Escalating wages, retrenchments and too little job growth

Current public sector wage demands far exceed inflation.

The recent unanimous decision by the Monetary Policy Committee (MPC) to keep the repo rate at 3.5 percent per annum, was accompanied with commentary around escalating wages posing an upside risk to inflation.

A number of sectors are currently in the midst of or beginning discussions with unions on wage negotiations.

Just a few days ago, The National Union of Mineworkers (NUM) submitted its wage demands for the period 2021 to 2023 to gold sector employers, with negotiations expected to take place outside the traditional centralised collective bargaining council for the first time.

Negotiations during what has become known as strike season in South Africa, focus on increases as well as additional areas such as leave and employee benefits, among others. Current demands – across all sectors – far exceed inflation, which is sitting at an average 4.2 percent this year.

In a recent update, the Bureau for Economic Research highlighted the wage increases tabled by unions:

  • Gold mining sector: The National Union of Mineworkers (NUM) is looking at a 15% increase in salaries.
  • Steel and engineering sector: The National Union of Metalworkers of SA (NUMSA) seeks a one-year, 15 percent increase, Solidarity is looking for CPI plus five percent.
  • Eskom: NUM and Numsa are seeking a 15 percent increase in wage, with Solidarity looking for nine percent (a 1.5 percent wage offer tabled last week was rejected).

Talks remain deadlocked at Transnet, where unions have been provided with a three percent non-pensionable increase allowance and the possibility of retrenchments.

According to the BER, the government is pursuing an effective wage freeze, with allowance for the usual ‘pay progression’.

None of the above negotiations are heading for clear resolutions and strikes in the private, public and SOE sectors remain a worrying possibility at a time when the South African economy can ill afford further hiccups in its recovery.

Ratings agency Moody’s recently commented in its annual report that South Africa faces the risk of even more tense socio-economic relations amid slow economic growth, too little job creation and rising public debt.