South Africa Clinches Three-Year Pay Deal With State Workers

(Bloomberg) -- South Africa’s government clinched a three-year wage agreement with its 1.3 million workers when six unions affiliated to the ruling party agreed to its terms, averting the risk of a national strike.

The deal will see civil servants getting raises of 6 percent to 7 percent for the year through March 2019 and by as much as 1 percentage point more than the consumer inflation rate for the following two years. The conclusion of the pay talks after 10 months of negotiations is a boon for President Cyril Ramaphosa, who faces elections next year and is under pressure from investors and ratings companies to stick to budget-deficit targets.

Containing the salary bill is essential if the Treasury is to meet its target of trimming the budget deficit to 3.6 percent of gross domestic product in the next fiscal year from 4.3 percent this year.

Besides securing inflation-beating increases, the unions won a number of concessions, including an agreement from the government that it wouldn’t freeze vacant posts, Mugwena Maluleke, the Cosatu unions’ lead negotiator, told reporters in Johannesburg on Friday.

Backdated Increases

The Cosatu unions represent more than half of state workers including teachers, police, health employees, nurses, and doctors. Their signing of the pay offer means the government can implement it even though it was rejected by the 230,000-member Public Servants Association.

The PSA has scrapped plans to go on strike next week because the wage offer was binding on all civil servant unions and labor action would be illegal, its spokesman, Tahir Maepa, said by phone.

Civil servants last staged a strike in 2010 that dragged on for three weeks before they were awarded 7.5 percent raises. Three-year settlements were reached in 2012 and 2015 that increased wages by 7 percent in the first year and inflation plus 1 percentage point for the next two years. The current pay deal expired at the end of March and any increases will be backdated.

Although the pay increases exceed the inflation rate, which stood at 4.5 percent in April, they are in line with the government’s spending plans. The state wage bill is projected to rise 7.3 percent to 587.1 billion rand ($44.9 billion) in the current fiscal year, and by a similar increase over each of the next two years, the budget shows. Personnel costs account for about 35.2 percent of total government expenditure.

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