Joburg’s R10bn wage commitment raises fresh questions over affordability

Detailed summary

‘This is essentially a commitment of funds that don't exist, and you can't commit funds and agree to an increase when you actually don't have the revenue to support it,’ says Professor Alex van den Heever.

JEREMY MAGGS: Johannesburg, as you well know, is already struggling to pay its bills, maintain infrastructure and deliver basic services. Now a controversial wage commitment made just before the municipal election has raised another difficult question: where is the money going to come from?

And perhaps more importantly, what does it mean for the next administration’s ability to repair the city?

Someone who’s been watching this is Professor Alex van den Heever, an adjunct professor at the Wits School of Governance. Alex, welcome back to the programme.

Let’s start with the fundamentals. What exactly has the city committed itself to and how much could this ultimately cost ratepayers?

ALEX VAN DEN HEEVER: Well, they’ve committed themselves to giving the increase that they were trying to give earlier, which was interrupted by the Minister of Finance’s (Enoch Godongwana) indication and letters that this was unlawful, as the funds did not exist to pay these increases, and in terms of the Municipal Finance Management Act (MFMA), it couldn’t proceed.

It was essentially a discussion; it looks as though it was basically a political decision to pay off the union. So that’s basically where it stands, so the amounts are massive.

JEREMY MAGGS: So maybe some political expediency there but the city argues that it has obligations to its workers. So Alex, how do you distinguish a legitimate wage obligation from what could be a financially irresponsible political promise?

ALEX VAN DEN HEEVER: First of all, the argument that this is a commitment to workers is as a disproportionate response to all the stakeholders that depend on the city, which includes the residents.

This is essentially a commitment of funds that don’t exist, and you can’t commit funds and agree to an increase when you actually don’t have the revenue to support it.

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