---
title: "There is no U-turn – The public sector austerity negotiations and the ‘4.5%’ spin"
description: "Contrary to news reports, the government has not abandoned its extreme austerity programme. Its negotiators are insisting on its implementation."
type: "OpinionNewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "Opinionistas"
author: "Dick Forslund"
author_url: "https://www.dailymaverick.co.za/author/dickforslund/"
canonical_url: "https://www.dailymaverick.co.za/opinionista/2022-06-07-on-hold-for-footnotes-and-table-there-is-no-u-turn-the-public-sector-austerity-negotiations-and-the-4-5-spin/"
published: "2022-06-07T14:27:18"
updated: "2022-06-07T18:44:44"
lang: "en-ZA"
word_count: 729
---

# There is no U-turn – The public sector austerity negotiations and the ‘4.5%’ spin

> Contrary to news reports, the government has not abandoned its extreme austerity programme. Its negotiators are insisting on its implementation.

By Dick Forslund · Published 7 June 2022, 16:27 SAST · Updated 7 June 2022, 20:44 SAST

## Content

On 2 June, *Business Maverick (BM)* reported that the government had “made a U-turn” in the public sector wage negotiations by [tabling a “4.5% pay hike” across the board](https://www.dailymaverick.co.za/article/2022-06-02-in-a-u-turn-and-defiance-of-a-remuneration-freeze-the-government-offers-public-servants-a-4-5-pay-hike/).

The news media reproduced the government’s version of what had been tabled. *BM* added that the bid was an important change in the employer’s position.

But it isn’t. There is no “U-turn”.

In the 2021 public service wage settlement, there is a Clause 3.3. It says that the non-pensionable “cash gratuity” of R1,220 to R1,695 before tax (higher for higher paid wage groups) “will remain in force until a new agreement is entered into by the parties”.

Referring to this clause, the employer counts its “4.5% offer” from the pensionable part of the actual salary, as if the additional cash payment isn’t a part of the wages actually paid.

When the wage bill increased by 4.3% in 2021/22 as a result of the 2021 settlement, the cash payment comprised about 2.5 percentage points of the increase. The rest was the result of adding a pensionable 1.5% wage increase to all.

Now, because of Clause 3.3, the 2022 wage negotiations therefore start from about minus 2.5%, on average.

The “on average” is crucial. The lower the pay grade, the more important the non-pensionable cash payment is for the final wage. For the lowest paid groups, the 2022 wage negotiations start from something like minus 7%-12% if talking with the employer, because the non-pensionable cash is set to fall away. How this should be handled is an open question.

If the cash payment is removed for good, it deducts 5%-10% (depending on the wage group and individual cases) from the wages of a majority of the 1,150,000 public service employees. If the unions would accept to add 4.5% after such a deduction, the majority would look at their payslips and see a wage cut in actual amounts compared to what they earn now.

And if the non-pensionable cash payment is kept as it is (adding zero to it), as indicated lately? Well, a wage increase by “4.5% across the board” would lead to something like a 1.8-2% increase of the actual wages before inflation, if the non-pensionable part is regarded as a part of the increase, when it is “put back again”.

By suggesting a de facto wage increase of about 2%, the employer is playing a card that fits very well within the 2022 main Budget fiscal framework from February. That is the politics of the latest offer.

In the present 2022/23 main Budget, the Compensation of Employees is set to increase from R594.8-billion in 2021/22 to R608.6-billion, ie, by R13.8-billion, or 2.3%. In this number, the huge contributions to the state pension funds are of course included. And that’s it.

![Table 1: From the Treasury’s presentation at the public sector wage negotiations.](https://cdn.dailymaverick.co.za/i/PjGF_82iNkc5lIIPnhRvg8W_V_Q=/200x100/smart/filters:strip_exif\(\)/file/dailymaverick/wp-content/uploads/2022/06/DickFoslund-BudgetFramework-Corrected.jpg)

*Table 1: From the Treasury’s presentation at the public sector wage negotiations.*

From the position of suggesting a real wage cut of 4%-10% (only guessing within a span how much official CPI inflation will hollow out wages this year), the employer dreams of a settlement in June and of starting the 2023 negotiations in July, before the Medium-Term Budget Policy Statement in October.

Let’s look forward in the table: In 2023, an actual decline in the public sector wage bill is planned: from the R608.6-billion in this Budget year to R598.7-billion in 2023/24. This is a fall of 1.6%. Besides another real wage cut in the public sector, such a plan means another year of public service job culling in a sector where 165,000 posts were officially declared vacant in December.

All this inspired is by the “optimistic scenario” in the Country Partnership Framework signed with the [World Bank in June 2021](https://www.dailymaverick.co.za/opinionista/2022-02-07-the-real-reasons-behind-south-africas-r11bn-loan-from-the-world-bank/). In this clash scenario, the state Budget will reach a “primary budget surplus” in the next year, ie, thinking that the government’s incomes in the 2023 Budget will be higher than the expenditures, debt service costs not included.

It is a promise to “the market” from the finance minister that “must” be kept, come overcrowded classrooms and [excess deaths at hospitals](https://www.dailymaverick.co.za/article/2022-05-22-a-wake-up-call-for-health-department-heads-children-are-dying-because-of-horrendous-state-of-our-public-hospitals/). It is a promise that the negotiators of the employer in the Public Service Co-ordinating Bargaining Council are expected to stick to.

The government has not abandoned its extreme austerity programme. Its negotiators are insisting on its implementation. **DM/BM**

*Disclosure: The AIDC has assisted the public sector unions with reports before the negotiations.*