South Africa Warns of State Job Cuts if Court Backs Pay Deal

(Bloomberg) -- South Africa may have to increase taxes, borrow more and fire workers if the government is forced to implement a civil-servant pay increase that was part of a 2018 agreement.
 
The Constitutional Court has yet to rule on an application to overturn a Labour Appeals Court decision that allowed the government to renege on a pay increase for the final year of the three-year agreement.
 
A decision in favor of the labor unions will have a significant impact on the fiscal framework, according to the medium-term budget policy statement released on Thursday. The Treasury has previously estimated it could cost the state about 37 billion rand ($2.4 billion).
 
The government would then have to consider “additional revenue measures, increased borrowing and active steps to reduce the size of the public service,” it said. 

The pay freeze was a critical component of former Finance Minister Tito Mboweni’s plans to cut government spending, a goal his successor Enoch Godongwana is sticking to. The state’s salary bill accounts for almost a third of its consolidated expenditure.
 
The government had to find 20.5 billion rand this year for state workers after it reached a wage deal with unions that included a once-off non-pensionable cash payment of 1,000 rand per person, an amount that was not budgeted for in February.
 
The state employed 1.34 million people in the 2020-21 fiscal year, up 0.7% from a year earlier.

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