EDITORIAL: The confusing picture of the public sector pay offer

For cash-strapped ordinary South Africans it was galling to see thousands of essential public sector health workers out on an illegal strike earlier this month that cost patients’ lives, only to have the state cave in immediately after winning an interdict stopping the strike. 

The Labour Appeal Court blasted the “flagrant disregard” displayed by the National Education, Health & Allied Workers’ Union (Nehawu) for the law, the employer, and the people of South Africa. Yet, instead of standing firm, the state rewarded Nehawu’s “deplorable” conduct by upping its wage offer for 2023/2024 from 4.7% to 7% and, subsequently, to 7.5%.

This is two percentage points above the Reserve Bank’s forecast for average headline consumer inflation of 5.4% for 2023. 

Given that the average public sector nurse earns more than R34,000 a month before taxes, that’s an increase of about R2,500 a month, including the continuation of the existing R1,000 cash gratuity.

You’d think the unions would be grabbing the offer with both hands given the state of the economy, which most economists think will slow to about 0.5% this year as a result of intense load-shedding. 

But the labour movement is split down the middle. The faction including the Federation of Unions of South Africa and the South African Democratic Teachers Union — representing 54% of votes in the bargaining chamber — is set to accept the sweetened offer. But the faction that includes Nehawu is calling it a “shameful lie” and sticking to its 10% demand. 

Nehawu has a point, in that the actual increase is only 3.3%. The other 4.2% consists of the R1,000 a month post-tax cash gratuity that workers have received for the past two years. This was supposed to be a stopgap measure to compensate for very low increases during the pandemic. Now it has been folded into workers’ regular pensionable salaries for 2023/2024, making it permanent. 

It’s all rather confusing. The bottom line is that the state is shifting away from its hardline position of attempting to force below-inflation increases onto public sector workers. But because the National Treasury budgeted for the country’s R700bn wage bill to grow by only 1.6% this year, fiscal slippage will result. 

If the state’s 7.5% offer is accepted, it will add an additional R23bn to this year’s wage bill.

Of course, the Treasury has created a fiscal buffer by allocating R95bn to reserves over the medium term precisely to cover the strong likelihood of a wage bill overrun and of further state-owned enterprise bailouts as well as the inevitable extension of the R36bn social relief of distress grant. But at the time of the 2023 budget, it was also banking on the economy growing by almost 1% this year.

That looks impossible now.

Sure, the Treasury deserves credit for slamming the brakes on unsustainable wage bill growth over the past few years; but after taking it on the chin during the pandemic the unions are now digging in their heels, while the state’s resolve seems to be wilting. 

Insiders say the problem is that the president got involved, leaving the Treasury to find the cash. Unfortunately, this likely means a continuation of the trend whereby the state employs fewer, better-paid workers at the expense of service delivery.

In the past, the state pushed wage increases down to provincial health and education departments, which, confined to tight expenditure ceilings, responded by reducing headcounts and reallocating resources away from goods, services, capital and maintenance, and towards compensation.    

As South Africa’s growth outlook darkens, the debt position worsens and the poor grow increasingly resentful of shoddy public services, the state will regret the precedent it has set by caving in to thuggery.