As govt looks set to force through 3% hike, Godongwana hints at wage talk reform

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Finance Minister Enoch Godongwane.
Finance Minister Enoch Godongwane.
  • The medium-term budget annexure projected an average of 3.1% growth in the public wage bill.
  • Finance Minister Enoch Godongwana warned that if a wage agreement is reached in 2022/23 that exceeds the budget, it would pose a risk to in-year and medium-term fiscal projections.
  • The document said the government was reviewing remuneration policies across the government towards a single remuneration framework.
  • For more financial news, go to the News24 Business front page.

As the government moves to force through a 3% wage hike in the public service, Finance Minister Enoch Godongwana's 2022 Medium-term Budget Policy Statement (MTBPS) hinted at reforms in the way the government negotiates wages with public servants and their unions.

The budget review document for the first time raised alarm at the costs the government incurs when paying employees in state-owned enterprises as well as in the public service. The MTBPS annexure projected an average of 3.1% growth in the public wage bill.

The Public Servants' Association (PSA) served the government with a seven-day strike notice on Monday. The Cosatu bloc of unions declared a dispute at the Public Service Coordinating Bargaining Council, with only the SA Democratic Teachers' Union accepting the government's 3% wage offer.

Transnet just saw the end of a weeks-long strike, where the state-owned logistics company warned that 66% of its monthly operating budget went towards compensation. In July, Eskom held antagonistic wage negotiations with unions, which saw strikes and sabotage that triggered Stage 6 load shedding around the country.

READ | Public sector wage crisis: Govt appeals to CCMA, as the union prepares to strike

During his speech, Godongwana told Parliament that the government planned to implement the final offer to unions, which is a 3% salary increase and the continuation of a R1 000 non-pensionable cash allowance until March next year.

"Madam Speaker, the offer on the table is in the best interest of the fiscus and public service workers. Implementing it does not undermine the collective bargaining process. We believe that the facilitation process has helped all parties get to this point. This offer will be implemented through the payroll system and back-dated to April 2022," said Godongwana.

The annexure of the MTBPS said a higher-than-expected surge in the public service wage bill was a significant expenditure risk to the fiscus in the medium-term expenditure framework (MTEF) period.

"If a wage agreement is reached in 2022/23 that exceeds the available budget, it would pose a significant risk to the in-year and medium-term fiscal projections. Given that higher-than-anticipated wage increases would have cost implications for each year of the 2023 MTEF period, spending on policy priorities might need to be reallocated to compensation budgets," said the annexure.

READ | Cosatu returns to 10% demand in govt wage talks, declares dispute as strike looms

The annexure said remuneration practices had become misaligned because of a fragmented system reflected in a similarly fragmented collective bargaining process in the public sector.

The document added that the Department of Public Service and Administration, the National Treasury, and other national departments were reviewing remuneration policies across the government to move towards a single remuneration framework. It also said this policy review would reduce remuneration inequality for employees performing similar tasks in different spheres of government.

The budget review document said South Africa's public-sector wage bill was higher than that of its peer countries, and one of the highest among emerging markets. South Africa's public-sector wage bill is about five percentage points greater than the OECD average as a share of GDP.

South Africa has low public-sector employment as a percentage of total employment compared to countries such as Norway and Denmark. This suggests that high average compensation levels are responsible for South Africa's high public-sector wage bill rather than the headcount.

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