Minister of Public Service and Administration Ayanda Dlodlo welcomed the wage deal.

JOHANNESBURG - The government came out unscathed in the latest round of wage negotiations, according to analysts. 

Capital Economics Africa economist John Ashbourne said the above-inflation salary increments would not have implications for the economy. 

“It is an above-inflation raise, albeit a small one. But the February 2018 Budget assumed a 7 percent increase in staff costs, so this deal is essentially in line with the government’s own forecast,” Ashbourne said. 

“This means that there won’t be a need to adjust spending plans elsewhere to make the budget add up.” 

The 2018 Medium Term Expenditure Framework (MTEF), which covers the period from 2018/19 to 2020/21, made a provision of R110 billion for salary adjustments and improvements in other conditions of service for employees. 

Minister of Public Service and Administration Ayanda Dlodlo welcomed the wage deal, but warned that the 2018 salary agreement exceeded the amount envisioned in the MTEF period by R30bn.

 “In the present economic conditions, it is important to balance our spending on the wage bill and resources required for service delivery while taking into cognisance the strain in our public finances as a result of the sluggish economy,” Dlodlo said. 

The government and workers agreed that for 2018/19 workers on level 1 to 7 would get consumer price index (CPI) plus 1.5 percent this year, those on salary 8 to 10 would get CPI plus 1 percent and those on level 11 to 12 CPI plus 0.5 percent. 

Cannon Asset Managers chief executive Adrian Saville said South Africa’s public sector was bloated relative to other middle-income countries, with well-below-average service outcomes. 

“South Africa’s public sector wages have run well ahead of inflation and also well ahead of the private sector since 2014, which adds to inflationary pressure in the economy and further aggravates the already-stressed fiscus,” Saville said. 

“Perhaps the silver lining is that the settlement figure of 7 percent in the first year has been budgeted.” 

The recent round of public sector wage negotiations was seen as a litmus test for President Cyril Ramaphosa’s appetite to rein in public finances. 

On aggregate, South Africa’s public sector employment accounts for 20 percent of total employment, compared with Brazil, the Philippines and Mexico, where the figure is 12 percent of total employment. Other concerns around public sector wages were that hikes were not linked to productivity. 

The most recent Global Competitiveness Report ranks South Africa 121st out of 137 countries in primary healthcare and basic education, despite the country spending more as a percentage of gross domestic product in these two public sectors than most middle-income countries.