A balanced outcome

The public sector wage settlement has yet to be finalised, but the news that SA’s public sector trade unions have agreed to the government’s revised 7.5% wage offer is encouraging. The unions have been divided on the offer, and the Public Sector Co-ordinating Bargaining Council has still to confirm formally that the vote has gone in favour of accepting the offer. The government itself has then to sign, and the Constitutional Court ruled in 2022 that the Treasury has the deciding vote, based on whether the settlement is affordable.

The settlement would mark an important step for labour in the public sector and for SA’s public finances. The proposed agreement is for just two years, which is a pity. Ideally, it would have ensured labour peace for the three years of the medium-term budget framework. But given the tensions since the government declined to implement the final year of the three-year 2018 settlement, a two-year settlement will be a significant achievement.

Significant too is that it breaks the trend of automatic increases of inflation plus cost of living that had been baked in for many years, driving up public sector wages to levels that were increasingly unsustainable. The 7.5% increase for the 2023/24 year is not really that because it includes the monthly R1,000 cash gratuity, introduced two years ago, that was meant to be temporary but is already in the budget baseline. Without that the increase is just 4.2.%, with the increase for the second year of the settlement set at the consumer price index rate.

This year’s increase could cost the government R35bn more than it had budgeted for. Finance minister Enoch Godongwana said in his February budget speech that future wage negotiations must strike a balance between fair pay, fiscal sustainability and the need for additional staff in frontline services. For the government and unions, that is the key challenge.