Constitutional Court confirms Ramaphosa’s Cabinet broke the law to fund salary increases

Note to Editors: Please find attached soundbite by Dr Leon Schreiber MP.

In a landmark ruling, the Constitutional Court today completely vindicated the DA’s longstanding opposition to the abuse of taxpayer money to fund the outrageous public sector salary increases that are bankrupting our country. The Court found that President Cyril Ramaphosa’s Cabinet – led by the Minister of Public Service and Administration, Ayanda Dlodlo – broke the law when it granted an unfunded R30.2 billion wage increase for public service employees under an illegal three-year wage deal signed in 2018. This illegal increase was over and above the R128.5 billion that had already been set aside by Parliament for salary increases in 2018, 2019 and 2020.

In its judgement, the Constitutional Court upheld an earlier Labour Court ruling that the Cabinet’s decision to funnel this additional R30.2 billion into the pockets of public servants and the thousands of ANC cadres “deployed” to capture the state violated clauses 78 and 79 of the 2016 Public Service Regulations and was therefore “invalid, unlawful and unenforceable.” In the process, the highest court in the land also upheld the Labour Court ruling that President Ramaphosa’s government violated sections 213 and 215 of the Constitution when it granted the illegal increase.

The 2016 Regulations clearly stipulate that any proposed wage increase must either be covered out of the existing budgets of government departments or be accompanied by an explicit undertaking from National Treasury that it would fund the increases. In clear violation of the law, the Court ruling confirms that, on 21 May 2018 – three months after Ramaphosa became President – “the State entered into an agreement with the relevant trade union representatives” for a salary increase that exceeded the R128.5 billion made available by Parliament for compensation of employees by an additional R30.2 billion (according to Treasury, this amount ultimately ballooned to R37.8 billion).

The State granted the increase despite failing to obtain the required approval from National Treasury. In fact, the Court confirms that on 14 February 2018, National Treasury had explicitly rejected the Cabinet’s request to fund the additional billions. The Court finds that “the effect … was that the allocated budget would be exceeded by R30.2 billion, an excess not approved at all by any Act of Parliament.”

For a full two years during 2018 and 2019, the State dutifully paid these illegal salary increases out of the pockets of South Africa’s long-suffering taxpayers. It was only in 2020, with Treasury sounding the alarm that the country was teetering on the edge of the fiscal cliff, that Finance Minister Tito Mboweni finally sought to stop the implementation of the third year of the illegal agreement. As a result, the Court found that President Ramaphosa’s government “expended a huge sum of money at the expense of poor citizens, in adjusting and paying out salary increases to public servants for the period of two years under an invalid collective agreement.”

In the wake of this ruling, the DA calls on President Ramaphosa to immediately fire Minister Dlodlo, who was the Minister of Public Service and Administration that oversaw the illegal deal and who was reappointed to the same position by the President in August 2021. Prior to being reappointed, she was the Minister of State Security who failed to prevent the violent looting that last year claimed hundreds of lives and cost the country billions. If the President fails to fire Minister Dlodlo, he will only be confirming the urgent need for a majority of Members of Parliament to support the DA’s upcoming motion of no confidence in his Cabinet.

The DA will furthermore write to National Treasury and the South African Revenue Service (SARS) to pressure these institutions to recoup the billions illegally paid to cadres and public servants during 2018 and 2019 under the invalid deal. These billions would be much better spent on stimulating the private economy and providing social support to the 30 million citizens trapped in poverty. If Treasury and SARS are serious about restoring South Africa’s public finances and upholding equality before the law, they would pursue the beneficiaries of this illegal deal with the same vigour that they go after taxpayers in the private sector.

On the basis of the precedent created by this case, the DA has also already submitted a request to Department of Public Service and Administration in terms of the Promotion of Access to Information Act (PAIA) to establish whether the State once again violated clauses 78 and 79 of the Regulations when it recently granted a further unaffordable R450 million increase to millionaire managers.

In the midst of an economic environment even more desperate than what prevailed in 2018, and with a new round of wage negotiations set to commence next month, the DA will continue to lead this fight against the ANC state and its unionist allies for a new fiscal paradigm that reduces the public sector wage bill, slashes the amount spent on millionaire managers, and instead empowers frontline public servants and the private economy.