Reducing public-sector wage growth is the only policy option that can offset reduced revenues according to the Institute of International Finance
The SA government needs to achieve “credible” fiscal consolidation, notably by reducing public sector wages, if it wants to boost business and consumer confidence enough to improve growth in the coming years, the Institute for International Finance — the global association for the financial industry — said in a report on Monday.
In an optimistic scenario, slower growth of the public wage bill would improve business and consumer sentiment even more, and economic growth could reach 1.6% and 1.8% in 2021 and 2022, respectively, the institute said. Mboweni said SA needs to achieve R150bn in savings over the next three years to stabilise government debt levels. Much of this is expected to come from savings on the wage bill, but public-sector unions have rejected moves to reduce the salaries of public servants.
The country is only expected to grow by 0.5%, as per National Treasury forecasts, rising to 1.2% in 2020, and 1.6% and 1.7% in 2021 and 2022, respectively. The institute warned that recent bouts of load-shedding, that saw Eskom cut an unprecedented 6,000MW from the grid on December 9, have worsened the outlook for growth.
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