South Africa Offers State Workers Inflation-Busting Pay Rise

(Bloomberg) -- South Africa is offering unions representing 1 million state employees inflation-busting pay increases at a time when the country needs to rein in spending to help keep its investment-grade credit rating.

Negotiations over wages for teachers, nurses and other state workers are testing the ability of the new cabinet, led by President Cyril Ramaphosa, to walk a political tightrope with labor unions that supported his rise and keep the country’s finances under control. The National Treasury wants the state to contain the public-sector wage bill, which has crowded out spending in other areas.

The government has offered increases of 7 percent for the most-junior employees for the year through March and 6 percent for senior staff including managers, a document seen by Bloomberg shows. Consumer prices rose 3.8 percent in March and South African central bank governor Lesetja Kganyago said on Wednesday that prices will probably trend higher.

The unions had demanded a 12 percent increase -- more than double the central bank’s forecast of 4.9 percent for average inflation this year -- and lowered the request to 10 percent on May 4, according to an official familiar with the talks who declined to be identified.

“We have received an offer that is worth the consideration of our members,” Sizwe Pamla, spokesman of the 1.7 million-member Congress of South African Trade Unions, said by phone. “We will allow our workers to engage comprehensively and will implement whatever mandate they give us. We can’t rule out or promise anything, it’s in the workers’ hands.”

Looming Election

Ramaphosa, himself a former labor-union leader, can’t afford to upset state workers before next year’s general election, where his ruling African National Congress will seek to reverse recent electoral losses. Cosatu, the country’s biggest labor-union federation, helped him win the ANC’s presidential race that paved the way for him to succeed Jacob Zuma as the country’s president three months ago.

Negotiations for the three-year wage deal resumed in January and were subjected to many delays because of the change of guard. The unions have until Friday to consider the offer made at a bargaining council where eight labor bodies are represented.

The Public Service Association, which has about 200,000 members and isn’t part of Cosatu, isn’t supporting the offer, Deputy General Manager Tahir Maepa said, without giving details.

“It’s worse than what we received at the beginning,” he said by phone. “There’s no way we’ll accept.”

Public Service and Administration Ministry spokesman Mava Scott said negotiations protocol prevented the government from commenting at this stage as that might jeopardize the talks.

The National Treasury wants to reduce the budget deficit to 3.6 percent of gross domestic product in the year through March 2019 from 4.3 percent in 2017-18, it said in the February budget. Wages accounted for about 35 percent of total state spending in fiscal 2018, up from about 33 percent in 2008, it said.

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