Public sector wage bills could eat up an additional R40 billion in government treasury

The Public Servant Association strikes continue unabated, preceded by lunchtime pickets after collective bargaining collapsed in the public sector.

The employer, the South African government, initially offered a 3% raise and a rolling R1,000 cash grant until March 31, 2023, but was turned down by workers, who said they last received a raise in 2019. The PSA – the equivalent of about 1 million members of the public sector – took offense at the victim.

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A 7.5% increase was put on the table

The Department for Public Services and Administration claimed it subsequently made an offer for a 7.5% increase, but the PSA said that offer never took place.

A statement said: “The Public Servants Association (PSA) condemns the unethical behavior of the Acting Minister for Public Services and Administration in deliberately misleading the public regarding the implementation of the 7.5%.”

However, according to astute KPMG economist Frank Blackmore, it is not surprising that the government would come up with an offer of 7.5% as he says this is in line with increases agreed with Transnet and Eskom.

The number of wage costs rose to around 700 billion rand

The government currently pays around R665 billion in wages to its public sector employees. A 7.5% increase is likely to take that number to R700 billion.

“Wages in the public sector are to be increased by 7.5%. This is more than double the original offer of 3.5% at the start of negotiations, but is in line with increases seen at two other state-owned companies earlier in the year (7% increase for Transnet and 6% increase for Eskom),” he explained to Schwarzmehr.

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“It has always been difficult to settle for anything lower than the state utility and Transnet. The bad news, of course, is that it eats up more government budgets. Public sector wage bills are expected to reach R700 billion – some R40 billion more than before these negotiations. And that’s obviously not good for the health of the tax authorities,” he said.

No plans as to where the additional R40 billion will come from

The government has not yet indicated where the additional R40 billion will come from. But during the speech on the medium-term budget, Finance Minister Enoch Godongwana said the country had brought in R1,682 billion in revenue, an increase of R1,598 billion.

Meanwhile, Business Leaders South Africa CEO Busiswe Mavuso earlier this week criticized union leaders for making demands without coming to the table to contribute to discussions as plans were drawn up that would help ensure economic recovery.

“If unions are asking for a 10% across the board increase in response to the government’s 3% offer, what plan do they have to mitigate the impact on fiscal sustainability? I would be quite open to a realistic and effective plan that might promise improvements in public sector productivity to boost economic activity and ultimately improve tax collection.

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“If such plans were put on the table as a way for workers to help ensure our economic recovery, then I would have a much better understanding of the 10 percent requirement. But I haven’t seen any such suggestions from work,” she said.

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