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Proposed wage bill cut could adversely affect the economy, says analyst

The country’s economy slipped into a technical recession after a decline in GDP of 1.4% in the fourth quarter of last year. Overall growth for 2019 was dismal at just 0.2%.

Picture: pixabay.com

JOHANNESBURG - Amid much tension about government’s decision to cut the public sector wage bill, Statistics South Africa on Tuesday said there was already a drop in government job numbers and this, in turn, had affected economic growth.

The country’s economy slipped into a technical recession after a decline in GDP of 1.4% in the fourth quarter of last year. Overall growth for 2019 was dismal at just 0.2%.

Stats SA said government expenditure decreased by 0.2% due to lower employment numbers in national and provincial governments as well as institutions of higher learning. But, this move meant more South Africans were unable to participate in the economy.

“With more people that employed, the more the demand there is in the economy for goods and services,” said the Institute for Economic Justice’s Neil Coleman.

Coleman said if the wage bill was cut by the proposed R160 billion, this could have a more devastating effect on the economy.

“This is now taking us in a full-blown austerity scenario. If they go ahead with this austerity plan, that will plunge us into a full-blown recession,” he said.

Meanwhile, Cosatu said it felt vindicated by these results and it was clear that the government didn’t think through the rationale of cutting the public sector wage bill.

WATCH: SA's technical recession explained in 120 seconds