Cape Town - South Africa’s government said it will give its 1.2 million employees inflation-linked increases over the next three years, setting it on course for a clash with labor unions demanding more than double the rate of price growth.
“Cost-of-living adjustments will track consumer-price projections,” the National Treasury said in its mid-term budget, released in Cape Town today.
“The budget also assumes that overall headcount numbers will stabilise at current levels.”
State workers want 15 percent raises from April and a 3,000-rand monthly housing allowance, up from 900 rand, according to a consolidated list of demands presented on September 30.
Inflation in Africa’s second-largest economy was 5.9 percent in September.
The Treasury forecasts the rate will average 5.6 percent over the next three years.
The wage bill stands at 440.7 billion rand in the year through March 2015 and the mid-term budget projects it will grow an average 6.6 percent over each of the next three fiscal years.
“Wage settlements should protect workers’ purchasing power, with any upward adjustments matched by productivity improvements,” the Treasury said.
“If increases in public- service wages significantly outpace inflation, government will be forced to curtail service delivery, either by reducing social spending or capital budgets, or by trimming staff numbers.”
Unfilled Posts
While the government has approved funding for 1.3 million civil-servant posts, only about 1.2 million are filled.
The government may consider scrapping unfilled posts, Finance Minister Nhlanhla Nene told reporters before his speech.
“Whatever we agree to should take into account our very constraint fiscal environment,” he said.
Public-sector workers went on strike for three weeks in 2010 before settling on a wage increase of 7.5 percent.
In 2012, unions and the government agreed to a three-year settlement, raising wages by 7 percent in the first year and then inflation plus 1 percentage point for the next two years.
The agreement expires at the end of March. - Bloomberg News