South Africa\u2019s government has offered public servants a 7% pay increase for the next financial year, more than was provided for in the February budget, complicating its efforts to rein in debt.<\/p>\n
While labour unions are due to table a formal response to the government\u2019s proposal on Friday, the 235,000-member Public Servants Association has already rejected it and wants 8%. The central bank expects inflation to average 5.4% this year.<\/p>\n
While the budget didn\u2019t preempt the outcome of the ongoing pay talks, any settlement that hasn\u2019t been provided for \u201cwill require very significant trade-offs in government spending because the wage bill is a significant cost driver,\u201d the Treasury said in an emailed response to questions on Thursday.<\/p>\n
It reiterated its commitment to reducing the budget deficit and ensuring fiscal sustainability was maintained.<\/p>\n
Compensation accounts for almost a third of state expenditure and is crowding out spending on other priorities. Ratings companies have flagged the wage bill as an ongoing risk to the fiscus.<\/p>\n
Cost of Increase<\/strong><\/p>\n Increasing pay for public servants on salary levels one to 12 by an average of 7% would cost R35.8 billion in the upcoming financial year, according to the Treasury.<\/p>\n The budget review released last month envisioned the compensation bill growing by an annual average of 2.1% over the six years through March 2026, down from 7.3% over the previous five-year period.<\/p>\n \u201cAlthough the 2021 public\u2010service wage agreement was higher than the budgeted amount, it consists of a cash gratuity rather than a permanent adjustment of salaries,\u201d the Treasury said in the review.<\/p>\n The latest increase offer has been calculated off a base that excludes the R1,000 monthly gratuity, according to economists at Absa Group Ltd.<\/p>\n That means \u201c4.2% of the 7% would be the rolling of the cash gratuity into pensionable pay while the remaining 2.8% is a nominal increase,\u201d the economists said in research note on Thursday.<\/p>\n \u201cThe wage bill uplift for the upcoming fiscal year was always likely to be much higher than the 1.5% rise that the National Treasury pencilled in for consolidated public sector compensation\u201d in the budget, they said.<\/p>\n The government unilaterally implemented 3% increases in the current financial year after wage talks with labor groups broke down, triggering a strike by the National Health and Allied Workers Union.<\/p>\n With elections due to take place next year, the governing African National Congress may be loathe to further alienate the unions, which have traditionally helped it mobilize support.<\/p>\n
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