SA government, unions square off over pay increases

South Africa’s government and labour unions representing its 1.3 million workers are on a potential collision course, with their views diverging widely over pay increases.

The national budget, released on Wednesday, provides for the state’s annual salary bill to rise by an average of 1.8% annually over the next three fiscal years. But the Public Servant’s Association, which represents more than 240 000 state workers, said it intends to seek raises equivalent to the consumer inflation rate — which currently stands at 5.7% — plus 2 percentage points, and that it wants a single-year wage deal.

Remuneration costs account for 32% of total government expenditure, and agreeing to demands for inflation-beating increases would derail the National Treasury’s plans to rein in the budget deficit and bring runaway state debt under control.

The PSA will meet with the Congress of South African Trade Unions, the country’s largest labor group, next week to consolidate their demands, said Claude Naicker, one of its provincial managers. The union wants to pay talks with the government to be concluded as quickly as possible, he said.

Affordable bill

Treasury officials plan to meet the unions March 28-31 to discuss the issue.

“I don’t want to prejudge the outcome of those meetings,” FInance Minister Enoch Godongwana told reporters on Wednesday.  “What would be of interest to us is how do we restructure that wage bill in such a manner that, in relative terms, what is paid is commensurate with what would be affordable from a government perspective.”

The government reneged on increases agreed to in the final year of a three-year deal struck with unions in 2018, saying it couldn’t afford them. The unions filed a lawsuit challenging the decision and the case is currently before the Constitutional Court. Should the government lose, it will have to come up with R37 billion ($2.4 billion) to make good on the pay accord.

While there are still risks from the pending court ruling “the government has been relatively successful in containing wage growth during the pandemic,” Fitch Ratings said in a note issued after the budget. Still, “the recovery in economic growth and stronger public finances may make the public-sector wage negotiations due to start in March 2022 tougher,” it said.