Public sector wage increases that are well above inflation, are unaffordable and will come at the cost of jobs, Finance Minister Nhlanhla Nene warns.
The public sector wage bill is one of the government’s biggest expenditure items, at R439-billion for 2014-2015. About 1.3-million people are employed by the national and provincial governments and their wage talks opened recently with a demand for a 15% increase.
“I have always been saying that if we settle for anything more than 1% above inflation , that will compromise the headcount. We are committed to maintaining a moderate increase in headcount, but also in the wages,” Nene said in an interview on the sidelines of the World Bank-International Monetary Fund (IMF) annual meetings in Washington at the weekend.
Stanlib chief economist Kevin Lings said the wage settlement would be closely monitored.
“Government finances are under strain. The wage agreement has to come in at a single-digit percentage increase in order to make the fiscal targets that we have agreed to for the next couple of years,” he said.
“If we give up on those targets and allow the deficit to widen, it will hurt us in terms of credit ratings and the cost of funding.”
The state purse has been under pressure, with risks that budget deficit targets may be missed as sluggish economic growth weighs on revenue collection.
Nene said the focus of wage negotiations should move from percentage increases to examining the living and working conditions of employees and improvements in productivity.
There was a need to “look at how well we are doing in efficiencies in revenue collection, but also whether there are any new sources of revenue that we should be looking at” – a veiled reference to future increases in taxes.
Investment in infrastructure and structural reforms, particularly those relating to labour markets and services sectors, need to be implemented speedily if much-needed, robust economic growth rates are to be achieved, leaders agreed at the conclusion of the World Bank-IMF meetings.
Weak growth still characterises the world economy, six years after the start of the global recession. Fiscal and monetary policies are no longer able to support economic growth.
The IMF said South Africa should address labour laws, difficult employer-employee relations and energy-supply constraints if it is to grow its economy.
International monetary and financial committee chairman Tharman Shanmugaratnam said world leaders engaged in “constructive” discussions at the meetings on the “real challenge” of structural reforms.
Shanmugaratnam said there was a “real risk” of “subpar” economic growth persisting for a few more years, but it could be tackled.
Infrastructure development featured prominently at the meetings as one of the ways countries could grow their economies and create jobs. IMF chief Christine Lagarde said additional work on “efficient investment” in infrastructure with public finance institutions would be completed over the next few weeks.
Having leaders from the IMF’s 188 member countries talk to one another, she said, helped policy coordination. The aim of the annual meetings was to “put a little bit of fire” into policymakers and central bank governors to implement growth-inducing reforms.
Nene said while South Africa’s economic growth would be lower than the 2.7% the Treasury forecast in February, he did not share the IMF’s view that it would be as low as 1.4%.
But, “without accepting 1.4% as the accurate number, the fact of the matter is we are looking at a much more reduced gross domestic product number”, he said. — BDLive
Nene urges wage moderation
The public sector wage bill is one of the government’s biggest expenditure items, at R439-billion for 2014-2015. About 1.3-million people are employed by the national and provincial governments and their wage talks opened recently with a demand for a 15% increase.
“I have always been saying that if we settle for anything more than 1% above inflation , that will compromise the headcount. We are committed to maintaining a moderate increase in headcount, but also in the wages,” Nene said in an interview on the sidelines of the World Bank-International Monetary Fund (IMF) annual meetings in Washington at the weekend.
Stanlib chief economist Kevin Lings said the wage settlement would be closely monitored.
“Government finances are under strain. The wage agreement has to come in at a single-digit percentage increase in order to make the fiscal targets that we have agreed to for the next couple of years,” he said.
“If we give up on those targets and allow the deficit to widen, it will hurt us in terms of credit ratings and the cost of funding.”
The state purse has been under pressure, with risks that budget deficit targets may be missed as sluggish economic growth weighs on revenue collection.
Nene said the focus of wage negotiations should move from percentage increases to examining the living and working conditions of employees and improvements in productivity.
There was a need to “look at how well we are doing in efficiencies in revenue collection, but also whether there are any new sources of revenue that we should be looking at” – a veiled reference to future increases in taxes.
Investment in infrastructure and structural reforms, particularly those relating to labour markets and services sectors, need to be implemented speedily if much-needed, robust economic growth rates are to be achieved, leaders agreed at the conclusion of the World Bank-IMF meetings.
Weak growth still characterises the world economy, six years after the start of the global recession. Fiscal and monetary policies are no longer able to support economic growth.
The IMF said South Africa should address labour laws, difficult employer-employee relations and energy-supply constraints if it is to grow its economy.
International monetary and financial committee chairman Tharman Shanmugaratnam said world leaders engaged in “constructive” discussions at the meetings on the “real challenge” of structural reforms.
Shanmugaratnam said there was a “real risk” of “subpar” economic growth persisting for a few more years, but it could be tackled.
Infrastructure development featured prominently at the meetings as one of the ways countries could grow their economies and create jobs. IMF chief Christine Lagarde said additional work on “efficient investment” in infrastructure with public finance institutions would be completed over the next few weeks.
Having leaders from the IMF’s 188 member countries talk to one another, she said, helped policy coordination. The aim of the annual meetings was to “put a little bit of fire” into policymakers and central bank governors to implement growth-inducing reforms.
Nene said while South Africa’s economic growth would be lower than the 2.7% the Treasury forecast in February, he did not share the IMF’s view that it would be as low as 1.4%.
But, “without accepting 1.4% as the accurate number, the fact of the matter is we are looking at a much more reduced gross domestic product number”, he said. — BDLive
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