With the opening salvos of the public sector wage negotiations fired, in which the unions have rejected the government’s improved offer of 6.5 percent, the stage looks set for another contentious bargaining season, according to Standard Bank.

The bank says in its economic strategy research report that South Africa can ill afford the negative impact of protracted strike action this year.

Standard Bank believes the multi-year agreements concluded in 2010 and last year led many to expect a relatively uneventful wage bargaining season this year. However, with the battle lines between the government and the public sector unions already drawn, another bruising encounter looks unavoidable.

“South Africa’s contentious labour relations are always a hot topic of debate as the country enters its annual wage bargaining season, typically the second and third quarters. This time of the year is often characterised by lengthy wage stoppages marred by – in recent years – a high incidence of violence and intimidation on the part of unions and a seeming inability to negotiate effectively on the part of employers.”

The lender says that apart from the direct cost to the economy, South Africa’s contentious labour relations have come under the hawk’s eye of international rating agencies.

The negative change in South Africa’s outlook by three leading rating agencies last year and in the first quarter of this year was in large part due to what the agencies viewed as a lack of progress on key socio-economic issues.

In some cases, South Africa was seen to have taken a few steps back on some of these matters. The high levels of unemployment and the increasing share of the wage bill in government expenditure are some of the pressing matters, the bank says.

Finance Minister Pravin Gordhan has unveiled a much more ambitious plan to reduce the budget deficit than had been introduced at the time of the medium-term budget policy statement, Standard Bank adds in the report.

“Gordhan emphasised the need for the government to rein in expenditure on salaries, and duly budgeted for an increase in public sector wages of no more than 5 percent.

“The widespread scepticism of (the) government’s ability to meet this target, having failed to keep a lid on the wage bill in prior years, seems justified. (The) government has already offered public servants a wage adjustment of 6.5 percent in the current negotiation season, an offer that was quickly rejected by the unions.

“Public sector unions, led by Cosatu, are seeking an 8 percent rise, down from the 10 percent initially sought,” it says.