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Government officials must be held accountable for promising to pay civil service wage increases in violation of fiscal prescripts

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Mthimkulu Mashiya is general secretary of the Transnet Bargaining Council and an accredited commercial mediator - accredited by Conflict Dynamics, Mediation in Motion and by the Centre for Effective Dispute Resolution. He is passionate about labour law.

The Constitutional Court has upheld the Labour Court of Appeal’s ruling that the awarding of a public service wage increase in 2018 was unlawful. A history of the decision-making that preceded the agreement shows that the government’s negotiators went ahead and committed the state, in flagrant violation of the applicable fiscal prescripts. Is it too much to expect government officials and ministers to not only know the legislative and regulatory prescripts that govern their sphere of work, but to scrupulously and conscientiously adhere to them?

The Constitutional Court has handed down the long-awaited decision on the public service wage dispute. This was an appeal by public service trade unions to the apex court after the Labour Appeal Court (LAC) ruled in December 2020 that the 2018 wage agreement was unlawful and therefore unenforceable. This resulted in public service employees not receiving salary increases for the financial year 2020/21. The Constitutional Court upheld the LAC’s decision.

It is perhaps appropriate to remind ourselves about the founding provisions of the country’s Constitution. According to section 1 of the Constitution, “The Republic of South Africa is one, sovereign, democratic state founded on the following values:

(a)    …

(b)   …

(c)    Supremacy of the Constitution and the rule of law. (my emphasis)

(d)   …”

The courts once again stood firm as the executive failed to adhere to the provisions of the applicable financial and fiscal prescripts that govern and regulate negotiations with trade unions.

As the LAC pointed out, National Treasury is given specific responsibilities by the country’s Constitution. In that regard, the court referred approvingly to section 216 of the Constitution, in terms of which:

“The National Treasury must enforce compliance with the measures established [to control state expenditure], and may stop the transfer of funds to an organ of state if that organ of state commits a serious or persistent material breach of those measures.”

In the process of negotiating with the trade unions – and in the lead-up to signing the three-year wage agreement of 2018 – the government’s negotiators committed a “serious material breach” of the applicable measures designed to control state expenditure. In the unanimous decision of the Constitutional Court, it is noted, in paragraph 13, that:

“On 20 March 2018, the COM [Committee of Ministers] met and reprimanded its negotiating team for failing to observe its mandate by tabling an offer which exceeded the allocated budget. On 4 April 2018, negotiations recommenced, and the State proposed a reduced offer which was within the budgeted amount but was rejected by the [trade unions] who insisted that effect be given to the offer of 25 January 2018.”

The important role played by Treasury, alluded to by the court, is reinforced in the Public Service Regulations. These regulations enjoin officials to:

“… be faithful to the Republic and honour and abide by the Constitution and all other law in the execution of his or her official duties…”

As far as collective bargaining in the relevant bargaining council is concerned, Regulations 78 and 79 are of particular importance. Read together with section 216 of the Constitution, they prescribe that the state can conclude collective agreements in the appropriate bargaining council only if certain conditions are met.

Among those mandatory conditions are that the agreement must not conflict with the Treasury Regulations and that commitments binding the state must be “on the basis of a written commitment from the Treasury to provide additional funds…”

In the course of this litigation, both at the LAC and in the Constitutional Court, it was common cause that there was no compliance with the regulations. As the LAC judgment puts it:

“When the two regulations are read together, it is clear that they impose a requirement for the conclusion of a collective agreement by the State to this extent: the cost of the collective agreement must be covered from the budget of the relevant department of State or on the basis of a written commitment from the Treasury to provide additional funds or, alternatively, from the budget of other departments or agencies with their written consent together with approval from National Treasury.”

One cannot criticise or blame the trade unions for pushing hard and getting the state to conclude the collective agreement. It is, however, inexplicable and indeed inexcusable that the government’s negotiators went ahead and committed the state in flagrant violation of the applicable fiscal prescripts.

From both judgments, it appears that Cabinet gave the go-ahead in January 2018 for this agreement to be signed. It was only later that the then Minister of Finance, Malusi Gigaba, realised that the state could simply not afford the increases, and therefore wrote to his Cabinet colleague, then Public Service and Administration Minister Faith Muthambi, stating that:

“The National Treasury has carefully examined the request against funds available within the fiscal framework. However, no additional funding can be made available to fund the wage negotiations outcome which exceeds the provided funding envelope over the 2018 MTEF. The compensation budgets of departments remain hard ceilings.”

