Win for government on public sector wage bill

SA’s top court has upheld a ruling by a lower tribunal that allowed the government to renege on salary increases for public servants, bolstering its efforts to rein in runaway debt and the budget deficit.

The Constitutional Court announced the ruling in a judgment published on its website on Monday.

The government backtracked on an agreement to raise pay for about 1.3-million employees in 2020, the final year of a three-year deal. The move was part of an effort to contain its wage bill which grew at an inflation-beating annual average rate of 7.3% before the onset of the Covid-19 pandemic.

In December 2020 the labour court dismissed an application by unions to force the state to fulfil the accord.

Monday’s ruling means government won’t have to find additional funds to make good on the agreement or bolster efforts to reduce its headcount.

While honouring the deal would have cost the government R37bn in the 2021 fiscal year, it would have been on the hook for R75bn in back pay for civil servants, Absa Group Ltd economists, including Peter Worthington and Miyelani Maluleke, said in research note on Monday that cited National Treasury officials.

The ruling comes before another round of wage negotiations.  

The Public Servants Association, which represents more than 240,000 state workers, said it intends to seek increases equivalent to the consumer inflation rate — which stands at 5.7% — plus two percentage points, and that it wants a single-year wage deal.

That compares with a budget estimate for the state’s annual salary bill to rise by an average of 1.8% annually over the next three fiscal years. 

Remuneration costs account for about a third of total government expenditure, and agreeing to demands for continued inflation-beating increases would compromise the medium-term fiscal framework presented by finance minister Enoch Godongwana on February 23.

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