South African Unions Reject State’s Bid to Renegotiate Pay

Antony Sguazzin

(Bloomberg) -- South African labor unions have rejected a government proposal to review planned increases for civil servants days before they were due to be implemented.

The Public Servants Association, which represents 230,000 government workers, said the state on Tuesday asked to review the last leg of a three-year pay agreement because it couldn’t afford it. Finance Minister Tito Mboweni is due to announce the annual budget on Wednesday.

“The timing of the proposal, a few days before the adjustments were due to be implemented, speaks of a government that regards public servants as an easy target to resolve its financial woes,” the PSA said.

Pushing the proposals through in the budget speech will be seen “as a declaration of war,” the Central Executive Committee of the Congress of South African Trade Unions, the country’s biggest labor federation, said in an emailed statement. Earlier this month, Cosatu said the government is seeking to cut 30,000 civil-servant jobs as Mboweni seeks to rein in government debt and get economic growth going.

“The CEC views this action by the government as a direct attack on collective bargaining, which will never be accepted,” Cosatu said. “This irresponsible and blatant act of provocation will seriously destabilize the public service and we warn the government to abandon this idea and give workers what is due to them.”

What Bloomberg’s Economist Says

“Public wages are set through bargaining with unions and agreements stay in force for three years. The current agreement is in place until March 2021, making it unlikely that the Treasury can report much progress on its efforts to address the wage bill before negotiations are finalized by the end of the year.”

-- Boingotlo Gasealahwe, Africa economist

- Click here to view the research

Freezing wages in the public sector could save as much as 128 billion rand ($8.4 billion) over the next three years, Barclays Plc economist Michael Kafe said in note dated Feb. 24. Barclay’s base case scenario is that Treasury will only be able to save 7 billion rand over the period because the government lacks the political will to cut payroll costs before the ruling party’s national general conference in June.

The wage bill accounts for more than 35% of government spending.

(Updates with comment from Cosatu starting in fourth paragraph.)

To contact the reporter on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Vernon Wessels, John Bowker

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