The 2021 wage deal for South Africa’s public servants gives the state breathing room until September

Now that the government and trade unions have finally signed a deal on 2021 salary increases for SA’s 1.3 million public servants, what happens next?

Public servants immediately benefit from the deal because they will receive an after-tax payment of about R5,000 with their August 2021 salaries – an amount that includes backpay dating to April.

Agreement was reached after a majority of trade unions representing public servants accepted the government’s offer of a 1.5% salary increase and a monthly cash allowance of between R1,220 and R1,695. This sliding scale will ensure that all public servants – including state doctors, nurses, teachers, attorneys, police officers and others – will receive R1,000 per month in their pockets after tax, regardless of their salary level or number of years in service. 

The salary increase under the deal will be backdated to 1 April, a period in which the remuneration of public servants is adjusted every year. The increase will be backdated because negotiations between the government and trade unions were drawn out and were not concluded before April.  

After receiving a once-off windfall of R5,000 (including backpay) in August, the take-home pay of public servants will then be adjusted in succeeding months to reflect a 1.5% salary increase and the monthly cash allowance of R1,000.

 A compromise embraced 

Reaching the deal was no easy feat as trade unions and the government have been in adversarial wage talks for more than three months. The failure of such talks could have led to a general strike in the public sector at a time when SA is in a state of disaster. A strike would have undermined the government’s efforts to stabilise public finances.

A compromise was reached on both sides to make the deal possible. 

Trade unions, which were pushing for an inflation-busting increase of at least 8% in 2021, have accepted a lower percentage and conceded that the government’s offer cannot get any better. 

Four trade unions told Business Maverick that their public servant members had to moderate their expectations because public finances are deteriorating and facing growing demands in the wake of the pandemic and the recent violence.  

“Most trade union members don’t have an appetite for a general strike while the country is burning,” said Mugwena Maluleke, chief negotiator for Cosatu-affiliated unions and the general secretary of the South African Democratic Teachers’ Union (Sadtu).

Support and rejection of the deal

Sadtu, the Public Servants’ Association, the Democratic Nursing Organisation of SA, the Health & Other Services Personnel Trade Union and the National Professional Teachers’ Organisation of SA (Naptosa) – which, in a coalition, represent 739,035 of the 1.3 million public servants – have signed the agreement, giving it more than 50% majority support. The National Education, Health and Allied Workers’ Union, the Police and Prisons Civil Rights Union and the South African Policing Union have chosen not to sign the agreement. However, their members will automatically benefit from it. 

The dissenting trade unions might want their displeasure over the agreement to be heard by the Constitutional Court, considering that some unions have appealed against a labour court ruling that allowed the government not to implement salary increases in 2020 because they were unaffordable. The appeal will be heard on 24 August. 

The government – represented by the department of public service and administration and National Treasury – has balked at the idea of any increases in the compensation of public servants because it planned to freeze their pay over the next three years to bring ballooning state debt and expenditure under control. 

In the end, the government also made a compromise by sweetening its 1.5% salary increase offer with a cash allowance to appease trade unions. Business Maverick understands that the Treasury’s head, finance minister Tito Mboweni, was a lone voice in recent Cabinet meetings in holding the line on a salary freeze for public servants. But Mboweni was turned down by his Cabinet colleagues. 

Cost of take-home salary adjustments

The 1.5% salary increase is already factored into the Treasury’s budget projections for the next three years, but the monthly cash allowance is not. It’s a new expense. The cash allowance will cost about R18-billion, which will add to the Treasury’s existing public sector compensation bill of R650.4-billion in the 2021/22 financial year. 

The Treasury will probably fund the cash allowance from its better-than-expected tax revenue, thanks to higher commodity prices in recent weeks. This is expected to leave the Treasury with a revenue windfall of between R80-billion and R100-billion by the end of the financial year.  

A collection of mixed denomination South African rand banknotes sit in an arranged photo in Johannesburg, South Africa, on Thursday, June 22, 2017. Photographer: Waldo Swiegers/Bloomberg via Getty Images