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Bloomberg reports that Fitch Ratings said on Monday that SA might struggle to stick to a plan to rein in government spending by freezing public-sector wages.
Finance minister Tito Mboweni has outlined a plan to pare the government salary bill, which has surged 51% since 2008, as part of an effort to start bringing the country’s debt trajectory down after 2026. But, according to Fitch’s Jan Friederich, the government hasn’t had a good track record in maintaining a lid on public spending during the past decade. “If you look back the past decade, there has always been overruns in wage negotiations even when the offer from the government was quite a bit more generous than inflation. Now a wage freeze in an environment where there is still some inflation is quite a drastic measure. A lot of the savings depend on it and it’s highly uncertain,” Friederich commented. The proposed wage freeze also risks stoking the ire of politically influential labour unions that are already in a legal battle with the state to honour the last leg of a 2018 pay increase deal. If state salaries can’t be cut, the government will find itself with little room to offset measures in other expenditure areas. Fitch and Moody’s Investors Service on Friday lowered the country’s credit ratings further.
- Read the full original of the report in the above regard by Felix Njini and Manus Cranny at Moneyweb (https://www.moneyweb.co.za/news-fast-news/sas-ability-to-tame-wage-bill-uncertain-fitch-says/)
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