Union seeks above-inflation wage hikes

Published Apr 19, 2017

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Johannesburg  - South Africa's largest

public sector union vowed on Wednesday to seek wage hikes above

the inflation rate in coming negotiations, defying the new

finance minister's demands for restraint to avoid further credit

downgrades.

The tough stance taken by the National Education Health &

Allied Workers' Union (Nehawu) raises the spectre of a protest

wave seeking President Jacob Zuma's resignation widening into

strikes damaging to Africa's most industrialised economy.

The public sector wage bill accounts for nearly half of

government revenue and has risen more than 80 percent over the

last decade, with yearly increases averaging more than 6 percent

above inflation.

The Treasury may struggle to borrow the extra money it needs

to plug the wide budget and capital deficits, as well as meet

wage demands from civil servants, after damaging downgrades to

junk by S&P Global Ratings and Fitch following Zuma's sacking of

respected Finance Minister Pravin Gordhan in late March.

Gordhan's successor, Malusi Gigaba, has pledged to oppose

above-inflation wage rises for state employees so as to preserve

South Africa's fiscal discipline and stave off a third credit

downgrade by Moody's. But two of the largest public sector

unions have promised to fight his plan.

"Any increase below 6.5 percent is a poverty wage. Whatever

increase we get must be above 6.5 percent so that our workers

can be able to afford the basic basket of goods," said Nehawu

spokesman Khaya Xaba. Inflation was 6.1 percent last month.

Nehawu is part of the ruling African National

Congress-allied Cosatu, the country's biggest union federation,

which has called on Zuma to resign over the sacking of Gordhan.

The South African Democratic Teachers' Union (Sadtu), as

well two transport sector unions, have also said they would

pursue above-inflation increases for their members.

The next round of wage negotiations is expected to begin in

June or July.

Spectre of strikes 

Labour analyst, Andrew Levy said a public sector strike was

likely among "more militant" unions like Nehawu and Sadtu. "They

will also likely play the card that the president needs all the

support he can get, so he should be nice to unions."

Nicky Weimar, senior economist at Nedbank, said the last two

years had seen "more aggressive unions willing to strike

even when times are tough".

The Reserve Bank has projected inflation averaging 5.9

percent in 2017, with growth seen at only 1.2 percent.

But analysts say these forecasts would be upset by the

downgrades, and forecast rising inflation and weak growth.

The rand has tumbled around 12 percent since Zuma recalled

Gordhan from an overseas trip days and fired him. The drop has

prompted the central bank to warn that the currency now poses

the biggest risk to the inflation rate.

Read also:  Being downgraded to junk status is not the end of the world 

Gigaba, appointed in an abrupt reshuffle that shook markets

and spurred the ratings downgrades, told reporters on Wednesday

that investors had been unsettled by the turmoil afflicting the

finance ministry. He said he needed to reassure investors as he

prepared to fly out to an IMF meeting in the United States.

He dismissed calls from one of his own advisers for the

nationalisation of banks and mines.

Protesters have taken to the streets demanding Zuma resign

or be removed after the credit downgrades. His second term as

president expires after an election in 2019.

Stoked by a weakening currency and miserable economic

growth, South Africa's national debt has risen to 2.2 trillion

rand ($166 billion), nearly 50 percent of GDP.

To tame growing debt, the Treasury has embarked on a fiscal

consolidation path of deep cuts to spending, raising taxes and

freezing government hiring while also limiting civil service

wages to inflation increases.

The government struck a deal in 2015 with 1.3 million state

employees to raise wages by inflation plus one percent in 2016

and 2017, helped avoid a crippling strike that economists said

would have dragged the economy into recession.

($1 = R13.3706).

REUTERS 

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