Real costs still un-measured

The cost of the drawn-out South African public service strike to the economy runs at somewhere between R300-R350 million per day. Departments will have to find collectively an additional R1.5 billion if the latest offer to the unions is accepted. The total impact of the entire 7.5% wage offer on the state’s salary bill will be R6.5 billion. But all of this is but a small part of the real total costs.

While analysts can make fairly well-informed guesstimates of the daily cost of the strike and the real government spending required (some 40% of tax income) to cover its wage bill can be calculated, the indirect cost to the economy and the socio-economic impact becomes immeasurably high and difficult. Some of these costs of the increase -- which is more than double the inflation rate -- that have already been incurred will linger in the country’s households for many years to come.

Some of the problems the strike is due to cause are probably already imbedded for the future. The fact that the country is heading for a disastrous matric exam and poor results, for instance, has several implications for skills levels and the employability of this year’s crop of matriculants. Some of the indirect costs are, however, less obvious.

These include:

• Job creation; Government spokesman Themba Maseko said after last week’s cabinet meeting there was a possibility that all vacant posts in the public service would be frozen as part of austerity measures to help pay for the raised offer. This can only serve to even worsen the already frightening income divide in the country;
• Service delivery; The cabinet was also concerned that the wage increase would put the government in a “dilemma” of not being able to meet its election promises to build houses, schools and employ more teachers, Maseko said. This comes at a time when the country regularly experiences violent service-delivery protests;
• Education; Teachers could find themselves with fewer textbooks in schools, he warned, while the quality of education is already seriously suspect. “The impact of this strike may affect the entire generation as the damage far outweighs the gains made by public servants (and) in particular the teachers,” the National Association of Parents in School Governance said in a statement;
• Fight against HIV/Aids; The Treatment Action Campaign has warned that the fact that the supply of medicine to people living with HIV has been interrupted in five of the nine provinces created the danger of resistance to antiretroviral treatment developing. “We don’t know the scale yet. We are collecting that data,” a spokesperson said;
• South Africa’s credit rating; The South African government’s latest wage offer to striking public-sector workers will lead to increased state borrowing and may put the country’s sovereign credit rating under threat, Reuters reported quoting Maseko as saying that “put simply, government will be borrowing money to pay wages and debt-service costs. This is not only unsustainable but will require future generations to pay for our current spending”; and
• Impact on strikers themselves; According to one analyst, based on 20% of public servants being on strike, lost wages after the first 14 days would be R410 million after tax. It would take affected civil servants three years to recoup this.

Costs like this would also permeate other existing socio/economic and socio/political problems such as the country’s inability over recent years to create unskilled jobs which impact negatively on its development of social and economic viability.

According to the SA Chamber of Commerce and Industry the strike has diminished the gains made by the country in hosting a successful Soccer World Cup. “The benefits that South Africa should have gained form the successful hosting of the 2010 FIFA Soccer World Cup are being seriously eroded by the current activities of labour,” it said in a statement.

There might also be another unexpected challenge awaiting government and/or the unions  in the future from victims of the strike. While some matriculants might suffer from poor results because of  the chaos caused at schools and throughout the educational system, there were also the loss of life and other negative results from the disruption of health services. It is not impossible that civil court action – even class actions – may follow once the first dust has settled.