Ramaphosa Faces Uphill Battle to Trim South Africa’s Wage Bill
Ramaphosa Faces Uphill Battle to Trim South Africa’s Wage Bill
South African President Cyril Ramaphosa’s ambitions of trimming the state’s wage bill to get the nation’s shaky finances under control have run into opposition from the outset.
In his Feb. 13 state-of-the-nation address, Ramaphosa warned that the government’s current debt levels are heading toward unsustainable levels and Finance Minister Tito Mboweni will unveil details of plans to cut costs in his Feb. 26 budget speech. The government is engaging with unions on how it could contain labor costs, which equate to 35.4% of national spending, he said.
The state has proposed cutting 30,000 jobs and freezing pay for three years, according to Sizwe Pamla, a spokesman for the Congress of South African Trade Unions, the nation’s biggest labor group and a member of the country’s ruling coalition. Such measures aren’t washing with unions that represent more than three-quarters of state workers.
“Just because we’re talking doesn’t mean we’re on the same page,” Pamla said. “Government has a right to engage with its employees, but government doesn’t have the right to its own slaves.”
| Read more: |
|---|
| South Africa to Confront Unions to Cut Ballooning State-Pay Bill |
| Five Takeaways From Ramaphosa’s State of Nation Speech: TOPLive |
The National Education, Health and Allied Workers Union said proposals to cut wages haven’t entered the bargaining council where such issues are negotiated, and a prevailing three-year wage agreement that expires next year is “sacrosanct and not open for review.”
Any attempt to predetermine the outcome of a new pay deal would be improper and show that the government doesn’t take its workers’ concerns seriously, said Lufuno Mulaudzi, president of the Public Servants Association.
“We are not going to accept anything that will lead to wage cuts and if the minister makes pronouncements in that regard, he’ll be in for a big fight,” Mulaudzi said. “We’ll make sure that we take our members to the streets of the country to make sure that services to the people are disrupted.”
While the Treasury has also already announced 50 billion rand ($3.4 billion) in spending cuts by 2022 to plug a widening budget gap, it needs to find another 150 billion rand of savings to meets its goal of achieving a primary balance by 2023. Payroll costs are an obvious target because they’ve grown faster than any other spending category other than interest costs since 2007.
Cosatu and other unions have called for the government to bolster state coffers by recouping billions of rand that were looted during former President Jacob Zuma’s tenure, and reducing perks for cabinet ministers, lawmakers and senior officials.
“No one will be holding their breath that the wage bill will actually come down,” said Chris Veegh, chief investment officer at 10X Investments. “The government has poor form in this regard and tends to cave in under pressure.”
To contact the reporter on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net
To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Mike Cohen, Jacqueline Mackenzie
©2020 Bloomberg L.P.