South Africa’s public sector unions have reached a wage agreement for a seven per cent increase for their members.
This is less than the initial wage demand of 15 per cent by unions. However, the government increased housing allowances and medical subsidies for these employees. Although the housing subsidy is only 1200 rand from the demanded 1500 rand.
According to Peter Montalto, senior emerging markets economist at Nomura, with these added subsidies, the rise is about 7.5 per cent for this year.
Montalto estimated that, “Depending on your calculations this comes out as a 7.5 per cent - 4.8 per cent [Nomura’s CPI forecast] =2.7 per cent real increase for the National Treasury this year using the budget CPI inflation forecast for the coming fiscal year.”
He found it to be “a surprise how quickly negotiation levels can change”. He suspects that government may have given reassurances on cutting down on layoffs for this kind of increase.
“For the current fiscal year we think the deal should add around 8.9 billion rand to expenditure and wipe out the unallocated reserve of 5 billion rand,” Montalto said.
Mokwena Maluleke, chief negotiator for COSATU’s public service unions told CNBC Africa, “We need quality services and therefore it is important that we are able to retain highly motivated and highly paid staff in the public service."
Maluleke acknowledged that conditions were not always favourable for public servants to perform their duties well. He took into consideration teachers who educate pupils in schools that have no facilities and nurses who deal with long lines in government hospitals.
He said that COSATU members were not impressed by the amount of time that it takes to reach agreements and this usually lead to strike action. These particular negotiations took up to eight months.