Mini-budget flags public sector wage bill — again

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The public sector wage bill remains a considerable fiscal risk, even as the government’s efforts to rein in spending start to bear fruit.

Public sector wage negotiations have deadlocked, with a number of key unions — including the National Education Health and Allied Workers Union (Nehawu) and the Public Servants Association — rejecting the government’s latest offer of a 3% wage hike.

The latter union has already announced it will go on strike, while Nehawu and other Cosatu affiliates have declared a dispute. Wage talks began in June and have coincided with a cost of living crisis that has pushed wage demands up in a number of sectors.

According to the medium-term budget policy statement, tabled by Finance Minister Enoch Godongwana on Wednesday, if the wage agreement exceeds the available budget, “it would pose a significant risk to the in-year and medium-term fiscal projections”. This means that other spending might have to be reallocated to compensate civil servants.

Moreover, the policy statement warns, a higher than budgeted wage agreement would compromise the headcount of civil servants. “Government departments would also need to ensure that personnel costs, including any hiring, would remain within their budgeted compensation ceilings.”

Godongwana delivered his medium-term budget speech just days after unions in labour federation Cosatu’s joint mandating committee said it would challenge the government’s efforts to unilaterally impose the 3% wage offer using a clause in the Public Service Act. The law allows the government to implement the last tabled offer in the event of a deadlock.

Imposing the 3% gave the treasury some clarity on the wage bill’s scale and how big a risk it poses to the fiscus. Part of the recent revenue windfall has gone towards the public sector wage bill.

But unions contend that the Public Service Act cannot be used in this case because the government allegedly withdrew its last offer. They have also accused the government of further undermining the collective bargaining process.

Speaking at a media briefing ahead of his speech to parliament on Wednesday,  Godongwana noted that no employer wants its workers to go on strike. “Any employer does anything possible to avoid a strike and I think we have done all we could to do so.”

Reining in the wage bill is at the centre of the treasury’s fiscal consolidation efforts, which is aimed at achieving a non-interest budget surplus by 2023 — a deadline that is now quite firmly in the government’s grasp.

In one of the annexures of the policy statement, the treasury notes that efforts to contain spending has brought compensation costs down to 31.4% of consolidated expenditure, from 34.5% in 2019.