Pay raise means bigger budget gap

SA faces a stark choice: risk 1.3 million government workers striking or meet their pay demands and jeopardise our credit rating.

After years of above-inflation increases, public-sector unions want “double-digit” raises from April 1, 2018, and better housing benefits. National Treasury has provided for average pay increases of up to 7.3% in each of the next three fiscal years. The annual inflation rate is 5.1%.

Finance Minister Malusi Gigaba tabled a bleak picture of SA’s finances last month, with growth and revenue falling below projections while public debt may exceed 60% of GDP by 2021. An inability to rein in spending growth and increasing debt threaten to trigger a downgrade of rand-denominated bonds by rating companies.

Last week Nehawu, which speaks for the biggest number of public-sector employees, said it’ll reject offers of less than 10% and that pleas for austerity are undermined by reports of state company corruption. Government employees represented by the Public Service Association want 10% to 12% increases.

“Since 2011, government has been forced to restrict employee headcount growth to accommodate rising salaries - spending on compensation has continued to grow more quickly than nominal GDP,” Treasury said on October 25, adding that a fair and reasonable compromise between government and state employees is in the public interest.

Treasury sees the fiscal gap swelling to 4.3% of GDP this year.

“If the government wants to offer us a single-digit increase like 7.3%, we have to withdraw our labour power and take the issue to the streets,” Nehawu spokesperson Khaya Xaba said. – Bloomberg