Impasse puts Cyril in bind
PLACATING UNIONS VERSUS STICKING TO THE BUDGET Personnel costs account for about 35.2% of government spending.
Astandoff between the government and unions representing its 1.3 million workers over pay puts President Cyril Ramaphosa in a jam. While his administration has pledged to stick to its deficit targets and expenditure ceilings – a tall order if it buckles to demands for increases of as much as 12% – he can ill afford to alienate the unions ahead of next year’s elections, or risk strikes that would curb growth. He’s also indebted to the unions for backing his campaign to win control of the ANC last year.
“He is in a Catch-22,” said Sethulego Matebesi, a University of the Free State political analyst. “The unions are not going to buy into the argument that the government can’t afford the increases they want.”
The wage talks have already dragged on for over seven months. The eight unions that represent state workers have warned they won’t tolerate the government’s “delaying tactics” much longer. “There is an inadequate offer on the table,” the Congress of South African Trade Unions (Cosatu) stated. “We caution government against creating an environment that will force workers to consider withdrawing their labour and embark on a calamitous strike.”
Cosatu “isn’t ready” to declare a dispute over negotiations, it said yesterday.
Three-year settlements were reached in 2012 and 2015 that increased wages by 7% in the first year and inflation plus one percentage point for the next two years. SA’s inflation rate fell to a seven-year low of 3.8% in March.
While wage talks were due to resume yesterday, the government requested a delay until May 3, saying it needed time to consult. The current pay deal expired at the end of March and any increases will be backdated.
“We understand the urgency of the situation and the need to conclude these talks timeously, but we also want to ensure that we package a deal that is workable and sustainable for both government, labour and the South African public in general,” acting minister of public service and administration Naledi Pandor stated on Monday.
The state wage bill is seen rising 7% to R587.1 billion in the current fiscal year and by a similar increase over each of the next two years. Personnel costs account for 35.2% of government spending.
“An above-inflation public sector wage deal would set the tone for other sectors of the economy and could lead to inflationary pressures,” RMB analyst Mpho Tsebe said in a note to clients. Containing the salary bill will be essential if Treasury is to meet its target of trimming the budget deficit to 3.6% of GDP in the year through March 2019, from 4.3%, according to Mike Schüssler, chief economist at Economists.co.za.
“Civil servants constitute about 21% of the formal sector workforce,” he said.
“In the third quarter of last year, 48.9% of all tax revenue that was collected was spent on wages. They are not overworked and underpaid.” – Bloomberg