Public sector unions have told their members to start preparing for industrial action, following a breakdown in wage negotiations with the government – however, much still needs to be done before workers can head to the streets.
This will leave South Africa facing an incredibly long and drawn-out period of strike threats and uncertainty, say economists from the Bureau of Economic Research (BER).
Government has been facing an uphill battle against unions over wage hikes after budgetary constraints forced it to renege on a 2018 wage agreement, which saw public sector wages frozen in 2020.
National Treasury has also vowed to cut the public sector wage bill by R160 billion over the next three financial years.
Unions have been pushing back against the move, taking the issue to the Labour Court – where the judges sided with the government on the matter – and now to the Constitutional Court. This could be heard in August, the BER said.
In the latest development, government on Friday (23 April) responded to unions’ demands for wage increases of CPI+4% with a counter-offer:
While there is still no room in the national budget for wage hikes, R9.4 billion could be made available to adjust salaries to cover rising living expenses – but this would only be possible if other items on the government’s wage bill were cut back.
This includes things like taking funds used for resettling workers in other regions and daily allowances and channelling them towards funding higher wages. Unions rejected the offer as ‘absurd’ and declared negotiations deadlocked.
According to the BER, it’s not that simple, however.
“A dispute cannot be declared yet, as more time needs to pass after the initial demand was made,” it said. Despite this, the unions have advised more than 235,000 members to prepare for industrial action.
For this to happen:
- A dispute needs to be declared first;
- Conciliation must follow;
- An application for a strike certificate can then be made.
“However, even before then unions will first need to ballot their members to gauge whether they support industrial action,” the BER said. “In sum, the saga is likely to drag on for some time still.”
Wage bill impact
Government has allowed the public sector wage bill to bloat significantly over the last decade, to the point that it now accounts for over a third of total government expenditure.
With little room to grow the country’s tax base – and thus increase revenue – government has no choice but to look at cutting expenditure to balance the country’s books, and finance minister Tito Mboweni has promised to do so, including a massive cut to the wage bill of R160 billion over the next three financial years.
Following the 2020 mid-term budget policy statement, analysts and economists warned that the government’s plans to cut spending and ease the burden on the economy hinged on the implementation of its promise to cut wages – which needs support from unions.
This was also flagged by ratings agencies in the weeks following the budget, as they noted that the government’s track record with following through on budget cuts – particularly around the wage bill – was poor.
The cutting back of the government’s wage bill is core to National Treasury’s plan to rein in spending. If the government buckles to pressure from unions – or the courts hand a victory to unions over the 2020 wage freeze – taxpayers will be footing the bill.
Should the government lose or buckle and be forced to pay the back-dated wages, it could be on the hook for as much as R294 billion.