Salga says majority of municipalities can’t afford to pay workers

Wage negotiations at local government level will resume on Monday (12 August), with the parties still being far apart. The previous wage agreement lapsed at the end of June and it is not yet clear whether the new agreement will be for the current year only or for multiple years.

The South African Municipal Workers Union (Samwu) and the Independent Municipal and Allied Trade Union (Imatu) are insisting on an increase of 8% and some improvement in benefits, while the local government association Salga – which represents municipal employers countrywide – is only prepared to give employees covered by the bargaining agreement 3.5% more.

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Salga further wants the majority of municipalities excluded from the agreement, saying they simply cannot afford to pay their workers more. It says the current exemption procedure is not working as parties in the South African Local Government Bargaining Council (SALGC) as a rule oppose them.

The association states that financially distressed municipalities will only be included in the agreement if a new “user-friendly” exemption mechanism can be agreed upon.

Municipalities affordability issues

According to Salga, the 66 municipalities considered by National Treasury to be “severely financially distressed” and the 157 that are considered “financially distressed” have severe affordability issues and the parties should acknowledge this.

This is the majority (86%) of municipalities as there are a total of 257 countrywide.

Salga proposes that these municipalities be allowed to submit applications to pay the increases when their finances have improved substantially and be required to provide financial recovery plans to ensure that they do take steps to improve their finances.

Last year the City of Tshwane applied for such exemption, which was not granted.

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Under the leadership of Mayor Cilliers Brink the city nevertheless refused to pay the agreed upon increases and was faced with a protracted violent strike as a result.

The matter is still in the courts.

Commenting on the current negotiations, which started in June, Brink says there is a direct link between the cost of services to residents and the salaries paid by municipalities.

“The current trajectory of above-inflation increases is unsustainable. Last year, Tshwane was the only municipality that acknowledged this reality. Now Salga agrees with us.”

Municipal pay

The municipal manager of a medium-sized municipality in the Western Cape gave some insight in what municipal workers earn. He asked not to be named.

“We pay an unskilled labourer, the guy who holds the spade and digs the trenches, R250 000 per year,” he says.

“That is at least three times what the same person would earn in the private sector.”

Here are the salary bands applicable in that municipality and countrywide. It does not include the salaries of municipal managers and those reporting directly to them as they are not part of the bargaining unit.

Over and above annual increases, staff often also get notch increases to move up within their salary band and staff at some rural municipalities also get area allowances.

A tractor driver, for example, earns almost R290 000 per annum. This includes a monthly salary of about R13 700, annual bonus, housing allowance, contribution to the medical fund, pension contribution, unemployment insurance, and group life insurance.

Apart from the issue of affordability, the productivity of municipal workers is often low and getting rid of lazy workers almost impossible, says the municipal manager.

Top appointments within the bargaining unit can earn up to ­R1.9 million per year. The head of electricity or water typically qualify at that level.

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Leon Claassen, an analyst at Ratings Afrika who analyses the financial statements of a large group of municipalities annually with a focus on financial sustainability, says the personnel costs of the 100 municipalities they scrutinised last year accounted for an average of 40% of their operating expenses in the 2022/23 financial year.

This does not even consider large-scale purchases of electricity and water.

“We consider 35% to be a good figure because spending on, for example, maintenance is reduced due to high personnel costs,” he says.

Private sector ‘cannot compete’

Dawie Roodt, chief economist at the Efficient Group, says the private sector simply cannot compete with salaries and fringe benefits in the state and municipalities.

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In truth, those in the government sector should be paid less, as they have much more job security than those in the private sector, says Roodt.

The high salary bill is a political quagmire that can only be stopped with strong political will. If political leaders put their foot down, however, they must accept the political pain that follows, he says.

The alternative is that taxpayers simply will not be able to keep up with rising property and other taxes to finance the salary bills, says Roodt.

He warns that the burden could even become too heavy for public institutions, citing the bankrupt Post Office and South African Airways (SAA) as examples of institutions that have collapsed due to excessive salary bills.

This article was republished from Moneyweb. Read the original here