South African public workers threaten to withdraw from wage deal

CAPE TOWN (Reuters) - South Africa's public sector unions on Tuesday threatened to abandon a recent wage hike deal after the government said it would raise salaries by 6.4 percent for the first of a three-year deal and not 7 percent agreed last month. Should government press ahead with its new wage offer, it could open up the possibility of a protracted public sector strike in Africa's most advanced economy which is struggling with sluggish growth rates forecast at 2 percent this year. The government said in a letter it had used an agreement three years ago to justify its claw back, arguing it was owed an "over-adjustment" of 0.6 percent by the unions. The state said this was the difference between the actual average consumer price index (CPI) of 5.6 percent for 2014/15 and the projected CPI of 6.2 percent. "Failure to implement the 7 percent as agreed will leave labour with no option but to withdraw from the entire agreement," the unions said in a joint statement. "We find this latest approach abominable and confrontational to say the least, because the employer has no business attempting to link a lapsed agreement with a new one," the unions representing 1.3 million teachers, nurses and police officers said. A government official said both parties had agreed to seek legal opinion on the impasse. Following protracted mediation following a deadlock in negotiations, government agreed on May 19 to pay workers a 7 percent raise for the first year of the agreement, and average inflation plus one percent for the following two years. The government also agreed to increase medical aid by 28.5 percent per worker and increase a housing allowance to 1,200 rand a month, from 900 rand. Any strike action by public sector workers could hurt investor sentiment and business confidence in South Africa, which has been hurt by a wave of industrial action in its key mining and manufacturing sectors over the past two years. The public sector wage bill has risen more than 80 percent over the last decade as yearly increases have averaged more than 6 percent above inflation and the government is under pressure to rein in spending and curb costs as rating agencies flag possible downgrades.