The big story: Unions and government face off

A battle over money is brewing between public sector unions and their bosses in government. 

Public service unions, which speak on behalf of more than 1.3 million teachers, nurses, police officers and other public servants, have asked for a 10% wage hike. The problem? SA’s purse strings are tighter than ever. 

10% is a big figure. It’s nearly double inflation, which is at 5.9%. Plus it’s being demanded in a year when many other South Africans have had to navigate salary cuts or freezes. Business Maverick notes that the demand is high by historical standards too: hikes have typically been agreed at two percentage points above inflation. 

But the unions say they’re making up for the past: over the past two years public servants weren’t awarded inflation-linked wage adjustments, because Treasury embarked on a wage freeze, a union boss told Business Maverick. 

The public sector wage bill currently accounts for the biggest share of government spending. President Cyril Ramaphosa’s administration is under pressure to cut spending. This is key to bettering our credit rating, which in turn means cheaper loans to fix state-owned enterprises, build infrastructure, etc. Finance minister Enoch Godongwana vowed in his inaugural budget speech this year to keep the public sector wage bill down. The 10% hike, if given, would cost the state R66.4 billion. An earlier demand of seven percent would have cost R46.6 billion.

Unions have asked for a number of other changes to how things are usually done, including negotiating year-by-year instead for three years at a time, as is the current case because it helps the government to plan.

It feels like the stage is being set for a bitter battle. Business Day quotes a source at the presidency as saying that these sorts of demands amount to labour unions “spoiling for a showdown”. 

It’s worth noting these unions lost their case at the Constitutional Court in February to force the government to implement backdated wage increases of about 8% in 2020. As Carol Paton notes in Fin24, this came after government did the previously unthinkable: breaking an existing wage agreement and freezing public servant wages. “This caused enormous anger and can hardly be seen as anything less egregious than a violation of the social contract,” Paton writes. Trade unions generally are less organised and weaker than they once were. This means desperation, which is not likely to lead to good outcomes for any of us. 😬

We’re sympathetic to the likes of nurses and teachers who earn far too little for the important and onerous work they do. Balancing those needs against a troubled economy is a tricky business. Government is expected to respond to the wage demands next Thursday, so we’ll update you in the next Wrap