Analysts predict major upset at next public sector wage negotiations

Analysts predict a major upset at the next public sector wage negotiations following Finance Minister Tito Mboweni‘s announcement of a R160.2 billion reduction in the wage bill of civil servants over the next three years.

Presenting his Budget Speech in Parliament on Wednesday afternoon, Mboweni also announced that there won’t be any tax hikes in personal tax.

Trade Union body, Cosatu expresses shock at plans to reduce the wage bill for civil servants. Cosatu’s Parliamentary coordinator, Matthew Parks says, “It is an extreme act of bad faith and poor negotiations by the government to indicate to us they want to withdraw from this year’s agreement. So as far as labour’s concerned, we can’t withdraw from it. We’re willing to discuss next year and the following three year agreements.  We’re willing to put a compromise on the table.”

As SABC’s Bulelani Phillip reports from parliament, the minister made too many promises with regards to the wage bill.  

Government, labour talks 

Economists say the successful talks between government and labour will be key to bring state spending under control.

Mboweni says measures to contain the wage bill have already been tabled at the Public Sector Coordinating Bargaining Council. However, Nedbank’s economist Nicky Weimer has warned that failure to reach an agreement with unions could put government finances in a worse position than before.

“If they fail to do that you are going to sit with a far worse picture, because you decided not to hike taxes. I think it was the right decision obviously it comes to the ability to deliver on those cuts. It is going to be an important renegotiation…if they don’t succeed it means your budget deficit is much larger less the economy delivers.”

Video: Finance Minister unveils a R2-billion tax relief surprise and changes to personal income tax brackets

‘Push back on wages’

Political Economist and Managing Director of Zehuti Advisory, Mandla Issacs, says government can’t afford an increasing wage bill.

“Our economy has not grown in real terms in a decade. It’s basically been flat and yet public sector wages have grown by 40% in real terms over the last 12-years, and government has not confronted this issue; in large part because the unions under the umbrella of Cosatu are part of the governing tripartite alliance and so, to keep the labour unions inside the tent the government has been wary to push back on wages, but unfortunately, right now we ran out of road. We simply can’t do this anymore.”

In the video below, Mandla Issacs from Zehuti Advisory joins us to discuss the 2020 Budget Speech:

Re-allocations

Government has trimmed its budget spending by R53-billion through re-allocations in 2020/21. The figure is expected to increase to nearly R58 billion in 2021/22 as it continues to cut spending on various items such as compensations and conditional grants.

Property buyers

Good news for prospective property buyers. No transfer duties will be liable on the purchase of property below R1-million.

Mboweni says the bracket to calculate transfer duties on the sale of property was last adjusted in 2017.

Greg Van Niekerk is a property consultant. “It will help the industry quite a bit…..people’s confidence will rise and we will see more deals under a million.”

Carbon tax increase

Bad news for consumers is that the price of new vehicles could increase due to the proposed rise in carbon tax. National Treasury proposes a carbon tax increase of 5.6%.

The increase will take effect from the first of April. Carbon tax is imposed on any item that burns fossil fuel.

Mboweni says carbon tax and other measures will help green the economy and will bring in R1.75 billion over the next few months. But new car dealerships say the move will have a negative impact on the already constrained market.

Lucky Sibanda is a new car sales executive. “It’s going to directly affect vehicle pricing. It may also dent confidence in the market which is already constraint….car dealers are struggling this is making it even worse.”

Treasury says government will consult with industries affected by the introduction of export taxes on scrap metal. It argues that the tax will improve the availability of better quality scrap in the country.

The proposed export taxes will apply to ferrous metals and aluminium.

Mboweni expects the government to achieve a reduction in the budget shortfall. In his 2020 budget statement, Mboweni forecast the budget deficit to narrow from 6.8% to 5.9% in the next three years.

Consolidated government expenditure 

In the video below Mboweni delivers his 2020 Budget Speech