As the clock ticks down to April 1, when public-sector pay increases should be paid, the government and unions held tense talks in the public sector co-ordinating bargaining chamber on Tuesday.
With trade unions resolute before the meeting that they would not agree to a renegotiation of the third year of the pay agreement, the government will probably face the choice of reneging on the agreement or paying up on April 1.
The largest public sector union, the National Education, Health and Allied Workers’ Union (Nehawu), said on Monday that should the government renege on the agreement, a mass protest will be held on March 30. They warned the government not to try to use the Covid-19 crisis as a bargaining chip in the talks.
The outcome of the talks was not disclosed by late Tuesday.
Despite the urgency of the issue for the government, which has premised its fiscal deficit targets on reducing the cost of employees to below inflation for 2020/2021, Tuesday’s talks were the first to be held in the bargaining chamber since the government dropped a bombshell in the budget announcing the cuts.
Notch increases
The government proposal is that on April 1 pay rises 1.5% in nominal terms, significantly below inflation over the past year of about 4.5%.
According to the existing agreement, pay should rise at CPI plus 1% for the first eight grades of the bargaining unit and at CPI plus 0.5% for the higher grades. In addition, all employees should receive notch increases equal to about 1% of pay. This would cut R37.8bn from the wage bill, said Treasury officials in February.
In the Treasury proposal, lesser cuts are envisaged for the next two years with pay rising 4.4% and 4.5% respectively. But without the large cut to the baseline this year, these cuts would of necessity be far bigger in future. The aim is to cut R160bn off the wage bill eventually in an effort to move towards stabilising debt and containing the fiscal deficit.
Should the cuts not be achieved for 2020/2021, the fiscal deficit, which rises to 6.8%, will widen by an additional percentage point, according to the Treasury.
Moody’s Investors Service, which could make a rating decision on SA at end-March, has expressed doubt that the government will meet these targets.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.