CAPE TOWN, May 19 (Reuters) – South Africa’s government sealed an agreement with unions on Tuesday to raise public sector wages by 7 percent this year, the head of the bargaining council said, averting a potentially crippling strike by 1.3 million workers.
Public sector unions had initially sought a 15 percent increase before lowering their demands to 10 percent during lengthy negotiations since September. Workers, including teachers, nurses and policemen, will also get better housing and medical aid allowances under a three-year deal.
“The talks have been tough but this is the best deal we could get,” said Frikkie de Bruin, general secretary of the Public Service Co-ordinating Bargaining Council.
The talks had to be referred to independent mediators in March because there was no breakthrough.
Under the deal the government agreed to increase wages this year by projected consumer price inflation, which the Treasury forecasts at 4.8 percent, plus 2.2 percent.
In 2016 and 2017 salaries will rise in line with average inflation plus one percent.
The government has also agreed to increase medical aid cover by 28.5 percent per worker and increase a housing allowance to 1,200 rand ($100.81) a month, from 900 rand.
“A good deal is a deal that nobody is really extremely satisfied about. There are things that could have been better but under the circumstances this is the best deal that was on the table,” said Leon Gilbert, spokesman for the largest independent union, the Public Servants Association.
The public sector wage bill has risen more than 80 percent over the last decade as yearly increases have averaged more than 6 percent above inflation and the government is under pressure to rein in spending and curb costs as rating agencies flag possible downgrades.
Comment by Nazmeera Moola, economist and strategist, Investec Asset Management
The South African government’s recently concluded three-year wage agreement with the public sector unions is an encouraging step towards improving the country’s current tepid potential growth.
The agreement comprised a consumer price inflation (CPI) plus 2% (7% nominal) increase in 2015, followed by increases of CPI plus 1% in each of 2016 and 2017. There were also adjustments to the housing and medical aid benefits.
While the increase is higher than the Treasury had originally budgeted for in 2015, the overall three-year package offers several benefits, namely:
- the three-year package will allow the government to achieve the budget deficit targets that they set out in the February 2015 budget;
- it provides stability for the public sector over three years; and
- it sets a reasonable base for negotiations in other sectors that will take place in the coming months – notably the gold mining sector.
The keys to increasing South Africa’s growth potential in the coming years are controlling the fiscal deficit, boosting electricity availability and reducing the regulatory burden on business. With this agreement, the government has taken a step towards achieving the first of these.
