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).