Government wages in the cross hairs ahead of Mboweni’s emergency budget

As finance minister Tito Mboweni prepares to deliver his emergency budget this week, unions are warning the him to back down from plans to cut the government wage bill – and insist he reverse course.

Speaking to the City Press, Nedlac members this week said that presentations made by the minister indicated that Mboweni would again be looking to the wage bill as a key avenue to reduce expenditure in the budget.

Mboweni in February pencilled in a R160 billion cut to the bill over the next three years in his budget presentation, which riled unions and led to a breakdown in trust between the two groups.

While it is not certain how this will change in the budget presented this week – if at all – the paper’s sources say all indications are that the cuts are still very much a part of Mboweni’s plans to reduce costs.

Public sector unions, meanwhile, want the minister to reverse course completely – recommending that he use this week’s budget to walk back the cuts announced for 2020, and reinstate the previous agreement between government and workers from 2018.

Under that agreement, workers were due to receive between 4.4% and 5.5% increases this year. However, due to there not being any money available, National Treasure reneged on this agreement, opting for a zero-percent real increase instead.

According to Intellidex analyst Peter Attard Montalto, while public sector wages may turn up in this week’s emergency budget, there is little room for Mboweni to move here.

“There is intense focus on this by markets – but we expect National Treasury to stick with what it pencilled in at the budget, maybe with a slight fall back from lower inflation in future, but still with the same zero real view,” he said.

He added that there are “substantive legal risks of back payment for the current fiscal year” if the whole approach by government is challenged successfully by unions, which then creates problems of a higher base in future, even if there are only flat real increases.

“We continue to see risk that the 2018 agreement with unions was binding and then was broken. An award here could come towards the end of the calendar year and would add significant complications at the MTBPS.

“The most we expect in future from NT is pushing through a little more attrition but, given that the bulk of workers are nurses, doctors and teachers, doing this at administrative level has very limited impact on the overall numbers,” he said.

Analysts speaking to the City Press hold a similar view, saying that bringing up the wage cuts in this emergency budget risks upsetting alliances and further alienating government from its public partners.

This would be particularly damaging during the time of Covid-19.

“Public servants are on the front line of battling Covid-19 and any continued proposals of cuts to their wages could result in disaster,” they said.

Read: Unions outraged by plans to pare back state wage bill

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Government wages in the cross hairs ahead of Mboweni’s emergency budget