Economists have warned that the government’s failure to reach an agreement with unions could worsen its financial position.
They say successful talks between government and labour would be key to bringing state spending under control.
In his 2020 budget speech in Parliament on Wednesday, the Finance Minister Tito Mboweni announced plans to reduce the government wage bill by R160.2 billion over the next there years.
Mboweni says the Public Sector Co-ordinating Bargaining Council has already tabled measures to contain the bloated wage bill.
Nedbank economist Nicky Weimer says government is dealing with a very difficult issue.
She says: “If they fail to do that, you are going to sit with a far worse picture because you decided not to hike taxes.”
“I think it was the right decision, it comes to the ability to deliver on those cuts. It is going to be an important renegotiation. If they don’t succeed it means your budget deficit is much larger, less the economy delivers.”
Government’s plan to cut the state employee wage bill has sparked an angry reaction from labour.
Unions have threatened to embark on protests saying the government wants to renege on the terms of a public sector wage deal struck in 2018.
They say officials informed them on Tuesday that they could not afford to pay public servants wage increases that were meant to come into force in April 2020, for the final year of the three-year deal.
Cosatu’s Matthew Parks has described Mboweni’s announcement as shocking.
He says: “It is an extreme act of bad faith and poor negotiations by government to indicate to us they want to withdraw from this year’s agreement.”
“As far as labour’s concerned we can’t withdraw from it. We are willing to discuss next year and the following three year agreements. We are willing to put compromise on the table area, we can save and reduce the fat.”
SAFTU general-secretary Zwelinzima Vavi: “We are told that government is already making moves to convene the public sector bargaining chamber in order to tell the workers that they must take a wage freeze.”
“The current agreement they signed rejected by all unions except the COSATU unions. The move is now to impose a wage freeze and withdraw government from the commitment that it has already made and signed with the 52% of the public servants represented by COSATU unions. If that is not a declaration of war, you tell me what that is.”
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