Pay increase justifiable: economists, politicians

THE announcement of a 24 per cent pay increase for civil servants over the next two financial years has drawn mixed reactions from political players and economists.

Whether the increase is justifiable and how it will be funded are just some of the issues at hand, and The Namibian sought views of five personalities in economics and politics on the likely effect the increase will have not only on the civil service, but the economy as a whole.
JUSTIFIABLE?
All agree that the increase is necessary.
Robin Sherbourne, Group Economist of Old Mutual, says the increase is ‘justifiable and expected’.
Ben Ulenga, President of the Congress of Democrats (CoD), says any increase at this time, especially for the lowly paid, is welcome, adding: ‘I hope the unions looked at all the priorities, as the interests of the workers should be defended’.
Reflecting on the 24 per cent increase for political office bearers late last year, Veikko Nekundi, Economics Affairs Secretary at the Swapo Party Youth League (SPYL), is elated about the increment for civil servants, but says he wishes it had come earlier, or at the same time as increases for political office bearers.
Erwin Naimhwaka, an economics lecturer at the University of Namibia, says the increases are ‘long overdue’; and Hidipo Hamutenya, President of the Rally for Democracy and Progress (RDP), says ‘the wages for public servants have been below inflation levels for a while now, and Government made a mistake by keeping increases on hold for so long. They should have done it in staggered increases over the years.’
FOOTING THE BILL
While the pay increase presents obvious benefits to civil servants, how the estimated additional N$1 billion a year, added to an already high wage bill, will be financed remains to be seen.
Ulenga cautions that Government should identify the correct resources for funding, adding that ‘the rich should cough up’ in covering the additional N$1 billion through taxes, particularly of high-income businesses. Nekundi, however, doubts the increases would have been made without consideration, adding that since Government hasn’t announced higher taxes along with the salary hikes, it must have a plan to finance the wage bill.
Sherbourne says he is unsure how the bill will be footed, and depending on the cost, other spending may have to be cut in order to finance the increase.
Naimhwaka, however, doubts that capital projects will have to be shelved as a result of the increase. ‘However, one can expect the budget deficit to increase over coming budget periods. Given that we are coming from running a budget surplus, the deficit is expected to be within manageable levels,’ he says.
He adds that he sees no room for increasing taxes to cover the cost, but believes that Government will continue to reinforce tax compliance.
‘PAY DOESN’T EQUAL PRODUCTIVITY’
While economists and politicians alike find the increase justifiable, one bone of contention lies in whether better pay will translate into better service delivery.
‘The public service was slowly getting low on motivation and was failing to keep the right skills, which affects productivity,’ says Naimhwaka in his justification that the increase was overdue.
‘The announced increases should be a relief to the public servants, I just hope that the public servants will reciprocate and improve productivity as well. Increases should not only be given as entitlements but should be linked to productivity.’
Sherbourne adds that in order to improve the productivity of the civil service, pay increases should not only be announced in election years but need to be linked to inflation and performance, so that employees are rewarded for good work. He adds that priorities need to be set straight when it comes to improving worker productivity.
‘We have Government putting tens of millions into a building for the Ministry of Lands, but you can’t get hold of someone in Government because information systems are down. We should be spending more on making civil servants more productive. The irony is that Namibia has one of the largest civil services in the world, but no capacity. This is a big challenge that needs to be addressed.’
HARD TIMES
Given the current global financial crisis, which is sure to have an impact on Namibia’s own national income, a reasonable question is whether this massive increase is timely.
Although he agrees with pay increases for civil servants, Hamutenya compares this increase to a ‘big bang coming at a time when the world economy is in a crisis’.
‘Most of Namibia’s income comes from the mining sector, where our minerals are sold to major economies of the world, who are directly facing the impact of the crisis. As a result, our economy is going to suffer, and this increase in wages is coming at a tough time.
‘It is a good thing to have a happy civil service, but if this does not translate into an improved economy, then priorities need to be rethought. The management of the economy should be handled carefully,’ he says.
But the impact of the crisis is twofold, says Nekundi, who says that not only does it affect the country’s economy as a whole, but also causes inconveniences on the individual level. ‘In these times, the increase is good from the individual perspective, but I hope that it won’t impact the economy itself.’
Positive about the increase, however, Naimhwaka says that ‘the timing is ideal, because of the state of the world economy and the general rapid increase in the cost of living. The increase can be seen as a fiscal response to boost demand in the economy.’
Ulenga agrees, saying that it is always the workers who bear the heaviest burden, and that the increases should be seen as a positive thing.
‘It is not fair to tell the poorest to tighten their belts further in tough economic times,’ he says.
BUYING VOTES?
‘If the Government were to turn around later on and withdraw or change the terms of the increases, then one will be entitled to call it an election ploy,’ says Naimhwaka.
‘I do not want to believe that those that are saying it is an election ploy would rather have the increases shelved until after the election.’
Nekundi agrees, saying that conclusions can’t be drawn in this regard without first comparing what previous increases were in comparison to this increase, and in relation to comparisons in inflation rates, all in the midst of the ongoing financial crisis.
‘As a politician, I wouldn’t want to buy votes, and I trust that the Government went into these negotiations in good faith, and not with the objective of buying votes.’
While agreeing with the pay increase, Ulenga states that since this is an election year, Government is eager to be seen as a good paymaster, but cautions that resources to cover the costs should be well considered.
Hamutenya believes that with 2009 being an election year, Government felt it needed to do something for voters, but he maintains that the increase was indeed overdue.
‘The increase was inevitable because pay was at below inflation rates. So there was pressure to increase wages. But if there was wisdom, and foresight, and if the vision was not lost, these increases would have taken place already at staggered increments based on inflation, instead of as a reaction to election pressures,’ he states. nangula@namibian.com.na