No more funds available to be reprioritised for public sector wages

As public sector unions and the government continue discussions at the Public Service Co-ordinating Bargaining Council regarding the next round of wage negotiations, the Department of Public Service and Administration (DPSA) says there are no more funds available that can be reprioritised to fund the last leg of the 2018 wage agreement.

Read: Treasury puts the brakes on the wage bill

“It’s too late. There is no money that can be reprioritised,” says DPSA Director-General Yoliswa Makhasi.

Implementation of the last year of the three-year wage deal was struck down by the Labour Appeal Court in December when it ruled that the deal is not binding because it had not been approved by the National Treasury. The court further ruled that implementing the deal would also set back the government’s plans to rein in public spending.

Freeze on increases

Last year, the government unilaterally decided to announce a freeze on public sector wage increases, in line with its bid to save R160 billion over the next three years.

Public service wages accounted for about 34% of consolidated state spending by 2019/20.

The unions’ appeal for the courts to force the government to implement the final year of the 2018 wage deal contravenes sections 213 and 215 of the Constitution and sections 78 and 79 of the Public Services Act, the court ruled. 

Four trade unions including the Public Servants Association of SA (PSA), the SA Democratic Teachers’ Union and the National Education, Health and Allied Workers’ Union (Nehawu) have taken the matter to the Constitutional Court on appeal. 

In court papers, Makhasi says at the beginning of 2020 the government began to negotiate the terms of Clause 3.3 of the wage agreement, which states that public servants are due to receive salary increases of up to 7% or CPI plus 1%, depending on job grade. 

Unions reject ‘gratuity’ offer

In the revised proposal by the DPSA public servants would receive a collective, once-off “gratuity” of R13.5 billion.

This would come from cuts and savings from government programmes, including school feeding schemes.

These payments would have no effect on the public sector wage bill for 2019/20. 

The proposal was made to unions in light of the country’s worsening public finances due to the Covid-19 pandemic. 

Trade unions rejected the proposal and were informed by the DPSA that the offer would not be made available later, according to Makhasi.

“The funding from cuts to budgets elsewhere has been used to combat the Covid-19 pandemic. It is no longer available for just and equitable relief for union members,” she says.

Government would need to borrow a lot more money

DPSA Minister Senzo Mchunu previously said in court papers that the government would be required to borrow more than R78 million if the last leg of the three-year wage deal was implemented. 

“South Africa cannot afford to borrow funds to pay for an unsustainably high wage bill for a small part of the national workforce fortunate to be in employment during a time of national crisis,” Makhasi says. 

For the next round of wage negotiations, the government expects to increase public servants wages by 1.2% annually in the next three years. Unions have tabled a demand of CPI plus 4% across the board.

According to the February 2021 budget, spending on public servant wages is likely to decrease from 61.1% of provincial budgets to 60.8% over the medium term.

Read:
Court dismisses public sector wage bill appeal
Treasury warns of fiscal crisis over state wages