Take a pay cut? No thanks

2012-10-20 19:39

A proposed freeze of salary ­increases and bonuses for top ­executives and senior government officials was a compromise from an initial suggestion to slash ­current salaries.

Business successfully fought off a proposal by the ­labour sector for cuts, settling instead to forfeit an increase and a bonus for 12 months, according to three sources who attended the two meetings convened by President Jacob Zuma to discuss, among other matters, income inequalities and boosting the economy.

Just days after Zuma announced the signing of the social pact, there’s talk of a brewing resistance within government towards freezing salary increases.

The freezing period is planned for government positions starting from deputy directors-general right up to the president, according to trade union federation Cosatu president Sdumo Dlamini, Black Business Council (BBC) president Ndaba Ntsele and at least one source in the presidency.
But government is unwilling to confirm that indeed Zuma, ministers and others will have their salaries frozen.

Presidential spokesperson Mac Maharaj told City Press there’s still a need for consultations on who will be affected.

A government official close to the talks said: “There’s resistance from some in government, that’s why Mac won’t confirm.”

The official said there was a feeling in government that leaders cannot just decide to “fiddle” with salaries.

Said Maharaj: “This is an agreement signed only by representatives of different sectors. They’ll now take it before their constituencies to see how it can be implemented. They’ll present it in its ­totality to their members.

“Even the presidents of Busa (Business Unity SA), the BBC and other stakeholders will need to take it to their constituencies,” he concluded.

Cabinet, as a government stakeholder, would need to make a decision on specific details of the freeze, Maharaj said.

Ebrahim Patel, economic ­development minister, backed ­Maharaj’s position of consulting on the “modalities” of implementing the salary freeze in the state.

“We will now process this through the processes of government and it will define all the ­modalities. What level of senior ­executives will be covered and how will it work ... I can’t give you all the details because it will be a function of formal processes in government,” he said.

However, Cosatu’s Dlamini said the freeze would “most definitely, start with the president of the country, ministers, directors­general and CEOs”.

And Ntsele said Wednesday’s agreement was “binding” on all signatories. “Because we have signed, people like myself must freeze theirs.

I must lead by example. It is not limited to the Anglos (mining company Anglo American) of this world,” he said.

Dlamini said it was not only ­salaries and bonuses that would be affected.

“You have to look at other benefits these executives have, such as share options and performance bonuses. We’re looking at everything.”

But this was disputed by the BBC’s Ntsele, who said it would be unfair for business to ask its executives not to accept their dividends.

While he refused to go into details about discussions that took place around the salary cut proposal, Ntsele said business felt a wage freeze was a good start.

“We don’t have to be shock absorbers at all times. If you freeze executive and hike worker pay, mathematically you’re closing the gap.”

Asked if a salary cut would not have been a more appropriate commitment towards eradicating inequality, Patel said democracy ­allowed

“economic actors” such as business to take their own ­decisions.

“The process of attempting to build some degree of consensus on what needs to be done is a difficult one because when you ask anyone to give up anything that they feel they are entitled to, naturally in any society there is concern that that results in resistance.”

While public servants’ union ­Nehawu supported the freeze, the union is irked by what it calls ­Zuma’s conflicting messages.

Nehawu’s national spokesperson, Sizwe Pamla, said Zuma “lost an opportunity” to prove he means well about closing the income gap when he accepted a 5.5% salary ­increase last month.

“You (Zuma) take 5.5% and two months later you come and lecture us on this. If he had rejected this increase he would have been a good example. Now people are going to be cynical and ask if this is not about Mangaung (where Zuma is seeking re-election) and you can’t blame them (for suspecting this).”

Nehawu is unhappy with the 12-month freeze period, which Pamla said was “too short” and should have been aligned to the public servants’ three-year wage agreement.

Spokesperson for the Ministry of Public Service and Administration Ndivhuwo Mabaya said the department would only comment once it had received “formal communication” from Cabinet.

Patel dismissed concern by some economists that the fiscus would lose revenue of about R5 billion if the freeze is implemented, saying it is more important to get striking workers back to work.

“The economy’s biggest loss is if you have protracted industrial action because people feel inequalities are unfair. You lose production, you lose wages, you lose the stimulus of production in the economy. That far outweighs any other considerations. The government has to look at the bigger picture.”

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