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Business Times writes that this week finance minister Tito Mboweni is expected to unveil plans to trim the burgeoning public sector wage bill, which accounts for more than a third of the government's expenditure.
If left unresolved, this would be among the factors that could drag SA's last remaining investment-grade rating into junk. The National Treasury has attempted to slow the growth of civil servant wage increases, which crowd out other critical expenditure, but it has avoided the retrenchments that could deliver, far more quickly, a savings target of R150bn over the next three years. The government and public sector unions will begin wage talks in July or August for the next three-year wage agreement from 2021. Citibank SA said last week that adjusting compensation growth in line with a nominal GDP growth forecast of at least 5% could save the government about R65bn. Although projections appeared to be above inflation now, in the longer term basing salary increases on nominal growth would be less costly. Gina Schoeman, Citi's SA chief economist, said that if the Treasury's October forecast of 6%-6.5% growth in nominal GDP was applied over the medium term to public sector wage hikes, the saving could be about R8bn. "All you'd have to say to the unions is we're not going to put it in line with CPI [the consumer price index], we just want to put it in line with more realistic nominal growth figures. In other words, compensation is growing in line with the nominal economy. That's really a saving." Cosatu spokesperson Sizwe Pamla said there was no condition binding negotiations to CPI. But any other method the government wanted to use would have to first be negotiated. "They will have to table it to the relevant platform and make solid arguments on it," he indicated. The most recent agreement contained one of the lowest settlements over the past decade.
- Read the full original of the report in the above regard by Asha Speckman at BusinessLive (paywall access only)
Get other news reports at the SA Labour News home page