BUSINESS MAVERICK

Treasury joins fight over inflation-beating salary increases for public servants

By Ray Mahlaka 20 July 2020

(Photo: Adobestock)

In court documents, National Treasury director-general Dondo Mogajane has made the government’s case about why it cannot honour salary increases for public sector workers.

The government has picked a fight with 1.3 million public servants by using the Covid-19 pandemic and its impact on already deteriorating public finances as the main reason to deny them inflation-beating salary increases.

The National Treasury, an arm of the government and the custodian of SA’s public purse, is no longer adopting a reconciliatory tone as it had tough words for public servants including nurses, doctors, teachers, and police officers.

“The Covid-19 pandemic has come at a great cost to employment in the private sector, with numerous remaining employees receiving no [salary] increments or even experiencing pay cuts to preserve employment,” said Treasury director-general Dondo Mogajane.   

But the job security of public servants is not “threatened” and “nor are their salaries reduced”.  

“Public servants have been the beneficiaries of decades’ above-inflation salary increases outperforming private-sector salaries. This is not just and equitable,” he said.

Mogajane’s views are in his responding affidavit to a Labour Court application that was launched in June by at least five trade unions to enforce a three-year agreement on salary increases. The trade unions include the Public Servants Association of SA, the National Professional Teachers’ Organisation of SA, the Health and Other Services Personnel Trade Union of SA, the SA Teachers Union, and the National Teachers Union.

Mogajane wants the court application to be dismissed and with a cost order against the trade unions.

Finance Minister Tito Mboweni fired the opening salvo in February when he unveiled the plan to cut the public sector wage bill by R160-billion over the next three years as it is the single largest component of government expenditure. 

According to Treasury figures, government expenditure and tax revenue grew by an average of 10% and 7.5% annually respectively over the past decade – but the compensation of public servants grew more quickly, at an average of 10.3% annually over the same period.

Botched wage agreement

Trade unions are aggrieved because the government refused to comply with the terms of a three-year wage agreement on 1 April, which guaranteed public servants salary increases of between 4.4% and 5.4% depending on their salary scale, with low and mid-income earners getting a higher percentage. 

The government is not budging from its offer of a 4.4% salary increase for lower-paid public servants and no increase for those in higher-income categories. A 4.4% salary increase is inflation-beating considering that consumer inflation has been steadily declining in recent months and fell to a 15-year low of 2.1% in May.

Arguably, the optics of the government not honouring payments to public sector workers at a time when some are risking their lives to contain the spread of Covid-19 are bad.

Trade unions are hoping to bind the government to the three-year wage agreement on salary increases that it signed in 2018 at the Public Service Co-ordinating Bargaining Council, where both parties negotiate terms of employment. The year 2020 is the last leg of the wage agreement.

Mogajane said the government cannot honour the last leg of the agreement because Covid-19 has unexpectedly forced it to redirect taxpayer funds to health, economic and social welfare initiatives to limit the impact of the pandemic on South Africans. 

“The government is now compelled by the Covid-19 circumstances to expend additional funds to protect vulnerable people, some rendered destitute by job losses or salary cuts in the private sector. Others are now in desperate need of accelerated progressive realisation of the right to healthcare, food, sanitisation or social welfare as the Covid-19 circumstances compel.”

Affordability problems

Mogajane said the wage agreement has become “unaffordable, unbudgeted and unauthorised by law”, rendering it “invalid and unenforceable”.

He believes that salary increases to public servants would cost the government an additional R37.8-billion in 2020 – money it would have to borrow, exacerbating SA’s current debt load of R3.97-trillion. Mogajane said the additional R37.8-billion potential expenditure was not included in Mboweni’s recent Supplementary Budget and Parliament has not approved that cost, making it invalid. 

He said written approval for the potential expenditure has not been granted by the Treasury, which flouts the law, including the Public Service Act. DM/BM

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