South African economists have different opinions on the impact of Thursday’s public-sector strike on the economy overall.
T-Sec economist Mike Schussler contends that the South African public-sector wage bill is relatively too high for a developing country, compared with other developing and developed countries, and this is a major problem.
Schussler warned that public servants are likely to lose R250-million a day in wages because of the strike action.
“I don’t see an overall huge impact of the strike on the economy if the strike is for a couple of days, but if the strike goes on for a week or two weeks, then this might have a knock-on effect on the private sector,” he added.
For example, he noted that South Africa’s public-sector wage bill as a percentage of the gross domestic product (GDP) is 13%, compared with the Czech Republic’s 8%.
“For a developing country I think we are paying too much in public-sector wages compared to other developing and developed countries, but here in South Africa we are faced with a question of priorities,” Schussler stated.
“I don’t think we are paying them too much compared to other countries, but I think there is just too many of them and the red tape is costing this economy a lot of money,” Schussler added.
Hundreds of thousands of public servants on Thursday morning embarked on a strike that has been billed as South Africa’s largest strike action to date.
Government and provincial departments stated that they have contingency plans in place to deal with possible service disruptions in areas such as health, education and policing.
Public servants’ unions are demanding a 7% wage increase while the government is offering a 6% increase across the board plus a 1% above-inflation performance bonus.
While Minister of Public Services Geraldine Fraser-Moleketi on Thursday called for wage negotiations to continue, public-sector unions said they are only willing to negotiate if a third-party facilitator is appointed.
However, Absa economist John Loos differed with Schussler, arguing that since the parastatals are not involved in the strike, the impact is likely to be limited on the economy overall.
“I think it is difficult to really quantify how much this strike will cost the economy overall unless economically important players like Transnet and Eskom were involved — then we could put a price tag on it,” Loos argued.
Loos added that it is important to note that public servants do not work in full capacity because output is not necessarily lost and can always be made up at a later stage.
“Administrative services’ backlogs can always be covered at a later stage. I suspect this strike won’t last for long because no one wants to lose wages,” Loos said.
Loos doubted the accuracy of the impact of the strike, saying that although the private sector largely depends on the public sector, it is only on the administrative level. — I-Net Bridge