CAPE TOWN: The South African’s government official warned that the wage demands of public sector unions are unaffordable and would add R50bn to the budget.
Finance Minister Nhlanhla Nene has said a 10% hike, which the unions are insisting on, would add R20bn to the government’s remuneration bill. He mentioned a 6.6% increase in his budget speech in February. But on Wednesday the senior official, who is part of the negotiations but asked not to be named, said the 10% across-the-board hike would be likely to add R50bn to state wage costs when other benefits were factored in.
The effect would be to “drastically skew the public sector wage bill” and it would mean personnel costs and interest repayments would be more than 50% of the state’s budget over the next three years, the official said. It would also widen the budget deficit. The wage bill stands at R400bn and is projected to grow to R430bn in the 2015-16 financial year. Rating agencies, the World Bank and International Monetary Fund have cited above-inflation wage hikes as a risk to SA’s economic outlook. The unions are demanding a 10% increase while the state is offering a hike pegged at inflation plus 1% over a three-year period followed by two years of inflation plus 0.5%. Consumer inflation is at 4%.
