tighten our belts and subject ourselves to a haircut, as Minister Nene put it, members of the executive can continue living as normal.
The austerity measures may have to extend to budget cuts across ministries and departments with the exception of areas such as education, health and social welfare in line with Nene's declaration that fiscal discipline will not be pursued at the expense of the poor and vulnerable. However, the sacrifices cannot be confined to the public sector. Labour in general must also come to the party and so must business.
We need a stable labour-relations environment where strikes can be quickly resolved and wage demands are realistic. Business will also have to play its role by investing in the economy and paying its due in terms of taxes. It is clear from the mid-term Budget that come next year, taxes will have to be increased. Business and higher income groups may be called upon to pay extra.
Will they see the bigger picture or will they complain? One thing is certain, if the government does not act decisively and act responsibly, it can cause great harm to the country and citizens. We have seen this happen in countries such as Spain, Greece and other struggling European countries. We should not allow that to happen. Let us support Nene and take his medicine. It is for our collective good.
