Tito’s balancing act leaves Cosatu livid about public servants’ wages

Finance minister Tito Mboweni stuck to his hard line on the salaries of public servants during his budget speech in the national assembly on Wednesday afternoon, proposing “moderate adjustments” to wage increases,  way below inflation.

But National Treasury did not close the door entirely to increased demands by public servants and the next round of wage negotiations is about to kick off.

Speaking at the post-budget media briefing, director-general Dondo Mogajane said that a specific amount has been budgeted for public sector wages does not mean negotiations at the Public Service Bargaining Council, where the state discusses wage increases with public sector unions, are automatically suspended.

“It doesn’t mean that [by] putting a number over the medium term we’ve already decided on the negotiations. All we are saying [is] there has to be a number,” he said.

In its reaction, labour federation Cosatu described the budget as a let-down for workers and has vowed not to allow the imposition of a wage freeze.

“The federation will not allow a defeat of the public sector workers and the unilateral imposition of a wage freeze. This is a blatant attempt to undermine the democratic institutions and scapegoat public servants for the mismanagement of the economy. We know the full political and economic implications if the public sector workers lose this battle,” Cosatu parliamentary coordinator Matthew Parks said.

This sets the scene for a showdown when public service and administration minister Senzo Mchunu squares up to the unions, which are already aggrieved by government’s refusal to honour the third leg of an existing three-year wage agreement.

Government’s refusal to budge on this matter has been backed by the labour court, which has ruled that the state has a right to refuse to pay increases that are unaffordable, even where there is an existing wage agreement. 

The federation will not allow a defeat of the public sector workers and the unilateral imposition of a wage freeze.

—  Cosatu's Matthew Parks

Mboweni said “allowing the [public sector] wage bill to continue rising in line with recent trends is not sustainable”.

He was referring to recent past practices in which public servants have been scoring above-inflation salary increases, which will see 41% of government revenue going to civil service salaries by 2021.

Mboweni said the government is phasing out the payment of performance bonuses, while considering amending or abolishing some allowances or benefits.

The finance minister’s tough stance is consistent with the position adopted by President Cyril Ramaphosa’s administration when it offered no increases to government workers last year, citing affordability issues.

National Treasury sounded another debt warning as costs to service its debt soar and combined debt is set to pass the R5-trillion mark by 2023/24.

Treasury warned in a budget review document that urgent steps are required to avoid the country entering into a debt spiral. Government will pay just less than R1-trillion over the next three years just to service its debt.

“Funds that could be spent on economic and social priorities are being redirected to pay local and overseas bondholders. Over the next three years, annual debt service payments exceed government spending on most functions, including health, economic services and peace and security,” Treasury noted.

A reduction in spending will help narrow the budget deficit from 14% to 6.3% in 2023/24. The state needs to borrow R500bn this year to make up for the revenue shortfall, but its borrowing requirements will decrease to R377bn by 2023/24.

The state will spend R6-trillion in the next three years, the bulk of which will go towards social spending. Learning and culture receive the lion’s share this year at R402.9bn. Social development, which encompasses the payment of various grants, is allocated R335.3bn, and health spending increases to R248.8bn.

National departments receive R763.3bn of total allocations this year, provinces will share R639.5bn, while municipalities are allocated R138.5bn. Government is setting aside R10bn for the vaccine rollout programme over the next two years and another R8bn to provincial health departments towards fighting Covid-19 as part of economic recovery efforts.

There was good news for taxpayers, though, with Treasury opting to scrap planned increases in personal income taxes that would have raised R40bn. It said the decision was motivated by an upturn in tax revenue and the need to stimulate economic growth.