Don’t expect major announcement on wage bill – unions

While progress in tackling the public sector wage bill might be on many critics’ priority lists ahead of Finance Minister Tito Mboweni’s budget speech on Wednesday, unions say they are not expecting any major announcements related to state worker salaries.

Mboweni is set to deliver what has been called his toughest budget yet, as pressure to stabilise government expenditure mounts ahead of a rating decision by Moody’s – the last ratings agency to hold South Africa’s debt above junk status.

In a note, Investec analyst Lara Hodes and PwC estimate that the budget deficit will widen beyond the 5.9% Mboweni forecast in the mid-term budget in October, while the debt-to-GDP ratio will continue to rise.

With tax collections expected to miss target in the mid-term budget, Mboweni will have to find places to cut expenditure.

In addition to a forecast increase in Vat, suggestions to speed up economic reforms, strengthening the South African Revenue Service’s ability to collect taxes and curbing the drain of state-owned entities — reducing the public sector wage bill has also been highlighted as key.

Public sector wage bill

Government spending on compensation accounts for more than 35% of the consolidated budget. Public sector salaries have grown by more than 40% over the past ten years.

One of the key considerations Mboweni needs to implement with “clear and urgent deadlines” is “a reduction in the public sector wage bill and ensuring future increases are within inflation targets,” the Banking Association of South Africa said in a statement.

As part of its wish list, PwC’s budget preview has stressed the need for a focus on the wage bill given the lack of fiscal space the state has to contend with.

“It is accepted that this might not be an easy task, given political sensitivities, but is absolutely necessary to put the fiscal framework on a sustainable footing,” it said.

In his State of the Nation Address this month, President Cyril Ramaphosa said the government is in talks with various labour and other stakeholders with regard to containing the wage bill.

Progress on how the government plans to rein in the bill will be announced in the 2020 budget, at least according to the note in the October 2019 medium-term budget policy statement. The document lists some measures that government will put on the table, including “pegging cost-of-living adjustments at or below CPI inflation, halting automatic pay progression and reviewing occupation-specific dispensations for wages”.

Unions

“We are talking and it means that hopefully we will find common ground. But so far anything that Treasury announces we didn’t agree to it, because we have rejected the austerity strategy that is fixated on the public service wage bill,” said Sizwe Pamla, spokesperson for trade union federation Cosatu in an interview on Monday.

Cosatu, which represents over 50% of the workers in the public service, says it has rejected the state’s plans to downsize the public sector by offering opportunities for early retirement without penalties in order to cut the wage bill.

Pamla said only 4 000 people responded to the offer instead of the anticipated 30 000.

In the 2019 February budget Mboweni stated that employees aged between 55 and 59 could take this option, calculating that the state would save R20.3 billion over the medium-term expenditure framework period if 30 000 workers in that band retired early.

Pamla explained that this was not led by a scientific assessment that determines the areas of overstaffing and understaffing, which, if conducted, would show “the farce of what this whole thing is” as government benchmarks its police, teacher and doctor ratios to citizens against international standards.

Pamla said reviewing the last year of the three-year public sector wage agreement signed in 2018 is also not up for debate, nor is the freezing of wages going forward.

Bargaining council

The Public Servants Association of South Africa (PSA), the largest politically non-affiliated union for public servants, echoed Cosatu’s sentiments.

While Mboweni may make remarks on curbing the public sector wage bill to appease investors and Moody’s, PSA Assistant General Manager Reuben Maleka said the union has “raised its concern and made a call that there will not be issues that pertain [to] the negotiations being pronounced by the minister of finance.

“We have stated very clearly that this is not the competency of the finance minister,” said Maleka.

“There’s a forum where we can talk about the public sector wage bill and whether we are reducing it or not, and that is with the minister of public service and administration at the Public Service Co-ordinating Bargaining Council [PSCBC].”

Negotiations for a new wage agreement will begin in the latter part of 2020.

Both unions say they are open to negotiating in the new round of discussions and that these will be led by the mandates they receive from workers, which won’t merely centre on the national debt, but also on workers’ needs.

Originally appeared on Moneyweb