South African Government Rebuffed in Attempt to Curb Pay

(Bloomberg) -- The Congress of South African Trade Unions said it won't discuss pay for government workers outside of the Public Service Coordinating Bargaining Council, setting a tight deadline for the implementation of spending cuts announced in the annual budget.

It had been expected that the issue would be discussed at a meeting of the ruling African National Congress's National Working Committee on Monday after unions were given less than 24 hours notice ahead of the budget on Feb. 26 of plans to limit pay increases to 1.5% on April 1, well below the inflation-beating increases that had already been agreed.

“We are clear that no bargaining matters are going to be discussed outside the bargaining council,” Mike Shingange, Cosatu's first deputy president, said in an interview. By announcing the plans in the budget the government was “negotiating in bad faith,” he said.

Finance Minister Tito Mboweni said in the budget pay increases, benefits and promotions will be limited to save 160 billion rand ($10.5 billion) over the next three fiscal years to help bring spiraling government debt under control. That's even as the current three-year wage agreement only ends in 2021.

The government's behavior will make it difficult for Cosatu, which at 1.8 million members is South Africa's biggest labor federation, to consider signing a three-year agreement again, he said. Pule Mabe, a spokesman for the ANC, declined to comment.

Broad Opposition

Labor unions that aren't affiliated to Cosatu have also expressed their opposition to government's plans.

“Tension is rising amongst public servants as the implementation date is drawing nearer,” said the Public Servants Association, which represents 230,000 government workers, in a statement. “Government's deathly silence is posing an increasing risk to give rise to actions that will have further dire consequences on the economy. “

South Africa is under pressure to show that it's acting to curb debt to avoid losing the last investment-grade rating on its debt. Moody's Investors Service assesses the country's debt at the lowest investment grade level, while Fitch Ratings and S&P Global Ratings have cut the nation to junk. In addition to its burgeoning wage bill the government has been called on to bail out under-performing state-owned companies.

The government was supposed to have given labor 21 days notice of any proposed changes and if they do try to unilaterally impose the smaller increase they will risk a strike by the country's 1.3 million public servants, Shingange said.

“The workers stand ready to defend this agreement,” he said. “It would end any hope of a cordial relationship.”

--With assistance from Paul Vecchiatto.

To contact the reporter on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Rene Vollgraaff

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