On Friday, 27 November 2020, Premier Alan Winde and I submitted a section 79 petition to President Cyril Ramaphosa to bring to his attention material concerns over the constitutionality of certain aspects of the 2020 Division of Revenue Second Amendment (DoRA 2) Bill which was passed by Parliament on Thursday, 26 November 2020.
When Minister Tito Mboweni tabled his Medium Term Budget Policy on 28 October 2020, he confirmed that the Western Cape Provincial Budget would be cut by R2.396 billion in the 2020/21 financial year for compensation of employees following National Treasury’s decision to freeze wages.
Importantly, while the Western Cape does support National Treasury’s overall goal of decreasing the public sector wage bill, the way that they have proceeded in the 2020/21 financial year has raised significant concern for the Western Cape, as it has with other provincial governments as well.
Essentially, National Treasury have transferred significant risk to provinces, by pre-emptively cutting our budgets. This assumes that they will win their court case against the unions on the wage agreement, an assumption which is far from certain.
Should they lose that court case, provinces, including the Western Cape, will face a significant and immediate liquidity squeeze as we will have to immediately implement the wage agreement but without necessarily having funds made available from national government.
We are also concerned with the figure arrived at by National Treasury of a R2.396 billion reduction to our budget. We suspect that the numbers have been bungled, and assuming that a “wage freeze” will hold, we believe that they may have cut our budget by up to R500 million too much.
Our concerns pertaining to the DoRA 2 Bill are material and urgent and were raised with the Minister of Finance, Tito Mboweni, and his officials in National Treasury prior to the Bill being presented to Parliament, to no avail, and despite our repeated attempts to engage with National Treasury on ways to resolve our concerns, they were not resolved prior to the Bill being introduced into Parliament.
The result now is that the DoRA 2 Bill, if brought into law by the President’s assent, will infringe on the ability of the provinces to comply with their current contractual and legal obligations to all their employees, and will impact on provincial revenue allocations in an unlawful and unconstitutional manner. And so, we will have no option but to seek legal redress in this regard, impacting as it will on our capacity to service existing collective agreements, deliver services and continue to perform as a functional organ of state.
While we support the overall objective of decreasing the public sector wage bill, the in-year approach is unconstitutional.
Put simply, we cannot be expected to cough up R2.3 billion that we do not have in the Western Cape.
We trust that President Cyril Ramaphosa and his legal team will engage with our arguments and will return the DoRA 2 Bill to Parliament on the grounds of our valid constitutional concerns.
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