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SA gets top court backing to renege on 2018 public wage deal

The ruling comes ahead of another round of wage negotiations.  
Remuneration costs account for about a third of total government expenditure. Image: Moneyweb

South Africa’s top court 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 as 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 coronavirus pandemic.

Read: Finance Minister: Public service wage bill risk to SA’s fiscal framework

The Labour Court in December 2020 dismissed an application by unions to force the state to fulfill the accord.

Monday’s ruling means the 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 R37 billion ($2.4 billion) in the 2021 fiscal year, it would have now been on the hook for R75 billion in back-pay for civil servants, Absa Group economists, including Peter Worthington and Miyelani Maluleke, said in research note on Monday that cited National Treasury officials.

The ruling comes ahead of another round of wage negotiations.

The Public Servant’s Association, which represents more than 240 000 state workers, said it intends to seek increases equivalent to the consumer inflation rate – which currently stands at 5.7% – plus 2 percentage points, and that it wants a single-year wage deal.

Read: SA government, unions square off over pay increases

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.

© 2022 Bloomberg

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I guess if ever there were any doubts that the ANC government owns the justice department then this will dispel all doubts !!!

This situation reminds me of the reason for my friend’s divorce. They were married for 25 years and my friend refused to buy a holiday house because he did not want to liquidate his investment portfolio due to the CGT implications. She divorced him, took half of his investment portfolio, and bought her own holiday house.

I think it is time for Cosatu to divorce the ANC after a marriage of 27 years. Let Cosatu stand on her own legs. No doubt, the break in the relationship will sink Luthuli House.

End of comments.

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