Transnet strikers: killing the golden goose

Transnet strikers – and other government employees for that matter – are killing the golden goose, writes ZAKHELE MTHEMBU.

With news of public sector employees demanding above-inflation wage increases and workers at Transnet going on strike this year, the role of government in employment must be reconsidered to determine whether it is beneficial to our society.

South Africa boasts a large public sector. Over 12% of the GDP is directed to the wage bill of the state alone, according to the Organisation for Economic Co-operation and Development’s (OECD’s) 2020 economic survey of South Africa. This would be welcomed by some if it meant mass state employment. Yet National Treasury has explained that wage increases, instead of raw mass employment, are the reason for the high public sector wage bill.

South Africa subscribes to a (misguided) commitment to the government playing a leading role in economic activities, including employment. The ANC government inherited a public sector that was used by the previous regime to ensure employment for the white minority population. The ANC, predictably, sought to do the same, using government employment for the black majority.

The obvious problem is that redistribution is used as a substitute for actual growth and production in the improvement of people’s lives. Redistribution is all government can do, since its operations, which are necessarily funded by taxation, presume production by taxed entities or individuals. We must ask ourselves whether a focus on redistribution is a beneficial substitute for productive economic activity. The answer is clear when one looks at countries that took the logic of state redistribution to its conclusion and became socialist and/or communist.

The public sector wage bill accounted for over 35.4% of total government expenditure in the 2018/2019 fiscal year, according to the Treasury. Public sector wage expenditure has grown faster than any other budgetary category since 2006/07, except for payments for financial assets.

This increase has coincided with depressed economic growth rates compared to other developing economies and with increasing unemployment – especially among the youth, who are supposed to be the most economically active people in our society. Then there is the personal income tax rate, which ranks among the highest in both Africa and the world.

The argument that the public sector cannot be the primary vehicle for the improvement of the material conditions of the population is intuitive. The public sector presumes productive activity happening outside government, otherwise it cannot be funded. Therefore, more people need to be participating in economic activity that generates taxable revenue.

Those in the employ of the public service have those in the private sector – generating the taxes that make up their compensation – to thank for their livelihoods: from the everyday Sipho who buys an item that has a sales tax (ironically named a value-added tax) to the high-income earning individual who pays over 40% of their income in taxes. These are the people who are the actual bosses of the public service, including the politicians in Cape Town, the bureaucrats in Pretoria, and the judges in Bloemfontein.

What this realisation of who public sector employees should be grateful to makes clear, is that the golden goose that is the private sector and its participants should not be killed or unduly strained. There should be more people in the private sector and more activity happening there, with greater freedom, rather than the central role the government plays in the economic affairs of South Africans.

Unions like the Public Servants Association of South Africa, United National Transport Union, and South African Transport and Allied Workers Union should bear in mind that the South African public’s taxes are the reason they have members. Their demands should be cognisant of our economic context and, most importantly, of our right as the South African public to reject their demands should we see fit.

The Transnet strike seems to indicate that public sector employees are not at all thankful to the productive members of society for generating economic activity, and therefore tax revenue, to pay their wages. The strikers appeared more than willing to tank the economy.

Instead of a capable state, which is always doublespeak for a bigger, more expensive state, there should be a deliberate effort to grow the private sector. The mentality that government (which is sustained by the private sector) should be the main economic player must perish.

South Africa’s public sector wage bill must come down, government spending must be curtailed, and taxes must be significantly decreased. All this must be advocated for and actioned, lest we find ourselves hastening our march down the road to serfdom, on which we have already been for a while.