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December 16, 2020

Africa

SOUTH AFRICA: Treasury wins first public-sector wage battle

BY Anne Frühauf

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On 15 December, the Labour Appeal Court rejected an application by public-sector unions to force the government to implement their 2020 wage increases, the third and final year of a 2018 wage deal. A seeming surprise to both sides, the judgment represents a significant victory for the Treasury, which is on the hook for delivering budget savings to the tune of ZAR 300bn over three years. But despite the court victory, the Treasury has not won the war in the workers’ trenches, where it now faces even more acrimonious negotiations for a new multi-year wage agreement from April 2021.

In what may come to be regarded a landmark case, the government had argued that the 2018 agreement was unlawful as the agreement did not fall within the compensation envelope actually budgeted for. Concurring, the court ruled the 2018 agreement invalid and unlawful as it failed to comply with constitutional provisions and certain public service regulations.

Neither trade unions nor the government appear to have expected the outcome. Just recently, Public Service and Administration Minister Senzo Mchunu, seemingly without the support of Finance Minister Tito Mboweni, had made a settlement offer to unions worth some ZAR 27bn to avert the case. For their part, the unions rejected the offer, probably in expectation of the court awarding them the full ZAR 37bn of salary increments that would have been due this year.

Trade unions are still reviewing the judgment, but an appeal appears to be on the cards. One of the public sector unions, the National Education, Health and Allied Workers’ Union (NEHAWU), has already described the judgment as a “threat to collective bargaining in this country,” saying it could set a bad precedent for workers regardless of the sector. Beyond a likely legal challenge, NEHAWU is already planning “rolling mass actions in the New Year starting with the marches to parliament and the Union Buildings” around the February budget.

If the judgement were upheld on a likely appeal, the Treasury would be able to save about ZAR 37bn on this year’s wage increases, which it has refused to implement since April. However, it arguably needs to extract even bigger savings from the wage bill over the next three years. With the public-sector unions extremely aggrieved by this week’s judgment, forcing a three-year wage freeze, as Mboweni hopes, may become an even taller order.

There is little doubt that the government finally needs to tackle a wage bill that ballooned to 41% of consolidated revenue in 2019/20. Yet the public sector has everything to lose: it has become the last bastion of support and subscriptions for affiliates of trade union federation COSATU given the extent to which union membership has hemorrhaged on the back of recession and unemployment, mainly in the private sector. A mighty government-labor battle in 2021 could severely strain COSATU’s relationship with President Cyril Ramaphosa, who relied on the federation’s support in his ascent to power. Despite Treasury coffers empty and South Africa drifting deeper into junk terrain, the temptation to cave in could therefore be enormous, especially if COSATU unions threaten to withhold support for the ANC in the 2021 municipal elections. All in all, labor and government seem primed for a major showdown in 2021.

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