Mboweni’s war with unions will end badly. Such wars always do
Things tend to go awry when the state takes on unions to impress the markets
The only credible reading of last week’s budget is that the government believes a public-sector strike will boost its credibility in the marketplace. But when governments get tough with unions to impress the markets, things tend to end badly. There is no reason to believe they will end better now.
Whether finance minister Tito Mboweni did discuss cutting public-sector wages with the unions before the speech (he says he did, they say he didn’t) hardly matters. Anyone who knows how bargaining works will know that announcing a huge cut in the wage bill before the unions agree will force them to say no. If the government wanted union agreement, it needed to have reached an agreement with unions before the budget announcement.
Mboweni knows how bargaining works – he is a former labour minister. So does the president, a former unionist. So they must have known the unions would reject the plan. Since they must also know they will not seem credible to markets (and inevitably, the ratings agencies) if they don’t cut the wage bill, they must be planning for a strike, expecting that the unions will lose and the government will show the agencies and investors it is in charge...