Nevertheless, the state honoured the first two years of the three-year agreement. Part of the trade unions’ argument was that the state’s honouring of year one and year two of the collective agreement had the effect of regularising and legitimising the non-compliance with the regulations. The unions therefore wanted the courts to enforce the impugned agreement and order the state to also honour year three by granting the agreed upon increases.

The courts were not impressed with the Constitutional Court stating:

“In the present case, the [unions] benefited from the agreement despite the fact that it was invalid and unlawful from the outset. It is also clear that the State has expended substantial financial resources on the adjustment of the public servants’ salaries over the period of two years and requiring the enforcement of [the collective agreement for year three] will directly affect its difficult task of managing the recovery of the economy and protecting the lives and livelihoods of the nation’s people during the Covid-19 pandemic.”

In its judgment in December 2020, the Labour Appeal Court had bluntly and unsympathetically ruled that:

“Under the present financial circumstances, it does not appear to be just and equitable to order government to expend significant and scarce financial resources on employees whose jobs are already secured and salaries have been paid in full, particularly in circumstances where the imperative exists for the recovery of the economy to the benefit of millions of vulnerable people.

“For example, the provision of social grants to fellow South Africans living on the margin could well be imperilled by such a decision, as might the need to pay for significant and critical additional medical costs caused by the pandemic.”

Echoing these sentiments, the Constitutional Court judgment states that:

“… the [unions] and their members can be said to have been unjustifiably enriched, they actually and materially benefitted from the impugned collective agreement.

“Firstly, the employees had their jobs secured and received year-on-year salary increments in the public sector, outstripping inflation and outperforming the private sector salary increases.

“This occurred at a time when the rest of the country’s workforce, including high-echelon public servants, Cabinet and Parliament, had suffered salary cuts or freezes as a consequence of the economic and the Covid-19 pandemic.”

But did it really have to come to this? Why does it almost always have to be the courts that have to whip the executive into line? Is it too much to expect government officials and ministers to not only know the legislative and regulatory prescripts that govern their sphere of work, but to scrupulously and conscientiously adhere to them? Regulation 79 could not be clearer. It unambiguously states, among others, that:

“An executive authority shall enter into a collective agreement in the appropriate bargaining council on any matter that has financial implications only if –

(a)   he or she has a realistic calculation of the costs involved in both the current and the subsequent fiscal year.

Earlier, I said one cannot and should not blame the trade unions for doing what trade unions do, namely fight tooth and nail for the best deal for their members.

Perhaps the state could have reprioritised spending in order to meet labour’s demands. For the state to conclude a collective agreement without doing “a realistic calculation of the costs involved” was not only unlawful but also highly irresponsible.

It is stating the obvious to say the exercise of public power must be based on the rule of law. This irresponsible and unlawful conduct by government officials and politicians imperilled the state’s ability to deliver services to the wider community. In this regard, the Constitutional Court pointed out that:

“… if [the 2018 collective agreement] were to be enforced, the amount available for service delivery in all its manifestations would be significantly reduced. In this regard, the State has laid emphasis on the impact that the Covid-19 pandemic has had on its financial resources, including the need to protect the lives and livelihoods of vulnerable people exposed to the severe consequences of the pandemic.

“In the present economic and health circumstances facing the country, it would not be just and equitable to require the State to make good the illicit salary increases it promised at the expense of far more pressing needs affecting the country.”

In a constitutional democracy like ours, complying with the Constitution and the applicable legislative and regulatory prescripts is not an optional “nice to have” that can be ignored on the whim of uncaring senior officials and their political masters.

In April 2016, and subsequent to the seminal decision of the Constitutional Court on the Nkandla debacle, then president Thabo Mbeki penned an opinion piece entitled, “The wider significance of the judgement of the Constitutional Court on the Nkandla matter.

In that piece, Mbeki asked a series of questions pertaining to the meaning of constitutional democracy. He asked:

  • What do we mean when we say that ours is a constitutional democracy?
  • What does our Constitution prescribe in terms of how South Africa should be governed?
  • Should any consequences arise from any failure by anybody or any governance institution to act according to the constitutional prescripts?
  • What must we do in the new South Africa to avoid the fundamentally bad governance which characterised the old South Africa of colonialism and apartheid?

I leave it to you to interrogate these questions and to provide answers and thus reflect on where we are and where we want to take this constitutional project called South Africa Inc. DM

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