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Minister of Administration and Public Services Senzo Mchunu. (Photo: Flickr / GCIS) / Minister of Finance, Tito Mboweni. (Photo: Leila Dougan)
The Minister of Administration and Public Service, Senzo Mchunu, wants to reach an out-of-court agreement with the public sector unions on the wage stagnation. Meanwhile, Finance Minister Tito Mboweni wants the courts to resolve the conflict.
First appeared in Maverick Diary 168
In its heated fight against civil servants over wage increases that exceed inflation, the government made a mistake this week that could move South Africa closer to becoming a failed state.
The wage bill of 1.2 million public servants is out of control; it has skyrocketed from R154 billion in 2006 to R639 billion in 2020, becoming the largest component of public spending. The runaway wage bill is one of the reasons Moody’s and Fitch dealt a double blow to SA in November when they downgraded the country more deeply to “junk” territory just six months after their previous downgrades.
It will be up to two key government figures, Minister of Administration and Public Service, Senzo Mchunu, and Minister of Finance, Tito Mboweni, to stand firm on a salary freeze plan for civil servants for the next three years to cut spending. in R300 billion and bring state debt. of 4 trillion rand under control.
Since February 2020, Mchunu and Mboweni have presented a united front and insisted that the final leg of a 2018 wage deal should not be implemented because South Africa’s fiscal crisis has reached a breaking point. But in recent days, Mchunu and Mboweni have taken different approaches in handling the pay deal, which proposes increases of between 4.4% and 5.4% for public servants (based on their pay scale) starting in April.
To put it more bluntly, the couple has screwed up.
The stage was set for an epic battle; the government was preparing to confront the unions representing public servants on December 2 in the Labor Appeal Court to defend its decision not to implement wage increases. Unions, including the Public Officials Association (PSA) and other Cosatu affiliates, are suing Mchunu and Mboweni to enforce the salary agreement, arguing that the government cannot abandon it because, as a contract, it is legally binding.
An agreement with the unions
Two days before the start of the court case, Mchunu, in a major U-turn, approached the unions to start talks to resolve the wage stagnation. DM168 understands that Mboweni and the National Treasury were excluded from Mchunu’s decision to extend an olive branch to the unions.
In a virtual meeting with the unions, Mchunu proposed a settlement offer that includes a one-time cash bonus for civil servants and a one-year pension payment. This deal is expected to cost the government an additional 27 billion rand compared to the 37.8 billion rand it would spend to implement the last part of the wage deal. Mchunu’s department, which has not disclosed details of the agreement to unions, did not respond to DM168 repeated requests for comments.
After Mchunu submitted the agreement, his department and the State Attorney’s Office sent a letter to the unions on December 1, one day before the start of the court case, requesting that the procedure be postponed until after February 2021. The postponement, which would buy the government more time to continue conciliation negotiations, was rejected by the unions, who insisted that the court case go ahead. More troubling is that Mchunu and Mboweni are on opposite sides of the pay deal.
First, Mboweni has made it clear that the government cannot afford to implement the wage deal, which he has described in court documents as “the biggest claim against the government ever made in any labor forum.” Second, Mboweni wants the government to stay in court so that the salary agreement is declared illegal, arguing that it is no longer bound by it in terms of sections 78 and 79 of the Public Services Act. This law requires the government to enter into collective agreements only if it can afford it.
Mchunu’s proposed settlement puts Mboweni in an awkward position because he will be responsible for calculating the cost of the one-time cash bond to public officials and a one-year pension payment at the fiscus and finding a mechanism to carry it out. The PSA union, which attended the Mchunu meeting, said the cash bonus has been calculated using a September inflation rate of 3% to offer civil servants at the lowest level of employment an amount of R4,000 and R52,000 taxable for those at the highest level. level of employment.
Financing the agreement
To finance the bond, Mchunu proposed using the monthly contributions that the government (or employer) makes to the social security savings of public servants, which are administered by the Government Employees Pension Fund (GEPF). Mchunu has sought the legal opinion and advice of pension fund experts to do this.
For the year to March 2020, the GEPF administered contributions to public sector pensions amounting to R80.2 billion, mostly composed of contributions from the government worth R51.6 billion and the rest of the civil servants public.
The government’s assault on pension contributions to pay one-time cash bonuses will affect the GEPF’s pool of pension contributions, which in turn are used to pay retirement benefits to public servants and other benefits of subsistence for their families.
GEPF’s new chief executive director, Musa Mabesa, said the government approached this week about paying one-year pensions for civil servants and funding the government pension contribution bond.
“The board is still putting its mind to it. There has been no decision and we have not made the necessary calculations to assess the impact on the GEPF, ”he said.
Mugwena Maluleke, the lead negotiator for most of Cosatu’s unions, has described the cash bonus offer as “disappointing” as it has the effect of civil servants financing the bonuses themselves from pension benefits. DM / BM
