The government has performed an 11th-hour climb down and offered to enter into settlement talks with public sector unions over salary increases it had previously said are unaffordable.
But that was not enough to prevent a court battle that may have huge ramifications for the credibility of fiscal policy and the government’s intention to contain SA’s ballooning debt after unions rejected the department of public service & administration’s offer to delay the case until after February 1 to allow time for negotiation.
The government, which unilaterally decided not to implement wage increases agreed to as part of a three-year deal signed in 2018, has for months insisted that the courts must settle the matter, which also has potential to heighten tension in the ANC-led alliance ahead of the 2021 elections.
A day before the labour appeal court was set to hear the case, Business Day revealed that the department of public service & administration had asked for a postponement.
The dispute has its genesis in the state refusing to implement the final leg of a multi-term wage agreement after finance minister Tito Mboweni pencilled in huge cuts to the public sector wage bill. The state said it did not have the R37.8bn needed to pay for the increases for the current fiscal year.
The attempt to settle now also raises questions on what the effect would be on a fresh deal that is still to be negotiated and will take effect in 2021.
In court papers in July, Treasury director-general Dondo Mogajane said implementing the current wage agreement was not only "unaffordable", but the unions’ sense of "entitlement" showed a lack of solidarity with other workers who had either lost their jobs or had their pay cut during the Covid-induced economic crisis.
The original agreement committed the government to wage increases above what was assumed in the 2018 budget. In his medium-term budget policy statement in October, Mboweni said public sector employee compensation had grown 7.2% a year on average over the past five years. That was well above the upper end of the Reserve Bank’s 3%-6% target range.
Since the case was instituted in June, a settlement has not been on the table and it is not clear how the government’s changed stance will affect the credibility of its pledge to get debt under control. The government’s target to stabilise the debt-to-GDP ratio at less than 100% over the next five years is premised on huge cuts in the wage bill. Moody’s Investors Service, when it downgraded SA in November, said the ability to achieve this was "questionable".
In a letter sent by the state attorney on Tuesday, unions were told a settlement would be preferable as the current dispute was set to go beyond the labour appeal court.
"The settlement options under discussion require time," the state attorney said, adding that it was reliably estimated it would take two months to sort out a settlement.
"Time is required for the government to work out, calculate and then convey to the unions the precise details of what the settlement means for the different salary levels in the bargaining unit."
But a settlement is far from a done deal, after public sector unions said they want the case to continue. The Public Servants Association (PSA) and all the ANC-aligned Cosatu unions opposed a postponement.
While some unions initially opted to go directly to the labour court to have members’ contractual rights enforced, Cosatu trade unions opted to follow the dispute resolution route, including conciliation and arbitration.
After conciliation failed, the government wanted the arbitration proceedings postponed pending the outcome of the PSA court action.
The arbitration was pushed to the wayside when the government opted to file a counter-application asking that the court declare the implementation of the final leg of the agreement unconstitutional because the money was not provided for in the Division of Revenue Act.
It was a result of the urgent nature of the matter that all parties, including the state, asked that it first be heard by the labour appeal court, instead of the labour court, to speed up the process, which was set for lengthy appeals regardless of who won.
Mugwena Maluleke, chief negotiator for the majority of Cosatu public sector unions, said the government’s attempt to settle was just another "delay tactic" and that there had been no offer on the table.
The court matter is set down to be heard virtually on Wednesday.
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