Brace for 'significant tradeoffs', Treasury warns as final public wage deal signed

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Photo: Getty Images
Photo: Getty Images

The National Treasury has pledged fiscal discipline and a commitment to reducing the fiscal deficit in the light of the final settlement on wages for public servants on Friday.

A narrow majority of trade unions in the Public Sector Co-ordinating Bargaining Chamber (PSCBC) signed the wage offer of 7.5% for 2023/24 and a CPI-linked wage increase for 2024/25, putting it in place for the start of the new financial year on 1 April. This will be the first time a new set of wage increases have been agreed upon before the implementation date.

The increase includes an average 4.2% increase, from incorporating the R1 000 after-tax cash gratuity of the last two years into the pensionable salary plus a 3.3% cost-of-living adjustment. Incorporating the R1 000 gratuity into the baseline will mean increases well above 7.5% for lower-paid workers.

The agreement, not inked into the February budget due to Finance Minister Enoch Godongwana's decision not to preempt the wage bargaining process, will cost the government R37.4 billion in 2023/24, with carry-through effects applicable for subsequent financial years.

In a statement on Friday, the Treasury pledged its commitment to fiscal consolidation, emphasising that where wage increases were "unaffordable", significant trade-offs would need to be made.

The statement says:

Government remains committed to reducing the fiscal deficit to more sustainable levels (i.e. stabilising debt). Therefore, the government will initiate processes to ensure that the latest wage agreement is implemented through significant tradeoffs in the short and medium-term. Moreover, the National Treasury reiterates the position that government borrowings will not be increased for the purposes of consumption expenditure, including paying for wages. Fiscal policy will remain focused on reducing fiscal risks and supporting measures to grow the economy. This will ensure that the overall fiscal path as outlined in the Budget is maintained.

The Treasury and government departments would put this into practice by means of:

  • Restrictions on recruitment of non-critical posts. In this way, headcount attrition will cushion the blow of the wage agreement;
  • Restricting previously-planned recruitment in certain areas;
  • Delaying projects and programmes funded within the budget and allowing departments to shift funds towards the increased compensation costs;
  • Implementing rationalisation measures, including as it relates to public entities; and
  • Reducing out-of-line remuneration in public entities. The Treasury is concluding a process to identify public entities that receive transfers from government where remuneration policies promote exorbitant or overly-generous pay packages, particularly for entities that do not raise significant own revenue.

The last point is particularly sore among unions, which are angry about the excessive salaries paid by state-owned entities and agencies.

While a majority (53.4%) of unions endorsed the settlement, a substantial minority have rejected it as inadequate because the cost-of-living increase is below the inflation. The majority union alliance comprises the public sector affiliates of the Federation of Trade Unions of SA (Fedusa) and the SA Democratic Teachers Union (Sadtu), a Cosatu affiliate. The minority unions are affiliated with Cosatu and the SA Federation of Trade Unions.

The split in Cosatu public sector unions is sure to have ramifications for the federation and its support of the ANC.

In a statement on Friday, the PSCBC said:

"The PSCBC applauds parties to Council for their commitment to the wage negotiation process, which resulted in the signing of the agreement before the commencement of the new financial year. The signing of the multi-term agreement allows for some stability to focus on implementing various PSCBC agreements, including the Public Sector Summit agreement."

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