Public service wage negotiations update to the members of the public and public servants
By Ministers Thulas Nxesi and Enoch Godongwana
We believe that it is critical that a factual update regarding public sector wage negotiations is provided. Whilst government remains committed to the principle of not negotiating through the media, it has rather become imperative that we give updates to both the public sector employees, and the public at large. This is necessary given that this is both a matter of public interest and to articulate accurate positions given some untruths that have found themselves in the media spaces.
The government’s position, as the employer and the custodian of the national fiscus, is fully engaged with the issue of the rising cost of living, including in respect of public servants. Nevertheless, the government is primarily responsible for ensuring the wage bill is sustainable, in the context of maintaining a healthy national fiscus. This is imperative to ensure that there is sufficient resources for funding South Africa’s development agenda, whilst avoiding sinking the country into a debt hole and unsustainable fiscal deficits.
Government’s Economic Outlook
The current round of negotiations commenced with the government sharing with organized labour the economic outlook and government fiscal framework. The government further shared with organised labour the fiscal risks, with the largest risk to the recovery in the public finances being a deterioration in GDP growth. The higher‐than‐expected global inflation could also lead to higher global interest rates, affecting debt‐service costs and the exchange rate.
Organised labour had an opportunity to engage the economic outlook as presented by the government, whilst also presenting its own perspective. The government notes that labor did not fully share the government’s assessment of the risks but did not dispute that the debt burden was significant. After this, organized labour presented their consolidated set of 15 demands for 2022/23 at the PSCBC for consideration by the employer. During engagements, parties agreed to prioritise the Cost-of-Living Adjustment for this round of negotiations and deferred other demands to the next round of wage negotiations.
The Tough Balancing Act Between Wage Increases and Additional Headcounts
The budgeting process is about the balancing act and making policy choices between competing spending priorities given the limited funds. On the public sector wage bill, there’s always competition between wage increases and the need for an increased headcount in frontline services. Higher than inflationary or unaffordable adjustments on the salaries of the current public servants would mean that there’ll be less money available to increase headcounts in critical frontline services. The State capacity in Education, Police and Health has not been increasing in line with the growing population over the years while wages have increased by an average of 2% above CPI between 2008/09 and 2019/20. For example, the average number of learners per teacher in public ordinary schools decreased from a ratio of 32.3 in 2015/16 to 31.4 in 2021/22 while the number of police officers per 100 000 population decreased from 260 to 236 during the same period. The number of nurses per 100 000 uninsured population also decreased in this period. It is for this reason that additional allocations amounting to approximately R50 billion over the 2022 MTEF were made available to Education, Police and Health to address the wage bill spending and service load pressures. Therefore, it becomes imperative that the current and future wage agreements strive to strike a balance between remuneration increases and the need for additional headcounts in frontline services in order to keep up with the increasing demand for public services.
Alignment of negotiations with the Government’s Planning Cycle
At this point, the timetable for negotiations for 2022/23 was mutually adopted with the commitment that immediately after these negotiations are concluded, the next round for 2023/24 would commence and align these with the government’s planning and budgeting circle. This would enable possible wage increases to be factored into the budgeting right at the beginning, rather than scrambling for money at a later stage.
Labour union Demands
Labour unions demanded a 10% across-the-board increase for this financial year. The 10% increase would cost government around R49 Billion rands. Organised labour was advised that government cannot afford this level of money and that this would dramatically disrupt the fiscal outlook, thereby compromising government’s efforts to deliver public services. Such high-cost demands would further frustrate the government’s efforts to continue working on a sustainable long‐term approach to social protection consistent with government’s broad development mandate and the need to ensure affordability.
Employer’s Initial Offer
In response, government proposed that the employees continue to be paid a non-pensionable cash gratuity, which amounts to an average of R1000.00 after tax to all employees across salary levels 1 – 12. This amounts to an average of 4.5% of the R20.5bn allocated for salaries in the 2022/23 compensation budget. Organised labour rejected this offer.
In response to unions’ rejection of the Employer’s initial offer, government presented various scenarios for pensionable increases (baseline increase) as demanded by labour. Although Labour demanded a baseline increase, contrary to what the Employer presented as an initial offer, Labour still rejected the Employer’s revised offer of 4.5% on average on the baseline.
