South African Court Backs Cancellation of Government’s Pay Deal

(Bloomberg) -- A South African court rejected an application by government workers seeking to force the government to implement a pay increase, ruling that canceling the deal formed part of the National Treasury’s plans to cut costs and rein in debt.

Labor unions representing civil servants sought to compel the government to implement the final phase of a three-year wage deal, which would have cost 37 billion rand ($2.5 billion). Finance Minister Tito Mboweni said last month the country couldn’t implement the increase because it would precipitate a fiscal crisis.

In its judgment on Tuesday a full bench of the Labour Appeals Court ruled that enforcing the pay increase would be unlawful as the offer exceeded the amount National Treasury had set aside for the financial year that ends March 31 and the agreement hadn’t been approved by Treasury.

In the mid-term budget in October, Mboweni said the civil-servant wage freeze should be extended for a further three years to help bring debt under control. That could lay the ground for another legal challenge by unions.

The government’s wage bill -- which has climbed by 40% over the last 12 years -- was part of the concerns raised by ratings companies when they further downgraded the country’s debt last month.

The National Education, Health and Allied Workers’ Union is consulting its legal team on further action, “which must include petitioning the Constitutional Court,” it said in an emailed statement. “Government must think twice if they think that we will take this lying down.”

Unions met with President Cyril Ramaphosa and Deputy President David Mabuza on Dec. 11 to discuss the dispute that erupted in February when the Finance Ministry told unions on the eve of the national budget that it could no longer afford the increase.

The Congress of South African Trade Unions, an umbrella union body that’s in alliance with the ruling African National Congress, has threatened to approach the International Labour Organization if the matter isn’t resolved.The Congress of South African Trade Unions, an umbrella union body, has threatened to approach the International Labour Organization if the matter isn’t resolved.

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