Briefing document by Public Service and Administration Minister Richard Masenyani Baloyi on the 2010/11 wage negotiations, July 30 2010

My pen is ready to sign off a draft resolution for the implementation of the settlement, and this should happen by Wednesday next week.

When a dispute was declared during the public service wage negotiations at the Public Service Coordinating and Bargaining Council (PSCBC) and the conciliation process unsuccessful with a certificate of non-resolution issued, I declared that the matter now called for political intervention and that I would lead this process that would find a resolution to the dispute.

I have since engaged in serious talks at that level, within Government and with organised labour leaders and these talks have culminated in the tabling of the final offer by the employer at the Collective Bargaining Council yesterday.

The offer as tabled by the employer yesterday is a reasonable and fair offer given the trends developed in relation to how the State determines salary increases.  The trend informs us of a salary adjustment that is based on inflation for the period under discussion plus a moderate real wage increase.

The public service trade unions have tabled a demand of 11% across the board effective from 1 April 2010. If one is to breakdown this proposal based on the forecasted average annual Consumer Price Inflation (CPI) (of 5.7%) for 2010/2011, the labour proposal is therefore demanding an increase of CPI + 5.3%.

While the principle of granting wage adjustments based on inflation plus a moderate real wage is the ideal, it is posited that this should not pose any serious knock-on inflationary effects and will be dependent on the affordability of the State.

Given the varied obligations by the State to the entire nation, the final offer remains a reasonable and fair offer on the basis that further expenditure on personnel remuneration compromises capacitating of and delivery by the State. 

The final offer by the State was thus tabled in the best interests of the public, including labour itself as we firmly assert that:

• Government should not have to stop increasing the number of police, nurses, teachers and other categories of public servants, in order to reroute the money that the Government has to pay for the salary increment for existing public servants;
• Government should not have to stop building police stations, prisons, schools, clinics and other amenities, and divert the money to do so into paying salary increments for the existing public servants;
• Government should not have to stop financing for the services to be rendered by making sure that there is medicine at our public hospitals, text books at our public schools, forms at our citizenship administration offices and other support materials at other service centres, and channel that money set aside to do so into paying salary increments for the existing public servants; and
• Government should go out borrowing money with creditors of the World to use the money to pay salary increments for the existing public servants.

It is from this premise that we tabled the final offer and we consider it imprudent for us to plunge the country into financial crisis through excessive salary deals.

As the employer we offered a 6.5% salary increase, versus the 8.6% that labour demanded. Of the total amount budgeted, we allocated 0.5% for housing, which translates to a top-up housing allowance bringing the figure now to R630.00 per person per month. This then suggests that the percentage financial contribution Government will spend, out of the total amount budgeted is 7%, versus labour's demands of 8.6%.

As per Resolution Number 1 of 2007, we are paying pay progression increment of 1.5%, thus adding up to additional 8.5% of the money the Government will spend on personnel-related expenses, versus labour's demands of 8.6%.

We offered that the following outstanding matters be processed in the second phase negotiations meant to take place as early as September 2010 and be concluded latest by November 2010:

• Housing allowance;
• Night shift allowance;

• Long service awards;
• Recognition of improved qualifications;
• Minimum service level agreements;
• Review of the negotiation cycle, in which case, for the first time, issues of collective bargaining that have financial implications will be considered in a cycle linked to the Government's budget cycle. If we can conclude this as we planned;
• Public sector-wide salary negotiations settlement alignment; and
• Medical aid subsidy equalisation.

The reasons why we have not been able to move any further than the allocated 6.5% include:

Affordability: When the negotiations process started, government had already determined its budget for the financial year under review, with 5.2% already allocated for personnel expense-related issues. Our negotiation is informed by the budget allocation for salary increases against other priorities of the state.

Given the limited space to manoeuvre in negotiations, we only managed to secure 6.5% as the final offer to the table. We as a Government have already stretched the budget beyond the limit and have already exposed some of our priorities to great risk.

Inflation:  The offer is in line with inflation (which currently stands at 4.7% for purposes of projections) which determines the prioritisation of government expenditure. The offer as it stands is now way above inflation.

The total amount budgeted for personnel-related expenses is R23.5 billion, and ear-marked to be spent as follows:

• R9.7 billion for cost-of-living salary adjustment, based on a projection of 5.2%, which comes to R12.8 billion with the carry-through effects;
• R5 billion for servicing the carry-through effects of the 2009/10 salary increment;
• R3.8 billion for salary progression, which ranges at an average of 1.5%;
• R5 billion for growth in jobs. 
• R38 billion for Occupation Specific Dispensation (OSD) settlement.

General trends: The current offer does not deviate from the trends of settlements in the Public Service, and the following illustrations confirm this view:

• 2007/2008  = Consumer Price Index (CPI) -X + 1%, settling at 7.5%
• 2008/2009  = CPI-X + 1%, settling at 10.5%
• 2009/2010  = CPI  + 2.5%, settling at 10 % - 13%

Wage bill growth as a result of OSD settlement: The implementation of a great number of settlements on the OSD has had a huge impact in the wage bill, which grew from R196 billion to R247 billion, implying a growth by R38 billion. 

We know that the Government has a long list of priorities that have to be addressed, and there is always a need that money be set aside to execute such plans to address the long lists of priorities that we have. Under these difficult circumstances, we cannot but make a call to all trade union leaders that we give priority to working together to find solutions to the challenges we have and we suspend the fighting. It is time for all of us to act responsibly.

As employer, we have tabled our final mandate drawn from serious efforts and strides to manage the situation to ensure it is in the best interest of all South Africans, that we settle the negotiations within the spirit and tone of the positive environment prevailing and defining the relationship between labour and government of mutual trust and guided by the environment around all of us.

I am making a call to our social partners, to remain committed to our resolve. On this score, allow me to give thanks to the leadership of the COSATU-affiliated unions, who are not only recognising that the environment is conducive to finding a solution amicably, but they also provide leadership to their members to give a chance to negotiations in an unpolluted environment.

It is unfortunate that the PSA has taken to the street in protest, choosing not to heed my request for union leaders to meet government as we tabled the final offer. The meeting provided an opportunity to put into context the final offer by the employer.

As government we urge labour to consider the final offer as tabled in council yesterday and to accept the offer as reasonable and fair given the implications it has on all the people of South Africa.

Issued by Department of Public Service and Administration, July 30 2010

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