After government presented its revised offer on the baseline, Labour then demanded the continuation of the cash gratuity, which amounted to an average of 4.5% on average for all employees with an additional baseline increase. This is a shift by the organized labour from the original position of a baseline increase only.
In response to organized labour’s shifting demand to the non-pensionable cash gratuity, government presented an improved offer of a non-pensionable cash gratuity of an average of R1000.00 per month after tax, being an average of 4.5% plus an additional 1.5% on the baseline. At this point, Labour revised their demand from 10% to 8% on the baseline, plus the continuation of the non-pensionable cash gratuity.
Employer’s Revised Offer
The Employer presented a revised and improved offer on the baseline to 2% plus the non-pensionable cash gratuity amounting to an average of 4.5% of the 20.5bn that is on the budget.
The 2% amounted to an additional R8,9bn over and above the budgeted of R20.5bn costing the Government a total of R29.5bn. Labour revised their demand to 6.5% across-the-board baseline increase plus the non-pensionable cash gratuity.
The Employer further indicated that any further increase above the 2% on the baseline, would require additional funding to be sourced from the Compensation of Employees’ budget, and would require an introduction of cost containment measures in the Public Service.
The Employer then further tabled cost containment measures that would be introduced if any offer above the 2% was to be considered.
Labour rejected the Employer’s proposal on cost containment measures that were required to cover an additional 1% to make an offer of 3% on the baseline.
Although organized labour declared a deadlock over the 2% increase on the baseline and a non-pensionable cash allowance of R1000 per month, amounting to 4.5% Government continued to engage organized labour in good faith. Government remained committed to the principle of ensuring that it remains the most preferred employer, whilst ensuring that South Africa enjoys a healthy fiscus and that funding of development initiatives is not compromised.
Facilitation process
During the negotiations, there have been numerous rounds of discussions, with offers and counteroffers between the employer and the unions, including areas of significant disagreement. As part of negotiating in good faith, Government proposed a facilitation process as part of deadlock-breaking mechanisms. Facilitation took place on 26-30 August 2022.
The facilitation process resulted in a Draft Collective Agreement proposing a 3% baseline increase plus the continuation of an R1000-00 non-pensionable cash allowance to all employees payable until 31 March 2023 when the new agreement for the financial year 2023/24 shall have been concluded.
Employer’s Current and Final Offer
At this stage, the government’s offer on the table is as follows:
A total of 7.5% offer packaged as follows:
1. The continuation of the current non-pensionable cash allowance of R1000-00 (4,5%) for this financial year across all salary levels; and
2. A pensionable increase of 3% across the board.
This offer is beside the 1.5% pay progression payable to all qualifying employees. Therefore, if the pay progression is added to the total package, the total Employer offer amounts to a 9% increase.
Under the current fiscal position of Government, this is a generous offer by Government to all Public Servants.
Conclusion
In conclusion, we wish to reiterate what we said during the budget vote: “The public sector wage bill is under severe pressure due to the general constraints faced by the South African economy”.
This statement summarises the problem statement that the wage bill has grown faster than economic growth over many years. Despite this, we have continued to ensure that public servants are reasonably cushioned against the rising cost of living without crowding out social expenditure. It is a difficult balancing act.
Therefore, the misinformation being peddled by some unions in the media is not only unfortunate but also very opportunistic and disingenuous.
The Employer has demonstrated and negotiated in good faith from the commencement of negotiations by presenting the fiscal position, the constraints thereof and the associated risks. All this to continue rendering services to the Public.
We hope that this factual narration of the negotiation process will assist the media to report factually and truthfully.
- Thulas Nxesi is Minister (Acting) at the Department of Public Service and Administration (DPSA)
- Enoch Godongwana is Minister of Finance
Enquiries:
Acting Minister’s Media Liaison Officer: Mr Sabelo Mali: 0827295804/ Sabelo.Mali@LABOUR.gov.za
DPSA Director Communications: Mr Moses Mushi: 082 972 6595/ mosesm@dpsa.gov.za
