(Bloomberg) — South Africa’s government raised its offer for salary increases to the country’s public servants to 4.7%, well short of a demand by labor unions representing 1.3 million state workers.
The offer was increased from 3% after the government rejected an initial demand by civil servants for a 12% increase in the fiscal year that begins April 1, according to Frikkie de Bruin, general secretary of the Public Service Co-ordinating Bargaining Council. Labor unions have lowered their demand to 7.5% after a facilitation process aimed at helping the two sides come to an agreement, he said by phone Tuesday.
“There’s some progress that was made,” De Bruin said. “We think that we are getting closer to a settlement range, which could be anything between 5.5% and 6%.”
Restraining increases in public-servant wages is pivotal to government efforts to rein in the nation’s debt, which is forecast to peak at 75.3% of gross domestic product in the 2025-26 fiscal year. Compensation accounts for almost a third of state expenditure, crowding out spending on other priorities.
In its offer, the government proposed a multi-year agreement, along with increases to state workers’ housing and danger allowances, according to De Bruin.
The offer was rejected by the majority of the Public Servants Association of South Africa members, Jannie Oosthuizen, its labor-relations officer, said. The PSA represents more than 240,000 workers.
The government’s latest offer is above South Africa’s inflation rate of 3.8% and near the central bank’s estimate for average inflation of 4.6% this year. Price pressures are expected to cool further, with inflation expected to remain at the lower end of the Reserve Bank’s 3% to 6% target range for the next three quarters.
Finance Minister Enoch Godongwana, who has committed to reining in spending on state wages, will present his medium-term budget policy statement on Wednesday.
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