Union demands pose threat of huge government deficit
THE government could be in the red to the tune of R157.4-billion if it accedes to all of the public service unions’ wage demands.
It is, however, planning to reduce its proposed increases for the medical aid subsidy and housing allowance for public servants when it presents its latest wage offer to the unions next Tuesday.
But a confidential document drafted by the Treasury, which was discussed at a mandate committee meeting this week, stated that if the government’s revised wage offer was accepted, it would result in a budget shortfall of R55.3-billion over three years.
A senior official in the Department of Public Service and Administration confirmed that the Treasury proposed that the original offer to increase the medical-aid subsidy from 17.6% to 28.5% be reduced to 22% — this, at a mandate committee meeting chaired by the department’s acting minister Nathi Mthethwa on Wednesday. It was also felt the earlier proposal to increase the housing allowance from R900 to R1 200 be reduced to either R 1 100 or R1 000.
Finance Minister Nhlanhla Nene and Health Minister Aaron Motsoaledi were also at the meeting.
According to the senior official, this money would be reallocated to increase the government’s proposed salary hike of 5.8% to about 8.5%.
The unions are demanding a 10% salary adjustment and a housing allowance of R1 500.
Wage talks have deadlocked, resulting in a conciliation process involving both the unions and the employer which started earlier this month.
The government’s current wage bill is R400-billion and is projected to grow to R430-billion during this financial year. This is about 35.5% of the total government budget.
According to the document, the current offer to labour will result in “substantial overspending against budgets, negatively impacting on service delivery”.
It said that the combination of revised inflation numbers, pay progression, the housing allowance, medical-contribution increases and adjustments to educators’ pay progression would result in a budget shortfall of R55.3-billion over the next three years.
“This will need to be absorbed in the baselines of departments. Large employing departments such as police, education and health will face significant strains. Service delivery will be affected: reduced head counts, less resources for goods and services or curtailing of capital budgets will be inevitable.”
The document stated that if the settlement to unions exceeded the current offer, the government would face several options — “all of them unpalatable”.
One of the options would be shifting resources from other spending priorities.
“Many of government’s policy priorities for the next few years would not be financed. This would have negative consequences for South Africans most in need by reducing the value of services provided to the poor.”
It said that further cuts to goods and services budgets would lead to an imbalance between personnel spending and complementary inputs.
“Public servants would be better paid, but the tools they require to do their jobs would be insufficient,” the document stated.
Brent Simons, spokesman for the Department of Public Service and Administration, declined to comment on the latest offer.
But he said that the government “would have to seriously look at readjusting our package”.
“We are going to ask unions that they also have a responsibility to the country; they need to consider the overall economic conditions. Unions will have to compromise; government is compromising.
“We are already saying that we are budgeting for a deficit — so we are asking unions to work with us and to make sure that we take this country forward. Should government meet the unions’ demands, it means that we are going to face a serious wage-bill shortfall.”
Said Simons: “What the unions must understand is that government must work within the kitty that is available.”
His department said in a statement that the state remained optimistic that the conciliation process would “produce a mutually beneficial outcome”.