Business Times reports that markets and ratings agencies are unfazed by the prospect of a public sector wage increase that's now set to come in higher than the government had budgeted for.

But there are concerns that the single-year deal unions have insisted on will fuel uncertainty and weigh on SA's credit ratings, at a time when the fiscal picture had been looking much better than expected. The government and public sector unions met on Friday to finalise details of a package that will yield an effective increase of about 4.8% for the current 2021/2022 year, rather than the 2.1% the government had budgeted for in February. This came after the government recently upped its offer of a cash gratuity that would give all public servants an after-tax increase of about R1,000 for this year, at a cost of about R18bn that departments will have to find from within their existing budgets. This will be on top of a 1.5% increase that had already been budgeted for to cover notch increases but which will be repurposed as a cost-of-living increase for all public servants. The deal, which the unions still have to sign, will flatten the longer-term trend of public sector pay increases, which have come in well above inflation and over the past 15 years. Citi economist Gina Schoeman commented that markets were not too swayed by the prospect of a higher wage increase, given that the economic recovery and the fiscal picture were better than expected, and the government has been cutting debt issuance. According to Sanlam Investments chief economist Arthur Kamp, the extra gratuity would not derail the government's fiscal consolidation process.

• Read the full original of the report in the above regard by Hilary Joffe at BusinessLive (paywall access only)
• Read too, Behind Mchunu’s sweetened final offer to public servants, at Daily Maverick

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